Exhibit 10.1

 

 

 

CREDIT AGREEMENT

 

 

dated April 8, 2004

 

 

among

 

 

AXSYS TECHNOLOGIES, INC.,

as Borrower,

 

 

THE SUBSIDIARY GUARANTORS PARTY HERETO

as Subsidiary Guarantors,

 

 

and

 

 

FLEET NATIONAL BANK

 

 

 

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TABLE OF CONTENTS

 

ARTICLE I  DEFINITIONS AND ACCOUNTING TERMS [a04-4672_1ex10d1.htm#ArticleI]

 

Section 1.1

Certain Defined Terms.

 

Section 1.2

Computation of Time Periods.

 

Section 1.3

Accounting Terms.

 

Section 1.4

Other Definitional Provisions.

 

Section 1.5

Conflicting Terms.

 

 

 

 

ARTICLE II  AMOUNTS AND TERMS OF THE LOANS [a04-4672_1ex10d1.htm#ArticleIi]

 

Section 2.1

Amounts.

 

Section 2.2

Procedure for Revolving Loans.

 

Section 2.3

Procedure for Letters of Credit; Certain Conditions.

 

Section 2.4

Repayment of Revolving Loans, Obligations Absolute.

 

Section 2.5

Method of Payment, Direct Debits, Payment Date Adjustments, Application of
Payments.

 

 

 

 

ARTICLE III  INTEREST, INTEREST PERIODS, CONVERSIONS, LATE PAYMENTS,
PREPAYMENTS, FEES AND INTEREST RATE HEDGE [a04-4672_1ex10d1.htm#ArticleIii]

 

Section 3.1

Interest and Late Payments.

 

Section 3.2

Election and Continuation of Interest Periods.

 

Section 3.3

Conversion of Revolving Loans.

 

Section 3.4

Late Payment.

 

Section 3.5

Repayments and Prepayments.

 

Section 3.6

Unused Line Fees.

 

Section 3.7

Commitment Fee.

 

Section 3.8

Letter of Credit Fees.

 

Section 3.9

Interest Rate Hedge with Bank.

 

 

 

 

ARTICLE IV FUNDING AND YIELD PROTECTION [a04-4672_1ex10d1.htm#ArticleIv]

 

Section 4.1

Illegality.

 

Section 4.2

Additional Costs.

 

Section 4.3

Basis for Determining LIBOR Base Rate Inadequate or Unfair.

 

Section 4.4

Capital Adequacy Protection.

 

Section 4.5

Indemnity.

 

Section 4.6

Payments Free of Taxes and Other Deductions.

 

Section 4.7

Survival.

 

 

 

 

ARTICLE V REPRESENTATIONS AND WARRANTIES [a04-4672_1ex10d1.htm#ArticleV]

 

Section 5.1

Representations and Warranties.

 

 

 

 

ARTICLE VI  CONDITIONS OF LENDING [a04-4672_1ex10d1.htm#ArticleVi]

 

Section 6.1

Conditions Precedent to Initial Loans.

 

Section 6.2

Conditions Precedent to Each Loan.

 

 

 

 

ARTICLE VII  COVENANTS [a04-4672_1ex10d1.htm#ArticleVii]

 

Section 7.1

Reporting Requirements.

 

Section 7.2

Insurance.

 

 

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Section 7.3

Tax and Other Liens.

 

Section 7.4

Place of Business, Maintenance of Existence.

 

Section 7.5 [a04-4672_1ex10d1.htm#Section7_5]

Litigation. [a04-4672_1ex10d1.htm#Section7_5]

 

Section 7.6

Maintenance of Books and Records, Existence and Compliance.

 

Section 7.7

ERISA.

 

Section 7.8

Notice of Certain Events.

 

Section 7.9

Audit and Appraisals by Bank; Fees.

 

Section 7.10

Notice of Reportable Events.

 

Section 7.11

Maintenance of Bank Accounts.

 

Section 7.12

New Subsidiary Guarantors.

 

Section 7.13

Properties.

 

Section 7.14

Defend Properties.

 

Section 7.15

Use of Proceeds.

 

Section 7.16

Further Assurances.

 

Section 7.17

Encumbrances.

 

Section 7.18

Negative Pledge.

 

Section 7.19

Limitation on Indebtedness.

 

Section 7.20

Contingent Liabilities.

 

Section 7.21

Consolidation, Merger or Acquisitions.

 

Section 7.22

Loans, Advances, Investments.

 

Section 7.23

Acquisition of Stock.

 

Section 7.24

Distributions.

 

Section 7.25

Sale and Lease of Assets.

 

Section 7.26

Name Changes; Change of State of Incorporation.

 

Section 7.27

Prohibited Transfers.

 

Section 7.28

Leasebacks.

 

Section 7.29

ERISA.

 

Section 7.30

Consolidated Fixed Charge Coverage Ratio.

 

Section 7.31

Consolidated Interest Coverage Ratio.

 

Section 7.32

Consolidated Funded Debt-to-Consolidated EBITDA Ratio.

 

 

 

 

ARTICLE VIII  EVENTS OF DEFAULT, ACCELERATION [a04-4672_1ex10d1.htm#ArticleViii]

 

Section 8.1

Events of Default, Acceleration.

 

 

 

 

ARTICLE IX  RIGHTS AND REMEDIES OF BANK

 

Section 9.1

Remedies of Bank.

 

Section 9.2

Specific Powers.

 

Section 9.3

Cumulative Remedies.

 

 

 

 

ARTICLE X  TERMINATION

 

Section 10.1

Term and Termination.

 

 

 

 

ARTICLE XI  EXPENSES

 

Section 11.1

Expenses.

 

 

 

 

ARTICLE XII  MISCELLANEOUS

 

Section 12.1

Indemnification.

 

Section 12.2

Payment Set-Aside.

 

Section 12.3

Set-off.

 

Section 12.4

Covenants to Survive.

 

Section 12.5

Amendments and Waivers.

 

Section 12.6

Notices.

 

 

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Section 12.7

Replacement of a Note or other Financing Agreement

 

Section 12.8

Transfer of Bank’s Interest.

 

Section 12.9

Waivers.

 

Section 12.10

Section Headings, Severability, Entire Agreement.

 

Section 12.11

Governing Law.

 

Section 12.12

Counterparts.

 

 

List of Schedules and Exhibits

 

Schedule 5.1(d)

Litigation

Schedule 5.1(i)

Indebtedness of Obligors

Schedule 5.1(j)

Permitted Liens

Schedule 5.1(n)

ERISA Matters

Schedule 5.1(p)(i)

Real Property Owned by Each Obligor

Schedule 5.1(p)(ii)

Real Property Leased by Each Obligor

Schedule 5.1(s)

Collective Bargaining Agreements

Schedule 5.1(v)

Other Affiliates of Each Obligor

Schedule 5.1(dd)

Insurance

Schedule 5.1(w)

Environmental Matters

 

 

Exhibit A

Revolving Loan Note

Exhibit B

Term Loan Note

Exhibit C

Joinder Agreement

 

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CREDIT AGREEMENT

 

Credit Agreement dated and effective as of April 8, 2004 among AXSYS
TECHNOLOGIES, INC., a Delaware corporation with its chief executive office and
principal place of business located at 175 Capital Boulevard, Suite 103, Rocky
Hill, Connecticut 06067 (the “Borrower”), the Subsidiary Guarantors (such term
and each other capitalized term used by not defined herein having the meaning
given to it in Article I) and FLEET NATIONAL BANK, a national banking
institution having an office at 777 Main Street, Hartford, Connecticut 06115
(the “Bank”).

 

PREAMBLE

 

WHEREAS, Borrower, Bifocal Acquisition Corp., a Massachusetts corporation and
wholly-owned Subsidiary of Borrower (“BAC”), Telic Optics, Inc., a Massachusetts
corporation (“Telic”), and the shareholders of Telic named therein have entered
into an Agreement and Plan of Merger, dated as of April 5, 2004 (as amended,
supplemented or otherwise modified from time to time, the “Merger Agreement”)
pursuant to which BAC will be merged with and into Telic (the “Merger”), with
Telic being the survivor of such Merger and a wholly-owned subsidiary of
Borrower; and

 

WHEREAS, Borrower has requested Bank, and Bank has agreed, to (a) extend to
Borrower a term loan in the principal amount of $5,000,000, the proceeds of
which are to be used to finance of portion of the merger consideration under the
Merger Agreement; and (b) extend to Borrower a revolving loan in the principal
amount of up to $5,000,000, the proceeds of which are to be used by Borrower for
working capital and general corporate purposes, including, but not limited to,
the acquisition of Capital Assets.

 

NOW, THEREFORE, for the mutual considerations contained in this Agreement,
Borrower, each Subsidiary Guarantor and Bank agree as follows:

 

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

 

SECTION 1.1                                   CERTAIN DEFINED TERMS.

 

As used herein, the following terms shall have the following meanings:

 

“Acquisition” shall mean an acquisition by Borrower of not less than a
Controlling interest in the outstanding capital stock or other equity interests
of any corporation, partnership, joint venture, a division of any corporation or
any similar business unit (or of substantially all the assets and business of
any of the foregoing) engaged in a Related Business.

 

“Additional Costs” shall have the meaning assigned in Section 4.2 hereof.

 

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“Adjustment Date” means each date which is the first day of the first fiscal
quarter of Borrower following Bank’s actual receipt of both of (a) the
applicable quarterly Covenant Compliance Certificate under Section 7.1(a)(ii)
hereof, and (b) either (i) Borrower’s quarterly consolidated and consolidating
financial statements required under Section 7.1(a)(i) hereof for the quarterly
and fiscal year-to-date periods ending on the last day of each of the first
three (3) fiscal quarters of Borrower, or (ii) Borrower’s annual audited
consolidated and consolidating financial statements required under Section
7.1(b), as applicable.

 

“Affiliate” shall mean, when used with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with, the Person specified and
shall include another Person who Controls twenty percent (20%) or more (on a
fully diluted basis) of the voting securities or other equity interest of the
Person specified.

 

“Agreement” shall mean this Credit Agreement, as the same may from time to time
be amended, restated supplemented or otherwise modified.

 

“Applicable Margin” means, with respect to the determination of pre-default
interest rates accruing from time to time on each outstanding LIBOR Loan:

 

(a)                                  for the period commencing on the date
hereof and ending on the day immediately preceding the Initial Adjustment Date,
1.00% above the applicable LIBOR Rate.

 

(b)                                 for each period commencing on an Adjustment
Date (including, but not limited to, the Initial Adjustment Date) and ending on
the day immediately preceding the next Adjustment Date, the percentage rate set
forth below opposite the level of Borrower’s consolidated financial performance
as measured by the Consolidated Funded Debt-to-EBITDA Ratio as of the end of
Borrower’s most recent fiscal quarter for the then ended Rolling Period (as
determined on the basis of the financial statements required to be delivered in
respect of such Adjustment Date):

 

Level

 

Consolidated Funded
Debt-to-EBITDA Ratio

 

Applicable Margin for LIBOR Loans

 

1

 

< 1.25x

 

1.00%

 

2

 

> 1.25x, but < 1.75x

 

1.25%

 

3

 

> 1.75x

 

1.50%

 

 

By way of illustration, if Borrower’s Consolidated Funded Debt-to-EBITDA Ratio
as of the last day of Borrower’s second fiscal quarter is 1.2 to 1.0, then,
effective on the first day of the first fiscal quarter immediately following the
date upon which Borrower’s quarterly Covenant Compliance Certificate and
quarterly financial statements for its second fiscal quarter are received by
Bank the Applicable Margin for all LIBOR Loans shall be adjusted (if not then
the same) to 1.00%.

 

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“Applicable Unused Line Fee Percentage” shall mean, with respect to the
calculation of the Unused Line Fees due to the Bank pursuant to Section 3.6
hereof:

 

(a)                                  for the period commencing on the date
hereof and ending on the day immediately preceding the Initial Adjustment Date,
0.20%; and

 

(b)                                 for each period commencing on an Adjustment
Date (including, but not limited to, the Initial Adjustment Date) and ending on
the day immediately preceding the next Adjustment Date, the percentage set forth
below opposite Borrower’s applicable financial performance level as measured by
Borrower’s Consolidated Funded Debt-to-EBITDA Ratio for the then ended Rolling
Period (as determined on the basis of the financial statements required to be
delivered in respect of such Adjustment Date):

 

Level

 

Consolidated Funded
Debt-to-EBITDA Ratio

 

Applicable Unused Line Fee Percentage

 

1

 

< 1.25x

 

0.20%

 

2

 

> 1.25x, but < 1.75x

 

0.30%

 

3

 

> 1.75x

 

0.40%

 

 

By way of illustration, if Borrower’s Consolidated Funded Debt-to-EBITDA Ratio
as of the last day of Borrower’s second fiscal quarter is 1.2 to 1.0, then,
effective on the first day of the first fiscal quarter immediately following the
date upon which Borrower’s quarterly Covenant Compliance Certificate and
quarterly financial statements for its second fiscal quarter are received by
Bank, the Applicable Unused Line Fee Percentage shall be adjusted (if not then
the same) to 0.20%.

 

“Assignee” shall mean that term as defined in Section 12.8(a) hereof.

 

“Available Amount” shall mean with respect to any Letter of Credit, at any time,
the maximum amount available to be drawn under such Letter of Credit at such
time (assuming compliance at such time with all conditions of drawing).

 

“BAC” shall mean Bifocal Acquisition Corp., a Massachusetts corporation and
wholly-owned Subsidiary of Borrower.

 

“Bank” shall mean Fleet National Bank, together with its successors and assigns.

 

“Bank Swap Agreement” shall mean the Swap Agreement entered into between
Borrower and Bank on or about the date hereof and all Confirmations relating
thereto including, without limitation the Confirmation relating to the Term
Loan.

 

“Borrower” shall mean Axsys Technologies, Inc., a Delaware corporation.

 

3

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“Business Day” shall mean any day other than a Saturday, Sunday, or other day on
which banks in the State of Connecticut or Commonwealth of Massachusetts are
required or authorized by law to be closed; provided, however, that when used in
connection with a LIBOR Loan, the term “Business Day” shall also exclude any day
on which banks are not open for business in London and any day on which dealings
in Dollar deposits are not carried on in the London interbank market.

 

“Capital Assets” shall mean assets that are depreciated or amortized on
Borrower’s Consolidated balance sheet in accordance with GAAP.

 

“Capital Expenditures” shall mean, for any period, the aggregate of all
expenditures (whether paid in cash or other consideration or accrued as a
liability) of Borrower and its Subsidiaries during such period that, in
accordance with GAAP, are or should be included in “additions to property, plant
and equipment” or similar items reflected in the consolidated balance sheet of
Borrower and its Subsidiaries for such period (including the amount of assets
leased in connection with any Capital Lease); provided, however, that Capital
Expenditures shall not include Capital Expenditures relating to the James Webb
Space Telescope to the extent such Capital Expenditures are actually funded by a
Governmental Authority or a prime contractor of a Governmental Authority.

 

“Capital Leases” shall mean capital leases, conditional sales contracts and
other title retention agreements relating to the purchase or acquisition of
assets that in accordance with GAAP are required or permitted to be depreciated
or amortized on the consolidated balance sheet of Borrower and its Subsidiaries.

 

“Code” shall mean that term as defined in Section 5.1(n)(i) hereto.

 

“Commitment Fee” shall mean that term as defined in Section 3.7 hereof.

 

“Companies” shall mean that term as defined in Section 5.1(n)(i) hereof.

 

“Consolidated Amortization Expense” shall mean, for any period, the amortization
expense of Borrower and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.

 

“Consolidated Current Maturity of Long-Term Debt” shall mean the aggregate of
all Indebtedness for borrowed money (including outstanding Indebtedness under
the Loans), Indebtedness under Capital Leases and contingent Indebtedness under
undrawn letters of credit of Borrower and its Subsidiaries paid or payable
during the applicable period.

 

“Consolidated Depreciation Expense” shall mean, for any period, the depreciation
expense of Borrower and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.

 

“Consolidated EBIT” shall mean, for any period, Consolidated Net Income for such
period, adjusted by adding thereto, in each case only to the extent (and in the
same

 

4

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proportion) deducted in determining such Consolidated Net Income (and with
respect to the portion of Consolidated Net Income attributable to any Subsidiary
of Borrower only if a corresponding amount would be permitted at the date of
determination to be distributed to Borrower by such Subsidiary without prior
approval (that has not been obtained), pursuant to the terms of its charter
documents and all agreements, instruments, judgments, decrees, orders, statutes,
rules, regulations and other restrictions applicable to such Subsidiary or its
equityholders):

 

(a)                                  Consolidated Interest Expense for such
period, and

 

(b)                                 Consolidated Tax Expense for such period;

 

provided, however, that Consolidated EBIT shall be calculated on a Pro Forma
Basis to give effect to the Merger, any Permitted Acquisition and any asset
sales (other than dispositions in the ordinary course of business) consummated
at any time on or after the first day of the relevant quarterly testing period
thereof as if the Merger or Permitted Acquisition had been effected on the first
day of such period and as if each such asset sale had been consummated on the
day prior to the first day of such period.

 

“Consolidated EBITDA” shall mean, for any period, Consolidated Net Income for
such period, adjusted by adding thereto, in each case only to the extent (and in
the same proportion) deducted in determining such Consolidated Net Income (and
with respect to the portion of Consolidated Net Income attributable to any
Subsidiary of Borrower only if a corresponding amount would be permitted at the
date of determination to be distributed to Borrower by such Subsidiary without
prior approval (that has not been obtained), pursuant to the terms of its
charter documents and all agreements, instruments, judgments, decrees, orders,
statutes, rules, regulations and other restrictions applicable to such
Subsidiary or its equityholders):

 

(a)                                  Consolidated Interest Expense for such
period,

 

(b)                                 Consolidated Amortization Expense for such
period,

 

(c)                                  Consolidated Depreciation Expense for such
period, and

 

(d)                                 Consolidated Tax Expense for such period;

 

provided, however, that Consolidated EBITDA shall be calculated on a Pro Forma
Basis to give effect to the Merger, any Permitted Acquisition and any asset
sales (other than dispositions in the ordinary course of business) consummated
at any time on or after the first day of the relevant quarterly testing period
or Rolling Period thereof, as the case may be, as if the Merger or Permitted
Acquisition had been effected on the first day of such period and as if each
such asset sale had been consummated on the day prior to the first day of such
period.

 

“Consolidated Fixed Charge Coverage Ratio” shall mean, for any period, the ratio
of (a) (i) Consolidated EBITDA for such period, less (ii) all cash payments in
respect of income

 

5

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taxes made during such period by Borrower and its Subsidiaries (net of any cash
refund in respect of income taxes actually received during such period), less
(iii) thirty percent (30%) of all Capital Expenditures made during such period
by Borrower and its Subsidiaries, less (iv) all dividend payments made during
such period by Borrower or any of its Subsidiaries (other than dividend payments
to Borrower or any of its Subsidiaries), to (b) the sum of (i) Consolidated
Current Maturity of Long-Term Debt for such period, plus (ii) Consolidated
Interest Expense for such period.

 

“Consolidated Funded Debt-to-Consolidated EBITDA Ratio” shall mean, for any
Rolling Period, the ratio of (a) the aggregate of all Indebtedness for borrowed
money (including outstanding Indebtedness under the Loans), Indebtedness under
Capital Leases and contingent Indebtedness under undrawn letters of credit of
Borrower and its Subsidiaries, in each case as of the last day of such Rolling
Period, to (b) Consolidated EBITDA for such Rolling Period.

 

“Consolidated Interest Coverage Ratio” shall mean, for any period, the ratio of
(a) Consolidated EBIT for such period, to (b) Consolidated Interest Expense for
such period.

 

“Consolidated Interest Expense” shall mean, for any period, the total
consolidated interest expense in respect of all Indebtedness for borrowed money
(including outstanding Indebtedness under the Loans), Indebtedness under Capital
Leases and contingent Indebtedness under undrawn letters of credit of Borrower
and its Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP.

 

“Consolidated Net Income” shall mean, for any period, the consolidated net
income (or loss) for such period of Borrower and its Subsidiaries determined on
a consolidated basis in accordance with GAAP, provided, however, that there
shall be excluded from such net income (to the extent otherwise included
therein), without duplication:

 

(a)                                  the net income (or loss) of any person
(other than a Subsidiary of Borrower) in which any person other than Borrower
and its Subsidiaries has an ownership interest, except to the extent that cash
in an amount equal to any such income has actually been received by Borrower or
(subject to clause (b) below) any of its Subsidiaries during such period;

 

(b)                                 the net income of any Subsidiary of Borrower
during such period to the extent that the declaration or payment of dividends or
similar distributions by such Subsidiary of that income is not permitted by
operation of the terms of its charter documents or any agreement, instrument,
judgment, decree, order, statute, rule, regulation or other restriction
applicable to that Subsidiary during such period, except that Borrower’s equity
in net loss of any such Subsidiary for such period shall be included in
determining Consolidated Net Income;

 

(c)                                  any gain (or loss), together with any
related provisions for taxes on any such gain (or the tax effect of any such
loss), realized during such period by Borrower or any of its Subsidiaries upon
any asset sale (other than any dispositions in the ordinary course of business)
by Borrower or any of its Subsidiaries;

 

6

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(d)                                 gains and losses due solely to fluctuations
in currency values and the related tax effects according to GAAP for such
period;

 

(e)                                  earnings resulting from any reappraisal,
revaluation or write-up of assets;

 

(f)                                    unrealized gains and losses for such
period with respect to obligations under or with respect to any swap, cap,
collar, forward purchase or similar agreements or arrangements dealing with
interest rates, currency exchange rates or commodity prices, either generally or
under specific contingencies; and

 

(g)                                 any extraordinary gain (or extraordinary
loss), together with any related provision for taxes on any such gain (or the
tax effect of any such loss), recorded or recognized by Borrower or any of its
Subsidiaries during such period.

 

“Consolidated Tax Expense” shall mean, for any period, the tax expense of
Borrower and its Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP.

 

“Contaminant” means any pollutants, hazardous or toxic substances or wastes or
contaminated materials which are or may be subject to regulation under, or the
Release of which or exposure to which is prohibited, limited or regulated under,
any Environmental Law.

 

“Control” shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or otherwise,
and the terms “Controlling” and “Controlled” shall have the meanings correlative
thereto.

 

“Covenant Compliance Certificate” shall have the meaning assigned in Section
7.1(a) hereof.

 

“Defaulting Event” shall mean the occurrence of an Event of Default or the
occurrence of any condition or event which but for the giving of notice or
passage of time or both would constitute an Event of Default.

 

“Distributions” shall mean, for any period of measurement with respect to
Borrower and each Subsidiary, the following: (a) the declaration or payment of
any dividend or distribution on or in respect of the shares of any class of
capital stock of Borrower or each such Subsidiary, except dividends payable
solely in shares of such corporation’s capital stock; and (b) any dividend or
distribution for any purpose from such corporation (however characterized),
including without limitation, inter-company loans and guarantees, to or for the
benefit of any or all of its shareholders, whether paid on or in respect of
shares of any class of the capital stock of such corporation or otherwise.

 

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“Dollar” and the sign “$” shall mean lawful money of the United States of
America.

 

“Environment” shall mean ambient air, surface water and groundwater (including
potable water, navigable water and wetlands), the land surface or subsurface
strata, the workplace or as otherwise defined in any Environmental Law.

 

“Environmental Claim” means any notice of violation, claim, demand, order,
directive having the force of law, cost recovery action or other cause of action
by, or on behalf of, the U.S. Environmental Protection Agency, any other
Governmental Authority or any other Person, for damages, injunctive or equitable
relief, personal injury (including sickness, disease or death), Remedial Action
costs, tangible property damage, natural resource damages, nuisance, pollution,
any material adverse effect on the Environment caused by any Contaminant, or for
fines, penalties or restrictions, resulting from or based upon (a) the
existence, or the continuance of the existence, of a Release (including sudden
or non-sudden, accidental or non-accidental Releases) or threatened Release, (b)
exposure to any Contaminant, (c) the presence, use, handling, transportation,
storage, treatment, or disposal of any Contaminant, or (d) the violation of any
Environmental Law.

 

“Environmental Laws” shall mean any and all applicable present and future
treaties, laws, rules, regulations, codes, ordinances, orders, decrees,
judgments, injunctions, notices or binding agreements issued, promulgated or
entered into by any Governmental Authority, relating in any way to the
Environment, preservation or reclamation of natural resources, the management,
use, treatment, storage, disposal, transportation, transfer, generation,
processing, production, refining, control, handling, Release or threatened
Release of any Contaminant or to health and safety matters (including without
limitation the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986, 42 U.S.C. §9601 et seq. (collectively, “CERCLA”); the Solid Waste Disposal
Act, as amended by the Resource Conservation and Recovery Act of 1976 and the
Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §6901 et seq.; the
Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977,
33 U.S.C. §1251 et seq.; the Clean Air Act of 1970, as amended, 42 U.S.C. §7401
et seq.; The Toxic Substances Control Act of 1976, as amended, 15 USC §2601 et
seq.; the Emergency Planning and Community Right-to-Know Act of 1986 (also known
as SARA Title III), as amended, 42 USC § 11001 et seq.; the Safe Drinking Water
Act of 1974, as amended, 42 USC §300(f) et seq.; the Federal Insecticide,
Fungicide and Rodenticide Act, as amended, 7 USC §136 et seq.; the Occupational
Safety and Health Act of 1970, as amended, 29 USC §651 et seq.; the Endangered
Species Act, as amended, 16 USC §1531 et seq.; the National Environmental Policy
Act, as amended, 42 USC §4321 et seq.; the Rivers and Harbors Act of 1899 33 USC
§401 et seq., and any similar or implementing state or local law, rule or
regulation); all laws, rules and regulations governing underground or
above-ground storage tanks, conditioning transfer of property upon a form of
negative declaration or other approval of a Governmental Authority of the
environmental condition of a property or requiring the disclosure of conditions
relating to Contaminants in connection with transfer of title to or interest in
property; conditions or requirements imposed in connection with any permits;
government orders and demands and judicial orders pursuant to any of the
foregoing; any and all other laws, rules and regulations of

 

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any Governmental Authority relating to the protection of human health or the
Environment from Contaminants; and all amendments or regulations promulgated
under any of the foregoing.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974 and all
rules and regulations promulgated pursuant thereto, as the same may from time to
time be supplemented or amended.

 

“Event of Default” shall have the meaning assigned in Section 8.1 hereof.

 

“Facility” shall mean the Revolving Loan facility being extended to Borrower
pursuant to this Agreement.

 

“Financing Agreements” shall mean this Agreement, the Notes, the Guaranty
Agreement, the Reimbursement Agreements, the Joinder Agreements, the Bank Swap
Agreement, any and all other instruments, agreements and documents now or
hereafter executed by Borrower and/or any Subsidiary in connection herewith or
therewith or related hereto or thereto, and all amendments, supplements and
modifications hereto or thereto (excluding the Merger Documents).

 

“GAAP” shall mean in general, generally accepted accounting principles which are
(a) consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, consistently applied from year
to year, (b) generally accepted in the United States of America, and (c) such
that certified public accountants would, insofar as the use of accounting
principles is pertinent, be in a position to deliver an unqualified opinion as
to financial statements in which such principles have been properly applied.

 

“Governmental Authority” shall mean any government, any state or other political
subdivision thereof, and any entity exercising executive, legislative, judicial,
regulatory, or administrative functions of or pertaining to government.

 

“Guaranty Agreement” shall mean each guaranty agreement executed by a Subsidiary
Guarantor in favor of Bank substantially in the form of Exhibit C attached
hereto.

 

“Head Office” shall mean the office of Bank at 777 Main Street, Hartford,
Connecticut, or such other place as Bank may designate to Borrower in writing.

 

“Indebtedness” shall mean with respect to any Person, without duplication: (a)
all indebtedness or liability of such Person for borrowed money, or with respect
to deposits or advances of any kind; (b) all obligations of such Person
evidenced by notes, bonds, debentures or similar instruments; (c) all
obligations of such Person under conditional sale or other title retention
agreements relating to property or assets purchased by such Person; (d) all
obligations of such Person issued or assumed as the deferred purchase price of
property or services (excluding trade obligations and accrued obligations
incurred in the ordinary course of business not overdue by more than ninety (90)
days); (e) all indebtedness or liability of others secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien on property owned or acquired by such Person, whether or
not the

 

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obligations secured thereby have been assumed; (f) all obligations of such
Person under Capital Leases; (g) all net obligations of such Person in respect
of interest rate protection agreements, foreign currency exchange agreements or
other interest or exchange rate hedging arrangements; (h) current liabilities of
such Person in respect of any Plan; (i) obligations of such Person under letters
of credit, bankers acceptances or comparable arrangements; (j) all obligations
of such Person under guaranties, endorsements (other than for collection or
deposit in the ordinary course of business), and other contingent obligations of
such Person to purchase, to provide funds for payment, to supply funds to invest
in any Person, or otherwise to assure a creditor against loss; and (k) all other
indebtedness of such Person that in accordance with GAAP is classified as
liabilities upon the balance sheet of such Person or to which reference is made
by footnotes thereto.  The Indebtedness of any Person (x) shall include the
Indebtedness of any partnership in which such Person is a general partner, and
(y) in the case of any limited recourse liability, shall not exceed the amount
of such recourse.

 

“Initial Adjustment Date” means the first day of the first fiscal quarter of
Borrower following Bank’s receipt of a Covenant Compliance Certificate and
Borrower’s quarterly consolidated and consolidating financial statements for the
fiscal quarter ended on April 3, 2004.

