Document:

SUBORDINATED
LOAN AGREEMENT

     

    by
and among

     

    CYALUME
TECHNOLOGIES HOLDINGS, INC., as Guarantor

     

    CYALUME
TECHNOLOGIES, INC., as Borrower

     

    and
the Subsidiary Guarantors

    from
time to time party hereto,

    as
Guarantors

     

    and

     

    GRANITE
CREEK PARTNERS AGENT, LLC, as Agent

     

    and

     

    The
Additional Lenders From

    Time
to Time Party Hereto

     

    July
29, 2010

     

      
        

      

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    TABLE OF
CONTENTS

     

    
      
        
          
            	
                    ARTICLE 1. DEFINITIONS AND RULES OF INTERPRETATION

                  	
                    1

                  
	
                    Section 1.1

                  	
                    Definitions

                  	
                    1

                  
	
                    Section 1.2

                  	
                    Rules
      of Interpretation

                  	
                    20

                  
	 
      	 
      
	
                    ARTICLE 2. TERM LOANS.

                  	
                    21

                  
	
                    Section 2.1

                  	
                    Term
      Loan; Commitment to Lend

                  	
                    21

                  
	
                    Section 2.2

                  	
                    The
      Term Notes

                  	
                    21

                  
	 
      	 
      
	
                    ARTICLE 3. CONVERSION

                  	
                    21

                  
	 
      	 
      
	
                    ARTICLE 4. [Intentionally Omitted]

                  	
                    22

                  
	 
      	 
      
	
                    ARTICLE 5. REPAYMENT OF LOANS

                  	
                    22

                  
	
                    Section 5.1

                  	
                    Maturity
      Date

                  	
                    22

                  
	
                    Section 5.2

                  	
                    Optional
      Prepayments

                  	
                    22

                  
	
                    Section 5.3

                  	
                    Mandatory
      Prepayments

                  	
                    22

                  
	
                    Section 5.4

                  	
                    Loan Payments
    Settlement

                  	
                    23

                  
	 
      	 
      
	
                    ARTICLE 6. CERTAIN GENERAL PROVISIONS

                  	
                    23

                  
	
                    Section 6.1

                  	
                    Closing
      Fee

                  	
                    23

                  
	
                    Section 6.2

                  	
                    Interest
      on Loans

                  	
                    24

                  
	
                    Section 6.3

                  	
                    Funds
      for Payments

                  	
                    24

                  
	
                    Section 6.4

                  	
                    Computations

                  	
                    24

                  
	
                    Section 6.5

                  	
                    Additional
      Costs, Etc.

                  	
                    25

                  
	
                    Section 6.6

                  	
                    Capital
      Adequacy

                  	
                    26

                  
	
                    Section 6.7

                  	
                    Certificate

                  	
                    26

                  
	
                    Section 6.8

                  	
                    Interest
      Following Event of Default

                  	
                    26

                  
	
                    Section 6.9

                  	
                    [Intentionally
      Omitted]

                  	
                    26

                  
	
                    Section 6.10

                  	
                    [Intentionally
      Omitted]

                  	
                    26

                  
	
                    Section 6.11

                  	
                    [Intentionally
      Omitted]

                  	
                    26

                  
	
                    Section 6.12

                  	
                    Taxes

                  	
                    27

                  
	
                    Section 6.13

                  	
                    General
      Obligations

                  	
                    28

                  
	
                    Section 6.14

                  	
                    Replacement
      of Lender Due to Increased Costs

                  	
                    29

                  
	 
      	 
      
	
                    ARTICLE 7. [Intentionally Omitted]

                  	
                    29

                  
	 
      	 
      
	
                    ARTICLE 8. COLLATERAL SECURITY

                  	
                    29

                  
	 
      	 
      
	
                    ARTICLE 9. REPRESENTATIONS AND WARRANTIES

                  	
                    30

                  
	
                    Section 9.1

                  	
                    Corporate
      Authority

                  	
                    30

                  
	
                    Section 9.2

                  	
                    Governmental
      Approvals

                  	
                    31

                  
	
                    Section 9.3

                  	
                    Title
      to Properties; Leases

                  	
                    31

                  
	
                    Section 9.4

                  	
                    Financial
      Statements and Projections

                  	
                    31

                  

          

        

      

    

     

    
      
         

      

      
        -i-

        
          

        

      

      
         

      

    

     

    
      
        
          
            	
                    Section 9.5

                  	
                    No
      Material Changes, Etc.

                  	
                    32

                  
	
                    Section 9.6

                  	
                    Franchises,
      Patents, Copyrights, Etc.

                  	
                    32

                  
	
                    Section 9.7

                  	
                    Litigation

                  	
                    32

                  
	
                    Section 9.8

                  	
                    No
      Materially Adverse Contracts, Etc.

                  	
                    33

                  
	
                    Section 9.9

                  	
                    Compliance
      with Other Instruments, Laws, Etc.

                  	
                    33

                  
	
                    Section 9.10

                  	
                    Tax
      Status

                  	
                    33

                  
	
                    Section 9.11

                  	
                    No
      Event of Default

                  	
                    34

                  
	
                    Section 9.12

                  	
                    Holding
      Company and Investment Company Acts

                  	
                    34

                  
	
                    Section 9.13

                  	
                    Absence
      of Financing Statements, Etc.

                  	
                    34

                  
	
                    Section 9.14

                  	
                    Perfection
      of Security Interest

                  	
                    34

                  
	
                    Section 9.15

                  	
                    Certain
      Transactions

                  	
                    34

                  
	
                    Section 9.16

                  	
                    Employee
      Benefit Plans

                  	
                    35

                  
	
                    Section 9.17

                  	
                    Regulations
      T, X and U

                  	
                    35

                  
	
                    Section 9.18

                  	
                    Environmental
      Compliance

                  	
                    36

                  
	
                    Section 9.19

                  	
                    Ownership;
      Subsidiaries, Etc.

                  	
                    37

                  
	
                    Section 9.20

                  	
                    Bank
      Accounts

                  	
                    38

                  
	
                    Section 9.21

                  	
                    Chief
      Executive Offices

                  	
                    38

                  
	
                    Section 9.22

                  	
                    Fiscal
      Year

                  	
                    38

                  
	
                    Section 9.23

                  	
                    No
      Amendments to Certain Documents

                  	
                    38

                  
	
                    Section 9.24

                  	
                    Disclosure

                  	
                    38

                  
	
                    Section 9.25

                  	
                    [Intentionally
      Omitted]

                  	
                    39

                  
	
                    Section 9.26

                  	
                    Insurance

                  	
                    39

                  
	
                    Section 9.27

                  	
                    Foreign
      Assets Control Regulation, Etc.

                  	
                    39

                  
	
                    Section 9.28

                  	
                    [Intentionally
      Omitted]

                  	
                    39

                  
	
                    Section 9.29

                  	
                    Licenses
      and Permits

                  	
                    39

                  
	
                    Section 9.30

                  	
                    SBA
      License Application and Related Requirements

                  	
                    40

                  
	
                    Section 9.31

                  	
                    Small
      Business Administration Documentation

                  	
                    40

                  
	
                    Section 9.32

                  	
                    Small
      Business Concern

                  	
                    40

                  
	
                    Section 9.33

                  	
                    Product
      Liability

                  	
                    40

                  
	
                    Section 9.34

                  	
                    Government
      Contracts

                  	
                    40

                  
	
                    Section 9.35

                  	
                    Export
      Licenses and Compliance

                  	
                    43

                  
	 
      	 
      
	
                    ARTICLE 10. AFFIRMATIVE COVENANTS OF THE BORROWER

                  	
                    44

                  
	
                    Section 10.1

                  	
                    Punctual
      Payment

                  	
                    44

                  
	
                    Section 10.2

                  	
                    Maintenance
      of Office

                  	
                    44

                  
	
                    Section 10.3

                  	
                    Records
      and Accounts

                  	
                    44

                  
	
                    Section 10.4

                  	
                    Financial
      Statements, Certificates and Information

                  	
                    45

                  
	
                    Section 10.5

                  	
                    Notices

                  	
                    47

                  
	
                    Section 10.6

                  	
                    Legal
      Existence; Maintenance of Properties

                  	
                    48

                  
	
                    Section 10.7

                  	
                    Insurance

                  	
                    48

                  
	
                    Section 10.8

                  	
                    Taxes

                  	
                    49

                  
	
                    Section 10.9

                  	
                    Inspection
      of Properties and Books, Etc.

                  	
                    49

                  
	
                    Section 10.10

                  	
                    Compliance
      with Laws, Contracts, Licenses, and Permits

                  	
                    50

                  
	
                    Section 10.11

                  	
                    Employee
      Benefit Plans

                  	
                    51

                  
	
                    Section 10.12

                  	
                    Bank
      Accounts

                  	
                    51

                  

          

        

      

    

     

    
      
         

      

      
        -ii-

        
          

        

      

      
         

      

    

     

    
      
        
          
            	
                    Section 10.13

                  	
                    Further
      Assurances

                  	
                    51

                  
	
                    Section 10.14

                  	
                    Use
      of Proceeds

                  	
                    51

                  
	
                    Section 10.15

                  	
                    Board;
      Board Meetings

                  	
                    51

                  
	
                    Section 10.16

                  	
                    SBIC
      Regulatory Provisions

                  	
                    52

                  
	 
      	 
      
	
                    ARTICLE 11. CERTAIN NEGATIVE COVENANTS OF THE BORROWER

                  	
                    54

                  
	
                    Section 11.1

                  	
                    Restrictions
      on Indebtedness

                  	
                    54

                  
	
                    Section 11.2

                  	
                    Restrictions
      on Liens

                  	
                    55

                  
	
                    Section 11.3

                  	
                    Restrictions
      on Investments

                  	
                    57

                  
	
                    Section 11.4

                  	
                    Restricted
      Payments

                  	
                    58

                  
	
                    Section 11.5

                  	
                    Merger,
      Consolidation and Disposition of Assets

                  	
                    59

                  
	
                    Section 11.6

                  	
                    Sale
      and Leaseback

                  	
                    60

                  
	
                    Section 11.7

                  	
                    Compliance
      with Environmental Laws

                  	
                    60

                  
	
                    Section 11.8

                  	
                    Employee
      Benefit Plans

                  	
                    60

                  
	
                    Section 11.9

                  	
                    Modification
      of Documents

                  	
                    61

                  
	
                    Section 11.10

                  	
                    Negative
      Pledges

                  	
                    61

                  
	
                    Section 11.11

                  	
                    Transactions
      with Affiliates

                  	
                    62

                  
	
                    Section 11.12

                  	
                    Upstream
      Limitations

                  	
                    62

                  
	
                    Section 11.13

                  	
                    Inconsistent
      Agreements

                  	
                    62

                  
	
                    Section 11.14

                  	
                    Bank
      Accounts

                  	
                    62

                  
	
                    Section 11.15

                  	
                    Restriction
      on Subsidiaries

                  	
                    62

                  
	
                    Section 11.16

                  	
                    Restrictions
      on Loans and Advances

                  	
                    63

                  
	
                    Section 11.17

                  	
                    Line
      of Business

                  	
                    63

                  
	
                    Section 11.18

                  	
                    Use
      of Proceeds

                  	
                    63

                  
	
                    Section 11.19

                  	
                    Activity
      of the Holding Company

                  	
                    63

                  
	 
      	 
      
	
                    ARTICLE 12. FINANCIAL COVENANTS OF THE BORROWER

                  	
                    64

                  
	
                    Section 12.1

                  	
                    Coverage
      Ratios

                  	
                    64

                  
	
                    Section 12.2

                  	
                    Leverage
      Ratio

                  	
                    64

                  
	
                    Section 12.3

                  	
                    Capital
      Expenditures

                  	
                    65

                  
	
                    Section 12.4

                  	
                    Current
      Ratio

                  	
                    65

                  
	
                    Section 12.5

                  	
                    Minimum
      EBITDA

                  	
                    65

                  
	 
      	 
      
	
                    ARTICLE 13. CLOSING CONDITIONS

                  	
                    65

                  
	
                    Section 13.1

                  	
                    Loan
      Documents

                  	
                    65

                  
	
                    Section 13.2

                  	
                    Senior
      Debt Documents

                  	
                    65

                  
	
                    Section 13.3

                  	
                    Certified
      Copies of Charter Documents

                  	
                    66

                  
	
                    Section 13.4

                  	
                    Corporate
      Action

                  	
                    66

                  
	
                    Section 13.5

                  	
                    Incumbency
      Certificate

                  	
                    66

                  
	
                    Section 13.6

                  	
                    Validity
      of Liens

                  	
                    66

                  
	
                    Section 13.7

                  	
                    Perfection
      Certificates and Lien Search Results

                  	
                    66

                  
	
                    Section 13.8

                  	
                    Certificates
      of Insurance

                  	
                    67

                  
	
                    Section 13.9

                  	
                    Pro
      Forma Compliance

                  	
                    67

                  
	
                    Section 13.10

                  	
                    Solvency
      Certificate

                  	
                    67

                  
	
                    Section 13.11

                  	
                    Opinion
      of Counsel

                  	
                    67

                  
	
                    Section 13.12

                  	
                    Disbursement
      Instructions

                  	
                    67

                  

          

        

      

    

     

    
      
         

      

      
        -iii-

        
          

        

      

      
         

      

    

     

    
      
        
          
            	
                    Section 13.13

                  	
                    Payment
      of Fees

                  	
                    67

                  
	
                    Section 13.14

                  	
                    Material
      Adverse Effect

                  	
                    67

                  
	
                    Section 13.15

                  	
                    Consents

                  	
                    68

                  
	
                    Section 13.16

                  	
                    [Intentionally
      Omitted]

                  	
                    68

                  
	
                    Section 13.17

                  	
                    Senior
      Debt Payment and Documents

                  	
                    68

                  
	
                    Section 13.18

                  	
                    Representations
      True; No Event of Default

                  	
                    68

                  
	
                    Section 13.19

                  	
                    No
      Legal Impediment

                  	
                    68

                  
	
                    Section 13.20

                  	
                    Governmental
      Regulations

                  	
                    68

                  
	
                    Section 13.21

                  	
                    Proceedings
      and Documents

                  	
                    68

                  
	 
      	 
      
	
                    ARTICLE 14. [Intentionally Omitted]

                  	
                    69

                  
	 
      	 
      
	
                    ARTICLE 15. EVENTS OF DEFAULT; ACCELERATION; ETC.

                  	
                    69

                  
	
                    Section 15.1

                  	
                    Events
      of Default and Acceleration

                  	
                    69

                  
	
                    Section 15.2

                  	
                    Termination
      of Total Commitment

                  	
                    72

                  
	
                    Section 15.3

                  	
                    Remedies

                  	
                    72

                  
	
                    Section 15.4

                  	
                    Distribution
      of Collateral Proceeds

                  	
                    72

                  
	 
      	 
      
	
                    ARTICLE 16. SETOFF

                  	
                    73

                  
	 
      	 
      
	
                    ARTICLE 17. EXPENSES

                  	
                    74

                  
	 
      	 
      
	
                    ARTICLE 18. INDEMNIFICATION

                  	
                    75

                  
	 
      	 
      
	
                    ARTICLE 19. SURVIVAL OF COVENANTS, ETC.

                  	
                    75

                  
	 
      	 
      
	
                    ARTICLE 20. AGENT

                  	
                    76

                  
	
                    Section 20.1

                  	
                    Appointment
      and Authorization of Agent

                  	
                    76

                  
	
                    Section 20.2

                  	
                    Delegation
      of Duties

                  	
                    76

                  
	
                    Section 20.3

                  	
                    Liability
      of the Agents

                  	
                    76

                  
	
                    Section 20.4

                  	
                    Reliance
      by Agent

                  	
                    77

                  
	
                    Section 20.5

                  	
                    Notice
      of Default

                  	
                    77

                  
	
                    Section 20.6

                  	
                    Credit
      Decision; Disclosure of Information by Agent

                  	
                    78

                  
	
                    Section 20.7

                  	
                    Indemnification
      of Agent

                  	
                    78

                  
	
                    Section 20.8

                  	
                    Agent
      in its Individual Capacity

                  	
                    79

                  
	
                    Section 20.9

                  	
                    Successor
      Agent

                  	
                    79

                  
	
                    Section 20.10

                  	
                    Agent
      May File Proofs of Claim

                  	
                    80

                  
	
                    Section 20.11

                  	
                    Collateral
      and Guaranty Matters

                  	
                    80

                  
	
                    Section 20.12

                  	
                    Lender
      Pledge

                  	
                    81

                  
	
                    Section 20.13

                  	
                    Return of Payments; Defaulting
      Lender

                  	
                    81

                  
	
                    Section 20.14

                  	
                    Right to Perform, Preserve and
      Protect

                  	
                    82

                  
	
                    Section 20.15

                  	
                    Amendment
      of Article 20

                  	
                    82

                  
	 
      	 
      
	
                    ARTICLE 21. ASSIGNMENT AND PARTICIPATION

                  	
                    83

                  
	
                    Section 21.1

                  	
                    Conditions
      to Assignment by any Lender

                  	
                    83

                  
	
                    Section 21.2

                  	
                    Participations

                  	
                    83

                  

          

        

      

    

     

    
      
         

      

      
        -iv-

        
          

        

      

      
         

      

    

     

    
      
        
          
            	
                    Section 21.3

                  	
                    Disclosure

                  	
                    83

                  
	
                    Section 21.4

                  	
                    Assignee
      or Participant Affiliated with the Borrower

                  	
                    83

                  
	
                    Section 21.5

                  	
                    Assignment
      by the Borrower

                  	
                    84

                  
	 
      	 
      
	
                    ARTICLE
      22. NOTICES, ETC.

                  	
                    84

                  
	 
      	 
      
	
                    ARTICLE
      23. GOVERNING LAW

                  	
                    85

                  
	 
      	 
      
	
                    ARTICLE
      24. HEADINGS

                  	
                    85

                  
	 
      	 
      
	
                    ARTICLE
      25. COUNTERPARTS

                  	
                    85

                  
	 
      	 
      
	
                    ARTICLE
      26. ENTIRE AGREEMENT, ETC.

                  	
                    85

                  
	 
      	 
      
	
                    ARTICLE
      27. WAIVER OF JURY TRIAL

                  	
                    86

                  
	 
      	 
      
	
                    ARTICLE
      28. CONSENTS, AMENDMENTS, WAIVERS, ETC.

                  	
                    86

                  
	 
      	 
      
	
                    ARTICLE
      29. SEVERABILITY

                  	
                    87

                  
	 
      	 
      
	
                    ARTICLE
      30. SUBORDINATION AGREEMENT

                  	
                    88

                  

          

        

      

    

     

    
      
         

      

      
        -v-

        
          

        

      

      
         

      

    

     

    List
of Exhibits and Schedules

     

    Exhibits

     

    
      
        
          
            	
                    Exhibit
      A

                  	 	
                    Form
      of Term Note

                  	 
	
                    Exhibit
      B

                  	 	
                    Form
      of Compliance Certificate

                  	 
	
                    Exhibit
      C

                  	 	
                    Form
      of Assignment and Acceptance Agreement

                  	 
	
                    Exhibit
      D

                  	 	
                    Form
      of Management Fees Subordination Agreement

                  	 
	
                    Exhibit
      E

                  	 	
                    Form
      of Conversion Notice

                  	 
	
                    Exhibit
      G

                  	 	
                    Form
      of Consulting Fees Subordination Agreement

                  	 

          

        

      

    

     

    Schedules

     

    
      
        
          	
                  Schedule
      9.3

                	 	
                  Title
      to Property; Leases

                	 
	
                  Schedule
      9.5

                	 	
                  Material
      Changes

                	 
	
                  Schedule
      9.6

                	 	
                  Franchises,
      Patents, Copyrights, Etc.

                	 
	
                  Schedule
      9.7

                	 	
                  Litigation

                	 
	
                  Schedule
      9.8

                	 	
                  No
      Materially Adverse Contracts, Etc.

                	 
	
                  Schedule
      9.9

                	 	
                  Compliance
      with Other Instruments, Laws, Etc.

                	 
	
                  Schedule
      9.15

                	 	
                  Indemnification
      Agreements

                	 
	
                  Schedule
      9.19A

                	 	
                  Post-Closing
      Capitalization of Borrower

                	 
	
                  Schedule
      9.19B

                	 	
                  Post-Closing
      Capitalization of Holding Company

                	 
	
                  Schedule
      9.20

                	 	
                  Bank
      Accounts

                	 
	
                  Schedule
      9.26

                	 	
                  Insurance

                	 
	
                  Schedule
      9.29

                	 	
                  Licenses
      and Permits

                	 
	
                  Schedule
      9.34

                	 	
                  Government
      Contracts

                	 
	
                  Schedule
      9.35

                	 	
                  Export
      Licenses

                	 

        

      

    

    
      
         

      

      
        -vi-

        
          

        

      

      
         

      

    

    This
Subordinated Loan Agreement is subject to the terms and provisions of the
Intercreditor and Subordination Agreement executed by GRANITE CREEK PARTNERS
AGENT, LLC,
as Junior Agent on behalf of itself and the Junior Lenders, and TD BANK,
N.A. dated as of July 29, 2010 (as amended, restated, supplemented or
otherwise modified from time to time, the “Subordination Agreement”) and each
holder of the Loans, by its acceptance hereof, shall be bound by the provisions
of the Intercreditor and Subordination Agreement.

     

    SUBORDINATED
LOAN AGREEMENT

     

    This
SUBORDINATED LOAN AGREEMENT is made as of the 29th day of July, 2010, by and
among CYALUME TECHNOLOGIES, INC., a Delaware corporation (the "Borrower"),
CYALUME TECHNOLOGIES HOLDINGS, INC., a Delaware corporation (the "Holding
Company"), the Lenders and the other financial institutions or other entities
from time to time parties hereto identified on the signature pages hereto and
GRANITE CREEK PARTNERS AGENT, LLC, a Delaware limited Liability company, as
Agent.

     

    Background

     

    Borrower
hereby requests loans from Agent and Lenders, and the parties wish to provide
for the terms and conditions upon which such loans shall be made;

     

    NOW,
THEREFORE, in consideration of the promises and the agreements, provisions and
covenants herein contained, the Borrower, the Holding Company and the Agent
hereby agree as follows:

     

    ARTICLE
1.

    DEFINITIONS
AND RULES OF INTERPRETATION.

     

    Section
1.1      Definitions.

     

    The
following terms shall have the meanings set forth in this Article 1 or elsewhere
in the provisions of this Credit Agreement referred to below:

     

    Acquired
EBITDA.  With respect to the twelve (12) month period following
the closing of a Permitted Acquisition, the maximum, stipulated, pro forma
amount approved by the Agent and the Lenders which can be added to actual
trailing twelve (12) month EBITDA.

     

    Acquisition.  The
acquisition by a Subsidiary of the Holding Company on the Acquisition Closing
Date of substantially all of the assets of the
Borrower.

     

    Acquisition
Closing Date.  The
date on which the conditions set forth in the Purchase Agreement have been
satisfied and the Acquisition has been consummated.

     

    Acquisition
Documents.  Collectively, the Purchase Agreement and all other
agreements and documents required to be entered into or delivered pursuant
thereto or in connection with the Acquisition, each in the form delivered to the
Agent on the Acquisition Closing Date and as amended as permitted
hereunder.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    Adjusted
EBITDA.  With respect to any period, an amount equal to EBITDA
for such period plus
to the extent accounted for in EBITDA and without duplication, the sum of
(i) Acquired EBITDA and (ii) legal and professional fees related to
Permitted Acquisitions to the extent included in Consolidated Net
Income.

     

    Affiliate.  As
applied to any Person, any other Person who, directly or indirectly, controls,
is controlled by, or is under common control with, such Person.  For
purposes of this definition, "control" means the possession, directly or
indirectly, of the power to direct the management and policies of a Person,
whether through the ownership of Shares, by contract, or otherwise; provided
that, for purposes of Section 11.11 hereof:  (a) any Person
which owns directly or indirectly 10% or more of the securities having ordinary
voting power for the election of directors or other members of the governing
body of a Person or 10% or more of the partnership or other ownership interests
of a Person (other than as a limited partner of such Person) shall be
deemed to control such Person; (b) each director (or comparable
manager) of a Person shall be deemed to be an Affiliate of such Person; and
(c) each partnership or joint venture in which a Person is a partner or
joint venturer shall be deemed to be an Affiliate of such
Person.

     

    Agent.  Granite
Agent, solely in its capacity as agent and collateral agent for the Lenders
hereunder and any other holder of Obligations, and any successor
thereto.

     

    Agent
Approved Subordination Agreement.  A subordination agreement in
form and substance satisfactory to the Agent, in its sole discretion, which
contains such payment, remedy blockages and standstill provisions and other such
terms as the Agent may require or may deem
acceptable.

     

    Agent's
Head Office.  The Agent's office located at 222 West Adams
Street, Suite 1980, Chicago, Illinois 60606 or such other location as the Agent
may designate from time to time.

     

    Agent's
Special Counsel.  Goldberg Kohn Ltd. or such other counsel as
may be approved by the Agent.

     

    Anti-Terrorism
Laws.  Any Laws relating to terrorism or money laundering,
including Executive Order No. 13224 (effective September 24, 2001),
the USA PATRIOT Act, the Laws comprising or implementing the Bank Secrecy Act,
and the Laws administered by OFAC.

     

    Balance
Sheet Date.  December 31, 2009.

     

    Bankruptcy
Code.  The provisions of Title 11 of the United States Code,
11 U.S.C., §§101 et seq., as now and hereafter in effect, any successors to
such statute and any other applicable insolvency or similar law of any
jurisdiction including, without limitation, any law of any jurisdiction
permitting a debtor to obtain a stay or a compromise of the claims of its
creditors against it.

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

    Blocked
Person.  Any Person:  (i) listed in the annex
to, or is otherwise subject to the provisions of, Executive Order
No. 13224; (ii) a Person owned or controlled by, or acting for or on
behalf of, any Person that is listed in the annex to, or is otherwise subject to
the provisions of, Executive Order No. 13224; (iii) a Person with
which any Lender is prohibited from dealing or otherwise engaging in any
transaction by any Anti-Terrorism Law; (iv) a Person that commits,
threatens or conspires to commit or supports "terrorism" as defined in Executive
Order No. 13224; or (v) a Person that is named a "specially designated
national" or "blocked person" on the most current list published by OFAC or
other similar list.

     

    Borrower.  See
the preamble hereto.

     

    Borrower's
Key Officers.  Derek Dunaway, Thomas McCarthy, Earl Cranor and
Michael Bielonko.

     

    Business
Day.  Any day (other than Saturday, Sunday or holiday) on
which the Agent is open and conducting its customary banking transactions in the
State of Illinois.

     

    Capital
Assets.  Fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents,
copyrights, trademarks, franchises and goodwill).

     

    Capital
Expenditures.  For any date of determination, the aggregate
amount of payments made by the Borrower or any of its Subsidiaries for the
rental, lease, purchase, construction, or use of any property, the value or cost
of which under GAAP would appear on the Borrower's balance sheet in the category
of property, plant or equipment or intangibles, minus
the sum of:  (i) expenditures made in Permitted Acquisitions,
including, without limitation, reasonable capitalized transaction costs related
thereto and approved by the Required Lenders and (ii) capitalized
transaction costs related to the obtaining and closing of the Loans approved by
the Required Lenders.

     

    Capitalization
Documents.  The Charter Documents of the Holding
Company.

     

    Capitalized
Lease(s).  Leases under which the Borrower or any of its
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with generally accepted accounting
principles.

     

    CERCLA.  See
Section 9.18(a).

    
      
         

      

      
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    Change
of Control.  The occurrence of any one of the following
events:  (i) the common stock of Holding Company is no longer
publicly traded or held under the Securities and Exchange Act of 1934;
(ii) the Holding Company shall cease to own 100% of the Shares of the
Borrower; (iii) there is a sale of all or substantially all of the assets
of the Borrower or (iv) any "person" or "group" (as such terms are used in
Sections 15(d) and 14(d) of the Securities Exchange Act of 1934 becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Securities
Exchange Act of 1934, except that a person or group shall be deemed to have
"beneficial ownership" of all securities that such person or group has the right
to acquire (such right, an "option right" whether such right is exercisable
immediately or only after the passage of time)) directly or indirectly, of 40%
or more of the equity interests of the Holding Company on a fully diluted
basis.

     

    Charter
Documents.  With respect to a Person which is a corporation,
its Certificate of Incorporation as amended with the consent of the Required
Lenders and in effect from time to time.

     

    Chattel
Paper.  All now owned or hereafter acquired right, title and
interest with respect to "chattel paper" including, without limitation,
"tangible chattel paper" and "electronic chattel paper", as such terms are
defined from time to time in the UCC and any and all supporting obligations in
respect thereof.

     

    Closing
Date.  The first date on which the conditions set forth in
Article 13 have been satisfied and the Agent and the Lenders execute and deliver
this Credit Agreement.

     

    Closing
Fee.  See Section 6.1.

     

    Code.  The
Internal Revenue Code of 1986, as amended.

     

    Collateral.  All
of the property, rights and interests of the Borrower and each Guarantor that
are or are intended to be subject to the security interests and mortgages
created by the Security Documents.

     

    Collateral
Access Agreements.  A
waiver or consent in form and substance satisfactory to the Agent executed by
any lessor of Real Estate leased by Borrower or any of its Subsidiaries at which
Real Estate any Collateral is located.

     

    Collateral
Assignment of Acquisition Documents.  The Subordinated
Collateral Assignment of Acquisition Documents dated or to be dated on or prior
to July 29, 2010, between the Borrower and the Agent, in form and substance
satisfactory to the Agent, as may be amended, modified or supplemented from time
to time.

     

    Consolidated
or consolidated or Consolidating or consolidating.  With
reference to any term defined herein, shall mean that term as applied to the
financial statements of the Holding Company and its Subsidiaries, consolidated
or consolidating in accordance with generally accepted accounting
principles.

    
      
         

      

      
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    Consolidated
Net Income (or Deficit).  For any period the gross revenues of
the Borrower and its Subsidiaries on a consolidated basis during such period,
less all expenses and other proper charges (including taxes on income), all
determined in accordance with generally accepted accounting principles, but in
any event, excluding:  (i) any gain arising from any write down
or write-up of assets, except to the extent inclusion thereof shall be approved
in writing by the Required Lenders; (ii) earnings of any Subsidiary accrued
prior to the date it became a Subsidiary; (iii) the net earnings of any
business entity (other than a Subsidiary) in which the Borrower or any
Subsidiary has an ownership interest, except to the extent such net earnings
shall have actually been received by the Borrower or such Subsidiary in the form
of cash distributions; (iv) the proceeds of any life insurance policy;
(v) any deferred or other credit representing any excess of the equity of
any Subsidiary at the date of acquisition thereof over the amount invested in
such Subsidiary; and (vi) any reversal of any contingency reserve, except
to the extent that provision for such contingency reserve shall be made from
income arising during such period.

     

    Consolidated
Total Debt Service.  For any period, the sum
of:  (i) Consolidated Total Interest Expense but excluding
deferred interest not paid in the applicable period plus (ii) all scheduled
installments of principal (which shall not include the annual mandatory
prepayment of Excess Cash Flow required in Section 5.3(e)) or other like
sums payable during such period on all Indebtedness of the Borrower and its
Subsidiaries outstanding during all or any part of such
period.

     

    Consolidated
Total Interest Expense.  For any period, the aggregate amount
of cash interest required to be paid by the Borrower and its Subsidiaries during
such period on all Indebtedness of the Borrower and its Subsidiaries outstanding
during all or any part of such period, whether such interest was or is required
to be reflected as an item of expense or capitalized and including commitment
fees, agency fees, facility fees, and similar recurring fees in connection with
the borrowing of money.

     

    Consulting
Agreement.  A consulting agreement between Jarret Fass and the
Holding Company in form and substance reasonably satisfactory to the Required
Lenders, as may be amended, modified or supplemented from time to time in
accordance with the terms of this Credit Agreement, which agreement and
Consulting Fees payable thereunder have been subordinated pursuant to the
Consulting Fee Subordination Letter.

     

    Consulting
Fees.  All fees or compensation to be paid to Jarret Fass
pursuant to the Consulting Agreement.

     

    Consulting
Fee Subordination Letter.  The letter agreement between Jarret
Fass and the Agent, substantially in the form attached hereto as Exhibit
G, or such other form as is reasonably satisfactory to the Required
Lenders, as may be amended, modified or supplemented from time to
time.

     

    Credit
Agreement.  This Subordinated Loan Agreement, including the
Schedules and Exhibits hereto, as the same may be amended, modified or
supplemented from time to time.

     

    CTSA.  Cyalume
Technologies, S.A.S., a corporation organized under the laws of France and which
is a Subsidiary of the Borrower.

    
      
         

      

      
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    Current
Assets.  As
of any date of determination, all assets of the Holding Company and its
Subsidiaries which would, in accordance with generally accepted accounting
principles, be classified as current assets at such
date.

     

    Current
Liabilities.  As of any date of determination, all liabilities
of the Holding Company and its Subsidiaries which would, in accordance with
generally accepted accounting principles, be classified as current liabilities
at such date but excluding therefrom the current maturities of long term debt
but including the outstanding Revolving Credit Loans (as defined in the Senior
Loan Agreement).

     

    Current
Ratio.  As
of any date of determination, the ratio of:  (i) Current Assets
to (ii) Current Liabilities.

     

    Default.  See
Section 15.1.

     

    Default
Rate.  See Section 6.8.

     

    Derivative
Contract.  A forward contract, futures contract, swap, option
or other financing agreement or arrangement (including, without limitation,
caps, floors, collars and similar agreements), the value of which is dependent
upon interest rates, currency exchange rates, commodities or other indices and
the ISDA Master Agreement dated as of December 19, 2008 by and between TD Bank,
N.A. and the Borrower and all schedules thereto.

     

    Derivative
Termination Value.  In
respect of any one or more Derivative Contracts, after taking into account the
effect of any legally enforceable netting arrangement relating to such
Derivative Contracts, for any date of determination, such calculation shall be
made as if such Derivative Contracts have been closed out on such date and
termination value(s) determined in accordance therewith as if terminated on
such date.

     

    Distribution.  As
to any Person, any of the following:  (i) the declaration or
payment of any dividend on or in respect of any Shares of the Borrower,
(ii) the purchase, redemption, or other retirement of any Shares of the
Borrower, directly or indirectly, through a Subsidiary of the Borrower or
otherwise, (iii) the return of capital by the Borrower to its owners as
such; or (iv) any other distribution on or in respect of any ownership
interests of the Borrower.

     

    Dollars
or $.  Dollars in lawful currency of the United States of
America.

     

    Domestic
Subsidiaries.  A Subsidiary that is organized under the laws of
any state of the United States of America.

    
      
         

      

      
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    EBITDA.  With
respect to any period, an amount equal to the Consolidated Net Income of the
Borrower and its Subsidiaries for such period, plus
to the extent accounted for in Consolidated Net Income during such period and
without duplication the sum of:  (i) depreciation and
amortization, (ii) Consolidated Total Interest Expense for such period,
(iii) non-cash expenses, (iv) income tax expense, (v) up to $1,500,000
in the aggregate, to be added back during the period incurred, for the term of
this Credit Agreement for the reserves or charges for the Omniglow Litigation,
(vi) extraordinary losses (net of tax effects) approved by the Agent in
writing, and (vii) up to $800,000 during the term of this Credit Agreement to be
included during the fiscal quarter in which they are paid, fees and expenses
incurred by Borrower in connection with transactions contemplated by this Credit
Agreement and the Granite Subordinated Debt Documents (including, without
limitation, any amendments, waivers, consents, future findings and other
agreements entered into in connection herewith) determined in accordance with
GAAP, in each case to be included during the fiscal quarter in which they are
paid, minus the sum of:  (a) interest and dividend income during
such period, (b) gain on the sale of assets other than the sale of
inventory in the ordinary course of business during such period,
(c) extraordinary gains during such period, and (d) any non-cash
components of income during such period.

     

    EBITDA
Threshold.  With respect to any period ending prior to December
31, 2011, $7,500,000, with respect to any period ending on or after December 31,
2011 and prior to December 31, 2012, $7,750,000, and with respect to any period
ending on or after December 31, 2012, $8,000,000.

