Document:

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                                                                  Exhibit 10.39

                             SETTLEMENT AGREEMENT
                                      AND
                                MUTUAL RELEASE

   This Settlement Agreement and Mutual Release (the "Agreement") is made as of
the 18th day of October, 2001 between BENTHOS, INC., a Massachusetts
corporation with a usual place of business situated at 49 Edgerton Drive, North
Falmouth, Massachusetts 02556 ("Benthos") and RJE INTERNATIONAL, INC., a
California corporation with a usual place of business situated at 15375
Barranca Parkway, Suite B107, Irvine, California 92618 ("RJE").

                             W I T N E S S E T H:

   WHEREAS, Datasonics, Inc. and RJE were parties to a certain Distribution
Agreement, dated June 17, 1996 (the "Distribution Agreement"), pursuant to
which RJE was the exclusive world-wide distributor of certain products
manufactured by Datasonics, Inc., as more fully described therein (the
"Products"); and

   WHEREAS, on or about August 19, 1999, Benthos purchased substantially all of
the assets of Datasonics and in connection therewith all of the rights and
obligations of Datasonics, Inc. pursuant to the Distribution Agreement were
assigned, with the consent of RJE, to Benthos; and

   WHEREAS, on or about August 29, 2001, Benthos terminated the Distribution
Agreement by written notice to RJE; and

   WHEREAS, Benthos sold and delivered to RJE and RJE accepted the Products
with an aggregate selling price of $452,283.73, which sum has not been paid by
RJE to Benthos; and

   WHEREAS, on March 21, 2001 Benthos filed a Statement of Claim with the
Boston Division of the American Arbitration Association, Case No. 11 1810016201
(the "Arbitration Proceeding"); and

   WHEREAS, on or about August 30, 2001, Benthos filed a complaint in a matter
referred to as Benthos, Inc. v. RJE International, Inc, Case No. 01CC11262, in
the Superior Court of Orange County, State of California (the "California
Action"); and

   WHEREAS, Benthos and RJE want to settle all of the outstanding matters
related to the Distribution Agreement, the Arbitration Proceeding and the
California Action and reduce their agreement with respect to the same to
writing.

   NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Benthos and RJE hereby mutually agree as follows.

   1. Settlement. Subject to the terms and conditions of this Agreement,
Benthos and RJE agree to compromise their differences and fully resolve all
outstanding issues in connection with the Distribution Agreement, the
Arbitration Proceeding and the California Action.

   2. Termination of Distribution Agreement. The Distribution Agreement has
been effectively terminated in accordance with its terms. The parties
acknowledge that any continuing obligations which survive the termination of
the Distribution Agreement shall continue notwithstanding the release contained
in Section 10 of this Agreement.

   3. Funds Due Benthos. RJE will pay the sum of Two Hundred Forty Five
Thousand Dollars ($245,000) to Benthos as follows: (a) $10,000 will be paid to
Benthos on the date hereof in immediately available funds by the wiring of such
funds to Benthos pursuant to the written wiring instructions from Benthos; and
(b) RJE

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will execute and deliver to Benthos on the date hereof the promissory note in
the original principal amount of Two Hundred Thirty Five Thousand Dollars
($235,000) in the form of the promissory note attached hereto as Exhibit A (the
"Promissory Note").

