CREDIT AGREEMENT

Loan Agreement

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EDAC TECHNOLOGIES CORP

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Title: CREDIT AGREEMENT
Governing Law: Connecticut Date: 1/7/2005
Industry: Aerospace and Defense Sector: Capital Goods

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CREDIT AGREEMENT

THIS CREDIT AGREEMENT (such agreement, as amended or otherwise

modified from time to time, being hereinafter referred to as this "Agreement"),

dated as of January 3, 2005, is between EDAC TECHNOLOGIES CORPORATION, a

Wisconsin corporation, GROS-ITE, INDUSTRIES, INC., a Connecticut corporation,

and APEX MACHINE TOOL COMPANY, INC., a Connecticut corporation (individually and

collectively referred to herein as "Borrower"), each with its principal office

at 1806 New Britain Avenue, Farmington, Connecticut 06032 and BANKNORTH, N.A., a

national bank having a mailing address at 102 West Main Street, New Britain,

Connecticut 06050-0174 ("Lender").

Background

Lender is willing, subject to the terms and conditions set forth in

this Agreement, to make available to Borrower (i) a Term Loan in the amount of

$5,000,000 to fund the refinancing of certain financing facilities currently

held by Borrower, (ii) a Revolving Credit Loan in an amount not to exceed

$5,000,000, to finance Borrower's general working capital needs, and (iii) an

interim Equipment Loan in the amount of $1,500,000 (initially in the form of a

line of credit and then converting into a term loan), to finance the acquisition

of certain Eligible Equipment. The credit facilities to be made available by

Lender to Borrower will be evidenced by the Loan Documents and secured by the

Security Documents. The funding of the Term Loan and the commencement of funding

the Revolving Credit Loan and the Equipment Loan shall occur on January 3, 2005

(the "Effective Date").

NOW, THEREFORE, in consideration of the terms and conditions set

forth herein, and of any loans, advances, guarantees, or extensions of credit

heretofore, now or hereafter made to or for the benefit of Borrower by Lender,

and intending to be legally bound hereby, the parties hereto agree as follows:

ARTICLE I

THE CREDIT FACILITY

SECTION 1.1 Revolving Credit and Term Loans.

1.1.1 Revolving Credit Loans.

(a) Subject to the terms and conditions hereof and in reliance

on the representations and warranties contained in this Agreement, Lender agrees

to make Revolving Credit Loans to Borrower commencing on the Effective Date and

continuing at any time or from time to time on or prior to the Revolving Credit

Loan Maturity Date in an aggregate principal amount at any one time outstanding

not exceeding the Revolving Credit Commitment. Subject to these limitations,

Borrower may borrow, repay and re-borrow funds from Lender pursuant to the

provisions of this Section and Section 1.1.5(b).

(b) Borrower's obligation to repay the Revolving Credit Loans

with interest in accordance with the terms of this Agreement shall be evidenced

by a single Revolving Credit Note substantially in the form of Exhibit A

attached hereto. The Revolving Credit Note

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shall be dated as of the date of this Agreement, shall mature and become due and

payable in accordance with the terms of this Agreement and shall bear interest

as set forth in Section 1.1.4. All Revolving Credit Loans made to Borrower by

Lender shall be recorded by Lender, and all payments made on account of the

Revolving Credit Loans shall be similarly recorded. Any failure of Lender to

record a transaction in a timely fashion, or any error in recording shall not

affect or impair the validity of any Obligation.

1.1.2 Term Loan.

(a) Subject to the terms and conditions hereof and in reliance

on the representations and warranties contained in this Agreement, Lender agrees

to make the Term Loan to Borrower on the Effective Date in an aggregate

principal amount equal to $5,000,000. The outstanding principal amount of the

Term Loan shall be paid in equal monthly installments of $97,559.81 allocate

between principal and interest as set forth on Schedule I attached hereto.

(b) Borrower's obligation to repay the Term Loan with interest

in accordance with the terms of this Agreement shall be evidenced by a single

Term Loan Note substantially in the form of Exhibit B attached hereto. The Term

Loan Note shall be dated as of the date of this Agreement, shall mature and

become due and payable in accordance with the terms of this Agreement and shall

bear interest as set forth in Section 1.1.4.

1.1.3 Equipment Loan.

(a) Subject to the terms and conditions hereof and in reliance

on the representations and warranties contained in this Agreement, Lender agrees

to make Equipment Loans to Borrower to fund the purchase of Eligible Equipment

commencing on the Effective Date and continuing over a period of time extending

until the Conversion Date, in an aggregate principal amount not to exceed

$1,500,000. The outstanding principal amount of the Equipment Loans shall be

advanced from time to time at Borrower's request in accordance with the

procedures specified in Section 1.1.5(b). On the Conversion Date the Equipment

Loan will be converted to a term loan, and no further advances of principal

shall thereafter be made from Lender to Borrower on account thereof. Beginning

on the first day of the month following the Conversion Date, and on the first

day of each month thereafter, Borrower shall make monthly payments of principal

and interest in an amount sufficient to amortize in full the then existing

principal balance in sixty (60) substantially equal monthly installments at the

Equipment Loan Fixed Rate put into effect hereunder on the Conversion Date.

(b) Borrower's obligation to repay the Equipment Loan with

interest in accordance with the terms of this Agreement shall be evidenced by a

single Equipment Loan Note substantially in the form of Exhibit C attached

hereto. The Equipment Loan Note shall be dated the date of this Agreement, shall

mature and become due and payable in accordance with the terms of this Agreement

and shall bear interest as set forth in Section 1.1.4.

1.1.4 Payment of Interest and Principal on Loans.

(a) Interest Rates. Each of the Loans shall bear interest at

applicable rate specified below:

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(i) Term Loan - A fixed rate equal to 6.30 % per annum;

(ii) Revolving Credit Loan - A variable rate equal to the Prime Rate

plus one percent (1%) adjusted daily.

(iii) Equipment Loan - Prior to Conversion, a variable rate equal to

the Prime Rate plus one percent (1%) adjusted daily, and upon and after

Conversion, the Equipment Loan Fixed Rate.

(b) Interest Payment Dates. Interest shall be payable in

arrears on the first day of each month. If not sooner paid, the entire

outstanding principal balance of each of the Loans shall be due and payable on

the Term Loan Maturity Date, the Revolving Credit Loan Maturity Date or the

Equipment Loan Maturity Date, as applicable.

continue at the rate specified above until the imposition of the Default rate

under Section 1.5.1 or until the applicable Loan, and all other Obligations

related thereto, are paid in full, whichever is applicable.

(d) Application of Payments. Each installment received by

Lender shall be applied first to the payment of late charges, then to accrued

and unpaid interest and the balance on account of the unpaid principal of the

applicable Loan.

1.1.5 Making the Loans.

(a) Term Loan - Borrower confirms that it has given Lender a

Borrowing Notice for the Term Loan. Subject to satisfaction of the terms and

conditions hereof, Lender shall make the Term Loan to Borrower by crediting the

amount thereof to Borrower's deposit account at Lender. The Term Loan will be

funded on Effective Date.