     

    Eligible
Assignee.  Any of:  (i) a commercial bank or
finance company or similar institutional lender organized under the laws of the
United States, or any State thereof or the District of Columbia, and having
total assets in excess of $250,000,000; (ii) a savings and loan association
or savings bank organized under the laws of the United States, or any State
thereof or the District of Columbia, and having a net worth of at least
$250,000,000; (iii) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development (the "OECD"), or a political subdivision of any such country, and
having total assets in excess of $250,000,000, provided
that such bank is acting through a branch or agency located in the country in
which it is organized or another country which is also a member of the OECD; and
(iv) if, no Default or Event of Default has occurred and is continuing, any
other bank, insurance company, commercial finance company or other financial
institution or other Person approved by the Borrower, such approval not to be
unreasonably withheld, conditioned or delayed.

     

    Employee
Benefit Plan.  Any employee benefit plan within the meaning of
Section (3) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate, other than a Multiemployer Plan.

     

    Environmental
Laws.  See Section 9.18(a).

     

    ERISA.  The
Employee Retirement Income Security Act of 1974, as
amended.

     

    ERISA
Affiliate.  Any Person which is treated as a single employer
with the Borrower under §414 of the Code.

     

    ERISA
Reportable Event.  A reportable event with respect to a
Guaranteed Pension Plan within the meaning of §4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.

    
      
         

      

      
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    Event
of Default.  See Section 15.1.

     

    Excess
Cash Flow.  With
respect to the Borrower and its Subsidiaries, for any fiscal year of the
Borrower, an amount equal to EBITDA for such fiscal year minus
Fixed Charges during such fiscal year.

     

    Extraordinary
Receipts.  Any proceeds that the Borrower or any of its
Subsidiaries receives not in the ordinary course of their respective businesses,
including without limitation, from (i) any casualty insurance policies
maintained by the  Borrower and/or any Subsidiary which the Agent is
permitted hereunder to apply to the repayment of the Obligations; (ii) tax
refunds of the Borrower and its Domestic Subsidiaries, (iii) pension plan
reversions, (iv) condemnation awards (and payments in lieu thereof),
(v) indemnity payments or (vi) any extraordinary gains realized by the
Borrower and/or any Subsidiary.

     

    Following
Business Day Convention.  The
convention for adjusting any relevant date that would otherwise fall on a day
that is not a Business Day so that the date will be the first following day that
is a Business Day.

     

    Fixed
Charge Coverage Ratio.  As of any date of determination, the
ratio of:  (i)  EBITDA for the period of the four (4) fiscal
quarters then ending to (ii) Fixed Charges for such
period.

     

    Fixed
Charges.  For any applicable period, the sum, without
duplication, of:  (i) Consolidated Total Debt Service (other than
principal payments on the Revolving Credit Loan, as defined in the Senior Loan
Agreement) plus
(ii) all income tax expenses for such period (excluding deferred income
taxes) plus
(iii) all Capital Expenditures made during such period plus
(iv) the amount of all Distributions for such period plus
(v) all capitalized costs associated with the development of patents and
trademarks plus
(vi) the amount of all cash payments made by Borrower to Holdings since July 1,
2010 for Permitted Holdco Distributions.

     

    Foreign
Lender.  See Section 6.12(c).

     

    Foreign
Lender Complete Exemption Certificate.  See Section
6.12(c).

     

    Foreign
Subsidiary.  Any Subsidiary of the Borrower which is not a
Domestic Subsidiary.

     

    General
Intangible.  As
applied to any Person, all now owned or hereafter acquired right, title, and
interest with respect to "general intangibles" (as such term is defined from
time to time in the UCC), and any and all supporting obligations in respect
thereof.

    
      
         

      

      
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    GAAP
or generally accepted accounting principles.  (i) When
used in this Credit Agreement, whether directly or indirectly through reference
to a capitalized term used therein, means (x) principles that are
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, in effect for the fiscal year
ended on the Balance Sheet Date, and (y) to the extent consistent with such
principles, the accounting practice of the Borrower reflected in its financial
statements for the year ended on the Balance Sheet Date, and (ii) when used
in general, other than as provided above, means principles that are
(x) consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, as in effect from time to time,
and (y) consistently applied with past financial statements of the Borrower
adopting the same principles; provided,
that in each case referred to in this definition of "generally accepted
accounting principles" a certified public accountant would, insofar as the use
of such accounting principles is pertinent, be in a position to deliver an
unqualified opinion (other than a qualification regarding changes in generally
accepted accounting principles) as to financial statements in which such
principles have been properly applied.

     

    Governmental
Authority.  The
government of the United States of America or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.

     

    Granite.  Granite
Creek FlexCap I, L.P., a Delaware limited
partnership.

     

    Granite
Agent .  Granite Creek Partners Agent, LLC, a Delaware limited
liability company.

     

    Guaranteed
Pension Plan.  Any employee pension benefit plan within the
meaning of §3(2) of ERISA maintained or contributed to by the Borrower or
any ERISA Affiliate the benefits of which are guaranteed on termination in full
or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.

     

    Guarantor.  The
Holding Company and each Domestic Subsidiary of the Borrower now or hereafter
existing.

     

    Guaranty.
 The
guaranty of any Guarantor in form and substance satisfactory to the Lenders, as
amended, modified or supplemented from time to time.

     

    Hazardous
Substances.  See Section 9.18(b).

     

    Holding
Company.  See
the preamble hereto.

     

    Indebtedness.  As
to any Person and whether recourse is secured by or is otherwise available
against all or only a portion of the assets of such Person and whether or not
contingent, but without duplication:

     

    (i)        every
obligation of such Person for money borrowed;

     

    (ii)       every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations incurred in connection with the acquisition
of property, assets or businesses or secured by a lien or other encumbrance on
any property of such Person;

    
      
         

      

      
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    (iii)      
every reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such
Person;

     

    (iv)      every
obligation of such Person issued or assumed as the deferred purchase price of
property or services (including securities repurchase agreements but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business which are not overdue or which are being contested in good
faith);

     

    (v)       every
obligation of such Person under any Capitalized Lease;

     

    (vi)      every
obligation of such Person under any lease (a "synthetic lease") treated as
an operating lease under generally accepted accounting principles and as a loan
or financing for U.S. income tax purposes;

     

    (vii)     all
sales by such Person of:  (x) accounts or general intangibles for
money due or to become due, (y) chattel paper, instruments or documents
creating or evidencing a right to payment of money or (z) other receivables
(collectively "receivables"), whether pursuant to a purchase facility or
otherwise, other than in connection with the disposition of the business
operations of such Person relating thereto or a disposition of defaulted
receivables for collection and not as a financing arrangement, and together with
any obligation of such Person to pay any discount, interest, fees, indemnities,
penalties, recourse, expenses or other amounts in connection
therewith;

     

    (viii)    every
obligation of such Person (an "equity related purchase obligation") to
purchase, redeem, retire or otherwise acquire for value any shares of capital
stock or membership interests or membership units of any class issued by such
Person, any warrants, options or other rights to acquire any such shares, or any
rights measured by the value of such shares, warrants or other similar
right;

     

    (ix)       every
obligation of such Person under a Derivative Contract;

     

    (x)        every
obligation in respect of Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent that
such Person is liable therefor as a result of such Person's ownership interest
in or other relationship with such entity, except to the extent that the terms
of such Indebtedness provide that such Person is not liable therefor and such
terms are enforceable under applicable law; and

     

    (xi)       every
obligation, contingent or otherwise, of such Person guaranteeing, or having the
economic effect of guarantying or otherwise acting as surety for, any obligation
of a type described in any of clauses (i) through (x) (the "primary
obligation") of another Person (the "primary obligor"), in any manner,
whether directly or indirectly, and including, without limitation, any
obligation of such Person (A) to purchase or pay (or advance or supply
funds for the purchase of) any security for the payment of such primary
obligation, (B) to purchase property, securities or services for the
purpose of assuring the payment of such primary obligation, or (C) to
maintain working capital, equity capital or other financial statement condition
or liquidity of the primary obligor so as to enable the primary obligor to pay
such primary obligation.

    
      
         

      

      
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    The
"amount" or "principal amount" of any Indebtedness at any time of determination
represented by:  (u) any Indebtedness, issued at a price that is
less than the principal amount at maturity thereof, shall be the amount of the
liability in respect thereof determined in accordance with generally accepted
accounting principles, (v) any Capitalized Lease shall be the principal
component of the aggregate of the rentals obligation under such Capitalized
Lease payable over the term thereof that is not subject to termination by the
lessee, (w) any sale of receivables shall be the amount of unrecovered
capital or principal investment of the purchaser (other than the Borrower or any
of its wholly-owned Subsidiaries) thereof, excluding amounts representative
of yield or interest earned on such investment, (x) any synthetic lease
shall be the stipulated loss value, termination value or other equivalent
amount, (y) any Derivative Contract shall be the maximum amount of any
termination or loss payment required to be paid by such Person if such
Derivative Contract were, at the time of determination, to be terminated by
reason of any event of default or early termination event thereunder, whether or
not such event of default or early termination event has in fact occurred and
(z) any equity related purchase obligation shall be the maximum fixed
redemption or purchase price thereof inclusive of any accrued and unpaid
dividends to be comprised in such redemption or purchase price.

     

    Indemnified
Liabilities.  See Section 18.

     

    Insolvency
Proceeding. Any
proceeding commenced by or against any Person under any provision of the
Bankruptcy Code or under any other state or federal bankruptcy or insolvency
law, assignments for the benefit of creditors, formal or informal moratoria,
compositions, extensions generally with creditors, or proceedings seeking
reorganization, arrangement, or other similar relief.

     

    Intercompany
Agreement.  That certain Intercompany Agreement between the
Borrower and CTSA, dated as of February 26, 2007, as the same may be amended,
modified or supplemented from time to time with the prior written consent of the
Agent.

     

    Inventory.  As
applied to any Person, all now owned or hereafter acquired right, title, and
interest with respect to inventory, including goods held for sale or lease or to
be furnished under a contract of service, goods that are leased by such Person
as lessor, goods that are furnished by such Person under a contract of service,
and raw materials, work in process, or materials used or consumed in the
business of such Person and as such term is defined in the
UCC.

    
      
         

      

      
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    Investments.  All
expenditures made and all liabilities incurred (contingently or
otherwise) for the acquisition of stock, membership interests or membership
units, or Indebtedness of, or for loans, advances, or capital contributions to,
or in respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person.  In determining the
aggregate amount of Investments outstanding at any particular time: (i) the
amount of any Investment represented by a guaranty shall be taken at not less
than the principal amount of the obligations guaranteed and still outstanding;
(ii) there shall be included as an Investment all interest accrued with
respect to Indebtedness constituting an Investment unless and until such
interest is paid; (iii) there shall be deducted in respect of each such
Investment any amount received as a return of capital (but only by repurchase,
redemption, retirement, repayment, liquidating dividend or liquidating
distribution); (iv) there shall not be deducted in respect of any
Investment any amounts received as earnings on such Investment, whether as
dividends, interest or otherwise, except that accrued interest included as
provided in the foregoing clause (ii) may be deducted when paid; and
(v) there shall not be deducted from the aggregate amount of Investments
any decrease in the value thereof.

     

    Lender.  Each
of:  (i) Granite, (ii) Patriot, (iii) each other Person
party hereto in its capacity as a lender, (iv) each other Eligible Assignee
that becomes a party hereto and (v) the respective successors of all of the
foregoing, and "Lenders" means all of the foregoing.

     

    Loan
Documents.  This Credit Agreement, the Notes, the Guaranty, the
Security Documents and each of the other documents, instruments and agreements
executed in connection therewith in favor of the Agent and/or the Lenders, as
each may be amended, modified or supplemented from time to time including,
without limitation, in connection with the execution, delivery and
implementation of this Credit Agreement.

     

    Loans.  Collectively,
the Term Loan.

     

    Management
Agreement.  A management agreement between Selway or an
Affiliate thereof and the Holding Company in
form and substance reasonably satisfactory to the Required Lenders, as may be
amended, modified or supplemented from time to time in accordance with the terms
of this Credit Agreement, which agreement and the Management Fees payable
thereunder have been subordinated pursuant to the Management Fee Subordination
Letter.

     

    Management
Fees.  All fees or other compensation to be paid to Selway
pursuant to the Management Agreement.

     

    Management
Fee Subordination Letter.  The letter agreement among the
Holding Company, Selway or such Affiliate and the Agent substantially in the
form attached hereto as Exhibit D,
or such other form as is reasonably satisfactory to the Required Lenders with
respect to the payment of Management Fees.

     

    Mandatory
Prepayments.  See Section 5.3.

     

    Material
Adverse Effect.  A material adverse effect
on:  (a) the business condition (financial or otherwise),
operations, performance or properties, of the Holding Company, the Borrower and
the Borrower's Subsidiaries, taken as a whole, or the Collateral, (b) the
rights and remedies of the Agent under any Loan Document, or (c) the
ability of the Holding Company or any Subsidiary to perform its or their
obligations under the Loan Documents.

    
      
         

      

      
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    Mortgage.  The
mortgage dated July 29, 2010 between the Borrower and Agent, pursuant to which
the Borrower grants a mortgage in all of the Borrower's right, title and
interest in that certain real estate more commonly known as 96 Windsor Street,
West Springfield, Massachusetts, together with the improvements
thereon.

     

    Multiemployer
Plan.  Any multiemployer plan within the meaning of
§3(37) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate.

     

    Net
Proceeds.  With respect to any proceeds of insurance or the
sale, transfer or other disposition by any Person of any group of Capital Assets
(other than Inventory in the ordinary course of business) means the amount
of cash in Dollars received by such Person from such insurance proceeds or sale
or other disposition after (i) provision for all income or other taxes of
such Person measured by or resulting from the receipt of such insurance proceeds
or as a result of such sale or other disposition, (ii) payment of all
reasonable brokerage commissions, reasonable attorney fees and other reasonable
fees and expenses related to such insurance proceeds, sale or other disposition
including the tax benefit resulting from a loss on such sale or other
disposition as and when such tax benefit is realized, (iii) deduction of
such appropriate amount to be provided by such Person as a reserve, in
accordance with GAAP, against any liabilities associated with such sale,
transfer, or other disposition and retained by such Person after such sale or
other disposition, (iv) transfer taxes, and (v) amounts payable to
holders of Permitted Liens to obtain a release of the Lien on the asset
sold.

     

    Notes.  The
Term Notes.

     

    OFAC.  The
U.S. Department of Treasury Office of Foreign Assets
Control.

     

    OFAC
Lists.  Collectively,
the Specially Designated Nationals and Blocked Persons List maintained by OFAC
pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25,
2001) and/or any other list of terrorists or other restricted Persons
maintained pursuant to any of the rules and regulations of OFAC or pursuant to
any other applicable Executive Orders.

     

    Obligations.  All
indebtedness, obligations and liabilities of the Holding Company, the Borrower
and the Borrower's Subsidiaries to the Lenders, individually or collectively,
existing on the date of this Credit Agreement or arising thereafter, direct or
indirect, joint or several, absolute or contingent, matured or unmatured,
liquidated or unliquidated, secured or unsecured, arising by contract, operation
of law or otherwise, arising or incurred under this Credit Agreement or any of
the other Loan Documents or in respect of any of the Loans made incurred or any
of the Notes, or other instruments at any time evidencing any
thereof.

    
      
         

      

      
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    Omniglow
Litigation.  That certain litigation between the Borrower and
Omniglow LLC, as more particularly described on Schedule
1.1 hereto, wherein Omniglow LLC was awarded $827,942.25 plus certain
costs.

     

    Outstanding.  With
respect to the Loans, the aggregate unpaid principal thereof as of any date of
determination.

     

    Patriot.  Patriot
Capital II, L.P., a Delaware limited partnership.

     

    PBGC.  The
Pension Benefit Guaranty Corporation created by §4002 of ERISA and any successor
entity or entities having similar responsibilities.

     

    Perfection
Certificate.  The Perfection Questionnaire as defined in the
Security Agreement.

     

    Permitted
Acquisitions.  Acquisitions of a business in the national
security or homeland security industries approved by the Required Lenders in
writing.

     

    Permitted
Acquisition Indebtedness.  Indebtedness incurred (other than
hereunder) or assumed in connection with a Permitted Acquisition approved
by the Required Lenders in writing and all of the documents, instruments or
agreements evidencing, or with respect to the payment of, any Permitted
Acquisition Indebtedness are subject to an Agent Approved Subordination
Agreement; provided, that, no Default or Event of Default has occurred and
is continuing at the time such Permitted Acquisition Indebtedness is incurred or
assumed.

     

    Permitted
Holdco Distributions.  See Section
11.4(vi).

     

    Permitted
Liens.  Liens, security interests and other encumbrances
permitted by Section 11.2.

     

    Person.  Any
individual, corporation, partnership, trust, unincorporated association,
business, limited liability company or other legal entity, and any government or
any governmental agency or political subdivision
thereof.

     

    Pledge
Agreement.  The Subordinated Stock Pledge Agreement dated July
29, 2010, between the Holding Company and the Agent, pursuant to which the
Holding Company pledges to the Agent all of the Shares of the Borrower, in form
and substance satisfactory to the Lenders, as may be amended, modified or
supplemented from time to time.

     

    Pro
Rata Share.  the Term Loan Commitment Percentage of such Term
Loan Lender.

     

    Purchase
Agreement.  That
certain Stock Purchase Agreement dated February 14, 2008, as amended, among the
Holding Company, the Borrower, Cyalume Acquisition Corp. and GMS Acquisition
Partners Holdings, LLC.

    
      
         

      

      
        -14-

        
          

        

      

      
         

      

    

    Real
Estate.  All real property owned or leased (as lessee or
sublessee) by the Borrower or any of its
Subsidiaries.

     

    Record.  The
grid attached to a Note, or the continuation of such grid, or any other similar
record, including computer records, maintained by the Agent with respect to any
Loan referred to in such Note.

     

    Regulatory
Problem:  Any transaction, circumstance or situation whereby
(i) any Person and such Person's Affiliates would own, control or have
power over a greater quantity of securities of any kind issued by any Borrower
or Guarantor than are permitted under any requirement of the SBA or any other
Governmental Authority, or (ii) any Governmental Authority has asserted (or such
Person believes that there is a risk of such assertion) that such Person and its
Affiliates are not entitled to hold, or exercise any significant right with
respect to, the common stock of any Borrower or Guarantor held by such Person,
including without limitation the existence of any other set of facts or
circumstances wherein it has been asserted by any governmental regulatory agency
(or Agent reasonably believe that there is a substantial risk of such assertion)
that any Lender and its Affiliates are not entitled to hold, or exercise any
significant right with respect to, any securities issued in exchange or
conversion thereof.

     

     Regulatory
Violation:  With respect to any SBIC Holder providing Financing
(within the meaning of the SBIC Regulations) under this Credit Agreement,
(i) a diversion of the proceeds of such Financing from the reported use
thereof on SBA Form 1031 delivered in connection with the transactions
contemplated hereunder to occur on the Closing Date, if such diversion was
effected without obtaining the prior written consent of the SBIC Holders (which
may be withheld in their sole discretion) or (ii) a change in the principal
business activity of Holdings, Borrower or any of their Subsidiaries to an
ineligible business activity (within the meaning of the SBIC
Regulations).

     

    Rental
Obligations.  All present or future obligations of the Borrower
or any of its Subsidiaries under any rental agreements or leases of real or
personal property, other than:  (a) obligations that can be
terminated by the giving of notice without liability to the Borrower or such
Subsidiary in excess of the liability for rent due as of the date on which such
notice is given and under which no penalty or premium is paid as a result of any
such termination, and (b) obligations in respect of Capitalized
Leases.

     

    Required
Lenders.  Lenders holding an aggregate Pro Rata Share of the
outstanding principal balance of the Loans in an amount equal to or in excess of
51% of the total outstanding principal balance of the
Loans.

     

    Restricted
Payment.  As to the Borrower and its Subsidiaries, each of the
following: (i) any Distribution, (ii) any loan, advance or other
payment to the holders of any Shares of the Borrower (which payments shall not
include salaries or reasonable compensation paid to any such holder other than
to a Borrower Key Officer pursuant to such holder's employment arrangement with
the Borrower, such employment arrangement to be approved by the board of
directors of the Borrower) or to any Affiliate of Borrower, or to any
Guarantor, (iii) any payment of any compensation, management fee or
expense, investment banking fee or similar amount to any Affiliate of the
Borrower, (iv) any payment under the Purchase Agreement after the Closing
Date, or (v) any payment to the holders of any Subordinated Debt except in
accordance with the Agent Approved Subordination Agreement applicable
thereto.

    
      
         

      

      
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    SBA:  The
U.S. Small Business Administration or any successor
agency.

     

    SBIC:  A
small business investment company licensed under the SBIC
Act.

     

    SBIC
Act:  The Small Business Investment Act of 1958, as amended and
the regulations promulgated thereunder.

     

    SBIC
Holders:  Granite
and Patriot, each of which is an SBIC.

     

    SBIC
Regulations:  The Small Business Investment Company Act of
1958, as amended, and the regulations issued by the SBA thereunder, codified as
Title 13 of the Code of Federal Regulations, 107 and 121, as
amended.

     

    SCP
Holders.  Each of Winston J. Churchill, Yaron Eitan, Thomas J.
Rebar and Wayne B. Weisman, as holders of the SCP Subordinated Notes, their
successors, assigns, heirs, executors and
administrators.

     

    SCP
Partners.  A general partnership consisting of, inter
alia,
Winston J. Churchill, Yaron Eitan, Thomas J. Rebar and Wayne B.
Weisman.

     

    SCP
Subordinated Notes.  Those amended and restated unsecured
subordinated promissory notes each dated as of the Closing Date, in the original
principal amounts and held by the respective SCP Holder as
follows:  $800,000 held by Winston J. Churchill, $100,000 held by
Thomas J. Rebar and $100,000 held by Wayne B. Weisman, each in form and
substance satisfactory to the Agent.

     

    Selway.  Selway
Management, Inc., a Delaware corporation which is an Affiliate of SCP
Partners.

     

    Security
Agreement(s).  The Subordinated Security and Pledge
Agreement(s), dated July 29, 2010, between the Borrower and each of its
Subsidiaries and each Guarantor and the Agent, pursuant to which the Borrower
and each of its Subsidiaries and each Guarantor grants a security interest in
all of its tangible and intangible personal property, in form and substance
satisfactory to the Lenders, as may be amended, modified or supplemented from
time to time.

     

    Security
Documents.  The Security Agreements, the Collateral Assignment
of Acquisition Documents, the Pledge Agreement, the Collateral Access
Agreements, the Mortgage, the Collateral Assignment of Leases and all other
security agreements between the Agent and any Subsidiary of the Holding Company
and any Guarantor.

    
      
         

      

      
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    Seller.  GMS
Acquisition Partners Holdings, LLC, a Delaware limited liability
company.

     

    Seller
Notes.  Those certain subordinate promissory notes payable to a
seller in a Permitted Acquisition executed in connection with a Permitted
Acquisition, which are in form and substance satisfactory to the Agent, which
are subject to and the holder of such notes shall have executed and delivered,
an Agent Approved Subordination Agreement.

     

    Senior
Debt.  The “Senior Debt” as defined in the Subordination
Agreement.

     

    Senior
Debt Documents.  The “Senior Loan Documents” as defined in the
Subordination Agreement.

     

    Senior
Funded Debt.  Shall mean all of:

     

    (i)         Indebtedness
in respect of borrowed money other than the Subordinated Debt and the
Loans;

     

    (ii)        Indebtedness
in respect of Capitalized Lease Obligations;

     

    (iii)       Indebtedness
in respect of the deferred purchase price of assets (other than normal trade
accounts payable in the ordinary cause of business);

     

    (iv)    
  Indebtedness in respect of unfunded pension
liabilities;

     

    (v)     
  Any guaranties or any agreement having the economic affect of
guarantying or otherwise acting as a surety for any of the foregoing
(i) through (iv) in any manner, whether directly or indirectly, and
including, without limitation, any obligation (A) to purchase or pay (or
advance or supply funds for the purchase of) any security for the payment
of such primary obligation, (B) to purchase property, securities or
services for the purpose of assuring the payment of such primary obligation, or
(C) to maintain working capital, equity capital or other financial
statement condition or liquidity of the primary obligor to pay such primary
obligation;

     

    (vi)   
   For purposes of calculating the financial covenants in Article
12, Indebtedness
in the amount of the aggregate Derivative Termination Value of all Derivative
Contracts under which the Agent is not the counterparty; and

     

    (vii)   
  Indebtedness (other than the Loans) incurred at the time of, or
within 20 days after, the acquisition of fixed assets for the purpose of
financing all or any part of the acquisition cost thereof.

     

    Senior
Leverage Ratio.  As of any date of determination, the ratio
of:  (i) Senior Funded Debt of the Borrower and its Subsidiaries
on a consolidated basis as of any date of determination to (ii) Adjusted
EBITDA of the Borrower and its Subsidiaries on a consolidated basis for the
period of the four (4) consecutive quarters then
ended.

    
      
         

      

      
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    Senior
Loan Agreement.  The Amended and Restated Revolving Credit and
Term Loan Agreement dated as of the date hereof by and among Borrower,
Guarantor, TD Bank, N.A., as agent (the “Senior Agent”) and a lender, and the
additional lenders from time to time party thereto.

     

    Services
Agreement.  That certain Services Agreement between the
Borrower and CTSA, dated as of January 1, 2007, as the same may be amended,
modified or supplemented from time to time with the prior written approval of
the Agent.

     

    Shares.  With
respect to the Borrower, the Holding Company or any other Person, any and all
shares of capital stock or other shares, interests, participations or other
equivalents (however designated of any class) in the capital of or other
ownership interests therein.

     

    Subordinated
Debt.  The Indebtedness of the Borrower that is expressly
subordinated and made junior to the payment and performance in full of all of
the Obligations, and is either (x) evidenced by any Seller Notes, (y)
Permitted Acquisition Indebtedness or any other indebtedness approved by
the Agent and the Lenders in their sole and absolute discretion subordinated to
the obligations pursuant to an Agent Approved Subordination Agreement or (z) is
evidenced by the SCP Subordinated Notes.

     

    Subordinated
Debt Documents.  Collectively: any Seller Notes, any notes
evidencing any other Subordinated Debt, and the Agent Approved Subordination
Agreements relating thereto.

     

    Subordination
Agreement.  See preamble hereto.

     

    Subsidiary.  Any
corporation, limited liability company, association, trust or other business
entity of which the Holding Company shall at any time own directly or indirectly
through a subsidiary or subsidiaries at least a majority (by number of
votes) of the outstanding Voting Stock.

     

    Term
Note.  See Section 2.2(a).

     

    Term
Loan.  The term loan in the aggregate principal amount of
$8,500,000 to be made severally by the Term Loan Lenders to the
Borrower.

     

    Term
Loan Commitment Percentage.  As to any Term Loan Lender, the
percentage set forth opposite such Term Loan Lender's name on the Commitment
Annex under the column "Term Loan Commitment Percentage" (if such Lender's name
is not so set forth thereon, then, on the Closing Date, such percentage for such
Term Loan Lender shall be deemed to be zero).

     

    Term
Loan Lenders.  All Lenders committed to make, subject to the
terms and conditions herein contained, Term Loan advances
hereunder.

    
      
         

      

      
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    Term
Loan Maturity Date.  March 19, 2014, unless sooner occurring
following acceleration.

     

    Term
Notes.  Collectively, the Term
Note(s).

     

    Total
Debt Service.  For any applicable period, the sum of (i)
Consolidated Total Interest Expense plus (ii) all scheduled installments of
principal or other like sums payable during such period by the Borrower and its
Subsidiaries in respect of Indebtedness.

     

    Total
Debt Service Coverage Ratio.  As of any date of determination,
the ratio of:  (i) EBITDA for the period of the two
(2) fiscal quarters then ending (including deductions for any Restricted
Payments during such period) to (ii) Consolidated Total Debt Service for
such period.

     

    Total
Funded Debt.  Shall mean:

     

    (i)         all
Senior Funded Debt and the Loans;

     

    (ii)        all
Subordinated Debt; and

     

    (iii)       (without
duplication) any guaranties or any agreement having the economic affect of
guarantying or otherwise acting as a surety for any of the foregoing (i) and
(ii) in any manner, whether directly or indirectly, and including, without
limitation, any obligation (A) to purchase or pay (or advance or supply funds
for the purchase of) any security for the payment of such primary obligation,
(B) to purchase property, securities or services for the purpose of assuring the
payment of such primary obligation, or (C) to maintain working capital, equity
capital or other financial statement condition or liquidity of the primary
obligor to pay such primary obligation.

     

    Total
Leverage Ratio.  As at any date of determination, the ratio of
(a) Total Funded Debt of the Borrower and its Subsidiaries on a consolidated
basis to (b) Adjusted EBITDA of the Borrower and its Subsidiaries on a
consolidated basis for the period of the four (4) consecutive quarters then
ended.

     

    Uniform
Commercial Code.  The Uniform Commercial Code as in effect on
the date hereof in the State of Illinois, as may be amended from time to
time.

     

    Voting
Stock.  Shares or similar interests, of any class or classes
(however designated), the holders of which are at the time entitled, as such
holders, to vote for the election of a majority of the directors (or persons
performing similar functions) of the corporation, association, trust or
other business entity involved, whether or not the right so to vote exists by
reason of the happening of a contingency.

     

    Warrants.  Collectively:  the
Warrant to Purchase Common Stock of Cyalume Technologies Holdings, Inc. dated as
of the date hereof issued by Holding Company in favor of Granite and the Warrant
to Purchase Common Stock of Cyalume Technologies Holdings, Inc. dated as of the
date hereof issued by Holding Company in favor of Patriot, in each case, as may
be amended, modified or supplemented from time to
time.

    
      
         

      

      
        -19-

        
          

        

      

      
         

      

    

    Wholly
Owned Subsidiary.  With respect to any Subsidiary, one hundred
percent (100%) of the Shares of such Subsidiary are owned directly by the
Holding Company.

     

    Section
1.2       Rules of
Interpretation.

     

    (a)        A
reference to any document or agreement shall include such document or agreement
as amended, modified or supplemented from time to time in accordance with its
terms and the terms of this Credit Agreement.

     

    (b)     
  The singular includes the plural and the plural includes the
singular.

     

    (c)        A
reference to any law includes any amendment or modification to such
law.

     

    (d)        A
reference to any Person includes its permitted successors and permitted
assigns.

     

    (e)        Accounting
terms not otherwise defined herein have the meanings assigned to them by
generally accepted accounting principles applied on a consistent basis by the
accounting entity to which they refer.

     

    (f)         The
words "include", "includes" and "including" are not limiting.

     

    (g)        All
terms not specifically defined herein or by generally accepted accounting
principles, which terms are defined in the Uniform Commercial Code as in effect
in the State of Illinois, have the meanings assigned to them therein, with the
term "instrument" being that defined under Article 9 of the Uniform Commercial
Code.

     

    (h)       
Reference to a particular "Section" refers to that section of this Credit
Agreement unless otherwise indicated.

     

    (i)         The
words "herein", "hereof", "hereunder" and words of like import shall refer to
this Credit Agreement as a whole and not to any particular section or
subdivision of this Credit Agreement.

     

    (j)         Unless
otherwise expressly indicated, in the computation of periods of time from a
specified date to a later specified date, the word "from" means "from and
including," the words "to" and "until" each mean "to but excluding," and the
word "through" means "to and including."

     

    (k)        This
Credit Agreement and the other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar
matters.  All such limitations, tests and measurements are, however,
cumulative and are to be performed in accordance with the terms
thereof.

    
      
         

      

      
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    (l)         This
Credit Agreement and the other Loan Documents are the result of negotiation
among, and have been reviewed by counsel to, among others, the Lenders and the
Borrower and are the product of discussions and negotiations among all
parties.  Accordingly, this Credit Agreement and the other Loan
Documents are not intended to be construed against the Lenders merely on account
of the Agent's involvement in the preparation of such documents.

     

    (m)       Reference
to a "schedule" in Article 9 hereof shall be deemed to include updates of such
schedule or the information disclosed thereon which update may be provided in
writing from the Borrower to the Agent in accordance with Article 22
hereof.

     

    (n)       Reference
to a statute or regulation in this Credit Agreement shall mean such statute or
regulation and any statute or regulation which is enacted in replacement or
substitution thereof or as a successor thereto.

     

    ARTICLE
2.

    TERM
LOANS.

     

    Section
2.1      Term Loan; Commitment to
Lend.

     

    Subject
to the terms and conditions set forth in this Credit Agreement, each Term Loan
Lender severally agrees to lend to the Borrower on the date hereof a term loan
equal to such Term Loan Lender's Term Loan Commitment Percentage of the Term
Loan.  Once repaid, the Term Loan may not be reborrowed.

     

    Section
2.2      The Term Notes.

     

    The
Term Loan made by each Term Loan Lender is evidenced by a promissory note of the
Borrower in favor of such Term Loan Lender, in substantially the form of Exhibit
A hereto (the "Term Loan Note") in the amount of such Term Loan
Lender's Term Loan Commitment Percentage dated as of the Closing
Date.

     

    ARTICLE
3.

    CONVERSION

     

    Each
Lender may at any time, on a single occasion, convert the entire unpaid
principal balance of the Loans held by such Lender (a “Converting Lender”) at
such time of conversion into common stock of the Holding Company at a conversion
price of $3.19 per share (the “Conversion Price”).  Any such
conversion shall be effected by notice from such Converting Lender to the
Borrower and the Holding Company in the form attached hereto as Exhibit
E.  Promptly after receipt of the foregoing notice, the Holding
Company shall issue and deliver to such Converting Lender certificates for the
number of shares of stock issuable upon such conversion. Such conversion shall
be deemed to have been effected as of the opening of business on the date the
Borrower and the Holding Company receives such notice or such conversion is
deemed to occur as provided above. Upon any such conversion, all accrued and
unpaid interest owed to such Converting Lender shall be paid in full in
cash.

    
      
         

      

      
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    If,
after the date hereof, the Holding Company effects a stock dividend, stock
split, combination or similar transaction on its common stock, the Conversion
Price in effect immediately prior to such action shall be adjusted so that the
Lenders shall be entitled to receive the amount of common stock of the Holding
Company it would have owned immediately following such action had the Loans been
converted in full immediately prior thereto.

     

    ARTICLE
4.

    [Intentionally
Omitted].

     

    ARTICLE
5.

    REPAYMENT
OF LOANS.

     

    Section
5.1      Maturity Date.

     

    The
Borrower promises to pay, in addition to interest thereon, all outstanding
principal of the Term Loan on the Term Loan Maturity Date.

     

    Section
5.2      Optional Prepayments.

     

    Subject
to the terms of the Subordination Agreement, the Borrower may, at any time or
from time to time, subject to also making the payments required under this
Section 5.2, prepay any Loan in whole or in part, in the minimum amount of
$100,000 (or the remainder if less).  Such notice of prepayment shall
specify the date and amount of such prepayment and the Loan being
prepaid.  If such notice is given by the Borrower, the Borrower shall
make such prepayment and the prepayment amount specified in such notice shall be
due and payable on the date specified therein, together, with accrued interest
to each such date on the amount prepaid.  

     

    Section
5.3      Mandatory Prepayments.

