Document:

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                                                                   Exhibit 10.6

                               SECURITY AGREEMENT

         This SECURITY AGREEMENT dated as of December 8, 2000 (this "AGREEMENT")
is entered into among CITICORP USA, INC. ("CITICORP") having an office at 599
Lexington Avenue, New York, NY 10043, as agent (the "AGENT"), for GENERAL
ELECTRIC CAPITAL CORPORATION, FOR ITSELF AND AS AGENT FOR CERTAIN PARTICIPANTS
("GE CAPITAL"), having an office at 10 South LaSalle Street, Chicago IL 60603,
and PRECISION PARTNERS, INC., a Delaware corporation, GALAXY INDUSTRIES
CORPORATION, a Michigan corporation, MID STATE MACHINE PRODUCTS, a Maine
corporation, NATIONWIDE PRECISION PRODUCTS CORP., a New York corporation, and
GENERAL AUTOMATION, INC., an Illinois corporation (each individually a "GRANTOR"
and collectively, the "GRANTORS").

                             PRELIMINARY STATEMENTS

         1.       The Grantors are "Loan Parties" under that certain Credit
Agreement, dated as of March 19, 1999 (as amended, modified or supplemented from
time to time, the "CREDIT AGREEMENT"), among Precision Partners, Inc., Precision
Partners Holding Company, Mid State Machine Products, Galaxy Industries
Corporation, Certified Fabricators, Inc., General Automation, Inc., Nationwide
Precision Products Corp., Gillette Machine & Tool Co., Inc., the Lenders,
Citicorp USA, Inc., as administrative agent (the "ADMINISTRATIVE AGENT"), Bank
of America, N.A. (successor to NationsBank, N.A.), as syndication agent, and
SunTrust Bank, Atlanta, as documentation agent. All capitalized terms used
herein and not otherwise defined shall have the meanings assigned to such terms
in the Credit Agreement.

         2.       As security for the Secured Obligations (as defined in the
Security Agreement, dated as of March 19, 1999 (the "SECURITY AGREEMENT") made
by the Borrower and the Subsidiary Guarantors in favor of the Administrative
Agent), among other things, the Grantors granted to the Administrative Agent a
security interest in and pledge of each Grantor's right, title and interest in
the Pledged Collateral (used herein as defined in the Security Agreement
excluding, however, the GE Capital Equipment Collateral as defined below and any
rights, title or interest in real property (other than fixtures) of the
Grantors).

         3.       The Grantors other than Precision Partners, Inc. are the
borrowers and Precision Partners, Inc. is the guarantor under a Loan, Security
and Guaranty Agreement dated as of the date hereof (as amended, modified or
supplemented from time to

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time, the "GE CAPITAL LOAN AGREEMENT"; the GE Capital Loan Agreement and the
other documents executed or delivered in connection therewith are referred to
herein as the "GE CAPITAL LOAN DOCUMENTS"). The obligations of the Grantors
under the GE Capital Loan Documents are referred to herein as the "GE CAPITAL
OBLIGATIONS".

         4.       As a condition precedent to the effectiveness of the GE
Capital Loan Agreement, the Grantors are required to execute and deliver this
Agreement.

         5.       The Administrative Agent, GE Capital and the Agent have
entered into an Intercreditor Agreement dated as of even date herewith (as
amended, modified or supplemented from time to time, the "INTERCREDITOR
AGREEMENT") wherein, among other things, GE Capital has appointed the Agent to
serve as its agent under this Agreement for the purpose of enforcing the rights
and remedies of GE Capital hereunder. The Administrative Agent has agreed to act
as Agent for the purposes of this Agreement.

         NOW, THEREFORE, in consideration of these premises and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Grantors hereby agree with the Agent as follows:

         SECTION 1. GRANT OF SECURITY INTEREST. As security for the GE Capital
Obligations, the Grantors transfer and assign to the Agent, for the benefit of
GE Capital, and grant to the Agent, for the benefit of GE Capital, a lien on and
security interest in the Pledged Collateral, subject to existing liens in favor
of the Administrative Agent and any other Permitted Liens.

         SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures and the
Pledged Collateral is collateral security for the prompt payment or performance
in full when due, whether at stated maturity, by acceleration or otherwise, of
all the GE Capital Obligations and all renewals thereof, whether for principal
(up to $22,770,826.00), and, to the extent related thereto, interest, fees,
expenses or otherwise, whether now existing or hereafter arising (THE "GE
CAPITAL SECURED OBLIGATIONS").

         SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Grantors
represent, warrant and covenant as follows:

              (a)    ORGANIZATION AND POWERS. Each Grantor is a corporation duly
       organized, validly existing and in

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       good standing under the laws of the jurisdiction in which it was
       organized, and has all requisite corporate power and authority to own
       and operate its properties, to carry on its business as now conducted
       and proposed to be conducted and to enter into this Agreement and
       carry out the transactions contemplated hereby.

              (b)    OWNERSHIP OF COLLATERAL; LIENS. The Grantors own the
       Pledged Collateral free and clear of any Lien other than Permitted Liens,
       the senior Liens in favor of the Administrative Agent and the junior
       security interest granted hereby, and the Grantors will defend the
       Pledged Collateral against all other claims and demands.

