exv10w3






Exhibit 10.3




Revolving Loan Facility




Senior Term Notes




Senior Subordinated Notes




Junior Subordinated Notes




Preferred Stock




Common Stock




Warrants to Purchase Common Stock




 






AMENDED AND RESTATED




NOTE AND EQUITY PURCHASE AGREEMENT




by and among




IST ACQUISITIONS, INC.




IMAGING AND SENSING TECHNOLOGY CORPORATION AND

CERTAIN OF THE SUBSIDIARIES OF

IMAGING AND SENSING TECHNOLOGY CORPORATION




AS LOAN PARTIES




AND




AMERICAN CAPITAL FINANCIAL SERVICES, INC.




AS AGENT




and




THE PURCHASERS IDENTIFIED ON

ANNEX A HERETO




October 29, 2004





 









 





TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE 1	 	DEFINITIONS
	 	 	4	 
	 	1.1	 	 	Certain Definitions
	 	 	4	 
	 	1.2	 	 	Accounting Principles
	 	 	22	 
	 	1.3	 	 	Other Definitional Provisions; Construction
	 	 	22	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE 2	 	ESTABLISHMENT OF REVOLVING LOAN FACILITY AND ISSUE AND SALE OF SECURITIES
	 	 	23	 
	 	2.1	 	 	Senior Term Loans
	 	 	23	 
	 	2.2	 	 	Subordinated Notes
	 	 	24	 
	 	2.3	 	 	Revolving Loans
	 	 	24	 
	 	2.4	 	 	Authorization and Issuance of the Warrants
	 	 	25	 
	 	2.5	 	 	Authorization and Issuance of Common Stock
	 	 	25	 
	 	2.6	 	 	Authorization and Issuance of Preferred Stock
	 	 	25	 
	 	2.7	 	 	Sale and Purchase
	 	 	25	 
	 	2.8	 	 	The Closing
	 	 	26	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE 3	 	REPAYMENT OF REVOLVING LOANS, THE SENIOR TERM LOANS AND THE SUBORDINATED NOTES
	 	 	26	 
	 	3.1	 	 	Interest Rates and Interest Payments
	 	 	26	 
	 	3.2	 	 	Repayment of Senior Term Notes
	 	 	28	 
	 	3.3	 	 	Repayment of Subordinated Notes
	 	 	29	 
	 	3.4	 	 	Repayment of Revolving Loans
	 	 	29	 
	 	3.5	 	 	Optional Prepayment of Notes
	 	 	29	 
	 	3.6	 	 	Notice of Optional Prepayment
	 	 	30	 
	 	3.7	 	 	Mandatory Prepayment
	 	 	30	 
	 	3.8	 	 	Home Office Payment
	 	 	30	 
	 	3.9	 	 	Taxes
	 	 	31	 
	 	3.10	 	 	Maximum Lawful Rate
	 	 	31	 
	 	3.11	 	 	Break Funding Payments
	 	 	32	 
	 	3.12	 	 	Capital Adequacy
	 	 	32	 
	 	3.13	 	 	Certain Waivers
	 	 	32	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE 4	 	CONDITIONS
	 	 	32	 






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TABLE OF CONTENTS

(continued)







	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	 	 	 	 	 
	 	 	 	 
	 	4.1	 	 	Conditions to the Senior Term Loans and Purchase of Securities
	 	 	32	 
	 	4.2	 	 	Conditions Precedent to each Revolving Loan
	 	 	37	 
	 	4.3	 	 	Waiver
	 	 	37	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE 5	 	REPRESENTATIONS AND WARRANTIES OF THE LOAN PARTIES
	 	 	37	 
	 	5.1	 	 	Representations and Warranties of Loan Parties
	 	 	37	 
	 	5.2	 	 	Absolute Reliance on the Representations and Warranties
	 	 	44	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE 6	 	TRANSFER OF SECURITIES
	 	 	44	 
	 	6.1	 	 	Restricted Securities
	 	 	44	 
	 	6.2	 	 	Legends; Purchaser’s Representations
	 	 	44	 
	 	6.3	 	 	Transfer of Notes
	 	 	45	 
	 	6.4	 	 	Replacement of Lost Securities
	 	 	45	 
	 	6.5	 	 	No Other Representations Affected
	 	 	45	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE 7	 	COVENANTS
	 	 	45	 
	 	7.1	 	 	Affirmative Covenants
	 	 	45	 
	 	7.2	 	 	Negative Covenants
	 	 	51	 
	 	7.3	 	 	Financial Covenants
	 	 	55	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE 8	 	EVENTS OF DEFAULT
	 	 	56	 
	 	8.1	 	 	Events of Default
	 	 	56	 
	 	8.2	 	 	Consequences of Event of Default
	 	 	57	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE 9	 	THE AGENT
	 	 	58	 
	 	9.1	 	 	Authorization and Action
	 	 	58	 
	 	9.2	 	 	Delegation of Duties
	 	 	58	 
	 	9.3	 	 	Exculpatory Provisions
	 	 	58	 
	 	9.4	 	 	Reliance
	 	 	59	 
	 	9.5	 	 	Non-Reliance on Agent and Other Purchasers
	 	 	59	 
	 	9.6	 	 	Agent in its Individual Capacity
	 	 	59	 
	 	9.7	 	 	Successor Agent
	 	 	59	 
	 	9.8	 	 	Collections and Disbursements
	 	 	60	 
	 	9.9	 	 	Reporting
	 	 	61	 






ii









 





TABLE OF CONTENTS

(continued)




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	 	 	 	 	 
	 	 	 	 
	 	9.10	 	 	Consent of Purchasers
	 	 	61	 
	 	9.11	 	 	This Article Not Applicable to Loan Parties
	 	 	61	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE 10	 	PUT OPTION AND UNLOCKING RIGHTS
	 	 	62	 
	 	10.1	 	 	Grant of Option
	 	 	62	 
	 	10.2	 	 	Put Price
	 	 	62	 
	 	10.3	 	 	Exercise of Put Option
	 	 	62	 
	 	10.4	 	 	Certain Remedies
	 	 	62	 
	 	10.5	 	 	Put Option Closing
	 	 	63	 
	 	10.6	 	 	Unlocking Rights
	 	 	63	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE 11	 	PURCHASE RIGHTS
	 	 	63	 
	 	11.1	 	 	Limited Preemptive Rights
	 	 	63	 
	 	11.2	 	 	Termination
	 	 	64	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE 12	 	REGISTRATION RIGHTS
	 	 	64	 
	 	12.1	 	 	Piggyback Registrations
	 	 	64	 
	 	12.2	 	 	Demand Registration Rights
	 	 	65	 
	 	12.3	 	 	S-3 Demand Registration Rights
	 	 	66	 
	 	12.4	 	 	Holdback Agreements
	 	 	66	 
	 	12.5	 	 	Registration Procedures
	 	 	67	 
	 	12.6	 	 	Registration Expenses
	 	 	69	 
	 	12.7	 	 	Indemnification
	 	 	69	 
	 	12.8	 	 	Participation in Underwritten Registrations
	 	 	70	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE 13	 	SUBORDINATION OF NOTES
	 	 	71	 
	 	13.1	 	 	General
	 	 	71	 
	 	13.2	 	 	Default in Respect of Senior Term Loan or Revolving Loan
	 	 	71	 
	 	13.3	 	 	Default in Respect of Senior Subordinated Notes
	 	 	72	 
	 	13.4	 	 	Insolvency,
etc
	 	 	74	 
	 	13.5	 	 	Limited Suspension of Remedies of Holders of Subordinated Notes
	 	 	76	 
	 	13.6	 	 	Proof of Claim
	 	 	77	 
	 	13.7	 	 	Acceleration of Subordinated Notes
	 	 	77	 
	 	13.8	 	 	Turnover of Payments
	 	 	78	 






iii









 





TABLE OF CONTENTS

(continued)




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	 	 	 	 	 
	 	 	 	 
	 	13.9	 	 	Obligations Not Impaired
	 	 	79	 
	 	13.10	 	 	Payment of Debt; Subrogation
	 	 	79	 
	 	13.11	 	 	Reliance of Holders of Senior Loans; Reliance of Holders of Senior
Subordinated Notes; Amendments
	 	 	79	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE 14	 	MISCELLANEOUS
	 	 	80	 
	 	14.1	 	 	Successors and Assigns
	 	 	80	 
	 	14.2	 	 	Modifications and Amendments
	 	 	80	 
	 	14.3	 	 	No Implied Waivers; Cumulative Remedies; Writing Required
	 	 	80	 
	 	14.4	 	 	Reimbursement of Expenses
	 	 	81	 
	 	14.5	 	 	Holidays
	 	 	81	 
	 	14.6	 	 	Notices
	 	 	81	 
	 	14.7	 	 	Survival
	 	 	82	 
	 	14.8	 	 	Governing Law
	 	 	82	 
	 	14.9	 	 	Jurisdiction, Consent to Service of Process
	 	 	82	 
	 	14.10	 	 	Jury Trial Waiver
	 	 	83	 
	 	14.11	 	 	Severability
	 	 	83	 
	 	14.12	 	 	Headings
	 	 	84	 
	 	14.13	 	 	Indemnity
	 	 	84	 
	 	14.14	 	 	Environmental Indemnity
	 	 	84	 
	 	14.15	 	 	Counterparts
	 	 	85	 
	 	14.16	 	 	Integration
	 	 	85	 
	 
	SIGNATURE PAGE TO AMENDED AND RESTATED NOTE AND EQUITY PURCHASE AGREEMENT	 	 	86	 
	ANNEX A INFORMATION RELATING TO PURCHASERS	 	 	91	 
	ANNEX B	 	 
	 	 	92	 
	SCHEDULES	 	 
	 	 	98	 
	EXHIBITS	 	 
	 	 	99	 







iv











 





AMENDED AND RESTATED NOTE AND EQUITY PURCHASE AGREEMENT




$15,000,000 Aggregate Principal Amount of Senior Term A Notes Due May 24, 2009




$7,500,000 Aggregate Principal Amount of Senior Term B Notes Due May 24, 2010




$4,000,000 Aggregate Principal Amount of Senior Term C Notes Due October 29, 2011




$7,500,000 Aggregate Principal Amount of Senior Subordinated Notes Due May 24, 2011




$1,250,000 Aggregate Principal Amount of Junior Subordinated Notes Due May 24, 2012




$5,250,000 Revolving Loan Facility




22,000 Shares Preferred Stock of Parent




10,000 Shares of Class B Common Stock of Parent




Warrants to Purchase 83,458 Shares

of Class B Common Stock of Parent




          THIS AMENDED AND RESTATED NOTE AND EQUITY PURCHASE AGREEMENT (this “Agreement”), dated
as of October 29, 2004, is by and among IST ACQUISITIONS, INC., a Delaware corporation
(“Parent”), IMAGING AND SENSING TECHNOLOGY CORPORATION, a New York corporation
(“Borrower”), IST CONAX NUCLEAR, INC., a New York corporation, I.S. TECHNOLOGY de PUERTO
RICO, INC., a Delaware corporation, IMAGING AND SENSING TECHNOLOGY INTERNATIONAL CORP., a New York
corporation, IST INSTRUMENTS, INC., a New York corporation, QUADTEK, INC., a Washington corporation
(each a “Subsidiary” and collectively the “Subsidiaries” and together with Borrower
and Parent, the “Loan Parties”), the securities purchasers that are now and hereafter at
any time parties hereto and are listed in Annex A (or any amendment or supplement thereto)
attached hereto (each a “Purchaser” and collectively, “Purchasers”), and AMERICAN
CAPITAL FINANCIAL SERVICES, INC., a Delaware corporation (“ACFS”), as administrative and
collateral agent for Purchasers (in such capacity “Agent”). Capitalized terms used and not
defined elsewhere in this Agreement are defined in Article 1 hereof.




RECITALS



1. The parties hereto were party to a Note and Equity Purchase Agreement, dated as of May 24, 2004,
as amended by Amendment No. 1 thereto, dated August 18, 2004 (the “Existing Purchase
Agreement”), pursuant to which Parent and Borrower obtained financing from Purchasers by
selling to Purchasers Senior Term A Notes, due May 24, 2009, for an aggregate amount of
$15,000,000, Senior Term B Notes, due May 24, 2010, for an aggregate amount of $7,500,000, Senior
Subordinated Notes, due May 24, 2011, for an aggregate amount of $7,500,000, and


2









 






Junior Subordinated Notes, due May 24, 2012, for an aggregate amount of $1,250,000 (collectively
the “Original Notes”).



2. Purchasers have sold or contributed certain of such Notes to ACS Funding Trust I, a Delaware
statutory trust, Wachovia Bank, National Association, a national banking association
(“Wachovia”), and CoLTS Trust 2004-1, a Delaware Statutory trust (“CoLTS”).



3. Wachovia, by its execution hereof, ratifies and consents to Amendment No. 1 to the Existing
Purchase Agreement.



4. Pursuant to a Stock Purchase Agreement (the “Stock Purchase Agreement”), dated May 24,
2004, by and between Parent and certain stockholders of Borrower (collectively, “Sellers”),
Parent acquired by purchase from Sellers all of the issued and outstanding capital stock of
Borrower (the “Acquisition”).



5. The Loan Parties sold the Original Notes to Purchasers in the aggregate amount of $31,250,000
for the purpose of financing the Acquisition.



6. The Loan Parties have entered into a revolving credit facility with Purchasers in the amount of
$5,250,000 for the purpose of financing the Acquisition and providing working capital.



7. Parent has sold 22,000 shares of its Series A Redeemable Preferred Stock, $.001 par value
(“Preferred Stock”), and 10,000 shares of its Class B Common Stock, $.001 par value
(“Class B Common Stock”) to Purchasers.



8. In order to induce Purchasers to purchase the Preferred Stock and the Junior Subordinated Notes
(as defined herein), Parent has issued and sold to Purchasers, in connection with the purchase of
the Preferred Stock and the Junior Subordinated Notes, warrants exercisable for an aggregate of
81,589 and 1,869 shares of Class B Common Stock, respectively, subject to the terms and conditions
set forth in this Agreement.



9. Pursuant to the Sale and Purchase Agreement of the Nuclear Business, dated of even date
herewith, by and between IST Auxitrol Nuclear SAS, a wholly-owned subsidiary of Parent (“IST
France”), and Auxitrol SA (“Auxitrol”), IST France has, concurrent herewith, acquired
by purchase certain assets of Auxitrol (the “Auxitrol Acquisition”).



10. The Loan Parties, Purchasers and the Agent have agreed to amend and restate the Existing
Purchase Agreement in connection with the Auxitrol Acquisition to provide for the purchase and sale
of Senior Term C Notes to Purchasers for the purpose of financing the Auxitrol Acquisition, and to
amend certain other terms of the Existing Purchase Agreement.



11. It is the intent of the parties hereto that this Agreement not constitute a novation of the
obligations and liabilities existing under the Existing Purchase Agreement or evidence payment of
any such obligations and liabilities, that this Agreement amends and restates in its entirety the
Existing Purchase Agreement, and that from and after the date hereof the Existing Purchase
Agreement shall be of no further force or effect.




3









 








          NOW, THEREFORE, the parties hereto, in consideration of the premises and their mutual
covenants and agreements herein set forth and intending to be legally bound hereby, covenant and
agree as follows:




ARTICLE 1

DEFINITIONS




          1.1 Certain Definitions. In addition to other words and terms defined elsewhere in
this Agreement, the following words and terms shall have the meanings set forth below (and such
meanings shall be equally applicable to both the singular and plural form of the terms defined, as
the context may require):




          “ACAS” shall mean American Capital Strategies, Ltd., a Delaware corporation.




          “ACFS” shall have the meaning assigned to such term in the preamble hereto.




          “Additional Closing” shall mean the closing of the purchase and sale of the Additional
Securities pursuant to this Agreement.




          “Additional Closing Date” shall have the meaning assigned to such term in Section 2.8(b)
hereof.




          “Additional Securities” shall mean the Senior Term C Notes.




          “Advance Rates” shall have the meaning assigned to such term in Section 2.3(a) hereof.




          “Affiliate” shall mean with respect to any Person, any other Person that is directly or
indirectly controlling, controlled by or under common control with such Person or entity or any of
its Subsidiaries, and the term “control” (including the terms “controlled by” and “under common
control with”) means having, directly or indirectly, the power to direct or cause the direction of
the management and policies of a Person, whether through ownership of voting securities or by
contract or otherwise. Without limiting the foregoing, the ownership of ten percent (10%) or more
of the voting securities of a Person shall be deemed to constitute control. Notwithstanding
anything to the contrary herein, neither Purchasers nor any of their respective Affiliates shall be
deemed to be Affiliates of the Loan Parties by virtue of the transactions contemplated in this
Agreement.




          “Acquisition” shall have the meaning assigned to such term in the Recitals hereto.




          “Agent” shall have the meaning assigned to such term in the preamble hereto and any successor
agent provided for hereunder.




          “Agreement” shall mean this Amended and Restated Note and Equity Purchase Agreement, as the
same may be amended, restated, supplemented or otherwise modified from time to time.




4









 








          “Amendment No. 1 to the Existing Purchase Agreement” shall mean that certain Amendment, dated
August 18, 2004, to the Existing Purchase Agreement.




          “Appraised Value” shall mean the fair market value of a security on a control premium basis
without discount for limitations on voting rights, minority interests, illiquidity or restrictions
on transfer, as determined by an appraisal performed at the expense of Parent by any of (x)
Houlihan, Lokey, Howard & Zukin, (y) Duff & Phelps or (z) Willamette Management Associates, or any
successor to such firms, as Parent shall elect; provided that such appraiser shall be directed to
determine the value of such securities as soon as practicable, but in no event later than thirty
(30) days from the date of its selection and for such purposes all rights, options and warrants to
subscribe for or purchase, and other securities convertible into or exchangeable for Common Stock
of Parent shall be deemed to be exercised, exchanged or converted, and the underlying shares of
Common Stock of Parent shall be deemed outstanding.




          “Auxitrol” shall have the meaning assigned to such term in the Recitals hereto.




          “Auxitrol Acquisition” shall have the meaning assigned to such term in the Recitals hereto.




          “Borrowing Base Certificate” shall have the meaning assigned to such term in Section 2.3(b)
hereof.




          “Business” shall mean the principal business of the Loan Parties as set forth in Section
5.1(b) herein and as such shall continue to be conducted following the purchase and sale of the
Securities.




          “Business Day” shall mean any day other than a Saturday, Sunday or other day on which banking
institutions in New York or Maryland are authorized or required by law to close.




          “By-laws” shall mean the by-laws, partnership agreement, operating agreement or analogous
instrument governing the operations of each of the Loan Parties, as applicable, including all
amendments and supplements thereto.




          “Capital Expenditures” shall mean for any period of determination the sum of capital
expenditures and payments under Capitalized Leases of the Loan Parties for such period determined
and consolidated in accordance with GAAP.




          “Capitalized Leases” shall mean, with respect to any Person, leases of (or other agreements
conveying the right to use) any property (whether real, personal or mixed) by such Person as lessee
that, in accordance with GAAP (as defined in Section 1.2 hereof), either would be required to be
classified and accounted for as capital leases on a balance sheet of such Person or otherwise be
disclosed as such in a note to such balance sheet.




          “Cash Flow Prepayments” shall have the meaning assigning to such term in Section 3.7(b)
hereof.




5









 








          “CERCLA” shall mean the Comprehensive Environmental Response, Compensation and Liability Act
(42 U.S.C. § 9604, et seq.), as amended, and rules, regulations, standards guidelines and
publications issued thereunder.




          “Change of Control” shall mean the occurrence of any of the following:




          (a) any transaction or series of related transactions resulting in the sale or issuance of
securities or any rights to securities of Parent by Parent representing in the aggregate more than
fifty percent (50%) of its issued and outstanding voting securities, on a fully diluted basis, or
any transaction or series of related transactions resulting in the sale, transfer, assignment or
other conveyance or disposition of any securities or any rights to securities of Parent by any
holder or holders thereof representing in the aggregate more than 50% of the issued and outstanding
voting securities of Parent on a fully diluted basis and the receipt of any consideration in
connection therewith;




          (b) a merger, consolidation, reorganization, recapitalization or share exchange (whether or
not the Parent is the surviving and continuing corporation) in which the stockholders of Parent
immediately prior to such transaction own, as a result of and receive in exchange for securities of
Parent owned by them (whether alone or together with cash, property or other securities), or the
issuance by Parent of securities to stockholders of another Person or Persons in such transactions,
cash, property or securities of the resulting or surviving entity and as a result thereof Persons
who were holders of voting securities of Parent and Underlying Common Stock hold less than 50% of
the capital stock, calculated on a Fully Diluted Basis, of the resulting corporation entitled to
vote in the election of directors;




          (c) a sale, transfer or other disposition of 30% or more of the assets of the Loan Parties, on
a consolidated basis;




          (d) any sale or issuance or series of sales or issuances of the Common Stock or any other
voting security (or security convertible into, exchangeable for, or exercisable for any other
voting security) of Parent within a 12-month period that results in a transfer of more than 50% of
the issued and outstanding shares of voting stock of Parent or a transfer of more than 50% of the
voting power of Parent; and




          (e) the initial public offer of securities by Parent other than an offering of securities for
an employee benefit plan on SEC Form S-8 or a successor form.




          “Charter Documents” shall mean the Articles of Incorporation, Certificate of Incorporation,
certificate of limited partnership, certificate of limited liability company, charter or analogous
organic instrument filed with the appropriate Governmental Authorities of each of the Loan Parties,
as applicable, including all amendments and supplements thereto.




          “Closing” shall mean the closing of the purchase and sale of the Original Securities pursuant
to this Agreement.




          “Closing Date” shall have the meaning assigned to such term in Section 2.8(a) hereof.




6









 








          “Code” shall mean the Internal Revenue Code of 1986, as amended.




          “Collateral Access Agreement” shall mean an agreement in form and substance reasonably
satisfactory to the Agent pursuant to which a mortgagee or lessor of real property on which
collateral is stored or otherwise located, or a warehouseman, processor or other bailee of
Inventory, acknowledges the Liens of the Agent and waives any Liens held by such Person on such
property and, in the case of any such agreement with a mortgagee or lessor, permits the Agent
access to and use of such real property for a reasonable amount of time following the occurrence
and during the continuance of an Event of Default to assemble, complete and sell any collateral
stored or otherwise located thereon.




          “CoLTS” shall have the meaning assigned to such term in the Recitals hereto.




          “Common Stock” shall mean the Class B Common Stock and Class A Common Stock of Parent, par
value $.001 per share.




          “Condition” shall mean any condition that results in or otherwise relates to any Environmental
Liabilities.




          “Controlled Group” shall mean the “controlled group of corporations” as that term is defined
in Section 1563 of the Internal Revenue Code of 1986, as amended, of which the Loan Parties are a
part from time to time.




          “Copyright Licenses” shall mean any agreement, whether written or oral, providing for the
grant by or to any Loan Party of any right to use any Copyright.




          “Copyrights” shall mean all copyrights in published and unpublished works, and all
applications, registrations and renewals relating thereto.




          “Covered Taxes” shall have the meaning assigned to such term in Section 3.9 hereof.




          “Customer” shall mean and include the account debtor with respect to any Receivable and/or the
prospective purchaser of goods, services or both with respect to any contract or contract right,
and/or any party who enters into or proposes to enter into any contract or other arrangement with
any Loan Party, pursuant to which such Loan Party is to deliver any personal property or perform
any services.




          “Debt to EBITDA Ratio” shall mean the ratio of (i) Indebtedness of the Loan Parties, on a
consolidated basis, as of a particular Measurement Date, to (ii) the EBITDA for the Measurement
Period ending on such Measurement Date.




          “Default” shall mean any event or condition that, but for the giving of notice or the lapse of
time, or both, would constitute an Event of Default.




          “Demand Registration” shall have meaning assigned to such term in Section 12.2(a) hereof.




7









 








          “EBITDA” shall mean for any Measurement Period, without duplication, the total of the
following for the Loan Parties on a consolidated basis, each calculated for such period: Net
Income plus interest expense, plus taxes, plus depreciation, amortization and Management Fees, as
adjusted by the Board of Directors of Parent for non-recurring charges.




          “Eligible Inventory” means Inventory of any Loan Party which meets each of the following
requirements:




          (a) it (i) is subject to a perfected Lien in favor of the Agent and (ii) is not subject to any
other assignment, claim or Lien;




          (b) it is salable;




          (c) it is in the possession and control of any Loan Party and it is stored and held in
facilities owned by a Loan Party or, if such facilities are not so owned, the Agent is in
possession of a Collateral Access Agreement with respect thereto;




          (d) it is not Inventory produced in violation of the Fair Labor Standards Act and subject to
the “hot goods” provisions contained in Title 29 U.S.C. §215;




          (e) it is not subject to any agreement which would restrict the Agent’s ability to sell or
otherwise dispose of such Inventory;




          (f) it is located in the United States or in any territory or possession of the United States
that has adopted Article 9 of the Uniform Commercial Code;




          (g) it is not “in transit” to any Loan Party or held by any Loan Party on consignment;
provided, that Inventory at or in transit from foreign suppliers for which a Letter of
Credit has been issued in support of such purchase shall be deemed eligible hereunder; and




          (h) the Agent shall not have determined in its discretion that it is unacceptable due to age,
type, category, quality, quantity and/or any other reason whatsoever.



Inventory which is at any time Eligible Inventory but which subsequently fails to meet any of the
foregoing requirements shall forthwith cease to be Eligible Inventory.




          “Eligible Receivables” shall mean, with respect to any Loan Party, each Receivable of such
Loan Party arising in the ordinary course of such Loan Party’s business and that Agent, in its sole
reasonable credit judgment, shall deem to be an Eligible Receivable, based on such considerations
as Agent may from time to time reasonably deem appropriate. A Receivable shall not be deemed
eligible unless such Receivable is subject to Agent’s first priority perfected security interest
and no other Lien (other than Permitted Encumbrances), and is evidenced by an invoice or other
documentary evidence satisfactory to Agent. In addition, no Receivable shall be an Eligible
Receivable if:




          (a) it arises out of a sale made by such Loan Party to an Affiliate of the Loan Party or to a
Person controlled by an Affiliate of the Loan Party;




8









 








          (b) it is due or unpaid more than ninety (90) days after the original invoice date;




          (c) any covenant, representation or warranty contained in this Agreement with respect to such
Receivable has been breached;




          (d) the Customer shall (i) apply for, suffer, or consent to the appointment of, or the taking
of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial
part of its property or call a meeting of its creditors, (ii) admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of its present business,
(iii) make a general assignment for the benefit of creditors, (iv) commence a voluntary case under
any state or federal bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a bankrupt
or insolvent, (vi) file a petition seeking to take advantage of any other law providing for the
relief of debtors, (vii) acquiesce to, or fail to have dismissed, any petition which is filed
against it in any involuntary case under such bankruptcy laws, or (viii) take any action for the
purpose of effecting any of the foregoing;




          (e) the sale to the Customer is on a bill-and-hold unless the invoice is acknowledged by the
Customer (provided that the value of such Receivables shall not exceed $50,000), guaranteed sale,
sale-and-return, sale on approval, consignment or any other repurchase or return basis or is
evidenced by chattel paper;




          (f) Agent believes, in its sole judgment, that collection of such Receivable is insecure or
that such Receivable may not be paid by reason of the Customer’s financial inability to pay;




          (g) except as permitted under subsection (e) of this definition, the goods giving rise to such
Receivable have not been shipped and delivered to and accepted by the Customer or the services
giving rise to such Receivable have not been performed by such Loan Party and accepted by the
Customer or the Receivable otherwise does not represent a final sale;




          (h) the Receivables of the Customer exceed a credit limit determined by Agent, in its sole
discretion, to the extent such Receivable exceeds such limit;




          (i) the Receivable is subject to any offset, deduction, defense, dispute, or counterclaim, the
Customer is also a creditor or supplier of any Loan Party or the Receivable is contingent in any
respect or for any reason;




          (j) any Loan Party has made any agreement with any Customer for any deduction therefrom,
except for discounts or allowances made in the ordinary course of business for prompt payment, all
of which discounts or allowances are reflected in the calculation of the face value of each
respective invoice related thereto;




          (k) except as permitted under subsection (e) of this definition, shipment of the merchandise
or the rendition of services has not been completed;




          (l) any return, rejection or repossession of the merchandise has occurred;




9









 








          (m) such Receivable is not payable to such Loan Party;




          (n) Receivables with respect to which the Customer is located in any state denying creditors
access to its courts in the absence of a Notice of Business Activities Report or other similar
filing, unless such Loan Party is incorporated under the laws of such state or has either qualified
as a foreign corporation authorized to transact business in such state or has filed a Notice of
Business Activities Report or similar filing with the applicable state agency for the then current
year; or




          (o) such Receivable is not otherwise satisfactory to Agent as determined in good faith by
Agent in the exercise of its discretion in a reasonable manner.




          Notwithstanding the foregoing, the term Eligible Receivables shall include: (i) fifty percent
(50%) of POC Receivables (up to a maximum of twenty percent (20%) of the Revolving Loan Commitment
Amount); and (ii) eighty-five percent (85%) of the accounts receivable of IS&T Canada, Inc. (to the
extent otherwise “Eligible Receivables”).




          “Environmental Laws” shall mean any Laws that address, are related to or are otherwise
concerned with environmental, health or safety issues, including any Laws relating to any
emissions, releases or discharges of Pollutants into ambient air, surface water, ground water or
land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, handling, clean-up or control of Pollutants or any exposure or impact on
worker health and safety.




          “Environmental Liabilities” shall mean any obligations or liabilities (including any claims,
suits or other assertions of obligations or liabilities) that are:




          (a) related to environmental, health or safety issues (including on-site or off-site
contamination by Pollutants of surface or subsurface soil or water, and occupational safety and
health); and




          (b) based upon or related to (i) any provision of past, present or future United States or
foreign Environmental Law (including CERCLA and RCRA) or common law, or (ii) any judgment, order,
writ, decree, permit or injunction imposed by any court, administrative agency, tribunal or
otherwise.




          The term “Environmental Liabilities” includes: (i) fines, penalties, judgments, awards,
settlements, losses, damages (including foreseeable and unforeseeable consequential damages),
costs, fees (including attorneys’ and consultants’ fees), expenses and disbursements; (ii) defense
and other responses to any administrative or judicial action (including claims, notice letters,
complaints, and other assertions of liability); and (iii) financial responsibility for (1) cleanup
costs and injunctive relief, including any Removal, Remedial or other Response actions, and natural
resource damages, and (2) any other compliance or remedial measures.




          “EPA” shall mean the United States Environmental Protection Agency and any governmental body
or agency succeeding to the functions thereof.




10









 








          “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the same may from
time to time be amended, and the rules and regulations of any governmental agency or authority, as
from time to time in effect, promulgated thereunder.




          “Event of Default” shall mean any of the events of default described in Section 8.1 hereof.




          “Excess Cash Flow” shall mean for any Measurement Period, on a consolidated basis, calculated
in accordance with GAAP: (a) EBITDA for such Measurement Period, minus (b) the sum of (i)
Capital Expenditures made by the Loan Parties during such period in cash; (ii) scheduled principal
payments made by the Loan Parties with respect to Indebtedness; (iii) amounts paid in cash by the
Loan Parties during such period for taxes and interest; (iv) net changes in working capital of the
Loan Parties and (v) amounts paid in cash by the Loan Parties during such period with respect to
any Capitalized Leases.




          “Executive Officer” shall mean the president or the chief financial officer of the Borrower
and Parent.




          “Existing Purchase Agreement” shall have the meaning assigned to such term in the Recitals
hereto.




          “Fair Market Value” of a security shall mean (i) if determined in connection with a sale of
substantially all of the assets of or securities issued by Parent to an unrelated third party, the
value to be realized by the holder of the security as a result thereof, (ii) otherwise, if
available, the Market Price thereof, and (iii) otherwise, if Market Price is not available, the
Appraised Value.




          “Financial Projections” shall have the meaning assigned to such term in Section 5.1(c)(ii)
hereof.




          “Financial Statements” shall have the meaning assigned to such term in Section 5.1(c)(i)
hereof.




          “Financing Statements” shall have the meaning assigned to such term in Section 4.1(c) hereof.




          “First Amendment to Intercreditor and Subordination Agreement” shall mean the Amendment, dated
as of October 29, 2004, to the Intercreditor and Subordination Agreement, dated as of May 25, 2004,
by and among Wachovia, CoLTS, ACAS, ACS Funding Trust I, Agent and the Loan Parties.




          “Fiscal Year” or “fiscal year” shall mean each twelve month period ending on April 30 of each
year.




          “Fixed Charge Coverage Ratio” shall mean for a particular Measurement Period, the ratio of
EBITDA of the Loan Parties less Capital Expenditures on a consolidated basis during such
Measurement Period to the Fixed Charges during such Measurement Period.




11









 








          “Fixed Charges” shall mean, for any period, and each calculated for such period (without
duplication) on a consolidated basis, the sum of (a) cash interest expense of the Loan Parties;
plus (b) scheduled payments of principal with respect to all Indebtedness of the Loan Parties; plus
(c) any cash payment or income or franchise taxes included in the determination of Net Income,
excluding any provision for deferred taxes; plus (d) payment of deferred taxes accrued in any prior
period.




          “French Pledge Agreement” shall have the meaning assigned to such term in Section 4.1(c)
hereof.




          “Fully Diluted Basis” shall mean the total number of shares of Common Stock, which are issued
and outstanding, plus the total number of shares of Common Stock which would be issued and
outstanding assuming the exercise of all outstanding options, warrants or rights to purchase Common
Stock and the conversion of all outstanding securities.




          “GAAP” shall have the meaning assigned to such term in Section 1.2 hereof.




          “Governmental Authorities” shall mean any federal, state or municipal court or other
governmental department, commission, board, bureau, agency or instrumentality, governmental or
quasi-governmental, domestic or foreign.




          “Guaranty” shall mean any guaranty of the payment or performance of any Indebtedness or other
obligation and any other arrangement whereby credit is extended to one obligor on the basis of any
promise of another Person, whether that promise is expressed in terms of an obligation to pay the
Indebtedness of such obligor, or to purchase an obligation owed by such obligor, or to purchase
goods and services from such obligor pursuant to a take-or-pay contract, or to maintain the
capital, working capital, solvency or general financial condition of such obligor, whether or not
any such arrangement is reflected on the balance sheet of such other Person, firm or corporation,
or referred to in a footnote thereto, but shall not include endorsements of items for collection in
the ordinary course of business. For the purpose of all computations made under this Agreement,
the amount of a Guaranty in respect of any obligation shall be deemed to be equal to the maximum
aggregate amount of such obligation or, if the Guaranty is limited to less than the full amount of
such obligation, the maximum aggregate potential liability under the terms of the Guaranty.




          “Holder” shall have the meaning assigned to such term in Section 10.1 hereof.




          “Indebtedness” shall mean, for any Person at the time of any determination, without
duplication, all obligations, contingent or otherwise, of such Person that, in accordance with
GAAP, should be classified upon the balance sheet of such Person as indebtedness, but in any event
including: (i) all obligations for borrowed money, (ii) all obligations arising from installment
purchases of property or representing the deferred purchase price of property or services in
respect of which such Person is liable, contingently or otherwise, as obligor or otherwise (other
than trade payables and other current liabilities incurred in the ordinary course of business on
terms customary in the trade), (iii) all obligations evidenced by notes, bonds, debentures,
acceptances or instruments, or arising out of letters of credit or bankers’ acceptances issued for
such Person’s account, (iv) all obligations, whether or not assumed, secured by any




12









 







Lien or payable out of the proceeds or production from any property or assets now or hereafter
owned or acquired by such Person, (v) all obligations for which such Person is obligated pursuant
to a Guaranty, (vi) the capitalized portion of lease obligations under Capitalized Leases, (vii)
all obligations for which such Person is obligated pursuant to any Interest Rate Protection
Agreements or derivative agreements or arrangements, and (viii) all obligations of such Person upon
which interest charges are customarily paid or accrued.




          “Intellectual Property Collateral” shall mean collectively all Patents, Trademarks and
Copyrights of the Loan Parties and all Trademark Licenses, Patent Licenses, and Copyright Licenses.




          “Interest Coverage Ratio” means, for any Measurement Date, the ratio of (a) EBITDA for such
Measurement Period over (b) cash interest expense less cash interest income of Loan Parties
during such Measurement Period.




          “Interest Rate Protection Agreement” shall mean any interest rate swap, interest rate cap,
interest rate collar or other interest rate hedging agreement or arrangement.




          “Inventory” shall mean, with respect to any Loan Party, now owned or hereafter acquired goods,
merchandise and other personal property, wherever located, to be furnished under any contract of
service or held for sale or lease, all raw materials, work in process, finished goods and materials
and supplies of any kind, nature or description which are or might be used or consumed in such Loan
Party’s Business or used in selling or furnishing such goods, merchandise and other personal
property, and all documents of title or other documents representing them.




          “Inventory Advance Rate” shall have the meaning assigned to such term in Section 2.3(a)(ii)
hereof.




          “Investment” as applied to any Person shall mean the amount paid or agreed to be paid or
loaned, advanced or contributed to other Persons, and in any event shall include, without
limitation, (i) any direct or indirect purchase or other acquisition of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership interests and joint
venture interests) and (ii) any capital contribution to any other Person.




          “Investment Banking Agreement” shall mean that certain investment banking agreement between
Borrower and ACFS dated as of the Closing Date.




          “IP Collateral Assignments” shall have the meaning assigned to such term in Section 4.1(c)
hereof.




          “IRS” shall mean the Internal Revenue Service and any governmental body or agency succeeding
to the functions thereof.




          “IST France” shall have the meaning assigned to such term in the Recitals hereto.




13









 








          “Junior Cash Interest” shall have the meaning assigned to such term in Section 3.1(c) hereof.




          “Junior Origination Fee” shall mean a fee of $1,226,250 to be paid by the Loan Parties to
Purchasers or their designee in consideration of the Subordinated Notes, the Preferred Stock and
the Class B Common Stock.




          “Junior PIK Interest” shall have the meaning assigned to such term in Section 3.1(c) hereof.




          “Junior Subordinated Notes” shall have the meaning assigned to such term in Section 2.2(b)
hereof.




          “Junior Subordinated Debt Warrants” shall have the meaning assigned to such term in Section
2.4 hereof.




          “Laws” shall mean all U.S. and foreign federal, state or local statutes, laws, rules,
regulations, ordinances, codes, policies, rules of common law, and the like, now or hereafter in
effect, including any judicial or administrative interpretations thereof, and any judicial or
administrative orders, consents, decrees or judgments.




          “LIBOR Business Day” means a business day on which banks in the city of London are generally
open for interbank or foreign exchange transactions.




          “LIBOR Period” means each month commencing on the Closing Date, or the Additional Closing
Date, in the case of the Senior Term C Notes, (or if the Closing Date (or Additional Closing Date)
is not a LIBOR Business Day, the next succeeding LIBOR Business Day) and ending one month
thereafter; provided, that the foregoing provision relating to LIBOR Periods is
subject to the following:




          (a) if any LIBOR Period would otherwise end on a day that is not a LIBOR Business Day, such
LIBOR Period shall be extended to the next succeeding LIBOR Business Day unless the result of such
extension would be to carry such LIBOR Period into another calendar month in which event such LIBOR
Period shall end on the immediately preceding LIBOR Business Day;




          (b) any LIBOR Period that would otherwise extend beyond the maturity date of the Senior Term
Notes shall end on such date; and




          (c) any LIBOR Period that begins on the last LIBOR Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the calendar month at the end of such
LIBOR Period) shall end on the last LIBOR Business Day of a calendar month.




          “LIBOR Rate” means, for each LIBOR Period, a rate of interest determined by Agent, equal to
the rate of interest that under current practice is listed as the one month London Interbank
Offered Rate as of the commencement of such LIBOR Period under the heading “Money Rates” in the
Eastern Edition of The Wall Street Journal (and should such practice



14









 






change, such other indication of the prevailing LIBOR Rate as may reasonably be chosen by the
Required Purchasers).




          “Lien” shall mean any security interest, pledge, bailment, mortgage, hypothecation, deed of
trust, conditional sales and title retention agreement (including any lease in the nature thereof),
charge, encumbrance or other similar arrangement or interest in real or personal property, now
owned or hereafter acquired, whether such interest is based on common law, statute or contract.




          “Loan Parties” shall have the meaning assigned to such term in the Recitals hereto.




          “Manage” and “Management” shall mean generation, production, handling, distribution,
processing, use, storage, treatment, operation, transportation, recycling, reuse and/or disposal,
as those terms are defined in CERCLA, RCRA and other Environmental Laws (including as those terms
are further defined, construed, or otherwise used in rules, regulations, standards, guidelines and
publications issued pursuant to, or otherwise in implementation of, such Environmental Laws).




          “Management Fee” shall have the meaning assigned to such term in Section 7.1(k) hereof.




          “Market Price” of any security shall mean the average of the closing prices of such security’s
sales on all securities exchanges on which such security may at the time be listed, or, if there
has been no sales on any such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of each day, or, if on any day such security is not so
listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of
4:00 P.M., New York time, or, if on any day such security is not quoted in the NASDAQ System, the
average of the highest bid and lowest asked prices on such day in the domestic over-the-counter
market as reported by the National Quotation Bureau, Incorporated, or any similar successor
organization, in each such case averaged over a period of thirty (30) days consisting of the day as
of which “Market Price” is being determined and the twenty-nine (29) consecutive business days
prior to such day. If at any time such security is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the “Market Price” shall be the fair value
thereof determined jointly by Parent and the Holders of Warrants representing a majority of the
shares of Common Stock of Parent obtainable upon exercise of the Warrants. If such parties are
unable to reach agreement within ten (10) days, then the Market Price shall be deemed not to be
available.




          “Material Adverse Change” shall mean any change that has a Material Adverse Effect.




          “Material Adverse Effect” shall mean a material adverse effect on the business, properties,
assets, liabilities or condition (financial or otherwise) of the Loan Parties, taken as a whole.




          “Measurement Date” shall have the meaning assigned to such term in Section 7.3 hereof.




15









 








          “Measurement Period” shall mean the twelve month period ending on a Measurement Date, or as
otherwise provided in Section 7.3.




          “Multiemployer Plan” shall mean a multiemployer plan (within the meaning of Section 3(37) of
ERISA) that is maintained for the benefit of the employees of the Loan Parties or any member of the
Controlled Group.




          “Net Income” shall mean, for any period, the net income (or loss) of the Loan Parties on a
consolidated basis for such period, after deduction of all expenses, taxes and other proper
charges, determined in accordance with GAAP, for such period taken as a single accounting period.




          “Notes” shall mean, collectively, the Senior Term Notes, the Senior Subordinated Notes, the
Junior Subordinated Notes and the Revolving Notes.




          “Option Plan” shall mean the IST Acquisitions, Inc. 2004 Option Plan.




          “Options” shall mean the options to purchase shares of Common Stock under the Option Plan and,
where the context requires, any shares of restricted stock issued upon exercise thereof.




          “Original Notes” shall mean the Original Senior Term Notes, the Senior Subordinated Notes, the
Junior Subordinated Notes and the Revolving Notes.




          “Original Securities” shall mean the Original Notes, the Preferred Stock, the Common Stock,
and any Common Stock issuable upon exercise of the Warrants.




          “Original Senior Term Notes” shall have the meaning assigned to such term in Section 2.1(b)
hereof.




          “Other Subordinated Junior Notes” shall have the meaning assigned to such term in Section 13.4
hereof.




          “Other Subordinated Securities” shall have the meaning assigned to such term in Section 13.4
hereof.




          “Other Taxes” shall have the meaning assigned to such term in Section 3.9 hereof.




          “Patent Licenses” shall mean all agreement, whether written or oral, providing for the grant
by or to the Loan Parties of any right to use any Patent.




          “Patents” shall mean (a) all patents now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection therewith, whether in the
United States Patent and Trademark Office or in any similar office or
agency of the United States, Canada, or any other country or any political subdivision thereof, or
otherwise, and all common-law rights related thereto, and (b) the right to obtain all renewals
thereof.



16









 








          “Parent” shall have the meaning assigned to such term in the preamble hereto.




          “Payment Default” shall mean the occurrence of an event of default under the terms of
particular Indebtedness as a result of the failure to pay interest or principal on such
Indebtedness beyond any applicable cure period.




          “PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A
of Title IV of ERISA, or any other governmental agency, department or instrumentality succeeding to
the functions thereof.




          “Permitted Liens” shall have the meaning assigned to such term in Section 7.2(b) hereof.




          “Person” shall mean any individual, partnership, limited partnership, corporation, limited
liability company, association, joint stock company, trust, joint venture, unincorporated
organization or governmental entity or department, agency or political subdivision thereof.




          “Piggyback Registration” shall have the meaning assigned to such term in Section 12.1(a).




          “PIK Interest” shall mean Junior PIK Interest or Senior PIK Interest, as applicable.




          “Plan” shall mean any employee benefit plan (within the meaning of Section 3(3) of ERISA),
other than a Multiemployer Plan, established or maintained by any of the Loan Parties or any member
of the Controlled Group.




          “Pledge Agreement” shall have the meaning assigned to such term in Section 4.1(c) hereof.




          “POC Receivables” shall mean percentage-of-completion receivables.




          “Pollutant” shall include any “hazardous substance” and any “pollutant or contaminant” as
those terms are defined in CERCLA; any “hazardous waste” as that term is defined in RCRA; and any
“hazardous material” as that term is defined in the Hazardous Materials Transportation Act (49
U.S.C. § 1801 et seq.), as amended (including as those terms are further defined, construed, or
otherwise used in rules, regulations, standards, guidelines and publications issued pursuant to, or
otherwise in implementation of, said Environmental Laws); and including without limitation any
petroleum product or byproduct, solvent, flammable or explosive material, radioactive material,
asbestos, polychlorinated biphenyls (PCBs), dioxins, dibenzofurans, heavy metals, and radon gas;
and including any other substance or material that is reasonably determined to present a threat,
hazard or risk to human health or the environment.




          “Preferred Stock” shall have the meaning assigned to such term in the Recitals hereof.



          “Preferred Stock Warrants” shall have the meaning assigned to such term in Section 2.4 hereof.



17









 










          “Prime Rate” shall mean the rate of interest that under current practice is listed as such
under the heading “Money Rates” in the Eastern Edition of The Wall Street Journal, and if a range
of rates is listed, the highest such rate, and should such practice change, such other indication
of the prevailing prime rate of interest as may reasonably be chosen by Required Purchasers.




          “Properties and Facilities” shall have the meaning assigned to such term in Section 5.1(q)
hereof.




          “Proprietary Rights” shall mean all right, title, and interest in the following intellectual
property, including both statutory and common law rights: (i) copyrights in published and
unpublished works, and all applications, registrations and renewals relating thereto; (ii)
registered or unregistered trademarks, service marks, domain names, logos, trade dress and other
source or business identifiers, and the goodwill associated therewith; (iii) patents, patent
applications, and other patent or industrial property rights in any country; and (iv) trade
secrets, confidential or proprietary information, inventions, ideas, designs, concepts,
compilations of information, methods, techniques, procedures, processes, and know-how, whether or
not patentable patents, trademarks, trade names, service marks, copyrights, inventions, production
methods, licenses, formulas, know-how and trade secrets, regardless of whether such are registered
with any Governmental Authorities, including applications therefor.




          “Purchase Documents” shall mean this Agreement, the Notes, the Warrants and the Security
Documents and all other agreements, instruments and documents delivered in connection therewith as
any or all of the foregoing may be supplemented or amended from time to time.




          “Purchaser” shall have the meaning assigned to such term in the preamble hereto and in Section
6.2 hereof.




          “Put Option” shall have the meaning assigned to such term in Section 10.1 hereof.




          “Put Option Closing” shall have the meaning assigned to such term in Section 10.5 hereof.




          “Put Price” shall have the meaning assigned to such term in Section 10.2 hereof.




          “Put Shares” shall have the meaning assigned to such term in Section 10.2 hereof.




          “RCRA” shall mean the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), as
amended, and all rules, regulations, standards, guidelines, and publications issued thereunder.


          “Receivables” shall mean all of such Loan Party’s accounts, contract rights, instruments
(including those evidencing indebtedness owed to such Loan Party by its Affiliates), documents,
chattel paper, general intangibles relating to accounts, drafts and acceptances, and all other
forms of obligations owing to such Loan Party arising out of or in connection with the sale



18









 









or
lease of Inventory or the rendition of services, all guarantees and other security therefor,
whether secured or unsecured, now existing or hereafter created, and whether or not specifically
sold or assigned to Agent hereunder.




          “Receivables Advance Rate” shall have the meaning assigned to such term in Section 2.3(a).




          “Registrable Securities” shall mean any shares of Common Stock of Parent purchased upon the
exercise of any Warrant and any shares of Common Stock of Parent purchased pursuant to Article 11
hereof, and any shares of Common Stock of Parent now owned or hereafter acquired by any Purchaser.




          “Removal,” “Remedial” and “Response” actions shall include the types of activities “covered”
by CERCLA, RCRA, and other comparable Environmental Laws, and whether the activities are those that
might be taken by a government entity or those that a government entity or any other person might
seek to require of waste generators, handlers, distributors, processors, users, storers, treaters,
owners, operators, transporters, recyclers, reusers, disposers, or other persons under “removal,”
“remedial,” or other “response” actions.




          “Reportable Event” shall mean any of the events that are reportable under Section 4043 of
ERISA and the regulations promulgated thereunder, other than an occurrence for which the thirty
(30) day notice contained in 29 C.F.R. § 2615.3(a) is waived.




          “Request for Borrowing” shall have the meaning assigned to such term in Section 2.3(b) hereof.




          “Required Purchasers” shall mean, at any time, Purchasers holding a pro rata percentage of the
outstanding principal amount of the Notes aggregating at least 66-2/3% at such time.




          “Revolving Loan” shall have the meaning assigned to such term in Section 2.3 hereof.




          “Revolving Loan Commitment” shall mean the amount of $5,250,000.




          “Revolving Loan Commitment Fee” shall mean a fee of $105,000 to be paid by the Loan Parties to
Purchasers or their designee in consideration of the Revolving Loan Commitment.




          “Revolving Loan Termination Date” shall have the meaning assigned to such term in Section
2.3(a) hereof.




          “Revolving Notes” shall have the meaning assigned to such term in Section 2.3(a) hereof.



          “SEC” shall mean the Securities and Exchange Commission and any governmental body or agency
succeeding to the functions thereof.



19









 











          “Securities” shall mean the Notes, the Warrants, the Preferred Stock, the Common Stock and the
Common Stock issuable upon exercise of the Warrants.




          “Securities Act” shall mean the Securities Act of 1933, as amended.




          “Securities Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.




          “Security Agreement” shall have the meaning assigned to such term in Section 4.1(c) hereof.




          “Security Documents” shall mean the Security Agreement, the IP Collateral Assignments, the
Pledge Agreement, the French Pledge Agreement, the Financing Statements, and all other documents,
instruments and other materials necessary to create or perfect the security interests created
pursuant to the Security Agreement.




          “Senior Cash Interest” shall have the meaning assigned to such term in Section 3.1(b).




          “Senior Loans” shall mean, collectively, the Revolving Loan and Senior Term Loans.




          “Senior Note Payment Default” shall have the meaning assigned to such term in Section 13.2
hereof.




          “Senior Note Covenant Default” shall have the meaning assigned to such term in Section 13.2
hereof.




          “Senior Origination Fee” shall mean a fee of $525,000 to be paid by the Loan Parties to
Purchasers or their designee in consideration of the Senior Loans (other than the Senior Term C
Loan).




          “Senior PIK Interest” shall have the meaning assigned to such term in Section 3.1(b) hereof.




          “Senior Subordinated Notes” shall have the meaning assigned to such term in Section 2.2(a)
hereof.




          “Senior Subordinated Note Payment Default” shall mean a Payment Default on the Senior
Subordinated Notes.




          “Senior Term Loan A” shall have the meaning assigned to such term in Section 2.1(a) hereof.



          “Senior Term Loan B” shall have the meaning assigned to such term in Section 2.1(b) hereof.



20









 











          “Senior Term Loan C” shall have meaning assigned to such term in Section 2.1(c) hereof.




          “Senior Term Loans” shall have the meaning assigned to such term in Section 2.1(b) hereof.




          “Senior Term A Notes” shall have the meaning assigned to such term in Section 2.1(a) hereof.




          “Senior Term B Notes” shall have the meaning assigned to such term in Section 2.1(b) hereof.




          “Senior Term C Notes” shall have the meaning assigned to such term in Section 2.1(c) hereof.




          “Senior Term C Closing Fee” shall mean a fee of $120,000 to be paid by the Loan Parties to
ACFS in consideration of the Senior Term C Notes.




          “Senior Term Notes” shall have the meaning assigned to such term in Section 2.1(c) hereof.




          “Stockholders Agreement” shall have the meaning assigned to such term in Section 4.1(f)
hereof.




          “Structuring Fee” shall mean a fee of $1,250,000 payable by the Loan Parties to ACFS in
consideration of the structuring of the financing contemplated hereby.




          “Subject Securities” shall mean the Warrants, any shares of Common Stock of Parent purchased
upon the exercise of any Warrant and any shares of Common Stock of Parent purchased pursuant to
Article 11 hereof.




          “Subordinated Notes” shall have the meaning assigned to such term in Section 2.2(b) hereof.




          “Subsidiary” of any corporation shall mean any other corporation or limited liability company
of which the outstanding capital stock possessing a majority of voting power in the election of
directors (otherwise than as the result of a default) is owned or controlled by such corporation
directly or indirectly through Subsidiaries.




          “Taxes” shall have the meaning assigned to such term in Section 3.9 hereof.




          “Termination and Release Agreement” shall mean that Termination and Release Agreement, dated
May 25, 2004, between JPMorgan Chase Bank and Borrower, as amended and supplemented from time to
time.



          “Trademark Licenses” shall mean any agreement, whether written or oral, providing for the
grant by or to any Loan Party of any right to use any Trademark.



21









 











          “Trademarks” shall mean (a) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks, logos and other source or
business identifiers, and all goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in connection therewith,
whether in the United States Patent and Trademark Office, the Canadian Intellectual Property Office
or in any similar office or agency of the United States, Canada, any state, any province or any
other country or any political subdivision thereof, or otherwise, and all common-law rights related
thereto, and (b) the right to obtain all renewals and extensions thereof.




          “Transaction Documents” shall have the meaning assigned to such term in Section 5.1(f) hereof.




          “Transactions” shall mean the incurrence of debt and the issuance of securities in connection
therewith, as contemplated by this Agreement, the Notes and all other agreements contemplated
hereby and thereby.




          “Underlying Common Stock” shall mean (i) the Common Stock of Parent issued or issuable upon
exercise of the Warrants and (ii) any equity securities issued or issuable with respect to the
securities referred to in clause (i) above by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other reorganization.




          “Unlocking Offer” shall have the meaning assigned to such term in Section 10.6 hereof.




          “UST” shall mean an underground storage tank, including as that term is defined, construed and
otherwise used in RCRA and in rules, regulations, standards, guidelines and publications issued
pursuant to RCRA and comparable state and local laws.




          “Wachovia” shall have the meaning assigned to such term in the Recitals hereto.




          “Warrants” shall have the meaning assigned to such term in Section 2.4 hereof.




          “Warrant Shares” shall mean the shares of Common Stock issued or issuable upon exercise of the
Warrants.




          1.2 Accounting Principles. The character or amount of any asset, liability, capital
account or reserve and of any item of income or expense to be determined, and any consolidation or
other accounting computation to be made, and the construction of any definition containing a
financial term, pursuant to this Agreement shall be determined or made in accordance with generally
accepted accounting principles in the United States of America consistently applied
(“GAAP”), unless such principles are inconsistent with the express requirements of this
Agreement.




          1.3 Other Definitional Provisions; Construction. Whenever the context so requires,
neuter gender includes the masculine and feminine, the singular number includes the plural and vice
versa. The words “hereof,” “herein” and “hereunder” and words of similar



22









 






import when used in this Agreement shall refer to this Agreement as a whole and not it any particular
provision of this agreement, and references to section, article, annex, schedule, exhibit and like
references are references to this Agreement unless otherwise specified. A Default or Event of Default shall
“continue” or be “continuing” until such Default or Event of Default has been cured or waived by
Agent and Purchasers. References in this Agreement to any Persons shall include such Persons,
successors and permitted assigns. Other terms contained in this Agreement (which are not otherwise
specifically defined herein) shall have meanings provided in Article 9 of the New York Uniform
Commercial Code on the date hereof to the extent the same are used or defined therein. Whenever
the context so requires, the term “Loan Parties” shall be deemed to include any direct or indirect
Subsidiary of Parent. By way of example, references to the consolidated financial position of the
Loan Parties shall be deemed to include the financial results of each of Parent’s direct and
indirect Subsidiaries which are included in the Financial Statements.




ARTICLE 2

ESTABLISHMENT OF REVOLVING LOAN FACILITY

AND ISSUE AND SALE OF SECURITIES




          2.1 Senior Term Loans.




          (a) Subject to the terms and conditions set forth in this Agreement, Purchasers agree to make
a loan (“Senior Term Loan A”) to the Loan Parties on the Closing Date in the principal
amount of $15,000,000. From and after Closing, the Senior Term Loan A shall be evidenced by one or
more promissory notes made by the Loan Parties in favor of Purchasers in the form attached hereto
as Exhibit A-1.1 (together with any promissory notes issued in substitution therefor
pursuant to Sections 6.3 and 6.4, the “Senior Term A Notes”) to be delivered by the Loan
Parties at the Closing.




          (b) Subject to the terms and conditions set forth in this Agreement, Purchasers agree to make
a loan (“Senior Term Loan B”) to the Loan Parties on the Closing Date in the principal
amount of $7,500,000. From and after Closing, the Senior Term Loan B shall be evidenced by one or
more promissory notes made by the Loan Parties in favor of Purchasers in the form attached hereto
as Exhibit A-1.2 (together with any promissory notes issued in substitution therefor
pursuant to Sections 6.3 and 6.4, the “Senior Term B Notes”, and together with the Senior
Term A Notes, the “Original Senior Term Notes”) to be delivered by the Loan Parties at the
Closing.




          (c) Subject to the terms and conditions set forth in this Agreement, Purchasers agree to make
a loan (“Senior Term Loan C” and together with Senior Term Loan A and the Senior Term Loan
B the “Senior Term Loans”) in the principal amount of $4,000,000. From and after the
Additional Closing, the Senior Term Loan C shall be evidenced by one or more promissory notes made
by the Loan Parties in favor of Purchasers in the form attached hereto as Exhibit A-1.3
(together with any promissory notes issued in substitution therefor pursuant to Sections 6.3 and
6.4, the “Senior Term C Notes”, and together with the Senior Term A Notes and
the Senior Term B Notes, the “Senior Term Notes”) to be delivered by the Loan Parties
at the Additional Closing.




23









 








          2.2 Subordinated Notes.




          (a) Senior Subordinated Notes. The Loan Parties have duly authorized the issuance and
sale to Purchasers of $7,500,000 in aggregate principal amount of the Loan Parties’ Senior
Subordinated Notes due May 24, 2011 (together with any Notes issued in substitution therefor
pursuant to Sections 6.3 and 6.4 and any Notes issued in exchange for Put Shares pursuant to
Section 10.5, the “Senior Subordinated Notes”), to be substantially in the form of the
Senior Subordinated Note attached hereto as Exhibit A-2.




          (b) Junior Subordinated Notes. The Loan Parties have duly authorized the issuance and
sale to Purchasers of $1,250,000 in aggregate principal amount of the Loan Parties’ Junior
Subordinated Notes due May 24, 2012 (together with any Notes issued in substitution therefor
pursuant to Sections 6.3 and 6.4 and any Notes issued in exchange for Put Shares pursuant to
Section 10.4, the “Junior Subordinated Notes”, together with the Senior Subordinated Notes,
the “Subordinated Notes”), to be substantially in the form of the Junior Subordinated Note
attached hereto as Exhibit A-3.




          2.3 Revolving Loans.




          (a) Subject to the terms and conditions set forth in this Agreement, on or after the Closing
Date and to, but excluding, May 24, 2005 (the “Revolving Loan Termination Date”),
Purchasers shall, severally, on a pro rata basis based on the percentages specified to Agent, make
loans and advances to the Loan Parties on a revolving credit basis (collectively, the
“Revolving Loans”) in an aggregate amount outstanding at any time equal to the lesser of
(x) the Revolving Loan Commitment Amount or (y) an amount equal to the sum of:





     (i) 85% of Eligible Receivables (“Receivables Advance Rate”), plus




     (ii) 50% of the value of the Eligible Inventory determined by Agent in its sole
discretion (the “Inventory Advance Rate,” together with the Receivables
Advance Rate, the “Advance Rates”), minus




     (iii) such reserves as Agent may reasonably deem proper and necessary in its
sole discretion from time to time.



          From and after the Closing, the Revolving Loans shall be evidenced by a promissory note made
by the Loan Parties in favor of Purchasers (the “Revolving Notes”) in the form attached
hereto as Exhibit A-4 to be delivered by the Loan parties at the Closing. The date and
amount of each Revolving Loan made by Purchasers and each payment on account of principal thereof
shall be recorded by Agent on its books; provided that, the failure of Agent to make any such
recordation shall not affect the obligations of the Loan Parties to make payments when due of any
amounts owing in respect of the Revolving Loans.