     

    Subject
to the terms of the Subordination Agreement, the Borrower shall be required to
make prepayments of (x) first, the Senior Debt until paid in full and (y)
thereafter, the Loans as set forth below (each a "Mandatory Prepayment"), such
payments being due and payable on the date on which any amount described below
is received by the Borrower or the Borrower is entitled to receive cash payments
therefor to be applied first to the Senior Debt and then to the
Loans:

     

    (a)           an
amount equal to 100% of the Net Proceeds received by the Borrower or any of its
Subsidiaries from the sale or other disposition of any of its Capital Assets,
except for (i) sales of inventory in the ordinary course of business or
(ii) sales of any assets no longer used or useful in the conduct of such
business, provided,
with respect to clause (ii) immediately preceding, that no Default or Event of
Default then exists or would exist after giving effect to such use of Net
Proceeds, the value of such assets does not exceed $500,000 in any fiscal year,
the Borrower or such Subsidiary uses the cash proceeds of any such sale to
purchase replacement or other equipment within 120 days of such sale, and such
sales are at fair market value;

    
      
         

      

      
        -22-

        
          

        

      

      
         

      

    

    (b)           subject
to Section 11.1, an amount equal to 100% of the proceeds received by the
Guarantor or any of its Subsidiaries (i) from the incurrence of any Indebtedness
for borrowed money other than borrowings permitted hereunder and (ii) from the
issuance of any Shares of the Guarantor or any of its Subsidiaries (referred to
herein, collectively, as “New Equity”), in each case, excluding reasonable fees
and expenses incurred by such Person relating to the incurrence of such
Indebtedness or issuance of such Shares;

     

    (c)           an
amount equal to 100% of the Net Proceeds received by the Borrower or any of its
Subsidiaries as insurance proceeds or condemnation awards, other than insurance
proceeds or condemnation awards not in excess of an aggregate amount of $500,000
in respect of loss or damage to equipment, Inventory, fixed assets or real
property to the extent such cash proceeds are applied to replace or repair the
equipment, Inventory, fixed assets or real property in respect of which such
proceeds were received, so long as such application is made within one hundred
and twenty (120) days after the occurrence of such loss, damage, or
condemnation;

     

    (d)           subject
to Borrower’s obligation to make payments in accordance with  Section
11.4(v), an amount equal to 100% of all Extraordinary Receipts received by the
Holding Company or any of its Subsidiaries; and

     

    (e)           commencing
with a payment on June 1, 2012 and on each June 1 of each year thereafter, an
amount equal to 60% of Excess Cash Flow for the immediately preceding fiscal
year of the Borrower.

     

    Section 5.4      Loan
Payments Settlement.

     

    (a)           Payments
of principal, interest and fees in respect of the Loans will be settled on the
date of receipt if received by Agent on the first Business Day of a month or on
the Business Day immediately following the date of receipt if received on any
day other than the first Business Day of a month.

     

    (b)           Any
amounts required to be paid under Section 5.3 shall be applied to the prepayment
of the Loans pro
rata
in accordance with each Lender's Pro Rata Share of such Loan.

     

    ARTICLE
6.

    CERTAIN
GENERAL PROVISIONS.

     

    Section
6.1      Closing Fee.

     

    The
Borrower will pay to the Agent for the benefit of the Lenders on the Closing
Date a closing fee (the "Closing Fee") in the amount of Two Hundred
Fifty-Five Thousand Dollars ($255,000).  The Closing Fee shall be
deemed fully earned on the Closing Date and shall not be subject to rebate or
return, in whole or in part under any circumstances.

    
      
         

      

      
        -23-

        
          

        

      

      
         

      

    

    Section
6.2      Interest on Loans.

     

    (a)           Unless
an Event of Default shall have occurred and the Default Rate applies, the
outstanding principal of the Loans shall bear interest at eleven percent (11%)
per annum.

     

    (b)           The
Borrower promises to pay interest on the outstanding amount of each of the
Loans, in arrears, on the first day of each calendar month commencing with the
payment to be made on September 1, 2010 (subject to the Following Business
Day Convention).

     

    Section
6.3      Funds for Payments.

     

    (a)           All
payments of principal, interest, fees and any other amounts due hereunder or
under any of the other Loan Documents shall be made to the Agent at the Agent's
Head Office, in each case in immediately available funds.

     

    (b)           All
payments by the Borrower hereunder and under any of the other Loan Documents to
or for the account of any Lender or the Agent hereunder or under any of the
other Loan Documents shall be made without setoff or counterclaim and free and
clear of and without deduction for any taxes, levies, imposts, duties, charges,
fees, deductions, withholdings, compulsory loans, restrictions or conditions of
any nature now or hereafter imposed or levied by any jurisdiction or any
political subdivision thereof or taxing or other authority therein unless the
Borrower is compelled by law to make such deduction or
withholding.  If any such obligation is imposed upon the Borrower with
respect to any amount payable by it hereunder or under any of the other Loan
Documents, the Borrower will pay to the Agent for the benefit of the Lenders on
the date on which such amount is due and payable hereunder or under such other
Loan Document, such additional amount in Dollars as shall be necessary to enable
each Lender to receive the same net amount which such Lender would have received
on such due date had no such obligation been imposed upon the
Borrower.

     

    Section
6.4      Computations.

     

    All
computations of interest on the Loans and of other fees to the extent applicable
shall be based on a 360-day year and paid for the actual number of days
elapsed.  Whenever a payment hereunder or under any of the other Loan
Documents becomes due on a day that is not a Business Day, the due date for such
payment shall be extended to the next succeeding Business Day, and interest
shall accrue during such extension.

    
      
         

      

      
        -24-

        
          

        

      

      
         

      

    

    Section
6.5      Additional Costs, Etc.

     

    If
any present or future applicable law, which expression, as used herein, includes
statutes, rules and regulations thereunder and interpretations thereof by any
competent court or by any governmental or other regulatory body or official
charged with the administration or the interpretation thereof and requests,
directives, instructions and notices at any time or from time to time hereafter
made upon or otherwise issued to any Lender by any central bank or other fiscal,
monetary or other authority (whether or not having the force of law),
shall:

     

    (a)           subject
any Lender to any tax, levy, impost, duty, charge, fee, deduction or withholding
of any nature with respect to this Credit Agreement or the other Loan Documents
(other than taxes based upon or measured by the income or profits of a Lender or
taxes in lieu thereof), or

     

    (b)           materially
change the basis of taxation (except for changes in taxes on income or
profits) of payments to any Lender of the principal of or the interest on
any Loans or any other amounts payable to any Lender under this Credit Agreement
or the other Loan Documents, or

     

    (c)           impose
or increase or render applicable (other than to the extent specifically provided
for elsewhere in this Credit Agreement) any special deposit, reserve,
assessment, liquidity, capital adequacy or other similar requirements (whether
or not having the force of law) against assets held by, or deposits in or
for the account of, or loans by, or commitments of an office of a Lender,
or

     

    (d)           impose
on any Lender any other conditions or requirements with respect to this Credit
Agreement, the other Loan Documents, the Loans, or any class of loans or
commitments of which any of the Loans forms a part;

     

    and
the result of any of the foregoing is:

     

    (i)          to
increase the cost to such Lender of making, funding, issuing, renewing,
extending or maintaining any of the Loans, or

     

    (ii)         to
reduce the amount of principal, interest or other amount payable to such Lender
hereunder on account of any of the Loans, or

     

    (iii)        to
require such Lender to make any payment or to forego any interest or other sum
payable hereunder, the amount of which payment or foregone interest or other sum
is calculated by reference to the gross amount of any sum receivable or deemed
received by such Lender from the Borrower hereunder,

     

    then,
and in each such case, the Borrower will, upon demand made by such Lender at any
time and from time to time and as often as the occasion therefor may arise, pay
to such Lender such additional amounts as will be sufficient to compensate such
Lender for such additional cost, reduction, payment or foregone interest or
other sum.  Such Lender shall allocate such cost increases among its
customers in good faith and on an equitable basis.

    
      
         

      

      
        -25-

        
          

        

      

      
         

      

    

    Section
6.6      Capital Adequacy.

     

    If
any present or future law, governmental rule, regulation, policy, guideline or
directive (whether or not having the force of law) or the interpretation
thereof by a court or Governmental Authority with appropriate jurisdiction
affects the amount of capital required or expected to be maintained by any
Lender or any corporation controlling any Lender determines that the amount of
capital required to be maintained by it is increased by or based upon the
existence of such Loans made or deemed to be made pursuant hereto, then such
Lender may
notify the Borrower of such fact, and the Borrower shall pay to such Lender from
time to time on demand, as an additional fee payable hereunder, such amount as
such Lender shall determine in good faith and certify in a notice to the
Borrower to be an amount that will adequately compensate such Lender in light of
these circumstances for its increased costs of maintaining such
capital.  Such Lender shall allocate such cost increases among its
customers in good faith and on an equitable basis.

     

    Section
6.7      Certificate.

     

    A
certificate setting forth any additional amounts payable pursuant to Sections
6.5 or 6.6 and a brief explanation of such amounts which are due, submitted by
such Lender to the Borrower, shall be prima facie evidence that such amounts are
due and owing.

     

    Section
6.8      Interest Following Event of
Default.

     

    After
the occurrence of any Event of Default set forth in clause (a), (b), (g) or (h)
of Section 15.1 which is continuing, the outstanding principal of the Loan shall
bear interest payable on demand at a rate ("Default Rate") per annum equal
to fifteen percent (15%) per annum.  The imposition of the Default
Rate shall not cure any such Event of Default

     

    Section
6.9      [Intentionally Omitted]

     

    Section
6.10    [Intentionally Omitted]

     

    Section
6.11    [Intentionally Omitted]

    
      
         

      

      
        -26-

        
          

        

      

      
         

      

    

    

      Section
6.12     Taxes.

       

      (a)           Unless
otherwise required by a taxing authority, all payments of principal and interest
on the Loans and all other amounts payable hereunder shall be made free and
clear of and without deduction for any present or future excise, stamp,
documentary or property taxes and other taxes, fees, duties, levies,
assessments, withholdings or other charges of any nature whatsoever (including
interest and penalties thereon) imposed by any taxing authority, excluding
taxes imposed on or measured by the Agent's or any Lender's net income or
revenue by any jurisdiction under which the Agent or such Lender is organized or
conducts business (all non-excluded items being called "Taxes").  If
any withholding or deduction from any payment to be made by the Borrower
hereunder is required in respect of any Taxes pursuant to any applicable law,
then the Borrower will:  (i) pay directly to the relevant
Governmental Authority the full amount required to be so withheld or deducted;
(ii) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
Governmental Authority; and (iii) pay to the Agent for the account of the
Agent and the Lenders such additional amount or amounts as is necessary to
ensure that the net amount actually received by the Agent and each Lender will
equal the full amount the Agent and such Lender would have received had no such
withholding or deduction been required.  If any Taxes are directly
asserted against the Agent or any Lender with respect to any payment received by
the Agent or such Lender hereunder, the Agent or such Lender may pay such Taxes
and Borrower will promptly pay such additional amounts (including any penalty,
interest or expense, other than as a result of delay by the Agent or a
Lender) as is necessary in order that the net amount received by such
Person after the payment of such Taxes (including any Taxes on such additional
amount) shall equal the amount such Person would have received had such
Taxes not been asserted so long as such amounts have accrued on or after the day
which is ninety (90) days prior to the date on which the Agent or such
Lender first made demand therefor; provided, that the
foregoing obligation to pay such additional amounts shall not
apply:  (i) to any payment to a Lender that fails to comply with
Section 6.12(c), or (ii) to any Taxes imposed by reason of the voluntary
change by a Lender of the jurisdiction to which such Lender is subject from the
United States to a jurisdiction outside the United States.

       

      (b)           If
Borrower fails to pay any Taxes when due to the appropriate Governmental
Authority or fails to remit to the Agent, for the account of the Agent and the
respective Lenders, the required receipts or other required documentary
evidence, the Borrower shall indemnify the Agent and each Lender for any
incremental Taxes, interest or penalties that may become payable by the Agent or
any Lender as a result of any such failure.

       

      (c)           Each
Lender, assignee and participant that is a U.S. person as defined in Section
7701(a)(30) of the Code shall deliver to the Borrower and the Agent, and if
applicable, the assigning Lender (or, in the case of a participant, to the
Lender from which the related participation shall have been purchased) on
or before the date on which it becomes a party to this Credit Agreement (or, in
the case of a participant, on or before the date on which such participant
purchases the related participation), two duly completed and signed copies of
Internal Revenue Service Form W-9.  Each Lender, assignee and
participant that is not a U.S. person as defined in Section 7701(a)(30) of
the Code (a "Foreign Lender") shall deliver to the Borrower and the Agent,
and if applicable, the assigning Lender (or, in the case of a participant, to
the Lender from which the related participation shall have been
purchased) on or before the date on which it becomes a party to this Credit
Agreement (or, in the case of a participant, on or before the date on which such
participant purchases the related participation) either:

       

      (i)            two
duly completed and signed copies of any of Internal Revenue Service Form W-8ECI,
Form W-BEN (with respect to a complete exemption under any income tax
treaty) or Form W-8IMY or successor and related applicable forms, as the
case may be, certifying to such Lender's entitlement as of such date to a
complete exemption from United States withholding tax with respect to payments
to be made under this Credit Agreement (or successor forms), or

       

      
        
           

        

        
          -27-

          
            

          

        

        
           

        

      

       

      (ii)           in
the case of a Foreign Lender that is not a "bank" within the meaning of Section
881(c)(3)(A) of the Code and that does not comply with the requirements of
clause (A) hereof, (x) a statement in form and content reasonably
acceptable to Agent and Borrower to the effect that such Foreign Lender is
eligible for a complete exemption from withholding of U.S. Taxes under Code
section 871(h) or 881(c) (a "Foreign Lender Complete Exemption
Certificate"), and (y) two duly completed and signed copies of Internal
Revenue Service Form W-8BEN or successor and related applicable
form.

       

      Further,
each Foreign Lender agrees (i) to deliver to the Borrower and the Agent,
and if applicable, the assigning Lender (or, in the case of a participant, to
the Lender from which the related participation shall have been purchased), two
further duly completed and signed copies of the applicable Form W-8 or successor
and related applicable forms or certificates, on or before the date that any
such form or certificate, as the case may be, expires or becomes obsolete and
promptly after the occurrence of any event requiring a change from the most
recent form(s) or certificate(s) previously delivered by it to the
Borrower (or, in the case of participant, to the Lender from which the related
participation shall have been purchased) in accordance with applicable U.S.
laws and regulations, (ii) in the case of a Foreign Lender that delivers a
Foreign Lender Complete Exemption Certificate, to deliver to the Borrower and
the Agent, and if applicable, the assigning Lender, such statement on an annual
basis on the anniversary of the date on which such Foreign Lender became a party
to this Credit Agreement and to deliver promptly to the Borrower and the Agent,
and if applicable, the assigning Lender, such additional statements and forms as
shall be reasonably requested by the Borrower from time to time, and
(iii) to notify promptly the Borrower and the Agent (or, in the case of
Participant, the Lender from which the related participation shall have been
purchased) if it is no longer able to deliver, or if it is required to
withdraw or cancel, any form or certificate previously delivered by it pursuant
to this Section 6.12(c).  The Borrower shall not be required to pay
additional amounts to any Lender pursuant to this Section 6.12 with respect
to United States withholding and income Taxes to the extent that the obligation
to pay such additional amounts would not have arisen but for the failure of such
Lender to comply with this paragraph other than as a result of a change in
law.

       

      Section
6.13     General Obligations.

       

      All
extensions of credit by any Lender to the Borrower under the Term Notes and all
other Obligations to the Agent and the Lenders under this Credit Agreement and
any of the Loan Documents shall constitute one general obligation secured by the
security interest in all of the Collateral and by all other security interests,
liens, claims, and encumbrances heretofore, now, or at any time or times
hereafter granted by the Borrower and its Subsidiaries to the Agent and the
Lenders.  The Borrower agrees that all of the rights of the Agent and
the Lenders set forth in this Credit Agreement shall apply to any modification
of or supplement to this Credit Agreement, any supplements or exhibits hereto,
and other agreements, unless otherwise agreed in writing.

       

      
        
           

        

        
          -28-

          
            

          

        

        
           

        

      

       

      Section
6.14     Replacement of Lender Due to Increased
Costs.

       

      Anything
contained herein to the contrary notwithstanding, in the event
that:  (a) (i) any Lender (an "Increased Cost Lender") shall give
notice to the Borrower that such Lender is entitled to receive payments under
Section 6.5, the Borrower may, at its option, so long as no Default or no Event
of Default has occurred and is continuing, notify such Increased Cost Lender and
the Agent of its intention to obtain, at the Borrower's expense, a replacement
lender ("Increased Cost Replacement Lender") for such Increased Cost Lender,
which Increased Cost Replacement Lender must be reasonably satisfactory to the
Agent.  In the event the Borrower obtains an Increased Cost
Replacement Lender within ninety (90) days following notice of its intention to
do so, Increased Cost Lender shall sell, at par, its interest in the Loans, the
Obligations related thereto and its rights hereunder as a Lender arising from
and after the date of such sale (but not its rights and liabilities in respect
thereof or under this Credit Agreement and the other Loan Documents for
obligations, indemnities and other matters arising or matters occurring before
the date of such sale) shall terminate on the date of such sale, and Increased
Cost Lender shall promptly execute all documents reasonably requested to
surrender and transfer such interest.  Upon any such sale and payment,
such replaced Increased Cost Lender shall no longer constitute a "Lender" for
purposes hereof, other than with respect to such rights and obligations that
survive termination as set forth herein.  Without in any manner
limiting the remedies of the Lenders, the obligations of an Increased Cost
Lender to sell and assign its Pro Rata Share under this Section 6.14 shall be
specifically enforceable by the Borrower, by an action brought in any court of
competent jurisdiction for such purpose, it being acknowledged and agreed that,
in light of the disruption in the administration of the Loans and the other
terms of the Loan Documents that an Increased Cost Lender may cause, damages and
other remedies at law are not adequate.

       

      ARTICLE
7.

      [Intentionally
Omitted]

       

      ARTICLE
8.

      COLLATERAL
SECURITY.

       

      The
Obligations shall be secured by a perfected second priority security interest
(subject only to the Liens securing the Senior Debt and the other Permitted
Liens and only to a 65% pledge of all of the equity interests in CTSA and any
other Foreign Subsidiary now owned or hereafter formed or acquired) in
favor of the Agent for the benefit of the Lenders, in all of the assets
(including, without limitation, in all Real Property) of the Borrower and
its Domestic Subsidiaries, whether now owned or hereafter formed or acquired
pursuant to the terms of the Security Documents to which the Borrower and its
Domestic Subsidiaries, are a party and, by a guaranty of the Holding Company and
a pledge by the Holding Company of all of the Shares of the Borrower each in
favor of the Agent for the benefit of the Lenders.

       

      
        
           

        

        
          -29-

          
            

          

        

        
           

        

      

       

      ARTICLE
9.

      REPRESENTATIONS
AND WARRANTIES.

       

      In order
to induce the Lenders to enter into this Credit Agreement and to make Loans, the
Holding Company, the Borrower and each of the Borrower's Subsidiaries a party
hereto represents and warrants to the Agent and to each of the Lenders as
follows:

       

      Section
9.1       Corporate Authority.

       

      (a)           The
Holding Company, the Borrower and each of the Borrower's
Subsidiaries:  (i) is a company duly organized, validly existing
and in good standing under the laws of its state of organization, (ii) has
all requisite power to own its property and conduct its business as now
conducted and as presently contemplated, and (iii) is in good standing as a
foreign company and is duly authorized to do business in each jurisdiction in
which the nature of the business conducted therein or the property owned by it
therein makes such qualification necessary except where a failure to be so
qualified or in good standing would not have or could not reasonably be expected
to have a Material Adverse Effect.

       

      (b)           The
execution, delivery and performance of this Credit Agreement and the other Loan
Documents to which the Holding Company or any of its Subsidiaries is or is to
become a party and the transactions contemplated hereby and
thereby:  (i) are within the corporate authority of such Person,
(ii) have been duly authorized by all necessary corporate proceedings,
(iii) do not conflict with or result in any breach or contravention of any
provision of law, statute, rule or regulation to which the Holding Company or
any of its Subsidiaries is subject or any judgment, order, writ, injunction,
license or permit applicable to the Holding Company or any of its Subsidiaries
except where such conflict, breach or contravention does not have, or could not
reasonably be expected to have, a Material Adverse Effect and (iv) do not
conflict with any provision of (A) the Charter Documents, (B) the
Capitalization Documents or (C) any other instrument binding upon the
Holding Company or any of its Subsidiaries except, in the case of this clause C
only, where such conflicts could not reasonably be expected to have a Material
Adverse Effect..

       

      (c)           The
execution and delivery of this Credit Agreement and the other Loan Documents to
which the Holding Company or any of its Subsidiaries is or is to become a party
will result in valid and legally binding obligations of such Person enforceable
against it in accordance with the respective terms and provisions hereof and
thereof, except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally the
enforcement of creditors' rights or by general equitable principles and except
to the extent that availability of the remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding therefor may be brought.

       

      
        
          
          

        

        
          -30-

          
            

          

        

        
          
          

        

      

       

      Section
9.2       Governmental
Approvals.
 

      The
execution, delivery and performance by the Holding Company and any of its
Subsidiaries of this Credit Agreement, the other Loan Documents or the
Capitalization Documents to which the Holding Company or any of its Subsidiaries
is or is to become a party and the transactions contemplated hereby and thereby
do not require the approval or consent of, or filing with, any Governmental
Authority other than those already obtained.

       

      Section
9.3       Title to Properties;
Leases.

       

      Except as
indicated on Schedule
9.3 hereto, the Holding Company and each of its Subsidiaries own all of
the assets reflected in the balance sheet of the Holding Company and its
Subsidiaries as at the Balance Sheet Date or acquired since that date (except
property and assets sold or otherwise disposed of in the ordinary course of
business since that date or disposed of in accordance with the terms and
conditions of this Credit Agreement), subject to no rights of others, including
any mortgages, leases, conditional sales agreements, title retention agreements,
liens or other encumbrances except Permitted Liens.

       

      Section
9.4       Financial Statements and
Projections.

       

      (a)           The
Borrower has furnished to the Agent an audited balance sheet of the Holding
Company and its Subsidiaries as at the Balance Sheet Date, and a statement of
income of the Holding Company and its Subsidiaries, on a consolidated basis, for
the fiscal year ended on December 31, 2009, and a related statement of cash
flows as of such date as audited by its accountant, CCR, LLP.  Such
balance sheet, statement of income and statement of cash flows have been
prepared in accordance with generally accepted accounting principles and fairly
present, in all material respects, the financial condition of the Holding
Company and its Subsidiaries as at the close of business on the date thereof and
the results of operations for the period then ended (subject to the lack of
footnotes and year-end adjustments).  To the knowledge of the
Borrower, there are no contingent liabilities of the Holding Company and its
Subsidiaries as of such date involving material amounts, which were not
disclosed in such balance sheet and the notes related thereto other than
(a) liabilities incurred in the ordinary course of business since the
Balance Sheet Date and (b) executory obligations under contracts which are
not required to be disclosed in such financial statements in accordance with
GAAP.  The Borrower has also furnished to the Agent an unaudited,
balance sheet of the Borrower, as at April 30, 2010 and a statement of income of
the Holding Company and its Subsidiaries on a consolidated basis, for the period
and a related statement of cash flows as of such date, all prepared in good
faith and such financial statements present fairly, in all material respects,
the financial position and results of operations and cash flows of the Holding
Company and its Subsidiaries as of such date and for such periods in accordance
with GAAP, subject to normal year-end audit adjustments and the absence of
footnotes and other than (a) liabilities incurred in the ordinary course of
business since the Balance Sheet Date and (b) executory obligations under
contracts which are not required to be disclosed in such financial statements in
accordance with GAAP.  To the knowledge of the Borrower, except as
fully reflected in such financial statements, there are no material liabilities
or obligations with respect to the Holding Company or any of its
Subsidiaries on a consolidated basis, of any nature whatsoever (whether
absolute, contingent or otherwise and whether or not due).

       

      
        
           

        

        
          -31-

          
            

          

        

        
           

        

      

       

      (b)           The
projections of the annual operating budgets of the Borrower and its Subsidiaries
on a consolidated basis, balance sheets and cash flow statements through the
Borrower's fiscal year ending December 31, 2013, copies of which the Borrower
has delivered to the Agent, disclose all material assumptions made with respect
to general economic, financial and market conditions used in formulating such
projections.  To the knowledge of the Borrower, no facts exist that
(individually or in the aggregate) would result in any material change in
any of such projections.  The projections are based upon reasonable
estimates and assumptions, have been prepared on the basis of the assumptions
stated therein and reflect the reasonable estimates of the results of operations
and other information projected therein.  The projections delivered to
Agent are not guarantees of performance and the failure to achieve any such
projections shall not by itself constitute an Event of Default.

       

      Section
9.5       No Material Changes,
Etc.

       

      Except as
set forth on Schedule 9.5,
since the Balance Sheet Date there has occurred no Material Adverse Effect
(assuming the financial condition and business of the Borrower would have been
the same as the Borrower at such time) from the financial condition shown on or
reflected in the balance sheet of the Holding Company and its Subsidiaries on a
consolidated basis,  as at the Balance Sheet Date, or from the
statement of income for the fiscal year then ended, other than changes in the
ordinary course of business that have not had any Material Adverse Effect, the
occurrence of which has not been waived in writing by the Required
Lenders.  Since the Closing Date, neither the Borrower nor any of its
Subsidiaries has made any Distribution other than a Distribution permitted
pursuant to this Credit Agreement.

       

      Section
9.6       Franchises, Patents, Copyrights,
Etc.

       

      The
Borrower and its Subsidiaries owns or licenses all franchises, patents,
copyrights, trademarks, trade names, licenses, rights under distribution
agreements and permits, and rights in respect of the foregoing adequate for the
conduct of its business substantially as conducted on the Closing
Date.  All of such franchises, patents, copyrights, trademarks,
tradenames, licenses, rights under distribution agreements or permits which are
material are listed on Schedule 9.6, and to
the knowledge of the Borrower and its Subsidiaries, the use thereof by the
Borrower or any of its Subsidiaries does not conflict with or infringe upon the
rights of others and all of any such licenses are in full force and
effect.

       

      Section
9.7       Litigation.

       

      There are
no actions, suits, proceedings or investigations of any kind pending or, to
Borrower's knowledge, threatened against the Holding Company or any of its
Subsidiaries before any court, tribunal or administrative agency or board or
other Governmental Authority that, if adversely determined, might reasonably be
expected, either in any case or in the aggregate, to have a Material Adverse
Effect, or which question the validity of this Credit Agreement or any of the
other Loan Documents, or any action taken or to be taken pursuant hereto or
thereto.  Schedule 9.7 hereto,
as the same may be updated pursuant to notices given under Section 10.5(d),
lists all material actions, suits, proceedings, or investigations of any kind
pending against the Holding Company or any of its Subsidiaries.

       

      
        
           

        

        
          -32-

          
            

          

        

        
           

        

      

       

      Section
9.8       No Materially Adverse Contracts,
Etc.

       

      Neither
the Holding Company nor any of its Subsidiaries are subject to any Charter
Document or other legal restrictions, or any judgment, decree, order, rule or
regulation that has or is reasonably expected to have a Material Adverse Effect
in the future.  Other than those contracts or agreements listed on
Schedule 9.8, in
the judgment of the Borrower, none of the Holding Company or any of its
Subsidiaries is a party to any contract or agreement which, if terminated by a
party thereto, would have or could reasonably be expected to have a Material
Adverse Effect.

       

      Section
9.9       Compliance with Other Instruments,
Laws, Etc.

       

      None of
the Holding Company or any of its Subsidiaries is in violation of any provision
of its or their Charter Documents, bylaws or any agreement or instrument to
which it may be subject or by which it or any of its properties may be bound or
any decree, order, judgment, statute, license, rule or regulation, in any of the
foregoing cases in a manner that has, or could reasonably be expected to have, a
Material Adverse Effect.  Schedule 9.9
accurately and completely lists each material agreement, contract and instrument
and each material license, consent, permit and other federal, state or local
authorization which are in effect in connection with the conduct of the business
of Holding Company and its Subsidiaries on the date hereof.  Except as
listed on Schedule
9.9, the Holding Company and its Subsidiaries, and to Borrower's
knowledge, all other parties to such material agreements, contracts or
instruments are in material compliance with the terms thereof, and no default or
event of default by any party thereto exists thereunder.  The Borrower
and its Subsidiaries are in material compliance, with such governmental
consents, permits and authorizations.  The Holding Company and each of
its Subsidiaries have provided true, accurate and complete copies of each
material agreement, contracts or instruments listed on Schedule 9.9 together
with any and all amendments thereto in each case as in effect on the date
hereof.

       

      Section
9.10     Tax Status.

       

      The
Holding Company, the Borrower and each of the Borrower's
Subsidiaries:  (a) have made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which any of them is subject or any legal extensions therefor
with the appropriate Governmental Authority, (b) have paid all taxes and
other governmental assessments and charges shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith,
diligently and by appropriate proceedings, (c) have set aside on their
books provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply
in accordance with GAAP and (d) have no lien filed therefor on any assets
of the Holding Company, the Borrower or any of the Borrower’s
Subsidiaries.  There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the
Borrower's Key Officers know of no basis for any such claim.

       

      
        
           

        

        
          -33-

          
            

          

        

        
           

        

      

       

      Section
9.11     No Event of Default.

       

      No
Default or Event of Default has occurred and is continuing.

       

      Section
9.12     Holding Company and Investment Company
Acts.

       

      Neither
the Holding Company nor any of its Subsidiaries is a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act of
1935; nor is it an "investment company", or an "affiliate company" or a
"principal underwriter" of an "investment company", as such terms are defined in
the Investment Company Act of 1940.

       

      Section
9.13     Absence of Financing Statements,
Etc.

       

      Except
with respect to Permitted Liens, there is no financing statement, security
agreement, chattel mortgage, real estate mortgage or other document filed or
recorded with any filing records, registry or other public office, that purports
to cover, affect or give notice of any present or possible future lien on, or
security interest in, any assets or property of the Holding Company, the
Borrower or any of the Borrower's Subsidiaries or any rights relating
thereto.

       

      Section
9.14     Perfection of Security Interest.

       

      All
filings, assignments, pledges and deposits of documents or instruments have been
made or are being made and all other actions have been taken or are being taken
that are necessary or advisable, under applicable law, to establish and perfect
the Agent's security interest in the Collateral.  The Collateral and
the Agent's rights with respect to the Collateral are not subject to any setoff,
claims, withholdings or other defenses.

       

      Section
9.15     Certain Transactions.

       

      Except
(a) as otherwise permitted under Section 11.11 and (b) the Management
Agreement, none of the officers, directors, employees or Affiliates of the
Holding Company or any of its Subsidiaries is presently a party to any
transaction with the Holding Company or any of its Subsidiaries (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Borrower, any corporation, partnership, trust or other entity
in which any officer, director, or any Affiliate or employee has a substantial
interest or is an officer, director trustee or partner.  Except as set
forth on Schedule
9.15, neither Borrower nor any Guarantor has indemnified any other Person
under any contract, agreement or arrangement providing for the furnishing of
services or goods to such Person by Borrower or such Guarantor.

       

      
        
           

        

        
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      Section
9.16     Employee Benefit Plans.

       

      (a)           Each
Employee Benefit Plan has been maintained and operated in compliance in all
material respects with the provisions of ERISA and, to the extent applicable,
the Code, including but not limited to the provisions thereunder respecting
prohibited transactions.

       

      (b)           Under
each Employee Benefit Plan which is an employee welfare benefit plan within the
meaning of §3(1) or §3(2)(B) of ERISA, no benefits are due unless the
event giving rise to the benefit entitlement occurs prior to plan termination
(except as required by Title I, Part 6 of ERISA).  The Borrower or an
ERISA Affiliate, as appropriate, may terminate each such Plan at any time (or at
any time subsequent to the expiration of any applicable bargaining
agreement) in the discretion of the Borrower or such ERISA Affiliate
without liability to any Person.

       

      (c)           Each
contribution required to be made to a Guaranteed Pension Plan, whether required
to be made to avoid the incurrence of an accumulated funding deficiency, the
notice or lien provisions of §302(f) or ERISA, or otherwise, has been
timely made.  No waiver of an accumulated funding deficiency or
extension of amortization periods has been received with respect to any
Guaranteed Pension Plan. No liability to the PBGC (other than required insurance
premiums, all of which have been paid) has been incurred by the Borrower or
any ERISA Affiliate with respect to any Guaranteed Pension Plan and there has
not been any ERISA Reportable Event, or any other event or condition which
presents a material risk of termination of any Guaranteed Pension Plan by the
PBGC.  Based on the latest valuation of each Guaranteed Pension Plan
(which in each case occurred within twelve months of the date of this
representation), and on the actuarial methods and assumptions employed for that
valuation, the aggregate benefit liabilities of all such Guaranteed Pension
Plans within the meaning of §4001 of ERISA did not exceed the aggregate value of
the assets of all such Guaranteed Pension Plans, disregarding for this purpose
the benefit liabilities and assets of any Guaranteed Pension Plan with assets in
excess of benefit liabilities, by more than $100,000.

       

      (d)           Neither
the Borrower nor any ERISA Affiliate has incurred any material liability
(including secondary liability) to any Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan under §4201 of ERISA
or as a result of a sale of assets described in §4204 of
ERISA.  Neither the Borrower nor any ERISA Affiliate has been notified
that any Multiemployer Plan is in reorganization or insolvent under and within
the meaning of §4241 or §4245 of ERISA or that any Multiemployer Plan intends to
terminate or has been terminated under §4041A of ERISA.

       

      Section
9.17     Regulations T, X and U.

       

      No
portion of any Loan is to be used for the purpose of purchasing or carrying any
"margin security" or "margin stock" or for any other purpose which might cause
any of the Loans to be considered a "purpose credit" as such terms are used in
Regulations T, U and X of the Board of Governors of the Federal Reserve
System.

       

      
        
           

        

        
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      Section
9.18     Environmental Compliance.

       

      Each of
the Holding Company, the Borrower and the Borrower's Subsidiaries has made
reasonable inquiry into the past and present condition and usage of the Real
Estate and the operations conducted thereon:

       

      (a)           none
of the Holding Company, the Borrower or the Borrower's Subsidiaries or, to
Borrower's knowledge, any operator of the Real Estate or any operations thereon
is in violation, or alleged violation, of any judgment, decree, order, law,
license, rule or regulation pertaining to environmental matters, including
without limitation, those arising under the Resource Conservation and Recovery
Act ("RCRA"), the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal
Clean Air Act, the Toxic Substances Control Act, or any state or local statute,
regulation, ordinance, order or decree relating to health, safety or the
environment (hereinafter "Environmental Laws"), which violation would have, or
could reasonably be expected to have, a Material Adverse Effect;

       

      (b)           neither
the Holding Company, the Borrower nor any of the Borrower's Subsidiaries has
received written notice from any third party including, without limitation: any
federal, state or local Governmental Authority, (i) that any one of them
has been identified by the United States Environmental Protection Agency
("EPA") as a potentially responsible party under CERCLA with respect to a
site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B
(1986); (ii) that any hazardous waste, as defined by 42 U.S.C. §9601(5),
any hazardous substances as defined by 42 U.S.C. §9601(14), any pollutant or
contaminant as defined by 42 U.S.C. §9601(33) and any toxic substances, oil
or hazardous materials or other chemicals or substances regulated by any
Environmental Laws ("Hazardous Substances") which any one of them has
generated, transported or disposed of has been found at any site at which a
federal, state or local agency or other third party has conducted or has ordered
that any of the Holding Company, the Borrower or any of the Borrower's
Subsidiaries conduct a remedial investigation, removal or other response action
pursuant to any Environmental Law; or (iii) that it is or shall be a named
party to any claim, action, cause of action, complaint, or legal or
administrative proceeding (in each case, contingent or otherwise) arising
out of any third party's incurrence of costs, expenses, losses or damages of any
kind whatsoever in connection with the release of Hazardous
Substances;

       

      
        
           

        

        
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      (c)           (i) no
portion of the Real Estate has been used by the Borrower for the handling,
processing, storage or disposal of Hazardous Substances except in accordance
with applicable Environmental Laws: and no underground tank or other underground
storage receptacle for Hazardous Substances is located on any portion of the
Real Estate except in accordance with applicable Environmental Laws;
(ii) in the course of any activities conducted by the Borrower or any of
its Subsidiaries or its operators of its properties, no Hazardous Substances
have been generated or are being used on the Real Estate except in accordance
with applicable Environmental Laws in all material respects; (iii) there
have been no releases (i.e. any past or present releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
disposing or dumping) or threatened releases of Hazardous Substances on,
upon, into or from the properties of the Holding Company or its Subsidiaries by
the Holding Company, the Borrower or any of its Subsidiaries or, any other
Person, which releases could reasonably be expected to have a Material Adverse
Effect; (iv) to the Borrower's knowledge, there have been no releases on,
upon, from or into any real property in the vicinity of any of the Real Estate
which, through soil or groundwater contamination, may have come to be located on
the Real Estate, and which could reasonably be expected to have a Material
Adverse Effect; and (v) in addition, any Hazardous Substances that have
been generated on any of the Real Estate have, to the Borrower's knowledge, been
transported offsite only by carriers having an identification number issued by
the EPA, treated or disposed of only by treatment or disposal facilities
maintaining valid permits as required under applicable Environmental Laws, which
transporters and facilities have been and are, to the Borrower's knowledge,
operating in compliance with such permits and applicable Environmental Laws;
and

       

      (d)           neither
the Borrower nor any of the Borrower's Subsidiaries or any of
the  Real Estate is subject to any applicable Environmental Law that
at the time of making this representation requires them to perform Hazardous
Substances site assessments, or to remove or remediate Hazardous Substances, or
to give notice to any Governmental Authority or to record or deliver to other
Persons any environmental disclosure document or statement by virtue of the
transactions set forth herein and contemplated hereby, or as a condition to the
recording of any mortgage or to the effectiveness of any other transactions
contemplated hereby.