   4. Return of Products. RJE has shipped to Benthos and Benthos acknowledges
receipt of the Products listed on Exhibit B (the "Returned Products"). RJE and
Benthos agree to the value for the Returned Products set forth thereon. The
Returned Products will be held in escrow by Benthos on behalf of RJE in
accordance with the provisions hereof. RJE hereby acknowledges that the
Returned Products are subject to a lien of Imperial Bank. RJE specifically
covenants and agrees that on or before November 16, 2001, RJE shall deliver to
Benthos UCC-3 form or forms that unconditionally and unequivocally releases any
and all liens on the Returned Products, including without limitation, the lien
of Imperial Bank (or any successor). Upon the delivery of the aforementioned
UCC-3 form or forms, title to the Returned Products will transfer to Benthos
and thereafter all right, title and interest in the Returned Products will be
vested in Benthos. RJE covenants that it will, at any time and from time to
time, after the date hereof, upon the reasonable request of Benthos, perform,
execute, acknowledge and deliver, or cause to be performed, executed
acknowledged and delivered, all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney and assurances as may be required
for the better assigning, transferring, granting, conveying, assuring and
confirming to Benthos, title to and possession of the Returned Products.
Further, RJE covenants that RJE is the lawful owner of the Returned Products,
has the right and title to transfer the Returned Products to Benthos, RJE will
defend the right and title of Benthos to the Returned Products against the
claims and demands of all persons and, after the release of the aforementioned
lien of Imperial Bank, the Returned Products will be free from all liens,
claims, encumbrances and security interests. If RJE fails to provide the form
(s) UCC-3 as required hereby then Benthos may exercise the remedies set forth
in Section 8 hereof. RJE will indemnify and hold Benthos harmless with respect
to any claims brought by anyone against Benthos, which claims arise from or are
the result of Benthos holding the Returned Products in escrow on behalf of RJE
in accordance with this Section 4.

   5. Security Agreement. In order to secure the obligations of RJE under the
Promissory Note and this Agreement, on the date hereof, RJE will execute and
deliver to Benthos the Security Agreement attached hereto as Exhibit B.

   6. California Action.

      6.1 Stipulation for Judgment. Upon the execution of this Settlement
   Agreement, the parties shall execute a Stipulation for Entry of Judgment in
   the California Action substantially in the form of Exhibit C to this
   Agreement (the "Stipulation for Judgment"), which shall provide that
   judgment be entered in favor of Benthos against RJE in the sum of Four
   Hundred Fifty-Two Thousand Two-Hundred Eighty Three Dollars and 73/100
   ($452,283.73), without pre-judgment interest but with post judgment
   interest, minus the value of the Returned Products retained by Benthos and
   minus the amount of payments made by RJE to Benthos pursuant to this
   Agreement. Benthos shall not file the Stipulation for Judgment unless a
   Default (as defined in the Security Agreement or the Promissory Note) occurs
   (a "Default"). Upon the occurrence of any Default, Benthos shall be entitled
   to file the Stipulation for Judgement and apply for Entry of Judgment
   thereon. As provided above, in any Judgment issued, RJE shall be credited
   with any payments made to Benthos pursuant to this Agreement, as well as the
   value of Returned Product retained by Benthos.

      6.2 Dismissal with Prejudice. Upon timely performance by RJE of all
   obligations of RJE under this Agreement, Benthos shall file a Request for
   Dismissal With Prejudice of the California Action (the "California Action
   Dismissal").

      6.3 Notice of Conditional Settlement. Upon the execution of this
   Agreement, Benthos shall file and serve in the California Action, a Notice
   of Conditional Settlement, substantially in the form of Exhibit D to this
   Agreement, which shall notify the court of the date on and conditions under
   which the California Action Dismissal will be filed.

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   7. Representations and Warranties.

      7.1 Representations and Warranties of RJE. RJE hereby represents and
   warrants to Benthos that:

          (i) Since January 1, 2001, no transfers of assets or distributions
       have been made from RJE, except in the ordinary course of business and
       in a manner consistent with past business practices and in each such
       case for fair consideration. RJE has elected to be taxed pursuant to
       Subchapter S of the Internal Revenue Code.

          (ii) The Security Agreement and the filing of an appropriate UCC-1
       financing statement will give Benthos a valid perfected lien on the
       assets of RJE, subject only to the first lien of Imperial Bank (and any
       successor) on file on the date hereof at the office of the Secretary of
       State of California.

          (iii) Attached hereto as Exhibit E is a copy of a loan
       revision/extension agreement, dated August 24, 2001, with respect to a
       certain promissory note, dated August 3, 2000, in the original principal
       amount of $650,000, the maker of which is RJE and the payee of which is
       Imperial Bank (the "Imperial Note").

          (iv) The maximum amount of credit available to RJE under the Imperial
       Note is $396,000.