          (b) Purchasers shall make Revolving Loans available to the Loan Parties up to a maximum of one
draw per week, in integral multiples of $100,000, provided that the conditions
set forth in Section 2.3(a) hereof, this Section 2.3(b) and Section 4.2 hereof have been
satisfied. Before a Revolving Loan is made, the Loan Parties shall have (i) provided Agent an
irrevocable written Request for Borrowing in the form of Exhibit H (a “Request for
Borrowing”) by



24









 






facsimile or other means set forth in Section 14.6 so that such notice is
received by Agent not later than three (3) Business Days before the day on which the Revolving Loan
is to be made, (ii) provided a borrowing base certificate in form and substance satisfactory to the
Agent (a “Borrowing Base Certificate”) demonstrating that, after giving effect to the
Revolving Loans requested in the accompanying Request for Borrowing, the outstanding Revolving
Loans do not exceed the amounts specified in Section 2.3(a)(x) or (y) and (iii) contacted Agent and
received from Agent either oral or written confirmation of Agent’s receipt of the Request for
Borrowing not later than 1:00 pm New York time three (3) Business Days before the date on which the
Revolving Loan is to be made. No Revolving Loan shall be made if it would cause the aggregate
amount of Revolving Loans to exceed the Revolving Loan Commitment Amount or the amount determined
pursuant to Section 2.3(a)(y). Agent and Purchasers shall be entitled to rely conclusively on any
Executive Officer’s authority to deliver a Request for Borrowing or other writing on behalf of the
Loan Parties and neither Agent nor any Purchaser shall have any duty to verify the identity of or
signature of any Person identifying himself as an Executive Officer.




          2.4 Authorization and Issuance of the Warrants.




          Warrants. Parent has duly authorized the issuance and sale to Purchasers of stock
purchase warrants substantially in the form of the warrant attached hereto as Exhibit B
evidencing Purchasers’ right to acquire an aggregate of 1,869 shares of Class B Common Stock of
Parent (the “Junior Subordinated Debt Warrants”). Parent has duly authorized the issuance
and sale to Purchasers of stock purchase warrants substantially in the form of the warrant attached
hereto as Exhibit B evidencing Purchasers’ right to acquire an aggregate of 81,589 shares
of Class B Common Stock of Parent (the “Preferred Stock Warrants” and, together with the
Junior Subordinated Debt Warrants, the “Warrants”).




          2.5 Authorization and Issuance of Common Stock. The Company has duly authorized the
issuance and sale to Purchasers, pursuant to the terms and conditions of this Agreement, of 10,000
shares of Class B Common Stock.




          2.6 Authorization and Issuance of Preferred Stock. The Company has duly authorized
the issuance and sale to Purchasers, pursuant to the terms and conditions of this Agreement, of
22,000 shares of Preferred Stock, having the rights, preferences, privileges and restrictions set
forth in the Charter Documents of Parent.




          2.7 Sale and Purchase. Subject to the terms and conditions and in reliance upon the
representations, warranties and agreements set forth herein, (a) the Loan Parties shall sell to
Purchasers, and Purchasers shall purchase from the Loan Parties, in an amount equal to the relative
portion of the Notes to be purchased by each Purchaser as set forth on Annex B, the Notes
in the aggregate principal amount set forth in Section 2.1, 2.2 and 2.3 hereof for $35,250,000 in
the aggregate plus the amount of the Revolving Loan, (b) Parent shall sell to Purchasers, and
Purchasers shall purchase from Parent, in an amount equal to the relative portion of the Warrants
as set forth on Annex B, the Warrants for $100 in the aggregate, (c) Parent shall sell to
Purchasers, and Purchasers shall purchase from Parent, in amount equal to the
relative portion of shares of Preferred Stock to be purchased by each Purchaser as set forth
on Annex B, the Preferred Stock for $1,000 per share and (d) Parent shall sell to
Purchasers, and Purchasers shall purchase from Parent, in amount equal to the relative portion of
shares of Class B Common



25









 






Stock to be purchased by each Purchaser as set forth on Annex B, the Class B Common
Stock for $100 per share.




          2.8 The Closing.




          (a) The closing of the sale of the Original Securities took place at the offices of Weil,
Gotshal & Manges LLP, 767 Fifth Avenue, New York, NY 10153, on May 24, 2004 (the “Closing
Date”). The Original Securities were issued in such name or names and in such permitted
denomination or denominations, numbers and amounts as set forth in Annex B or as Purchasers
requested in writing not less than two (2) Business Days before the Closing Date. Delivery of the
Original Securities were made to Purchasers against payment of the purchase price therefor, less
any unpaid Senior Origination Fee, Junior Origination Fee, Revolving Loan Commitment Fee,
Structuring Fee and any other amounts due and payable pursuant to Section 4.1(i).




          (b) Delivery of and payment for the Additional Securities (the “Additional Closing”)
shall be made at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, NY 10153,
commencing at 10:00 a.m., local time, on the date hereof or at such place or on such other date on
or before the date hereof as may be mutually agreeable to the Loan Parties and Purchasers. The
date and time of the Additional Closing as finally determined pursuant to this Section 2.8 are
referred to herein as the “Additional Closing Date.” Delivery of the Additional Securities
shall be made to Purchasers against payment of the purchase price therefor, less any unpaid Senior
Term C Closing Fee and any other amounts due and payable pursuant to Section 4.1(i) hereof, by wire
transfer of immediately available funds in the manner agreed to by the Loan Parties and Purchasers.
The Senior Term C Notes shall be issued in such name or names and in such permitted denomination
or denominations, numbers and amounts as set forth in Annex B or as Purchasers may request
in writing not less than two (2) Business Days before the Additional Closing Date.




ARTICLE 3

REPAYMENT OF REVOLVING LOANS, THE SENIOR TERM LOANS

AND THE SUBORDINATED NOTES




          3.1 Interest Rates and Interest Payments.




          (a) Senior Term Loans.





     (i) The Loan Parties, jointly and severally, covenant and agree to make
payments to the Agent, for the ratable benefit of Purchasers, of accrued interest on
the Senior Term Loan A on the last day of each LIBOR Period, commencing on July 1,
2004 through the date of repayment in full of the Senior Term Loan A. The Senior
Term Loan A shall bear interest on the outstanding principal thereof at a rate equal
to the LIBOR Rate, as such rate may adjust from time to time, plus four and five
tenths percent (4.5%) per annum.




     (ii) The Loan Parties, jointly and severally, covenant and agree to make
payments to the Agent, for the ratable benefit of Purchasers, of accrued interest on
the Senior Term Loan B on the last day of each LIBOR Period,



26









 







commencing on July 1,
2004 through the date of repayment in full of the Senior Term Loan B. The Senior
Term Loan B shall bear interest on the outstanding principal thereof at a rate equal
to the LIBOR Rate, as such rate may adjust from time to time, plus eight percent
(8.0%) per annum.




     (iii) The Loan Parties, jointly and severally, covenant and agree to make
payments to the Agent, for the ratable benefit of Purchasers, of accrued interest on
the Senior Term Loan C on the last day of each LIBOR Period, commencing on December
1, 2004 through the date of repayment in full of the Senior Term Loan C. The Senior
Term Loan C shall bear interest on the outstanding principal thereof at a rate equal
to the LIBOR Rate, as such rate may adjust from time to time, plus nine percent
(9.0%) per annum.



          (b) Senior Subordinated Notes. The Loan Parties, jointly and severally, covenant and
agree to make payments to Agent for the ratable benefit of Purchasers, of accrued interest on the
Senior Subordinated Notes on the first Business Day of each month during the term of the Senior
Subordinated Notes commencing on July 1, 2004. The Senior Subordinated Notes will bear interest in
two components: (i) interest will be payable in cash on the outstanding principal amount thereof
(as increased by Senior PIK Interest that is paid-in-kind as described below) at a rate equal to
twelve percent (12%) per annum (“Senior Cash Interest”); and (ii) interest will be payable
in kind on (and thereby increase) the outstanding principal amount of the Senior Subordinated Notes
(as such principal amount is increased from time to time) at a rate of two percent (2%) per annum
(“Senior PIK Interest”). A late fee of two hundred and fifty (250) basis points shall be
added on any amounts due hereunder which are not paid in accordance with this Section 3.1(b).
Senior PIK Interest shall be payable as an increase in the principal amount of the Senior
Subordinated Notes on the first Business Day of each month without any further action on the part
of Agent or the Loan Parties and such increased principal amount of the Senior Subordinated Notes
shall be paid in full in connection with the repayment of the Senior Subordinated Notes. The
Agent’s determination of the amount of Senior Subordinated Notes outstanding at any time shall be
conclusive and binding, absent manifest error.




          (c) Junior Subordinated Notes. The Loan Parties, jointly and severally, covenant and
agree to make payments to Agent for the ratable benefit of Purchasers, of accrued interest on the
Junior Subordinated Notes on the first Business Day of each month during the term of the Junior
Subordinated Notes commencing on July 1, 2004. The Junior Subordinated Notes will bear interest in
two components: (i) interest will be payable in cash on the outstanding principal amount thereof
(as increased by Junior PIK Interest that is paid-in-kind as described below) at a rate equal to
twelve percent (12%) per annum (“Junior Cash Interest”), and (ii) interest will be payable
in kind on (and thereby increase) the outstanding principal amount of the Junior Subordinated Notes
(as such principal amount is increased from time to time) at a rate of two percent (2%) per annum
(“Junior PIK Interest”). A late fee of two hundred and fifty (250) basis points shall be
added on any amounts due hereunder which are not paid in accordance with this Section 3.1(c).
Junior PIK Interest shall be payable as an increase in the principal amount of the Junior
Subordinated Notes on the first Business Day of each month without any further
action on the part of Agent or the Loan Parties and such increased principal amount of the
Junior Subordinated Notes shall be paid in full in connection with the repayment of the Junior



27









 






Subordinated Notes. The Agent’s determination of the amount of Junior Subordinated Notes
outstanding at any time shall be conclusive and binding, absent manifest error.




          (d) Cash Payments in Lieu of PIK Interest. Notwithstanding Sections 3.1(b) and 3.1(c)
hereof, commencing with the first “accrual period” (as defined for purposes of the Code) ending
after the fifth anniversary of the Closing Date and continuing with each subsequent accrual period
thereafter, the Loan Parties shall, in respect of both series of Subordinated Notes, pay in cash,
on or before the end of such accrual period, an amount equal to the sum of the annual PIK Interest,
the accrued and unpaid PIK Interest and the accrued and unpaid original issue discount (other than
PIK Interest) with respect to such series of Subordinated Notes if, but only to the extent that,
the aggregate amount of the sum of (i) the PIK Interest and (ii) the original issue discount (other
than PIK Interest), in each case that has accrued and not been paid in cash from the Closing Date
through the end of such accrual period on such series of Subordinated Notes, exceeds the product of
the “issue price” (as defined for purposes of the Code) for such series of Subordinated Notes and
the “yield to maturity” (as defined for purposes of the Code) on such series of Subordinated Notes.
Any such payment shall first be allocated to the accrued and unpaid PIK Interest.




          (e) Revolving Loans. The Loan Parties, jointly and severally, covenant and agree to
make payments to the Agent for the ratable benefit of Purchasers of accrued interest on the
Revolving Loans on the first Business Day of each month, through the date of their repayment in
full. The Revolving Loans will bear interest on the outstanding principal thereof at a rate per
annum equal to the LIBOR Rate, as such rate may adjust from time to time, plus four and one half
quarters percent (4.50%). Until the Revolving Loan Termination Date, the Loan Parties agree to pay
to Agent an unused line fee on the average daily unused amount of the Revolving Loan Commitment, at
a rate equal to 0.70% per annum (computed for the actual number of days elapsed on the basis of a
year of 360 days). For purposes of calculating usage under this Section 3.1(e), the Revolving Loan
Commitment on any day shall be deemed used to the extent of the Revolving Notes outstanding at the
close of business of Agent on such day. Such unused line fee shall be payable monthly in arrears
on the last Business Day of each month and on the Revolving Loan Termination Date for any period
then ending for which such unused line fee shall not have previously been paid.




          (f) Computation of Interest. Interest on the Notes and the Revolving Loans will be
computed on the basis of a year within three hundred sixty (360) days and the actual number of days
elapsed.




          3.2 Repayment of Senior Term Notes.




          (a) Original Senior Term Notes. The Loan Parties, jointly and severally, covenant and
agree to repay to Agent, for the ratable benefit of Purchasers, the Original Senior Term Notes in
accordance with the amortization schedule set forth on Annex C attached hereto.
Notwithstanding the foregoing schedule, the Loan Parties, jointly and severally covenant and agree
to repay any and all unpaid principal on the Original Senior Term Notes, unpaid interest, fees and
other amounts due hereunder upon maturity of the Original Senior Term Notes.





28











 





          (b) Senior Term C Notes. The Loan Parties, jointly and severally, covenant and agree
to repay to Agent, for the ratable benefit of Purchasers, the unpaid balance of the Senior Term C
Notes in full, together with the all the accrued and unpaid interest, fees and other amounts due
hereunder, on October 29, 2011.




          3.3 Repayment of Subordinated Notes.




          (a) Senior Subordinated Notes. The Loan Parties, jointly and severally, covenant and
agree to repay to Agent, for the ratable benefit of Purchasers, the unpaid balance of the Senior
Subordinated Notes in full, together with the all the accrued and unpaid interest, fees and other
amounts due hereunder, on May 24, 2011.




          (b) Junior Notes. The Loan Parties, jointly and severally, covenant and agree to
repay to Agent, for the ratable benefit of Purchasers, the unpaid balance of the Junior Notes in
full, together with the all the accrued and unpaid interest, fees and other amounts due hereunder
May 24, 2012.




          3.4 Repayment of Revolving Loans. The Loan Parties covenant and agree to pay to
Agent, for the ratable benefit of Purchasers, the Revolving Loans in full together with all unpaid
accrued interest, fees and other amounts due hereunder on the Revolving Loan Termination Date. In
addition, the Loan Parties covenant and agree to pay to Agent, for the ratable benefit of
Purchasers, such amount of the Revolving Loans as shall be necessary at any time so that the
aggregate amount of Revolving Loans outstanding at any time do not exceed the lesser of the amounts
set forth in Section 2.3(a)(x) and (y).




          3.5 Optional Prepayment of Notes. Subject to the terms of this Section 3.5, the Loan
Parties may prepay to Agent, for the ratable benefit of Purchasers, the outstanding principal
amount of the Senior Term Notes and the Subordinated Notes in whole or in part in multiples of
$250,000, or such lesser amount as is then outstanding, at any time at a price equal to (i) the
accrued interest, if any, to the date set for prepayment, plus (ii) in the case of the Subordinated
Notes, a prepayment fee representing the amortization of certain of Purchasers’ costs incurred in
connection with the purchase of the Subordinated Notes equal to the principal amount prepaid
thereon multiplied by the following percentage:




	 	 	 
	If Prepaid During	 	 
	the 12-Month Period	 	 
	Ending on May 24	 	 
	of the Following Years:	 	Percentage
	2005
	 	5%
	2006
	 	4%
	2007
	 	3%
	2008
	 	2%
	2009 and Thereafter
	 	1%





provided, however, that no prepayment shall be applied to (a) the Subordinated
Notes so long as the Senior Term Notes remain outstanding and (b) to the Junior Subordinated Notes
so long as the Senior Subordinated Notes remain outstanding. All such prepayments shall (A) be
applied




29









 







by Agent to the outstanding principal in the inverse order of maturity after application of such
prepayment to any accrued interest and prepayment premium payable in connection therewith and (B)
in connection with the Senior Term Loans, shall be applied first to the Senior Term Loan A and
second, so long as no Senior Term A Notes remain outstanding, to the Senior Term Loan B, and third,
so long as no Senior Term B Notes remain outstanding, to the Senior Term Loan C.




          3.6 Notice of Optional Prepayment. If the Loan Parties shall elect to prepay any
Notes pursuant to Section 3.5 hereof, the Loan Parties shall give notice of such prepayment to
Agent and each holder of the Notes to be prepaid not less than thirty (30) days or more than ninety
(90) days prior to the date fixed for prepayment, specifying (i) the date on which such prepayment
is to be made, (ii) the principal amount of such Notes to be prepaid on such date, and (iii) the
premium, if any, and accrued interest applicable to the prepayment. Such notice shall be
accompanied by a certificate of the Chairman of the Board of Directors, the President or the Vice
President and of the Treasurer of Parent that such prepayment is being made in compliance with
Section 3.5. Notice of prepayment having been so given, the aggregate principal amount of the
Notes specified in such notice, together with accrued interest thereon and the premium, if any,
shall become due and payable on the prepayment date set forth in such notice.




          3.7 Mandatory Prepayment.




          (a) Change of Control; Event of Default. The Notes shall be prepaid in full, together
with all interest, fees and expenses plus a prepayment premium computed in accordance with Section
3.5, as if such prepayment were a voluntary prepayment, in the event of a Change of Control or upon
such Notes becoming due as a consequence of an Event of Default pursuant to Section 8.2.




          (b) Excess Cash Flow. In addition to the amounts payable by the Loan Parties in
respect of the Notes pursuant to Sections 3.2, 3.3, 3.4 and 3.7(a) hereof, the Loan Parties jointly
and severally, covenant and agree to make an annual principal prepayment on the Senior Term Loans
(the “Cash Flow Prepayment”) on or before the end of the LIBOR Period that occurs the
soonest after the one hundred twentieth (120th) day following the end of each Fiscal Year in an
amount equal to fifty percent (50%) of the Excess Cash Flow, or such lesser amount as is then
outstanding under the Notes for so long as any amounts remain outstanding under the Senior Term
Notes. All Cash Flow Prepayments in respect of any Fiscal Year shall be applied by Agent to the
outstanding principal of the Senior Term Notes. All such prepayments shall be applied by Agent to
the outstanding principal of Senior Term Loan A, and then to the outstanding principal of Senior
Term Loan B, and then to the outstanding principal of Senior Term Loan C, in each case in the
inverse order of maturity after application of such prepayment to any accrued interest payable in
connection therewith.




          3.8 Home Office Payment. The Loan Parties will pay all sums becoming due on any Note
for principal, premium, if any, and interest to Agent by the method and at the address specified
for such purpose in Annex A, or by such other method or at such other address as Purchasers
shall have from time to time specified to the Loan Parties in writing for such purpose, without the
presentation or surrender of such Note or the making of any notation thereon, except that upon
written request of the Loan Parties made concurrently with or
reasonably promptly after payment or prepayment in full of any Note, each holder of a Note
shall



30









 






surrender such Note for cancellation, reasonably promptly after such request, to the Loan
Parties at their principal executive office.




          3.9 Taxes. Any and all payments by the Loan Parties hereunder or under the Notes or
other Purchase Documents that are made to or for the benefit of Purchasers shall be made free and
clear of and without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings and penalties, interests and all other liabilities with respect
thereto (collectively, “Taxes”), excluding taxes imposed on Agent’s or Purchasers’ net
income or capital and franchise taxes imposed on any of them by the jurisdiction under the laws of
which any of them is organized or any political subdivision thereof (all such nonexcluded Taxes
being hereinafter referred to as “Covered Taxes”). If any of the Loan Parties shall be
required by law to deduct any Covered Taxes from or in respect of any sum payable hereunder or
under any Notes or other Purchase Documents to Agent for the benefit of Purchasers, or to
Purchasers, the sum payable shall be increased as may be necessary so that after making all
required deductions of Covered Taxes (including deductions of Covered Taxes applicable to
additional sums payable under this paragraph), each Purchaser receives an amount equal to the sum
it would have received had no such deductions been made. The Loan Parties shall make such
deductions and the Loan Parties shall pay the full amount so deducted to the relevant taxation
authority or other authority in accordance with applicable law. In addition, the Loan Parties
agree to pay any present or future stamp, documentary, excise, privilege, intangible or similar
levies that arise at any time or from time to time from any payment made under any and all Purchase
Documents or from the execution or delivery by the Loan Parties or from the filing or recording or
maintenance of, or otherwise with respect to the exercise by Agent or Purchasers of their
respective rights under any and all Purchase Documents (collectively, “Other Taxes”). The
Loan Parties will indemnify Agent and Purchasers for the full amount of Covered Taxes imposed on or
with respect to amounts payable hereunder and Other Taxes, and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto. Payment of this indemnification
shall be made within thirty (30) days from the date Agent or Purchasers provide the Loan Parties
with a certificate certifying and setting forth in reasonable detail the calculation thereof as to
the amount and type of such Taxes. Any such certificates submitted by Agent or Purchasers in good
faith to the Loan Parties shall, absent manifest error, be final, conclusive and binding on all
parties. The obligation of the Loan Parties under this Section 3.9 shall survive the payment of
the Notes and the termination of this Agreement. Within thirty (30) days after the Loan Parties
having received a receipt for payment of Covered Taxes and/or Other Taxes, the Loan Parties shall
furnish to Agent the original or certified copy of a receipt evidencing payment thereof.




          3.10 Maximum Lawful Rate. This Agreement, the Notes and the other Purchase Documents
are hereby limited by this Section 3.10. In no event, whether by reason of acceleration of the
maturity of the amounts due hereunder or otherwise, shall interest and fees contracted for,
charged, received, paid or agreed to be paid to Purchasers exceed the maximum amount permissible
under such applicable law. If, from any circumstance whatsoever, interest and fees would otherwise
be payable to Agent or Purchasers in excess of the maximum amount permissible under applicable law,
the interest and fees shall be reduced to the maximum amount permitted under applicable law. If
from any circumstance, Agent or Purchasers shall have received anything of value deemed interest by
applicable law in excess of the maximum lawful
amount, an amount equal to any excess of interest shall be applied to the reduction of the



31









 






principal amount of the Notes, in such manner as may be determined by Purchasers, and not to the
payment of fees or interest, or if such excess interest exceeds the unpaid balance of the principal
amount of the Notes, such excess shall be refunded to the Loan Parties.




          3.11 Break Funding Payments. In the event of the payment of any principal of any Note
(other than the Subordinated Notes) other than on the date such payment was scheduled pursuant to
Annex C attached hereto or the due date for mandatory prepayments pursuant to Section 3.7
hereof (including payments as a result of an Event of Default), the Loan Parties shall compensate
each Purchaser, upon demand, for the loss, cost and expense attributable to such event with respect
to the period from such payment date to the day immediately preceding the next payment date
scheduled pursuant to Annex C hereof.




          3.12 Capital Adequacy. If, after the date hereof, either the introduction of or any
change of the interpretation of any law or the compliance by Purchasers with any guideline or
request from any governmental authority (whether or not having the force of law) has or would have
the effect of reducing the rate of return on the capital or assets of Purchasers as a consequence
of, as determined by Agent or Purchasers in their sole discretion, the existence of any Purchaser’s
obligations under this Agreement or any other Purchase Documents, then, upon demand by Purchasers,
the Loan Parties immediately shall pay to Purchasers, from the time as specified by Purchasers,
additional amounts sufficient to compensate Purchasers in light of such circumstances. The
obligations of the Loan Parties under this Section 3.11 shall survive the payments of the Notes and
the termination of this Agreement.




          3.13 Certain Waivers. The Loan Parties unconditionally waive (i) any rights to
presentment, demand, protest or (except as expressly required hereby) notice of any kind, and (ii)
any rights of recission, setoff, counterclaim or defense to payment under the Notes or otherwise
that the Loan Parties may have or claim against any Purchaser, the Agent or any prior Purchaser or
Agent.




ARTICLE 4

CONDITIONS




          4.1 Conditions to the Senior Term Loans and Purchase of Securities. The obligation of
Purchasers to advance the Senior Term Loans and to purchase and pay for the Securities is subject
to the satisfaction, prior to or at the Closing, in the case of the issuance of the Original
Securities, and the Additional Closing, in the case of the issuance of the Additional Securities,
as the case maybe, of the following conditions:




          (a) Representations and Warranties True. The representations and warranties contained
in Article 5 hereof shall be true and correct in all material respects at and as of the Closing
Date and the Additional Closing Date as though then made, except to the extent of changes caused by
the transactions expressly contemplated herein.




          (b) Material Adverse Change. There shall have been no Material Adverse Change in the
business, financial condition, assets, Business or prospects of the Loan Parties or the capital
markets since April 30, 2003.




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          (c) Security Documents. The Loan Parties and Agent, for the benefit of Purchasers,
shall have entered into (i) a security agreement or security agreements with Agent subordinated in
lien priority only to the Liens in favor of any senior lender as contemplated therein, if any, in
form and substance as set forth in Exhibit C attached hereto (as the same may be amended,
modified or supplemented from time to time in accordance with the terms thereof, the “Security
Agreement”), (ii) a collateral patent, trademark and license assignment or assignments in form
and substance as set forth in Exhibit D attached hereto (as the same may be amended,
modified or supplemented from time to time in accordance with the terms thereof, the “IP
Collateral Assignments”), and (iii) a stock pledge and security agreement in form and substance
as set forth in Exhibit E attached hereto (as the same may be amended, modified or
supplemental from time to time in accordance with the terms thereof, the “Pledge
Agreement”). Parent and Agent, for the benefit of Purchasers, shall have entered into a French
stock pledge and security agreement in form and substance as set forth in Exhibit E-1
attached hereto (as the same may be amended, modified or supplemental from time, the “French
Pledge Agreement”). The Loan Parties shall have executed and delivered to Agent, for the
benefit of Purchasers, such financing statements and other instruments (collectively,
“Financing Statements”) as Agent shall require in order to perfect and maintain the
continued perfection of the security interest created by the Security Agreement. Agent shall have
received reports of filings with appropriate government agencies showing that there are no Liens on
the assets of the Loan Parties other than Permitted Liens.




          (d) Environmental Reports. Agent shall have received reports covering the Loan
Parties’ properties in form and substance satisfactory to Agent regarding the Loan Parties’
compliance with Environmental Laws.




          (e) Collateral Access Agreements. The Loan Parties shall have delivered to Agent a
Collateral Access Agreement for each property specified by the Agent, in form and substance
satisfactory to the Agent.




          (f) Stockholders Agreement. Parent and each of its stockholders shall have entered
into a stockholders agreement in form and substance as set forth in Exhibit I hereto (as
the same may be amended, modified or supplemented and in effect from time to time, the
“Stockholders Agreement”).




          (g) Delivery of First Amendment to Intercreditor and Subordination Agreement. Agent
shall have received a duly executed copy of the First Amendment to the Intercreditor and
Subordination Agreement.




          (h) Closing Documents. The Loan Parties will have delivered or caused to be delivered
to Agent all of the following documents in form and substance satisfactory to Agent:





     (i) Senior Term Notes evidencing the Senior Term Loans (as designated by Agent
and Purchasers pursuant to Section 2.1 and Annex A hereof) in aggregate
original principal amounts as set forth herein, duly completed and executed by the
Loan Parties;



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     (ii) one or more Subordinated Notes (as designated by Agent and Purchasers
pursuant to Section 2.2 and Annex A hereof) in aggregate original principal
amounts as set forth herein, duly completed and executed by the Loan Parties;




     (iii) one or more Revolving Notes evidencing the Revolving Loans (as designated
by Agent and Purchasers pursuant to Section 2.3 and Annex A hereof) in the
maximum amounts as set forth herein, duly completed and executed by the Loan
Parties;




     (iv) one or more Warrants (as designated by Agent and Purchasers pursuant to
Section 2.4 and Annex A hereof) evidencing the right to acquire the number
of shares of Class B Common Stock set forth in Section 2.4 and Annex A
hereof, subject to adjustment from time to time in accordance with the terms
thereof;




     (v) one or more stock certificates representing the Preferred Stock purchased
pursuant to this Agreement;




     (vi) one or more stock certificates representing the Class B Common Stock
purchased pursuant to this Agreement;




     (vii) certificates of good standing dated not more than 10 days prior to the
Closing Date and the Additional Closing Date for each of the Loan Parties issued by
their respective jurisdictions of organization and each jurisdiction where it is
qualified to operate as a foreign corporation, or its equivalent;




     (viii) a copy of the Charter Documents of each of the Loan Parties, certified
by the appropriate governmental official of the jurisdiction of its organization as
of a date not more than 10 days prior to the Closing Date and the Additional Closing
Date;




     (ix) a copy of the By-laws of each of the Loan Parties, certified as of the
Closing Date and the Additional Closing Date by the secretary, assistant secretary,
manager or general partner, as applicable, of each respective Loan Party;




     (x) a certificate of the secretary or assistant secretary, manager or general
partner of each of the Loan Parties, certifying as to the names and true signatures
of the officers or other authorized person of the respective Loan Party authorized
to sign this Agreement and the other documents to be delivered by the respective
Loan Party hereunder;




     (xi) copies of the resolutions duly adopted by each Loan Party’s board of
directors, general partners, board of managers or other governing body, authorizing
the execution, delivery and performance by the respective Loan Party of this
Agreement and each of the other agreements, instruments and documents
contemplated hereby to which the respective Loan Party is a party to, and the



34









 







consummation of all of the other Transactions, certified as of the Closing Date and
the Additional Closing Date by the secretary, assistant secretary, manager or
general partner of the respective Loan Party;




     (xii) a certificate dated as of the Closing Date and the Additional Closing
Date from an officer, general partner or manager of each of the Loan Parties stating
that the conditions specified in this Section 4.1 have been fully satisfied or
waived by Agent;




     (xiii) certificates of insurance evidencing the existence of all insurance
required to be maintained by the Loan Parties pursuant to Section 7.1(c), and Agent
shall be satisfied with the type and extent of such coverage;




     (xiv) copies of all material leases to which any of the Loan Parties is a party
to; and




     (xv) such other documents relating to the Transactions contemplated by this
Agreement as Agent or its counsel may reasonably request.



          (i) Purchaser’s Fees and Expenses.





     (i) Revolving Loan Commitment Fee. On the Closing Date, the Loan
Parties shall pay the Revolving Loan Commitment Fee to ACFS (and the Loan Parties
hereby authorize Agent to deduct from the aggregate proceeds from the sales of the
Notes by the Loan Parties, the unpaid amount of such Revolving Loan Commitment Fee);




     (ii) Senior Origination Fee. On the Closing Date, the Loan Parties
shall pay the Senior Origination Fee to ACFS (and the Loan Parties hereby authorize
Agent to deduct from the aggregate proceeds from the sales of the Notes by the Loan
Parties, the unpaid amount of such Senior Origination Fee);




     (iii) Junior Origination Fee. On the Closing Date, the Loan Parties
shall pay the Junior Origination Fee to ACFS (and the Loan Parties hereby authorize
Agent to deduct from the aggregate proceeds from the sales of the Notes by the Loan
Parties, the unpaid amount of such Junior Origination Fee);




     (iv) Structuring Fee. On the Closing Date, the Loan Parties shall pay
the Structuring Fee to ACFS (and the Loan Parties hereby authorize the Agent to
deduct from the sales of the Notes by the Loan Parties the unpaid amount of such
Structuring Fee);




     (v) Senior Term C Closing Fee. On the Additional Closing Date, the
Loan Parties shall pay the Senior Term C Closing Fee to ACFS (and the Loan Parties
hereby authorize Agent to deduct from the aggregate proceeds from the sales of the
Senior Term C Notes by the Loan Parties, the unpaid amount of such Senior Term C
Closing Fee); and



35









 






     (vi) Other Fees and Expenses. On the Closing Date and the Additional
Closing Date, the Loan Parties shall have paid the fees and expenses of Agent and
Purchasers, payable by the Loan Parties pursuant to Section 14.4 hereof (and the
Loan Parties hereby authorize Agent to deduct all such amounts from the aggregate
proceeds of the sale of the Notes by the Loan Parties).



          (j) Legal Investment. On the Closing Date and the Additional Closing Date,
Purchasers’ purchases of the Securities shall not be prohibited by any applicable law, rule or
regulation of any Governmental Authority (including, without limitation, Regulations T, U or X of
the Board of Governors of the Federal Reserve System) as a result of the promulgation or enactment
thereof or any changes therein, or change in the interpretation thereof by any Governmental
Authority, subsequent to the date of this Agreement.




          (k) Proceedings. All proceedings taken or required to be taken in connection with the
transactions contemplated hereby to be consummated at or prior to the Closing and the Additional
Closing and all documents incident thereto will be satisfactory in form and substance to Agent and
its counsel and to Purchasers and their counsel.




          (l) Background Investigations. Agent shall be satisfied with the results of
background investigations of Donald Hartman and Steven Burke.




          (m) Employment/Confidentiality and Noncompete Agreements. The Loan Parties shall have
entered into employment/confidentiality and noncompete agreements with officers and employees of
the Loan Parties designated by Agent on terms reasonably satisfactory to Agent, and such
confidentiality and noncompete agreements shall be in full force and effect as of the Closing Date
and shall not have been amended or modified. The Loan Parties shall have provided the Agent with
copies of all employment/confidentiality and noncompete agreements and all other agreements
providing compensation in any form whatsoever (including, without limitation, any benefit plans
between Loan Parties and any and all of its directors, officers or employees).




          (n) Consummation of Acquisitions.





     (i) On the Closing Date, the Acquisition shall have been consummated in form
and substance satisfactory to Purchasers, in Purchasers’ sole discretion, and
Purchasers shall have been provided copies of all agreements, instruments and
documents delivered in connection therewith.




     (ii) On the Additional Closing Date, the Auxitrol Acquisition shall have been
consummated in form and substance satisfactory to Purchasers, in Purchasers’ sole
discretion, and Purchasers shall have been provided copies of all agreements,
instruments and documents delivered in connection therewith.



          (o) Investment Banking Agreement. The Loan Parties and ACFS shall have executed an
Investment Banking Agreement in a form reasonably satisfactory to ACFS in the form attached hereto
as Exhibit G.




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          4.2 Conditions Precedent to each Revolving Loan. The obligation of Purchasers on any
date (including the Closing Date) to make a Revolving Loan is subject to the satisfaction of each
of the following conditions precedent:




          (a) Request for Borrowing and Borrowing Base Certificate. Agent shall have received a
duly executed Request for Borrowing and Borrowing Base Certificate with respect to each Revolving
Loan in accordance with Section 2.3(b) hereof.




          (b) Compliance. Both before and after giving effect to the proceeds of any Revolving
Loan, (i) no Default or Event of Default shall have occurred and be continuing, (ii) repayment of
the Notes shall not been accelerated in accordance with Section 8.2 hereof, (iii) the Loan Parties
shall have complied and be in compliance with all the terms, covenants and conditions of each
Purchase Document, and (iv) the representations and warranties of the Loan Parties contained in
Section 5 hereof shall be true and correct on and as of the Closing Date and shall be true and
correct in all material respects on and as of any such date after the Closing Date; with the same
effect as though made on and as of the date of each Revolving Loan (except to the extent that any
of the Schedules to this Agreement have been amended prior to any funding date to appropriately
update any immaterial matters disclosed therein); and the Agent, if it so requests, shall have
received a certificate, dated as of the date of each Revolving Loan, signed by an Executive Officer
of the Loan Parties to the foregoing effect.




          (c) No Material Adverse Change. No Material Adverse Change shall have occurred since
the date of the last audited financial statements of the Loan Parties delivered to the Agent.




          (d) Additional Documents. The Agent shall have received prior to the date of each
Revolving Loan all additional documents and certificates that the Agent shall have reasonably
requested.




          4.3 Waiver. Any condition specified in this Article 4 may be waived by Agent on
behalf of Purchasers; provided that no such waiver will be effective against Agent unless it is set
forth in a writing executed by Agent.




ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF THE LOAN PARTIES




          5.1 Representations and Warranties of Loan Parties. As a material inducement to Agent
and Purchasers to enter into this Agreement, advance the Senior Term Loans and purchase the
Securities, the Loan Parties, jointly and severally, hereby represent and warrant to Agent and
Purchasers as follows:




          (a) Organization and Power. Each of the Loan Parties is a corporation duly organized,
validly existing and in good standing under the laws of its state of formation. Each of the Loan
Parties has all requisite corporate or other organizational power and authority and all material
licenses, permits, approvals and authorizations necessary to own and operate its properties, to
carry on its businesses as now conducted and presently proposed to be conducted and to carry out
the Transactions, and is qualified to do business in the jurisdictions listed on the
“Organization Schedule” attached hereto as Schedule 5.1(a), which includes
every jurisdiction



37









 






where the failure to so qualify might reasonably be expected to have a Material
Adverse Effect. Each of the Loan Parties has its principal place of business as set forth on the
Organization Schedule. The copies of the Charter Documents and By-Laws of the Loan Parties that
have been furnished to Agent reflect all amendments made thereto at any time prior to the date of
this Agreement and are correct and complete.




          (b) Principal Business. The Loan Parties are primarily engaged in the development,
assembly, manufacture and sale of imaging and sensing devices for nuclear power and industrial
markets (the “Business”).




          (c) Financial Statements and Financial Projections.





     (i) Financial Statements; Historical Statements. The Loan Parties have
delivered to Agent copies of Borrower’s audited consolidated year-end financial
statements for and as of the fiscal years ended April 30, 2001, April 30, 2002 and
April 30, 2003 and unaudited balance sheet, income statements and statement of cash
flows for the eleven (11) month period ending March 31, 2004 (together, the
“Financial Statements”). The Financial Statements were compiled from the
books and records maintained by the Borrower’s management, are correct and complete
and fairly represent the consolidated financial condition of the Borrower as of
their dates and the results of operations for the fiscal periods then ended and have
been prepared in accordance with GAAP consistently applied.




     (ii) Financial Projections. The Loan Parties have delivered to Agent
financial projections (consisting of a projected income statement) of the Loan
Parties for the period May 1, 2004 through May 1, 2008 derived from various
assumptions of the Loan Parties’ management (the “Financial Projections”).
The Financial Projections represent a reasonable range of possible results in light
of the history of the Business and the Loan Parties, present and foreseeable
conditions and the intentions of the Loan Parties’ management. The Financial
Projections accurately reflect the liabilities of the Loan Parties upon consummation
of the transactions contemplated hereby as of the Closing Date and the Additional
Closing Date.




     (iii) Accuracy of Financial Statements. The Loan Parties do not have
any liabilities, contingent or otherwise, or forward or long-term commitments that
are not disclosed in the Financial Statements or in the notes thereto, and except as
disclosed therein there are no unrealized or anticipated losses from any commitments
of the Loan Parties that may cause a Material Adverse Effect.



          (d) Capitalization and Related Matters.





     (i) As of the Additional Closing Date and immediately thereafter, the
authorized capital stock of Parent will consist of (A) 125,000 shares of Class A
Common Stock, of which 500 shares of Class A Common Stock are issued and
outstanding; (B) 125,000 shares of Class B Common Stock, of which 10,000



38









 







shares of Class B Common Stock are issued and outstanding and of which 83,458 shares of
Class B Common Stock have been reserved for issuance upon exercise of the Warrants
outstanding on the date hereof; and (C) 100,000 shares of Preferred Stock, of which
22,000 shares of Preferred Stock of Parent are issued and outstanding.




     (ii) As of the Additional Closing Date, the authorized capital stock of each of
the other Loan Parties and the number and ownership of all outstanding capital stock
of each of the other Loan Parties is set forth on the Organization Schedule. Except
as set forth in Schedule 5.1(d)(ii), as of the Closing Date and the
Additional Closing Date, none of the Loan Parties will have outstanding any stock or
securities convertible into or exchangeable for any shares of its capital stock
other than the Warrants and Options and none will have outstanding any rights or
options to subscribe for or to purchase its capital stock or any stock or securities
convertible into or exchangeable for its capital stock, other than the Warrants and
Options. As of the Closing Date and the Additional Closing Date, none of the Loan
Parties will be subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock, except as set forth in
Schedule 5.1(d)(ii), herein and in the Stockholders Agreement. As of the
Closing and the Additional Closing, all of the outstanding shares of each Loan
Party’s capital stock will be validly issued, fully paid and nonassessable. There
are no statutory or contractual stockholders’ preemptive rights with respect to the
issuance of the Warrants hereunder. None of the Loan Parties have violated any
applicable federal or state securities laws in connection with the offer, sale or
issuance of any of its capital stock, and the offer, sale and issuance of the
Securities hereunder do not require registration under the Securities Act or any
applicable state securities laws. There are no agreements among Parent’s
stockholders with respect to the voting or transfer of Parent’s capital stock other
than as contemplated herein.




     (iii) The shares of the Underlying Common Stock issuable upon exercise of the
Warrants have been duly reserved for issuance and, when issued upon exercise of the
Warrants and payment of the consideration therefor, will be duly authorized, validly
issued, fully paid and non-assessable, will not have been issued in violation of any
preemptive or similar rights created by applicable Law or Parent’s Charter
Documents, By-laws or by any agreement to which Parent is a party or by which it is
bound, and will have been issued in compliance with applicable federal and state
securities or “blue sky” Laws.



          (e) Subsidiaries. The Loan Parties do not own, or hold any rights to acquire, any
shares of stock or any other security or interest in any other Person, and the Loan Parties have no
Subsidiaries, except in each case as set forth on the Organizational Schedule.




          (f) Authorization; No Breach. The execution, delivery and performance of this
Agreement, the other Purchase Documents and all other agreements contemplated hereby and thereby to
which each of the Loan Parties is a party (collectively, the “Transaction
Documents”), and the consummation of the Transactions have been duly authorized by each of




39









 







the Loan Parties. The execution and delivery by each of the Loan Parties of the
Transaction Documents and the consummation of the Transactions do not and will not (i) conflict
with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default
under, (iii) except as created pursuant to the Security Documents, result in the creation of any
Lien upon any of the Loan Parties’ capital stock or assets pursuant to, (iv) give any third party
the right to accelerate any obligation under, (v) result in a violation of, or (vi) require any
authorization, consent, approval, exemption or other action by or notice to any Governmental
Authority pursuant to, the Charter Documents of any of the Loan Parties, or any law, statute, rule
or regulation to which any of the Loan Parties is subject, or any agreement, instrument, order,
judgment or decree to which any of the Loan Parties is a party or to which they or their assets are
subject.




          (g) Governmental Approvals. Except as specifically provided by the Transaction
Documents, no registration with or consent or approval of, or other action by, any Governmental
Authority is or will be required in connection with the consummation of the Transactions by the
Loan Parties.




          (h) Enforceability. This Agreement constitutes, and each of the other Transaction
Documents when duly executed and delivered by each of the Loan Parties who are parties thereto will
constitute, legal, valid and binding obligations of each of the Loan Parties enforceable in
accordance with their respective terms.




          (i) No Material Adverse Change. Since April 30, 2003, there has been no Material
Adverse Change.




          (j) Litigation. Except as described in the “Litigation Schedule” attached hereto as
Schedule 5.1(j), there are no actions, suits or proceedings at law or in equity or by or
before any arbitrator or any Governmental Authority now pending or, to the best knowledge of the
Loan Parties’ management after due inquiry, threatened against or filed by or affecting any of the
Loan Parties or any of their directors or officers or the businesses, assets or rights of any of
the Loan Parties. The Loan Parties and their directors or officers shall promptly provide Agent
with a copy of all pleadings of all lawsuits filed against others and, in the case of other
actions, a letter stating the nature of such suits and a copy of all pleadings.




          (k) Compliance with Laws. The Loan Parties are not in violation in any material
respect of any applicable Law. The Loan Parties are not in default with respect to any judgment,
order, writ, injunction, decree, rule or regulation of any Governmental Authority. The Loan
Parties are not in, and the consummation of the Transactions will not cause any, default concerning
any judgment, order, writ, injunction or decree of any Governmental Authority, and there is no
investigation, enforcement action or regulatory action pending or threatened against or affecting
any of the Loan Parties by any Governmental Authority, except as set forth on the Litigation
Schedule. Except as set forth in the Litigation Schedule, there is no remedial or other corrective
action that any of the Loan Parties is required to take to remain in compliance with any judgment,
order, writ, injunction or decree of any Governmental Authority or to maintain any material
permits, approvals or licenses granted by any Governmental Authority in full force and effect.
During the past ten (10) years, none of the officers, directors or management of any



40









 






of the Loan Parties have been arrested or convicted of any material crime nor have any of them
been bankrupt or an officer or director of a bankrupt company.




          (l) Environmental Protection. Except as specified in “Environmental Schedule”
attached hereto as Schedule 5.1(l) and after giving effect to the Transactions: (i) the
business of the Loan Parties, the methods and means employed by the Loan Parties in the operation
thereof (including all operations and conditions at or in the properties of the Loan Parties), and
the assets owned, leased, managed, used, controlled, held or operated by the Loan Parties, comply
in all material respects with all applicable Environmental Laws; (ii) with respect to the
Properties and Facilities, and except as disclosed in the Environmental Schedule, the Loan Parties
have obtained, possess, and are in full compliance with all permits, licenses, reviews,
certifications, approvals, registrations, consents, and any other authorizations required under any
Environmental Laws; (iii) the Loan Parties have not received (x) any claim or notice of violation,
lien, complaint, suit, order or other claim or notice to the effect that the Loan Parties are or
may be liable to any Person as a result of (A) the environmental condition of any of their
Properties or any other property, or (B) the release or threatened release of any Pollutant, or (y)
any letter or request for information under Section 104 of the CERCLA, or comparable state laws,
and to the best of the any of Loan Parties’ knowledge, none of the operations of the Loan Parties
is the subject of any investigation by a Governmental Authority evaluating whether any remedial
action is needed to respond to a release or threatened release of any Pollutant at the Properties
and Facilities or at any other location, including any location to which the Loan Parties have
transported, or arranged for the transportation of, any Pollutants with respect to the Properties
and Facilities; (iv) except as disclosed in the Environmental Schedule, neither the Loan Parties
nor any prior owner or operator has incurred in the past, or is now subject to, any Environmental
Liabilities; (v) except as disclosed in the Environmental Schedule, there are no Liens, covenants,
deed restrictions, notice or registration requirements, or other limitations applicable to the
Properties and Facilities, based upon any Environmental Laws or other legal obligations; (vi) there
are no USTs located in, at, on, or under the Properties and Facilities other than the USTs
identified in the Environmental Schedule as USTs; and each of those USTs is in full compliance with
all Environmental Laws and other legal obligations; and (vii) except as disclosed in the
Environmental Schedule, there are no PCBs, lead paint, asbestos (of any type or form), or
materials, articles or products containing PCBs, lead paint or asbestos, located in, at, on, under,
a part of, or otherwise related to the Properties and Facilities (including, without limitation,
any building, structure, or other improvement that is a part of the Properties and Facilities), and
all of the PCBs, lead paint, asbestos, and materials, articles and products containing PCBs, lead
paint or asbestos identified in the Environmental Schedule are in full compliance with all
Environmental Laws and other legal obligations.




          (m) Legal Investments; Use of Proceeds. The Loan Parties will use the proceeds from
the sale of the Notes to pay a portion of the purchase consideration for the Acquisition. The Loan
Parties are not engaged in the business of extending credit for the purpose of purchasing or
carrying any “margin stock” or “margin security” (within the meaning of Regulations T, U or X
issued by the Board of Governors of the Federal Reserve System), and no proceeds of the sale of the
Notes will be used to purchase or carry any margin stock or margin security or to extend credit to
others for the purpose of purchasing or carrying any margin stock or margin security.




41









 








          (n) Taxes. Each of the Loan Parties has filed or caused to be filed all Federal,
state and local tax returns that are required to be filed by it, and has paid or caused to be paid
all taxes shown to be due and payable on such returns or on any assessments received by it,
including payroll taxes.




          (o) Labor and Employment. The Loan Parties are and each of their Plans are in
compliance in all material respects with those provisions of ERISA, the Code, the Age
Discrimination in Employment Act, and the regulations and published interpretations thereunder that
are applicable to the Loan Parties or any such Plan. As of the Closing Date and the Additional
Closing Date, no Reportable Event has occurred with respect to any Plan as to which any of the Loan
Parties are or were required to file a report with the PBGC. No Plan has any material amount of
unfunded benefit liabilities (within the meaning of Section 4001(a)(18) of ERISA) or any
accumulated funding deficiency (within the meaning of Section 302(a)(2) of ERISA), whether or not
waived, and neither the Loan Parties nor any member of the Controlled Group has incurred or expects
to incur any material withdrawal liability under Subtitle E of Title IV of ERISA to a Multiemployer
Plan. The Loan Parties are in compliance in all material respects with all labor and employment
laws, rules, regulations and requirements of all applicable domestic and foreign jurisdictions.
There are no pending or threatened labor disputes, work stoppages or strikes.




          (p) Investment Company Act; Public Utility Holding Company Act. None of the Loan
Parties is (i) an “investment company” or “controlled” by an investment company within the meaning
of the Investment Company Act of 1940, as amended, or (ii) a “holding company” or a “subsidiary
company” of a “holding company” or an “affiliate” of a “holding company” or of a “subsidiary
company” of a “holding company,” within the meaning of the Public Utility Holding Company Act of
1935, as amended.




          (q) Properties; Security Interests. The Loan Parties have good and marketable title
to, or valid leasehold interests in, all of the material assets and properties used or useful by
the Loan Parties in the Business (collectively, the “Properties and Facilities”), subject
to no Liens except for Permitted Liens. All of the Properties and Facilities are in good repair,
working order and condition and all such assets and properties are owned by the Loan Parties free
and clear of all Liens except for Permitted Liens. The Properties and Facilities constitute all of
the material assets, properties and rights of any type used in or necessary for the conduct of the
Business. The Security Agreement creates and grants to Agent a valid and perfected security
interest in all the collateral thereunder, subject only to Permitted Liens. The Loan Parties do
not own any real estate. All real estate leased by any of the Loan Parties is listed on the
“Properties Schedule,” attached hereto as Schedule 5.1(q).




          (r) Intellectual Property; Licenses. Each of the Loan Parties possesses all
Proprietary Rights necessary to conduct the Business as heretofore conducted or as proposed to be
conducted by it. All Proprietary Rights registered in the name of any of the Loan Parties and
applications therefor filed by any of the Loan Parties are listed on the “Intellectual Property
Schedule,” attached hereto as Schedule 5.1(r). No event has occurred that permits, or
after notice or lapse of time or both would permit, the revocation or termination of any of the
foregoing, which taken in isolation or when considered with all other such revocations or
terminations could have a Material Adverse Effect. None of the Property Rights owned by or



42









 






used under license by any Loan Party infringes, misappropriates or conflicts with any
Proprietary Rights or other rights of any other Person; no products or services sold by any Loan
Party in connection with the Business is intriguing on, misappropriating or making any unlawful or
unauthorized use of any Proprietary Rights or other rights of another Person; and no other Person
is infringing upon misappropriate making or making any unlawful or unauthorized use of any
Proprietary Rights of any Loan party. None of the Loan Parties has notice or knowledge of any
facts or any past, present or threatened occurrence that could preclude or impair the Loan Parties’
ability to retain or obtain any authorization necessary for the operation of the Business.




          (s) Solvency. After giving effect to the Transactions, (i) the fair value of the
assets of the Loan Parties, at a fair valuation, will exceed their debts and liabilities,
subordinated, contingent or otherwise, (ii) the present fair saleable value of the property of the
Loan Parties will be greater than the amount that will be required to pay the probable liability of
their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other
liabilities become absolute and matured, (iii) the Loan Parties will be able to pay their debts and
liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute
and matured, and (iv) the Loan Parties will not have unreasonably small capital with which to
conduct the business in which they are engaged as such business is now conducted and is proposed to
be conducted following the Closing Date.




          (t) Complete Disclosure. All factual information furnished by or on behalf of the
Loan Parties to Agent for purposes of or in connection with this Agreement or the Transactions is,
and all other such factual information hereafter furnished by or on behalf of the Loan Parties will
be, true and accurate in all material respects on the date as of which such information is
furnished and not incomplete by omitting to state any fact necessary to make such information not
misleading at such time in light of the circumstances under which such information was provided.




          (u) Side Agreements. Neither the Loan Parties nor any Affiliate of the Loan Parties
nor any director, officer or employee of the Loan Parties or any of their Affiliates, respectively,
has entered into, as of the Closing Date and the Additional Closing Date, any side agreement,
either oral or written, with any individual or business, pursuant to which the director, officer,
employee, Loan Parties or Affiliate agreed to do anything beyond the requirements of the formal,
written contracts executed by the Loan Parties and disclosed to Purchasers and Agent herein.




          (v) Broker’s or Finder’s Commissions. No broker’s or finder’s or placement fee or
commission will be payable to any broker or agent engaged by the Loan Parties or any of its
officers, directors or agents with respect to the issuance and sale of the Notes, the Warrants or
the transactions contemplated by this Agreement, including without limitation the Transactions,
except for fees payable to ACFS, Purchasers and Agent. The Loan Parties agree to indemnify Agent
and Purchasers and to hold them harmless from and against any claim, demand or liability for
broker’s or finder’s or placement fees or similar commissions, whether or not payable by the Loan
Parties, alleged to have been incurred in connection with such transactions, other than any
broker’s or finder’s fees payable to Persons engaged by Agent or Purchasers without the knowledge
of the Loan Parties.




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          (w) Absence of Undisclosed Liabilities. Except as set forth on Schedule
5.1(w), the Borrower has no liabilities or obligations, either accrued, absolute, contingent or
otherwise, except:





     (i) those liabilities or obligations set forth on the Financial Statements and
not heretofore paid or discharged,




     (ii) liabilities arising in the ordinary course of business under any
agreement, contract, commitment, lease or plan specifically disclosed on the
schedules or not required to be disclosed because of the term or amount involved or
otherwise, and




     (iii) those liabilities or obligations (including those relating to foreign
exchange purchasing contracts) incurred, consistently with past business practice,
in or as a result of the normal and ordinary course of business.



          (x) Accuracy of Information. None of the Purchase Documents nor any other information
furnished to any of Purchasers by any of the Loan Parties and any of their Affiliates in connection
with the Transactions contains any untrue statement of material fact or omits to state any material
fact necessary to make the statements contained therein not misleading.




          (y) OFAC; USA PATRIOT Act. No Loan Party nor any Affiliate of any Loan Party is (i) a
country, territory, organization, person or entity named on an Office of Foreign Asset Control
(OFAC) list, (ii) a Person that resides or has a place of business in a country or territory named
on such lists or which is designated as a “Non-Cooperative Jurisdiction” by the Financial Action
Task Force on Money Laundering, or whose subscription funds are transferred from or through such a
jurisdiction; or (iii) a person or entity that resides in or is organized under the laws of a
jurisdiction designated by the United States Secretary of the Treasury under Sections 311 or 312 of
the USA PATRIOT Act as warranting special measures due to money laundering concerns.




          5.2 Absolute Reliance on the Representations and Warranties. All representations and
warranties contained in this Agreement and any financial statements, instruments, certificates,
schedules or other documents delivered in connection herewith, shall survive the execution and
delivery of this Agreement, regardless of any investigation made by Agent or Purchasers or on
Agent’s or Purchasers’ behalf.




ARTICLE 6

TRANSFER OF SECURITIES




          6.1 Restricted Securities. Purchasers acknowledge that the Securities have not been
registered under the Securities Act and may be resold only if registered pursuant to the provisions
of the Securities Act or if an exemption from registration is available, and that, except as
provided in Article 12, the Loan Parties are not required to register any of the Securities under
the Securities Act.




          6.2 Legends; Purchaser’s Representations. Each Purchaser hereby represents and
warrants to the Loan Parties that it is an “accredited investor” within the meaning of Rule



44









 






501(a)
under the Securities Act and is acquiring the Securities for investment for its own account, with
no present intention of dividing its participation with others (except for a potential transfer or
transfers of the Securities to an affiliate or affiliates of Purchasers) or reselling or otherwise
distributing the same in violation of the Securities Act or any applicable state securities laws.
The Loan Parties may place an appropriate legend on the Securities owned by Purchasers concerning
the restrictions set forth in this Article 6. Upon the assignment or transfer by Purchasers or any
of its successors or assignees of all or any part of the Securities, the term “Purchaser” as used
herein shall thereafter mean, to the extent thereof, the then holder or holders of such Securities,
or portion thereof.




          6.3 Transfer of Notes. Subject to Section 6.2 hereof, a holder of a Note may transfer
such Note to a new holder, or may exchange such Note for Notes of different denominations (but in
no event of denominations of less than $100,000 in original principal amount), by surrendering such
Note to the Loan Parties duly endorsed for transfer or accompanied by a duly executed instrument of
transfer naming the new holder (or the current holder if submitted for exchange only), together
with written instructions for the issuance of one or more new Notes specifying the respective
principal amounts of each new Note and the name of each new holder and each address therefor. The
Loan Parties shall simultaneously deliver to such holder or its designee such new Notes, shall mark
the surrendered Notes as canceled and shall provide notice of such transfer to Agent. In lieu of
the foregoing procedures, a holder may assign a Note (in whole but not in part) to a new holder by
sending written notice to the Loan Parties and Agent of such assignment specifying the new holder’s
name and address; in such case, the Loan Parties shall promptly acknowledge such assignment in
writing to both the old and new holder.




          6.4 Replacement of Lost Securities. Upon receipt of evidence reasonably satisfactory
to the Loan Parties of the mutilation, destruction, loss or theft of any Securities and the
ownership thereof, the Loan Parties shall, upon the written request of the holder of such
Securities, execute and deliver in replacement thereof new Securities in the same form, in the same
original principal amount and dated the same date as the Securities so mutilated, destroyed, lost
or stolen; and such Securities so mutilated, destroyed, lost or stolen shall then be deemed no
longer outstanding hereunder. If the Securities being replaced have been mutilated, they shall be
surrendered to the Loan Parties; and if such replaced Securities have been destroyed, lost or
stolen, such holder shall furnish the Loan Parties with an indemnity in writing to save it harmless
in respect of such replaced Security.




          6.5 No Other Representations Affected. Nothing contained in this Article 6 shall
limit the full force or effect of any representation, agreement or warranty made herein or in
connection herewith to Purchaser.




ARTICLE 7

COVENANTS




          7.1 Affirmative Covenants. The Loan Parties, jointly and severally, covenant that, so
long as all or any of the principal amount of the Notes or any interest thereon
shall remain outstanding, and, thereafter, so long as any Purchaser owns any Warrants or
Underlying Common Stock, the Loan Parties shall:




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          (a) Existence. Do or cause to be done all things necessary to preserve, renew and
keep in full force and effect its legal existence.




          (b) Businesses and Properties; Compliance with Laws. At all times (i) do or cause to
be done all things necessary to preserve, renew and keep in full force and effect the rights,
licenses, registrations, permits, certifications, approvals, consents, franchises, patents,
copyrights, trademarks and trade names, and any other trade names that may be material to the
conduct of their businesses; (ii) comply in all material respects with all laws and regulations
applicable to the operation of such business, including but not limited to, all Environmental Laws,
whether now in effect or hereafter enacted and with all other applicable laws and regulations,
(iii) take all action that may be required to obtain, preserve, renew and extend all rights,
patents, copyrights, trademarks, tradenames, franchises, registrations, certifications, approvals,
consents, licenses, permits and any other authorizations that may be material to the operation of
such business, (iv) maintain, preserve and protect all property material to the conduct of such
business, and (v) except for obsolete or worn out equipment, keep their property in good repair,
working order and condition and from time to time make, or cause to be made, all needful and proper
repairs, renewals, additions, improvements and replacements thereto necessary in order that the
business carried on in connection therewith may be properly conducted at all times.




          (c) Insurance. (i) Within forty-five days after the Closing Date, the Loan Parties
shall deliver to Agent evidence of a directors and officers insurance policy issued by a carrier
reasonably acceptable to Agent insuring the directors and officers of the Parent and its
Subsidiaries; (ii) maintain insurance required by the Purchase Documents and any and all contracts
entered into by the Loan Parties, including but not limited to: (a) coverage on their insurable
properties (including all inventory, equipment and real property) against the perils of fire, theft
and burglary; (b) public liability; (c) workers’ compensation; (d) business interruption; (e)
product liability; and (f) such other risks as are customary with companies similarly situated and
in the same or similar business as that of the Loan Parties under policies issued by financially
sound and reputable insurers in such amounts as are customary with companies similarly situated and
in the same or similar business. Each of the Loan Parties shall pay all insurance premiums payable
by it and shall deliver the policy or policies of such insurance (or certificates of insurance with
copies of such policies) to Purchasers. All insurance policies of the Loan Parties shall contain
endorsements, in form and substance reasonably satisfactory to Agent, providing that the insurance
shall not be cancelable except upon thirty (30) days’ prior written notice to Agent. Agent, on
behalf of Purchasers, shall be shown as a loss payee and an additional named insured party under
all such insurance policies.




          (d) Obligations and Taxes. Pay and discharge promptly when due all taxes, assessments
and governmental charges or levies imposed upon them or upon their income or profits or in respect
of their properties before the same shall become delinquent or in default, as well as all lawful
claims for labor, materials and supplies or otherwise, which, if unpaid, might give rise to Liens
or charges upon such properties or any part thereof; provided, however, that the Loan Parties shall
not be required to pay and discharge or to cause to be paid and discharged
any such tax, assessment, charge, levy or claim so long as the validity or amount thereof
shall be contested in good faith by appropriate proceedings and the Loan Parties shall have set
aside on their books adequate reserves with respect thereto.