 

“Interest Period” shall mean

 

(a)                                  for each Revolving Loan or any portion or
portions thereof which Borrower elects to be or continue to be a LIBOR Loan, an
available period of one (1) month commencing on the date upon which such Loan is
made as a LIBOR Loan, continued as a LIBOR Loan or converted from a Prime Rate
Loan to a LIBOR Loan and ending on the last Business Day of any such Interest
Period;

 

(b)                                 for the Term Loan, successive available
periods of one (1) month, the first of which shall commence on the date hereof
and each successive period to commence on the first day immediately following
the last day of the immediately preceding Interest Period, with the last such
Interest Period ending on the Maturity Date of the Term Loan;

 

provided, however, that the foregoing provisions relating to Interest Periods
are subject to the following:

 

(i)                                     whenever the last day of any Interest
Period would otherwise occur on a day other than a Business Day, such Interest
Period shall be extended to occur on the next succeeding Business Day, provided,
however, that if such extension would cause the last day of such Interest Period
to occur in the next following calendar month, the last day of such Interest
Period shall occur on the next preceding Business Day;

 

(ii)                                  any Interest Period that begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day

 

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in the last calendar month of such Interest Period) shall end on the last
Business Day of a calendar month;

 

(iii)                               with respect to each Revolving Loan, no
Interest Period shall end after the Termination Date; and

 

(iv)                              with respect to the Term Loan, no Interest
Period shall end after (1) the next regularly-scheduled Principal Repayment
Date, and (2) the Maturity Date for the Term Loan.

 

“Joinder Agreement” shall mean a joinder agreement, substantially in the form of
Exhibit C.

 

“Lender Parties” shall mean that term as defined in Section 12.1(a).

 

“L/C Disbursement” shall mean a payment or disbursement made by the Bank
pursuant to a Letter of Credit.

 

“Letter of Credit” shall mean each standby commercial letter of credit issued by
Bank pursuant to Section 2.1(c) hereof for the account of the Borrower or any
Subsidiary Guarantor.

 

“Letter of Credit Commitment Amount” shall mean ONE MILLION AND NO/100 DOLLARS
($1,000,000).

 

“Letter of Credit Fees” shall mean that term as defined in Section 3.8 hereof.

 

“LIBOR Base Rate” means, as applicable to each LIBOR Loan, the rate per annum as
determined on the basis of the offered rates for deposits in Dollars, for a
period of time comparable to the Interest Period applicable to such LIBOR Loan,
which appears on the Telerate page 3750 as of 11:00 a.m. London time on the day
that is two (2) Business Days prior to the first day of such Interest Period;
provided, however, if the rate described above does not appear on the Telerate
System on any applicable interest determination date, the LIBOR Base Rate shall
be the rate (rounded upwards, if necessary, to the nearest one
hundred-thousandth of a percentage point) determined on the basis of the offered
rates for deposits in Dollars for a period of time comparable to the Interest
Period applicable to such LIBOR Loan which are offered by four (4) major banks
in the London interbank market at approximately 11:00 a.m. London time on the
day that is two (2) Business Days prior to the first day of such Interest Period
as selected by the Bank.  The principal London office of each of the four major
London banks will be requested to provide a quotation of its Dollar deposit
offered rate.  If at least two (2) such quotations are provided, the rate for
that date will be the arithmetic mean of the quotations.  If fewer than two (2)
quotations are provided as requested, the rate for that date will be determined
on the basis of the rates quoted for loans in Dollars to leading European banks
for a period of time comparable to the Interest Period applicable to such LIBOR
Loan offered by major banks in New York City at approximately 11:00 a.m. New
York City time, on the day that is two (2) Business Days prior to the first day
of the Interest Period.  In the event that the Bank is unable to obtain any such
quotation as provided above, it will be deemed that a LIBOR Loan is unavailable
and,

 

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accordingly, such LIBOR Loan shall immediately and automatically convert,
without notice, to a Prime Rate Loan.

 

“LIBOR Loan” means the Term Loan and each Revolving Loan at such time as the
same bears interest at a rate determined with reference to the LIBOR Rate.

 

“LIBOR Rate” means, for each LIBOR Loan for each Interest Period, an interest
rate per annum determined pursuant to the following formula, as adjusted from
time to time in accordance with the applicable provisions of this Agreement:

 

LIBOR Rate  =

 

LIBOR Base Rate

 

 

1 - Reserve Percentage

 

“Lien” shall mean any mortgage, pledge, hypothecation, assignment, security
interest, lien or encumbrance, priority or other security agreement or
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any lease (other than an
operating lease) having substantially the same economic effect as a conditional
sale or other title retention agreement, and the filing of, or agreement to
give, any financing statement or other document under the Uniform Commercial
Code or comparable law of any jurisdiction).

 

“Loan” shall mean any Revolving Loan or the Term Loan.

 

“Material Adverse Effect” shall mean (a) a material adverse effect on the
business, property, results of operations or condition (financial or otherwise),
or material agreements of Borrower or of its Subsidiaries taken as a whole, (b)
material impairment of the validity or enforceability of this Agreement or any
other Financing Agreement, (c) material impairment of the rights of or benefits
or remedies available to Bank under any Financing Agreement, or (d) material
impairment of the ability of Borrower or of its Subsidiaries taken as a whole to
fully and timely perform any of their material obligations under any Financing
Agreement to which it is or is to be a party.

 

“Maturity Date” shall mean April 8, 2009.

 

“Merger” shall have the meaning assigned to such term in the first recital
hereto.

 

“Merger Agreement” shall have the meaning assigned to such term in the first
recital hereto.

 

“Merger Documents” shall mean the collective reference to the Merger Agreement
and the other documents executed and delivered in connection therewith.

 

“Note” shall mean the Revolving Loan Note or the Term Loan Note.

 

“Notice of Borrowing” shall have the meaning assigned in Section 2.2(a) hereof.

 

“Notice of Issuance” shall have the meaning assigned in Section 2.3(a) hereof.

 

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“Obligations” shall mean and include all loans, advances, interest,
Indebtedness, liabilities, obligations, guaranties, covenants and duties at any
time owing by any of the Obligors to Bank of every kind and description, whether
or not evidenced by any note or other instrument, whether or not for the payment
of money, whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, including, but not limited to, the
Loans, and all other Indebtedness, liabilities and obligations arising under
this Agreement and the other Financing Agreements, including, without
limitation, all Indebtedness, liabilities and obligations of any of the Obligors
arising under any Reimbursement Agreement and the Bank Swap Agreement, and all
reasonable out-of-pocket costs, expenses, fees, charges and attorneys’,
paralegals’ and professional fees incurred in connection with any of the
foregoing, or in any way connected with, involving or relating to the
preservation, enforcement, protection or defense of, or realization under this
Agreement, any of the Notes, the Guaranty Agreements, the Reimbursement
Agreements, any of the other Financing Agreements, any related agreement,
document or instrument, and the rights and remedies hereunder or thereunder,
including without limitation, all reasonable costs, expenses and fees incurred
in connection with any “workout” or default resolution negotiations involving
legal counsel or other professionals and further in connection with any
re-negotiation or restructuring of the Indebtedness evidenced by this Agreement,
any Note, any Guaranty Agreement, any Reimbursement Agreement and/or any of the
other Financing Agreements.

 

“Obligors” shall mean Borrower and each of the Subsidiary Guarantors.

 

“Participant” shall mean that term as defined in Section 12.8(b) hereof.

 

“PBGC” shall mean that term as defined in Section 5.1(n)(i) hereof.

 

“Permitted Acquisition” shall mean an Acquisition in respect of which (a) in the
case of each Acquisition of capital stock, such Acquisition was not preceded by
an unsolicited tender offer for such capital stock by Borrower or any of its
Affiliates, and (b) Borrower shall have delivered to Bank (i) a pro forma
consolidated financial statement in form, scope and substance satisfactory to
Bank, in its sole but reasonable discretion, reflecting the full financial
effects of such Acquisition and the projected financial effects of such
Acquisition over Borrower’s immediately succeeding period including at least the
next two (2) fiscal year ends of Borrower (or the remaining term of this
Agreement, if shorter) and indicating, after giving effect to such Acquisition
(which shall include the past twelve month operating performance of such
acquired Person or business), Borrower’s continued compliance with the Financial
Covenants set forth in Article VII C. hereof, and (ii) a certificate certifying
that at the time of and immediately after giving effect to such Acquisition, no
Default or Event of Default shall have occurred and be continuing.

 

“Permitted Liens” shall mean (a) Liens for taxes which are not yet due and
payable or which are being contested in good faith provided that such contest
stays any enforcement proceeding, (b) materialmen’s, mechanics’, repairmen’s and
other like Liens arising in the ordinary course of business securing obligations
which are not more than ninety (90) days overdue or which are being contested in
good faith or bonded to the reasonable satisfaction of

 

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Bank, (c) Liens imposed by law in connection with workers’ compensation,
unemployment insurance, social security or similar legislation which are not
more than ninety (90) days overdue or which are being contested in good faith,
(d) Liens set forth on Schedule 5.1(j) attached hereto, (e) purchase money Liens
on assets (including, but not limited to, in connection with Capital Leases) so
long as (i) each such Lien attaches concurrently or within thirty (30) days
after the acquisition of the assets so acquired, (ii) each such Lien shall
attach only to the assets so acquired, and (iii) each such Lien secures
Indebtedness permitted under Section 7.19 hereof; and (f) Liens in favor of the
Bank.

 

“Person” means any natural person, sole proprietorship, partnership,
corporation, limited liability company, business trust, joint stock company,
trust, unincorporated association, organization, joint venture, institution,
governmental authority, or other entity of any nature whatsoever.

 

“Plan” shall mean any employee benefit plan that is covered by Title I of ERISA
sponsored or maintained by any Obligor or any Person affiliated with any
Obligor.

 

“Precision” shall mean Precision Aerotech, Inc., a Delaware corporation.

 

“Premises” shall mean any real property now or hereafter owned, leased or used
by any Obligor.

 

“Prime Rate” shall mean the variable per annum rate of interest so designated
from time to time by Bank as its prime rate.  The Prime Rate is a reference rate
and does not necessarily represent Bank’s lowest or best rate being charged to
any customer.

 

“Prime Rate Loan” shall mean any Loan or a portion or portions thereof which
bears interest at or with reference to, as the case may be, the Prime Rate.

 

“Principal Repayment Date” shall mean with respect to the Term Loan, each date
set forth on the amortization schedule attached to the Term Loan Note.

 

“Pro Forma Basis” shall mean on a basis in accordance with GAAP and otherwise
reasonably satisfactory to Bank.

 

“Reimbursement Agreement” shall mean that term as defined in Section 2.3(a)
hereof.

 

“Related Business” shall mean any business of Borrower and its Subsidiaries as
conducted on the date hereof and any business related, ancillary or
complementary thereto.

 

“Release” shall mean any spilling, leaking, migrating, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
disposing, depositing, dispersing, emanating or migrating of any Contaminant in,
into, onto or through the Environment.

 

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“Remedial Action” means (a) “remedial action” as such term is defined in CERCLA,
42 U.S.C. 9601(24), and (b) all other actions required by any Governmental
Authority or voluntarily undertaken to (i) clean up, remove, treat, abate or in
any way address any Contaminant in the Environment, (ii) prevent the Release or
threat of Release, or minimize the further Release of any Contaminant so it does
not migrate or endanger or threaten to endanger public health, welfare or the
Environment, or (iii) perform studies and investigations in connection with, or
as a precondition to, (i) or (ii) above.

 

“Reserve Percentage” shall mean, for any Interest Period for all LIBOR Loans,
the maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed on member banks of the Federal
Reserve System against “Euro-currency Liabilities” as defined in Regulation D. 
As of the date hereof, the Reserve Percentage imposed on Bank is zero.

 

“Revolving Loan” shall have the meaning assigned in Section 2.1(a) hereof.

 

“Revolving Loan Account” shall have the meaning assigned in Section 2.2(b)
hereof.

 

“Revolving Loan Commitment Amount” shall mean FIVE MILLION AND NO/100 DOLLARS
($5,000,000).

 

“Revolving Loan Note” shall mean the revolving loan promissory note of Borrower
payable to the order of Bank dated as of the date hereof, in the form of Exhibit
A attached hereto, evidencing the Obligations arising under the Revolving Loans,
and any and all substitutions and replacements thereof, all as the same may be
amended, restated, supplemented and/or modified from time to time.

 

“Rolling Period” shall mean, with respect to any fiscal quarter of Borrower,
such fiscal quarter and the three consecutive fiscal quarters immediately prior
thereto.

 

“Solvent” shall mean as to Borrower and each Subsidiary, that Borrower and each
Subsidiary (a) has capital sufficient to carry on its business and transactions
and all business and transactions in which it is about to engage; (b) is able to
pay its debts as they mature; and (c) owns property whose fair salable value is
greater than the amount required to pay its debts.

 

“Speedring” shall mean Speedring, Inc., Delaware corporation.

 

“Speedring Systems” shall mean Speedring Systems, Inc., a Delaware corporation.

 

“Subsidiary” shall mean any corporation, partnership, association or other
business entity (a) of which securities or other ownership interests
representing more than fifty percent (50%) of the equity or more than fifty
percent (50%) of the ordinary voting power or more than fifty percent (50%) of
the general partnership interests are, at the time any determination is being
made, owned, Controlled, or held, or (b) that is, at the time any

 

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determination is made, otherwise Controlled, by Borrower or one or more
Subsidiaries of Borrower or by Borrower and one or more Subsidiaries of
Borrower, including without limitation, the Subsidiary Guarantors, each of which
is a Subsidiary of Borrower.

 

“Subsidiary Guarantors” shall mean Speedring Systems, Speedring, Precision, BAC
and each other direct or indirect Subsidiary of Borrower that becomes a party to
this Agreement and the Guaranty Agreement pursuant to Section 7.12 hereof,
including, but not limited to, Telic, and the permitted successors and assigns
of each such Subsidiary Guarantor.

 

“Swap Agreement” shall mean the ISDA Master Agreement or any other swap
agreement (as defined in 11 United States Code Section 101) now or hereafter
entered into by Borrower with respect to any LIBOR Loan, including the Schedules
and all Confirmations related thereto (as such terms are defined in the ISDA
Master Agreement).

 

“Telic” shall mean Telic Optics, Inc., a Massachusetts corporation.

 

“Term Loan” shall have the meaning assigned in Section 2.1(b) hereof.

 

“Term Loan Note” shall mean the term loan promissory note of Borrower payable to
the order of Bank dated as of the date hereof, in the form of Exhibit B attached
hereto, evidencing the Obligations arising under the Term Loan, and any and all
substitutions and replacements thereof, all as the same may be amended,
restated, supplemented and/or modified from time to time.

 

“Termination Date” shall mean April 7, 2006 and any subsequent date to which the
Termination Date may be extended pursuant to Section 10.1(a) hereof.

 

“Type”, when used in respect of any Loan, shall refer to the Rate by reference
to which interest on such Loan is determined.  For purposes hereof, the term
“Rate” shall mean the LIBOR Rate and the Prime Rate.

 

“Unused Letter of Credit Commitment Amount” shall mean at any time (a) the
Letter of Credit Commitment Amount at such time, minus (b) the aggregate
Available Amount of all Letters of Credit outstanding at such time, minus (c)
the aggregate amount of all unreimbursed L/C Disbursements at such time.

 

“Unused Line Fees” shall have the meaning assigned in Section 3.6 hereof.

 

“Unused Revolving Loan Commitment Amount” shall mean at any time (a) the
Revolving Loan Commitment Amount at such time, minus (b) the aggregate principal
amount of all Revolving Loans outstanding at such time minus (c) the aggregate
Available Amount of all Letters of Credit outstanding at such time, minus (d)
the aggregate amount of all unreimbursed L/C Disbursements at such time.

 

“Yield Maintenance Fee” shall mean, with respect to each repayment or prepayment
of principal under any LIBOR Loan (whether such repayment or prepayment is made

 

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pursuant to Section 3.5 hereof, as a result of acceleration following an Event
of Default, or for any other reason), an amount computed as follows: the current
rate for United States Treasury securities (bills on a discounted basis shall be
converted to a bond equivalent) with a maturity date closest to the maturity
date of the Interest Period in effect for such LIBOR Loan at the time of such
repayment or prepayment shall be subtracted from the LIBOR Rate component of the
interest rate in effect under such LIBOR Loan at the time of such repayment or
prepayment.  If the result is zero or a negative number, the Yield Maintenance
Fee shall be zero.  If the result is a positive number, then the resulting
percentage shall be multiplied by the amount of the principal balance being
prepaid.  The resulting amount shall be divided by 360 and multiplied by the
number of days remaining in such Interest Period.  Said amount shall be reduced
to present value calculated by using the above referenced United States Treasury
securities rate and the number of days remaining in such Interest Period.

 

SECTION 1.2                                   COMPUTATION OF TIME PERIODS.

 

In this Agreement in the computation of periods of time from a specified date to
a later specified date, the word “from” shall mean “from and including” and the
words “to” and “until” each mean “to but excluding”.

 

SECTION 1.3                                   ACCOUNTING TERMS.

 

Unless otherwise defined, all accounting terms shall be construed, and all
computations or classifications of assets and liabilities and of income and
expenses shall be made or determined in accordance with GAAP.

 

SECTION 1.4                                   OTHER DEFINITIONAL PROVISIONS.

 

The definitions in Section 1.1 shall apply equally to both the singular and
plural forms of the terms defined.  Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter forms.
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require.  Except as otherwise
expressly provided herein, any reference in this Agreement to any Financing
Agreement shall mean such document as amended, restated, supplemented or
otherwise modified from time to time (subject to the restrictions on such
amendments, restatements, supplements or modifications set forth herein). The
words “include”, “includes” and “including” shall be deemed to be followed by
the phrase “without limitation”. The words “hereof”, “herein” and “hereunder”
and words of similar import shall refer to this Agreement as a whole and not to
any particular provision of this Agreement. The phrase “upon the occurrence and
during the continuance of any Event of Default” or phrases of similar import
contained herein or in any other Financing Agreement shall not be construed, by
implication or otherwise, to mean that Borrower, any Subsidiary Guarantor or any
other Person shall have a right to cure any such Event of Default (unless
otherwise expressly provided herein or therein), and the only right Borrower,
each Subsidiary Guarantor and/or any other Person shall have upon the occurrence
of any such Event of Default is to tender payment in full of all outstanding
Obligations unless Bank shall have

 

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agreed in writing to waive such Event of Default and/or otherwise permit
Borrower, any Subsidiary Guarantor and/or other Person to cure such Event of
Default.

 

SECTION 1.5                                   CONFLICTING TERMS.

 

It being the express intention and agreement of Obligors and Bank that the
provisions of this Agreement shall control and govern the Obligations, in the
event and to the extent that any term or provision of this Agreement conflicts
with a similar term or provision contained in another Financing Agreement, the
term or provision of this Agreement shall govern and control.

 

ARTICLE II

 

AMOUNTS AND TERMS OF THE LOANS

 

SECTION 2.1                                   AMOUNTS.

 

(a)                                  Revolving Loans. Subject to the terms and
conditions contained in this Agreement, Bank agrees to make revolving loans
(each a “Revolving Loan”) to Borrower from time to time on any Business Day
during the period from the date hereof until the Termination Date in an amount
for each such Revolving Loan not to exceed the Unused Revolving Loan Commitment
Amount on such Business Day. Within the limits of the Unused Revolving Loan
Commitment Amount, so long as Borrower is in compliance with all of the terms
and conditions of this Agreement and no Defaulting Event has occurred, Borrower
may borrow Revolving Loans under this Section 2.1(a), repay all or a portion of
outstanding Revolving Loans pursuant to Section 3.5 hereof, and re-borrow
Revolving Loans under this Section 2.1(a).

 

(b)                                 Term Loan. Subject to the terms and
conditions contained in this Agreement, Bank agrees to extend to Borrower a term
loan in the principal amount of $5,000,000 (the “Term Loan”) as evidenced by, in
addition to this Agreement, the Term Loan Note.

 

(c)                                  Letters of Credit. Subject to the terms and
conditions of this Agreement, Borrower may, from time to time on any Business
Day during the period from the date hereof until the Termination Date, request
Bank to issue Letters of Credit for drawing in Dollars (or such other currency
as shall be approved by Bank) for the account of Borrower or any Subsidiary
Guarantor or to amend, renew or extend an existing Letter of Credit.  A Letter
of Credit shall be issued, amended, renewed or extended on any Business Day,
provided that (i) no Letter of Credit shall be issued in an Available Amount
which exceeds the Unused Letter of Credit Commitment Amount on such Business
Day, and (ii) after giving effect to such issuance, amendment, renewal or
extension, the sum of (1) the aggregate outstanding principal amount of all
Revolving Loans on such Business Day, (2) the aggregate Available Amount of all
outstanding Letters of Credit on such Business Day, and (3) the aggregate
outstanding unpaid L/C Disbursements on such Business Day does not exceed the
Revolving Loan Commitment Amount.

 

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(d)                                 Use of Proceeds. Borrower represents that
the proceeds of the Revolving Loans shall be used by Borrower for working
capital and general corporate purposes, including, but not limited to, the
acquisition of Capital Assets and the issuance of Letters of Credit by the Bank
on behalf of the Borrower or any Subsidiary Guarantor, and Borrower represents
that the Term Loan will be used to finance the acquisition of all of the issued
and outstanding capital stock of Telic pursuant to the Merger Agreement.

 

SECTION 2.2                                   PROCEDURE FOR REVOLVING LOANS.

 

(a)                                  Notices of Borrowing. Each request for a
Revolving Loan may be made only once per Business Day and shall be made on
notice, given not later than (i) 1:00 p.m. (Hartford, Connecticut time) on the
date of the proposed borrowing, in the case of requests for Prime Rate Loans,
and (ii) 1:00 p.m. (Hartford, Connecticut time) on the second Business Day prior
to the date of the proposed borrowing, in the case of requests for LIBOR Loans,
by Borrower to Bank. Each such notice (which notice shall be irrevocable and
binding on Borrower) of a proposed borrowing (a “Notice of Borrowing”) shall be
by telephone, confirmed immediately in writing, or by telex or telecopier,
specifying the date of the proposed borrowing (which shall be a Business Day),
the amount to be borrowed and the type of borrowing (which shall be either a
Prime Rate Loan, a LIBOR Loan or any combination thereof as Borrower may elect
subject to the provisions of this Agreement). If no election as to the Type of
Revolving Loan borrowing is specified in any such Notice of Borrowing, then
Borrower shall be deemed to have requested such Revolving Loan to be a Prime
Rate Loan. All LIBOR Loans shall have an Interest Period of one (1) month. Each
borrowing under the Facility shall be in an amount equal to $250,000 or in
integral multiples of $100,000 in excess thereof. In the event that written
confirmation of a telephonic Notice of Borrowing differs in any respect from the
action taken by Bank, the records of Bank shall be presumed correct absent
manifest or demonstrable error.

 

(b)                                 Revolving Loan Account, Monthly Statements.
Insofar as Bank shall make Revolving Loans hereunder, Bank shall enter the
amounts of such Revolving Loans as debits on an internal ledger account (the
“Revolving Loan Account”).  Bank may also record to the Revolving Loan Account,
in accordance with customary banking procedures, all fees, accrued and unpaid
interest, late fees, other fees and charges which are properly chargeable to
Borrower under this Agreement, all payments, subject to collection, made by
Borrower on account of Obligations evidenced by the Revolving Loan Account and,
to the extent amounts contained in Borrower’s main operating concentration
account maintained with Bank are insufficient to pay the same, usual and
customary bank charges for the maintenance and administration of checking and
other bank accounts maintained by Borrower. On a monthly basis, Bank may render
a statement for the Revolving Loan Account, which statement, if rendered, shall
be presumed correct unless Borrower notifies Bank to the contrary within thirty
(30) days of the receipt of said statement by Borrower.

 

(c)                                  Disbursement of Revolving Loans. Insofar as
Borrower may request and Bank shall make Revolving Loans hereunder, Bank shall
make such funds available to Borrower by crediting Borrower’s main operating
concentration account maintained with Bank or such other account (whether or not
maintained with Bank) as Borrower may otherwise direct in writing.

 

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SECTION 2.3                                   PROCEDURE FOR LETTERS OF CREDIT;
CERTAIN CONDITIONS.

 

(a)                                  Notices of Issuance, Amendment, Renewal,
Extension.  Requests for the issuance of Letters of Credit (or to amend, renew
or extend an existing Letter of Credit) may be made only once per Business Day
and shall be made on notice, given not later than 1:00 p.m. (Hartford,
Connecticut time) three (3) Business Days prior to the date of the proposed
issuance or amendment, renewal or extension, by Borrower to the Bank. Each such
notice (which notice shall be irrevocable and binding on Borrower) of a proposed
issuance of a Letter of Credit or of an amendment, renewal or extension of an
existing Letter of Credit (each, a “Notice of Issuance”) shall be by telephone,
confirmed promptly in writing, or by telex or telecopier, specifying therein the
(i) requested date of issuance, amendment, renewal or extension (which shall be
a Business Day), (ii) requested Available Amount of such Letter of Credit in
Dollars (or other currency approved by the Bank), (iii) requested expiration
date of such Letter of Credit (which shall comply with subsection (c) below),
and (iv) the name and address of the beneficiary of such Letter of Credit, and
shall be accompanied by such other information as shall be necessary to prepare
such Letter of Credit and such application and agreement for letter of credit as
the Bank may require Borrower and/or any other Obligor to execute in connection
with such requested Letter of Credit (each, a “Reimbursement Agreement”).  In
the event that written confirmation of a telephonic Notice of Issuance differs
in any material respect from the action taken by the Bank, the records of the
Bank shall control absent manifest or demonstrable error.  In the event and to
the extent that the provisions of a Reimbursement Agreement shall conflict with
this Agreement, the more stringent provisions of each shall govern.

 

(b)                                 Form of Letter of Credit.  Each Letter of
Credit shall, among other things, (i) be in a form acceptable to the Bank, and
(ii) be governed by, and shall be construed in accordance with, the laws or
rules designated in such Letter of Credit or the applicable Reimbursement
Agreement, or if no such laws or rules are so designated, the Uniform Customs
(in the case of commercial letters of credit) or ISP98 (in the case of standby
letters of credit) and, as to matters not governed by the Uniform Customs or
ISP98, as applicable, Article 5 of the Uniform Commercial Code as in effect from
time to time in the State of Connecticut.

 

(c)                                  Expiry Dates.  Each Letter of Credit shall
expire at the close of business on the earlier of the date one (1) year after
the date of the issuance of such Letter of Credit or the date that is one
hundred eighty (180) Business Days after the Termination Date, unless such
Letter of Credit expires by its terms on an earlier date.

 

(d)                                 Reimbursement; L/C Disbursements as
Revolving Loans.  If the Bank shall make any L/C Disbursement in respect of a
Letter of Credit, Borrower shall pay to the Bank an amount equal to such L/C
Disbursement on the date specified for reimbursement in the applicable
Reimbursement Agreement.  Notwithstanding the foregoing, the Bank shall have the
right (but not the obligation), in its sole and absolute discretion, to treat as
Revolving Loans any and all L/C Disbursements which are not reimbursed to the
Bank on the date specified for reimbursement in the applicable Reimbursement
Agreement and, in furtherance thereof, the Bank shall have the right (but not
the obligation) to effect payment thereof, together with payment of any of the
fees, expenses and charges due and payable in connection therewith, immediately
by a

 

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charge to Borrower’s Revolving Loan Account, notwithstanding that the Bank has,
at such time, exercised any right it may have not to make Revolving Loans and
further notwithstanding that additional Revolving Loans are not available for
borrowing by Borrower.  Such treatment shall not constitute a Defaulting Event
or an Event of Default.  Any L/C Disbursement which Bank elects to treat as a
Revolving Loan shall initially be a Prime Rate Loan bearing interest at the
Prime Rate, provided that Borrower shall also have the right, subject to the
terms and conditions contained in this Agreement, to request Bank to make a
Revolving Loan in accordance with Section 2.2(a) hereof, the proceeds of which
Borrower intends to use to satisfy any or all of its Obligations in connection
with outstanding L/C Disbursements.

 

(e)                                  No Liability of the Bank.  Borrower assumes
all risks of the acts or omissions of any beneficiary or transferee of any
Letter of Credit with respect to the use of such Letter of Credit, and
Borrower’s obligations with respect to L/C Disbursements shall be absolute,
unconditional and irrevocable, irrespective of: (i) any lack of validity or
enforceability of any Letter of Credit, or any term or provision therein, (ii)
the existence of any dispute, claim, setoff, defense or other right that
Borrower or any other Person may have against the beneficiary under any Letter
of Credit, the Bank or any other Person, whether in connection with this
Agreement, any other Financing Agreement or any other related or unrelated
agreement or transaction; (iii) any draft or other document presented under a
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;
(iv) payment by the Bank under a Letter of Credit against presentation of a
draft or other documents that substantially complies in all material respects
with the terms of such Letter of Credit; and (v) any error, omission,
interruption or delay in any transmission, dispatch or delivery of any message
or advice, however transmitted, in connection with any Letter of Credit.

 

The foregoing shall not be construed to excuse the Bank from liability to
Borrower to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by Borrower to the extent
permitted by law) suffered by Borrower that are caused by (x) the Bank’s willful
misconduct or gross negligence in determining whether documents presented under
any Letter of Credit comply with the terms of the Letter of Credit, or (y) the
Bank’s willful failure to make lawful payment under a Letter of Credit after
presentation to it of a draft or documents strictly complying with the terms and
conditions of the Letter of Credit.  It is understood that the Bank may, subject
to the standard of gross negligence or willful misconduct, accept documents that
appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary and, in
making any payment under any Letter of Credit (1) the Bank’s exclusive reliance
on the documents presented to it under such Letter of Credit as to any and all
matters set forth therein, including reliance on the amount of any draft
presented under such Letter of Credit, whether or not the amount due to the
beneficiary thereunder equals the amount of such draft and whether or not any
document presented pursuant to such Letter of Credit proves to be insufficient
in any respect, if such document on its face appears to be in order, and whether
or not any other statement or any other document presented pursuant to such
Letter of Credit proves to be forged or invalid or any statement therein proves
to be inaccurate or untrue in any respect whatsoever and (2) any noncompliance
in any immaterial respect of the documents presented under such Letter of Credit
with the terms thereof shall, in each case, be deemed not to constitute willful
misconduct or gross negligence of the Bank.

 

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(f)                                    Interim Interest.  If the Bank shall make
any L/C Disbursement in respect of a Letter of Credit, then, unless Borrower
shall reimburse such L/C Disbursement in full on the date specified for
reimbursement in the applicable Reimbursement Agreement, the unpaid amount
thereof shall bear interest for each day from and including the date of such L/C
Disbursement to but excluding the date of payment, at a floating rate per annum
equal to the Prime Rate.