          (v) No statement made or information provided herein by RJE contains
       or will contain any untrue statement of material fact or omits or will
       omit to state any material fact necessary to make the statements or
       information provided not misleading.

      7.2 Survival of Representations and Warranties. The representations and
   warranties of RJE set forth in Section 7.1 above shall survive until the
   satisfaction of all of the obligations of RJE under the Promissory Note.

   8. Remedies. If RJE fails to deliver the form(s) UCC-3 to Benthos as
required by Section 4, then on or before November 30, 2001 RJE shall pay to
Benthos the sum of One Hundred Ten Thousand Dollars ($110,000), and Benthos
shall return to RJE the Returned Product. The failure of RJE to make the
payment due on November 30, 2001, as set forth in this Section, shall be deemed
a Default permitting Benthos to file the Stipulation for Judgment in accordance
with Section 6.1.

   9. Dismissal of Claims. RJE and Benthos shall execute and deliver to the
American Arbitration Association whatever documentation is required to dismiss
without prejudice the Arbitration Proceeding.

   10. Mutual Release. RJE and Benthos hereby release any and all claims,
actions, causes of action or demands whatsoever against one another (and each
of their respective officers, directors, affiliates, subsidiaries, agents,
attorneys, employees, predecessors, successors and assigns), whether presently
known or unknown, both in law and in equity, which RJE and Benthos and/or their
successors or assigns ever had, now have or hereafter, shall or may have from
the beginning of the world until the date hereof, including without limitation,
upon or by reason of any matter or cause arising out of or in any way related
to the Distribution Agreement or the termination thereof, as well as any and
all claims as set forth in the Arbitration Proceeding and the California
Action. Neither the foregoing release, nor the provisions of Section 11, apply
to or diminish the continuing obligations of RJE under this Agreement, the
Promissory Note or the Security Agreement.

   11. Waiver of Code Provisions. Each of the parties hereto does hereby
acknowledge and agree that it is its intention that this Agreement shall be
effective as a full and final accord and satisfaction and settlement of and as
a bar to each and every claim, demand, debt, account, reckoning, liability,
obligation, cost, expense, lien, action and cause of action, heretofore
referred to and released, which any party hereto has, or has had against the
other parties hereto arising out of the matters as alleged in the Arbitration
Proceeding as well as the California Action. In connection with such waiver and
relinquishment, each of the parties hereto acknowledges that it is aware that
it or its attorney may hereafter discover facts different from or in addition
to the facts which it or its attorney now knows or believes to be true with
respect to the subject matter of this Agreement, but that it is each party's

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intention to fully, finally, absolutely and forever settle any and all claims,
disputes and differences which now exist or heretofore have existed between
them. In furtherance of such intention the mutual releases herein given shall
be and remain in effect as full and complete general mutual releases
notwithstanding the discovery of any such different or additional facts.
Therefore, each of the parties hereto acknowledges that it has been informed by
respective attorneys and/or advisors of, and that each party is familiar with
Section 1542 of the Civil Code of the State of California which provides as
follows: "A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor." Each of the parties hereto does hereby abandon, release, waive and
relinquish all rights and benefits which they may acquire under Section 1542 of
the Civil Code of the State of California pertaining to the subject matter of
this Agreement.

   12. Complete Settlement. This Agreement shall be a full, binding and
complete settlement between the parties to this Agreement, save only and
excepting the future, executory provisions of this Agreement, the Promissory
Note and the Security Agreement. This Agreement constitutes the entire
Agreement among the parties with respect to the subject matter of this
Agreement and supersedes any prior agreements and understandings with respect
to such subject matter. This Agreement may be changed, waived, modified or
terminated only by a written instrument signed by all parties to this
Agreement. Notwithstanding the foregoing, the parties are not relieved of any
continuing obligations that they may have to one another under this Agreement,
the Promissory Note and the Security Agreement.

   13. Severability. Any provision of this Agreement which is invalid, illegal
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without in any manner affecting the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement
invalid, illegal or unenforceable in any other jurisdiction.