46









 








          (e) Financial Statements; Reports. Furnish to Agent:





     (i) Annual Statements. Within ninety (90) days after the end of each
fiscal year, a balance sheet and statements of operations, stockholders’ equity and
cash flows of the Loan Parties showing the financial condition of the Loan Parties
as of the close of such year and the results of operations during such year, all of
the foregoing financial statements to be audited by a firm of independent certified
public accountants of recognized national standing acceptable to Agent and
accompanied by an opinion of such accountants without material exceptions or
qualifications. Additionally, such financial statements shall be accompanied by a
certificate of such accountants (which shall not contain any qualification exception
or score limitation not acceptable to Agent) stating that in the course of its
regular audit of the Business of the Loan Parties, which audit was conducted in
accordance with GAAP, no Default or Event of Default relating to financial and
accounting matters has come to their attention, or if any Default or Event of
Default exists, a statement as to the nature thereof.




     (ii) Monthly Statements. Within thirty (30) calendar days after the
end of each calendar month, financial statements (including a balance sheet and cash
flow and income statements) showing the financial condition and results of
operations of the Loan Parties as of the end of each such month and for the then
elapsed portion of the current fiscal year, together with comparisons to the
corresponding periods in the preceding year and the budget for such periods,
accompanied by a certificate of an officer that such financial statements have been
prepared in accordance with GAAP, consistently applied, and setting forth in
comparative form the respective financial statements for the corresponding date and
period in the previous fiscal year.




     (iii) Format; Management Report; Certificate of Compliance. Each
balance sheet, operations statement and cash flow statement furnished to Agent or
Purchasers pursuant to subsections (i) and (ii) of this 7.1(e) will be furnished by
an electronic means in Excel spreadsheet format containing such line items and other
formatting requirements as may be specified by Agent. Each financial statement
furnished to Agent pursuant to subsections (i) and (ii) of this Section 7.1(e) shall
be accompanied by (A) a written narrative report by the management of the Loan
Parties explaining material developments and trends in the Business and such
financial statements and (B) a written certificate signed by the Loan Parties’ chief
financial officer to the effect that no Default or Event of Default has occurred
during the period covered by such statements or, if any such Default or Event of
Default has occurred during such period, setting forth a description of such Default
or Event of Default and specifying the action, if any, taken by the Loan Parties to
remedy the same, and a compliance certificate in the form of
Exhibit F showing the Loan Parties’ compliance with the covenants set
forth in Section 7.3.




     (iv) Accountant Reports. Promptly upon the receipt thereof, copies of
all reports, if any, submitted to the Loan Parties by independent certified public



47









 







accountants in connection with each annual, interim or special audit or review of
the financial statements of the Loan Parties made by such accountants, including but
not limited to, any comment letter submitted by such accountants to management in
connection with any annual review.




     (v) Projections. As soon as available, but in no event later than
April 15 of each year, a projection of the Loan Parties’ balance sheet, and income,
retained earnings and cash flow statements, respectively, for the following four (4)
fiscal years (provided that for the first fiscal year the foregoing information
shall be provided on a monthly basis) and comparable actual and budgeted figures for
the current year; and within ten (10) days after any material update or amendment of
any such plan or forecast, a copy of such update or amendment, including a
description of and reasons for such update or amendment. Each such projection,
update or amendment shall be accompanied by a written certificate signed by the Loan
Parties’ chief financial officer to the effect that it has been prepared on the
basis of the Loan Parties’ historical financial statements and records, together
with the assumptions set forth in such projection and that it reflects expectations,
after reasonable analysis, of the Loan Parties’ management as to the matters set
forth therein.




     (vi) Within ten (10) days after the end of each calendar month, a Borrowing
Base Certificate demonstrating that, as of the end of such month, the aggregate
amount of outstanding Revolving Loans does not exceed the lesser of Section
2.3(a)(x) and (y).




     (vii) Additional Information. Promptly, from time to time, such other
information regarding the compliance by the Loan Parties with the terms of this
Agreement and the other Purchase Documents or the affairs, operations or condition
(financial or otherwise) of the Loan Parties as Agent or Required Purchasers may
reasonably request and that is capable of being obtained, produced or generated by
the Loan Parties or of which the Loan Parties have knowledge.



          (f) Litigation and Other Notices. Give Agent prompt written notice of the following:





     (i) Orders; Injunctions. The issuance by any court or governmental
agency or authority of any injunction, order, decision or other restraint
prohibiting, or having the effect of prohibiting, the making of any loan or the
initiation of any litigation or similar proceeding seeking any such injunction,
order or other restraint.




     (ii) Litigation. The notice, filing or commencement of any action,
suit or proceeding against any of the Loan Parties whether at law or in equity or by
or before any court or any Federal, state, municipal or other governmental agency or
authority and that, if adversely determined against any of the Loan Parties, could
resulted in uninsured liability in excess of $100,000 in the aggregate.



48









 






     (iii) Environmental Matters. (A) Any release or threatened release of
any Pollutant required to be reported to any Federal, state or local governmental or
regulatory agency under any applicable Environmental Laws, (B) any Removal, Remedial
or Response action taken by any of the Loan Parties or any other person in response
to any Pollutant in, at, on or under, a part of or about any of the Loan Parties’
properties or any other property, (C) any violation by any of the Loan Parties of
any Environmental Law, in each case, that could result in a Material Adverse Effect,
or (D) any notice, claim or other information that any of the Loan Parties might be
subject to an Environmental Liability.




     (iv) Default. Any Default or Event of Default, specifying the nature
and extent thereof and the action (if any) that is proposed to be taken with respect
thereto.




     (v) Material Adverse Effect. Any development in the business or
affairs of any of the Loan Parties that could have a Material Adverse Effect.




     (vi) Board Meetings. Written notice of each regular meeting of each
Loan Party’s Board of Directors at least thirty (30) days in advance of such meeting
and prior written notice of each special meeting of the Loan Party’s Board of
Directors at least seven (7) days in advance of such meeting, but in any case such
notice shall be delivered no later than the date on which the members of the Board
of Directors are notified of such meeting. In addition, the Loan Parties will send
Agent copies of all reports and materials provided to members of the Board of
Directors at meetings or otherwise.



          (g) ERISA. Comply in all material respects with the applicable provisions of ERISA
and the provisions of the Code relating thereto and furnish to Agent, and if requested by them in
writing, furnish to Purchasers, (i) as soon as possible, and in any event within thirty (30) days
after the Loan Parties know or have reason to know thereof, notice of (A) the establishment by the
Loan Parties of any Plan, (B) the commencement by the Loan Parties of contributions to a
Multiemployer Plan, (C) any failure by the Loan Parties or any of their ERISA Affiliates to make
contributions required by Section 302 of ERISA (whether or not such requirement is waived pursuant
to Section 303 of ERISA), or (D) the occurrence of any Reportable Event with respect to any Plan or
Multiemployer Plan for which the reporting requirement is not waived, together with a statement of
an officer setting forth details as to such Reportable Event and the action that the Loan Parties
propose to take with respect thereto, together with a copy of the notice of such Reportable Event
given to the PBGC if any such notice was provided by the Loan Parties, and (ii) promptly after
receipt thereof, a copy of any notice the Loan Parties may receive from the PBGC relating to the
intention of the PBGC to terminate any Plan or Multiemployer Plan, or to
appoint a trustee to administer any Plan or Multiemployer Plan, and (iii) promptly after
receipt thereof, a copy of any notice of withdrawal liability from any Multiemployer Plan.




          (h) Maintaining Records; Access to Premises and Inspections. Maintain financial
records in accordance with generally accepted practices and, upon reasonable notice, at all
reasonable times and as often as Agent or any Purchasers may reasonably request (and at any time
after the occurrence and during the continuation of a Default or Event of Default), permit



49









 






any
authorized representative designated by Agent to visit and inspect the properties and financial
records of the Loan Parties and to make extracts from such financial records, all at the Loan
Parties’ reasonable expense, and permit any authorized representative designated by Agent or any
Purchasers to discuss the affairs, finances and condition of the Loan Parties with the Loan
Parties’ chief financial officers and such other officers as the Loan Parties shall deem
appropriate, and the Loan Parties’ independent public accountants.




          (i) Board of Directors.





     (i) Parent’s Board of Directors shall consist of three (3) directors and shall
meet at least once per calendar quarter. Purchasers shall have the right to
designate one (1) director to Parent’s Board of Directors. Upon (A) the occurrence,
and during the continuance, of an Event of Default pursuant to Section 8.1
or (B) upon the occurrence of any default or event of default under any other
instrument of Indebtedness of any Loan Party, Purchasers shall have the right to
elect a majority of the directors of Parent’s Board of Directors. Parent covenants
to maintain such number of vacancies on the Board of Directors so that Purchasers
may all time avail themselves of the rights under this Section 7.1(i)(i).
The members of Parent’s Board of Directors shall receive reimbursement for
reasonable out-of-pocket expenses from Parent incurred in connection with attendance
at Boards of Directors, committee and stockholder meetings.




     (ii) In the event Purchasers shall waive their right to designate directors
pursuant to this Section 7.1(i), Agent may designate an observer, without
voting rights, who will be entitled to attend all meetings of Parent’s Board of
Directors (including committees) and stockholders. Any observer designated by
Purchasers shall be entitled to notice of all meetings of Parent’s Board of
Directors (including committee meetings) and stockholders and to all information
provided to Directors and stockholders. Such observer shall receive the same
compensation as other non-employee members of Parent’s Board of Directors and, in
any case, receive reimbursement for reasonable out-of-pocket expenses from Parent
incurred in connection with attendance at Board of Directors, committee and
stockholder meetings.




     (iii) The Board of Directors shall maintain an audit committee, which shall be
comprised of directors who are not otherwise employed by Parent. Purchasers shall
have the right to designate one (1) member of the audit committee so long as any
Note shall remain outstanding.




     (iv) The Board of Directors shall maintain a compensation committee, which
shall be comprised of directors who are not otherwise employed by Parent.
Purchasers shall have the right to designate one (1) member of the compensation
committee so long as any Note shall remain outstanding, or so long as any Purchaser
shall hold any Warrant or Common Stock or Preferred Stock of Parent.




     (v) All rights of Purchasers under this Section 7.1(i) shall be
exercised by Required Purchasers.



50









 






     (vi) Parent hereby agrees that, notwithstanding the fiduciary duties a director
may have as a director of Parent, a director or any observer described in this
Section 7.1(i) may share with Agent or any Purchaser and such Purchaser’s legal and
financial advisors any confidential information related to the business and
operations of the Loan Parties disclosed to him during the exercise of his duties as
a director of Parent or his participation as an observer to the Board of Directors
of Parent, as the case may be, unless the Board of Directors specifically directs
that such confidential information not be so disclosed.



          (j) Future Financings. The Loan Parties shall give to Agent and Purchasers an
opportunity to participate in any future financings of the Loan Parties.




          (k) Management Fee. Parent shall pay ACAS the management fee in such amount and at
such times as set forth in the Investment Banking Agreement (the “Management Fee”).




          7.2 Negative Covenants. The Loan Parties, jointly and severally, covenant that, so
long as all or any part of the principal amount of the Notes or any interest thereon shall remain
outstanding and, thereafter, so long as any Purchaser owns any Warrants or Underlying Common Stock:




          (a) Indebtedness. None of the Loan Parties shall create, incur, assume guarantee or
be or remain liable for, contingently or otherwise, or suffer to exist any Indebtedness, except:





     (i) Indebtedness under this Agreement;




     (ii) Indebtedness incurred in the ordinary course of business with respect to
customer deposits, trade payables and other unsecured current liabilities not the
result of borrowing and not evidenced by any note or other evidence of indebtedness;




     (iii) Indebtedness under the Termination and Release Agreement; and




     (iv) Indebtedness listed on the Permitted Indebtedness Schedule attached hereto
as Schedule 7.2(a).



          (b) Negative Pledge; Liens. The Loan Parties shall not create, incur, assume or
suffer to exist any Lien of any kind on any of their properties or assets of any kind, except the
following (collectively, “Permitted Liens”):





     (i) Liens for or priority claims imposed by law that are incidental to the
conduct of business or the ownership of properties and assets (including mechanic’s,
warehousemen’s, attorneys’ and statutory landlords’ Liens) and deposits, pledges
incurred in the ordinary course of business and not in connection with the borrowing
of money; provided, however, that in each case, the obligation secured is not
overdue, or, if overdue, is being contested in good faith and adequate reserves have
been set up by the Loan Parties as the case may



51









 







be; and provided, further, that the
lien and security interest provided in the Security Documents or any portion thereof
created or intended to be created thereby is not, in the opinion of Purchaser,
unreasonably jeopardized thereby;




     (ii) Liens securing the payments of taxes, assessments and governmental charges
or levies incurred in the ordinary course of business that either (a) are not
delinquent, or (b) are being contested in good faith by appropriate legal or
administrative proceedings and as to which adequate reserves have been set aside on
their books, and so long as during the period of any such contest, the Loan Parties
shall suffer no loss of any privilege of doing business or any other right, power or
privilege necessary or material to the operation of the Business;




     (iii) Liens listed on the “Permitted Encumbrances Schedule” attached
hereto as Schedule 7.2(b);




     (iv) Liens granted pursuant to the Termination and Release Agreement; and




     (v) Extensions, renewals and replacements of Liens referred to in clauses (i)
through (iv) of this Section 7.2(b); provided, however, that any such extension,
renewal or replacement Lien shall be limited to the property or assets covered by
the Lien extended, renewed or replaced and that the obligations secured by any such
extension, renewal or replacement Lien shall be in an amount not greater than the
amount of the obligations secured by the Lien extended, renewed or replaced.



          (c) Contingent Liabilities. The Loan Parties shall not become liable for any
Guaranties, except for the endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business.




          (d) Leases. At no point shall the sum of the aggregate amount of annualized payments
on operating leases during any Fiscal Year exceed $250,000.




          (e) Mergers, etc. The Loan Parties shall not merge into or consolidate or combine
with any other Person, or purchase, lease or otherwise acquire (in one transaction or a
series of related transactions) all or any part of the property or assets of any Person other
than purchases or other acquisitions of inventory, materials, leases, property and equipment in the
ordinary course of business. Except as expressly permitted by the Security Documents, the Loan
Parties shall not sell, transfer or otherwise dispose of any of its assets, including the
collateral under the respective Security Documents.




          (f) Affiliate Transactions. The Loan Parties shall not make any loan or advance to
any director, officer or employee of the Loan Parties or any Affiliate, or enter into or be a party
to any transaction or arrangement with any Affiliate of the Loan Parties, including, without
limitation, the purchase from, sale to or exchange of property with, any merger or consolidation
with or into, or the rendering of any service by or for, any Affiliate, except (i) pursuant to the
reasonable requirements of the Loan Parties’ business and upon fair and



52









 






reasonable terms no less
favorable to the Loan Parties than would be obtained in a comparable arm’s-length transaction with
a Person other than an Affiliate, (ii) payment of the Management Fee or other fees payable pursuant
to Section 4.1(i), (iii) payment of directors’ fees to non-officer directors not to exceed $20,000
a year in the aggregate, and (iv) payment of reasonable expenses (including legal, accounting, and
professional fees) of ACAS and its affiliates incurred in connection with the Acquisition and the
transactions contemplated herein and in connection with ACAS’s management of its investment in the
Loan Parties.




          (g) Dividends and Stock Purchases. The Loan Parties shall not directly or indirectly:
declare or pay any dividends or make any distribution of any kind on their outstanding capital
stock or any other payment of any kind to any of their stockholders or its Affiliates (including
any redemption, purchase or acquisition of, whether in cash or in property, securities or a
combination thereof, any partnership interests or capital accounts or warrants, options or any of
their other securities), or set aside any sum for any such purpose other than for such dividends,
distributions or payments paid solely to other Loan Parties; provided, however, that this Section
7.2(g) shall not apply to (i) stock purchases pursuant to Article 10 hereof, (ii) stock purchases
pursuant to the Stockholders Agreement or the Option Plan and (iii) payment of the Management Fee,
the other fees pursuant to Section 4.1(i).




          (h) Advances, Investments and Loans. The Loan Parties shall not purchase, or hold
beneficially any stock, other securities or evidences of Indebtedness of, or make or permit to
exist any loan, Guaranty or advance to, or make any investment or acquire any interest whatsoever
in, any other Person (including, but not limited to, the formation or acquisition of any
Subsidiaries), except:





     (i) Securities issued or directly and fully guaranteed or insured by the United
States of America or any agency or instrumentality thereof having maturities of not
more than six (6) months from the date of acquisition;




     (ii) United States dollar-denominated time deposits, certificates of deposit
and bankers acceptances of any bank or any bank whose short-term debt rating from
Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc.
(“S&P”), is at least A-1 or the equivalent or whose short-term debt rating
from Moody’s Investors Service, Inc. (“Moody’s”) is at least P-1 or
the equivalent with maturities of not more than six months from the date of
acquisition;




     (iii) Commercial paper with a rating of at least A-1 or the equivalent by S&P
or at least P-1 or the equivalent by Moody’s maturing within six months after the
date of acquisition;




     (iv) Marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public instrumentality
thereof maturing within six months from the date of acquisition thereof and, at the
time of acquisition, having one of the two highest ratings obtainable from either
S&P or Moody’s;



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     (v) Investments in money market funds substantially all the assets of which are
comprised of securities of the types described in clauses (i) through (iv) above;




     (vi) Investments (including debt obligations) received in connection with the
bankruptcy or reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and suppliers arising
in the ordinary course of business;




     (vii) Receivables owing to the Loan Parties created or acquired in the ordinary
course of business and payable on customary trade terms of the Loan Parties;




     (viii) Deposits made in the ordinary course of business consistent with past
practices to secure the performance of leases or in connection with bidding on
government contracts;




     (ix) Advances to employees in the ordinary course of business for business
expenses; provided, however, that the aggregate amount of such advances at any time
outstanding shall not exceed $20,000;




     (x) Securities issued by other Loan Parties;




     (xi) Investments in forward exchange contracts related to foreign currencies in
the ordinary course of business consistent with past practice; and




     (xii) Investments in the cash collateral account described in the Termination
and Release Agreement.



          (i) Use of Proceeds. The Loan Parties shall not use any proceeds from the sale of the
Notes hereunder, directly or indirectly, for the purposes of purchasing or carrying any “margin
securities” within the meaning of Regulations T, U or X promulgated by the Board of Governors of
the Federal Reserve Board or for the purpose of arranging for the extension of credit secured,
directly or indirectly, in whole or in part by collateral that includes any “margin securities.”




          (j) Stock Issuances. Except as provided herein or upon the exercise of the Warrants,
or pursuant to the Option Plan as in effect on the Closing Date, the Loan Parties shall not issue
any capital stock or other equity interests or any options or warrants to purchase, or securities
convertible into capital or equity interests or establish any stock appreciation rights or similar
programs based on the value of the Loan Parties’ equity interests.




          (k) Amendment of Charter Documents. The Loan Parties shall not amend, terminate,
modify or waive or agree to the amendment, modification or waiver of any material term or provision
of their respective Charter Documents, or Bylaws.




          (l) Subsidiaries. None of the Loan Parties shall establish or acquire any Subsidiary.




54









 








          (m) Business. None of the Loan Parties shall engage, directly or indirectly, in any
business other than the Business.




          (n) Fiscal Year; Accounting. None of the Loan Parties shall change its Fiscal Year
from ending on April 30 or method of accounting (other than immaterial changes in methods), except
as required by GAAP.




          (o) Establishment of New or Changed Business Locations. None of the Loan Parties
shall relocate its principal executive offices or other facilities or establish new business
locations or store any inventory or other assets at a location not identified to Agent on or before
the date hereof, without providing not less than thirty (30) days advance written notice to Agent.




          (p) Changed or Additional Business Names. None of the Loan Parties shall change its
corporate name establish new or additional trade names or change its state of organization without
providing not less than thirty (30) days advance written notice to Agent.




          7.3 Financial Covenants.




          (a) The Loan Parties, jointly and severally, covenant that, so long as all or any part of the
principal amount of the Notes or any interest thereon shall remain outstanding, they shall
maintain, on a consolidated basis at the end of each three month period (each such date being a
“Measurement Date”) beginning July 31, 2004:





     (i) Minimum Fixed Charge Coverage Ratio. A minimum Fixed Charge
Coverage Ratio of 1 to 1 (1:1); provided that for the 2005 Fiscal Year, the
Measurement Period shall mean the period beginning on May 24, 2004 and ending on the
Measurement Date;




     (ii) Maximum Debt to EBITDA Ratio. A maximum Debt to EBITDA Ratio as
set forth on Annex D hereto;




     (iii) Minimum Interest Coverage Ratio. A minimum Interest Coverage
Ratio as set forth on Annex E hereto; provided that for the 2005 Fiscal
Year, the Measurement Period shall mean the period beginning on May 24, 2004 and
ending on the Measurement Date;




     (iv) Minimum EBITDA. A minimum EBITDA as set forth on Annex F
hereto; provided that for the 2005 Fiscal Year, the Measurement Period shall mean
the period beginning on May 24, 2004 and ending on the Measurement Date.



          (b) So long as all or any part of the principal amount of the Notes or any interest thereon
shall remain outstanding, the Loan Parties shall not make or commit to make any payments in any
Fiscal Year on account of Capital Expenditures that in the aggregate would cost more than:





55












 





	 	 	 	 	 
	Fiscal Year	 	Amount	 
	2004 and Thereafter (provided covenant will be tested on each
Measurement Date)
	 	$	800,000	 






ARTICLE 8

EVENTS OF DEFAULT




          8.1 Events of Default. An Event of Default shall mean the occurrence of one or more
of the following described events:




          (a) any Loan Party shall default in the payment of (i) interest on any Note within five (5)
days after its due date or (ii) principal of any Notes when due, whether at maturity, upon notice
of prepayment in accordance with Sections 3.5 or 3.6, upon any scheduled payment date, a mandatory
prepayment date in accordance with Section 3.7 or by acceleration or otherwise;




          (b) any Loan Party shall default under any agreement under which any Indebtedness in an
aggregate principal amount of $200,000 or more is created in a manner entitling the holder of such
Indebtedness to accelerate the maturity of such Indebtedness;




          (c) any representation or warranty herein made by any Loan Party, or any certificate or
financial statement furnished pursuant to the provisions hereof, shall prove to have been false or
misleading in any material respect as of the time made or furnished or deemed made or furnished;




          (d) any Loan Party shall default in the performance of any covenant, condition or provision of
Section 7.1(h), 7.2 or 7.3;




          (e) a default or event of default shall occur under any other Purchase Document, beyond any
applicable notice or cure periods;




          (f) any Loan Party shall default in the performance of any other covenant, condition or
provision of this Agreement, any Note or any other Purchase Document, and such default shall not be
remedied to Agent’s or Required Purchasers’ satisfaction for a period of thirty (30) days of the
earlier of (i) written notice from an Agent of such default or (ii) actual knowledge by any Loan
Party of such default;




          (g) a proceeding shall have been instituted in a court having jurisdiction in the premises
seeking a decree or order for relief in respect of any Loan Party in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or for the
appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of any Loan Party or for any substantial part of its property, or for the winding-up or
liquidation of their affairs, and such proceeding shall remain undismissed or unstayed and in
effect for a period of sixty (60) days;




          (h) any Loan Party shall commence a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, shall consent to the entry



56









 






of an order for relief
in an involuntary case under any such law, or shall consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar
official) of any Loan Party or for any substantial part of their property, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay their debts as they become
due, or shall take any action in furtherance of any of the foregoing;




          (i) both the following events shall occur: (i) a Reportable Event, the occurrence of which
would have a Material Adverse Effect that could cause the imposition of a Lien under Section 4068
of ERISA, shall have occurred with respect to any Plan or Plans; and (ii) the aggregate amount of
the then “current liability” (as defined in Section 412(l)(7) of the Internal Revenue Code of 1986,
as amended) of all accrued benefits under such Plan or Plans exceeds the then current value of the
assets allocable to such benefits by more than $100,000 at such time;




          (j) a final judgment that with other undischarged final judgments against any Loan Party,
exceeds an aggregate of $100,000 (excluding judgments to the extent the applicable Loan Party is
fully insured or the deductible or retention limit does not exceed $100,000 and with respect to
which the insurer has assumed responsibility in writing), shall have been entered against any Loan
Party if, within thirty (30) days after the entry thereof, such judgment shall not have been
discharged or execution thereof stayed pending appeal, or if, within thirty (30) days after the
expiration of any such stay, such judgment shall not have been discharged;




          (k) any Transaction Document or Security Document shall at any time after the Closing Date
cease for any reason to be in full force and effect or shall cease to create perfected security
interests in favor of Agent in the collateral subject or purported to be subject thereto, subject
to no other Liens other than Permitted Liens, or such collateral shall have been transferred to any
Person without the prior written consent of the holders of a majority in principal amount of the
outstanding Notes; or




          (l) a Change of Control shall have occurred.




          8.2 Consequences of Event of Default.




          (a) Bankruptcy. If an Event of Default specified in paragraphs (g) or (h) of Section
8.1 hereof shall occur, the unpaid balance of the Notes and interest accrued thereon and all other
liabilities of the Loan Parties to the holders thereof hereunder and thereunder shall be
immediately due and payable, without presentment, demand, protest or (except as expressly required
hereby) notice of any kind, all of which are hereby expressly waived.




          (b) Other Defaults. If any other Event of Default shall occur, Required Purchasers
may at their option, by written notice to the Loan Parties, declare the entire unpaid
balance of the Notes, and interest accrued thereon and all other liabilities of the Loan
Parties hereunder and thereunder to be forthwith due and payable, and the same shall thereupon
become immediately due and payable, without presentment, demand, protest or (except as expressly
required hereby) notice of any kind, all of which are hereby expressly waived; provided, that in
the case of a default specified in clause (ii) of paragraph (a) of Section 8.1 hereof shall occur,
any



57









 






holder of a Note as to which such Event of Default has occurred may declare the entire unpaid
balance of such Note (but only such Note) and other amounts due hereunder and thereunder with
regard to such Note to become immediately due and payable.




          (c) Penalty Interest. Following the occurrence and during the continuance of any
Event of Default and during the five (5) day grace period set forth in Section 8.1 (a), the holders
of the Notes shall be entitled to receive, to the extent permitted by applicable law, interest on
the outstanding principal of, and premium and overdue interest, if any, on, the Notes at a rate per
annum equal to the interest rate thereon (determined as provided in Section 3.1) plus two hundred
and fifty (250) basis points.




          (d) Premium. In the event of any acceleration of Notes pursuant to Section 8.2(b)
hereof, the Loan Parties shall also pay to Agent, for the ratable benefit of Purchasers, the
prepayment premium that would otherwise be payable upon any voluntary prepayment of such Notes.




          (e) Security. Payments of principal of, and premium, if any, and interest on, the
Notes and all other obligations of the Loan Parties under this Agreement or the Notes are secured
pursuant to the terms of the Security Documents.




ARTICLE 9

THE AGENT




          9.1 Authorization and Action. Each Purchaser and each subsequent holder of any Note
by its acceptance thereof, hereby designates and appoints ACFS as Agent hereunder and authorizes
ACFS to take such actions as agent on its behalf and to exercise such powers as are delegated to
Agent by the terms of this Agreement and the other Purchase Documents, together with such powers as
are reasonably incidental thereto. Agent shall not have any duties or responsibilities, except
those expressly set forth herein, or any fiduciary relationship with any Purchaser, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities on the part of Agent
shall be read into this Agreement or otherwise exist for Agent. In performing its functions and
duties hereunder, Agent shall act solely as agent for Purchasers and does not assume, nor shall be
deemed to have assumed, any obligation or relationship of trust or agency with or for the Loan
Parties or any of their respective successors or assigns. Agent shall not be required to take any
action that exposes Agent to personal liability or that is contrary to this Agreement or applicable
Laws. The appointment and authority of Agent hereunder shall terminate at the indefeasible payment
in full of the Notes and related obligations.




          9.2 Delegation of Duties. Agent may execute any of its duties under this Agreement by
or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. Agent shall not be responsible for
the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable
care.




          9.3 Exculpatory Provisions. Neither Agent nor any of its directors, officers, agents
or employees shall be (i) liable for any action lawfully taken or omitted to be taken by it or them
under or in connection with this Agreement (except for its, their or such Person’s own gross
negligence or willful misconduct or, in the case of Agent, the breach of its obligations



58









 






expressly
set forth in this Agreement, unless such action was taken or omitted to be taken by Agent at the
direction of the Required Purchasers), or (ii) responsible in any manner to any Purchaser for any
recitals, statements, representations or warranties made by the Loan Parties contained in this
Agreement or in any certificate, report, statement or other document referred to or provided for
in, or received under or in connection with, this Agreement for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other document furnished in
connection herewith, or for any failure of any of the Loan Parties to perform their respective
obligations hereunder, or for the satisfaction of any condition specified in Article 4. Agent
shall not be under any obligation to any Purchaser to ascertain or to inquire as to the observance
or performance of any of the agreements or covenants contained in, or conditions of, this
Agreement, or to inspect the properties, books or records of any of the Loan Parties.




          9.4 Reliance. Agent shall in all cases be entitled to rely, and shall be fully
protected in relying, upon any document or conversation believed by it to be genuine and correct
and to have been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the Loan Parties),
independent accountants and other experts selected by Agent. Agent shall in all cases be fully
justified in failing or refusing to take any action under this Agreement or any other document
furnished in connection herewith unless it shall first receive such advice or concurrence of the
Required Purchasers or all of Purchasers, as applicable, as it deems appropriate or it shall first
be indemnified to its satisfaction by Purchasers; provided, that, unless and until Agent shall have
received such advice, Agent may take or refrain from taking any action, as Agent shall deem
advisable and in the best interests of Purchasers. Agent shall in all cases be fully protected in
acting, or in refraining from acting, in accordance with a request of the Required Purchasers or
all of Purchasers, as applicable, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all Purchasers.




          9.5 Non-Reliance on Agent and Other Purchasers. Each Purchaser expressly acknowledges
that neither Agent, nor any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to it and that no act by Agent or hereafter
taken, including, without limitation, any review of the affairs of the Loan Parties, shall be
deemed to constitute any representation or warranty by Agent. Each Purchaser represents and
warrants to Agent that it has and will, independently and without reliance upon Agent or any other
Purchaser and based on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property, prospects, financial and
other conditions and creditworthiness of the Loan Parties and made its own decision to enter into
this Agreement.




          9.6 Agent in its Individual Capacity. Agent, and each of its Affiliates may make
loans to, purchase securities from, provide services to, accept deposits from and generally engage
in any kind of business with the Loan Parties or any Affiliate of the Loan Parties as though Agent
were not Agent hereunder.




          9.7 Successor Agent. Agent may, upon forty-five (45) days’ notice to the Loan Parties
and Purchaser, and Agent will, upon the direction of the Required Purchasers (other than Agent, in
its individual capacity), resign as Agent. If Agent shall resign, then the Required



59









 






Purchasers
during such fifteen-day period shall appoint a successor Agent and if the Required Purchasers
direct Agent to resign, such direction shall include an appointment of a successor Agent. If for
any reason no successor Agent is appointed by the Required Purchasers during such fifteen-day
period, then effective upon the expiration of such fifteen-day period, Purchasers shall perform all
of the duties of Agent hereunder and the Loan Parties shall make all payments in respect of the
Notes directly to the applicable Purchaser and for all purposes shall deal directly with
Purchasers. After any retiring Agent’s resignation hereunder as Agent, the provisions of Article 9
shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement.




          9.8 Collections and Disbursements.




          (a) Agent will have the right to collect and receive all payments of the Notes, and to collect
and receive all reimbursements due hereunder, together with all fees, charges or other amounts due
under this Agreement and the other Purchase Documents with regard to the Notes, and Agent will
remit to each Purchaser, according to its pro rata percentage, all such payments actually received
by Agent in accordance with the settlement procedures established from time to time. Settlements
shall occur on such dates as Agent may elect in its sole discretion, but which shall be no later
than two (2) Business Days after request by the Required Purchasers.




          (b) If any such payment received by Agent is rescinded or otherwise required to be returned
for any reason at any time, whether before or after termination of this Agreement or the other
Purchase Documents, each Purchaser will, upon written notice from Agent, promptly pay over to Agent
its pro rata percentage of the amounts so rescinded or returned, together with interest and other
fees thereon so rescinded or returned.




          (c) All payments by Agent and Purchasers to each other hereunder shall be in immediately
available funds. Agent will at all times maintain proper books of accounts and records reflecting
the interest of each Purchaser in the Notes, in a manner customary to Agent’s keeping of such
records, which books and records shall be available for inspection by each Purchaser at reasonable
times during normal business hours, at such Purchaser’s sole expense. Agent may treat the payees
of any Note as the holder thereof until written notice of the transfer thereof shall have been
received by Agent in accordance with Section 6.3. In the event that any Purchaser shall receive
any payment in reduction of the Notes in an amount greater than its applicable pro rata percentage
in respect of obligations to Purchasers evidenced hereby (including, without limitation amounts
obtained by reason of setoffs) such Purchaser shall hold such excess in trust for Agent (on behalf
of all other Purchasers) and shall promptly remit to Agent such excess amount so that the amounts
received by each Purchaser hereunder shall at all
times be in accordance with its applicable pro rata percentage. If, however, any Purchaser
that has received any such excess amount fails to remit such amount to the Agent, the Agent shall
reallocate the amounts paid on the next payment date to each Purchaser so that, after giving effect
to such payments, the pro rata obligations owed by the Loan Parties to each Purchaser shall be in
an amount equal to the pro rata amount owed by the Loan Parties before the date of the payment of
such excess amount. In no event shall any Purchaser be deemed to have a participation or other
right in, to or against any other Purchaser’s Note as a result of the payment of any excess amount.




60









 








          9.9 Reporting. During the term of this Agreement, Agent will promptly furnish each
Purchaser with copies of all notices and financial statements of the Loan Parties required to be
delivered or obtained hereunder and such other financial statements and reports and other
information in Agent’s possession as any Purchaser may reasonably request. Agent will immediately
notify Purchasers when it receives actual knowledge of any Event of Default under the Purchase
Documents.




          9.10 Consent of Purchasers.




          (a) Except as expressly provided herein, Agent shall have the sole and exclusive right to
service, administer and monitor the Notes and the Purchase Documents related thereto, including,
without limitation, the right to exercise all rights, remedies, privileges and options under this
Agreement and under the other Purchase Documents. Notwithstanding the foregoing, each Purchaser
shall make its own investment decision with regard to the Notes, including, without limitation, the
credit judgment with respect to the purchasing of the Notes and the determination as to the basis
on which and extent to which purchases of Notes may be made.




          (b) Notwithstanding anything to the contrary contained in Section 9.10(a) above, Agent shall
not without the prior written consent of all Purchasers then holding Notes: (i) extend any payment
date under the Notes, (ii) reduce any interest rate applicable to any of the Notes or any fee
payable to Purchasers hereunder, (iii) waive any Event of Default under Section 8.1(a), (iv)
compromise or settle all or a portion of the Indebtedness under the Notes, (v) release any obligor
from the Indebtedness under the Notes except in connection with full payment and satisfaction of
all Indebtedness under the Notes, (vi) amend the definition of Required Purchasers, or (vii) amend
this Section 9.10(b).




          (c) Notwithstanding anything to the contrary contained in Section 9.10(a) above, and subject
to any applicable limitation set forth in Section 9.10(b) above, Agent shall not, without the prior
written consent of Required Purchasers: (i) waive any Event of Default; (ii) consent to any Loan
Parties’ taking any action that, if taken, would constitute an Event of Default under this
Agreement or under any of the other Purchase Documents; or (iii) amend or modify or agree to an
amendment or modification of this Agreement or other Purchase Documents.




          (d) After an acceleration of the Indebtedness, Agent shall have the sole and exclusive right,
after consultation (to the extent reasonably practicable under the circumstances) with all
Purchasers and, upon written instruction from the Required Purchasers, to exercise or refrain from
exercising any and all rights, remedies, privileges and options under this Agreement
or the other Purchase Documents and available at law or in equity to protect the rights of
Agent and Purchasers and collect the Indebtedness under the Notes, including, without limitation,
instituting and pursuing all legal actions brought against any Loan Party or to collect the
Indebtedness under the Notes, or defending any and all actions brought by any Loan Party or other
Person; or incurring expenses or otherwise making expenditures to protect the collateral, the Notes
or Agent’s or any Purchaser’s rights or remedies.




          9.11 This Article Not Applicable to Loan Parties. Except for this Section 9.11, this
Article 9 is included in this Agreement solely for the purpose of determining certain rights as



61









 






between Agent and Purchasers and does not create, nor shall it give rise to, any rights in or
obligations on the part of the Loan Parties and all rights and obligations of the Loan Parties
(other than as specifically set forth herein) under this Agreement shall be determined by reference
to the provisions of this Agreement other than this Article 9.




ARTICLE 10

PUT OPTION AND UNLOCKING RIGHTS




          10.1 Grant of Option. Parent hereby grants to each holder of Subject Securities (a
“Holder”) an option to sell to Parent, and Parent is obligated to purchase from each Holder
under such option (the “Put Option”), all (or such portion as is designated by any such
Holder pursuant to Section 10.3 below) of the Subject Securities then owned by such Holder. The
Put Option will be effective at any time and from time to time after the earliest to occur of (i)
the fifth anniversary of the Closing Date, (ii) the date of the payment in full of the outstanding
principal, interest and fees in respect of the Notes, (iii) a Change of Control.




          10.2 Put Price. In the event that any Holder exercises the Put Option, the price (the
“Put Price”) to be paid to each such Holder pursuant to this Agreement will be the sum of
the amount determined by multiplying the number of shares of Subject Securities (or, in the case of
any Warrant, the number of shares of Underlying Common Stock into which such Warrant is
convertible) for which the Put Option is being exercised (collectively, the “Put
Shares”) by the Fair Market Value therefor.




          10.3 Exercise of Put Option. If any Holder elects to exercise its Put Option, such
Holder shall give notice to Parent and each other Holder of such Holder’s election to exercise the
Put Option, specifying, among other things, the date on which the Put Option Closing (as
hereinafter defined) shall occur, which date shall not be less than twenty-one (21) days after the
date of such notice. If a Holder receives such notice of another Holder’s exercise of such other
Holder’s Put Option, the Holder receiving such notice may elect to exercise its Put Option and
designate a Put Option Closing simultaneous with that of such other Holder by sending a notice in
accordance with Section 10.1. Parent will provide each Holder desiring to exercise its Put Option
with the name and address of each other Holder. Notwithstanding the foregoing, the right of each
Holder to exercise its Put Option shall be an individual and separate right, and the exercise of
any Put Option by any Holder shall not be conditioned upon the exercise by any other Holder of its
Put Option.




          10.4 Certain Remedies. In the event that Parent defaults on its obligation to
purchase all or any portion of the Put Shares upon exercise of the Put Option by any Holder,
the Holder may elect, in addition to any other rights or remedies of such Holder, either to
(i) rescind its exercise of the Put Option, in which case the Put Option will continue in full
force and effect, or (ii) receive a promissory note in the form attached hereto as Exhibit
A-3, duly executed by the Loan Parties, payable to the Holder in the principal amount of the
Put Price, which promissory note shall constitute a “Junior Subordinated Note” for all purposes
hereunder and under the Transaction Documents; provided, however, that such Note shall bear
interest payable in cash on the outstanding principal thereof at a rate per annum equal to the
Prime Rate, as such may adjust from time to time, plus three hundred (300) basis points per annum;
provided, further, that the Loan Parties shall repay the unpaid principal balance of such Note in
full, together with all



62









 






accrued and unpaid interest, fees and other amounts due thereunder, in
sixty (60) consecutive equal monthly payments commencing on the first Business Day of the first
full month following the execution of such Note and there shall be no premium charged for prepaying
such Note.




          10.5 Put Option Closing. Each closing for the purchase and sale of the Put Shares as
to which any Holder has notified Parent of such Holder’s intention to exercise the Put Option (a
“Put Option Closing”) shall occur on the date specified in such notice of exercise. At any
Put Option Closing, to the extent applicable, the Holder of the Put Share will deliver the
certificate or certificates evidencing the Put Shares being purchased, duly endorsed in blank. In
consideration therefor, Parent will deliver to the Holder the Put Price, which will be payable by
wire transfer of immediately payable funds to an account designated by such Holder or, at the
option of Holder in its sole discretion, a promissory note in the form of Exhibit A.2, duly
executed by the Loan Parties, payable to the Holder in the principal amount of the Put Price which
promissory note shall constitute a “Senior Subordinated Note” for all purposes hereunder and under
the Transaction Documents. In the event multiple Holders have exercised the Put Option and there
is insufficient cash available to pay each such Holder the full amount of funds they have requested
pursuant to the preceding sentence, any payment of cash will be made on a pro rata basis among such
Holders in proportion to their respective number of Put Shares and the remaining amounts due shall
be paid delivery of a Junior Subordinated Note in accordance with Section 10.4.




          10.6 Unlocking Rights. In the event that at any time after the date two (2) years
from the Closing Date, Parent shall receive a bona fide third-party offer not solicited by any
Purchaser or Agent (unless such solicitation occurred at the request of Parent) to purchase all or
substantially all of the Common Stock or assets of Parent or to merge with the Parent or for Parent
or any other Loan Party or Parties to engage in any similar transaction in a manner with no
conditions that are unlikely to be satisfied prior to the proposed closing thereof that would cause
the Parent’s stockholders to receive cash or publicly-traded securities in exchange for their
Common Stock (an “Unlocking Offer”) and Agent and Required Purchasers shall have notified
Parent that they support the Unlocking Offer, either (i) Parent shall accept such Unlocking Offer
within ten (10) Business Days of receipt of notice of such Unlocking Offer or (ii) if Parent does
not accept such Unlocking Offer, each Purchaser shall have the right to put all, but not less than
all, of its Subject Securities to Parent in accordance with Section 10.1 at any time prior to the
date that is thirty (30) days after the date Parent receives such Unlocking Offer, except that the
Fair Market Value per share shall be deemed to be equal to the amount of such Unlocking Offer.
Parent shall provide the Agent with prompt notice of its receipt of any Unlocking Offer and the
material terms thereof.




ARTICLE 11

PURCHASE RIGHTS




          11.1 Limited Preemptive Rights. If after the date of this Agreement, Parent
authorizes the issuance and sale of any shares of capital stock or any securities containing
options or rights to acquire any shares of capital stock (other than in connection with the
exercise of the Warrants, the issuance or exercise of Options issued pursuant to the Option Plan,
an underwritten public offering or the issuance of such securities in exchange for the securities
or assets of another Person as a part of Change of Control) at any time that any Purchaser holds
any



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Common Stock of Parent or Warrants, Parent will offer to sell to each Purchaser a portion of
such securities equal to the percentage determined by dividing (i) the number of shares of Common
Stock of Parent and Underlying Common Stock (without duplication) then held by such Purchaser by
(ii) the number of shares of Common Stock of Parent outstanding (on a Fully Diluted Basis). For
purposes of clause (ii) above, a share of Common Stock of Parent acquirable upon exercise or
conversion of options or rights to acquire any shares of Common Stock of Parent shall be deemed
outstanding only if the applicable conversion price, exercise price or other acquisition price is
equal to or less than the then current Market Price of a share of Common Stock of Parent. Each
Purchaser will be entitled to purchase such stock or securities at the same price and on the same
terms as such stock or securities are to be offered to any other Person. Each Purchaser must
exercise its purchase rights within thirty (30) days after receipt of written notice from Parent
describing in reasonable detail the stock or securities being so offered, the purchase price
thereof, the payment terms and each Purchaser’s percentage allotment. Upon the expiration of such
period of thirty (30) days, Parent will be free to sell such stock or securities that Purchasers
have not elected to purchase during the one hundred twenty (120) days following such expiration on
terms and conditions no more favorable to purchasers thereof than those offered to Purchasers. Any
stock or securities offered or sold by Parent after such one hundred twenty (120) day period must
be reoffered to each Purchaser pursuant to the terms of this Section 11.1. Any stock or securities
purchased by a Purchaser from Parent pursuant to this Section 11.1 shall, upon such purchase and
thereafter be deemed to be Securities and Registrable Securities for all purposes of this
Agreement.




          11.2 Termination. The provisions of Section 11.1 shall terminate upon the
consummation of an underwritten public offering of Parent’s Common Stock registered under the
Securities Act with an investment banking firm of national reputation as managing underwriter.




ARTICLE 12

REGISTRATION RIGHTS




          12.1 Piggyback Registrations.




          (a) Whenever Parent proposes to register any of its securities under the Securities Act and
the registration form to be used may be used for the registration of Registrable Securities (a
“Piggyback Registration”), Parent will give prompt written notice (in any event within
three Business Days after its receipt of notice of any exercise of demand registration rights other
than under this Agreement) to all holders of Registrable Securities with respect of the proposed
offering at least thirty (30) days before the initial filing with the SEC of such registration statement, and
offer to include in such filing such Registrable Securities as any
such holder may request. Each such holder of Registrable Securities desiring to have Registrable
Securities registered under this Section 12.1 shall advise Parent in writing within fifteen (15)
days after the date of receipt of such notice from Parent, setting forth the amount of such
Registrable Securities for which registration is requested. Parent shall thereupon include in such
filing the number of Registrable Securities for which registration is so requested, and shall use
its best efforts to effect registration under the Securities Act of such Registrable Securities.




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          (b) The registration expenses of the holders of Registrable Securities will be paid by Parent
in all Piggyback Registrations to the extent provided in Section 12.6.




          (c) If a Piggyback Registration is an underwritten primary registration on behalf of holders
of Parent’s securities, and the managing underwriters advise Parent in writing that in their
opinion the number of securities requested to be included in such registration exceeds the number
that can be sold in an orderly manner in such offering within a price range acceptable to Parent,
Parent will include in such registration: (i) first, the securities Parent proposes to sell, (ii)
second, the Registrable Securities requested to be included in such registration, pro rata among
the holders of the securities requested to be included in such registration, provided that no
holders of such securities will have priority for inclusion in such registration over the holders
of the Registrable Securities.




          (d) If a Piggyback Registration is an underwritten secondary registration on behalf of holders
of Parent’s securities, and the managing underwriters advise Parent in writing that in their
opinion the number of securities requested to be included in such registration exceeds the number
that can be sold in an orderly manner in such offering within a price range acceptable to the
holders initially requesting such registration, Parent will include in such registration the
Registrable Securities requested to be included in such registration, pro rata among the holders of
other securities requested to be included in such registration, provided that no holders of such
securities will have priority for inclusion in such registration over the holders of the
Registrable Securities.




          (e) If any Piggyback Registration is an underwritten offering, the selection of investment
banker(s) and manager(s) for the offering must be approved by the holders of a majority of the
Registrable Securities who request to be included in such Piggyback Registration. Such approval
will not be unreasonably withheld.




          (f) If Parent has previously filed a registration statement with respect to Registrable
Securities pursuant to this Section 12.1, and if such previous registration has not been withdrawn
or abandoned, Parent will not file a registration statement or cause to be effected any other
registration of any of its equity securities or securities convertible or exchangeable into or
exercisable for its equity securities under the Securities Act (except on Form S-8 or any successor
form), whether on its own behalf or at the request of any holder or holders of such securities,
until a period of at least 180 days has elapsed from the effective date of such previous
registration.




          12.2 Demand Registration Rights.




          (a) If, at any time after Parent has filed any registration statement under the Securities Act
or the Securities Exchange Act, except with respect to registration statements filed on Form S-8 or
any successor form, Parent receives a written request by the holders of a majority of the
Registrable Securities to effect the registration under the Securities Act of such shares of Common
Stock of Parent, Parent shall follow the procedures described in this Section 12.2. Within five
(5) days of its receipt of such request, Parent shall give written notice of such proposed
registration (a “Demand Registration”) to all holders of Registrable Securities, and
thereupon, Parent shall, as expeditiously as possible, use its best reasonable efforts to effect
the



65









 






registration on a form of general use under the Securities Act of the shares it has been
requested to register in such initial request and in any response to such notice given to Parent
within twenty (20) days after Parent’s giving of such notice; provided, however, that Parent shall
not be required to effect a Demand Registration if more than two Demand Registrations have been
undertaken.




          (b) Parent may not be required to effect a registration pursuant to this Section 12.2 during
the first 180 days after the effective date of any registration statement filed by Parent under
Section 12.1 if the holders of Registrable Securities requesting registration have been afforded
the opportunity to register in such registration all or a majority of their Registrable Securities.




          (c) Parent may include in any registration under this Section 12.2 any other shares of Common
Stock of Parent (including issued and outstanding shares of stock as to which the holders thereof
have contracted with Parent for “piggyback” registration rights) so long as the inclusion in such
registration of such shares will not, in the opinion of the managing underwriter of the shares of
the stockholder or stockholders first demanding registration (if the offering is underwritten),
interfere with the successful marketing in accordance with the intended method of sale or other
disposition of all the stock sought to be registered by such demanding stockholder or stockholders
pursuant to this Section 12.2.




          12.3 S-3 Demand Registration Rights. In addition to the registration rights provided
in Sections 12.1 and 12.2 above, if at any time Parent is eligible to use SEC Form S-3 (or any
successor form) for registration of secondary sales of Registrable Securities, any holder of
Registrable Securities may request in writing that Parent register shares of Registrable Securities
on such form. Upon receipt of such request, Parent will promptly notify all holders of Registrable
Securities in writing of the receipt of such request and each such Holder may elect (by written
notice sent to Parent within thirty (30) days of receipt of Parent’s notice) to have its
Registrable Securities included in such registration pursuant to this Section 12.3. Thereupon,
Parent will, as soon as practicable, use its best efforts to effect the registration on Form S-3 of
all Registrable Securities that Parent has so been requested to register by such holder for sale.
Parent will use its best efforts to qualify and maintain its qualification for eligibility to use
Form S-3 for such purposes. Parent shall not be required to effect more than three registrations
pursuant to this Section 12.3.




          12.4 Holdback Agreements.




          (a) Each holder of Registrable Securities agrees not to effect any public sale or distribution
(including sales pursuant to Rule 144) of equity securities of Parent, or any
securities convertible into or exchangeable or exercisable for such securities, during the
seven days prior to and the ninety (90)-day period (or such longer period, not to exceed ninety
(90) additional days, as the managing underwriter shall require) beginning on the effective date of
any underwritten Piggyback Registration in which Registrable Securities are included or Demand
Registration (except as part of such underwritten registration), unless the underwriters managing
the registered public offering otherwise agree.




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          (b) Parent agrees (i) not to effect any public sale or distribution of its equity securities,
or any securities convertible into or exchangeable or exercisable for such securities, during the
seven days prior to and during the 90-day period beginning on the effective date of or any
underwritten Piggyback Registration or Demand Registration (except as part of such underwritten
registration or pursuant to registrations on Form S-8 or any successor form), unless the
underwriters managing the registered public offering otherwise agree, and (ii) to cause each holder
of at least 10% (on a fully-diluted basis) of its Common Stock of Parent, or any securities
convertible into or exchangeable or exercisable for Common Stock, purchased from Parent at any time
after the date of this Agreement (other than in a registered public offering) to agree not to
effect any public sale or distribution (including sales pursuant to Rule 144) of any such
securities during such period (except as part of such underwritten registration, if otherwise
permitted), unless the underwriters managing the registered public offering otherwise agree.




          12.5 Registration Procedures. Whenever the holders of Registrable Securities have
requested that any Registrable Securities be registered pursuant to this Agreement, Parent will use
reasonable efforts to effect the registration and the sale of such Registrable Securities in
accordance with the intended method of disposition thereof (including the registration of Warrants
held by a holder of Registrable Securities requesting registration as to which Parent has received
reasonable assurances that only Registrable Securities will be distributed to the public), and
pursuant thereto Parent will as expeditiously as possible:




          (a) prepare and file with the SEC a registration statement with respect to such Registrable
Securities and use reasonable efforts to cause such registration statement to become effective
(provided that before filing a registration statement or prospectus or any amendments or
supplements thereto, Parent will furnish to the counsel selected by the holders of a majority of
the Registrable Securities covered by such registration statement copies of all such documents
proposed to be filed, which documents will be subject to the review of such counsel);




          (b) furnish to each seller of Registrable Securities such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus included in such
registration statement (including each preliminary prospectus) and such other documents as such
seller may reasonably request in order to facilitate the disposition of the Registrable Securities
owned by such seller;




          (c) use reasonable efforts to register or qualify such Registrable Securities under such other
securities or blue sky laws of such jurisdictions as any seller of Registrable Securities
reasonably requests and do any and all other acts and things that may be reasonably necessary or
advisable to enable such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller (provided that Parent will not be required to (i)
qualify generally to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph, (ii) subject itself to taxation in any such jurisdictions,
(iii) consent to general service of process in each such jurisdiction or (iv) undertake such
actions in any jurisdiction other than the states of the United States of America and the District
of Columbia);




          (d) notify each seller of such Registrable Securities, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening



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of any event as a
result of which the prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein not misleading, and,
at the request of any such seller, Parent will prepare a supplement or amendment to such prospectus
so that, as thereafter delivered to purchasers of such Registrable Securities, such prospectus will
not contain an untrue statement of a material fact or omit to state any fact necessary to make the
statements therein not misleading;




          (e) use its best efforts to cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by Parent are then listed and, if not so
listed, to be listed on the NASD automated quotation system and, if listed on the NASD automated
quotation system, use its best efforts to secure designation of all such Registrable Securities
covered by such registration statements as a NASDAQ “national market system security” within the
meaning of Rule 11Aa2-1 of the Securities and Exchange Commission or, failing that, to secure
NASDAQ authorization for such Registrable Securities and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register as such with respect to such
Registrable Securities with the NASD;




          (f) provide a transfer agent and registrar for all such Registrable Securities not later than
the effective date of such registration statement;




          (g) enter into such customary agreements (including underwriting agreements in customary form)
and take all such other actions as the holders of a majority of the Registrable Securities being
sold or the underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities (including, without limitation, effecting a stock split
or a combination of shares);




          (h) make available for inspection by any seller of Registrable Securities, any underwriter
participating in any disposition pursuant to such registration statement and any attorney,
accountant or other agent retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of Parent, and cause Parent’s officers,
directors, employees and independent accountants to supply all information reasonably requested by
any such seller, underwriter, attorney, accountant or agent in connection with such registration
statement;




          (i) otherwise use its best efforts to comply with all applicable rules and regulations of the
SEC, and make available to its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months beginning with the first day of Parent’s
first full calendar quarter after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;




          (j) permit any holder of Registrable Securities, which holder, in its sole and exclusive
judgment, might be deemed to be an underwriter or a controlling person of Parent, to participate in
the preparation of such registration or comparable statement and to require the insertion therein
of material, furnished to Parent in writing, which in the reasonable judgment of such holder and
its counsel should be included; and




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          (k) In the event of the issuance of any stop order suspending the effectiveness of a
registration statement, or of any order suspending or preventing the use of any related prospectus
or suspending the qualification of any Common Stock of Parent included in such registration
statement for sale in any jurisdiction, Parent will use its reasonable best efforts promptly to
obtain the withdrawal of such order. If any such registration or comparable statement refers to
any holder by name or otherwise as the holder of any securities of Parent and if in its sole and
exclusive judgment such holder is or might be deemed to be a controlling person of Parent, such
holder shall have the right to require (i) the insertion therein of language, in form and substance
satisfactory to such holder and presented to Parent in writing, to the effect that the holding by
such holder of such securities is not to be construed as a recommendation by such holder of the
investment quality of Parent’s securities covered thereby and that such holding does not imply that
such holder will assist in meeting any future financial requirements of Parent, (ii) in the event
that such reference to such holder by name or otherwise is not required by the Securities Act or
any similar federal statute then in force, the deletion of the reference to such holder; provided
that with respect to this clause (ii) such holder shall furnish to Parent an opinion of counsel to
such effect, which opinion and counsel shall be reasonably satisfactory to Parent.




          12.6 Registration Expenses. All expenses incident to Parent’s performance of or
compliance with this Article 12, including without limitation all registration and filing fees,
fees and expenses of compliance with securities or blue sky laws, printing expenses, messenger and
delivery expenses, and fees and disbursements of counsel for Parent and all independent certified
public accountants, underwriters (excluding discounts and commissions) and other Persons retained
by Parent (all such expenses, excluding underwriting discounts and commissions, being herein called
“Registration Expenses”), will be borne by Parent. Parent will bear the cost of one set of counsel
for the Holders of Registrable Securities participating in any Piggyback Registration or Demand
Registration. All underwriting discounts and commissions will be borne by the seller of the
securities sold pursuant to the registration.




          12.7 Indemnification.




          (a) Parent agrees to indemnify, to the extent permitted by law, each holder of Registrable
Securities, its officers and directors and each Person who controls such holder (within the meaning
of the Securities Act) against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission
or alleged omission of a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to Parent by such holder expressly for use therein or by such
holder’s failure to deliver a copy of the registration statement or prospectus or any amendments or
supplements thereto after Parent has furnished such holder with a sufficient number of copies of
the same. In connection with an underwritten offering,
Parent will indemnify such underwriters, their officers and directors and each Person who
controls such underwriters (within the meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of the holders of Registrable Securities.




          (b) In connection with any registration statement in which a holder of Registrable Securities
is participating, each such holder will furnish to Parent in writing such



69









 






information and
affidavits as Parent reasonably requests for use in connection with any such registration statement
or prospectus and, to the extent permitted by law, will indemnify Parent, its directors and
officers and each Person who controls Parent (within the meaning of the Securities Act) against any
losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue
statement of material fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements therein not
misleading but only to the extent that such untrue statement or omission is contained in any
information or affidavit so furnished in writing by such holder; provided, however, that the
obligations of each holder of Registrable Securities shall be limited to an amount equal to the net
proceeds to such holder of Registrable Securities sold as contemplated herein.




          (c) Any Person entitled to indemnification hereunder will (i) give prompt written notice to
the indemnifying party of any claim with respect to which it seeks indemnification and (ii) unless
in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume
the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such
defense is assumed, the indemnifying party will not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent will not be unreasonably
withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a
claim will not be obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between such indemnified party
and any other of such indemnified parties with respect to such claim.




          (d) The indemnification provided for under this Agreement will remain in full force and effect
regardless of any investigation made by or on behalf of the indemnified party or any officer,
director or controlling Person of such indemnified party and will survive the transfer of
securities. Parent also agrees to make such provisions, as are reasonably requested by any
indemnified party, for contribution to such party in the event Parent’s indemnification is
unavailable for any reason.




          12.8 Participation in Underwritten Registrations. No Person may participate in any
registration hereunder that is underwritten unless such Person (a) agrees to sell such Person’s
securities on the basis provided in any underwriting arrangements approved by the Person or Persons
entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents required under the
terms of such underwriting arrangements; provided that no holder of Registrable Securities included
in any underwritten registration shall be required to make any
representations or warranties to Parent or the underwriters other than representations and
warranties regarding such holder and such holder’s intended method of distribution.




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ARTICLE 13

SUBORDINATION OF NOTES




          13.1 General. The Subordinated Notes are subordinate and junior in right of payment
to the Senior Term Loans and the Revolving Loans and the Junior Subordinated Notes are subordinate
and junior in right of payment to the Senior Subordinated Notes to the extent provided in this
Article 13.




          13.2 Default in Respect of Senior Term Loan or Revolving Loan.




          (a) Senior Note Payment Default. In the event of an Event of Default pursuant to
Section 8.1(a) with respect to any Senior Term Note or Revolving Loan (a “Senior Note Payment
Default”) then, unless and until such Senior Note Payment Default shall have been cured or
waived or shall have ceased to exist, no direct or indirect payment (in cash, property or by
set-off or otherwise, except that payment may be made by delivery of Notes of the same type) shall
be made on account of the principal of, or prepayment premium, if any, or any other amount in
respect of, or interest on, any Subordinated Notes, or as a sinking fund for any Subordinated
Notes, or in respect of any redemption, retirement, purchase or other acquisition of any
Subordinated Notes, during any period:





     (i) commencing on the date notice of such Senior Note Payment Default shall
have been given to Purchaser holding Subordinated Notes by the Agent and ending on
the date on which such Senior Note Payment Default shall have been cured or waived
or shall have ceased to exist; or




     (ii) in which any judicial proceeding or any other proceeding or action
(whether judicial or otherwise) seeking to foreclose or otherwise realize on any
collateral shall be pending in respect of such Senior Note Payment Default, or in
which the maturity of such Senior Term Notes or Revolving Loans shall have been
accelerated in respect of such Senior Note Payment Default and such acceleration
shall not have been annulled.



