-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VI3vvseIJWxIGaqouqYWSZ5I/rYep7NrCSogafTukHBawM7oq3wAJZWxmOJxXaXO zP4vRhKgj53QhhzkL6YdYQ== 0000932214-99-000007.txt : 19990301 0000932214-99-000007.hdr.sgml : 19990301 ACCESSION NUMBER: 0000932214-99-000007 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990225 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990226 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AEROFLEX INC CENTRAL INDEX KEY: 0000002601 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 111974412 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-08037 FILM NUMBER: 99550586 BUSINESS ADDRESS: STREET 1: 35 S SERVICE RD CITY: PLAINVIEW STATE: NY ZIP: 11803 BUSINESS PHONE: 5166946700 MAIL ADDRESS: STREET 1: 35 S SERVICE ROAD CITY: PLAINVIEW STATE: NY ZIP: 11803 FORMER COMPANY: FORMER CONFORMED NAME: ARX INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: AEROFLEX LABORATORIES INC DATE OF NAME CHANGE: 19851119 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: February 25, 1999 (Date of earliest event reported) Aeroflex Incorporated - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 1-8037 11-1974412 - -------------------------------------------------------------------------------- (State or other (Commission (IRS Employer jurisdiction of File Number) Identification incorporation Number) 35 South Service Road, Plainview, New York 11803 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code (516) 694-6700 ------------- - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) ITEM 2. Acquisition or Disposition of Assets 1. (a) On February 25, 1999, the Registrant acquired all of the outstanding stock of UTMC Microelectronic Systems, Inc., a Delaware Corporation ("UTMC") (a wholly-owned subsidiary of the Hamilton Standard Division of United Technologies Corporation ("UTC")) with its principal office located in Colorado Springs, Colorado. Prior to the acquisition, UTMC distributed by dividend to UTC the assets and UTC assumed the liabilities of the circuit card assembly ("CCA") portion of UTMC's business. UTMC, at acquisition, consisted of only the integrated circuit business. The Registrant paid $42,500,000 in cash. The Registrant used available cash of $22,500,000 and borrowings under its new Revolving Credit and Term Loan Agreement with Fleet Bank, N.A. and The Chase Manhattan Bank of $20,000,000. In connection with the acquisition, UTMC and UTC entered into a five-year Supply Agreement ("the Long Term Agreement") for the manufacture by UTMC of certain products for sale to UTC. The Long Term Agreement includes minimum purchases by UTC during the first two years of the Agreement. UTMC and UTC also entered into a Facilities Lease and Services Agreement under which Hamilton Standard Electronics, Inc. ("HSE"), a wholly-owned subsidiary of UTC, will continue to operate the CCA business in the UTMC facilities and receive certain services from UTMC, including operations, quality, accounting, human resources, general administrative and information services for a two-year period, which may be extended for an additional year. Further, UTMC and UTC entered into an Assignment and License-Back Agreement pursuant to which UTC transferred to UTMC certain intellectual property owned by UTC which was used or useful to UTMC in its integrated circuit business. (b) UTMC's owned facility was used by it in the design, development and manufacture of integrated circuits, and the Registrant intends to continue such operations in the same location. ITEM 5. Other Events ------------ 1. (a) Effective on February 25, 1999 the Registrant and its subsidiaries ("the Co-Borrowers") entered into the Fourth Amended and Restated Loan and Security Agreement ("the Agreement") with Fleet Bank, N.A. and The Chase Manhattan Bank ("the Banks"). The Agreement provides for revolving credit loans up to $23,000,000, expiring on December 31, 2002, term loans of $20,000,000 requiring repayments of $2,500,000 on June 30, 1999 and quarterly payments of $1,250,000 beginning September 30, 1999 with final payment due on December 31, 2002 and mortgage loans of $4,484,000. The revolving credit and term loans were made for the purpose of acquiring UTMC and for general corporate purposes, including working capital, capital expenditures and facilities expansion and may be used for potential acquisitions. The Co-Borrowers have pledged substantially all of their assets to the Banks under the Agreement. ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits ----------------------------------------- (a) Financial Statements of Business Acquired. Since it is impractical to provide the required financial statements at this time, the Company will file the required financial statements on Form 8-K/A as soon as practicable, but not later than sixty days after the required filing date of this report. (b) Pro Forma Financial Information. Any required pro forma financial information also will be filed on Form 8-K/A within sixty days after the required filing date of this report. (c) Exhibits. 2.1. Common Stock Purchase Agreement made as of February 25, 1999 between the Registrant and UTC acting through its Hamilton Standard Division as the owner of all of the issued and outstanding capital stock of UTMC. 10.2. Long Term Agreement made as of February 25, 1999 between UTC and UTMC. 10.3. Facilities Lease and Services Agreement made as of February 25, 1999 between UTMC, UTC and HSE. 10.4. Assignment and License-Back Agreement made as of February 25, 1999 between UTMC and UTC. 10.5. Fourth Amended and Restated Loan and Security Agreement, dated as of February 25, 1999 among Aeroflex Incorporated and its subsidiaries and Fleet Bank, N.A. and The Chase Manhattan Bank. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Aeroflex Incorporated By: /s/ Michael Gorin ---------------------------------------- Michael Gorin President and Chief Financial Officer Date: February 25, 1999 EX-2.1 2 2/25/99-2 COMMON STOCK PURCHASE AGREEMENT COMMON STOCK PURCHASE AGREEMENT made as of the 25th day of February, 1999 by and between AEROFLEX INCORPORATED, a Delaware corporation with its principal place of business at 35 South Service Road, Plainview, New York 11803 (the "Purchaser"), and UNITED TECHNOLOGIES CORPORATION, a Delaware corporation, acting through its HAMILTON STANDARD DIVISION, with its principal place of business at One Hamilton Road, Windsor Locks, Connecticut 06096 (the "Stockholder"), as the owner of all of the issued and outstanding capital stock of UTMC MICROELECTRONIC SYSTEMS INC., a Delaware corporation with its principal place of business at 4350 Centennial Boulevard, Colorado Springs, Colorado 80907 (the "Company"). W I T N E S S E T H: WHEREAS, the Purchaser and Stockholder have agreed to the sale by the Stockholder to the Purchaser of all of the outstanding common stock of the Company upon the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the covenants, warranties and mutual agreements herein set forth, and in reliance upon the representations and warranties contained herein, the parties do hereby agree as follows: 1. Transfer of Stock. In reliance on the representations and warranties contained herein and subject to all of the terms and conditions hereof, the Stockholder hereby sells, assigns, transfers and delivers to the Purchaser, and the Purchaser hereby purchases from the Stockholder, all of the issued and outstanding Common Stock of the Company (the "Stock"). 2. Unadjusted Purchase Price. 2.1. Unadjusted Purchase Price. Subject to adjustment following the Closing as provided in Section 2.2 hereof, the unadjusted purchase price for the Stock (the "Unadjusted Purchase Price") shall be Forty-Two Million Five Hundred Thousand Dollars ($42,500,000). 2.2 Post-Closing Purchase Price Adjustment. (a) If the "Closing Net Book Value" (as defined in Section 2.2(c) below) of the "I.C. Business" (as hereinafter defined) as finally determined under this Section is less than Twenty-Seven Million Five Hundred Thousand Dollars ($27,500,000), the Unadjusted Purchase Price shall be reduced dollar for dollar by the amount by which Twenty-Seven Million Five Hundred Thousand Dollars ($27,500,000) exceeds the Closing Net Book Value. Any payment to be made pursuant to this Section 2.2(a) shall be made within three (3) business days of final determination of the Closing Net Book Value by wire transfer to an account in the United States designated by the person entitled to receive such payment. Any such payment to be made which is not made when due shall bear interest at the rate of twelve (12%) percent per annum from the due date thereof to the date paid. The Unadjusted Purchase Price as adjusted is referred to herein as the "Purchase Price". (b) As soon as practicable after the Closing Date, but in no event later than thirty (30) days after the Closing Date, the Stockholder will prepare a balance sheet of the I.C. Business as of the close of business on the date immediately preceding the Closing Date (the "Closing Balance Sheet"), and a determination of the Closing Net Book Value as of such date in accordance therewith and Section 2.2(c). Purchaser's representatives, including its independent certified public accountants, shall have access to the Company's accounting records, and work papers created in connection with preparing the Closing Balance Sheet. The Stockholder will establish the Closing Net Book Value in accordance with this Section 2.2 and deliver its Closing Balance Sheet within such thirty (30) day period. If Purchaser objects to the determination of the Closing Net Book Value, Purchaser shall give notice to Stockholder within ninety (90) days after Purchaser's receipt thereof. If Purchaser fails to give notice to Stockholder of an objection within such ninety (90) day period, the determination by the Stockholder of the Closing Net Book Value shall be deemed final, conclusive and binding on Stockholder and Purchaser as to the adjustment, if any, of the Unadjusted Purchase Price and the Closing Net Book Value. If Purchaser gives Stockholder notice of such an objection within such ninety (90) day period, all disagreements with respect to the Closing Net Book Value shall be resolved as soon as practicable by the Colorado Springs or Denver, Colorado, office of a mutually acceptable "Big 5" accounting firm (other than KPMG Peat Marwick LLP ("KPMG") and PricewaterhouseCoopers LLP ("Pricewaterhouse"), which shall determine the Closing Net Book Value in accordance with Section 2.2(c). The determination of the Closing Net Book Value by such mutually acceptable "Big 5" accounting firm shall be final, conclusive and binding, as to the adjustment of the Unadjusted Purchase Price in accordance with this Section 2, upon Stockholder and Purchaser. The fees and expenses of Pricewaterhouse shall be borne solely by the Stockholder, the fees and expenses of KPMG shall be borne solely by Purchaser, and the fees and expenses of the mutually acceptable "Big 5" accounting firm shall be shared equally by Purchaser and Stockholder. Notwithstanding the preceding portions of this Section 2.2(b), the applicable party or parties shall pay promptly to the other party or parties that portion of any reduction in the Unadjusted Purchase Price which is not in dispute. Any notice of objections shall specify in reasonable detail the nature of the objections. (c) The "Closing Net Book Value" shall be the difference between the assets and liabilities of the I.C. Business as of the close of business on the date immediately preceding the Closing Date based on the Closing Balance Sheet. The Closing Balance Sheet shall present accurately (without regard to any limitations as to materiality) the assets, liabilities and Closing Net Book Value of the I.C. Business as of the close of business on the date immediately preceding the Closing Date in accordance with GAAP consistently applied by the Company. Notwithstanding the preceding provisions of this Section 2.2(c), for purposes of preparing the Closing Balance Sheet and determining the Closing Net Book Value: (i) the same accounting principles that were used in preparing the December 31, 1998 balance sheet and the December 31, 1997 balance sheet included in the "Financial Statements" (as hereinafter defined) shall be used in preparing the Closing Balance Sheet and determining the Closing Net Book Value; (ii) the Closing Balance Sheet shall properly reflect a cash balance at least equal to any accrued but unpaid bonus incentive compensation to employees of the I.C. Business for the year ended December 31, 1998; (iii) the Closing Balance Sheet shall not include any "Excluded Assets" (as hereinafter defined) or "Excluded Liabilities" (as hereinafter defined); (iv) all accruals for current and deferred pension assets and liabilities shall be excluded from the determination of Closing Net Book Value; and (v) any increase or decrease in the inventory reserve of Seven Million Five Hundred Thousand Dollars ($7,500,000); deferred tax assets of Four Million Four Hundred Nine Thousand U.S. Dollars ($4,409,000); deferred tax liabilities of Five Hundred Twelve Thousand U.S. Dollars ($512,000); and a warranty reserve of One Hundred Thousand U.S. Dollars ($100,000) will be excluded from the determination of the Closing Net Book Value. 3. The Closing. 3.1. Place and Date. The closing of the transactions provided for in Section 1 shall take place at Cleary, Gottlieb, Steen & Hamilton, 153 East 53rd Street, New York, New York 10022 (or at such other place as the parties may agree upon in writing) contemporaneously with the execution of this Agreement. The closing is referred to in this Agreement as the "Closing" and date of the closing is referred to herein as the "Closing Date". 3.2. Unadjusted Purchase Price Paid at Closing. At the Closing, the Purchaser shall pay the Unadjusted Purchase Price to the Stockholder by wire transfer in immediately available funds to such bank account as the Stockholder shall have specified in writing to the Purchaser three (3) business days in advance of the Closing Date. 3.3. Documents to be Delivered by the Stockholder. (a) the Stockholder shall, and in the case of the Facilities Lease and Services Agreement shall cause Hamilton Standard Electronics, Inc. to, execute and deliver to the Purchaser the following: (i) duly issued certificates representing all of the Stock duly endorsed in blank, with blank stock powers attached and with all required stock transfer stamps attached; (ii) the "Facilities Lease and Services Agreement" executed on the date hereof by the Company and the Stockholder; (iii) the "Long Term Agreement" executed on the date hereof by the Company and the Stockholder; (iv) the "Assignment and License-Back Agreement" executed on the date hereof by the Company and the Stockholder; and (v) the certificate specified in Section 7.1 of this Agreement. (b) the Stockholder and the Company shall each execute such other documents and instruments and take such action as may be necessary or reasonably requested by the Purchaser to fully vest in Purchaser full title to the Stock and place the Purchaser in possession and control of the Company and its assets. 3.4. Documents to be Delivered by the Purchaser. At the Closing the Purchaser or the Company, as the case may be, shall execute and/or deliver to the Stockholder the following: (i) a copy of resolutions of the Board of Directors of the Purchaser authorizing the execution, delivery and performance of this Agreement by the Purchaser, and a certificate of its secretary or assistant secretary, dated the Closing Date, to the effect that such resolutions were duly adopted and are in full force and effect; (ii) the Facilities Lease and Services Agreement; (iii) the Long Term Agreement; (iv) the Assignment and License-Back Agreement; and (v) the certificate specified in Section 7.2 of this Agreement. 3.5. Form of Documents. Unless specifically otherwise provided herein, all documents to be delivered pursuant to this Section 3 by one party to the other party to this Agreement shall be in form and substance reasonably satisfactory to such other party and its counsel. 4. Representations and Warranties of the Stockholder. The Stockholder represents and warrants to the Purchaser as of the Closing Date as follows: 4.1. Organization and Authority. The Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation as set forth in Schedule 4.1, with all requisite power and authority (corporate and governmental) to own, operate and lease its properties and to carry on its business as now being conducted. The Company is duly licensed or qualified to do business and is in good standing in each jurisdiction set forth on Schedule 4.1 hereto, which except as set forth in Schedule 4.1 are all the jurisdictions in which the Company is required to be so qualified or licensed. 4.2. Subsidiaries. The Company has no direct or indirect interest or interests by stock ownership in any firm, association, corporation or business enterprise, except as set forth on Schedule 4.2. 4.3. Authorization of Agreements. The Stockholder has the corporate power and authority to execute and deliver this Agreement and to carry out its obligations hereunder. The execution, delivery and performance by the Stockholder of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Stockholder. This Agreement has been duly executed and delivered by the Stockholder and, assuming due execution by the Purchaser, constitutes the legal, valid and binding obligation of the Stockholder enforceable against the Stockholder in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization and similar laws of general application relating to or affecting the rights and remedies of creditors, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in an action at law or a suit in equity). 4.4. Capital Stock. The authorized, issued and outstanding capital stock of all classes of the Company are set forth on Schedule 4.4. All of the outstanding capital stock of the Company has been duly authorized and is validly issued, fully paid and nonassessable. All outstanding capital stock and any other outstanding securities of the Company (including any employee stock options) were issued in compliance with all applicable federal and state securities laws. The lawful, registered and beneficial owners (and their addresses) of all issued and outstanding shares of the capital stock of the Company and the number of shares held by each is as indicated on Schedule 4.4 hereto. The Stockholder has and on the Closing Date will convey to the Purchaser good title to the Stock, free and clear of any security interest, claim, lien, pledge, option, warrant, encumbrance or restriction whatsoever. Except as set forth on Schedule 4.4, there are no rights, subscriptions, warrants, options, conversion rights, commitments or agreements of any kind authorized or outstanding to purchase or otherwise acquire from the Stockholder, the Company or any other person, any shares of stock, or securities or obligations of any kind convertible into or exchangeable for any shares of stock, of any class of the Company or any other equity interest in the Company. There is no proxy, or any agreement, arrangement or understanding of any kind authorized or outstanding which restricts, limits or otherwise affects the right to vote any share of Stock or other securities of the Company. 4.5. No Conflicts. The execution, delivery and performance of this Agreement, any other agreement or document contemplated herein and the consummation of all of the transactions contemplated hereby and thereby: (i) do not and will not require the consent, waiver, approval, license, designation or authorization of, or declaration with, any Person or court to which the Company is subject or any governmental authority or agency; and (ii) do not and will not, with or without the giving of notice or the passage of time or both, violate or conflict with or result in a breach or termination of any provision of, or constitute a default under, or accelerate or permit the acceleration of the performance required by the terms of, or result in the creation of any mortgage, security interest, claim, lien, charge or other encumbrance upon any of the assets of the Company pursuant to, or otherwise give rise to any liability or obligation under, the certificate of incorporation or bylaws of the Company, any agreement, mortgage, deed of trust, indenture, license, permit or any other agreement or instrument or any order, judgment, decree, statute or regulation to which the Company is a party or by which the Company or any of its assets may be bound; and (iii) will not cause the termination of any such agreement or instrument, or in any way affect or violate the terms and conditions of, or cause the cancellation, modification, revocation or suspension of, any rights of the Company, except with respect to clauses (i), (ii) and (iii) above, such breach or breaches of the representations contained therein which individually or in the aggregate would not have a material adverse effect upon the Company or the I.C.Business. 4.6. Financial Statements. Attached hereto as Schedule 4.6 are the Financial Statements of the I.C. Business. 4.6.1 Except as set forth in Schedule 4.6.1, for the relevant periods, the Financial Statements: (1) are complete and correct in all material respects; (2) present fairly the financial position of the I.C. Business at such dates and the results of operations and cash flows for the respective periods ended on such dates; and (3) were prepared in accordance with generally accepted accounting principles, consistently applied during the periods, and are in accordance with the books and records maintained by the Company, with no differences between such Financial Statements and the financial records maintained and accounting methods applied by the Company for tax purposes, except as disclosed in the notes to the Financial Statements. 