AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT
                 ----------------------------------------------

     AMENDMENT  NO. 1 TO LOAN AND SECURITY AGREEMENT (this "AMENDMENT") dated as
of  July  9,  2004  by  and  among  The  GSI Group, Inc., a Delaware corporation
("BORROWER"),  Assumption  Leasing  Company,  Inc.,  an Illinois corporation the
"GUARANTOR"),  the  lenders  ("LENDERS")  from  time  to  time party to the Loan
Agreement  (as  defined  below) and Congress Financial Corporation (Central), an
Illinois  corporation,  in  its capacity as agent for Lenders (in such capacity,
"AGENT").
                                R E C I T A L S:

     WHEREAS,  Agent,  the  Lenders, Borrower and Guarantors are parties to that
certain  Loan  and  Security  Agreement  dated as of October 31, 2003 (the "Loan
Agreement";  capitalized  terms  used  and  not  defined  herein  shall have the
meanings  assigned  to  them  in  the  Loan  Agreement,  as  amended  hereby);

     WHEREAS, Borrower and Guarantors have requested that the Agent and Lenders
Agree to  certain  amendments  as  set  forth  herein;  and

     WHEREAS,  Agent  and  the Lenders have granted their approval to
such amendments upon  the  terms  and  conditions  contained  herein,

     NOW,  THEREFORE, in consideration of the premises contained herein, and for
other  good and valuable consideration, the receipt and sufficiency of which are
hereby  acknowledged,  the  parties  hereto  hereby  agree  as  follows:

Section  1.     Amendment  to Loan Agreement.  Immediately upon the satisfaction
                ----------------------------
of  each  of  the applicable conditions precedent set forth in Section 2 of this
Amendment, the following amendments to the Loan Agreement shall become effective
as  of  the  date  hereof:
               (a)     Section  1  of  the  Loan  Agreement  is  hereby amended
by amending and restating  clause  (b)(i)  of the definition of "Excess
Availability" to read as follows:

                      "(i)     the  amount  of  all  then  outstanding  and
unpaid Obligations of Borrower  (other  than  Term  Loan  Obligations  and  the
Sloan  Participation Obligations),  plus".

               (b)     Section  1  of  the  Loan  Agreement  is  hereby amended
by amending and restating the  definition  of  "Maximum  Term  Credit"  to  read
as  follows:

            "Maximum Term Credit" shall mean $20,781,959.26, as of July 9, 2004.
               (c)     Section  1  of  the  Loan  Agreement  is  hereby amended
by amending and restating  the  parenthetical in the definition of "Obligor" to
read as follows:

     "(including,  without  limitation,  Guarantors  and  Craig  Sloan)".
                                        1
<PAGE>

               (d)     Section  1  of  the  Loan  Agreement  is  hereby amended
by adding a new defined  term  "Sloan  Participation  Obligations"  to  Section
1 in its proper alphabetical  place  which  shall  read  as  follows:

     "Sloan  Participation  Obligations"  shall  mean  the  aggregate  amount of
Revolving  Loans purchased by Craig Sloan from the Revolving Lenders pursuant to
the terms of any junior participation agreements entered into among Craig Sloan,
Agent  and  the  Lenders,  together with all accrued and unpaid interest on such
purchased  Revolving  Loans."

               (e)     Section  2.3(a)  of the Loan Agreement is hereby amended
by amending and restating  Section  2.3(a)  to  read  as  follows:

                   "(a)  The parties hereto acknowledge that the Term Lenders
funded a $12,500,000 term  loan  on  October  21,  2003  of  which $6,181,959.26
remains outstanding as of July 9, 2004. Subject to and upon the terms and
conditions contained  herein, in  addition  to  the  Revolving  Loans and Letter
of Credit Accommodations under Sections 2.1 and 2.2 hereof, each Term Lender
severally (and  not  jointly) agrees to fund its Pro Rata Share of an additional
term loan to Borrower in the original principal amount of $14,600,000 on July 9,
2004 (collectively, with the outstanding original term  loan  in  the  amount of
$6,181,959.26,  the  "Term  Loan").  The Term Loan is (A) to be repaid, together
with interest and other amounts, in accordance with this Agreement and the other
Financing  Agreements  and  (B) secured by all of the Collateral (subject to the
application  of  proceeds  provisions  contained  herein).  The  entire  unpaid
principal  amount  of  the Term Loan and all accrued and unpaid interest thereon
shall be due and payable on the earlier of the Term Loan Termination Date or the
acceleration  of the Obligations.  Except for the making of the Term Loan as set
forth  in this Section, Borrower shall have no right to request and Term Lenders
shall  have  no obligation to make any additional loans or advances to Borrowers
under  this  Section and any repayments of the Term Loan shall not be subject to
any  readvance  to  or  reborrowing  by  Borrower.  The parties hereto agree and
acknowledge  that  proceeds  from  the funding of the Term Loan in the amount of
$14,600,000  on July 9, 2004 shall be applied by Borrower to pay for $352,000 in
fees  owing  to Term Lenders on July 9, 2004 with the balance used to repurchase
948,052  shares  of  stock  in  the Borrower held by Craig Sloan which purchased
stock  will  be  included as treasury stock in the Borrower's books, pursuant to
resolutions  adopted  by the Borrower.  The parties hereto acknowledge that Term
Lenders  may  fund  only $14,248,000 of the additional Term Loan on July 9, 2004
after  giving  effect  to  the netting of such fees but that the total Term Loan
advanced  to  Borrower  on  July  9,  2004  shall  be deemed to be $14,600,000."