 

(g)                                 Cash Collateralization.  If any Event of
Default shall occur and be continuing, Borrower shall, on the third Business Day
after receipt of notice from the Bank of the amount to be deposited (which
notice shall also contain a description of the Event(s) of Default which shall
have occurred), deposit in an account with the Bank an amount in cash equal to
the aggregate Available Amount of all outstanding Letters of Credit as of such
date.  Such deposit shall be held by Bank as collateral for the payment and
performance of the Obligations.  The Bank shall have exclusive dominion and
control, including the exclusive right of withdrawal, over such account.  Such
deposits shall not bear interest.  Moneys in such account shall (i) first,
automatically be applied by the Bank to reimburse itself for L/C Disbursements
for which it has not been reimbursed, (ii) second, be held for the satisfaction
of the reimbursement obligations of Borrower for the Bank’s exposure under
undrawn Letters of Credit, and (iii) third, be applied to satisfy any other
Obligations.

 

SECTION 2.4                                   REPAYMENT OF REVOLVING LOANS,
OBLIGATIONS ABSOLUTE.

 

(a)                                  Revolving Loan Repayment. NOTWITHSTANDING
BANK’S RIGHTS UPON THE OCCURRENCE OF A DEFAULTING EVENT AND WHETHER OR NOT ANY
SUCH DEFAULTING EVENT HAS OCCURRED, BORROWER SHALL REPAY TO BANK THE AGGREGATE
PRINCIPAL AMOUNT OF ALL OUTSTANDING REVOLVING LOANS ON THE TERMINATION DATE.

 

(b)                                 Obligations Absolute.

 

(i)                                     The Obligations of Obligors under this
Agreement and all other Financing Agreements shall be unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement and such other Financing Agreements under all circumstances, including
without limitation, the following circumstances:

 

(A)                              any lack of validity or enforcement of this
Agreement, any other Financing Agreement or any other agreement or instrument
relating thereto;

 

(B)                                any agreed change in the time, manner or in
any other term of all or any of the Obligations, or any change in the place of
payment of any of the Obligations;

 

(C)                                any amendment or waiver of, or consent to
departure from, any of the Financing Agreements or all or any of the
Obligations;

 

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(D)                               the existence of any claim, set-off, defense
or other right that any of the Obligors may have, whether in connection with the
transactions contemplated by this Agreement or any unrelated transaction;

 

(E)                                 any document executed and/or delivered by or
on behalf of any Obligor or any other Subsidiary proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;

 

(F)                                 any release or amendment or waiver of or
consent to departure from any Guaranty Agreement; or

 

(G)                                any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing, including without
limitation, any other circumstance that might otherwise constitute a defense
available to, or a discharge of, any Obligor.

 

Without limiting the generality of the foregoing, it is expressly understood and
agreed that the absolute and unconditional obligation of the Obligors set forth
above shall not be construed as a waiver by the Obligors of any claims or
defenses it may have against Bank.

 

SECTION 2.5                                   METHOD OF PAYMENT, DIRECT DEBITS,
PAYMENT DATE ADJUSTMENTS, APPLICATION OF PAYMENTS.

 

(a)                                  Method of Payment. The Obligors shall make
each payment due under this Agreement and under the Notes to the Bank at the
Head Office (or such other place as the Bank may from time to time specify in
writing) not later than 3:00 P.M., Hartford, Connecticut time, on the date when
due in Dollars in immediately available funds, without setoff, defense or
counterclaim and free and clear of, and without any deduction or withholding
for, any taxes or other payments as contemplated under Section 4.6 hereof.

 

(b)                                 Direct Debits. Notwithstanding subsection
(a) above, Obligors hereby agree that the Bank may directly debit any demand
deposit account of any Obligor held by the Bank for any amount due and payable
under this Agreement, any of the Notes, any Guaranty Agreement, any
Reimbursement Agreement and/or the Bank Swap Agreement, including, without
limitation, principal, interest, fees and charges, provided that Bank shall only
debit Borrower’s main operating concentration account maintained with Bank so
long as amounts contained therein are sufficient to pay such amount or amounts
then due and payable.

 

(c)                                  Payment Date Adjustments. Whenever any
payment of principal of, or interest on, any Prime Rate Loan shall be due on a
day which is not a Business Day, such payment shall be made on the next
succeeding Business Day. Whenever any payment of principal of, or interest on,
any LIBOR Loan shall be due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day unless such Business Day falls
in another calendar month, in which case the date for payment thereof shall be
the next preceding

 

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Business Day. If the date for any payment of principal is extended by operation
of law or otherwise, interest and fees thereon shall be payable for such
extended time.

 

(d)                                 Application of Payments. All payments
(including prepayments) by or on behalf of Borrower hereunder and under any of
the other Financing Agreements shall be applied first to the payment of all
fees, expenses and other amounts due to the Bank (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 in such manner and order of priority
as the Bank determines in its sole discretion.

 

ARTICLE III

 

INTEREST, INTEREST PERIODS, CONVERSIONS,
LATE PAYMENTS, PREPAYMENTS, FEES AND INTEREST RATE HEDGE

 

SECTION 3.1                                   INTEREST AND LATE PAYMENTS.

 

(a)                                  Pre-default Rates.

 

(i)                                     Revolving Loans. Subject to the
provisions of Section 3.1(b) hereof, during the period from the date made
through and including the date of payment in full, each Revolving Loan shall
bear interest on the outstanding principal amount thereof at a rate per annum
equal to, at the election of Borrower subject to the terms of this Agreement:
(A) the Prime Rate, or (B) the LIBOR Rate (as determined for each available
Interest Period) plus the Applicable Margin for available Interest Periods of
one (1) month.

 

(ii)                                  Term Loan. Subject to the provisions of
Sections 3.1(b), 4.1 and 4.3 hereof, the Term Loan shall bear interest at a rate
per annum (as determined for each available Interest Period) equal to the LIBOR
Rate plus the Applicable Margin for available Interest Periods of one (1) month.

 

(b)                                 Default Interest. Notwithstanding the
foregoing, at all times after the occurrence and during the continuance of an
Event of Default (whether or not Bank has accelerated payment of the
Obligations) or after maturity (by acceleration or otherwise) or after judgment,
Borrower’s right to select pricing options shall cease and interest on all Loans
shall, at the option of the Bank, accrue at a rate per annum equal to two
percent (2.0%) above the Prime Rate.

 

(c)                                  Calculation of Interest, Interest Rate
Changes. Interest on the Loans shall be calculated on the basis of a 360 day
year and the actual number of days elapsed. With respect to each Prime Rate
Loan, any change in the interest rate because of a change in the Prime Rate
shall become effective, without notice or demand, immediately upon any change in
the Prime Rate. With respect to each LIBOR Loan, any change in the interest rate
because of a change in the Reserve Percentage shall become effective, without
notice or demand, on the date on which such change in the Reserve Percentage
becomes effective.

 

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(d)                                 Payment of Interest.

 

(i)                                     Prime Rate Loans. Interest on each Prime
Rate Loan shall be payable monthly in arrears, in Dollars and in immediately
available funds beginning on the first Business Day of the month immediately
succeeding the month in which such Loan was made or converted into such Prime
Rate Loan and continuing on the first Business Day of each and every month
thereafter, without notice or demand, so long such Loan remains outstanding or
until such Loan is converted to a LIBOR Loan in accordance with the provisions
of this Agreement.

 

(ii)                                  LIBOR Loans. Interest on each LIBOR Loan
shall be payable in Dollars and in immediately available funds on the last
Business Day of each applicable Interest Period.

 

(e)                                  Lawful Interest. All agreements between
Borrower, each Subsidiary Guarantor and Bank are hereby expressly limited so
that in no contingency or event whatsoever, whether by reason of acceleration of
maturity of any of the Obligations or otherwise, shall the amount paid or agreed
to be paid to Bank for the use or the forbearance of the Obligations exceed the
maximum permissible under applicable law.  As used herein, “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 Agreement, the Notes and the other Financing
Agreements shall be governed by such new law as of its effective date. In this
regard, it is expressly agreed that it is the intent of the Obligors and Bank in
the execution, delivery and acceptance of the Financing Agreements to contract
in strict compliance with the laws of the State of Connecticut from time to time
in effect. If, under or from any circumstances whatsoever, fulfillment of any
provision hereof or of any of the other Financing Agreements 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 for from circumstances whatsoever 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 of
the Loans and not to the payment of interest. This provision shall control every
other provision of all agreements between Borrower, each Subsidiary Guarantor
and Bank.

 

SECTION 3.2                                   ELECTION AND CONTINUATION OF
INTEREST PERIODS.

 

(a)                                  Election.  The only Interest Period
available for Revolving Loans and the Term Loan shall be an Interest Period of
one (1) month.

 

(b)                                 Continuation.

 

(i)                                     Revolving Loans.  Any Revolving Loan
which is a LIBOR Loan shall be automatically continued as a LIBOR Loan (unless
repaid in full) upon the expiration of the then current Interest Period with
respect thereto without further notice to or from Borrower, provided that no
Revolving Loan may be continued as a LIBOR Loan: (A) at a time when any

 

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Event of Default has occurred and is continuing, or (B) at a time when a LIBOR
Loan is unavailable pursuant to Sections 4.1 or 4.3 hereof.

 

(ii)                                  Term Loan.  The Term Loan shall be a LIBOR
Loan with available Interest Periods of one (1) month only, and shall be
automatically continued as a LIBOR Loan upon the expiration of the then current
Interest Period with respect thereto without further notice from or to Borrower,
provided that the Term Loan may not be continued as a LIBOR Loan: (A) at a time
when any Event of Default has occurred and is continuing, or (B) at a time when
a LIBOR Loan is unavailable pursuant to Sections 4.1 or 4.3 hereof.

 

SECTION 3.3                                   CONVERSION OF REVOLVING LOANS.

 

Borrower may elect from time to time, subject to the provisions of this
Agreement, to convert any outstanding Revolving Loan, or a portion or portions
thereof, into a Revolving Loan of another available Type by giving Bank not less
than two (2) Business Days’ prior irrevocable written notice of such election,
provided that any such conversion of a LIBOR Loan to a Prime Rate Loan may only
be made on the last Business Day of an Interest Period with respect thereto. Any
such notice of conversion to a LIBOR Loan shall specify the amount of the
Revolving Loan being converted and, in the case of a conversion to a LIBOR Loan,
the length of the initial available Interest Period.  All or any part of
outstanding Revolving Loans may be converted as provided herein, provided that
no Prime Rate Loan may be converted to a LIBOR Loan: (a) at a time when any
Event of Default has occurred and is continuing, or (b) in the event a LIBOR
Loan is unavailable pursuant to Sections 4.1 or 4.3 hereof.  Borrower shall have
no ability to convert all or any portion of the Term Loan to a Prime Rate Loan.

 

SECTION 3.4                                   LATE PAYMENT.

 

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 and payable (other than as a
result of being accelerated after the occurrence of an Event of Default),
without in any way affecting Bank’s right to declare an Event of Default to have
occurred, Borrower shall pay to Bank a late charge equal to five percent (5%) of
the required payment and such late charge shall be immediately due and payable
without demand or notice of any kind.

 

SECTION 3.5                                   REPAYMENTS AND PREPAYMENTS.

 

(a)                                  Revolving Loans. Borrower may, at its
option, repay any Revolving Loan at any time and from time to time, in whole or
in part, on the following conditions: (i) Borrower shall pay all accrued
interest on the principal being paid to the date of the repayment and, in the
case of repayments in full, all fees, charges, costs, expenses and other amounts
then due under any of the Revolving Loans; and (ii) if such Revolving Loan (or
portion thereof being repaid) is then a LIBOR Loan, such LIBOR Loan shall only
be repaid on the last Business Day of the then current Interest Period with
respect thereto (unless such repayment is accompanied by the required Yield
Maintenance Fee and breakage and/or other make-whole amounts, if any, as
provided in subsections (c) and (e) below). In its notice, Borrower shall
specify the date and

 

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amount of the prepayment, whether the Revolving Loan being repaid is a Prime
Rate Loan, a LIBOR Loan or a combination thereof, and, if a combination thereof,
the amount allocable to each.

 

(b)                                 Term Loan. Borrower may, at its option,
prepay the Term Loan, in whole or in part, on the following conditions: (i)
Borrower shall pay all accrued interest on the principal being paid to the date
of the prepayment and, in the case of prepayments in full, all fees, charges,
costs, expenses and other amounts then due under the Term Loan; (ii) if the Term
Loan (or portion thereof being prepaid) is then a LIBOR Loan, such LIBOR Loan
shall only be prepaid on the last Business Day of the then current Interest
Period with respect thereto (unless such repayment is accompanied by the
required Yield Maintenance Fee and breakage and/or other make-whole amounts, if
any, as provided in subsections (c) and (e) below); and (iii) any partial
prepayment of the Term Loan shall be applied to principal installments due
thereunder in the inverse order of maturity and shall not relieve Borrower’s
obligation to make regularly scheduled principal payments thereunder. In its
notice, Borrower shall specify the date and amount of the prepayment.

 

(c)                                  Indemnity for Repayment or Prepayment of
LIBOR Loans; Payment of Yield Maintenance Fee.  In the event that a repayment or
prepayment of a LIBOR Loan is made, required or permitted on a date other than
the last Business Day of the then current Interest Period with respect thereto,
Borrower shall indemnify Bank therefor in accordance with Section 4.5 hereof,
including but not limited to, paying to Bank the applicable Yield Maintenance
Fee, if any.

 

(d)                                 Prepayment of Loans. In the event Borrower
makes, at any time, a repayment or prepayment of a Loan, such repayment or
prepayment shall be made without penalty or premium to Borrower (other than, in
the case of LIBOR Loans, the payment of the applicable Yield Maintenance Fee and
breakage and/or other make-whole amounts, if any).

 

(e)                                  Effect of Prepayments on Bank Swap
Agreement.

 

(i)                                     The prepayment by Borrower of all or any
portion of the Term Loan shall not affect Borrower’s obligation to continue to
make payments to Bank under the Bank Swap Agreement (and, if applicable, to pay
any breakage or other make-whole amounts with respect thereto), and the Bank
Swap Agreement and Borrower’s obligations thereunder shall remain in full force
and effect notwithstanding any such prepayment so long as the Bank Swap
Agreement remains in full force and effect.

 

(ii)                                The prepayment in full of the Term Loan at a
time when the Bank Swap Agreement is in effect with respect thereto but prior to
the Maturity Date of the Term Loan shall, at Bank’s option, be deemed an
“Additional Termination Event” (as such term is defined in the Bank Swap
Agreement), the occurrence of which shall entitle Bank, at its option, to
terminate the transaction entered into under the Bank Swap Agreement relating to
such Term Loan. Upon any such termination of the Bank Swap Agreement, Borrower
shall be liable to Bank for all indebtedness and obligations arising under or in
connection with such termination, including

 

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without limitation, all amounts due to Bank, as swap counterparty, as a result
of the occurrence of such an “Additional Termination Event”.

 

(f)                                    Application of Prepayments.

 

Any and all prepayments shall be applied in accordance with Section 2.5(d)
hereof.  All partial prepayments, to the extent applied to principal, shall be
applied to the principal installments due under the applicable Loan in the
inverse order of maturity and shall not relieve Borrower’s obligation to make
regularly scheduled principal payments thereunder.

 

SECTION 3.6                                   UNUSED LINE FEES.

 

No later than five (5) Business Days after Borrower’s receipt of an invoice or
other notice as to the amount of such fee, Borrower shall pay to Bank fees based
upon the average daily Unused Revolving Loan Commitment Amount for each calendar
quarter of Borrower (the “Unused Line Fees”). The Unused Line Fees shall be
calculated as of the end of each calendar quarter of Borrower and on the
Termination Date (or such earlier date on which the Revolving Loan has been
terminated and all Obligations under the Revolving Loan are fully and finally
paid) and shall be determined by multiplying (i) the Applicable Unused Line Fee
Percentage for such calendar quarter (or portion thereof) by (ii) the Unused
Revolving Loan Commitment Amount for each day during such calendar quarter (or
portion thereof).

 

SECTION 3.7                                   COMMITMENT FEE.

 

On or before the date hereof, Borrower shall pay to Bank a one-time
non-refundable commitment fee with respect to the Term Loan in an amount equal
to $40,000 (the “Commitment Fee”).

 

SECTION 3.8                                   LETTER OF CREDIT FEES.

 

In connection with the issuance, extension or renewal of each Letter of Credit,
Borrower shall pay to the Bank all standard negotiation and administrative fees
and charges imposed by the Bank (collectively, the “Letter of Credit Fees”), in
each case payable upon issuance, extension or renewal.

 

SECTION 3.9                                   INTEREST RATE HEDGE WITH BANK.

 

Borrower acknowledges and affirms its election to enter into the Bank Swap
Agreement with Bank in order to hedge the floating interest expense under the
Term Loan for the entire term thereof.

 

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ARTICLE IV

 

FUNDING AND YIELD PROTECTION

 

SECTION 4.1                                   ILLEGALITY.

 

Notwithstanding any other provisions herein, if, after the date hereof, any
applicable law, regulation or directive, or any change therein or in the
interpretation or application thereof after the date hereof shall make it
unlawful, or any central bank or other governmental authority shall assert that
it is unlawful, for Bank to make or maintain any LIBOR Loan as contemplated by
this Agreement, then (a) the obligation of Bank to make such LIBOR Loan,
continue such LIBOR Loan as such and convert a Prime Rate Loan to such LIBOR
Loan shall forthwith be suspended until Bank shall notify Borrower that Bank has
determined that the circumstances causing such suspension no longer exist, and
(b) all such Loans then outstanding as unlawful LIBOR Loans, if any, shall be
converted automatically, without notice on the last day of the then current
Interest Periods with respect thereto (or within such earlier period as required
by law) to a loan bearing interest at a floating rate per annum equal to the
Prime Rate. If any such conversion of a LIBOR Loan is made or required on a day
that is not the last Business Day of the then current Interest Period applicable
thereto, Borrower shall pay Bank such amount or amounts as may be required
pursuant to Sections 3.5 and 4.5 hereof, including, without limitation, the
applicable Yield Maintenance Fee, if any.

 

SECTION 4.2                                   ADDITIONAL COSTS.

 

In the event that applicable law, treaty or regulation or directive from any
government, governmental agency or regulatory authority enacted after the date
hereof, or any change therein or in the interpretation or application thereof,
or compliance by Bank with any request or directive having the force of law
enacted after the date hereof from any central bank or government, governmental
agency or regulatory authority, shall:

 

(a)                                  subject Bank to any tax of any kind
whatsoever (except taxes on the overall net income, franchise or gross receipts
of Bank) with respect to this Agreement, the Notes or any of the Loans made by
it, or any of the Letters of Credit issued by it, or change the basis of
taxation of payments to Bank of principal, interest or any other amount payable
hereunder or thereunder (except for changes in the rate or calculation of tax on
the overall net income of Bank);

 

(b)                                 impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirements against assets
held by, or deposits or other liabilities in or for the account of, advances or
loans or other extensions of credit by, or any other acquisition of funds by,
any office of Bank, including (without limitation) pursuant to Regulations of
the Board of Governors of the Federal Reserve System; or

 

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(c)                                  in the opinion of Bank, cause any Note, any
Loan, any Letter of Credit or this Agreement to be included in any calculations
used in the computation of regulatory capital standards; or

 

(d)                                 impose on Bank any other condition;

 

and the result of any of the foregoing is to increase the cost to Bank of
making, converting into, continuing and/or maintaining the Loans (or any part
thereof) or issuing Letters of Credit by an amount that Bank deems to be
material, or to reduce the amount of any payment (whether of principal, interest
or otherwise) with respect of any of the Loans or any of the Reimbursement
Agreements by an amount that Bank deems material, then, in any case, Borrower
shall promptly pay Bank, upon its demand, such additional amounts necessary, in
the reasonable judgment of Bank, to compensate Bank for such additional costs or
such reduction, as the case may be (collectively the “Additional Costs”). Bank
shall give Borrower notice of any such determination as soon as practicable and
shall certify the amount of such Additional Costs to Borrower, and such
certification, absent manifest or demonstrable error, shall be presumed
conclusive.

 

SECTION 4.3                                   BASIS FOR DETERMINING LIBOR BASE
RATE INADEQUATE OR UNFAIR.

 

In the event that Bank shall have determined (which determination shall be
conclusive and binding upon Borrower) that (a) by reason of circumstances
affecting the interbank LIBOR market in which Bank regularly participates,
adequate and reasonable means do not exist for determining the LIBOR Rate, or
(b) Dollar deposits in the relevant amount and for the relevant maturity are no
longer available to Bank in the interbank LIBOR market in which Bank regularly
participates, or (c) the making or continuation of LIBOR Loans has been made
impractical or unlawful by the occurrence of a contingency that materially and
adversely affects the interbank LIBOR market in which Bank regularly
participates, or (d) the LIBOR Base Rate will not adequately and fairly reflect
the cost to Bank of making, funding or maintaining LIBOR Loans, or (e) the LIBOR
Base Rate shall no longer represent the effective cost to Bank of U.S. Dollar
deposits in the relevant market for deposits in which it regularly participates,
Bank shall give Borrower notice of such determination as soon as practicable. If
such notice is given (i) any requested LIBOR Loan shall be made as a Prime Rate
Loan, unless Borrower gives Bank two (2) Business Days’ prior written notice
that its request for such borrowing is cancelled, (ii) any Revolving Loan that
was to have been converted to a LIBOR Loan shall be converted into or continued
as, as the case may be, a Prime Rate Loan, and (iii) any outstanding LIBOR Loan
shall be automatically converted, without notice, on the last Business Day of
the then current Interest Period applicable thereto: (v) to, in the case of all
LIBOR Loans which are Revolving Loans, Prime Rate Loans; (w) to, with respect to
the Term Loan, a loan with an interest rate equal to the Prime Rate. Until such
notice has been withdrawn, the obligation of Bank to make LIBOR Loans, continue
LIBOR Loans as such and convert Revolving Loans to LIBOR Loans shall forthwith
be suspended.

 

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SECTION 4.4                                   CAPITAL ADEQUACY PROTECTION.

 

If Bank shall have determined that the adoption of any applicable law,
governmental rule, regulation or order regarding capital adequacy of banks or
bank holding companies, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by Holder with any request or directive regarding capital
adequacy (whether or not having the force of law and whether or not failure to
comply therewith would be unlawful, so long as Bank believes in good faith that
such has the force of law or that the failure to so comply would be unlawful) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on any of Bank’s capital as a consequence
of Bank’s obligations hereunder to a level below that which Bank could have
achieved but for such adoption, change or compliance (taking into consideration
Holder’s policies with respect to capital adequacy immediately before such
adoption, change or compliance and assuming that Bank’s capital was fully
utilized prior to such adoption, change or compliance) by an amount deemed by
Bank in its reasonable judgment to be material, then, upon demand, Borrower
shall promptly pay to Bank, from time to time as specified by Bank, such
additional amounts as shall be sufficient to compensate Bank for such reduced
return, together with interest on each such amount from the date of such
specification by Bank until payment in full thereof at the highest rate of
interest (other than the default rate of interest) due on the Loans. A
certificate of Bank setting forth the amount to be paid to Bank shall, in the
absence of manifest error, be presumed conclusive. In determining such amount,
Bank shall use any reasonable averaging and attribution methods generally
employed by the banking industry under such circumstances.

 

SECTION 4.5                                   INDEMNITY.

 

In the event of (a) a default by Borrower in the payment of principal of or
interest on any LIBOR Loan, (b) the failure by Borrower to complete a borrowing
of, conversion into or continuation of a LIBOR Loan after notice thereof has
been given, or (c) the making of a repayment or prepayment of a LIBOR Loan
(whether such repayment or prepayment is made pursuant to Sections 3.5 or 4.1
hereof, as a result of termination and/or acceleration following an Event of
Default, or for any other reason) on a day which is not the last day of the then
current Interest Period applicable thereto, Borrower agrees to pay to Bank, in
addition to and not in lieu of Additional Costs and any other amount due
hereunder (but without duplication as to amounts paid in respect of the required
Yield Maintenance Fee), on demand such amount or amounts as shall be sufficient
in the reasonable opinion of Bank to compensate Bank for any loss, cost or
expense (including, without limitation, costs or losses associated with
prepaying or redeploying deposits, whether or not Bank shall have actually
funded the Loan with corresponding deposits) incurred as a result of the
occurrence of any of the foregoing conditions (a), (b) or (c).  Any demand by
Bank for payment pursuant to this Section 4.5 shall be accompanied by a schedule
in reasonable detail setting forth its computation of any such loss, cost or
expense, such schedule to be conclusive and binding on Borrower absent manifest
or demonstrable error.

 

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SECTION 4.6                                   PAYMENTS FREE OF TAXES AND OTHER
DEDUCTIONS.

 

Any and all payments by or on behalf of Obligors hereunder and under any of the
other Financing Agreements shall be made without setoff or counterclaim and free
and clear of and without deduction for any and all current and future taxes,
levies, imposts, duties, charges, fees, deductions, withholdings, liabilities,
compulsory loans, restrictions or conditions of any nature now or hereafter
imposed or levied by any jurisdiction or any political subdivision thereof or
taxing or other authority therein (collectively or individually called “Taxes”).
The parties hereto acknowledge that Obligors shall not be responsible for the
payment of any taxes on the overall net income of Bank which may arise as a
result of the Loans.  If any such obligation is imposed upon any of the Obligors
with respect to any amount payable by it hereunder or under any of the other
Financing Agreements, Obligors will pay to Bank on demand after notice from the
Bank (if not otherwise paid to the appropriate taxing authority), such
additional amount in Dollars as shall be necessary to enable Bank to receive the
same net amount which Bank would have received on such due date had no such
obligation been imposed upon Obligors.  Obligors will deliver promptly to Bank
certificates or other valid vouchers for all taxes or other charges deducted
from or paid with respect to payments made by Obligors hereunder or under such
other Financing Agreements.  Obligors will indemnify Bank for the full amount of
Taxes paid by Bank and any liability (including penalties, interest and expenses
(including reasonable attorneys’ fees and expenses) arising therefrom or with
respect thereto, whether or not such Taxes were correctly or legally asserted by
the relevant Government Authority.  A certificate as to the amount of such
payment or liability prepared by Bank, absent manifest or demonstrable error,
shall be final, conclusive and binding for all purposes.  Such indemnification
shall be made within ten (10) days after the date Bank makes written demand
therefor.

 

SECTION 4.7                                   SURVIVAL.

 

All claims by Bank under this Article IV shall be brought within one hundred
eighty (180) days of Bank’s actual knowledge of the basis for such claims (which
may be after the termination of this Agreement and the payment of the Loans and
other Obligations).

 

ARTICLE V

 

REPRESENTATIONS AND WARRANTIES

 

SECTION 5.1                                   REPRESENTATIONS AND WARRANTIES.

 

In order to induce Bank to enter into this Agreement and the other Financing
Agreements and to make the Loans and to issue the Letters of Credit, each of the
Obligors makes the following representations and warranties to Bank, which shall
be deemed made as of the date hereof and as of the date of each Revolving Loan
(except to the extent such representation or warranty relates to a specified
date, in which case such representation or warranty shall be true and correct as
of such date), and shall survive the execution and delivery hereof and each
performance hereunder. Any knowledge acquired by Bank shall not diminish Bank’s
rights to rely upon such representations and warranties.

 

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(a)                                  Incorporation, Good Standing and Due
Qualification.

 

(i)                                     Borrower (i) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware; (ii) has all requisite power and authority necessary to own its
properties and assets and to carry on the business in which it is now engaged or
proposed to be engaged; and (iii) is duly qualified and in good standing to do
business as a foreign corporation under the laws of each jurisdiction in which
such qualification is required except to the extent such failure to be so
qualified would not reasonably be expected to result in a Material Adverse
Effect.

 

(ii)                                  Each Subsidiary Guarantor (i) is a
corporation duly organized, validly existing and in good standing under the laws
of their respective jurisdictions of incorporation; (ii) has all requisite power
and authority necessary to own its properties and assets and to carry on the
business in which it is now engaged or proposed to be engaged; and (iii) is duly
qualified and in good standing to do business as a foreign corporation under the
laws of each jurisdiction in which such qualification is required except to the
extent such failure to be so qualified would not reasonably be expected to
result in a Material Adverse Effect.

 

(b)                                 Corporate Authority. Each Obligor has full
power and authority to enter into this Agreement and the other Financing
Agreements, to make the borrowings and guaranties contemplated herein, to
execute and deliver the Notes and the other Financing Agreements as to which
they are a party, and to incur the obligations provided for herein and therein,
all of which have been duly authorized by all necessary corporate action. No
other consent or approval or the taking of any other action in respect of
shareholders or of any public authority is required as a condition to the
validity or enforceability of this Agreement, the Notes, the Guaranty
Agreements, the other Financing Agreements, or any other instrument, document or
agreement delivered in connection herewith or therewith, except in each case as
would not reasonable be expected to result in a Material Adverse Effect.

 

(c)                                  Binding Agreements. This Agreement
constitutes, and the Notes, the Guaranty Agreements and the other Financing
Agreements executed and/or delivered in connection herewith or therewith, when
issued and delivered pursuant hereto for value received shall constitute, the
valid and legally binding obligations of each of the Obligors which are a party
thereto, enforceable in accordance with their respective terms, except as
enforcement may be limited by principles of equity, bankruptcy, insolvency, or
other laws affecting the enforcement of creditors’ rights generally.