4.6.2 As at December 31, 1998, the I.C. Business had no liabilities, commitments or obligations of any nature, whether absolute, accrued, contingent or otherwise, that are of a type required to be reflected on, or described in a footnote to, an audited balance sheet prepared under generally accepted accounting principles as consistently applied by the Company ("GAAP") that are not adequately reflected or reserved against in the unaudited balance sheet of the I.C. Business as at December 31, 1998 which is included in the Financial Statements or disclosed in the footnotes thereto; provided, that the materiality threshold for determining whether liabilities, commitments or obligations are required to be reflected on, or described in a footnote to, an audited balance sheet, shall be $300,000 in the aggregate, whether or not consistent with GAAP. 4.7. Taxes. True and correct copies of the Company's state income tax returns for the years ended December 31, 1997, 1996 and 1995 have been delivered to the Purchaser. All tax returns (including information returns) required by any jurisdiction to have been filed as of the date of this Agreement by or with respect to the Company have been timely filed, except for returns with respect to which extensions have been granted, and each such return is true, correct and complete. Schedule 4.7 sets forth each jurisdiction in which the Company is required to file all tax returns. Except as set forth in Schedule 4.7, all liabilities of the Company to any jurisdiction for taxes of every kind and nature, including interest thereon and penalties with respect thereto, (collectively "Taxes") relating to any period prior to December 31, 1998 have been timely paid by the Company or are accrued and provided for in the Financial Statements as of December 31, 1998. Any liability for Taxes incurred by the Company since December 31, 1998 was incurred in the ordinary course of business. The Company is not required to file any foreign income tax returns. The state income tax returns of the Company have not been audited by the appropriate taxing authorities within the past five (5) years. To the knowledge of the Stockholder, neither the Internal Revenue Service nor any state, local or other taxing authority has proposed any additional taxes, interest or penalties with respect to the Company or any of its operations or business; there are no pending or, to the knowledge of the Stockholder, threatened tax claims or assessments; and there are no pending or, to the knowledge of the Stockholder, threatened tax examinations by any taxing authorities. The Company has not given any waivers of rights (which are currently in effect) under applicable statutes of limitations with respect to the income tax returns for any fiscal year. 4.8. No Adverse Changes. Except as disclosed on Schedule 4.8 hereto, since December 31, 1998: (i) the I.C. Business of the Company has been conducted only in the ordinary course; (ii) there has been no change that individually or in the aggregate, has had a material adverse effect on the condition (financial or otherwise), assets, liabilities, business, operations, or affairs of the I.C. Business, taken as a whole; and (iii) there has been no damage, destruction or loss or, to the knowledge of the Stockholder, other occurrence or development, whether or not insured against, which, either singly or in the aggregate, materially adversely affects, and the Stockholder has no knowledge of any threatened occurrence or development which would materially adversely affect, the condition (financial or otherwise), assets, liabilities, business, operations, affairs or prospects of the I.C. Business. 4.9. Conduct of Business. Except as disclosed on Schedule 4.9 hereto, since December 31, 1998, the Company with respect to the I.C. Business has not: (i) created or incurred any liability (absolute, accrued, contingent or otherwise) except unsecured current liabilities incurred in the ordinary course of business consistent with past practice; (ii) mortgaged, pledged or subjected to any lien or otherwise encumbered any of its assets, tangible or intangible; (iii) discharged or satisfied any lien or encumbrance or paid any obligation or liability (absolute, accrued, contingent or otherwise) other than current liabilities shown on the Financial Statements as at December 31, 1998 and taxes and current liabilities incurred since December 31, 1998 in the ordinary course of business or under contracts or agreements entered into in the ordinary course of business (other than as a result of any default or breach of, or penalty under, any such contracts or agreements); (iv) waived, released or compromised any claims or rights of substantial value, or experienced any actual or threatened strike or lock-out or similar labor trouble, or lost, or been threatened with the loss of, any key employees or any substantial number of employees; (v) entered into any settlement, compromise or consent with respect to any claim, proceeding or investigation; (vi) sold, assigned, transferred, leased or otherwise disposed of any of any material asset, tangible or intangible, or canceled any debts or claims except, in each case, for fair consideration in the ordinary course of business (it being understood that the disposition of any asset, other than inventory consisting of finished products, or cancellation of any debt or claim carried on the books at more than $30,000 shall be deemed not to be a disposition or cancellation in the ordinary course of business); (vii) declared or paid any dividends, or made any other distribution on or in respect of, or directly or indirectly purchased, retired, redeemed or otherwise acquired any shares of its capital stock, paid any notes or accounts or paid any amount or transferred any asset to the Stockholder (other than intercompany payables in the ordinary course of business); (viii) made or become a party to, or become bound by, any contract or commitment or renewed, extended, amended, modified or terminated any contract or commitment which in any one case involved an amount in excess of $50,000 (or in the aggregate an amount in excess of $100,000 but excluding therefrom the amount of Material/Service Agreements entered into in the ordinary course of business); (ix) issued or sold any shares of its capital stock; (x) paid or agreed to pay, other than in the ordinary course of business, conditionally or otherwise, any bonus, extra compensation, pension or severance pay to any of its officers or employees, whether under any existing profit sharing, pension or other plan or otherwise, or increased the rate or altered the form of compensation, including without limitation salaries, fees, commission rates, bonuses, profit sharing, incentive, pension, retirement or other similar payments, from that being paid at December 31, 1998 to any of its stockholders, directors, officers or employees; (xi) entered into any transaction not in the ordinary course of business (except for transactions contemplated by this Agreement); (xii) made or announced any change in the form or manner of distribution of any of its products or services; (xiii) changed any of its accounting methods or principles used in recording transactions on its books or records or in preparing the Financial Statements; or (xiv) entered into any contract or commitment to do any of the foregoing. 4.10. Title to and Condition of Assets. With respect to the I.C. Business, the Company has valid title to all of its personal property and valid leasehold interests in all real and personal property leased by it, free and clear of all claims, liens, charges, mortgages, pledges, security interests, restrictions and other encumbrances of any kind whatsoever except as set forth in the terms of the related leases or as set forth in Schedule 4.10. No instrument, easement, license or grant of record, applicable zoning or building law, ordinance or administrative regulation or other similar impediment of any kind prohibits or interferes with, limits or impairs, or would, if not permitted by any prior nonconforming use, prohibit or interfere with or limit or impair, the use, operation, maintenance of, or access to, or the value of, the real or personal property owned or leased by the Company in any material respect, except as set forth in such related leases. The assets and properties owned or leased by the Company are (i) sufficient and adequate to carry on its business as presently conducted; (ii) are in reasonably good condition and repair, normal wear and tear excepted, and are in a state of maintenance, repair and operating condition required for the proper operation and use thereof in the ordinary course of business; (iii) comply in all material respects with all applicable federal, state or local laws, ordinances, rules and regulations and with the terms and conditions of all leases and other agreements affecting or relating to any such property; and (iv) are adequate to provide the products and services of the I.C. Business in accordance with the most current standards established by I.C. Business customers, clients and governmental bodies. 4.11. Real Property. 4.11.1. Schedule 4.11.1 contains, among other things: (i) a description of each parcel of real property owned or leased by the Company or in which it has any interest, and (ii) a true and complete copy of the certificate of occupancy (or local equivalent, if any) covering each of the parcels owned by the Company. 4.11.2 The only real property owned by the Company is the premises, including an unimproved contiguous parcel of real property, known as 4350 Centennial Boulevard, Colorado Springs, Colorado 80907 (collectively, the "Real Property"). The Real Property is all of the real property owned by the Company. The Company is in actual possession of the Real Property and has good and indefeasible title in fee simple to, and owns the Real Property, free and clear of any encroachment, mortgage, deed of trust (other than those listed on Schedule 4.11.2(i) hereto), or other lien, security interest, or encumbrance, lease, sublease, or right of occupancy, except for: (i) minor matters (other than liens) which are not substantial in character and which, individually, and in the aggregate, do not materially interfere with the existing use or operation of the Real Property, or any material part thereof, and do not materially adversely affect the value of the Real Property, or any part thereof; (ii) real property taxes, if any, affecting the Real Property only, not yet due and payable; (iii) the exceptions set forth in Schedule 4.11.2(i) hereto; and (iv) the state of facts shown on the survey listed in Schedule 4.11.2(ii) hereto, as of the date of such survey so listed. None of the improvements erected on the Real Property encroach on adjoining property or public street except as shown on the aforesaid survey. 4.11.3 The only leasehold estates under which the Company is a lessee (or sublessee) of any real property or interest therein are as set forth in Schedule 4.11.1 (the "Leases"). True, correct and complete copies of the Leases as in effect on the date hereof have been delivered to Purchaser. The Company is in actual possession of the properties demised under the Leases and has good and indefeasible title to the leasehold estates conveyed under the Leases, free and clear of any mortgage, deed of trust, pledge, vendors' or other lien, security interest, sublease or right of occupancy. 4.11.4 All easements, rights of way or licenses material to the use or the operations of the Real Property or the quiet enjoyment of the leasehold estates and possession of the properties demised under the Leases are set forth on Schedule 4.11.4 and are in full force and effect, and each such easement, right of way and license is not affected by the transaction provided for in this Agreement (without the requirement for any consent or other action by or payment to any third party). The Company has the right of ingress and egress through a public road or street, to and from each parcel of Real Property and to and from the properties demised under the Leases. 4.11.5 The Real Property, the properties demised under the Leases and any other properties and assets owned, leased or used by the Company in connection with the operation of the Real Property or the properties demised under the Leases (including, without limitation, the walls, ceilings and other structural elements of any improvements erected on any part of the Real Property and the building systems such as heating, plumbing, ventilation, air conditioning and electrical) are, to the knowledge of the Stockholder, adequate and sufficient for the current operations of the Company and such properties now being used by the Company in its businesses and operations, whether leased or owned, are in reasonably good working order, repair and operating condition (ordinary wear and tear excepted), are without any material structural defects, and have been maintained in accordance with generally accepted industry practices. 4.11.6 To the knowledge of Stockholder, there is no pending or threatened proceeding for the taking or condemnation of all or any portion of the Real Property or the properties demised under the Leases or pending or threatened taking or condemnation proceeding which would result in a termination of any Lease. 4.12. Personal Property. Schedule 4.12 hereto sets forth an accurate summary of all material items of personal property (exclusive of inventory) owned or leased by the I.C. Business. Except as described in Schedule 4.12, no material shortage or damage exists for which the Company is liable to another in (i) any raw materials, supplies, work in process or finished goods owned by customers or suppliers of the Company and stored upon its premises or (ii) any other items of personal property owned by another. 4.13. Inventory. Schedule 4.13 hereto sets forth an accurate summary of all of the inventory of the I.C. Business as of December 31, 1998. The items described in Schedule 4.13 together with the assets listed in Schedules 4.11.1 and 4.12 constitute substantially all of the tangible assets used in the I.C. Business. The inventory summarized in Schedule 4.13 and all additions thereto acquired since December 31, 1998 and now on hand are in reasonably good condition, of a quantity and quality usable and saleable in the ordinary course of business and are adequate and appropriate for the I.C. Business as now conducted. Obsolete, discontinued, returned, damaged, overage or off-quality items do not constitute a material part of such inventory and are carried on the Financial Statements for the period ending December 31, 1998 at realizable market value. Finished goods in inventory conform to specifications, including without limitation all applicable governmental regulations, are free from defects and are marketable in their current condition. 4.14. Accounts Receivable. All accounts receivable shown on the Financial Statements as of December 31, 1998, or thereafter acquired by the I.C. Business have been collected or are current and payable within 90 days of issuance and are subject to no known counterclaims or setoffs. All such accounts receivable have been generated in the ordinary course of business and reflect a bona fide obligation for the payment of goods or services provided by the Company and have been or will be collected within 180 days of date of invoice therefor. 4.15. Material/Service Agreements; Other Contracts. (a) Schedule 4.15(a) sets forth as of February 8, 1999, a complete list with regard to the I.C. Business of (i) all bids, applications or proposals submitted by it to provide materials or services with a valuation of $25,000 or more per annum to any Person and for which the award, approval or selection is pending ("Material/Service Bids"), and (ii) all contracts or agreements for the provision of materials or services with a valuation of $25,000 or more per annum to which the Company is a party and which have not yet been performed in full ("Material/Service Agreements"). To the Stockholder's knowledge, all of such Material/Service Bids and Material/Service Agreements are fully performable by the Company in compliance with their terms. No grounds exist for the termination or cancellation for cause of any Material/Service Agreement by the other party thereto. Schedule 4.15(a) sets forth for each Material/Service Agreement: (i) the customer, (ii) the remaining revenue to be earned, and (iii) delivery dates. (b) Except as disclosed in Schedule 4.15(b) hereto other than as disclosed on Schedule 4.15(a), the Company, with respect to the I.C. Business, is not a party to or bound by any oral or written contracts, obligations or commitments with respect to any of the following: (i) contract, commitment or arrangement involving, in any one case, $20,000 or more; (ii) contract with a term of, or requiring performance, more than six months from its date; (iii) lease or lease purchase agreement, mortgage, conditional sale or title retention agreement, indenture, security agreement, credit agreement, pledge or option with respect to any property, real or personal (tangible or intangible), in any capacity; (iv) employment contracts, undertakings, understandings or arrangements; (v) contract or agreement with any labor union or other collective bargaining group; (vi) bonus, pension, savings, welfare, profit sharing, stock option, phantom stock, stock appreciation rights, retirement, commission, executive compensation, hospitalization, insurance or similar plan providing for employee benefits or any other arrangement providing for benefits for any former or current employees or for the remuneration, direct or indirect, of the directors, officers or employees of the Company ; (vii) note, loan, credit or financing agreement or other contract for money borrowed, and all related security agreements and collateral documents, including any agreement for any commitment for future loans, credit or financing; (viii) guarantees; (ix) contract or understanding regarding any capital expenditures in excess of $25,000; (x) agency (sales or otherwise), distribution, brokerage (including, without limitation, any brokerage or finder's agreement or arrangement with respect to any of the transactions contemplated by this Agreement) or advertising agreement; (xi) contract with investment bankers, accountants, attorneys, consultants or other independent contractors, including those relating to this Agreement; (xii) shareholder agreement or contract with the Stockholder (or family member thereof), director or officer of the Company or any Affiliate of such persons; (xiii) contract, commitment or arrangement which would restrain the Company from engaging or competing in any business; (xiv) contract, commitment or arrangement not made in the ordinary course of business involving an amount payable per annum of $25,000 or more or, in the aggregate, $200,000; and (xv) license (other than shrink wrap licenses relating to generally available software), franchise or royalty agreement. (c) The Stockholder has delivered or made available to the Purchaser correct and complete copies of all of the contracts, agreements and other documents listed in Schedules 4.15(a) and 4.15(b) hereto and all amendments thereto and any waivers currently in effect granted thereunder (the "Scheduled Contracts"). Except as specifically set forth on Schedules 4.15(a) and 4.15(b), the sale of the Stock to the Purchaser and the consummation of the other transactions contemplated by this Agreement are not a violation of or grounds for the modification or cancellation of any of the Scheduled Contracts or for the imposition of any penalty or security interests thereunder. To the Stockholder's knowledge, the Company enjoys good working relationships under all Scheduled Contracts, and no unresolved disputes are pending or, to the Stockholder's knowledge, threatened under or in respect of any such Scheduled Contracts. The consideration to be received or paid by the Company under all Scheduled Contracts have been determined in accordance with its established policies. The Company has no outstanding power of attorney other than routine power of attorney relating to representation before governmental agencies or given in connection with qualification to do business in another jurisdiction. Except as described in Schedules 4.15(a) and (b) hereto, all Scheduled Contracts described in such Schedules 4.15(a) and (b) are valid and enforceable against the Company, and to the Stockholder's knowledge against the other party or parties thereto, as the case may be, in accordance with their respective terms, except as the enforcement thereof may be subject to or limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors' rights generally now or hereafter in effect and subject to the application of equitable principles and the availability of equitable remedies; and there is not, under any of such Scheduled Contracts, any existing default by the Company, to the Stockholder's knowledge, by any other party, or, to the Stockholder's knowledge, any event which with notice, lapse of time, or both, would constitute a default and which would have a material adverse effect on the continued operation of the I.C. Business. 