(b) Prime Rate Loans - Borrower shall give Lender notice no

later than 11:00 a.m. (Eastern time) on the day of the proposed Borrowing for

any Revolving Credit Loan and/or Equipment Loans (prior to Conversion). Each

such notice shall be given in writing by delivery by Borrower to Lender of a

duly completed Borrowing Notice in the form attached hereto as Exhibit D and a

Borrowing Base Certificate in the form attached hereto as Exhibit E. Each

request for a Revolving Credit Loan and/or Equipment Loan hereunder shall

constitute a representation and warranty by Borrower that all the conditions in

Section 2.1 or 2.2, as the case may be, have been satisfied. Subject to the

satisfaction of the terms and conditions hereof, Lender shall make the requested

Revolving Credit Loan and/or Equipment Loan available to Borrower by crediting

such amount to Borrower's deposit account with Lender not later than 3:00 p.m.

(Eastern time) on the day Borrower submits the Borrowing Notice (or the

following Business Day if the Borrowing Notice is not received by Lender on or

before 11:00 a.m.).

not advance any Equipment Loans in excess of 100% of the invoiced purchase price

of the related Eligible Equipment.

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(d) Special Revolving Credit Funding Requirements - Revolving

Credit Loans made with respect to Eligible Inventory will be limited to raw

materials and finished goods only and shall specifically exclude any work in

process. Eligible Inventory available to support Revolving Credit Loans shall be

capped at $2,000,000 so that the maximum amount of the outstanding Revolving

Credit Loans related to Eligible Inventory shall not exceed $1,000,000 (i.e.

$2,000,000 maximum X 50% advance rate).

(e) Irrevocable Request. - Each request for a Loan pursuant to

this Section 1.1.5 shall be irrevocable and binding on Borrower. Borrower shall

indemnify Lender against any loss, cost or expense incurred by Lender as result

of any failure to fulfill on or before the date specified in the request for

such Loan, the applicable conditions set forth in Article II, including, without

limitation, any loss, cost or expense which Lender determines in its reasonable

judgment that it has incurred by reason of the liquidation or reemployment of

deposits or other funds acquired by Lender to fund the requested Loan when such

advance, as a result of such failure, is not made on such date. Any demand by

Lender for payment pursuant to this Section 1.1.5(e) shall be accompanied by a

schedule in reasonable detail setting forth its computation of any such loss,

cost or expense, such schedule to be conclusive and binding on Borrower absent

manifest error.

1.1.6 Prepayment of Prime Rate Loans.

(a) Borrower may repay at any time any Prime Rate Loan, in

whole or in part, by paying to Lender the amount to be repaid by 2:00 p.m.

(Eastern time) on any Business Day; provided, however, that any such prepayment

shall be subject to a prepayment fee of three percent (3%) of the amount of

principal being prepaid if such prepayment is made within twelve (12) months

after the Closing Date and funded in whole or in part by the proceeds of a

refinancing with another lender.

(b) Any such repayment of any Prime Rate Loan shall be in a

principal amount of not less than $50,000.00 or such greater amount which is a

multiple of $50,000.00 or the total principal amount of Revolving Credit Loans

outstanding hereunder.

1.1.7 Prepayment of FHLBB Amortizing Loans.

(a) Borrower may prepay any FHLBB Amortizing Loan (in

whole or in part) only on the first day of a calendar month, provided, however,

that any such prepayment shall be subject to the payment of the prepayment fees

specified in Subsections (b) and (c) below, as applicable.

(b) Any prepayment of the principal balance of an FHLBB

Amortizing Loan made within twelve (12) months after the Closing Date and funded

in whole or in part by the proceeds of a refinancing with another lender, shall

be accompanied by a prepayment fee equal to the Yield Maintenance Fee plus three

percent (3%) of the amount of principal being prepaid.

Amortizing Loan made more than twelve (12) months after the Closing Date, or

made within twelve (12) months after the Closing Date but not funded in whole or

in part by the proceeds of a

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refinancing with another lender, shall be accompanied by a prepayment fee equal

to the greater of 1% of the principal balance being prepaid or the Yield

Maintenance Fee.

(d) If any FHLBB Amortizing Loan is required by the

terms of this Agreement to be made other than on the first day of the month for

any reason, including, without limitation, acceleration pursuant to Article V

hereof, Borrower shall pay Lender on demand such amount as shall be sufficient

in the reasonable opinion of Lender to compensate Lender for any loss (including

loss of earnings and anticipated profits) cost or expense (including, without

limitation, costs or losses associated with prepaying or redeploying deposits,

whether or not Lender shall have actually funded a FHLBB Amortizing Loan with

corresponding deposits) incurred as a result of such repayment being made on

such other date.

(e) Any demand by Lender for payment pursuant to this

Section 1.1.7 shall be accompanied by a schedule in reasonable detail setting

forth its computation of any such loss, cost or expense, such schedule to be

conclusive and binding on Borrower absent manifest error.

(f) Any repayment of an FHLBB Amortizing Loan shall be

in a principal amount of not less than a single monthly principal payment

thereof. All such payments made shall be applied to the scheduled monthly

principal payments of the FHLBB Amortizing Loan in the inverse order of their

maturities.

1.1.8 Mandatory Prepayments. Borrower shall make mandatory

prepayments of the Loans in amounts equal to the amount of any insurance

proceeds received in the event of an actual or constructive material loss or

seizure or requisition of any Collateral except amounts permitted to be retained

by Borrower or any of Borrower's Subsidiaries pursuant to the provisions of

Section 10.2 of the Security Agreement and Sections 1.2B. and 1.4 of each

Mortgage (such Mortgage provisions to be subordinate and subject to any contrary

provision of the first mortgages on the Real Property), which proceeds shall be

used in accordance with such provisions. Such mandatory prepayments shall be

made within five (5) days following receipt of the applicable proceeds, shall be

accompanied by an Authorized Officer's certificate setting out the calculations

used to determine such amount and certifying it as correct, and shall not be

subject to any prepayment fee.

1.1.9 Application of Prepayments. If no prepayment fees (as

opposed to Yield Maintenance Fess) are payable pursuant to Section 1.17,

Borrower shall be responsible, in addition to the applicable Yield Maintenance

Fee, for the payment of any administrative costs incurred by Lender in

connection with such prepayment. All prepayments shall be applied first to the

payment of late charges, then to accrued and unpaid interest and the balance on

account of the principal payments required under the applicable Loan in the

inverse order of maturity. Any partial prepayments shall not affect Borrower's

obligation to make the regular monthly installments required with respect to the

applicable Loan until such Loan is fully paid.

1.1.10 Prepayment Fee Upon Acceleration. If any Loan shall be

accelerated for any reason whatsoever, the applicable prepayment fee in effect

as of the date of such acceleration shall be paid and such prepayment fee shall

also be added to the Obligations in determining the debt for the purposes of any

judgment of foreclosure or deficiency judgment.

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1.1.11 Termination or Reduction of Loan Commitments. Borrower

may, upon ten (10) Business Days notice to Lender, (a) permanently terminate the

Revolving Credit Commitment in whole or in part, and (b) prior to Conversion,

permanently terminate the Equipment Loan Commitment in whole or in part;

provided that any partial reduction shall be in the minimum amount of $50,000 or

any integral multiple thereof. Upon any permanent termination or reduction of

the Revolving Credit Commitment or the Equipment Loan Commitment, as applicable,

Borrower shall simultaneously repay that portion of the applicable Loans that

exceeds the applicable commitment as so reduced. Any repayment required by this

Section 1.1.9 shall be subject to the provisions of Sections 1.1.6 and 1.1.7.