       

      Section
9.19     Ownership; Subsidiaries, Etc.

       

      On the
Closing Date, the Holding Company has a Wholly Owned Subsidiary which is the
Borrower and the Borrower has no Subsidiaries other than CTSA.  As of
the Closing Date, the authorized, issued and outstanding Shares of the Borrower
is as set forth on Schedule 9.19A which
also lists the number of Shares or interests owned of record or beneficially by
any Person on a fully diluted basis and the name of owners of more than five
percent (5%) of the outstanding Shares and of the officers and directors
thereof.  As of the Closing Date, the authorized, issued and
outstanding shares of the Holding Company is as set forth on Schedule 9.19B which
also lists the number of Shares or interests owned of record or beneficially by
any Person that owns five percent (5%) or more of the Holding Company on a fully
diluted basis and the name of such owner.  All of such outstanding
Shares are duly authorized, validly issued, fully paid and nonassessable and are
free and clear of all liens.  Except as listed on Schedule 9.19A, the
Borrower has not issued any securities convertible into, or options or warrants
for, any common or preferred Shares and there are no agreements, voting trusts
or understandings binding upon the Holding Company or Borrower or affecting in
any manner, the sale, pledge, assignment or other disposition thereof, including
any right of first refusal, option, redemption, call or other right with respect
thereto.

       

      
        
           

        

        
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      Section
9.20     Bank Accounts.

       

      Schedule 9.20, as
updated in writing and delivered to the Agent from time to time in accordance
with Article 22, sets forth the account numbers and location of all bank
accounts of the Borrower and each of its Subsidiaries.

       

      Section
9.21     Chief Executive Offices.

       

      The
Holding Company's and the Borrower's chief executive office is located at which
location its books and records are kept.

       

      Section
9.22     Fiscal Year.

       

      The
Holding Company and its Subsidiaries have a fiscal year which is the twelve
(12) months ending on December 31 of each year.

       

      Section
9.23     No Amendments to Certain
Documents.

       

      Except
for amendments effectuated prior to or on the Closing Date, neither the Borrower
nor the Holding Company has amended the Purchase Agreement, any Seller Note, the
SCP Subordinated Notes, or the Management Agreement.  Each of the
representations and warranties made by the Holding Company and the Borrower in
any of the Loan Documents or the Subordinated Debt Documents was true and
correct in all material respects when made and continues to be true and correct
in all material respects on and as of the Closing Date, except to the extent
that any of such representations and warranties relate, by the express terms
thereof, solely to a date falling prior to the Closing Date, and except to the
extent that any of such representations and warranties may have been affected by
the consummation of the transactions contemplated and permitted or required by
the Loan Documents.

       

      Section
9.24     Disclosure.

       

      No
representation or warranty made by the Holding Company or any of its
Subsidiaries in this Credit Agreement or in any agreement, instrument, document,
certificate, statement or letter furnished to the Agent or any of the Lenders by
or on behalf of the Holding Company or any of its Subsidiaries in connection
with any of the transactions contemplated by any of the Loan Documents contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained therein not misleading in
light of the circumstances in which they are made.  There is no
existing condition known to the Holding Company or any of its Subsidiaries which
is reasonably likely in the future to cause a Material Adverse
Effect.

       

      
        
           

        

        
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      Section
9.25     [Intentionally Omitted].

       

      Section
9.26     Insurance.

       

      The
Borrower and each of its Subsidiaries maintains with financially sound and
reputable insurers insurance with respect to its properties and businesses
against such casualties and contingencies as are in accordance with sound
business practices, with the details of such coverage being more fully described
on Schedule
9.26, as updated in writing and delivered to the Agent from time to time
in accordance with Article 22.

       

      Section
9.27     Foreign Assets Control Regulation,
Etc.

       

      Neither
the making of the Loans nor the incurrence of the Indebtedness evidenced thereby
nor the Holding Company's nor any of its Subsidiaries use of the proceeds
thereof will violate the Trading with the Enemy Act, as amended, or any of the
foreign assets control regulations of the United States Treasury Department (31
C.F.R., Subtitle B, Chapter V, as amended) or any enabling legislation or
executive order relating thereto or any Anti-Terrorism Laws.  Without
limiting the foregoing, neither the Holding Company nor any of its
Subsidiaries:  (a) is, or will become, a Person described or
designated in the Specially Designated Nationals and Blocked Persons List of the
Office of Foreign Assets Control or in Section 1 of Executive Order No. 13,244
of September 24, 2001, Blocking Property and Prohibiting Transactions with
Persons Who Commit, Threaten to Commit or Support Terrorism, 66 U.S. Fed. Reg.
49, 079 (2001), as amended, or (b) engages or will engage in any dealings
or transactions, or is or will be otherwise associated, with any such
Person.  The Holding Company and its Subsidiaries are in compliance,
in all material respects, with the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA
Patriot Act) Act of 2001, as amended from time to time, and the rules and
regulations promulgated thereunder from time to time in effect.  No
part of the proceeds from the Loans will be used, directly or indirectly, for
any payments to any governmental official or employee, political party, official
of a political party, candidate for political office, or anyone else acting in
an official capacity, in order to obtain, retain or direct business or obtain
any improper advantage, in violation of the United States Foreign Corrupt
Practices Act of 1977, as amended, assuming in all cases that such Act applies
to the Borrower and its Subsidiaries.

       

      Section
9.28     [Intentionally Omitted]

       

      Section
9.29     Licenses and Permits.

       

      The
Borrower holds all licenses, permits, authorizations, certifications,
accreditations, provider agreements and associated provider numbers
(collectively, the "Licenses") issued by a Governmental Authority or other
organization which are material to the Borrower to operate its business, and
which are capable of being issued at this time and each of the Licenses is
listed on Schedule
9.29 attached hereto.  The Borrower is in material compliance
with the Licenses, except where failure to be in compliance could not reasonably
be expected to have a Material Adverse Effect.  All Licenses which
have been issued are in full force and effect.  The Borrower does not
know of any threatened suspension, revocation or invalidation of any of the
Licenses, or any basis therefore.

       

      
        
           

        

        
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      Section
9.30     SBA License Application and
Related Requirements

       

      Borrower
hereby acknowledges that each of Granite and Patriot is a SBIC pursuant to the
SBIC Act.  Borrower acknowledges that compliance by Borrower with the
terms of this Credit Agreement and the representations, warranties and covenants
contained herein are necessary for Granite and Patriot to be in compliance under
the SBIC Act and Borrower agrees to comply with the terms of this Credit
Agreement for such purpose.

       

      Section
9.31     Small Business
Administration Documentation.

       

      The
information regarding Borrower set forth in the SBA Form 480, Form 652, Parts A
and B of Form 1031 and the Use of Proceeds Statement (as defined below) is
accurate and complete in all material respects.  Each SBIC Holder
acknowledges that Borrower completed, executed and delivered to Granite SBA
Forms 480, 652 and 1031 (Parts A and B) together with a business plan showing
Borrower's financial projections (including balance sheets and income and cash
flows statements) for the period described therein and a written statement
(whether included in this Credit Agreement or pursuant to a separate statement)
from Borrower regarding its use of proceeds from the Loans or Warrants to
Lenders (the "Use of Proceeds Statement").

       

      Section
9.32     Small Business
Concern.

       

      Each of
Borrower and each Guarantor, together with its "affiliates" (as that term is
defined in Title 13, Code of Federal Regulations, § 121.103), is a "small
business concern" within the meaning of the SBIC Act, including, without
limitation, Title 13, Code of Federal Regulations, § 121.301 and each of
Borrower and such Guarantor does not presently engage in, and does not intend to
engage in, any activities, nor does such Borrower intend to use, directly or
indirectly, the proceeds of the Loans or Warrants for any purpose for which a
licensee under the SBIC Act is prohibited from providing funds by the SBIC Act
(including Title 13, Code of Federal Regulations, § 107.720).

       

      Section
9.33     Product
Liability.

       

      All of
Borrower’s and Guarantors’ products are non-toxic and do not contain any
Hazardous Substances.

       

      Section
9.34     Government
Contracts.

       

      (i)           Schedule
9.34 lists all Government Contracts, and Schedule
9.34 lists all Government Bids.  “Government Contract”
means any contract that:  (a) is between the Borrower or a Guarantor
and a U.S. or other governmental entity, or is entered into by the Borrower as a
subcontractor (at any tier) in connection with a contract between another entity
and a U.S. or other governmental entity; and (b) for which final payment to the
Borrower was not made prior to the Closing Date.  “Government Bid”
means any offer to sell made by the Borrower prior to the Closing Date which, if
accepted, would result in a Government Contract.

       

      
        
           

        

        
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      (ii)           Except
as set forth in Schedule 9.34, none
of Borrower, any Guarantor nor any director, officer, agent, employee (whether
full time or contract) or other Person acting on behalf of Borrower or any
Guarantor has, in the course of its actions for, or on behalf of, Borrower or
such Guarantor: (a) used or authorized the use of any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to commercial or political activity; (b) offered, made or authorized any direct
or indirect unlawful payment to any foreign or domestic government official or
employee (whether full time or contract); or (c) offered, made or authorized any
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee (whether full
time or contract).

       

      (iii)          With
respect to each Government Contract or Government Bid to which Borrower or such
Guarantor is a party:

       

      (A)           Borrower
and each Guarantor has complied with all terms and conditions of such Government
Contract or Government Bid, including all clauses, provisions and requirements
incorporated expressly, by reference or by operation of law therein, except
where the failure to so comply could not reasonably be expected to have a
Material Adverse Effect;

       

      (B)            All
representations and certifications executed, acknowledged or set forth in or
pertaining to such Government Contract or Government Bid were, to the knowledge
of the Borrower, complete and correct in all material respects as of their
effective date;

       

      (C)           Neither
the United States Government nor any prime contractor, subcontractor or other
Person has notified Borrower or any Guarantor, either in writing or, to the
knowledge of Borrower or such Guarantor, verbally, that Borrower or such
Guarantor has breached or violated any law, regulation, certification,
representation, clause, provision or requirement pertaining to such Government
Contract or Government Bid;

       

      (D)           No
cure notice or show cause notice is currently in effect pertaining to such
Government Contract, and such Government Contract was not terminated for default
or convenience;

       

      (E)            No
material cost incurred by Borrower or any Guarantor pertaining to such
Government Contract or Government Bid has been formally questioned or
challenged, is the subject of any investigation or has been disallowed by the
United States Government, and no material amount due to Borrower or any
Guarantor pertaining to such Government Contract or Government Bid has been
withheld or set-off nor has any claim been made to withhold or set-off
money;

       

      
        
           

        

        
          -41-

          
            

          

        

        
           

        

      

       

      (F)            Neither
Borrower or any Guarantor has received any written adverse or negative
assessment of its performance under any Government Contract during the last
three years;

       

      (G)            Borrower’s
and each Guarantor’s cost accounting system complies with the Cost Accounting
Standards (as defined in the Federal Acquisition Regulations, 48 C.F.R. Chapter
99) to the extent required by such Government Contract, and during the past
three years, Borrower’s and each Guarantor’s bids or proposals for such
Government Contract complied with the Truth in Negotiations Act;

       

      (H)           Borrower
and each Guarantor is in compliance with, and maintains controls sufficient to
monitor compliance with, all Qualified Products Lists and Qualified Manufacturer
Lists applicable to the products and production facilities of Borrower or such
Guarantor; and

       

      (I)          
  Borrower and each Guarantor is in compliance with, and maintains
controls sufficient to monitor compliance with, the Buy American Act (as
implemented in the Federal Acquisition Regulations, 48 C.F.R. Part 25), and any
domestic preference applicable to such Government Contract, including without
limitation, a preference for domestic specialty metals.

       

      (iv)          Except
as set forth in Schedule
9.34:  (a) neither Borrower nor any Guarantor nor any of the
Borrower’s or Guarantors’ employees is, or during the last three years has been,
under administrative, civil or criminal investigation or audit (other than
routine inquiries, audits and reconciliations) by the United States Government,
or is the subject of any internal audit by Borrower or such Guarantor, with
respect to any alleged material irregularity, misstatement or omission arising
under or relating to any Government Contract or Government Bid; (b) during the
last three years, neither Borrower nor any Guarantor has conducted or initiated
any material internal investigation or made a voluntary disclosure to the United
States Government with respect to any alleged irregularity, misstatement or
omission arising under or relating to a Government Contract or Government Bid
and neither Borrower nor any Guarantor is currently subject to any
Administrative Agreement relating to a Government Contract or Government Bid;
(c) during the last three years, neither Borrower nor any Guarantor nor any of
Borrower’s or such Guarantor’s employees has been suspended or debarred from
doing business with the United States Government, has been proposed for
suspension or debarment, or has been the subject of a finding of
non-responsibility on a Government Bid; and (d) during the last three years,
neither Borrower nor any Guarantor nor any of Borrower’s or such Guarantor’s
employees has been named as a defendant in any proceeding brought under the
False Claims Act.  To the knowledge of Borrower, there exist no facts
or circumstances that would warrant the institution of suspension or debarment
proceedings or the finding of non-responsibility on the part of Borrower or any
Guarantor or any of Borrower’s or such Guarantor’s employees.

       

      
        
           

        

        
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      (v)           To
the knowledge of the Borrower, except as set forth in Schedule 9.34, there
exist: (a) no outstanding material claims against Borrower or any Guarantor
either by the United States Government or by any prime contractor,
subcontractor, vendor or other Person, arising under or relating to any
Government Contract or Government Bid; and (b) no material disputes between
Borrower or any Guarantor and the United States Government under the Contract
Disputes Act or between Borrower or any Guarantor and any prime contractor,
subcontractor or vendor arising under or relating to any Government Contract or
Government Bid.

       

      (vi)          Except
for the security interest granted to Agent and liens granted to secure the
Senior Debt, neither Borrower nor any Guarantor has assigned or otherwise
conveyed or transferred, or agreed to assign, to any Person, any Government
Contract, or any account receivable relating thereto.

       

      Section
9.35     Export Licenses and
Compliance.

       

      (i)     
      Except as set forth in Schedule 9.35,
Borrower and each Guarantor conducts, and has at all times during the past three
years conducted, its export and reexport transactions in all material respects
in accordance with all applicable U.S. export and reexport controls, including
the United States Export Administration Act and Export Administration
Regulations, the Arms Export Control Act and International Traffic in Arms
Regulations and all regulations promulgated and administered by the Treasury
Department’s Office of Foreign Assets Control (collectively “U.S. Export
Controls”).

       

      (ii)           Except
as set forth in Schedule 9.35,
neither Borrower nor any Guarantor has received any written notification or
communication (or, to the knowledge of the Borrower, any oral notification or
communication) from any Governmental Authority asserting that Borrower or any
Guarantor is not in compliance, in any material respect, with any U.S. Export
Controls.

       

      (iii)          Except
as set forth in Schedule 9.35,
Borrower and each Guarantor has or has applied for all permits, registrations,
licenses, certifications and other approvals (collectively, the “Permits”) from
Governmental Authorities which are required under U.S. Export Controls in order
for Borrower or such Guarantor to conduct its business as presently conducted
and which, if not possessed, would be material to the operations of Borrower or
such Guarantor, considered together.  To the Borrower’s knowledge, (i)
all such issued Permits are valid and in full force and effect and (ii) there is
no formal proceeding pending by a, nor has Borrower or any Guarantor received a
written notice from any Governmental Authority seeking or threatening to,
modify, suspend, revoke, withdraw, terminate or otherwise limit any such
Permit.

       

      (iv)          Schedule 9.35 lists
all material export, re-export or transshipment licenses, pending license
applications, authorizations and approved manufacturing license agreements or
technical assistance agreements which are held by Borrower or any Guarantor as
of the date of this Credit Agreement.

       

      (v)           Except
as set forth in Schedule 9.35, during
the last three years, neither Borrower nor any Guarantor has in any material
respect disclosed, disseminated or released to a foreign national in the United
States technology or technical data in a manner that required Borrower or such
Guarantor to obtain a license for deemed export from the United States of
America without obtaining such license.

       

      
        
           

        

        
          -43-

          
            

          

        

        
           

        

      

       

      (vi)          Except
as set forth in Schedule 9.35, there
have been no voluntary self disclosures made by Borrower or any Guarantor to the
U.S. Department of State's Directorate of Defense Trade Controls, the U.S.
Department of Commerce's Bureau of Industry and Security, or the U.S. Department
of Treasury’s Office of Foreign Assets Control with respect to any exports,
imports or other transactions by Borrower or any Guarantor in the last three
years.

       

      (vii)         To
the knowledge of the Borrower, neither Borrower nor any Guarantor has
participated directly or indirectly in any export, import or other transactions
with a person or entity denied U.S. export privileges or otherwise specially
designated or debarred from exporting or receiving exported products, software,
technology or services by the United States Government, except as authorized by
applicable Law or Permit.

       

      ARTICLE
10.

      AFFIRMATIVE
COVENANTS OF THE BORROWER.

       

      The
Holding Company, the Borrower and each of the Borrower's Subsidiaries that
become a party to this Credit Agreement from time to time covenant and agree
that, so long as any Loan, or Note is outstanding or the Agent or any Lender has
any obligation to make any Loans and any and all other amounts payable under the
Loan Documents have been paid in full in cash:

       

      Section
10.1     Punctual Payment.

       

      The
Borrower will duly and punctually pay or cause to be paid the principal and
interest on the Loans, and all other amounts provided for in this Credit
Agreement and the other Loan Documents to which the Holding Company or any of
its Subsidiaries is a party, all in accordance with the terms of this Credit
Agreement and such other Loan Documents.

       

      Section
10.2     Maintenance of Office.

       

      The
Borrower will maintain its chief executive office at the location described in
Section 9.21, or at such other place in the United States of America as the
Borrower shall designate upon written notice to the Agent, where notices,
presentations and demands to or upon the Borrower in respect of the Loan
Documents to which the Borrower is a party may be given or made.

       

      Section
10.3     Records and Accounts.

       

      The
Holding Company and its Subsidiaries will:  (a) keep true and
accurate records and books of account in which full, true and correct entries
will be made in accordance with generally accepted accounting principles and
(b) maintain adequate accounts and reserves for all taxes (including income
taxes), depreciation, depletion, obsolescence and amortization of its
properties, contingencies, and other reserves.

       

      
        
           

        

        
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      Section
10.4     Financial Statements, Certificates and
Information.

       

      The
Borrower will deliver to the Agent and each of the Lenders:

       

      (a)           as
soon as practicable, but in any event not later than one hundred twenty
(120) days after the end of each fiscal year of the Holding Company and its
Subsidiaries, commencing with the fiscal year ending December 31, 2010, and
thereafter, the audited consolidated balance sheet of the Holding Company and
its Subsidiaries and the consolidating balance sheet of the Holding Company and
its Subsidiaries, each as at the end of such year, and the related consolidated
statement of the income and consolidated statement of operations, stockholders'
equity and cash flow and consolidating statement of income and consolidating
statement of cash flow for such year, setting forth in comparative form the
figures for the previous fiscal year and all such consolidated and consolidating
statements to be in reasonable detail, in each case prepared in accordance with
generally accepted accounting principles, and for all such statements, certified
without qualification by CCR LLP or by other independent certified public
accountants reasonably satisfactory to the Agent and the Required Lenders,
together with an opinion of such accountant to the effect that such financial
statements present fairly in all material respects the financial condition and
results of operations of the Holding Company and its Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied and that the
audit by such accountants in connection with such financial statements has been
made in accordance with generally accepted auditing standards and a written
statement from such accountants to the effect that they have read a copy of this
Credit Agreement, and that, in making the examination necessary to said
certification, they have obtained no knowledge of any Default or Event of
Default under Article 12 hereof, or, if such accountants shall have obtained
knowledge of any then existing Default or Event of Default under Article 12,
they shall disclose in such statement any such Default or Event of
Default;

       

      (b)           as
soon as practicable, but in any event not later than forty-five (45) days
after the end of each fiscal quarter of the Borrower commencing with the fiscal
quarter ending September 30, 2010, copies of the unaudited consolidated balance
sheet of the Holding Company and its Subsidiaries and the unaudited
consolidating balance sheet of the Borrower and its Subsidiaries, each as at the
end of such fiscal quarter, and the related consolidated statement of income and
consolidated statement of cash flow and consolidating statement of income and
consolidating statement of cash flow for the portion of the Borrower's fiscal
year then elapsed, all in reasonable detail and prepared in accordance with
generally accepted accounting principles, together with a certification by one
of the Borrower's Key Officers that the information contained in such financial
statements fairly presents in all material respects the financial position of
the Holding Company and its Subsidiaries on the date thereof (subject to the
lack of footnotes and year-end adjustments);

       

      
        
           

        

        
          -45-

          
            

          

        

        
           

        

      

      (c)           simultaneously
with the delivery of the financial statements referred to in subsections
(a) and (b) above, a statement certified by the principal financial or
accounting officer of the Borrower, in substantially the form of Exhibit B hereto, and
setting forth in reasonable detail:  (i) computations evidencing
compliance with the covenants contained in Article 12 and (if
applicable) reconciliations to reflect changes in generally accepted
accounting principles since the Balance Sheet Date, together with supporting
documentation used in such calculations or determinations, as the case may be,
and a comparison to:  (x) the Borrower's results obtained in such
applicable period during the preceding fiscal year and (y) the budget which
was delivered to the Lenders for the then current fiscal year;

       

      (d)           as
soon as practicable, but in any event not later than thirty (30) days after
the end of each calendar month, commencing with the month ending June 30, 2010,
copies of the unaudited consolidated balance sheet of the Holding Company and
its Subsidiaries and the unaudited consolidating balance sheet of the Holding
Company and its Subsidiaries, each as at the end of such calendar month, the
related consolidating statement of income and consolidating statement of cash
flow for the portion of the Borrower's fiscal year then elapsed, and a
comparison to the results obtained in the preceding fiscal year and to the
budget which was delivered to the Lenders for the then current fiscal year, all
in reasonable detail and prepared in accordance with generally accepted
accounting principals together with a certification by one of the Borrower's Key
Officers that the information contained in such financial statements fairly
presents in all material respects the financial position of the Borrower and its
Subsidiaries on the date thereof (subject to year-end adjustments and the lack
of footnotes);

       

      (e)           contemporaneously
with the filing or mailing thereof, copies of all material of a financial nature
filed with the Securities and Exchange Commission or sent to the stockholders of
the Borrower or the Holding Company, as the case may be;

       

      (f)      
     by not later than fifteen (15) days after the
end of each calendar month: (i) an accounts receivable aging and
(ii) Inventory reports in form satisfactory to the Agent;

       

      (g)           as
soon as practicable, but in any event not later than December 31 of each fiscal
year of the Borrower, projections of the Holding Company and its Subsidiaries
updating those projections delivered to the Lenders and referred to in Section
9.4(b) or, if applicable, updating any later such projections delivered in
response to a request pursuant to this Section 10.4(g) and a proposed
annual detailed business operating budget for the next succeeding fiscal year
prepared on a monthly basis which shall set forth, in detail reasonably
satisfactory to the Required Lenders, the assumptions underlying such business
operating budget; and

       

      (h)           from
time to time such other financial data and information (including accountants'
management letters) as the Agent or any Lender may reasonably
request.

       

      
        
          
          

        

        
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      Section
10.5     Notices.
 

      (a)           The
Borrower will promptly notify the Agent and each of the Lenders in writing of
the occurrence of any Default or Event of Default of which it becomes
aware.  If any Person shall give any notice or take any other action
in respect of a claimed default (whether or not constituting an Event of
Default) under this Credit Agreement or any other note or other evidence of
Indebtedness, evidencing an obligation in excess of $100,000, to which or with
respect to which it  or any of its Subsidiaries is a party or obligor,
whether as principal, guarantor, surety or otherwise, the Borrower shall
forthwith give written notice thereof to the Agent and each of the Lenders,
describing the notice or action and the nature of the claimed
default.

       

      (b)           The
Borrower will promptly notify the Agent and each of the Lenders in
writing:  (i) of any violation of any Environmental Law that it
or any of its Subsidiaries reports in writing or is reportable by such Person in
writing (or for which any written report supplemental to any oral report is
made) to any federal, state or local environmental agency and
(ii) upon becoming aware thereof, of any inquiry, proceeding,
investigation, or other action, including a notice from any agency of potential
environmental liability, or any federal, state or local environmental agency or
board, that can reasonably be expected to materially and adversely affect the
assets, liabilities, financial conditions or operations of the Borrower or any
of its Subsidiaries, or security interests or priority thereof pursuant to the
Security Documents.

       

      (c)           The
Borrower will, promptly upon becoming aware thereof, notify the Agent and each
of the Lenders in writing of any setoff, claims (including, with respect to the
Real Estate, environmental claims), withholdings or other defenses to which any
of the Collateral, or the Agent's rights with respect to the Collateral, are
subject.

       

      (d)           The
Holding Company and the Borrower will, and will cause each of the Borrower's
Subsidiaries to, give notice to the Agent and each of the Lenders in writing
within fifteen (15) days of becoming aware of any litigation or proceedings
threatened in writing or any pending litigation and proceedings affecting the
Holding Company, the Borrower or any of the Borrower's Subsidiaries or to which
the Holding Company, the Borrower or any of the Borrower's Subsidiaries is or
becomes a party involving an uninsured claim against the Borrower or any of its
Subsidiaries that could reasonably be expected to have a Material Adverse Effect
and stating the nature and status of such litigation or
proceedings.  The Holding Company will, and will cause each of its
Subsidiaries to, give notice to the Agent and each of the Lenders in writing, in
form and detail satisfactory to the Required Lenders, within ten (10) days
of any judgment not covered by insurance, final or otherwise, against the
Holding Company, the Borrower or any of the Borrower's Subsidiaries in an amount
in excess of $100,000.

       

      (e)           The
Borrower will promptly upon receipt thereof, deliver to the Agent and each of
the Lenders copies of all audit reports and management letters, if any,
submitted to the Holding Company or to the Borrower by its accountants and
copies of all financial statements, material reports, material notices and proxy
statements sent by or on behalf of the Holding Company or the Borrower to its
stockholders.

       

      (f)           The
Holding Company and the Borrower will simultaneously with the issuance thereof,
and immediately upon the receipt thereof by or on behalf of the Holding Company
or the Borrower, as applicable, deliver to the Agent and each of the Lenders
copies of all reports, covenant compliance certificates, budgets, projections,
requests for waivers, notices of default, requests for amendments or other
correspondence issued in connection with or relating to the Subordinated Debt
Documents.

       

      
        
           

        

        
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      (g)          The
Borrower will promptly notify the Agent and each of the Lenders in writing upon
becoming aware thereof, of any inquiry, proceeding, investigation, or other
action, including a notice from any Governmental Authority of any violation of
any laws or any action, pending or threatened regarding any Licenses that can
reasonably be expected to have a Material Adverse Effect.

       

      (h)          The
Borrower will promptly notify the Agent in writing upon a Borrower Key Officer
ceasing to be involved on a full time basis in the day to day management and
operations of the business of the Borrower.

       

      (i)           The
Borrower will within five (5) days of its receipt thereof, deliver to the Agent
a copy of any material notice, document, survey results, report or other written
communication from any Governmental Authority delivered in connection with any
inspection, License renewal or other site visit including, without limitation,
all survey results.

       

      (j)           The
Borrower will deliver to the Agent written notice of its intention (i) to prepay
all or any portion of the Loans no less than sixty (60) days prior to making
such prepayment, and (ii) to prepay the Senior Debt in full not less than ten
(10) days prior to making such payment.

       

      Section
10.6     Legal Existence; Maintenance of
Properties.

       

      The
Holding Company will do and will cause each of the Borrower and the Borrower's
Subsidiaries to do or cause to be done all things necessary to preserve and keep
in full force and effect its legal existence, rights, and
franchises.  The Holding Company:  (a) will cause all
of its properties used or useful in the conduct of its business or the business
of its Subsidiaries to be maintained and kept in good condition, repair and
working order, consistent with past practice, in all material respects, ordinary
wear and tear excepted, and supplied with all necessary equipment, (b) will
cause to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Holding Company may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all time consistent with past
practices, and (c) will, and will cause each of its Subsidiaries to,
continue to engage primarily in the businesses now conducted by them and in
related businesses.

       

      Section
10.7     Insurance.

       

      The
Borrower will, and will cause each of its Subsidiaries to, maintain with
financially sound and reputable insurers insurance with respect to its
properties and business against such casualties and contingencies as shall be in
accordance with the general practices of businesses engaged in similar
activities in similar geographic areas and in amounts, containing such terms, in
such forms and for such period as may be reasonable and prudent and in
accordance with the terms of the Security Agreement.

       

      
        
           

        

        
          -48-

          
            

          

        

        
           

        

      

       

      Section
10.8     Taxes.

       

      The
Holding Company and the Borrower will, and will cause each of the Borrower's
Subsidiaries to, duly pay and discharge, or cause to be paid and discharged,
before the same shall become overdue, all taxes, assessments and other
governmental charges imposed on it and its real properties, sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if unpaid might by law
become a lien or charge upon any of its property except for taxes, assessments,
governmental charges, and claims for labor, materials or supplies that are being
contested in good faith by appropriate proceedings and for which the Borrower or
the applicable Subsidiary has set aside on its books adequate reserves and no
Lien has been filed in connection therewith.

       

      Section
10.9     Inspection of Properties and Books,
Etc.

       

      (a)           The
Holding Company and the Borrower shall permit the Lenders, through the Agent, or
any of the Agent's designated representatives, to visit and inspect any of the
properties of the Holding Company and its Subsidiaries, to examine the books of
account of the Holding Company and its Subsidiaries (and to make copies thereof
and extracts therefrom), and to discuss the affairs, finances and accounts of
the Holding Company and its Subsidiaries with the Holding Company and its
Subsidiaries, officers and accountants, and to be advised as to the same by,
such officers and accountants and to communicate directly with such officers and
accountants, and the Borrower hereby authorizes such officer's and accountants
to disclose to the Agent for the Lenders any and all financial statements and
other supporting financial documents with respect to the Holding Company and its
Subsidiaries' financial condition and affairs (other than materials protected by
the attorney-client privilege and materials which may not be disclosed without
violation of a confidentiality obligation binding upon it), all at such
reasonable times and intervals, and so long as no Default exists or Event of
Default has occurred and is continuing, during regular business hours and upon
reasonable prior notice, at the Borrower's expense, as the Agent may reasonably
request.  So long as no Event of Default has occurred and is
continuing, no more than two (2) such examinations shall be conducted during any
calendar year.

       

      (b)           Upon
the Agent's reasonable request and at reasonable times, the Holding Company and
its Subsidiaries will permit the Agent's examiners or independent collateral
auditors selected by the Agent to conduct commercial finance examinations at
such times and intervals as the Agent may request; provided, that so
long as no Default or Event of Default has occurred and is continuing such
audits shall not occur more often than once during each fiscal year and after
the occurrence of any Default or Event of Default which is continuing shall not
occur more often than twice during each fiscal year.  All such
examinations shall be conducted and made at the expense of the
Borrower.

       

      
        
           

        

        
          -49-

          
            

          

        

        
           

        

      

         

      (c)           Upon
the Agent's reasonable request, the Holding Company and its Subsidiaries will
obtain and deliver to the Agent and each of the Lenders appraisal reports in
form and substance and from appraisers satisfactory to the Agent, stating
(i) the then current fair market, orderly liquidation and forced
liquidation values of all or any portion of the Capital Assets or Real Estate
owned by the Borrower or any of its Subsidiaries and (ii) the then current
business value of the Holding Company and its Subsidiaries.  All such
appraisals shall be at the expense of the Borrower, provided that so long
as no Default or Event of Default has occurred and is continuing (x) such
appraisals shall not occur more often than twice during each fiscal year and (y)
for purposes of the limitation contained in this proviso, any such appraisal
performed at the request of, and acceptable to, the Senior Agent shall be deemed
to be an appraisal performed pursuant to this clause (c) so long as a copy of
such appraisal is promptly provided to Agent and Lenders.  In the
event a Default or Event of Default has occurred and is continuing, there shall
be no such limit.

       

      (d)           No
more frequently than once during any twelve (12) month period, or more
frequently as determined by the Agent if Default or an Event of Default shall
have occurred and be continuing, the Agent may, in its discretion, obtain one or
more environmental assessments or audits of the Real Estate prepared by a
hydro-geologist, an independent engineer or other qualified consultant or expert
approved by the Agent to evaluate or confirm:  (i) whether any
Hazardous Substances are present in the soil or water at such Real Estate and
(ii) whether the use and operation of such real Estate complies with all
Environmental Laws; provided, that for purposes of the limitation set forth at
the beginning of this sentence, any such environmental assessment or audit
performed at the request of, and acceptable to, the Senior Agent shall be deemed
to be an environmental assessment or audit performed pursuant to this clause (c)
so long as a copy of such environmental assessment or audit is promptly provided
to Agent and Lenders.  Environmental assessments may include without
limitation detailed visual inspections of such Real Estate including any and all
storage areas, storage tanks, drains, dry wells and leaching areas, and the
taking of soil samples, surface water samples and ground water samples, as well
as such other investigations or analyses as the Agent deems
appropriate.  All such environmental assessments shall be conducted
and made at the expense of the Borrower.

       

      (e)           At
the request of the Agent, the Borrower shall deliver a letter addressed to the
accountants referenced in Section 10.9(a) instructing them to comply with the
provisions of such Section.

       

      Section
10.10  Compliance with Laws, Contracts, Licenses, and
Permits.

       

      The
Holding Company and the Borrower will comply with and the Borrower will cause
its Subsidiaries to comply with:  (a) the applicable laws and
regulations wherever its business is conducted, including all Environmental
Laws, (b) the provisions of its Charter Documents, (c) all agreements
and instruments by which it or any of its properties may be bound and
(d) all applicable decrees, orders, and judgments except in the case of
(a), (c) and (d) above where such noncompliance does not have or could
not reasonably be expected to have a Material Adverse Effect.  If any
authorization, consent, approval, permit or license from any officer, agency or
instrumentality of any Governmental Authority shall become necessary or required
in order that the Holding Company, the Borrower or any of the Borrower's
Subsidiaries may fulfill any of its obligations hereunder or any of the other
Loan Documents to which the Holding Company, the Borrower or any of the
Borrower's Subsidiaries is a party, the Borrower will, or (as the case may
be) will cause such Subsidiary to, promptly take or cause to be taken all
reasonable steps within the power of the Holding Company, the Borrower or any of
its Subsidiaries to obtain such authorization, consent, approval, permit or
license and furnish the Agent with evidence thereof.

       

      
        
           

        

        
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      Section
10.11   Employee Benefit Plans.

       

      The
Borrower will:  (a) promptly upon filing the same with the
Department of Labor or Internal Revenue Service furnish to the Agent a copy of
the most recent actuarial statement required to be submitted under
§103(d) of ERISA and Annual Report, Form 5500, with all required
attachments, in respect of each Guaranteed Pension Plan and (b) promptly
upon receipt or dispatch, furnish to the Agent any material notice, report or
demand sent or received in respect of a Guaranteed Pension Plan under §§302,
4041, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer
Plan under §§4041A, 4202, 4219, 4242 or 4245 of ERISA.

       

      Section
10.12   Bank Accounts.