              (c)    CORPORATE EXISTENCE. Each Grantor shall maintain its
       corporate existence and continue in, and substantially limit its
       operations to, the same lines of business as the Grantors presently
       conduct.

              (d)    MAINTENANCE OF PLEDGED COLLATERAL. The Grantors shall at
       all times maintain the Pledged Collateral in good working order and
       condition, ordinary wear and tear excepted.

              (e)    BOOKS AND RECORDS, INSPECTIONS. The Grantors shall maintain
       books and records pertaining to the Pledged Collateral in such detail,
       form and scope as is consistent with good business practices, and shall
       provide the Agent and GE Capital access to the premises of the Grantors
       at any time and from time to time, during normal business hours and upon
       reasonable notice under the circumstances, for the purposes of (i)
       inspecting and copying (at the Grantors' expense) any and all records of
       the Grantors relating or pertaining to the Pledged Collateral or (ii)
       inspecting the Pledged Collateral.

              (f)    CASUALTY LOSS. The Grantors shall promptly notify the Agent
       and GE Capital of any material damage to, destruction of, or lawful or
       unlawful taking of any of the Pledged Collateral and shall diligently
       file and prosecute any claim or claims for any award or payment in
       connection with any such event.

       SECTION 4. FURTHER ASSURANCES.

              (a)    Each Grantor agrees that from time to time, at its expense,
       it will promptly execute and deliver all further instruments and
       documents, and take all further actions that may be necessary or
       desirable, or (i) that

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       the Agent may reasonably request or (ii) that, subject to the terms of
       the Intercreditor Agreement, GE Capital may reasonably request, in
       order to perfect and protect any security interest granted or
       purported to be granted hereby or to enable (x) the Agent to exercise
       and enforce, for the benefit of GE Capital, its rights and remedies
       hereunder, or (y) GE Capital, subject to the terms of the
       Intercreditor Agreement, to exercise and enforce its rights and
       remedies hereunder, with respect to any Pledged Collateral. Without
       limiting the generality of the foregoing, each Grantor will: (i)
       execute and file such financing or continuation statements, or
       amendments thereto, and such other instruments or notices, as may be
       necessary or desirable, or as the Agent or GE Capital may reasonably
       request, in order to perfect and preserve the security interests
       granted or purported to be granted to the Agent hereby and (ii) at the
       Agent's or GE Capital's request, appear in and defend any action or
       proceeding that may affect such Grantor's title to or the Agent's or
       GE Capital's security interest in the Pledged Collateral, provided
       that GE Capital's rights under this sentence shall be subject to the
       terms of the Intercreditor Agreement.

              (b)    Each Grantor hereby authorizes the Agent to file one or
       more financing or continuation statements, and amendments thereto,
       relative to all or any part of the Pledged Collateral without the
       signature of the Grantors. A carbon, photographic or other reproduction
       of this Agreement or financing statement signed by the Grantors shall be
       sufficient as a financing statement.

       SECTION 5. THE AGENT APPOINTED ATTORNEY-IN-FACT. Each Grantor hereby
irrevocably appoints the Agent as such Grantor's attorney-in-fact, with full
authority in the place and stead of such Grantor and in the name of such
Grantor, the Agent or otherwise, upon the occurrence and continuance of an Event
of Default described in Section 7, in the Agent's discretion to take any action
and to execute any instrument that the Agent 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 acquittance and receipt for monies due and to become due
       under or in respect of any of the Pledged Collateral;

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              (b)    to file any claim or take any action or institute any
       proceedings that the Agent may deem necessary or desirable for the
       collection of any of the Pledged Collateral or otherwise to enforce the
       rights of the Agent with respect to any of the Pledged Collateral; and

              (c)    generally to sell, transfer, pledge, make any agreement
       with respect to or otherwise deal with any of the Pledged Collateral as
       fully and completely as though the Agent were the absolute owner thereof
       for all purposes, and to do, at the Agent's option and the Grantors'
       expense, at any time, or from time to time, all acts and things that the
       Agent deems necessary to protect, preserve or realize upon the Pledged
       Collateral and the Agent's security interest therein, in order to effect
       the intent of this Agreement, all as fully and effectively as such
       Grantor might do.

       SECTION 6. THE AGENT'S DUTIES AND LIABILITIES.

              (a)    The powers conferred on the Agent hereunder are solely to
       protect GE Capital's interest in the Pledged Collateral and shall not
       impose any duty upon it to exercise any such powers. Except for the safe
       custody of any Pledged Collateral in its possession and the accounting
       for monies actually received by it hereunder, the Agent shall have no
       duty as to any Pledged Collateral or as to the taking of any necessary
       steps to preserve rights against prior parties or any other rights
       pertaining to any Pledged Collateral. The Agent shall be deemed to
       exercise reasonable care in the custody and preservation of such Pledged
       Collateral if such Pledged Collateral is accorded treatment substantially
       equal to that which the Agent accords its own property.