SECTION 1.2 Fees. Borrower shall pay a facility fee equal to (i) $50,000

(1%) for the Term Loan, (ii) $29,166.67 (1% pro-rated for 7-months) for the

Revolving Credit Loan, and (iii) $15,000 (1%) for the Equipment Loan, the unpaid

portion of which is due and payable on the Closing Date.

SECTION 1.3 Computation of Interest and Fees; Payment Procedures.

1.3.1 Computation. All interest and fees payable hereunder and

under the Notes shall be computed on the basis of a 360-day year for the actual

number of days elapsed.

1.3.2 Payment. Any principal, interest, fees or other

Obligations payable by Borrower hereunder shall be paid to Lender in immediately

available funds before 2:00 p.m. (Eastern Time) on the date due at the principal

office of Lender set forth in the preamble of this Agreement. All such payments

may be charged by Lender against Borrower's accounts with Lender.

1.3.3 Administration of Payment. Any check, draft or money

order remitted in settlement of this Note may be handled for collection in

accordance with the practice of the collecting bank or banks, and shall not be

deemed payment until and unless good funds are actually received by or credited

to Lender.

SECTION 1.4 Capital Adequacy. If (a) the introduction of, or any change

in, or in the interpretation of, any United States or foreign law, rule or

regulation, in each case after the date hereof, or (b) compliance with any

directive, guidelines or request from any central bank or other United States or

foreign governmental authority (whether or not having the force of law)

promulgated or made after the date hereof affects the amount of capital required

or expected to be maintained by Lender or any corporation directly or indirectly

owning or controlling Lender and Lender shall have determined that such

introduction, change or compliance has or would have the effect of reducing the

rate of return on its capital or on the capital of such owning or controlling

corporation as a consequence of its obligations hereunder to a level below that

which Lender or such owning or controlling corporation could have achieved but

for such introduction, change or compliance (after taking into account Lender's

policies or the policies of such owning or controlling corporation, as the case

may be, regarding capital adequacy) by an amount deemed by Lender (in its sole

discretion) to be material, then, from time to time, Borrower shall, to the

extent Lender is not otherwise compensated hereunder for such change, pay to

Lender within thirty (30) Business Days after receipt of notice from Lender of

any change described in this

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Section, such amount as shall compensate Lender for any such change. Such notice

shall set forth in reasonable detail Lender's computation of the amount

necessary to compensate it and such computation shall be conclusive in the

absence of manifest error. Alternatively, in lieu of making such payment,

Borrower shall have the right, within such thirty (30) Business Day period to

notify Lender that Borrower intends to pay off the Loans in full, in which event

Borrower shall have the right to make such payment in full within a period

ending one hundred and eighty (180) days after the receipt of the original

notice from Lender, without the payment of any prepayment fee and/or Yield

Maintenance Fee.

SECTION 1.5 Default Interest; Late Payment Fee.

1.5.1 Default Interest. Upon the occurrence and during the

continuance of an Event of Default, Borrower shall on demand from time to time

pay interest, to the extent permitted by law, on each Loan (and other related

overdue amounts outstanding) up to the date of actual payment (after as well as

before judgment) at a Default rate that is five percent (5%) above the interest

rate otherwise due on such Loan. The Default rate shall be a variable rate,

adjustable daily, with respect to any Prime Rate Loan, and a fixed rate with

respect to any FHLBB Amortizing Loan.

1.5.2 Late Fee. If any payment is not received within fifteen

(15) days after the same is due to Lender, Borrower agrees to pay to Lender a

late charge equal to the greater of (a) five percent 5% of the overdue amount,

or (b) twenty five dollars ($25.00). Lender and Borrower acknowledge that such

late payments shall cause additional administrative expenses to Lender, which

cannot be ascertained at the time of such late payment and that such late

payment fee and default rate are agreed to amounts to defray such expenses. Such

late charge shall be made for each payment period for which any payment is

delinquent.

SECTION 1.6 Maximum Rate. Nothing contained in this Agreement or the Notes

shall require Borrower to pay interest at a rate prohibited by applicable

statute. If interest payable to Lender on any date would be in a prohibited

amount, it shall be automatically reduced to an amount which is not prohibited

and any amounts paid in excess of the prohibited amount shall be applied to the

reduction of the principal of the Notes.

ARTICLE II

CONDITIONS OF LENDING

SECTION 2.1 Conditions Precedent to Initial Loans. The obligation of

Lender to make the Loans hereunder shall be subject to the fulfillment of each

of the following conditions precedent:

2.1.1 Fees. Borrower shall have paid, or made arrangements

satisfactory to Lender for the payment of, all fees, costs, expenses, taxes and

indemnities then payable by Borrower pursuant to Sections 1.2, 8.4 and 8.5

hereof.

2.1.2 Representations. The representations and warranties

contained in Article III of this Agreement and in each other Loan Document and

certificate or other writing delivered to Lender pursuant hereto on or prior to

the Closing Date shall be true and correct on and as of the Closing Date, the

Effective Date, and each subsequent date upon which a

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Borrowing occurs as though made on and as of such date; and no Default or Event

of Default shall have occurred and be continuing or would result from the making

of the Loan on the Effective Date.

2.1.3 No Violations. The making of the Loan shall not

contravene any law, rule or regulation applicable to Lender.

2.1.4 Deliveries to Lender. Lender shall have received the

following, each in form and substance satisfactory to Lender:

(a) the Revolving Credit Note duly executed by Borrower;

(b) the Term Loan Note duly executed by Borrower;

(d)) the Security Agreement covering Borrower's and its

Subsidiaries personal property duly executed by Borrower and its Subsidiaries;

(e) intentionally omitted;

(f) the Perfection Certificates duly executed by

Borrower and its Subsidiaries;

(g) the Mortgages duly executed by Borrower in proper

form for recording in each jurisdiction where the Real Property is located;

(h) intentionally omitted;

(i) intentionally omitted;

(j) appropriate financing statements on Form UCC-1, in

proper form for filing in such offices (or notations on motor vehicle title

certificates) as may be necessary or, in the opinion of Lender or its counsel,

desirable to perfect the security interests purported to be created by the

Security Documents to which Borrower and its Subsidiaries are parties;

(k) searches of appropriate state and local records

listing all effective financing statements which name as debtor, Borrower or any

of its Subsidiaries or any predecessor of Borrower or any of its Subsidiaries

(or the owner of the assets of Borrower or any of its Subsidiaries or any

predecessor of Borrower or any of its Subsidiaries) which are filed in the

governmental offices, together with copies of such financing statements, none of

which, except as otherwise agreed to in writing by Lender, shall cover any of

the Collateral;

(l) evidence of the insurance coverage required by the

terms of this Agreement, the Security Agreement or the Mortgages, in each case

where appropriate, with endorsements (i) naming Lender as additional insured or

loss payee thereunder as specified by Lender, and (ii) providing that such

policy may be terminated, modified or cancelled only upon

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thirty (30) days' prior written notice to Lender, together with evidence of the

payment of all premiums due in respect thereof for such period as Lender may

reasonably request;

(m) a copy of the resolutions adopted by the board of

directors of Borrower and each Subsidiary of Borrower certified as of the

Closing Date by an Authorized Officer thereof, authorizing (i) the transactions

contemplated by the Loan Documents (ii) the execution, delivery and performance

of the Loan Documents and the other documents to be delivered by Borrower in

connection herewith;