 

(d)                                 Litigation. Except as set forth in Schedule
5.1(d), as of the date hereof, there are no actions, suits or proceedings
pending against any Obligor or any of their properties or assets before any
court, Governmental Authority, board of arbitration, or arbitrator, nor to the
best of any Obligor’s knowledge, are any actions, suits or proceedings
threatened, which, either in any case or in the aggregate, would have a Material
Adverse Effect, nor are there any such actions, suits or proceedings which
question the validity of this Agreement, the Notes, the Guaranty Agreements, 
any of the other Financing Agreements, or any action to be taken in connection
with the transactions contemplated hereby or thereby. Without limiting the
generality

 

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of the foregoing, there are no proceedings now pending nor threatened with
respect to the operation of the business of any of the Obligors before the
National Labor Relations Board, State Commission on Human Rights and
Opportunities, State Department of Labor, U.S. Department of Labor or any other
Governmental Authority having jurisdiction of employee rights with respect to
hiring, tenure and conditions of employment. No Obligor has received any
summons, citation, directive, letter, or other communication from any
Governmental Authority concerning any intentional or unintentional violation or
alleged violation of any Environmental Laws which may, in any one case or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

 

(e)                                  No Conflicting Law or Agreements. The
execution, delivery and performance by each of the Obligors of this Agreement,
the Notes, the Guaranty Agreements and the other Financing Agreements to which
they are a party: (i) do not violate any provision of the charter documents or
By-laws of any Obligor, (ii) do not violate any order, decree or judgment, or
any provision of any statute, rule or regulation, (iii) do not violate or
conflict with, result in a breach of or constitute (with notice or lapse of
time, or both) a default under any material shareholder agreement, stock
preference agreement, mortgage, indenture or other contract or undertaking to
which any Obligor is a party, or by which any of their properties is bound, and
(iv) do not result in the creation or imposition of any Lien, charge or
encumbrance of any nature whatsoever upon any property or assets of any Obligor
in favor of any Person.

 

(f)                                    Taxes. With respect to all taxable
periods of each Obligor that remain open and subject to adjustment under
applicable statutes of limitation, each Obligor has filed all tax returns which
are required to be filed and all federal, state, municipal, franchise and other
taxes shown on such filed returns have been paid or are being diligently
contested, in good faith, by appropriate proceedings and have been reserved
against as required by GAAP.

 

(g)                                 Financial Information. All factual written
data, reports and information which any Obligor has heretofore delivered or
caused to be so delivered to Bank in connection with this Agreement are complete
and correct in all material respects, contain no material omission or
misstatement and fairly present the Consolidated and consolidating financial
condition of the Obligors as of the dates and for the periods referred to and
have been prepared in accordance with GAAP consistently applied by the Obligors
throughout the periods involved (other than any forecasts, projections or other
forward-looking information, as to which no representation is being made
hereunder). All financial and other information submitted by any Obligor to
Bank, whether previously or in the future, is and will be true and correct in
all material respects, and is and will be complete insofar as may be necessary
to give Bank a true and accurate knowledge of the subject matter.

 

(h)                                 Adverse Developments. Since the date of the
most recent financial statements of the Obligors delivered to Bank, there has
occurred no event or condition which would have a Material Adverse Effect.

 

(i)                                     Existence of Indebtedness. As of the
date hereof, set forth on Schedule 5.1(i) is a complete and accurate list of all
existing Indebtedness of the Obligors (other than Indebtedness owing to trade
creditors) to any Person or entity (except Bank), including without

 

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limitation, all Indebtedness owing to any officer, director, shareholder and
employee (in the aggregate) of each of the Obligors, showing as of the date
hereof the principal amount outstanding thereunder and all Liens and security
interests of any nature given or agreed to be given as security therefor.

 

(j)                                     Existence of Assets and Title Thereto.
Each Obligor has good title to or rights in its properties and assets, including
the properties and assets reflected in the financial statements referred to
above. As of the date hereof, such properties and assets are not subject to any
mortgage, pledge, Lien, lease, encumbrance or charge except as set forth on
Schedule 5.1(j).

 

(k)                                  Regulations T, U and X. No portion of the
proceeds of the borrowings hereunder are being used and will not be used,
directly or indirectly, for the purposes of purchasing or carrying any margin
stock (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) in violation, or which would cause Bank to be in violation, of
Regulations T, U or X promulgated by the Board of Governors of the Federal
Reserve System.

 

(l)                                     Compliance. No Obligor is in default
with respect to any order, writ, injunction or decree of any court or of any
federal, state, municipal or other governmental department, commission, board,
bureau, agency, authority or official and no Obligor is in violation of any
material law, statute, rule or regulation to which it or its properties is
subject, where such default or violation would have a Material Adverse Effect.
Each Obligor further represents that it has not received notice of any such
default from any party; and is not in default in the payment or performance of
any of its obligations to any third parties or in the performance of any
mortgage, indenture, lease, contract or other agreement to which it is a party
or by which any of its assets or properties is bound, where, in any such case,
such default or violation would have a Material Adverse Effect.

 

(m)                               Leases. Each Obligor enjoys quiet and
undisturbed possession under all material leases under which it is operating,
and all of such material leases are valid and subsisting and to is knowledge not
in default.

 

(n)                                 Pension Plans.

 

(i)                                     No fact, including but not limited to
any “reportable event”, as that term is defined in Section 4043 of ERISA exists
in connection with any Plan of any Obligor or of and Person affiliated with any
Obligor (collectively, the “Companies”), under Sections 414(b), (c), (m), (n)
and (o) of the Internal Revenue Code of 1986, as amended (the “Code”) which
might constitute grounds for termination of any such Plan by the Pension Benefit
Guaranty Corporation (the “PBGC”), or for the appointment by the appropriate
United States District Court of a trustee to administer any such Plan;

 

(ii)                                  No “prohibited transaction” within the
meaning of Section 406 of ERISA or Section 4975 of the Code exists or will exist
upon the execution and delivery of this Agreement and the other Financing
Agreements, or the performance by the parties hereto or thereto of their
respective duties and obligations hereunder and thereunder;

 

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(iii)                               Each of the Companies have made or accrued
all contributions due under the terms of the Plans, and no application for a
funding waiver or an extension of any amortization period pursuant to Section
412 of the Code has been made with respect to any “pension plan”, as defined in
Section 3 of ERISA, that is subject to Title IV of ERISA, and the present fair
market value of all Plan assets exceeds the present value of all vested benefits
under each Plan on a plan termination basis (using PBGC actuarial assumptions),
as determined on the most recent valuation date of the Plan and in accordance
with ERISA and each of the Companies agrees to do all acts, including, but not
limited to, timely making all contributions necessary to maintain compliance
with ERISA or the Code, and agrees not to terminate any such Plan in a manner or
do or fail to do any act which could result in the imposition of a Lien on any
of its properties pursuant to Section 4068 of ERISA;

 

(iv)                              None of the Companies sponsors or maintains,
and has never contributed to, and has not incurred any withdrawal liability
under a “multi-employer plan” as defined in Section 3 of ERISA and none of the
Companies has any written or verbal commitment of any kind to establish,
maintain or contribute to any “multi-employer plan” under the Multi-employer
Pension Plan Amendment Act of 1980;

 

(v)                                 None of the Companies has any unfunded
liability in contravention of ERISA and the Code;

 

(vi)                              Each Plan that is intended to be a qualified
plan under Section 401(a) of the Code has received a determination letter from
the Internal Revenue Service (the “IRS”) stating that the Plan is so qualified
and such determination continues to be in full force and effect.  All amendments
requested by the IRS in connection with the issuance of a favorable
determination action letter have been adopted by the Plan on or before the date
prescribed by the regulations under Section 401(b) of the Code;

 

(vii)                           Each of the Plans complies currently, and has
complied in the past, both as to form and operation, in all material respects,
with its terms and with the applicable provisions of the Code and ERISA, and all
applicable regulations thereunder and all applicable rules issued by the
Internal Revenue Service, U.S. Department of Labor and the PBGC, and each Plan
intended to qualify under Section 401(a) of the Code is and remains a
“qualified” plan under the Code;

 

(viii)                        No actions, suits or claims are pending (other
than routine claims for benefits) against any Plan, or the assets of any such
Plan;

 

(ix)                                The Companies have performed all obligations
required to be performed by it under any Plan and the Companies are not in
default, or in violation of any Plan, and have no knowledge of any such default
or violation by any other party to any and all Plans;

 

(x)                                   No liability has been incurred by any of
the Companies to the PBGC or to participants or beneficiaries on account of any
termination of a Plan subject to Title IV of ERISA, no notice of intent to
terminate a Plan has been filed by (or on behalf of) any of the

 

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Companies pursuant to Section 4041 of ERISA and no proceeding has been commenced
by the PBGC pursuant to Section 4042 of ERISA;

 

(xi)                                No Plan has entered into a loan to acquire
“qualifying employer securities” (as defined in Section 4975(e)(8) of the Code)
and, accordingly, the Companies are under no obligation to make contributions to
such Plan to satisfy any debt obligation of the Plan;

 

(xii)                             No Plan has acquired securities of any of the
Companies after December 31, 1986 and the Companies have not contributed
securities to a Plan after December 31, 1986;

 

(xiii)                          The reporting and disclosure provisions of the
Securities Act of 1933 and Securities Exchange Act of 1934, to the extent
applicable, have been complied with for all such Plans;

 

(xiv)                         None of the Companies maintains a Plan that is a
welfare benefit plan, as that term is defined in Section 3(l) of ERISA, that
provides coverage for any period of time beyond termination of employment
(except to the extent required by Section 4980B of the Code);

 

(xv)                            All Plans that are health plans, as that term is
defined in the Health Insurance Portability Act of 1996 (“HIPAA”), comply with
all applicable provisions of HIPAA;

 

(xvi)                         Except as set forth on Schedule 5.1(n), no Plan
that is a welfare plan, as that term is defined in Section 3(1) of ERISA, is
self-funded;

 

(xvii)                      None of the Companies maintains a Plan that is a
cash balance plan; and

 

(xviii)                 Except as set forth on Schedule 5.1(n), no Plan assets
of a Plan described in paragraph (vi) above are invested in insurance products.

 

(o)                                 Office. The chief executive office and
principal place of business of each of the Obligors is at the address set forth
in the first paragraph of this Agreement, or at such other place as may from
time to time be designated by any of the Obligors in accordance with Section
7.4(a) hereof.

 

(p)                                 Places of Business.

 

(i)                             Schedule 5.1(p)(i) lists completely and
correctly as of the date hereof all real property owned by each of the Obligors
and the addresses thereof.

 

(ii)                          Schedule 5.1(p)(ii) lists completely and correctly
as of the date hereof all real property leased by each of the Obligors and the
addresses thereof. Each Obligor has valid leases in all of the real property
that it leases as set forth on Schedule 5.1(p)(ii).

 

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(q)                                 Contingent Liabilities. Other than in the
ordinary course of its business and except for the Guaranty Agreements, no
Obligor is a party to any suretyship, guarantyship, or other similar type
agreement; nor has it offered its endorsement to any individual, concern,
corporation or other entity or, to the best of each Obligor’s knowledge, acted
or failed to act in any manner which would in any way create a contingent
liability that does not appear in the financial statements referred to
hereinbefore.

 

(r)                                    Contracts. No contract, governmental or
otherwise, to any Obligor is a party, is subject to renegotiation of any
material terms, nor is any Obligor in default of any material contract where
such default would have a Material Adverse Effect.

 

(s)                                  Unions, Labor Disputes and Acts of God. No
Obligor is a party to any collective bargaining or union agreement. No Obligor
knows of any threatened work stoppage by any members of its work force. As of
the date hereof, there are no strikes, lockouts or slowdowns against any Obligor
pending or, to the knowledge of each Obligor, threatened.  To each Obligor’s
knowledge, the hours worked by and payments made to employees of the Obligors
have not been in violation of the Fair Labor Standards Act or any other
applicable Federal, state, local or foreign law dealing with such matters.  The
business and Premises and other assets of the Obligors have not been affected by
any fire, explosion, accident, drought, storm, hail, earthquake, embargo, act of
God, or other casualty (whether or not covered by insurance) which could, in any
one case or in the aggregate, reasonably be expected to have a Material Adverse
Effect.

 

(t)                                    Licenses. To the best of each Obligor’s
knowledge, each Obligor has all licenses, permits and other permissions required
by any Government Authority, or from any licensing entity necessary for the
conduct of its business, all of which each such Obligor represents to be in good
standing and in full force and effect, except as would not reasonably be
expected to result in a Material Adverse Effect.

 

(u)                                 Assets. Each Obligor is and shall continue
to be the legal and beneficial owner of its properties and assets free and clear
of all Liens, encumbrances, security interests and claims, except for Permitted
Liens.

 

(v)                                 Parent, Affiliate or Subsidiary
Corporations, Shareholders of each Obligor. Borrower has no parent corporation;
Precision, Telic and BAC are each a wholly owned Subsidiary of Borrower;
Speedring and Speedring Systems are each a wholly owned Subsidiary of Precision;
Borrower has no direct or indirect Subsidiaries other than the Subsidiary
Guarantors and, except as set forth on Schedule 5.1(v), Borrower has no other
Affiliates.

 

(w)                               Environmental Matters. Except as disclosed on
Schedule 5.1(w) hereto:

 

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(i)                                     None of the Premises contain any
Contaminants in amounts or concentrations which (A) constitute, or constituted a
violation of, (B) require Remedial Action under, or (C) could give rise to
liability under, Environmental Laws, which violations, Remedial Actions and
liabilities, in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.

 

(ii)                                  The Premises and all operations of
Obligors are in compliance, and in the last five years have been in compliance,
with all Environmental Laws and all necessary environmental permits have been
obtained and are in effect, except to the extent that such non-compliance or
failure to obtain any necessary permits, in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect.

 

(iii)                               There have been no Releases or threatened
Releases at, from, under or proximate to any of the Premises or otherwise in
connection with the operations of any Obligor, which Releases or threatened
Releases, in the aggregate, could reasonably be expected to result in a Material
Adverse Effect.

 

(iv)                              No Obligor has received any notice of an
Environmental Claim, and to Obligors’ knowledge no Environmental Claims are
pending, in connection with any of the Premises or the operations of any Obligor
which, in the aggregate, could reasonably be expected to result in a Material
Adverse Effect.

 

(v)                                 Contaminants have not been transported from
any of the Premises, nor have Contaminants been generated, treated, stored or
disposed of at, on or under any of the Premises in a manner that could give rise
to liability under any Environmental Law which, in the aggregate, could
reasonably be expected to result in a Material Adverse Effect.

 

(x)                                   Material Judgments. No Obligor has any
unsatisfied material judgment.

 

(y)                                 No Defaulting Event. No Defaulting Event has
occurred and is continuing, and there has not occurred since the date hereof any
event or circumstance that has resulted or could reasonably be expected to
result in a Material Adverse Effect.

 

(z)                                   Solvency. Each Obligor is and shall at all
times continue to be Solvent.

 

(aa)                            Fiscal Year.  The fiscal year of each Obligor
for financial accounting purposed ends on December 31 of each calendar year.

 

(bb)                          No Broker’s Fees, etc.                          
No Obligor is obligated to pay any brokerage commissions, finder’s fees or
appraisal fees in connection with the transactions contemplated by this
Agreement.

 

(cc)                            Investment Company Act, Public Utility Holding
Company Act. No Obligor is (a) an “investment company” as defined in, or subject
to regulation under, the Investment Company Act of 1940, or (b) a “holding
company” as defined in, or subject to regulation under, the Public Utility
Holding Company Act of 1935.

 

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(dd)                          Insurance.  Schedule 5.1(dd) sets forth a true,
complete and correct description of all insurance maintained by the Obligors as
of the date hereof. As of such date, such insurance is in full force and effect
and all premiums have been duly paid. Each Obligor has insurance in such amounts
and covering such risks and liabilities as are in accordance with normal
industry practice.

 

(ee)                            Merger Documents; Representations and Warranties
in Merger Agreement.

 

(i)                                   Bank has been furnished true and complete
copies of each Merger Document to the extent executed and delivered on or prior
to the date hereof.

 

(ii)                                All representations and warranties of
Borrower set forth in the Merger Agreement were true and correct in all material
respects as of the time such representations and warranties were made and shall
be true and correct in all material respects as of the date hereof as if such
representations and warranties were made on and as of such date, unless stated
to relate to a specific earlier date, in which case such representations and
warranties shall be true and correct in all material respects as of such earlier
date.

 

(ff)                                Foreign Assets Control Regulations.  None of
the requesting or borrowing of the Loans or the use of the proceeds of any
thereof will violate the Trading With the Enemy Act (50 U.S.C. § 1 et seq., as
amended) (the “Trading With the Enemy Act”) or any of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) (the “Foreign Assets Control Regulations”) or any
enabling legislation or executive order relating thereto (which for the
avoidance of doubt shall include, but shall not be limited to (a) Executive
Order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions
With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg.
49079 (2001)) (the “Executive Order”) and (b) the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001 (Public Law 107-56)).  Furthermore, no Obligor nor any of
their Subsidiaries or other Affiliates (a) is or will become a “blocked person”
as described in the Executive Order, the Trading With the Enemy Act or the
Foreign Assets Control Regulations or (b) engages or will engage in any dealings
or transactions, or be otherwise associated, with any such “blocked person”.

 

ARTICLE VI

 

CONDITIONS OF LENDING

 

SECTION 6.1                                   CONDITIONS PRECEDENT TO INITIAL
LOANS.

 

Subject to the further conditions set forth in Section 6.2 hereof, the
effectiveness of this Agreement and the obligation of Bank to make the Loans and
to extend any Letter of Credit under this Agreement is subject to the prior
satisfaction of the following conditions:

 

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(a)                                  Agreement, Notes, Bank Swap Agreement. Bank
shall have received this Agreement, the Notes drawn to its order in the forms of
Exhibit A and Exhibit B and the Bank Swap Agreement, all duly executed by
Borrower and the Subsidiary Guarantors, as applicable.

 

(b)                                 Evidence of Corporate Action; Incumbency;
Good Standing. Bank shall have received: (i) certified copies of all corporate
action (in form, scope and substance reasonably satisfactory to Bank) taken by
Borrower and each Subsidiary Guarantor to authorize the execution, delivery and
performance of this Agreement, the Notes, the Guaranty Agreements, the Bank Swap
Agreement, and the other Financing Agreements, and the borrowings and guaranties
to be made hereunder and thereunder, together with such other papers as Bank or
its counsel may require; (ii) without limiting the generality of the foregoing,
Bank shall have received certificates, dated as of the date of this Agreement,
of the Secretary of Borrower and each Subsidiary Guarantor, certifying the names
and true signatures of each officer of Borrower and each Subsidiary Guarantor
who has been authorized to sign the Financing Agreements and the other documents
to be delivered by Borrower or any of the Subsidiary Guarantors under this
Agreement; (iii) copies of the certificate of incorporation (certified by the
Secretary of the State of the state of organization with respect to Borrower and
each Subsidiary Guarantor) and bylaws of Borrower and each Subsidiary Guarantor;
and (iv) Certificates of Good Standing or Legal Existence, as the case may be,
issued by the Secretary of State of the states of organization and qualification
of Borrower and each Subsidiary Guarantor, evidencing that Borrower and each
Subsidiary Guarantor are corporations legally existing in their respective
states of their organization and in each state where they are qualified to do
business.

 

(c)                                  Guaranty Agreements. Bank shall have
received a Guaranty Agreement duly executed by each of the Subsidiary
Guarantors.

 

(d)                                 Merger. Bank shall have reviewed, and be
reasonably satisfied with, the final terms and conditions of the Merger
Documents and the Merger shall be consummated on the date hereof in all material
respects in accordance with the terms hereof and of the Merger Documents (as so
reviewed and approved by Bank), without waiver or amendment of any such terms
that has not been previously approved by Bank unless and to the extent that any
such waiver or amendment could not reasonably be deemed to be materially adverse
to the interests of Bank.

 

(e)                                  Opinion of Counsel. Bank shall have
received a favorable written opinion of independent counsel for Borrower and
each Subsidiary Guarantor and accompanied by such supporting documents as Bank
or its counsel reasonably may require.

 

(f)                                    Commitment Fee. The $40,000 Commitment
Fee shall have been paid in full in Dollars.

 

(g)                                 Further Documents.  Bank shall have received
such further documents, instruments and agreements as Bank may reasonably
request.

 

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SECTION 6.2                                   CONDITIONS PRECEDENT TO EACH LOAN.

 

The obligation of Bank to make a Loan (including, without limitation, the
initial Revolving Loan) and to extend any Letter of Credit (including, without
limitation, the initial Letter of Credit ) on the occasion of each request
therefore shall be subject to the further conditions precedent that on the date
of such Loan or extension of Letter of Credit (a) the following statements shall
be true (and each of the giving of the applicable Notice of Borrowing and the
acceptance by Borrower of the proceeds of such Revolving Loan and/or the giving
of the applicable Notice of Issuance and issuance by Bank of the Letter of
Credit shall constitute a representation and warranty by Borrower that both on
the date of such notice and on the date of such borrowing or issuance, as the
case may be, such statements are true):

 

(i)                                     Absence of Termination or Defaulting
Event. Neither Bank nor Borrower shall have terminated the Facility, nor shall a
Defaulting Event exist or have occurred, or would exist or occur as a result of
such borrowing or issuance or from the application of the proceeds thereof;

 

(ii)                                  No Material Adverse Effect. No Material
Adverse Effect shall have occurred and be continuing; and

 

(iii)                               Truth of Representations and Warranties. All
of the representations and warranties set forth in Article V hereof are true and
correct in all material respects on and as of such date, before and after giving
effect to such borrowing or issuance and to the application of proceeds
therefrom, as though made on and as of such date other than any such
representations or warranties that, by their terms, refer to a specific date
other than the date of such borrowing or issuance, in which case as of such
specific date;

 

and (b) Bank shall have received such further documents, instruments and
agreements as Bank may reasonably request.

 

ARTICLE VII

 

COVENANTS

 

A.                                    Affirmative Covenants.

 

Each Obligor covenants and agrees that from the date hereof until payment and
performance in full of all Obligations (other than contingent indemnity
Obligations for which no claim has been asserted), and until the termination of
this Agreement and the Bank Swap Agreement, unless Bank otherwise consents in
writing, which consent shall not be unreasonably withheld or delayed, each
Obligor shall:

 

SECTION 7.1                                   REPORTING REQUIREMENTS.

 

Deliver or cause to be delivered to Bank:

 

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(a)                                  as soon as practicable and, in any event,
within forty-five (45) days after the close of each of the first three (3)
fiscal quarters of Borrower: (i) internally prepared Consolidated and
consolidating financial statements of Borrower, including a balance sheet as of
the end of each such quarter and statements of income, expense and cash flows
for such quarter and for the portion of Borrower’s fiscal year to date then
ended, prepared in conformity with GAAP, applied on a basis consistent with that
of the preceding period, and certified by the chief financial officer as being
accurate and fairly presenting the financial position of Borrower, and (ii) a
certificate (a “Covenant Compliance Certificate”) executed by its president or
chief financial officer which shall state, among other things, that:
(A) Borrower has complied, and is then in compliance, with all the terms,
covenants and conditions of this Agreement and the other Financing Agreements
which are binding upon it, including without limitation, the Financial Covenants
set forth in Article VII C. hereof; (B) there exists no Defaulting Event; and
(C) the representations and warranties contained herein and in the other
Financing Agreements are true and correct in all material respects with the same
effect as though such representations and warranties had been made at the time
of the delivery of such Covenant Compliance Certificate, other than any such
representations or warranties that, by their terms, refer to a specific date, in
which case as of such specific date, and which shall set forth, in sufficient
detail, Borrower’s calculation of the Financial Covenants set forth in Article
VII C. hereof;

 

(b)                                 as soon as practicable and, in any event,
within ninety (90) days after the close of each fiscal year of Borrower (i)
audited Consolidated and internally prepared consolidating financial statements
of Borrower, including a balance sheet and statements of income, expense,
retained earnings and cash flows for the year then ended, prepared in conformity
with GAAP, applied on a basis consistent with that of the preceding year or
containing disclosure of the effect on financial position or results of
operations of any change in the application of accounting principles during the
year accompanied by a report thereon containing an opinion of a firm of
independent certified public accountants selected by Borrower and acceptable to
Bank, and (ii) a Covenant Compliance Certificate;

 

(c)                                  promptly upon Bank’s written request, such
other information about the financial condition and operations of Borrower and
any other Obligor as Bank reasonably may, from time to time, request; and

 

(d)                                 promptly upon becoming aware of the
occurrence of any Defaulting Event, written notice of such occurrence signed by
the president or chief financial officer of Borrower describing such occurrence
and the steps, if any, being taken to cure the Defaulting Event.

 

SECTION 7.2                                   INSURANCE.

 

Keep its properties insured against fire and other hazards (so-called “All Risk”
coverage) in amounts and with companies reasonably satisfactory to Bank to the
same extent and covering such risks as is customary in the same or a similar
business; maintain public liability coverage, including without limitation,
products liability coverage, against claims for personal injuries or death; and
maintain all worker’s compensation, employment or similar insurance as may be
required by applicable law. Each Obligor hereby indemnifies Bank against any
loss or damage to any assets or properties of the Obligors which are not insured
by Borrower or any of the other

 

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Obligors and for any deficiency in any effective insurance coverage required to
be maintained by any Obligor pursuant to this Section, which indemnification
obligation shall constitute part of the Obligations.

 

SECTION 7.3                                   TAX AND OTHER LIENS.

 

Comply with all statutes and government regulations and pay all taxes,
assessments, governmental charges or levies, or claims for labor, supplies, rent
and other obligations made against it or its property which, if unpaid, might
become a Lien or charge against it or its properties, except liabilities being
contested in good faith and against which Borrower and/or the applicable
Subsidiary Guarantor shall set up adequate reserves in accordance with GAAP.

 

SECTION 7.4                                   PLACE OF BUSINESS, MAINTENANCE OF
EXISTENCE.

 

(a)                                  Maintain its principal place of business
and chief executive offices at the address set forth in the first paragraph of
this Agreement, unless the applicable Obligor shall have given Bank ten (10)
days prior written notice of any change in such places of business.

 

(b)                                 Preserve and maintain its existence in its
current form of organization in the jurisdiction of its organization, and
qualify and remain qualified as a foreign corporation in each jurisdiction in
which such qualification is required, except where the failure to remain so
qualified would not have a Material Adverse Effect.

 

SECTION 7.5                                   LITIGATION.

 

Promptly advise Bank of the commencement of any action, suit, proceeding or
investigation of any kind pending against any Obligor before any court, tribunal
or administrative agency or board which, if adversely determined, would
reasonably be expected to, either in any case or in the aggregate, have a
Material Adverse Effect on Borrower or on its Subsidiaries taken as a whole, or
materially impair the right of Borrower or of its Subsidiaries taken as a whole
to carry on business substantially as now conducted, or which questions the
validity of any of the Financing Agreements or any action taken or to be taken
pursuant hereto or thereto.

 

SECTION 7.6                                   MAINTENANCE OF BOOKS AND RECORDS,
EXISTENCE AND COMPLIANCE.

 

Maintain accurate current and complete books and records of all financial
affairs and transactions, maintain and preserve its corporate existence, comply
with all valid and applicable statutes, rules and regulations binding upon it.

 

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SECTION 7.7                                   ERISA.

 

Maintain each Plan in compliance in all material respects with the applicable
provisions of ERISA, the Code and other federal or state law; cause each Plan
which is qualified under Section 401(a) of the Code to maintain such
qualification; and make all required contributions to any Plan subject to
Section 412 of the Code. Additionally, each Obligor shall immediately notify
Bank of:

 

(a)                                  any event which causes it to fail to comply
in all material respects with ERISA or any event or condition with respect to a
Plan that could reasonably be expected to result in a Material Adverse Effect;

 

(b)                                 the adoption of any amendment to a Plan that
would require the provision of security pursuant to Section 401(a)(29) of the
Code or Section 307 of ERISA;

 

(c)                                  the filing pursuant to Section 412(d) of
the Code or Section 303 of ERISA of an application for a waiver of the minimum
funding standard with respect to any Plan;

 

(d)                                 any notice from the IRS with respect to any
defect relating to the qualification of any Plan;

 

(e)                                  the voluntary or involuntary correction of
any material form or operational defect with respect to any Plan or the failure
to correct any known material defect;

 

(f)                                    the imposition of any retroactive rate
increase or other charge with respect to any Plan that is a welfare benefit
plan, as that term is defined in Section 3(l) of ERISA;

 

(g)                                 a material increase in the unfunded pension
liability of any Plan that is a qualified plan under Section 401(a) of the Code;

 

(h)                                 the adoption of, or the commencement of
contributions to, any Plan subject to Section 412 of the Code; or

 

(i)                                     the adoption of any amendment to a Plan
subject to Section 412 of the Code, if such amendment results in a material
increase in contributions or unfunded pension liability.

 

SECTION 7.8                                   NOTICE OF CERTAIN EVENTS.

 

Give prompt written notice to Bank of:

 

(a)                                  any material dispute that arises between
any Obligor and any governmental regulatory body or law enforcement agency;

 

(b)                                 any labor controversy resulting in a strike
or work stoppage against any Obligor;

 

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(c)                                  any proposal by any public authority to
acquire a material portion of the assets or business of any Obligor;

 

(d)                                 any change of the name, identity or
corporate structure of any Obligor;

 

(e)                                  any event, other than as disclosed in this
Agreement, by virtue of which or in connection with which any Obligor has
received written notice of an Environmental Claim reasonably expected to have a
Material Adverse Effect; and

 

(f)                                    any other matter which has or is
reasonably likely to have a Material Adverse Effect.

 

SECTION 7.9                                   AUDIT AND APPRAISALS BY BANK;
FEES.

 

Permit Bank or its agents to audit the books and records of each of the Obligors
and to conduct or cause to be conducted audits of each Obligor’s assets at such
times during normal business hours, upon reasonable notice, and in such manner
and detail as Bank deems reasonably necessary, in Bank’s discretion, provided
that so long as no Event of Default has occurred and is continuing, such audits
shall be conducted no more frequently than once per year and shall be conducted
without material disruption to Obligors. In the event any such audit is
conducted at a time when an Event of Default has occurred and is then
continuing, Borrower shall promptly pay or reimburse to Bank reasonable audit
fees per man per day and any out of pocket expenses incurred in connection with
any such audit. Bank may charge any such audit and out-of-pocket expenses to the
Revolving Loan Account.

 

SECTION 7.10                            NOTICE OF REPORTABLE EVENTS.