              (b)    The Agent and GE Capital shall not be liable to the
       Grantors (i) for any loss or damage sustained by them, or (ii) for any
       loss, damage, depreciation or other diminution in the value of any of the
       Pledged Collateral that may occur as a result of or in connection with or
       that is in any way related to (x) any exercise by the Agent or GE Capital
       of any right or remedy under this Agreement or (y) any other act of or
       failure to act by the Agent or GE Capital, except to the extent that the
       same shall be determined by a judgment of a court of competent
       jurisdiction to be the result of acts or omissions on the part of the
       Agent or GE Capital constituting gross negligence or

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       willful misconduct.

              (c)    No claim may be made by the Grantors against the Agent, GE
       Capital or their respective affiliates, partners, directors, officers,
       employees, attorneys or agents for any special, indirect, or
       consequential damages in respect of any breach or wrongful conduct
       (whether the claim therefor is based on contract, tort or duty imposed by
       law) in connection with, arising out of or in any way related to the
       transactions contemplated and relationship established by this Agreement,
       or any act, omission or event occurring in connection therewith; and the
       Grantors hereby waive, release and agree not to sue upon any such claim
       for any such damages, whether or not accrued and whether or not known or
       suspected to exist in its favor.

       SECTION 7. EVENTS OF DEFAULT. The occurrence of any Event of Default
under and as defined in the GE Capital Loan Agreement as in effect on the date
hereof, or if any representation or warranty made by any Grantor in Section 3 of
this Agreement shall prove to have been inaccurate in any material respect as of
the date hereof, or the occurrence of any breach, which is not cured within 30
days following notice to the Grantors from the Agent or GE Capital, of any
covenant contained in Section 3 of this Agreement shall constitute an "Event of
Default".

       SECTION 8. REMEDIES. If any Event of Default shall have occurred and be
continuing, the Agent may, subject to the Intercreditor Agreement, exercise in
respect of the Pledged Collateral, (a) all the rights and remedies of a secured
party in default under the Code, whether or not the Code applies to the affected
Pledged Collateral, (b) all of the rights and remedies provided for in this
Agreement and any other agreement between the Grantors and (i) the Agent for the
benefit of GE Capital or (ii) GE Capital and (c) such other rights and remedies
as may be provided by law or otherwise (such rights and remedies of the Agent
for the benefit of GE Capital or of GE Capital to be cumulative and
non-exclusive).

       SECTION 9. APPLICATION OF PROCEEDS. Subject to the terms of the
Intercreditor Agreement, and except as expressly provided elsewhere in this
Agreement, all proceeds received by the Agent in respect of any sale of,
collection from or other realization upon all or any part of the Pledged
Collateral may,

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in the discretion of the Agent, be held by the Agent as Pledged Collateral for,
or then, or at any other time thereafter applied, in full or in part by the
Agent against the GE Capital Secured Obligations in the following order of
priority:

              (a)    To the payment of all costs and expenses of such sale,
       collection or other realization and all other expenses, liabilities and
       advances made or incurred by the Agent in connection therewith and all
       amounts for which the Agent is entitled to indemnification hereunder and
       all advances made by the Agent hereunder for the account of the Grantors
       and for the payment of all costs and expenses paid or incurred by the
       Agent in connection with the exercise of any right or remedy hereunder;

              (b)    To the payment of the Credit Agreement Obligations (used
       herein as defined in the Intercreditor Agreement) in such order as the
       Administrative Agent shall elect;

              (c)    To the payment of the GE Capital Secured Obligations in
       such order as GE Capital shall elect; and

              (d)    To the payment to or upon the order of the Grantors, or
       whomsoever may be lawfully entitled to receive the same or as a court of
       competent jurisdiction may direct, any surplus then remaining from such
       proceeds.

       SECTION 10. INDEMNITY AND EXPENSES.

              (a)    The Grantors agree to indemnify the Agent and GE Capital
       from and against any and all claims, losses and liabilities arising out
       of or resulting from this Agreement (including, without limitation,
       enforcement of this Agreement), except claims, losses or liabilities of
       the Agent or GE Capital resulting from the Agent's or GE Capital's gross
       negligence or willful misconduct, as the case may be.

              (b)    The Grantors will, upon demand, pay to the Agent and GE
       Capital the amount of any and all reasonable expenses, including the
       reasonable fees and disbursements of counsel to the Agent and GE Capital,
       and of any experts and agents, that the Agent and GE Capital may incur in
       connection with (i) the administration of this Agreement, (ii) the
       custody, preservation, use or operation of, or the sale of, collection
       from, or other realization upon, any of the Pledged Collateral, (iii) the
       exercise or enforcement

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       of any of the rights of the Agent hereunder or (iv) the failure by the
       Grantors to perform or observe any of the provisions hereof.