(n) a certificate executed by an Authorized Officer of

Borrower and each of its Subsidiaries dated the Closing Date and certifying the

names and true signatures of the officers of Borrower and each of its

Subsidiaries authorized, on behalf of Borrower and each of its Subsidiaries to

sign each Loan Document and the other documents to be executed and delivered by

Borrower and each of its Subsidiaries in connection herewith, together with

evidence of the incumbency of such Authorized Officer;

(o) a copy of the certificate or articles of

incorporation and all amendments thereto of Borrower and each of its

Subsidiaries, certified as of a date not more than ten (10) Business Days prior

to the Closing Date by the appropriate official of the state of incorporation

thereof and as of the Closing Date by an Authorized Officer thereof;

(p) a copy of the by-laws of Borrower and each of its

Subsidiaries, certified as of the Closing Date by an Authorized Officer thereof;

(q) a certificate, dated as of a date not more than five

(5) Business Days prior to the Closing Date of the appropriate official(s) of

the state of incorporation and each state of foreign qualification of Borrower

and each of its Subsidiaries, certifying as to the subsistence in good standing

of, Borrower and each of its Subsidiaries in such states;

(r) a certificate of an Authorized Officer of Borrower,

certifying as of the Closing Date as to the matters set forth in Section 2.1.2.;

(s) a certificate of an Authorized Officer of Borrower,

dated the Closing Date, certifying, on behalf of Borrower, that since October 2,

2004 no material adverse change in the operations or financial condition of

Borrower has occurred, and as to such other matters as Lender may reasonably

request;

(t) favorable written opinion of Rogin, Nassau, counsel

to Borrower, dated the Closing Date, in form and substance satisfactory to

Lender and its counsel and as to such matters as Lender may reasonably request;

(u) executed originals of all promissory notes and other

instruments, if any, evidencing or constituting any of the Collateral endorsed

to the order of Lender, and executed counterparts of all chattel paper, if any,

evidencing or constituting any of the Collateral;

(v) such estoppel certificates, waivers, consents or

other approvals from any Person or Persons, and evidence of completion of other

actions as may, in

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the opinion of Lender, be necessary or desirable to establish the priority of or

otherwise protect the liens and security interests purported to be created by

the Loan Documents and any supplement thereto, including without limitation a

landlord's waiver from any landlord of Borrower or any of its Subsidiaries which

leases to Borrower or any of its Subsidiaries a property where a substantial

amount of Collateral is located;

(w) a letter of direction from Borrower addressed to

Lender with respect to the disbursement of the proceeds of the funding of the

Loans on the Effective Date;

(x) intentionally omitted;

(y) intentionally omitted;

(z) date down endorsements of owner's title policies

demonstrating that Lender's Mortgages securing the Loans will constitute (i) a

second lien on certain Real Property owned by Borrower and located at 21 Spring

Lane, Farmington, Connecticut (subsequent to a first mortgage in favor of Lender

in the original principal amount of $1,659,000), and (ii) a second lien

(subsequent to a first mortgage in favor of Farmington Savings Bank in the

original principal amount of $2,000,000.00) on certain Real Property owned by

Borrower and located at 1790, 1798, 1806 New Britain Avenue, Farmington,

Connecticut;

(aa) intentionally omitted;

(bb) completion of a satisfactory pre-closing audit by

Lender;

(cc) such other approvals, opinions or documents as

Lender may reasonably request.

2.1.5 Validity of Liens. The Security Documents shall be

effective to create in favor of Lender a legal, valid and enforceable first

(except as otherwise permitted herein) security interest in and lien upon the

Collateral as of the Closing Date. All filings, recordings, deliveries of

instruments and other actions necessary or desirable in the opinion of Lender to

protect and preserve such security interests shall have been duly effected or

provided for.

2.1.6 No Material Adverse Change. There shall not have

occurred any material adverse change in the business, financial condition or

results of operations or prospects of Borrower since October 2, 2004.

2.1.7 Satisfactory Proceedings. All proceedings in connection

with the execution of the Loan Documents and the Security Documents on the

Closing Date and the making of any Loan on the Effective Date, and the other

transactions contemplated by this Agreement, and all documents incidental

thereto, shall be satisfactory to Lender and its counsel, and Lender and such

counsel shall have received all such information and documents as Lender, or

such counsel, may reasonably request.

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SECTION 2.2 Conditions Precedent to Additional Loans. The obligation of

Lender to make any Loan other than on the Effective Date is subject to

fulfillment of each of the following conditions precedent and Borrower shall be

deemed to have certified to Lender by a request for a Loan that each of such

conditions precedent have been fulfilled:

2.2.1 Fees. Borrower shall have paid, or made arrangements

satisfactory to Lender for the payment of, all fees, costs, expenses, taxes and

indemnities then payable by Borrower pursuant to Sections 8.4 and 8.5 hereof.

2.2.2 Representations. The representations and warranties

contained in Article III of this Agreement and in each other Loan Document and

certificate or other writing delivered to Lender pursuant hereto shall be true

and correct in all material respects on and as of the Closing Date, the

Effective Date and each date of a subsequent Borrowing as though made on and as

of such date; and no Default or Event of Default shall have occurred and be

continuing or would result from the making of the Loan on such date.

2.2.3 No Violations. The making of such Loan shall not

contravene any law, rule or regulation enacted after the date hereof applicable

to Lender.

2.2.4 Notice. Lender shall have received a Borrowing Notice

for such Borrowing pursuant to Section 1.1.5 hereof with respect to the

Borrowing to be made on the Effective Date and each subsequent date upon which a

Borrowing occurs.

2.2.5 The information contained in the most recently delivered

Borrowing Notice and Borrowing Base Certificate is complete and correct and the

amounts shown therein as "Eligible Receivables" and "Eligible Inventory" have

been determined as provided in the Loan Documents, in each case, as of the date

thereof.

2.2.5 No Material Adverse Change. Except for the Debt incurred

hereunder, there shall not have occurred any material adverse change in the

business, operations or condition, financial or otherwise, of Borrower since the

date of the Closing Financial Statements referred to in Section 3.9.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Borrower hereby represents and warrants as follows:

SECTION 3.1 Existence. Borrower is a corporation duly organized,

validly existing and in good standing under the laws of the State of Wisconsin.

SECTION 3.2 Subsidiaries, etc. The only Subsidiaries of Borrower,

and the only partnerships or joint ventures in which Borrower or any Subsidiary

of Borrower has an interest, are those listed on Schedule 3.2. Borrower or a

Subsidiary of Borrower, as the case may be, owns the percentage of the issued

and outstanding capital stock or other evidences of the ownership of each

Subsidiary, partnership or joint venture listed on Schedule 3.2 as set forth on

such Schedule. No such Subsidiary, partnership or joint venture has issued any

securities convertible into shares of its capital stock (or other evidence of

ownership) or securities

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convertible into such capital stock (or other evidence of ownership), and the

outstanding capital stock (or other evidence of ownership) of such Subsidiaries,

partnerships or joint ventures are owned by Borrower and its Subsidiaries free

and clear of all Liens, warrants, options or rights of others of any kind

whatsoever except for Permitted Liens permitted by Section 4.13. All of the

divisions of Borrower and its Subsidiaries are listed on Schedule 3.2.