          (b) Senior Note Covenant Default. In the event of an Event of Default with respect to
any Senior Term Note or Revolving Loan other than pursuant to Section 8.1(a) (a “Senior Note
Covenant Default”), then, unless and until such Senior Note Covenant Default shall have been
cured or waived or shall have ceased to exist, no direct or indirect payment (in cash, property or
by set-off or otherwise, except that payment may be made by delivery of Notes of the same type)
shall be made on account of the principal of, or prepayment premium, if any, or any other amount in
respect of, or interest on, any Subordinated Notes, or as a sinking fund for any Subordinated
Notes, or in respect of any redemption, retirement, purchase or other acquisition of any
Subordinated Notes, during any period:





     (i) of one hundred eighty (180) days after written notice (a “Senior Note
Blocking Notice”) of such Senior Note Covenant Default shall have been
given to the Loan Parties and to Purchaser holding Subordinated Notes by the
Agent, provided that only one (1) such Senior Note Blocking Notice shall be



71









 







given
pursuant to the terms of this Section 13.2(b)(i) in any three hundred sixty (360)
day period; or




     (ii) in which any judicial proceeding or any other proceeding or action
(whether judicial or otherwise) seeking to foreclose or otherwise realize on any
collateral shall be pending in respect of such Senior Note Covenant Default, or in
which an effective notice of acceleration of the maturity of such Senior Term Notes
or Revolving Loans shall have been transmitted to the Loan Parties and each of the
holders of the Subordinated Notes in respect of such Senior Note Covenant Default
and such acceleration shall not have been annulled, or in which notice of the
failure to pay such Senior Term Notes or Revolving Loans upon their final maturity
shall have been transmitted to the Loan Parties and each of the holders of the
Subordinated Notes and such failure shall be continuing;


provided that (A) no Senior Note Covenant Default that served as the basis for, or existed at the
time of, a previous Senior Note Blocking Notice, shall provide the basis for a subsequent Senior
Note Blocking Notice unless such Senior Note Covenant Default has been cured or waived for a
period of at least one hundred eighty (180) consecutive days, and (B) notwithstanding the
foregoing, no more than four (4) payment blockages may be imposed under any of the provisions of
this Section 13.2(b) while the Junior Subordinated Notes shall remain outstanding.




          (c) Notice by Agent. Agent shall give written notice to each holder of Subordinated
Notes of any Senior Note Covenant Default or Senior Note Payment Default (and any acceleration of
the maturity of any Indebtedness as a result thereof) and the receipt of any notice under Section
13.2(a) or (b) immediately upon the occurrence or receipt thereof, as the case may be.




          13.3 Default in Respect of Senior Subordinated Notes.




          (a) Senior Subordinated Notes Payment Default. In the event of an Event of Default
pursuant to Section 8.1(a) with respect to any Senior Subordinated Note (a “Senior Subordinated
Notes Payment Default”) then, unless and until such Senior Subordinated Notes Payment Default
shall have been cured or waived or shall have ceased to exist, no direct or indirect payment (in
cash, property or by set-off or otherwise, except that payment may be made by delivery of Junior
Subordinated Notes) shall be made on account of the principal of, or prepayment premium, if any, or
any other amount in respect of, or interest on, any Junior Subordinated Notes, or as a sinking fund
for any Junior Subordinated Notes, or in respect of any redemption, retirement, purchase or other
acquisition of any Junior Subordinated Notes, during any period:





     (i) commencing on the date notice of such Senior Subordinated Notes Payment
Default shall have been given to Purchaser holding Junior Subordinated Notes by the
Agent and ending on the date on which such Senior Subordinated Notes Payment Default
shall have been cured or waived or shall have ceased to exist; or



72









 






     (ii) in which any judicial proceeding or any other proceeding or action
(whether judicial or otherwise) seeking to foreclose or otherwise realize on any
collateral shall be pending in respect of such Senior Subordinated Notes Payment
Default, or in which the maturity of such Senior Subordinated Notes shall have been
accelerated in respect of such Senior Subordinated Notes Payment Default and such
acceleration shall not have been annulled.



          (b) Senior Subordinated Notes Covenant Default. In the event of an Event of Default
with respect to any Senior Subordinated Note other than pursuant to Section 8.1(a) (a “Senior
Subordinated Notes Covenant Default”), then, unless and until such Senior Subordinated Notes
Covenant Default shall have been cured or waived or shall have ceased to exist, no direct or
indirect payment (in cash, property or by set-off or otherwise, except that payment may be made be
delivery of Junior Subordinated Notes) shall be made on account of the principal of, or prepayment
premium, if any, or any other amount in respect of, or interest on, any Junior Subordinated Notes,
or as a sinking fund for any Junior Subordinated Notes, or in respect of any redemption,
retirement, purchase or other acquisition of any Junior Subordinated Notes, during any period:





     (i) of one hundred eighty (180) days after written notice (a “Senior
Subordinated Notes Blocking Notice”) of such Senior Subordinated Notes Covenant
Default shall have been given to the Loan Parties and to Purchaser holding Junior
Subordinated Notes by the Agent, provided that only one (1) such Senior Subordinated
Notes Blocking Notice shall be given pursuant to the terms of this Section
13.3(b)(i) in any three hundred sixty (360) day period; or




     (ii) in which any judicial proceeding or any other proceeding or action
(whether judicial or otherwise) seeking to foreclose or otherwise realize on any
collateral shall be pending in respect of such Senior Subordinated Notes Covenant
Default, or in which an effective notice of acceleration of the maturity of such
Senior Subordinated Notes shall have been transmitted to the Loan Parties and each
of the holders of the Junior Subordinated Notes in respect of such Senior
Subordinated Notes Covenant Default and such acceleration shall not have been
annulled, or in which notice of the failure to pay such Senior Subordinated Notes
upon its final maturity shall have been transmitted to the Loan Parties and each of
the holders of the Junior Subordinated Notes and such failure shall be continuing;


provided that (A) no Senior Subordinated Notes Covenant Default that served as the basis for, or
existed at the time of, a previous Senior Subordinated Notes Blocking Notice, shall provide the
basis for a subsequent Senior Subordinated Notes Blocking Notice unless such Senior Subordinated
Notes Covenant Default has been cured or waived for a period of at least one hundred eighty (180)
consecutive days, and (B) notwithstanding the foregoing, no more than four (4) payment blockages
may be imposed under any of the provisions of this Section 13.3(b) while the Junior Subordinated
Notes shall remain outstanding.




          (c) Notice by Agent. Agent shall give written notice to each holder of Junior
Subordinated Notes of any Senior Subordinated Notes Covenant Default or Senior Subordinated Notes
Payment Default (and any acceleration of the maturity of any Indebtedness as a result



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thereof) and the receipt of any notice under Section 13.3(a) or (b) immediately upon the
occurrence or receipt thereof, as the case may be.




          13.4 Insolvency, etc. In the event of:




          (a) any insolvency, bankruptcy, receivership, liquidation, reorganization, readjustment,
composition or other similar proceeding relating to any Loan Party, its creditors or its Properties
and Facilities;




          (b) any proceeding for the liquidation, dissolution or other winding-up of any Loan Party,
voluntary or involuntary, whether or not involving insolvency or bankruptcy proceedings;




          (c) any assignment by any Loan Party for the benefit of creditors; or




          (d) any other marshalling of the assets of any Loan Party;





     (i) then, solely from the proceeds of all Accounts (as defined in the Security
Agreement) and all Inventory (as defined in the Security Agreement),



               first, all reasonable out-of-pocket costs and expenses (including, without limitation,
reasonable attorneys’ fees) of the Agent in connection with enforcing the rights of the Purchasers
under the Purchase Documents, shall be paid;



               second, all reasonable out-of-pocket costs and expenses (including, without
limitation, reasonable attorneys’ fees) of the Purchasers in connection with enforcing the rights
of the Purchasers under the Purchase Documents, shall be paid;



               third, all Revolving Notes shall be paid in full in cash before any payment or
distribution, whether in cash, securities (other than securities of any Loan Party or any other
corporation provided for by a plan of reorganization or readjustment the payment of which is
subordinated, at least to the extent provided in this Article 13 with respect to Subordinated
Notes, to the payment of all of the Revolving Notes and the Senior Term Notes at the time
outstanding and to any securities issued in respect thereof under any such plan or reorganization
or readjustment (such securities being referred to as “Other Subordinated Securities”)) or
other property shall be made to any holder of any Senior Term Notes or Subordinated Notes;



               fourth, all Senior Term A Notes shall be paid in full in cash in order of scheduled
maturity pursuant to Annex C before any payment or distribution, whether in cash,
securities (other than Other Subordinated Securities) or other property, shall be made to any
holder of any Senior Term B Notes, Senior Term C Notes or Subordinated Notes;



               fifth, all Senior Term B Notes shall be paid in full in cash in order of scheduled
maturity pursuant to Annex C before any payment or distribution, whether in cash,
securities (other than Other Subordinated Securities) or other property, shall be made to any
holder of any Senior Term C Notes or Senior Subordinated Notes;



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               sixth, all Senior Term C Notes shall be paid in full in cash before any payment or
distribution, whether in cash, securities (other than Other Subordinated Securities) or other
property, shall be made to any holder of Subordinated Notes;



               seventh, all Senior Subordinated Notes shall be paid in full in cash before any
payment or distribution, whether in cash, securities (other than securities of any Loan Party or
any other corporation provided for by a plan of reorganization or readjustment the payment of which
is subordinated, at least to the extent provided in this Article 13 with respect to Junior
Subordinated Notes, to the payment of all Senior Subordinated Notes at the time outstanding and to
any securities issued in respect thereof under any such plan of reorganization or readjustment
(such securities being referred to as “Other Subordinated Junior Notes”)) or other property
shall be made to any holder of any Junior Subordinated Notes;



               and eighth, all Junior Subordinated Notes shall be paid in full in cash; and



          (ii) then, from the proceeds of all Collateral (as defined in the Security Agreement) other
than the Collateral described in clause (i) above,




               first, to the extent not paid pursuant to clause “first” of Section 13.4(d)(i) above,
all reasonable out-of-pocket costs and expenses (including, without limitation, reasonable
attorneys’ fees) of the Agent in connection with enforcing the rights of Purchasers under the
Purchase Documents, shall be paid;



               second, to the extent not paid pursuant to clause “second” of Section 13.4(d)(i)
above, all reasonable out-of-pocket costs and expenses (including, without limitation, reasonable
attorneys’ fees) of Purchasers in connection with enforcing the rights of Purchasers under the
Purchase Documents, shall be paid;



               third, all Senior Term A Notes shall be paid in full in cash before any payment or
distribution, whether in cash, securities (other than Other Subordinated Securities) or other
property shall be made to any holder of any Senior Term B Notes, Senior Term C Notes, Revolving
Notes or Subordinated Notes;



               fourth, all Senior Term B Notes shall be paid in full in cash before any payment or
distribution, whether in cash, securities (other than Other Subordinated Securities) or other
property shall be made to any holder of any Senior Term C Notes, Revolving Notes or Subordinated
Notes;



               fifth, all Senior Term C Notes shall be paid in full in cash before any payment or
distribution, whether in cash, securities (other than Other Subordinated Securities) or other
property shall be made to any holder of any Revolving Notes or Subordinated Notes;



               sixth, to the extent not paid in full in cash pursuant to clause “first” of Section
13.4(i) above, all Revolving Notes shall be paid in full in cash before any payment or
distribution, whether in cash, securities (other than Other Subordinated Securities) or other
property shall be made to any holder of any Subordinated Notes;



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               seventh, all Senior Subordinated Notes shall be paid in full in cash before any
payment or distribution, whether in cash, securities (other than Other Subordinated Junior Notes)
or other property shall be made to any holder of any Junior Subordinated Notes;



               and eighth, all Junior Subordinated Notes shall be paid in full in cash.


Solely with respect to the proceeds of all Accounts and all Inventory (each as defined in the
Security Agreement), any payment or distribution, whether made in cash, securities (other than
Other Subordinated Securities or Other Subordinated Junior Notes) or other property, and whether
made directly or indirectly that would otherwise (but for Section 13.4(d)(i)) be payable or
deliverable in respect of the Senior Term Notes or the Subordinated Notes, shall be paid or
delivered directly first to the holders of the Revolving Notes in accordance with the
priorities then existing among such holders until all Revolving Notes shall have been paid in full
in cash, second to the holders of the Senior Term A Notes in order of maturity pursuant to
Annex C until all Senior Term A Notes shall have been paid in full in cash, third
to the holders of the Senior Term B Notes in order of maturity pursuant to Annex C until
all Senior Term B Notes shall have been paid in full in cash, fourth to the holders of the
Senior Term C Notes in order of maturity until all Senior Term C Notes shall have been paid in full
in cash, fifth to the holders of Senior Subordinated Notes in accordance with the
priorities then existing among such holders until all Senior Subordinated Notes shall have been
paid in full in cash, and sixth to the holders of Junior Subordinated Notes in accordance
with the priorities then existing among such holders until all Junior Subordinated Notes shall have
been paid in full in cash.



With respect to the proceeds of all Collateral other than Accounts and Inventory (each as defined
in the Security Agreement), any payment or distribution, whether made in cash, securities (other
than Other Subordinated Securities or Other Subordinated Junior Notes) or other property, and
whether made directly or indirectly that would otherwise (but for Section 13.4(d)(ii)) be payable
or deliverable in respect of Subordinated Notes shall be paid or delivered directly first
to the holders of the Senior Term A Notes in order of maturity pursuant to Annex C until
all Senior Term A Notes shall have been paid in full in cash, second to the holders of the
Senior Term B Notes in order of maturity pursuant to Annex C until all Senior Term B Notes
shall have been paid in full in cash, third to the holders of the Senior Term C Notes in
order of maturity until all Senior Term C Notes shall have been paid in full in cash,
fourth to the extent not paid in full in cash pursuant to Section 13.4(d)(i) above and the
immediately preceding paragraph, to the holders of the Revolving Notes, fifth to the
holders of Senior Subordinated Notes in accordance with the priorities then existing among such
holders until all Senior Subordinated Notes shall have been paid in full in cash, and sixth
to the holders of Junior Subordinated Notes in accordance with the priorities then existing among
such holders until all Junior Subordinated Notes shall have been paid in full in cash.




          13.5 Limited Suspension of Remedies of Holders of Subordinated Notes. At any time
during which payment on the Subordinated Notes shall be prohibited pursuant to the terms of
Sections 13.2 or 13.3, no holder of Subordinated Notes (or the Agent in respect thereof) may:




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          (a) declare or join in the declaration of any Subordinated Notes to be due and payable or
otherwise accelerate the maturity of the principal of the Subordinated Notes, accrued interest
thereon or prepayment premium or other amounts due thereunder, or




          (b) commence any administrative, legal or equitable action against the Loan Parties;




provided, however, that the limitations contained in clauses (a) and (b) above shall terminate with
respect to such period on the earlier of (i) the date on which the Agent or any holders of the
Senior Loans accelerates the maturity of the Senior Loans pursuant to Section 13.2 or, with respect
to the Junior Subordinated Notes, the date on which the holders of the Senior Subordinated Notes
accelerate the maturity of the Senior Subordinated Notes pursuant to Section 13.3 and (ii) the date
that is the one hundred eightieth (180th) day after the date of delivery of written notice by Agent
to the holders of the Subordinated Notes or by Agent to the holders of the Junior Subordinated
Notes, as the case may be, of the occurrence and continuance of a Default or Event of Default under
this Agreement.




          13.6 Proof of Claim. Each holder of Subordinated Notes irrevocably authorizes and
empowers the holders of Senior Loans and each holder of Junior Subordinated Notes irrevocably
authorizes and empowers the holders of Senior Subordinated Notes in any proceeding under any
federal or state bankruptcy or insolvency law, or any other reorganization, dissolution or
liquidation proceedings of the Loan Parties to file a proof of claim on behalf of such holder of
Subordinated Notes or Junior Subordinated Notes, as the case may be, with respect to the
Subordinated Notes or the Junior Subordinated Notes, as the case may be, and the other amounts
owing hereunder and the Notes if (and only if) such holder of Subordinated Notes or Junior
Subordinated Notes, as the case may be, fails to file proof of its claims prior to ten (10) days
before the expiration of the time period during which such proof of claim must be filed. Neither
this Section 13.6, nor any other provisions hereof, shall be construed to give the holders of
Senior Loans any right to vote any Subordinated Notes or the holders of Senior Subordinated Notes
any right to vote any Junior Subordinated Notes, or any related claim, whether in connection with
any resolution, arrangement, plan of reorganization, compromise, settlement, election, or
otherwise.




          13.7 Acceleration of Subordinated Notes. In the event that any Subordinated Notes
shall be declared due and payable as the result of the occurrence of any one or more Events of
Default in respect thereof, under circumstances when the terms of Section 13.2 do not prohibit
payment on Subordinated Notes, no payment shall be made in respect of any Subordinated Notes unless
and until all Senior Loans shall have been paid in full in cash or such declaration and its
consequences shall have been rescinded and all such Defaults and Events of Default shall have been
remedied or waived or shall have ceased to exist. In the event that any Junior Subordinated Notes
shall be declared due and payable as the result of the occurrence of any one or more Events of
Default in respect thereof, under circumstances when the terms of Section 13.3 do not prohibit
payment on Junior Subordinated Notes, no payment shall be made in respect of any Junior
Subordinated Notes unless and until all Senior Subordinated Notes shall have been paid in full in
cash or such declaration and its consequences shall have been rescinded and all such Defaults and
Events of Default shall have been remedied or waived or shall have ceased to exist.




77









 








          13.8 Turnover of Payments.




          (a) If:





     (i) any payment or distribution shall be collected or received by any holders
of Subordinated Notes in contravention of any of the terms of this Article 13 and
prior to the payment in full in cash of the Senior Loans at the time outstanding;
and




     (ii) the Agent shall have notified such holders of Subordinated Notes, within
one hundred eighty (180) days of any such payment or distribution, of the facts by
reason of which such collection or receipt so contravenes this Article 13;


then such holders of Subordinated Notes will deliver such payment or distribution, to the extent
necessary to pay all such Senior Loans in full in cash, to the holders of such Senior Loans and,
until so delivered, the same shall be held in trust by such holders of Subordinated Notes as the
property of the holders of such Senior Loans. If after any amount is delivered pursuant to this
Section 13.8(a), whether or not such amounts have been applied to the payment of the Senior Loans,
and the outstanding Senior Loans shall thereafter be paid in full in cash by the Loan Parties or
otherwise other than pursuant to this Section 13.8(a), the holders of Senior Loans shall return to
such holders of Subordinated Notes an amount equal to the amount delivered to such holders of
Senior Loans pursuant to this Section 13.8(a). Any optional prepayment made in respect of the
Subordinated Notes that violates this Agreement shall also be subject to this Section 13.8(a).




          (b) If:





     (i) any payment or distribution shall be collected or received by any holders
of Junior Subordinated Notes in contravention of any of the terms of this Article 13
and prior to the payment in full in cash of the Senior Subordinated Notes at the
time outstanding; and




     (ii) the Agent shall have notified such holders of Junior Subordinated Notes,
within one hundred eighty (180) days of any such payment or distribution, of the
facts by reason of which such collection or receipt so contravenes this Article 13;


then such holders of Junior Subordinated Notes will deliver such payment or distribution, to the
extent necessary to pay all such Senior Subordinated Notes in full in cash, to the holders of such
Senior Subordinated Notes and, until so delivered, the same shall be held in trust by such holders
of Junior Subordinated Notes as the property of the holders of such Senior Subordinated Notes. If
after any amount is delivered to the holders of Senior Subordinated Notes pursuant to this Section
13.8(b), whether or not such amounts have been applied to the payment of Senior Subordinated Notes,
and the outstanding Senior Subordinated Notes shall thereafter be paid in full in cash by the Loan
Parties or otherwise other than pursuant to this Section 13.8(b), the holders of Senior
Subordinated Notes shall return to such holders of Junior Subordinated Notes an amount equal to the
amount delivered to such holders of Senior Subordinated Notes pursuant


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to this Section 13.8(b). Any optional prepayment made in respect of the Junior Subordinated Notes
that violates this Agreement shall also be subject to this Section 13.8(b).




          13.9 Obligations Not Impaired.




          (a) No Impairment of Senior Loans or Senior Subordinated Note. No right of any
present or future holder of any Senior Loans and no right of any present or future holder of any
Senior Subordinated Notes to enforce the subordination as herein provided shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of the Loan Parties or by
any act or failure to act, in good faith, by any such holder, or by any non-compliance by the Loan
Parties with the terms, provisions and covenants of this Agreement, regardless of any knowledge
thereof any such holder may have or be otherwise charged with.




          (b) No Impairment of Subordinated Notes. Nothing contained in this Article 13 shall
impair, as between the Loan Parties and any holder of Subordinated Notes, the obligation of the
Loan Parties to pay to such holder the principal thereof and prepayment premium, if any, and
interest thereon as and when the same shall become due and payable in accordance with the terms of
this Agreement, or prevent any holder of any Subordinated Notes from exercising all rights, powers
and remedies otherwise permitted by applicable law or under this Agreement all subject to the
rights of the holders of the Senior Loans to receive cash, securities or other property otherwise
payable or deliverable to the holders of Subordinated Notes.




          13.10 Payment of Debt; Subrogation. Upon the payment in full of all Senior Loans in
cash and termination of the Revolving Loan Commitment, the holders of Subordinated Notes shall be
subrogated to all rights of any holder of Senior Loans to receive any further payments or
distributions applicable thereto until the Subordinated Notes shall have been paid in full, and
such payments or distributions received by the holders of Subordinated Notes by reason of such
subrogation, of cash, securities or other property which otherwise would be paid or distributed to
the holders of Senior Loans, shall, as between the Loan Parties and its creditors other than the
holders of Senior Loans, on the one hand, and the holders of Subordinated Notes, on the other hand,
be deemed to be a payment by the Loan Parties on account of Senior Loans and not on account of
Subordinated Notes. Upon the payment in full of all Senior Subordinated Notes in cash, the holders
of Junior Subordinated Notes shall be subrogated to all rights of any holder of Senior Subordinated
Notes to receive any further payments or distributions applicable to the Senior Subordinated Notes
until the Junior Subordinated Notes shall have been paid in full, and such payments or
distributions received by the holders of Junior Subordinated Notes by reason of such subrogation,
of cash, securities or other property which otherwise would be paid or distributed to the holders
of Senior Subordinated Notes, shall, as between the Loan Parties and its creditors other than the
holders of Senior Subordinated Notes, on the one hand, and the holders of Junior Subordinated
Notes, on the other hand, be deemed to be a payment by the Loan Parties on account of Senior
Subordinated Notes and not on account of Junior Subordinated Notes.




          13.11 Reliance of Holders of Senior Loans; Reliance of Holders of Senior Subordinated
Notes; Amendments.




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          (a) Reliance of Holders of Senior Loans. Each holder of Subordinated Notes by its
acceptance thereof shall be deemed to acknowledge and agree that the foregoing subordination
provisions are, and are intended to be, an inducement to and a consideration of each holder of any
Senior Loans, whether such financing was created or acquired before or after the creation of
Subordinated Notes, to acquire and hold, or to continue to hold, such Senior Loans, and such holder
of Senior Loans shall be deemed conclusively to have relied on such subordination provisions in
acquiring and holding, or in continuing to hold, such Senior Loans.




          (b) Reliance of Holders of Senior Subordinated Notes. Each holder of Junior
Subordinated Notes by its acceptance thereof shall be deemed to acknowledge and agree that the
foregoing subordination provisions are, and are intended to be, an inducement to and a
consideration of each holder of any Senior Subordinated Notes, whether such Senior Subordinated
Note was created or acquired before or after the creation of Junior Subordinated Notes, to acquire
and hold, or to continue to hold, such Senior Subordinated Notes, and such holder of Senior
Subordinated Notes shall be deemed conclusively to have relied on such subordination provisions in
acquiring and holding, or in continuing to hold, such Senior Subordinated Notes.




          (c) Amendments. Notwithstanding anything to the contrary herein, no amendment, waiver
or other modification of this Article 13 shall be effective unless such amendment, waiver or other
modification shall have been approved in writing by Agent and all of the holders of Senior Loans
and Subordinated Notes outstanding at the time of such amendment, waiver or other modification.




ARTICLE 14

MISCELLANEOUS




          14.1 Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns, except that (i) the Loan
Parties may not assign or transfer their rights hereunder or any interest herein or delegate their
duties hereunder and (ii) Purchasers shall have the right to assign their rights hereunder and
under the Securities in accordance with Article 6.




          14.2 Modifications and Amendments. The provisions of this Agreement may be modified,
waived or amended, but only by a written instrument signed by each of the Loan Parties to be bound
thereby, and to the extent such modification, amendment or waiver relates (i) to the Notes, such
instrument must be executed by Agent on behalf of Purchasers upon satisfaction of the conditions
set forth in Section 9.10, (ii) to the Warrants or the Underlying Common Stock, such instrument
must be executed by the holders of a seventy-five percent (75%) of the Warrant Shares and (iii) to
the Preferred Stock, such instrument must be executed by the holders of a seventy-five percent
(75%) of the Preferred Stock.




          14.3 No Implied Waivers; Cumulative Remedies; Writing Required. No delay or failure
in exercising any right, power or remedy hereunder shall affect or operate as a waiver thereof; nor
shall any single or partial exercise thereof or any abandonment or discontinuance of steps to
enforce such a right, power or remedy preclude any further exercise thereof or of any other right,
power or remedy. The rights and remedies hereunder are
cumulative and not



80









 






exclusive of any rights or remedies that Agent or Purchasers or any holder
of Notes, Warrants or Warrant Shares would otherwise have. Any waiver, permit, consent or approval
of any kind or character of any breach or default under this Agreement or any such waiver of any
provision or condition of this Agreement must be in writing, satisfy the conditions set forth in
Section 9.10 and shall be effective only to the extent in such writing specifically set forth.




          14.4 Reimbursement of Expenses. The Loan Parties jointly and severally agree to pay
or reimburse Agent and Purchasers upon demand for all fees and expenses incurred or payable by
Agent or Purchasers (including, without limitation, reasonable fees and expenses of special counsel
for Agent or any Purchaser and changes for services performed for Purchaser’s by Agents’ internal
auditing staff), from time to time (i) arising in connection with the negotiation, preparation and
execution of this Agreement, the Notes, the other Purchase Documents and all other instruments and
documents to be delivered hereunder or thereunder or arising in connection with the transactions
contemplated hereunder or thereunder, (ii) relating to any amendments, waivers or consents pursuant
to the provisions hereof or thereof, and (iii) arising in connection with the enforcement of this
Agreement or collection of any Note.




          14.5 Holidays. Whenever any payment or action to be made or taken hereunder or under
the Notes shall be stated to be due on a day that is not a Business Day, such payment or action
shall be made or taken on the next following Business Day, and such extension of time shall be
included in computing interest or fees, if any, in connection with such payment or action.




          14.6 Notices. All notices and other communications given to or made upon any party
hereto in connection with this Agreement shall, except as otherwise expressly herein provided, be
in writing (including telecopy, but in such case, a confirming copy will be sent by another
permitted means) and mailed via certified mail, telecopied or delivered by guaranteed overnight
parcel express service or courier to the respective parties, as follows:



to the Loan Parties:



IST Acquisitions, Inc.

c/o American Capital Strategies, Ltd.,

461 Fifth Avenue, 26th Floor,

New York, New York 10017

Attn:  Robert Klein

           Chairman

Facsimile: (212) 213-2060



with a copy to:



Imaging and Sensing Technology Corporation

100 IST Center

Horseheads, New York 14845

Attn: Donald Hartman

Facsimile: (607) 562-4300




81









 







to Agent:



American Capital Strategies, Ltd.

2 Bethesda Metro Center, 14th Floor

Bethesda, Maryland 20814

Attn: Compliance Officer

Facsimile: (301) 654-6714



with a copy to:



American Capital Strategies, Ltd.,

461 Fifth Avenue, 26th Floor,

New York, New York 10017

Attn:  Robert Klein

           Managing Director and Principal

Facsimile: (212) 213-2060



with a copy to:



Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153

Attn: Christopher Aidun, Esq.

Facsimile: (212) 310-8127



to Purchasers:



As set forth on Annex A



or in accordance with any subsequent written direction from the recipient party to the sending
party. All such notices and other communications shall, except as otherwise expressly herein
provided, be effective upon delivery if delivered by courier or overnight parcel express service;
in the case of certified mail, three (3) Business Days after the date sent; or in the case of
telecopy, when received.




          14.7 Survival. All representations, warranties, covenants and agreements of the Loan
Parties contained herein or made in writing in connection herewith shall survive the execution and
delivery of this Agreement and the purchase of the Securities and shall continue in full force and
effect so long as any Securities are outstanding and until payment in full of all of the Loan
Parties’ obligations hereunder or thereunder. All obligations relating to indemnification
hereunder shall survive any termination of this Agreement and shall continue for the length of any
applicable statute of limitations.




          14.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.




          14.9 Jurisdiction, Consent to Service of Process.




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          (a) THE LOAN PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMIT, FOR THEMSELVES AND THEIR
PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT OF THE
UNITED STATES OF AMERICA SITTING IN THE STATE OF NEW YORK, AND ANY APPELLATE COURT FROM ANY
THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR ANY
OTHER PURCHASE DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW
YORK OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES
THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN
OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN
THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT AGENT AND PURCHASERS MAY OTHERWISE HAVE TO BRING ANY
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE NOTES OR ANY OTHER PURCHASE DOCUMENT AGAINST
THE LOAN PARTIES OR THEIR PROPERTIES IN THE COURTS OF ANY JURISDICTION.




          (b) THE LOAN PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT THEY
MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES
OR ANY OTHER PURCHASE DOCUMENT IN ANY NEW YORK OR FEDERAL COURT. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.




          (c) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER
PROVIDED FOR NOTICES IN SECTION 14.6 HEREOF. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF
ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.




          14.10 Jury Trial Waiver. THE LOAN PARTIES HEREBY IRREVOCABLY WAIVE ANY RIGHT TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION WITH
THIS AGREEMENT, OR (II) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO
THIS AGREEMENT AND AGREES THAT ANY SUCH ACTION OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.




          14.11 Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law, but if any



83









 






provision of this Agreement is held to be prohibited by or invalid under applicable law in any
jurisdiction, such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating any other provision of this Agreement.




          14.12 Headings. Article, section and subsection headings in this Agreement are
included for convenience of reference only and shall not constitute a part of this Agreement for
any other purpose.




          14.13 Indemnity. The Loan Parties hereby agree to indemnify, defend and hold harmless
Agent and Purchasers and their officers, directors, employees, agents and representatives, and
their respective successors and assigns in connection with any losses, claims, damages, liabilities
and expenses, including reasonable attorneys’ fees, to which Agent or any Purchaser may become
subject (other than as a result of the gross negligence or willful misconduct of any such Person),
insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of
or by reason of any investigation, litigation or other proceedings related to or resulting from any
act of, or omission by, the Loan Parties or their Affiliates or any officer, director, employee,
agent or representative of the Loan Parties or their Affiliates with respect to the Transactions,
the Securities, Charter Documents, the Bylaws or any agreements entered into in connection with any
such agreements, instruments or documents and to reimburse Agent and Purchasers and each such
Person and Affiliate, upon demand, for any legal or other expenses incurred in connection with
investigating or defending any such loss, claim, damage, liability, expense or action. To the
extent that the foregoing undertakings may be unenforceable for any reason, the Loan Parties agree
to make the maximum contribution to the payment and satisfaction of indemnified liabilities set
forth in this Section 14.13 that is permissible under applicable law.




          14.14 Environmental Indemnity. The Loan Parties, and their successors and assigns,
hereby release and discharge, and agree to defend, indemnify and hold harmless, Agent, Purchasers
and their Affiliates (including their partners, subsidiaries, customers, guests, and invitees, and
the successors and assigns of all of the foregoing, and their respective officers, employees and
agents) from and against any and all Environmental Liabilities, whenever and by whomever asserted,
to the extent that such Environmental Liabilities are based upon, or otherwise relate to: (i) any
Condition at any time in, at, on, under, a part of, involving or otherwise related to the
Properties and Facilities (including any of the properties, materials, articles, products, or other
things included in or otherwise a part of the Properties and Facilities); (ii) any action or
failure to act of any Person, including any prior owner or operator of the Properties and
Facilities (including any of the properties, materials, articles, products, or other things
included in or otherwise a part of the Properties and Facilities), involving or otherwise related
to the Properties and Facilities or operations of the Loan Parties; (iii) the Management of any
Pollutant, material, article or product (including Management of any material, article or product
containing a Pollutant) in any physical state and at any time, involving or otherwise related to
the Properties and Facilities or any property covered by clause (iv) (including Management either
from the Properties and Facilities or from any property covered by clause (iv), and Management to,
at, involving or otherwise related to the Properties and Facilities or any property covered by
clause (iv)); (iv) Conditions, and actions or failures to act, in, at, on, under, a part of,
involving or otherwise related to any property other than the Properties and Facilities, which
property was, at or prior to the Closing Date, (I) acquired, held, sold, owned, operated,



84









 






leased, managed, or divested by, or otherwise associated with, (A) the Loan Parties, (B) any
of the Loan Parties’ Affiliates, or (C) any predecessor or successor organization of those
identified in (A) or (B); or (II) engaged in any tolling, contract manufacturing or processing, or
other similar activities for, with, or on behalf of the Loan Parties; (v) any violation of or
noncompliance with or the assertion of any Lien under the Environmental Laws, (vi) the presence of
any toxic or hazardous substances, wastes or contaminants on, at or from the past and present
properties and facilities, including, without limitation, human exposure thereto; (vii) any spill,
release, discharge or emission affecting the past and present properties and facilities, whether or
not the same originates or emanates from such properties and facilities or any contiguous real
estate, including, without limitation, any loss of value of such properties and facilities as a
result thereof; or (viii) a misrepresentation in any representation or warranty or breach of or
failure to perform any covenant made by the Loan Parties in this Agreement. This indemnity and
agreement to defend and hold harmless shall survive any termination or satisfaction of the Notes or
the sale, assignment or foreclosure thereof or the sale, transfer or conveyance of all or part of
the past and present properties and facilities or any other circumstances that might otherwise
constitute a legal or equitable release or discharge, in whole or in part, of the Loan Parties
under the Notes.




          14.15 Counterparts. This Agreement may be executed in any number of counterparts and
by either party hereto on separate counterparts, each of which, when so executed and delivered,
shall be an original, but all such counterparts shall together constitute one and the same
instrument.




          14.16 Integration. This Agreement and the other Purchase Documents set forth the
entire understanding of the parties hereto with respect to all matters contemplated hereby and
supersede all previous agreements and understandings among them concerning such matters. No
statements or agreements, oral or written, made prior to or at the signing hereof, shall vary,
waive or modify the written terms hereof. This Agreement shall amend and restate the Existing
Purchase Agreement in its entirety, and the initial agreement shall have no further effect as of
the date hereof.




* * *





85











 





SIGNATURE PAGE TO

AMENDED AND RESTATED

NOTE AND EQUITY PURCHASE AGREEMENT




          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year
first above written.




	 	 	 	 	 
	 	LOAN PARTIES:





IST ACQUISITIONS, INC.

 	 
	 	By:  	/s/ Donald Hartman 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	IMAGING AND SENSING TECHNOLOGY CORPORATION

 	 
	 	By:  	/s/ Donald Hartman 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	IST CONAX NUCLEAR, INC.

 	 
	 	By:  	/s/ Donald Hartman 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	I.S. TECHNOLOGY de PUERTO RICO, INC.

 	 
	 	By:  	/s/ Donald Hartman 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	IST INSTRUMENTS, INC.

 	 
	 	By:  	/s/ Donald Hartman 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	IMAGING AND SENSING TECHNOLOGY INTERNATIONAL CORP.

 	 
	 	By:  	/s/ Donald Hartman 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 



86









 








	 	 	 	 	 
	 	QUADTEK, INC.

 	 
	 	By:  	/s/ Donald Hartman 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	AGENT:



AMERICAN CAPITAL FINANCIAL SERVICES, INC.

 	 
	 	By:  	/s/ Robert Klein 	 
	 	 	Name:  	Robert Klein 	 
	 	 	Title:  	Managing Director	 
	 
	 	PURCHASERS:




AMERICAN CAPITAL STRATEGIES, LTD.

 	 
	 	By:  	/s/ Robert Klein 	 
	 	 	Name:  	Robert Klein 	 
	 	 	Title:  	Managing Director	 
	 
	 	ACS FUNDING TRUST I

 	 
	 	By:  	AMERICAN
CAPITAL STRATEGIES, LTD.,
 its Servicer 	 
	 	 	 
	 	By:  	/s/ Robert Klein 	 
	 	 	Name:  	Robert Klein 	 
	 	 	Title:  	Managing Director 	 
	 
	 	COLTS TRUST 2004-11

 	 
	 	By:  	WACHOVIA BANK, NATIONAL
ASSOCIATION, its
Servicer
 	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	Kenneth Gacevich 	 
	 	 	Title:  	Vice President 	 
	 





 




			
	1	 	CoLTS Trust 2004-1 did not consent to the amendments
effected by the Amended and Restated Note and Equity Purchase Agreement and
thus is not a signatory hereto.




87









 










	 	 	 	 	 
	 	WACHOVIA BANK, NATIONAL ASSOCIATION

 	 
	 	By:  	/s/ Kenneth Gacevich 	 
	 	 	Name:  	Kenneth Gacevich 	 
	 	 	Title:  	Vice President 	 



88









 






	 	 	 	 	 



ANNEX




	 	 	 
	Annex A
	 	Purchasers and Payment Information

	Annex B
	 	Purchaser Allocations

	Annex C
	 	Amortization Schedule

	Annex D
	 	Maximum Debt to EBITDA Ratio

	Annex E
	 	Minimum Interest Coverage Ratio

	Annex F
	 	Minimum EBITDA







SCHEDULES




	 	 	 
	“Organizational Schedule”
	 	(Schedule 5.1(a))

	“Capitalization Schedule”
	 	(Schedule 5.1(d)(ii))

	“Litigation Schedule”
	 	(Schedule 5.1(j))

	“Environmental Schedule”
	 	(Schedule 5.1(l))

	“Properties Schedule”
	 	(Schedule 5.1(q))

	“Intellectual Property Schedule”
	 	(Schedule 5.1(r))

	“Undisclosed Liabilities Schedule”
	 	(Schedule 5.1(w))

	“Permitted Indebtedness Schedule”
	 	(Schedule 7.2(a))

	“Permitted Encumbrances Schedule”
	 	(Schedule 7.2(b))







EXHIBITS




	 	 	 
	EXHIBIT A-1.1
	 	Form of Senior Term A Note

	EXHIBIT A-1.2
	 	Form of Senior Term B Note

	EXHIBIT A-1.3
	 	Form of Senior Term C Note

	EXHIBIT A-2
	 	Form of Senior Subordinated Note

	EXHIBIT A-3
	 	Form of Junior Subordinated Note

	EXHIBIT A-4
	 	Form of Revolving Note

	EXHIBIT B
	 	Form of Warrants







89









 






	 	 	 
	EXHIBIT C
	 	Form of Security Agreement

	EXHIBIT D
	 	Form of Collateral Assignment

	EXHIBIT E
	 	Form of Pledge Agreement

	EXHIBIT E-1
	 	Form of French Pledge Agreement

	EXHIBIT F
	 	Form of Compliance Certificate

	EXHIBIT G
	 	Form of Investment Banking Agreement

	EXHIBIT H
	 	Request for Borrowing

	EXHIBIT I
	 	Stockholders Agreement







90









 






ANNEX A

INFORMATION RELATING TO PURCHASERS




Name and Address

of Initial Purchaser




AMERICAN CAPITAL STRATEGIES, LTD.

2 Bethesda Metro Center

14th Floor

Bethesda, MD 20814



Certain of the Notes have or will be assigned or sold to the following entities:




ACS FUNDING TRUST I

c/o AMERICAN CAPITAL STRATEGIES, LTD.,

as Servicer

2 Bethesda Metro Center, 14th Floor

Bethesda, MD 20814




WACHOVIA BANK, NATIONAL ASSOCIATION

One Wachovia Center, Mail Code: NC0610

Charlotte, NC 28288

Attn: William J. Brown




COLTS TRUST 2004-1

c/o Wachovia Bank, National Association

One Wachovia Center

Mail Code: NC0600

301 South College Street

Charlotte, NC 28288

Attn.: Kenneth Gacevich / Dominic Barakat





	(1)	 	All payments:




If by wire:





	 	 	Bank: Wells Fargo Bank, N.A.

ABA#: XXXXXXXXX

Account Name: ACS Funding Trust I

Account #: XXXX-XXXXXX
	 
	 	 	Bank: Wachovia Bank, National Association

ABA#: XXXXXXXXX

Name: Incoming Wires Account

Account #: XXXXXXXXXXXXX

Account Name: COLTS Collateral

FFC: 1076022995

Attn: CDO Group




If by mail:





	 	 	ACS Funding Trust I

NW 7941

P.O. Box 1450

Minneapolis, MN 55485-7941




If by overnight parcel service

(e.g., FedEx, UPS, etc):





	 	 	NW 7941

c/o Regular ACS Funding Trust I

1350 Energy Lane, Suite 200

St. Paul, MN 55108






	 	 	with sufficient information

to identify the source and

application of such funds.




** All check should be made payable to “ACS Funding Trust I”





	(2)	 	All notices of payments and
written confirmations of
such wire transfers:
	 
	 	 	American Capital Strategies, Ltd., as Servicer

2 Bethesda Metro Center, 14th Floor

Bethesda, Maryland 20814

Attn: Comptroller

Facsimile: (301) 654-6714






	(3)	 	All other communications:
	 
	 	 	If regarding any Note:
	 
	 	 	American Capital Strategies, Ltd., as Servicer

2 Bethesda Metro Center, 14th Floor

Bethesda, Maryland 20814

Attn: Compliance Officer

Facsimile: (301) 654-6714
	 
	 	 	If regarding the Senior Term A Notes:
	 
	 	 	Wachovia Bank, National Association

One Wachovia Center, Mail Code: NC0610

Charlotte, NC 28288

Attn: William J. Brown







91









 








ANNEX B




Purchaser Allocations




	 	 	 	 	 
	Purchaser	 	Allocation	 
	 	 	 	 	 
	American Capital Strategies, Ltd.
	 	 	100%*	 








 




			
	*	 	The outstanding principal amount of the $15,000,000 Senior Term A Notes will be sold to Wachovia
Bank, National Association immediately after the Closing Date.




92









 










ANNEX C





Note Repayment Schedule



Senior Term A Notes




	 	 	 	 	 
	Payment Date	 	Payment Amount	 
	August 31, 2004
	 	$	312,500	 
	November 30, 2004
	 	$	312,500	 
	February 28, 2005
	 	$	312,500	 
	May 31, 2005
	 	$	312,500	 
	August 31, 2005
	 	$	500,000	 
	November 30, 2005
	 	$	500,000	 
	February 28, 2006
	 	$	500,000	 
	May 31, 2006
	 	$	500,000	 
	August 31, 2006
	 	$	750,000	 
	November 30, 2006
	 	$	750,000	 
	February 28, 2007
	 	$	750,000	 
	May 31, 2007
	 	$	750,000	 
	August 31, 2007
	 	$	1,000,000	 
	November 30, 2007
	 	$	1,000,000	 
	February 28, 2008
	 	$	1,000,000	 
	May 31, 2008
	 	$	1,000,000	 
	August 31, 2008
	 	$	1,187,500	 
	November 30, 2008
	 	$	1,187,500	 
	February 28, 2009
	 	$	1,187,500	 
	May 24, 2009
	 	$1,187,500 (plus any remaining unpaid outstanding amounts owing)






Senior Term B Notes




	 	 	 	 	 
	Payment Date	 	Payment Amount	 
	August 31, 2004
	 	$	25,000	 
	November 30, 2004
	 	$	25,000	 
	February 28, 2005
	 	$	25,000	 
	May 31, 2005
	 	$	25,000	 
	August 31, 2005
	 	$	25,000	 
	November 30, 2005
	 	$	25,000	 
	February 28, 2006
	 	$	25,000	 
	May 31, 2006
	 	$	25,000	 
	August 31, 2006
	 	$	25,000	 
	November 30, 2006
	 	$	25,000	 
	February 28, 2007
	 	$	25,000	 
	May 31, 2007
	 	$	25,000	 
	August 31, 2007
	 	$	25,000	 
	November 30, 2007
	 	$	25,000	 
	February 28, 2008
	 	$	25,000	 
	May 31, 2008
	 	$	25,000	 






93









 






	 	 	 	 	 
	Payment Date	 	Payment Amount	 
	August 31, 2008
	 	$	25,000	 
	November 30, 2008
	 	$	25,000	 
	February 28, 2009
	 	$	25,000	 
	May 31, 2009
	 	$	25,000	 
	August 31, 2009
	 	$	25,000	 
	November 30, 2009
	 	$	25,000	 
	February 28, 2010
	 	$	25,000	 
	May 24, 2010
	 	$25,000 (plus any remaining unpaid outstanding amounts owing)






94









 






ANNEX D





Maximum Debt to EBITDA Ratio




	 	 	 	 	 
	July 04
	 	 	6.00	 
	Oct. 04
	 	 	6.00	 
	Jan. 05
	 	 	6.00	 
	April 05
	 	 	6.25	 
	 
	July 05
	 	 	6.00	 
	Oct. 05
	 	 	5.75	 
	Jan. 06
	 	 	5.50	 
	April 06
	 	 	5.25	 
	 
	July 06
	 	 	5.00	 
	Oct. 06
	 	 	4.75	 
	Jan. 07
	 	 	4.75	 
	April 07
	 	 	4.50	 
	 
	July 07
	 	 	4.50	 
	Oct. 07
	 	 	4.25	 
	Jan. 08
	 	 	4.00	 
	April 08
	 	 	4.00	 







95









 






	 	 	 	 	 





ANNEX E






Minimum Interest Coverage Ratio





	 	 	 	 	 
	July 04
	 	 	1.90	 
	Oct. 04
	 	 	1.90	 
	Jan. 05
	 	 	1.90	 
	April 05
	 	 	1.90	 
	 
	July 05
	 	 	1.90	 
	Oct. 05
	 	 	2.00	 
	Jan. 06
	 	 	2.10	 
	April 06
	 	 	2.20	 
	 
	July 06
	 	 	2.50	 
	Oct. 06
	 	 	2.50	 
	Jan. 07
	 	 	2.50	 
	April 07
	 	 	2.75	 
	 
	July 07
	 	 	2.75	 
	Oct. 07
	 	 	3.00	 
	Jan. 08
	 	 	3.00	 
	April 08
	 	 	3.00	 







96









 






	 	 	 	 	 





ANNEX F





Minimum EBITDA




	 	 	 	 	 
	July 04
	 	 	1,000,000	 
	Oct. 04
	 	 	2,250,000	 
	Jan. 05
	 	 	3,250,000	 
	April 05
	 	 	4,500,000	 
	 
	July 05
	 	 	4,500,000	 
	Oct. 05
	 	 	4,500,000	 
	Jan. 06
	 	 	5,000,000	 
	April 06
	 	 	5,000,000	 
	 
	July 06
	 	 	5,500,000	 
	Oct. 06
	 	 	5,500,000	 
	Jan. 07
	 	 	6,000,000	 
	April 07
	 	 	6,000,000	 
	 
	July 07
	 	 	6,500,000	 
	Oct. 07
	 	 	6,500,000	 
	Jan. 08
	 	 	7,000,000	 
	April 08
	 	 	7,000,000	 







97









 





SCHEDULES






 









 








Schedule 5.1(a)




Organization Schedule


5.1(a). Borrower is qualified to do business only in Texas.



5.1(d)(iii).




	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Authorized	 	 	 	 
	Name	 	Jurisdiction	 	Shares/Type	 	Par Value	 	Issued Shares
	Parent

	 	Delaware
	 	125,000 Class A

Common Stock
	 	$.001/share
	 	[                    ] Class A

Common Stock

	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	125,000 Class B

Common Stock
	 	$.001/share	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	100,000 Preferred

Stock
	 	$.001/share
	 	10,000 Class B

Common Stock

	 
	 	 	 	 	 	 	 	 	 	 
	Borrower

	 	New York
	 	10,000 Class A

Common Stock
	 	$1.00/share
	 	3,500 Class A

Common Stock

	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	10,000 Class B

Common Stock
	 	$1.00/share
	 	56 Class B 

Common Stock

	 
	 	 	 	 	 	 	 	 	 	 
	IST Conax Nuclear,
Inc.

	 	New York
	 	500,000 Class A

Common
	 	$.01 share
	 	101,000	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	IS. Technology de
Puerto Rico

	 	Delaware
	 	150,000 Class A

Common
	 	$l.00/share
	 	1,000	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Imaging and Sensing
Technology
International Corp.

	 	New York
	 	20,000 Common
	 	$l.00/share
	 	100	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	IST Instruments,
Inc.

	 	New York
	 	20,000 Common
	 	$l.00/share
	 	1,000	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Quadtek, Inc.

	 	Washington
	 	1,000,000 Class A

Common
	 	$.011/share
	 	1,000,000	 	 






 









 






Schedule 5.l(d)(ii)




Outstanding Stock


Parent Preferred Stock is subject to redemption as set forth in Parent’s Amended and Restated
Certificate of Incorporation.







 









 








Schedule 5.l(j)




Litigation


IST-Conax Nuclear, Inc. (“IST”) is the Demandant in an IP infringement case against Pyung IL
Industries, Co., Ltd. (“Pyung”). IST claims Pyung infringed IST’s trade secrets when it developed
electric penetration assemblies. The case has been brought before the Civil Affairs Department,
Suwon District Court, Seoul, Korea. IST seeks preliminary and permanent injunctions.



IST-Conax Nuclear, Inc. (“IST”) is the Demandant in an IP infringement case against Korea Hydro &
Nuclear Power Co., Ltd. (“KHNP”). IST claims KHNP infringed IST’s trade secrets when it jointly
developed electric penetration assemblies with Pyung IL Industries, Co., Ltd. The case has been
brought before the Civil Affairs Department, Suwon District Court, Seoul, Korea. IST seeks
preliminary and permanent injunctions.







 









 








Schedule 5.1(l)




Environmental Schedules


(ii) The following reports prepared on behalf of American Capital by Environ International
Corporation, in April 2004, were provided to Selling Stockholders:




Environmental Review of Imaging & Sensing Technology, Big Flats, New York — DRAFT

Environmental Review of IS Technology de Puerto Rico, Inc. — DRAFT

Environmental Review of IST Canada, Inc. Cambridge, Ontario, Canada — DRAFT

Environmental Review of IST Conax Nuclear, Cheektowaga, New York — DRAFT

Environmental Review of IST Station Approach, Alton, Hampshire, UK — DRAFT



Statement on Underground Storage Tanks:




Big Flats, NY:



On April 21, 2004, IST Corp. removed two concrete underground tanks on its leased property in The
Airport Corporate Park, Big Flats, NY. One tank of 1500 gallons capacity was used only for storage
of non-contact cooling water for a cooling tower assembly no longer in place. According to the
Knowledge of IST, the tank was empty, clean and dry upon removal. The other tank was a 1000 gallon
concrete tank that was used for the storage of acid contaminated water from a cathode ray tube
manufacturing operation. The operation ended in August of 2000 and the tank was emptied and
cleaned to environmentally acceptable standards by OPTECH Corp. of Waverly, NY. The invoice for
this operation is not readily accessible, but can be retrieved upon request.




Puerto Rico



The Environmental Review of IS Technology de Puerto Rico, Inc. Report prepared by Environ (April
2004) references anecdotal information concerning the possibility that one former fuel oil tank was
removed by PRIDCO in 1990 as part of a repaving project, and that another tank may remain which was
unable to be excavated due to its being situated beneath an emergency generator unit. IST has
obtained and reviewed the internal. PRIDCO memoranda concerning this matter, and these documents
refer only to a single tank as to which plans were underway to remove it following integrity
testing which demonstrated that the tank was mechanically sound. IST has no independent Knowledge
regarding the existence of any such tank or tanks, and no underground tanks have ever been used in
IST in its operations. Any USTs which may exist would be owned by PRIDCO, owner of the property.



(iii) None. However, Environ has made available to IST a report of Environmental Quality
Laboratories, Inc. (Santurce, Puerto Rico) dated May 17, 2004, covering the results of two samples
obtained from the property
(“GROUNDWATER — Grab” and “SOIL — Grab”) and one laboratory blank (“DI Water — Grab”). The
sample entitled “GROUNDWATER — Grab” showed the presence of Pthalate compounds which are
plasticizers which might be laboratory contaminants or artifacts of plastic materials used in the
sampling process and not related to materials used in site operations. The sample entitled “SOIL
— Grab” showed the presence of “Trichloroethene” (“TCE”) at 47.1 ppb. The IST facility in Puerto
Rico has made diligent efforts to establish whether TCE was used in its operations and has not
uncovered any evidence that this substance was used in IST’s operations, although this compound is
suspected to have been used in historical operations by Westinghouse and prior textile
manufacturers at the site





 









 







prior to IST’s commencing operations in 1988. These are the only
circumstances as to which the Selling Representatives have Knowledge concerning any Releases at
Company Property.



See draft Environmental Reports in subsection (ii).



(v) See subsection (iii).



(vii) The Company anticipates that the liability for BF3 gas disposal on Military returned
detectors will be no greater than $20,000.



Waste material destined for disposal is estimated at $15,000.







 









 








Schedule 5.1(q)




Properties Schedule


Ontario, Canada: Lease for real property among Riordan Leasing Inc., I & ST Canada, Inc., and
Imaging and Sensing Technology Corporation, dated July 26, 2002.



Cheektowaga, New York: Lease for real property between Sonwil Distribution Center, Inc. and IST
Conax Nuclear, Inc., dated April 14, 1998. Lease term is 5 years, but it has been extended for 5
years.



Horseheads, New York: Lease for real property between Sonwil Development Group, L.L.C. and Imaging
and Sensing Technology Corporation, dated December 1, 1999.



Pickerington, OH: Lease for real property between Hunters Run Properties LLC and Imaging and
Sensing Technology, dated March 11, 2002.



Woodinville, Washington: Lease for real property between The Evans Company and IST Corporation,
dated May 7, 2002.



Hampshire, England: Lease for real property between F.W. Kerridge Limited and Imaging and Sensing
Technology Limited, dated January 8, 2002.



Cayey, Puerto Rico: Lease for real property between The Puerto Rico Industrial Development Company,
and I.S. Technology De Puerto Rico, Inc., dated May 1, 1998.







 









 








Schedule 5.1(r)




Intellectual Property Schedule




 











 










Monday, April 26, 2004



IMAGING & SENSING TECHNOLOGY CORP.



STATUS REPORT




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dkt #/Cty	 	 	 	 	 	 	 	 	 	 	 	NHHD	 	 
	Type/Rel.	 	Subject / Inventor	 	Client Ref#	 	Serial #	 	Filing Date	 	Atty.	 	Status
	 
	20138/7010 USA

	 	CATHODE FILAMENT FOR AN

ULTRA-VIOLET DISCHARGE LAMP
	 	 	 	 	08/739,806	 	 	10/30/1996
	 	GGL
	 	Patent issued on 1/26/99 as
U.S. Patent No. 5,864,209.
4th year maintenance fee paid
7/19/2002.
	REGULAR CASE TYPE ORIGINAL OR PATENT 

NATIONAL CASE

	 	/Inventor(s): David Lyle Clark	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7021 GBRI

	 	GETTER FLASH SHIELD
	 	 	 	 	9929683.2	 	 	12/15/1999
	 	GGL
	 	Issued as Patent No. 2346007
on 3/3/04.
	REGULAR CASE TYPE ORIGINAL OR PATENT 

NATIONAL CASE

	 	/Inventor(s): Eric P.
Davenport	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7022 ASTL

	 	GETTER FLASH SHIELD
	 	 	 	 	65531/99	 	 	12/21/1999
	 	GGL
	 	Response to Office Action due
7/15104.
	REGULAR CASE TYPE ORIGINAL OR PATENT 

NATIONAL CASE

	 	/Inventor(s): Eric P.
Davenport	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7023 GERM

	 	GETTER FLASH SHIELD
	 	 	 	 	19963838.1	 	 	12/30/1999
	 	GGL
	 	Request for exam due 12/30/06.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT 

NATIONAL CASE

	 	/Inventor(s): Eric P.
Davenport	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7024 JAPA

	 	GETTER FLASH SHIELD
	 	 	 	 	2000-012095	 	 	1/20/2000
	 	GGL
	 	Request for exam due 1/20/07.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT 

NATIONAL CASE

	 	/Inventor(s): David Lyle Clark	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7025 USA

	 	GETTER FLASH SHIELD
	 	 	 	 	09/884,116	 	 	6/19/2001
	 	GGL
	 	Patent Issued on March 12,
2002 as U.S. Patent No. 6,356,015.
	 






					
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Monday, April 26, 2004



IMAGING & SENSING TECHNOLOGY CORP.



STATUS REPORT




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dkt #/Cty	 	 	 	 	 	 	 	 	 	 	 	NHHD	 	 
	Type/Rel.	 	Subject / Inventor	 	Client Ref#	 	Serial #	 	Filing Date	 	Atty.	 	Status
	 
	REGULAR CASE TYPE CONTINUATION NATIONAL 

CASE

	 	/Inventor(s): Eric P.
Davenport	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7030

	 	HOLLOW CATHODE DISCHARGE

DEVICE WITH FRONT SHIELD
	 	 	 	 	07/043,575	 	 	4/27/1987
	 	GGL
	 	Patent issued on 1/3/89 as
U.S. Patent No. 4,795,942.
12th Year Maintenance fee
paid 6/8/2000.
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Eric P.
Davenport	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7040 USA

	 	LAMP WITH ANODE SUPPORT

STRUCTURE AND ANODE SURFACE

USA CONFIGURATION HAVING

IMPROVED HEAT DISSIPATION

PROPERTIES
	 	 	 	 	09/333,378	 	 	6/15/1999
	 	GGL
	 	Patent Issued on 2/10/04 as
U.S. Patent No. 6,690,111.
	 
	REGULAR CASE TYPE 

Request for Continued E 

NATIONAL CASE

	 	/Inventor(s): Eric P.
Davenport	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7041 ASTL

	 	LONG-LIFE DEUTERIUM LAMP

WITH IMPROVED HEAT

DISSIPATION PROPERTIES
	 	 	 	 	35343/00	 	 	5/16/2000
	 	GGL
	 	Response to office action due
7/16/04.
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Eric P.
Davenport	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7042 GBRI

	 	LONG-LIFE DEUTERIUM LAMP

WITH IMPROVED HEAT

DISSIPATION PROPERTIES
	 	 	 	 	0013864.4	 	 	6/7/2000
	 	GGL
	 	Response to office action to
associate 3/22/04. Acceptance
deadline is 4/26/04.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Eric P.
Davenport	 	 	 	 	 	 	 	 	 	 	 	 
	 






					
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Monday, April 26, 2004



IMAGING & SENSING TECHNOLOGY CORP.



STATUS REPORT




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dkt #/Cty	 	 	 	 	 	 	 	 	 	 	 	NHHD	 	 
	Type/Rel.	 	Subject / Inventor	 	Client Ref#	 	Serial #	 	Filing Date	 	Atty.	 	Status
	 
	20138/7043 JAPA

	 	LONG-LIFE DEUTERIUM LAMP

WITH IMPROVED HEAT

DISSIPATION PROPERTIES
	 	 	 	 	2000-178318	 	 	6/14/2000
	 	GGL
	 	Request for exam due 6/14/07.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Eric P.
Davenport	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7044 GERM

	 	LONG-LIFE DEUTERIUM LAMP
WITH IMPROVED HEAT.
DISSIPATION PROPERTIES
	 	 	 	 	10029108.2	 	 	6/14/2000
	 	GGL
	 	Request for exam due 6/14/07.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT 

NATIONAL CASE

	 	/Inventor(s): Eric P.
Davenport	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7050 USA

	 	MINIATURE DEUTERIUM ARC LAMP
	 	 	 	 	09/010,248	 	 	1/21/1998
	 	GGL
	 	Patent issued on 6/20/2000 as
U.S. Patent No. 6,078,132.
4th year Maintenance Fee paid
12/8/03.
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Eric P.
Davenport	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7051 GERM

	 	MINIATURE DEUTERIUM ARC LAMP
	 	 	 	 	19901919.3	 	 	1/19/1999
	 	GGL
	 	Examination requested 8/1/00. Not examined yet.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Eric P.
Davenport	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7052 JAPA

	 	MINIATURE DEUTERIUM ARC LAMP
	 	 	 	 	12566/99	 	 	1/21/1999
	 	GGL
	 	Request for exam due 1/21/06.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Eric P.
Davenport	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7053 ASTL

	 	MINIATURE DEUTERIUM ARC LAMP
        .
	 	 	 	 	12171/99	 	 	1/21/1999
	 	GGL
	 	Issued on 11/15/01 as Patent
No. 736672.
	 






					
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Monday, April 26, 2004



IMAGING & SENSING TECHNOLOGY CORP.