4.16. Intellectual Property. Schedule 4.16 hereto sets forth a true and complete list of all (i) trademarks, service marks and tradenames, and the federal, state and foreign registrations and applications thereof, (ii) patents and patent applications and extensions and renewals thereof, (iii) copyrights and copyright applications and renewals thereof, (iv) licenses held with respect to any trademark, service mark, trade name, patent or copyright (other than shrink-wrap licenses relating to generally available software), and (v) Trade Secrets of the I.C. Business (the "Intellectual Property"). All the Intellectual Property that is owned by the Company is owned free and clear of any and all licenses, liens, claims, security interests, charges or other encumbrances or restrictions of any kind, except as reflected on Schedule 4.16, and no licenses for the use of any of such rights have been granted by the Company to any third parties, except as reflected in Schedule 4.16 attached hereto. All of such rights are valid, enforceable and in good standing, and are sufficient and appropriate for the conduct of the I.C. Business as currently conducted or, to the Stockholder's knowledge, as contemplated in its plans for future activities. The sale of the Stock to the Purchaser and the consummation of the other transactions contemplated hereby will not adversely affect any rights in the Intellectual Property of the Company. To the Stockholder's knowledge, the operation of the I.C. Business does not infringe in any way on or conflict with any registered or unregistered patent, trademark, trade name, copyright, trade secret, contract, license or other right, of any person, and the Company does not license any such right from others except as set forth on Schedule 4.16. No claim is pending or, to the Stockholder's knowledge, threatened or has been made within the past five years, to the effect that any such infringement or conflict has occurred. No other Intellectual Property other than those owned or licensed by the Company are required by it for its I.C. Business as conducted prior to the date hereof. The Stockholder has no knowledge of any infringement by any third parties upon any of the Intellectual Property. True, correct and complete copies of all documentation describing or relating to the Intellectual Property other than Trade Secrets have been made available or delivered by the Stockholder to the Purchaser. 4.17. Insurance. Schedule 4.17 hereto contains a complete and correct list of all insurance policies maintained by the Company together with a schedule of required premiums under each such policy. The Stockholder has made available to the Purchaser complete and correct copies of all such policies together with all riders and amendments thereto. Such policies are in full force and effect, and all premiums due thereon have been paid. The Company has complied in all material respects with the provisions of such policies. No notice has been received canceling or threatening to cancel or refusing to renew any of such insurance. Except as set forth in Schedule 4.17, the rights of the insured under such policies will not be terminated or adversely affected by the Closing or the consummation of the other transactions contemplated hereby. To the Stockholder's knowledge, there is currently no basis for any insurance claim by the Company. The Company has not created any letters of credit or other funding obligation with respect to such policies. 4.18. Customer and Supplier Relationships. Attached as Schedule 4.18 is a complete and correct list of all current customers of the I.C. Business showing the sales to each for the year ended December 31, 1998 and of all suppliers whose sales to the Company amounted to more than $200,000 during such period showing the sales of each such supplier. With respect to any such customer or supplier or group of related customers or suppliers listed on Schedule 4.18, the Stockholder has no knowledge that any such customer, supplier or group of related customers or suppliers has terminated or expects to terminate a material portion of its normal business with the Company, other than as a result of general economic or industry conditions. 4.19. Employees. The Stockholder has furnished to Purchaser a true and complete list setting forth all of the employees and officers of the I.C. Business whose annual salary and bonus is in the aggregate $50,000 or more (listing each such person individually by name) with a description of their job designations, compensation, benefits (including severance pay and bonuses), outstanding loans to officers or employees and all understandings not in the ordinary course of business relating to terms and conditions of employment. Proper and accurate amounts have been withheld by the Company from its employees' compensation for all periods in full compliance with tax withholding provisions of applicable federal, state, local or foreign law. Proper and accurate federal, state, local and foreign returns have been filed by the Company 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 to be due and payable have been timely paid. 4.20. Labor Relations. There has been no violation of any federal, state or local statutes, laws, ordinances, rules, regulations, orders or directives with respect to the employment of individuals by, or the employment practices or work conditions of the Company or their respective terms and conditions of employment, wages and hours that could have a material adverse effect on the Company or the I.C. Business. The Company is not engaged in any unfair labor practice or other unlawful employment practice and there are no unfair labor practice charges or other employee related complaints against the Company pending or, to the Stockholder's knowledge, threatened before the National Labor Relations Board, the Equal Employment Opportunity Commission, the Occupational Safety and Health Review Commission, the Department of Labor, or any other federal, state, or local, or other governmental authority by or concerning the employees of the Company that could have a material adverse effect on the Company or the I.C. Business. No representation question, grievance or arbitration proceedings arising out of collective bargaining agreements covering employees of the Company exists or is pending or, to the Stockholder's knowledge, threatened respecting the employees of the Company. There is no work stoppage, strike, slowdown, lockout, picketing or other similar labor problem involving persons employed by the Company pending or, to the Stockholder's knowledge, threatened. There are no labor union contracts or collective bargaining agreements to which the Company is a party relating to any employee of the Company. 4.21. Benefit Plans. (a) Schedule 4.21(a) hereto sets forth a true and complete list of each "employee welfare benefit plan" (as defined in Section 3(1) of ERISA) maintained by the Company or to which the Company contributes or is required to contribute, including any multiemployer employee welfare benefit plan, on behalf of officers and employees of the Company (such multiemployer and other employee welfare benefit plans being hereinafter collectively referred to as the "Welfare Benefit Plans"). With respect to each Welfare Benefit Plan, all contributions or premiums due by, or attributable to the period ending on, the Closing Date have been paid. (b) Schedule 4.21(b) hereto sets forth a true and complete list of each "employee pension benefit plan" (as defined in Section 3(2) of ERISA) maintained by the Company or to which the Company contributes or is required to contribute, including any multiemployer employee pension benefit plan, on behalf of officers and employees of the Company (such multiemployer and other employee pension benefit plans being hereinafter collectively referred to as the "Pension Benefit Plans"). Except as set forth in Schedule 4.21(b). no Pension Benefit Plan is a "defined benefit plan" (as defined in Section 3(35) of ERISA). With respect to each Pension Benefit Plan, all contributions due by or attributable to the period ending on the Closing Date have been made or accrued on the Financial Statements and each Pension Benefit Plan has been fully funded without further liability to the Company in respect thereof. (c) Each Pension Benefit Plan, each Welfare Benefit Plan and each related trust agreement and annuity contract and insurance policy complies currently and has complied in the past, both as to form and operation, in all material respects with the provisions of (A) the Code in order to be tax qualified under the Code; (B) ERISA; and (C) all other applicable laws, rules and regulations; all necessary government approvals for the Pension Benefit Plans have been obtained; and favorable determination letters, copies of which have been made available to the Purchaser, as to the qualification under the Code of each of the Pension Benefit Plans, as amended, have been received from the Internal Revenue Service and no event has occurred or condition exists which would materially adversely affect such determination. (d) Each Welfare Benefit Plan and each Pension Benefit Plan has been administered to date in compliance with the requirements of the Code, ERISA and all other applicable laws and all reports required by any government agency with respect to each Welfare Benefit Plan and each Pension Benefit Plan have been timely filed. (e) Neither the Company nor any plan fiduciary of any Welfare Benefit Plan or Pension Benefit Plan has engaged in any transaction in violation of Section 406 of ERISA or any "prohibited transaction" (as described in Section 4975(c) of the Code). (f) Schedule 4.21(f) lists each deferred compensation plan, bonus plan, employee stock purchase plan and any other employee benefit plan, agreement, arrangement or commitment not required under a previous subsection to be listed on Schedule 4.21(a) or 4.21(b) maintained by the Company or an Affiliate with respect to the compensation of any of the Company's employees. (g) There are no actions, suits or claims (other than routine claims for benefits) pending or which could reasonably be expected to be asserted against the Company in connection with, or against, any Pension Benefit Plan or Welfare Benefit Plan, and there are no civil or criminal actions pending or, to the Stockholder's knowledge, threatened against any fiduciary, Pension Benefit Plan or Welfare Benefit Plan with respect to such Plans. (h) All Welfare Benefit Plans, Pension Benefit Plans, related trust agreements or annuity contracts (or any other funding instruments), and all plans, agreements, arrangements and commitments referred to in subsection (f) of this Section are legally valid and binding and in full force and effect. 4.22. Litigation; Compliance; Permits. Except as disclosed in Schedule 4.22 hereto, there are no actions, suits, proceedings, arbitrations or governmental investigations pending, or, to the Stockholder's or Company's knowledge, threatened against, by or affecting the Company in which, individually or in the aggregate, an unfavorable determination could materially affect the business of the Company or its prospects, earnings or condition (financial or otherwise) or any of its assets or result in any material liability on the part of the Company or prevent, hinder or delay the execution and performance of this Agreement or any of the transactions contemplated hereby, or could declare this Agreement unlawful or cause the rescission of any of the transactions hereunder, or require the Purchaser to divest itself of the Stock; nor has any such suit been pending within the two years prior to the date hereof. The Company has not been charged with or received notice of any violation of any applicable federal, state, local or foreign law, rule, regulation, ordinance, order or decree relating to it, or the operation of its business, and the Stockholder and the Company are not aware of any threatened claim of such violation (including any investigation) or any basis therefor. Schedule 4.22 sets forth a list of all actions, suits, proceedings, arbitrations or governmental investigations pending, or, to the best of Stockholder's knowledge, threatened against, by or affecting the Company. The Company has complied in all material respects with all laws, rules, regulations, ordinances, orders, judgments, decrees, writs, injunctions, building codes, safety, fire and health approvals, certificates of occupancy or other governmental restrictions applicable to them, their assets, employees and employment practices. The Company has all material governmental licenses, permits, approvals or other authorizations required for the conduct of its business as now conducted, all of which are in full force and effect and all of which are listed on Schedule 4.22 hereto; there is no action pending or, to the knowledge of the Stockholder, threatened, to terminate any rights under any such governmental licenses, permits or authorizations; and except as disclosed on Schedule 4.22 at the Closing, none of such licenses, permits, approvals and authorizations will be adversely affected by the sale of the Stock to the Purchaser or the consummation of the other transactions contemplated by this Agreement. 4.23. Environmental Compliance. Except as set forth in Schedule 4.23, (i) all of the assets and properties owned, leased or operated by the Company are in material compliance with all Environmental Laws and are not subject to any pending or, to the knowledge of the Stockholder or the Company, threatened Environmental Actions; (ii) none of the assets and properties which have been or are currently owned, leased or operated by the Company have been used while owned, leased or operated by the Company for the generation, storage, manufacture, use, transportation, disposal or treatment of Hazardous Substances in violation of Environmental Laws; (iii) there has been no Hazardous Discharge on or from any of the assets and properties currently or formerly owned, leased or operated by the Company prior to or during such ownership, leasing or operation; (iv) there are no outstanding or, to the Stockholder's knowledge, threatened Environmental Actions against the Company or, to the Stockholder's knowledge, any of the owners or operators of any facilities that may have received solid waste or Hazardous Substances from any of the assets, former assets and properties currently or formerly owned, leased or operated by the Company; and (v) the Company has not owned, possessed or arranged for the transportation of Hazardous Substances at any site where it has performed remediation services. No employee or other person has ever made a claim or demand against the Company based on alleged damage to health caused by any Hazardous Substance. All services performed by the Company, including, without limitation, remediation activities, were and are in full compliance with all Environmental Laws and provide no basis for an Environmental Action against the Company or any other Person or any other claim that such services were not properly performed. 4.24. Corporate Records. The copy of the certificate of incorporation of the Company, and all amendments thereof to date, certified by the Secretary of State of their respective jurisdictions of incorporation and of the by-laws of the Company, as amended to date, certified by the Secretary or an Assistant Secretary of the Company, as applicable, all under a date not more than five (5) days prior to the Closing Date which have been or will be delivered to the Purchaser are complete and correct, and the minute books of the Company correctly reflect all material corporate actions taken at all meetings of directors (including committees thereof) and the stockholders. The stock transfer books and stock ledgers are complete and correct and correctly reflect all issuances and transfers of the capital stock of the Company. 4.25. Bank Accounts; Power of Attorney. Schedule 4.25 hereto correctly sets forth: (i) a list of all banks in which the Company has an account or safety deposit box, account number, purpose of such account or safety deposit box and the names of all persons authorized to draw thereon or have access thereto; and (ii) the names of all persons holding powers of attorney from the Company and a description of the power of attorney. 4.26. Warranties. Except as described in Schedule 4.26 annexed hereto, during the past three years the Company has not given any written warranties with respect to any of its I.C. Business products or services, and except as set forth in such Schedule 4.26, in the last three years no claim for breach of any such written warranty or any implied warranty with respect to such I.C. products or services has been made, or to the knowledge of the Stockholder or the Company, is threatened. Returns and repairs in respect of the Company's products for each of the three (3) calendar years preceding the date of this Agreement are listed in Schedule 4.26, and Schedule 4.26 sets forth all such separate returns and repairs in excess of $25,000 during such three (3) year period. Schedule 4.26 also sets forth a description of all claims for personal injury or property damage or similar claims for I.C. Business product liability or arising from services provided by the I.C. Business which have been made against the Company during the past three years. 4.27. Disclosure. As used in this Agreement the term "to the Stockholder's knowledge" or "to the best of the Stockholder's knowledge" means the actual knowledge of the Stockholder or any executive officer or director of the Company . 4.28. Y2K Representation. (a) For purposes of this Agreement, "Year 2000 Compliant" shall mean that: (i) the occurrence in or use by computer programs of dates before, on or after January 1, 2000 will not adversely affect the performance of such programs with respect to date-dependent data, computations, output, or other functions (including, without limitation, calculating, comparing and sequencing); (ii) such programs will not abnormally end or provide invalid or incorrect results as a result of datedependent data; and (iii) such programs can accurately recognize, manage, accommodate and manipulate date-dependent data, including, without limitation, single and multi-century formulas and leap years. (b) The Company's products do not contain any computer programs. The Company's key financial and operational computer programs have been reviewed and, where required, detailed plans have been developed and have been and are being implemented on a schedule intended to permit the Company's computer programs to be Year 2000 Compliant. Set forth on Schedule 4.28 is a summary of such plans and schedule. (c) Except as disclosed on Schedule 4.28, the Company has not received any communications from any of its suppliers or customers relating to the possibility that any of their computer programs (including those contained in any of their products) are not or will not be Year 2000 Compliant. (d) Except as disclosed on Schedule 4.28, the Company has not given any warranties or undertakings to any of its customers to the effect that the Company or any of its computer programs (including those contained in any of is products) are Year 2000 Compliant. (e) Notwithstanding the foregoing or any other provision of this Agreement, Stockholder makes no representation or warranty about whether any of the Company's computer programs are Year 2000 Compliant and Stockholder shall have no liability or obligation to Purchaser or any other person in the event any such programs are determined not to be Year 2000 Compliant. 4.29 Foreign Corrupt Practices Act. The Company has not made, offered or agreed to offer anything of value to any government official, political party or candidate for government office nor has it taken any action which would cause the Company to be in violation of the Foreign Corrupt Practices Act of 1977 or any similar law of any foreign jurisdiction or the United States. 5. Representations and Warranties of Purchaser. The Purchaser represents and warrants to the Stockholder and the Company on the date hereof and on the Closing Date as follows: 5.1. Corporate Status. The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with full corporate power and authority to carry on its business as now conducted. 5.2. Authorization of Agreements. The Purchaser has the power and authority to execute and deliver this Agreement and to carry out its obligations hereunder. The execution, delivery and performance by the Purchaser of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Purchaser. This Agreement has been duly executed and delivered by the Purchaser and constitutes the legal, valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization and similar laws of general application relating to or affecting the rights and remedies of creditors. 5.3 Purchase of Stock for Investment. Purchaser represents that it is acquiring the Stock for its own account for investment and not with a view to or for sale in connection therewith, any distribution thereof, nor with any present intention of distributing or selling the same. 5.4 No Conflicts. The execution, delivery and performance of this Agreement, any other agreement or document contemplated herein and the consummation of all of the transactions contemplated hereby and thereby: (i) do not and will not require the consent, waiver, approval, license, designation or authorization of, or declaration with, any Person or court to which the Purchaser is subject or any governmental authority or agency; and (ii) do not and will not, with or without the giving of notice or the passage of time or both, violate or conflict with or result in a material breach or termination of any provision of, or constitute a material default under, or accelerate or permit the acceleration of the performance required by the terms of, or result in the creation of any mortgage, security interest, claim, lien, charge or other material encumbrance upon any of the material assets of the Purchaser pursuant to, or otherwise give rise to any liability or obligation under, the certificate of incorporation or By-laws of the Purchaser, any material agreement, mortgage, deed of trust, indenture, license, permit or any other material agreement or instrument or any order, judgment, decree, statute or regulation to which the Purchaser is a party or by which the Purchaser or any of its assets may be bound, which individually or in the aggregate could have a material adverse effect upon the Purchaser; and (iii) will not cause the termination of any such agreement or instrument, or in any way affect or violate the terms and conditions of, cause the cancellation, modification, revocation or suspension of, any rights of the Purchaser, except with respect to clauses (i), (ii) and (iii) above, such breach or breaches of the representations contained therein which individually or in the aggregate would not have a material adverse effect upon the Purchaser. 