SECTION 3.3 Corporate Authorizations. Borrower and each of its

Subsidiaries (a) has all requisite corporate power and authority to conduct its

business as now conducted and as presently contemplated to be conducted, and, to

make the borrowings hereunder (in the case of Borrower) and to consummate the

transactions contemplated hereby, and by the other Loan Documents; and (b) is

duly qualified to do business and is in good standing in each jurisdiction in

which the character of the properties owned or leased by it or in which the

transaction of its business makes such qualification necessary except where

failure to be so qualified will not have a Material Adverse Effect.

SECTION 3.4 No Violation. The execution, delivery or performance by

Borrower and its Subsidiaries of each of the Loan Documents to which it is a

party will not cause it to be in violation of (a) its certificate or articles of

incorporation or its by-laws, (b) any law, governmental regulation, order or

judgment applicable to Borrower or any of its Subsidiaries or any of their

respective properties or assets, and, except as set forth in Schedule 3.4.,

neither Borrower nor any of its Subsidiaries is in violation of any thereof in

any material respect, or (c) any material term of any agreement or instrument

binding on or affecting Borrower or any of its Subsidiaries. The execution,

delivery and performance by Borrower and each of its Subsidiaries of each Loan

Document to which it is a party do not and will not result in or require the

creation of any lien, security interest or other charge or encumbrance upon or

with respect to any of its properties, whether now owned or hereafter acquired,

except for Permitted Liens.

SECTION 3.5 Authorizations and Approvals. No authorization or

approval or other action by, and no notice to or filing (except filings to

perfect the security interests under the Security Documents) with, any

governmental authority or other regulatory body or any other Person is required

for the due execution, delivery and performance by Borrower and each of its

Subsidiaries of each Loan Document to which it is a party.

SECTION 3.6 Validity. This Agreement is, and each other Loan

Document when delivered hereunder, will be, duly authorized and executed and

constitute a legal, valid and binding obligation of Borrower and each of its

Subsidiaries which is a party thereto, enforceable against it in accordance with

its terms, except as limited by bankruptcy, insolvency, moratorium and other

laws affecting the enforcement of creditors' rights generally and by the

application of equitable principles.

SECTION 3.7 Indebtedness. Except as described on Schedule 3.7,

Borrower and its Subsidiaries have no presently outstanding Indebtedness nor is

Borrower or any Subsidiary of Borrower in default with respect to its existing

Indebtedness.

SECTION 3.8 Pending Litigation. Except as set forth on Schedule 3.8,

there is no action, suit or proceeding pending or, to Borrower's knowledge,

threatened against or otherwise affecting Borrower or any Subsidiary of

Borrower, or any of the property of Borrower

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or any Subsidiary of Borrower before any court, arbitrator or governmental

department, commission, board, bureau, agency or instrumentality, which if

adversely determined would (a) materially adversely affect the operations or

condition, financial or otherwise, of Borrower and its subsidiaries on a

consolidated basis, (b) adversely affect the ability of Borrower or any

Subsidiary of Borrower to perform their respective obligations under any Loan

Document or (c) have any material adverse affect on the Collateral (a "Material

Adverse Effect").

SECTION 3.9 Financial Statements. The financial statements of

Borrower constituting the 10-Q filing with the Securities and Exchange

Commission dated July 3, 2004 (the "Closing Financial Statements") fairly

present the financial consolidated financial condition and operations of

Borrower and its Subsidiaries for the fiscal periods ended on the dates thereof

(all in accordance with GAAP). There has been no material adverse change in the

business, operations, assets, prospects, properties or financial condition of

Borrower since the date of such audited Financial Statements. The Pro Forma

Financial Statements of Borrower delivered to Lender present fairly the

consolidated financial condition of Borrower and its Subsidiaries as of the date

hereof and are materially accurate and complete. The projections (including,

without limitation, financial projections included in the pro formas of the

financial condition of Borrower and its Subsidiaries provided to Lender have

been prepared in good faith based upon assumptions disclosed therein, are

consistent with the Pro Forma Financial Statements and are reasonable as of the

date hereof.

SECTION 3.10 Solvency. Borrower (both before and after giving effect

to the transactions contemplated hereby) (a) is solvent, having assets, at

present valuation, in excess of the amount required to pay its probable

liabilities on its existing debts as they become absolute and matured, and (b)

has, and will have, access to adequate capital for the conduct of its business

and the ability to pay its debts from time to time incurred in connection

therewith as such debts mature. It is understood that the valuations of assets

pursuant to the immediately preceding sentence have been made at going concern

values which Borrower believes to be justified under the circumstances.

SECTION 3.11 Margin Securities. Borrower is not and will not be

engaged in the business of extending credit for the purpose of purchasing or

carrying margin stock (within the meaning of Regulation U issued by the Board of

Governors of the Federal Reserve System), and no proceeds of any Loan will be

used to purchase or carry any margin stock or to extend credit to others for the

purpose of purchasing or carrying any margin stock.

SECTION 3.12 Taxes. All tax returns, reports and statements required

by law, whether federal, state or local or otherwise, to be filed by Borrower

and its Subsidiaries have been filed with the appropriate governmental agencies

in all jurisdictions in which such returns, reports and statements are required

to be filed, and all taxes, assessments and other governmental charges shown

thereon to be due and payable, or otherwise levied on Borrower or any Subsidiary

have been timely paid prior to the date on which any fine, penalty, interest,

late charge or loss may be added thereto for nonpayment thereof, except (a)

insofar as extensions have been obtained and are currently in effect and (b) to

the extent contested in good faith by proper proceedings which stay the

imposition of any penalty, fine or lien resulting from the nonpayment thereof

and with respect to which adequate reserves have been set aside for the payment

thereof and (c) to the extent that the failure to file any state or local tax

returns or

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reports would not have a Material Adverse Effect. Neither Borrower nor any

Subsidiary of Borrower has given or been requested to give a waiver of any

statute of limitations relating to the payment of federal, state or local taxes.

Proper and accurate amounts have been withheld by Borrower and each of its

Subsidiaries from its employees for all periods in full and complete compliance

with the tax, social security and unemployment withholding provisions of

applicable federal and state law. All payments of sales and use taxes required

by applicable state law have been made by Borrower and each of its Subsidiaries.

Proper and accurate federal and state returns have been filed by Borrower and

its Subsidiaries for all periods for which returns were due with respect to

employee income tax withholding, social security and unemployment taxes, and the

amounts shown thereon as due and payable have been paid in full or adequate

provision therefor is included on the books of Borrower and its Subsidiaries.

SECTION 3.13 Nature of Business. Borrower is engaged solely in the

business of providing manufacturing and design services to a broad range of

industries and the manufacture and repair of industrial spindles.

SECTION 3.14 Title to Property; Liens. Borrower and each of its

Subsidiaries owns all its respective material assets (other than assets held by

Borrower or any such Subsidiary as lessee under leases) reflected in the Pro

Forma Financial Statements (except assets sold or otherwise disposed of in the

ordinary course of business) and such assets are free and clear of all liens,

security interests and other charges and encumbrances and other types of

preferential arrangements except for Permitted Liens.