       SECTION 11. CONTINUING SECURITY INTEREST. This Agreement shall create a
continuing security interest in the Pledged Collateral and shall (a) remain in
full force and effect until the indefeasible payment in full of (i) the Credit
Agreement Obligations upon which payment the Agent will resign as agent
hereunder and GE Capital shall thereupon be deemed the secured party hereunder
and (ii) the GE Capital Secured Obligations, (b) be binding upon the Grantors,
their successors and assigns and (c) inure, together with the rights and
remedies of the Agent hereunder for the benefit of GE Capital, to the benefit of
the Agent and its successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), GE Capital may assign or otherwise
transfer the GE Capital Loan Documents, in accordance with the terms of the
Intercreditor Agreement and the GE Capital Loan Agreement, to any other person
or entity, and such other benefits in respect thereof granted to GE Capital
herein or otherwise. Upon the indefeasible payment in full of the GE Capital
Secured Obligations, the security interest granted hereby shall terminate and
all rights to the Pledged Collateral shall revert to the Grantors. Upon any such
termination, the Agent will, at the Grantors' expense, execute and deliver to
the Grantors such documents as the Grantors shall reasonably request to evidence
such termination.

       SECTION 12. AMENDMENTS; ETC. No amendment or waiver of any provision of
this Agreement nor consent to any departure by the Grantors herefrom shall in
any event be effective unless the same shall be in writing and signed by the
Agent, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.

       SECTION 13. ADDRESSES FOR NOTICES. All notices and other communications
provided for hereunder shall be in writing (including by telecopier) and mailed
or telecopied or delivered to the Grantors, addressed to or in care of Precision
Partners, Inc. at its address specified after the signature of Precision
Partners, Inc. hereto, or to the Agent at its address specified after its
signature hereto, or as to any party at such other address as shall be
designated by such party in a written notice to each other party complying as to
delivery with the terms of this Section. All such notices and other
communications shall, when mailed, be effective three Business Days after being

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deposited in the mails, postage paid and addressed as aforesaid or, when
telecopied, when received.

       SECTION 14. CONSENT TO JURISDICTION. All judicial proceedings brought
against the Grantors with respect to this Agreement may be brought in any state
or federal court of competent jurisdiction in the State of New York and, by
execution and delivery of this Agreement, each Grantor accepts for itself and in
connection with the Pledged Collateral, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid courts and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement.

       SECTION 15. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO CONFLICT OF LAW PRINCIPLES THEREOF. Unless otherwise
defined herein, terms used in Article 9 of the Uniform Commercial Code in the
State of New York are used herein as therein defined.

       SECTION 16. WAIVER OF JURY TRIAL. THE AGENT, GE CAPITAL AND THE
GRANTORS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY DOCUMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH AND FOR ANY COUNTERCLAIM THEREIN.

       SECTION 17. HEADINGS. Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement or be given any substantive effect.

       SECTION 18. SEVERABILITY. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.

       SECTION 19. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same agreement. Any such counterpart, when
delivered by telecopier, shall have the same force and effect as an original
manually executed counterpart.

       SECTION 20. INTERCREDITOR AGREEMENT. This Agreement is subject in all
respects to the provisions of the Intercreditor Agreement which shall control
the terms hereof in the event of any inconsistency.

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               {THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK}

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       IN WITNESS WHEREOF, the Grantors and the Agent have caused this Agreement
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.

                                        PRECISION PARTNERS, INC.

                                        By:   /s/  Frank Reilly
                                           -------------------------------
                                           Name: Frank Reilly
                                           Title: Executive Vice President
                                                  and Cheif Financial Officer
                                        5605 N. MacArthur Blvd.
                                        Suite 760
                                        Irving, TX 75038
                                        Attention: Frank R. Reilly
                                        Telecopy: (972) 580-1551

                                        GALAXY INDUSTRIES CORPORATION

                                        By:   /s/  Frank Reilly
                                           ----------------------------------
                                           Name: Frank Reilly
                                           Title: Vice President
                                        41150 Joy Road
                                        Plymouth, MI 48170

                                        MID STATE MACHINE PRODUCTS

                                        By:   /s/  Frank Reilly
                                           ----------------------------------
                                           Name: Frank Reilly
                                           Title: Vice President
                                        1501 Verti Drive
                                        Winslow, ME 04901

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                                        NATIONWIDE PRECISION PRODUCTS CORP.

                                        By:   /s/  Frank Reilly
                                           ----------------------------------
                                           Name: Frank Reilly
                                           Title: Vice President
                                        200 Tech Park Drive
                                        Henrietta, NY 14623

                                        GENERAL AUTOMATION, INC.

                                        By:   /s/  Frank Reilly
                                           ----------------------------------
                                           Name: Frank Reilly
                                           Title: Vice President
                                        3300 Oakton Street
                                        Skokie, IL 60076

                                        CITICORP USA, INC., acting solely
                                        in its capacity as Agent for GE
                                        Capital

                                        By:   /s/  Michael Becker
                                           ----------------------------------
                                           Name: Michael Becker
                                           Title:
                                        599 Lexington Avenue
                                        New York, NY 10043
                                        Attention: Mr. Michael Becker
                                        Telecopy: (212) 793-4782

                                        with a copy to:

                                        General Electric Capital
                                          Corporation
                                        401 Merritt Seven
                                        Second Floor
                                        Norwalk, Connecticut 06856
                                        Attention: Mr. Jeff Fitts
                                        Telecopy: (203) 229-1992