       

      The
Borrower and its Domestic Subsidiaries shall maintain its or their primary
operating and primary deposit accounts and all cash concentration accounts in
accordance with the terms of the Senior Loan Agreement.

       

      Section
10.13   Further Assurances.

       

      The
Holding Company will, and will cause each of its Subsidiaries to, cooperate with
the Lenders and the Agent and execute such further instruments and documents as
the Agent shall reasonably request to carry out to their satisfaction the
transactions contemplated by this Credit Agreement and the other Loan
Documents.

       

      Section
10.14   Use of Proceeds.

       

      The
Borrower will use the proceeds of the Loans solely:  (a) to repay
Senior Debt, (b) to pay transaction fees and expenses incurred in connection
with the Loans, (c) for Capital Expenditures, to the extent permitted
hereunder, and (d) for working capital purposes.

       

      Section
10.15   Board; Board
Meetings.

       

      (a)           Subject
to Section
10.15(c), the Holding Company shall give to Agent notice of all meetings
and actions by written consent of its board of directors and each committee
thereof, at the same time and in the same manner as notice of any meetings of
such board of directors or committees is required to be given to managers who do
not waive such notice (or, if such action requires no notice, then 5 days
written notice thereof describing the matters upon which action is to be taken).
The Holding Company shall furnish to the Agent copies of all consents and other
documents furnished to any body described in the first sentence of this Section
at the same time the same are furnished to the members of any such
body.

       

      
        
           

        

        
          -51-

          
            

          

        

        
           

        

      

       

      (b)           The
Agent shall have the right to send two observers selected by the Agent, to each
meeting of the board of directors of the Holding Company or any committee
thereof, or to have such observers attend any such meeting telephonically.
Notwithstanding the foregoing, such observers may be excluded from any portion
of any such meeting that is devoted solely to a discussion concerning any Person
such observer represents in such Person's capacity as a lender to the
Borrower.

       

      (c)           In
the event that the Holding Company holds an emergency meeting of its board of
directors, it shall provide the Agent and Lenders with the notice contemplated
by Section
10.15 and shall, in any event, endeavor to provide such notice within 3
Business Days of the date of such meeting.

       

      (d)           Subject
to the Subordination Agreement, all reasonable out-of-pocket costs and expenses
of the Agent’s and Lenders’ board observers in connection with attendance of
board of director meeting in accordance with this Section 10.15 shall be at the
Borrower's sole expense.

       

      Section
10.16   SBIC Regulatory Provisions.

       

      (a)           As
long as any SBIC Holder is a Lender, Borrower shall notify SBIC Holders
(a) at least fifteen (15) days prior to taking any action after which the
number of record holders of the Borrower would be increased from fewer than
fifty (50) to fifty (50) or more, and (b) of any other action or occurrence
after which the number of record holders of stock of the Borrower was increased
(or would increase) from fewer than fifty (50) to fifty (50) or more, as soon as
practicable after the Borrower becomes aware that such other action or
occurrence has occurred or is proposed to occur.

       

      (b)           At
the same time Borrower delivers its financial statements to Lenders pursuant to
Section 10.4,
and at such other times as Agent or any Lender reasonably requests, Borrower
shall deliver to each SBIC Holder a written statement certified by an authorized
signatory of Borrower describing in reasonable detail the use of the proceeds of
the Loans.  In addition to any other rights granted hereunder,
Borrower and each Guarantor shall grant SBIC Holders and the SBA access to
Borrower or such Guarantor's books and records for the purpose of verifying the
use of such proceeds and verifying the certifications made in SBA Forms 480 and
652 and for the purpose of determining whether the principal business activity
of Borrower or such Guarantor continues to constitute an eligible business
activity (within the meaning of the SBIC Regulations).

       

      
        
           

        

        
          -52-

          
            

          

        

        
           

        

      

      (c)           Upon
the occurrence of a Regulatory Violation or in the event that any SBIC Holder
determines in its sole discretion that a Regulatory Violation has occurred, in
addition to any other rights and remedies to which it may be entitled as a
holder of the Loan Documents (whether under this Credit Agreement, the Term Note
or otherwise), such SBIC Holder shall have the right, to the extent required
under the SBIC Regulations, to demand the immediate repayment of the Obligations
or repurchase of the Warrants owned by such SBIC Holder at a price equal (a) to
the outstanding amount of the Obligations, plus all accrued interest thereon and
(b) the fair market value of the Warrants, by delivering written notice of
such demand to Borrower and Guarantors.  Borrower shall pay the
purchase price for such securities by a cashier's or certified check or by wire
transfer of immediately available funds to such SBIC Holder demanding repurchase
within thirty (30) days after Borrower's receipt of the demand notice, and upon
such payment, such SBIC Holder shall deliver the certificates evidencing the
securities to be repurchased duly endorsed for transfer or accompanied by duly
executed forms of assignment.

       

      (d)           In
the event that any SBIC Holder determines that it has a Regulatory Problem, such
SBIC Holder shall have the right to transfer the Obligations and the Warrants
without regard to any restrictions on transfer set forth in this Credit
Agreement, the Borrower’s Charter Documents or otherwise, and Borrower and each
Guarantor  shall take all such actions as are reasonably requested by
such SBIC Holder in order to (a) effectuate and facilitate any transfer by
such SBIC Holder of any securities of Borrower or such Guarantor then held by
such SBIC Holder to any Person designated by such SBIC Holder which is an
accredited investor, (b) permit such SBIC Holder (or any of its Affiliates)
to exchange all or any portion of the equity interests of Borrower or any
Guarantor then held by it on a share-for-share basis for shares of a class of
nonvoting equity interests of Borrower or such Guarantor, which nonvoting equity
interests shall be identical in all respects to the equity interests on such
terms as are requested by such SBIC Holder in light of regulatory considerations
then prevailing, and (c) amend this Credit Agreement, the Borrower’s
Charter Documents and any related agreements and instruments to the extent
necessary to effectuate and reflect the foregoing.  Such cooperation
shall include, without limitation, the making of any required filing with any
Governmental Authority including the filing of a certificate or plan of
divestiture.

       

      (e)           Promptly
after the end of each calendar year commencing with the calendar year ending
December 31, 2010 (but in any event prior to January 31st of each year),
Borrower shall deliver to each SBIC Holder a written assessment of the economic
impact of such SBIC Holder's investment in Borrower, specifying the full-time
equivalent jobs created or retained in connection with the investment, the
impact of the investment on the business of Borrower and Guarantors and on taxes
paid by Borrower and Guarantors and their employees and such other reasonable
information requested by the SBA or such SBIC Holder in connection with the
filing of its SBA Form 46B or similar filings or requests.

       

      Section
10.17   Post Closing Covenant.

       

      Borrower
shall deliver, within 60 days of the date hereof, to Agent fully executed
documents as may be reasonably required pursuant to French law to provide to
Agent, for the benefit of the Lenders, a valid and perfected first priority
security interest in 65% of the outstanding equity securities of
CTSA.

       

      
        
           

        

        
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      ARTICLE
11.

      CERTAIN
NEGATIVE COVENANTS OF THE BORROWER.

       

      The
Borrower covenants and agrees that, so long as any Loan or Note is outstanding
or the Agent or any Lender has any obligation to make any Loans and any and all
other amounts payable under the Loan Documents have been paid in full in
cash:

       

      Section
11.1     Restrictions on Indebtedness.

       

      The
Borrower will not, and will not permit any of its Subsidiaries to, create,
incur, assume, guarantee or be or remain liable, contingently or otherwise, with
respect to any Indebtedness other than:

       

      (a)           Indebtedness
to the Lenders arising under any of the Loan Documents;

       

      (b)           Current
Liabilities of the Borrower and its Subsidiaries incurred in the ordinary course
of business not incurred through (i) the borrowing of money, or
(ii) the obtaining of credit except for credit on an open account basis
customarily extended and in fact extended in connection with normal purchases of
goods and services;

       

      (c)           Indebtedness
in respect of taxes, assessments, governmental charges or levies and claims for
labor, materials and supplies to the extent that payment therefor shall not at
the time be required to be made in accordance with the provisions of Section
10.8 or Section 11.2(vi);

       

      (d)           endorsements
for collection, deposit or negotiation and warranties or products or services,
in each case incurred in the ordinary course of business;

       

      (e)           Subordinated
Debt subject to an Agent Approved Subordination Agreement;

       

      (f)           unsecured
Indebtedness of CTSA, including, without limitation under the Intercompany
Agreement, in an amount not to exceed U.S. $1,000,000;

       

      (g)           purchase
money Indebtedness incurred in connection with the acquisition after the date
hereof of any personal property by the Borrower and its Subsidiaries or
obligations under Capitalized Leases; provided, that the
aggregate principal amount of such Indebtedness and the payment obligations of
the Borrower under such Capitalized Leases shall not exceed the aggregate amount
of $500,000 at any one time;

       

      (h)           deferred
compensation due to employees not to exceed an aggregate $20,000 outstanding at
any time;

       

      (i)     
      obligations consisting of financing of
insurance premiums in the ordinary course of business;

       

      (j)      
     Permitted Acquisition Indebtedness;

       

      
        
           

        

        
          -54-

          
            

          

        

        
           

        

      

       

      (k)           obligations
arising with respect to customary indemnification obligations incurred in the
ordinary course of business in connection with (b), or (g) above;
and

       

      (l)       
    obligations incurred in the ordinary course of business
with respect to surety and performance bonds;

       

      (m)          Subordinated
Debt evidenced by the SCP Subordinated Notes in an aggregate principal amount on
December 19, 2008 of $1,000,000 and which principal amount may increase in
accordance with the provisions of the SCP Subordinated Notes which provide for
the compounding of interest;

       

      (n)           Senior
Debt;

       

      (o)           any
extension, renewal or replacement of any of the foregoing on terms and
conditions that are, on the whole, no more onerous to the Borrower, Holding
Company and its Subsidiaries than the terms and conditions applicable
immediately before such extension, renewal or replacement, so long as (i) such
Indebtedness is not increased above the amount outstanding immediately prior to
giving effect to any such extension, renewal or replacement, and (ii) to the
extent that the Indebtedness to be extended, renewed or replaced is Subordinated
Debt, such extension, renewal or replacement continues to be subordinated to the
Obligations on terms and conditions reasonably satisfactory to the
Agent.

       

      Section
11.2     Restrictions on Liens.

       

      The
Borrower will not, and will not permit any of its Subsidiaries
to:  (a) create or incur or suffer to be created or incurred or
to exist any lien, encumbrance, mortgage, pledge, charge, restriction or other
security interest of any kind upon any of its property or assets of any
character whether now owned or hereafter acquired, or upon the income or profits
therefrom; (b) transfer any of such property or assets or the income or
profits therefrom for the purpose of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to payment of
its general creditors; (c) acquire, or agree or have an option to acquire,
any property or assets upon conditional sale or other title retention or
purchase money security agreement, device or arrangement; (d) suffer to
exist any Indebtedness or claim or demand against it that if unpaid might by law
or upon bankruptcy or insolvency, or otherwise, be given any priority whatsoever
over its general creditors; or (e) sell, assign, pledge or otherwise
transfer any accounts, contract right, general intangibles, chattel paper or
instruments, with or without recourse; provided, that the
Borrower or any of its Subsidiaries may create or incur or suffer to be created
or incurred or to exist:

       

      (i)            liens
to secure taxes, assessments and other government charges in respect of
obligations not overdue;

       

      
        
           

        

        
          -55-

          
            

          

        

        
           

        

      

      (ii)           deposits
or pledges made in connection with, or to secure payment of, workmen's
compensation, unemployment insurance, old age pensions or other social security
obligations or to secure the performance of bids, tenders, contracts (other than
for the repayment of borrowed money) or leases or to secure statutory
obligations or surety or appeal bonds, or to secure indemnity, performance or
other similar bonds in the ordinary course of business;

       

      (iii)          encumbrances
on Real Estate consisting of easements, rights of way, zoning restrictions,
restrictions on the use of real property and defects and irregularities in the
title thereto, landlord's or lessor's liens under leases to which the Borrower
or any of its Subsidiaries is a party, and other minor liens or encumbrances
none of which in the opinion of the Borrower interferes materially with the use
of the property affected in the ordinary conduct of the business of the Borrower
and its Subsidiaries, which defects do not individually or in the aggregate have
or could reasonably be expected to have, a Material Adverse Effect;

       

      (iv)          liens
to lessors under Capitalized Leases permitted by Section 11.1(g) and
purchase money security interests in or purchase money mortgages on personal
property acquired after the date hereof to secure purchase money Indebtedness of
the type and amount permitted by Section 11.1(g), incurred in connection with
the acquisition of such property, which security interests or mortgages cover
only the personal property so acquired; and

       

      (v)           liens
in favor of the Agent for the benefit of the Lenders under the Loan
Documents;

       

      (vi)          liens
arising in the ordinary course of business out of mechanics', carriers',
laborers, material suppliers, workmen's, repairmen's or other like liens in
respect of obligations which are not overdue, or making deposits to obtain the
release of such liens or are being contested in good faith and by appropriate
proceedings diligently conducted and for which proper reserve or other provision
has been made in accordance with and to the extent required by GAAP so long as
such liens do not gain priority over any of the liens in favor of the Agent for
any of the Loans or any proceeds thereof;

       

      (vii)      
  making deposits to secure replevin, surety, attachment or appeal
bonds relating to legal proceedings to which the Borrower or any of its
Subsidiaries is a party;

       

      (viii)        bankers'
liens, rights of set-off or similar rights as to accounts maintained with a
financial institution;

       

      (ix)          liens
in favor of vendors of goods arising as a matter of law securing the payment of
the purchase price therefor so long as such liens attach only to the purchased
goods;

       

      (x)           incurring
liens arising out of judgments or awards against the Borrower or any of its
Subsidiaries with respect to which it is currently engaged in proceedings for
review or appeal and with respect to which it shall have secured a stay of
execution pending such proceedings for review or appeal.

       

      
        
           

        

        
          -56-

          
            

          

        

        
           

        

      

         

      (xi)          any
interest of title of a licensor, sublicensor, lessor or sublessor, lessee or
sublessee, in each case under any license or lease agreement in the ordinary
course of business arising solely under a state statute or common law and liens
arising from Uniform Commercial Code financing statements (or equivalent
filings, registrations or agreements in foreign jurisdictions) solely evidencing
a lessor's interest under leases;

       

      (xii)         liens
on insurance policies and the proceeds thereof securing the financing of the
premiums with respect thereto;

       

      (xiii)        liens
arising solely under a state statute or common law in connection with the
purchase, storage or shipping of goods or assets on the related goods or assets
and proceeds thereof in favor of the seller, or shipper of such goods or assets;
and

       

      (xiv)        liens
arising under the Senior Debt Documents securing the Senior Debt.

       

      Section
11.3     Restrictions on Investments.

       

      The
Borrower will not, and will not permit any of its Subsidiaries to, make or
permit to exist or to remain outstanding any Investment except Investments
in:

       

      (a)           marketable
direct or guaranteed obligations of the United States of America that mature
within one (1) year from the date of purchase;

       

      (b)          demand
deposits, certificates of deposit, bankers acceptances and time deposits of
United States banks having total assets in excess of
$1,000,000,000;

       

      (c)      
    securities commonly known as "commercial paper" issued
by a corporation organized and existing under the laws of the United States of
America or any state thereof that at the time of purchase have been rated and
the ratings for which are not less than "P 1" if rated by Moody's Investors
Services, Inc., and not less than "A 1" if rated by Standard and
Poor's;

       

      (d)           Accounts
receivable created, acquired or made and trade credit extended in the ordinary
course of business and payable or dischargeable in accordance with customary
trade terms;

       

      (e)           Investments
consisting of stock, obligations, securities or other property received in
connection with any bankruptcy or reorganization of, or any good faith
settlement of delinquent accounts and disputes with, any customer or supplier
arising in the ordinary course of business;

       

      
        
           

        

        
          -57-

          
            

          

        

        
           

        

      

       

      (f)    
       Investments constituting deposits made
in connection with the purchase of goods or services in the ordinary course of
business;

       

      (g)           the
Borrower may make a loan to a Wholly Owned Domestic Subsidiary which is a
Guarantor provided:  (i) the aggregate amount of all of such
loans does not exceed $250,000 outstanding at any time and (ii) such loans
are evidenced by a promissory note which is pledged and delivered to the Agent
for the benefit of the Lenders and is part of the Collateral;

       

      (h)           Permitted
Acquisitions;

       

      (i)         
  security deposits in connection with any lease;

       

      (j)         
  non cash loans or advances made in connection with a management or
employee stock ownership program;

       

      (k)           Investments
in Wholly Owned Domestic Subsidiaries which are Guarantors; and

       

      (l)         
  Investments prior to the date hereof in CTSA.

       

      provided, however, that with
the exception of demand deposits referred to in Section 11.3(b), the
Investments listed in (a), (b) (c) and (e) immediately preceding
will be considered Investments permitted by this Section 11.3 only if all
actions have been taken to the satisfaction of the Agent to provide to the Agent
for the benefit of the Lenders a second priority (subordinate only to the Liens
securing the Senior Debt) perfected security interests in all of such
Investments free of all encumbrances other than Permitted Liens.

       

      Section
11.4             Restricted
Payments.

       

      The
Borrower will not and will not permit any of its Subsidiaries to make any
Restricted Payment:

       

      (i)            provided, that: the
Borrower may make a Distribution to the Holding Company to allow the Holding
Company to make a payment of (A) the Management Fee under the Management
Agreement in the amount of such Management Fees and (B) the Consulting Fee under
the Consulting Agreement in the amount of such Consulting Fee, so long as upon
such payments: (x) the aggregate amount of all of such payments made
pursuant to this clause (i) shall not exceed $20,000 in any calendar month,
(y) both at the time of and after giving effect to each such payment no
Default or Event of Default shall have occurred and be continuing or would be
caused if such payment were made and (z) EBITDA for the twelve (12) consecutive
month period ending on the last day of the then most recent month for which
financial statements have been delivered to Agent is not less than the EBITDA
Threshold;

       

      
        
           

        

        
          -58-

          
            

          

        

        
           

        

      

       

      (ii)           provided, that the
Borrower may make a Distribution to the Holding Company to allow the Holding
Company to pay out-of-pocket expenses for accounting, board of director fees and
expenses, investor relations, legal, and SEC reporting and other operating costs
(excluding such costs and expenses incurred in connection with this financing
transaction), in an amount not to exceed $500,000 in any fiscal year of the
Borrower;

       

      (iii)          provided, that any
Subsidiary of the Borrower may make a Distribution to the Borrower;

       

      (iv)          provided, that the
Borrower may make payments on Subordinated Debt permitted under an Agent
Approved Subordination Agreement including, without limitation, an Agent
Approved Subordination Agreement relating to the Granite Subordinated Debt
Documents;

       

      (v)          provided, that the
Borrower may pay to the Seller under the Purchase Agreements net cash proceeds
actually received which it is required to pay to such Sellers from the
litigation described in Section 8.12 of the Purchase Agreement in effect on the
date hereof; and

       

      (vi)          provided,
that the Borrower may make a Distribution to the Holding Company to allow the
Holding Company to pay costs and expenses, including, without limitation, legal
fees incurred in connection with this financing transaction and the transactions
contemplated by the Original Credit Agreement (as defined in the Senior Loan
Agreement) so long as: (x) the aggregate amount of such payment made pursuant to
this clause (vi) shall not exceed $150,000 in any fiscal quarter (y) EBITDA for
the twelve consecutive month period ending on the last day of the then most
recent month for which financial statements have been delivered to the Agent is
not less than EBITDA Threshold and (z) both at the time of and after giving
effect to each such payment no Default or Event of Default shall have occurred
and be continuing or would be caused if such payment were made (such permitted
payments of such costs and expenses referred to as “Permitted Holdco
Distributions”).

       

      Section
11.5     Merger, Consolidation and Disposition of
Assets.

       

      (a)           The
Borrower will not, nor will it permit any of its Subsidiaries to, become a party
to any merger or consolidation, or agree to or effect any asset acquisition or
stock, membership interest or membership unit or partnership interest
acquisition other than a Permitted Acquisition and merger of a Subsidiary of the
Borrower into the Borrower, provided that the
Borrower survives as the sole remaining entity.

       

      (b)           The
Borrower will not, nor will it permit any of its Subsidiaries to, become a party
to or agree to or effect any disposition of assets except for dispositions of
assets listed in (i)-(iv) of this subsection and in the case of (ii), (iii) and
(iv) below of up to $500,000 in value in the aggregate in any fiscal year,
unless such proceeds are otherwise reinvested as provided in Section
5.3(a) hereof.  The dispositions permitted under this subsection
(b) are:

       

      
        
           

        

        
          -59-

          
            

          

        

        
           

        

      

    

    

      (i)     
the sale of Inventory in the ordinary course of business;

       

      (ii)    
disposition of leased or owned motor vehicles in the ordinary course of
business;

       

      (iii)   
the disposition of assets damaged in a casualty event; and

       

      (iv)   
the disposition of assets which are obsolete or no longer useful in the
Borrower's or its Subsidiaries' business.

       

      Section
11.6       Sale and Leaseback.

       

      The
Borrower will not and will not permit any of its Subsidiaries to, enter into any
arrangement, directly or indirectly, whereby the Borrower or any Subsidiary of
the Borrower shall sell or transfer any property owned by it in order then or
thereafter to lease such property or lease other property that the Borrower or
such Subsidiary intends to use for substantially the same purpose as the
property being sold or transferred.

       

      Section
11.7       Compliance with Environmental
Laws.

       

      The
Borrower will not, and will not permit any of its Subsidiaries
to:  (a) use any of the Real Estate or any portion thereof for
the handling, processing, storage or disposal of Hazardous Substances other than
in the ordinary course of business, (b) cause or permit to be located on
any of the Real Estate any underground tank or other underground storage
receptacle for Hazardous Substances, (c) generate any Hazardous Substances
on any of the Real Estate other than in the ordinary course of business and in
accordance with all applicable Environmental Laws, (d) conduct any activity
at any Real Estate or use any Real Estate in any manner so as to cause a release
(i.e. releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, disposing or dumping) or
threatened release of Hazardous Substances on, upon or into the Real Estate the
liability for the clean up or remediation of such release or activity would
exceed, in the aggregate for all of such occurrences, could reasonably be
expected to have a Material Adverse Effect or (e) otherwise conduct any
activity at any Real Estate or use any Real Estate in any manner, that would
violate any Environmental Law or bring such Real Estate in violation of any
Environmental Law if such violation could reasonably be expected to have a
Material Adverse Effect.

       

      Section
11.8       Employee Benefit
Plans.

       

      Neither
the Borrower nor any ERISA Affiliate will:

       

      (a)           engage
in any "prohibited transaction" within the meaning of §406 of ERISA or §4975 of
the Code which could result in a material liability for the Borrower or any of
its Subsidiaries;

      
        
           

        

        
          -60-

          
            

          

        

        
           

        

      

      (b)           permit
any Guaranteed Pension Plan to incur an "accumulated funding deficiency", as
such term is defined in §302 of ERISA, whether or not such deficiency is or may
be waived;

       

      (c)           fail
to contribute to any Guaranteed Pension Plan to an extent which, or terminate
any Guaranteed Pension Plan in a manner which, could result in the imposition of
a lien or encumbrance on the assets of the Borrower or any of its Subsidiaries
pursuant to §302(f) or §4068 of ERISA; or

       

      (d)           permit
to take any action which would result in the aggregate benefit liabilities (the
meaning of §4001 or ERISA) of all Guaranteed Pension Plans exceeding the
value of the aggregate assets of such Plans, disregarding for this purpose of
the benefit liabilities and assets of any such Plan with assets in excess of
benefit liabilities, by more than the amount set forth in Section
9.16(c).

       

      Section
11.9       Modification of Documents.

       

      The
Borrower will not, nor will it permit any of its Subsidiaries
to:  (a) make any amendment or modification to any indenture,
notes or other agreement evidencing or governing any Subordinated Debt, except
as permitted under the applicable Agent Approved Subordination Agreement,
(b) make an amendment or modification to the Management Agreement which
increases any amount the Borrower is required to pay thereunder or is otherwise
adverse to the Lenders or the Holding Company's or Borrower or Borrower's
Subsidiaries' ability to perform its obligations under the Loan Documents,
(c) make any amendment or modification to any terms or provisions of their
respective Charter Documents if the effect of such amendment or modification
shall adversely affect the Lenders, without the prior written consent of the
Agent, (d) issue any Shares other than in connection with the conversion
contemplated by Article 3 or the exercise of any Warrant, or the issuance of
45,000 shares to Selway on or about the date hereof, or (e) amend, waive,
modify or terminate any provision of the Purchase Agreement.

       

      Section
11.10     Negative Pledges.

       

      The
Borrower will not and will not permit any of its Subsidiaries to enter into any
agreement (excluding this Credit Agreement, the other Loan Documents and the
Senior Debt Documents) prohibiting the creation or assumption of any lien
upon its properties, revenues or assets or those of any of its Subsidiaries,
whether now owned or hereafter acquired other than agreements with Persons
prohibiting any such lien on assets in which such Person has a prior security
interest which is permitted by Section 11.2.

      
        
           

        

        
          -61-

          
            

          

        

        
           

        

      

      Section
11.11     Transactions with Affiliates.

       

      Other
than the Intercompany Agreement, the Services Agreement,  the
Management Agreement and the SCP Subordinated Notes, the Borrower will not, and
will not permit any of its Subsidiaries to, enter into, or cause, suffer or
permit to exist (a) any arrangement or contract with any of its other
Affiliates of a nature customarily entered into by Persons which are Affiliates
of each other (including advisory, management or similar contracts or
arrangements relating to the allocation of revenues, taxes and expenses or
otherwise) requiring any payments to be made by the Borrower or any of its
Subsidiaries to any Affiliate unless such arrangement is fair and equitable to
the Borrower or such Subsidiary; or (b) any other transaction, arrangement
or contract with any of their other Affiliates which would not be entered into
by a prudent Person in the position of the Borrower or such Subsidiary with, or
which is on terms which are less favorable than are obtainable from, any Person
which is not one of its Affiliates.

       

      Section
11.12     Upstream Limitations.

       

      The
Borrower will not, nor will the Borrower permit any of its Subsidiaries to,
enter into any agreement, contract or arrangement (other than this Credit
Agreement and the other Loan Documents and the Senior Debt
Documents) restricting the ability of any Subsidiary to pay or make
dividends or distributions in cash or kind, to make loans, advances or other
payments of whatsoever nature or to make transfers or distributions of all or
any part of its assets to the Borrower or to any Subsidiary of such
Subsidiary.

       

      Section
11.13     Inconsistent Agreements.

       

      The
Borrower will not, nor will it permit any of its Subsidiaries to, enter into any
agreement containing any provision which would be violated or breached by the
performance by the Borrower or such Subsidiary of its obligations hereunder or
under any of the Loan Documents.

       

      Section
11.14     Bank Accounts.

       

      The
Borrower will not:  (a) establish any bank accounts other than
those listed on Schedule 9.20 without
the Agent's prior written consent or (b) violate directly or indirectly any
bank agency or lock box agreement, if any, in favor of the Agent for the benefit
of the Lenders with respect to such account (it being understood that no such
agreement will be in place on the Closing Date), (c) deposit into any of
the payroll accounts listed on Schedule 9.20 any
amounts in excess of amounts necessary to pay current payroll obligations from
such accounts.

       

      Section
11.15     Restriction on Subsidiaries.

       

      The
Borrower will not nor will it permit any of its Subsidiaries to form any
Subsidiary without the prior written consent of the Required Lenders other than
a Subsidiary formed to hold the assets from a Permitted Acquisition and no other
assets.  In the event that the Required Lenders, in their sole
discretion, consent to, or, if a Subsidiary is formed to hold the assets of a
Permitted Acquisition, the formation or acquisition of a Subsidiary, any such
Subsidiary formed or acquired by the Borrower or any Subsidiary thereof shall
simultaneously with the consummation of any such formation or acquisition grant
to the Agent for the benefit of the Lenders a second perfected security interest
(except as otherwise permitted by the Required Lenders) in all of its
existing and after-acquired assets, and guaranty of all of the Obligations and
all of the ownership interests of such Subsidiary shall be pledged to the Agent
for the benefit of the Lenders.  All applicable parties shall execute
and/or deliver to the Agent all such documents and instruments requested by the
Agent in order to perfect the Agent's security interest
therein.

      
        
           

        

        
          -62-

          
            

          

        

        
           

        

      

      Section
11.16     Restrictions on Loans and
Advances.

       

      The
Borrower will not make any loans or advances to, nor acquire the Indebtedness
of, any Person except for the following:

       

      (a)           advance
payments made to the Borrower's suppliers in the ordinary course of its business
and consistent with past practices;

       

      (b)           advances
to the Borrower's officers, employees and sales persons with respect to
reasonable expenses to be incurred by such officers, employees and sales persons
for the benefit of the Borrower, which expenses are properly substantiated by
the Person seeking such advance and properly reimbursable by the Borrower and in
any event not to exceed $10,000 in the aggregate outstanding at any one
time;

       

      (c)           the
extension of trade credit in the ordinary course of business consistent with
past practices;

       

      (d)           loans
or advances made under the Intercompany Agreement, provided that such
loans or advances shall not exceed, in the aggregate, $100,000 in any fiscal
year; and

       

      (e)           loans
permitted by Section 11.3.

       

      Section
11.17     Line of Business.

       

      The
Borrower and its Subsidiaries will engage in no business other than that of a
manufacturer and distributor of chemiluminescent light and infrared safety,
security and training products for use by the military and homeland security
businesses and businesses incidental thereto.

       

      Section
11.18     Use of Proceeds.

       

      The
Borrower will not use the proceeds of the Loans for any purpose other than the
purposes stated in Section 10.14.

       

      Section
11.19     Activity of the Holding Company.

       

      The
Holding Company shall conduct no business or other activity other than holding
all of the Shares of the Borrower or any other Subsidiary.

      
        
           

        

        
          -63-

          
            

          

        

        
           

        

      

      ARTICLE
12.

      FINANCIAL
COVENANTS OF THE BORROWER.

       

      The
Borrower covenants and agrees that, so long as any Loan or Note is outstanding
or the Agent or any Lender has any obligation to make any Loans and any and all
other amounts payable under the Loan Documents have been paid in full in
cash:

       

      Section
12.1       Coverage Ratios.

       

      (a)           Fixed Charge
Ratio.  As of the last day of the fiscal quarter ending
September 30, 2010,  the Fixed Charge Coverage Ratio for the
immediately preceding four (4) fiscal quarters shall not be less than .68:1.00,
and as of the last day of the fiscal quarter ending December 31, 2010, the Fixed
Charge Coverage Ratio for the immediately preceding four (4) fiscal quarters
shall not be less than 0.85:1.00, and as of the last day of the fiscal quarter
ending March 31, 2011 and for each fiscal quarter thereafter, the Fixed Charge
Coverage Ratio for the immediately preceding four (4) fiscal quarters shall not
be less than 0.94:1.00.

       

      (b)           Total Debt Service Coverage
Ratio.  As of the last day of the fiscal quarter ending on
September 30, 2010, and for each fiscal quarter thereafter, the Total Debt
Service Coverage Ratio shall not be less than 1.02:1.00.

       

      Section
12.2       Leverage Ratio.

       

      (a)           At
any time during the periods set forth below, the Senior Leverage Ratio shall not
be more than the ratio set forth below during such period:

       

      
        
          
            	
                    Period

                  	 
      	
                    Ratio

                  
	 
      	 
      	 
      
	
                    the
      Closing Date, through and including December 31, 2010

                  	 
      	
                    3.45:1.00

                  
	 
      	 
      	 
      
	
                    January
      1, 2011, through and including December 31, 2011

                  	 
      	
                    2.87:1.00

                  
	 
      	 
      	 
      
	
                    January
      1, 2012, and thereafter

                  	
                      

                  	
                    2.30:1.00

                  

          

        

      

      

      (b)           At
any time during the periods set forth below, the Total Leverage Ratio shall not
be more than the ratio set forth below during such period:

       

      
        
          
            	
                    Period

                  	 
      	
                    Ratio

                  
	 
      	 
      	 
      
	
                    the
      Closing Date, through and including December 31, 2010

                  	 
      	
                    4.60:1.00

                  
	 
      	 
      	 
      
	
                    January
      1, 2011, through and including December 31, 2011

                  	 
      	
                    4.02:1.00

                  
	 
      	 
      	 
      
	
                    March
      31, 2012

                  	 
      	
                    3.73:1.00

                  
	
                     
      

                  	 
      	 
      
	
                    June
      30, 2012, and thereafter

                  	
                      

                  	
                    3.45:1.00

                  

          

        

      

      
        
           

        

        
          -64-

          
            

          

        

        
           

        

      

      Section
12.3       Capital Expenditures.

       

      The
Borrower will not make, nor permit any Subsidiary to make any Capital
Expenditures in any fiscal year that exceed $2,000,000 for any fiscal
year.

       

      Section
12.4       Current Ratio.

       

      As of the
last day of any fiscal quarter the Holding Company and its Subsidiaries shall
not permit the Current Ratio to be less than 0.85:1.00.

       

      Section
12.5       Minimum EBITDA.

       

      At any
time during the periods ending on the dates set forth below the minimum EBITDA
of the Borrower and its Subsidiaries for the four (4) fiscal quarters then
ending shall not be less than the amount set forth below:

       

      
        
          
            
              
                
                  	
                          Period

                        	 	
                          Minimum EBITDA

                        	 
	 
      	 	 	 
	
                          September
      30, 2010, December 31, 2010, March 31, 2011, June 30, 2011 and
      September 30, 2011

                        	 	$	5,950,000	 
	 
      	 	 	 	 
	
                          December
      31, 2011, March 31, 2012, June 30, 2012 and September 30,
      2012

                        	 	$	6,162,925	 
	 
      	 	 	 	 
	
                          December
      31, 2012 and the last day of each fiscal quarter
thereafter

                        	 	$	6,375,000	 

                

              

            

          

        

      

      

      ARTICLE
13.

      CLOSING
CONDITIONS.

       

      The
obligations of the Lenders to make the Loans and  to enter into this
Credit Agreement shall be subject to the satisfaction of the following
conditions precedent on or prior to the date hereof.

       

      Section
13.1       Loan Documents.

       

      Each of
the Loan Documents shall have been duly executed and delivered by the respective
parties thereto, shall be in full force and effect and shall be in form and
substance satisfactory to the Lenders.  Each of the Lenders shall have
received a fully-executed copy of each such document.

       

      Section
13.2       Senior Debt
Documents.

       

      Each of
the Senior Debt Documents shall have been duly executed and delivered by the
respective parties thereto, shall be in full force and effect and shall be in
form and substance reasonably satisfactory to the Lenders.  Each of
the Lenders shall have received a fully-executed copy of each such
document.

      
        
           

        

        
          -65-

          
            

          

        

        
           

        

      

      Section
13.3       Certified Copies of Charter
Documents.

       

      The
Lenders shall have received from the Borrower a copy, certified by a duly
authorized officer of such Person to be true and complete on and as of the
Closing Date, of its Charter Documents, the Charter Documents of the Holding
Company and each Subsidiary of the Borrower.

       

      Section
13.4       Corporate Action.

       

      All
corporate action necessary for the valid execution, delivery and performance by
the Borrower of this Credit Agreement and the other Loan Documents to which it
is or is to become a party shall have been duly and effectively taken, and
evidence thereof satisfactory to the Lenders shall have been provided to the
Agent.

       

      Section
13.5       Incumbency
Certificate.

       

      The Agent
shall have received from the Holding Company and each of its Subsidiaries an
incumbency certificate, dated as of the Closing Date, signed by a duly
authorized officer of the Holding Company and each of its Subsidiaries and
giving the name and bearing a specimen signature of each individual who shall be
authorized:  (a) to sign, in the name and on behalf of the
Holding Company and each of its Subsidiaries, each of the Loan Documents to
which the Holding Company and each of its Subsidiaries is or is to become a
party; (b) Term Loan borrowing; and (c) to give notices and to take
other action on its behalf under the Loan Documents.

       

      Section
13.6       Validity of Liens.