SECTION 3.15 Restrictions on Borrower and its Subsidiaries. Neither

Borrower nor any Subsidiary is party to any contract or agreement, or subject to

any charter or other corporate restriction, which would have a Material Adverse

Effect. Neither Borrower nor any Subsidiary has agreed or consented to cause or

permit in the future (upon the happening of a contingency or otherwise) any of

its property, whether now owned or hereafter acquired, to be subject to a lien

other than a Permitted Lien.

SECTION 3.16 Chief Executive Offices. The chief executive offices of

Borrower and each of its Subsidiaries and the offices where all of the records

and books of account of Borrower and each of its Subsidiaries are kept, are

located on the date hereof as set forth on Schedule 3.16 or such other location

designated by Borrower in compliance with the provisions of Section 4.29 hereof.

SECTION 3.17 Investment Company Act. Borrower is not an "investment

company" registered or required to be registered under the Investment Company

Act of 1940, as amended, and is not controlled by such a Person.

SECTION 3.18 Intellectual Property; Accreditation. Except as set

forth in the Schedule 3.18, Borrower and each Subsidiary of Borrower owns or

possesses the right to use all the patents, trademarks, copyrights and other

intellectual property used or useful in, or necessary for, the present and

planned future conduct of its business. Except as set forth in Schedule 3.18, to

the best of Borrower's knowledge, the ownership and/or use of the aforementioned

intellectual property by Borrower and each Subsidiary of Borrower does not

infringe on the intellectual property rights of any other Person, and no claim

has been made,

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notice given or dispute arisen concerning such infringement. All registrations,

patents and licenses issued with respect to Borrower's and each of its

Subsidiaries intellectual property are valid and in full force and are not

subject to any proceeding or claim challenging their extent or validity.

Borrower is fully accredited as required by its agreements with the Seller and

has complied with all requirements of the Seller to remain accredited and has

not received any notice from the Seller of any breach of any requirement to

remain fully accredited. All intellectual property licenses and other rights

necessary for Borrower to conduct its business, and Borrower has fully complied

with any and all agreements relating thereto and has received no notice of any

violation thereof.

SECTION 3.19 The Security Documents.

3.19.1 The provisions of the Security Documents are effective to

create in favor of Lender, a legal, valid and enforceable security interest in

all right, title and interest of Borrower and each of the Subsidiaries in the

Collateral; when the financing statements have been filed in the offices in the

jurisdictions listed in Schedule 3.19 hereto, the Security Documents shall

constitute a fully perfected first lien on, and security interest in all right,

title and interest of Borrower and each of its Subsidiaries in the Collateral

described therein to the extent the filing of financing statements under the UCC

is a permissible method of perfection of security interests in the Collateral

described therein in each such jurisdiction, subject to no prior liens, except

for Permitted Liens.

3.19.2 Intentionally Omitted.

3.19.3 Each Mortgage is effective to grant to Lender, a legal, valid

and enforceable mortgage lien on all of the right, title and interest of

Borrower in the mortgaged property described therein; which lien secures all the

Loans and constitutes a second lien with respect to the Real Property located at

21 Spring Lane, Farmington, Connecticut and a second lien with respect to the

Real Property located at 1790, 1798, 1806 New Britain Avenue, Farmington,

Connecticut. When each Mortgage is duly recorded in the appropriate recording

office in the county in which the subject Real Property is located and the

mortgage recording fees and taxes in respect thereof are paid and compliance is

otherwise had with the formal requirements of state law applicable to the

recording of real estate mortgages generally, such Mortgage shall constitute a

fully perfected lien on, and security interest in, such mortgaged property,

subject, with respect to the Real Property, only to the encumbrances and

exceptions to title noted in the owner's title policy and date down endorsement

as marked and delivered to Lender pursuant to subsection 2.1.4(z); and when

financing statements have been filed in the governmental office for the state

and county in which the Real Property is located, each Mortgage shall also

create a legal, valid, enforceable and perfected second lien on, and security

interest in, all right, title and interest of Borrower thereto in all real and

personal property which is the subject of such Mortgage, subject only to the

encumbrances and exceptions to title noted in the owner's title date down

endorsement delivered to Lender as set forth above.

3.19.4 The property which is subject to the Security Documents to

which Borrower and its Subsidiaries are parties constitutes substantially all

the property of any nature of Borrower and its Subsidiaries.

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SECTION 3.20 ERISA. No Reportable Event (for which the notice

requirement has not been waived by the United States Department of Labor) has

occurred during the immediately preceding six-year period with respect to any

Single Employer Plan, and each Single Employer Plan has complied and has been

administered in all material respects, in accordance with applicable provisions

of ERISA and the Internal Revenue Code. The present value of all benefits vested

under each Single Employer Plan maintained by Borrower or any Commonly

Controlled Entity (based on those assumptions used to fund such Employee Plan)

did not, as of the last annual valuation date applicable thereto, exceed the

value of the assets of such Employee Plan allocable to such vested benefits,

except with respect to the EDAC Technologies Corporation Gros-Ite Industries

Employees' Pension Plan. Neither Borrower, nor any Commonly Controlled Entity

has during the immediately preceding six-year period, had a complete or partial

withdrawal from any Multiemployer Plan, and the liability to which Borrower or

any Commonly Controlled Entity would become subject under ERISA if Borrower or

any Commonly Controlled Entity were to withdraw completely from all

Multiemployer Plans as of the most recent valuation date applicable thereto is

not in excess of $0.00. Neither Borrower, nor any Commonly Controlled Entity has

received notice that any Multiemployer Plan is in reorganization or is insolvent

nor, to the best knowledge of Borrower, is any such Multiemployer Plan in

reorganization or insolvent, nor, to the best knowledge of Borrower, is such a

reorganization or insolvency likely to occur. The present value (determined

using actuarial and other assumptions which are reasonable in respect of the

benefits provided and the employees participating) of the liability of Borrower

for post-retirement benefits to be provided to its current and former employees

under Employee Plans which are welfare benefit plans (as defined in Section 3(l)

of ERISA) does not, in the aggregate, exceed the assets under all such Employee

Plans allocable to such benefits.

SECTION 3.21 Environmental Compliance.

Except as set forth in Schedule 3.21 and subject to any

information to the contrary indicated in the Environmental Reports:

3.21.1 Borrower (including in such term for the purposes of

this Section 3.21, any present or former Affiliate of Borrower for whose

environmental liability Borrower or any Subsidiary of Borrower might be

responsible) is in material compliance with all Environmental Laws.

3.21.2 Borrower has obtained and is in compliance with all

material permits, certificates, licenses, approvals and other authorizations

required by the Environmental Laws, and has filed all material notifications

required by the Environmental Laws, in connection with its ownership or use of

any real estate or the operation of its business.

3.21.3 There are no outstanding notices of violation, orders,

claims, citations, complaints, penalty assessments, suits or other proceedings,

administrative, civil or criminal, at law or in equity, pending against

Borrower, and to Borrower's knowledge, no investigation or review is pending or

threatened against Borrower by any governmental entity with respect to any

alleged material violation of any Environmental Law in connection with its

ownership or use of any real estate or the conduct of its business which would

have a Material Adverse Effect.

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3.21.4 To the best of Borrower's knowledge, all toxic,

polluting or hazardous substances or wastes (collectively "Hazardous

Substances") generated or managed by Borrower have been transported in

compliance with the Environmental Laws to storage, treatment, recycling or

disposal facilities permitted or authorized to handle such substance by the

government agency with jurisdiction thereof.