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                                                                   Exhibit 10.7

                               SECURITY AGREEMENT

       This SECURITY AGREEMENT dated as of December 8, 2000 (this "AGREEMENT")
is entered into among GENERAL ELECTRIC CAPITAL CORPORATION ("GE CAPITAL") having
an office at 10 South LaSalle Street, Chicago IL 60603, as agent (the "AGENT")
for CITICORP USA, INC. in its capacity as Administrative Agent for certain
lenders under the Credit Agreement referred to below ("CITICORP") having an
office at 599 Lexington Avenue, New York, NY 10043, and GALAXY INDUSTRIES
CORPORATION, a Michigan corporation, MID STATE MACHINE PRODUCTS, a Maine
corporation, NATIONWIDE PRECISION PRODUCTS CORP., a New York corporation, and
GENERAL AUTOMATION, INC., an Illinois corporation (each individually a "GRANTOR"
and collectively, the "GRANTORS").

                             PRELIMINARY STATEMENTS

       1.     The Grantors are "Loan Parties" under that certain Credit
Agreement, dated as of March 19, 1999 (as amended, modified or supplemented from
time to time, the "CREDIT AGREEMENT"), among Precision Partners, Inc., Precision
Partners Holding Company, Mid State Machine Products, Galaxy Industries
Corporation, Certified Fabricators, Inc., General Automation, Inc., Nationwide
Precision Products Corp., Gillette Machine & Tool Co., Inc., the Lenders,
Citicorp USA, Inc., as administrative agent, Bank of America, N.A. (successor to
NationsBank, N.A.), as syndication agent, and SunTrust Bank, Atlanta, as
documentation agent. All capitalized terms used herein and not otherwise defined
shall have the meanings assigned to such terms in the Credit Agreement.

       2.     The Grantors are the borrowers and Precision Partners, Inc. is the
guarantor under a Loan, Security and Guaranty Agreement dated as of the date
hereof (as amended, modified or supplemented from time to time, the "GE CAPITAL
LOAN AGREEMENT"; the GE Capital Loan Agreement and the other documents executed
or delivered in connection therewith are referred to herein as the "GE CAPITAL
LOAN DOCUMENTS"). The obligations of the Lessees and Precision Partners, Inc.
under the GE Capital Loan Documents are referred to herein as the "GE CAPITAL
OBLIGATIONS".

       3.     As security for the GE Capital Obligations, the Grantors have
granted or will grant to GE Capital a security interest in and pledge of their
right, title and interest in the

<PAGE>

equipment described in Schedule A hereto acquired the Lessees and all other
Collateral, as defined in the GE Capital Loan Agreement (collectively, the
"GE CAPITAL EQUIPMENT COLLATERAL").

       4.     As a condition precedent to the effectiveness of Waiver and
Amendment No. 3 to the Credit Agreement, the Grantors are required to execute
and deliver this Security Agreement.

       5.     GE Capital and Citicorp have entered into an Intercreditor
Agreement dated as of even date herewith (as amended, modified or supplemented
from time to time, the "INTERCREDITOR AGREEMENT") wherein, among other things,
Citicorp has appointed GE Capital to serve as its agent under this Agreement for
the purpose of enforcing the rights and remedies of Citicorp hereunder. GE
Capital has agreed to act as Agent for the purposes of this Agreement.

       NOW, THEREFORE, in consideration of these premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Grantors hereby agree with the Agent as follows:

       SECTION 1. GRANT OF SECURITY INTEREST. As security for the Secured
Obligations, the Grantors transfer and assign to the Agent, for the benefit of
Citicorp in its capacity as Administrative Agent for the Lenders, and grant to
the Agent, for the benefit of Citicorp in its capacity as Administrative Agent
for the Lenders, a lien on and security interest in the GE Capital Equipment
Collateral, subject to existing liens in favor of GE Capital and any other
Permitted Liens.

       SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures and the GE
Capital Equipment Collateral is collateral security for the prompt payment or
performance in full when due, whether at stated maturity, by acceleration or
otherwise, of all the Secured Obligations and all renewals thereof, whether for
principal, interest, fees, expenses or otherwise, whether now existing or
hereafter arising (the "CREDIT AGREEMENT OBLIGATIONS").

       SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Grantors
represent, warrant and covenant as follows:

              (a)    ORGANIZATION AND POWERS. Each Grantor is a corporation duly
       organized, validly existing and in good standing under the laws of the
       jurisdiction in which it was organized, and has all requisite corporate

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       power and authority to own and operate its properties, to carry on its
       business as now conducted and proposed to be conducted and to enter into
       this Agreement and carry out the transactions contemplated hereby.

              (b)    OWNERSHIP OF COLLATERAL; LIENS. The Grantors own the GE
       Capital Equipment Collateral free and clear of any Lien other than
       Permitted Liens, senior Liens in favor of GE Capital and the junior
       security interest granted hereby, and the Grantors will defend the GE
       Capital Equipment Collateral against all other claims and demands.

              (c)    CORPORATE EXISTENCE. Each Grantor shall maintain its
       corporate existence and continue in, and substantially limit its
       operations to, the same lines of business as the Grantors presently
       conduct.