               (f)     Section  2.3(b)  of the Loan Agreement is hereby amended
by adding a new sentence to the end  of  Section  2.3(b)  to  read  as  follows:
                                        2
<PAGE>
                      "Upon  the  making  of  any  prepayment under this Section
2.3(b), Borrower shall maintain  Excess  Availability  of  at  least $10,000,000
for a period of thirty (30) consecutive days commencing on the date of such
prepayment."

               (g)    Section 6.4 of the Loan Agreement is hereby amended by (i)
 deleting the ";  and"  from  the  end  of clause (C); (ii) replacing the period
at the end of clause  (D)  with  ";  and";  and  (iii)  inserting  a new clause
(E) to read as follows:

                      (E)     no payment  of  principal  or  interest  shall  be
made on, and no proceeds of Collateral shall be applied against, the Revolving
Loans consisting of the Sloan Participation Obligations until such time as all
other Obligations (excluding the Sloan Participation Obligations) are paid in
full and the Commitments  of  the  Revolving  Lenders  have  terminated."

               (h)     Section  9.9(g) of the Loan Agreement is hereby amended
by replacing the amount of "$2,500,000" set forth in clause (i) of such Section
with the amount of "$5,000,000".

               (i)     Section  9.11  of  the  Loan Amendment is hereby amended
by amending and restating clause  (d)  of  Section  9.11  to  read  as  follows:

                      "(d)     Borrower  may  (i) make a one time repurchase of
948,052 shares of its common  stock  from  Craig Sloan on or prior to July 31,
2004 with proceeds from the Term Loan as described in Section 2.3(a); provided,
that with respect                                                     --------
to  this  clause  (i),  (A)  no Event of Default has occurred and is continuing
immediately  before, and immediately after giving effect to, such repurchase and
(B)  Borrower  is  in compliance with Section 10.12 of the Indenture at the time
of, and after giving effect to, such dividend, (ii) pay dividends, to the extent
permitted  by  applicable  law,  in  an aggregate amount of up to $83,333 in any
calendar month; provided, that with respect to this clause (ii), (A) no Event of
                --------
Default has occurred and is continuing immediately before, and immediately after
giving  effect  to, such dividend and (B) Borrower is in compliance with Section
10.12  of  the  Indenture  at  the  time  of,  and  after giving effect to, such
dividend,  and  (iii)  in  addition to any dividends permitted under clause (ii)
above, pay additional dividends once each calendar year, to the extent permitted
by  applicable  law,  in an aggregate amount of up to $1,000,000 in any calendar
year;  provided,  that  with  respect to this clause (iii), (A) such dividend is
       --------
payable only once per calendar year, commencing on December 15, 2004 and on each
anniversary  thereof,  (B)  no  Event  of Default has occurred and is continuing
immediately  before,  and immediately after giving effect to, such dividend, (C)
Borrower  is  in  compliance with Section 10.12 of the Indenture at the time of,
and  after  giving  effect  to,  such  dividend  and  (D)  Borrower  has  Excess
Availability of at least $10,000,000 after giving effect to such dividend.  Upon
the  making  of  any  dividend under clause (iii) above, Borrower shall maintain
Excess  Availability  of  at  least  $10,000,000  for  a  period  of thirty (30)
consecutive  days  commencing  on  the  date  of  such  dividend."
                                        3
<PAGE>
               (j)     Section 10.1  of the Loan Agreement is amended by (i)
deleting the word "or"  at the end of clause (o); (ii) replacing the period at
the end of clause (p) with ";or" and (iii) adding a new clause (q) to read as
follows:

               "(q)  there  shall  be  a  termination of that certain Consulting
Agreement dated as of July 1, 2004 between Craig Sloan and Borrower (other than
as a result of the death or disability of Craig Sloan); or an event resulting in
a "Cause" (as defined  in  Section 5(c) of such Consulting Agreement) shall have
occurred;  or  such  Consulting  Agreement shall be the subject of an amendment,
modification  or  waiver  which  has  not received the prior written approval of
Required  Revolving  Lenders  and  Required  Term  Lenders.