3.21.5 No notification of Release (as defined in Subsection

3.21.6 below) of a Hazardous Substance pursuant to CERCLA, the Federal Clean

Water Act or the Clean Air Act, or any state or local environmental law,

regulation or ordinance has been received or filed by Borrower as to any

property now or formerly owned or occupied by Borrower. No property now occupied

or owned by Borrower, is listed or proposed for listing on the National Priority

List under CERCLA and, to Borrower's knowledge, no property currently or

formerly owned or Occupied by Borrower is listed or proposed for listing on the

National Priority List under CERCLA, or on the Comprehensive Environmental

Response, Compensation Liability Information System ("CERCLIS"), or any similar

state list of sites requiring investigation or clean-up.

3.21.6 No Hazardous Substances have been released, discharged

or disposed of, spilled, leaked, pumped, poured, emitted, emptied, injected,

leached, dumped or allowed to escape ("Release") in any material respect, during

the period of Borrower's ownership or occupancy, other than as allowed by the

Environmental Laws, at, on, or under any property now owned or occupied by

Borrower, or during such time as Borrower formerly owned or occupied any

property, by Borrower, or to Borrower's knowledge, by any third party or in the

conduct of Borrower's business which release could be reasonably expected to

have a Material Adverse Effect.

3.21.7 Borrower has not received from any federal, state or

local environmental regulatory entity, any requests for information, notices of

claim, demand letters, or other notifications that, in connection with the

ownership or use of any real estate or the conduct of Borrower's business, it is

or may be potentially responsible with respect to any investigation or clean-up

of Hazardous Substances or toxic wastes or pollutants at any sites and such

responsibility could reasonable be expected to have a Material Adverse Effect.

3.21.8 To the best of Borrower's knowledge, no polychlorinated

biphenyls ("PCB's"), asbestos-containing materials, or underground storage

tanks, active or abandoned are or have been present at any property now owned,

operated or occupied by Borrower, nor were they present during such time as

Borrower formerly owned, operated or occupied any property.

3.21.9 To the best knowledge of Borrower, no Hazardous

Substance has come to be located at any site which is listed or proposed for

listing under CERCLA, CERCLIS or on any similar state list, or which is the

subject of federal, state or local enforcement actions or other investigations,

which may lead to any material claims against Borrower or any claims against

Lender for clean-up costs, remedial work, damages to natural resources or for

personal injury claims, including, but not limited to, claims under CERCLA.

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3.21.10 Except for the Environmental Reports, or as otherwise

listed in Schedule 3.21 and heretofore provided to Lender, there have been no

environmental inspections, investigations, studies, audits, tests, reviews or

other analyses ("Reports") conducted in relation to either (i) any property or

business now owned, operated, or leased by Borrower or (ii) any property

previously owned, operated or leased by Borrower, provided that such Report was

prepared by or on behalf of Borrower.

SECTION 3.22 Licenses and Permits. Except as set forth on Schedule

3.22, Borrower is current and in good standing with respect to all governmental

approvals, permits, certificates, licenses, inspections, consents and franchises

(collectively, "Approvals") necessary to continue to conduct its business and to

own or lease and operate its properties as heretofore conducted, owned, leased

or operated and as presently contemplated to be conducted, owned, leased or

operated, except for Approvals the failure to which obtain is not likely,

individually or in the aggregate, to have a Material Adverse Effect.

SECTION 3.23 Other Names. The business conducted by Borrower, or any

Subsidiary of Borrower has not been conducted under any corporate, trade or

fictitious name other than as listed on Schedule 3.23 hereto or as may be

disclosed pursuant to Section 4.29 below.

SECTION 3.24 Strikes; Work Stoppages; Immigration Law. There are no

strikes, work stoppages or controversies pending or to the best of Borrower's

knowledge threatened, between Borrower and any of its Subsidiaries and any of

their employees which would cause a Material Adverse Effect.

SECTION 3.25 Capital Structure. True and correct listings of the

shareholder's of any Subsidiary or Affiliate of Borrower as of the date hereof,

including the number of shares owned by each, are attached hereto as Schedule

3.25. Borrower's outstanding shares consist solely of 4,444,438 common shares.

There are no outstanding securities, rights, options, warrants, shareholders

agreements, registration rights agreements or other agreements relating to any

interest of any sort in Borrower except as set forth on Schedule 3.25.

SECTION 3.26 Customer and Trade Relations. As of the date hereof,

there exists no actual or to Borrower's knowledge threatened, termination,

cancellation, material limitation of or any material modification or material

change in the business relationship of Borrower or any of its Subsidiaries with

any customer or group of customers of Borrower whose purchases individually or

in the aggregate are material to the operations of Borrower or any of its

Subsidiaries or in any business relationship of Borrower or any of its

Subsidiaries with any material supplier to Borrower or any of its Subsidiaries.

SECTION 3.27 Intentionally Omitted.

SECTION 3.28 Accuracy of Information. No Loan Document, no schedule

or exhibit thereto and no other document, certificate, report, statement or

other information furnished to Lender in connection herewith or with the

consummation of the transactions contemplated hereby contains any material

misstatement of fact or omits to state a material fact necessary to make the

statements contained herein or therein not misleading. There is no fact

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materially adversely affecting the assets, business, operations or prospects of

Borrower or any of its Subsidiaries which has not been set forth in an exhibit

or schedule hereto or otherwise disclosed in writing by Borrower to Lender with

specific reference to this Agreement or the financing evidenced hereby.

SECTION 3.29 Survival of Warranties. All representations and

warranties contained in the Loan Documents shall survive the execution and

delivery of the Loan Documents and, for purposes of Sections 8.4 and 8.5, the

termination thereof.

ARTICLE IV

COVENANTS

So long as any Obligation remains outstanding or unsatisfied, or

Lender has any obligation to make Loans hereunder Borrower agrees that:

SECTION 4.1 Financial Covenants of Borrower. Borrower will not for

any period set forth below:

4.1.1 Leverage Ratio. Permit the Leverage Ratio to be greater

than 4.75 to 1.00 during any applicable measuring period.

4.1.2 Initial Debt Service Coverage Ratio. Permit the Initial

Debt Service Coverage Ratio to be less than 1.00 to 1.00 as of December 31,

2004.

4.1.3 Continuing Debt Service Coverage Ratio. Permit the

Continuing Debt Service Coverage Ratio to be less than 1.25 to 1.00 during any

applicable measuring period.

SECTION 4.2 Reporting Requirements. Borrower will furnish to Lender:

4.2.1 As soon as available and in any event within fifteen

(15) days after the end of each calendar month, agings of accounts receivable

and accounts payable and inventory listings in form reasonably satisfactory to

Lender, and a completed Borrowing Base Certificate in substantially the form

attached hereto as Exhibit E.

4.2.2 As soon as available and in any event within forty five

(45) days after the end of each fiscal quarter, (a) a consolidated and

consolidating balance sheet of Borrower and its Subsidiaries for such fiscal

quarter, and (b) consolidated and consolidating statements of income and

retained earnings and cash flows of Borrower and its Subsidiaries for such

fiscal quarter, in reasonable detail, prepared in accordance with GAAP for the

period from the end of the preceding Fiscal Year to the end of such fiscal

quarter, all in a form reasonably satisfactory to Lender and duly certified by

Borrower's chief financial officer or chief executive officer, on behalf of

Borrower, as fairly presenting the financial condition of Borrower and its

Subsidiaries at the end of such periods and the results of the operations of

Borrower and its Subsidiaries for such periods (subject to normal year-end audit

adjustments) and having been prepared in accordance with GAAP, together with a

Compliance Certificate of such officer.