   14. Counterparts and Fax Signatures. This Agreement may be signed using one
or more counterparts and by the use of facsimile transmission of signatures.
The several executed copies together shall be considered an original and shall
be binding on the parties.

   15. No Admission. This Agreement represents a compromise and resolution of a
dispute, and neither this Agreement nor the parties' willingness to enter into
it shall be construed as an admission or acknowledgment of liability or the
validity of any claim or defense asserted by any party to this Agreement.

   16. Authority. Any individual signing this Agreement on behalf of any party
represents and warrants that he or she has full authority to do so.

   17. Confidentiality. The parties further agree to refrain from publicly
discussing the terms of this Agreement or the allegations made in the
Arbitration Proceeding or the California Action. The terms of this Agreement
are to be maintained as strictly confidential by both parties and neither party
may share the terms of this Agreement with any other person without the prior
written consent of the other party or except as may be ordered by a court or
required by law, legal ethics or federal securities laws.

Benthos:                                  BENTHOS, INC.

                                                  /s/ RONALD L. MARSIGLIO
                                          By: _________________________________
                                                    Ronald L. Marsiglio
                                             President and Chief Executive
                                                          Officer

RJE:                                      RJE INTERNATIONAL, INC.

                                                     /s/ ROBERT JECHART
                                          By: _________________________________
                                                       Robert Jechart
                                                         President

                                      4

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                             SCHEDULE OF EXHIBITS

<TABLE>
<S>       <C>
Exhibit A Promissory Note
Exhibit B Security Agreement
Exhibit C Stipulation for Entry of Judgment
Exhibit D Notice of Conditional Settlement
Exhibit E Imperial Note Loan Revision/Extension Agreement
</TABLE>

                                      5<PAGE>

                                                                    EXHIBIT 10.7

                SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
                -----------------------------------------------

This SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") dated as
of this 13th day of August 2001, between TECHNICAL COMMUNICATIONS CORPORATION
("Borrower") and COAST BUSINESS CREDIT, a division of Southern Pacific Bank
("Coast"), is made in reference to the following facts:

     A. Borrower previously entered into a Loan and Security Agreement with
Coast dated July 31, 2000 (as amended, the "Loan Agreement") and related
documents in connection therewith (as each may be amended, supplemented,
replaced or modified from time to time, the "Loan Documents"). Terms used
herein, unless otherwise defined herein, shall have the meanings set forth in
the Loan Agreement.

     B. Borrower has caused an Event of Default under Paragraph 7 of Section 8.1
of the Loan Agreement as a result of the failure of Borrower to comply with
Interest Coverage ratio.

     C. Borrower has requested certain modifications to the Loan Agreement.

     D. Coast is willing to amend the Loan Agreement on the terms and subject to
the conditions set forth in this Amendment.

NOW THEREFORE, in consideration of the foregoing and the terms and conditions
hereof, the parties do hereby agree as follows:

     1. Financial and Other Covenants. Section 8.1 of the Loan Agreement is
hereby amended in full and restated as follows:

"8.1   FINANCIAL AND OTHER COVENANTS:  Borrower shall at all times comply with
the financial and other covenants set forth in the Schedule.  Notwithstanding
the foregoing, during the period beginning on the Amendment Effective Date and
ending sixty days thereafter (the "Non-Compliance Period"), Borrower shall be
permitted to borrow funds under this Agreement subject to the terms and
conditions set forth in that certain Second Amendment to Loan and Security
Agreement, without regard to compliance with either (i) paragraph 4 of Section
5.15 of the Schedule or (ii) paragraph 7 of Section 8.1 of the Schedule
(collectively, the "Specified Covenants").

     2. Conditions Precedent to Borrowing During Non-Compliance Period.  Coast
shall not be obligated to make any Loans during the Non-Compliance Period unless
each of the following conditions have been satisfied as determined by Coast in
its sole and absolute discretion:

        (a) Borrower shall have delivered to Coast, on the Amendment Effective
        Date and each week thereafter, a certificate setting forth Borrower's
        borrowing base as of the date of delivery of such certificate;

        (b) Coast shall have received from Borrower a letter stating that
        Coast's subordination with respect to the account of the government of
        Egypt has been cancelled, no actions have been taken under the current
        subordination agreement with respect to such account and such account
        has not been sold, assigned or otherwise transferred; and

        (c) The aggregate amount of all Loans advanced during the Non-Compliance
        Period shall not exceed the lesser of (i) $600,000 and (ii) the
        projected cash-needs that were submitted to Coast as of August 8, 2001.