 

Upon the occurrence of any “Reportable Event” as defined in Section 4043 of the
Code, with respect to any Plan now or hereafter maintained by any Obligor to
which such statute may be applicable, whether or not notice thereof is required
to be given to any Person, governmental agency or the PBGC, give prompt written
notice of such occurrence to Bank signed by the president or chief financial
officer of Borrower describing such occurrence and the steps, if any, being
taken to cure the Reportable Event.

 

SECTION 7.11                            MAINTENANCE OF BANK ACCOUNTS.

 

Maintain at least one (1) operating account with the Bank at all times.

 

SECTION 7.12                            NEW SUBSIDIARY GUARANTORS.

 

Cause each Subsidiary of Borrower, including, but not limited to, Telic, to
become a party to this Agreement and to become a Subsidiary Guarantor by
executing and delivering to Bank a Joinder Agreement or such comparable
documentation in form and substance reasonably satisfactory to the Bank.

 

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SECTION 7.13                            PROPERTIES.

 

Maintain its assets and properties necessary for the operation of its business
in good repair, working order and operating condition (ordinary wear and tear
and obsolete assets no longer used in its business excepted) and not knowingly
permit any of same to be abused or misused.

 

SECTION 7.14                            DEFEND PROPERTIES.

 

Defend all of its material assets and properties necessary for the operation of
its business against all claims and demands of all Persons (other than holders
of Permitted Liens) at any time claiming the same or any interest therein.

 

SECTION 7.15                            USE OF PROCEEDS.

 

Use the proceeds of the Loans only for the purposes and subject to the
limitations specified herein.

 

SECTION 7.16                            FURTHER ASSURANCES.

 

Execute any and all further documents, agreements and instruments, and take all
further action that may be required under applicable law, or that Bank may
reasonably request, in order to effectuate the transactions contemplated by the
Financing Agreements.

 

B.                                    Negative Covenants

 

Each Obligor covenants and agrees that from the date hereof until payment and
performance in full of all Obligations, and until the termination of this
Agreement and the Bank Swap Agreement, unless Bank otherwise consents in
writing, which consent shall not be unreasonably withheld or delayed, no Obligor
shall:

 

SECTION 7.17                            ENCUMBRANCES.

 

Except for Permitted Liens, incur or permit to exist any Lien, mortgage, charge
or other encumbrance against any of its real or personal property assets ,
whether now owned or hereafter acquired.

 

SECTION 7.18                            NEGATIVE PLEDGE.

 

Make or enter into any agreement with any lender (other than Bank) which
prohibits, restricts or in any way limits any Obligor’s ability to incur or
permit to exist any Lien, mortgage, charge or other encumbrance against any of
its real or personal property assets (other than assets which are then subject
to Permitted Liens), whether now owned or hereafter acquired, in favor of Bank.

 

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SECTION 7.19                            LIMITATION ON INDEBTEDNESS.

 

Create, incur or guarantee any Indebtedness or obligation for borrowed money
(including without limitation, any reimbursement obligations for any letter of
credit issued by any financial institution) from, or issue or sell any of its
obligations to, any lender other than Bank, provided that so long as no
Defaulting Event has occurred and is then continuing and, after giving effect to
any such borrowing or guarantee, no Defaulting Event would occur and be
continuing, the Obligors shall be relieved from the restrictions of this
covenant with respect to: (a) unsecured Indebtedness and/or purchase money
Indebtedness for borrowed money or Capital Leases secured by purchase money
Liens permitted under clause (e) of the definition of the term “Permitted Liens”
contained in Section 1.1 hereof, provided that the aggregate principal amount of
all Indebtedness permitted under this subsection (a) shall not exceed Two
Million Five Hundred Thousand Dollars ($2,500,000) at any time outstanding; (b)
Indebtedness arising from endorsement of negotiable instruments for collection
in the ordinary course of business; (c) accounts payable to trade creditors for
goods or services and current operating liabilities (other than for borrowed
money), in each case incurred in the ordinary course of business; and (d)
subordinated debt which is permitted by the Bank in its reasonable discretion.

 

SECTION 7.20                            CONTINGENT LIABILITIES.

 

Assume, guarantee, endorse or otherwise become liable upon the obligations of
any Person, firm or corporation other than Bank, or enter into any purchase or
option agreement or other arrangement having substantially the same effect as
such a guarantee, except by the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of business
and except that any Obligor may do so with respect to Indebtedness of another
Obligor which is permitted under Section 7.19 hereof.

 

SECTION 7.21                            CONSOLIDATION, MERGER OR ACQUISITIONS.

 

Except for the Merger, enter into any transaction of merger or consolidation or
acquire by purchase or otherwise all or substantially all of the business,
property or assets of, or stock or other evidence of beneficial ownership of,
any Person or entity, provided that the Borrower shall be relieved from the
restrictions of this covenant with respect to a Permitted Acquisition so long as
(a) no Defaulting Event has occurred and is then continuing, (b) after giving
effect to such Permitted Acquisition, no Defaulting Event would occur and be
continuing, and (c) in connection with such Permitted Acquisition, Borrower
shall have complied with each of the conditions set forth in the definition of
“Permitted Acquisitions” contained in Section 1.1 hereof.

 

SECTION 7.22                            LOANS, ADVANCES, INVESTMENTS.

 

Make or permit to exist any loans or advances to, or purchase any stock, other
securities or evidences of Indebtedness of, or make or permit to exist any
investment or acquire any other interest whatsoever in, any Affiliate (including
without limitation, any partnership, joint venture, joint stock corporation or
parent or Subsidiary) or any other Person, except (a) with respect to the
Merger, (b) to the extent otherwise permitted pursuant to Section 7.21 hereof,
and (c)

 

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intercompany transactions among Obligors, and except that any Obligor may own,
purchase or acquire (i) prime commercial paper due within one (1) year from the
date of purchase and payable in United States dollars, (ii) certificates of
deposit in United States commercial banks (having capital resources in excess of
$20,000,000.00) due within one (1) year from the date of purchase and payable in
United States dollars, (iii) obligations of the United States government or any
agency thereof, (iv) obligations guaranteed directly by the United States
government, (v) repurchase agreements of United States commercial banks (having
capital resources in excess of $20,000,000.00) for terms of less than one (1)
year, and/or (vi) eurodollar deposits with maturities of ninety (90) days or
less.

 

SECTION 7.23                            ACQUISITION OF STOCK.

 

Except with respect to the Merger, purchase, acquire, redeem or retire, or make
any commitment to purchase, acquire, redeem or retire any capital stock of any
Obligor, whether now or hereafter outstanding; provided that Borrower may do so
with respect to its capital stock in open market transactions so long as (a) no
Defaulting Event has occurred and is continuing, and (b) after giving effect to
any such payment or declaration, no Defaulting Event would occur and be
continuing.

 

SECTION 7.24                            DISTRIBUTIONS.

 

Declare or pay or permit any Subsidiary to declare, pay or make any
Distribution, provided that so long as (a) no Defaulting Event has occurred and
is continuing, and (b) after giving effect to any such payment or declaration,
no Defaulting Event would occur and be continuing, Borrower and each Subsidiary
may declare or pay dividends to its shareholders.

 

SECTION 7.25                            SALE AND LEASE OF ASSETS.

 

Sell, lease or otherwise dispose of any of its assets, except for (a) sales of
inventory in the ordinary course of its business, (b) the disposal of assets no
longer used in its business, (c) sales of other assets (including, but not
limited to, the stock of a Subsidiary) provided that immediately prior to such
sale Borrower delivers to the Bank a Covenant Compliance Certificate which
includes financial covenant calculations on a Pro Forma Basis for the four
fiscal quarters immediately following such sale, and (d) intercompany transfers
among Obligors.

 

SECTION 7.26                            NAME CHANGES; CHANGE OF STATE OF
INCORPORATION.

 

Change its corporate name, conduct its business under any trade name or style
other than as set forth in this Agreement or change the State or Country of its
incorporation or formation, unless in each case Borrower or such Subsidiary
shall have given Bank ten (10) days prior written notice thereof.

 

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SECTION 7.27                            PROHIBITED TRANSFERS.

 

Except as otherwise permitted pursuant to Section 7.23 and Section 7.25 hereof,
transfer, in any manner, either directly or indirectly, any cash, property, or
other assets to any parent or Affiliate, other than (i) transactions made in the
ordinary course of business and for fair consideration on terms no less
favorable (considered as a whole) than if such transactions had been an
arms-length transaction between such Obligor and an unaffiliated entity, and
(ii) intercompany transactions among Obligors.

 

SECTION 7.28                            LEASEBACKS.

 

Lease any real estate or other Capital Asset from any lessor who shall have
acquired such property from Borrower or such Subsidiary.

 

SECTION 7.29                            ERISA.

 

Knowingly engage in a violation of ERISA’s fiduciary responsibility rules with
respect to any Plan or knowingly engage in a prohibited transaction within the
meaning of Section 406 of ERISA or Section 4975 of the Code.

 

C.                                    Financial Covenants.

 

Borrower covenants and agrees that from the date hereof until payment and
performance in full of all Obligations, and until the termination of this
Agreement and the Bank Swap Agreement, unless Bank otherwise consents in
writing, Borrower shall not:

 

SECTION 7.30                            CONSOLIDATED FIXED CHARGE COVERAGE
RATIO.

 

Permit its Consolidated Fixed Charge Coverage Ratio to be less than 1.50-to-1.0
as of the end of each fiscal quarter of Borrower for the then ended Rolling
Period.

 

SECTION 7.31                            CONSOLIDATED INTEREST COVERAGE RATIO.

 

Permit its Consolidated Interest Coverage Ratio to be less than 2.0-to-1.0 as of
the end of each fiscal quarter of Borrower.

 

SECTION 7.32                            CONSOLIDATED FUNDED DEBT-TO-CONSOLIDATED
EBITDA RATIO.

 

Permit the ratio of its Consolidated Funded Debt-to-Consolidated EBITDA Ratio to
be greater than 2.0-to-1.0 as of the end of each fiscal quarter of Borrower.

 

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ARTICLE VIII

 

EVENTS OF DEFAULT, ACCELERATION

 

SECTION 8.1                                   EVENTS OF DEFAULT, ACCELERATION.

 

If any one or more of the following events (herein each called an “Event of
Default”) shall occur and be continuing: (a) failure of Borrower to pay
principal, interest or any other sum due hereunder or under any of the Notes or
the Bank Swap Agreement within five (5) days after the date it is otherwise due
and payable; (b) failure of Borrower to pay the outstanding Obligations arising
under the Facility immediately upon termination of the Facility by Bank or
Borrower; (c) failure of any Obligor to pay any other Obligation within five (5)
days after the date it is otherwise due and payable; (d) breach of any covenant
or agreement contained in, or failure by any Obligor to perform any act, duty or
Obligation as required by, this Agreement which continues uncured for a period
of thirty (30) days, whether or not consecutive; (e) the making by any Obligor
of any misrepresentation of a material fact to Bank; (f) if there shall remain
in force, undischarged, unsatisfied and unstayed, for more than ninety (90)
days, whether or not consecutive, any final judgment (after all applicable
appeals have been exhausted) against any Obligor, which individually or together
with other undischarged, unsatisfied and unstayed final judgments against any
Obligor, exceeds $500,000; (g) the filing, making or issuance of any material
levy, seizure, attachment, judgment or injunction upon or against any Obligor or
any material part of its assets which is not released, dissolved, stayed or
bonded to the reasonable satisfaction of Bank within ninety (90) days
thereafter; (h) insolvency (inability to pay its debts as they mature or where
its assets are not in excess of its liabilities as determined in accordance with
GAAP) of any Obligor, or dissolution, business failure, appointment of a
receiver or custodian, assignment for the benefit of creditors or the
commencement of any proceedings under any bankruptcy or insolvency law by,
against or of any Obligor, which, in the case of an involuntary proceeding, is
not dismissed within sixty (60) days after the date of the filing thereof;
(i) calling of a meeting of creditors, appointment of a committee of creditors
or liquidating banks, or offering of a composition extension to creditors by,
for or of any Obligor; (j) the loss, revocation or failure to renew any
regulatory license and/or permit now held or hereafter acquired by any Obligor
which has a Material Adverse Effect; (k) the occurrence of a default or event of
default (howsoever defined) under any of other Financing Agreements or under any
other instrument, document or agreement evidencing, governing and/or securing
any other Indebtedness owing by any Obligor to Bank, whether now existing or
hereafter arising; (l) if any Obligor shall default (as principal or guarantor
or other surety) in the payment of any principal or interest, regardless of the
amount, due in respect of Indebtedness in the principal amount in excess of
$500,000, or shall default in the performance of or compliance with any other
obligation contained in any agreement or instrument evidencing or securing such
Indebtedness, and such default gives to the holder of such Indebtedness the
right to accelerate the Indebtedness (whether or not the holder has, in fact,
accelerated such Indebtedness), and such default shall continue for longer than
the period of grace, if any, specified therein; (m) the service of any process
upon Bank seeking to attach or garnish by mesne or trustee process any funds of
any Obligor in excess of $500,000 which are on deposit with Bank, except where
the enforcement of such attachment or garnishment is contested by such Obligor
and such funds continue to remain on deposit, or such attachment or garnishment
is Bank bonded to the reasonable satisfaction of Bank; (n) any

 

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Subsidiary Guarantor shall revoke or attempt to revoke its Guaranty Agreement,
or any Guaranty Agreement is otherwise terminated for any reason whatsoever
(other than in connection with a permitted sale of the capital stock of any
Subsidiary Guarantor); (o) the PBGC makes a determination that there has
occurred an event or condition which constitutes grounds under Section 4042 of
ERISA for the termination of, or for the appointment of a Trustee to administer,
any Plan of any Obligor; and (p) except for Permitted Liens, any Lien shall
exist on any of the properties or assets of any Obligor,

 

then, (1) upon the happening of any Event of Default set forth in subsections
(h) and (i) above, any requirement upon Bank to make further Loans and to extend
or renew further Letters of Credit shall, notwithstanding any time or credit
allowed by any note or agreement, automatically and immediately terminate and
any and all Obligations shall automatically become immediately due and payable,
without presentment, demand, protest, notice of protest or other notice or
requirements of any kind, all of which are expressly waived by each of the
Obligors, and (2) upon the happening of any one or more of the other Events of
Default, any requirement upon Bank to make further Loans and to extend or renew
further Letters of Credit shall, at the option of Bank and notwithstanding any
time or credit allowed by any note or agreement, terminate and any and all
Obligations shall, at the option of Bank, become immediately due and payable,
without presentment, demand, protest, notice of protest or other notice or
requirements of any kind, all of which are expressly waived by each of the
Obligors. In addition to the foregoing, upon (x) the occurrence of any Event of
Default and at any time thereafter during the continuance of such event, or (y)
the prepayment in full of the Term Loan for any reason whatsoever, Bank may, at
its option, terminate the Bank Swap Agreement, whereupon Borrower shall be
liable to Bank for all Obligations arising under or in connection with such
terminated Bank Swap Agreement, including without limitation, all amounts due to
Bank as a result of the early termination thereof.

 

ARTICLE IX

 

RIGHTS AND REMEDIES OF BANK

 

SECTION 9.1                                   REMEDIES OF BANK.

 

Upon the occurrence and during the continuance of any Event of Default, Bank
shall have in any jurisdiction where enforcement hereof is sought, all rights
and remedies which Bank may have under law and equity and Bank may proceed to
enforce any such rights and exercise any such remedies, whether by suit in
equity or by action at law, whether for specific performance of any covenant or
agreement contained in this Agreement, the Notes or the other Financing
Agreements, or in aid of the exercise of any power granted in either this
Agreement or the Notes or any other Financing Agreement, or it may proceed to
obtain judgment or any other relief whatsoever appropriate to the enforcement of
such rights, or proceed to enforce any legal or equitable right which Bank may
have by reason of the occurrence of such Event of Default.

 

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SECTION 9.2                                   SPECIFIC POWERS.

 

Bank may at any time after the occurrence of an Event of Default, at Bank’s sole
discretion: (a) exercise all rights granted in this Agreement and the other
Financing Agreements; and (b) do any and all things necessary and proper to
carry out the purposes contemplated in this Agreement, the other Financing
Agreements and any other agreement between the parties.

 

SECTION 9.3                                   CUMULATIVE REMEDIES.

 

The enumeration of Bank’s rights and remedies set forth in this Agreement is not
intended to be exhaustive and the exercise by Bank of any right or remedy shall
not preclude the exercise of any other rights or remedies, all of which shall be
cumulative and shall be in addition to any other right or remedy given hereunder
or under any other agreement between the parties or which may now or hereafter
exist in law or at equity or by suit or otherwise. No delay or failure to take
action on the part of Bank in exercising any right, power or privilege hereunder
or under any of the other Financing Agreements shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
privilege preclude other or further exercise thereof or the exercise of any
other right, power or privilege or shall be construed to be a waiver of any
Defaulting Event.

 

ARTICLE X

 

TERMINATION

 

SECTION 10.1                            TERM AND TERMINATION.

 

(a)                                  The Facility. Unless sooner terminated as a
result of (i) the occurrence of an Event of Default and termination by Bank, or
(ii) payment of all Obligations and termination of the Facility prior to the
Termination Date, the obligation of Bank to make Revolving Loans and to extend
or renew Letters of Credit shall terminate on the Termination Date. Bank may, in
its sole and absolute discretion, upon written notice to Borrower and Borrower’s
written acceptance of such renewal, elect to renew the Facility for an
additional period of time and on such other terms and conditions as Bank shall
determine in its sole discretion, in which case the Termination Date shall be
extended for a corresponding period. Upon any termination of the Facility (A)
Borrower shall pay the entire balance of the Revolving Loans without demand or
notice, and (B) all of the rights, interests and remedies of Bank and
Obligations of Borrower shall survive (until, except as otherwise expressly
provided herein, payment of all Obligations in full in Dollars and in
immediately available funds) and Borrower shall have no right to receive or
request, and Bank shall have no obligation to make or extend any further
Revolving Loans or extend or renew any Letters of Credit.

 

(b)                                 Term Loan. Unless payment is accelerated as
a result of the occurrence of an Event of Default, the Term Loan shall be repaid
in accordance with the terms of the Term Loan Note.

 

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ARTICLE XI

 

EXPENSES

 

SECTION 11.1                            EXPENSES.

 

Each Obligor agrees to jointly and severally pay on demand all reasonable
out-of-pocket expenses of Bank in connection with the preparation,
administration, default, collection, waiver or amendment of loan terms, or in
connection with Bank’s exercise, preservation or enforcement of any of its
rights, remedies or options hereunder, under the Bank Swap Agreement or under
any of the other Financing Agreements, including, without limitation, fees of
outside counsel, accounting, consulting and other similar professional fees or
expenses, and any fees or expenses associated with travel or other costs
relating to any examinations conducted in connection with the Loans, the Bank
Swap Agreement or any collateral therefore (if any), and the amount of all such
expenses shall after demand, until paid, bear interest at the highest rate
applicable to the Loans (including any default rate, if applicable) and be an
obligation secured by any collateral (if any). In addition, each Obligor shall
jointly and severally pay any and all stamp and other taxes and fees payable or
determined to be payable in connection with the execution, delivery, filing, and
recording of any of the Financing Agreements and the other documents to be
delivered under any of the Financing Agreements, and agree to hold and save Bank
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or failure to pay such taxes and fees.

 

ARTICLE XII

 

MISCELLANEOUS

 

SECTION 12.1                            INDEMNIFICATION.

 

(a)                                  To the fullest extent permitted by
applicable law, each Obligor agrees to defend, indemnify and hold harmless Bank,
any other holder of the Obligations and each of the present and future
shareholders, partners, directors, officers, employees, agents, counsel and
successors and assigns of each of them (collectively with Bank, the “Lender
Parties”) from and against any and all loss, cost, expense, claim, liability
(including strict liability) or asserted liability incurred from or out of, in
any manner whatsoever, the Loans, the execution, delivery or performance of this
Agreement, the Bank Swap Agreement, any of the other Financing Agreements or any
of the other documents or instruments to be executed and delivered hereunder by
either Obligor, or otherwise arising out of the debtor/creditor relationship
between Obligors, Bank or Lender Parties relating to the Loans, the Bank Swap
Agreement or any of the other Obligations, the exercise of any of Bank’s rights
under the Loans, the Bank Swap Agreement or any of the other Obligations, any
litigation or proceeding instituted or conducted by any Governmental Authority,
any act or omission of Bank or otherwise, except to the extent (and only to the
extent) that the same arises from the gross negligence or willful misconduct of
Bank.  Each Obligor shall have the right to choose counsel to defend any such
action, provided that none

 

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of the Obligors nor such counsel shall settle or compromise any such claim with
respect to Bank without the prior written consent of Bank.

 

(b)                                 Without limiting the generality of the
preceding subparagraph (b), each Obligor agrees to defend, protect, indemnify
and hold harmless Lender Parties from and against, and to reimburse Lender
Parties on demand with respect to, any and all matters of any and every kind or
character, known or unknown, fixed or contingent, asserted against or incurred
by Lender Parties at any time and from time to time by reason of or arising out
of any violation of any Environmental Laws, the presence, disposal, escape,
seepage, leakage, spillage, discharge, emission, Release or threatened Release
of any Contaminant or any action, suit, proceeding or investigation brought or
threatened with respect to any Contaminant (including, but not limited to,
claims with respect to wrongful death, personal injury or damage to property),
in each case, including, without limitation, the reasonable fees and
disbursements of counsel and allocated costs of internal counsel incurred in
connection with any such investigation, litigation or other proceeding.  Each
Obligor shall have the right to choose counsel to defend any such action,
provided that such counsel is acceptable to Bank and provided further that none
of the Obligors nor such counsel shall settle or compromise any such claim with
respect to Bank without the prior written consent of Bank.

 

(c)                                  The obligations of each Obligor described
in this Section 12.1 shall survive the closing of the transactions described in
this Agreement, including the making of the Loans and the payment and
satisfaction of the Notes and the other Obligations and the expiration or
termination of the Bank Swap Agreement and the Facility.

 

SECTION 12.2                            PAYMENT SET-ASIDE.

 

To the extent that any Obligor or any other Person makes a payment or payments
to Bank (whether hereunder, under the Notes, under any Guaranty Agreement or
under the other Financing Agreements) with respect to the Obligations, or Bank
enforces its security interests or rights or exercises its right of setoff, and
such payment or payments or the proceeds of such enforcement or setoff or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are required to be
refunded, repaid or otherwise restored to any such Obligor or such other Person,
a trustee, receiver or any other Person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action) in each case in connection with any bankruptcy or similar
proceeding involving any such Obligor or such other Person, then to the extent
of any such restoration, the Obligation or part thereof originally intended to
be satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred,
whereupon this Agreement shall be automatically reinstated without any further
action by any Obligor and Bank and continue to be fully applicable to such
Obligation to the same extent as though the payment so repaid or recovered had
never been originally made on such Obligation.

 

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SECTION 12.3                            SET-OFF.

 

Each Obligor hereby grants to Bank a continuing lien, security interest and
right of setoff for all of its Obligations and other liabilities to Bank,
whether now existing or hereafter arising, upon and against all its deposits
(general or special, time or demand, provisional or final), credits, collateral
and property now or hereafter in the possession, custody, safekeeping or control
of Bank or any entity under common control of FleetBoston Financial Corporation
and its successors and assigns, or in transit to any of them.  Bank may, at any
time and from time to time, without demand or notice (any such notice being
expressly waived by each Obligor), apply or set off the same, or any part
thereof, to any Obligation or liability of any such Obligor to Bank, even though
unmatured and regardless of the adequacy of any other collateral securing such
Obligations and liabilities.  ANY AND ALL RIGHTS TO REQUIRE BANK TO MARSHAL OR
OTHERWISE EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL
(IF ANY) WHICH SECURES ANY OR ALL OF SUCH OBLIGATIONS AND LIABILITIES PRIOR TO
EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER
PROPERTY OF ANY OF THE OBLIGORS ARE HEREBY KNOWINGLY, VOLUNTARILY AND
IRREVOCABLY WAIVED.  The rights of Bank under this Section 12.3 are in addition
to other rights and remedies (including, without limitation, other rights of
setoff) which Bank may have.

 

SECTION 12.4                            COVENANTS TO SURVIVE.

 

All covenants, agreements, representations and warranties made by any Obligor in
this Agreement and in the certificates or other instruments prepared or
delivered by it or on its behalf in connection with or pursuant to this
Agreement or any other Financing Agreement shall be considered to have been
relied upon by Bank and shall survive the making by Bank of the Loans and
delivery of this Agreement and the other Financing Agreements, regardless of any
investigation made by Bank or on its behalf, and shall continue in full force
and effect as long as any Obligation (other than contingent indemnity
Obligations for which no claim has been asserted) is outstanding and so long as
the Facility and/or the Bank Swap Agreement has not been terminated.  The
provisions of Sections 11.1, 12.1, 12.2 and 12.9 hereof shall remain operative
and in full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of the Obligations, the expiration or termination of the Facility or
the Bank Swap Agreement, the invalidity or unenforceability of any term or
provision of this Agreement or any other Financing Agreement, or any
investigation made by or on behalf of Bank. All covenants, agreements,
warranties and representations shall be binding upon and inure to the benefit of
Bank, the Obligors and their respective successors and assigns, whether or not
so expressed, except that no Obligor shall have the right to assign its rights
hereunder or under any of the other Financing Agreements or any interest herein
or therein without the prior written consent of Bank.

 

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SECTION 12.5                            AMENDMENTS AND WAIVERS.

 

Neither this Agreement, the Notes, the other Financing Agreements, nor any term,
covenant or condition hereof or thereof may be changed, waived, discharged,
modified or terminated except by a writing executed by the parties hereto or
thereto and no failure on the part of Bank to exercise, and no delay in
exercising, any right, power, or remedy under any of the Financing Agreements
shall operate as a waiver of such right, power, or remedy, nor shall any single
or partial exercise of any right, power, or remedy under any of the Financing
Agreements, or any abandonment or discontinuance of steps to enforce such a
right, power or remedy, preclude any other or further exercise thereof or the
exercise of any other right, power, or remedy. No course of dealing between any
Obligor and Bank or its employees shall be effective to change, modify or
discharge any provision of this Agreement or to constitute a waiver of any
Defaulting Event or Event of Default and no notice or demand on Obligors in any
case shall entitle Obligors or other Persons to any other or further notice or
demand in similar or other circumstances.

 

SECTION 12.6                            NOTICES.

 

All notices, demands, requests, and other communications given under this
Agreement shall only be effective if they are (a) in writing, (b) sent by hand
delivery, by facsimile transmission, by reputable express delivery service, or
by certified or registered mail, postage prepaid, and (c) actually received by
the addressee (if delivered by hand or express delivery service, or sent by
facsimile transmission), or on the date five (5) Business Days after dispatch
(if mailed or certified by register mail):

 

(i)                                     If to Bank, to it at:

 

Fleet National Bank

777 Main Street

Mail Stop: CT EH 40224E

Hartford, Connecticut 06115

Attn:   Matthew E. Hummel, Senior Vice President

Telephone No: (860) 952-7483

Telecopier No.: (860) 952-7515

 

With a copy to:

 

Robinson & Cole LLP

280 Trumbull Street

Hartford, Connecticut 06103-3597

Attn:   Michael F. Maglio, Esq.

Telephone No.: (860) 275-8274

Telecopier No.: (860)275-8299

 

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(ii)                                  If to Borrower, to it at:

 

Axsys Technologies, Inc.

175 Capital Blvd., Suite 103

Rocky Hill, CT 06067

Attn: David Almeida

Telephone No.: (860) 257-0200

Telecopier No.: (860) 594-5750

 

With a copy to:

 

Jones Day

North Point

901 Lakeside Avenue

Cleveland, Ohio 44114

Attn: Christopher Hewitt, Esq.

Telephone No.: (216) 586-7254

Telecopier No.: (216) 579-0212

 

(iii)                               If to any Subsidiary Guarantor, to it at:

 

c/o Axsys Technologies, Inc.

175 Capital Blvd., Suite 103

Rocky Hill, CT 06067

Attn: David Almeida

Telephone No.: (860) 257-0200

Telecopier No.: (860) 594-5750

 

With a copy to:

 

Jones Day

North Point

901 Lakeside Avenue

Cleveland, Ohio 44114

Attn: Christopher Hewitt, Esq.

Telephone No.: (216) 586-7254

Telecopier No.: (216) 579-0212

 

or to such other address (and/or facsimile transmission number) as the
applicable Obligor or Bank, as the case may be, shall have specified in the
latest unrevoked notice sent to the other in accordance with this Section 12.6.

 

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Section 12.7                            Replacement of a Note or other Financing
Agreement.

 

Upon receipt by Obligors of an affidavit and indemnity agreement of an officer
of Bank as to the loss, theft, destruction, or mutilation of any Note or any
other Financing Agreement to which any Obligor is a party which is not of public
record, and, in the case of loss, theft, destruction, or mutilation, upon
surrender and cancellation of such Note or other Financing Agreement, the
applicable Obligor will execute and deliver, in lieu thereof, a replacement Note
or other Financing Agreement in the same principal amount thereof and otherwise
of like tenor.

 

SECTION 12.8                            TRANSFER OF BANK’S INTEREST.

 

(a)                                  Assignments.  Each Obligor hereby agrees
that Bank, in its sole discretion, shall have the unrestricted right at any time
and from time to time, upon thirty (30) days’ prior written notice to Borrower
but without the consent of Borrower and any other Obligor, to assign all or a
portion of its rights and obligations hereunder to one or more banks or other
financial institutions (each, an “Assignee”), and in the event of any such
assignment to an Assignee, each Obligor agrees that it shall execute, or cause
to be executed, such documents, including without limitation, amendments to this
Agreement and to any other Financing Agreements, as Bank shall deem necessary to
effect the foregoing.  In addition, at the request of Bank and any such
Assignee, Borrower shall issue one or more new Notes, as applicable, to any such
Assignee and, if Bank has retained any of its rights and obligations following
such assignment, to Bank, which new Notes shall be issued in replacement of, but
not in discharge of, the Obligations evidenced by the Notes held by Bank prior
to such assignment which are being replaced and shall reflect the amount of any
Loan held by such Assignee and Bank after giving effect to such assignment. 
Upon the execution and delivery of appropriate assignment documentation,
amendments and any other documentation required by Bank in connection with such
assignment, and the payment by Assignee of the purchase price agreed to by Bank
and such Assignee, such Assignee shall be a party to this Agreement and shall
have all of the rights and obligations of Bank hereunder (and under any and all
other Financing Agreements) to the extent that such rights and obligations have
been assigned by Bank pursuant to the assignment documentation between Bank and
such Assignee, and Bank shall be released from its obligations hereunder and
thereunder to a corresponding extent. Bank may furnish any information
concerning any Obligor in its possession from time to time to Assignees and
prospective Assignees, provided that Bank shall require any such Assignees and
prospective Assignees to agree in writing to maintain the confidentiality of
such information, except as required by applicable laws or Governmental
Authorities.