Section  2.     Conditions  to Effectiveness of Amendment.  This Amendment shall
                -----------------------------------------
be  effective  upon  satisfaction  of  the  following  conditions  precedent:

   2.1.  This  Amendment  shall  have  been executed and delivered by Agent, the
Lenders,  Borrower  and  Guarantor;

   2.2.  The  representations  and warranties contained herein shall be true and
correct  in  all  respects;

   2.3.  Agent  shall  have  received a duly executed Acknowledgment and Consent
from  the  Guarantor;

   2.4.  Lenders  shall have received an executed copy of a consulting agreement
between  Craig  Sloan  and  Borrower,  which  shall  be  in  form  and substance
satisfactory  to  Lenders;

   2.5.  Agent  shall have received an executed copy of a capital call agreement
among  Craig  Sloan,  Borrower  and  Agent, which shall be in form and substance
satisfactory  to  Agent;

   2.6.  Ableco  shall  have  received,  for  the  ratable  benefit  of the Term
Lenders,  an amendment fee from Borrower equal to $352,000 which shall be earned
in full and due payable on the date hereof and such fee shall be netted from the
proceeds  of  the  Term  Loan  funded  on  July  9,  2004;

   2.7.  The Agent shall have received, for the ratable benefit of the Revolving
Lenders,  an  amendment fee from Borrower equal to $75,000 which shall be earned
in  full  and  due  and  payable  on  the  date  hereof;

   2.8.  Agent  shall  have received a copy of resolutions of Borrower certified
by  the  secretary  of  Borrower  as duly adopted, which resolutions approve the
transactions  contemplated  by  this  Amendment;
                                        4
<PAGE>
   2.9.  Agent  and  Lenders  shall  have  received  an  opinion from Borrower's
counsel  as  to  the  transactions  contemplated  by this Amendment, in form and
substance  satisfactory  to  Lenders;  and

   2.10.  Agent  and  Lenders  have received a final copy of that certain Duff &
Phelps  valuation  of Borrower's voting common stock, which shall be in form and
substance  satisfactory  to  Agent  and  Lenders.

Section 3.     Representations and Warranties.  In order to induce the Agent and
               ------------------------------
Lenders  to enter into this Amendment, each of Borrower and Guarantor represents
and warrants to Agent and the Lenders, upon the effectiveness of this Amendment,
which representations and warranties shall survive the execution and delivery of
this  Amendment  that:

   3.1.  No  Default; etc.  No Event of Default and no event or condition which,
         ----------------
merely  with notice or the passage of time or both, would constitute an Event of
Default, has occurred and is continuing after giving effect to this Amendment or
 would  result  from  the  execution  or  delivery  of this Amendment or the
consummation  of  the  transactions  contemplated  hereby.

   3.2.  Corporate  Power  and  Authority:  Authorization.  Each of Borrower and
         ------------------------------------------------
Guarantor  has  the  corporate  power  and authority to execute and deliver this
Amendment  and  the  execution  and  delivery  by Borrower and Guarantor of this
Amendment has been duly authorized by all requisite corporate action by Borrower
or  such  Guarantor.

   3.3.  Execution  and  Delivery.  Each  of  Borrower  and  Guarantor  has duly
         ------------------------
executed  and  delivered  this  Amendment.

   3.4.  Enforceability.  This  Amendment  constitutes  the  legal,  valid  and
         --------------
binding  obligation  of Borrower and Guarantor, enforceable against Borrower and
Guarantor  in accordance with its respective terms, except as enforcement may be
limited  by  bankruptcy,  insolvency, reorganization, moratorium or similar laws
affecting  the  enforcement  of  creditors'  right  generally,  and  by  general
principles  of  equity.

   3.5.  Representations  and  Warranties.  All  of  the  representations  and
         --------------------------------
warranties contained in the Loan Agreement and in the other Financing Agreements
(other  than  those  which speak expressly only as of a different date) are true
and  correct  as  of  the  date  hereof  after  giving effect to this Amendment.