       

      The
Security Documents shall be effective to create in favor of the Agent for the
benefit of the Lenders a legal, valid and enforceable second (except for
Permitted Liens entitled to priority under applicable law and the Liens granted
to secure the Senior Debt) security interest in and lien upon the
Collateral.  All filings, recordings, deliveries of instruments and
other actions necessary or desirable in the opinion of the Agent to protect and
preserve such security interests shall have been duly effected.  The
Lenders shall have received evidence thereof in form and substance satisfactory
to the Lenders.  Agent shall have received in form and substance
satisfactory to the Lenders the Mortgage with evidence of its recording in the
applicable Registry of Deeds creating a second lien priority subject only to
such encumbrances as approved by the Agent in writing including, without
limitation, Liens securing the Senior Debt.

       

      Section
13.7       Perfection Certificates and Lien
Search Results.

       

      The Agent
shall have received from the Borrower a completed and fully-executed Perfection
Certificate and the results of UCC searches indicating no liens other than
Permitted Liens or liens to be released prior to Closing and otherwise in form
and substance satisfactory to the Agent.

      
        
           

        

        
          -66-

          
            

          

        

        
           

        

      

      Section
13.8       Certificates of
Insurance.

       

      The Agent
shall have received:  a certificate of insurance from an independent
insurance broker dated as of the Closing Date, identifying insurers, types of
insurance, insurance limits, and policy terms, and otherwise describing the
insurance obtained in accordance with the provisions of the Security Documents
and a summary of the polices to be issued.

       

      Section
13.9       [Intentionally
Omitted].

       

      Section
13.10     Solvency Certificate.

       

      Each of
the Lenders shall have received an officer's certificate from the Borrower dated
as of the Closing Date as to the solvency of the Borrower following the
consummation of the transactions contemplated herein and in form and substance
satisfactory to the Agent.

       

      Section
13.11     Opinion of Counsel.

       

      The Agent
shall have received a favorable legal opinion dated as of the Closing Date and
addressed to each of the Lenders, in form and substance reasonably satisfactory
to each of the Lenders, from corporate counsel to the Borrower and the Holding
Company.

       

      Section
13.12     Disbursement Instructions.

       

      The Agent
shall have received disbursement instructions from the Borrower.

       

      Section
13.13     Payment of Fees.

       

      The
Borrower shall have paid to the Agent for distribution to the Lenders the
Closing Fee which is due and payable on the Closing Date and all other fees and
expenses (including, without limitation, all legal fees and disbursements,
commercial finance examination fees and appraisal fees incurred prior to the
Closing Date) required to be paid as of the Closing Date.

       

      Section
13.14     Material Adverse Effect.

       

      No event
shall have occurred since the Balance Sheet Date which had or could reasonably
be expected to have a Material Adverse Effect on the Holding Company and its
Subsidiaries, including, without limitation, the Borrower.

      
        
           

        

        
          -67-

          
            

          

        

        
           

        

      

      Section
13.15     Consents.

       

      Copies of
the applications to be submitted to the appropriate Governmental Authorities to
transfer and/or apply for federal, state and local licenses, permissions and
consents of all jurisdictions in which the Company conducts business, and all
required consents to the transfer of all material contracts.

       

      Section
13.16     [Intentionally Omitted].

       

      Section
13.17     Senior Debt Payment and
Documents.

       

      Borrower
shall prepay no less than Seven Million Two Hundred Thousand Dollars
($7,200,000) of the Term Loan (as defined in the Senior Loan Agreement) and no
less than $500,000 of the Revolving Credit Loan (as defined in the Senior Loan
Agreement) from the proceeds of the Loans.

       

      Section
13.18     Representations True; No Event of
Default.

       

      Each of
the representations and warranties of the Holding Company and its Subsidiaries
contained in this Credit Agreement, the other Loan Documents, or in any
certificate, document or instrument delivered pursuant to or in connection with
this Credit Agreement shall be true as of the date as of which they were made
and shall also be true at and as of the time of the making of such Loan with the
same effect as if made at and as of that time (except to the extent of changes
resulting from transactions permitted by this Credit Agreement and the other
Loan Documents, and to the extent that such representations and warranties
relate expressly to an earlier date) and no Default or Event of Default
shall have occurred and be continuing.

       

      Section
13.19     No Legal Impediment.

       

      No change
shall have occurred in any law or regulations thereunder or interpretations
thereof that in the reasonable opinion of the Required Lenders would make it
illegal for the Lenders to make such Loan.

       

      Section
13.20     Governmental Regulations.

       

      Each
Lender shall have received such statements in substance and form reasonably
satisfactory to the Agent as the Agent shall require for the purpose of
compliance with any applicable regulations of the Comptroller of the Currency or
the Board of Governors of the Federal Reserve System.

       

      Section
13.21     Proceedings and Documents.

       

      All
proceedings in connection with the transactions contemplated by this Credit
Agreement, the other Loan Documents and all other documents incident thereto
shall be satisfactory in substance and in form to the Lenders and the Lenders'
Special Counsel, and the Lenders, the Agent and such counsel shall have received
all information and such counterpart originals or certified other copies of such
documents as the Agent may reasonably request.

      
        
           

        

        
          -68-

          
            

          

        

        
           

        

      

      ARTICLE
14.

      [Intentionally
Omitted]

       

      ARTICLE
15.

      EVENTS
OF DEFAULT; ACCELERATION; ETC.

       

      Section
15.1       Events of Default and
Acceleration.

       

      If any of
the following events ("Events of Default" or, if the giving of notice or the
lapse of time of both is required, then, prior to such notice or lapse of time,
"Defaults") shall occur:

       

      (a)           the
Borrower shall fail to pay any principal of the Loans when the same shall become
due and payable, whether at the stated date of maturity or any accelerated date
of maturity or at any other date fixed for payment;

       

      (b)           the
Borrower shall fail to pay any interest on the Loans within three (3) days such
interest payment is due or other fees and sums due hereunder or under any of the
other Loan Documents, when the same shall become due and payable, whether at the
stated date of maturity or any accelerated date of maturity or at any other date
fixed for payment;

       

      (c)           the
Borrower shall fail to comply with any of its covenants contained in Sections
10.4, 10.5, 10.6, 10.7, 10.8, 10.9, 10.10, 10.12, 10.13, 10.14, 10.17, 11 or
12;

       

      (d)           the
Borrower or any of its Subsidiaries shall fail to perform any term, covenant or
agreement contained herein or in any of the other Loan Documents (other than
those specified elsewhere in this Section 15.1) for thirty (30) days
after written notice of such failure has been given to the Borrower by the
Agent;

       

      (e)           any
representation or warranty of the Borrower or any of its Subsidiaries in this
Credit Agreement or any of the other Loan Documents or in any other document or
instrument delivered pursuant to or in connection with this Credit Agreement
shall prove to have been false in any material respect upon the date when made
or deemed to have been made or repeated;

       

      (f) 
          the Borrower or any
of its Subsidiaries shall fail to pay at maturity, or within any applicable
period of grace, any obligation for borrowed money or credit received or in
respect of any Capitalized Leases where the principal amount or the aggregate
payments, respectively, exceed $100,000, or fail to observe or perform any
material term, covenant or agreement contained in any agreement (other than the
Senior Debt Documents) by which it is bound, evidencing or securing such
borrowed money or credit received or in respect of any Capitalized Leases for
such period of time as would permit (assuming the giving of appropriate notice
if required) the holder or holders thereof or of any obligations issued
thereunder to accelerate the maturity thereof;

      
        
           

        

        
          -69-

          
            

          

        

        
           

        

      

      (g)           the
Borrower or any of its Subsidiaries shall make an assignment for the benefit of
creditors, or admit in writing its inability to pay or generally fail to pay its
debts as they mature or become due, or shall petition or apply for the
appointment of a trustee or other custodian, liquidator or receiver of the
Borrower or any of its Subsidiaries or of any substantial part of the assets of
the Borrower or any of its Subsidiaries or shall commence any Insolvency
Proceeding, or shall take any action to authorize or in furtherance of the
foregoing, or if any such petition or application shall be filed or any such
case or other proceeding shall be commenced against the Borrower or any of its
Subsidiaries and the Borrower or any of its Subsidiaries shall indicate its
approval thereof, consent thereto or acquiescence therein;

       

      (h)           a
decree or order is entered appointing any such trustee, custodian, liquidator or
receiver or adjudicating the Borrower or any of its Subsidiaries bankrupt or
insolvent, or approving a petition in any such case or Insolvency Proceeding, or
a decree or order for relief is entered in respect of the Borrower or any of its
Subsidiaries in an involuntary case under federal bankruptcy laws as now or
hereafter constituted and any such decree or order continues unstayed and in
effect for a period of forty-five (45) days;

       

      (i)       
    there shall remain in force, undischarged, unsatisfied
and unstayed, for more than thirty (30) days, whether or not consecutive, any
final judgment against the Borrower or any of its Subsidiaries that, with other
outstanding final judgments, undischarged, against the Borrower or any of its
Subsidiaries exceeds in the aggregate $250,000 and which judgment is not fully
covered by insurance by a financially sound and reputable insurance company
which has accepted full coverage therefor in writing;

       

      (j)      
     a default shall occur under any of the
Subordinated Debt Documents which has a principal amount in excess of, in the
aggregate, $250,000 or any part of the Subordinated Debt or the Subordinated
Debt shall be (or shall be required at such time to be) prepaid, redeemed
or repurchased in whole or in part other than in accordance with an Agent
Approved Subordination Agreement;

       

      (k)           if
any of the Loan Documents shall be canceled, terminated, revoked or rescinded
otherwise than in accordance with the terms thereof or with the express prior
written agreement, consent or approval of the Required Lenders, or any action at
law, suit or in equity or other legal proceeding to cancel, revoke or rescind
any of the Loan Documents shall be commenced by or on behalf of the Borrower or
any of its Subsidiaries party thereto or any other Governmental Authority or
agency of competent jurisdiction shall make a determination that, or issue a
judgment, order, decree or ruling to the effect that, any one or more of the
Loan Documents is illegal, invalid or unenforceable in accordance with the terms
thereof;

      
        
           

        

        
          -70-

          
            

          

        

        
           

        

      

      (l)         
  the Borrower or any ERISA Affiliate incurs any liability to the PBGC
or a Guaranteed Pension Plan pursuant to Title IV of ERISA in an aggregate
amount exceeding $100,000, or the Borrower or any ERISA Affiliate is assessed
withdrawal liability pursuant to Title IV of ERISA by a Multiemployer Plan
requiring aggregate annual payments exceeding $100,000, or any of the following
occurs with respect to a Guaranteed Pension Plan: (i) an ERISA Reportable
Event, or a failure to make a required installment or other payment (within the
meaning of §302(f)(1) of ERISA); provided, that the
Agent determines in its reasonable discretion that such
event:  (A) could be expected to result in liability of the
Borrower to the PBGC or such Guaranteed Pension Plan in an aggregate amount
exceeding $100,000 and (B) could constitute grounds for the termination of
such Guaranteed Pension Plan by the PBGC, for the appointment by the appropriate
United States District Court of a trustee to administer such Guaranteed Pension
Plan or for the imposition of a lien in favor of such Guaranteed Pension Plan;
(ii) the appointment by a United States District Court of a trustee to
administer such Guaranteed Pension Plan; or (iii) the institution by the
PBGC of proceedings to terminate such Guaranteed Pension Plan;

       

      (m)           the
Borrower or any of its Subsidiaries shall be enjoined, restrained or in any way
prevented by the order of any court or any administrative or regulatory agency
from conducting any material part of its business and such order shall continue
in effect for more than thirty (30) days;

       

      (n)           there
shall occur any material damage to, or loss, theft or destruction of, any
Collateral, whether or not insured, or any strike, lockout, labor dispute,
embargo, condemnation, act of God or public enemy, or other casualty, which in
any such case causes, for more than thirty (30) consecutive days, of
cessation or substantial curtailment of revenue producing activities at any
facility of the Borrower or any of its Subsidiaries if such event or
circumstance is not covered by business interruption insurance and would have a
Material Adverse Effect;

       

      (o)           the
Borrower or any of its Subsidiaries shall be indicted for a federal crime, a
punishment for which could include the forfeiture of any assets of the Borrower
or such Subsidiary included in any assets of the Borrower or such Subsidiary
having a fair market value in excess of $100,000;

       

      (p)           a
Change of Control shall occur;

       

      (q)           the
Borrower and its Subsidiaries shall have one or more of its material contracts
with its customers cancelled and the effect of such cancellation shall result
directly or indirectly, the loss, in the aggregate of fifteen percent
(15%) of the revenues of the Borrower and its Subsidiaries as such revenue
is shown on the audited financial statement, most recently delivered to the
Agent; or

       

      (r)           more
than two (2) of Borrower's Key Officers shall cease to be involved in the
management and operations of the business of the Borrower on a full time basis
and no successor reasonably satisfactory to Agent shall have been appointed
within sixty (60) days from the date such Key Officer ceases to be involved in
the management and operations;

      
        
           

        

        
          -71-

          
            

          

        

        
           

        

      

      Section
15.2       Termination of Total
Commitment.

       

      If any
one or more of the Events of Default specified in Section 15.1(g) or
Section 15.1(h) shall occur, any unused portion of the credit hereunder
shall forthwith terminate and each of the Lenders shall be relieved of all
further obligations to make loans to the Borrower.  If any other Event
of Default shall have occurred and be continuing, the Agent may, and upon
request of the Required Lenders shall, by notice to the Borrower, terminate the
unused portion of the credit hereunder, and upon such notice being given such
unused portion of the credit hereunder shall terminate immediately and each of
the Lenders  shall be relieved of all further obligations to make
Loans.  No termination of the credit hereunder shall relieve the
Borrower of any of the Obligations.  In addition, if any Event of
Default shall have occurred and be continuing, Agent may, without notice, take
any one or more of the following actions: (i) declare all or any portion of the
Obligations to be forthwith due and payable, whereupon such Obligations shall
become and be due and payable or (ii) exercise any rights and remedies provided
to Agent and the Lenders under the Loan Documents or at law or equity, including
all remedies provided under the Uniform Commercial Code; provided, that upon
the occurrence of any Event of Default specified in Section 15.1(g) or Section
15.1(h), the Obligations shall become immediately due and payable without
declaration, notice or demand by Lender.

       

      Section
15.3       Remedies.

       

      In case
any one or more of the Events of Default shall have occurred and be continuing,
and whether or not the Lenders have accelerated the maturity of the Loans
pursuant to Section 15.2, the Agent, if owed any amount with respect to the
Loans, may proceed to protect and enforce its rights by suit in equity, action
at law or other appropriate proceeding, whether for the specific performance of
any covenant or agreement contained in this Credit Agreement and the other Loan
Documents or any instrument pursuant to which the Obligations to the Lenders are
evidenced, and, if such amount shall have become due, by declaration or
otherwise, proceed to enforce the payment thereof or any other legal or
equitable right of any Lender.  No remedy herein conferred upon any
Lender or the Agent or the holder of any Note is intended to be exclusive of any
other remedy and each and every remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute or any other provision of law.

       

      Section
15.4       Distribution of Collateral
Proceeds.

       

      In the
event that all of the Loans, all accrued and unpaid interest thereon and all
other amounts owing under the Loan Documents, shall have been declared due and
payable pursuant to the provisions of Section 15.2, any funds received by
any Lender from or on behalf of the Borrower or any of its Subsidiaries shall be
remitted to, and applied by, the Agent in the following manner and
order:

       

      (a)           first, to the payment of
interest on, and then the principal portion of, any Loans which the Agent may
have advanced on  behalf of any Lender for which the Agent has not
then been reimbursed by such Lender or the Borrower or any of its
Subsidiaries;

      
        
           

        

        
          -72-

          
            

          

        

        
           

        

      

      (b)           second, to reimburse the
Agent and the Lenders, in that order, for any expenses due from the Borrower
under the Loan Documents;

       

      (c)           third, to the payment of the
fees, pro rata according to the fees due and owing to the Lenders;

       

      (d)    
       fourth, to the payment of any
other fees, expenses or other amounts (other than the principal of and interest
on the Loans) payable by the Borrower or any of its Subsidiaries to the
Lenders under the Loan Documents;

       

      (e)       
    fifth,
to the payment, pro rata according to the Pro Rata Share of each Lender,
of interest due on the Loans;

       

      (f)      
     sixth, to the payment to the
Lenders of, pro rata according to the Pro Rata Share of each Lender of, the
unpaid principal amount of the Loans;

       

      (g)           seventh, to all other
Obligations for distribution to the Lenders in accordance with their Pro Rata
Share; and

       

      (h)           eighth, thereafter, any
remaining funds shall be paid to the Borrower or as a court of competent
jurisdiction shall direct.

       

      Notwithstanding
the foregoing, the Lenders may agree among themselves to an allocation of such
funds that does not comply with the immediately preceding sentence.

       

      ARTICLE
16.

      SETOFF.

       

      Subject
to the Subordination Agreement, regardless of the adequacy of any Collateral,
during the continuance of any Event of Default, any deposits or other sums
credited by or due from any Lender to the Borrower or any of its Subsidiaries
and any securities or other property of the Borrower or any of its Subsidiaries
in the possession of any Lender may be applied to or set off by such Lender
against the payment of Obligations and any and all other liabilities, direct, or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, of the Borrower to such Lender.

       

      Each of
the Lenders agrees with each other Lender that:  (i) if an amount
to be set off is to be applied to obligations of the Borrower or any of its
Subsidiaries to such Lender, other than Obligations evidenced by the Notes held
by such Lender, such amount shall be applied ratably to such other Obligations
and to the Obligations evidenced by all such Notes held by such Lender and if
such Lender shall receive from the Borrower or any of its Subsidiaries, whether
by voluntary payment, exercise of the right of setoff, counterclaim, or offset,
enforcement of the claim evidenced by the Notes held by such Lender by
proceeding against the Borrower or any of its Subsidiaries at law or in equity
or by proof thereof in bankruptcy, reorganization, liquidation, receivership or
similar proceedings, or otherwise, and shall retain and apply to the payment of
the Note or Notes held by such Lender any amount in excess of its ratable
portion of the payments received by all of the Lenders with respect to the Notes
held by all of the Lenders, such Lender will make such dispositions and
arrangements with the other Lenders with respect to such excess, either by way
of distribution, assignment of claim, subrogation or otherwise or shall result
in each Lender receiving in on account of the Note or Notes held by it its
proportionate payment as contemplated by this Credit Agreement; provided, that if all
or any part of such excess payment is thereafter recovered from such Lender,
such disposition and arrangements shall be rescinded and the amount restored to
the extent of such recovery, but without interest.

      
        
           

        

        
          -73-

          
            

          

        

        
           

        

      

      ARTICLE
17.

      EXPENSES.

       

      Subject
to the Subordination Agreement, the Borrower agrees to
pay:  (a) the reasonable costs of producing and reproducing this
Credit Agreement, the other Loan Documents and the other agreements and
instruments mentioned herein, (b) any taxes (including any interest and
penalties in respect thereto) payable by the Agent or any of the Lenders
(other than taxes based upon the Agent's or any such Lenders' net
income) on or with respect to the transactions contemplated by this Credit
Agreement (the Borrower hereby agreeing to indemnify the Agent and each Lender
with respect thereto), (c) the reasonable fees, expenses and disbursements
of the Agent's Special Counsel or any local counsel to the Agent incurred in
connection with the preparation, administration or interpretation of the Loan
Documents and other instruments mentioned herein, each closing hereunder, and
amendments, modifications, approvals, consents or waivers hereto or hereunder,
(d) the fees, expenses and disbursements of the Agent incurred by the Agent
in connection with the preparation, administration or interpretation of the Loan
Documents and other instruments mentioned herein, including all commercial
finance examinations and appraisal charges, (e) any fees, costs, expenses
and bank charges, including bank charges for returned checks, incurred by the
Agent in establishing, maintaining or handling accounts for the collection of
any of the Collateral, (f) all reasonable out-of-pocket expenses (including
without limitation reasonable attorneys' fees and costs, which attorneys may be
employees of the Agent, and reasonable consulting, accounting, appraisal,
investment banking and similar professional fees and charges) incurred by
the Agent or any Lenders in connection with (i) the enforcement of or
preservation of rights under any of the Loan Documents against the Borrower or
any of its Subsidiaries or any guarantor or the administration thereof after the
occurrence of a Default or Event of Default and (ii) any litigation,
proceeding or dispute whether arising hereunder or otherwise, in any way related
to the Agent's or any Lender's relationship with the Borrower or any of its
Subsidiaries, and (g) all reasonable fees, expenses and disbursements of
the Agent or any Lenders incurred in connection with UCC searches, UCC filings
or mortgage recordings.  The Borrower hereby agrees to reimburse the
Agent on demand for any and all costs, liabilities and obligations incurred by
Agent pursuant to Section 20.14.  The covenants of this Article 17
shall survive payment or satisfaction of all Obligations.

      
        
           

        

        
          -74-

          
            

          

        

        
           

        

      

      ARTICLE
18.

      INDEMNIFICATION.

       

      Subject
to the Subordination Agreement, the Borrower and each of its Subsidiaries agree
to indemnify and hold harmless the Agent and each Lender and each of their
respective officers, directors, employees, agents, attorneys and Affiliates from
and against any and all claims, actions and suits whether groundless or
otherwise, and from and against any and all liabilities, losses, damages and
expenses of every nature and character arising out of this Credit Agreement or
any of the other Loan Documents or the transactions contemplated hereby (except
due to the indemnified party's own willful misconduct or gross
negligence) including, without limitation:  (a) any actual
or proposed use by the Borrower or any of its Subsidiaries of the proceeds of
any of the Loans, (b) the reversal or withdrawal of any provisional credits
granted by the Agent upon the transfer of funds from the bank agency or lock box
accounts or in connection with the provisional honoring of checks or other
items, (c) any actual or alleged infringement of any patent, copyright,
trademark, service mark or similar right of the Borrower or any of its
Subsidiaries comprised in the Collateral, (d) the Borrower or any of its
Subsidiaries entering into or performing this Credit Agreement or any of the
other Loan Documents or (e) with respect to the Borrower or any of its
Subsidiaries and their respective properties and assets, the violation of any
Environmental Law, the presence, disposal, escape, seepage, leakage, spillage,
discharge, emission, release or threatened release of any Hazardous Substances
or any action, suit, proceeding or investigation brought or threatened with
respect to any Hazardous Substances (including, but not limited to, claims with
respect to wrongful death, personal injury or damage to property), in each case
including, without limitation, the reasonable fees and disbursements of counsel
and allocated costs of internal counsel incurred in connection with any such
investigation, litigation or other proceeding brought or asserted by any party,
including without limitation liabilities caused by the negligence of the party
seeking indemnification (collectively, the "Indemnified
Liabilities").  In litigation, or the preparation therefor, the Agent
shall be entitled to select its own counsel and, in addition to the foregoing
indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses
of such counsel.  If, and to the extent that the obligations of the
Borrower under this Article 18 are unenforceable for any reason, the Borrower
hereby agrees to make the maximum contribution to the payment in satisfaction of
such obligations which is permissible under applicable law.  The
covenants contained in this Article 18 shall survive payment or satisfaction in
full of all Obligations.

       

      ARTICLE
19.

      SURVIVAL
OF COVENANTS, ETC.

       

      All
covenants, agreements, representations and warranties made herein, in the Notes,
in any of the other Loan Documents or in any documents or other papers delivered
by or on behalf of the Borrower or any of its Subsidiaries pursuant hereto shall
be deemed to have been relied upon by the Agent and the Lenders, notwithstanding
any investigation heretofore or hereafter made by any of them, and shall survive
the making by the Lenders of any of the Loans, as herein contemplated, and shall
continue in full force and effect so long as any amount due under this Credit
Agreement or the Notes or any of the other Loan Documents remains outstanding or
any Lender has any obligation to make any Loans, and for such further time as
may be otherwise expressly specified in this Credit Agreement.  All
statements contained in any certificate or other paper delivered to the Agent or
any Lenders at any time by or on behalf of the Borrower or any of its
Subsidiaries pursuant hereto or in connection with the transactions contemplated
hereby shall constitute representations and warranties by the Borrower or such
Subsidiary hereunder.

      
        
           

        

        
          -75-

          
            

          

        

        
           

        

      

      ARTICLE
20.

      AGENT.

       

      Section
20.1       Appointment and Authorization of
Agent.

       

      Each
Lender hereby irrevocably appoints, designates and authorizes the Agent to take
such action on its behalf under the provisions of this Credit Agreement and each
other Loan Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Credit Agreement or any other
Loan Document, together with such powers as are reasonably incidental
thereto.  Notwithstanding any provision to the contrary contained
elsewhere herein or in any other Loan Document, the Agent shall not have any
duties or responsibilities, except those expressly set forth herein, nor shall
the Agent have or be deemed to have any fiduciary relationship with any Lender
or participant, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Credit Agreement or any other
Loan Document or otherwise exist against the Agent.  Without limiting
the generality of the foregoing sentence, the use of the term "agent" herein and
in the other Loan Documents with reference to the Agent is not intended to
connote any fiduciary or other implied (or express) obligations arising
under agency doctrine of any applicable law.  Instead, such term is
used merely as a matter of market custom, and is intended to create or reflect
only an administrative relationship between independent contracting
parties.

       

      Section
20.2       Delegation of Duties.

       

      The Agent
may execute any of its duties under this Credit Agreement or any other Loan
Document by or through agents, employees or attorneys-in-fact and shall be
entitled to advice of counsel and other consultants or experts concerning all
matters pertaining to such duties.  The Agent shall not be responsible
for the negligence or misconduct of any agent or attorney-in-fact that it
selects in the absence of gross negligence or willful misconduct in such
selection.

       

      Section
20.3       Liability of the
Agents.

       

      The Agent
shall:  (a) not be liable for any action taken or omitted to be
taken by it or any agent, employee or attorney-in-fact under or in connection
with this Credit Agreement or any other Loan Document or the transactions
contemplated hereby (except for the Agent's own gross negligence or willful
misconduct in connection with its duties expressly set forth herein), or
(b) be responsible in any manner to any Lender or participant for any
recital, statement, representation or warranty made by the Borrower or any
Subsidiary or any officer thereof, contained herein or in any other Loan
Document, or in any certificate, report, statement or other document referred to
or provided for in, or received by Agent under or in connection with, this
Credit Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Credit Agreement or any other
Loan Document, or for any failure of the Borrower or any Subsidiary or any other
party to any Loan Document to perform its obligations hereunder or
thereunder.  The Agent shall not be under any obligation to any Lender
or participant to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Credit Agreement or
any other Loan Document, or to inspect the properties, books or records of
Borrower or any of its Subsidiaries or any Affiliate thereof.

      
        
           

        

        
          -76-

          
            

          

        

        
           

        

      

      Section
20.4       Reliance by Agent.

       

      (a)           The
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any writing, communication, signature, resolution, representation, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, electronic mail message, statement or other 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, independent accountants and other experts selected by the
Agent.  The Agent shall be fully justified in failing or refusing to
take any action under any Loan Document unless it shall first receive such
advice or concurrence of the Required Lenders as it deems appropriate and, if it
so requests, it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action.  The Agent shall in
all cases be fully protected in acting, or in refraining from acting, under this
Credit Agreement or any other Loan Document in accordance with a request or
consent of the Required Lenders (or such greater number of Lenders as may be
expressly required hereby in any instance) and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the
Lenders.

       

      (b)           For
purposes of determining compliance with the conditions specified in
Article 5, each Lender that has signed this Credit Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter required thereunder to be consented to or approved by
or acceptable or satisfactory to a Lender unless the Agent shall have received
notice from such Lender prior to the proposed Closing Date specifying its
objection thereto.

       

      Section
20.5       Notice of Default.

       

      The Agent
shall not be deemed to have knowledge or notice of the occurrence of any Default
or Event of Default, except with respect to defaults in the payment of
principal, interest and fees required to be paid to the Agent for the account of
the Lenders, unless the Agent shall have received written notice from a Lender
or from the Borrower referring to this Credit Agreement, describing such Default
or Event of Default and stating that such notice is a "notice of
default."  The Agent will notify the Lenders of its receipt of any
such notice.  The Agent shall take such action with respect to such
Default or Event of Default as may be directed by the Required Lenders; provided, however, that unless
and until the Agent has received any such direction, the Agent may (but shall
not be obligated to) take such action, or refrain from taking such action,
with respect to such Default or Event of Default as it shall deem advisable or
in the best interest of the Lenders.

      
        
           

        

        
          -77-

          
            

          

        

        
           

        

      

      Section
20.6       Credit Decision; Disclosure of
Information by Agent.

       

      Each
Lender acknowledges that the Agent has not made any representation or warranty
to it, and that no act by the Agent hereafter taken, including any consent to
and acceptance of any assignment or review of the affairs of the Borrower or any
Subsidiary or any Affiliate thereof, shall be deemed to constitute any
representation or warranty by the Agent to any Lender as to any matter,
including whether the Agent has disclosed material information in its
possession.  Each Lender represents to the Agent that it has,
independently and without reliance upon the Agent and based on such documents
and information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Borrower or any Subsidiary, and all
applicable bank or other regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter into
this Credit Agreement and to extend credit to the Borrower
hereunder.  Each Lender also represents that it will, independently
and without reliance upon the Agent and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
analysis, appraisals and decisions in taking or not taking action under this
Credit Agreement and the other Loan Documents, and to make such investigations
as it deems necessary to inform itself as to the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Borrower.  Except for notices, reports and other documents expressly
required to be furnished to the Lenders by the Agent herein, the Agent shall not
have any duty or responsibility to provide any Lender with any credit or other
information concerning the business, prospects, operations, property, financial
and other condition or creditworthiness of the Borrower or any of its
Subsidiaries or any of their respective Affiliates which may come into the
possession of any Person retained by the Agent.

       

      Section
20.7       Indemnification of
Agent.

       

      Whether
or not the transactions contemplated hereby are consummated, the Lenders shall
indemnify upon demand each of the Agent, its agents, employees, representatives
and attorneys-in-fact (to the extent not reimbursed by or on behalf of the
Borrower and without limiting the obligation of the Borrower or any Subsidiary
to do so), pro rata, and hold harmless each of the Agent, its agents, employees,
representatives and attorneys-in-fact Person from and against any and all
Indemnified Liabilities incurred by it; provided, however, that no
Lender shall be liable for the payment to any of the Agent, its agents,
employees, representatives and attorneys-in-fact of any portion of such
Indemnified Liabilities to the extent determined in a final, nonappealable
judgment by a court of competent jurisdiction to have resulted from such of the
Agent, its agents, employees, representatives and attorneys-in-fact own gross
negligence or willful misconduct; provided, however, that no
action taken in accordance with the directions of the Required Lenders shall be
deemed to constitute gross negligence or willful misconduct for purposes of this
Section 20.7.  Without limitation of the foregoing, each Lender shall
reimburse the Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including the reasonable costs and expenses of the
Agent's Special Counsel) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities
under, this Credit Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Agent is not
reimbursed for such expenses by or on behalf of the Borrower or its
Subsidiaries.  The covenants of this Section 20.7 shall survive
payment or satisfaction of all Obligations and the resignation of the
Agent.

      
        
           

        

        
          -78-

          
            

          

        

        
           

        

      

      Section
20.8       Agent in its Individual
Capacity.

       

      Granite
Agent and its Affiliates may make loans to, acquire equity interests in and
generally engage in any kind of banking, trust, financial advisory, underwriting
or other business with the Borrower or any Subsidiary and their respective
Affiliates as though Granite Agent were not the Agent hereunder and without
notice to or consent of the Lenders.  The Lenders acknowledge that,
pursuant to such activities, Granite Agent or its Affiliates may receive
information regarding the Borrower or any Subsidiary or their Affiliates
(including information that may be subject to confidentiality obligations in
favor of the Borrower or such Affiliate) and acknowledge that the Agent
shall be under no obligation to provide such information to
them.  With respect to its Loans, Granite Agent shall have the same
rights and powers under this Credit Agreement as any other Lender and may
exercise such rights and powers as though it were not the Agent and the terms
"Lender" and "Lenders" include Granite, in its individual capacity.

       

      Section
20.9       Successor Agent.

       

      The Agent
may resign as Agent upon thirty (30) days' notice to the Lenders and the
Borrower.  If the Agent resigns under this Credit Agreement, the
Required Lenders shall appoint from among the Lenders a successor agent for the
Lenders, which so long as no Default or Event of Default has occurred and is
continuing, shall be with the consent of the Borrower (which consent of the
Borrower shall not be unreasonably withheld or delayed), provided that, if a
Default or Event of Default has occurred and is continuing no such Borrower
consent is required.  If no successor agent is appointed prior to the
effective date of the resignation of the Agent, the Agent may appoint, after
consulting with the Lenders and so long as no Default or Event of Default has
occurred and is continuing, a successor agent from among the
Lenders.  Upon the acceptance of its appointment as successor agent
hereunder, the Person acting as such successor agent shall succeed to all the
rights, powers and duties of the retiring Agent and the term "Agent" shall mean
such successor agent, and the retiring Agent's appointment, powers and duties as
Agent shall be terminated, without any other or further act or deed on the part
of such retiring Agent or any other Lender.  After any retiring
Agent's resignation hereunder as Agent, the provisions of this Article 20 shall
no longer apply to such resigning agent except Section 20.4 and 20.5 shall
continue to inure to its benefit as to any actions taken or omitted to be taken
by it while it was Agent under this Credit Agreement.  If no successor
agent has accepted appointment as Agent by the date which is thirty
(30) days following a retiring Agent's notice of resignation, the retiring
Agent's resignation shall nevertheless thereupon become effective and the
Lenders shall perform all of the duties of the Agent hereunder until such time,
if any, as the Required Lenders appoint a successor agent as provided for
above.

      
        
           

        

        
          -79-

          
            

          

        

        
           

        

      

      Section
20.10     Agent May File Proofs of Claim.

       

      Subject
to the Subordination Agreement, in case of the pendency of any receivership,
insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to the Borrower or any
Subsidiary, the Agent (irrespective of whether the principal of any Loan shall
then be due and payable as herein expressed or by declaration or otherwise and
irrespective of whether the Agent shall have made any demand on the
Borrower) shall be entitled and empowered, by intervention in such
proceeding or otherwise

       

      (a)           to
file and prove a claim for the whole amount of the principal and interest owing
and unpaid in respect of the Loans and all other Obligations that are owing and
unpaid and to file such other documents as may be necessary or advisable in
order to have the claims of the Lenders and the Agent (including any claim for
the reasonable compensation, expenses, disbursements and advances of the Lenders
and the Agent and their respective agents and counsel and all other amounts due
the Lenders and the Agent) allowed in such judicial proceeding;
and

       

      (b)           to
collect and receive any monies or other property payable or deliverable on any
such claims and to distribute the same;

       

      and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Lender to make such payments to the Agent and, in the event that the Agent shall
consent to the making of such payments directly to the Lenders, to pay to the
Agent any amount due for the reasonable compensation, expenses, disbursements
and advances of the Agent and its agents and counsel, and any other amounts due
the Agent hereunder.

       

      (c)           Nothing
contained herein shall be deemed to authorize the Agent to authorize or consent
to or accept or adopt on behalf of any Lender any plan of reorganization,
arrangement, adjustment or composition affecting the Obligations or the rights
of any Lender or to authorize the Agent to vote in respect of the claim of any
Lender in any such proceeding.

       

      Section
20.11     Collateral and Guaranty Matters.

       

      The
Lenders irrevocably authorize the Agent, at its option and in its
discretion:

       

      (a)           to
release any lien on any property granted to or held by the Agent under any Loan
Document:  (i) upon termination of all commitments to lend
hereunder and payment in full of all Obligations (other than contingent
indemnification obligations), (ii) that is sold or to be sold as part of or
in connection with any sale permitted hereunder or under any other Loan
Document, or (iii) if approved, authorized or ratified in writing by the
Required Lenders;

      
        
           

        

        
          -80-

          
            

          

        

        
           

        

      

      (b)           to
subordinate any lien on any property granted to or held by the Agent under any
Loan Document to the holder of any lien on such property that is permitted by
Section 11.2; and

       

      (c)           to
release any Guarantor from its obligations under a Guaranty if such Person
ceases to be a Subsidiary as a result of a transaction permitted
hereunder.

       

      Upon
request by the Agent at any time, the Required Lenders will confirm in writing
the Agent's authority to release or subordinate its interest in particular types
or items of property, or to release any Guarantor from its obligations under a
Guaranty pursuant to this Section 20.11.