 

(b)                                 Participations. Each Obligor hereby agrees
that Bank, in its sole discretion, shall have the unrestricted right at any time
and from time to time, and without the consent of or notice to any Obligor, to
grant participating interests in all or any part of the Obligations to one or
more banks or other financial institutions (each, a “Participant”). In the event
of any such grant by Bank of a participating interest to a Participant, Bank
shall remain responsible for the performance of its obligations hereunder and
each Obligor shall continue to deal solely and directly with Bank in connection
with Bank’s rights and obligations hereunder.  Bank may furnish any information
concerning any Obligor in its possession from time to time to Participants and
prospective Participants, provided that Bank shall require any such Participants

 

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and prospective Participants to agree in writing to maintain the confidentiality
of such information, except as required by applicable laws or Governmental
Authorities.

 

(c)                                  Pledge to Federal Reserve Banks. Bank and
each Assignee shall have the unrestricted right at any time and from time to
time, and without the consent of or notice to any Obligor, to pledge or assign
all or any portion of its rights under this Agreement, the Notes or any other
Financing Agreement to any of the twelve (12) Federal Reserve Banks organized
under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341, provided that
no such pledge or assignment or enforcement thereof shall release Bank or such
Assignee from its obligations hereunder or thereunder.

 

SECTION 12.9                            WAIVERS.

 

(a)                                  Prejudgment Remedy, Etc.. TO INDUCE BANK TO
ENTER INTO THE COMMERCIAL LOAN TRANSACTIONS EVIDENCED BY THIS AGREEMENT, THE
NOTES, AND ANY OTHER FINANCING AGREEMENTS, EACH OBLIGOR AGREES THAT THESE ARE
COMMERCIAL TRANSACTIONS AND NOT CONSUMER TRANSACTIONS, AND WAIVES ANY RIGHT TO
NOTICE AND A HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, AS
AMENDED, OR UNDER ANY OTHER FEDERAL OR STATE STATUTE OR STATUTES OR FOREIGN LAWS
AFFECTING PREJUDGMENT REMEDIES, AND AUTHORIZES BANK’S ATTORNEY TO ISSUE A WRIT
FOR A PREJUDGMENT REMEDY WITHOUT COURT ORDER, PROVIDED THE COMPLAINT SHALL SET
FORTH A COPY OF THIS WAIVER, AND WAIVES ANY CLAIM IN TORT, CONTRACT OR OTHERWISE
AGAINST BANK’S ATTORNEY WHICH MAY ARISE OUT OF SUCH ISSUANCE OF A WRIT FOR A
PREJUDGMENT REMEDY WITHOUT COURT ORDER.  FURTHER, IN THE EVENT BANK SEEKS TO
TAKE POSSESSION OF ANY OR ALL OF ANY OBLIGOR’S PROPERTY OR OTHER ASSETS BY COURT
PROCESS OR OTHER METHOD AVAILABLE UNDER THE LAW, EACH OBLIGOR IRREVOCABLY WAIVES
ANY BOND AND ANY SURETY OR SECURITY RELATING THERETO REQUIRED BY ANY STATUTE,
COURT RULE OR OTHERWISE AS AN INCIDENT TO SUCH POSSESSION, AND WAIVES ANY DEMAND
FOR POSSESSION PRIOR TO THE COMMENCEMENT OF ANY SUIT OR ACTION TO RECOVER WITH
RESPECT THERETO. SPECIFICALLY, EACH OBLIGOR RECOGNIZES AND UNDERSTANDS THAT THE
EXERCISE OF BANK’S RIGHTS DESCRIBED ABOVE MAY RESULT IN THE ATTACHMENT OF OR
LEVY AGAINST SUCH OBLIGOR’S PROPERTY, AND SUCH WRIT FOR A PREJUDGMENT REMEDY
WILL NOT HAVE THE PRIOR WRITTEN APPROVAL OR SCRUTINY OF A COURT OF LAW OR OTHER
JUDICIAL OFFICER AND NO OBLIGOR WILL HAVE THE RIGHT TO ANY NOTICE OR PRIOR
HEARING WHERE SUCH OBLIGOR MIGHT CONTEST SUCH A PROCEDURE.  THE INTENT OF EACH
OBLIGOR IS TO GRANT TO BANK FOR GOOD AND VALUABLE CONSIDERATION THE RIGHT TO
OBTAIN SUCH A PREJUDGMENT REMEDY AND TO EXPRESS ITS BELIEF THAT ANY SUCH
PREJUDGMENT REMEDY OBTAINED IS VALID AND CONSTITUTIONAL UNLESS A COURT OF
COMPETENT JURISDICTION SHOULD DETERMINE OTHERWISE.  FURTHER, TO

 

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THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH OBLIGOR HEREBY WAIVES
DEMAND, PRESENTMENT FOR PAYMENT, PROTEST, NOTICE OF PROTEST, NOTICE OF DISHONOR,
DILIGENCE IN COLLECTION, NOTICE OF NONPAYMENT OF THIS AGREEMENT AND THE NOTES
AND ANY AND ALL NOTICES OF A LIKE NATURE.  FURTHER, TO THE EXTENT NOT OTHERWISE
EXPRESSLY PROVIDED HEREIN, EACH OBLIGOR EXPRESSLY WAIVES ALL DEFENSES OF
SURETYSHIP OR IMPAIRMENT OF COLLATERAL.

 

(b)                                 Jury Waiver. EACH OBLIGOR AND THE BANK (BY
ACCEPTANCE OF THE NOTES) 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 AGREEMENT OR ANY OTHER
FINANCING AGREEMENTS 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 ANY OF THE LOANS OR ENFORCEMENT OF
THE FINANCING AGREEMENTS, AND AGREE THAT NO 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, EACH OBLIGOR 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. EACH OBLIGOR 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. EACH OBLIGOR
ACKNOWLEDGES AND STIPULATES THAT THE WAIVERS GRANTED ABOVE ARE MADE KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY AND AFTER FULL CONSULTATION WITH COUNSEL AND
CONSTITUTE A MATERIAL INDUCEMENT FOR THE BANK TO ACCEPT THE NOTES AND MAKE THE
LOANS.

 

(c)                                  Voluntary Nature of Waivers. EACH OBLIGOR
ACKNOWLEDGES THAT IT MAKES THE FOREGOING WAIVERS IN SUBSECTIONS (a) AND (b)
ABOVE, KNOWINGLY, WILLINGLY, WITHOUT DURESS AND VOLUNTARILY AND ONLY AFTER
CONSIDERATION OF THE RAMIFICATIONS OF SUCH WAIVERS WITH ITS ATTORNEYS, AND THAT
SUCH WAIVERS CONSTITUTE A MATERIAL INDUCEMENT FOR BANK TO ENTER INTO THE
FINANCING AGREEMENTS AND MAKE THE LOANS.

 

SECTION 12.10                     SECTION HEADINGS, SEVERABILITY, ENTIRE
AGREEMENT.

 

(a)                                  Section and subsection headings have been
inserted herein for convenience only and shall not be construed as part of this
Agreement.

 

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(b)                                 This Agreement and the other Financing
Agreements are intended by the parties as the final, complete and exclusive
statement of the transactions evidenced by this Agreement and the other
Financing Agreements and all Exhibits and Schedules to this Agreement shall be
annexed hereto and shall be deemed to be part of this Agreement. All prior or
contemporaneous promises, agreements and understandings, whether oral or
written, are deemed to be superceded by this Agreement and the other Financing
Agreements, and no party is relying on any promise, agreement or understanding
not set forth in this Agreement and/or the other Financing Agreements. This
Agreement and the other Financing Agreements may not be amended or modified
except by a written instrument describing such amendment or modification
executed by each Obligor and Bank. Nothing in this Agreement or in the other
Financing Agreements, express or implied, is intended to confer upon any party
other than the parties hereto and thereto, any rights, remedies, obligations or
liabilities under or by reason of this Agreement or the other Financing
Agreements.

 

(c)                                  If any one or more terms or provisions
contained in this Agreement or in any of the other Financing Agreements or the
application thereof to any circumstance shall, in any jurisdiction and to any
extent, be held invalid, illegal or unenforceable, such terms or provisions
shall be ineffective as to such jurisdiction only to the extent of such
invalidity, illegality or unenforceability without invalidating or rendering
unenforceable the remaining terms and provisions hereof or thereof or the
application of such term or provision to circumstances other than those as to
which it is held invalid, illegal or unenforceable.  The parties shall endeavor
in good faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.

 

SECTION 12.11                     GOVERNING LAW.

 

This Agreement and the other Financing Agreements, and all transactions,
assignments and transfers hereunder and thereunder, and all the rights of the
parties, shall be governed as to validity, construction, enforcement and in all
other respects by the laws of the State of Connecticut (but not its conflicts of
law provisions). It is the express intention of Bank and the Obligors that the
laws of the State of Connecticut (but not its conflicts of law provisions) apply
to the entirety of the transactions evidenced by the Financing Agreements. Each
Obligor agrees that the Superior Court for the Judicial District of Hartford or
the United States District Court for the District of Connecticut at Hartford
shall have jurisdiction to hear and determine any claims, disputes or suits
pertaining to the financing transactions of which this Agreement is a part
and/or to any matter arising or in any way related to this Agreement or any
other agreement between Bank and any Obligor expressly submits and consents in
advance to the nonexclusive jurisdiction of such court and service of process in
any such suit or dispute being made upon the Obligors by mail at the address set
forth in the first paragraph of this Agreement. Each Obligor hereby waives an
objection that it may now or hereafter have to the venue of any such suit or
dispute or any such court or that such suit is brought in an inconvenient forum.

 

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SECTION 12.12                     COUNTERPARTS.

 

This Agreement may be executed and delivered in any number of counterparts (and
by different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute
but one and the same agreement.  Delivery of an executed signature page to this
Agreement by facsimile transmission shall be as effective as delivery of a
manually signed counterpart of this Agreement.

 

 

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
THE NEXT PAGE IS THE SIGNATURE PAGE

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized officers as of the date first written above.

 

 

AXSYS TECHNOLOGIES, INC.

 

 

 

By

/s/ David A. Almeida

 

 

Its CFO & VP of Finance

 

 

 

SPEEDRING SYSTEMS, INC.

 

 

 

By

/s/ David A. Almeida

 

 

Its Secretary and Treasurer

 

 

 

SPEEDRING, INC.

 

 

 

By

/s/ David A. Almeida

 

 

Its Secretary and Treasurer

 

 

 

 

 

BIFOCAL ACQUISITION CORP.

 

 

 

By

/s/ David A. Almeida

 

 

Its President

 

 

 

PRECISION AEROTECH, INC.

 

 

 

By

/s/ David A. Almeida

 

 

Its Secretary and Treasurer

 

 

 

 

 

FLEET NATIONAL BANK

 

 

 

By

/s/ Matthew E. Hummel

 

 

 

Matthew E. Hummel

 

 

Its Senior Vice President

 

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Exhibit A

 

Revolving Loan Note

REVOLVING LOAN PROMISSARY NOTE

 

$5,000,000

 

April 8, 2004

 

FOR VALUE RECEIVED, the undersigned, AXSYS TECHNOLOGIES, INC., a Delaware
corporation (“Maker”), does hereby promise to pay to the order of FLEET NATIONAL
BANK (“Lender”), at its office at 777 Main Street, Hartford, Connecticut 06115
(or such other place as the holder hereof (including Lender, hereinafter
referred to as “Holder”) may from time to time specify in writing), the
principal sum of FIVE MILLION AND NO/100 DOLLARS ($5,000,000), or, if less, the
aggregate unpaid principal amount of all Revolving Loans which shall have been
made by Holder to Maker pursuant to the terms of that certain Credit Agreement
between Maker and Lender dated of even date herewith, as amended from time to
time (as amended, the “Credit Agreement”), together with interest on the unpaid
principal amount of this Note beginning as of the date hereof, before or after
maturity or judgment (subject, however, to the applicability of a default rate
of interest as described below), payable at the per annum rates, at the times
and in the manner as provided in the Credit Agreement, and together with all
taxes levied or assessed on this Note or the debt evidenced hereby against
Holder (other than taxes on the overall net income, franchise or gross receipts
of Holder), and together with all reasonable out-of-pocket costs, expenses and
attorneys’ and other professional fees incurred in any action to collect this
Note or to enforce, defend, protect, preserve, foreclose or realize upon any
mortgage, lien, security interest or other collateral securing this Note or to
enforce, foreclose, defend, preserve, protect or sustain any such mortgage, lien
or security interest or guaranty or other agreement or in any litigation or
controversy arising from or connected with any of the foregoing.  Capitalized
terms used in this Note and not otherwise defined herein shall have the meanings
assigned in the Credit Agreement.

 

This Note is the “Revolving Loan Note” referred to in, evidences Revolving Loans
under, and has been issued by Maker in accordance with the terms of, the Credit
Agreement. Payments on this Note may be evidenced by a grid (if any) attached to
this Note or similar certificates or documents, or by the internal computerized
records of Holder, provided that any failure of Holder to make any such notation
shall not affect the unconditional obligation of Maker to pay all amounts due
hereunder as and when due. Holder shall be entitled to the benefits of the
Credit Agreement and the other Financing Agreements and may enforce the
agreements of Maker contained therein, and Holder may exercise the respective
remedies provided for thereby or otherwise available in respect thereof, all in
accordance with the terms thereof. Holder shall have the right (but not the
obligation), in its sole discretion, to charge any amounts due hereunder to
accounts maintained by Maker with Holder as provided in the Credit Agreement.

 

All computations of interest with respect to this Note shall be made on the
basis of a 360-day year and the actual number of days elapsed.  Interest shall
be due and payable at the times and in the manner provided in the Credit
Agreement.  Unless sooner accelerated as a result of the occurrence and
continuance of an Event of Default, principal, accrued and unpaid interest and
any other sums due hereunder shall be due and payable in full, in Dollars and in
immediately available funds on the Maturity Date. Whenever any payment of
principal of, or interest on, any

 

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

 

Prime Rate Loan shall be due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day. Whenever any payment of
principal of, or interest on, any LIBOR Loan shall be due on a day which is not
a London Business Day, such payment shall be made on the next succeeding London
Business Day unless such London Business Day falls in another calendar month, in
which case the date for payment thereof shall be the next preceding London
Business Day. If the date for any payment of principal is extended by operation
of law or otherwise, interest and fees thereon shall be payable for such
extended time.

 

Maker has the right under certain circumstances to prepay in whole or in part
the principal of this Note on the terms and conditions specified in the Credit
Agreement without penalty or premium.

 

Maker agrees that: (i) if any installment of interest or any other sum due under
this Note shall not be paid within five (5) days after the date it is otherwise
due and payable; or (ii) if any other Event of Default shall occur, then, upon
the happening of any such event, the entire indebtedness with accrued interest
thereon due under this Note shall, automatically or at the option of Holder, as
the case may be as provided in the Credit Agreement, accelerate and become
immediately due and payable without notice. Failure to exercise such option
shall not constitute a waiver of the right to exercise the same in the event of
any subsequent Event of Default. Notwithstanding anything to the contrary
contained herein, upon the occurrence and during the continuance of such an
Event of Default or after maturity or judgment, the interest rate on this Note
shall automatically increase without notice or demand to a per annum rate equal
to two percent (2.0%) above the Prime Rate.

 

If the entire amount of any required principal and/or interest due under this
Note is not paid in full within ten (10) days after the same is due, without in
any way affecting Holder’s right to declare an Event of Default to have
occurred, Maker shall pay a late fee equal to five percent (5%) of the required
payment and such late charge shall be immediately due and payable without demand
or notice of any kind.

 

Maker agrees that no delay or failure on the part of Holder in exercising any
power, privilege, remedy, option or right hereunder shall operate as a waiver
thereof or of any other power, privilege, remedy or right; nor shall any single
or partial exercise of any power, privilege, remedy, option or right hereunder
preclude any other or future exercise thereof or the exercise of any other
power, privilege, remedy, option or right. The rights and remedies expressed
herein and in the Credit Agreement are cumulative, and may be enforced
successively, alternatively, or concurrently and are not exclusive of any rights
or remedies which Holder may or would otherwise have under the provisions of all
applicable laws, and under the provisions of all agreements between Maker and
Holder or between any endorser or guarantor and Holder.

 

All agreements between Maker and Holder are hereby expressly limited so that in
no contingency or event whatsoever, whether by reason of acceleration of
maturity of any of the Obligations or otherwise, shall the amount paid or agreed
to be paid to Holder for the use or the forbearance of the Obligations exceed
the maximum permissible under applicable law.  As used herein, “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 the Credit Agreement, this Note and the other Financing
Agreements shall be governed by

 

2

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

 

such new law as of its effective date. In this regard, it is expressly agreed
that it is the intent of Maker and Holder in the execution, delivery and
acceptance of the Financing Agreements to contract in strict compliance with the
laws of the State of Connecticut from time to time in effect. If, under or from
any circumstances whatsoever, fulfillment of any provision hereof or of any of
the other Financing Agreements 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 Holder 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 of the Revolving Loans in such
manner and order of priority as Holder shall determine, in its sole discretion,
and not to the payment of interest. This provision shall control every other
provision of all agreements between Maker and Holder.

 

Maker hereby grants to Holder a continuing lien, security interest and right of
setoff as security for all of its Obligations and other liabilities to Holder,
whether now existing or hereafter arising, upon and against all of its deposits,
credits, collateral and property now or hereafter in the possession, custody,
safekeeping or control of Holder or, if Holder is Lender, any entity under the
control of FleetBoston Financial Corporation and its successors and assigns or
in transit to any of them. At any time and from time to time, without demand or
notice (any such demand or notice being expressly waived by Maker), Holder may
setoff the same or any part thereof and apply the same to any indebtedness,
Obligation or liability of Maker to Holder, even though unmatured, irrespective
of whether or not Holder shall have made any demand under the Credit Agreement
or any other Financing Agreement and regardless of the adequacy of any other
collateral securing such Obligations and liabilities. ANY AND ALL RIGHTS TO
REQUIRE HOLDER TO MARSHAL OR OTHERWISE EXERCISE ITS RIGHTS OR REMEDIES WITH
RESPECT TO ANY OTHER COLLATERAL WHICH SECURES ANY OR ALL OF SUCH OBLIGATIONS AND
LIABILITIES PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH
DEPOSITS, CREDITS OR OTHER PROPERTY OF MAKER ARE HEREBY KNOWINGLY, VOLUNTARILY
OR IRREVOCABLY WAIVED.  The rights of Holder under this paragraph are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) which Holder may have.

 

Failure by Holder to insist upon the strict performance by Maker of any terms
and provisions herein shall not be deemed to be a waiver of any terms and
provisions herein, and Holder shall retain the right thereafter to insist upon
strict performance by Maker of any and all terms and provisions of this Note or
any document securing the repayment of this Note.

 

MAKER AND HOLDER (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 OTHER FINANCING AGREEMENTS 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,

 

3

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COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF THE LENDER RELATING TO THE
ADMINISTRATION OF ANY OF THE LOANS OR ENFORCEMENT OF THE FINANCING AGREEMENTS,
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, MAKER 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. MAKER CERTIFIES THAT
NO REPRESENTATIVE, AGENT OR ATTORNEY OF HOLDER HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT HOLDER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE
THE FOREGOING WAIVERS. MAKER ACKNOWLEDGES AND STIPULATES THAT THE WAIVERS
GRANTED ABOVE ARE MADE KNOWINGLY, VOLUNTARILY AND INTENTIONALLY AND AFTER FULL
CONSULTATION WITH COUNSEL AND CONSTITUTE A MATERIAL INDUCEMENT FOR HOLDER TO
ACCEPT THIS NOTE AND MAKE REVOLVING LOANS.

 

TO INDUCE LENDER TO ENTER INTO THE LOAN TRANSACTIONS EVIDENCED BY THE CREDIT
AGREEMENT, THIS NOTE AND THE OTHER FINANCING AGREEMENTS, MAKER AGREES THAT THE
LOAN TRANACTIONS ARE COMMERCIAL TRANSACTIONS AND NOT CONSUMER TRANSACTIONS, AND
WAIVES ANY RIGHT TO NOTICE AND A HEARING UNDER CHAPTER 903a OF THE CONNECTICUT
GENERAL STATUTES, AS AMENDED, OR UNDER ANY OTHER FEDERAL OR STATE STATUTE OR
STATUTES OR FOREIGN LAWS AFFECTING PREJUDGMENT REMEDIES, AND AUTHORIZES HOLDER’S
ATTORNEY TO ISSUE A WRIT FOR A PREJUDGMENT REMEDY WITHOUT COURT ORDER, PROVIDED
THE COMPLAINT SHALL SET FORTH A COPY OF THIS WAIVER, AND WAIVES ANY CLAIM IN
TORT, CONTRACT OR OTHERWISE AGAINST HOLDER’S ATTORNEY WHICH MAY ARISE OUT OF
SUCH ISSUANCE OF A WRIT FOR A PREJUDGMENT REMEDY WITHOUT COURT ORDER.  FURTHER,
IN THE EVENT HOLDER SEEKS TO TAKE POSSESSION OF ANY OR ALL OF THE COLLATERAL BY
COURT PROCESS OR OTHER METHOD AVAILABLE UNDER THE LAW, MAKER IRREVOCABLY WAIVES
ANY BOND AND ANY SURETY OR SECURITY RELATING THERETO REQUIRED BY ANY STATUTE,
COURT RULE OR OTHERWISE AS AN INCIDENT TO SUCH POSSESSION, AND WAIVES ANY DEMAND
FOR POSSESSION PRIOR TO THE COMMENCEMENT OF ANY SUIT OR ACTION TO RECOVER WITH
RESPECT THERETO.  SPECIFICALLY, MAKER RECOGNIZES AND UNDERSTANDS THAT THE
EXERCISE OF HOLDER’S RIGHTS DESCRIBED ABOVE MAY RESULT IN THE ATTACHMENT OF OR
LEVY AGAINST MAKER’S PROPERTY, AND SUCH WRIT FOR A PREJUDGMENT REMEDY WILL NOT
HAVE THE PRIOR WRITTEN APPROVAL OR SCRUTINY OF A COURT OF LAW OR OTHER JUDICIAL
OFFICER AND  MAKER WILL NOT HAVE THE RIGHT TO ANY NOTICE OR PRIOR HEARING WHERE
MAKER MIGHT CONTEST SUCH A PROCEDURE.  THE INTENT OF MAKER IS TO GRANT TO HOLDER
FOR GOOD AND VALUABLE

 

4

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

 

CONSIDERATION THE RIGHT TO OBTAIN SUCH A PREJUDGMENT REMEDY AND TO EXPRESS ITS
BELIEF THAT ANY SUCH PREJUDGMENT REMEDY OBTAINED IS VALID AND CONSTITUTIONAL
UNLESS A COURT OF COMPETENT JURISDICTION SHOULD DETERMINE OTHERWISE.  FURTHER,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, MAKER HEREBY WAIVES DEMAND,
PRESENTMENT FOR PAYMENT, PROTEST, NOTICE OF PROTEST, NOTICE OF DISHONOR,
DILIGENCE IN COLLECTION, NOTICE OF NONPAYMENT OF THE THIS NOTE AND ANY AND ALL
NOTICES OF A LIKE NATURE.  FURTHER, TO THE EXTENT NOT OTHERWISE EXPRESSLY
PROVIDED HEREIN, MAKER EXPRESSLY WAIVES ALL DEFENSES BASED UPON SURETYSHIP OR
IMPAIRMENT OF COLLATERAL.  MAKER CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF HOLDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT HOLDER WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS. MAKER
ACKNOWLEDGES AND STIPULATES THAT THE WAIVERS GRANTED ABOVE ARE MADE KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY AND AFTER FULL CONSULTATION WITH COUNSEL AND
CONSTITUTE A MATERIAL INDUCEMENT FOR HOLDER TO ACCEPT THIS NOTE AND MAKE
REVOLVING LOANS.

 

This Note shall be governed by the laws of the State of Connecticut (excluding
the laws applicable to conflicts or choice of law).

 

 

 

AXSYS TECHNOLOGIES, INC.

 

 

By

 

 

 

 

Its

 

5

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Exhibit B

 

Term Loan Note

TERM LOAN PROMISSARY NOTE

 

$5,000,000

 

April 8, 2004

 

FOR VALUE RECEIVED, the undersigned, AXSYS TECHNOLOGIES, INC., a Delaware
corporation (“Maker”), does hereby promise to pay to the order of FLEET NATIONAL
BANK (“Lender”), at its office at 777 Main Street, Hartford, Connecticut 06115,
(or such other place as the holder hereof (including Lender, hereinafter
referred to as “Holder”) may from time to time specify in writing):

 

(a)                     the principal sum of FIVE MILLION AND NO/100 DOLLARS
($5,000,000), payable in sixty (60) monthly installments in the amounts and on
the dates set forth on Schedule 1 hereto; together with

 

(b)                    interest on the unpaid principal amount of this Note
beginning as of the date hereof, before or after maturity or judgment (subject,
however, to the applicability of a default rate of interest as described below),
payable at the per annum rates, at the times and in the manner as provided in
that certain Credit Agreement between Maker and Lender dated of even date
herewith, as amended from time to time (as amended, the “Credit Agreement”); and
together with

 

(c)                     all taxes levied or assessed on this Note or the debt
evidenced hereby against the Holder (other than taxes on the overall net income,
franchise or gross receipts of Holder) and all reasonable out-of-pocket costs,
expenses and attorneys’ and other professional fees incurred in any action to
collect this Note or to enforce, defend, protect, preserve, foreclose or realize
upon any mortgage, lien, security interest or other collateral securing this
Note or to enforce, foreclose, defend, preserve, protect or sustain any such
mortgage, lien or security interest or guaranty or other agreement or in any
litigation or controversy arising from or connected with any of the foregoing.

 

Capitalized terms used in this Note and not otherwise defined herein shall have
the meanings assigned n the Credit Agreement.

 

This Note is the “Term Loan Note” referred to in, evidences the Term Loan under,
and has been issued by Maker in accordance with the terms of, the Credit
Agreement. Payments on this Note may be evidenced by a grid (if any) attached to
this Note or similar certificates or documents, or by the internal computerized
records of Holder, provided that any failure of Holder to make any such notation
shall not affect the unconditional obligation of Maker to pay all amounts due
hereunder as and when due. Holder shall be entitled to the benefits of the
Credit Agreement and the other Financing Agreements and may enforce the
agreements of Maker contained therein, and Holder may exercise the respective
remedies provided for thereby or otherwise available in respect thereof, all in
accordance with the terms thereof. Holder shall have the right (but not the
obligation), in its sole discretion, to charge any amounts due hereunder to
accounts maintained by Maker with Holder as provided in the Credit Agreement.

 

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

 

All computations of interest with respect to this Note shall be made on the
basis of a 360-day year and the actual number of days elapsed. Whenever any
payment of principal of, or interest on, any Prime Rate Loan shall be due on a
day which is not a Business Day, such payment shall be made on the next
succeeding Business Day. Whenever any payment of principal of, or interest on,
any LIBOR Loan shall be due on a day which is not a London Business Day, such
payment shall be made on the next succeeding London Business Day unless such
London Business Day falls in another calendar month, in which case the date for
payment thereof shall be the next preceding London Business Day. If the date for
any payment of principal is extended by operation of law or otherwise, interest
and fees thereon shall be payable for such extended time.

 

Maker has the right under certain circumstances to prepay in whole or in part
the principal of this Note on the terms and conditions specified in the Credit
Agreement without penalty or premium.

 

Maker agrees that: (i) if any installment of interest or any other sum due under
this Note shall not be paid within five (5) days after the date it is otherwise
due and payable; or (ii) if any other Event of Default shall occur, then, upon
the happening of any such event, the entire indebtedness with accrued interest
thereon due under this Note shall, automatically or at the option of Holder, as
the case may be as provided in the Credit Agreement, accelerate and become
immediately due and payable without notice. Failure to exercise such option
shall not constitute a waiver of the right to exercise the same in the event of
any subsequent Event of Default. Notwithstanding anything to the contrary
contained herein, upon the occurrence and during the continuance of such an
Event of Default or after maturity or judgment, the interest rate on this Note
shall automatically increase without notice or demand to a per annum rate equal
to two percent (2.0%) above the Prime Rate.

 

If the entire amount of any required principal and/or interest due under this
Note is not paid in full within ten (10) days after the same is due, without in
any way affecting Holder’s right to declare an Event of Default to have
occurred, Maker shall pay a late fee equal to five percent (5%) of the required
payment and such late charge shall be immediately due and payable without demand
or notice of any kind.

 

Maker agrees that no delay or failure on the part of Holder in exercising any
power, privilege, remedy, option or right hereunder shall operate as a waiver
thereof or of any other power, privilege, remedy or right; nor shall any single
or partial exercise of any power, privilege, remedy, option or right hereunder
preclude any other or future exercise thereof or the exercise of any other
power, privilege, remedy, option or right. The rights and remedies expressed
herein and in the Credit Agreement are cumulative, and may be enforced
successively, alternatively, or concurrently and are not exclusive of any rights
or remedies which Holder may or would otherwise have under the provisions of all
applicable laws, and under the provisions of all agreements between Maker and
Holder or between any endorser or guarantor and Holder.