3.  Covenants.  Borrower hereby agrees that, during the Non-Compliance Period,
it will at all times comply with the following covenants, as determined by Coast
in its sole and absolute discretion:

        (a)  Borrower shall deliver to Coast, on the Amendment Effective Date
        and each week thereafter, a certificate setting forth Borrower's
        borrowing base as of the date of such certificate; and

        (b)  Borrower shall repay all Loans advanced during the Non-Compliance
        Period in full by no later than the final day of the Non-Compliance
        Period using Receivables from Borrower's contract with the government of
        Egypt.

4.     Conditions Subsequent.  If (i) any Loans advanced by Coast during the
Non-Compliance Period remain outstanding after the final day of the Non-
Compliance Period and (ii) Coast agrees, in its sole

                                       1
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and absolute discretion, to permit such Loans to be outstanding after the Non-
Compliance Period or if Coast is willing to make any Loans to Borrower after the
final day of the Non-Compliance Period, then Borrower agrees that, with respect
to all such Loans, it must be in compliance with all financial and other
covenants set forth in the Loan Agreement.

     5. Conditions Precedent.  The amendments hereunder are conditioned upon
Lender's receipt of a fully-executed copy of this Amendment, such date being the
"Amendment Effective Date".

     6. Reaffirmation.  Except as modified by the terms herein, the Loan
Agreement and the other Loan Documents remain in full force and effect.  If
there is any conflict between the terms and provisions of this Amendment and the
terms and provisions of the Loan Agreement or the other Loan Documents, the
terms and provisions of this Amendment shall govern.

     7.  Counterparts.  This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

     8. Governing Law.  This Amendment shall be governed by and construed
according to the laws of the State of California.

     9. Attorneys' Fees; Costs.  Borrower agrees to pay, on demand, all
attorneys' fees and costs incurred in connection with the negotiation,
documentation and execution of this Amendment. If any legal action or proceeding
shall be commenced at any time by any party to this Amendment in connection with
its interpretation or enforcement, the prevailing party or parties in such
action or proceeding shall be entitled to reimbursement of its reasonable
attorneys' fees and costs in connection therewith, in addition to all other
relief to which the prevailing party or parties may be entitled.

    10. Jury Trial Waiver.  BORROWER AND COAST EACH WAIVE ALL RIGHTS TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING INSTITUTED BY EITHER OF THEM AGAINST THE OTHER
WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THE LOAN DOCUMENTS, THIS AMENDMENT, THE
OBLIGATIONS, THE COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT BY BORROWER OR COAST,
OR, IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE
RELATIONSHIP BETWEEN BORROWER AND COAST.

"Borrower"                           "Coast"

TECHNICAL COMMUNICATIONS             COAST BUSINESS CREDIT,
CORPORATION                            a division of Southern Pacific Bank

By:       /s/ Carl H. Guild Jr.      By:       /s/ Lawrence J. Placek
          ---------------------                -------------------------
Name:     Carl H. Guild Jr.          Name:     Lawrence J. Placek
          ---------------------                -------------------------
Title:    President & CEO            Title:    Sr. Vice President
          ---------------------                -------------------------

          Each of the undersigned hereby acknowledges and consents to the
foregoing Amendment and confirms and agrees that the Continuing Guaranty
executed by it in favor of Coast shall remain in full force and effect in
accordance with its terms.

TCC INVESTMENT CORPORATION           TCC FOREIGN SALES CORPORATION

By:  /s/ Carl H. Guild Jr.           By:  /s/ Carl H. Guild Jr.
     -------------------------            ---------------------------
Its:    President                    Its:    President
     -------------------------            ---------------------------

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