              (d)    MAINTENANCE OF GE CAPITAL EQUIPMENT COLLATERAL. The
       Grantors shall at all times maintain the GE Capital Equipment Collateral
       in good working order and condition, ordinary wear and tear excepted.

              (e)    BOOKS AND RECORDS, INSPECTIONS. The Grantors shall maintain
       books and records pertaining to the GE Capital Equipment Collateral in
       such detail, form and scope as is consistent with good business
       practices, and shall provide the Agent and Citicorp access to the
       premises of the Grantors at any time and from time to time, during normal
       business hours and upon reasonable notice under the circumstances, for
       the purposes of (i) inspecting and copying (at the Grantors' expense) any
       and all records of the Grantors relating or pertaining to the GE Capital
       Equipment Collateral or (ii) inspecting the GE Capital Equipment
       Collateral.

              (f)    CASUALTY LOSS. The Grantors shall promptly notify the Agent
       and Citicorp of any material damage to, destruction of, or lawful or
       unlawful taking of any of the GE Capital Equipment Collateral and shall
       diligently file and prosecute any claim or claims for any award or
       payment in connection with any such event.

       SECTION 4. FURTHER ASSURANCES.

              (a)    Each Grantor agrees that from time to time, at its expense,
       it will promptly execute and deliver all further instruments and
       documents, and take all further actions that may be necessary or
       desirable, or (i) that the Agent may reasonably request or (ii) that,
       subject to the terms of the Intercreditor Agreement, Citicorp

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       reasonably may request, in order to perfect and protect any security
       interest granted or purported to be granted hereby or to enable (x) the
       Agent to exercise and enforce, for the benefit of Citicorp, its rights
       and remedies hereunder, or (y) Citicorp, subject to the terms of the
       Intercreditor Agreement, to exercise and enforce its rights and remedies
       hereunder, with respect to any GE Capital Equipment Collateral. Without
       limiting the generality of the foregoing, each Grantor will: (i) execute
       and file such financing or continuation statements, or amendments
       thereto, and such other instruments or notices, as may be necessary or
       desirable, or as the Agent or Citicorp may reasonably request, in order
       to perfect and preserve the security interests granted or purported to be
       granted to the Agent hereby and (ii) at the Agent's or Citicorp's
       request, appear in and defend any action or proceeding that may affect
       such Grantor's title to or the Agent's or Citicorp's security interest in
       the GE Capital Equipment Collateral, provided that Citicorp's rights
       under this sentence shall be subject to the terms of the Intercreditor
       Agreement.

              (b)    Each Grantor hereby authorizes the Agent to file one or
       more financing or continuation statements, and amendments thereto,
       relative to all or any part of the GE Capital Equipment Collateral
       without the signature of the Grantors. A carbon, photographic or other
       reproduction of this Agreement or financing statement signed by the
       Grantors shall be sufficient as a financing statement.

       SECTION 5. THE AGENT APPOINTED ATTORNEY-IN-FACT. Each Grantor hereby
irrevocably appoints the Agent as such Grantor's attorney-in-fact, with full
authority in the place and stead of such Grantor and in the name of such
Grantor, the Agent or otherwise, upon the occurrence and continuance of an Event
of Default described in Section 7, in the Agent's discretion to take any action
and to execute any instrument that the Agent 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 acquittance and receipt for monies due and to become due
       under or in respect of any of the GE Capital Equipment Collateral;

                                      - 5 -

<PAGE>

              (b)    to file any claim or take any action or institute any
       proceedings that the Agent may deem necessary or desirable for the
       collection of any of the GE Capital Equipment Collateral or otherwise to
       enforce the rights of the Agent with respect to any of the GE Capital
       Equipment Collateral; and

              (c)    generally to sell, transfer, pledge, make any agreement
       with respect to or otherwise deal with any of the GE Capital Equipment
       Collateral as fully and completely as though the Agent were the absolute
       owner thereof for all purposes, and to do, at the Agent's option and the
       Grantors' expense, at any time, or from time to time, all acts and things
       that the Agent deems necessary to protect, preserve or realize upon the
       GE Capital Equipment Collateral and the Agent's security interest
       therein, in order to effect the intent of this Agreement, all as fully
       and effectively as such Grantor might do.

       SECTION 6. THE AGENT'S DUTIES AND LIABILITIES.

              (a)    The powers conferred on the Agent hereunder are solely to
       protect Citicorp's interest in the GE Capital Equipment Collateral and
       shall not impose any duty upon it to exercise any such powers. Except for
       the safe custody of any GE Capital Equipment Collateral in its possession
       and the accounting for monies actually received by it hereunder, the
       Agent shall have no duty as to any GE Capital Equipment Collateral or as
       to the taking of any necessary steps to preserve rights against prior
       parties or any other rights pertaining to any GE Capital Equipment
       Collateral. The Agent shall be deemed to exercise reasonable care in the
       custody and preservation of such GE Capital Equipment Collateral if such
       GE Capital Equipment Collateral is accorded treatment substantially equal
       to that which the Agent accords its own property.