STATUS REPORT




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dkt #/Cty	 	 	 	 	 	 	 	 	 	 	 	NHHD	 	 
	Type/Rel.	 	Subject / Inventor	 	Client Ref#	 	Serial #	 	Filing Date	 	Atty.	 	Status
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Eric P.
Davenport	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7054 GBRI

	 	MINIATURE DEUTERIUM ARC LAMP
	 	 	 	 	9900814.6	 	 	1/14/1999
	 	GGL
	 	Issued on 5/8/02 as Patent
No. 2333643B
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Eric P.
Davenport	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7060 USA

	 	ANALOG LIQUID LEVEL SENSOR
	 	 	 	 	09/164,962	 	 	10/1/1998
	 	GGL
	 	Patent Issued on 3/20/2001 as
U.S. Patent No. 6,202,486.
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): John W.
Kemp 

                     Rajugopal R. Gubbi

                    
Joseph D. Harwood	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7062 EPC

	 	ANALOG LIQUID LEVEL SENSOR
	 	 	 	 	99954724.3	 	 	10/1/1999
	 	GGL
	 	Not examined yet.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
PC/EPC APPLICATIO

	 	/Inventor(s): John W. Kemp	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7063 CANA

	 	ANALOG LIQUID LEVEL SENSOR
	 	 	 	 	2,312,368	 	 	10/1/1999
	 	GGL
	 	Request for exam due 10/1/04.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
PATENT COOPERATIO

	 	/Inventor(s): John W. Kemp	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7064 CZEK

	 	ANALOG LIQUID LEVEL SENSOR
	 	 	 	PV 2000-1995
	 	10/1/1999
	 	GGL
	 	Examination requested 9/26/02. Not examined yet.
	REGULAR CASE TYPE ORIGINAL OR PATENT
PATENT COOPERATIO

	 	/Inventor(s): John W. Kemp	 	 	 	 	 	 	 	 	 	 	 	 
	 






					
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	 	Page 4 of 14
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Monday, April 26, 2004



IMAGING & SENSING TECHNOLOGY CORP.



STATUS REPORT




	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dkt #/Cty	 	 	 	 	 	 	 	 	 	NHHD	 	 
	Type/Rel.	 	Subject / Inventor	 	Client Ref#	 	Serial #	 	Filing Date	 	Atty.	 	Status
	 
	20138/7065 KORS

	 	ANALOG LIQUID LEVEL SENSOR
	 	 	 	PV 2000-1995
	 	10/1/1999
	 	GGL
	 	Request for exam due 10/1/04.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
PATENT COOPERATIO

	 	/Inventor(s): John W. Kemp	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7066 JAPA

	 	ANALOG LIQUID LEVEL SENSOR
	 	 	 	PV 2000-1995
	 	10/1/1999
	 	GGL
	 	Request for exam due 10/1/06.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
PATENT COOPERATIO

	 	/Inventor(s): John W. Kemp	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7080 USA

	 	HEATER FACSIMILE TEMPERATURE

DETECTOR, AND METHOD OF

ASSEMBLING SAME
	 	 	 	08/423,416
	 	4/18/1995
	 	GGL
	 	Patent issued 8/26/97 as U.S.
Patent No. 5,660,475. 4th
Year Maintenance Fee paid
2/16/2001.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Todd M. Wetherill 
Kerwin C. Playfoot
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7090 USA

	 	IN-CORE ASSEMBLY

CONFIGURATION HAVING A

DUAL-WALL PRESSURE BOUNDARY

FOR NUCLEAR REACTOR
	 	 	 	07/014,941
	 	2/17/1987
	 	GGL
	 	Patent issued on 10/25/88 as
U.S. Patent No. 4,780,267.
12th Year Maintenance fee
paid 4/4/2000.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): William H.
Todt 

Kerwin C. Playfoot
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7161 USA

	 	CATHODE-LUMINESCENT PANEL

LAMP, AND METHOD
	 	 	 	07/778,194
	 	5/10/1990
	 	GGL
	 	Patent issued on 10/19/93 as
U.S. Patent No. 5,254,905.
4th Year Maintenance fee paid
12/6/96. 8th Year Maintenance fee paid 4/18/2001.
	 






					
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	 	Page 5 of 14
	 	MDC IPMaster
	 
	 	 	 	 






 









 











Monday, April 26, 2004



IMAGING & SENSING TECHNOLOGY CORP.



STATUS REPORT




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dkt #/Cty	 	 	 	 	 	 	 	 	 	 	 	NHHD	 	 
	Type/Rel.	 	Subject / Inventor	 	Client Ref#	 	Serial #	 	Filing Date	 	Atty.	 	Status
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
PATENT COOPERATIO

	 	/Inventor(s): Thomas A.
Dunbar
 Richard F. Kankus


Thomas J. Kolonoski
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7190 USA

	 	CONNECTOR FOR SEALINGLY

JOINING THE ENDS OF A PAIR

OF ELECTRICAL CABLES
	 	 	 	 	06/594,576	 	 	3/29/1984
	 	GGL
	 	Patent issued on 10/21/86 as
U.S. Patent No. 4,618,198.
12th Year Maintenance fee
paid 11/5/97.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Steven M. Dale


Richard A. Lyon 

David P.
Schutram
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7141 Japan

	 	Seismic Restraint Means
	 	 	 	 	59-0011806	 	 	 	 	 	 	Patent Number: 1834688. This patent will be abandoned.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7142 Great Britain

	 	Seismic Restraint Means
	 	 	 	 	84300408.6	 	 	 	 	 	 	Patent Number: 0117618. This patent will be abandoned.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7191 JAPA

	 	CONNECTOR FOR SEALINGLY

JOINING THE ENDS OF A PAIR

OF ELECTRICAL CABLES
	 	 	 	 	183260/86	 	 	8/4/1986
	 	GGL
	 	Issued as Japanese Patent No.
1,902,369 on 2/8/95.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Steven M. Dale


Richard A. Lyon 

David P.
Schutram
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7220 USA

	 	METAL-ENCASED LIGHT CONDUCTOR
	 	 	 	 	06/813,789	 	 	12/27/1985
	 	GGL
	 	Patent issued on 8/18/87 as
U.S. Patent No. 4,687,293.
12th Year Maintenance fee paid 2/10/99.
	 






					
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Monday, April 26, 2004



IMAGING & SENSING TECHNOLOGY CORP.



STATUS REPORT




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dkt #/Cty	 	 	 	 	 	 	 	 	 	 	 	NHHD	 	 
	Type/Rel.	 	Subject / Inventor	 	Client Ref#	 	Serial #	 	Filing Date	 	Atty.	 	Status
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Matthew J.
Randazzo	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7223 ITAL

	 	METAL-ENCASED LIGHT CONDUCTOR
	 	 	 	 	86306849.0	 	 	9/4/1986
	 	GGL
	 	Issued as Patent No. 2031581 on 4/22/92.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Matthew J.
Randazzo	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7223 GERM

	 	METAL-ENCASED LIGHT CONDUCTOR
	 	 	 	 	86306849.0	 	 	9/4/1986
	 	GGL
	 	Issued as Patent No. 2031581 on 4/22/92.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Matthew J.
Randazzo	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7223 GBRI

	 	METAL-ENCASED LIGHT CONDUCTOR
	 	 	 	 	86306849.0	 	 	9/4/1986
	 	GGL
	 	Issued as Patent No. 2031581 on 4/22/92.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Matthew J.
Randazzo	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7223 FRAN

	 	METAL-ENCASED LIGHT CONDUCTOR
	 	 	 	 	86306849.0	 	 	9/4/1986
	 	GGL
	 	Issued as Patent No. 3685017.9 on 4/22/92.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Matthew J.
Randazzo	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7260 USA

	 	BAFFLE FOR ELIMINATING

INTERFERENCE RING(S) FROM

OUTPUT LIGHT PATTERN FROM A

DEUTERIUM LAMP
	 	 	 	 	09/016,476	 	 	1/30/1998
	 	GGL
	 	Patent issued on 10/26/99 as
U.S. Patent No. 5,972,469.
4th yr. maintenance fee paid
4/24/03.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Curtis L. James	 	 	 	 	 	 	 	 	 	 	 	 
	 






					
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Monday, April 26, 2004



IMAGING & SENSING TECHNOLOGY CORP.



STATUS REPORT




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dkt #/Cty	 	 	 	 	 	 	 	 	 	 	 	NHHD	 	 
	Type/Rel.	 	Subject / Inventor	 	Client Ref#	 	Serial #	 	Filing Date	 	Atty.	 	Status
	 
	20138/7261 GBRI

	 	BAFFLE FOR ELIMINATING

INTERFERENCE RING(S) FROM

OUTPUT LIGHT PATTERN FROM A

DEUTERIUM LAMP
	 	 	 	 	9900816.1	 	 	1/14/1999
	 	GGL
	 	Issued as Patent No. GB
2333891 on 5/29/02.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Curtis L. James	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7224 Norway

	 	Metal Encased Light Conductor
	 	 	 	 	864395	 	 	 	 	 	 	Patent Number: 169868. This
patent is abandoned.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7240 USA

	 	Optical Liquid Level Sensor
using a
polytetralfluoroethylene
perfluoroakoxy.	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7262 GERM

	 	BAFFLE FOR ELIMINATING

INTERFERENCE RING(S) FROM

OUTPUT LIGHT PATTERN FROM A

DEUTERIUM LAMP
	 	 	 	 	19902808.7	 	 	1/25/1999
	 	GGL
	 	Request for exam due 1/25/06.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Curtis L. James	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7263 JAPA

	 	BAFFLE FOR ELIMINATING

INTERFERENCE RING(S) FROM

OUTPUT LIGHT PATTERN FROM A

DEUTERIUM LAMP
	 	 	 	 	21475/99	 	 	1/29/1999
	 	GGL
	 	Response to office
action/notice of appeal filed
8/20/03.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Curtis L. James	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7264 ASTL

	 	BAFFLE FOR ELIMINATING

INTERFERENCE RING(S) FROM

OUTPUT LIGHT PATTERN FROM A

DEUTERIUM LAMP
	 	 	 	 	14219/99	 	 	1/29/1999
	 	GGL
	 	Issued on 10/18/01 as Patent
No. 735209.
	 






					
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Monday, April 26, 2004



IMAGING & SENSING TECHNOLOGY CORP.



STATUS REPORT




	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dkt #/Cty	 	 	 	 	 	 	 	 	 	NHHD	 	 
	Type/Rel.	 	Subject / Inventor	 	Client Ref#	 	Serial #	 	Filing Date	 	Atty.	 	Status
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Curtis L. James	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7290 USA

	 	APPARATUS AND METHODS FOR

IMAGING AND COUNTING MOVING
PARTICLES
	 	 	 	07/104,764
	 	10/2/1987
	 	GGL
	 	Patent issued on 3/21/89 as
U.S. Patent No. 4,814,868.
12th Year Maintenance fee
paid 8/22/2000.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Richard K.
James	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7300 USA

	 	IMAGING AND TEMPERATURE

MONITORING SYSTEM
	 	 	 	07/782,262
	 	10/25/1991
	 	GGL
	 	Patent issued on 6/15/93 as
U.S. Patent No. 5,219,226.
8th Year Maintenance fee paid
11/9/2000.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Richard K.
James	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7310 USA

	 	INSTRUMENT VISUALIZATION

SYSTEM
	 	 	 	09/549,363
	 	4/14/2000
	 	GGL
	 	Patent issued on 12/23/03 as
U.S. Patent No. 6,667,761.
	 
	REGULAR CASE TYPE Request for Continued E
NATIONAL CASE

	 	/Inventor(s): Richard Ludwig 


William L. Zabriskie 
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7320 USA

	 	SYSTEM FOR GENERATING

TEMPERATURE IMAGES WITH

CORRESPONDING ABSOLUTE

TEMPERATURE VALUES
	 	 	 	07/541,275
	 	6/20/1990
	 	GGL
	 	Patent issued on 4/28/92 as
U.S. Patent No. 5,109,277.
12th Year Maintenance fee
paid 10/27/03.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Richard K.
James	 	 	 	 	 	 	 	 	 	 
	 






					
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Monday, April 26, 2004



IMAGING & SENSING TECHNOLOGY CORP.



STATUS REPORT




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dkt #/Cty	 	 	 	 	 	 	 	 	 	 	 	NHHD	 	 
	Type/Rel.	 	Subject / Inventor	 	Client Ref#	 	Serial #	 	Filing Date	 	Atty.	 	Status
	 
	20138/7330 GBRI

	 	PNEUMATICALLY-POWERED

INSPECTION CAMERA
	 	 	 	 	0018319.4	 	 	7/27/2000
	 	GGL
	 	Response to office action due
7/29/04.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Peter Woodstock	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7331 USA

	 	FLUID-POWERED INSPECTION

CAMERA
	 	 	 	 	09/915,126	 	 	7/25/2001
	 	GGL
	 	Not examined yet. Status
Inquiry filed 8/28/03.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Peter Woodstock	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7333 TAIW

	 	PNEUMATICALLY-POWERED

INSPECTION CAMERA
	 	 	 	 	90118186	 	 	7/25/2001
	 	GGL
	 	Response to office action
filed 3/30/04.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Peter Woodstock	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7334 CANA

	 	FLUID-POWERED INSPECTION

CAMERA
	 	 	 	 	2,353,745	 	 	7/25/2001
	 	GGL
	 	Request for examination due
7/25/06.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Peter Woodstock	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7335 EPC

	 	FLUID-POWERED INSPECTION

CAMERA
	 	 	 	 	01959177.5	 	 	7/24/2001
	 	GGL
	 	Not examined yet.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
PCT/EPC APPLICATIO

	 	/Inventor(s): Peter Woodstock	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7341 USA

	 	A GAS-FILLED ARC DISCHARGE

LAMP AND A METHOD OF MAKING
THEREOF
	 	 	 	 	10/073,439	 	 	2/8/2002
	 	GGL
	 	Amendment filed 3/15/04.
	 






					
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	 	Page 10 of 14
	 	MDC IPMaster






 









 











Monday, April 26, 2004



IMAGING & SENSING TECHNOLOGY CORP.



STATUS REPORT




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dkt #/Cty	 	 	 	 	 	 	 	 	 	 	 	NHHD	 	 
	Type/Rel.	 	Subject / Inventor	 	Client Ref#	 	Serial #	 	Filing Date	 	Atty.	 	Status
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): David Lyle
Clark	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7343 JAPA

	 	A GAS-FILLED ARC DISCHARGE

LAMP AND A METHOD OF MAKING
THEREOF
	 	2001-2
	 	 	2002-563500	 	 	2/8/2002
	 	GGL
	 	Request for exam due 2/8/05.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
PATENT COOPERATIO

	 	/Inventor(s): David Lyle
Clark	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7344 ASTL

	 	A GAS-FILLED ARC DISCHARGE

LAMP AND A METHOD OF MAKING
THEREOF
	 	2001-2
	 	 	2002243952	 	 	2/8/2002
	 	GGL
	 	Request for examination due
2/8/07.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
PATENT COOPERATIO

	 	/Inventor(s): David Lyle
Clark	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7345 EPC

	 	A GAS-FILLED ARC DISCHARGE

LAMP AND A METHOD OF MAKING
THEREOF
	 	2001-2
	 	 	02709470.5	 	 	2/8/2002
	 	GGL
	 	Not examined yet.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
PATENT COOPERATIO

	 	/Inventor(s): David Lyle
Clark	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7350* GERM

	 	ELECTROCHEMICAL GAS SENSOR
ASSEMBLY
	 	 	 	 	96303317.0	 	 	5/13/1996
	 	GGL
	 	Issued on 7/24/02 as German
Patent No. 69622470.4-08.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): John Robert
Finbow Malcclm Robert
Bulpitt

Steven A.W. Dejaray
	 	 	 	 	 	 	 	 	 	 	 	 
	 







			
	*	 	 Transferred to Aerion Technologies, Inc.
pursuant to April 30, 2004 asset purchase agreement.





					
	Patent Status Report
	 	Page 11 of 14
	 	MDC IPMaster






 









 











Monday, April 26, 2004



IMAGING & SENSING TECHNOLOGY CORP.



STATUS REPORT




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dkt #/Cty	 	 	 	 	 	 	 	 	 	 	 	NHHD	 	 
	Type/Rel.	 	Subject / Inventor	 	Client Ref#	 	Serial #	 	Filing Date	 	Atty.	 	Status
	 
	20138/7350* FRAN

	 	ELECTROCHEMICAL GAS SENSOR
ASSEMBLY
	 	 	 	 	96303317.0	 	 	5/13/1996
	 	GGL
	 	Issued on 7/24/02 as European
Patent No. 0744620.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): John Robert
Finbow Malcolm Robert
Bulpitt
 Steven A.W. Dejaray
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7350* GBRI

	 	ELECTROCHEMICAL GAS SENSOR
ASSEMBLY
	 	 	 	 	96303317.0	 	 	5/13/1996
	 	GGL
	 	Issued on 7/24/02 as European
Patent No. 0744620.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): John Robert
Finbow Malcolm Robert
Bulpitt
 Steven A.W. Dejaray
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7351* CANA

	 	ELECTROCHEMICAL GAS SENSOR
ASSEMBLY
	 	 	 	 	2,176,781	 	 	5/16/1996
	 	GGL
	 	Allowed. Issue Fee to be paid
by 4/10/04.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): John Robert
Finbow Malcolm Robert
Bulpitt
 Steven A.W. Dejaray
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7352* USA

	 	ELECTROCHEMICAL GAS SENSOR
ASSEMBLY
	 	 	 	 	08/653,414	 	 	5/24/1996
	 	GGL
	 	Patent issued on 9/16/97 as
U.S. Patent No. 5,668,302.
4th year Maintenance fee paid
3/8/2001.
	 








			
	* 	 	 Transferred to Aerion Technologies, Inc.
pursuant to April 30, 2004 asset purchase agreement.





					
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Monday, April 26, 2004



IMAGING & SENSING TECHNOLOGY CORP.



STATUS REPORT




	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dkt #/Cty	 	 	 	 	 	 	 	 	 	NHHD	 	 
	Type/Rel.	 	Subject / Inventor	 	Client Ref#	 	Serial #	 	Filing Date	 	Atty.	 	Status
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): John Robert
Finbow Malcolm Robert
Bulpitt
 Steven A.W. Dejaray
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7390* USA

	 	METHOD OF ELECTRICALLY

SHORTING AN ELECTROLYTIC

CELL
	 	 	 	06/307,098
	 	5/4/1984
	 	GGL
	 	Patent issued on 8/27/1985 as
U.S. Patent No. 4,537,662.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Robert M. Hruda	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7400 USA

	 	GAS SENSOR-DETECTOR COUPLING

DEVICE
	 	2001-3
	 	 	 	 	 	GGL
	 	New Application received
7/3/2001.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): Andrew Rybacha

Nigel Taylor
 Zelijko Zupanc
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7420 USA

	 	A DEUTERIUM ARC LAMP

ASSEMBLY WITH AN ELAPSED

TIME INDICATOR SYSTEM AND A

METHOD THEREOF
	 	 	 	10/228,129
	 	8/26/2002
	 	GGL
	 	Amendment filed 3/3/04.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): David Lyle
Clark	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7421 PCT

	 	A DEUTERIUM ARC LAMP

ASSEMBLY WITH AN ELAPSED

TIME INDICATOR SYSTEM AND A

METHOD THEREOF
	 	 	 	PCT/US03/ 26893
	 	 8/26/2003
	 	GGL
	 	Chapter 11 national filing
deadline is 2/26/05.
	 









			
	*  	 	Transferred to Aerion Technologies, Inc.
pursuant to April 30, 2004 asset purchase agreement.





					
	Patent Status Report
	 	Page 13 of 14
	 	MDC IPMaster






 









 











Monday, April 26, 2004



IMAGING & SENSING TECHNOLOGY CORP.



STATUS REPORT




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dkt #/Cty	 	 	 	 	 	 	 	 	 	 	 	NHHD	 	 
	Type/Rel.	 	Subject / Inventor	 	Client Ref#	 	Serial #	 	Filing Date	 	Atty.	 	Status
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
PATENT COOPERATIO

	 	/Inventor(s): David Lyle
Clark	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	20138/7422 TAIW

	 	A DEUTERIUM ARC LAMP

ASSEMBLY WITH AN ELAPSED

TIME INDICATOR SYSTEM AND A

METHOD THEREOF
	 	 	 	 	092123463	 	 	8/26/2002
	 	GGL
	 	Pending.
	 
	REGULAR CASE TYPE ORIGINAL OR PATENT
NATIONAL CASE

	 	/Inventor(s): David Lyle
Clark	 	 	 	 	 	 	 	 	 	 	 	 
	 






					
	Patent Status Report
	 	Page 14 of 14
	 	MDC IPMaster







 












 









Imaging & Sensing Technology Corporation

Trademark Status Report — U.S.

April 26, 2004




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Trademark	 	Goods/Wares	 	Application No.	 	Filing Date	 	Reg. No.	 	Reg. Date	 	Next Renewal	 	Status
	BEDBUG

	 	infrared imaging
apparatus
	 	73/614,955
	 	8/15/86
	 	 	1,434,570	 	 	3/31/87
	 	Renewal due:

3/31/07
	 	Registered.
	 
	CB Design





	 	electro-optical sensors
and controllers and
conductors for use with
the same, electrical
conductors,
penetrations and
feedthrough modules for
passing an electrical
conductor through a
wall, thermocouples and
temperature sensors for
converting temperature
into an electrical
signal, and
electrically-operable
valves and releases
	 	73/790,584
	 	4/3/89
	 	 	1,569,447	 	 	12/5/89
	 	Renewal due:

12/5/09
	 	Registered.
	 
	1ST — REES

	 	visual imaging systems,
comprising cameras, for
use and inspection of
hazardous environments,
such as those
contaminated by
radiation and
temperature
	 	75/315,425
	 	6/26/97
	 	 	2,180,464	 	 	8/11/98
	 	Sections 8&15
Declaration
due: 8/11/04
	 	Registered.
	 
	IST & Design






	 	cathode ray tubes;
namely, mechanical feed
through modules for
penetrations for
passing electrical
conductors through a
wall; television
cameras; and light
sources; namely, hollow
cathode lamps for
analytical equipment
	 	74/177,905
	 	6/20/91
	 	 	1,706,388	 	 	8/11/92
	 	Renewal due:

8/11/12
	 	Registered.
	IST CONAX NUCLEAR

	 	sensor and control
components for nuclear
reactors, namely,
electrical penetrations
assemblies and
feedthrough modules for
passing a conductor
through a containment
wall, adapter modules,
electrical conductor
seal assemblies,
nuclear electrical
service connectors, and
special purpose valves
for controlling flows
of fluid with respect
to nuclear reactors
	 	75/727,142
	 	6/10/99
	 	 	2,399,578	 	 	10/31/00
	 	Sections 8&15
Declaration
due: 10/31/06
	 	Registered.






 









 











	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Trademark	 	Goods/Wares	 	Application No.	 	Filing Date	 	Reg. No.	 	Reg. Date	 	Next Renewal	 	Status
	IST CRT SCIENTIFIC

	 	cathade ray tube
	 	75/727,140
	 	6/10/99
	 	 	2,405,603	 	 	11/21/00

	 	Sections 8&15 Declaration 
due: 11/21/06
	 	Registered.
	IST-QUADTEK

	 	high-temperature
imaging equipment,
namely image processors
and imaging pyrometers,
for industrial, mining,
petrochemical, pulp and
paper, cement and glass
industries:
	 	75/727,141
	 	6/10/99
	 	 	2,399,577	 	 	10/31/00
	 	Sections 8&15
Declaration
due: 10/31/Q6
	 	Registered.
	 
	KNOW YOUR AIR*

	 	detectors and
monitors namely gas
detectors, smoke
detectors, carbon
dioxide gas monitors,
carbon monoxide gas
monitors, combustible
and toxic gas sensors,
and oxygen sensors for
residential, industrial
and commercial use
	 	75/887,158
	 	1/6/00
	 	 	2,629,784	 	 	10/8/02
	 	Sections 8&15
Declaration
due: 10/8/08
	 	Registered.
	 
	LYNX

	 	electronic monitoring
equipment, namely, high
temperature video
cameras, imaging
processors and monitors
for use in monitoring
industrial process
conditions
	 	75/126,720
	 	6/28/96
	 	 	2,069,656	 	 	6/10/97
	 	Renewal due:

6/10/07
	 	Registered.
	 
	PARTICULATOR

	 	particle video imager
and counter
	 	73/811,484
	 	7/10/89
	 	 	1,582,384	 	 	2/13/90
	 	Renewal due:

2/13/10
	 	Registered.
	QUADTEK

	 	industrial closed
circuit imaging units
for monitoring of hot
industrial processes
	 	73/644,622
	 	2/13/87
	 	 	1,501,969	 	 	8/30/88
	 	Renewal due:

8/30/08
	 	Registered.
	 
	SENSORLYNX*

	 	industrial safety
instruments for
measuring various
environmental
parameters, namely,
heat stress (web bulb
globe temperature/WBFT
index), indoor air and
confined space air
quality (the presence
of carbon monoxide,
carbon dioxide and
other hazardous gases),
relative humidity, and
ambient air
temperature, all for
human health and safety
purposes
	 	76/081,646
	 	6/29/00
	 	 	2,627,286	 	 	10/1/02
	 	Sections 8&15
Declaration
due: 10/1/08
	 	Registered.
	 








 




			
	*	 	 Transferred to Aerion Technologies, Inc.
pursuant to April 30, 2004 asset purchase agreement.




 









 












	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Trademark	 	Goods/Wares	 	Application No.	 	Filing Date	 	Reg. No.	 	Reg. Date	 	Next Renewal	 	Status
	SPYROMETER

	 	electronic monitoring
equipment, namely,
imaging pyrometer for
scanning and providing
temperature read-outs
for high temperature
process conditions
	 	75/126,718
	 	6/28/96
	 	 	2,117,556	 	 	12/2/97
	 	Renewal due: 
due:
12/02/07
	 	Registered.
	 
	WIBGET Design*




	 	heat stress monitor
	 	73/167,172
	 	4/20/78
	 	 	1,129,504	 	 	1/22/80
	 	Renewal due:
1/22/10
	 	Registered.
	 









			
	 
	*	 	 Transferred to Aerion Technologies, Inc.
pursuant to April 30, 2004 asset purchase agreement.






 











 




 
Imaging & Sensing Technology Corporation

Foreign Trademark Status Report

April 26, 2004




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Country	 	Trademark	 	Goods/Wares	 	Application No	 	Filing Date	 	Reg. No.	 	Reg. Date	 	Next Renewal	 	Status
	 
	 
	Canada

	 	QUADTEK
	 	infrared imaging
systems; and
industrial closed
circuit imaging units
for monitoring of hot
industrial processes.
	 	 	059461700	 	 	8/12/87
	 	TMA365166
	 	2/9/90
	 	2/9/05
	 	Registered.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Canada*

	 	KNOW YOUR AIR
	 	detectors and monitors
namely gas detectors,
smoke detectors,
carbon dioxide gas
monitors, carbon
monoxide gas monitors,
combustible and toxic
gas sensors, and
oxygen sensors for
residential,
industrial and
commercial use
	 	 	1,039,535	 	 	12/13/99
	 	TMA550,879
	 	9/17/01
	 	9/17/16
	 	Registered.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	France

	 	CONAX BUFFALO
	 	electro-optical
sensors and
controllers and
conductors for use
with the same;
electrical conductors,
penetrations and
feedthrough modules
for passing an
electrical conductor
through a wall,
thermocouples and
temperature sensors
for converting
temperature into an
electrical signal, and
electrically-operable
valves and releases
	 	 	188302	 	 	2/15/90
	 	 	1581308	 	 	2/14/00
	 	2/14/10
	 	Registered.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Great Britain

	 	CONAX BUFFALO
	 	electrically-triggered
explosively-operated
valves included in
class 7; all being
part of machines; but
not including any such
goods being parts of
pumping machines
	 	 	1460199	 	 	4/3/91
	 	 	1460199	 	 	12/11/92
	 	4/3/08
	 	Registered.
	 









			
	 
	* 	 	 Transferred to Aerion Technologies, Inc.
pursuant to April 30, 2004 asset purchase agreement.




 









 











	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Country	 	Trademark	 	Goods/Wares	 	Application No	 	Filing Date	 	Reg. No.	 	Reg. Date	 	Next Renewal	 	Status
	 
	Great Britain

	 	CONAX BUFFALO
	 	electro-optical
sensors and control
devices and conductors
for use with same;
electrical conductors,
penetrations and
feedthrough modules
for passing an
electrical conductor
through a wall,
thermocouples and
temperature sensors
for converting
temperature into an
electrical signal, and
electrically-operable
valves and release devices
	 	 	1414697	 	 	2/13/90
	 	 	1414697	 	 	8/30/91
	 	12/4/06
	 	Registered.
	 






 









 







Schedule 5.1(w)




Undisclosed Liabilities



The Woojin Agreement (see Schedule 5.18(e)) provides that the Company will take Woojin through four
technology transfers. At present, Woojin’s technology transfer is maintained at level III. The
cost of implementing level IV for Woojin will be $50,000 greater than any incremental revenue
received from Woojin. Over the life of the agreement, the Company has already received $450,000
from Woojin as pertains to the technology transfer.



Legal fees from Nixon Peabody LLP



Deal fees from Brown Gibbons Lang & Company



Legal fees dealing with the action in South Korea against Pyung IL and KHNP (see Schedule 5.22) are
anticipated to be expensed against future orders (success fees). Action against KHNP could result
in outstanding fees.



Known warranties and agent fees are currently accrued:



IST Conax:



Commissions due Koseal Trading for Penetrations taken into sales are $4,365. A warranty accrual of
$35,000 exists for current construction projects.



Commissions due Glory Enterprises for Lungman Temperature Sensors and Lungman EPA are calculated as
a percentage of the 5% of the contract value still owed by the customer. The commission to Glory
Enterprises for Lungman Temperature Sensors is $9,167. The commission to Glory Enterprises for
Lungman EPA is $68,649. These are accrued in commissions for IST Conax.



IST Canada:



Commissions due Koseal Trading for Amplifier sales in Korea to Wolsong total $14,428, to be paid in
June. There is a warranty accrual of $52,700 Canadian for potential modification/rework on Liquid
Level Probes for SCE in modified use of Probes supplied via Westinghouse.



The Company currently has approximately $10,000-$15,000 liability on disposal of materials such as
used Uranium and chemicals that would normally be expensed.



I&ST Canada Inc. completed the sale of the Analytical Instrument Group Business Unit of Imaging
and Sensing Technology Corporation (“AIM”) to





 











 




Aerion Technologies, Inc. on April 30, 2004. There is an Engineering Services Contract as
part of this divestiture.



As part of the AIM divestiture to Aerion Technologies, Inc., there will be $175,000 held for 18
months against the purchase price pending potential discrepancies, warranties, etc.



See contracts containing royalty provisions in Schedule 5.18 (d):



The letter of intent from the Company to Esterline Corporate Headquarters guarantees royalty
payments and a commitment to employ personnel directly supporting the Auxitrol nuclear business.
See letter of intent in Section 5.19 (a)(vii).



The Balance Sheet contains progress payments of $3,392,052 for advance payments beyond what the
Company has recognized as sales:




	 	 	 	 	 	 	 	 	 
	Customer	 	Contract Number	 	Project Name	 	Cash in Advance	 
	AECL/KHNP
	 	YL-10A	 	SIRs-Wolsong	 	$	125,824	 
	Laker Energy
	 	YL-11A	 	SIRs-Cernavoda	 	$	127,720	 
	Westinghouse/KEDO
	 	VL-61	 	ICIs-SINPO	 	$	402,420	 
	Westinghouse/KEDO
	 	VL-12A	 	LLPs — SINPO	 	$	92,050	 
	Westinghouse/Entergy
	 	XL-6E	 	ICIs-Waterford 3	 	$	105,715	 
	Westinghouse/FP&L
	 	TL-11D	 	ICIs-St. Lucie 1&2	 	$	1,210	 
	Westinghouse/KHNP
	 	XL-3B	 	LLPs-SK&SW	 	$	276,500	 
	Westinghouse/KHNP
	 	XL-3C	 	ICIs-SK&SW	 	$	1,710,290	 
	Westinghouse
	 	W PO 4500109290	 	Boronometer	 	$	550,323	 
	 
	 	TOTAL:	 	 	 	$	3,392,052	 





The Spectral Technologies Group of the Company is party to one open contract with the European
Space Agency whereby progress payments have been paid for work completed. Payments are based on an
agreed schedule whereby the Company is paid once a defined task has been completed. Of the total
$58,060.24 contract dated 1/16/04, the Company has been paid $17,417.69 to date. Work will be
completed on the second phase and $20,320.64 will be billed by 5/17 according to the Agreement.
The final phase will be completed on 6/14 and the balance of $20,321.91 will be billed at that
time.










7









 








Schedule 7.2(a)




Permitted Indebtedness


None.








 









 








Schedule 7.2(b)




Permitted Encumbrances


None.










 









 








EXHIBITS





 









 








EXHIBIT A-1.1




Form of Senior Term A Note



 









 





FORM OF SENIOR TERM A NOTE




SENIOR TERM A NOTE




	 	 	 
	Purchaser: Wachovia Bank, National Association

	 	Horseheads, New York
	Principal Amount: $15,000,000

	 	May 25, 2004






     FOR VALUE RECEIVED, the undersigned, IST Acquisitions, Inc., a Delaware corporation
(“Parent”), Imaging and Sensing Technology Corporation, a New York corporation (“Borrower”), I.S.
Technology de Puerto Rico, Inc., a Delaware corporation, IST Instruments, Inc., a New York
corporation, Imaging and Sensing Technology International Corp., a New York corporation, IST Conax
Nuclear, Inc., a New York corporation, and Quadtek, Inc., a Washington corporation (the
“Subsidiaries”, and, together with Parent and Borrower, the “Loan Parties”), hereby jointly and
severally promise to pay to the order of the Purchaser set forth above (the “Purchaser”) the
principal amount set forth above or, if less, the aggregate unpaid principal amount of this Senior
Term A Note ( the “Senior Term A Note”) set forth above, payable at such times, and in such
amounts, as are specified in the Note and Equity Purchase Agreement, dated as of May 24, 2004,
among the Loan Parties, American Capital Financial Services, Inc., as Agent, and the other parties
thereto, as the same may be amended, restated, supplemented or otherwise modified from time to time
(the “Purchase Agreement”).



     The Loan Parties jointly and severally promise to pay interest on the unpaid principal amount
of this Senior Term A Note from the date made until such principal amount is paid in full, at such
interest rates, and payable at such times, as are specified in the Purchase Agreement.



     Both principal and interest are payable in the lawful money of the United States of America as
follows:


If by U.S. Mail to:



American Capital Financial Services, Inc., as Agent

ACS Funding Trust I, NW 7941

P.O. Box 1450

Minneapolis, MN 55485-7941.



If by Overnight Service to:



NW 7941 c/o Regular ACS Funding Trust I

1350 Energy Lane, Suite 200

St. Paul, MN 55108






 









 







If by wire transfer to:



Wells Fargo Bank, N.A.

ABA # xxxxxxxxx

Account Name: ACS Funding Trust I

Account #: xxxx-xxxxxx




     This Senior Term A Note is one of the Senior Term A Notes referred to in, and is entitled to
the benefits of, the Purchase Agreement. Capitalized terms used herein and not defined herein are
used herein as defined in the Purchase Agreement.



     The Purchase Agreement, among other things, (i) provides for the purchase of the Senior Term A
Notes by the Purchaser in an aggregate amount not to exceed at any time outstanding the Principal
Amount set forth above, the indebtedness of the Loan Parties resulting from such purchase being
evidenced by this Senior Term A Note and (ii) contains provisions for acceleration of the maturity
of the unpaid principal amount of this Senior Term A Note upon the happening of certain stated
events and also for prepayments on account of the principal hereof prior to the maturity hereof
upon the terms and conditions therein specified.



     This Senior Term A Note is secured as provided in the Security Documents.



     Demand, diligence, presentment, protest and notice of non-payment and protest are hereby
waived by the Loan Parties.



     This Senior Term A Note shall be governed by, and construed and interpreted in accordance
with, the laws of the State of New York.



13









 





     IN WITNESS WHEREOF, the Loan Parties have caused this Senior Term A Note to be executed and
delivered by their respective duly authorized officer as of the day and year and at the place set
forth above.



	 	 	 	 	 
	 	LOAN PARTIES



IST ACQUISITIONS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	IMAGING AND SENSING TECHNOLOGY CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	IST CONAX NUCLEAR, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	IS TECHNOLOGY de PUERTO RICO, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 



14









 






	 	 	 	 	 



	 	 	 	 	 
	 	IMAGING AND SENSING TECHNOLOGY INTERNATIONAL CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	IST INSTRUMENTS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	QUADTEK, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 



15









 






	 	 	 	 	 



EXHIBIT A-1.2




Form of Senior Term B Note



 









 





FORM OF SENIOR TERM B NOTE




SENIOR TERM B NOTE




	 	 	 
	Purchaser: American Capital Strategies, Ltd.

	 	Horseheads, New York
	Principal Amount: $7,500,000

	 	May 24, 2004






     FOR VALUE RECEIVED, the undersigned, IST Acquisitions, Inc., a Delaware corporation
(“Parent”), Imaging and Sensing Technology Corporation, a New York corporation (“Borrower”), I.S.
Technology de Puerto Rico, Inc., a Delaware corporation, IST Instruments, Inc., a New York
corporation, Imaging and Sensing Technology International Corp., a New York corporation, IST Conax
Nuclear, Inc., a New York corporation, and Quadtek, Inc., a Washington corporation (the
“Subsidiaries”, and, together with Parent and Borrower, the “Loan Parties”), hereby jointly and
severally promise to pay to the order of the Purchaser set forth above (the “Purchaser”) the
principal amount set forth above or, if less, the aggregate unpaid principal amount of this Senior
Term B Note (the “Senior Term B Note”) set forth above, payable at such times, and in such amounts,
as are specified in the Note and Equity Purchase Agreement, dated as of May 24, 2004, among the
Loan Parties, American Capital Financial Services, Inc., as Agent, and the other parties thereto,
as the same may be amended, restated, supplemented or otherwise modified from time to time (the
“Purchase Agreement”).



     The Loan Parties jointly and severally promise to pay interest on the unpaid principal amount
of this Senior Term B Note from the date made until such principal amount is paid in full, at such
interest rates, and payable at such times, as are specified in the Purchase Agreement.



     Both principal and interest are payable in the lawful money of the United States of America as
follows:


If by U.S. Mail to:



American Capital Financial Services, Inc., as Agent

ACS Funding Trust I, NW 7941

P.O. Box 1450

Minneapolis, MN 55485-7941.



If by Overnight Service to:



NW 7941 c/o Regular ACS Funding Trust I

1350 Energy Lane, Suite 200

St. Paul, MN 55108






 









 







If by wire transfer to:



Wells Fargo Bank, N.A.

ABA # xxxxxxxxx

Account Name: ACS Funding Trust I

Account #: xxxx-xxxxxx




     This Senior Term B Note is one of the Senior Term B Notes referred to in, and is entitled to
the benefits of, the Purchase Agreement. Capitalized terms used herein and not defined herein are
used herein as defined in the Purchase Agreement.



     The Purchase Agreement, among other things, (i) provides for the purchase of the Senior Term B
Notes by the Purchaser in an aggregate amount not to exceed at any time outstanding the Principal
Amount set forth above, the indebtedness of the Loan Parties resulting from such purchase being
evidenced by this Senior Term B Note and (ii) contains provisions for acceleration of the maturity
of the unpaid principal amount of this Senior Term B Note upon the happening of certain stated
events and also for prepayments on account of the principal hereof prior to the maturity hereof
upon the terms and conditions therein specified.



     This Senior Term B Note is secured as provided in the Security Documents.



     Demand, diligence, presentment, protest and notice of non-payment and protest are hereby
waived by the Loan Parties.



     This Senior Term B Note shall be governed by, and construed and interpreted in accordance
with, the laws of the State of New York.



18









 




IN WITNESS WHEREOF, the Loan Parties have caused this Senior Term B Note to be executed and
delivered by their respective duly authorized officer as of the day and year and at the place set
forth above.




	 	 	 	 	 
	 	LOAN PARTIES



IST ACQUISITIONS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	IMAGING AND SENSING TECHNOLOGY CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	IST CONAX NUCLEAR, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive
Officer 	 
	 
	 	IS TECHNOLOGY de PUERTO RICO, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 



19









 






	 	 	 	 	 



	 	 	 	 	 
	 	IMAGING AND SENSING TECHNOLOGY INTERNATIONAL CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	IST INSTRUMENTS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	QUADTEK, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 




20











 





EXHIBIT A-2




Form of Senior Subordinated Note






 









 








FORM OF SENIOR SUBORDINATED NOTE




SENIOR SUBORDINATED NOTE




	 	 	 
	Purchaser: American Capital Strategies, Ltd.

	 	Horseheads, New York
	Principal Amount: $7,500,000

	 	May 24, 2004






     FOR VALUE RECEIVED, the undersigned, IST Acquisitions, Inc., a Delaware corporation
(“Parent”), and Imaging and Sensing Technology Corporation, a New York corporation (“Borrower”),
I.S. Technology de Puerto Rico, Inc., a Delaware corporation, IST Instruments, Inc., a New York
corporation, Imaging and Sensing Technology International Corp., a New York corporation, IST Conax
Nuclear, Inc., a New York corporation, and Quadtek, Inc., a Washington corporation (the
“Subsidiaries”, and, together with Parent and Borrower, the. “Loan Parties”), hereby jointly and
severally promise to pay to the order of the Purchaser set forth above (the “Purchaser”) the
principal amount set forth above or, if less, the aggregate unpaid principal amount, subject to
increase as a result of interest payable-in-kind (“Senior PIK Interest”) in accordance with Section
3.1 of the Note and Equity Purchase Agreement, dated as of May 24, 2004, among the Loan Parties,
American Capital Financial Services, Inc., as Agent, and the other parties thereto, as the same may
be amended, restated, supplemented or otherwise modified from time to time (the “Purchase
Agreement”), or, if less, the aggregate unpaid principal amount of this Senior Subordinated Note
(the “Senior Subordinated Note”), payable at such times, and in such amounts, as are specified in
the Purchase Agreement.



     The Loan Parties jointly and severally promise to pay interest on the unpaid principal amount
of this Senior Subordinated Note from the date made until such principal amount is paid in full, at
such interest rates, and payable at such times, as are specified in the Purchase Agreement. The
Principal Amount of this Senior Subordinated Note shall be increased by Senior PIK Interest as
provided in the Purchase Agreement.



     Both principal and interest are payable in the lawful money of the United States of America as
follows:



     If by U.S. Mail to:


American Capital Financial Services, Inc., as Agent

ACS Funding Trust I, NW 7941

P.O. Box 1450

Minneapolis, MN 55485-7941.




     If by Overnight Service to:



 









 




NW 7941 c/o Regular ACS Funding Trust I

1350 Energy Lane, Suite 200

St. Paul, MN 55108




      If by wire transfer to:


Wells Fargo Bank, N.A.

ABA # xxxxxxxxx

Account Name: ACS Funding Trust I

Account #: xxxx-xxxxxx




     This Senior Subordinated Note is one of the Senior Subordinated Notes referred to in, and is
entitled to the benefits of, the Purchase Agreement. Capitalized terms used herein and not defined
herein are used herein as defined in the Purchase Agreement.



     The Purchase Agreement, among other things, (i) provides for the purchase of the Senior
Subordinated Notes by the Purchaser in an aggregate amount (excluding Senior PIK Interest) not to
exceed at any time outstanding the Principal Amount set forth above, the indebtedness of the Loan
Parties resulting from such purchase being evidenced by this Senior Subordinated Note and (ii)
contains provisions for acceleration of the maturity of the unpaid principal amount of this Senior
Subordinated Note upon the happening of certain stated events and also for prepayments on account
of the principal hereof prior to the maturity hereof upon the terms and conditions therein
specified.



     This Senior Subordinated Note is secured as provided in the Security Documents.



     Demand, diligence, presentment, protest and notice of non-payment and protest are hereby
waived by the Loan Parties.



     This Senior Subordinated Note shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York.



23









 





     IN WITNESS WHEREOF, the Loan Parties have caused this Senior Subordinated Note to be executed
and delivered by their respective duly authorized officers as of the day and year and at the place
set forth above.



	 	 	 	 	 
	 	LOAN PARTIES



IST ACQUISITIONS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	IMAGING AND SENSING TECHNOLOGY CORPORATION
 	 
	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	IST CONAX NUCLEAR, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	I.S. TECHNOLOGY de PUERTO RICO, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 



24









 






	 	 	 	 	 



	 	 	 	 	 
	 	IMAGING AND SENSING TECHNOLOGY INTERNATIONAL CORP.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	IST INSTRUMENTS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	QUADTEK, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 



25









 






	 	 	 	 	 



EXHIBIT A-3




Form of Junior Subordinated Note






 









 








FORM OF JUNIOR SUBORDINATED NOTE




JUNIOR SUBORDINATED NOTE




	 	 	 
	Purchaser: American Capital Strategies, Ltd.

	 	Horseheads, New York
	Principal Amount: $1,250,000

	 	May 24, 2004






     FOR VALUE RECEIVED, the undersigned, IST Acquisitions, Inc., a Delaware corporation
(“Parent”), and Imaging and Sensing Technology Corporation, a New York corporation (“Borrower”),
I.S. Technology de Puerto Rico, Inc., a Delaware corporation, IST Instruments Inc., a New York
corporation, Imaging and Sensing Technology International Corp., a New York corporation, IST Conax
Nuclear, Inc., a New York corporation, and Quadtek, Inc., a Washington corporation (the
“Subsidiaries”, and, together with Parent and Borrower, the “Loan Parties”), hereby promise to pay
to the order of the Purchaser set forth above (the “Purchaser”) the principal amount set forth
above, subject to increase as a result of interest payable-in-kind (“Junior PIK Interest”) in
accordance with Section 3.1 of the Note and Equity Purchase Agreement, dated as of May 24, 2004,
among the Loan Parties, American Capital Financial Services, Inc., as Agent, and the other parties
thereto, as the same may be amended, restated, supplemented or otherwise modified from time to time
(the “Purchase Agreement”), or, if less, the aggregate unpaid principal amount of this Junior
Subordinated Note (the “Junior Subordinated Note”), payable at such times, and in such amounts, as
are specified in the Purchase Agreement.



     The Loan Parties jointly and severally promise to pay interest on the unpaid principal amount
of this Junior Subordinated Note from the date made until such principal amount is paid in full, at
such interest rates, and payable at such times, as are specified in the Purchase Agreement. The
Principal Amount of this Junior Subordinated Note shall be increased by Junior PIK Interest as
provided in the Purchase Agreement.



     Both principal and interest are payable in the lawful money of the United States of America as
follows:



     If by U.S. Mail to:


American Capital Financial Services, Inc., as Agent

ACS Funding Trust I, NW 7941

P.O. Box 1450

Minneapolis, MN 55485-7941




      If by Overnight Service to:



 









 




NW 7941 c/o Regular ACS Funding Trust I

1350 Energy Lane, Suite 200

St. Paul, MN 55108




If by wire transfer to:


Wells Fargo Bank, N.A.

ABA # xxxxxxxxx

Account Name: ACS Funding Trust I

Account #: xxxx-xxxxxx




     This Junior Subordinated Note is one of the Junior Subordinated Notes referred to in, and is
entitled to the benefits of, the Purchase Agreement. Capitalized terms used herein and not defined
herein are used herein as defined in the Purchase Agreement.



     The Purchase Agreement, among other things, (i) provides for the purchase of the Junior
Subordinated Notes by the Purchaser in an aggregate amount (excluding Junior PIK Interest) not to
exceed at any time outstanding the Principal Amount set forth above, the indebtedness of the Loan
Parties resulting from such purchase being evidenced by this Junior Subordinated Note and (ii)
contains provisions for acceleration of the maturity of the unpaid principal amount of this Junior
Subordinated Note upon the happening of certain stated events and also for prepayments on account
of the principal hereof prior to the maturity hereof upon the terms and conditions therein
specified.



     This Junior Subordinated Note is secured as provided in the Security Documents.



     Demand, diligence, presentment, protest and notice of non-payment and protest are hereby
waived by the Loan Parties.



     This Junior Subordinated Note shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York.



28









 





     IN WITNESS WHEREOF, the Loan Parties have caused this Junior Subordinated Note to be executed
and delivered by their respective duly authorized officers as of the day and year and at the place
set forth above.



	 	 	 	 	 
	 	LOAN PARTIES



IST ACQUISITIONS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	IMAGING AND SENSING TECHNOLOGY CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	IST CONAX NUCLEAR, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	I.S. TECHNOLOGY de PUERTO RICO, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 



29









 






	 	 	 	 	 



	 	 	 	 	 
	 	IMAGING AND SENSING TECHNOLOGY INTERNATIONAL CORP.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	IST INSTRUMENTS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	QUADTEK, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 



30









 






	 	 	 	 	 



EXHIBIT A-4




Form of Revolving Note






 









 








FORM OF REVOLVING NOTE




REVOLVING NOTE




	 	 	 
	Purchaser: American Capital Strategies, Ltd.

	 	Horseheads, New York
	Principal Amount: $5,250,000

	 	May 24, 2004






     FOR VALUE RECEIVED, the undersigned, IST Acquisitions, Inc., a Delaware corporation
(“Parent”), Imaging and Sensing Technology Corporation, a New York corporation (“Borrower”), I.S.
Technology de Puerto Rico, Inc., a Delaware corporation, IST Instruments, Inc., a New York
corporation, Imaging and Sensing Technology International Corp., a New York corporation, IST Conax
Nuclear, Inc., a New York corporation, and Quadtek, Inc., a Washington corporation (the
“Subsidiaries”, and, together with Parent and Borrower, the “Loan Parties”), hereby jointly and
severally promise to pay to the order of the Purchaser set forth above (the “Purchaser”) the
principal amount set forth above or, if less, the aggregate unpaid principal amount of this
Revolving Note (the “Revolving Note”) set forth above, payable at such times, and in such amounts,
as are specified in the Note and Equity Purchase Agreement, dated May 24, 2004, among the Loan
Parties, American Capital Financial Services, Inc., as Agent, and the other parties thereto, as the
same may be amended, restated, supplemented or otherwise modified from time to time (the “Purchase
Agreement”).



     The Loan Parties jointly and severally promise to pay interest on the unpaid principal amount
of this Revolving Note from the date made until such principal amount is paid in full, at such
interest rates, and payable at such times, as are specified in the Purchase Agreement.



     Both principal and interest are payable in the lawful money of the United States of America as
follows:



     If by U.S. Mail to:


American Capital Financial Services, Inc., as Agent

ACS Funding Trust I, NW 7941

P.O. Box 1450

Minneapolis, MN 55485-7941.




     If by Overnight Service to:


NW 7941 c/o Regular ACS Funding Trust I

1350 Energy Lane, Suite 200

St. Paul, MN 55108






 









 








     If by wire transfer to:


Wells Fargo Bank, N.A.

ABA # xxxxxxxxx

Account Name: ACS Funding Trust I

Account #: xxxx-xxxxxx




     This Revolving Note is one of the Revolving Notes referred to in, and is entitled to the
benefits of, the Purchase Agreement. Capitalized terms used herein and not defined herein are used
herein as defined in the Purchase Agreement.



     The Purchase Agreement, among other things, (i) provides for the purchase of the Revolving
Notes by the Purchaser in an aggregate amount not to exceed at any time outstanding the Principal
Amount set forth above, the indebtedness of the Loan Parties resulting from such purchase being
evidenced by this Revolving Note and (ii) contains provisions for acceleration of the maturity of
the unpaid principal amount of this Revolving Note upon the happening of certain stated events and
also for prepayments on account of the principal hereof prior to the maturity hereof upon the terms
and conditions therein specified.



     This Revolving Note is secured as provided in the Security Documents.



     Demand, diligence, presentment, protest and notice of non-payment and protest are hereby
waived by the Loan Parties.



     This Revolving Note shall be governed by, and construed and interpreted in accordance with,
the laws of the State of New York.



33









 





     IN WITNESS WHEREOF, the Loan Parties have caused this Revolving Note to be executed and
delivered by their respective duly authorized officer as of the day and year and at the place set
forth above.



	 	 	 	 	 
	 	LOAN PARTIES



IST ACQUISITIONS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	IMAGING AND SENSING TECHNOLOGY CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	IST CONAX NUCLEAR, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	IS TECHNOLOGY de PUERTO RICO, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 



34









 






	 	 	 	 	 



	 	 	 	 	 
	 	IMAGING AND SENSING TECHNOLOGY INTERNATIONAL CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	IST INSTRUMENTS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	QUADTEK, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 



35









 






	 	 	 	 	 



EXHIBIT B




Form of Warrants







 









 









     FORM OF JUNIOR SUBORDINATED DEBT WARRANT


THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THIS
WARRANT, SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH
LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS.



THE TRANSFER OF THIS WARRANT AND THE SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT IS SUBJECT
TO THE CONDITIONS ON TRANSFER SPECIFIED IN THE NOTE AND EQUITY PURCHASE AGREEMENT DATED AS OF MAY
24, 2004, BY AND AMONG THE ISSUER HEREOF (THE “COMPANY”), THE OTHER BORROWERS THERETO, THE
PURCHASERS (AS DEFINED IN THE PURCHASE AGREEMENT) AND AMERICAN CAPITAL FINANCIAL SERVICES, INC., AS
AGENT, AS AMENDED FROM TIME TO TIME, (THE “PURCHASE AGREEMENT”).



THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE CONDITIONS ON TRANSFER SPECIFIED
IN THE STOCKHOLDERS AGREEMENT DATED AS OF MAY 24, 2004, BY AND AMONG THE COMPANY AND OTHER
STOCKHOLDERS OF THE COMPANY (AS AMENDED FROM TIME TO TIME, THE “STOCKHOLDERS AGREEMENT”). UPON
WRITTEN REQUEST, A COPY OF SUCH CONDITIONS WILL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF
WITHOUT CHARGE.




JUNIOR SUBORDINATED DEBT WARRANT




	 	 	 
	Date of Issuance: May 24, 2004

	 	Certificate No. W-1






     FOR VALUE RECEIVED, IST Acquisitions, Inc., a Delaware corporation (the “Company”), hereby
grants to American Capital Strategies, Ltd. or its registered assigns (the “Registered Holder”)
the right to purchase 1,869 shares of the Company’s Class B Common Stock (as further adjusted from
time to time, the “Exercise Shares”) at a price per share of $0.001 (as adjusted from time to time
hereunder, the “Exercise Price”). This Junior Subordinated Debt Warrant (“Warrant”) is one of one
or more Warrants issued by the Company in connection with the transactions contemplated in the
Purchase Agreement (collectively, the “Warrants”). Certain capitalized terms used herein are
defined



 









 




in Section 4 hereof. Certain capitalized terms used and not defined herein are defined in
the Purchase Agreement. The amount and kind of securities
purchasable pursuant to the rights granted hereunder and the Exercise Price for such
securities are subject to adjustment pursuant to the provisions contained in this Warrant.




     This Warrant is subject to the following provisions:



     Section 1. Exercise of Warrant.



     1A. Exercise Period and Amount. The Registered Holder may exercise, in whole or in
part (but not as to a fractional share of Common Stock), the purchase rights represented by this
Warrant for the Exercise Shares at any time and from time to time after the Exercise Eligibility
Date to and including the Expiration Date (the “Exercise Period”). The Company will give the
Registered Holder written notice of the expiration of this Warrant at least 30 days but not more
than 90 days prior to the Expiration Date.



          (i) Exercise Procedure. This Warrant will be deemed to have been exercised on the
date that the Company has received all of the following items (the “Exercise Time”):



               (a) a completed Exercise Agreement, as described in Section 1B below, executed by the Person
exercising all or part of the purchase rights represented by this Warrant (the “Purchaser”);



               (b) this Warrant;



               (c) if this Warrant is not registered in the name of the Purchaser, an Assignment or
Assignments in the form set forth in Exhibit II hereto properly executed evidencing the assignment
of this Warrant to the Purchaser, in compliance with the provisions set forth in Section 6 hereof;
and



               (d) a check payable to the Company in an amount equal to the product of the Exercise Price
multiplied by the number of shares of Common Stock being purchased upon such exercise (the
“Aggregate Exercise Price”); provided, however, that the Registered Holder may exercise this
Warrant in whole or in part by the surrender of this Warrant to the Company, with a duly executed
Exercise Agreement marked to reflect “Net Issue Exercise” and specifying the number of shares of
Common Stock to be purchased; and upon such Net Issue Exercise, the Registered Holder shall be
entitled to pay the Exercise Price for Common Stock purchased hereunder by cancellation of a number
of shares of Common Stock to be purchased hereunder, valued at Fair Market Value less the Exercise
Price thereof.



38









 





          (ii) Certificates for shares of Common Stock purchased upon exercise of this Warrant will be
delivered by the Company to the Purchaser within five (5) Business Days after the date of the
Exercise Time. Unless this Warrant has expired or all of the purchase rights represented hereby
have been exercised,
the Company will prepare a new Warrant, substantially identical hereto, representing the
rights formerly represented by this Warrant which have not expired or been exercised and will,
within such five (5) Business Day period, deliver such new Warrant to the Person designated for
delivery in the Exercise Agreement.



          (iii) The Common Stock issuable upon the exercise of this Warrant will be deemed to have been
issued to the Purchaser at the Exercise Time, and the Purchaser will be deemed for all purposes to
have become the record holder of such Common Stock at the Exercise Time.



          (iv) The issuance of certificates for shares of Common Stock upon exercise of this Warrant
will be made without charge to the Registered Holder or the Purchaser for any issuance tax in
respect thereof or other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Common Stock. Each share of Common Stock issuable upon exercise of
this Warrant will, upon exercise of this Warrant in accordance with the terms hereof and payment of
the Exercise Price therefor, be validly issued, fully paid and nonassessable and free from all
liens and charges with respect to the issuance thereof. Unless the shares of Common Stock issuable
upon exercise of this Warrant have been registered under the Securities Act of 1933, as amended,
each certificate representing any such shares shall bear a legend substantially in the following
form:




“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED OR ANY STATE SECURITIES LAWS AND NEITHER THESE
SECURITIES NOR ANY INTEREST HEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH
LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.”



     Such shares may be subject to additional restrictions on transfer imposed under the terms of
the Purchase Agreement, the Stockholders Agreement or applicable state and federal securities law.



          (v) The Company will not close its books against the transfer of this Warrant or of any share
of Common Stock issued or issuable upon the exercise of this Warrant in any manner which interferes
with the timely exercise



39









 




of this Warrant. The Company will from time to time take all such action
as may be necessary to assure that the par value per share of the unissued Common Stock acquirable
upon exercise of this Warrant is at all times equal to or less than the Exercise Price then in
effect.




          (vi) The Company shall provide reasonable assistance and cooperation to any Registered Holder
or Purchaser required to make any governmental filings or obtain any governmental approvals prior
to or in connection with any exercise of this Warrant (including, without limitation, making any
filings reasonably required to be made by the Company).



          (vii) Notwithstanding any other provision hereof, if an exercise of any portion of this
Warrant is to be made in connection with a public offering or sale of the Company, the exercise of
any portion of this Warrant may, at the election of the Registered Holder, be conditioned upon the
consummation of the public offering or sale of the Company in which case such exercise shall not be
deemed to be effective until the consummation of such transaction.



          (viii) The Company shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock solely for the purpose of issuance upon the exercise of the
Warrants, such number of shares of Common Stock issuable upon the exercise of all outstanding
Warrants. All shares of Common Stock that are so issuable shall, when issued in accordance with
the terms of this Warrant, be duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges but subject to the Purchase Agreement and the Stockholder Agreement.
The Company shall take all such actions as may be reasonably necessary to assure that all such
shares of Common Stock may be so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon which shares of Common
Stock may be listed (except for official notice of issuance which shall be immediately delivered by
the Company upon each such issuance).



     1B. Exercise Agreement. Upon any exercise of this Warrant, the Exercise Agreement
will be substantially in the form set forth in Exhibit I hereto, except that if the shares
of Common Stock are not to be issued in the name of the Person in whose name this Warrant is
registered, the Exercise Agreement will also state the name of the Person to whom the certificates
for the shares of Common Stock are to be issued and will be accompanied by a properly executed
Assignment (as required by Section 6 hereof), and if the number of shares of Common Stock to be
issued does not include all the shares of Common Stock purchasable hereunder, it will also state,
the name of the Person to whom a new Warrant for the unexercised portion of the rights hereunder is
to be delivered (and if such Person is other than the Person in whose name this Warrant is then
registered, will be accompanied by a properly executed Assignment (as required



40









 




by Section 6)).
Such Exercise Agreement will be dated the actual date of execution thereof.




     1C. Fractional Shares. If a fractional share of Common Stock would, but for the
provisions of paragraph 1A, be issuable upon exercise of the rights represented by this Warrant,
the Company will, within five (5) Business Days after the date of the Exercise Time, deliver to the
Purchaser a check payable to the Purchaser in lieu of such fractional share in an amount equal to
the difference
between Fair Market Value of such fractional share as of the Exercise Time and the Exercise
Price of such fractional share.



     Section 2. Adjustment of Number of Exercise Shares. In order to prevent dilution of
the rights granted under this Warrant, the number of Exercise Shares shall be subject to adjustment
from time to time as provided in this Section 2.