Section  4.     Miscellaneous.
                -------------
                                        5
<PAGE>
   4.1.  Effect; Ratification.  Each of Borrower and Guarantor acknowledges that
         --------------------
     all  of  the  reasonable  legal  expenses  incurred by Agent and Lenders in
connection  herewith  shall  be  reimbursable  under  Section  9.20  of the Loan
                                                      -------------
Agreement.  The  Amendments  set  forth  herein  are  effective  solely  for the
purposes  set  forth herein and shall be limited precisely as written, and shall
not  be  deemed  to (i) be a consent to any amendment, waiver or modification of
any  other  term  or  condition  of the Loan Agreement or of any other Financing
Agreement  except  as provided herein or (ii) prejudice any right or rights that
Agent  or  any  Lender  may  now  have  or  may  have  in the future under or in
connection  with  the  Loan  Agreement  or  any other Financing Agreement.  Each
reference  in  the  Loan  Agreement  to "this Agreement," "herein," "hereof" and
words of like import and each reference in the other Financing Agreements to the
"Loan  Agreement"  shall  mean  the  Loan  Agreement  as  amended  hereby.  This
Amendment  shall  be  construed  in  connection  with  and  as  part of the Loan
Agreement  and all terms, conditions, representations, warranties, covenants and
agreements  set  forth in the Loan Agreement and each other Financing Agreement,
except  as  waived  herein are hereby ratified and confirmed and shall remain in
full  force  and  effect.

   4.2.  Counterparts.  This  Amendment  may  be  executed  in  any  number  of
         ------------
counterparts,  each  such  counterpart constituting an original but all together
one  and  the  same  instrument.

   4.3.  Governing  Law.  This Amendment shall be governed by, and construed and
         --------------
interpreted  in  accordance  with,  the  internal laws of the State of Illinois.

   4.4.  Condition Subsequent.  The Borrower agrees that within thirty (30) days
         --------------------
     after  the  date hereof, it will (a) obtain a key man life insurance policy
on Craig Sloan from an insurer reasonably acceptable to Agent in the face amount
of $10,000,000 and (b) enter into an assignment agreement in favor of Agent (and
will  obtain  a  written  acknowledgement  from  such  insurer) assigning all of
Borrower's rights to payment under such policy to Agent as additional collateral
security  for  the  Obligations.  Failure  to  so  comply  with  this  condition
subsequent  shall  result  in  an  Event  of  Default  under the Loan Agreement.

                            [Signature Page Follows]
                            -                      -


                                        6
<PAGE>
          [Signature Page to Amendment to Loan and Security Agreement]

     IN  WITNESS  WHEREOF, the parties hereto have executed this Amendment No. 1
to  Loan  and  Security  Agreement  as  of  the  date  first  above  written.
BORROWER:
--------

THE  GSI  GROUP,  INC.


By:
Name:
Title


GUARANTOR:
---------

ASSUMPTION  LEASING  COMPANY,  INC.


By:
Name:
Title


AGENT:
-----

CONGRESS  FINANCIAL  CORPORATION  (CENTRAL)


By:
Name:
Title


                                        7
<PAGE>
------
REVOLVING  LENDERS:
------------------


CONGRESS  FINANCIAL  CORPORATION  (CENTRAL)


By:
Name:
Title


FLEET  CAPITAL  CORPORATION

By:
Name:
                              Title


                              TERM  LENDERS:
                              -------------

                              ABLECO  FINANCE  LLC,  on  behalf  of  itself
                              and  its  affiliate  assigns

By:
Name:
Title


                                        8
<PAGE>
------




                           Acknowledgement and Consent
                           ---------------------------

     The  undersigned  has  heretofore  executed  and delivered to Agent and the
Lenders  that  certain  Guaranty  Agreement  dated  as  of October 31, 2003 (the
"Guaranty")  in  favor  of  Agent  for  the benefit of Lenders.  The undersigned
      ---
hereby  consents to the Amendment No. 1 to the Loan and Security Agreement dated
as of July 9, 2004 set forth above ("Amendment") and confirms that the Financing
                                     ---------
Agreements  executed  and  delivered  by  it  and all of the obligations of such
undersigned  thereunder  remain  in  full  force  and  effect.  The  undersigned
acknowledges  and agrees that, notwithstanding the execution and delivery of the
Amendment,  the Guaranty executed and delivered by such undersigned to the Agent
remains  in  full  force and effect and the rights and remedies of the Agent and
the Lenders thereunder and the obligations of such undersigned thereunder remain
in  full  force  and  effect  and  shall not be affected, impaired or discharged
hereby.  The  undersigned  acknowledges  and  agrees  that  the  consent of such
undersigned to any further waivers, consents or amendments to the Loan Agreement
shall  not  be  required  as  a result of this waiver having been obtained.  The
undersigned  further  acknowledges that the Agent and the Lenders are relying on
the  assurance  set forth herein in extending and maintaining credit outstanding
to  the  Borrower.

GUARANTOR:
---------

ASSUMPTION  LEASING  COMPANY,  INC.

By:
Name:
Title