       

      Section
20.12     Lender Pledge.

       

      Any
Lender may at any time pledge or assign a security interest in all or any
portion of its rights under this Credit Agreement (including under its Note, if
any) to secure obligations of such Lender, including any pledge or
assignment to secure obligations to a Federal Reserve Bank; provided that, no
such pledge or assignment shall release such Lender from any of its obligations
hereunder or substitute any such pledge or assignee for such Lender as a party
hereto.

       

      Section
20.13     Return of Payments; Defaulting Lender.

       

      (a)           If
the Agent pays an amount to a Lender under this Credit Agreement in the belief
or expectation that a related payment has been or will be received by the Agent
from the Borrower or any of its Subsidiaries and such related payment is not
received by the Agent, then the Agent will be entitled to recover such amount
from such Lender on demand without setoff, counterclaim or deduction of any
kind, together with interest accruing on a daily basis at the Defaulting Lender
Rate.

       

      (b)           If
the Agent determines at any time that any amount received by the Agent under
this Credit Agreement must be returned to the Borrower or paid to any other
Person pursuant to any insolvency law or otherwise, then, notwithstanding any
other term or condition of this Credit Agreement or any other Loan Document, the
Agent will not be required to distribute any portion thereof to any
Lender.  In addition, each Lender will repay to the Agent on demand
any portion of such amount that the Agent has distributed to such Lender,
together with interest at such rate, if any, as the Agent is required to pay to
Borrower or such other Person, without setoff, counterclaim or deduction of any
kind.

       

      (c)           Notwithstanding
anything set forth herein to the contrary, a Defaulting Lender shall not have
any voting or consent rights under or with respect to any Loan Document or
constitute a "Lender" (or be included in the calculation of "Required Lenders"
hereunder) for any voting or consent rights under or with respect to any
Loan Document.

      
        
           

        

        
          -81-

          
            

          

        

        
           

        

      

      (d)           If
any Lender shall obtain any payment or other recovery (whether voluntary,
involuntary, by application of setoff or otherwise) on account of any Loan
in excess of its Pro Rata Share of payments entitled pursuant to the other
provisions of this Section 20.13, such Lender shall purchase from the other
Lenders such participations in extensions of credit made by such other Lenders
(without recourse, representation or warranty) as shall be necessary to
cause such purchasing Lender to share the excess payment or other recovery
ratably with each of them; provided, however, that if all
or any portion of the excess payment or other recovery is thereafter recovered
from such purchasing Lender, the purchase shall be rescinded and each Lender
which has sold a participation to the purchasing Lender shall repay to the
purchasing Lender the purchase price to the ratable extent of such recovery,
without interest.  The Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this clause (d) may, to the
fullest extent permitted by law, exercise all its rights of payment with respect
to such participation as fully as if such Lender were the direct creditor of
Borrower in the amount of such participation.  If under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured claim
in lieu of a setoff to which this clause (d) applies, such Lender shall, to
the extent practicable, exercise its rights in respect of such secured claim in
a manner consistent with the rights of the Lenders entitled under this clause
(d) to share in the benefits of any recovery on such secured
claim.

       

      Section
20.14     Right to Perform, Preserve and Protect.

       

      If the
Borrower fails to perform any obligation hereunder or under any other Loan
Document beyond any applicable grace period, the Agent itself may, but shall not
be obligated to, cause such obligation to be performed at the Borrower's
expense.  Following such failure by the Borrower, the Agent is further
authorized by the Borrower and the Lenders to make expenditures from time to
time which the Agent, in its reasonable business judgment, deems necessary or
desirable to:  (a) preserve or protect the business conducted by
the Borrower, the Collateral, or any portion thereof and/or (b) enhance the
likelihood of, or maximize the amount of, repayment of the Loans and other
Obligations.

       

      Section
20.15     Amendment of Article 20.

       

      The
Borrower hereby agrees that this Article 20 constitutes an agreement among,
and solely for the benefit of, the Agent and the Lenders, (and the Agent and the
Lenders acknowledge that the Borrower is not a party to such foregoing
provisions) and that any and all of the provisions of this Article 20
and that such agreements among the Lenders may be amended at any time by the
Lenders without the consent or approval of or notice to the Borrower (other than
any requirement of notice to the Borrower of the resignation of the
Agent).

      
        
           

        

        
          -82-

          
            

          

        

        
           

        

      

      ARTICLE
21.

      ASSIGNMENT
AND PARTICIPATION.

       

      Section
21.1       Conditions to Assignment by any
Lender.

       

      Except as
provided herein, any Lender may assign to one or more Eligible Assignees all or
a portion of its interest, rights and obligations under this Credit Agreement
and the Notes held by it in accordance with the Assignment and Acceptance form
attached hereto as Exhibit C; provided,
that, prior to the payment in full of the Senior Debt, any such Eligible
Assignee shall have agreed in writing to be bound in all respects by the terms
and provisions of the Subordination Agreement.

       

      Section
21.2       Participations.

       

      Any
Lender may sell participations to one or more banks or other entities in all or
a portion of any Lender's rights and obligations under this Credit Agreement and
the other Loan Documents; provided,
that:  (a) any such sale or participation shall not affect the
rights and duties of such Lender hereunder to the Borrower, (b) the
Borrower shall continue to deal with the selling Lender and (c) the only rights
granted to the participant pursuant to such participation arrangements with
respect to waivers, amendments or modifications of the Loan Documents shall be
the rights to approve waivers, amendments or modifications that would reduce the
principal of or the interest rate on any Loan or extend any regularly scheduled
payment date for principal or interest.

       

      Section
21.3       Disclosure.

       

      The
Borrower and its Subsidiaries agree that in addition to disclosures made in
accordance with standard and customary banking practices the Lenders may
disclose information obtained by such Lender pursuant to this Credit Agreement
to assignees or participants and potential assignees or participants hereunder;
provided, that
such assignees or participants or potential assignees or participants shall
agree:  (a) to treat in confidence such information unless such
information otherwise becomes public knowledge, (b) not to disclose such
information to a third party, except as required by law or legal process and
(c) not to make use of such information for purposes of transactions
unrelated to such contemplated assignment or participation.

       

      Section
21.4       Assignee or Participant Affiliated
with the Borrower.

       

      If any
assignee of a Lender is an Affiliate of the Borrower or of any of its
Subsidiaries, then any such assignee Lender shall have no right to vote as a
"Lender" hereunder or under any of the other Loan Documents for purposes of
granting consents or waivers or for purposes of agreeing to amendments or other
modifications to any of the Loan Documents.

      
        
           

        

        
          -83-

          
            

          

        

        
           

        

      

      Section
21.5       Assignment by the
Borrower.

       

      Neither
the Borrower nor any of its Subsidiaries shall assign or transfer any of its
rights or obligations under any of the Loan Documents without the prior written
consent of the Required Lenders and the Agent.

       

      ARTICLE
22.

      NOTICES,
ETC.

       

      Except as
otherwise expressly provided in this Credit Agreement, all notices and other
communications made or required to be given pursuant to this Credit Agreement or
the Notes shall be in writing and shall be delivered in hand, mailed by United
States registered or certified first class mail, postage prepaid, sent by
overnight courier, or sent by telegraph, telecopy, facsimile or telex and
confirmed by delivery via courier or postal service, addressed as
follows:

       

      (a)          if
to the Borrower or any of its Subsidiaries, or at such other address for notice
as the Borrower shall last have furnished in writing to the Person giving the
notice; and

       

      
        	
                 
      

              	
                to:

              	
                96
      Windsor Street

              

      

      
        	
                 
      

              	
                West
      Springfield, MA 01089

              

      

      
        	
                 
      

              	
                Attention:  Michael
      Bielonko

              

      

       

      
        	
                 
      

              	
                with
      a copy to:

              	
                Loeb
      & Loeb LLP

              

      

      
        	
                 
      

              	
                345
      Park Avenue

              

      

      
        	
                 
      

              	
                New
      York, NY 10154

              

      

      
        	
                 
      

              	
                Attention:  Mitchell
      Nussbaum, Esq.

              

      

       

      (b)          if
to the Agent, to 222 West Adams, Suite 1980, Chicago, Illinois  60611,
Attention: Brian Boorstein, or such other address for notice as the Agent shall
last have furnished in writing to the Person giving the notice.

       

      
        	
                 
      

              	
                with
      a copy to:

              	
                Goldberg
      Kohn Ltd.

              

      

      
        	
                 
      

              	
                55
      East Monroe Street, Suite 3300

              

      

      
        	
                 
      

              	
                Chicago,
      Illinois  60606

              

      

      
        	
                 
      

              	
                Attention:  Denise
      B. Caplan

              

      

       

      Any such
notice or demand shall be deemed to have been duly given or made and to have
become effective (i) if delivered by hand, overnight courier or facsimile
to a responsible officer of the party to which it is directed, at the time of
the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid,
on the third Business Day following the mailing thereof.

      
        
           

        

        
          -84-

          
            

          

        

        
           

        

      

      ARTICLE
23.

      GOVERNING
LAW.

       

      THIS
CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, EACH OF
THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE STATE OF ILLINOIS
AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF SAID STATE (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF
LAW).  EACH PARTY HERETO AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF
THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE
COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF
SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON SUCH PARTY BY
MAIL AT THE ADDRESS SPECIFIED IN ARTICLE 22.  EACH PARTY HERETO HEREBY
WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH
SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT
COURT.

       

      ARTICLE
24.

      HEADINGS.

       

      The
captions in this Credit Agreement are for convenience of reference only and
shall not define or limit the provisions hereof.

       

      ARTICLE
25.

      COUNTERPARTS.

       

      This
Credit Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when
executed and delivered shall be an original, and all of which together shall
constitute one instrument.  In proving this Credit Agreement it shall
not be necessary to produce or account for more than one such counterpart signed
by the party against whom enforcement is sought.

       

      ARTICLE
26.

      ENTIRE
AGREEMENT, ETC.

       

      The Loan
Documents and any other documents executed in connection herewith or therewith
express the entire understanding of the parties with respect to the transactions
contemplated hereby.  Neither this Credit Agreement nor any term
hereof may be changed, waived, discharged or terminated, except as provided in
Article 28.

      
        
           

        

        
          -85-

          
            

          

        

        
           

        

      

      ARTICLE
27.

      WAIVER
OF JURY TRIAL.

       

      EACH
PARTY HERETO HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION
OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS CREDIT AGREEMENT,
THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS
HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF WHICH RIGHTS AND
OBLIGATIONS.  EXCEPT AS PROHIBITED BY LAW, EACH PARTY HERETO HEREBY
WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO
IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES.  THE BORROWER CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF THE AGENT OR ANY OF THE LENDERS HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT THE AGENT OR ANY OF THE LENDERS WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS.

       

      ARTICLE
28.

      CONSENTS,
AMENDMENTS, WAIVERS, ETC.

       

      (a)           No
failure to exercise and no delay in exercising, on the part of any Lender, any
right, remedy, power or privilege under any Loan Document shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege under any Loan Document preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege.  The rights, remedies, powers and privileges under the Loan
Documents are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.  No waiver of any provision of any Loan
Document or consent to any departure by the Borrower therefrom shall in any
event be effective unless the same shall be permitted by this Article 28, and
then such waiver or consent shall be effective only in the specific instance and
for the purpose for which given.  Without limiting the generality of
the foregoing, the making of a Loan shall not be construed as a waiver of any
Default, regardless of whether any Lender may have had notice or knowledge of
such Default at the time.

       

      (b)           Notwithstanding
anything to the contrary contained in any Loan Document, with the written
consent of the Required Lenders, the Agent and the appropriate parties to the
Loan Documents (other than the other Lenders) may, from time to time, enter
into written amendments, supplements or modifications thereof and, with the
consent of the Required Lenders, the Agent on behalf of the other Lenders, may
execute and deliver to any such parties a written instrument waiving or
consenting to the departure from, on such terms and conditions as the Agent may
specify in such instrument, any of the requirements of the Loan Documents or any
Default or Event of Default and its consequences; provided, however, that no such amendment,
supplement, modification, waiver or consent shall:

       

      (i)      extend
or increase the Pro Rata Share of any of the commitment of any Lender to fund a
portion of the Term Loan, without such Lender's consent;

       

      (ii)     unless
agreed to by each Lender affected thereby:  (A) reduce the
principal amount of any Loan, or reduce the rate of interest thereon, or
reduce any fees or other obligations payable under the Loan Documents or
(B) extend any date (including the Term Loan Maturity Date) fixed for
the payment or mandatory prepayment of principal or interest on any Loan, any
fees, or any other obligation payable under the Loan Documents;

      
        
           

        

        
          -86-

          
            

          

        

        
           

        

      

      (iii)    unless
agreed to by all of the Lenders, (A)  increase the commitment of any Lender
to fund a portion of the Term Loan, (B) change the definition of "Required
Lenders" or any other provision hereof specifying the number or percentage of
Lenders required to waive, amend or modify any rights hereunder or make any
determination or grant any consent hereunder, (C) change the order of
payments under Section 15.4, (D) consent to any assignment or delegation by
any Borrower of any of its rights or obligations under any Loan Document,
(E) release any Borrower from its obligations under this Credit Agreement,
(F) release any Guarantor from its obligations under this Credit Agreement
or any Guaranty (except as a result of the termination of the existence of such
Guarantor in a transaction permitted hereunder), or release any of the
Collateral from the liens of the Security Documents (except as may be expressly
permitted thereunder or hereunder, or (G) amend, modify or affect Article
28);

       

      (iv)    unless
agreed to by all of the Lenders, shorten the maturity of the Loans;
and

       

      (v)     unless
agreed to by the Agent, amend, modify or otherwise affect the rights or duties
of the Agent under this Credit Agreement or the other Loan
Documents.

       

      Any such
amendment, supplement, modification, waiver or consent shall apply equally to
each Lender and shall be binding upon each Lender and subject to the Borrower's
execution of such amendment, supplement, modification, waiver or consent the
Borrower and upon all future holders of the Notes.  In the case of any
waiver, the Lender and the Borrower shall be restored to their former position
and rights hereunder and under the outstanding Notes and other Loan Documents to
the extent provided for in such waiver, and any Default or Event of Default
waived shall not extend to any subsequent or other Default or Event of Default,
or impair any right consequent thereon.

       

      ARTICLE
29.

      SEVERABILITY.

       

      The
provisions of this Credit Agreement are severable and if any one clause or
provision hereof shall be held invalid or unenforceable in whole or in part in
any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Credit Agreement in any
jurisdiction.

      
        
           

        

        
          -87-

          
            

          

        

        
           

        

      

      ARTICLE
30.

      SUBORDINATION
AGREEMENT.

       

      Notwithstanding
any provision to the contrary in this Credit Agreement, this Credit Agreement,
the Liens and security interests granted to the Agent and Lenders, at law or
equity, pursuant to this Credit Agreement, and the exercise of any right or
remedy by the Agent or any Lender hereunder are subject to the provisions of the
Subordination Agreement.  Agent and each Lender acknowledge and agree
to be bound by the Subordination Agreement.  In the event of any
conflict between the terms of the Subordination Agreement and this Credit
Agreement or the other Loan Documents, the terms of the Subordination Agreement
shall govern.  Without limiting the generality of the foregoing, and
notwithstanding anything herein to the contrary, all right and remedies of the
Agent and Lenders shall be subject to the terms of the Subordination Agreement,
and until the Senior Debt is paid in full, any obligation of Borrower or any
Guarantor hereunder with respect to the delivery or control of any Collateral,
the notation of any lien on any certificate of title, bill of lading or other
document, the giving of any notice to any bailee or other Person, the provision
of voting rights or the obtaining of any consent of any Person shall be deemed
to be satisfied if the Borrower or such Guarantor complies with the requirements
of the similar provision of the Senior Loan Agreement or the applicable Senior
Debt Document.

       

      The
Borrower and Guarantors acknowledge that the Subordination Agreement and the
rights and benefits thereof (as specific references thereto herein) inure only
to the benefit of the holders of the Senior Debt and that no other Person,
including the Borrower and Guarantors, shall have or be entitled to assert any
rights or benefits hereunder arising under the Subordination Agreement or by
virtue of the existence of the specific references thereto herein.

      

      [
The remainder of this page is intentionally left blank. ]

      
        
           

        

        
          -88-

          
            

          

        

        
           

        

      

      IN
WITNESS WHEREOF, the undersigned have duly executed this Credit Agreement as a
sealed instrument as of the date first set forth above.

       

      
        
          	
                  CYALUME
      TECHNOLOGIES

                  HOLDINGS,
      INC.

                
	 
      	 
      
	
                  By:

                	
                  /s/ Derek Dunaway

                
	
                  Title:
      Chief Executive Officer

                
	 
      	 
      
	
                  CYALUME
      TECHNOLOGIES, INC.

                
	 
      	 
      
	
                  By:

                	
                  /s/ Michael Bielonko

                
	
                  Title:
      Chief Financial Officer

                

        

      

      

      Signature
Page to Subordinated Loan Agreement

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      

      
        
          	
                  PATRIOT CAPITAL II,
      L.P., a Delaware

                  limited
      partnership

                
	 
      	 
      
	
                  By:

                	
                  Patriot
      Partners II, LLC, a Delaware

                
	 
      	
                  limited
      liability company, General

                  Partner

                
	 
      	 
      
	
                  By:

                	
                  /s/ Thomas O. Holland,
  Jr.

                
	 
      	
                  Thomas
      O. Holland, Jr.

                
	 
      	
                  Managing
      Member

                

        

      

      

      Signature
Page to Subordinated Loan Agreement

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      

      
        
          
            	
                    GRANITE
      CREEK FLEXCAP I, L.P.

                  
	 
      	 
      
	
                    By:

                  	
                    /s/ Brian B. Boorstein

                  
	
                    Title:
      Managing Partner

                  

          

        

      

       

      Signature
Page to Subordinated Loan Agreement

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      
        
          	
                  GRANITE
      CREEK PARTNERS AGENT,

                  LLC, as
      Agent

                
	 
      	 
      
	
                  By:

                	
                  /s/ Brian B. Boorstein

                
	
                  Title:
      Managing Member

                

        

      

      

      Signature
Page to Subordinated Loan AgreementThis
Subordinated Security and Pledge Agreement is subject to the terms and
provisions of the Intercreditor and Subordination Agreement by and between
GRANITE CREEK PARTNERS AGENT, LLC, as Junior Agent
on behalf of itself and the Junior Lenders, and TD BANK, N.A. dated as of
July 29, 2010 (as amended, restated, supplemented or otherwise modified
from time to time, the "Subordination Agreement") and each holder of the Loans,
by its acceptance hereof, shall be bound by the provisions of the Subordination
Agreement.

     

    SUBORDINATED
SECURITY AND PLEDGE AGREEMENT

     

    This
Subordinated Security and Pledge Agreement (this "Agreement"), dated
the 29th day of July, 2010, is made by CYALUME TECHNOLOGIES, INC., a Delaware
corporation having its principal place of business and chief executive office at
96 Windsor Street, West Springfield, Massachusetts (the "Debtor"), for the
benefit of GRANITE CREEK PARTNERS AGENT, LLC, a Delaware limited liability
company, as Agent (the "Agent") and for the
financial institutions or other entities (hereinafter, collectively, the "Lenders") which are
or may become parties to the Loan Agreement (as defined below) (in such capacity
the "Secured
Party").

     

    WITNESSETH

     

    WHEREAS,
pursuant to that certain Subordinated Loan Agreement dated as of July 29,
2010, by and among the Debtor, Cyalume Technologies Holdings, Inc., a Delaware
corporation (the "Holding Company"),
the Lenders, and the Secured Party, as Agent (as amended, restated, modified,
supplemented and in effect from time to time, the "Loan Agreement"; capitalized
terms used herein without definition having the respective meanings ascribed to
them in the Loan Agreement), the Lenders have agreed to make Loans to the
Debtor; and

     

    WHEREAS,
the obligation of the Lenders to make such Loans is subject to the condition,
among others, that the Debtor execute and deliver this Agreement and grant the
liens in favor of the Secured Party as hereinafter described.

     

    NOW,
THEREFORE, for good and valuable consideration, receipt and sufficiency of which
is hereby acknowledged, it is hereby agreed as follows:

     

    1.           Security
Interest.  As security for the due and punctual payment and
performance of the Secured Obligations described in Section 2 hereof, the Debtor
hereby grants to the Secured Party for the benefit of the Lenders and itself, a
continuing security interest in and to all of its right, title and interest in
the Collateral, whether now owned or existing or hereafter acquired or
arising.

     

    As used
herein, "Collateral" shall
mean all of Debtor's tangible and intangible personal property and fixtures (but
none of its obligations with respect thereto), including, without limitation,
all of Debtor's right, title and interest in the property described below, as
each such term is used in the Uniform Commercial Code as in effect from time to
time in the State of Illinois (the "UCC"):

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (i)          all
investment property;

     

    (ii)         goods;

     

    (iii)        equipment;

     

    (iv)        inventory;

     

    (v)     
   instruments (including, without limitation, promissory
notes);

     

    (vi)        accounts;

     

    (vii)       documents;

     

    (viii)      chattel
paper (whether tangible or electronic);

     

    (ix)         deposit
accounts;

     

    (x)          fixtures;

     

    (xi)         letter-of-credit
rights and support obligations;

     

    (xii)        the
commercial tort claims (i.e., any claims arising in
tort that the Debtor may have) set forth on Exhibit 1(xii)
hereto;

     

    (xiii)       general
intangibles (including, without limitation, payment intangibles and Intellectual
Property Collateral (as defined below)); and

     

    (xiv)       any
and all additions, accessions and attachments to and of the foregoing and any
substitutions, replacements, proceeds (including, without limitation, insurance
proceeds), products and supporting obligations of the foregoing.

     

    Notwithstanding
anything to the contrary contained herein, the security interests granted under
this Agreement shall not extend to (and such property shall not constitute
Collateral) the equity interests of the Debtor in CTSA or any other Foreign
Subsidiary now owned or hereafter formed or acquired pursuant to the terms and
conditions of the Loan Agreement, other than a 65% pledge of the equity
interests in CTSA and any other such Foreign Subsidiary in favor of the Agent
for the benefit of the Lenders .

     

    It is
understood and agreed that the security interests and liens created hereby and
under the Loan Agreement and the other Loan Documents shall not prevent, as long
as no Event of Default has occurred and continuing and after written notice from
the Agent, Debtor from using the Collateral in the ordinary course of its
business.

     

    2.           Secured
Obligations.  The lien hereby granted shall secure equally and
ratably the due and punctual payment and performance of the following
liabilities and obligations (collectively, the "Secured
Obligations"):

     

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

     

    (a)           principal
of and premium, if any, and interest on and fees (including, without limitation,
the Closing Fee and all other fees from time to time due from Debtor pursuant to
the Loan Agreement) and other amounts payable with respect to the Term Loan Note
or the Delayed Draw Note (or any of them) and any guarantees thereof;
and

     

    (b)           any
and all other indebtedness and obligations of the Debtor and/or any of its
Subsidiaries under the Loan Agreement or under any other agreement, document or
instrument relating thereto, all as amended, modified or supplemented from time
to time, related in any way to the Term Loan Notes or the Delayed Draw Notes (or
any of them).

     

    3.           Special Warranties and Covenants of
the Debtor.  Debtor hereby represents and warrants to and
covenants and agrees with the Secured Party and the Lenders that:

     

    (a)           Debtor
is the owner of and has good and marketable title to the Collateral free from
any liens, other than liens created hereby and Permitted Liens, and Debtor will
defend the Collateral against all claims and demands of all Persons at any time
claiming the same or any interest therein.

     

    (b)           The
address shown at the beginning of this Agreement is the chief executive office
and principal place of business of Debtor and the location of all records
concerning that portion of Collateral consisting of accounts receivable and
other general intangibles. Debtor's only additional places of business and the
only additional locations of any Collateral (including Collateral located at
warehouses and the like) are listed on Exhibit 3(b) attached hereto (which
includes legal descriptions of all real property sufficient for fixture
filings). Except as set forth on Exhibit 3(b) attached hereto, during the five
(5) years ended on the date hereof, neither Debtor nor any of its
predecessors-in-interest has conducted any business or sold any goods under any
name (including any fictitious business or trade name) other than its legal
name. Debtor's legal name and jurisdiction of organization is correctly set
forth at the beginning of this Agreement. Debtor will not change its corporate
form or jurisdiction of organization, or change its chief executive office or
principal place of business or any other place of business, or the location of
any Collateral (other than inventory in transit) (including, without limitation,
the records relating thereto), or make any change in its legal name or conduct
business operations under any fictitious business or trade name (other than any
names specified on Exhibit 3(b) attached hereto), (i) in contravention of the
Loan Agreement or (ii) without, in each such case, (A) giving at least twenty
(20) days' prior written notice thereof to the Secured Party and (B) executing,
delivering, filing and recording all necessary financing statements (or
amendments thereto) or other instruments and documents in order to maintain the
validity, enforceability, priority and perfection of the lien arising hereunder
and under the other Loan Documents.

     

    (c)           Except
as explicitly permitted by the Loan Agreement, (i) Debtor will not sell or
otherwise dispose of any of the Collateral or any interest therein and (ii)
Debtor will not create, assume, incur or suffer to exist any lien of any kind
(whether senior, pari passu
or subordinate) on the Collateral, other than Permitted
Liens.

     

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

     

    (d)           Subject
to the terms of the Loan Agreement, Debtor will keep the Collateral, including,
without limitation, all inventory and equipment, used or useful in the conduct
of its business, in good repair, working order and condition, ordinary wear and
tear excepted, and adequately insured at all times in accordance with the
provisions of the Loan Agreement and the other Loan Documents. Each insurance
policy pertaining to any of the Collateral shall be in form and substance and
shall have such limits and deductibles as shall be reasonably satisfactory to
the Secured Party and, without limiting the generality of the foregoing,
shall:

     

    (i)           name
the Secured Party as loss payee (in the case of property insurance) and as an
additional insured (in the case of liability insurance) pursuant to a so-called
standard mortgagee clause and shall contain the so-called agreed upon
replacement cost endorsement and waiver of subrogation;

     

    (ii)         provide
that no action of Debtor or any of its Subsidiaries or any tenant or subtenant
shall void such policy as to the Secured Party;

     

    (iii)        provide
that the Secured Party shall be notified (and Debtor hereby covenants to notify
the Secured Party) of any expiration, cancellation or material amendment of such
policy at least thirty (30) days in advance of the effective date thereof and
provide that the Secured Party shall have the right to cure any deficiency
resulting in the same;

     

    (iv)        provide
that the Secured Party shall receive (and Debtor shall cause the Secured Party
to receive) annually, certificates of insurance (or other appropriate
documentation) demonstrating compliance by Debtor with all provisions of the
Loan Agreement relating to insurance matters; and

     

    (v)         be
issued by an insurance company or insurance companies licensed to do business in
the jurisdiction in which the Collateral is located and having the highest or
second highest rating available from A.M. Best Company or an equivalent
Person.

     

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

    Certified
copies of all such insurance policies relating to the Collateral shall be
delivered to the Secured Party upon written request. In the event of any
material damage or destruction to the Collateral, Debtor shall give prompt
written notice to the Secured Party. Debtor shall not adjust, compromise or
settle any claim for insurance proceeds in excess of $100,000 without the prior
written consent of the Secured Party. Subject to the terms of the Loan Agreement
and so long as no Default or Event of Default shall have occurred and be
continuing, and so long as each of the following conditions are satisfied,
Debtor may apply the proceeds of any insurance to the repair and restoration or
replacement of any of the Collateral which was the subject of the loss, provided
that (i) the cost of repair and restoration or replacement shall not exceed
$100,000, (ii) Debtor continues to be the sole owner of the Collateral subject
to the lien arising hereunder and under the other Loan Documents and, if
applicable, said Permitted Liens, (iii) the contemplated repair and restoration
or replacement shall reconstruct or restore the Collateral to substantially its
previous condition within ninety (90) days from the date of the damage or
destruction to the Collateral, (iv) all sums necessary to effect the repair and
restoration or replacement over and above any available insurance proceeds shall
be at the sole cost and expense of the Debtor, (v) Debtor shall deposit all
available proceeds together with the additional sums referred to in subsection
(iv) with the Secured Party prior to commencing any repair and restoration or
replacement and (vi) at all times during any repair and restoration or
replacement Debtor shall, at its sole cost and expense, maintain workers'
compensation and public liability insurance in amounts satisfactory to the
Secured Party and in accordance with the provisions of this Section 3(d). If at
any time the Secured Party determines, in good faith, that the foregoing
conditions have not been or cannot be satisfied, then the Secured Party may
apply the proceeds of insurance to the prepayment, without premium, of the
Senior Debt or the Term Loans in accordance with Section 5.3 of the Loan
Agreement. Any insurance proceeds that are received at a time when a Default or
Event of Default shall have occurred and be continuing may be applied by the
Secured Party to the repayment of the Secured Obligations (or, prior the payment
in full of the Senior Debt, the Senior Debt) in accordance with the terms of the
Loan Agreement. If Debtor fails to provide insurance as required by this
Agreement, the Loan Agreement or any of the other Loan Documents, the Secured
Party may, at its option, provide such insurance, and the Debtor will on demand
pay to the Secured Party the amount of any disbursement made by the Secured
Party for such purpose and any such unreimbursed amounts shall constitute
Secured Obligations for all purposes of this Agreement.

     

    Notwithstanding
anything to the contrary herein, the Mortgage shall control with respect to the
insurance policies required on the Premises and property covered
therein.

     

    (e)           To
the extent required by the Loan Agreement, Debtor will pay and discharge
promptly as they become due and payable all taxes, assessments and other
governmental charges or levies imposed upon it or its income or upon any of its
properties, real, personal or mixed, or upon any part thereof, including,
without limitation, the Collateral or any part of the Collateral, as well as all
claims of any kind (including claims for labor, materials and supplies) which if
unpaid might by law become a lien or charge upon its property.

     

    (f)           Debtor
will, upon the reasonable request of the Secured Party, promptly make, execute
(as applicable), acknowledge and deliver and file and record in all proper
offices and places, including, without limitation, the U.S. Patent and Trademark
Office and the U.S. Copyright Office, such financing statements, continuation
statements, certificates, collateral agreements and other agreements, documents
or instruments as may be necessary to perfect or from time to time renew the
lien arising hereunder and under the other Loan Documents, including, without
limitation, those that may be necessary to perfect such lien in any additional
Collateral hereafter acquired by Debtor or in any replacements or proceeds
thereof, and Debtor will take all such action as may be deemed reasonably
necessary by the Secured Party to carry out the intent and purposes of the Loan
Documents or for assuring and confirming to the Secured Party the grant and
perfection of the lien in the Collateral, including, without limitation, the
Intellectual Property Collateral. To the extent permitted by law, Debtor
authorizes and appoints (such appointment being coupled with an interest and
irrevocable) the Secured Party to execute (as applicable) and to file and record
such financing statements, continuation statements, certificates, collateral
agreements and other agreements, documents and instruments in its stead, with
full power of substitution, as Debtor's attorney-in-fact to be exercised only
(i) if Debtor fails or refuses to do so promptly following a written request
therefor or (ii) following an Event of Default and during the continuance
thereof.

     

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

     

    (g)           Debtor
hereby authorizes the Secured Party to file and record in all proper offices and
places, including, without limitation, the U.S. Patent and Trademark Office and
the U.S. Copyright Office, such financing statements, continuation statements,
certificates, collateral agreements and other agreements, documents and
instruments as may be necessary to perfect from time to time renew the lien
arising hereunder and under the other Loan Documents, including, without
limitation, those that may be necessary to perfect such lien in any additional
Collateral hereafter acquired by Debtor or in any replacements or proceeds
thereof.

     

    (h)           Debtor
agrees that if any warehouse receipt or receipt in the nature of a warehouse
receipt is issued with respect to any of the inventory (or any other
Collateral), such receipt shall not be "negotiable" (as such term is used in the
Uniform Commercial Code as in effect in any relevant jurisdiction or under other
relevant law). If, notwithstanding the foregoing, any negotiable warehouse
receipts or other negotiable documents are issued with respect to any of the
inventory (or other Collateral), all such instruments shall be held in trust for
the Secured Party and shall be immediately endorsed to the order of the Secured
Party and delivered to the Secured Party to be held by the Secured Party as
Collateral hereunder. In addition, Debtor will notify all warehousemen, bailees,
agents, processors and other similar Persons of the lien created pursuant to the
Loan Documents and will cause each to hold all Collateral for the account of,
and subject to the instructions of, the Secured Party.

     

    (i)           Except
in the ordinary course of business or as otherwise explicitly permitted by the
Loan Agreement, without the prior written consent of the Secured Party, Debtor
shall not amend or modify, or waive any of its rights under or with respect to,
any of the accounts receivable, if the effect thereof would be to materially and
adversely impair any remedies of the Debtor or the Secured Party under or with
respect thereto. Upon the occurrence and during the continuance of any Event of
Default, the Secured Party may notify or may require the Debtor to notify (and
after any such notification Debtor shall cause) all Persons obligated on the
accounts receivable to make payment directly to (or in accordance with the
instructions of) the Secured Party. From and after the occurrence of any Event
of Default and during the continuance thereof, the Secured Party may require:
(i) all sums collected or received and all property recovered or possessed by
Debtor in connection with any of the Collateral, including, without limitation,
all sums received in respect of any of the accounts receivable, to be received
and held by Debtor in trust for the Secured Party and to be segregated from the
assets and funds of Debtor and to be immediately delivered to the Secured Party
for application to the payment of the Secured Obligations in accordance with the
terms hereof and (ii) the Debtor, upon the written request of the Secured Party,
to institute depositary, lockbox and other similar credit procedures providing
for the direct receipt of such sums.

     

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

     

    (j)           Debtor
will, to the extent permitted by applicable law, specifically assign to the
Secured Party all federal government contracts and will cooperate with the
Secured Party in giving notice of such assignment pursuant to the Federal
Assignment of Claims Act. Debtor will cooperate with the Secured Party in
providing such further information with respect to contracts with any
governmental authority as the Secured Party may reasonably request and will
provide such instruments of further assurance with respect to such contracts as
the Secured Party may reasonably request.

     

    (k)           Debtor
hereby constitutes and appoints the Secured Party its true and lawful attorney,
irrevocably, with full power, upon the occurrence and during the continuance of
any Event of Default, in the name of Debtor or otherwise, at the expense of
Debtor and without notice to or demand upon Debtor, to act, require, demand,
receive, compound and give acquittance for any and all monies and claims for
monies due or to become due to Debtor, to endorse any checks or other
instruments or orders in connection therewith and to file any claims or take any
action or institute any proceedings which the Secured Party may deem to be
reasonably necessary or advisable to protect the interests of the Secured Party,
which appointment as attorney is coupled with an interest and is irrevocable.
Without limiting the generality of the foregoing, upon the occurrence and during
the continuance of any Event of Default, the Secured Party shall have full
power: (i) to demand, collect, receive payment of, receipt for, settle,
compromise or adjust, and give discharges and releases in respect of any of the
Collateral including, without limitation, any accounts receivable; (ii) to
commence and prosecute any suits, actions or proceedings at law or in equity in
any court of competent jurisdiction to collect and/or to enforce any other
rights in respect of any of the Collateral including, without limitation, any
accounts receivable; (iii) to defend any suit, action or proceeding brought
against Debtor with respect to any of the Collateral including, without
limitation, any account receivable; (iv) to settle, compromise or adjust any
suit, action or proceeding described in clause (ii) or (iii) above, and, in
connection therewith, to give such discharges or releases as the Secured Party
may deem appropriate; (v) to endorse checks, notes, drafts, acceptances, money
orders, bills of lading, warehouse receipts or other instruments or documents
including, without limitation, those evidencing or securing the accounts
receivable or any of them; (vi) to receive, open and dispose of all mail
addressed to Debtor and to notify the post office authorities to change the
address of delivery of mail addressed to Debtor to such address, care of the
Secured Party, as the Secured Party may designate; (vii) to act as attorney for
Debtor in obtaining, adjusting, settling and canceling any insurance and
endorsing any drafts and retaining any amounts collected or received under any
policies of insurance; (viii) to discharge any taxes, assessments or other
governmental charges or levies or any other liens to which any Collateral is at
any time subject; and (ix) generally to sell, assign, transfer, pledge, make any
agreement in respect of or otherwise deal with the Collateral as fully and
completely as though the Secured Party was the absolute owner thereof for all
purposes. Debtor agrees to reimburse the Secured Party upon written demand for
any payments made or reasonable expenses incurred by the Secured Party pursuant
to the foregoing authorization and any unreimbursed amounts shall constitute
Secured Obligations for all purposes hereof.