 

All agreements between Maker and Holder are hereby expressly limited so that in
no contingency or event whatsoever, whether by reason of acceleration of
maturity of any of the Obligations or otherwise, shall the amount paid or agreed
to be paid to Holder for the use or the forbearance of the Obligations exceed
the maximum permissible under applicable law.  As used

 

2

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

 

herein, “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 the Credit Agreement, this Note
and the other Financing Agreements shall be governed by such new law as of its
effective date. In this regard, it is expressly agreed that it is the intent of
Maker and Holder in the execution, delivery and acceptance of the Financing
Agreements to contract in strict compliance with the laws of the State of
Connecticut from time to time in effect. If, under or from any circumstances
whatsoever, fulfillment of any provision hereof or of any of the other Financing
Agreements 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 Holder 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 of the Revolving Loans in such manner and order of
priority as Holder shall determine, in its sole discretion, and not to the
payment of interest. This provision shall control every other provision of all
agreements between Maker and Holder.

 

Maker hereby grants to Holder a continuing lien, security interest and right of
setoff as security for all of its Obligations and other liabilities to Holder,
whether now existing or hereafter arising, upon and against all of its deposits,
credits, collateral and property now or hereafter in the possession, custody,
safekeeping or control of Holder or, if Holder is Lender, any entity under the
control of FleetBoston Financial Corporation and its successors and assigns or
in transit to any of them. At any time and from time to time, without demand or
notice (any such demand or notice being expressly waived by Maker), Holder may
setoff the same or any part thereof and apply the same to any indebtedness,
Obligation or liability of Maker to Holder, even though unmatured, irrespective
of whether or not Holder shall have made any demand under the Credit Agreement
or any other Financing Agreement and regardless of the adequacy of any other
collateral securing such Obligations and liabilities. ANY AND ALL RIGHTS TO
REQUIRE HOLDER TO MARSHAL OR OTHERWISE EXERCISE ITS RIGHTS OR REMEDIES WITH
RESPECT TO ANY OTHER COLLATERAL WHICH SECURES ANY OR ALL OF SUCH OBLIGATIONS AND
LIABILITIES PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH
DEPOSITS, CREDITS OR OTHER PROPERTY OF MAKER ARE HEREBY KNOWINGLY, VOLUNTARILY
OR IRREVOCABLY WAIVED.  The rights of Holder under this paragraph are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) which Holder may have.

 

Failure by Holder to insist upon the strict performance by Maker of any terms
and provisions herein shall not be deemed to be a waiver of any terms and
provisions herein, and Holder shall retain the right thereafter to insist upon
strict performance by Maker of any and all terms and provisions of this Note or
any document securing the repayment of this Note.

 

MAKER AND HOLDER (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

 

3

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OTHER FINANCING AGREEMENTS 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 LENDER RELATING TO THE ADMINISTRATION OF ANY OF THE LOANS OR
ENFORCEMENT OF THE FINANCING AGREEMENTS, 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, MAKER 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. MAKER CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF HOLDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT HOLDER WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS. MAKER
ACKNOWLEDGES AND STIPULATES THAT THE WAIVERS GRANTED ABOVE ARE MADE KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY AND AFTER FULL CONSULTATION WITH COUNSEL AND
CONSTITUTE A MATERIAL INDUCEMENT FOR HOLDER TO ACCEPT THIS NOTE AND THE TERM
LOAN.

 

TO INDUCE LENDER TO ENTER INTO THE LOAN TRANSACTIONS EVIDENCED BY THE CREDIT
AGREEMENT, THIS NOTE AND THE OTHER FINANCING AGREEMENTS, MAKER AGREES THAT THE
LOAN TRANACTIONS ARE COMMERCIAL TRANSACTIONS AND NOT CONSUMER TRANSACTIONS, AND
WAIVES ANY RIGHT TO NOTICE AND A HEARING UNDER CHAPTER 903a OF THE CONNECTICUT
GENERAL STATUTES, AS AMENDED, OR UNDER ANY OTHER FEDERAL OR STATE STATUTE OR
STATUTES OR FOREIGN LAWS AFFECTING PREJUDGMENT REMEDIES, AND AUTHORIZES HOLDER’S
ATTORNEY TO ISSUE A WRIT FOR A PREJUDGMENT REMEDY WITHOUT COURT ORDER, PROVIDED
THE COMPLAINT SHALL SET FORTH A COPY OF THIS WAIVER, AND WAIVES ANY CLAIM IN
TORT, CONTRACT OR OTHERWISE AGAINST HOLDER’S ATTORNEY WHICH MAY ARISE OUT OF
SUCH ISSUANCE OF A WRIT FOR A PREJUDGMENT REMEDY WITHOUT COURT ORDER.  FURTHER,
IN THE EVENT HOLDER SEEKS TO TAKE POSSESSION OF ANY OR ALL OF THE COLLATERAL BY
COURT PROCESS OR OTHER METHOD AVAILABLE UNDER THE LAW, MAKER IRREVOCABLY WAIVES
ANY BOND AND ANY SURETY OR SECURITY RELATING THERETO REQUIRED BY ANY STATUTE,
COURT RULE OR OTHERWISE AS AN INCIDENT TO SUCH POSSESSION, AND WAIVES ANY DEMAND
FOR POSSESSION PRIOR TO THE COMMENCEMENT OF ANY SUIT OR ACTION TO RECOVER WITH
RESPECT THERETO.  SPECIFICALLY, MAKER RECOGNIZES AND UNDERSTANDS THAT THE
EXERCISE OF HOLDER’S RIGHTS DESCRIBED ABOVE MAY RESULT IN THE ATTACHMENT OF OR
LEVY AGAINST MAKER’S PROPERTY, AND SUCH WRIT FOR A PREJUDGMENT REMEDY WILL NOT
HAVE THE PRIOR WRITTEN APPROVAL OR SCRUTINY OF A COURT OF LAW OR OTHER JUDICIAL
OFFICER

 

4

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

 

AND MAKER WILL NOT HAVE THE RIGHT TO ANY NOTICE OR PRIOR HEARING WHERE MAKER
MIGHT CONTEST SUCH A PROCEDURE.  THE INTENT OF MAKER IS TO GRANT TO HOLDER FOR
GOOD AND VALUABLE CONSIDERATION THE RIGHT TO OBTAIN SUCH A PREJUDGMENT REMEDY
AND TO EXPRESS ITS BELIEF THAT ANY SUCH PREJUDGMENT REMEDY OBTAINED IS VALID AND
CONSTITUTIONAL UNLESS A COURT OF COMPETENT JURISDICTION SHOULD DETERMINE
OTHERWISE.  FURTHER, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, MAKER
HEREBY WAIVES DEMAND, PRESENTMENT FOR PAYMENT, PROTEST, NOTICE OF PROTEST,
NOTICE OF DISHONOR, DILIGENCE IN COLLECTION, NOTICE OF NONPAYMENT OF THE THIS
NOTE AND ANY AND ALL NOTICES OF A LIKE NATURE.  FURTHER, TO THE EXTENT NOT
OTHERWISE EXPRESSLY PROVIDED HEREIN, MAKER EXPRESSLY WAIVES ALL DEFENSES BASED
UPON SURETYSHIP OR IMPAIRMENT OF COLLATERAL.  MAKER CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF HOLDER HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT HOLDER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE
THE FOREGOING WAIVERS. MAKER ACKNOWLEDGES AND STIPULATES THAT THE WAIVERS
GRANTED ABOVE ARE MADE KNOWINGLY, VOLUNTARILY AND INTENTIONALLY AND AFTER FULL
CONSULTATION WITH COUNSEL AND CONSTITUTE A MATERIAL INDUCEMENT FOR HOLDER TO
ACCEPT THIS NOTE AND MAKE THE TERM LOAN.

 

This Note shall be governed by the laws of the State of Connecticut (excluding
the laws applicable to conflicts or choice of law).

 

 

 

AXSYS TECHNOLOGIES, INC.

 

 

By

 

 

 

 

Its

 

5

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

 

SCHEDULE 1

 

Payment Date

 

Payment Amount

 

Payment Date

 

Payment Amount

 

 

 

 

 

 

 

 

 

May 10, 2004

 

$

83,333.33

 

June 8, 2007

 

$

83,333.33

 

June 8, 2004

 

$

83,333.33

 

July 9, 2007

 

$

83,333.33

 

July 8, 2004

 

$

83,333.33

 

August 8, 2007

 

$

83,333.33

 

August 9, 2004

 

$

83,333.33

 

September 10, 2007

 

$

83,333.33

 

September 8, 2004

 

$

83,333.33

 

October 9, 2007

 

$

83,333.33

 

October 8, 2004

 

$

83,333.33

 

November 8, 2007

 

$

83,333.33

 

November 8, 2004

 

$

83,333.33

 

December 10, 2007

 

$

83,333.33

 

December 8, 2004

 

$

83,333.33

 

January 8, 2008

 

$

83,333.33

 

January 10, 2005

 

$

83,333.33

 

February 8, 2008

 

$

83,333.33

 

February 8, 2005

 

$

83,333.33

 

March 10, 2008

 

$

83,333.33

 

March 8, 2005

 

$

83,333.33

 

April 8, 2008

 

$

83,333.33

 

April 8, 2005

 

$

83,333.33

 

May 8, 2008

 

$

83,333.33

 

May 9, 2005

 

$

83,333.33

 

June 9, 2008

 

$

83,333.33

 

June 8, 2005

 

$

83,333.33

 

July 8, 2008

 

$

83,333.33

 

July 8, 2005

 

$

83,333.33

 

August 8, 2008

 

$

83,333.33

 

August 8, 2005

 

$

83,333.33

 

September 8, 2008

 

$

83,333.33

 

September 8, 2005

 

$

83,333.33

 

October 8, 2008

 

$

83,333.33

 

October 11, 2005

 

$

83,333.33

 

November 10, 2008

 

$

83,333.33

 

November 8, 2005

 

$

83,333.33

 

December 8, 2008

 

$

83,333.33

 

December 8, 2005

 

$

83,333.33

 

January 8, 2009

 

$

83,333.33

 

January 9, 2006

 

$

83,333.33

 

February 9, 2009

 

$

83,333.33

 

February 8, 2006

 

$

83,333.33

 

March 9, 2009

 

$

83,333.33

 

March 8, 2006

 

$

83,333.33

 

April 8, 2009

 

$

83,333.53

 

April 10, 2006

 

$

83,333.33

 

 

 

 

 

May 8, 2006

 

$

83,333.33

 

 

 

 

 

June 8, 2006

 

$

83,333.33

 

 

 

 

 

July 10, 2006

 

$

83,333.33

 

 

 

 

 

August 8, 2006

 

$

83,333.33

 

 

 

 

 

September 8, 2006

 

$

83,333.33

 

 

 

 

 

October 10, 2006

 

$

83,333.33

 

 

 

 

 

November 8, 2006

 

$

83,333.33

 

 

 

 

 

December 8, 2006

 

$

83,333.33

 

 

 

 

 

January 8, 2007

 

$

83,333.33

 

 

 

 

 

February 8, 2007

 

$

83,333.33

 

 

 

 

 

March 8, 2007

 

$

83,333.33

 

 

 

 

 

April 10, 2007

 

$

83,333.33

 

 

 

 

 

May 8, 2007

 

$

83,333.33

 

 

 

 

 

 

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

 

Exhibit C

 

Joinder Agreement

JOINDER AGREEMENT

 

Reference is made to the Credit Agreement dated as of April 8, 2004 (as amended,
amended and restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”) among AXSYS TECHNOLOGIES, INC., a Delaware corporation
(“Borrower”), the Subsidiary Guarantors (such term and each other capitalized
term used but not defined herein having the meaning given it in Article I of the
Credit Agreement) and FLEET NATIONAL BANK (the “Bank”).

 

W I T N E S S E T H:

 

WHEREAS, the Subsidiary Guarantors have entered into the Credit Agreement and
the Guaranty Agreement in order to induce Bank to make the Loans to Borrower;
and

 

WHEREAS, pursuant to Section 7.12 of the Credit Agreement, each Subsidiary that
was not in existence or not yet a Subsidiary on the date of the Credit Agreement
is required to become a Subsidiary Guarantor under the Credit Agreement and a
Guarantor under the Guaranty Agreement by executing a Joinder Agreement. The
undersigned Subsidiary (the “New Guarantor”) is executing this joinder agreement
(“Joinder Agreement”) to the Credit Agreement and the Guaranty Agreement in
order to induce Bank to make additional Revolving Loans and as consideration for
the Loans previously made.

 

NOW, THEREFORE, Bank and the New Guarantor hereby agree as follows:

 

A.                                    Guarantee.  In accordance with Section
7.12 of the Credit Agreement, the New Guarantor, by its signature below,
confirms that it has become as of the date hereof a Subsidiary Guarantor and
Obligor under the Credit Agreement and a Guarantor under the Guaranty Agreement,
in each case with the same force and effect as if originally named therein as a
Subsidiary Guarantor and Obligor and a Guarantor, respectively, by operation of
the Merger.

 

B.                                    Representations and Warranties. The New
Guarantor hereby (a) agrees to all the terms and provisions of the Credit
Agreement and the Guaranty Agreement applicable to it as a Subsidiary Guarantor
and Obligor and a Guarantor, respectively, thereunder and (b) represents and
warrants that the representations and warranties made by it as a Subsidiary
Guarantor and Obligor and a Guarantor, respectively, thereunder are true and
correct in all material respects (except that any representation and warranty
that is (1) qualified as to “materiality” or “Material Adverse Effect” shall be
true and correct in all respects, and (2) made as of a specified date shall be
reaffirmed as of such date) on and as of the date hereof. Each reference to a
Subsidiary Guarantor or Obligor (other than Borrower) in the Credit Agreement
and a Guarantor in the Guaranty Agreement shall be deemed to include the New
Guarantor. The New Guarantor hereby attaches supplements to each of the
schedules to the Credit Agreement and the Guaranty Agreement applicable to it.

 

C.                                    Severability.  Any provision of this
Joinder Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions

 

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

 

hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.

 

D.                                    Counterparts.  This Joinder Agreement may
be executed in counterparts, each of which shall constitute an original.
Delivery of an executed signature page to this Joinder Agreement by facsimile
transmission shall be as effective as delivery of a manually executed
counterpart of this Joinder Agreement.

 

E.                                    No Waiver.  Except as expressly
supplemented hereby, the Credit Agreement and the Guaranty Agreement shall
remain in full force and effect.

 

F.                                      Notices.  All notices, requests and
demands to or upon the New Guarantor or Bank shall be governed by the terms of
Section 12.6 of the Credit Agreement.

 

G.                                  Governing Law.  THIS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE
WITH AN) GOVERNED BY THE LAW OF THE STATE OF CONNECTICUT, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION.

 

IN WITNESS WHEREOF, the undersigned have caused this Joinder Agreement to be
duly executed and delivered by their duly authorized officers as of the day and
year first above written.

 

 

 

TELIC OPTICS, INC.

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

 

 

Address for Notices:

 

 

 

c/o Axsys Technologies, Inc.

 

175 Capital Blvd., Suite 103

 

Rocky Hill, CT 06067

 

Attn: David Almeida

 

Telephone No.: (860) 257-0200

 

Telecopier No.: (860) 594-5750

 

 

 

FLEET NATIONAL BANK

 

 

 

By:

 

 

 

 

Name:

Matthew E. Hummel

 

 

Title:

Senior Vice President

 

 

 

2

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

 

Schedule 5.1(d)

 

Litigation

 

Except for the items described below, Axsys is unaware of any pending or
threatened litigation (where the potential liability is not covered by
insurance), proceedings, investigations, audits and other claims brought by a
person, entity or government agency.

 

Gale v. Bershad:

 

On May 30, 1997, an action was filed in the Court of Chancery in the State of
Delaware against Axsys and three of the directors on behalf of a purported class
of persons who purchased Axsys’ preferred stock. The plaintiff has challenged
our decision to redeem all of our outstanding shares of the preferred stock. The
plaintiff claimed that the defendants (1) breached fiduciary duties in setting
the redemption price too low and unfairly seeking to advantage holders of common
stock and (2) breached contractual duties as set forth in the Certificate of
Designation governing the preferred stock, as well as an implied covenant of
good faith and fair dealing.   In March 1998, the Court dismissed the
plaintiff’s claim of breach of fiduciary duties but declined to dismiss the
plaintiff’s claims concerning the purported breach of contract and implied
covenant of good faith and fair dealing. In January of 2001, the plaintiff filed
an amended complaint asserting the same causes of action raised in the original
complaint. We filed an answer, in January of 2001, denying the material
substantive allegations of the amended complaint and asserting, as affirmative
defenses, the failure to state a claim and the defense that plaintiff is not an
adequate class representative. As of December 31, 2003, we have reached an
agreement with the plaintiff in principle to settle the action, although
definitive documentation of the settlement has not been filed with the Court.
The settlement hearing is planned for May 2004.

 

Parker v. Brush Wellman

 

On January 29, 2004, we were served with a complaint in a matter entitled Neal
Parker et al v. Brush Wellman, Inc., et al, in which we, as
successors-in-interest to Speedring, Inc. is names as a defendant. The case was
filed in the Superior Court of Fulton County in the State of Georgia. No answer
has yet been filed by us. We obtained a 30-day extension of time to file a
responsive pleading from plaintiff’s counsel. Our answer to the complaint is due
in the end of March of 2004. The matter is a potential class-action lawsuit
against multiple defendants for unspecified damages relating to beryllium
exposure to employees of Lockheed Martin Corporation at its Marietta, Georgia
facility.   We are named as a defendant as Speedring, Inc. allegedly was a
fabricator of a beryllium-containing product that was sold to and used at the
Lockheed Martin facility. While we are denying any liability and intend to
vigorously defend the matter, we are researching insurance coverage for this
type of claim.

 

Axsys Technologies, Inc. v. Mitchell Dutton

 

On July 20, 2003, the Company filed a complaint on an order to show cause
seeking temporary restraint against Mitchell Dutton, formerly the general
manager of our Distributed Products Group (“AST”). Our lawsuit sought injunctive
relief, including the return of confidential and propriety information and money
damages for conversion, breach of fiduciary

 

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

 

duty, breach of duty of loyalty, tortuous interference with AST’s business
relationship with certain of its customer and suppliers and for misappropriation
of trade secrets, confidential and proprietary information (the “Action”). On
August 5, 2003, the Court entered an order granting in part and denying in part
our application for a temporary restraining order, finding that Dutton’s conduct
in taking certain proprietary information was wrongful and unjustifiable and
ordering its return to us. The Court also ordered certain expedited discovery
pending the preliminary injunction hearing. On August 26, 2003, after the
completion of the expedited discovery, we filed an amended complaint. The
amended complaint restructured the allegations in the original complaint and
added detailed facts supporting these allegations. On September 9, 2003, the
Court denied the Company’s application for preliminary restraints against
Dutton.

 

On October 22, 203, Dutton filed an answer, affirmative defenses and
counterclaim against us. The counterclaim filed by Dutton against the Company
alleged tortuous interference and defamation, claiming that Axsys improperly
contacted customers and suppliers of Axsys in an effort to keep Dutton from
competing with us. The counterclaim also alleged tat the continuation of the
Action by the Company against Dutton after the proprietary information had been
returned, was frivolous. The counterclaim sought compensatory and punitive
damages from Axsys in an unspecified amount.

 

In November 2003, Axsys and Dutton reached a settlement of all claims in the
Action, subject to Dutton’s negotiation and entry into a separate agreement with
one of AST’s Japanese suppliers. The settlement provided for no payment of money
damages by any party and included a restriction on Dutton and related entities
from selling or offering to sell certain products to our existing customers.

 

It appears that Dutton has reached an agreement with the Japanese supplier and
will document this agreement. Whether the settlement will in fact be
consummated, however, is still uncertain. All parties had consented to extend
the time for us to file a response to the counterclaim filed by Dutton until
March 26, 2004, in order to permit the parties to consummate the anticipated
settlement of this matter. In the event the settlement is not consummated, we
plan to file an answer to the counterclaim by March 26, 2004, denying Dutton’s
allegations.

 

McDowell vs. Axsys Technologies

 

AST Bearings, a division of Axsys Technologies, hired Tracy McDowell as a
shipping clerk in 1966. In October 2001, McDowell was notified he was being
terminated. He was offered a severance package including 6 months salary. On
October 26, 2001, McDowell’s attorney, Samuel J. Halpern, wrote demanding more
severance (2.5 weeks per year of service). No agreement on severance was
reached. McDowell left as of December 31, 2001 without severance.

 

On June 20, 2002, McDowell filed a complaint with the Equal Employment
Opportunity Commission (EEOC) charging age and ERISA discrimination against
Axsys and Mitchell Dutton, the former general manager of AST Bearings.  AST
maintains that McDowell was terminated for performance. The EEOC issued a right
to sue notice. An initial pretrial scheduling conference was held with the judge
to conduct discovery. Discovery was filed by the January 9, 2004 deadline.

 

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

 

In December 2003, Chubb, Axsys’ insurance company was notified of the suit. The
age discrimination claims of the suit are covered under Axsys’ D&O policy; the
ERISA claims are covered by Axsys’ fiduciary liability insurance. Chubb has
appointed its own council, Klett, Rooney, as Chubb has a duty to defend the
claim. Any settlement or judgment would have to be allocated between the two
policies, with the age discrimination portion attributed to the D&O policy and
the ERISA portion attributed to the fiduciary policy.

 

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

 

Schedule 5.1(i)

 

Indebtedness of Obligors

 

1.                                       Axsys has capitalized leases with
Wachovia Securities (formerly First Union Commercial Corporation). Axsys entered
into a master lease agreement with Wachovia Securities on August 21, 2001, to
finance the purchase of new production equipment. These leases were funded
between October 1, 2001 and October 31, 2002. All of these leases have a 48
month term. The total amount financed was $1,667,000. $182,000 of that amount
was used for equipment located at Speedring Systems, Inc., an Axsys subsidiary
located in Rochester Hills, MI and the remainder was for equipment located at
Speedring, Inc, an Axsys subsidiary located in Cullman, AL, The leases are in
the name of “Axsys Technologies, Inc.” The outstanding balance on these leases
as of March 6, 2004 (Axsys’ fiscal February month end) was $923,000.

 

2.                                       Axsys has two letters of credit with
Fleet Bank that serve as security deposits for two leased facilities for two
discontinued operations. One letter of credit is in the amount of $23,469. It
was originally issued on November 28, 2001, with an initial expiration date of
December 31, 2002. This letter of credit has been renewed each year and now is
scheduled to expire on December 31, 2004. The other letter of credit is in the
amount of $207,000. This second letter of credit was originally issued on May 7,
2001, with an initial expiration date of April 30, 2002. This second letter of
credit has been renewed each year and is now scheduled to mature on April 30,
2004. Axsys intends to renew this second letter of credit for another year. No
draws have been made on either letter of credit.

 

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

 

Schedule 5.1(j)

 

Permitted Liens

 

 

NAME

 

STATE

 

JURISDICTION

 

SECURED PARTY

 

UCC FILE NO.
FILE DATE

 

COLLATERAL DESCRIPTION

Axsys Technologies, Inc.

 

DE

 

SOS

 

First Union Commercial Corporation

 

UCC No: 20231013
File Date: 12/31/01

 

All equipment, fixtures and furnishings and other personal property and all
modifications and additions thereto, and replacements and substitutions
therefore in whole or in part, now or hereafter covered by that Equipment Lease
dated August 21, 2001, and all schedules now or hereafter referencing said Lease
between Secured Party, as Lessor, and Debtor, as Lessee. Secured Party and
Debtor have entered into a valid lessor-lessee relationship and this is a
precautionary filing only. Proceeds of collateral are also covered, but Debtor
does not have the power of sale.

Axsys Technologies, Inc.

 

DE

 

SOS

 

General Electric Capital Corporation

 

UCC No: 31226326
File Date: 4/30/03

 

Yr 1998, Model 1200, SN 980034, Optimum Flycutting Machine System including: HD
Bridge Type, Upper Enclosures, Tool/Air Lube System

Yr 1998, Model MiniFIZ-100P-HR, SN 55-602 & 86-261, Phase Measuring
Interferometer including Transmission Flat

Yr 1998, Model 1600CM, SN USB-9303906, Hewlett Packard Printer

 

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

 

NAME

 

STATE

 

JURISDICTION

 

SECURED PARTY

 

UCC FILE NO.
FILE DATE

 

COLLATERAL DESCRIPTION

Axsys Technologies, Inc.

 

DE

 

SOS

 

General Electric Capital Corporation

 

UCC No: 32103607
File Date: 8/13/03

 

(1) Nanoform 600 with Ultrapath CNC, Serial number:
980035 with various features
(1) Enviromental Temperature Control
(1) Ultracomp, Amplifier & Probe
(1) Ultracomp Mount, Diamond Turning
(1) Auto Balancing Software
(1) Integrated Gage Amp., UPIL, ISA
(1) Tool Air/Lube System, BIJUR

Axsys Technologies, Inc.

 

DE

 

SOS

 

General Electric Capital Corporation

 

UCC No: 32642695
File Date: 10/9/03

 

(1) One Planer Type Horizontal Boring & Milling Machine with Tosnuc 888, s/ns:
P025286,130263, mfg.#: 415H29
(6) Six Support Plate 1/2" x 2" x 10.8"
(22) Twenty-two 0.7" x 4.9" x 7.1" Plate
(22) Twenty-two Foundation Collar 1.6" Dia.
(10) Ten Support Bar 2.6" x 15.7"
(2) Two Support Plate 1/2" x 14" x 16.8"
(1) One 6288-8176 (6298-8763)
(22) Twenty-two LL-22 Level Line Mounts
(1) One Spindle Coolant Tank
(1) One Primary Spindle Coolant Tank

Axsys Technologies, Inc.

 

CA

 

SOS

 

Inter-Tel Leasing, Inc.

 

UCC No: 9819060118
File Date: 7/6/98

 

1 Inter-Tel Axxess Telephone System with Voice Mail

 

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

 

NAME

 

STATE

 

JURISDICTION

 

SECURED PARTY

 

UCC FILE NO.
FILE DATE

 

COLLATERAL DESCRIPTION

Axsys Technologies, Inc.

 

CA

 

SOS

 

General Electric Capital Corporation

 

UCC No: 9918960896
File Date: 7/2/99
Amend: 01009C0537
File Date: 7/4/01

 

(1) 1999 Tschuden61170 1989 Model 610 Cylindrical Grinder equipped with (1) 5-C
Drawbar, (2) Diamond Dressers, (3) Chucks, (1) Small Mag Chuck, (40) Assorted
Centers, (1) Wheel Blancey w/ (2) Arbors, (10) Grinding Wheels w/ (1) I.D.
Spindle, Mandrels & Collets, (2) Extra Belts, (1) Box Assorted Tooling

(1) 1999 Machining Time Savers 17128 1999 30"xl6"x20" Vertical Maching Center,
(1) Rotary Table Hrt 160, (1) 4th Axis Drive and Wiring, (1) Programmable
Coolant Nozzle, (1) Expanded Memory to 8,250 ft, (1) 3.5 Floppy Disc Drive &
Interface, (1) Chip Conveyor, auger Style

Axsys Technologies, Inc.

 

CA

 

SOS

 

Copelco Capital, Inc.

 

UCC No: 9929460827
File Date: 10/12/99

 

Lease 1670710, 1 Xerox 8825 Engineering Copier

Axsys Technologies, Inc.

 

CA

 

SOS

 

General Electric Capital Corporation

 

UCC No: 0100960943
File Date: 1/4/01

 

Collateral listed on Schedule No. 10

Axsys Technologies, Inc.

 

CA

 

SOS

 

Telogy, Inc.

 

UCC No: 0114960877
File Date: 5/23/01

 

Together with all attachments and replacements thereof provided under lease
accommodations by Telogy Inc. This financing statement is filed in connection
with a lease of goods between the Secured Party as Lessor, and the Debtor as
Lessee. RA #401 894^^
(1) HP E44208 S/N: MY4 1000107

 

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

 

NAME

 

STATE

 

JURISDICTION

 

SECURED PARTY

 

UCC FILE NO.
FILE DATE

 

COLLATERAL DESCRIPTION

Axsys Technologies, Inc.

 

CA

 

SOS

 

Manufacturer and Dealer Services LLC

 

UCC No: 0118060133
File Date: 6/25/01

 

1 Genie GS-1930 Scissor Lift

Axsys Technologies, Inc.

 

CA

 

San Diego

 

General Electric Capital Corporation

 

UCC No: 1997-0382861
File Date: 8/11/97
Amend: 2001 0025747
File Date: 1/17/01
State: none
Fed: none
Judg: none
Fixt: none

NOTE: Filing appears to have lapsed, however an amendment was accepted for it
after lapse date.

 

All electronic manufacturing equipment more fully described on Collateral
Schedule No. 003 attached hereto and made a part hereof. Including all other
attachments, accessories, additions, replacements and substitutions and proceeds
now or hereafter attached hereto. Equipment currently located at: Vernitron
Corporation, 1601 Precision Park Lane, San Diego, CA 92173 (See Collateral
Schedule No. 003)

Axsys Technologies, Inc.

 

CT

 

SOS

 

General Electric Capital Corporation

 

UCC No: 0002043692
File Date: 1/3/01

 

Collateral listed in Schedule No. 10

 

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

 

NAME

 

STATE

 

JURISDICTION

 

SECURED PARTY

 

UCC FILE NO.
FILE DATE

 

COLLATERAL DESCRIPTION

Axsys Technologies, Inc.

 

CT

 

SOS

 

General Electric Capital Corporation

 

UCC No: 0002044443
File Date: 1/8/01

 

(1) One Republic Lagun Five PT 70X120 30HP Manual Lathe
(1) One Variable Speed Headstock
(1) One Constant Surface Speed w/ Anilam Wizard 450-L/IO 2 with 2 Axis Digital
Readout
(1) One P4 Bearings
(1) One Special Gearing to Allow for .0009 IPR Crossfeed
(1) One Face Plarte

Axsys Technologies, Inc.

 

CT

 

SOS

 

General Electric Capital Corporation

 

UCC No: 0002051290
File Date: 2/14/01

 

See Collateral Schedule Nos. 1, 2, and 3

Axsys Technologies, Inc.