5.5 Litigation. Except as disclosed in Schedule 5.5 hereto, there are no actions, suits, proceedings, arbitrations or governmental investigations pending, or, to the Purchaser's knowledge, threatened against, by or affecting the Purchaser in which, individually or in the aggregate, an unfavorable determination could prevent, hinder or delay the execution and performance of this Agreement or any of the transactions contemplated hereby, or could declare this Agreement unlawful or cause the rescission of any of the transactions hereunder, or require the Purchaser to divest itself of the Stock; nor has any such suit been pending within the two years prior to the date hereof. 6. Covenants. 6.1. Consents. The Stockholder and the Company shall use their best efforts to obtain at the earliest practicable date, by instruments in form and substance reasonably satisfactory to the Purchaser, all consents and approvals to the sale of the Stock to the Purchaser, if any, required by any governmental entity or under any of the Scheduled Contracts. 6.2. Expenses. The Purchaser and the Stockholder shall bear their own respective expenses incurred in connection with this Agreement and the transaction contemplated hereby and in connection with all obligations required to be performed by each of them under this Agreement. The Company shall not pay any such expenses of the Stockholder or the Company in connection herewith. 6.3. Resignations of Directors and Officers. The Stockholder shall provide to the Purchaser written resignations effective as of the Closing Date of such directors, officers, trustees and bank signatories of the Company as the Purchaser may request prior to the Closing Date. In the event that the Purchaser requests any bank signatory or trustee resignations, the Stockholder shall cause to be delivered to Purchaser written instructions to each bank at which the Company has an account or credit facility or at which the Company rents a safe deposit box informing such bank of the said resignations and revoking the authority of said persons to act with respect to said account, credit facility or trust and to have access to said safe deposit box. The Stockholder and the Company shall also cause to be delivered to Purchaser effective the Closing Date the written surrender by all persons holding powers of attorney from the Company of their authority and power to act under such powers of attorney. 6.4. Minute Books, Stock Books and Corporate Records. The complete and correct minute books, certificate of incorporation, by-laws, stock certificate and transfer books, stock ledgers, financial and other corporate records and the corporate seal of the Company shall be delivered to the Purchaser by the Stockholder on or before the Closing Date. 6.5. Taxes. The Stockholder shall pay any federal, state or local sales, transfer or stamp taxes payable in connection with the sale and transfer of the Stock pursuant to this Agreement, including any sales or transfer taxed applicable to the Real Property. 6.6. No Section 338(h)(10) Election. Neither the Seller nor Purchaser shall make an election pursuant to Section 338(h) (10) of the Internal Revenue Code with respect to the Company. 6.7. Access to Books and Records of the Company. After the Closing Date, the Purchaser shall permit the Stockholder and the representatives of the Stockholder reasonable access, at reasonable intervals, during normal business hours and in a manner so as not to interfere with the normal business operations of the Company, to relevant books, records (including tax records), contracts and documents of or pertaining to the Company in connection with the preparation of the Closing Balance Sheet as well as tax audits and investigations of Stockholder conducted by a governmental authority relating to periods of time prior to the Closing Date. The Stockholder will keep strictly confidential all such information which it receives from the Company in the course of the tax reviews contemplated by this Section and will not use any such information except in connection with tax audits and investigations of Stockholder conducted by a governmental authority relating to periods of time prior to the Closing Date. 6.8 December 31, 1998 Financials. The Stockholder will furnish Purchaser with the December 31, 1998 financial statements of the I.C. Business as audited by Pricewaterhouse promptly after Stockholder's receipt thereof but no later than February 15, 1999. 6.9 Right of First Refusal. The Stockholder will not, at any time prior to the date sixty (60) days following the expiration of the Facilities Lease and Services Agreement and Transitional Service Agreement (and any extensions thereof), sell any material asset used in connection with the operation of the Circuit Card Assembly Business without first giving written notice to the Purchaser (the "Notice of Sale"). The Notice of Sale shall include the substantially complete terms of the proposed sale. For a period of thirty (30) days after receipt by Purchaser of the Notice of Sale, Purchaser will have the right to give written notice to Stockholder of Purchaser's exercise of Purchaser's right to purchase such asset used in connection with the operation of the Circuit Card Assembly Business on the same terms, price and conditions as set forth in the Notice of Sale. If Purchaser exercises such right in the manner and within the time period set forth above, then Purchaser shall purchase such asset within fifteen (15) days of the date on which the Purchaser delivers its notice of exercise to Stockholder. If the Stockholder does not receive written notice of Purchaser's exercise of such right to purchase within such thirty (30) day period, there shall be a conclusive presumption that Purchaser has elected not to exercise such rights and Stockholder may sell such asset used in connection with the operation of the Circuit Card Assembly Business on the same terms as set forth in the Notice of Sale. If the sale is not consummated within 120 days of the date of the Notice of Sale, then Purchaser's right of first refusal shall reapply to such transaction. 6.10 Scholar Award Plan. Stockholder will reimburse Company for all awards made by the Company to those employees who complete the requirements of its scholar award plan within six (6) months after Closing. 6.11 COBRA. (a) For a period of eighteen (18) months after Closing, the Stockholder, upon the request of the Company, will furnish COBRA benefits to those employees of the I.C. Business who as of the Closing are, or during the three (3) month period after the Closing become, entitled to such benefits, and the Company shall reimburse Stockholder for its full costs therefor plus an amount equal to permitted statutory fees to the extent not collected by the Stockholder from such employees. (b) For a period of up to three (3) months after Closing, the Stockholder, upon the request of the Company, will provide to employees of the I.C. Business "UTC Choice" benefits (including medical, dental, life, long- and short-term disability, medical and dependent reimbursement). The Purchaser will cause the Company to reimburse Stockholder for the cost to Stockholder of providing such benefits during such period, including, without limitation, the actual cost of claims incurred during the period of coverage, plus applicable third party administrators' fees to the extent the Stockholder is self-insured. 6.12 Accounts Receivable. (a) From and after the date hereof, Stockholder will pay to the Company all proceeds of accounts receivable and other collections of the I.C. Business which are deposited in Stockholder's or its Affiliates' lockbox within five (5) business days after deposit thereof. (b) All accounts receivable of the Company which constitute payables by Stockholder or its Affiliates will be paid or caused to be paid to the Company by Stockholder within thirty (30) days after invoice therefor. (c) Payments not made pursuant to (a) and (b) above shall bear interest at the rate of twelve (12%) percent per annum. (d) The Purchaser will cause the Company to assign to Stockholder those uncollected accounts receivable referred to in Section 4.14 hereof which have been paid by Stockholder (instead of such account debtor) to the Company. 6.13 Employee Benefit Plans. For a period of one (1) year following the Closing, Purchaser agrees to establish, maintain and provide retirement and welfare benefit arrangements for the benefit of the employees of the I.C. Business, including, without limitation, a 401(k) defined contribution plan, medical and dental plans, life insurance and disability benefits. Purchaser will cause service rendered by such employees prior to the Closing Date to be taken into account for vesting, accrual and eligibility purposes under employee benefit plans of Purchaser as to which such employees may benefit, to the same extent as such service was taken into account under the corresponding plans of the Company, or its Affiliates, as the case may be, for those purposes. 7. Closing Certificates. 7.1 The Stockholder shall deliver to the Purchaser at Closing a certificate dated the Closing Date to the effect that (i) the representations and warranties contained in Section 4 hereof are true at and as of the date hereof, except as affected by the transactions contemplated hereby, and (ii) the Stockholder has duly performed and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied with by him on the Closing Date. 7.2 The Purchaser shall deliver to the Stockholder at Closing a certificate dated the Closing Date to the effect that (i) the representations and warranties contained in Section 5 hereof are true at and as of the date hereof and shall be repeated and shall be true at and as of the date hereof, except as affected by the transactions contemplated hereby, and (ii) the Purchaser has duly performed and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied with by it on the Closing Date. 8. Competition. 8.1 Covenant Not to Compete. (a) In furtherance of the sale of the Stock and the business of the Company, for a period commencing on the Closing Date and ending five (5) years thereafter, the Stockholder shall not, directly or indirectly (a) manufacture or sell any Products, or participate in any business which offers or sells any Products, which compete in any geographic area of the Territory (as defined in Section 8.1(d) and (e) below) with the Products offered or sold by the Company, or (b) induce or attempt to induce directly or indirectly any customer of the Company to cease doing business in whole or in part with the Company or solicit the business of any such customer for any products which compete with any of the Products offered or sold by the Company. Participation in a business shall include, but not be limited to, serving as a director, officer, employee, agent or representative or having a direct and indirect interest in the business as a stockholder, partner, joint venturer or any other financial interest; provided, however, that the following shall not be a violation of the foregoing covenant: (i) the ownership by the Stockholder of not more than two (2%) percent of the outstanding shares of stock of any such business listed on any national stock exchange or listed and actively traded on NASDAQ; nor (ii) the design, development, or manufacture of integrated circuits or circuit card assemblies for the Stockholder's internal manufacturing or assembly requirements for products that do not directly or indirectly compete with the Products sold or offered for sale by the Company. (b) For a period commencing on the Closing Date and ending at the earlier of (i), as to all employees, three (3) years thereafter or (ii), as to any particular employee, three (3) months after termination of employment of such employee by the Company, the Stockholder shall not, either on its own account or for any person, firm or company, hire, solicit, interfere with, or endeavor to cause any employee of the Company to leave his employment or induce or attempt to induce any such employee to breach his employment agreement with the Company without the written consent of the Company. Such consent will not be unreasonably withheld provided that such consent may be conditioned upon repayment to the Purchaser or the Company of any severance benefits paid by either of them to such employee after the Closing. (c) For a period commencing on the Closing Date and ending at the earlier of (i), as to all employees, the expiration of the Facilities Lease and Services Agreement and the Transitional Service Agreement (including any extensions or renewal option periods exercised thereunder), or (ii) as to any particular employee, three (3) months after termination of employment of such an employee by the Stockholder's Circuit Card Assembly Business conducted at the Company's facility, Purchaser shall not, and shall cause the Company not to, hire, solicit, interfere with, or endeavor to cause any such employee to leave his employment or induce or attempt to induce any such employee to breach his employment with the Stockholder without the written consent of the Stockholder. Such consent will not be unreasonably withheld provided that such consent may be conditioned upon repayment to the Stockholder of any severance benefits paid to such employee after the Closing. (d) For purposes of Section 8.1(a), "Territory" shall mean the United States and Canada and any other state, province or place where the Company has engaged in business in any material respect during the three (3) years preceding the date hereof, and all references to the Stockholder shall be deemed to include all subsidiaries and Affiliates of the Stockholder. (e) The Stockholder acknowledges that the geographic scope of the restrictions imposed on the Stockholder hereunder are fair and reasonable in the circumstances and are necessary and fundamental to the protection of the business of the Company. 8.2. Equitable Relief. The Stockholder acknowledges that the covenants contained in this Section 8 were a material and necessary inducement for the Purchaser to agree to the transactions contemplated hereby, that the Stockholder realized significant monetary benefit from these transactions, that violation of any of the covenants contained in this Section 8 will cause irreparable and continuing damage to the Purchaser, that without the necessity of posting a bond, the Purchaser shall be entitled to injunctive or other equitable relief from any court of competent jurisdiction restraining any further violation of such covenants and that such injunctive relief shall be cumulative and in addition to any other rights or remedies to which the Purchaser may be entitled. The covenants in this Section 8 shall run in favor of the Company and its successors and assigns. 8.3. Severability. In case any one or more of the terms or provisions contained in this Section 8 shall for any reason be held invalid, illegal or unenforceable, such invalidity, illegality or unenforceability shall not affect any other terms or provisions hereof, but such term or provision shall be deemed modified or deleted as or to the extent required by applicable law, and such modification or deletion shall not affect the validity of the other terms or provisions of this Section 8. In addition, if any one or more of the restrictions contained in this Section 8 shall for any reason be held to be unreasonable with regard to time, duration, geographic scope or activity, the parties contemplate and hereby agree that such restrictions shall be modified and shall be enforced to the full extent compatible with applicable law. 9. Definitions; Miscellaneous. 9.1. Definition of Certain Terms. As used herein, the following terms shall have the following meanings: Affiliate: with respect to any Person, any Person which, directly or indirectly, controls, is controlled by, or is under common control with, such Person. The term "control" (including, with correlative meaning, the terms "controlled by" and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. Agreement: this Stock Purchase Agreement. Assignment and Assumption Agreement: the Agreement dated as of February 25, 1999 between the Company and Hamilton Standard Electronics, Inc., executed immediately prior to the Closing. Assignment and License-Back Agreement: as defined in Section 3.3(a)(iv). Circuit Card Assembly Business: the assembly and testing of electronic circuit cards for the benefit of Hamilton Standard, to be used in Hamilton Standard products. Closing: as defined in Section 3.1. Closing Balance Sheet: as defined in Section 2.2(b). Closing Date: as defined in Section 3.1. Closing Net Book Value: as defined in Section 2.2(c). Company: as defined in the Preamble to this Agreement. Code: the Internal Revenue Code of 1986, as amended, together with the U.S. Treasury rulings and regulations promulgated thereunder. Employee Benefit Plan: any pension, retirement, profit-sharing, deferred compensation, bonus or other incentive plan, or other employee benefit program, arrangement, agreement or understanding, or medical, vision, dental or other health plan, or life insurance or disability plan, or any other employee benefit plan, including, without limitation, any Employee benefit plan" as defined in Section 3(3) of ERISA to which the Company contributes or is a party or is bound or under which it may have liability and which employees or former employees of the Company (or their beneficiaries) are eligible to participate or derive a benefit. Environmental Actions: refers to any complaint, summons, citation, notice, directive, order, claim, litigation, investigation, proceeding, judgment, letter or other communication from any federal, state, local or municipal agency, department, bureau, office or other authority or any third party involving a Hazardous Discharge or any violation of any order, permit or Environmental laws. Environmental Laws: as defined in the definition of Hazardous Substances. ERISA: the Employee Retirement Income Security Act of 1974, as amended. Excluded Assets: all fixtures, equipment, materials, inventory, personal property, intellectual property, interests, rights, contracts, records, reports, permits and other tangible and intangible assets of every kind and description, including, without limitation, all rights with respect to the rights and services of employees of the Company, that relate solely to the conduct by the Company of the Circuit Card Assembly Business, including without limitation, the assets listed on Schedule 9.1, the inventory of silicon wafers which are identified for and uniquely suitable for the design and manufacture of products to be incorporated into Hamilton Standard products and all intellectual property and other data necessary therefor. Excluded Liabilities: means (i) all liabilities or obligations of every kind and description of the Company to the extent that they relate to or are associated with the Excluded Assets or the Circuit Card Assembly Business; (ii) all liabilities in respect of Employee Benefit Plans for retirees and long- and short-term disability income benefits for employees sustaining such disabilities prior to the Closing Date; (iii) all liabilities in respect of defined benefit plans, the UTC Employees Savings Plan, the UTC Voluntary Early Retirement Plan, and the UTC Medical and Life Insurance Benefit Plan; (iv) all liabilities for federal, state, local, income and other taxes arising from the assignment and transfer by the Company to Hamilton Standard Electronics, Inc. ("HSE") of the Excluded Assets and HSE's assumption of certain liabilities, more particularly described in the Assignment and Assumption Agreement; (v) all liabilities arising from the distribution of the shares of capital stock of HSE to the Stockholder; (vi) all liabilities arising from claims made by employees of the Circuit Card Assembly Business for termination, severance and similar payments or compensation and for other employee benefits and compensation; (vii) Workmens' Compensation claims arising from events occurring prior to the Closing Date; (viii) employee and covered dependents medical, dental and hospitalization claims based upon illness or other event giving rise to such claims which occurred prior to the Closing Date; (ix) claims for extended medical benefits for existing early retirees; and (x) all liability for claims of Beverly Martinez for wrongful termination of employment. Facilities Lease and Services Agreement: as defined in Section 3.3(a)(ii). Financial Statements: the financial statements of the I.C. Business as at, and for the year ended December 31, 1997, audited by Pricewaterhouse, certified public accountants for the Company, and the year ended December 31, 1998, unaudited, which financial statements include, in each case, a balance sheet, a statement of earnings and accumulated earnings, and a statement of cash flows. Hazardous Discharge: means any releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, disposing or dumping of Hazardous Substances. Hazardous Substance: means any substance, compound, chemical or element which is (i) defined as a hazardous substance, hazardous material, toxic substance, hazardous waste, pollutant or contaminant under any Environmental law, or (ii) a petroleum hydrocarbon, including crude oil or any fraction thereof, (iii) hazardous, toxic, corrosive, flammable, explosive, infectious, radioactive, carcinogenic or a reproductive toxicant, or (iv) regulated pursuant to any Environmental Laws. The term "Environmental Law" means each and every applicable federal, state, local and foreign law, statute, ordinance, regulation, rule, judicial or administrative order or decree, permit license, approval, authorization or similar requirement of each and every federal, and pertinent state, local and foreign governmental agency or other governmental authority, pertaining to the protection of human health and safety or the environment including, without limitation, the Comprehensive Environmental Response Compensation and Liability Act (CERCLA), 42 U.S.C. 9601 et set, the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. 