     

    
      
         

      

      
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    (l)           The
powers conferred on the Secured Party by this Agreement, the Loan Agreement and
the other Loan Documents are solely to protect the interests of the Secured
Party and the Lenders and shall not impose any duty upon the Secured Party to
exercise any such power, and if the Secured Party shall exercise any such power,
such exercise by the Secured Party shall not relieve Debtor of any Default or
Event of Default, and the Secured Party shall be accountable only for amounts
actually received as a result thereof. Except as otherwise required by
applicable law, rule or regulation, the Secured Party shall be under no
obligation to take steps necessary to preserve the rights in or value of or to
collect any sums due in respect of any Collateral against any other Person but
may do so at its option. Without limiting the generality of the foregoing,
except as otherwise required by applicable law, rule or regulation, the Secured
Party shall have no duty or liability with respect to any claim or claims
regarding Debtor's ownership or purported ownership, or rights or purported
rights arising from, the Intellectual Property Collateral (or any portion
thereof) or any use, license, or sublicense thereof, whether arising out of any
past, current or future event, circumstance, act or omission or otherwise. All
of such duties and liabilities shall be exclusively the obligation of the
Debtor. All expenses incurred in connection with the application, protection,
maintenance, renewal or preservation of any of the Collateral including, without
limitation, the Intellectual Property Collateral, shall be borne by the
Debtor.

     

    (m)           Debtor
shall defend, indemnify and hold harmless the Secured Party from any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses, or disbursements (including reasonable attorneys' fees) of any
kind whatsoever which may be imposed on, incurred by or asserted against the
Secured Party in connection with or in any way arising out of or relating to the
Collateral or this Agreement, other than those which result from a breach of
this Agreement by the Secured Party or its gross negligence or willful
misconduct.

     

    (n)           It
is the intention of the parties hereto that none of the Collateral shall become
fixtures and Debtor shall take all reasonable action or actions as may be
necessary to prevent any of the Collateral from becoming fixtures. Debtor will,
if requested by the Secured Party, use its best efforts to obtain waivers of
lien, in form and substance satisfactory to the Secured Party, from each Person
(including lessors) having any interest in the real property on which any of the
Collateral is or is to be located.

     

    (o)           To
the best of Debtor's knowledge, all of Debtor's inventory manufactured or
produced by Debtor has been (and from and after the date hereof will be)
produced in compliance with all material applicable laws, including, without
limitation, the Fair Labor Standards Act, as amended.

     

    (p)           Debtor
will promptly notify the Secured Party and the Lenders, as provided in the Loan
Agreement, of any loss or damage to any Collateral in excess of $250,000 or any
request by any other Person for any material credit or adjustment with respect
to any accounts receivable.

     

    
      
         

      

      
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    (q)           Debtor
confirms that value has been given to it by the Secured Party, that it has
rights in the Collateral and that it has not agreed with the Secured Party to
postpone the time for attachment of any of the security interests in any of the
Collateral. The security interests created by this Agreement will have effect
and be deemed to be effective whether or not the Secured Obligations are owing
or in existence before, after or upon the date of this Agreement.

     

    (r)           Debtor
will promptly notify the Secured Party (which notification shall be deemed to
automatically amend Exhibit 1(xii)
hereto) of any commercial tort claim of Debtor not specifically identified
herein and grant to the extent permitted under applicable law, to Secured Party
a security interest in any such commercial tort claim and the proceeds
thereof.

     

    (s)           Debtor
shall and shall cause each of its Subsidiaries to place a conspicuous legend on
each of its contracts which constitutes chattel paper which legend will
state:  "THIS IS CHATTEL PAPER IN WHICH A LIEN HAS BEEN GRANTED TO
GRANITE CREEK PARTNERS AGENT, LLC" and shall, upon demand, deliver to the
Secured Party or to such other Person as the Secured Party shall designate, to
act on its behalf, all Collateral in its original form consisting of negotiable
instruments or documents, certificated securities, chattel paper and instruments
(in each case, accompanied by stock powers, allonges or other instruments of
transfer executed in blank).

     

    (t)           Debtor
shall take all steps necessary to grant the Secured Party or to such other
Person as the Secured Party shall designate, to act on its behalf, control of
all electronic chattel paper in accordance with the UCC and all "transferable
records" as defined in each of the Uniform Electronic Transactions Act and any
other applicable law.

     

    (u)           The
Debtor has no knowledge of any fact that would impair the validity or make
uncollectible any Collateral that is accounts receivable, chattel paper, general
intangibles, contract rights, documents or instruments, and, to the best of the
Debtor's knowledge, each obligor liable upon such Collateral has and will have
the capacity to contract.

     

    (v)           None
of the Equipment and Inventory has, within the four months preceding the date of
this Security Agreement, been located at any place other than the places
specified on Exhibit
3(b) attached hereto.  Other than as set forth on Exhibit 3(v) attached
hereto the Debtor has no trade names. During the four months preceding the date
hereof, other than as set forth on Exhibit 3(v) the
Debtor has not been known by any legal name different from the one set forth on
the signature page hereto, nor has the Debtor been the subject of any merger or
other corporate reorganization, except as set forth on Exhibit 3(v)(1)
attached hereto.  The Debtor's federal taxpayer identification number
is (and, during the four months preceding the date hereof, the Debtor has not
had a federal taxpayer identification number different from)
13-3353274.  The Debtor is not a party to any federal, state or local
government contract except as set forth in Exhibit 3(v)(2)
attached hereto.

     

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

     

    (w)           The
items making up the Inventory at any time are and will be genuine and saleable
(or, in the case of non-finished goods Inventory, in good condition and
available to be incorporated into finished goods Inventory) in the ordinary
course of the Debtor's business.

     

    (x)           The
Debtor agrees that it will maintain exclusive possession of its goods,
instruments and inventory, other than Inventory in transit in the ordinary
course of business and Inventory which is in the possession or control of a
warehouseman, bailee agent or other Person (other than a Person controlled by or
under common control with the Debtor) that has been notified of the security
interest created in favor of the Debtor pursuant to this Security Agreement, and
has agreed to hold such Inventory subject to the Agent's lien and waive any Lien
held by it against such Inventory.

     

    (y)           Each
Account Receivable is and will be a true and correct statement of the actual
Indebtedness incurred by each account debtor with respect thereto, and arises
and will arise out of or in connection with the sale or lease of goods or for
the rendering of services by the Debtor to each such account
debtor.

     

    4.           Special Provisions Concerning
Intellectual Property Collateral.  Without limiting the
generality of the other provisions of this Agreement:

     

    (a)           Debtor
hereby represents and warrants to and covenants and agrees with the Secured
Party that:

     

    (i)           a
true and complete list of all trademarks, patents and copyrights currently
owned, held (whether pursuant to a license or otherwise) or used by the Debtor,
in whole or in part, in conducting its business is set forth on Exhibit 4(a)(i)
attached hereto, and such exhibit correctly sets forth the information specified
therein;

     

    (ii)          each
and every trademark in use is subsisting; to the extent owned by the Debtor,
each and every trademark, patent and copyright is valid and enforceable; and, to
the best of Debtor's knowledge, there is no infringement or unauthorized use of
any of the trademarks, patents or copyrights, in whole or in part;

     

    (iii)         no
claim has been made in writing that the use of any of the trademarks or
copyrights or the practice of any of the patents does or may violate the rights
of any other Person, and Debtor is not aware of any basis for any such claim to
be asserted;

     

    (iv)         the
Debtor is the sole and exclusive owner of the entire and unencumbered right,
title and interest in and to each of the trademarks, patents and copyrights
purported to be owned by it, free and clear of any lien, express or implied,
other than Permitted Liens, and except as set forth on Exhibit 4(a)(i) attached
hereto, no other Person has any license or other right with respect to any of
the trademarks, patents, copyrights or any other Intellectual Property
Collateral; and

     

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

     

    (v)         Debtor
and, to Debtor's knowledge, its predecessors in interest has used the proper
statutory notice in connection with its use of the trademarks in all material
respects, and the Debtor has marked its products with all applicable patent
numbers.

     

    (b)           If
Debtor shall create or obtain rights to any trademarks, patents or copyrights
(or any other Intellectual Property Collateral) in addition to those set forth
on Exhibit 4(a)(i) attached hereto, the provisions of this Agreement shall
automatically apply thereto and Debtor shall take such action as the Secured
Party may reasonably request to more fully evidence the same. Debtor shall
promptly notify the Secured Party in writing of any new patent application or
grant or trademark or copyright application or registration in which Debtor has
an ownership interest.

     

    (c)           Debtor:
(i) authorizes the Secured Party, without any further action by Debtor, to amend
Exhibit 4(a)(i)
to reference any trademark, patent or copyright (or any other Intellectual
Property Collateral) acquired by Debtor after the date hereof or to delete any
reference to any right, title or interest in any trademark or patent or
copyright (or any other Intellectual Property Collateral) in which Debtor no
longer has or claims any right, title or interest; (ii) will promptly (but in
any event within ten (10) days after becoming aware thereof) notify the Secured
Party and the Lenders, as provided in the Loan Agreement, of the institution of,
or any adverse determination in, any proceeding in the U.S. Patent and Trademark
Office, the U.S. Copyright Office or in any federal, state or foreign court or
agency regarding Debtor's claim of ownership, or the enforceability or validity
of any of the Intellectual Property Collateral, in each case which could
reasonably be expected to materially adversely affect the value of any of the
Intellectual Property Collateral, the ability of Debtor or the Secured Party to
dispose of any of the same or the rights and remedies of the Secured Party in
relation thereto; (iii) will promptly notify the Secured Party of any suspected
infringement of any of the Intellectual Property Collateral by any third party
or any claim by any third party that Debtor is infringing upon the intellectual
property rights of such third party that does or could reasonably be expected to
materially adversely affect the value of any of the Intellectual Property
Collateral; (iv) concurrently with the filing of any patent application or
application for registration of any trademark or copyright, will execute,
deliver and record in all appropriate registers and offices, an appropriate form
of a collateral security agreement evidencing the Secured Party's security
interest therein; and (v) will keep accurate and complete records respecting the
Intellectual Property Collateral.

     

    (d)           Debtor
shall: (i) to the extent commercially reasonable, make and diligently prosecute
federal application on any existing or future registrable but unregistered
trademarks or copyrights or unpatented but patentable inventions, (ii) to the
extent still utilized in the operation of the business, preserve, maintain and
renew all of the Intellectual Property Collateral and rights and interests
related thereto, including, without limitation, by payment of all taxes,
annuities, issue and maintenance fees and by the use of all proper statutory
notices, designations and patent numbers, and (iii) initiate and diligently
prosecute in its own name, for its own benefit and at its own expense, such
suits, proceedings or other actions for infringement, or other damage or
opposition, cancellation, concurrent use or interference proceedings as are
reasonably necessary to protect any of the trademarks, patents or copyrights or
other Intellectual Property Collateral which Debtor reasonably determines is
material to its business; provided, that no such suit, proceeding or other
action shall be settled or voluntarily dismissed, nor shall any party be
released or excused from any claims or liability for infringement, unless, in
the reasonable judgment of Debtor, to do so is in the best interests of the
Debtor and is not disadvantageous in any material respect to the Secured
Party.

     

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    

     

    (e)           Without
limiting the generality of the other provisions of this Agreement, the Loan
Agreement and the other Loan Documents, and in addition to all other rights and
remedies of the Secured Party hereunder and thereunder and referred to herein
and therein, Debtor hereby collectively assigns to the Secured Party all of its
right, title and interest in and to all and any of the Intellectual Property
Collateral including, without limitation, each patent, trademark and copyright,
now owned or hereafter acquired by Debtor, and all of the goodwill of the
business of Debtor symbolized by the same and all interest of Debtor in and to
any cause of action related thereto, and Debtor hereby grants to the Secured
Party an absolute power of attorney (which grant is coupled with an interest and
is irrevocable) to sign, upon the occurrence and during the continuance of any
Event of Default, any document which may be necessary or required by the U.S.
Patent and Trademark Office, the U.S. Copyright Office or by any other office or
authority in order to further evidence (and to effect and to record) the
foregoing assignment. Debtor further agrees that, upon the occurrence and during
the continuance of any Event of Default, the Secured Party may take any or all
of the following actions: (i) declare the entire right, title and interest of
Debtor in and to the Intellectual Property Collateral vested in the Secured
Party, in which event such right, title and interest shall immediately vest in
the Secured Party; (ii) take and use and/or, subject to the terms of Section 7
and applicable law, sell the Intellectual Property Collateral (or any portion
thereof) and carry on the business and use the assets of Debtor in connection
with which the Intellectual Property Collateral (or any portion thereof) has
been used; (iii) bring suit to enforce the Trademarks, Patents and/or Copyrights
or any of the other Intellectual Property Collateral and/or any licenses
thereunder or other rights with respect thereto; (iv) direct Debtor to refrain,
in which event Debtor shall refrain, from using the Intellectual Property
Collateral (or any portion thereof) in any manner whatsoever, directly or
indirectly; and (v) direct Debtor to execute, in which event Debtor shall
execute, other and further documents that the Secured Party may reasonably
request to further confirm the provisions hereof and to further evidence the
foregoing assignment. Upon request of the Secured Party, Debtor also shall make
available to the Secured Party, to the extent within Debtor's power and
authority, such individuals then in Debtor's employ to assist in the production,
advertisement and sale of the products and services sold under the Trademarks,
Copyrights and Patents or any of the other Intellectual Property Collateral,
such individuals to be available to perform their prior functions on the Secured
Party's behalf and to be compensated at the expense of the Debtor.

     

    (f)           For
the purposes of this Agreement, "Intellectual Property Collateral"
means:

     

    (i)           all
trademarks, trademark applications and registrations and trade names, together
with the goodwill appurtenant thereto, owned, held (whether pursuant to a
license or otherwise), used or to be used, in whole or in part, in conducting
the Debtor's business, (the "Trademarks");

     

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    

     

    (ii)          all
patents and patent applications of the Debtor, including, without limitation,
the inventions and improvements described and claimed therein (the
"Patents");

     

    (iii)         all
copyrights and applications for registration of copyrights of the Debtor and all
rights in literary property (the "Copyrights");

     

    (iv)        all
reissues, divisions, continuations, renewals, extensions and
continuations-in-part of any Trademarks, Patents and/or Copyrights; all income,
royalties, damages and payments now or hereafter due and/or payable with respect
to any Trademarks, Patents and/or Copyrights, including, without limitation,
damages and payments for past or future infringements thereof; all rights (but
no obligation) to sue for past, present and future infringements of any
Trademarks, Patents and/or Copyrights or bring interference proceedings with
respect thereto; and all rights corresponding to any Trademarks, Patents and/or
Copyrights throughout the world;

     

    (v)         all
rights and interests of the Debtor pertaining to common law and statutory
trademark, service marks, trade names, slogans, labels, trade secrets, patents,
copyrights, corporate names, company names, business names, fictitious business
names, trademark or service mark registrations, designs, logos, trade styles,
applications for trademark registration and any other indicia of origin;
and

     

    (vi)        all
operating methods, formulae, processes, know-how and the like of the
Debtor.

     

    5.           Events of
Default.  The Debtor shall be in default under this Agreement
if any one or more of the following events (each an "Event of Default") shall
occur and continue (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or Governmental Authority):

     

    (a)           if
default shall be made in the performance or observance of any covenant,
agreement or condition contained in Sections 3(a), 3(b), 3(c), 3(d), or 3(r) of
this Agreement;

     

    (b)           if
default shall be made in the performance or observance of any other of the
covenants, agreements or conditions contained in this Agreement and such default
shall have continued for a period of thirty (30) days after the earlier of (i)
the Debtor's obtaining actual knowledge of such default or (ii) the Debtor's
receipt of written notice of such default;

     

    (c)           if
any representation or warranty made by or on behalf of Debtor in this Agreement
or in any agreement, document or instrument delivered under or pursuant to any
provision hereof shall prove to have been materially false or incorrect on the
date as of which made; or

     

    
      
         

      

      
        -13-

        
          

        

      

      
         

      

    

     

    (d)           if
any other Event of Default as defined in the Loan Agreement or any other Loan
Document shall occur.

     

    6.           Rights and
Remedies.

     

    (a)           Upon
the occurrence and during the continuance of any Event of Default, the Secured
Party shall have the following rights and remedies:

     

    (i)           all
rights and remedies provided by law or in equity, including, without limitation,
those provided by the UCC;

     

    (ii)         all
rights and remedies provided in this Agreement; and

     

    (iii)        all
rights and remedies provided in the Loan Agreement, the other Loan Documents or
in any other agreement, document or instrument pertaining to any of the Secured
Obligations.

     

    (b)           Notwithstanding
anything to the contrary set forth herein, the Secured Party shall have the
right to exercise (after the occurrence of any Event of Default) all of the
rights and remedies of the Secured Party relating to the Collateral which arise
under or are referred to in this Agreement (including the exercise of any power
of attorney granted herein and the right to enforce this Agreement, by judicial
proceedings or otherwise, to foreclose the lien created hereby, to take
possession of and, subject to the terms of Section 7 and applicable law, to sell
the Collateral (or any part thereof), and/or to direct the time, method and
place of conducting any proceeding for any such remedy or exercising any such
right), and all such rights and remedies may be exercised by the Secured Party
or by a duly authorized representative (or representatives) appointed by the
Secured Party.

     

    
      
         

      

      
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    7.           Right to Dispose of Collateral,
Etc.

    (a)           Without
limiting the scope of Section 6 hereof, upon the occurrence and during the
continuance of any Event of Default, the Secured Party shall have the right and
power to take possession of all or any part of the Collateral and, in addition
thereto, the right to enter upon any premises on which all or any part of the
Collateral may be situated and remove the same therefrom and the Secured Party
may sell, resell, assign and deliver, or otherwise dispose of any or all of the
Collateral, for cash and/or credit, in one or more parcels, at any exchange or
broker's board, or at public or private sale and upon such terms and at such
place or places and at such time or times and to such Persons (including,
without limitation, the Secured Party), to the extent permitted by applicable
law, as the Secured Party deems expedient, all without demand for performance by
the Debtor or any notice or advertisement whatsoever except as may be required
by this Agreement or by law. The Secured Party may require the Debtor to make
all or any part of the Collateral (to the extent the same is moveable) available
to the Secured Party at a place to be designated by the Secured Party which is
reasonably convenient to the Secured Party and the Debtor. Unless the Collateral
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Secured Party will give the Debtor at least ten (10)
days' prior written notice of the time and place of any public sale thereof or
of the time after which any private sale or any other intended disposition
thereof is to be made. Any such notice shall be deemed to meet any requirement
hereunder or under any applicable law (including the UCC) that reasonable
notification be given of the time and place of such sale or other disposition.
After deducting all costs and expenses of collection, storage, custody, sale or
other disposition and delivery (including legal costs and reasonable attorneys'
fees) and all other charges against the Collateral, the residue of the proceeds
of any such sale or disposition shall be applied to the payment of the Secured
Obligations in the manner set forth in Section 15.4 of the Loan Agreement. In
the event the proceeds of any sale, lease or other disposition of the Collateral
hereunder are insufficient to pay all of the Secured Obligations in full, the
Debtor will be liable for the deficiency, including, if the Secured Party so
elects, interest thereon at a rate per annum equal to the Default Rate
applicable thereto until paid or a late fee as provided in Section 6.8 of the
Loan Agreement, and the cost and expenses of collection of such deficiency,
including, without limitation, reasonable attorneys' fees, expenses and
disbursements. Without limiting the generality of the foregoing or the scope of
Section 6 hereof, upon the occurrence and during the continuance of any Event of
Default, any amount owing by the Secured Party to any Debtor may, without regard
to the value of the Collateral, be offset and applied toward the payment of the
Secured Obligations as aforesaid, whether or not the Secured Obligations, or any
part thereof, shall be then due.

     

    (b)           Debtor
acknowledges that portions of the Collateral could be difficult to preserve and
dispose of and be further subject to complex maintenance and management.
Accordingly, the Secured Party, in exercising its rights hereunder, or
otherwise, shall have the widest possible latitude to preserve and protect the
Collateral and the Secured Party's lien therein. Moreover, Debtor acknowledges
and agrees that the Secured Party shall have no obligation to, and Debtor hereby
waives to the fullest extent permitted by law any right that it may have to
require the Secured Party to: (i) clean up or otherwise prepare any of the
Collateral for sale, (ii) pursue any Person to collect any of the Obligations,
or (iii) exercise collection remedies against any Persons obligated on the
Collateral. The Secured Party's compliance with applicable local, state or
federal law requirements, in addition to those imposed by the UCC, in connection
with a disposition of any or all of the Collateral will not be considered to
adversely affect the commercial reasonableness of any disposition of any or all
of the Collateral under the UCC.

     

    (c)           Certain
Affiliates of Debtor have executed and delivered or may hereafter execute and
deliver to the Secured Party additional Security Documents securing the Secured
Obligations. Debtor acknowledges and agrees with Secured Party that Secured
Party's rights and remedies, and recourse to the Collateral, hereunder, are not
in any way affected by and shall not in any manner be delayed or impaired by
Secured Party's rights under such other Security Documents, or any defenses
available to or asserted by such Affiliates thereunder, or any exercise or delay
or failure to exercise any of Secured Party's rights and remedies
thereunder.

     

    
      
         

      

      
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    8.           Right to Use the Collateral,
Etc.  Without limiting the scope of Section 6 hereof, upon the
occurrence and during the continuance of any Event of Default, but subject to
the provisions of the UCC or other mandatory provisions of applicable law, the
Secured Party shall have the right and power to take possession of all or any
part of the Collateral, and to exclude the Debtor and all Persons claiming under
Debtor wholly or partly therefrom, and thereafter to hold, store, and/or use,
operate, manage and control the same. Upon any such taking of possession, the
Secured Party, from time to time, at the Debtor's expense, may (but shall not be
obligated to) make all such repairs, replacements, alterations and improvements
to any of the Collateral and may manage and control the Collateral and carry on
the business and exercise all rights and powers of the Debtor in respect thereto
as the Secured Party shall deem reasonably appropriate, including, without
limitation, the right to enter into any and all such agreements with respect to
the use of the Collateral or any part thereof as the Secured Party may see fit
(including, without limitation, licensing agreements related to the Intellectual
Property Collateral); and the Secured Party shall be entitled to collect and
receive all rents, issues, profits, fees, revenues and other income of the same
and every part thereof. Such rents, issues, profits, fees, revenues and other
income shall be applied to pay the expenses of so holding, storing, using,
operating, managing and controlling the Collateral, and of conducting any
business related thereto, and of all maintenance, repairs, replacements,
alterations, additions and improvements, and to make all payments which the
Secured Party may be required or may elect to make, if any, for taxes,
assessments, insurance and other charges upon the Collateral or any part
thereof, and all other payments which the Secured Party may be required or
authorized to make under any provision of this Agreement, the Loan Agreement or
any of the other Loan Documents (including legal costs and reasonable attorneys'
fees). The remainder of such rents, issues, profits, fees, revenues and other
income shall be applied to the payment of the Secured Obligations in the manner
set forth in Section 15.4 of the Loan Agreement.

     

    
      
         

      

      
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    9.           Waivers, Remedies Cumulative,
Etc.

     

    (a)           Debtor
hereby waives presentment, demand, notice, protest and, except as is otherwise
explicitly provided herein or in the Loan Agreement, all other demands and
notices in connection with this Agreement or the enforcement of any of the
rights and remedies of the Secured Party hereunder or in connection with any
Secured Obligations or any Collateral; consents to and waives notice of the
granting of renewals, extensions of time for payment or other indulgences to
Debtor or any other Person, or substitution, release or surrender of any
Collateral, the addition or release of Persons primarily or secondarily liable
on any Secured Obligation, the acceptance of partial payments on any Secured
Obligation and/or the settlement or compromise thereof. To the extent permitted
by law, Debtor also hereby waives any rights and/or defenses Debtor may have
under any anti-deficiency laws or other laws limiting, qualifying or discharging
the Secured Obligations and/or any of the remedies of the Secured Party against
Debtor. Debtor further waives, to the extent permitted by law: (i) any right it
may have under any applicable law (including the constitution of any
jurisdiction in which any of the Collateral may be located and the Constitution
of the United States of America) to notice (other than any requirement of notice
explicitly provided herein or in the Loan Agreement) or to a judicial hearing
prior to the exercise of any right or remedy provided by this Agreement, the
Loan Agreement or any of the other Loan Documents and any right to set aside or
invalidate any sale duly consummated in accordance with the foregoing provisions
hereof on the grounds (if such be the case) that the sale was consummated
without a prior judicial hearing; (ii) any right to damages occasioned by any
lawful exercise by the Secured Party of any right or remedy hereunder or
referred to herein, including any damages arising as a result of any taking of
possession of the Collateral; (iii) all other requirements as to the time,
place and terms of sale or other requirements with respect to the enforcement of
the Secured Party's rights hereunder; (iv) all rights of redemption,
appraisement, valuation, stay, extension or moratorium now or hereafter in force
under any applicable law; and (v) the appointment of a receiver as provided
herein or in the Loan Agreement. The Secured Party shall not be required to
marshall any Collateral (or any part thereof) in any particular order. To the
extent permitted by law, Debtor hereby agrees it will not invoke any right it
may have under any law to require the marshalling of Collateral or any other
right under any law which might cause delay in or impede the enforcement of the
rights of the Secured Party under this Agreement, the Loan Agreement or any of
the other Loan Documents, and Debtor hereby irrevocably waives the benefits of
all such laws. Any sale of, or the grant of options to purchase, or any other
realization upon, any Collateral shall operate to divest all right, title,
interest, claim and demand, either at law or in equity, of Debtor therein and
thereto, and shall be a perpetual bar both at law and in equity against the
Debtor and against any and all Persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part thereof, from,
through and under Debtor.

     

    (b)           To
the extent permitted by law, the obligations of the Debtor under this Agreement
shall remain in full force and effect without regard to, and shall not be
impaired by: (i) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Debtor or of any other
Person (including the Holding Company); (ii) any exercise or nonexercise, or any
waiver, by the Secured Party, of any right, remedy, power or privilege under or
in respect of any of the Secured Obligations or any of the Collateral or any
other security therefor (including under any Loan Document executed by the
Holding Company); (iii) any amendment to or modification of or waiver granted
under this Agreement, the Loan Agreement or any of the other Loan Documents; or
(iv) the taking of additional security for or any guarantee of any of the
Secured Obligations or the release or discharge or termination of any security
or guarantee for any of the Secured Obligations including any waiver granted
under a termination of any Loan Document executed by the Holding Company; and
whether or not Debtor shall have notice or knowledge of any of the
foregoing.

     

    (c)           No
remedy conferred herein or in the Loan Agreement or any of the other Loan
Documents upon the Secured Party is intended to be exclusive of any other
remedy, and each and every such remedy (whether granted by Debtor or the Holding
Company) shall be cumulative and shall be in addition to every other remedy
given hereunder or under the Loan Agreement or any of the other Loan Documents
or now or hereafter existing at law or in equity or by statute or otherwise. No
course of dealing between the Debtor or any Affiliate of the Debtor (including
the Holding Company) and the Secured Party, and no delay in exercising any
rights hereunder or under the Loan Agreement or any of the other Loan Documents,
shall operate as a waiver of any right of the Secured Party. No waiver by the
Secured Party of any default shall be effective unless made in writing and
otherwise in accordance with the terms of Article 28 of the Loan Agreement and
no such waiver shall extend to or affect any obligation not expressly waived or
impair any right consequent thereon.

     

    
      
         

      

      
        -17-

        
          

        

      

      
         

      

    

     

    (d)           Debtor's
waivers set forth in this Agreement (including, without limitation, those set
forth in this Section 9) have been made voluntarily, intelligently and knowingly
and after Debtor has been apprised and counseled by its attorneys as to the
nature thereof and its possible alternative rights.

     

    10.           Termination.  This
Agreement and the lien on the Collateral created hereby shall automatically
terminate, with no further actions required by any party hereto, when all of the
Secured Obligations have been indefeasibly paid and finally discharged in full
in cash (and all commitments of the Secured Party to lend any additional amounts
to the Debtor under the Loan Agreement shall have been terminated) (other than
contingent indemnification obligations which by their terms survive termination
of the Loan Documents).  Upon termination as aforesaid, the Secured
Party shall execute and deliver such releases and discharges as the Debtor may
reasonably request at Debtor's expense.

     

    11.           Reinstatement.  Notwithstanding
the provisions of Section 10 to the contrary, and notwithstanding anything else
to the contrary contained herein, this Agreement shall continue to be effective
or be reinstated, as the case may be, if at any time any amount received by the
Secured Party in respect of the Collateral or the Secured Obligations is
rescinded, or must otherwise be restored or returned by the Secured Party upon
the insolvency, bankruptcy, dissolution, liquidation or reorganization of Debtor
or any Affiliates of Debtor or any guarantor of all or any part of the Secured
Obligations, or upon the appointment of any intervenor, receiver or conservator
of, or trustee or similar official for Debtor, any such Affiliate or guarantor,
or any substantial part of their respective properties or assets, or otherwise,
all as though such payment had not been made.

     

    12.           Consents, Approvals,
Etc.  Upon the exercise by the Secured Party of any power,
right, privilege or remedy pursuant to this Agreement, the Loan Agreement or any
of the other Loan Documents which requires any consent, approval, registration,
qualification or authorization of, or declaration or filing with, or other
action by, any other Person, including, without limitation, any governmental
authority or instrumentality, Debtor will execute and deliver, or will cause the
execution and delivery of, all such agreements, documents, applications,
certificates, instruments and other documents and papers and will take, or will
cause to be taken, such other action that may be required to obtain such
consent, approval, registration, qualification or authorization of or other
action by such other Person and/or that may be reasonably requested by the
Secured Party in connection therewith.

     

    13.           Certain
Definitions.  In addition to the descriptions contained in
Section 1 hereof, the items of Collateral referred to therein shall have all of
the meanings ascribed to them in the UCC.

     

    
      
         

      

      
        -18-

        
          

        

      

      
         

      

    

     

    14.           Amendments.  All
amendments of this Agreement and all waivers of compliance herewith shall be in
writing and shall be effected in compliance with the provisions of Article 28 of
the Loan Agreement.

     

    15.           Communications.  All
communications provided for herein shall be made as specified in Article 22 of
the Loan Agreement.

     

    16.           Successors and
Assigns.  This Agreement shall bind and inure to the benefit of
and be enforceable by the Secured Party and the Debtor, successors to the Debtor
and the successors and assigns of the Secured Party.

     

    17.           Governing Law; Jurisdiction; Waiver
of Jury Trial.  This Agreement, including the validity hereof
and the rights and obligations of the parties hereunder, and all amendments and
supplements hereof and all waivers and consents hereunder, shall be construed in
accordance with and governed by the domestic substantive laws of the State of
Illinois without giving effect to any choice of law or conflicts of law
provision or rule that would cause the application of the domestic substantive
laws of any other jurisdiction. Each party hereto, to the extent that it may
lawfully do so, hereby consents to service of process, and to be sued, in the
State of Illinois and consents to the jurisdiction of the courts of the State of
Illinois and the United States District Court for the Northern District of
Illinois, as well as to the jurisdiction of all courts to which an appeal may be
taken from such courts, for the purpose of any suit, action or other proceeding
arising out of any of its obligations hereunder and under the Loan Agreement and
the other Loan Documents or with respect to the transactions contemplated hereby
or thereby, and expressly waives any and all objections it may have as to venue
in any such courts. Each party hereto further agrees that a summons and
complaint commencing an action or proceeding in any of such courts shall be
properly served and shall confer personal jurisdiction if served personally or
by certified mail to it in accordance with Section 15 or as otherwise provided
under the laws of the State of Illinois. Notwithstanding the foregoing, each
party hereto agrees that nothing contained in this Section 17 shall preclude the
institution of any such suit, action or other proceeding by the Secured Party in
any jurisdiction other than the State of Illinois. EACH PARTY HERETO IRREVOCABLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION OR OTHER PROCEEDING
INSTITUTED BY OR AGAINST IT IN RESPECT OF ITS OBLIGATIONS HEREUNDER AND UNDER
THE LOAN AGREEMENT AND ANY OF THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS
CONTEMPLATED HEREBY AND BY THE LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS.

     

    
      
         

      

      
        -19-

        
          

        

      

      
         

      

    

    18.           Miscellaneous.  The
headings in this Agreement are for purposes of reference only and shall not
limit or otherwise affect the meaning hereof. This Agreement (together with the
Loan Agreement and the other Loan Documents) embodies the entire agreement and
understanding between the Secured Party and the Debtor and supersedes all prior
agreements and understandings relating to the subject matter hereof. Each
covenant contained herein and in the Loan Agreement and in each of the other
Loan Documents shall be construed (absent an express provision to the contrary)
as being independent of each other covenant contained herein and therein, so
that compliance with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with any other covenant. If any
provision in this Agreement, the Loan Agreement or any of the other Loan
Documents refers to any action taken or to be taken by any Person, or which such
Person is prohibited from taking, such provision shall be applicable, whether
such action is taken directly or indirectly by such Person, whether or not
expressly specified in such provision. In case any provision in this Agreement,
the Loan Agreement or any of the other Loan Documents shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions hereof and thereof shall not in any way be affected or impaired
thereby. This Agreement may be executed in any number of counterparts and by the
parties hereto on separate counterparts all such counterparts shall together
constitute but one and the same instrument.

     

    19.           Subordination
Agreement.  Notwithstanding any provision to the contrary in
this Agreement, this Agreement, the Liens and security interests granted to the
Agent and Lenders, at law or equity, pursuant to this Agreement and the other
Loan Documents, and the exercise of any right or remedy by the Agent or any
Lender hereunder are subject to the provisions of the Subordination
Agreement.  Agent and Lenders acknowledge and agree to be bound by the
Subordination  Agreement.  In the event of any conflict
between the terms of the Subordination Agreement and this Agreement or the other
Loan Documents, the terms of the Subordination Agreement shall
govern.  Without limiting the generality of the foregoing, and
notwithstanding anything herein to the contrary, all right and remedies of the
Agent and Lenders shall be subject to the terms of the Subordination Agreement,
and until the Senior Debt is paid in full, any obligation of the Debtor
hereunder with respect to the delivery or control of any Collateral, the
notation of any lien on any certificate of title, bill of lading or other
document, the giving of any notice to any bailee or other Person, the provision
of voting rights or the obtaining of any consent of any Person shall be deemed
to be satisfied if the Debtor complies with the requirements of the similar
provision of the Senior Loan Agreement or the applicable Senior Debt
Document.

     

    The
Debtor acknowledges that the Subordination Agreement and the rights and benefits
thereof (as specific references thereto herein) inure only to the benefit of the
holders of the Senior Debt and that no other Person, including the Debtor and
Guarantors, shall have or be entitled to assert any rights or benefits hereunder
arising under the Subordination Agreement or by virtue of the existence of the
specific references thereto herein.

     

    
      
         

      

      
        -20-

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the Debtor has executed this Agreement as of the date first
above written with the intent to be legally bound.

     

    
      	 
      	
              CYALUME
      TECHNOLOGIES, INC.

            
	 
      	 
      
	 
      	
              By:

            	
              /s/ Michael Bielonko

            
	 
      	
              Name:
      Michael Bielonko

            
	 
      	
              Title:  Chief
      Financial Officer

            

    

    

    Signature
Page to Subordinated Security and Pledge Agreement

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	 
      	
              GRANITE
      CREEK PARTNERS AGENT, LLC, as Agent

            
	 
      	 
      
	 
      	
              By:

            	
              /s/ Brian B. Boorstein

            
	 
      	
              Name:  Brian
      B. Boorstein

            
	 
      	
              Title:   Managing
      Member

            

    

    

    Signature
Page to Subordinated Security and Pledge Agreement

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