     2A. Adjustment of Number of Exercise Shares upon Issuance of Shares of Common Stock or
Stock Equivalents. If and whenever on or after the Closing Date the Company issues or sells,
or in accordance with paragraph 2B is deemed to have issued or sold, any shares of Common Stock for
a consideration per share less than the Fair Market Value per share of Common Stock at the time of
issuance or sale (not including the issuance of shares of Common Stock pursuant to the exercise of
Warrants issued on the Closing Date and not including the exercise of any options to purchase
Common Stock issued or reserved for issuance under the Company’s 2004 Stock Plan), then forthwith
upon such issue or sale, the Exercise Shares will be increased by multiplying such number by a
fraction (A) the numerator of which is the Fair Market Value per share of Common Stock at the time
of such issue and sale and (B) the denominator of which is determined by dividing (1) the product
derived by multiplying the Fair Market Value per share of Common Stock at the time of such issue or
sale times the number of shares of Common Stock outstanding on a Fully Diluted Basis immediately
prior to such sale, plus (2) the aggregate consideration, if any, received by the Company upon such
issue or sale, by (3) the number of shares of Common Stock outstanding on a Fully Diluted Basis
immediately after such sale.



     2B. Effect on Exercise Shares of Certain Events. For purposes of determining the
adjusted Exercise Shares under Section 2A above, the following will be applicable:



          (i) Issuance of Stock Equivalents. If the Company in any manner grants or issues
Stock Equivalents and the lowest price per share of Common Stock for which any one share of Common
Stock of the Company or analogous economic right is issuable upon the exercise of any such Stock
Equivalent is less than the Fair Market Value at the time of the granting or issuing of such Stock
Equivalent, then such shares of Common Stock will be deemed to



41









 




have been issued and sold by the
Company for such price per share of Common Stock. For purposes of this paragraph, the “lowest
price per share of Common Stock for which any one share of Common Stock or analogous economic right
is issuable” will be equal to the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one (1) share of Common Stock or analogous economic
right upon the exercise of the Stock Equivalent (whether by conversion, exchange or otherwise) or
other similar indication of the price per share of Common Stock as of the time of granting (such as
the floor value for stock appreciation rights). No further adjustment of
the Exercise Shares will be made upon the actual issue of such shares of Common Stock or upon
the exercise of any rights under the Stock Equivalents.




          (ii) Change in Option Price or Conversion Rate. If the purchase price provided for in
any Stock Equivalent, the additional consideration, if any, payable upon the issue, conversion or
exchange of any Stock Equivalent, or the rate at which any Stock Equivalent is convertible into or
exchangeable for shares of Common Stock changes at any time, the Exercise Shares in effect at the
time of such change will be readjusted to the Exercise Shares that would have been in effect at
such time had such Stock Equivalent provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time initially granted, issued
or sold; provided that, if such adjustment would result in a decrease in the Exercise. Shares then
in effect, such adjustment will not be effective until 30 days after written notice thereof has
been given by the Company to all Registered Holders of the Warrants.



          (iii) Treatment of Expired and Unexercised Stock Equivalents. Upon the expiration of
any Stock Equivalent or the termination of any right to convert or exchange any Stock Equivalent
without the exercise of such Stock Equivalent, the Exercise Shares then in effect will be adjusted
to the Exercise Shares which would have been in effect at the time of such expiration or
termination had such Stock Equivalent, to the extent outstanding immediately prior to such
expiration or termination, never been issued; provided that, if such expiration or termination
would result in a decrease in the Exercise Shares then in effect, such decrease shall not be
effective until 30 days after written notice thereof has been given by the Company to all holders
of the Warrants.



          (iv) Calculation of Consideration Received. If any shares of Common Stock or Stock
Equivalents are issued or sold or deemed to have been issued or sold for cash, the consideration
received therefor will be deemed to be the net amount received by the Company. In case any shares
of Common Stock or Stock Equivalents are issued or sold for a consideration other than cash, the
amount of the consideration other than cash received by the Company will be the Fair Market Value
of such consideration. In case any shares of Common Stock or Stock Equivalents are issued to the
owners of the non-surviving entity in connection with any merger in which the Company is the
surviving entity, the



42









 




amount of consideration therefor will be deemed to be the Fair Market Value
of such portion of the net assets and business of the non- surviving entity as is attributable to
such shares of Common Stock or Stock Equivalents, as the case may be.




          (v) Integrated Transactions. In case any Stock Equivalent is issued in connection
with the issue or sale of other securities of the Company, together comprising one integrated
transaction in which no specific consideration is allocated to such Stock Equivalent by the parties
thereto, the Stock Equivalent will be deemed to have been issued for Fair Market Value if the
entire integrated transaction is for Fair Market Value.



          (vi) Record Date. If the Company takes a record of the holders of Common Stock for
the purpose of entitling them (A) to receive a dividend or other distribution payable in Common
Stock or Stock Equivalents or (B) to subscribe for or purchase Common Stock or Stock Equivalents,
then such record date will be deemed to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration of such dividend or the making of
such other distribution or the date of the granting of such right of subscription or purchase, as
the case may be.



     2C. Subdivision or Combination of Common Stock. Without duplication of Section 2A, if
the Company at any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of
shares, the Exercise Shares in effect immediately prior to such subdivision will be proportionately
increased. If the Company at any time combines (by reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise
Shares in effect immediately prior to such combination will be proportionately decreased and the
Exercise Price proportionately increased.



     2D. Reorganization, Reclassification, Consolidation, Merger or Sale. Any
recapitalization, reorganization, reclassification, consolidation, merger, sale of all or
substantially all of the Company’s assets with, into or to another Person or other transaction
which is effected in such a way that holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities, assets or other property with respect
to or in exchange for Common Stock is referred to herein as “Organic Change.” Prior to the
consummation of any Organic Change, the Company will make appropriate provision (in form and
substance reasonably satisfactory to the Registered Holders of the Warrants representing a majority
of the Common Stock obtainable upon exercise of all Warrants then outstanding) to ensure that each
of the Registered Holders of the Warrants will thereafter have the right to acquire and receive in
lieu of or addition to (as the case may be) the shares of Common Stock immediately theretofore



43









 




acquirable and receivable upon the exercise of such holder’s Warrant, such shares of stock,
securities, assets or other property (“Exchangeable Property”) as may be issued or payable with
respect to or in exchange for the number of shares of Common Stock immediately theretofore
acquirable and receivable upon exercise of such holder’s Warrant had such Organic Change not taken
place. In any such case, the Company will make appropriate provision (in form and substance
reasonably satisfactory to the Registered Holders of the Warrants representing a majority of the
shares of Common Stock obtainable upon exercise of all Warrants then outstanding) with respect to
such holders’ rights and interests to ensure that the provisions of this Section 2 and Sections 3
and 5 hereof will thereafter be applicable to the Warrants (including, in the case of any such
consolidation, merger or sale in which the successor entity or purchasing entity is other than the
Company, an immediate adjustment of the Exercise Price in proportion to the
Exchangeable Property receivable for each share Common Stock reflected by the terms of such
consolidation, merger or sale, and a corresponding immediate adjustment in the number of Exercise
Shares). The Company will not effect any such Organic Change unless, prior to the consummation
thereof, the successor entity (if other than the Company) resulting from consolidation or merger or
the purchasing corporation assumes by written instrument (in form and substance reasonably
satisfactory to the Registered Holders of Warrants representing a majority of the shares of Common
Stock obtainable upon exercise of all of the Warrants then outstanding), the obligation to deliver
to each such holder Exchangeable Property as, in accordance with the foregoing provisions, such
holder may be entitled to acquire.




     2E. Notices.



          (i) Promptly upon any adjustment of the Exercise Shares, the Company will give written notice
thereof to the Registered Holder, setting forth in reasonable detail and certifying the calculation
of such adjustment.



          (ii) The Company will give written notice to the Registered Holder at least 20 days prior to
the date on which the Company closes its books or takes a record (A) with respect to any dividend
or distribution upon the Common Stock, (B) with respect to any pro rata subscription offer to
holders of Common Stock or (C) for determining rights to vote with respect to any Organic Change,
dissolution or liquidation.



          (iii) The Company will also give written notice to the Registered Holders at least 20 days
prior to the date on which any Organic Change, dissolution or liquidation will take place.



     Section 3. Dividends



44









 





     3A. In the event that, during the term of the Warrants, the Company pays any cash dividend or
makes any cash distribution to any holder of Common Stock, the Registered Holder shall be entitled
to receive in respect of its Warrant a dilution fee in cash (the “Dilution Fee”) on the date of
payment of such dividend or distribution, which Dilution Fee shall be equal to the product of (i)
the highest amount per share paid to holders of Common Stock times (ii) the number of Exercise
Shares to which the Holder is then entitled. No such dividend or distribution shall be paid unless
the Registered Holder shall have received advance written notice thereof at least 10 days prior to
the record date therefor.



     3B. If the Company declares or pays a dividend upon the Common Stock payable otherwise than in
cash out of earnings or earned surplus (determined in accordance with generally accepted accounting
principles, consistently applied) except for a stock dividend payable in shares of Common Stock (a
“Liquidating Dividend”), then the Company will pay to the Registered Holder at the time of payment
thereof the Liquidating Dividend which would
have been paid to the Registered Holder on the Common Stock had this Warrant been fully
exercised immediately prior to the date on which a record is taken for such Liquidating Dividend
or, if no record is taken, the date as of which the record holders of Common Stock entitled to such
dividends are to be determined.



     Section 4. Definitions. The following terms have meanings set forth below:



     “Common Stock” means, collectively, Class B Common Stock, $0.001 par value, of the Company
and, except for purposes of the shares obtainable upon exercise of this Warrant, any capital stock
of any class of the Company hereafter authorized which is not limited to a fixed sum or percentage
of par or stated value in respect of the rights of the holders thereof to participate in dividends
or in the distribution of assets upon any liquidation, dissolution or winding up of the Company.



     “Exercise Eligibility Date” means the Date of Issuance of this Warrant.



     “Expiration Date” means May 24, 2014.



     “Fair Market Value” shall have such meaning as assigned to that term in the Purchase
Agreement.



     “Fully Diluted Basis” means, at any given time, the number of shares of Common Stock actually
outstanding at such time, plus the number of Stock Equivalents then outstanding (including
Warrants), regardless of their exercise price or its equivalent.




45











 





     “Person” means an individual, a partnership, a limited liability company, joint venture, a
corporation, a trust, an unincorporated organization and a government or any department or agency
thereof.



     “Stock Equivalents” means any security, option, warrant, right or claim exercisable into,
exchangeable for, or convertible to shares of Common Stock or the economic equivalent value of
shares of Common Stock (including, by way of illustration, the Company’s Class A Common Stock,
preferred stock and stock appreciation rights).



     Section 5. No Voting Rights; Limitations of Liability. This Warrant shall not entitle
the holder hereof to any voting rights or other rights of a stockholder of the Company. No
provision hereof, in the absence of affirmative action by the Registered Holder to purchase Common
Stock, and no enumeration herein of the rights or privileges of the Registered Holder shall give
rise to any liability of such holder for the Exercise Price of Common Stock acquirable by exercise
hereof or as a stockholder of the Company.



     Section 6. Warrant Transferable. Subject to the transfer conditions referred to in
the legend endorsed hereon, this Warrant and all rights hereunder are transferable, in whole or in
part, without charge to the Registered Holder, upon surrender of this Warrant with a properly
executed Assignment (in the form of Exhibit II hereto) at the principal office of the
Company.



     Section 7. Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon the surrender hereof by the Registered Holder at the principal office of the
Company, for new Warrants of like tenor representing in the aggregate the purchase rights
hereunder, and each of such new Warrants will represent such portion of such rights as is
designated by the Registered Holder at the time of such surrender. The date the Company initially
issues this Warrant will be deemed to be the “Date of Issuance” hereof regardless of the number of
times new certificates representing the unexpired and unexercised rights formerly represented by
this Warrant shall be issued. All Warrants representing portions of the rights hereunder are
referred to herein as the “Warrants.”



     Section 8. Replacement. Upon receipt of evidence reasonably satisfactory to the
Company (including at the request of the Company an affidavit of the Registered Holder) of the
ownership and the loss, theft, destruction or mutilation of any certificate evidencing this
Warrant, and in the case of any such loss, theft or destruction, upon receipt of indemnity
reasonably satisfactory to the Company (provided that if the holder is a financial institution or
other institutional investor its own agreement will be satisfactory) or, in the case of any such
mutilation upon surrender of such certificate, the Company will (at its expense) execute and
deliver in lieu of such certificate a new certificate of like kind



46









 




representing the same rights
represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate.




     Section 9. Notices. Except as otherwise expressly provided herein, all notices
referred to in this Warrant will be in writing and will be delivered personally, sent by reputable
express courier service (charges prepaid) or sent by registered or certified mail, return receipt
requested, postage prepaid and will be deemed to have been given when so delivered, one Business
Day after being so sent or three Business Days after being so deposited in the U.S. Mail (i) to
the Company, at its principal executive offices and (ii) to the Registered Holder of this Warrant,
at such holder’s address as it appears in the records of the Company (unless otherwise indicated by
any such holder).



     Section 10. Amendment and Waiver. Except as otherwise provided herein, the provisions
of the Warrants may be amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company has obtained the written
consent of the Registered Holders of Warrants representing a majority of the shares of Common Stock
issuable upon exercise of the Warrants; provided that no such action may change the Exercise Price
of the Warrants or the number of shares or class of stock obtainable upon exercise of each Warrant
without the written consent of the Registered Holders of Warrants representing at least 80% of the
shares of Common Stock obtainable upon exercise of the Warrants.



     Section 11. Descriptive Headings; Governing Law. The descriptive headings of the
several Sections and paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The construction, validity and interpretation of this Warrant
will be governed by the internal law, and not the conflicts law, of the State of Maryland.



*   *   *   *   *



47









 





     IN WITNESS WHEREOF, the Company has caused this Junior Subordinated Debt Warrant to be signed
and attested by its duly authorized officers under its corporate seal and to be dated the Date of
Issuance hereof.



	 	 	 	 	 
	 	IST ACQUISITIONS, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive
Officer 	 
	 



SIGNATURE PAGE TO JUNIOR SUBORDINATED DEBT WARRANT





48









 





EXHIBIT 1




EXERCISE AGREEMENT


To:



Dated:




     The undersigned, pursuant to the provisions set forth in the attached Warrant (Certificate No.
W-1), hereby agrees to subscribe for the purchase of
                      shares of the Common Stock covered
by such Warrant and makes payment herewith in full therefor at the price per share provided by such
Warrant.



     o      Check Box for Net Issue Exercise




	 	 	 	 	 	 	 
	 
	 

	 	Signature
	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Address
	 	 

	 	 
















 





EXHIBIT II




ASSIGNMENT



     FOR VALUE RECEIVED,                      hereby sells, assigns, and transfers all of the rights of the
undersigned under the attached Warrant (Certificate No. W-1) with respect to the number of
shares of the Common Stock covered thereby set forth below, unto:



	 	 	 	 	 
	Names of Assignee
	 	Address
	 	No. of Shares
	 
	 	 
	 	 







Signature                                                  














 





FORM OF PREFERRED STOCK WARRANT



THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THIS
WARRANT, SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH
LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS.



THE TRANSFER OF THIS WARRANT AND THE SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT IS SUBJECT
TO THE CONDITIONS ON TRANSFER SPECIFIED IN THE NOTE AND EQUITY PURCHASE AGREEMENT DATED AS OF MAY
24, 2004, BY AND AMONG THE ISSUER HEREOF (THE “COMPANY”), THE OTHER BORROWERS THERETO, THE
PURCHASERS (AS DEFINED IN THE PURCHASE AGREEMENT) AND AMERICAN CAPITAL FINANCIAL SERVICES, INC., AS
AGENT, AS AMENDED FROM TIME TO TIME, (THE “PURCHASE AGREEMENT”).



THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE CONDITIONS ON TRANSFER SPECIFIED
IN THE STOCKHOLDERS AGREEMENT DATED AS OF MAY 24, 2004, BY AND AMONG THE COMPANY AND OTHER
STOCKHOLDERS OF THE COMPANY (AS AMENDED FROM TIME TO TIME, THE “STOCKHOLDERS AGREEMENT”). UPON
WRITTEN REQUEST, A COPY OF SUCH CONDITIONS WILL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF
WITHOUT CHARGE.




PREFERRED STOCK WARRANT




	 	 	 
	Date of Issuance: May 24, 2004

	 	Certificate No. W-2






     FOR VALUE RECEIVED, IST Acquisitions, Inc., a Delaware corporation (the “Company”), hereby
grants to American Capital Strategies, Ltd. or its registered assigns (the “Registered Holder”) the
right to purchase 81,589 shares of the Company’s Class B Common Stock (as further adjusted from
time to time, the “Exercise Shares”) at a price per share of $0.001 (as adjusted from time to time
hereunder, the “Exercise Price”). This Preferred Stock Warrant (“Warrant”) is one of one or more
Warrants issued by the Company in connection with the transactions contemplated in the Purchase
Agreement (collectively, the “Warrants”). Certain capitalized terms used herein are defined in
Section 4 hereof. Certain capitalized terms used and not defined herein are













 




defined in the
Purchase Agreement. The amount and kind of securities purchasable pursuant to the rights granted
hereunder and the Exercise Price for
such securities are subject to adjustment pursuant to the provisions contained in this
Warrant.




     This Warrant is subject to the following provisions:



     Section 1. Exercise of Warrant.



     1A. Exercise Period and Amount. The Registered Holder may exercise, in whole or in
part (but not as to a fractional share of Common Stock), the purchase rights represented by this
Warrant for the Exercise Shares at any time and from time to time after the Exercise Eligibility
Date to and including the Expiration Date (the “Exercise Period”). The Company will give the
Registered Holder written notice of the expiration of this Warrant at least 30 days but not more
than 90 days prior to the Expiration Date.



          (i) Exercise Procedure. This Warrant will be deemed to have been exercised on the
date that the Company has received all of the following items (the “Exercise Time”):




               (a) a completed Exercise Agreement, as described in Section 1B below, executed by the Person
exercising all or part of the purchase rights represented by this Warrant (the “Purchaser”);



               (b) this Warrant;



               (c) if this Warrant is not registered in the name of the Purchaser, an Assignment or
Assignments in the form set forth in Exhibit II hereto properly executed evidencing the
assignment of this Warrant to the Purchaser, in compliance with the provisions set forth in Section
6 hereof; and



               (d) a check payable to the Company in an amount equal to the product of the Exercise Price
multiplied by the number of shares of Common Stock being purchased upon such exercise (the
“Aggregate Exercise Price”); provided, however, that the Registered Holder may exercise this
Warrant in whole or in part by the surrender of this Warrant to the Company, with a duly executed
Exercise Agreement marked to reflect “Net Issue Exercise” and specifying the number of shares of
Common Stock to be purchased; and upon such Net Issue Exercise, the Registered Holder shall be
entitled to pay the Exercise Price for Common Stock purchased hereunder by cancellation of a number
of shares of Common Stock to be purchased hereunder, valued at Fair Market Value less the Exercise
Price thereof.



52









 





          (ii) Certificates for shares of Common Stock purchased upon exercise of this Warrant will be
delivered by the Company to the Purchaser within five (5) Business Days after the date of the
Exercise Time. Unless this Warrant
has expired or all of the purchase rights represented hereby have been exercised, the Company
will prepare a new Warrant, substantially identical hereto, representing the rights formerly
represented by this Warrant which have not expired or been exercised and will, within such five (5)
Business Day period, deliver such new Warrant to the Person designated for delivery in the Exercise
Agreement.




          (iii) The Common Stock issuable upon the exercise of this Warrant will be deemed to have been
issued to the Purchaser at the Exercise Time, and the Purchaser will be deemed for all purposes to
have become the record holder of such Common Stock at the Exercise Time.




          (iv) The issuance of certificates for shares of Common Stock upon exercise of this Warrant
will be made without charge to the Registered Holder or the Purchaser for any issuance tax in
respect thereof or other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Common Stock. Each share of Common Stock issuable upon exercise of
this Warrant will, upon exercise of this Warrant in accordance with the terms hereof and payment of
the Exercise Price therefor, be validly issued, fully paid and nonassessable and free from all
liens and charges with respect to the issuance thereof. Unless the shares of Common Stock issuable
upon exercise of this Warrant have been registered under the Securities Act of 1933, as amended,
each certificate representing any such shares shall bear a legend substantially in the following
form:





“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED OR ANY STATE SECURITIES LAWS AND NEITHER THESE
SECURITIES NOR ANY INTEREST HEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH
LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.”



     Such shares may be subject to additional restrictions on transfer imposed under the terms of
the Purchase Agreement, the Stockholders Agreement or applicable state and federal securities law.



          (v) The Company will not close its books against the transfer of this Warrant or of any share
of Common Stock issued or issuable upon the exercise of this Warrant in any manner which interferes
with the timely exercise





53









 







of this Warrant. The Company will from time to time take all such action
as may be necessary to assure that the par value per share of the unissued Common Stock
acquirable upon exercise of this Warrant is at all times equal to or less than the Exercise
Price then in effect.




          (vi) The Company shall provide reasonable assistance and cooperation to any Registered Holder
or Purchaser required to make any governmental filings or obtain any governmental approvals prior
to or in connection with any exercise of this Warrant (including, without limitation, making any
filings seasonably required to be made by the Company).




          (vii) Notwithstanding any other provision hereof, if an exercise of any portion of this
Warrant is to be made in connection with a public offering or sale of the Company, the exercise of
any portion of this Warrant may, at the election of the Registered Holder, be conditioned upon the
consummation of the public offering or sale of the Company in which case such exercise shall not be
deemed to be effective until the consummation of such transaction.




          (viii) The Company shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock solely for the purpose of issuance upon the exercise of the
Warrants, such number of shares of Common Stock issuable upon the exercise of all outstanding
Warrants. All shares of Common Stock that are so issuable shall, when issued in accordance with
the terms of this Warrant, be duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges but subject to the Purchase Agreement and the Stockholder Agreement.
The Company shall take all such actions as may be reasonably necessary to assure that all such
shares of Common Stock may be so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon which shares of Common
Stock may be listed (except for official notice of issuance which shall be immediately delivered by
the Company upon each such issuance).




     1B. Exercise Agreement. Upon any exercise of this Warrant, the Exercise Agreement
will be substantially in the form set forth in Exhibit I hereto, except that if the shares of
Common Stock are not to be issued in the name of the Person in whose name this Warrant is
registered, the Exercise Agreement will also state the name of the Person to whom the certificates
for the shares of Common Stock are to be issued and will be accompanied by a properly executed
Assignment (as required by Section 6 hereof), and if the number of shares of Common Stock to be
issued does not include all the shares of Common Stock purchasable hereunder, it will also state
the name of the Person to whom a new Warrant for the unexercised portion of the rights hereunder is
to be delivered (and if such Person is other than the Person in whose name this Warrant is then
registered, will be accompanied by a properly executed Assignment (as required



54









 




by Section 6)).
Such Exercise Agreement will be dated the actual date of execution thereof.




     1C. Fractional Shares. If a fractional share of Common Stock would, but for the
provisions of paragraph 1A, be issuable upon exercise of the rights represented by this Warrant,
the Company will, within five (5) Business Days after the date of the Exercise Time, deliver to the
Purchaser a check payable to the Purchaser in lieu of such fractional share in an amount equal to
the difference between Fair Market Value of such fractional share as of the Exercise Time and the
Exercise Price of such fractional(share.



     Section 2. Adjustment of Number of Exercise Shares. In order to prevent dilution of
the rights granted under this Warrant, the number of Exercise Shares shall be subject to adjustment
from time to time as provided in this Section 2.



     2A. Adjustment of Number of Exercise Shares upon Issuance of Shares of Common Stock or
Stock Equivalents. If and whenever on or after the Closing Date the Company issues or. sells,
or in accordance with paragraph 2B is deemed to have issued or sold, any shares of Common Stock for
a consideration per share less than the Fair Market Value per share of Common Stock at the time of
issuance or sale (not including the issuance of shares of Common Stock pursuant to the exercise of
Warrants issued on the Closing Date and not including the exercise of any options to purchase
Common Stock issued or reserved for issuance under the Company’s 2004 Stock Plan), then forthwith
upon such issue or sale, the Exercise Shares will be increased by multiplying such number by a
fraction (A) the numerator of which is the Fair Market Value per share of Common Stock at the time
of such issue and sale and (B) the denominator of which is determined by dividing (1) the product
derived by multiplying the Fair Market Value per share of Common Stock at the time of such issue or
sale times the number of shares of Common Stock outstanding on a Fully Diluted Basis immediately
prior to such sale, plus (2) the aggregate consideration, if any, received by the Company upon such
issue or sale, by (3) the number of shares of Common Stock outstanding on a Fully Diluted Basis
immediately after such sale.



     2B. Effect on Exercise Shares of Certain Events. For purposes of determining the
adjusted Exercise Shares under Section 2A above, the following will be applicable:



          (i) Issuance of Stock Equivalents. If the Company in any manner grants or issues
Stock Equivalents and the lowest price per share of Common Stock for which any one share of Common
Stock of the Company or analogous economic right is issuable upon the exercise of any such Stock
Equivalent is less than the Fair Market Value at the time of the granting or issuing of such Stock
Equivalent, then such shares of Common Stock will be deemed to






55









 







have been issued and sold by the
Company for such price per share of Common Stock. For purposes of this paragraph, the “lowest
price per share of Common Stock for which any one share of Common Stock or analogous economic right
is issuable” will be equal to the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one (1) share of Common Stock or analogous economic
right upon the exercise of the Stock Equivalent (whether by conversion, exchange or otherwise) or
other similar indication of the price per share of Common Stock as of the time of granting (such as
the floor value for stock appreciation rights). No further adjustment of the Exercise Shares will
be made upon the actual issue of such shares of Common Stock or upon the exercise of any rights
under the Stock Equivalents.




          (ii) Change in Option Price or Conversion Rate. If the purchase price provided for in
any Stock Equivalent, the additional consideration, if any, payable upon the issue, conversion or
exchange of any Stock Equivalent, or the rate at which any Stock Equivalent is convertible into or
exchangeable for shares of Common Stock changes at any time, the Exercise Shares in effect at the
time of such change will be readjusted to the Exercise Shares that would have been in effect at
such time had such Stock Equivalent provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time initially granted, issued
or sold; provided that, if such adjustment would result in a decrease in the Exercise Shares then
in effect, such adjustment will not be effective until 30 days after written notice thereof has
been given by the Company to all Registered Holders of the Warrants.




          (iii) Treatment of Expired and Unexercised Stock Equivalents. Upon the expiration of
any Stock Equivalent or the termination of any right to convert or exchange any Stock Equivalent
without the exercise of such Stock Equivalent, the Exercise Shares then in effect will be adjusted
to the Exercise Shares which would have been in effect at the time of such expiration or
termination had such Stock Equivalent, to the extent outstanding immediately prior to such
expiration, or termination, never been issued; provided that, if such expiration or termination
would result in a decrease in the Exercise Shares then in effect, such decrease shall not be
effective until 30 days after written notice thereof has been given by the Company to all holders
of the Warrants.




          (iv) Calculation of Consideration Received. If any shares of Common Stock or Stock
Equivalents are issued or sold or deemed to have been issued or sold for cash, the consideration
received therefor will be deemed to be the net amount received by the Company. In case any shares
of Common Stock or Stock Equivalents are issued or sold for a consideration other than cash, the
amount of the consideration other than cash received by the Company will be the Fair Market Value
of such consideration. In case any shares of Common Stock or Stock Equivalents are issued to the
owners of the non-surviving entity in connection with any merger in which the Company is the
surviving entity, the






56









 







amount of consideration therefor will be deemed to be the Fair Market Value
of such portion of the net assets and business of the non- surviving entity as is
attributable to such shares of Common Stock or Stock Equivalents, as the case may be.




          (v) Integrated Transactions. In case any Stock Equivalent is issued in connection
with the issue or sale of other securities of the Company, together comprising one integrated
transaction in which no specific consideration is allocated to such Stock Equivalent by the parties
thereto, the Stock Equivalent will be deemed to have been issued for Fair Market Value if the
entire integrated transaction is for Fair Market Value.




          (vi) Record Date. If the Company takes a record of the holders of Common Stock for
the purpose of entitling them (A) to receive a dividend or other distribution payable in Common
Stock or Stock Equivalents or (B) to subscribe for or purchase Common Stock or Stock Equivalents,
then such record date will be deemed to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration of such dividend or the making of
such other distribution or the date of the granting of such right of subscription or purchase, as
the case may be.




     2C. Subdivision or Combination of Common Stock. Without duplication of Section 2A, if
the Company at any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of
shares, the Exercise Shares in effect immediately prior to such subdivision will be proportionately
increased. If the Company at any time combines (by reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise
Shares in effect immediately prior to such combination will be proportionately decreased and the
Exercise Price proportionately increased.



     2D. Reorganization, Reclassification, Consolidation, Merger or Sale. Any
recapitalization, reorganization, reclassification, consolidation, merger, sale of all or
substantially all of the Company’s assets with, into or to another Person or other transaction
which is effected in such a way that holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities, assets or other property with respect
to or in exchange for Common Stock is referred to herein as “Organic Change.” Prior to the
consummation of any Organic Change, the Company will make appropriate provision (in form and
substance reasonably satisfactory to the Registered Holders of the Warrants representing a majority
of the Common Stock obtainable upon exercise of all Warrants then outstanding) to ensure that each
of the Registered Holders of the



57









 




Warrants will thereafter have the right to acquire and receive in
lieu of or addition to (as the case may be) the shares of Common Stock immediately theretofore
acquirable and receivable upon the exercise of such holder’s Warrant, such shares of stock,
securities, assets or other property (“Exchangeable Property”) as may be issued or payable with
respect to or in exchange for the number of shares of Common Stock immediately theretofore
acquirable and receivable upon exercise of such holder’s Warrant had such Organic Change not taken
place. In any such case, the Company will make appropriate provision (in form and substance
reasonably satisfactory to the Registered Holders of the Warrants representing a majority of the
shares of Common Stock obtainable upon exercise of all Warrants then outstanding) with respect to
such holders’ rights and interests to ensure that the provisions of this Section 2 and Sections 3
and 5 hereof will thereafter be applicable to the Warrants (including, in the case of any such
consolidation, merger or sale in which the successor entity or purchasing entity is other than the
Company, an immediate adjustment of the Exercise Price in proportion to the Exchangeable Property
receivable for each share Common Stock reflected by the terms of such consolidation, merger or
sale, and a corresponding immediate adjustment in the number of Exercise Shares). The Company will
not effect any such Organic Change unless, prior to the consummation thereof, the successor entity
(if other than the Company) resulting from consolidation or merger or the purchasing corporation
assumes by written instrument (in form and substance reasonably satisfactory to the Registered
Holders of Warrants representing a majority of the shares of Common Stock obtainable upon exercise
of all of the Warrants then outstanding), the obligation to deliver to each such holder
Exchangeable Property as, in accordance with the foregoing provisions, such holder may be entitled
to acquire.




     2E. Notices.



          (i) Promptly upon any adjustment of the Exercise Shares, the Company will give written notice
thereof to the Registered Holder, setting forth in reasonable detail and certifying the calculation
of such adjustment.




          (ii) The Company will give written notice to the Registered Holder at least 20 days prior to
the date on which the Company closes its books or takes a record (A) with respect to any dividend
or distribution upon the Common Stock, (B) with respect to any pro rata subscription offer to
holders of Common Stock or (C) for determining rights to vote with respect to any Organic Change,
dissolution or liquidation.




          (iii) The Company will also give written notice to the Registered Holders at least 20 days
prior to the date on which any Organic Change, dissolution or liquidation will take place.




     Section 3. Dividends



58









 





     3A. In the event that, during the term of the Warrants, the Company pays any cash dividend or
makes any cash distribution to any holder of Common Stock, the Registered Holder shall be entitled
to receive in respect of its Warrant a dilution fee in cash (the “Dilution Fee”) on the date of
payment of such dividend or distribution, which Dilution Fee shall be equal to the product of (i)
the highest amount per share paid to holders of Common Stock times (ii) the number of Exercise
Shares to which the Holder is then entitled. No such dividend or distribution shall be paid unless
the Registered Holder shall have received advance written notice thereof at least 10 days prior to
the record date therefor.



     3B. If the Company declares or pays a dividend upon the Common Stock payable otherwise than in
cash out of earnings or earned surplus (determined in accordance with generally accepted accounting
principles, consistently applied) except for a stock dividend payable in shares of Common Stock (a
“Liquidating Dividend”), then the Company will pay to the Registered Holder at the time of payment
thereof the Liquidating Dividend which would have been paid to the Registered Holder on the Common
Stock had this Warrant been fully exercised immediately prior to the date on which a record is
taken for such Liquidating Dividend or, if no record is taken, the date as of which the record
holders of Common Stock entitled to such dividends are to be determined.



     Section 4. Definitions. The following terms have meanings set forth below:



     “Common Stock” means, collectively, Class B Common Stock, $0.001 par value, of the Company
and, except for purposes of the shares obtainable upon exercise of this Warrant, any capital stock
of any class of the Company hereafter authorized which is not limited to a fixed sum or percentage
of par or stated value in respect of the rights of the holders thereof to participate in dividends
or in the distribution of assets upon any liquidation, dissolution or winding up of the Company.



     “Exercise Eligibility Date” means the Date of Issuance of this Warrant.



     “Expiration Date” means May 24, 2014.



     “Fair Market Value” shall have such meaning as assigned to that term in the Purchase
Agreement.



     “Fully Diluted Basis” means, at any given time, the number of shares of Common Stock actually
outstanding at such time, plus the number of Stock Equivalents then outstanding (including
Warrants), regardless of their exercise price or its equivalent.



59









 





     “Person” means an individual, a partnership, a limited liability company, joint venture, a
corporation, a trust, an unincorporated organization and a government or any department or agency
thereof.



     “Stock Equivalents” means any security, option, warrant, right or claim exercisable into,
exchangeable for, or convertible to shares of Common Stock or the economic equivalent value of
shares of Common Stock (including, by way of illustration, the Company’s Class A Common Stock,
preferred stock and stock appreciation rights).



     Section 5. No Voting Rights; Limitations of Liability. This Warrant shall not entitle
the holder hereof to any voting rights or other rights of a stockholder of the Company. No
provision hereof, in the absence of affirmative action by the Registered Holder to purchase Common
Stock, and no enumeration herein of the rights or privileges of the Registered Holder shall give
rise to any liability of such holder for the Exercise Price of Common Stock acquirable by exercise
hereof or as a stockholder of the Company.



     Section 6. Warrant Transferable. Subject to the transfer conditions referred to in
the legend endorsed hereon, this Warrant and all rights hereunder are transferable, in whole or in
part, without charge to the Registered Holder, upon surrender of this Warrant with a properly
executed Assignment (in the form of Exhibit II hereto) at the principal office of the Company.



     Section 7. Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon the surrender hereof by the Registered Holder at the principal office, of the
Company, for new Warrants of like tenor representing in the aggregate the purchase rights
hereunder, and each of such new Warrants will represent such portion of such rights as is
designated by the Registered Holder at the time of such surrender. The date the Company initially
issues this Warrant will be deemed to be the “Date of Issuance” hereof regardless of the number of
times new certificates representing the unexpired and unexercised rights formerly represented by
this Warrant shall be issued. All Warrants representing portions of the rights hereunder are
referred to herein as the “Warrants.”



     Section 8. Replacement. Upon receipt of evidence reasonably satisfactory to the
Company (including at the request of the Company an affidavit of the Registered Holder) of the
ownership and the loss, theft, destruction or mutilation of any certificate evidencing this
Warrant, and in the case of any such loss, theft or destruction, upon receipt of indemnity
reasonably satisfactory to the Company (provided that if the holder is a financial institution or
other institutional investor its own agreement will be satisfactory) or, in the case of any such
mutilation upon surrender of such certificate, the Company will (at its expense) execute and
deliver in lieu of such certificate a new certificate of like kind



60









 




representing the same rights represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated certificate.




     Section 9. Notices. Except as otherwise expressly provided herein, all notices
referred to in this Warrant will be in writing and will be delivered personally, sent by reputable
express courier service (charges prepaid) or sent by registered or certified mail, return receipt
requested, postage prepaid and will be deemed to have been given when so delivered, one Business
Day after being so sent or three Business Days after being so deposited in the U.S. Mail (i) to the
Company, at its principal executive offices and (ii) to the Registered Holder of this Warrant, at
such holder’s address as it appears in the records of the Company (unless otherwise indicated by
any such holder).



     Section 10. Amendment and Waiver. Except as otherwise provided herein, the provisions
of the Warrants may be amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company has obtained the written
consent of the Registered Holders of Warrants representing a majority of the shares of Common Stock
issuable upon exercise of the Warrants; provided that no such action may change the Exercise Price
of the Warrants or the number of shares or class of stock obtainable upon exercise of each Warrant
without the written consent of the Registered Holders of Warrants representing at least 80% of the
shares of Common Stock obtainable upon exercise of the Warrants.



     Section 11. Descriptive Headings; Governing Law. The descriptive headings of the
several Sections and paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The construction, validity and interpretation of this Warrant
will be governed by the internal law, and not the conflicts law, of the State of Maryland.



*    *    *    *    *




61









 





EXHIBIT I




EXERCISE AGREEMENT


To:



Dated:




     The undersigned, pursuant to the provisions set forth in the attached Warrant (Certificate No.
W-2), hereby agrees to subscribe for the purchase
of                     
  shares of the Common Stock
covered by such Warrant and makes payment herewith in full therefor at the price per share provided
by such Warrant.



     o      Check Box for Net issue Exercise






Signature                                                 




Address                                                   














 





EXHIBIT II




ASSIGNMENT



     FOR VALUE RECEIVED,                      hereby sells, assigns, and transfers all of the rights of
the undersigned under the attached Warrant (Certificate No. W-2) with respect to the number
of shares of the Common Stock covered thereby set forth below, unto:



	 	 	 	 	 
	Names of Assignee
	 	Address
	 	No. of Shares
	 
	 	 
	 	 








Signature                                         

















 





EXHIBIT C




Form of Security Agreement



 









 





FORM OF SECURITY AGREEMENT




SECURITY AGREEMENT




     THIS SECURITY AGREEMENT (as from time to time amended, modified, restated, supplemented and in
effect, this “Security Agreement”) is entered into as of May 24, 2004 by IST ACQUISITIONS,
INC., a Delaware corporation (“Parent”), IMAGING AND SENSING TECHNOLOGY CORPORATION, a New
York corporation (“IST”), I.S. TECHNOLOGY de PUERTO RICO, INC., a Delaware corporation
(“IST Puerto Rico”), IST INSTRUMENTS, INC., a New York Corporation (“IST
Instruments”), IMAGING AND SENSING TECHNOLOGY INTERNATIONAL CORP., a New York corporation
(“IST International”), IST CONAX NUCLEAR, INC., a New York corporation (“IST
Conax”), and QUADTEK, INC., a Washington corporation (“Quadtek” and together with
Parent, IT, IST Puerto Rico, IST Instruments, IST International and IST Conax, the
“Grantors”), to and in favor of AMERICAN CAPITAL FINANCIAL SERVICES, INC., a Delaware
corporation (the “Agent”), as agent for the Purchasers identified in the Note and Equity
Purchase Agreement (as amended, restated, supplemented or otherwise modified from time to time, the
“Purchase Agreement”) among the Grantors, the Agent and the Purchasers party thereto, dated
of even date herewith (in such capacity, the “Secured Party”).



RECITALS:



     A. Pursuant to the Purchase Agreement, the Grantors have issued to the Purchasers (i)
Revolving Notes dated of even date herewith in the aggregate principal amount of $5,250,000 (the
“Revolving Notes”), (ii) Senior Term A Notes dated of even date herewith in the aggregate
principal amount of $15,000,000 (the “Senior Term A Notes”), (iii) Senior Term B Notes
dated of even date herewith in the aggregate principal amount of $7,500,000 (the “Senior Term B
Notes”), (iv) Senior Subordinated Notes dated of even date herewith in the aggregate principal
amount of $7,500,000 (the “Senior Subordinated Notes”) and (v) Junior Secured Subordinated
Notes dated of even date herewith in the aggregate principal amount of $1,250,000 (the “Junior
Subordinated Notes” and, together with the Revolving Notes, Senior Term A Notes, Senior Term B
Notes, Senior Subordinated Notes and Junior Subordinated Notes, the “Notes”). The purchase
and sale of the Notes and certain other securities is governed by the Purchase Agreement.
Capitalized terms used herein without definition shall be defined in the manner set forth in the
Purchase Agreement.



     B. In order to induce the Purchasers to accept the Notes in accordance with the Purchase
Agreement, and in consideration therefor, the Grantors have agreed to grant to the Secured Party,
as agent for the Purchasers, a perfected Lien on and security interest in all of the Grantors
assets and properties, whether now or hereafter existing, owned or acquired, all pursuant to the
terms of this Security Agreement in order to secure (i) the due and punctual payment of (A) the
principal and interest (including, without limitation, interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) on the Notes, when and as due, whether at maturity, by acceleration,
upon one or more dates set for prepayment or otherwise, and (B) all other monetary obligations of
the Grantors under the Notes, the Purchase Agreement or the Security Documents including



 









 





FORM OF SECURITY AGREEMENT



but not limited to, fees, costs, expenses and indemnities, whether primary, secondary, direct,
contingent, fixed or otherwise (including, without limitation, monetary obligations incurred during
the pendency of any bankruptcy, insolvency, receivership or other similar proceeding regardless of
whether allowed or allowable in such proceeding), and (ii) the due and punctual performance of the
Purchase Agreement, covenants, agreements, obligations and liabilities of the Grantors under or
pursuant to the Purchase Agreement, the Notes or the Security Documents (collectively, the
“Obligations”).




     C. It is a condition precedent to the acceptance of the Notes by the Purchasers that the
Grantors execute and deliver this Security Agreement.



     NOW, THEREFORE, for and in consideration of the covenants and provisions set forth herein, and
for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
each Grantor agrees as follows:



ARTICLE 1

SECURITY INTEREST



     1.1 Grant of Security Interest. As security for the Obligations, each Grantor hereby
sells, conveys, assigns, pledges and grants a continuing and unconditional security interest to the
Secured Party, its successors and permitted assigns, in and to all of the personal property of such
Grantor, wherever located, and now owned or hereafter acquired including:



     (a) all equipment (including all “Equipment” as the term is defined in Section 9-102(a)(33) of
the Uniform Commercial Code as in effect from time to time in the State of New York (such code,
together with any other successor or applicable adoption of the Uniform Commercial Code in any
applicable jurisdiction, the “Code”)), machinery, vehicles, fixtures, improvements,
supplies, office furniture, fixed assets, all as now owned or hereafter acquired by such Grantor or
in which such Grantor has or hereafter acquires any interest, and any items substituted therefor as
replacements and any additions or accessions thereto;



     (b) all goods (including all “Goods” as defined in Section 9-102(a)(44) of the Code) and all
inventory (including all “Inventory” as defined in Section 9-102(a)(48) of the Code) of such
Grantor, now owned or hereafter acquired by such Grantor or in which such Grantor has or hereafter
acquires any interest, including but not limited to, raw materials, scrap inventory, work in
process, products, packaging materials, finished goods, documents of title, chattel paper and other
instruments covering the same and all substitutions therefor and additions thereto (all of the
property described in this clause (b) being hereinafter collectively referred to as
“Inventory”);



     (c) all present and future accounts in which such Grantor has or hereafter acquires any
interest (including all “Accounts” as defined in Section 9-102(a)(2) of the Code), contract rights
(including all rights to receive payments and other rights under all equipment and other leasing
contracts) and rights to payment and rights or accounts receivable evidencing or representing
indebtedness due or to become due such Grantor on account of goods sold or leased or services
rendered, claims, instruments and other general intangibles (including tax refunds, royalties and
all other rights to the payment of



 









 





FORM OF SECURITY AGREEMENT



money of every nature and description), including but not limited to, any such right evidenced
by chattel paper, and all Liens, securities, guaranties, remedies, security interests and
privileges pertaining thereto (all of the property described in this clause (c) being hereinafter
collectively referred to as “Accounts”);




     (d) all investment property now owned or hereafter acquired by such Grantor (including all
“Investment Property” as defined in Section 9-102(a)(49) of the Code), including, without
limitation, all securities (certificated and uncertificated), securities accounts, securities
entitlements, commodity contracts and commodity accounts;



     (e) all general intangibles now owned or hereafter acquired by such Grantor or in which such
Grantor has or hereafter acquires any interest (including all “General Intangibles” as defined in
Section 9-102(a)(42) of the Code), including but not limited to, payment intangibles (including all
“Payment Intangibles” as defined in Section 9-102(a)(61) of the Code), chooses in action and causes
of action and all licenses and permits (to the extent the collateral assignment of such licenses
and permits is not prohibited by applicable law), registrations, franchises, corporate or other
business records, systems, designs, software, goodwill, logos, indicia, business identifiers,
inventions, processes, production methods, proprietary information, know-how and trade-secrets of
such Grantor, and all trade-names, copyrights, patents, trademarks (including service marks) or
patent or trademark applications, contract rights (including but not limited to all rights to
receive payments and other rights under all equipment and other leasing contracts, instruments and
documents owned or used by such Grantor, and any goodwill relating thereto);



     (f) all other property owned by such Grantor or in which such Grantor has or hereafter
acquires any interest, wherever located, and of whatever kind or nature, tangible or intangible;



     (g) all insurance policies of any kind maintained in effect by such Grantor, now existing or
hereafter acquired, under which any of the property referred to in clauses (a) through (f) above is
insured, including but not limited to, any proceeds payable to such Grantor pursuant to such
policies;



     (h) all moneys, cash collateral, chattel paper (including all “Chattel Paper” as defined in
Section 9-102(a)(11) of the Code), checks, notes, bills of exchange, documents of title, money
orders, negotiable instruments, commercial paper, and other securities, letters of credit
(including all “Letter-of-Credit Rights” as defined in Section 9-102(a)(51) of the Code),
supporting obligations (including all “Supporting Obligations” as defined in Section 9-102(a)(77)
of the Code), instruments (including all “Instruments” as defined in Section 9-102(a)(47) of the
Code), documents (including all “Documents” as defined in Section 9-102(a)(30) of the Code),
deposit accounts (including all “Deposit Accounts” as defined in Section 9-102(a)(29) of the Code),
deposits and credits from time to time whether or not in the possession of or under the control of
the Secured Party; and



     (i) any consideration received when all or any part of the property referred to in clauses (a)
through (h) above is sold, transferred, exchanged, leased, collected or otherwise disposed of, or
any value received as a consequence of possession thereof,



 









 





FORM OF SECURITY AGREEMENT



including but not limited to, all products, proceeds (including all “Proceeds” as defined in
Section 9-102(a)(64) the Code), cash, negotiable instruments and other instruments for the payment
of money, chattel paper, security agreements or other documents, insurance proceeds or proceeds of
other proceeds now or hereafter owned by such Grantor or in which such Grantor has an interest.




     The property set forth in clauses (a) through (i) of the preceding sentence, together with
property of a similar nature which such Grantor hereafter owns or in which such Grantor hereafter
acquires any interest, is referred to herein as the “Collateral.” Notwithstanding anything
herein to the contrary, in not event shall the Collateral include, and Grantors shall not be deemed
to have granted a security interest in, (i) any personal and real property, fixtures and interests
of Grantors which are not assignable or are incapable of being encumbered as a matter or law, (ii)
the Grantors’ rights or interests in any license, contract or agreement to which any Grantor is a
party or any of its rights or interests thereunder to the extent, but only to the extent, that such
a grant would, under the terms of such license, contract or agreement or otherwise, result in a
breach of the terms of, or constitute a default under any license, contract or agreement to which
such Grantor is a party; provided, upon the ineffectiveness, lapse or termination of any such
provision, the Collateral shall include, and Grantors shall be deemed to have granted a security
interest in, all such rights and interests as if such provision had never been in effect or (iii)
more than sixty-five percent (65%) of the aggregate interest in the stock of any non-U.S. direct or
indirect Subsidiary of Parent. In addition, the Collateral shall exclude any rights to (i) any
intellectual property rights which would be rendered invalid or unenforceable by the grant of a
security interest created pursuant to the terms of this Agreement, for so long as such prohibition
or reason for invalidity exists and (iii) any intent-to-use trademark application for which a
statement of use has not been filed (but only until such statement is filed).



     1.2 Perfection of Security Interests.



     (a) Each Grantor hereby authorizes Secured Party to file a financing statement or financing
statements (the “Financing Statement”) describing its respective Collateral in any and all
jurisdictions where Secured Party reasonably deems such filing to be necessary or appropriate
including, without limitation, the jurisdiction of such Grantor’s location for purposes of the
Code. Each Grantor will reimburse Secured Party for any and all costs, charges and expenses
(including reasonable fees of counsel) incurred in connection with such filings. For purposes of
this Section 1.2(a), the Financing Statements shall be deemed to include any amendment,
modification, assignment, continuation statement or other similar instrument consistent with the
rights granted to Secured Party under this Agreement and the Purchase Agreement.



     (b) Each Grantor shall have possession of its respective Collateral, except where as expressly
otherwise provided in this Security Agreement or where Secured Party has the right to perfect its
security interest by possession in addition to the filing of a Financing Statement. Where
Collateral is in the possession of a third party, such Grantor will join with the Secured Party
upon request of the Secured Party in notifying the third party of the Secured Party’s security
interest therein and obtaining an acknowledgement from the third party that it is holding the
Collateral for the benefit of the Secured Party.



 









 





FORM OF SECURITY AGREEMENT




     (c) Each Grantor will cooperate with Secured Party in obtaining control (including “Control”
as contemplated by Section 9-312(b) of the Code) with respect to Collateral consisting of deposit
accounts, investment property, letter of credit rights and electronic chattel paper.



     (d) Each Grantor will not create any chattel paper without a legend on such chattel paper
acceptable to the Secured Party indicating that Secured Party has a secured interest in such
Chattel Paper.



     1.3 Conditional Assignment.



     (a) Each Grantor hereby authorizes the Secured Party to complete, as assignee, execute
pursuant to the power of attorney granted pursuant to Section 4.2, and record in any applicable
public office or agency of the United States, any state or territory thereof, or any other country,
a document in substantially the form of Exhibit A (the “Assignment”), upon the occurrence and
during the continuance of an Event of Default and the proper exercise of the Secured Party’s
remedies under the Security Agreement.



     (b) In addition to, and not by way of limitation of, the grant of a security interest in the
Payment Intangibles pursuant to Section 1.1 hereof, as collateral security for the complete and
timely payment, performance and satisfaction of the Obligations, subject to Section 1.3(d)
each Grantor hereby assigns, conveys, mortgages, pledges, hypothecates, transfers and grants to the
Secured Party its entire right, title and interest in, to and under the Payment Intangibles;
provided, however, that such assignment, conveyance, mortgage, pledge,
hypothecation, transfer and grant shall be and become of force and effect, with respect to any item
of the Payment Intangibles, only: (i) upon or after the occurrence or during the continuance of an
Event of Default; and (ii) either (A) upon the written demand of the Secured Party at any time
during such continuance, or (B) immediately and automatically, without any notice or action of any
kind by the Secured Party, upon the sale or other disposition of such item of the Payment
Intangibles by the Secured Party pursuant to Article 9 of the UCC (including the transfer or other
disposition of such item by such Grantor to the Secured Party in lieu of foreclosure).



     (c) Notwithstanding any of the foregoing, so long as no Event of Default has occurred and is
continuing, and except as otherwise provided in this Security Agreement, the Grantors shall be
permitted to remain in full possession, ownership, enjoyment and control of all of their right,
title and interest in the Payment Intangibles and to manage, operate, dispose and use the same and
each part thereof, in each case, as permitted hereunder, with all the rights pertaining thereto and
the Secured Party shall not have any right or authority to take any actions in any matter relating
to the Payment Intangibles.



     (d) Notwithstanding anything herein to the contrary, in no event shall the conditional
assignment granted under this Section 1.3 include, and Grantors shall not be deemed to have granted
such conditional assignment with regards to, (i) any personal and real property, fixtures and
interests of Grantors which are not assignable or are incapable of being encumbered as a matter or
law, or (ii) the Grantors’ rights or interests in any license, contract or agreement to which any
Grantor is a party or any of its rights or interests thereunder to the extent, but only to the
extent, that such a grant would, under the terms of such license, contract or agreement or
otherwise, result in a breach of the



 









 





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terms of, or constitute a default under any license, contract or agreement to which such
Grantor is a party; provided, upon the ineffectiveness, lapse or termination of any such provision,
such conditional assignment shall include, and Grantors shall be deemed to have granted such
conditional assignment with regards to, all such rights and interests as if such provision had
never been in effect. In addition, such conditional assignment shall exclude any rights to (i) any
intellectual property rights which would be rendered invalid or unenforceable by the grant of an
assignment pursuant to the terms of this Section 1.3, for so long as such prohibition or reason for
invalidity exists and (iii) any intent-to-use trademark application for which a statement of use
has not been filed (but only until such statement is filed).




ARTICLE 2

REPRESENTATIONS AND WARRANTIES



     2.1 Representations and Warranties. The Grantors jointly and severally represent,
warrant and agree that:



     (a) Each Grantor has and shall have absolute, good and marketable title to all the Collateral
owned by it, wherever and whenever acquired, free and clear of any Lien except for such Liens
and/or filings as may be permitted by the Purchase Agreement (“Permitted Liens”). Such
Grantor has not filed, nor is there on record, a financing statement under the Code (or similar
statement or instrument of registration under the law of any jurisdiction) covering any Collateral
except for Permitted Liens for which the Secured Party has not received UCC-3 termination
statements.



     (b) Schedule 2.1(b) hereto lists (i) each Grantor’s chief executive offices and other
principal place(s) of business, (ii) each Grantor’s legal form and its jurisdiction, as applicable,
of incorporation, formation, organization or registration, (iii) the address where books and
records relating to the Collateral are maintained, (iv) any other location of any other equipment
and goods (other than mobile goods) included in the Collateral, and (v) location of owned and
leased facilities and name of lessor/sublessor.



     (c) Each Grantor has paid or will pay when due all taxes, fees, assessments and other charges
now or hereafter imposed upon the Collateral except for any tax, fee, assessment or other charge
the validity of which is being contested in good faith by appropriate proceedings and so long as
such Grantor has set aside on its books adequate reserves with respect thereto.



     (d) As a result of the execution and delivery of this Security Agreement and the filing of any
Financing Statements or other documents necessary to assure, preserve and perfect the security
interest created hereby to the extent a Lien may be perfected by filing a Financing Statement, or
such other documents, the Secured Party shall have a valid, perfected, enforceable Lien on, and a
continuing security interest in, the Collateral, enforceable and superior as such as against
creditors and purchasers (other than purchasers of Inventory in the ordinary course of business)
and as against any owner of real property where any of the equipment or Inventory is located and as
against any purchaser of such real property and any present or future creditor obtaining a mortgage
or other Lien on such real property, and such Lien shall be superior and prior to all other Liens
other than the Permitted Liens.



 









 





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     (e) The amount that has been or that shall be represented by each Grantor to the Secured Party
from time to time owing by all obligors (such obligors being hereinafter referred to as the
“Account Debtors”) in the aggregate with respect to Accounts has not and will not
materially deviate from the correct amount actually and unconditionally owing at such time by such
Account Debtors subject to set off, return and similar rights arising in the ordinary course of
business. All Accounts represent bona fide transactions completed in all material respects in
accordance with the terms and provisions contained in the invoices and other documents evidencing
the same. As of the date hereof, there are no material setoffs, counterclaims or disputes existing
or asserted with respect to Accounts and subject to set off, return and similar rights arising in
the ordinary course of business. No Grantor has made any agreement with any Account Debtor for any
material deduction therefrom except set-off and claims arising in the ordinary course of business.
To each Grantor’s knowledge, all Account Debtors have the capacity to contract and are solvent,
except as set forth on Schedule 2.1(e) attached hereto setting forth a list of doubtful
accounts. To each Grantor’s knowledge, the goods giving rise to Accounts are not subject to any
Lien, claim or encumbrance except set-off and claims arising in the ordinary course of business,
except in favor of the Secured Party and except as permitted by the Purchase Agreement. No Grantor
has any knowledge of any fact or circumstances that would impair the validity or collectability of
Accounts.



     (f) None of the Collateral is held by a third party in any location as assignee, trustee,
bailee, consignee or in any similar capacity except as set forth on Schedule 2.1(f).



     (g) Within the five-year period preceding the date hereof, each Grantor has not had, or
operated in any jurisdiction, under any trade name, fictitious name or other name other than its
legal name.



     2.2 Survival. All representations, warranties and agreements of the Grantors contained
in this Security Agreement shall survive the execution, delivery and performance of this Security
Agreement until the termination of this Security Agreement pursuant to Section 6.5 hereof.



ARTICLE 3

COVENANTS



     3.1 Covenants. Each of the Grantors hereby jointly and severally covenants and agrees
with the Secured Party that so long as this Security Agreement shall remain in effect or any
Obligations other than with respect to residual indemnification obligations shall remain unpaid or
unperformed: (a) such Grantor shall promptly give written notice to the Secured Party of any
material levy or attachment, execution or other process against any of the Collateral; (b) at such
Grantor’s own cost and expense, such Grantor shall take any and all actions reasonably necessary or
desirable to defend the Collateral against the claims and demands of all Persons other than the
Secured Party and secured parties with Permitted Liens under the Purchase Agreement, and to defend
the security interest of the Secured Party in the Collateral and the priority thereof against any
Lien of any nature other than those permitted under the Purchase Agreement; (c) such Grantor shall
without undue delay immediately notify the Secured Party of any event causing any material loss,
damage or depreciation in value of the Collateral in the aggregate and of the extent of such loss,
damage or depreciation; (d) such Grantor shall mark any



 









 





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Collateral that is chattel paper with a legend showing the Secured Party’s Lien and security
interest therein; (e) such Grantor shall promptly give written notice to the Secured Party of any
change in the intellectual property rights material to its business; and (f) such Grantor shall not
(i) amend, in a manner materially adverse to Secured Parties or terminate any contract or other
document or instrument constituting part of the Collateral, except for transactions in the ordinary
course of business substantially consistent with customary practice or as otherwise permitted in
the Purchase Agreement, (ii) voluntarily or involuntarily exchange, lease, sell, transfer or
otherwise dispose of any Collateral other than with respect to licenses of intellectual property
and sales of Inventory in the ordinary course of business and other than as contemplated by the
Purchase Agreement, (iii) make any material compromise, settlement, discharge or adjustment or
grant any extension of time for payment with respect to any material Account or any Lien, Guaranty
or remedy pertaining thereto, except for transactions in the ordinary course of business
substantially consistent with past practice, except after written notice to and with written
consent of the Secured Party and compliance with such procedures as the Secured Party reasonably
may impose to prevent any interruptions or discontinuity in the security interest granted pursuant
to this Security Agreement, (iv) change its name or use any fictitious or trade name, (v) change
the location of its chief executive office or (vi) permit any of the Collateral (other than
Collateral that constitutes goods that are mobile and that are of a type normally used in more than
one jurisdiction or otherwise in the ordinary course of business (including, without limitation,
sales and shipments of inventory in the ordinary course of business)) to be removed from or located
in any place not identified as the location of such Collateral to the Secured Party, as the case
may be, except after written notice to and with written consent of the Secured Party and compliance
with such procedures as the Secured Party reasonably may impose to prevent any interruptions or
discontinuity in the security interest granted pursuant to this Security Agreement.




ARTICLE 4

REMEDIAL MATTERS



     4.1 Event of Default. An “Event of Default” shall exist hereunder (a) if an
Event of Default shall occur under the Purchase Agreement or any of the Notes, (b) upon the filing
of a voluntary or involuntary petition for bankruptcy, insolvency, receivership or similar event
involving any Grantor, or (c) if any Grantor shall breach in any material respect any agreement
contained herein or otherwise default in any material respect in the observance or performance of
any of the covenants, terms, conditions or agreements on the part of each Grantor contained in this
Security Agreement and, with respect to non-monetary covenants, terms, conditions or agreements,
such non-observance or non-performance continues for a period of thirty (30) days after the earlier
of (i) written notice from the Secured Party of such default or (ii) actual knowledge of such
Grantor of such default.