6901 et seq., the Toxic Substances Control Act (TSCA), 15 U.S.C. 2601 et seq., the Water Pollution Control Act (FWPCA), 33 U.S.C. 1251 et seq., and the Occupational Safety and Health Act (OSHA), 42 U.S.C. 655. The term "Hazardous Substance" shall also include asbestos-containing materials and manufactured products containing Hazardous Substances. Hewlett-Packard Indemnification Agreement: means the Indemnification Agreement effective August 11, 1995 among Hewlett-Packard Company and United Technologies Corporation, acting through its Hamilton Standard division, and its affiliates, United Technologies Microelectronics Center, Inc., Hamilton Standard Commercial Aircraft Electronics, Inc. and CTU of Delaware, formerly known as Mostek Corporation. I.C. Business: means all of the properties, assets, rights and interests of the Company of every kind and description, tangible and intangible, real, personal and mixed, including the Real Property, and wherever located, less the Excluded Assets; and all liabilities of every kind and description of the Company other than the Excluded Liabilities. Indemnified Party: a party hereto or other Person designated herein entitled to indemnification under this Agreement. Indemnifying Party: a party hereto required to provide indemnification under this Agreement. Intellectual Property: as defined in Section 4.16. Leases: as defined in Section 4.11.3. Long Term Agreement: as defined in Section3.3(a)(iii). Material/Service Agreements: as defined in Section 4.15(a). Material/Service Bids: as defined in Section 4.15(a). NBV Loss: as defined in Section 10.5(a). Non-NBV Loss: as defined in Section 10.5(b). Notice of Sale: as defined in Section 6.9. Pension Benefit Plans: as defined in Section 4.21(b). Person: any natural person, firm, partnership, association, corporation, trust, public body or government. Plan: each Pension Benefit Plan and each Welfare Benefit Plan. Products: application specific integrated circuits and communication data bus integrated circuits; standard integrated circuit products; and circuit card products designed by the Company for applications other than Hamilton Standard products; in each case manufactured by the Company during the three (3) year period preceding the Closing Date. Purchaser: as defined in the Preamble to this Agreement. Purchase Price: as defined in Section 2.2(a). Real Property: as defined in Section 4.11.2. Rockwell Agreement: The Asset Purchase Agreement dated July 14, 1995 between United Technology Corporation, for its wholly-owned subsidiary United Technology Microelectronics Center, Inc., and Rockwell International Corporation, Telecommunications Business, for its wholly-owned subsidiary Rockwell Telecommunications Colorado Springs, Inc. Scheduled Contracts: as defined in Section 4.15(c). Stock: as defined in Section 1. Stockholder: as defined in the Preamble to this Agreement. Taxes: as defined in Section 4.7. Territory: as defined in Section 8.1(d). Trade Secret: any information used by the Company in its business, including a formula, pattern, compilation, program, device, method, technique, or process, that has a material independent economic value, actual or potential, not being generally known to, and not being readily ascertainable by proper means by other Persons who can obtain economic value by its` disclosure or use. Unadjusted Purchase Price: as defined in Section 2.1. Welfare Benefit Plans: as defined in Section 4.21(a). Year 2000 Compliant: as defined in Section 4.28. 10. Survival of Representations & Warranties; Indemnification. 10.1 Survival of Representations and Warranties. Except as expressly provided in this Agreement, all representations and warranties made hereunder or pursuant hereto or in connection with the transactions contemplated hereby shall not terminate, but shall survive the Closing and continue in effect until the expiration of three (3) years following the Closing Date, at which time they shall expire; provided, however, that representations and warranties under Sections 4.4 and 4.7, and the first sentence of 4.10 shall remain in effect until the expiration of the applicable statute of limitations, if any, and the representations and warranties under Section 4.23 shall continue in effect until the expiration of five (5) years following the Closing Date, at which time they shall expire; and further provided, that any such representation or warranty as to which a claim shall have been asserted during such survival period shall continue in effect until such time as such claim shall have been resolved or settled. Notice of such claim shall specify the nature thereof in reasonable detail and the Indemnified Party shall give reasonable access to any documents or properties within the control of the Indemnified Party as may be useful in the investigation of the basis of such claim. 10.2 Survival of Covenants and Agreements. Except as expressly provided in this Agreement, all covenants and agreements made hereunder or pursuant hereto or in connection with the transactions contemplated hereby shall not terminate but shall survive the Closing without limitation, except as provided by law. 10.3 Indemnification by Stockholder. Stockholder agrees to indemnify and hold harmless Purchaser, its affiliates, their respective officers, directors and principal stockholders and their respective successors and assigns on an after-tax benefit basis, from and against any claims, liabilities, losses, damages or expenses (any one such item being herein called a "Loss" and all such items being herein collectively called "Losses") which are caused by or arise out of: (i) any breach or default in the performance by Stockholder of any covenant or agreement of the Stockholder contained herein or in any certificate delivered pursuant hereto; (ii) any breach of warranty or representation made by Stockholder contained herein or in any certificate delivered pursuant hereto; (iii) the Excluded Liabilities; (iv) the Company's indemnification obligations set forth in Section 15(B)(1) of the Rockwell Agreement; (v) the occurrence, release or threat of release of "Contamination" or "Contaminants", at, on, under or from the "Property" as a result of Hewlett-Packard's activities or operations at the "HP Facility", as such terms are defined in the "Hewlett Packard Indemnification Agreement"; and (vi) any and all actions, suits, proceedings, claims, demands, judgments, costs and expenses (including reasonable legal fees) incident to any of the foregoing; provided that the Stockholder receives written notice of the Purchaser's claim in respect of such Losses, specifying in reasonable detail the basis therefor, on or before the last day of the applicable survival period specified in Section 10.1, or, in the case of the indemnities set forth in romanettes (iv) and (v) above, on or before the fifth anniversary of the Closing Date; and provided further, that no item shall be a Loss to the extent that (i) such item was reserved on the Closing Balance Sheet, or (ii) such item is taken into consideration in the calculation of Closing Net Book Value. 10.4 Indemnification by Purchaser. Purchaser agrees to indemnify and hold harmless Stockholder and the Company, its affiliates, its respective officers, directors and principal stockholders and its respective successors and assigns on an after-tax benefit basis, from and against any claims, liabilities, losses, damages or expenses (any one such item being herein called a "Loss" and all such items being herein collectively called "Losses") which are caused by or arise out of: (i) any breach or default in the performance by Purchaser of any covenant or agreement of the Purchaser contained herein or in any certificate delivered pursuant hereto; (ii) any breach of warranty or representation made by Purchaser contained herein or in any certificate delivered pursuant hereto; and (iii) any and all actions, suits, proceedings, claims, demands, judgments, costs and expenses (including reasonable legal fees) incident to any of the foregoing; provided that the Purchaser receives written notice of the Stockholder's claim in respect of such Losses, specifying in reasonable detail the basis therefor, on or before the last day of the applicable survival period specified in Section 10.1. 10.5 Indemnification Thresholds and Cap. (a) Notwithstanding anything contained in this Agreement to the contrary, no Indemnified Party shall be entitled to seek indemnification under this Section 10 in respect of any Loss arising out of the breach of any representation or warranty set forth in Section 4 hereof to the extent that, if it had been known and taken into consideration at the time of the preparation of the Closing Balance Sheet, the Loss would have been reflected in the calculation of the Closing Net Book Value (a "NBV Loss"), until such time as the aggregate amount of its present claim in respect to such NBV Loss against the Indemnifying Party plus all prior claims for NBV Losses exceeds the Deductible Amount (as defined below), at which time the Indemnified Party shall be entitled to receive the amount by which the amount of indemnification to which it is entitled in respect of all such present and prior claims for NBV Losses exceeds the Deductible Amount and shall be entitled to indemnification for the full amount of its damages for NBV Losses arising thereafter. The "Deductible Amount" shall mean the amount (if any) by which the Closing Net Book Value exceeds $27,200,000. (b) Notwithstanding anything contained in this Agreement to the contrary, no Indemnified Party shall be entitled to seek indemnification under this Section 10 in respect of any Loss arising out of the breach of any representation or warranty set forth in Section 4 hereof to the extent that such Loss is not a NBV Loss (a "Non-NBV Loss") until such time as the aggregate amount of its present claim in respect of such Non-NBV Loss against the Indemnifying Party plus all prior claims for Non-NBV Losses exceeds $200,000, at which time the Indemnified Party shall be entitled to receive the amount by which the amount of indemnification to which it is entitled in respect of all such present and prior claims for Non-NBV Losses exceeds $200,000 and shall be entitled to indemnification for the full amount of its damages for Non-NBV Losses thereafter. (c) Notwithstanding anything contained in this Agreement to the contrary, (i) the Stockholder shall not be required to indemnify the Purchaser from and after such time that the aggregate amount of the Purchaser's Losses for which the Stockholder has indemnified Purchaser exceeds Fifteen Million Dollars ($15,000,000), and (ii) the Purchaser shall not be required to indemnify the Stockholder from and after such time that the aggregate amount of the Stockholder's Losses for which the Purchaser has indemnified Stockholder exceeds Fifteen Million Dollars ($15,000,000). 10.6 Defense by Indemnifying Parties. (a) In the event any Indemnified Party is entitled to indemnification hereunder based upon a claim asserted by a third party, the Indemnifying Party shall be given prompt notice thereof, in reasonable detail. Subject to the proviso of Sections 10.3 and 10.4, the failure to so notify the Indemnifying Party shall not constitute a waiver of such claim but an Indemnified Party shall not be entitled to receive any indemnification with respect to any Loss that occurred as a result of the failure of such person to give such notice. The Indemnifying Party shall have the right (without prejudice to the right of any Indemnified Party to participate at its expense through counsel of its own choosing) to defend or prosecute such claim at its expense and through counsel of its own choosing if it gives written notice of its intention to do so not later than thirty (30) days following notice thereof by the Indemnified Party or such shorter time period as required so that the interests of the Indemnified Party would not be materially prejudiced as a result of its failure to have received such notice; provided, however, that if the defendants in any action shall include both an Indemnifying Party and an Indemnified Party and the Indemnified Party shall have reasonably concluded that counsel selected by the Indemnifying Party has a conflict of interest because of the availability of different or additional defenses to the Indemnified Party, the Indemnified Party shall have the right to select separate counsel to participate in the defense of such action on its behalf, at the expense of the Indemnifying Party. If the Indemnifying Party does not so choose to defend or prosecute any such claim asserted by a third party for which any Indemnified Party would be entitled to indemnification hereunder, then the Indemnified Party shall be entitled to recover from the Indemnifying Party, on a monthly basis, all of its attorneys' reasonable fees and other reasonable costs and expenses of litigation of any nature whatsoever incurred in the defense of such claim. If the Indemnifying Party assumes the defense of any such claim, the Indemnifying Party will hold the Indemnified Party harmless from and against any and all damages arising out of any settlement approved by such Indemnifying Party or any judgment in connection with such claim or litigation. Notwithstanding the assumption of the defense of any claim by the Indemnified Party pursuant to this Section 10.6(a), the Indemnifying Party shall have the right to approve the terms of any settlement of a claim (which approval shall not be unreasonably withheld). (b) The Indemnifying Party and the Indemnified Party shall cooperate in furnishing evidence and testimony and in any other manner which the other may reasonably request, and shall in all other respects have any obligation of good faith dealing, one to the other, so as not to unreasonably expose the other to an undue risk of loss. The Indemnified Party shall be entitled to reimbursement for out-of-pocket expenses reasonably incurred by it in connection with such cooperation. Except for fees and expenses for which indemnification is provided pursuant to Section 10.3 or 10.4 hereof, as the case may be, and as provided in the preceding sentence, each party shall bear its own fees and expenses incurred pursuant to this Section 10.6(b). 10.7 Remedies Exclusive. Subject to the last sentence of this Section 10.7, from and after the Closing Date, the rights and remedies under Sections 10.3 and 10.4 hereof shall be deemed to be exclusive of all other rights and remedies that would otherwise be available to the parties hereto. No course of dealing by either party shall operate as a waiver of such right or remedy. Notwithstanding the foregoing, each of the parties hereto shall have the right to enforce their respective rights hereunder by an action or actions for specific performance, injunction or other appropriate equitable remedies. 11. Miscellaneous. 11.1. Consent to Jurisdiction and Waivers. The Purchaser and the Stockholder each irrevocably consent that any legal action or proceeding against any of them under, arising out of or in any manner relating to, this Agreement or any other document delivered in connection herewith, may be brought in any court of the State of New York located within Nassau County or New York County or in the United States District Court for the Eastern or Southern District of New York. The Purchaser and the Stockholder by the execution and delivery of this Agreement, expressly and irrevocably consent and submit to the personal jurisdiction of any of such courts in any such action or proceeding. The Purchaser and the Stockholder further irrevocably consent to the service of any complaint, summons, notice or other process relating to any such action or proceeding by delivery thereof to it by hand or by any other manner provided for in Section 11.3. The Purchaser and the Stockholder hereby expressly and irrevocably waive any claim or defense in any such action or proceeding based on any alleged lack of personal jurisdiction, improper venue or forum non conveniens or any similar basis. Nothing in this Section shall affect or impair in any manner or to any extent the right of the Purchaser to commence legal proceedings or otherwise proceed against the Stockholder in any jurisdiction or to serve process in any manner permitted by law. 11.2. Severability. If any provision of this Agreement, and, in particular, if any provision of the covenant not to compete, shall be held or deemed to be or shall, in fact, be inoperative or unenforceable as applied in any particular case because it conflicts with any other provision or provisions hereof or any constitution or statute or rule of public policy, or for any other reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions herein contained invalid, inoperative, or unenforceable to any extent whatever. The invalidity of any one or more phrases, sentences, clauses, sections, or subsections of this Agreement shall not affect the remaining portions of this Agreement. 11.3. Notices. All notices, consents, requests, instructions, approvals and other communications provided for herein and all legal process in regard hereto shall be validly given, made or served, if in writing and delivered personally or sent by registered or certified mail (return receipt requested), postage prepaid, recognized national or international air courier or by facsimile transmission electronically confirmed: if to Purchaser: Aeroflex Incorporated 35 South Service Road Plainview, New York 11803 Attn.: Michael Gorin, President Fax: (516) 694-4823 Telephone: (516) 694-6700 with a copy to: Blau, Kramer, Wactlar & Lieberman, P.C. 100 Jericho Quadrangle Jericho, New York ll753 Attn.: Edward I. Kramer, Esq. Fax: (516) 822-4824 Telephone: (516) 822-4820 if to the Stockholder: United Technologies Corporation (Hamilton Standard Division) One Hamilton Road, M/S 1-3-BC27 Windsor Locks, Connecticut 06096-1010 Attn.: Vice President, Contracts and Counsel Fax: (860) 654-2621 Telephone: (860) 654-2173 with a copy to: Cleary, Gottlieb, Steen & Hamilton 2000 Pennsylvania Avenue, N.W. Washington, DC 20006-1801 Attn.: John T. Byam, Esq. Fax: (202) 974-1999 Telephone: (202) 974-1660 or, in each case, at such other address as may be specified in writing to the other parties in accordance herewith. 11.4. Consequential Damages. Neither party shall have any liability to the other under this Agreement for consequential, exemplary, special, incidental or punitive damages. 11.5. Waiver. Either party may waive compliance by the other with any of the provisions of this agreement. No waiver of any provisions shall be construed as a waiver of any other provision or a future waiver of any other provision hereof. Any waiver must be in writing. 11.6. Brokers, Finders, etc. The Company, Stockholder and Purchaser represent and warrant to each other that they have not dealt with or employed any broker, finder, investment banker or financial advisor in connection with the negotiation, execution or performance of this Agreement. 11.7. Miscellaneous. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. This Agreement, including the Schedules hereto which are made a part hereof, constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. This Agreement may not be amended except by an instrument in writing duly executed and delivered on behalf of each of the parties hereto. This Agreement may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same instrument. This Agreement shall be governed in all respects, including validity, interpretation and effect, by the laws of the State of New York, applicable to contracts made and to be performed in New York. This Agreement shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties hereto. This Agreement is not assignable by a party without the prior written consent of the other party. The rights and obligations contained in this Agreement are solely for the benefit of the parties hereto and are not intended to benefit or be enforceable by any other party, under the third party beneficiary doctrine or otherwise. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written. AEROFLEX INCORPORATED By: /s/ Michael Gorin Title: President UNITED TECHNOLOGIES CORPORATION (HAMILTON STANDARD DIVISION) By: /s/ Chester Paul Beach, Jr. Title:Vice President, Hamilton Standard Division and Assistant Secretary EX-10.1 3 Long Term Agreement NO. 902178 This Long Term Agreement NO. 902178 ("Agreement") is made as of February 25, 1999, between UNITED TECHNOLOGIES CORPORATION, HAMILTON STANDARD DIVISION ("Buyer"), a Delaware corporation having a place of business at One Hamilton Road, Windsor Locks, Connecticut, USA, and UTMC Microelectronic Systems Inc., ("Seller") a Delaware corporation having a place of business at 4350 Centennial Boulevard, Colorado Springs, Colorado, USA (hereinafter collectively referred to as the "Parties"). WHEREAS, Buyer wishes to purchase certain Supplies from Seller to be manufactured by Seller utilizing wafer and die stock furnished by Buyer ("Supplies"); WHEREAS, Seller wishes to sell such Supplies to Buyer; and, WHEREAS, the Parties wish to enter into an agreement covering the terms and conditions under which Buyer will purchase, and Seller will sell, such Supplies; NOW, THEREFORE, IN CONSIDERATION OF the promises, mutual covenants and agreements herein contained, the Parties agree as follows: 1. SUPPLIES TO BE FURNISHED 1.1 Seller shall furnish the Supplies set forth in Exhibit A to the Buyer in the quantities and at the times required by the Buyer's Purchase Orders and Releases and pursuant to the terms of this Agreement. Buyer's specific documents and procedures for issuing, and Seller's procedures for accepting, Purchase Orders and Releases are set forth in this Agreement. Except as otherwise provided in Section 3.2, the sale of supplies or other goods manufactured utilizing wafer and die stock procured by Seller from sources other than the stock furnished by the Buyer is not governed by this Agreement. 2. PRICES AND PAYMENT 2.1 The firm, fixed prices for Supplies ordered in specified quantities are set forth in Exhibit A. These prices represent the last transfer price between Seller and Buyer, less the portion of the transfer price that represents the cost of the Wafers inventoried for Buyer as described in Article 9. These prices are in United States (U.S.) Dollars and exclude all taxes, duties and other charges associated with the sale of Supplies. The price shall be fixed according to the quantity of each part number ordered in the annual Purchase Order issued by the Buyer as set forth in Article 4 herein. 2.2 With the exception of the part numbers listed in Exhibit B, Buyer shall not issue and Seller shall not be obligated to perform under any purchase order with respect to any part number for which the quantity ordered therein is less than twenty-five (25). 2.3 Payment terms for all Supplies delivered pursuant to this Agreement shall be Net 30 days. 2.4 Prices shall remain fixed and not subject to economic price adjustment for deliveries for the term of this Agreement. 2.5 In the event Seller makes an engineering change to a part identified on Exhibit A that results in the assignment of a different part number to such re-engineered part (each, a "Modified Part"), Buyer and Seller shall negotiate in good faith an appropriate price for such Modified Part, taking into consideration the price of the original part as set forth on Exhibit A, the costs incurred and effort expended by Seller in making the engineering change and the projected ability of Seller to recover its investment in making the engineering change through sales other than to Buyer. Upon agreement of Buyer and Seller on an appropriate price for a Modified Part, the Modified Part shall, ipso facto, be incorporated into Exhibit A for purposes of this Agreement. 3. DELIVERY 3.1 Seller agrees to deliver the Supplies in accordance with the Buyer's Purchase Order and Releases issued thereunder; provided, that deliveries will not be required earlier than the Lead Time set forth in the Agreement. Seller acknowledges and understands that the Buyer may issue or otherwise request Need Dates for Supplies in less than Lead Time. In such cases, Seller agrees to undertake its best efforts to meet such Need Dates. In order to assist Seller in planning for the delivery of Supplies, the Buyer shall provide forecasts of its needs to Seller in accordance with Article 4 herein. Notwithstanding the foregoing, during the six-month period commencing as of the date hereof (the "Initial Period"), Seller has the right to (a) accelerate delivery of Supplies specified on the Purchase Order to the extent necessary to meet its delivery requirements hereunder, upon prior approval of Buyer, which approval shall not be unreasonably withheld, and (b) to delay delivery of the Supplies required by any Release due to the inability of Seller to procure sufficient quantities of packaging materials, provided that at the conclusion of the Initial Period Seller shall have delivered Supplies the aggregate value of which (i.e., quantity times price) shall be equal to the aggregate value of Supplies required by all such Releases issued during the Initial Period, subject to (a) above and Section 3.4. 3.2 Buyer agrees to issue a Purchase Order and subsequent Releases for delivery of Supplies under this Agreement, and make other purchases from the Seller of integrated circuit products and ancillary services, in an amount equal to or greater than Seven Million Nine Hundred Eighty Thousand U.S. Dollars ($7,980,000) during the first twenty-four months following the date of this Agreement at not less than the following aggregate rates: o Four Hundred and Forty Thousand U.S. Dollars ($440,000) per month for the first four (4) months; o Three Hundred and Sixty Thousand U.S. Dollars ($360,000) per month for the next six (6) months; and o Two Hundred and Ninety Thousand U.S. Dollars ($290,000) per month for the next fourteen (14) months; provided, that Buyer shall be entitled to a credit against its subsequent purchase obligations under this Article 3.2 to the full extent that its purchases in any month exceed the aggregate rate for that month stated herein. 3.3 Seller shall maintain an inventory of specialized packing materials (including but not limited to ceramic cer-quads and "berg-edge clips") required to package the Supplies, in such quantity to ensure the delivery of the Supplies within the specified Lead time. 3.4 The lead time ("Lead Time") for the Supplies shall be eight (8) weeks. 4. PURCHASE ORDERS AND RELEASES The Buyer shall issue a single Purchase Order to the Supplier of even date herewith, and annually thereafter for the duration of this Agreement, prescribing (i) its annual requirement for each part number listed on Exhibit A and the schedule for deliveries of each part number during the annual period. Subject to the requirements of Article 3.2 herein, Buyer may subsequently modify the Purchase Order delivery schedule with respect to part numbers and quantities scheduled for delivery more than sixty (60) days from the date of the said modification, by issuing a written delivery release ("Release") to the Seller; delivery schedules within a sixty-day window shall be considered firm and may only be modified by mutual agreement. Seller shall acknowledge and completely perform all Releases, subject to the availability of Buyer-furnished wafers and dies. This Agreement does not constitute a purchase of any Supplies nor does it obligate the Buyer to purchase any Supplies except as otherwise set forth herein. 5. ELECTRONIC COMMERCE Seller agrees to utilize Electronic Date Interchange and Bar Coding compatible with the systems of Buyer. 6. BUSINESS REVIEWS 6.1 Reviews; Agenda. Buyer and Seller shall hold semi-annual Business Reviews during which the participants shall review issues pertaining to this Agreement and/or the Business between Buyer and Seller. The issues to be reviewed during each Business Review shall be summarized in an agenda jointly prepared by designated representatives of Buyer and Seller. The issues may include, but are not limited to, delivery forecasts, delivery and quality issues, the status of the industry generally, including manufacturing and engineering trends, key programs of both Buyer and Seller, and possible business opportunities between Buyer and Seller. 6.2 Establishment of Metrics. Until such time as metrics have been jointly agreed to between Buyer and Seller, the parties shall designate one or more representatives who shall meet semi-annually or more frequently for the purpose of establishing delivery and quality performance metrics. Buyer and Seller shall use reasonable diligence in good faith to agree on such metrics promptly and not later than six (6) months following the execution of this Agreement. The Business Review meetings may be used to establish metrics, or the parties may elect to hold separate meetings to establish the metrics. 6.3 Steering Committee. Buyer and Seller shall designate a Steering Committee composed of key representatives of each. The Steering Committee shall be responsible for oversight and direction of the Business Reviews, designation of representatives to prepare Business Review agendas, and the effective conduct of the Business Reviews to carry out the purposes set forth herein. 7. PACKING, TRANSPORTATION DATA AND SHIPPING INSTRUCTIONS Packing and shipping and other transportation requirements shall be specified in the Releases issued by the Buyer, consistent with the practice between Buyer and Seller as of the date hereof. TERMS AND CONDITIONS OF PURCHASE 8.1 Inspection and Acceptance. The Seller shall only tender for acceptance those Supplies that conform to the requirements of this contract. The Buyer reserves the right to inspect or test any Supplies that have been tendered for acceptance. Seller shall repair or replace, at Seller's discretion, any nonconforming Supplies. Conformance of Supplies is defined as successful completion of testing by Seller in accordance with contractual testing requirements. Seller may modify this system at anytime without securing Buyer's approval provided that the inspection system remains compliant with contractual requirements, including as appropriate industry or MIL standard inspection specifications. Buyer shall provide Seller written notice of rejection of Supplies delivered hereunder within thirty (30) days of receipt thereof. If Seller has not received written notice of rejection within the time period stated above, such Supplies shall be deemed accepted. Acceptance shall not alter any warranties provided under this contract. All nonconforming Supplies shall be returned to Seller at Seller's expense, subject to Seller's established procedures for the return of defective or nonconforming products. 8.2 Patent Indemnity. The Seller shall indemnify and hold harmless Buyer and its affiliates (provided that Seller shall reimburse only reasonable attorney fees) for Seller's infringement of the intellectual property rights of others in connection with the performance by Seller of its duties hereunder. Buyer agrees to provide Seller prompt written notice of any claim of infringement for which Buyer intends to seek indemnification. Seller's obligation to indemnify and hold Buyer harmless for infringement is contingent upon timely receipt of this notice. Buyer agrees to provide to Seller absolute authority and reasonable assistance, at Seller's expense, in the defense and/or settlement of any such claims. In the event that the Supplies are found to be infringing, Seller shall procure the right for Buyer to use the Supplies, or provide a non- infringing substitute, or will refund to Buyer the purchase price of the Supplies found to be infringing. Seller's obligation shall not extend to claims that arise from compliance by Seller with specifications issued by Buyer, which arise from modification of the Supplies by someone other than Seller, which arise from combination of the Supplies delivered hereunder with materials/goods or products delivered by someone other than the Seller or which arise from the Seller's proper practice of any of the patents assigned by Buyer to Seller pursuant to an Assignment and License Back Agreement between Buyer and Seller, dated as of the date hereof. Buyer hereby agrees to indemnify and hold harmless Seller and its affiliates (provided that Buyer shall reimburse only reasonable attorneys fees) for any claims of infringement brought against Seller that arise from compliance by Seller with specifications issued by Buyer, which arise from modification of the Supplies by Buyer, or arise from combination of the Supplies delivered hereunder with materials/goods or products delivered by Buyer. The above constitutes Buyer's and Seller's exclusive rights and remedies regarding infringement of intellectual property rights. 8.3 Termination for Default. In the event of proper termination for default, Seller shall be liable to the Buyer for the direct costs of procuring a reasonable substitute, not to exceed the purchase price set forth in the particular Releases, or at Buyer's election, a refund of the purchase price upon return of the nonconforming Supplies. 8.4 Warranty. Seller warrants that the Supplies delivered shall be free from defects in material and workmanship and shall conform to the contractual specifications. Buyer agrees to provide Seller written notice of breach of these warranties within one year of delivery of Supplies. Seller's obligations and Buyer's rights are contingent upon timely receipt of this notice. Seller shall repair or replace, at Seller's discretion, any Supplies delivered hereunder that are not in compliance with this warranty. Buyer's rights provided hereunder are Buyer's exclusive rights for breach of warranties and are in lieu of all other rights provide by law or in equity. Except for the warranties provided above, Seller and Buyer agree that no other warranties, express, implied, or statutory, including warranties of merchantability or fitness for a particular purpose, are granted. 8.5 Remedies. Neither party will liable to the other for any special, incidental or consequential damages, notwithstanding notice of the possibility thereof and the maximum liability of either party to the other whether arising in contract, tort or otherwise shall not exceed the purchase price of the particular Release. 8.6 Intellectual Property Rights. Notwithstanding any other provision contained in this Agreement, the Parties agree that Buyer shall not acquire rights in Seller technology, technical data or computer software, except such deliverable technology, deliverable technical data and deliverable computer software, the development costs of which are borne by the Buyer and for which line item prices are stated in Exhibit A. Seller shall provide to the U.S. Government rights in technical data and computer software to the extent required by law. 8.7 Federal Procurement Clauses. Notwithstanding any other provision contained in this Agreement, the Parties agree that Buyer shall not have rights of audit of or access to Seller's business or financial data. Seller shall provide access to its business and financial data to the US. Government to the extent required by law and regulation. Only such FAR, DFARS, NASA PR's, NFS and other federal government procurement clauses as appear in Buyer's contract with its customer and are applicable by their terms to a subcontractor at Seller's tier, will be applicable to Purchase Orders and Releases issued pursuant to this Agreement. Seller considers the Supplies to be provided under this Agreement to be commercial items or nondevelopmental items as defined in FAR Part 12. Consequently, Buyer shall not require Seller to provide cost or pricing data or comply with the U.S. Government cost accounting standards. 9. STOCK INVENTORY Buyer has procured a certain amount of wafer and die stock for the sole and exclusive purpose of having Supplies manufactured for Buyer. Seller shall continue to store this wafer and die stock inventory on Buyer's behalf in an environmentally proper and physically safe manner as it has been stored and maintained prior to the date of this Agreement at no charge to Buyer and shall use this inventory solely to fulfill Buyer's purchasing requirements as they arise. Buyer shall retain title and risk of loss in the wafer and die stock; provided, however, that Seller shall be liable to Buyer for loss of or damage to such inventory caused by the negligence or willful misconduct of the Seller or its employees, agents or invitees, provided that Buyer actually suffers damages as a result thereof. Seller shall also maintain all Gate Array and Linear data base files and GDS-2 mask files currently being held by Seller on Buyer's behalf. 10. YEAR 2000 10.1 For purposes of this Agreement, "Year 2000 Compliant" shall mean that: (i) the occurrence in or use by computer programs of dates before, on or after January 1, 2000 will not adversely affect the performance of such programs with respect to date-dependent data, computations, output, or other functions (including, without limitation, calculating, comparing and sequencing); (ii) such programs will not abnormally end or provide invalid or incorrect results as a result of date-dependent data; and (iii) such programs can accurately recognize, manage, accommodate and manipulate date-dependent data, including, without limitation, single and multi- century formulas and leap years. 10.2 Seller represents and warrants that: (1) Seller's products do not contain any computer programs. Seller's key financial and operational computer programs have been reviewed and, where required, detailed plans have been developed and have been and are being implemented on a schedule intended to permit Seller's computer programs to be Year 2000 Compliant. A summary of such plans and schedules is set forth on Exhibit C hereto; (2) Except as disclosed on Exhibit C, Seller has not received any communications from any of its suppliers or customers relating to the possibility that any of their computer programs (including those contained in any of their products) are not or will not be Year 2000 Compliant; (3) Except as disclosed on Exhibit C. Seller has not given any warranties or undertakings to any of its customers to the effect that Seller or any of its computer programs (including those contained in any of its products) are Year 2000 Compliant. 10.3 Notwithstanding the foregoing or any other provision of this Agreement, Seller makes no representation or warranty about whether any of Seller's computer programs are Year 2000 Compliant and Seller shall have no liability or obligation to Buyer or any other person in the event any such programs are determined not to be Year 2000 Compliant. 11. TESTING EQUIPMENT Seller agrees to continue to utilize the Trillium test equipment and test vectors on all Supplies (including, but not limited to, Gate Arrays) provided to Buyer under this Agreement; provided, that Seller may utilize test equipment and test vectors equivalent to the Trillium test equipment and vectors, upon prior approval of Buyer, which approval shall not be unreasonably withheld. Seller likewise agrees to continue to use the burn-in on all Supplies (including, but not limited to, Gate Arrays) provided to Buyer under this Agreement. 12. PUBLICITY The Seller shall not make any publicity releases or authorize others to make such releases regarding the subject matter of this Agreement without the prior written approval of the Buyer. The above restrictions shall not apply to information provided in response to Government agency requests or requirements, including SEC disclosure requirements as reasonably determined by Seller's securities counsel. 13. RELATIONSHIP OF THE PARTIES The relationship between Seller and Buyer shall be that of independent contractors and not that of principal and agent, nor that of legal partners. Neither Party shall represent itself as the agent or legal partner of the other Party or do any act or thing which might result in other persons believing that it has authority to contract or in any other way to enter into commitments on behalf of the other. 14. FORCE MAJEURE Seller shall exercise its best efforts to avoid any material delay in scheduled delivery of Supplies arising from events beyond its control and without its fault or negligence, including without limitation subcontracting with an alternate supplier. In the event that Seller is hindered or prevented from performing its obligations and such is beyond the control and without the fault or negligence of the Seller for a period of six (6) months or longer, then Buyer may terminate this Agreement at no cost or other liability by providing written notice to the Seller; provided, that in the event that the Buyer-furnished wafer and die stock is substantially destroyed by such event, Buyer may terminate this Agreement immediately. Events beyond the control and without the fault or negligence of the Seller include acts of God such as fire, flood, earthquake, hurricane, flooding; acts of a government acting in its sovereign capacity, strikes not caused by illegal actions of the Seller; embargoes; acts of war; general insurrection or civil strife but shall not include Seller's suppliers delays unless such delays are caused by one or more of the causes set forth herein. Delays caused by force majeure shall be considered excusable and Seller shall be entitled to a schedule adjustment not to exceed one day for each day that Seller was prohibited from performing due to force majeure. There shall be no price adjustment whatsoever for excusable delays; provided, that in the event that the Buyer-furnished wafer and die stock is materially damaged by such event, the Parties shall negotiate in good faith an equitable reduction in Buyer's purchase obligation under Article 3.2 herein. Buyer shall be excused from performing as a result and during the period of excusable delays, except for Buyer's obligations to make payment for conforming Supplies and products it has accepted. 