              (b)    The Agent and Citicorp shall not be liable to the Grantors
       (i) for any loss or damage sustained by them, or (ii) for any loss,
       damage, depreciation or other diminution in the value of any of the GE
       Capital Equipment Collateral that may occur as a result of or in
       connection with or that is in any way related to (x) any exercise by the
       Agent or Citicorp of any right or remedy under this Agreement or (y) any
       other act of or failure to act by the Agent or Citicorp, except to the
       extent that the same shall be determined by a judgment of a court of
       competent jurisdiction to be the result of acts or omissions on the part
       of the Agent or

                                      - 6 -
<PAGE>

       Citicorp constituting gross negligence or willful misconduct.

              (c)    No claim may be made by the Grantors against the Agent,
       Citicorp or their respective affiliates, partners, directors, officers,
       employees, attorneys or agents for any special, indirect, or
       consequential damages in respect of any breach or wrongful conduct
       (whether the claim therefor is based on contract, tort or duty imposed by
       law) in connection with, arising out of or in any way related to the
       transactions contemplated and relationship established by this Agreement,
       or any act, omission or event occurring in connection therewith; and the
       Grantors hereby waive, release and agree not to sue upon any such claim
       for any such damages, whether or not accrued and whether or not known or
       suspected to exist in its favor.

       SECTION 7. EVENTS OF DEFAULT. The occurrence of any Event of Default
under and as defined in the Credit Agreement as in effect on the date hereof, or
if any representation or warranty made by any Grantor in Section 3 of this
Agreement shall prove to have been inaccurate in any material respect as of the
date hereof, or the occurrence of any breach of any covenant, which is not cured
within 30 days following notice to the Grantors from the Agent or Citicorp,
contained in Section 3 of this Agreement shall constitute an "Event of Default".

       SECTION 8. REMEDIES. If any Event of Default shall have occurred and be
continuing, the Agent may, subject to the Intercreditor Agreement, exercise in
respect of the GE Capital Equipment Collateral, (a) all the rights and remedies
of a secured party in default under the Code, whether or not the Code applies to
the affected GE Capital Equipment Collateral, (b) all of the rights and remedies
provided for in this Agreement and any other agreement between the Grantors and
(i) the Agent for the benefit of Citicorp or (ii) Citicorp and (c) such other
rights and remedies as may be provided by law or otherwise (such rights and
remedies of the Agent for the benefit of Citicorp or of Citicorp to be
cumulative and non-exclusive).

       SECTION 9. APPLICATION OF PROCEEDS. Subject to the terms of the
Intercreditor Agreement, and except as expressly provided elsewhere in this
Agreement, all proceeds received by the Agent in respect of any sale of,
collection from or other realization upon all or any part of the GE Capital
Equipment

                                      - 7 -

<PAGE>

Collateral may, in the discretion of the Agent, be held by the Agent as GE
Capital Equipment Collateral for, or then, or at any other time thereafter
applied, in full or in part by the Agent against the Credit Agreement
Obligations in the following order of priority:

              (a)    To the payment of all costs and expenses of such sale,
       collection or other realization and all other expenses, liabilities and
       advances made or incurred by the Agent in connection therewith and all
       amounts for which the Agent is entitled to indemnification hereunder and
       all advances made by the Agent hereunder for the account of the Grantors
       and for the payment of all costs and expenses paid or incurred by the
       Agent in connection with the exercise of any right or remedy hereunder;

              (b)    To the payment of the GE Capital Obligations in such order
       as GE Capital shall elect;

              (c)    To the payment of the Credit Agreement Obligations in such
       order as Citicorp shall elect; and

              (d)    To the payment to or upon the order of the Grantors, or
       whomsoever may be lawfully entitled to receive the same or as a court of
       competent jurisdiction may direct, any surplus then remaining from such
       proceeds.

       SECTION 10. INDEMNITY AND EXPENSES.

              (a)    The Grantors agree to indemnify the Agent and Citicorp from
       and against any and all claims, losses and liabilities arising out of or
       resulting from this Agreement (including, without limitation, enforcement
       of this Agreement), except claims, losses or liabilities of the Agent or
       Citicorp resulting from the Agent's or Citicorp's gross negligence or
       willful misconduct, as the case may be.

              (b)    The Grantors will, upon demand, pay to the Agent and
       Citicorp the amount of any and all reasonable expenses, including the
       reasonable fees and disbursements of counsel to the Agent and Citicorp,
       and of any experts and agents, that the Agent and Citicorp may incur in
       connection with (i) the administration of this Agreement, (ii) the
       custody, preservation, use or operation of, or the sale of, collection
       from, or other realization upon, any of the GE Capital Equipment
       Collateral, (iii) the exercise or enforcement of any of the rights of the
       Agent hereunder or (iv) the failure

                                      - 8 -
<PAGE>

       by the Grantors to perform or observe any of the provisions hereof.