     4.2 Powers of Attorney.



     (a) Each Grantor hereby irrevocably appoints the Secured Party (and any officer or agent of
the Secured Party) as its true and lawful attorney-in-fact, with power of substitution for and in
the name of the Secured Party or otherwise, for the use and benefit of the Secured Party, effective
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an Event of Default: (i) to receive, endorse the name of such Grantor upon and deliver any
notes, acceptances, checks, drafts, money orders or other evidences of payment that may come into
the possession of the Secured Party with respect to the Collateral; (ii) to cause such Grantor’s
mail to be transferred to the Secured Party’s own offices and to receive and open all mail
addressed to such Grantor for the purposes of removing any such notes, acceptances, checks, drafts,
money orders or other evidences of payment; (iii) to demand, collect and receive payment in respect
of the Collateral and to apply any such payments directly to the payment of the Obligations in
accordance with Section 4.5 hereof; (iv) to receive and give discharges and releases of all or any
of the Collateral; (v) to commence and prosecute any and all suits, actions or proceedings at law
or in equity in any court of competent jurisdiction, to collect or otherwise realize on all or any
part of the Collateral or to enforce any rights in respect thereof; (vi) to sign the name of such
Grantor on any invoice or bill of lading relating to any of the Collateral; (vii) to send
verification of any Accounts to any Account Debtor or customer; (viii) to notify any Account Debtor
or other obligor of such Grantor with respect to any Collateral to make payment to the Secured
Party; (ix) to settle, compromise, compound, adjust or defend any actions, suits or proceedings
relating or pertaining to all or any of the Collateral; (x) to take any action for purposes of
carrying out of the terms of this Security Agreement; (xi) to enforce all of such Grantor’s rights
and powers under and pursuant to any and all agreements with respect to the Collateral; and (xii)
generally, to sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal
with all or any of the Collateral, and to do all other acts and things necessary to carry out this
Security Agreement, as fully and completely as though the Secured Party were the absolute owner of
the Collateral for all purposes; provided, however, nothing herein contained shall be construed as
requiring or obligating the Secured Party to make any commitment or to make any inquiry as to the
nature or sufficiency of any payment received by the Secured Party, or to present or file any claim
or notice, or to take any action with respect to the Collateral or any part thereof or the moneys
due or to become due in respect thereof or any property covered thereby, and no action taken by the
Secured Party or omitted to be taken with respect to the Collateral or any part thereof shall give
rise to any defense, counterclaim or offset in favor of such Grantor or to any claim or action
against the Secured Party. It is understood and agreed that the power of attorney granted to the
Secured Party for the purposes set forth above in this Section 4.2 is coupled with an interest and
is irrevocable until the termination of this Security Agreement, and such Grantor hereby ratifies
all actions taken by its attorney-in-fact by virtue hereof. The provisions of this Section 4.2
shall in no event relieve such Grantor of any its obligations hereunder or under any of the other
Security Documents with respect to the Collateral or any part thereof or impose any obligation on
the Secured Party to proceed in any particular manner with respect to the Collateral or any part
thereof, or in any way limit the exercise by the Secured Party of any other or further right which
it may have on the date of this Security Agreement or hereafter, whether hereunder, under any of
the other Security Documents, by law or otherwise.




     (b) Beyond the duty of the Secured Party to exercise reasonable care in the custody of any
Collateral in its possession, the Secured Party shall not, under any circumstance or in any event
whatsoever, have any liability for any part of the Collateral, nor shall the Secured Party have any
liability for any error or omission or delivery of any kind incurred in the good faith settlement,
collection or payment of any of the Collateral or any monies received in payment therefor or for
any damages resulting therefrom, nor



 









 





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shall this Security Agreement impose upon the Secured Party any obligation to perform any
obligation with respect to the Collateral. The costs of collection, notification and enforcement,
including but not limited to, reasonable attorneys’ fees and reasonable out-of-pocket expenses,
shall be borne solely by the Grantors whether the same are incurred by the Grantors or the Secured
Party.




     4.3 Collections. Upon the occurrence and during the continuance of an Event of
Default, the Secured Party may, in its sole discretion, in its name or in the name of any Grantor,
or otherwise: (a) demand, sue for, collect or receive any money or property at any time payable or
receivable on account of or in exchange for, or make any compromise or settlement deemed desirable
with respect to any of the Collateral, but shall be under no obligation to do so; or (b) extend the
time of payment, arrange for payment in installments, or otherwise modify the term of, or release,
any of the Collateral, without thereby incurring responsibility to, or discharging or otherwise
affecting any liability of, any Grantor, other than to discharge such Grantor in so doing with
respect to liabilities of such Grantor to the extent that the liabilities are paid or repaid. After
the occurrence and during the continuance of an Event of Default, any money, checks, notes, bills,
drafts, or commercial paper received by such Grantor shall be held in trust for the Secured Party
and any other secured party having rights thereto senior to the Secured Party and shall be promptly
turned over to the Secured Party or any other secured party having rights thereto senior to the
Secured Party as its interest shall appear. The Secured Party may make such payments and take such
actions as the Secured Party, in its sole discretion, deems necessary to protect its security
interest in the Collateral or the value thereof, and the Secured Party is hereby unconditionally
and irrevocably authorized (without limiting the general nature of the authority hereinabove
conferred) to pay, purchase, contest or compromise any Liens which in the judgment of the Secured
Party appear to be equal to, prior to or superior to its security interest in the Collateral and
any Liens not expressly permitted by this Security Agreement.



     4.4 Possession; Sale of Collateral.



     (a) Upon the occurrence and during the continuance of an Event of Default, the Secured Party
may: (i) require any Grantor to assemble the tangible assets that comprise part of the Collateral
and make them available to the Secured Party at any place or places reasonably designated by the
Secured Party; (ii) to the extent permitted by applicable law, with or without notice or demand for
performance and without liability for trespass, enter any premises where the Collateral may be
located and peaceably take possession of the same, and may demand and receive such possession from
any person who has possession thereof, and may take such measures as it may deem necessary or
proper for the care or protection thereof (including, but not limited to, the right to remove all
or any portion of the Collateral); and (iii) with or without taking such possession may sell or
cause to be sold, in one or more sales or parcels, for cash, on credit or for future delivery,
without assumption of any credit risk, all or any portion of the Collateral, at public or private
sale or at any broker’s board or any securities exchange, without demand of performance or notice
of intention to sell or of time or place of sale, except ten (10) Business Days’ written notice to
such Grantor of the time and place of such sale or sales (and such other notices as may be required
by applicable statute, if any, and which cannot be waived), which each Grantor hereby expressly
acknowledges is commercially reasonable. The Secured Party shall have no obligation to clean-up or
otherwise prepare



 









 





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any Collateral for sale. Each purchaser at any such sale shall hold the property sold
absolutely, free from any claim or right on the part of such Grantor, and each Grantor hereby
waives (to the extent permitted by law) all rights of redemption, stay and appraisal that each
Grantor now has or may at any time in the future have under any rule of law or statute now existing
or hereafter enacted. At any such sale, the Collateral, or portion thereof, to be sold may be sold
in one lot as an entirety or in separate parcels, as the Secured Party may (in its sole and
absolute discretion) determine. The Secured Party shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such
Collateral shall have been given. The Secured Party may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by announcement at the
time and place fixed for sale, and such sale may, without further notice, be made at the time and
place to which the same was so adjourned. The Secured Party may comply with any applicable state or
federal law requirements in connection with a disposition of the Collateral and compliance will not
be considered adversely to affect the commercial reasonableness of any disposition of the
Collateral. In case any sale of all or any part of the Collateral is made on credit or for future
delivery, the Collateral so sold may be retained by the Secured Party until the sale price is paid
by the purchaser or purchasers thereof. The Secured Party shall not incur any liability for the
failure to collect or realize upon any or all of the Collateral or for any delay in doing so and,
in case of any such failure, shall not be under any obligation to take any action with respect
thereto; provided, such Collateral may be sold again upon like notice. If any Collateral is sold
upon credit, such Grantor will be credited only with payments actually made by the purchaser,
received by the Secured Party and applied to the Obligations in accordance with Section 4.5. In
the event the purchasers fail to pay for the Collateral, the Secured Party may resell the
Collateral. At any public sale made pursuant to this Section 4.4, the Secured Party may bid for or
purchase, free from any right of redemption, stay or appraisal and all rights of marshalling, the
Collateral and any other security for the Obligations or otherwise on the part of such Grantor (all
said rights being also hereby waived and released by each Grantor to the fullest extent permitted
by law), and may make payment on account thereof by using any claim then due and payable to the
Secured Party from any Grantor as a credit against the purchase price, and the Secured Party may,
upon compliance with the terms of sale, hold, retain and dispose of such property without further
accountability to such Grantor therefor. For purposes hereof, a written agreement to purchase the
Collateral or any portion thereof shall be treated as a sale thereof; the Secured Party shall be
free to carry out such sale pursuant to such agreement, and such Grantor shall not be entitled to
the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that
after the Secured Party shall have entered into such an agreement, all Events of Default shall have
been remedied and any obligations to the Secured Party shall have been paid in full. As an
alternative to exercising the power of sale herein conferred upon it, the Secured Party may proceed
by a suit or suits at law or in equity to foreclose this Security Agreement and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having
competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. In any action
hereunder, the Secured Party shall be entitled to the appointment of a receiver without notice, to
peaceably take possession of all or any portion of the Collateral and to exercise such powers as
the court shall confer upon the receiver. Notwithstanding the foregoing, if an Event of Default
shall occur and be continuing, the Secured Party shall be entitled to




 









 





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apply, without notice to any Grantor, any cash or cash items constituting Collateral in their
possession to payment of the Obligations.




     (b) If an Event of Default shall occur and be continuing, the Secured Party shall, in addition
to exercising any and all rights and remedies afforded to them hereunder, have all the rights and
remedies of a secured party under all applicable provisions of law, including but not limited to,
the Code.



     (c) Each Grantor agrees that notwithstanding anything to the contrary contained in this
Security Agreement, such Grantor shall remain liable under each contract or other agreement giving
rise to Accounts and general intangibles and all other contracts or agreements constituting part of
the Collateral and the Secured Party shall not have any obligation or liability in respect thereof.



     (d) After the occurrence and during the continuance of an Event of Default, upon the Secured
Party’s request, but subject to the rights of any other secured party having rights senior to the
Secured Party, such Grantor shall deliver to the Secured Party all original and other documents,
evidencing and relating to the sale and delivery of Inventory or Accounts, including but not
limited to, all original orders, invoices and shipping receipts. Such Grantor shall also furnish to
the Secured Party, promptly upon the request of the Secured Party, such reports, reconciliations
and aging balances regarding Accounts as the Secured Party may reasonably request from time to
time.



     4.5 Application of Proceeds. Unless the Secured Party otherwise directs, the proceeds
of any sale of Collateral pursuant to this Security Agreement or otherwise, as any Collateral
consisting of cash, shall be applied after receipt by the Secured Party as follows:




     First, to the payment of all reasonable costs, fees and expenses of the Secured Party
and its agents, representatives and attorneys incurred in connection with such sale or
with the retaking, holding, handling, preparing for sale (or other disposition) of the
Collateral or otherwise in connection with any Notes, this Security Agreement or any of
the Obligations, including, but not limited to, the reasonable fees and expenses of the
Secured Party’s agents and attorneys’ and court costs (whether at trial, appellate or
administrative levels), if any, incurred by the Secured Party in so doing;




     Second, to the payment of the outstanding principal balance, accrued interest,
dividends and fees on the Obligations in such order as the Secured Party may determine;
and




     Third, to the Grantors or to such other Person as a court may direct.



     4.6 Authority of Secured Party. The Secured Party shall have and be entitled to
exercise all such powers hereunder as are specifically delegated to the Secured Party by the terms
hereof, together with such powers as are reasonably incidental thereto. The Secured Party may
execute any of its duties hereunder by or through its agents or employees and shall be entitled to
retain counsel and to act in reliance upon the advice of such counsel concerning all matters
pertaining to its duties hereunder.



 









 





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     4.7 Certain Waivers; Grantors Not Discharged. Each Grantor expressly and irrevocably
waives (to the extent permitted by applicable law) presentment, demand of payment and protest of
nonpayment in respect of its Obligations under this Security Agreement. The obligations and duties
of each Grantor hereunder are irrevocable, absolute, and unconditional and shall not be discharged,
impaired or otherwise affected by (a) the failure of the Secured Party to assert any claim or
demand or to enforce any right or remedy against such Grantor or any grantee under the provisions
of this Security Agreement or any waiver, consent, extension, indulgence or other action or
inaction in respect thereof, (b) any extension or renewal of any part of the Obligations, (c) any
rescission, waiver, amendment or modification of any of the terms or provisions of any agreement
related to this Security Agreement, (d) the release of any Liens on or security. interests in any
part of the Collateral or the release, sale or exchange of or failure to foreclose against any
security held by or for the benefit of the Secured Party for payment or performance of the
Obligations, (e) the bankruptcy, insolvency or reorganization of such Grantor or any grantee or any
other Persons, (f) any change, restructuring or termination of the corporate structure or existence
of such Grantor or any grantee or any restructuring or refinancing of all or any portion of the
Obligations, or (g) any other event that under law would discharge the obligations of a surety
other than payment and satisfaction in full of all Obligations.



     4.8 Transfer of Security Interest. The Secured Party may transfer to any other Person
all or any part of the Liens and security interests granted hereby, and all, or any part of the
Collateral which may be in the Secured Party’s possession at any time after the occurrence and
during the continuance of an Event of Default (including to a successor Secured Party or holder of
Notes). Upon such transfer, the transferee shall be vested with all the rights and powers of the
Secured Party hereunder with respect to such of the Collateral as is so transferred but, with
respect to any of the Collateral not so transferred, the Secured Party shall retain all of its
rights and powers (whether given to it in this Security Agreement, or otherwise). The Secured Party
or any of them may, at any time, assign their rights as the secured party hereunder to any Person,
in the Secured Party’s discretion, and upon notice to each Grantor, provided that any such
transferee shall agree to be subject to the subordination provisions hereof, but without any
requirement for consent or approval by or from any Grantor, and any such assignment shall be valid
and binding upon each Grantor, as fully as if they had expressly approved the same.



ARTICLE 5

SECURED PARTY’S INTERESTS



     5.1. Pro Rata Interests. The security interests and other rights granted or reserved
to the Secured Party and its successors and assigns under this Security Agreement (the
“Contractual Rights”) are for the pro rata benefit of the Purchasers and the other rights
available to the Secured Party and the Purchasers under applicable law by reason of the existence
of this Security Agreement and the attachment and perfection of the security interests created
under this Security Agreement (the “Statutory Rights”) are for the pro rata benefit of the
Purchasers according to the outstanding principal amount of Notes held by each Purchaser,
respectively, in each case subject to any subordination agreed to by and among the Purchasers,
expressed as a percentage of the aggregate outstanding principal amount of all Notes, and shall be
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percentages, subject to such subordination, regardless of the time or order of the attachment
or perfection of their respective security interests or the time or manner of filing of their
respective deeds of trust, financing statements or assignments thereof and regardless of which, if
any, Purchaser may hold possession of Collateral. All Contractual Rights and Statutory Rights shall
be exercised from time to time by Secured Party in accordance with such instructions as may be
required by the Purchase Agreement. All recoveries attributable to enforcement of Contractual
Rights or Statutory Rights, or both, shall be shared ratably by the Purchasers according to their
respective pro rata interests, and subject to any subordination agreed to by and among the
Purchasers, as provided in the Purchase Agreement.




     5.2 Grantors’ Obligations. The provisions of this Article 5 are for the purpose of
defining the relative rights of the Secured Party or Purchasers with respect to the Collateral and
the exercise of Contractual Rights and Statutory Rights. Nothing herein shall impair the
obligations of any Grantor, which are absolute and unconditional, to pay and perform the
Obligations as and when due. No provision of this Security Agreement shall be construed to prevent
the Secured Party or any Purchaser from exercising remedies that may otherwise be available to it.



ARTICLE 6

MISCELLANEOUS



     6.1 Further Assurances. Each Grantor agrees, at its expense, to do such further
things, to execute, acknowledge, deliver and cause to be duly filed all such further instruments
and documents and take all such actions as the Secured Party may from time to time reasonably
request for the better assuming and preserving of the security interests and the rights and
remedies created hereby, including but not limited to, the execution and delivery of such
additional conveyances, assignments, agreements and instruments, the payment of any fees and taxes
required in connection with the execution and delivery of this Security Agreement, the granting of
the security interests created hereby and the execution, filing and recordation of any financing
statements (including fixture filings) or other documents as the Secured Party may deem reasonably
necessary or desirable for the perfection of the security interests granted hereunder. If any
amount payable under or in connection with any of the Collateral shall be or become evidenced by
any promissory note or other instrument, such note or instrument shall be immediately pledged and
delivered to the Secured Party, duly endorsed in a manner satisfactory to the Secured Party,
subject to the rights of any other secured party having rights senior to the Secured Party. If at
any time any Grantor shall take and perfect a security interest in any property to secure payment
and performance of an Account, such Grantor, upon the request of the Secured Party, shall promptly
assign such security interest to the Secured Party, subject to the rights of any other secured
party having rights senior to the Secured Party. Each Grantor agrees to notify the Secured Party
thirty (30) days prior to any change (a) in its corporate name, (b) of its jurisdiction of
incorporation or organization, (c) in the location of its chief executive office, (d) in its
principal place of business, or (e) in the office or offices where it keeps its records relating to
the Collateral. Each Grantor agrees that, after the occurrence and during the continuance of an
Event of Default, it shall upon request of the Secured Party, take any and all actions, to the
extent permitted by applicable law, at its own expense, to obtain the approval of any governmental
authority for any action or transaction contemplated by this Security Agreement that is then
required by law, and



 









 





FORM OF SECURITY AGREEMENT



specifically, without limitation, upon request of the Secured Party, to prepare, sign and file
with any governmental authority such Grantor’s portion of any application or applications for
consent to the assignment of licenses held by such Grantor, or for consent to the possession and
sale of any of the Collateral by or on behalf of such Secured Party. Each Grantor further agrees
that it shall at all times, at its own expense and cost, keep accurate and complete records with
respect to the Collateral, including but not limited to, a record of all payments and proceeds
received in connection therewith or as a result of the sale thereof and of all credits granted, and
agrees that the Secured Party or their representatives shall have the right at any reasonable time
and from time to time, at such Grantor’s expense, to call at such Grantor’s place or places of
business to inspect the Collateral and to examine or cause to be examined all of the books,
records, journals and other data relating to the Collateral and to make extracts therefrom or
copies thereof as are reasonably requested.




     6.2 Effectiveness. This Security Agreement shall take effect immediately upon
execution by each Grantor.



     6.3 Indemnity; Reimbursement of Secured Party; Deficiency. In connection with the
Collateral, this Security Agreement and the administration and enforcement or exercise of any right
or remedy granted to the Secured Party hereunder or under the other Security Documents, the
Grantors jointly and severally agree, subject to the limitations set forth hereafter (a) to
indemnify, defend and hold harmless the Secured Party from and against any and all claims, demands,
losses, judgments and liabilities (including but not limited to, liabilities for penalties) of
whatever nature, relating thereto or resulting therefrom, and (b) to reimburse the Secured Party
and the Purchasers for all reasonable costs and expenses, including but not limited to, the
reasonable fees and disbursements of attorneys, relating thereto or resulting therefrom. The
foregoing indemnity agreement includes all reasonable costs incurred by the Secured Party and the
Purchasers in connection with any litigation relating to the Collateral whether or not the Secured
Party or any Purchaser shall be a party to such litigation, including but not limited to, the
reasonable fees and disbursements of attorneys for the Secured Party, and any out-of pocket costs
incurred by the Secured Party in appearing as a witness or in otherwise complying with legal
process served upon it. The obligations of each Grantor in this Section 6.3 are limited to the
extent claims for indemnity, defense, or reimbursement do not arise from the gross negligence or
willful misconduct of the Secured Party. In no event shall the Secured Party or any Purchaser be
liable, in the absence, in the case of the Secured Party, of gross negligence or willful misconduct
on its part, for any matter or thing in connection with this Security Agreement other than to
account for moneys actually received by it in accordance with the terms hereof, and each Grantor
hereby releases the Secured Party and each Purchaser from any and all claims, causes of action and
demands at any time arising out of or with respect to this Security Agreement or the Collateral.
All indemnities contained in this Section 6.3 and elsewhere in this Security Agreement shall
survive the expiration or earlier termination of this Security Agreement. After application of the
proceeds by the Secured Party pursuant to Section 4.5 hereof, each Grantor shall remain liable to
the Secured Party for any deficiency.



     6.4 Continuing Lien. It is the intent of the parties hereto that (a) this Security
Agreement shall constitute a continuing agreement as to any and all future, as well as existing
transactions, between each Grantor and the Secured Party under or in



 









 





FORM OF SECURITY AGREEMENT



connection with the Notes, and (b) the security interest provided for herein shall attach to
after-acquired as well as existing Collateral.




     6.5 Termination. Upon payment and satisfaction in full of the Obligations other than
residual indemnification obligations and termination of all commitments relating thereto, the
Secured Party shall reassign, redeliver and release (or cause to be so reassigned, redelivered and
released), without recourse upon or warranty by the Secured Party, and at the sole expense of the
Grantors, to the Grantors, against receipt therefor, such of the Collateral (if any) as shall not
have been sold or otherwise applied by the Secured Party pursuant to the terms hereof and not
theretofore reassigned, redelivered and released to the Grantors, together with appropriate
instruments of reassignment and release.



     6.6 Notices. All notices and other communications given to or made upon any party
hereto in connection with this Security Agreement shall, except as otherwise expressly herein
provided, be in writing (including telecopy, telexed or telegraphic communication) and mailed via
certified mail, nationwide overnight courier service, telexed, telegraphed or delivered to the
respective parties, as follows:



          to the Grantors:


Imaging and Sensing Technology

Corporation

100 IST Center

Horseheads, New York 14845

Attention: Donald Hartman



with a copy to:



IST Acquisitions, Inc.

c/o American Capital Strategies, Ltd.

Two Bethesda Metro Center

14th Floor

Bethesda, Maryland 20814

Attention: Compliance Officer



and:



IST Acquisitions, Inc.

c/o American Capital Strategies, Ltd.

Attention: Robert Klein, Principal

461 Fifth Avenue, 26th Floor

New York, New York 10017

Fax: (212) 213-2060



and



Weil, Gotshal & Manges LLP

767 Fifth Avenue




 









 





FORM OF SECURITY AGREEMENT



New York, New York 10153

Attention: Christopher K. Aidun



Fax: (212) 310-8007




          to the Secured Party:


American Capital Financial Services, Inc., as Agent

2 Bethesda Metro Center

14th Floor

Bethesda, Maryland 20814

Attn: Compliance Officer

Fax: (301) 654-6714




          with copies to:


American Capital Strategies, Ltd

461 Fifth Avenue, 26th Floor

New York, NY 10017

Attention: Robert Klein, Principal and Managing Director

                    Brian Graff, Principal and Managing Director

Fax: (212) 213-2060



and



Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153

Attn: Christopher K. Aidun, Esq.

Fax: (212) 310-8007




     6.7 Successors and Assigns. Whenever in this Security Agreement any of the parties
hereto is referred to, such reference shall be deemed to include the successors and permitted
assigns of such party, and all covenants, promises and agreements by or on behalf of the Secured
Party that are contained in this Security Agreement shall bind and inure to the benefit of its
respective successors and permitted assigns. No Grantor may assign or transfer any of its rights or
obligations hereunder without the prior written consent of the Secured Party.



     6.8 APPLICABLE LAW. THIS SECURITY AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO NEW YORK CHOICE OF LAW
DOCTRINE.



     6.9 Waivers. No failure or delay of the Secured Party in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such
right or power, or any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or future exercise thereof or the exercise of any other right or power. The
rights and remedies of the Secured Party



 









 





FORM OF SECURITY AGREEMENT



hereunder are cumulative and not exclusive of any rights or remedies which they would
otherwise have. No waiver of any provision of this Security Agreement or consent to any departure
by any Grantor therefrom shall in any event be effective unless the same shall be authorized as
provided in Section 6.10, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice to or demand on any Grantor in any case
shall entitle such Grantor to any other or further notice or demand in similar or other
circumstances.




     6.10 Amendments/Waivers. Neither this Security Agreement nor any provision hereof may
be amended, waived or modified except pursuant to an agreement or agreements in writing entered
into by each Grantor and the Secured Party.



     6.11 Severability. In the event any one or more of the provisions contained in this
Security Agreement should be held invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein or therein shall not in
any way be affected or impaired thereby.



     6.12 Counterparts. This Security Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which when taken together
shall constitute but one contract, and shall become effective when copies hereof which, when taken
together, bear the signatures of each of the parties hereto shall be delivered or mailed to the
Secured Party.



     6.13 Headings. Article and Section headings used herein are for convenience of
reference only and are not to affect the construction of, or to be taken into consideration in
interpreting, this Security Agreement.



     6.14 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY EXPRESSLY WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHT, POWER, OR REMEDY UNDER OR
IN CONNECTION WITH THIS SECURITY AGREEMENT AND AGREES THAT ANY SUCH ACTION SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY. THE TERMS AND PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL
INDUCEMENT FOR THE PARTIES ENTERING INTO THIS SECURITY AGREEMENT.



     6.15 Interpretation. In the event of a conflict between this Security Agreement and
the Purchase Agreement, the terms of the Purchase Agreement shall control.



[signatures on following pages]




 









 





FORM OF SECURITY AGREEMENT




     IN WITNESS WHEREOF, the Grantor has executed this Security Agreement as of the date first
above written.



	 	 	 	 	 
	 	GRANTORS:



IST ACQUISITIONS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	IMAGING AND SENSING TECHNOLOGY CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	IST CONAX NUCLEAR, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	I.S. TECHNOLOGY de PUERTO RICO, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	IST INSTRUMENTS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 




 









 





FORM OF SECURITY AGREEMENT




	 	 	 	 	 
	 	IMAGING AND SENSING TECHNOLOGY INTERNATIONAL CORP.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	QUADTEK, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	Acknowledged by:
	 
	 	 	 	 
	AMERICAN CAPITAL FINANCIAL SERVICES, INC., as agent
	 
	 	 	 	 
	By:

	 	 
	 	 
	 

	 	 	 	 
	 

	 	Robert Klein	 	 
	 

	 	Vice-President	 	 






Signature Page to Security Agreement





 












 





EXHIBIT A




ASSIGNMENT



     THIS ASSIGNMENT (this “Assignment”) is entered into as of ___by IST ACQUISITIONS,
INC., a Delaware corporation (“Parent”), IMAGING AND SENSING TECHNOLOGY CORPORATION, a New
York corporation (“IST”), I.S. TECHNOLOGY de PUERTO RICO, INC., a Delaware corporation
(“IST Puerto Rico”), IST INSTRUMENTS, INC., a New York Corporation (“IST
Instruments”), IMAGING AND SENSING TECHNOLOGY INTERNATIONAL CORP., a New York corporation
(“IST International”), IST CONAX NUCLEAR, INC., a New York corporation (“IST
Conax”), and QUADTEK, INC., a Washington corporation (“Quadtek” and together with
Parent, IST, IST Puerto Rico, IST Instruments, IST International and IST Conax, the
“Grantors”), to and in favor of AMERICAN CAPITAL FINANCIAL SERVICES, INC., a Delaware
corporation (“the “Agent”), as agent for the Purchasers identified in the Note Purchase
Agreement (as amended, restated, supplemented or otherwise modified from time to time, the
“Purchase Agreement”) among the Grantors, the Agent and the Purchasers party thereto, dated
May 24, 2004 (in such capacity, the “Secured Party”).


WHEREAS, pursuant to the Purchase Agreement, the Grantors have issued to the Purchasers the Notes
on the terms and conditions further specified in the Purchase Agreement;



WHEREAS, in order to induce the Purchasers to accept the Notes in accordance with the Purchase
Agreement, and in consideration therefor, the Grantors agreed to grant to the Secured Party, as
agent for the Purchasers, a perfected Lien on and security interest in all of the Grantors assets
and properties subject to certain exceptions stated therein, whether now or hereafter existing,
owned or acquired, all pursuant to the terms of the Security Agreement, in order to secure the
full, prompt and complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of the Obligations;



WHEREAS, an Event of Default has occurred and/or is continuing under the Purchase Agreement; and



WHEREAS, pursuant to and as required by the Purchase Agreement, the Grantors now desire to assign
to the Secured Party, and the Secured Party desires to receive from the Grantors, the Intellectual
Property Collateral (including, without limitation, the Intellectual Property Collateral set forth
on Schedule A hereof) on the terms and conditions specified herein.



NOW, THEREFORE, for and in consideration of the covenants and provisions set forth herein, and for
other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each
Grantor agrees as follows:





1. Capitalized terms used herein without definition shall be defined in the manner set
forth in the Purchase Agreement.



 









 





FORM OF SECURITY AGREEMENT





2. Subject to Section 3 hereof, each Grantor does hereby assign, sell and transfer unto
the Secured Party all of its right, title and interest in and to the Payment Intangibles
together with (a) all registrations of and pending registration applications for such
Payment Intangibles, (b) the goodwill of the business symbolized by and associated with
such Payment Intangibles, and (c) the right to sue and recover for, and the right to
profits or damages due or accrued arising out of or in connection with any and all past,
present or future infringements or dilution of or damage or injury to such Payment
Intangibles, the registrations or pending registration applications thereof, or such
associated goodwill.




3. Notwithstanding anything herein to the contrary (including Schedule A hereof), for the
purposes of this Assignment, in no event shall the Payment Intangibles include, and
Grantors shall not be deemed to have assigned, (i) any personal and real property,
fixtures and interests of Grantors which are not assignable or are incapable of being
encumbered as a matter or law, or (ii) the Grantors’ rights or interests in any license,
contract or agreement to which any Grantor is a party or any of its rights or interests
thereunder to the extent, but only to the extent, that such a grant would, under the terms
of such license, contract or agreement or otherwise, result in a breach of the terms of,
or constitute a default under any license, contract or agreement to which such Grantor is
a party; provided, upon the ineffectiveness, lapse or termination of any such provision,
this Assignment of Payment Intangibles shall include, and Grantors shall be deemed to have
been assigned all such rights and interests as if such provision had never been in effect.
In addition, the Payment Intangibles being assigned hereunder shall exclude any rights to
(i) any intellectual property rights which would be rendered invalid or unenforceable by
the grant of an assignment, for so long as such prohibition or reason for invalidity
exists and (ii) any intent-to-use trademark application for which a statement of use has
not been filed (but only until such statement is filed).




4. This Assignment is intended to and shall take effect at such time as the Secured Party
shall complete this instrument by signing its acceptance of this Assignment below.




5. This Assignment shall be construed in accordance with and governed by the laws of the
State of New York, without giving effect to New York choice of law doctrine.



[Signature page follows]




 









 





FORM OF SECURITY AGREEMENT



IN WITNESS WHEREOF, the Grantors and the Agent have caused this Assignment to be executed and
delivered by their duly authorized attorneys in fact as of the date first set forth above.




	 	 	 	 	 
	 	ASSIGNORS:



IST ACQUISITIONS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	IMAGING AND SENSING TECHNOLOGY CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	IST CONAX NUCLEAR, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	I.S. TECHNOLOGY de PUERTO RICO, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 




 









 





FORM OF SECURITY AGREEMENT




	 	 	 	 	 
	 	IST INSTRUMENTS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	IMAGING AND SENSING TECHNOLOGY INTERNATIONAL CORP.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	QUADTEK, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	Accepted and Agreed by ASSIGNEE
	 
	 	 	 	 
	AMERICAN CAPITAL FINANCIAL SERVICES, INC., as agent
	 
	 	 	 	 
	By:

	 	 
	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	Title:
	 	 	 	 






 









 





FORM OF SECURITY AGREEMENT




Acknowledgement of Grantor




	 	 	 	 	 	 	 	 	 
	STATE OF

	 	 
	 	 	)	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	)	 	 	ss.
	COUNTY OF

	 	 
	 	 	)	 	 	 
	 

	 	 	 	 	 	 	 	 





On this       day of                      before me personally appeared                     ,
proved to me on the basis of satisfactory evidence to be the person who executed the foregoing
instrument on behalf of IST ACQUISITIONS, INC. who being by me duly sworn did depose and say that
he is an authorized attorney in fact of said corporation, that the said instrument was signed on
behalf of said corporation as authorized by its Board of Directors and that he acknowledged said
instrument to be the free act and deed of said corporation.




	 	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	 
	 

	 	Notary Public	 	 






 









 





FORM OF SECURITY AGREEMENT




Acknowledgement of Grantor




	 	 	 	 	 	 	 	 	 
	STATE OF

	 	 
	 	 	)	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	)	 	 	ss.
	COUNTY OF

	 	 
	 	 	)	 	 	 
	 

	 	 	 	 	 	 	 	 





On this       day of                      before me personally appeared                     ,
proved to me on the basis of satisfactory evidence to be the person who executed the foregoing
instrument on behalf of IMAGING AND SENSING TECHNOLOGY CORPORATION, who being by me duly sworn did
depose and say that he is an authorized attorney in fact of said corporation, that the said
instrument was signed on behalf of said corporation as authorized by its Board of Directors and
that he acknowledged said instrument to be the free act and deed of said corporation.




	 	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	 
	 

	 	Notary Public	 	 






 









 





FORM OF SECURITY AGREEMENT




Acknowledgement of Grantor




	 	 	 	 	 	 	 	 	 
	STATE OF

	 	 
	 	 	)	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	)	 	 	ss.
	COUNTY OF

	 	 
	 	 	)	 	 	 
	 

	 	 	 	 	 	 	 	 





On this       day of                      before me personally appeared                     ,
proved to me on the basis of satisfactory evidence to be the person who executed the foregoing
instrument on behalf of IST CONAX NUCLEAR, INC., who being by me duly sworn did depose and say that
he is an authorized attorney in fact of said corporation, that the said instrument was signed on
behalf of said corporation as authorized by its Board of Directors and that he acknowledged said
instrument to be the free act and deed of said corporation.




	 	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	 
	 

	 	Notary Public	 	 






 









 





FORM OF SECURITY AGREEMENT




Acknowledgement of Grantor




	 	 	 	 	 	 	 	 	 
	STATE OF

	 	 
	 	 	)	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	)	 	 	ss.
	COUNTY OF

	 	 
	 	 	)	 	 	 
	 

	 	 	 	 	 	 	 	 





On this       day of                      before me personally appeared                     ,
proved to me on the basis of satisfactory evidence to be the person who executed the foregoing
instrument on behalf of I.S. TECHNOLOGY de PUERTO RICO, INC., who being by me duly sworn did depose
and say that he is an authorized attorney in fact of said corporation, that the said instrument was
signed on behalf of said corporation as authorized by its Board of Directors and that he
acknowledged said instrument to be the free act and deed of said corporation.




	 	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	 
	 

	 	Notary Public	 	 






 









 





FORM OF SECURITY AGREEMENT




Acknowledgement of Grantor




	 	 	 	 	 	 	 	 	 
	STATE OF

	 	 
	 	 	)	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	)	 	 	ss.
	COUNTY OF

	 	 
	 	 	)	 	 	 
	 

	 	 	 	 	 	 	 	 





On this       day of                      before me personally appeared                     ,
proved to me on the basis of satisfactory evidence to be the person who executed the foregoing
instrument on behalf of IST INSTRUMENTS, INC., who being by me duly sworn did depose and say that
he is an authorized attorney in fact of said corporation, that the said instrument was signed on
behalf of said corporation as authorized by its Board of Directors and that he acknowledged said
instrument to be the free act and deed of said corporation.




	 	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	 
	 

	 	Notary Public	 	 






 









 





FORM OF SECURITY AGREEMENT




Acknowledgement of Grantor




	 	 	 	 	 	 	 	 	 
	STATE OF

	 	 
	 	 	)	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	)	 	 	ss.
	COUNTY OF

	 	 
	 	 	)	 	 	 
	 

	 	 	 	 	 	 	 	 





On this       day of                      before me personally appeared                     ,
proved to me on the basis of satisfactory evidence to be the person who executed the foregoing
instrument on behalf of IMAGING AND SENSING TECHNOLOGY INTERNATIONAL CORP., who being by me duly
sworn did depose and say that he is an authorized attorney in fact of said corporation, that the
said instrument was signed on behalf of said corporation as authorized by its Board of Directors
and that he acknowledged said instrument to be the free act and deed of said corporation.




	 	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	 
	 

	 	Notary Public	 	 






 









 





FORM OF SECURITY AGREEMENT




Acknowledgement of Grantor




	 	 	 	 	 	 	 	 	 
	STATE OF

	 	 
	 	 	)	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	)	 	 	ss.
	COUNTY OF

	 	 
	 	 	)	 	 	 
	 

	 	 	 	 	 	 	 	 





On this       day of                      before me personally appeared                     ,
proved to me on the basis of satisfactory evidence to be the person who executed the foregoing
instrument on behalf of QUADTEK, INC., who being by me duly sworn did depose and say that he is an
authorized attorney in fact of said corporation, that the said instrument was signed on behalf of
said corporation as authorized by its Board of Directors and that he acknowledged said instrument
to be the free act and deed of said corporation.




	 	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	 
	 

	 	Notary Public	 	 






 









 





FORM OF SECURITY AGREEMENT




SCHEDULE A

SCHEDULE OF INTELLECTUAL PROPERTY COLLATERAL




 









 





FORM OF SECURITY AGREEMENT




SCHEDULE 2.1(b)



Pursuant to Section 2.1(b), the following information is disclosed:




	 	 	 	 	 	 	 	 	 	 	 	 	 
	Grantor and	 	Chief	 	 	 	Jurisdiction	 	 	 	Equipment	 	Location of
	Identification	 	Executive	 	Other Place(s)	 	of	 	Collateral	 	and Goods	 	Leased
	No.	 	Office	 	of Business	 	Organization	 	Location	 	Location	 	Facilities
	IST
Acquisitions,
Inc.

	 	c/o
American
Capital
Strategies,
Ltd.
461 Fifth Avenue,
26th Floor,
New York,
New York,
10017
	 	 	 	Delaware	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Imaging and
Sensing
Technology
Corporation

	 	100 IST
Center
 

Horseheads,
NY 14045
	 	 	 	New York	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	I.S.
Technology
de Puerto
Rico

	 	100 IST
Center
 

Horseheads,
NY 14045
	 	 	 	Delaware	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	IST
Instruments
Inc.

	 	100 IST
Center
 

Horseheads,
NY 14045
	 	 	 	New York	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	IST
International
Corp.

	 	100 IST
Center
 

Horseheads,
NY 14045
	 	 	 	New York	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	IST Conax 

Nuclear

	 	100 IST
Center
 

Horseheads,
NY 14045
	 	 	 	New York	 	 	 	 	 	 






 









 





FORM OF SECURITY AGREEMENT




SCHEDULE 2.1(e)




LIST OF DOUBTFUL ACCOUNTS



 









 





SCHEDULE 2.1 (f)




COLLATERAL HELD BY A THIRD PARTY



 









 





EXHIBIT
D




Form of
Collateral Assignment



 









 





EXHIBIT E




Form of Pledge Agreement



 









 





FORM OF PLEDGE AGREEMENT




PLEDGE AGREEMENT




     THIS PLEDGE AGREEMENT (this “Agreement”) dated as of May 24, 2004, is made by IST
ACQUISITIONS, INC., a Delaware corporation (“Parent”), IMAGING AND SENSING TECHNOLOGY
CORPORATION, a New York Corporation (“IST”), and IST INSTRUMENTS INC., a New York
Corporation (“Instruments,” and together with Parent and IST, the “Grantor
Parties”), for the benefit of AMERICAN CAPITAL FINANCIAL SERVICES, INC., a Delaware
corporation, as agent for Purchasers (defined in the Purchase Agreement referred to below), its
successors and assigns (“Grantee”).



W I T N E S S E T H:




     WHEREAS, pursuant to that certain Note and Equity Purchase Agreement (the “Purchase
Agreement”) dated as of even date herewith among the Grantor Parties and certain other subsidiaries
of Parent (the “Loan Parties”), Grantee and Purchasers party thereto, Purchasers have
purchased certain Notes (as defined in the Purchase Agreement) from the Loan Parties and the Loan
Parties have incurred certain obligations to the Purchasers and Grantee; and



     WHEREAS, IST is a wholly-owned subsidiary of Parent and Parent owns all of the outstanding
capital stock of IST listed on and represented by the certificates described on Schedule A
hereto and Parent has realized significant and material benefit from the purchase of the Notes by
Purchasers and has agreed to pledge all of the equity securities of IST owned by it as collateral
security for its obligations under the Purchase Agreement and the Notes; and



     WHEREAS, IST and Instruments, as owners of the shares of capital stock of the Subsidiaries (as
defined herein) listed on and represented by the certificates described on Schedule A
hereto, collectively own all of the outstanding shares of capital stock of such Subsidiaries and
have realized significant and material benefit from the purchase of the Notes by Purchasers and IST
and Instruments have agreed to pledge certain of the equity securities owned by them as collateral
security for its obligations under the Purchase Agreement and the Notes; and



     WHEREAS, the Purchasers have made the execution and delivery of this Agreement a condition
precedent to their purchase of the Notes.



     NOW, THEREFORE, in consideration of the premises above and in order to induce Grantee to enter
into the Purchase Agreement and the Purchasers to purchase the Notes and to enter into the Purchase
Agreement, the Grantor Parties hereby agrees as follows:



     1. Defined Terms. As used in this Agreement, capitalized terms defined in the Purchase
Agreement that are not defined herein shall have the meanings ascribed to them therein, and the
following terms shall have the following meanings:



          “General Intangibles” shall have the meaning specified in the UCC.



 









 





          “Instruments” shall have the meaning specified in the UCC.



          “Person” means any individual, partnership, limited liability company, corporation,
trust, joint venture, association, unincorporated organization or government or department or
agency thereof.



          “Secured Obligations” shall mean all principal, interest, fees, costs, expenses and
other amounts owed by, and other covenants and obligations of, the Grantor Parties to Grantee and
Purchasers from time to time under or pursuant to the Notes or created under the Purchase Agreement
with regard to the Notes, the Purchase Agreement or this Agreement.



          “Subsidiaries” shall mean each of I.S. Technology de Puerto Rico, Inc., a Delaware
corporation, Instruments, Imaging and Sensing Technology International Corp., a New York
corporation, Imaging and Sensing Technology Limited, a United Kingdom corporation, IST Conax
Nuclear, a New York corporation, Quadtek, Inc., a Washington corporation, and I&ST Canada, Inc. an
Ontario corporation.



     2. Creation of Lien and Security Interest. In order to secure timely payment in full
of the Secured Obligations (whether at stated maturity, by acceleration or otherwise), Grantor
Parties hereby grant, assign and convey unto Grantee for the benefit of Purchasers a lien on and
continuing security interest in and to, the hereinafter described “Collateral” (the “Security
Interest”), the Security Interest being a Lien on the Collateral prior to all other Liens except
for any Lien in favor of any senior lender (if any), effective as of the date hereof without the
need to execute any further instruments, agreements or documents other than as specifically set
forth herein.



     3. Collateral. The Security Interest covers the following property (the
“Collateral”): (i) all of the stock, equity securities or other ownership interests owned
by Parent and issued by IST (the “IST Equity Securities”); (ii) all of the stock, equity
securities or other ownership interests owned by IST and issued by I.S. Technology de Puerto Rico,
Inc. (the “IST Puerto Rico Equity Securities”); (iii) all of the stock, equity securities
or other ownership interests owned by IST and issued by IST Instruments, Inc. (the “IST
Instruments Equity Securities”); (iv) all of the stock, equity securities or other ownership
interests owned by IST and issued by Imaging and Sensing Technology International Corp. (the
“IST International Equity Securities”); (v) sixty-five percent (65%) of the stock, equity
securities or other ownership interests owned by IST and issued by Imaging and Sensing Technology
Limited (the “IST Ltd. Equity Securities”); (vi) all of the stock, equity securities or
other ownership interests owned by IST and issued by IST Conax Nuclear (the “IST Conax Equity
Securities”); (vii) sixty-five percent (65%)of the stock, equity securities or other ownership
interests owned by IST and issued by I & ST Canada, Inc. (the “IST Canada Equity
Securities”); (viii) all of the stock, equity securities or other ownership interests owned by
Imaging and Sensing Technology Limited and issued by Quadtek, Inc. (the “Quadtek Equity
Securities” and together with the IST Equity Securities, the IST Puerto Rico Equity Securities,
the IST Instruments Equity Securities, the IST International Equity Securities, the IST Ltd. Equity
Securities, the IST Conax Equity Securities, the IST Canada Equity Securities and the Quadtek
Equity Securities, the “Equity Securities”) and (ix) and any and all “Rights” as hereinafter
defined, provided that with respect to Imaging and Sensing Technology



3









 




Limited and I & ST Canada, Inc., in no event shall Grantee be granted a security interest in
excess of sixty-five percent (65%) of the equity securities. For purposes of this Agreement,
“Rights” means: (a) Equity Securities realized upon exercise of any warrants to purchase
Equity Securities, bonus shares, debentures or other securities; (b) options or rights to take up
shares, debentures or other securities; (c) dividends, distributions, or returns of capital or
other moneys; and (d) other rights, moneys or securities of any nature (including, without
limitation, rights, voting rights, moneys or securities arising from consolidation or subdivision
of capital, redemption or conversion of shares, reduction of capital, liquidation or a similar plan
or arrangement), all of which at any time (whether now or in the future) are attributable to or are
arising from any Collateral.




     4. Continuing Security. This Agreement shall operate as a continuing security interest
between Grantee, for the benefit of Purchasers, and Grantor Parties:




(i) irrespective of any sum or sums that may be paid to the credit of any account of
the Grantor Parties with Grantee or any Purchaser; and




(ii) notwithstanding the appointment, retirement or removal, at any time, of a receiver
of the Grantor Parties,


and shall remain in full force and effect and extend to cover all of the Secured Obligations until
a final release of this Agreement has been executed by Grantee.




     5. Certificates, Voting, etc. Upon execution and delivery of this Agreement, the
Grantor Parties shall deliver to Grantee or its designated agent certificates representing all of
the Equity Securities with a stock power executed in blank in form and substance satisfactory to
Grantee. If at any time any of the Grantor Parties shall issue any additional or substitute stock
or stock certificates, or any other instruments evidencing an interest in or an obligation of any
of the Grantor Parties, the Grantor Parties shall promptly pledge, mortgage and deposit (or cause
to be pledged, mortgaged or deposited) in favor of or with Grantee such additional certificates,
instruments or documents as additional security for the Secured Obligations, all of which
additional security shall constitute Collateral (and shall be included within the definition of
“Collateral” hereunder). Grantee shall hold the Collateral solely as security for the payment and
performance of the Secured Obligations. Unless an Event of Default shall have occurred and is
continuing (and in such case, Grantee shall have all voting and consent rights available to the
stockholders of IST, Instruments and the Subsidiaries with regard to the Collateral), the Grantor
Parties shall have the right to exercise the rights as a stockholder with regard to voting and
consenting to corporate actions that are associated with the Collateral; provided, however, that no
vote shall be cast, consent given or right exercised or other action taken by the Grantor Parties
which would impair the Collateral or which would be inconsistent with or result in any violation of
any provision of the Purchase Agreement or this Agreement.



     6. Right to Receive Distributions. Unless an Event of Default shall have occurred and
is continuing (and in such case, all dividends and distributions described herein shall be
Collateral), the Grantor Parties shall have the right to receive and to retain cash dividends and
other cash distributions which are paid on account of the Collateral. If any such dividends or
other distributions are paid to the Grantor Parties following an



4









 




Event of Default, such dividends or other distributions shall be held in trust by the Grantor
Parties for the benefit of Grantee, and the Grantor Parties shall immediately notify Grantee in
writing, and shall, if Grantee so instructs, immediately pay over such dividends or other
distributions to Grantee as Collateral.




     7. Restrictions. The Grantor Parties shall not (a) except for the security interest
created by this Agreement and Permitted Liens, create or suffer to exist any Lien upon or with
respect to any of the Collateral; (b) use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement, the Purchase Agreement or any applicable law; (c)
sell, convey, hypothecate or otherwise transfer (by operation of law or otherwise) any Collateral
or any interest in the Collateral to any person or other entity; or (d) enter into any agreement or
undertaking restricting the right or ability of the Grantor Parties or such Grantee to sell, assign
or transfer any of the Collateral.



     8. Representations and Warranties. Each Grantor Party hereby severally represents and
warrants to Grantee and Purchasers as follows:



          (a) Except for Permitted Liens, each Grantor Party is the record and beneficial owner of the
Collateral constituting Instruments or certificated securities and has good, valid and marketable
title to each other item of Collateral, free and clear of all Liens, and has the requisite rights
in and power and authority and legal right to pledge and transfer such Collateral to Grantee as
provided herein.



          (b) The Equity Interests. pledged hereunder constitute one hundred percent (100%) of the
issued and outstanding equity of all classes of the IST, Instruments and each of the Subsidiaries
organized in the United States and sixty-five percent (65%) of the issued and outstanding equity of
all classes of the Subsidiaries organized outside the United States.



          (c) The pledge, assignment and delivery of the Collateral pursuant to this Agreement will
create a valid perfected lien on and it valid perfected security interest in the Collateral in
favor of Grantee under the Uniform Commercial Code of the State of New York as in effect from time
to time and the Uniform Commercial Code as in effect from time to time in any applicable
jurisdiction (such codes, together with any other successor or applicable adoption of the Uniform
Commercial Code in any applicable jurisdiction, the “UCC”)), subject to no prior Lien
(except for any Lien in favor of any senior lender (if any)) and to no agreement purporting to
grant any third party any security interest or other interest in any of the Collateral, except
Permitted Liens. No additional actions by the Grantor Parties or any third party are necessary to
create or perfect the Security Interest.



          (d) All Collateral, other than Rights which constitute General Intangibles, is represented by
certificated securities or Instruments in the possession of Grantee.



     9. Events of Default. The following shall constitute “Events of Default” hereunder:



5









 





          (a) The occurrence of an “Event of Default” under the Purchase Agreement; or



          (b) breach by any of the Grantor Parties of, or failure of any of the Grantor Parties to
perform any of their respective obligations hereunder, which breach or failure to perform shall not
have been cured within fifteen (15) days after the earlier to occur of (i) receipt of written
notice thereof from Grantee or (ii) actual knowledge of the breach by any of the Grantor Parties.



     10. Remedies Upon Default. Upon the occurrence and during the continuation of an Event
of Default, after any applicable cure period, and at any time thereafter, Grantee may (but shall
not be required to) take any or all of the following actions simultaneously or in any order which
it may choose:



          (a) exercise any remedies with respect to the Collateral (or any of it), including sale of the
Collateral, as may be provided by applicable law then in effect, or as may be available in equity;



          (b) exercise any remedies with respect to the Collateral available to a secured party under
the UCC, regardless of whether or not the UCC actually applies;



          (c) vote or otherwise exercise any rights accruing to the owner of the Collateral without
notice to or consent of the Grantor Parties;



          (d) commence and prosecute an action, at law or in equity, in any court of competent
jurisdiction, injunctive or declaratory relief or any other relief available under applicable law,
and take all such actions as may be necessary or desirable to enforce any order or judgment entered
in connection with such action;



          (e) hold as additional Collateral for the Secured Obligations or apply in accordance with
Section 14 hereof any and all dividends and distributions on account of the Collateral; and/or



          (f) exercise any other remedies afforded to Grantee pursuant to the terms of this Agreement.



     All of Grantee’s rights and remedies hereunder, under the Purchase Agreement and under any and
all other instruments and documents executed in connection herewith and therewith, shall be
cumulative and not exclusive, and shall be enforceable alternatively, successively or concurrently
as Grantee may, in its sole discretion, deem expedient. Grantee shall have no obligation to
preserve rights in the Collateral or marshal any of the Collateral for the benefit of any person or
entity.



     11. Additional Rights of Grantee With Respect to Certain Collateral. Upon the
occurrence of and during the continuation of any Event of Default:



          (a) Grantee, in its discretion, and without notice to any of the Grantor Parties, may take any
one or more of the following actions without liability except to account for property actually
received by it: (i) transfer to or register in its name



6









 




or the name of its nominee any stock certificates or any other evidence of the Collateral,
with or without indication of the security interest herein created, and whether or not so
transferred or registered, receive the income, dividends and other distributions thereon and hold
them as additional Collateral or apply them to the Secured Obligations in accordance with Section
14; (ii) exercise or cause to be exercised all voting and corporate powers with respect to any of
the Collateral, including (1) all rights to call or require shareholders meetings and to remove or
elect directors, and (2) all rights of proxy appointments, conversion, exchange, subscription or
any other rights, privileges or options pertaining to such Collateral, as if the absolute owner
thereof; (iii) exchange any of the Collateral for other property upon a reorganization,
recapitalization, reclassification or other readjustment and, in connection therewith, deposit any
of the Collateral with any depository upon such terms as Grantee may determine; and (iv) in its
name or in the name of the Grantor Parties, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for any of the Collateral,
and Grantee further shall have the right during any time to sign and endorse the name of the
Grantor Parties upon any such stock certificate, stock power, check, draft, money order, or any
other documents of title or evidence of payment with respect to the Collateral, in the name of the
Grantor Parties, it being the intention of the Grantor Parties to grant to Grantee the right to
sell any portion or all of the Collateral and the proceeds therefrom, upon the occurrence of an
Event of Default hereunder.




          (b) If Grantee in good faith believes that the Securities Act of 1933, as amended from time to
time (the “Act”), or any other state or federal law prohibits or restricts the customary
manner of sale or distribution of any of the Collateral, Grantee may sell such Collateral privately
or in any other manner deemed advisable by Grantee at such price or prices as Grantee determines in
its sole discretion. Each of the Grantor Parties recognizes that such prohibition or restriction
may cause the Collateral to have less value than it otherwise would have and that, consequently,
such sale or disposition by Grantee may result in a lower sales price than if the sale were
otherwise held and notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. Grantee may sell the Collateral in
Bethesda, Maryland or elsewhere, in one or more sales or parcels, for cash, credit or future
delivery, and with or without the use of a stockbroker, as Grantee may deem advisable. Grantee may
be the purchaser of any or all of the Collateral. In the event that Grantee elects to sell all or
any part of the Collateral in a public sale, the Grantor Parties shall cooperate with all requests
by Grantee, its agents and representatives with respect to the registration and qualification of
such Collateral which is securities; or the applicable part thereof, under the Act and all state
securities laws.



     12. Grantee Appointed Attorney-in-Fact. Each Grantor Party hereby irrevocably
appoints Grantee as its attorney-in-fact, with full authority in its place and stead and in the
name of such Grantor Party, from time to time in Grantee’s discretion, to take any action and to
execute any instrument which Grantee may deem necessary or advisable to accomplish the purposes of
this Agreement including, without limitation:



          (a) to ask, demand, collect, sue for, recover, compound, receive and give receipts for moneys
due and to become due under or in respect of any of the Collateral;



7









 





          (b) to receive, endorse and collect any drafts or other instruments, documents and chattel
paper; and



          (c) to file any claims, take any action or institute any proceedings which Grantee may deem
necessary or desirable for the collection of any of the Collateral (including any proceeds thereof)
or otherwise to enforce the rights of the Grantor Parties and/or Grantee with respect to any of the
Collateral.



     The Grantor Parties agree to execute appropriate certificates and instruments, all in blank,
as appropriate, as Grantee may request to evidence such powers of attorney. The powers of attorney
granted herein shall be coupled with an interest and shall be irrevocable.



     13. Expenses. The Grantor Parties shall pay, when due, any and all reasonable fees,
taxes (other than taxes based on the income of Grantee) or other charges imposed in connection with
the Security Interests including, without limitation, any fees imposed in connection with
recordation of instruments necessary or desirable in order to reflect, effectuate or release the
Security Interests. The Grantor Parties shall also pay to Grantee, on demand, any and all other
expenses and fees incurred in connection with any other actions taken by Grantee to enforce its
rights hereunder including, without limitation, any actions taken pursuant to Section 12 hereof.



     14. Application of Proceeds. Upon the occurrence and during the continuance of an
Event of Default, the proceeds from any sale or other disposition of, or other realization upon,
all or any part of the Collateral shall be applied by Grantee in the form, order and manner
provided in the Security Agreement.



     15. Release and Indemnity. Each Grantor Party hereby releases and severally
indemnifies and holds harmless Grantee and its agents, successors and assigns for any claims,
actions, causes of action, demands, liabilities, debts or suits arising out of or in any way
related to Grantee’s possession, disposition, collection, control or use of the Collateral;
provided, however, that this release and indemnity shall not extend to any actions
taken by Grantee which (a) contravene the express terms of this Agreement, or (b) constitute gross
negligence or willful misconduct.



     16. Notices. All notices and other communications given to or made upon any party
hereto in connection with this Agreement shall, except as otherwise expressly herein provided, be
in writing and mailed via certified mail, sent by Federal Express or other similar express delivery
service for next day delivery, faxed (with a confirming copy sent by such a express delivery
service for next day delivery) or hand delivered to the respective parties, as follows:



8









 





          If to Grantee:


American Capital Financial Services, Inc.

2 Bethesda Metro Center, Suite 1400

Bethesda, Maryland 20814

Attn: Compliance Officer

Facsimile: 301-654-6714




          With a copy to:


American Capital Strategies, Ltd.

461 Fifth Avenue, 26th Floor

New York, New York 10017

Attn: Brian Graff

Facsimile: (212) 213-2060



and



Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, NY 10053

Attn: Christopher K. Aidun, Esq.

Facsimile: 212-310-8007




          If to the Grantor Parties:


IST Acquisitions, Inc.

c/o American Capital Strategies, Ltd.

461 Fifth Avenue, 26th Floor

New York, New York 10017

Attn: Brian Graff

Facsimile: (212) 213-2060




          With a copy to:


Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, NY 10053

Attn: Christopher K. Aidun, Esq.

Facsimile: 212-310-8007



or in accordance with any subsequent written direction delivered in accordance with this section
from the recipient party to the sending party. All such notices and other communications shall,
except as otherwise expressly herein provided, be effective upon delivery if delivered by hand; in
the case of certified mail, three Business Days after the date sent; in the case of any fax, when
received; or in the case of express delivery service, the day after delivery of the notice to such
service with charges prepaid.







9









 








     17. Assignability and Parties in Interest. This Agreement shall not be assignable by
the Grantor Parties without the written consent of Grantee. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective successors and permitted
assigns.



     18. Termination. This Agreement shall terminate, the Security Interest shall be
released and the certificates representing all of the Equity Securities shall be returned to the
Grantor Parties upon the earliest to occur of (i) the payment and satisfaction in full of the Notes
and all of the Secured Obligations; or (ii) the mutual agreement of the Grantor Parties and
Grantee.



     19. Governing Law; Submission to Jurisdiction. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of Maryland, without regard to
its conflict of laws principles. All judicial actions, suits or proceedings brought against any of
the Grantor Parties with respect to its obligations, liabilities or any other matter under or
arising out of or in connection with this Agreement or any transaction contemplated hereby or for
recognition or enforcement of any judgment rendered in any such proceedings may be brought in a
state or federal court of competent jurisdiction in the State of New York. By execution and
delivery of this Agreement, the Grantor Parties accept, generally and unconditionally, the
jurisdiction of the aforesaid courts and irrevocably agree to be bound by any final judgment
rendered thereby in connection with this Agreement or any transaction contemplated hereby from
which no appeal has been taken or is available. The Grantor Parties irrevocably agree that all
process in any proceeding or any court arising out of or in connection with this Agreement may be
effected by mailing a copy thereof by registered or certified mail or any substantially similar
form of mail, postage prepaid, to the Grantor Parties at the address referred to in Section 16 or
such other address(es) of which Grantee shall have been notified pursuant to said paragraph. Such
service shall be effective five (5) days after such mailing. The Grantor Parties hereby acknowledge
that such service will be effective and binding service in every respect. The Grantor Parties shall
not assert that such service did not constitute effective and binding service within the meaning of
any applicable state or federal law, rule, regulation or the like. The Grantor Parties hereby
irrevocably waive any objection, including, without limitation, any objection to the laying of
venue or based on the grounds of forum non conveniens, which it now or hereafter may have
to the bringing of any such action or proceeding in any such jurisdiction. Each Grantor Party
acknowledges that final judgment against it in any action, suit or proceeding referred to in this
paragraph shall be conclusive and may be enforced in any other jurisdiction, by suit on the
judgment, a certified or exemplified copy of which shall be conclusive evidence of the fact and of
the amount of such Grantor Party’s indebtedness hereunder.



     20. Complete Agreement. This Agreement contains the entire agreement between the
parties hereto with respect to the transactions contemplated herein and, except as provided herein,
supersede all previous oral and written and all contemporaneous oral negotiations, commitments,
writings and understandings.



     21. Amendments and Waivers.



10









 





          (a) This Agreement may be amended only by a writing signed by Grantee and the Grantor Parties.



          (b) No delay or omission on the part of any party hereto in exercising any right hereunder
shall operate as a waiver of such right or any other right hereunder or operate to constrain the
rights of any other parties hereunder. No waiver of any one right shall operate as a waiver of any
subsequent right.



     22. Interpretation. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of this Agreement.



     23. Severability. If any provision of this Agreement shall be held to be invalid,
illegal or unenforceable in any material respect, such provision shall be replaced with a provision
which is as close as possible in effect to such invalid, illegal or unenforceable provision, and
still be valid, legal and enforceable, and the validity, legality and enforceability of the
remainder of this Agreement shall not in any way be affected or impaired thereby, unless the
parties otherwise so provide.



     24. Further Assurances. The Grantor Parties agree, from time to time, at their
expense, to execute and deliver promptly all further instruments and documents as Grantee may
reasonably require in order to perfect, confirm and ratify the Security Interest, including,
without limitation, the execution and delivery of such financing statements or continuation
statements, and amendments thereto, as may be necessary or desirable, or as Grantee may request in
order to perfect and preserve the Security Interest. The Grantor Parties hereby authorize Grantee
or its agent to file such financing statements and/or such continuation statements and amendments
thereto relating to all or any part of the Collateral without its signature, where permitted by
law. A carbon, photographic or other reproduction of this Agreement or any financing statement
covering the collateral granted hereby or any part thereof shall be sufficient as a financing
statement where permitted by law.