 

NJ

 

SOS

 

General Electric Capital Corporation

 

UCC No: 1869786
File Date: 11/2/98

 

Yr 1998, Model 1200, SN 980034, Optimum Flycutting Machine System including: HD
Bridge Type, Upper Enclosures, Tool/Air Lube System

Yr 1998, Model MiniFIZ-100P-HR, SN 55-602 & 86-261, Phase Measuring
Interferometer including Transmission Flat

Yr 1998, Model 1600CM, SN USB-9303906, Hewlett Packard Printer

Axsys Technologies, Inc.

 

NJ

 

SOS

 

General Electric Capital Corporation

 

UCC No: 1891389
File Date: 2/6/99

 

(1) Nanoform 600 with Ultrapath CNC, Serial number: 980035 with various features
(1) Enviromental Temperature Control
(1) Ultracomp, Amplifier & Probe
(1) Ultracomp Mount, Diamond Turning
(1) Auto Balancing Software
(1) Integrated Gage Amp., UPIL, ISA
(1) Tool Air/Lube System, BIJUR

 

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

 

NAME

 

STATE

 

JURISDICTION

 

SECURED PARTY

 

UCC FILE NO.
FILE DATE

 

COLLATERAL DESCRIPTION

Axsys Technologies, Inc.

 

NJ

 

SOS

 

General Electric Capital Corporation

 

UCC No: 1898193
File Date: 4/6/99

 

(1) One Planer Type Horizontal Boring & Milling Machine with Tosnuc 888, s/ns:
P025286, 130263, mfg.#: 4I5H29
(6) Six Support Plate 1/2" x 2" x 10.8"
(22) Twenty-two 0.7" x 4.9" x 7.1" Plate
(22) Twenty-two Foundation Collar 1.6" Dia.
(10) Ten Support Bar 2.6" x 15.7"
(2) Two Support Plate 1/2" x 14" x 16.8"
(1) One 6288-8176 (6298-8763)
(22) Twenty-two LL-22 Level Line Mounts
(1) One Spindle Coolant Tank
(1) One Primary Spindle Coolant Tank

Axsys Technologies, Inc.

 

NJ

 

SOS

 

General Electric Capital Corporation

 

UCC No: 1916014
File Date: 7/2/99

 

(l)1999 Tschuden 61170  1989 Model 610 Cylindrical Grinder equipped with (1) 5- 
C Drawbar, (2) Diamond Dressers, (3) Chucks, (1) Small Mag Chuck, (40) Assorted
Centers, (1) Wheel Blancey w/ (2) Arbors, (10) Grinding Wheels w/ (1) I.D.
Spindle,  Mandrels & Collets, (2) Extra Belts, (1) Box Assorted  Tooling

(1) 1999 Machining Time Savers 17128 1999 30"x l6"x20" Vertical Maching Center,
(1) Rotary Table Hrt 160, (1) 4th Axis Drive and Wiring, (1) Programmable
Coolant Nozzle, (1) Expanded Memory to 8,250 ft, (1) 3.5 Floppy Disc Drive &
Interface, (1) Chip Conveyor, auger Style

 

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

 

NAME

 

STATE

 

JURISDICTION

 

SECURED PARTY

 

UCC FILE NO.
FILE DATE

 

COLLATERAL DESCRIPTION

Axsys Technologies, Inc.

 

NJ

 

SOS

 

Newcourt Leasing Corporation

 

UCC No: 2034982
File Date: 4/4/01

 

(1) Ricoh 550 Copier, Model 550, SN A9049120463

Note: This transaction is a true lease and is not intended by the parties as a
secured transaction. Filing is only intended to make the true lease a matter of
public record. The lessor is the owner of such property including all
accessories, attachments, additions and any substitutions of similar equipment
types, and the lessee has no rights, express or implied to sell, exchange,
emcumber or otherwise dispose of such property
Equipment/Lease No: 300-0010958-000

Speedring, Inc.

 

AL

 

SOS

 

The Cit Group/Equipment Financing, Inc.

 

UCC No: B94-19866
File Date: 6/1/94
State: none
Fed: none
Judg:

 

I Mazak MP 625 w/Gantry SN-110730
With all attachments, replacement parts, substitutions, additions, repairs and
accessories incorporated therein and/or affixed thereto

Speedring, Inc.

 

AL

 

SOS

 

The Cit Group/Equipment Financing, Inc.

Mazak Corporation

 

UCC No: B94-19867
File Date: 2/23/99
State: none
Fed: none

 

1-Monarch NC Mill SN 80630
1 Sonic Mill SN-SM4364
Including all substitutions, additions, attachments, replacements, accessions
and the proceeds of all of the foregoing.

Speedring, Inc.

 

AL

 

SOS

 

M&I First National Leasing Corporation

 

UCC No: B96-28509
File Date: 3/5/01
State: none
Fed: none

 

One (1) new Mori Seiki Vertical Machining Center model MV-55/50 with Fanuc MF-MG
CNC Control.

 

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

 

 

NAME

 

STATE

 

JURISDICTION

 

SECURED PARTY

 

UCC FILE NO.
FILE DATE

 

COLLATERAL DESCRIPTION

Speedring, Inc.

 

AL

 

SOS

 

General Electric Capital Corporation

 

UCC No: B99- 14773
File Date: 4/7/99
State: none
Fed: none

 

(1) One Planer Type Horizontal Boring & Milling
Machine with Tosnuc 888, s/ns: P025286, 130263, mfg.#: 415H29
(6) Six Support Plate 1/2" x 2" x 10.8"
(22) Twenty-two 0.7" x 4.9" x 7.1" Plate
(22) Twenty-two Foundation Collar 1.6" Dia.
(10) Ten Support Bar 2.6" x 15.7"
(2) Two Support Plate 1/2" x 14" x 16.8"
(1) One 6288-8376 (6298-8763)
(22) Twenty-two LL-22 Level Line Mounts
(1) One Spindle Coolant Tank
(1) One Primary Spindle Coolant Tank

Speedring, Inc.

 

AL

 

SOS

 

CNC Design & Electronics, Inc.

 

UCC No: B 1999-
23651
File Date: 6/2/99
State: none
Fed: none

 

B6FC Bedmill - S/N B6FC-317 w/ Centroid Control
#6477 and Accessories
Purchase Money Security Interest

Speedring, Inc.

 

AL

 

SOS

 

General Electric Capital Corporation

 

UCC No:B2001-
00488
File Date: 1/5/01
State: none
Fed: none

 

(1) One Republic Lagun Five PT 70X120 30HP Manual
Lathe s/ns: 70122905205
(1) One Variable Speed Headstock
(1) One Constant Surface Speed w/ Anilam Wizard 450-L/IO 2 with 2 Axis Digital
Readout
(1) One P4 Bearings
(1) One Special Gearing to Allow for .0009 IPR Crossfeed
(1) One Face Plarte

Speedring, Inc.

 

AL

 

Cullman

 

First Union Commercial Corporation

 

UCC No: 222541
File Date: 3/28/02

 

See Exhibit A

Speedring, Inc.

 

AL

 

Cullman

 

First Union Commercial Corporation

 

UCC No: 222766
File Date: 5/29/02

 

See Exhibit A

 

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

 

NAME

 

STATE

 

JURISDICTION

 

SECURED PARTY

 

UCC FILE NO.
FILE DATE

 

COLLATERAL DESCRIPTION

Speedring, Inc.

 

AL

 

Cullman

 

First Union Commercial Corporation

 

UCC No:2239l3
File Date: 5/1/03

 

See Exhibit A

Speedring Systems, Inc.

 

DE

 

SOS

 

General Electric Capital Corporation

 

UCC No: 31226292
File Date: 4/30/03

 

Yr 1998, Model 1200, SN 980034, Optimum Flycutting Machine System including: HD
Bridge Type, Upper Enclosures, Tool/Air Lube System

Yr 1998, Model MiniFlZ-lOOP-HR, SN 55-602 & 86-261, Phase Measuring
Interferometer including Transmission Flat

Yr 1998, Model 1600CM, SN USB-9303906, Hewlett Packard Printer

Speedring Systems, Inc.

 

DE

 

SOS

 

General Electric Capital Corporation

 

UCC No: 32103516
File Date: 8/13/03

 

(1) Nanoform 600 with Ultrapath CNC, Serial number: 980035 with various features
(1) Enviromental Temperature Control
(1) Ultracomp, Amplifier & Probe
(1) Ultracomp Mount, Diamond Turning
(1) Auto Balancing Software
(1) Integrated Gage Amp., UPIL, ISA
(1) Tool Air/Lube System, BIJUR

Speedring Systems, Inc.

 

DE

 

SOS

 

The Cit Group/Equipment Financing, Inc.

 

UCC No: 32185109
File Date: 8/21/03

 

Collateral listed on Financing Statement Addendum

 

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

 

NAME

 

STATE

 

JURISDICTION

 

SECURED PARTY

 

UCC FILE NO.
FILE DATE

 

COLLATERAL DESCRIPTION

Speedring Systems, Inc.

 

DE

 

SOS

 

General Electric Capital Corporation

 

UCC No: 32642745
File Date: 10/9/03

 

(1) One Planer Type Horizontal Boring & Milling Machine with Tosnuc 888, s/ns:
P025286, 130263, mfg.#: 415H29
(6) Six Support Plate 1/2" x 2" x 10.8"
(22) Twenty-two 0.7" x 4.9" x 7.1" Plate
(22) Twenty-two Foundation Collar 1.6" Dia.
(10) Ten Support Bar 2.6" x 15.7"
 (2) Two Support Plate 1/2" x 14" x 16.8"
(1) One 6288-8176 (6298-8763)
(22) Twenty-two LL-22 Level Line Mounts
(1) One Spindle Coolant Tank
(1) One Primary Spindle Coolant Tank

Speedring Systems, Inc.

 

MI

 

SOS

 

General Electric Capital Corporation

 

UCC No: 98574B
File Date: 11/2/98
State: none
Fed: none

 

Yr 1998, Model 1200, SN 980034, Optimum Frycutting Machine System including: HD
Bridge Type, Upper Enclosures, Tool/Air Lube System

Yr 1998, Model MiniFIZ-100P-HR, SN 55-602 & 86-261, Phase Measuring
Interferometer including Transmission Flat

Yr 1998, Model 1600CM, SN USB-9303906, Hewlett Packard Printer

Speedring Systems, Inc.

 

MI

 

SOS

 

General Electric Capital Corporation

 

UCCNo:01466C
File Date: 2/26/99
State: none
Fed: none

 

(1) Nanoform 600 with Ultrapath CNC, Serial number: 980035 with various features
(1) Enviromental Temperature Control
(1) Ultracomp, Amplifier & Probe
(1) Ultracomp Mount, Diamond Turning
(1) Auto Balancing Software
(1) Integrated Gage Amp., UP1L, ISA
(1) Tool Air/Lube System, BIJUR

 

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

 

NAME

 

STATE

 

JURISDICTION

 

SECURED PARTY

 

UCC FILE NO.
FILE DATE

 

COLLATERAL DESCRIPTION

Speedring Systems, Inc.

 

Ml

 

SOS

 

Newcourt Financial Technology Rentals & Services

 

UCC No: D516346
File Date: 5/11/99

 

(1) Tek/TDS3034 - 4CH, 300 MHZ DPO SN# 913513/B010211
(1) Tek/TDS3GM - RS232 GPIB Module SN# 905976/NSN

Speedring Systems, Inc.

 

MI

 

SOS

 

Newcourt Financial Technology Rentals & Services

 

UCC No: D529779
File Date: 6/11/99

 

(1) Tek/TDS794D - 4CH, 2GZ, Scope W/ 2)P5339A,
1)P6217, 1)P6247, 1M, R5, C5

Speedring Systems, Inc.

 

MI

 

SOS

 

Ervin Leasing Company

 

UCC No: D605483
File Date: 1/6/00

 

1 Konica 7150 Copier - SN 55NE09142

Speedring Systems, Inc.

 

MI

 

SOS

 

Ervin Leasing Company

 

UCC No: D733082
File Date: 1/16/01

 

1 Konica 7020 w/ Finisher SN 26NE07967

Speedring Systems, Inc.

 

MI

 

SOS

 

Ervin Leasing Company

 

UCC No: D734204
File Date: 1/18/01

 

1 Konica 7020 Copier with Finisher SN 26NE02025

Speedring Systems, Inc.

 

MI

 

SOS

 

Ervin Leasing Company

 

UCC No: D745076
File Date: 2/16/01

 

1 Konica 9660 Fax Machine SN 004C1016956

Speedring Systems, Inc.

Additional Debtor:
Axsys Technologies Imaging Systems

 

MI

 

SOS

 

Ervin Leasing Company

 

UCC No: 2003162513-0
File Date: 8/26/03

 

1 Konica 7022 Copier S/N 26WE13865

 

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

 

NAME

 

STATE

 

JURISDICTION

 

SECURED PARTY

 

UCC FILE NO.
FILE DATE

 

COLLATERAL DESCRIPTION

Speedring Systems, Inc.

Additional Debtor:
Axsys Technologies Imaging Systems

 

MI

 

SOS

 

Ervin Leasing Company

 

UCC No: 2003211192-8
File Date: 11/4/03

 

1 Konica 8020 Copier S/N 65FE00793

Telic Optics, Inc.

 

MA

 

SOS

 

Middlesex Savings Bank

 

UCC No: 506754
File Date: 10/28/97
Cont: 200211235400 File Date: 5/1/02
State: none

 

One Zygo Growth Potential Interferometer 4" Horizontal System - #6500-0434-06

Telic Optics, Inc.

 

MA

 

SOS

 

Middlesex Savings Bank

 

UCC No: 563828
File Date: 7/13/98
Cont: 200317698280
File Date: 1/16/03
State: none

 

(1) Nanoform 200 - P/N A02173 - S/N 980-032

 

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

 

Schedule 5.1(n)(xvi)

 

Self-funded Welfare Plans

 

1.                                       None.

 

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

 

Schedule 5. l(n)(xvi)

 

Plans investing in Insurance Products

 

1.                                       None.

 

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

 

Schedule 5.1(p)(i)

 

Real Property Owned by Each Obligor

 

1.                                       Speeding, Inc. (d/b/a Axsys
Technologies Precision Machined Products)
6717 AL Highway 157
Cullman, AL 35057

 

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

 

Schedule 5.1(p)(ii)

 

Real Property Leased by Each Obligor

 

See attached.

 

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

 

Axsys Technologies, Inc.

March 19, 2004

 

Re:                               Fleet National Bank Loan
Documents request dated: March 16, 2004

 

Item # 7:

 

Location:

 

Axsys Technologies, Inc.
175 Capital Blvd, Suite 103
Rocky Hill, CT 06067

 

 

 

Status:

 

Leased

 

 

 

Owner & Lessor:

 

New Boston 175 Capital Boulevard, LLC
c/o New Boston Management Services, Inc.
100 Pearl Street
Hartford, CT  06103

 

 

 

Location:

 

Axsys Technologies Motion Control Products
7603 Saint Andrews Ave, Suite H
San Diego, CA 92154

 

 

 

Status:

 

Leased

 

 

 

Owner & Lessor:

 

ARI San Diego Distribution Center LLC and
CB Richard Ellis, Inc
4365 Executive Drive, Suite 900
San Diego, CA 92121

 

 

 

Location:

 

AST Bearings
115 Main Road
Montville, NJ 07045

 

 

 

Status:

 

Leased

 

 

 

Owner & Lessor:

 

Woodmont Properties Main Road LLC
119 Cherry Hill Road, Suite 110
Parsippany, NJ 07054

 

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

 

Location:

 

AST Bearings
3A Farraday
Irvine, CA  92618

 

 

 

Status:

 

Leased

 

 

 

Owner & Lessor:

 

John C. Thomson
c/o Stadium Properties
3151 Airway Ave H-3
Costa Mesa, CA  92626

 

 

 

Location:

 

Speedring, Inc
d/b/a  Axsys Technologies Precision Machined Products
6717 AL Highway 157
Cullman, AL  35057

 

 

 

Status:

 

Owned

 

 

 

Lessor:

 

N/A

 

 

 

Location:

 

Speedring Systems, Inc.
d/b/a Axsys Technologies Imaging Systems
2909 Waterview Drive
Rochester Hills, MI 48306

 

 

 

Status:

 

Leased

 

 

 

Owner & Lessor:

 

Joel Nosanchuk
P.O. Box 668
Bloomfield Hills, MI 48303-0668

 

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

 

Schedule 5.1(s)

 

Collective Bargaining Agreements

 

None.

 

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

 

Schedule 5.1(v)

 

Other Affiliates of each Obligor

 

1.                                       Stephen Bershad, Chief Executive
Officer of Axsys.

 

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

 

Schedule 5.1(dd)

 

Insurance

 

See attached.

 

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

 

AXSYS TECHNOLOGIES, INC.

 

Summary of Insurance Coverages in Effect as of March 19, 2004

RC Knox & Company

 

Company

 

Policy Number

 

Policy Period

 

Annual Premium

 

Liberty Mutual Insurance Company

 

FLCZ91430844013

 

6/17/03-04

 

$

103,722

 

 

 

PROPERTY COVERAGE

 

 

 

Principal Limits:

 

$

68,873,000

 

Buildings and Business Personal Property

 

 

 

38,392,000

 

Loss of Income

 

 

 

2,500,000

 

Additional Expense

 

 

 

50,000,000

 

Flood except as noted in policy

 

 

 

50,000,000

 

Earthquake excluding any location in California

 

 

 

2,500,000

 

Real & Personal Property at each New Location

 

 

 

2,500,000

 

Real & Personal Property at each Unscheduled Location

 

 

 

100,000

 

Deductible

 

 

 

 

 

 

 

Equipment Breakdown Including Production Machinery)

 

 

 

 

 

$

100,000,000

 

Property Damage and Loss of Income

 

 

 

 

 

 

 

 

 

2,500,000

 

Additional Expense

 

 

 

100,000

 

Deductible

 

 

THIS SUMMARY OF INSURANCE IS AN OVERVIEW OF YOUR INSURANCE PROGRAM AND DOES NOT
CHANGE THE FORMS OR CONDITIONS OF THE ACTUAL POLICIES. YOU MUST REFER TO YOUR
POLICIES FOR FULL TERMS, CONDITIONS AND EXCLUSIONS.

 

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

 

AXSYS Technologies, Inc.

Summary of Insurance Coverages in Effect as of 3/19/2004

RC Knox & Company

 

Company

 

Policy Number

 

Policy Period

 

Annual Premium

 

 

 

 

 

 

 

 

 

The Travelers

 

TJ-GLSA-473D8575-TIL-03

 

11/1/03-04

 

$

98,882

*

 

 

 

 

 

 

 

 

 

GENERAL LIABILITY

 

 

 

 

 

15,000

 Loss Fund

 

 

 

 

 

 

 

$

13,882

 

 

 

 

 

 

 

 

 

 

Limits:

 

$

 1,000,000

 

Each Occurrence

 

 

 

 

 

 

 

 

 

1,000,000

 

Personal & Advertising Injury

 

 

 

 

 

 

 

 

 

100,000

 

Fire Damage

 

 

 

5,000

 

Medical Expense

 

 

 

2,000,000

 

General Aggregate “Per Project”

 

 

 

2,000,000

 

Products & Completed Operations

 

 

 

1,000,000

 

Employee Benefits - 1,000 Deductible (Each Employee)

 

 

 

 

 

 

 

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

 

 

*subject to retrospective adjustment

 

 

2

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

 

Company

 

Policy Number

 

Policy Period

 

Annual Premium

 

 

 

 

 

 

 

 

 

Travelers

 

TJ-CAP-473D8587-TIL-03

 

11/1/03-04

 

$

 12,461

 

 

 

 

 

 

 

 

 

COMMERCIAL AUTO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Composite Rate – Based - on 4 Units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Limits:

 

$

 1,000,000

 

Liability (Including Hired/Non-Owned)

 

 

 

500

 

Comprehensive Deductible

 

 

 

500

 

Collision Deductible

 

 

 

1,000,000

 

Uninsured Motorists

 

 

 

Included

 

Drive Other Car

 

 

 

 

 

(All Employee-Assigned Autos)

 

 

 

5,000

 

Auto Medical Payments

 

 

 

$ 40 Per Day/30 Days Rental Reimbursement

 

 

 

Hired Car Physical Damage:

 

 

 

$

 30,000

 

Comprehensive / $500 Deductible

 

 

 

$

 30,000

 

Collision / $500 Deductible

 

 

3

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

 

Company

 

Policy Number

 

Policy Period

 

Annual Premium

 

 

 

 

 

 

 

 

 

 

 

Travelers

 

TRJUB-186K594-8-03

 

11/01/03-04

 

$

245,367

*

 

 

 

 

 

 

 

 

 

 

 

 

WORKERS’ COMPENSATION (RETROSPECTIVE RATING PLAN)

 

207,000

 Loss Fund

 

 

 

 

$

455,893

 

 

 

Coverage A:

 

Statutory

 

 

 

 

 

Coverage B:

 

Employer’s Liability Limits

 

 

 

 

 

 

 

 

 

$1,000,000

 

Bodily Injury by Accident (Each Accident)

 

 

 

1,000,000

 

Bodily Injury by Disease (Policy Limit)

 

 

 

1,000,000

 

Bodily Injury by Disease (Each Employee)

 

 

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

 

 

*subject to retrospective adjustment 

 

 

National Union (AIG)

 

BE4916630

 

11/01/03-11/01/04

 

$

84,465

 

 

 

EXCESS LIABILITY

 

Limits:

 

$25,000,000

 

Each Occurrence

 

 

 

25,000,000

 

Other Aggregate

 

 

 

25,000,000

 

Products Aggregate

 

 

 

$10,000

 

Retention

 

 

4

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

 

Company

 

Policy Number

 

Policy Period

 

Annual Premium

 

 

 

 

 

 

 

 

 

Executive Risk

 

8168-2703

 

6/17/03-04

 

$115,000

 

 

DIRECTORS & OFFICERS LIABILITY

 

Limits:

 

$7,500,000

 

Maximum Aggregate for All Claims

 

 

 

0

 

Each Insured Person Retention

 

 

 

100,000

 

Each Claim Retention

 

 

 

 

 

 

 

Retroactive Date:

 

12/17/82

 

 

 

 

Travelers Insurance Company

 

104065914

 

6/17/03-04

 

$20,000

 

 

EXCESS D&O – PART A only

 

Limit:

 

$2,500,000

 

Maximum Aggregate for All Claims but only for loss not indemnified by Axsys

 

 

 

 

 

 

 

Retroactive Date:

 

06/17/03

 

 

 

 

5

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

 

Company

 

Policy Number

 

Policy Period

 

Annual Premium

 

 

 

 

 

 

 

 

 

Executive Risk

 

81516096

 

6/17/03-04

 

$

6,500

 

 

PENSION WELFARE BENEFIT PLAN FIDUCIARIES & PLAN ADMINISTRATORS INSURANCE

 

Limits:

 

$

3,000,000

 

Aggregate

 

 

 

0

 

Retention

 

 

 

 

 

 

 

Retroactive Date:

 

Existing Date of Incorporation Sponsor Organization

 

 

 

 

 

 

 

Crime Section

 

 

 

$

15,070

 

 

 

 

 

 

 

Limits:

 

$

5,000,000

 

Employee Theft

 

 

 

5,000,000

 

Depositors Forgery

 

 

 

5,000,000

 

Loss on Premise/Loss Outside Premises

 

 

 

5,000,000

 

Transit

 

 

 

5,000,000

 

Computer Fraud & Funds Transfer

 

 

 

100,000

 

Credit Card Forgery ($0 deductible)

 

 

 

 

 

 

 

Deductibles:

 

$

25,000

 

Applies to Above Except Credit Card Forgery

 

 

Pacific insurance Company Ltd.

 

ZG0021266

 

6/17/03-04

 

$

27,844

 

 

 

 

 

 

 

 

 

DIC COVERAGE (Including California Earthquake and Flood)

 

 

 

(Including Tax & Fees)

 

 

Limit:

 

$

5,000,000

 

Per Occurrence and Aggregate

 

 

 

 

 

 

 

Deductibles:

 

5

%

Per Schedule (on file with company)

 

 

 

25,000

 

All Other Perils

 

 

6

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Company

 

Policy Number

 

Policy Period

 

Annual Premium

 

 

 

 

 

 

 

 

 

United National Insurance Company

 

IMZ 30050

 

6/17/03-04

 

$

6,545

 

 

 

 

 

(Including Tax & Fees)

 

 

 

 

 

 

 

 

 

 

 

DIC COVERAGE (Including California Earthquake and Flood)

 

 

 

 

 

 

 

 

 

 

 

Limits:

 

$2,500,000 Excess of    $5,000,000

 

 

 

Follow Form of Pacific Insurance Company Policy

 

 

 

 

 

Sirius International

 

NLC 20586

 

6/17/03-04

 

$

6,545

 

 

 

 

 

(Including Tax & Fees)

 

 

 

 

 

 

 

 

 

 

 

DIC COVERAGE

 

$2,500,000 part of $5,000,000 and excess of Pacific Insurance

 

 

 

 

 

Hudson Insurance Company

 

HD1326

 

6/17/03-04

 

$

11,320

 

 

 

 

 

(including Tax & Fees)

 

 

 

 

 

 

 

 

 

 

 

DIC COVERAGE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Limits:

 

$5,500,000 Part of $8,500,000 and Excess of United National Insurance Company

 

 

 

 

 

Ace Syndicate

 

ACE20373

 

6/17/03-04

 

$

6,288

 

 

 

 

 

 

 

 

 

DIC COVERAGE

 

 

 

 

 

 

 

 

 

 

 

Limits:

 

$3,000,000 Part of $8,500,000 Excess of United National Insurance Company

 

 

7

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Company

 

Policy Number

 

Policy Period

 

Annual Premium

 

 

 

 

 

 

 

 

 

Associated Aviation Underwriters

 

APG607718AAAU

 

1/28/04-05

 

$

59,860

 

 

 

 

 

 

 

 

 

AVIATION PRODUCTS – COMPLETED OPERATIONS & GROUNDING LIABILITY COVERAGE

 

 

 

 

 

 

 

Limits:

 

$ 25,000,000

 

Aggregate

 

Products/Completed

 

25,000,000

 

Each Occurrence & Aggregate

 

Operations:

 

 

 

 

 

Grounding:

 

25,000,000

 

Each Grounding & Aggregate

 

 

 

 

 

 

 

 

 

Hartford Life Insurance Co.

 

ETB111812

 

10/15/02-05

 

$

5,648

 

 

 

 

 

 

 

 

 

GROUP TRAVEL ACCIDENT POLICY

 

 

 

 

 

 

 

 

 

 

 

Officers, President,

 

$ 500,000

 

Benefit Accidental Death

 

General Managers (Class I)

 

 

 

Dismemberment

 

Active Full Time

 

250,000

 

Benefit Accidental Death

 

Employees

 

 

 

Dismemberment

 

Salaried $50,000 & above (Class II)

 

 

 

 

 

Active Full Time

 

100,000

 

Benefit Accidental Death

 

Employees

 

 

 

Dismemberment

 

Salaried Less than $50,000

 

 

 

 

 

 

8

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Schedule 5.1(w)

 

Environmental Matters

 

Environmental Claims/Remediation

 

Axsys has been identified as a potentially responsible party (“PRP”) under the
Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”)
with respect to third-party waste disposal sites.

 

Pursuant to a remedial plan approved by the Ohio Environmental Protection Agency
(“Ohio EPA”) in 1993, Axsys investigated soils and groundwater at a site
formerly owned by a division of Axsys, and has conducted certain remedial work
at this site including soil removal. Axsys has incurred costs of $182,000 in
2003 and approximately $782,000 to date. We received the approval of the Ohio
EPA for an alternate closure plan related to this site. As of September 7, 2003,
installation of the remediation system was in progress. We anticipate that
actual expenditures will be incurred over a period of several years. As of
December 31, 2003, Axsys has accrued $280,000 for expenses related to this site.

 

During 1999, Axsys sold the land and building of a previously discontinued
Sensor Systems division in St. Petersburg, Florida. We conducted investigations
of soil and groundwater at the former facility and received approval of the
remedial action plan from the Florida Department of Environmental Protection.
During the second quarter of 2003, we installed the remediation systems and have
begun the clean up of the site. In 2003, we spent $276,000 on the clean up of
this facility and have incurred approximately $629,000 to date. As of
December 2003, Axsys has accrued $436,000 for expenses related to this site.

 

On December 21, 2001, Axsys received a letter from the United States
Environmental Protection Agency (“EPA”) notifying us that we are considered to
be a potentially responsible party at a site located in Prospect, Connecticut,
which until 1978 was owned by a former subsidiary. The letter also demanded
payment of approximately $25,000 in past response costs and unspecified future
costs. Although we may be obligated under CERCLA for contributions towards
response costs incurred as a result of alleged releases of hazardous substances
at the site, we are still investigating our responsibilities to the site. In
addition, it is our policy to accrue environmental cleanup related costs when
those costs are believed to be probable and can be reasonably estimated. The
quantification of environmental exposure, if any, with respect to this site
requires an assessment of many factors, including the quality of information
available, the assessment stage of each investigation, preliminary findings and
the length of time involved in remediation. As Axsys has not determined if any
liability exists, a meaningful range of exposure cannot be estimated. Axsys has
responded to the EPA’s demand and received a response in March of 2004
requesting additional information. Axsys intends to reply to the EPA in
April 2004.

 

On February 12, 1991, the EPA commenced an action against Axsys (formerly
Vernitron), EDO Corporation and two other defendants. The EPA determined that
the

 

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

 

defendants were liable under CERCLA for costs incurred by the EPA in response to
environmental conditions at the Kellogg-Deering well Field Superfund site in
Norwalk, Connecticut and ordered the defendants to remediate the site.

 

It was determined that EDO Corporation was the primary responsible party with
Axsys’ pro rata share being 6.25% of the costs. The remediation of the site was
completed between 1995-2000 and monitoring and maintenance continuing until
2025. Based on estimates received from EDO Corporate in February of 2004, the
total costs for 2004-2025 are estimated to be $1,845,000 with Axsys’ pro rata
share being approximately $115,000.

 

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Schedule A

 

List of Selling Shareholders

 

1.                                       James W. Howard

 

2.                                       Ronald D. Stern

 

3.                                       Irving Lowe

 

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