15. DOCUMENTS INCORPORATED BY REFERENCE The following documents are hereby incorporated by reference: 1. Exhibit "A" - Part Numbers covered by this Agreement 2 Exhibit "B" - Part Numbers with no minimum order requirement 3. Exhibit "C" - Year 2000 Compliance Disclosure 16. ORDER OF PRECEDENCE In the event of a conflict between this Agreement and Releases issued pursuant to this Agreement the order of precedence shall be as follows for determining which provisions control: 1. This Agreement 2. Face Sheets of Release 3. Drawings and Specifications incorporated in Releases 4. Exhibits to this Agreement 17. NOTICES AND CORRESPONDENCE All notices and correspondence shall be sent by either party to the other in all matters dealing with this Agreement to the following address: To the Buyer: United Technologies Corporation Hamilton Standard Division Windsor Locks, Connecticut 06096 Attention: Jeffrey Bartkus, Procurement Specialist Fax: 860-654-2615 To the Seller: UTMC Microelectronic Systems, Inc. 4350 Centennial Boulevard Colorado Springs, Colorado 80907 Attention: President Fax: 719-594-5541 Such notices and correspondence shall be deemed received when sent to the above addresses upon physical receipt, upon ten (10) days passing after having been sent by United States Postal Service (or its equivalent in other countries) Airmail, upon receipt electronically or by facsimile whichever first occurs. 18. MODIFICATIONS TO AGREEMENT No modifications or amendments to this Agreement shall be binding unless executed in writing by the Buyer and Seller pursuant to a formal amendment to this Agreement. Modifications to the terms and conditions in use between Seller and each of Buyer shall be made in writing and once signed by both parties they shall be deemed to form part of this Agreement. 19. GRATUITIES AND GIFTS Seller represents and warrants to Buyer that neither Seller (including any of its officers, partners, employees or agents) nor any Subcontractor or Subcontractor employee has: 19.1 provided, attempted to provide, or offered to provide any gifts, gratuities, kickbacks, or bribes; 19.2 solicited, accepted or attempted to accept any gifts, gratuities, kickbacks, or bribes; or 19.3 included, directly or indirectly the amount of any gifts, gratuities, kickbacks, or bribes in the price applicable to this Agreement or in the subcontract price charged by any subcontractor to a higher tier subcontractor. In addition to any other remedies that Buyer may have, Seller shall indemnify and hold harmless Buyer from and against any loss or damage, including, without limitation, Buyer's costs, attorney's fees, or any fines or penalties assessed against Buyer, resulting from a violation of the Anti-Kickback Act of 1986 by Seller (including any of its officers, partners, employees, or agents) or by any subcontractor or subcontractor employee. 20. APPLICABLE LAW AND FORUM This Agreement shall be construed and governed by the laws of the State of New York, without regard to the principles of conflicts of law. 21. COMPLIANCE WITH LAWS In the performance of this Agreement, Buyer and Seller shall comply with all applicable laws and regulations federal, state and local. 22. PARTIAL INVALIDITY If in any instance any provision of this Agreement is invalid or unenforceable such provision shall not apply in that instance but the remaining provisions shall be given full force and effect in accordance with their terms. 23. WAIVER The failure of either party to insist on strict performance of any provision or to exercise any right shall not be deemed a waiver of such provision or right thereafter. Any waiver, to be effective, must be in writing and signed by the Party waiving compliance. 24. CAPTIONS Captions are used herein only for convenience and shall not be construed to limit or extend the language of any provision. 25. CUMULATIVE REMEDIES Subject to the provisions of Section 8.5, the rights and remedies of the Parties shall be cumulative and in addition to any other rights and remedies provided in law or equity. 26. ASSIGNMENT Neither Buyer nor Seller may assign this Agreement without the prior written approval of the other party, except as follows: 26.1 Buyer may assign, this Agreement to any corporation, limited liability company or partnership resulting from the merger or consolidation of Buyer or to any entity that acquires all or substantially all of Buyer's assets as a going concern, as long as such entity assumes the obligations of the Buyer. In the event of any assignment of this Agreement, Buyer (to the extent it shall continue in existence) shall guarantee the performance of the assignee's obligations hereunder; 26.2 From and after the second anniversary of the date of this Agreement, Seller may assign, this Agreement to any corporation, limited liability company or partnership resulting from the merger or consolidation of Seller or to any entity that acquires all or substantially all of Seller's assets as a going concern, as long as such entity assumes the obligations of the Seller. In the event of any assignment of this Agreement, Seller (to the extent it shall continue in existence) shall guarantee the performance of the assignee's obligations hereunder. 27. EXPENSES Unless otherwise expressly provided herein all expenses incurred by either party in connection with the formation or implementation of this Agreement shall be the sole responsibility of that party and neither party shall have any claim for such expenses against the other. 28. TERM AND TERMINATION 28.1 This Agreement shall commence on the date of execution and shall continue in effect for five (5) years, unless terminated earlier pursuant to the provisions of Article 14 ("Force Majeure") or as provided below. 28.2 Either party may terminate this Agreement without cancellation charge, in the event of a material breach by the other party, provided that written notice of the breach is given to the breaching party and the breaching party fails to cure the noticed breach within thirty (30) days, or within any longer cure period that the injured party specifies in its notice. 28.3 Notwithstanding any other provision in this Article, either party may terminate this Agreement upon the following events: 28.3.1 The liquidation or dissolution of the other party; 28.3.2 The making of an assignment for the benefit of creditors of the other party; 28.3.3 The filing of a voluntary petition under any Federal or State bankruptcy statute by the other party; 28.3.4 The filing of an involuntary petition under any Federal or State bankruptcy statute against the other party; or 28.3.5 The inability of the other party to pay its debts as they become due. 29. SUPERSEDING EFFECT This Agreement contains all the agreements between Buyer and Seller and no course of trade or prior conduct shall be applicable to this Agreement. This Agreement supersedes all previous agreements between Buyer and Seller with respect to the subject matter of this Agreement. IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the date first written above. UTMC MICROELECTRONIC SYSTEMS INC. By: /s/Michael Gorin --------------------------------------------- Name: Michael Gorin Title: UNITED TECHNOLOGIES CORPORATION Hamilton Standard Division By: /s/Chester Paul Beach, Jr. --------------------------------------------- Name: Chester Paul Beach, Jr. Title: Vice President, Contracts and Counsel EX-10.2 4 FACILITIES LEASE AND SERVICES AGREEMENT ------------------ This Facilities Lease and Services Agreement (Agreement) is made this 25th day of February, 1999, by and between UTMC MICROELECTRONIC SYSTEMS INC., a Delaware corporation (UTMC), UNITED TECHNOLOGIES CORPORATION, a Delaware corporation (UTC), and HAMILTON STANDARD ELECTRONICS, INC., a Delaware corporation (HSE). WHEREAS, concurrently with the execution of this Agreement, UTC has sold to Aeroflex Incorporated (Aeroflex) all of the shares of capital stock of UTMC, on the terms and subject to the conditions set forth in a Purchase Agreement, dated as of the date hereof (the Purchase Agreement); WHEREAS, immediately prior to the date hereof, the business of HSE was conducted by UTMC as a business unit within UTMC (the CCA Unit); WHEREAS, immediately prior to the date hereof, UTMC provided certain rights and services to the CCA Unit and UTC provided certain rights and services to UTMC; WHEREAS, to facilitate the transition of the CCA Unit to HSE and the transition of UTMC to Aeroflex, the parties have agreed to enter into this Agreement; and WHEREAS, contemporaneously with the execution of this Agreement, HSE and UTMC are entering into an agreement for the production by UTMC of certain integrated circuits utilizing HSE-supplied wafers and dies (the Supply Agreement). NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I LEASE OF PREMISES BY UTMC TO HSE 1.1 Building. UTMC hereby leases to HSE, and HSE hereby leases from UTMC, approximately 23,300 square feet of space in the approximately 103,000 square foot building (the Building) located at 4350 Centennial Boulevard, Colorado Springs, Colorado, as shown on the floor plan attached hereto as Exhibit A, together with the appurtenances thereto (the Premises). 1.2 Access Road. Road access to portions of the Building is provided by UTMCs privately owned and maintained roadway shown cross-hatched on the map attached hereto as Exhibit B (the Access Road). During the Term (as defined in Article IV), HSE and its agents, employees and invitees shall have the right to the free use of the Access Road to provide access to the Building 1.3 Common Areas. During the Term, HSE and its agents, employees and invitees shall have the nonexclusive right to the free use of the common areas in the Building shown on Exhibits A and B hereto (the Common Areas) for the intended and normal purposes thereof, subject to reasonable rules established by UTMC. The Common Areas shall include the parking lot, sidewalks, driveways, entranceways, lobbies and other similar public areas, loading dock, rest rooms, medical and first aid facilities, corridors (but only such corridors as connect any Common Areas or any Common Area with the Premises), stairwells, lunch room, conference facilities, exercise room, locker rooms, hallways, reception area and any other area(s) designated by agreement of HSE and UTMC as Common Areas. 1.4 Access. HSE and its agents, employees and invitees shall have access to the Premises, Access Road and Common Areas twenty-four (24) hours a day, seven (7) days a week. 1.5 Rights-of-Way. During the Term, HSE shall have a non-exclusive right- of-way through the Building solely for the purposes of conducting activities incidental to the permitted uses hereunder, providing the services required to be provided by HSE under Article III or V of this Agreement or to fulfill its obligations under the Supply Agreement. UTMC shall have a non-exclusive right-of-way under, over and through the Premises solely for the purposes of conducting activities incidental to UTMCs operations in the Building and providing the services required to be provided by UTMC under Articles II and III of this Agreement. In addition, UTMC and its agents shall have the right to enter the Premises at reasonable times for the purpose of inspecting the same, performing maintenance and making such alterations, repairs, improvements or additions to the Premises as may be required hereunder or that UTMC may deem necessary or desirable; provided, however, that UTMC shall use its best efforts to ensure that such entry, or such maintenance, alterations, repairs, improvements or additions shall not adversely affect HSEs operations in any way. UTMC, its agents and customers may also enter the Premises at reasonable times, upon prior notice and subject to reasonable conditions to protect HSE proprietary information, to the extent necessary to permit UTMC customers to observe and reasonably inspect HSE's CCA Services (as defined in Article V). 1.6 Relinquishment of Portions of the Premises. At any time and from time to time, HSE shall have the right, exercisable by delivery of written notice to UTMC, to relinquish its right to all or any portion of the Premises. Upon any such relinquishment by HSE, UTMCs and HSEs obligations under this Agreement shall terminate with respect to such portion(s) so relinquished (subject to the provisions of Sections 4.3 and 6.6), the right to occupy and use such portion(s) shall revert to UTMC and the term Premises as used herein shall exclude such portion(s). Without limiting the generality of the first sentence of this Section 1.6, HSE agrees to relinquish its right to, and shall vacate, on or about July 31, 1999, the approximately 2,000 square feet of the Premises indicated on Exhibit C hereto (the July 31 Footage). ARTICLE II FACILITY SERVICES AND RIGHTS TO USE CERTAIN ASSETS 2.1 Facility Services. During the Term, UTMC shall provide or cause to be provided to the Building (including the Premises) and/or to HSE, as the case may be, at UTMCs own cost, those services set forth on Schedule 2.1 (the Facility Services). The Facility Services provided to HSE and/or the Premises shall at all times during the Term be of substantially the same quality as the Facility Services provided to the other parts of the Building and/or UTMC, as the other occupant of the Building; provided, however, except as otherwise expressly provided herein (or unless UTMC and HSE otherwise agree in writing), during the Term, the Facility Services provided or caused to be provided by UTMC shall be of equivalent quantity and quality to such services provided to the Premises and/or the CCA Unit, as the case may be, prior to the sale of UTMC to Aeroflex. 2.2 Shared Tangible Assets. During the Term, HSE shall have a non- exclusive right to use those tangible assets of UTMC used by the CCA Unit in the ordinary and usual course of its business prior to the sale of UTMC to Aeroflex, subject to such reasonable rules established by UTMC (the Shared Tangible Assets), including without limitation the Shared Tangible Assets listed on Schedule 2.2. UTMC shall use its best efforts to maintain the Shared Tangible Assets in good working condition and to repair or replace (as necessary) any damaged or malfunctioning Shared Tangible Assets as soon as practicable. It is understood and agreed that , in the event of any such damage or malfunction, UTMC may utilize a third-party service provider to perform the functions or services of any damaged or malfunctioning Shared Tangible Asset on an interim basis, provided that UTMC arranges for such functions or services also to be provided to HSE at no cost to HSE. ARTICLE III OPERATIONAL SERVICES 3.1 UTC Services. During the period of the Term in which HSE actually occupies any portion of the Premises pursuant to this Agreement, and subject to the provisions of Section 6.12, UTC shall provide or cause to be provided to the Building and/or to UTMC, as the case may be, at UTCs own cost, those services set forth on Schedule 3.1 (the UTC Services). The UTC Services provided to the Building and/or UTMC shall be of substantially the same quality as the UTC Services provided to the Building and/or HSE (to the extent applicable), as the other occupant of the Building; provided, however, except as otherwise expressly provided herein, the UTC Services provided or caused to be provided by UTC shall be of equivalent quantity and quality to such services provided to the Building and/or UTMC, as the case may be, prior to the sale of UTMC to Aeroflex. 3.2 UTMC Services. During the Term, UTMC shall, in addition to the Facility Services, provide or cause to be provided to the Premises and/or to HSE, as the case may be, at UTMCs own cost, those services set forth on Schedule 3.2 (the UTMC Services). The UTMC Services provided to HSE and/or the Premises shall at all times during the Term be of substantially the same quality as the UTMC Services provided to the Building and/or UTMC, as the other occupant of the Building; provided, however, except as otherwise expressly provided herein, the UTMC Services provided or caused to be provided by UTMC shall be of equivalent quantity and quality to such services provided to the Premises and/or the CCA Unit, as the case may be, prior to the sale of UTMC to Aeroflex. 3.3 Updating. The parties have exercised due diligence in preparing this Agreement and the Schedules, which Schedules are intended to describe all of the services that the parties agree are to be provided by UTC to UTMC and by UTMC to HSE. The parties acknowledge, however, that the complexity of the transactions contemplated by this Agreement may result in incomplete Schedules. Accordingly, each party will promptly notify the others if it becomes aware of items that were inadvertently omitted from or included on a Schedule, or additional information which, if known at the time a Schedule was originally prepared, would have caused the parties to have prepared the Schedule in a different manner. The parties will cooperate in good faith to promptly update the Schedules as necessary and appropriate to reflect any additional items or information that are discovered after the execution of this Agreement. 3.4 Inventory Management. HSE shall have the exclusive right to manage and control, and shall retain title and risk of loss to, all Circuit Card Assembly materials and HSE wafer and die inventory located within the caged HSE Materials Center on the Premises. HSE will be responsible for maintaining UTMC materials within such caged Materials Center in an environmentally proper and physically safe manner as they have been maintained prior to the sale of UTMC to Aeroflex and shall be liable to UTMC for loss of or damage to such UTMC materials caused by the negligence or willful misconduct of HSE or its employees. UTMC authorized personnel will be allowed access for the management and control of UTMCs materials used in connection with the provision by HSE of CCA Services (as defined in Section 5.2 below) or the IC manufacturing process, such as UTMC wafers, die, packages and lids. UTMC shall acquire responsibility for storage conditions of, and the right to physically control, such UTMC materials upon receipt from HSE of written notice of HSEs intention to vacate the Premises within 90 days of the date of such notice. Upon delivery and receipt of such notice, HSE and UTMC shall use their best efforts to minimize any disruption caused by such transfer to UTMC of the right to physically control UTMCs materials. 3.5 Severability of Services and Rights Provided. This Agreement shall be construed as a separate and independent agreement for each and every service and right provided under this Agreement. Each of the Schedules is hereby incorporated in its entirety by reference herein. Any specific service or right may be terminated at any time by the recipient of such service or beneficiary of such right by delivery of written notice to such effect to the provider thereof. Any termination of this Agreement with respect to any service or right shall not terminate the Agreement with respect to any other service or right then being provided pursuant to this Agreement. ARTICLE IV TERM; RENT AND SERVICE FEE 4.1 Term. The term of this Agreement shall commence on the date hereof and shall expire at midnight on the second anniversary of the date hereof (the Initial Term); provided, however, that HSE shall have the right to extend the term of this Agreement for an additional twelve-month period, expiring at midnight on the third anniversary of the date hereof (the Extension Term) by providing UTMC with written notice of HSEs intention to extend, which notice to be effective must be received by UTMC not later than 180 days prior to the expiration of the Initial Term. The Initial Term, together with the Extension Term (if any) are herein collectively referred to as the Term. Notwithstanding the foregoing, in the event this Agreement shall be terminated in accordance with Article VI or otherwise by agreement of all of the parties hereto, the Term shall expire on the date of such termination. 4.2 Rent and Service Fee. In consideration of the leasehold interests granted and rights and services to be provided by UTMC hereunder, and taking in account the services to be provided by UTC to UTMC set forth in Article III, HSE shall pay to UTMC as rent and a net service fee (Rent and Service Fee) with respect to the Initial Term the sum of Six Million U.S. Dollars ($6,000,000), payable in twenty-four (24) equal monthly installments of Two Hundred Fifty Thousand U.S. Dollars ($250,000), beginning on the first day of the month following the date hereof. In the event that HSE exercises its option to extend this Agreement for the Extension Term, HSE shall pay to UTMC a reasonable Rent and Service Fee with respect to such Extension Term, to be agreed upon at the time between UTMC and HSE acting in good faith based upon the square footage of the Premises to be occupied by HSE and the services to be provided by UTMC and UTC during the Extension Term, not to exceed One Hundred Twenty- Eight U.S. Dollars and Seventy-Six Cents ($128.76) times the number of square feet of the Premises as of the first day of the Extension Term (after any adjustments to the Premises in accordance with the provisions of Section 1.6 hereof), payable in twelve equal monthly installments beginning on the first day of the month following the first day of the Extension Period. 