       SECTION 11. CONTINUING SECURITY INTEREST. This Agreement shall create a
continuing security interest in the GE Capital Equipment Collateral and shall
(a) remain in full force and effect until the indefeasible payment in full of
(i) the GE Capital Obligations upon which payment the Agent will resign as agent
hereunder and Citicorp shall thereupon be deemed the secured party hereunder and
(ii) the Credit Agreement Obligations, (b) be binding upon the Grantors, their
successors and assigns and (c) inure, together with the rights and remedies of
the Agent hereunder for the benefit of Citicorp, to the benefit of the Agent and
its successors, transferees and assigns. Without limiting the generality of the
foregoing clause (c), Citicorp may assign or otherwise transfer the Credit
Agreement, in accordance with the terms of the Intercreditor Agreement and the
Credit Agreement, to any other person or entity, and such other benefits in
respect thereof granted to Citicorp herein or otherwise. Upon the indefeasible
payment in full of the Credit Agreement Obligations, the security interest
granted hereby shall terminate and all rights to the GE Capital Equipment
Collateral shall revert to the Grantors. Upon any such termination, the Agent
will, at the Grantors' expense, execute and deliver to the Grantors such
documents as the Grantors shall reasonably request to evidence such termination.

       SECTION 12. AMENDMENTS; ETC. No amendment or waiver of any provision of
this Agreement nor consent to any departure by the Grantors herefrom shall in
any event be effective unless the same shall be in writing and signed by the
Agent, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.

       SECTION 13. ADDRESSES FOR NOTICES. All notices and other communications
provided for hereunder shall be in writing (including by telecopier) and mailed
or telecopied or delivered to the Grantors, addressed to or in care of Precision
Partners, Inc. at its address specified after the signature of Precision
Partners, Inc. hereto, or to the Agent at its address specified after its
signature hereto, or as to any party at such other address as shall be
designated by such party in a written notice to each other party complying as to
delivery with the terms of this Section. All such notices and other
communications shall, when mailed, be effective three Business Days after being
deposited in the mails, postage paid and addressed as aforesaid

                                      - 9 -

<PAGE>

or, when telecopied, when received.

       SECTION 14. CONSENT TO JURISDICTION. All judicial proceedings brought
against the Grantors with respect to this Agreement may be brought in any state
or federal court of competent jurisdiction in the State of New York and, by
execution and delivery of this Agreement, each Grantor accepts for itself and in
connection with the GE Capital Equipment Collateral, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid courts and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement.

       SECTION 15. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO CONFLICT OF LAW PRINCIPLES THEREOF. Unless otherwise defined
herein, terms used in Article 9 of the Uniform Commercial Code in the State of
New York are used herein as therein defined.

                  SECTION 16. WAIVER OF JURY TRIAL. THE AGENT, CITICORP AND THE
GRANTORS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH AND FOR ANY COUNTERCLAIM THEREIN.

       SECTION 17. HEADINGS. Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement or be given any substantive effect.

       SECTION 18. SEVERABILITY. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.

       SECTION 19. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same agreement. Any such counterpart, when
delivered by telecopier, shall have the same force and effect as an original
manually executed counterpart.

       SECTION 20. INTERCREDITOR AGREEMENT. This Agreement is subject in all
respects to the provisions of the Intercreditor Agreement which shall control
the terms hereof in the event of any inconsistency.

                                      - 10 -

<PAGE>

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                                      - 11 -

<PAGE>

       IN WITNESS WHEREOF, the Grantors and the Agent have caused this Agreement
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.

                                     GALAXY INDUSTRIES CORPORATION

                                     By:   /s/  Frank Reilly
                                        -------------------------------------
                                        Name: Frank Reily
                                        Title: Vice President
                                     41150 Joy Road
                                     Plymouth, MI 48170

                                     MID STATE MACHINE PRODUCTS

                                     By:   /s/  Frank Reilly
                                        -------------------------------------
                                        Name: Frank Reilly
                                        Title: Vice President
                                     1501 Verti Drive
                                     Winslow, ME 04901

                                      - 12 -
<PAGE>

                                     NATIONWIDE PRECISION PRODUCTS CORP.

                                     By:   /s/  Frank Reilly
                                        -------------------------------------
                                        Name: Frank Reilly
                                        Title: Vice President
                                     200 Tech Park Drive
                                     Henrietta, NY 14623

                                     GENERAL AUTOMATION, INC.

                                     By:   /s/  Frank Reilly
                                        -------------------------------------
                                        Name: Frank Reilly
                                        Title: Vice President
                                     3300 Oakton Street
                                     Skokie, IL 60076

                                      - 13 -
<PAGE>

                                     GENERAL ELECTRIC CAPITAL
                                     CORPORATION, acting solely in its
                                     capacity as Agent for Citicorp

                                     By:   /s/ Jeff Fitts
                                        -------------------------------------
                                       Name: Jeff Fitts
                                       Title: Senior Risk Manager
                                     401 Merritt Seven
                                     Second Floor
                                     Norwalk, Connecticut 06856
                                     Attention: Mr. Jeff Fitts
                                     Telecopy: (203) 229-1992

                                     with a copy to:

                                     Citicorp USA, Inc.
                                     599 Lexington Avenue
                                     New York, NY 10043
                                     Attention: Mr. Michael Becker
                                     Telecopy: (212) 793-4782

                                      - 13 -

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