     25. Waiver of Trial by Jury. EACH OF THE PARTIES HERETO WAIVES ALL RIGHT TO A JURY
TRIAL IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING SEEKING ENFORCEMENT OF SUCH PARTY’S RIGHTS
UNDER THIS AGREEMENT. THE TERMS AND PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL INDUCEMENT FOR
THE PARTIES ENTERING INTO THIS AGREEMENT.



[signatures appear on following page]






11









 








SIGNATURE PAGE TO




PLEDGE AGREEMENT



     IN WITNESS WHEREOF, the Grantor Parties have caused this Pledge Agreement to be executed as of
the date first above written.



	 	 	 	 	 
	 	IST ACQUISITIONS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	IMAGING AND SENSING TECHNOLOGY CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	IST INSTRUMENTS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald Hartman 	 
	 	 	Title:  	Chief Executive Officer 	 
	 




12









 





Schedule A



Parent is the owner of one hundred percent (100%) of the Common Stock of IST.



IST is the owner of one hundred percent (100%) of the Common Stock of I.S. Technology de Puerto
Rico, Inc.



IST is the owner of one hundred percent (100%) of the Common Stock of Instruments.



IST is the owner of one hundred percent (100%) of the Common Stock of Imaging and Sensing
Technology International Corp.



IST is the owner of one hundred percent (100%) of the Ordinary Shares of Imaging and Sensing
Technology Limited (“IST Limited”).



IST is the owner of one hundred percent (100%) of the Common Stock of IST Conax Nuclear, Inc.



IST is the owner of one hundred percent (100%) of the Common Stock of I & ST Canada, Inc.



IST Limited is the owner of one hundred percent (100%) of the Common Stock of Quadtek, Inc.





13












 





EXHIBIT E-1




Form of French Pledge Agreement



 









 





FINANCIAL INSTRUMENTS ACCOUNT PLEDGE AGREEMENT



SHARES OF IST AUXITROL NUCLEAR S.A.S.



Dated as of October 29, 2004



By and among



IST ACQUISITIONS, INC.



Pledgor



AMERICAN CAPITAL FINANCIAL SERVICES, INC.



Agent



 









 





TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	1.
	 	DEFINITIONS - INTERPRETATION	 	 	2	 
	 
	 	 	 	 	 	 
	2.
	 	CONSTITUTION AND SCOPE OF THE PLEDGE	 	 	3	 
	 
	 	 	 	 	 	 
	3.
	 	REPRESENTATIONS AND WARRANTIES	 	 	6	 
	 
	 	 	 	 	 	 
	4.
	 	ENFORCEMENT	 	 	7	 
	 
	 	 	 	 	 	 
	5.
	 	DURATION	 	 	7	 
	 
	 	 	 	 	 	 
	6.
	 	OTHER RIGHTS AND ACTIONS OF THE AGENT	 	 	8	 
	 
	 	 	 	 	 	 
	7.
	 	REGISTRATION	 	 	8	 
	 
	 	 	 	 	 	 
	8.
	 	COVENANTS	 	 	8	 
	 
	 	 	 	 	 	 
	9.
	 	VOTING RIGHTS	 	 	9	 
	 
	 	 	 	 	 	 
	10.
	 	INVALIDATION	 	 	9	 
	 
	 	 	 	 	 	 
	11.
	 	WAIVERS	 	 	9	 
	 
	 	 	 	 	 	 
	12.
	 	AMENDMENTS	 	 	9	 
	 
	 	 	 	 	 	 
	13.
	 	APPLICABLE LAW	 	 	10	 
	 
	 	 	 	 	 	 
	14.
	 	NOTICES	 	 	10	 
	 
	 	 	 	 	 	 
	15.
	 	RELEASE AND INDEMNITY	 	 	10	 
	 
	 	 	 	 	 	 
	16.
	 	FURTHER ASSURANCES	 	 	10	 
	 
	 	 	 	 	 	 
	EXHIBIT A: Form of Declaration of Pledge of a Financial Instruments Account
	 
	 	 	 	 	 	 
	EXHIBIT B:  Form of Certificate of Registration






i









 





BETWEEN THE UNDERSIGNED:





	l.	 	IST Acquisitions, Inc., a corporation governed by the laws of the State of Delaware, having
its registered address at c/o American Capital Strategies. Ltd., 461 Fifth Avenue, 26th Fl.,
New York, NY 10017, represented by Donald W. Hartman, duly authorized thereto,





hereafter referred to as the “Pledgor”.




AND:





	2.	 	American Capital Financial Services, Inc., a corporation governed by the laws of the State of
Delaware, having its registered office at 2 Bethesda Metro Center, Suite 1400, Bethesda, MD
20814, acting in its own name and in its capacity as Agent (as such term is defined in the
Amended and Restated Note and Equity Purchase Agreement as hereinafter defined) on behalf and
for the account of the Purchasers (as such term is defined in the Amended and Restated Note
and Equity Purchase Agreement).





hereafter referred to as the “Agent”.




WHEREAS:





	A.	 	Reference is made to a Amended and Restated Note and Equity Purchase Agreement dated October
29, 2004, among the Pledgor, Imaging Sensing and Technology Corporation, a New York
corporation and a wholly-owned subsidiary of Pledgor (the “Borrower”), certain subsidiaries of
Pledgor and Borrower, the Purchasers and the Agent (the “Amended and Restated Note and Equity
Purchase Agreement”).
	 
	B.	 	Unless otherwise provided, capitalized terms used in the Amended and Restated Note and Equity
Purchase Agreement shall have the same meaning when used herein, including in the recital to
this Agreement.
	 
	C.	 	Pursuant to the Amended and Restated Note and Equity Purchase Agreement and subject to the
terms and conditions set out therein, the Purchasers have agreed:






	 	(i)	 	to make the Senior Term Loan A to the Loan Parties in the principal amount
of $15,000,000 which is to be evidenced by the Senior Term A Notes;
	 
	 	(ii)	 	to make the Senior Term Loan B to the Loan Parties in the principal amount
of $7,500,000 which is to be evidenced by the Senior Term B Notes;





 









 






	 	(iii)	 	to make the Senior Term Loan C to the Loan Parties in the principal amount
of $4,000,000 which is to be evidenced by the Senior Term C Notes;
	 
	 	(iv)	 	to purchase $7,500,000 in aggregate principal amount of the Senior
Subordinated Notes, due May 24, 2011;
	 
	 	(iii)	 	to purchase $1,250,000 in aggregate principal amount of the Junior
Subordinated Notes due May 24, 2012;
	 
	 	(iv)	 	to make the Revolving Loan in an aggregate principal amount outstanding at
any time less than or equal to $5,250,000 to be evidenced by the Revolving Notes.






	D.	 	Pursuant to the Amended and Restated Note and Equity Purchase Agreement and subject to the
terms and conditions set out therein, the Pledgor has agreed to guaranty the obligations of
the Loan Parties.
	 
	E.	 	The Pledgor is the owner of 100% of the share capital of IST Auxitrol Nuclear S.A.S., a
French société par actions simplifiée, with a share capital of 100,000 Euros, having its
registered address at 5 allée Charles Pathé 18000 Bourges France, and registered with the
Trade and Companies Registry of Bourges under the number RCS 479 428 336 (the “Company”) and
it is a condition to (i) the granting of the Senior Term A Loan, the Senior Term B Loan, the
Revolving Loan and the Senior Term C Loan, and (ii) the purchase of the Senior Subordinated
Notes and the Junior Subordinated Notes that the Pledgor shall have executed this Financial
Instruments Account Pledge Agreement to the Agent acting for its own account and for the
account and on behalf of the Purchasers.





NOW, THEREFORE, IT IS AGREED AS FOLLOWS:





	1.	 	DEFINITIONS — INTERPRETATION






	 	1.1.	 	Definitions
	 
	 	 	 	Capitalized terms and expressions used in this Agreement shall, subject to the
following definitions, have the same meaning as ascribed to those terms and
expressions in the Amended and Restated Note and Equity Purchase Agreement:
	 
	 	 	 	“Account Holder” means the Company.
	 
	 	 	 	“Agreement” shall mean the present deed of pledge.





2









 






	 	 	 	“Financial Instrument Account” shall mean the financial instrument
account within the meaning set forth in section L. 431-4 et seq. of the French
Financial and Monetary Code, opened in the
books of the Account Holder under the name of the Pledgor, to the credit of which
the Shares are credited in accordance with the Agreement, such financial
instrument account being pledged in favor of the Agent, for its own account and
on behalf and for the account of the Purchasers, pursuant to the Agreement.
	 
	 	 	 	“Secured Obligations” shall mean any of the Pledgor’s obligations to the
Agent, acting for its own account and on behalf and for the account of the
Purchasers, under the Amended and Restated Note and Equity Purchase Agreement, a
copy of which is attached hereto as Exhibit 1.
	 
	 	 	 	“Shares” shall mean 6,500 shares of the Company representing 65% of its
share capital and of the existing rights of the Company.
	 
	 	1.2.	 	Interpretation






	 	(a)	 	In this Agreement, unless the contrary intention appears,
a reference to:






	 	(i)	 	a Section is a reference to a section
of this Agreement;
	 
	 	(ii)	 	words importing the plural shall
include the singular and vice versa;
	 
	 	(iii)	 	a person is a reference to or includes
its successors and assigns; and
	 
	 	(iv)	 	an agreement or document includes a
reference to that agreement or document as varied, novated,
supplemented or replaced from time to time.






	 	(b)	 	The headings in this Agreement are for convenience only
and are to be ignored in construing this Agreement.
	 
	 	(c)	 	In the event of any inconsistency between the terms of
this Agreement and those of the Amended and Restated Note and Equity
Purchase Agreement, the terms of the Amended and Restated Note and Equity
Purchase Agreement shall prevail.






	2.	 	CONSTITUTION AND SCOPE OF THE PLEDGE





3









 






	 	2.1.	 	Pledge of Shares
	 
	 	 	 	In accordance with this Agreement and the declaration of pledge, a form of which
is attached as Exhibit 2 hereto (the “Declaration of
Pledge of a Financial Instruments Account”), and to guarantee and secure
the payment of the Secured Obligations, Pledgor hereby pledges as a first ranking
security interest, the Financial Instrument Account, and together with it the
Shares, in favor of the Agent, for the ratable benefit of the Purchasers, which
accepts the same, in its name and as agent of the Purchasers in accordance with
Section L. 431-4 of the French Monetary and Financial Code.
	 
	 	 	 	To this effect, the Pledgor executes the Declaration of Pledge of a Financial
Instruments Account simultaneously with this Agreement.
	 
	 	 	 	The Pledgor hereby undertakes to cause the Account Holder to register the Shares
on the Financial Instrument Account in its shareholders ledger by opening the
Financial Instrument Account and by transferring the Shares to such Financial
Instrument Account and to deliver to the Agent on the date of execution of this
Agreement, a certificate of registration (attestation d’inscription en compte)
relating to the Collateral Account (as defined below), in the form of Exhibit
3 hereto.
	 
	 	 	 	An original copy of the Declarations of Pledge of a Financial Instruments Account
shall be delivered for this purpose by the Pledgor to the Account Holder upon
execution of this Agreement.
	 
	 	 	 	All costs and expenses relating to the performance of the formalities referred to
above and elsewhere in this Agreement shall be borne by the Pledgor. The Pledgor
shall also pay to Agent any expenses and fees incurred in connection with the
enforcement by Agent of its rights hereunder.
	 
	 	2.2.	 	Scope of the Pledge
	 
	 	 	 	The pledge referred to in Section 2.1 above shall cover all securities, options,
rights (including preferential subscription rights), interests, participations,
amounts and proceeds (but excluding dividends) from time to time receivable or
otherwise distributable in respect of, or in exchange for, the Shares (including
as a result of any stock dividend, stock split or reclassification of
securities), by any means whatsoever (together with the Shares, the “Pledged
Assets”), such securities, options, rights, interests,





4









 






	 	 	 	participations,
amounts or proceeds being automatically incorporated herein, without novation of
this Agreement or the lights and securities held by the Agent acting for its own
account and for the account and on behalf of the Purchasers hereunder.
Notwithstanding the foregoing, if any dividends are paid following a default by
Pledgor under the Amended and Restated Note and
Equity Purchase Agreement, such dividends shall be held in trust by Pledgor for
the benefit of Agent.
	 
	 	 	 	The Pledgor agrees to take from time to time all such actions as shall be
required under French law or reasonably requested by the Agent, to deposit and
record in the Financial Instrument Account pursuant to the Declaration of Pledge
of a Financial Instruments Account any such securities, options, rights,
interests, participations, amounts or proceeds in respect of, or in exchange for
the Shares; provided that if any such securities, options, lights,
interests, participations, amounts or proceeds cannot be deposited or recorded in
the Financial Instrument Account, the Pledgor shall deposit and request that the
Account Holder record them in an appropriate account, which shall be deemed
pledged hereunder in favor of the Collateral Agent together with the Financial
Instrument Account.






	 	2.3.	 	Substitution
	 
	 	 	 	The pledge contemplated in this Agreement shall be binding on any successor or
assignee of the Pledgor or the Agent as if such successor or assignee were a
party hereto and shall inure to the benefit of any subrogated transferee or other
successor or assignee of the Pledgor or the Agent.
	 
	 	2.4.	 	Liability of the Agent vis-à-vis third parties
	 
	 	 	 	The Pledgor shall remain liable as holder of the Shares, in accordance with
French laws and regulations and the bylaws (statuts) of the Account Holder, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, subject to the provisions of Article 9
hereof upon the occurrence and continuation of an Event of Default.
	 
	 	 	 	The exercise by the Agent of any of its rights hereunder shall not release the
Pledgor from any of its duties or obligations as holder of the Shares, in
accordance with French laws and regulations and with the by-laws of the Account
Holder.





5









 






	 	 	 	The Agent shall not have any obligation or liability relating to the holding of
the Pledged Assets by reason of this Agreement nor shall the Agent be obligated
to perform any of the obligations or duties of the Pledgor with respect to the
Pledged Assets.






	3.	 	REPRESENTATIONS AND WARRANTIES
	 
	 	 	The Pledgor represents and warrants that, as of the date hereof:






	 	(a)	 	It is an entity duly existing under Delaware law;
	 
	 	(b)	 	It is duly authorized to execute the Declaration of Pledge of a Financial
Instruments Account and this Agreement and to perform its obligations under this
Agreement;
	 
	 	(c)	 	The Shares are not subject to any charge, mortgage, pledge, encumbrance,
option, lien or claim of any third patty other than the pledge created hereby;
	 
	 	(d)	 	The Shares, which represent 65% of the Account Holder’s share capital, have
been duly authorized and validly issued, are fully paid and are fully owned by the
Pledgor ;
	 
	 	(e)	 	The execution of the Declaration of Pledge of a Financial Instruments
Account and the execution and performance of this Agreement do not conflict with any
provision of law, regulation, rule, decree, order or judgment applicable to the
Pledgor, Pledgor’s by-laws, or any agreement binding upon it;
	 
	 	(f)	 	No consent, license, approval or authorization of or registration with or
declaration to any governmental authority is required in connection with the
execution of the Declaration of Pledge of a Financial Instruments Account or the
execution and performance of this Agreement, including enforcement of the security
interests created hereunder, other than those referred to in this Agreement;
	 
	 	(g)	 	Its obligations under the Declaration of Pledge of a Financial Instruments
Account and this Agreement constitute its legal, valid and binding obligations,
enforceable against it in accordance with their terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors’ rights generally;
	 
	 	(h)	 	There is no action, suit or proceeding before any court, tribunal,
governmental body, agency or other official or any arbitrator, pending or, to its
knowledge, threatened against the Pledgor, which could reasonably be expected to
affect, the legality, validity or





6









 






	 	 	 	enforceability against it of the Declaration of
Pledge of a Financial Instruments Account or this Agreement or its ability to perform
its obligations under this Agreement; and
	 
	 	(i)	 	Upon execution and delivery by the Pledgor to the Agent of the Declaration
of Pledge of a Financial Instruments Account, the
Agent, acting for its own account and for the account and on behalf of the
Purchasers, will have a valid, perfected, first priority security interest in the
Pledged Assets, subject to no prior lien and all of the Pledged Assets will be
deposited in the Financial Instrument Account and recorded therein by the Pledgor
and the Account Holder.






	4.	 	ENFORCEMENT
	 
	 	 	If the Pledgor is in default under its obligations as set forth in the Amended and
Restated Note and Equity Purchase Agreement, the Agent, in its name and as agent for the
Purchasers, shall be entitled to exercise all of its rights, actions and privileges
granted by this Agreement and by law to a secured creditor to recover the aggregate amount
of its claims, including, without limitation, by requesting the “judicial attribution”
(attribution judiciaire) of the Pledged Assets in accordance with Article 2078 of the
French Civil Code and/or by proceeding with the sale on public auction of the Pledged
Assets pursuant to Article L. 521-3 of the French Commercial Code. If the Agent decides to
repossess the Pledged Assets upon “judicial attribution”, it shall be entitled to
immediately receive the Pledged Assets.
	 
	 	 	Value judicially allocated to the Pledged Assets in the event the Agent decides to
repossess the Pledged Assets or consideration received in respect of the Pledged Assets in
the event Agent decides to sell the Pledged Assets on public auction shall be applied by
the Agent for the benefit of itself and the Purchasers in or towards payment of the
Secured Obligations in accordance with the Amended and Restated Note and Equity Purchase
Agreement, without prejudice to the rights of the Agent to recover any shortfall from the
Pledgor.
	 
	5.	 	DURATION
	 
	 	 	This Agreement shall enter into force as of the date hereof.
	 
	 	 	This Agreement shall remain in force for so long as any Secured Obligation remains
outstanding. When all Secured Obligations have been fully satisfied and discharged, this
Agreement shall terminate and the Agent shall execute and deliver to the Pledgor, at the
expense of the





7









 






	 	 	Pledgor, all termination statements and similar documents which the Pledgor
shall reasonably request to evidence such termination and the release of the pledge
provided for herein.
	 
	6.	 	OTHER RIGHTS AND ACTIONS OF THE AGENT
	 
	 	 	This Agreement does not and shall not in any way prejudice any other rights of the Agent
and does not and shall not affect the nature or scope or
enforceability of any additional or further undertakings, security interests or guarantees
which may have been or may be contracted or granted by the Pledgor.
	 
	7.	 	[Intentionally Omitted]
	 
	8.	 	COVENANTS
	 
	 	 	The Pledgor hereby undertakes to, and agrees with, the Agent as follows:






	 	(a)	 	it will not assign, sell, pledge, transfer, or otherwise dispose of or
abandon, nor suffer or permit any of the same to occur with respect to, any Pledged
Assets or proceeds therefrom to or for the benefit of any person other than the
Agent, without the prior written consent of the Agent;
	 
	 	(b)	 	it will not permit the Account Holder to issue any capital shares (or
options, warrants, calls or commitments of any character whatsoever relating to such
shares, or any securities convertible into or exchangeable for such shares) in
addition to or in substitution for the Shares without the prior written consent of
the Agent; provided that the Agent shall not withhold its consent to the issuance of
new capital shares if such new capital shares are immediately upon their issuance
pledged in favor of the Agent under the same terms and conditions as those provided
herein;
	 
	 	(c)	 	it will cause the Account Holder, at its sole expense, to perform all acts
and execute all documents reasonably requested by the Agent from time to time to
evidence, perfect, maintain or enforce the Agent’s security interest, for the ratable
benefit of the Purchasers, granted herein or otherwise in furtherance of the
provisions hereof;
	 
	 	(d)	 	it will not, without the Agent’s prior written consent, permit the Account
Holder to change its name, identity or corporate structure or the provisions of its
bylaws in any manner inconsistent with the terms of the Amended and Restated Note and
Equity Purchase Agreement.





8









 






	9.	 	VOTING RIGHTS






	 	(a)	 	So long as the Pledgor is not in default under its obligations set forth in
the Amended and Restated Note and Equity Purchase Agreement, the Pledgor may exercise
any and all voting rights pertaining to the Shares for any purpose not inconsistent
with the terms of this Agreement or the Amended and Restated Note and Equity Purchase
Agreement.
	 
	 	(b)	 	In case the Pledgor is in default under its obligations set forth in the
Amended and Restated Note and Equity Purchase Agreement, all rights of the Pledgor to
exercise the voting rights which it would otherwise be entitled to exercise pursuant
to paragraph (a) of this Article shall be subject to the prior consultation of the
Agent; the Pledgor shall then vote in compliance with the voting instructions given
by the Agent.






	10.	 	INVALIDATION
	 
	 	 	Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition or un
enforceability without invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision or any other provision hereof in any other jurisdiction.
	 
	11.	 	WAIVERS
	 
	 	 	The Agent shall not by any act (except by a written instrument pursuant to Article 12
hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any breach of any of the terms or conditions
hereof. No failure to exercise, nor any delay in exercising, on the part of the Agent, any
right, power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege. A waiver
by the Agent of any right or remedy hereunder on any one occasion shall not be construed
as a bar to any right or remedy, which the Agent would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be exercised singly
or concurrently and are not exclusive of any rights or remedies provided by law.
	 
	12.	 	AMENDMENTS





9









 






	 	 	No term or provision of this Agreement may be waived, amended, supplemented or otherwise
modified except by a written instrument executed by the Pledgor and the Agent, provided
that any provision of this Agreement may be waived by the Agent in a letter or agreement
executed by the Agent.
	 
	13.	 	APPLICABLE LAW
	 
	 	 	This Agreement shall be governed by, and interpreted in accordance with, the laws of
France. The parties hereby irrevocably consent to the exclusive jurisdiction of the
commercial court of Paris (France) in connection with
any action or proceeding arising out of or relating to this Agreement or any document or
instrument delivered pursuant to this Agreement.
	 
	14.	 	NOTICES
	 
	 	 	All notices and other communications relating to the Agreement shall be made in accordance
with section 14.6 of the Amended and Restated Note and Equity Purchase Agreement.
	 
	15.	 	RELEASE AND INDEMNITY
	 
	 	 	The Pledgor hereby releases and indemnifies and holds harmless Agent and the Purchasers
and their agents, successors and assigns for any claims, actions, causes of action,
demands, liabilities, debts or suits missing out of or in any way related to this
Agreement or the Agent’s possession, disposition, collection, control or use of the
Shares; provided, however, that this release and indemnity shall not
extend to any actions taken by Agent which (a) contravene the express terms of this
Agreement, or (b) constitute gross negligence or willful misconduct.
	 
	16.	 	FURTHER ASSURANCES




The Pledgor agrees, from time to time, at its expense, to execute and deliver promptly all further
instruments and documents as Agent may reasonably require in order to carry out the intent of this
Agreement.




10









 





	 	 	 
	  Executed in New York, NY
	  On February 17, 2005
	  In four (4) original copies
	 
	 	 
	  IST Acquisitions, Inc.

	 	  American Capital Financial Services, Inc.
	  Pledgor

	 	  Agent
	 
	 	 
	  

	 	  
	 

	 	 
	  Name:

	 	  Name:
	  Title:

	 	  Title:







11












 





EXHIBIT 1

Amended and Restated Note and Equity Purchase Agreement




12









 





UNOFFICIAL ENGLISH TRANSLATION FOR INFORMATION PURPOSES ONLY. DOCUMENT TO

BE EXECUTED IN THE FRENCH LANGUAGE.




EXHIBIT 2

FORM OF DECLARATION OF PLEDGE

OF A FINANCIAL INSTRUMENTS ACCOUNT




(in accordance with the provisions of Article L. 431-4 of the Monetary and

Financial Code (previously Article 29 of Law n° 83-1 of January 3, 1983, as

amended by Article 102 of Law n°96-597 of July 2, 1996))



Capitalized terms and expressions used but not defined herein shall, unless the context otherwise
requires, have the meanings given to them in the Financial Instruments Account Pledge Agreement
entered into on the date hereof among IST Acquisitions, Inc. as Pledgor and American Capital
Financial Services, Inc. as Agent.



PLEDGOR



Name: IST Acquisitions, Inc.



Registered Office Address: c/o American Capital Strategies. Ltd., 461 Fifth Avenue, 26th
Fl., New York, NY 10017.



(the Pledgor)



PLEDGED FINANCIAL INSTRUMENTS ACCOUNT



Identification of the pledged account: Financial instruments account (account n° 2 held in
the books of IST Auxitrol Nuclear S.A.S. (the Account Holder) in the name of IST Acquisitions, Inc.
(the Pledgor).



ACCOUNT HOLDER



Name: IST Auxitrol Nuclear S.A.S., a French Société par Actions Simplifiée.



Registered Office Address : 5 allée Charles Pathé 18000 Bourges, registered with the Trade and
Companies Registry of Bourges under the number RCS 479 428 336.



(the Account Holder)



SECURED OBLIGATIONS



Secured Obligations: shall mean any of the Pledgor’s obligations to the Agent, acting for
its own account and on behalf and for the account of the Purchasers, under the Amended and Restated
Note and Equity Purchase Agreement.




14









 




PLEDGEE



American Capital Financial Services, Inc. as Agent, acting for its own account and on behalf and
for the account of the Purchasers (as such term is defined in the Amended and Restated Note and
Equity Purchase Agreement).



LIST OF THE SECURITIES HELD IN THE PLEDGED ACCOUNT



6,500 shares representing 65% of the shares of IST Auxitrol Nuclear S.A.S., as well as all income
or proceeds of, and all rights with respect to these shares or any right or securities that may be
substituted for, or added to such shares.



TERMS OF THE PLEDGE



According to the terms of the Financial Instruments Account Pledge Agreement dated as of October
29, 2004 (the “Financial Instruments Account Pledge Agreement”) concluded by the Pledgor.



This declaration of pledge of a financial instruments account shall enter into force as of the date
hereof.



Made in New York, NY on February 17, 2005

In four (4) original copies



IST Acquisitions, Inc.



represented by /s/ Donald W. Hartz



duly authorized for the purpose of this declaration




15









 





DÉCLARATION DE GAGE DE COMPTE D’INSTRUMENTS FINANCIERS




(conformément aux dispositions de l’Article L. 431-4 du Code Monétaire et

Financier (antérieurement Article 29 de la loi n° 83-1 du 3 janvier 1983, tel que

modifié par l’Article 102 de la loi n° 96-597 du 2 juillet 1996)



Sauf si le contexte en appelle autrement, les termes et expressions en majuscules utilisés dans les
présentes, mais non définis aux présentes, auront la signification qui leur est donnée dans la
Convention de Gage de Compte d’lnstruments Financiers conclue à la date des présentes par IST
Acquisitions, Inc. (le Constituant du Gage), et American Capital Financial Services, Inc.
(l’Agent).



CONSTITUANT DU GAGE



Dénomination sociale: IST Acquisitions, Inc.



Siège social: c/o American Capital Strategies. Ltd., 461 Fifth Avenue, 26th Fl., New York,
NY 10017.



(le Constituant du Gage)



COMPTE D’INSTRUMENTS FINANCIERS GAGÉ



Identification du compte gagé: Compte spécial d’instruments financiers (compte n° 2) ouvert
dans les livres de IST Auxitrol Nuclear S.A.S. (le Teneur de Compte) au nom de IST Acquisitions,
Inc. (le Constituant du Gage).



TENEUR DE COMPTE



Dénomination sociale: IST Auxitrol Nuclear S.A.S., une Société par Actions Simplifiée de
droit français.



Siège social: 5 allée Charles Pathé 18000 Bourges, immatriculée au Registre du Commerce et
des Sociétés de Bourges sous le numéro RCS 479 428 336.



(le Teneur de Compte)



OBLIGATIONS GARANTIES



“Obligations garanties”: signifie toutes les obligations du Constituant du Gage envers
l’Agent, agissant pour son propre compte et au nom et pour le compte des Acheteurs, en vertu du
Amended and Restated Note and Equity Purchase Agreement, incluant, sans y être limité, l’Article 14
du Amended and Restated Note and Equity Purchase Agreement susmentionné.







16









 







BÉNÉFICIAIRE



American Capital Financial Services, Inc., en sa qualité d’Agent (Agent), agissant pour son propre
compte et au nom et pour le compte des Acheteurs (tel que ce dernier terme est défini dans le
Amended and Restated Note and Equity Purchase Agreement).



LISTE DES INSTRUMENTS FINANCIERS INSCRITS AU COMPTE GAGE



6,500 actions représentant 65% des actions de IST Auxitrol Nuclear S.A.S., ainsi que tout dividende
ou autre revenu et tout droit procédant desdites actions ou tout droit ou valeur mobilière qui
viendraient en substitution ou en complément desdites actions.



CONDITIONS DU GAGE



Selon les conditions et modalités de la Convention de Gage de Compte d’Instruments Financiers en
date du October 29, 2004 (la “Convention de Gage de Compte d’Instruments Financiers”) conclue par
le Constituant du Gage.



Cette déclaration de gage d’instruments financiers entrera en vigueur à la date des présentes.



Fait à February 17, 2005 Le New York, NY

En quatre (4) exemplaires originaux



IST Acquisitions, Inc.



Représenté par /s/ Donald W. Hartz

Dûment     habilité à l’effet des présentes




17









 





UNOFFICIAL ENGLISH TRANSLATION FOR INFORMATION PURPOSES ONLY. DOCUMENT TO BE EXECUTED IN THE
FRENCH LANGUAGE.




EXHIBIT 3

FORM OF CERTIFICATE OF REGISTRATION




(in accordance with the provisions of Article L. 431-4 of the Monetary and

Financial Code (previously Article 29 of the Law no 83-1 of

January 3, 1983, as amended by Article 102 of the

Law no 96-597 of July 2, 1996)



I, the undersigned, Steve Burke, acting in my capacity as President of IST Auxitrol Nuclear S.A.S.
(the Account Holder), after having taken note of the Declaration of Pledge of a Financial
Instruments Account (the “Declaration of Pledge of a Financial Instruments Account”) dated as of
the date hereof, a copy of which is attached hereto,



- certify hereby that the Financial Instruments Account in the name of IST Acquisitions, Inc. as
Pledgor (account no [2]) held in our books and designated in such Declaration of Pledge of a
Financial Instruments Account has been pledged in favor of American Capital Financial Services,
Inc. as Agent, acting for its own account and on behalf and for the account of the Purchasers (as
such term is defined in the Amended and Restated Note and Equity Purchase Agreement dated as of
October 29, 2004, a copy of which is attached hereto),



- acknowledge the undertaking of the Pledgor not to dispose of, by any means whatsoever, any of the
Pledged Assets from the Financial Instruments Account as provided for in section 8 of the Financial
Instruments Account Pledge Agreement executed the 17th of February by IST Acquisitions, Inc. as
Pledgor and American Capital Financial Services, Inc. as Agent, a copy of which has been provided
to me along with the abovementioned Declaration of Pledge of a Financial Instruments Account,



- accept the mission resulting from the provisions of the Financial Instruments Account Pledge
Agreement dated as of October 29, 2004, in accordance with the provisions of Article L. 431-4 of
the French Monetary and Financial Code.



The list of the securities and moneys recorded in such pledged Financial Instruments Account on the
date hereof is the following:



6,500 shares of the Company

Made in New York, NY on February 17, 2005



In four (4) original copies



IST Auxitrol Nuclear S.A.S.




18









 




represented by

duly authorized for the purposes thereof





19









 





ATTESTATION D’INSCRIPTION EN COMPTE




(conformément aux dispositions de l’Article L. 431-4 du Code Monétaire et

Financier (antérieurement Article 29 de la loi no 83-1 du 3 janvier 1983,

tel que modifié par l’Article 102 de la loi n° 96-597 du 2 juillet 1996)



Je, soussigné, Steve Burke, agissant en qualité de Président de IST Auxitrol Nuclear S.A.S. (le
Teneur de Compte), après avoir pris connaissance de la Déclaration de Gage de Compte d’Instruments
Financiers (la « Déclaration de Gage de Compte d’Instruments Financiers ») datée à la date des
présentes, dont une copie est annexée aux présentes,



- certifie par la présente que le Compte d’Instruments Financiers ouvert dans nos livres au nom de
IST Acquisitions, Inc. (le Constituant) (compte n° [2]) et visée dans la Déclaration de Gage de
Compte d’Instruments Financiers a été gagé au profit de American Capital Financial Services, Inc.,
en sa qualité d’Agent (Agent), agissant pour son propre compte et au nom et pour le compte des
Acheteurs (tel que ce dernier terme est défini dans le Amended and Restated Note and Equity
Purchase Agreement en date du October 29, 2004, dont une copie est annexée aux présentes),



- prends acte de l’interdiction faite au Constituant de disposer, de quelque manière que ce soit,
des Instruments Financiers inscrits dans le Compte Gagé et de leurs fruits et produits en toute
monnaie tel que prévu par la section 8 de la Convention de Gage de Compte d’Instruments Financiers
conclue le February 17, 2005 par IST Acquisitions, Inc. (le Constituant du Gage), et American
Capital Financial Services, Inc. (l’Agent), dont une copie m’a été remise avec la Déclaration de
Gage de Compte d’Instruments Financiers cidessus visée,



- accepte la mission qui résulte des dispositions de la Convention de Gage de Compte d’Instruments
Financiers en date du October 29, 2004, conformément aux dispositions de l’Article L. 431-4 du Code
Monétaire et Financier.



La liste des instruments financiers et des sommes inscrits au Compte d’Instruments Financiers gagé,
susmentionné, à la date de la présente est la suivante:



6,500 actions de la Société



Fait à February 17, 2005 Le New York, NY

En quatre (4) exemplaires originaux



IST Auxitrol Nuclear S.A.S.




20









 




par Steve Burke

Dûment habilité à l’effet des présentes





21












 





EXHIBIT F




Compliance Certificate




     Pursuant to Section 7.1(e)(iii) of the Amended and Restated Note and Equity Purchase
Agreement dated as of October 29, 2004 (as the same may be amended, restated, supplemented or
otherwise modified from time to time, the “Purchase Agreement”) among the Loan Parties,
Purchasers thereto, and American Financial Capital Strategies, Inc., as agent for Purchasers.
Capitalized terms used herein and not defined herein are used herein as defined in the Purchase
Agreement.



     Each of the undersigned hereby certifies that he or she is the Chief Financial Officer of the
respective Loan Party under which his or her signature appears and further certifies that:



     [Insert description of compliance tests for financial covenants.]



 









 





 



    IN WITNESS WHEREOF,  the parties hereto have executed this
    Agreement as of the day and year first above written.



 


 



    LOAN PARTIES:



 



    1ST ACQUISITIONS, INC.



 


			
	 	    By: 
	
    






    Name:

    Title:



 



    IMAGING AND SENSING TECHNOLOGY

    CORPORATION



 


			
	 	    By: 
	
    






    Name:

    Title:



 


 



    1ST CONAX NUCLEAR, INC.




 


			
	 	    By: 
	
    






    Name:

    Title:



 



    I.S. TECHNOLOGY de PUERTO RICO, INC.



 


			
	 	    By: 
	
    






    Name:

    Title:



 



    IST INSTRUMENTS, INC.




 


			
	 	    By: 
	
    






    Name:

    Title:



 



    IMAGING AND SENSING TECHNOLOGY

    INTERNATIONAL CORP.




 


			
	 	    By: 
	
    






    Name:

    Title:




 



    QUADTEK, INC.




 


			
	 	    By: 
	
    






    Name:

    Title:



 













 





EXHIBIT G




Form of Investment Banking Agreement




 









 





FORM OF INVESTMENT BANKING AGREEMENT




INVESTMENT BANKING SERVICES AGREEMENT

BETWEEN

AMERICAN CAPITAL FINANCIAL SERVICES, INC.

AND

IST ACQUISITIONS, INC.




May 24, 2004




CONTACTS:




     American Capital Financial Services, Inc.
          Robert Klein



     IST Acquisitions Inc.
          Donald Hartman



(c) 2002 American Capital Financial Services, Inc.




 









 





INVESTMENT BANKING SERVICES AGREEMENT




     This Investment Banking Services Agreement (the “Agreement”) is made as of this 24th day of
May, 2004 (the “Execution Date”), between IST Acquisitions, Inc., a Delaware corporation with its
principal place of business in Horseheads, New York (the “Company”) and American Capital Financial
Services, Inc., a Delaware corporation with its principal place of business in Bethesda, Maryland
(“ACFS”), to be effective as of May 24, 2004 (the “Effective Date”).




	A.	 	INTRODUCTION






	 	1.	 	Whereas, the Company is primarily engaged in the development, assembly,
manufacture and sale of imaging and sensing devices for nuclear power and industrial
markets and is jointly owned by members of the management team and an affiliate of
ACFS, American Capital Strategies, Ltd. (“ACAS”);
	 
	 	2.	 	Whereas, the Company wishes to enter into a comprehensive investment
banking agreement under which it will commit to employ ACFS as financial advisor in
any acquisition, sale, merger or financing transaction entered into by the Company
and in other financial advisory work, including valuation, structuring and
negotiating, which ACFS is qualified to perform;
	 
	 	3.	 	Whereas, ACFS has represented to the Company that it has expertise and
experience in such work;
	 
	 	4.	 	Whereas, the Company wishes to enter into this Agreement with ACFS on the
terms provided for herein; and
	 
	 	5.	 	Whereas, as used herein, the “Company” shall include any transaction or
arrangement involving any subsidiary of the Company, including, without limitation,
Imaging and Sensing Technology Corporation a New York Corporation.





     NOW, THEREFORE, in consideration of the mutual promises contained in this Agreement, and
intending to be legally bound hereby, the parties hereby agree as follows:




	B.	 	SCOPE OF THE AGREEMENT
	 
	 	 	This Agreement relates to investment banking services, which shall be defined as
follows (and such definitions shall be equally applicable to both the singular and plural
form of the terms defined, as the context may require):






	 	1.	 	“Acquisition Transactions” shall mean the acquisition by the Company of any
other business whether by purchase of stock or assets in a cash sale or for other
consideration, or by merger in which the Company is substantially the surviving
entity.





2









 






	 	2.	 	“Financial Advisory Work” shall mean the work performed in connection with
any Acquisition, Sale or Financing Transaction, or any other work normally performed
for clients by investment banking or venture capital organizations.
	 
	 	3.	 	“Sale Transactions” shall mean sale of all or part of the equity or assets
of the Company in a cash sale or for other consideration, or by a merger in which the
Company is not substantially the surviving entity.
	 
	 	4.	 	“Financing Transaction” shall mean the sale of any equity or debt
securities by the Company.
	 
	 	5.	 	“Close” or “Closing” shall mean the day on which any Acquisition, Sale or
Financing Transaction (each, sometimes referred to herein as a “Transaction”) occurs.






	C.	 	RESPONSIBILITIES OF ACFS
	 
	 	 	ACFS will perform the following work as the Company’s exclusive agent:






	 	1.	 	RAISING FINANCING

ACFS will, if the Company chooses to use an agent for such purpose, assist the Company
in placing any equity or debt securities.
	 
	 	2.	 	ACQUISITION AND MERGER TRANSACTIONS

ACFS will assist the Company in researching, evaluating, initiating, structuring and
closing any potential Transaction.
	 
	 	3.	 	FINANCIAL ANALYSIS

As appropriate, ACFS will assist the Company in gathering and reviewing data to build
a financial model (“Model”) of the Company, and in using such a Model to evaluate the
Company and any proposed Transaction. The Model will integrate historical financial
performance of the Company with projections subsequent to any Transaction, and will
include a detailed income statement, balance sheet, cash flow statement, valuation,
and a detailed set of assumptions.
	 
	 	 	 	The Model will assist in evaluating the capital requirements of the Company; potential
merger and acquisition synergies; and the impact of any Transaction on shareholder
value and liquidity.
	 
	 	4.	 	MANAGEMENT AND BOARD OF DIRECTORS

ACFS will make continuing reports to the Company’s management and Board of Directors
regarding its work for the Company, as requested.
	 
	 	5.	 	STOCKHOLDER COMMUNICATIONS

ACFS will assist the Company in communicating with, educating, and informing its
stockholders about any potential Transaction.
	 
	 	6.	 	COORDINATION

ACFS will assist the Company in coordinating the financial institutions, legal





 









 






	 	 	 	counsel, valuation firms, accountants, and any other professional advisors who may be
required for a Transaction.






	D.	 	REPORTING
	 
	 	 	ACFS and the Company will inform each other on a timely basis of any and all material
developments regarding matters to which this Agreement pertains, throughout the life of
this Agreement.
	 
	E.	 	AUTHORITY OF ACFS
	 
	 	 	ACFS understands and agrees that it is not a general agent for the Company, and it is
not granted any right or authority to assume or to create any obligation or responsibility
or to make any representation or warranty on behalf of or in the name of the Company, or
to bind the Company in any manner whatsoever.
	 
	F.	 	FEES AND EXPENSES






	 	1.	 	EXPENSES

The Company will reimburse ACFS for all reasonable out-of-pocket expenses that ACFS
may incur under this Agreement from the Effective Date to any Close or the earlier
abandonment or termination of any Transaction. Such expenses will include travel,
telephone, courier, postage, printing and other expenses incurred by ACFS in the
performance of its work under this Agreement (the “Expenses”).
	 
	 	 	 	If this Agreement is Terminated (as defined below) pursuant to the terms of this
Agreement, all Expenses owed shall be paid to ACFS at the time of the Termination.
	 
	 	2.	 	MANAGEMENT FEE
	 
	 	 	 	For so long as ACAS has an investment in any of the Company’s debt or equity
securities, the Company shall pay to ACFS an annual Management Fee of $500,000 for
each calendar year commencing with 2004. The Management Fee will be payable quarterly
in advance on each May 1, August 1, November 1 and February 1. If any quarterly
installment of the Management Fee is not paid when due because of prohibitions in any
credit agreement to which the Company is a party, such fee shall accrue and become
payable promptly at such time as such payment is not so prohibited.
	 
	 	3.	 	FINANCIAL ADVISORY FEE
	 
	 	 	 	The Company will pay ACFS a fee for Financial Advisory Work (the “Financial Advisory
Fee”) at ACFS’ standard rates for corporate clients in effect at the time. ACFS shall
invoice the Company for Financial Advisory Fees monthly and such invoices shall be due
upon receipt. ACFS shall, as requested by the Company, provide written estimates of
Financial Advisory Fees associated with any proposed Transaction. If this Agreement is
Terminated as per the terms set forth in this Agreement, all Financial Advisory Fees
owed shall be paid to ACFS at the time of such Termination.





 









 






	 	4.	 	PERFORMANCE FEES
	 
	 	 	 	Upon Closing of any Transaction, the Company will pay ACFS, in cash, performance
fee(s) (the “Performance Fee”) according to the following schedule:






	 	a)	 	Acquisition Structuring Fee
	 
	 	 	 	Upon Closing of an Acquisition Transaction the Company will pay ACFS a
“Structuring Fee” equal to the sum of:
	 
	 	 	 	Five percent (5%) of the first one million dollars of the purchase price of the
assets or equity of the business purchased or acquired by merger plus the value
of any existing debt assumed from the purchased business (together, the “Purchase
Price”); plus
	 
	 	 	 	Four percent (4%) of the second one million dollars of the Purchase Price; plus
	 
	 	 	 	Three percent (3%) of the third one million dollars of the Purchase Price; plus
	 
	 	 	 	Two percent (2%) of the fourth one million dollars of the Purchase Price; plus
	 
	 	 	 	One percent (1%) of the Purchase Price in excess of $4 million dollars (the
entire above calculation is referred to herein as the “Single Lehman Formula”);
	 
	 	 	 	Less the amount of any Financial Advisory Fees relating to the Acquisition
Transaction paid to ACFS (but in no event shall the Performance Fee be less than
zero).
	 
	 	 	 	Example:
	 
	 	 	 	In a Transaction in which the Company pays $5 million for the equity of a
business, and assumes $7 million in debt of the business, the Purchase Price
shall be calculated to equal $12,000,000 and the Structuring Fee shall be equal
to 5% x $1,000,000 plus 4% times $1,000,000 plus 3% times $1,000,000, plus 2%
times $1,000,000 plus 1% times $8,000,000, or $220,000.
	 
	 	b)	 	Financing Fees
	 
	 	 	 	Upon Closing of a Financing Transaction (including any Financing Transaction
closed in conjunction with an Acquisition Transaction), the Company will pay ACFS
a “Financing Fee” equal to the sum of the following computations:





 









 






	 	(1)	 	Two percent (2%) of any new indebtedness incurred by the
Company and secured by a first lien on any securities or assets of the
Company (“Senior Financing”); plus
	 
	 	(2)	 	Three and one-half percent (3.5%) of any new indebtedness
incurred by the Company and subordinated with respect to rights in
liquidation or with respect to rights to payment of either interest or
principal, to the Senior Financing, whether or not secured (“Subordinated
Financing”); plus
	 
	 	(3)	 	Four and one-half percent (4.5%) of any equity invested
in the Company (“Equity”);






	 	 	 	Less the amount of any Financial Advisory Fees relating to the Financing
Transaction paid to ACFS (but in no event shall the Performance Fee be less than
zero).
	 
	 	c)	 	Sale Fees
	 
	 	 	 	Upon Closing of a Sale Transaction, the Company will pay ACFS a “Sale Fee” equal
to the sum of the computations below:






	 	(1)	 	Five percent (5%) of the first $2 million of Capital (as
defined below);
	 
	 	(2)	 	Four percent (4%) of the second $2 million of Capital;
	 
	 	(3)	 	Three percent (3%) of the third $2 million of Capital;
	 
	 	(4)	 	Two percent (2%) of the fourth $2 million of Capital;
	 
	 	(5)	 	One percent (1%) of any additional Capital;






	 	 	 	Less, the amount of any Financial Advisory Fees relating to the Sale Transaction
paid to ACFS, (but in no event shall the Performance Fee be less than zero.)
	 
	 	d)	 	Definition of Capital
	 
	 	 	 	“Capital” shall be defined as follows:






	 	(1)	 	Non-Change of Control Transaction






	 	(a)	 	Stock Transaction

In any Transaction in which less than 50% of the voting stock
of the Company is acquired by a purchaser, “Capital” shall
equal the fair market value (“FMV”) of the consideration paid
or committed for such stock, whether the stock was newly issued
by the Company or sold by stockholders (“Stockholders”) of the
Company; or





 









 






	 	(b)	 	Debt Placement

In any Transaction in which less than 50% of the voting stock
of the Company is acquired by a purchaser or in which no equity
is sold, “Capital” shall equal the FMV of any debt committed to
the Company or any liabilities of the Company assumed by a
purchaser.






	 	(2)	 	Change of Control Transaction






	 	(a)	 	Stock Transaction

In any Transaction in which 50% or more of the voting stock of
the Company is acquired by a purchaser, “Capital” shall equal
the FMV of the consideration paid or committed for such stock
and all other securities purchased, whether the stock or other
securities were newly issued by the Company or sold by
Stockholders, plus the FMV of the liabilities of the Company;
or
	 
	 	(b)	 	Asset Transaction

In any Transaction in which 50% or more of the assets of the
Company are acquired by a purchaser, “Capital” shall equal the
FMV of the consideration paid or committed for such assets.






	 	(3)	 	Merger Transaction

In any Transaction that is implemented through a merger or business
combination, “Capital” shall equal the FMV of the Company’s equity plus
the FMV of the Company’s liabilities.






	G.	 	TERMINATION
	 
	 	 	The Company may terminate this Agreement (the
“Termination”) at any time by written
notice to ACFS provided that, at the time of Termination, ACAS does not have an investment
in any of the Company’s debt or equity securities. From the date of the Termination, ACFS
will not (i) earn any Financial Advisory Fees, (ii) be required to perform any services
for the Company and (iii) incur additional Expenses under this Agreement. A Termination
shall not otherwise limit any of ACFS’ s rights set forth in this Agreement including
rights to compensation under paragraph F of this Agreement in the event that a Transaction
occurs at any time in a period of eighteen (18) months following the Termination of this
Agreement. Notwithstanding the preceding sentence, ACFS’ rights under paragraph F.2 shall
survive as long as ACAS has an investment in any of the Company’s debt or equity
securities.
	 
	H.	 	INDEMNIFICATION OF ACFS
	 
	 	 	ACFS is not providing and does not represent that it is providing the Company with
financial planning or investment advice within the meaning of the Investment Advisers Act
of 1940, as amended. Nor does any information provided by ACFS constitute legal advice or
legal opinion. The Company acknowledges that ACFS makes no representation that any
Financing can be





 









 






	 	 	successfully raised by ACFS for a Transaction or that a Transaction can be consummated.
	 
	 	 	The Company agrees to indemnify and cause any company surviving any Transaction to
indemnify and hold harmless ACFS and its affiliates, employees and agents, and their
respective successors and assigns (together with ACFS, the “Indemnified Parties” and each,
an “Indemnified Party”), to the maximum extent lawful, from and against any losses,
claims, damages, liabilities or expenses (or actions in respect thereof) which (i) are
related to or arise out of this Agreement or any Transaction and (ii) challenge or put in
issue the accuracy or completeness of information or data provided to any Indemnified
Party by the Company, its agents or employees and reflected in any report, study,
presentation, recommendation or conclusion issued by any Indemnified Party. In any case
where an indemnification obligation arises under the preceding sentence, the Company will
reimburse each Indemnified Party for all expenses (including counsel fees) as they are
incurred by such Indemnified Party in connection with investigating, preparing or
defending any such action or claim, whether or not in connection with pending or
threatened litigation to which any Indemnified Party is a party.
	 
	 	 	The Company will not, however, be responsible for any losses, claims, damages, liabilities
or expenses of any Indemnified Party to the extent such losses, claims, damages,
liabilities or expenses are finally judicially determined to have resulted from the bad
faith or gross negligence of such Indemnified Party. The Company agrees that no
Indemnified Party shall have any liability to the Company for, or in connection with, this
Agreement except that ACFS may be liable to the extent any such liability for losses,
claims, damages, liabilities or expenses incurred by the Company results from the bad
faith or negligence of ACFS or its representatives. The foregoing shall be in addition to
any rights that ACFS or its representatives may have at common law or otherwise,
including, but not limited to, any right to contribution.
	 
	 	 	If any action or proceeding shall be brought or asserted against any Indemnified Party in
respect of which indemnity may be sought from the Company, ACFS shall promptly notify the
Company in writing, and the Company shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Parties and the payment
of all expenses. The Indemnified Parties shall have the right to employ separate counsel
in any such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the Indemnified Parties unless:






	 	1.	 	the Company has agreed to pay such fees and expenses;
	 
	 	2.	 	the Company shall have failed to assume the defense of such action
or proceeding on a timely basis with counsel satisfactory to the Indemnified
Parties for the purposes of such defense; or
	 
	 	3.	 	ACFS shall have reasonably concluded and notified the Company that
the representation of the Company and any Indemnified Party by the same counsel
is inappropriate due to actual or potential differing interests between them.





 









 






	 	 	The Company shall not be liable for any settlement of any such action or proceeding
effected without the Company’s written consent, but if settled with the Company’s consent,
or if there be a final judgment for the plaintiff in any such action or proceeding, the
Company agrees to indemnify and hold harmless the Indemnified Parties from and against any
loss or liability by reason of such settlement or judgment. No action or proceeding
covered by this Paragraph H the defense of which has been assumed by the Company may be
settled without the consent of any Indemnified Party affected thereby unless such
settlement includes the full unconditional release of such Indemnified Party without
liability, admission of liability or other adverse affect.
	 
	I.	 	REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
	 
	 	 	The Company represents, warrants and covenants as follows:






	 	1.	 	This Agreement has been duly authorized and executed on behalf of the
Company and is a valid and binding obligation of the Company and enforceable against
it in accordance with its terms.
	 
	 	2.	 	The obligations of the Company under this Agreement shall be binding upon
any successor, subsidiary or assign of the Company.






	J.	 	INDEMNIFICATION OF THE COMPANY
	 
	 	 	ACFS agrees to indemnify the Company against any liability for losses, claims,
damages, liabilities or expenses incurred by the Company to the extent such losses,
claims, liabilities or expenses result from the bad faith or gross negligence of ACFS or
its representatives;
	 
	K.	 	REPRESENTATIONS, WARRANTIES AND COVENANTS OF ACFS
	 
	 	 	ACFS represents, warrants and covenants that it shall act in accordance with
applicable securities laws while performing its obligations under this agreement.
	 
	L.	 	LAWS GOVERNING
	 
	 	 	The construction and interpretation of this Agreement and the rights of the parties
to this Agreement shall be governed by the laws of the State of Delaware.
	 
	M.	 	CAPTIONS
	 
	 	 	The captions of the paragraphs hereof are for convenience only and shall not control
or affect the meaning or construction of any of the provisions of this Agreement.
	 
	N.	 	ARBITRATION
	 
	 	 	All claims, demands, disputes, controversies, differences, or misunderstandings
between the parties relating to this Agreement shall be settled by arbitration, in
accordance with the rules of the American Arbitration Association, and judgment





 









 






	 	 	on the award rendered by the arbitrator or arbitrators may be entered and enforced in any
court having jurisdiction, and jurisdiction to be in no way limited by the paragraph
entitled “Laws Governing” hereof.
	 
	O.	 	COUNTERPARTS
	 
	 	 	This Agreement may be executed in any number of counterparts, each of which shall be
an original instrument of the party executing the same, but all of which together shall
constitute one and the same Agreement.
	 
	P.	 	SEVERABILITY
	 
	 	 	Should any provisions of this Agreement, or portions hereof, be found to be invalid
by any court of competent jurisdiction, the remainder of this Agreement shall nonetheless
remain in full force and effect.
	 
	Q.	 	CORPORATE OBLIGATION
	 
	 	 	The obligations of ACFS are solely corporate obligations, and no officer, director,
employee, agent, shareholder or controlling person shall, as a result of ACFS’ obligations
hereunder, be subjected to any personal liability whatsoever to any person, nor will any
such claim be asserted by or on behalf of any party to this Agreement.
	 
	R.	 	OTHER SERVICES
	 
	 	 	If ACFS is called upon to render services, give testimony, produce documents, answer
depositions or interrogatories, or otherwise become involved in connection with any
administrative or judicial proceedings, investigations or inquiries relating to any
Transaction, the Company will pay, in addition to the other fees hereunder, for the time
reasonably required to be expended by any officers or employees of ACFS at their standard
hourly rates then in effect, plus reasonable out-of-pocket expenses relating thereto, and
any and all reasonable legal fees and expenses incurred by ACFS in so appearing or
preparing for appearance.
	 
	S.	 	MISCELLANEOUS
	 
	 	 	Subsequent to any Transaction, ACFS shall have the right to use and disclose the name
and logo of the Company, the services provided by ACFS under this Agreement and the size
and description of the Transaction in ACFS’ marketing and promotional materials.
	 
	T.	 	NOTICES
	 
	 	 	All notices hereunder shall be in writing, postage prepaid, addressed to the parties
at the addresses set forth below:






	 	1.	 	IST ACQUISITIONS, INC.

100 IST Center

Horseheads, New York 14845





 









 






	 	 	 	Attn: Donald Hartman

Facsimile: (607) 562-4300






	 	2.	 	AMERICAN CAPITAL FINANCIAL SERVICES, INC.

461 Fifth Avenue, 26th Floor

New York, NY 10017

Fax: (212) 213-2060

Attention: Robert Klein





 









 





     IN WITNESS WHEREOF, the parties below have caused this Investment Banking
Services Agreement to be executed as of the day and year first written above.



	 	 	 	 	 
	 	AMERICAN CAPITAL FINANCIAL
SERVICES, INC.


 	 
	 	By:  	 	 
	 	 	Robert Klein 	 
	 	 	Authorized Signatory 	 
	 



	 	 	 	 	 
	 	IST ACQUISITIONS, INC.


 	 
	 	By:  	 	 
	 	 	Donald Hartman 	 
	 	 	Chief Executive Officer 	 
	 



Signature page to Investment Banking Agreement




 









 





EXHIBIT H




Request for Borrowing





 












 





Form of Request For Borrowing




	 	 	 
	American Capital Financial Services, Inc.,
	 	 
	   as Agent under the Purchase
	 	 
	   Agreement referred to below
	 	 
	2 Bethesda Metro Center, 14th Floor
	 	 
	Bethesda, Maryland 20814
	 	 
	Attn: Compliance Officer
	 	 
	Facsimile: (301) 654-6714

	 	[     ], 200[  ]





Attention:





			
	    Re:	 	IST Acquisitions, Inc., Imaging and Sensing Technology

Corporation (“IST”) and certain of the subsidiaries of IST

(collectively, the “Loan Parties”)





               Reference is made to the Note and Equity Purchase Agreement, dated as of May 24, 2004 (as
the same may be amended, restated, supplemented or otherwise modified from time to time, the
“Purchase Agreement”), among the Loan Parties, the Purchasers party thereto and American
Capital Financial Services, Inc., as Agent. Capitalized terms used herein and not otherwise defined
herein are used herein as defined in the Purchase Agreement.




               The Loan Parties hereby give you notice, irrevocably, pursuant to Section 2.3(b) of the
Purchase Agreement, that the undersigned hereby request to borrow such amount pursuant to the
Revolving Loans under the Purchase Agreement as set forth on the Borrowing Base Certificate
attached hereto as Exhibit A (the “Proposed Borrowing”).




               The date of the Proposed Borrowing is [  ], 200[  ] (the “Funding Date”).




               The undersigned hereby certifies that each of the conditions precedent in Section 4.2 of the
Purchase Agreement have been satisfied in all respects.




 









 





	 	 	 	 	 
	 	IST ACQUISITIONS, INC.


 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	IMAGING AND SENSING
TECHNOLOGY CORPORATION


 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	IST CONAX NUCLEAR, INC.


 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	I.S. TECHNOLOGY de PUERTO RICO,
INC.


 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	IST INSTRUMENTS, INC.


 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



 









 





	 	 	 	 	 
	 	IMAGING AND SENSING
TECHNOLOGY INTERNATIONAL
CORP.


 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	QUADTEK, INC.


 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



 









 





EXHIBIT A




BORROWING BASE CERTIFICATE




 









 





EXHIBIT A




FORM OF BORROWING BASE CERTIFICATE




	 	 	 	 	 
	To:

	 	American Capital Financial Services, Inc.	 	 
	 

	 	c/o American Capital Strategies, Ltd.	 	 
	 

	 	2 Bethesda Metro Center, 14th Floor	 	 
	 

	 	Bethesda, Maryland 20814	 	 
	 

	 	Attn: Compliance Officer
	 	[     ], 200[  ]





Ladies and Gentlemen:




               Reference is made to the Note and Equity Purchase Agreement dated as of May 24, 2004 (as
amended or otherwise modified from time to time, the “Purchase Agreement”) among the Loan
Parties, American Capital Financial Services, Inc., as Agent, and the Purchasers named therein.
This certificate (this “Certificate”), together with supporting calculations attached
hereto, is delivered to you pursuant to the terms of the Purchase Agreement. Capitalized terms used
but not otherwise defined herein shall have the same meanings herein as in the Purchase Agreement.



               The Loan Parties hereby certify and warrant to the Agent that at the close of business on
                    ,       (the “Calculation Date”), the Borrowing Base was $                    ,
computed as set forth on the schedule attached hereto.



 









 





               IN WITNESS WHEREOF, each Loan Party has caused this Certificate to be executed and delivered
by its respective officer thereunto duly authorized on                     .




	 	 	 	 	 
	 	IST ACQUISITIONS, INC.


 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	IMAGING AND SENSING
TECHNOLOGY CORPORATION


 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	IST CONAX NUCLEAR, INC.


 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	I.S. TECHNOLOGY de PUERTO RICO,
INC.


 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	IST INSTRUMENTS, INC.


 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	IMAGING AND SENSING
TECHNOLOGY INTERNATIONAL
CORP.


 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



 









 





	 	 	 	 	 
	 	QUADTEK, INC.


 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



 









 





SCHEDULE TO BORROWING BASE CERTIFICATE

Dated as of [                                        ]





	1.	 	Gross Receivables

$                    
	 
	2.	 	Less ineligible Receivables





          [Describe type of deduct per definition of “Eligible Receivables” in Section 1.1 of the
Purchase Agreement.]




	 	 	 
	-

	 	$                         
	-

	 	$                         
	-

	 	$                         
	-

	 	$                         
	-

	 	$                         
	-

	 	$                         
	-

	 	$                         
	-     Total
	 	 
	$                         
	 	 







	3.	 	Eligible Receivables [Item

1 minus Item 2]

$                    
	 
	4.	 	Item 3 times 85%

$                    
	 
	5.	 	Inventory

$                    
	 
	6.	 	Less ineligible Inventory





          [Describe type of deduct per definition of “Eligible Inventory” in Section 1.1 of the Purchase
Agreement.]




	 	 	 
	-

	 	$                         
	-

	 	$                         
	-

	 	$                         
	-

	 	$                         
	-

	 	$                         
	-

	 	$                         
	-

	 	$                         
	-     Total
	 	 
	$                         
	 	 






 









 






	7.	 	Eligible Inventory [Item 5 minus Item 6]
	
 

	8.	 	Item 7 times
50%

$          

	
 

	9.	 	Borrowing Base [Item 4 plus Item 8]

$          

	
 

	10.	 	Lesser of Item 9 and the Revolving Loan Commitment

$          

	
 

	11.	 	Revolving Notes Outstanding

$          

	
 

	12.	 	Net Availability [Excess of Item  10 over
Item 11]

$          







22