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4.2.3 as soon as available and in any event within one hundred

twenty (120) days after the end of each Fiscal Year of Borrower, (a) a

consolidated and consolidating balance sheet of Borrower as at the end of such

Fiscal Year, and (b) consolidated and consolidating statements of income,

retained earnings and cash flow of Borrower and its Subsidiaries for such Fiscal

Year, all in reasonable detail, including all supporting schedules and comments,

prepared in accordance with GAAP and setting forth in comparative form

corresponding figures for the preceding Fiscal Year, and accompanied by (i) a

report and an opinion (which shall not be qualified in any material respect),

each in form and substance reasonably satisfactory to Lender, by independent

certified public accountants of recognized standing selected by Borrower and

reasonably satisfactory to Lender, with (ii) a Compliance Certificate of

Borrower's chief financial officer or chief executive officer;

4.2.4 as soon as practicable and in any event within fifteen

(15) days after filing complete copies of all federal and state tax returns of

Borrower and its Subsidiaries, as applicable, each of which shall be signed and

certified by Borrower to be true, correct and complete, or if an extension is

filed with respect to the filing of any such tax return, a copy of such

extension within fifteen (15) days of filing of such extension;

4.2.5 as soon as possible and in any event within three (3)

Business Days after Borrower obtains knowledge of the occurrence of a Default or

an Event of Default, or any Material Adverse Effect, the written statement of

the chief executive officer or the chief financial officer of Borrower setting

forth the details of such Default, Event of Default, or Material Adverse Effect

and the statement of such officer setting forth the action which Borrower

proposes to take with respect thereto;

4.2.6 promptly after the sending thereof, copies of all

statements, reports and other information which Borrower distributes to any

holders of its Indebtedness or its securities or filed with the Securities and

Exchange Commission or any national securities exchange;

4.2.7 (a) promptly after the request therefor by Lender,

copies of each annual report (Form 5500 series) for any Employee Plan which

Borrower or any of its Commonly Controlled Entities files under ERISA with the

Internal Revenue Service, and (ii) promptly after the filing or receipt thereof,

copies of any other report or notice which Borrower or any of its Commonly

Controlled Entities files with or receives from the Pension Benefit Guaranty

Corporation or the U.S. Department of Labor or from any plan sponsor (as defined

in Section 3(16)(B) of ERISA), in respect of any Employee Plan and which

evidences the Pension Benefit Guaranty Corporation's intention to terminate any

Employee Plan or to have a trustee appointed to administer any Employee Plan or

which concerns the imposition or amount of withdrawal liability pursuant to

Section 4202 of ERISA;

4.2.8 promptly after the commencement thereof but in any event

not later than five (5) Business Days after service of process with respect

thereto on, or the obtaining of knowledge thereof by Borrower notice of each

action, suit or proceeding before any court, arbitrator or governmental

department, commission, board, bureau, agency or instrumentality which, if

determined adversely, would have a Material Adverse Effect and copies of any

notice of default under any material lease or other material agreement;

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4.2.9 as soon as practicable and in any event within ten (10)

days of delivery to Borrower, a copy of any material letter issued by Borrower's

independent public accountants or other management consultants with respect to

Borrower's financial or accounting systems or controls, including all so-called

"management letters"; and

4.2.10 promptly upon request, such other information

concerning the condition or operations, financial or otherwise, of Borrower as

Lender may from time to time reasonably request.

SECTION 4.3 Use of Proceeds. Borrower will use the proceeds of the

Term Loan only to pay off an existing loan with General Electric Credit

Corporation and related expenses, and will use the proceeds of Revolving Credit

Loans only to pay off an existing loan with General Electric Credit Corporation

and for general working capital purposes, and will use the proceeds of the

Equipment Loans only for the purchase of certain Eligible Equipment.

SECTION 4.4 Compliance with Laws, Etc. Borrower will and will cause

each of its Subsidiaries to comply in all material respects with all applicable

laws, rules, regulations and orders, and all contracts and agreements to which

it or its properties are subject, such compliance to include, without

limitation, compliance with ERISA with respect to any Employee Plan, paying

before the same become delinquent all taxes, assessments and governmental

charges or levies imposed upon it or upon its income or profits or its

properties, and paying all lawful claims which if unpaid might become a lien or

charge upon any of its properties, except to the extent such taxes, assessments

and governmental charges or levies are contested in good faith by proper

proceedings which stay the imposition of any penalty, fine or lien resulting

from the non-payment thereof and with respect to which adequate reserves have

been set aside for the payment thereof and such contest will not in the

reasonable judgment of Lender endanger its interest in any Collateral.

SECTION 4.5 Preservation of Existence, Etc. Borrower will and will

cause each of its Subsidiaries to maintain and preserve its existence, rights

and privileges, and become or remain duly qualified and in good standing in each

jurisdiction in which the character of the properties owned or leased by it or

in which the transaction of its business makes such qualification necessary,

except where failure to do so, individually or in the aggregate, is not likely

to have a Material Adverse Effect.

SECTION 4.6 Obtaining of Permits, Etc. Borrower will and will cause

each of its Subsidiaries to obtain, maintain and observe all permits, licenses,

authorizations, approvals and accreditation necessary or useful in the proper

conduct of its business, except where failure to do so, individually or in the

aggregate, is not likely to have a Material Adverse Effect.

SECTION 4.7 Maintenance of Insurance. Borrower will and will cause

each of its Subsidiaries to maintain the insurance required by the Security

Agreement and the Mortgages; and Borrower and its Subsidiaries will maintain

with financially sound and reputable insurance companies or associations

satisfactory to Lender insurance (including, without limitation, comprehensive

general liability and hazard insurance) with respect to its properties and

business and the properties and business of its Subsidiary, in such amounts and

covering such risks, as is required by any governmental authority having

jurisdiction with respect thereto or as is carried

<PAGE>

generally in accordance with sound business practice by companies in similar

businesses similarly situated. Lender will be named a lender loss payee as its

interests may appear with respect to all such insurance.

SECTION 4.8 Intentionally Omitted.

SECTION 4.9 Maintenance of Properties, Etc. Borrower will and will

cause each of its Subsidiaries to maintain and preserve all of its properties

necessary or useful in the proper conduct of its business in good working order

and condition, ordinary wear and tear excepted, and comply at all times with the

material provisions of all material leases to which it is a party or under which

it occupies property, so as to prevent any material loss or forfeiture thereof

or thereunder.

SECTION 4.10 Keeping of Records and Books of Account. Borrower will

and will cause each of its Subsidiaries to keep adequate records and books of

account with complete entries made in accordance with GAAP reflecting all of its

financial transactions, including, but not limited to all transactions between

or among Borrower and its Affiliates.

SECTION 4.11 Inspection Rights. Upon reasonable notice (and for this

purpose no more than two Business Days notice shall be required under any

circumstances) if no Event of Default or Default shall exist, or at any time

with or without notice after the occurrence of an Event of Default or Default,

Borrower shall, and shall cause each of its Subsidiaries to, allow any

representative of Lender to visit and inspect any of the properties

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