4.3 Abatement of Rent and Service Fee. In the event that UTMC physically occupies any portion of the Premises relinquished by HSE pursuant to Section 1.6 during the Initial or Extended Term, other than the July 31 Footage, then the Rent and Service Fee payable under Section 4.2 shall be abated by a reasonable amount, to be agreed upon at the time between UTMC and HSE, based upon the square footage of the Premises so relinquished and effective as of the monthly installment payable on the first day of the month following such occupancy by UTMC and each month thereafter for the remainder of the Initial or Extended Term, as the case may be. Except as specifically provided herein, there shall be no abatement of the Rent and Service Fee by reason of any relinquishment of any portion of the Premises by HSE pursuant to Section 1.6 (including, without limitation, the relinquishment of the July 31 Footage). ARTICLE V ADDITIONAL SERVICES; ALLOCATION OF EXPENSES 5.1 Reliability and Material Analysis Services. During the Initial Term, UTMC will provide HSE with failure analysis services on substantially the same terms and conditions, including, without limitation, response time, as UTMC provided to the CCA Unit during the 1998 calendar year. In consideration for UTMCs provision of such services, HSE shall pay to UTMC an annual amount equal to Two Hundred Fifty Thousand U.S. Dollars ($250,000), which shall be in addition to the Rent and Service Fee specified in Section 4.2 hereof. Such payment shall be made in equal monthly installments of Twenty Thousand Eight Hundred Thirty-Three U.S. Dollars ($20,833), beginning on the first day of the month following the date hereof. 5.2 Circuit Card Assembly Services. During the Term, upon request, HSE will provide circuit card assembly services (CCA Services) to UTMC, for so long as and to the extent that HSE has the manufacturing and assembly capability in the Premises to do so. Such services shall be rendered on the following terms and conditions: 5.2.1 All CCA Services will be rendered on a purchase order basis. In addition to setting forth in sufficient specificity the work to be performed (which may cross- reference information previously set forth in a bid or quote), the purchase order will specify the extent to which HSE is to procure materials, parts and components to be assembled. 5.2.2 If a purchase order specifies that HSE is to procure materials, parts or components, UTMC shall pay to HSE, in addition to the labor charges set forth below, the cost to HSE of such materials, parts and components, plus thirteen percent (13.0%) (Component Costs). HSE shall be entitled to invoice UTMC for Component Costs upon delivery of the materials, parts and components to HSE. Such invoice shall be due and payable by UTMC within thirty (30) days of receipt. 5.2.3 For CCA Services with respect to which HSE provides a quote during the Term, HSE shall provide such services at a rate of One Hundred U.S. Dollars ($100) per quoted direct labor hour. 5.2.4 HSE shall be entitled to invoice UTMC, in accordance with the provisions of Section 5.2.3, for the direct labor charges in respect of a purchase order upon completion of the work that is the subject of the purchase order. Such invoice shall be due and payable by UTMC within thirty (30) days of receipt. 5.2.5 Unless otherwise specified in the purchase order or agreed by UTMC and HSE, all circuit cards assembled by HSE for UTMC shall be delivered to UTMC upon completion. 5.2.6 For administrative convenience, UTMC and HSE may by mutual agreement implement the foregoing terms and conditions through a blanket purchase order and release orders for specific products based upon quotes from HSE. 5.3 Common Carrier Expenses. Promptly following the date hereof, UTMC will enter into a separate contract with common carriers for the shipment of its goods and products. Until such time, however, UTMC and HSE shall each be responsible for its respective, pro rata share of the total combined freight and transportation expenses of the two companies. HSE and UTMC will work together in good faith to implement appropriate administrative measures to enable the parties to determine such pro rata shares. 5.4 Additional Services. Nothing contained in this Agreement shall be deemed to prohibit any party hereto from agreeing to render additional services to another party hereto, at a price to be determined by the affected parties. ARTICLE VI SUPPLEMENTAL PROVISIONS 6.1 Authorized Use. HSE may use the Premises for general office purposes and for the assembly of circuit cards and any other use incidental thereto not prohibited by Applicable Laws (as defined below). HSE shall not commit any waste of the Premises nor use or permit the use of the Premises in any manner that creates a nuisance. 6.2 Condition of the Premises; Peaceable Possession. HSE acknowledges that it has inspected the Premises and accepts them in their present AS IS condition, except as otherwise expressly set forth herein. UTMC warrants that HSE shall have peaceable possession and quiet enjoyment of the Premises during the Term. 6.3 Compliance with Laws. UTMC shall comply with all applicable laws, ordinances, rules, regulations, standards and other requirements of governmental authorities, in each case whether local, state or federal, as now or hereafter in effect (Applicable Laws) regarding the Premises, except to the extent such Applicable Laws relate to the use of the Premises and with which only HSE can comply, such as laws governing maximum occupancy, workplace smoking and illegal business operations, with which HSE hereby agrees to comply. 6.4 Payment of Taxes. UTMC shall pay before delinquency all real property taxes with respect to the Building and the land on which it is situated. Each of HSE and UTMC shall pay all personal property and income taxes relating to the equipment and inventories owned by it and the operation of its business. 6.5 Repairs and Maintenance. 6.5.1 UTMC shall, upon HSEs request and at HSEs sole cost and expense (which cost and expense shall be equal to UTMCs direct cost for such repair or replacement), make or cause to be made repairs and replacements to the Premises or Building needed because of HSEs misuse or negligence, except to the extent UTMC files a claim with and actually recovers in respect of such repairs or replacements from a third- party insurance carrier. 6.5.2 Other than the repairs that are the responsibility of HSE pursuant to Section 6.5.1, UTMC shall pay for and make or cause to be made all repairs and replacements to the Premises, Common Areas, Building and Access Road necessary to maintain the same in good order, including, without limitation: . All structural maintenance and repairs that may be reasonably necessary, including but not limited to repairs of the foundation, walls, floors, windows, roof, and exterior painting; . Adequate maintenance and repair of: . the plumbing, electrical, heating and air-conditioning systems; . all interior walls, ceilings, doors, windows, floors and floor coverings of the Premises; . all areas and facilities making up the Common Areas; and . the sidewalks, driveways, service areas, curbs, parking areas and landscaping, including snow and ice removal. 6.6 Removal of Property. At the end of the Term, as well as upon any relinquishment of a portion of the Premises by HSE pursuant to Section 1.6, HSE shall surrender to UTMC the Premises or such portion thereof, as the case may be, in as good order and repair as of the date hereof, broom clean, except for (i) ordinary wear and tear, (ii) damage by the elements, fire and other casualty not the result of HSEs misuse or negligence, (iii) taking under power of eminent domain and (iv) alteration permitted by UTMC under this Agreement unless consent thereto was conditioned upon HSEs removal thereof at the end of the Term. All of HSEs machinery, equipment, shelving, fixtures, furniture and personal property (HSEs Property) shall be and shall remain the property of HSE and at any time during the Term HSE may, at its option, remove all HSEs Property installed or owned by HSE and located in the Building, and on or before the last day of the Term, or the date on which HSE shall relinquish a portion of the Premises pursuant to Section 1.6, HSE shall remove all HSEs Property installed or owned by HSE and located in the Building or in such relinquished portion, as the case may be, and HSE agrees to pay for the repair of any damage to the Premises that may be caused by the removal of such items. 6.7 Casualty Insurance. 6.7.1 During the Term, UTMC shall maintain in full force, or cause to be maintained in full force, all-risk property insurance covering the Building, including the Premises, insuring against such hazards, casualties and contingencies as are normally and usually covered by extended coverage policies in effect where the Building is located, to the extent of eighty percent (80%) of the full replacement cost of the Building subject to a Five Hundred Thousand U.S. Dollar ($500,000) deductible. 6.7.2 With respect to any insurance that UTMC is required to procure pursuant to this Section 6.7. and Section 6.9 below, UTMC shall promptly deliver to HSE the corresponding policies or certificates of insurance, in form reasonably satisfactory to HSE. UTMC shall procure and pay for all renewals of such insurance from time to time before the expiration thereof, and shall deliver to HSE evidence of such renewal at least thirty (30) days before the expiration of any existing policy. All such policies shall be issued by companies of recognized responsibility licensed to do business in Colorado. The proceeds of policies providing all-risk property insurance shall be payable to UTMC and HSE as their interests may appear. 6.8 Waiver of Subrogation. UTMC and HSE shall each obtain from their respective insurance carriers a waiver of subrogation rights endorsement waiving such rights against such other party and its agents, employees and rights endorsement invitees. UTMC and HSE hereby waive all rights to recover against each other for any loss or damage arising from any cause to the extent the party suffering such loss or damage files a claim with and actually recovers in respect of such loss or damage from a third-party insurance carrier. Such waiver shall not apply to any loss or damage caused by a partys willful misconduct. 6.9 Public Liability Insurance. During the Term, UTMC shall obtain and keep in full force, or cause to be obtained and kept in full force, for benefit of UTMC and HSE, a commercial general liability policy of insurance against claims for bodily injury, death and property damage occurring in, on or about the Building and the Access Road with limits of not less than $10,000,000 combined single limit for bodily injury and property damage liability in any one occurrence. HSE shall be named as an additional insured on such policy. 6.10 Damage and Destruction. 6.10.1 If, during the Term, the Premises or any part of the Building which provides any mode of access to the Premises, or which provides essential services to the Premises including, without limitation, the Common Areas and the Access Road (the Relevant Space), is damaged or destroyed in part or whole from any cause not the result of misuse or negligence of HSE or its agents, employees or invitees and UTMC has determined in its reasonable discretion (which determination shall be made and notice thereof shall be sent to HSE no later than the thirtieth (30th) day following the date on which the damage occurs (the Determination Date)) that the Relevant Space can be substantially repaired and restored within ninety (90) days from the date of damage, then UTMC shall, at its sole cost and expense, use its best efforts to promptly and diligently repair and restore the Relevant Space to substantially the same condition as existed before such damage. Such repair and restoration shall be made within ninety (90) days from the date of the damage. If the Relevant Space is not repaired and restored within ninety (90) days from the date of the damage, then HSE may terminate this Agreement at any time after the ninetieth (90th) day but no later than the one hundred twentieth (120th) day following the date on which such damage occurred, provided that HSE determines in its reasonable discretion that the Relevant Space constitutes a material portion of the leasehold estate granted to HSE hereunder, that the damage or destruction results in material interference with an essential service to be provided hereunder to HSE, or that the damage or destruction otherwise materially interferes with the conduct by HSE of its business. The Rent and Service Fee shall be abated from the date upon which damage occurs through and including the date upon which the repair and restoration are completed, in proportion to that part of the Premises that is unfit for the purposes for which HSE was using the Premises immediately prior to the damage. The abatement shall take into account the nature and extent of interference with HSEs use of the Premises due to damage to all of the Relevant Spaces and HSEs loss of access and essential services. It is understood and agreed that such an abatement may require a refund by UTMC to HSE of Rent and Service Fee already paid by HSE with respect to such abatement period. 6.10.2 If (i) UTMC determines in its reasonable discretion that the damage to the Relevant Space cannot be repaired and restored within such ninety (90) day period and (ii) HSE determines in its reasonable discretion that the Relevant Space constitutes a material portion of the leasehold estate granted to HSE hereunder, that the damage or destruction results in material interference with an essential service to be provided hereunder to HSE, or that the damage or destruction otherwise materially interferes with the conduct by HSE of its business, and provided that HSE delivers written notice of such determination to UTMC within seven days after the Determination Date, then either UTMC or HSE may, within ten days after the Determination Date, terminate this Agreement by giving written notice to the other parties. If neither UTMC nor HSE elects to terminate this Agreement, UTMC, at its sole cost and expense, will promptly and diligently repair and restore the Relevant Space to substantially the same condition as existed before such damage. In such event, the Rent and Service Fee shall be abated from the date upon which the damage occurs through and including the date upon which the repair and restoration are completed, in proportion to that part of the Premises that is unfit for the purposes for which HSE was using the Premises immediately prior to the damage. Such abatement shall take into account the nature and extent of interference with HSEs use of the Premises due to damage to all of the Relevant Spaces and HSEs loss of access and essential services. It is understood and agreed that such an abatement may require a refund by UTMC to HSE of Rent and Service Fee already paid by HSE with respect to such abatement period. 6.10.3 If UTMC fails to send HSE notice of its determination with respect to the time needed for the repair and restoration referred to above, then HSE shall have the right, within forty-five (45) days after the date of damage, to terminate this Agreement upon written notice to UTMC. 6.10.4 If either party terminates this Agreement as permitted in this Section 6.10, the Rent and Service Fee shall be payable pro rata up to the date of termination and shall take into account any abatement resulting from the provisions of this Section 6.10. Upon such termination, UTMC shall promptly refund to HSE any prepaid Rent and Service Fee. 6.11 Eminent Domain. If the whole or any substantial part of the Relevant Space is taken by public authority under the power of eminent domain for either a permanent or temporary use exceeding ninety (90) days, HSE, at its option, may terminate this Agreement or continue in any portion of the Premises remaining untaken under the terms and conditions of this Agreement, except that the Rent and Services Fee shall be reduced in proportion to the portion of Premises taken or that portion of the Premises which, due to such taking, is unfit for the purposes for which HSE was using the Premises immediately prior to such taking. The reduction in the Rent and Service Fee shall taken into account the nature and extent of interference with HSEs use of the Premises due to the taking of the Relevant Space and HSEs loss of access and essential services. Whenever any portion of the Premises shall be taken under the power of eminent domain, and if HSE does not terminate this Agreement as provided above, UTMC shall make any reasonably necessary alternations so as to make the remaining Premises a complete unit. In the event of any such taking, the entire award will be paid to UTMC and HSE will have no right or claim to any part of it; provided, however, that HSE shall have the right to assert a claim against the condemning or taking authority for HSEs moving expenses, business dislocation damages, HSEs personal property and fixtures, leasehold improvements owned by HSE and HSEs leasehold estate and shall be entitled to retain any award thereafter. If HSE terminates this Agreement as permitted in this Section 6.11, the Rent and Service Fee shall be payable pro rata up to the date of termination and shall take into account any abatement resulting from the provisions of this Section 6.11. Upon such termination, UTMC shall promptly refund to HSE any prepaid Rent and Service Fee. 6.12 UTMCs Right to UTC Services. If HSE provides written notice to UTMC of its intent to terminate this Agreement as permitted in Section 6.10 or Section 6.11 and UTMC shall have provided written notice to UTC within fifteen (15) days of such date of such notice that UTMC desires to continue to receive the UTC Services for the duration of the Term, then the provisions of this Agreement pertaining to the rights and obligations of UTC and UTMC with respect to the UTC Services (but only such rights and obligations) shall survive such termination, in accordance with Section 3.5. In the event UTMC elects, in the manner and within the time period specified above, to continue to receive the UTC Services, UTC shall be entitled to invoice UTMC for such services at a rate equal to the actual costs and expenses incurred by UTC in connection with the provision of the UTC Services to UTMC. Such invoices will be due and payable by UTMC within thirty (30) days of receipt thereof. 6.13 Alterations. HSE agrees not to make any material alterations, improvements or additions to the Premises except as set forth in this Section 6.13. HSE shall have the right at its own expense with the prior written consent of UTMC, which consent shall not be unreasonably withheld or delayed, to make such alterations, additions, installations, changes and improvements to the Premises (HSE Improvements) as may be necessary for HSEs purposes, provided, that such HSE Improvements (i) comply with Applicable Laws, (ii) comply with the reasonable requirements of UTMC and (iii) shall not change the general character of the Building or the Premises or diminish the value thereof below its fair market value prior to such HSE Improvements. As a condition to giving any such consent, UTMC may reasonably require that HSE remove any such HSE Improvements at the end of the Term and restore the Premises to their original condition (subject to the provisions of Section 6.6). HSE shall keep the Premises and Building free from all mechanics and materialmens liens in connection with the making of any HSE Improvements. 6.14 Assignment and Subletting. This Agreement may not be assigned by UTMC, UTC or HSE without the prior written consent of the other parties, except as follows: (i) Each of HSE, UTC and UTMC may assign this Agreement to any corporation, limited liability company or partnership resulting from the merger or consolidation of such party or to any entity that acquires all or substantially all of such partys assets as a going concern, as long as such entity assumes the obligations of assignor. In the event of any assignment of this Agreement, the assignor (to the extent it shall continue in existence) shall guarantee the performance of the assignees obligations hereunder; and (ii) HSE may sublet the Premises to any corporation, limited liability company or partnership that controls, is controlled by or is under common control with HSE, provided that the Premises are to be used in connection with operations substantially similar to the operations of HSE or other operations compatible with UTMCs activities in the Building. In the event of any such subletting of the Premises, HSE shall guarantee the performance of the subtenants obligations hereunder. 6.15 Environmental Matters. 6.15.1 During the Term, each of HSE and UTMC shall (i) comply with all Environmental Laws (as defined below) concerning or relating to the use, storage or disposal of Chemical Substances (as defined below) and (ii) operate its business in compliance with the conditions of all permits necessary under the Environmental Laws and maintain all such permits valid and in force. HSE shall also comply with UTMC's reasonable rules and requirements regarding the management, use, storage and disposal of Chemical Substances. Chemical Substance means any chemical substance, including but not limited to, petroleum or any fraction thereof; asbestos or asbestos-containing material; polychlorinated biphenyls; tetrahydrofuran; methylene chloride; methylethylketone or chlorofluorocarbons; and without limitation, any substances, materials, or wastes which are identified or regulated under the Clear Air Act, as amended; the Clean Water Act, as amended; the Occupational Safety and Health Act, as amended; the Toxic Substances Control Act, as amended; the Comprehensive Environmental Response, Compensation and Liability Act, as amended; or any analogous state, local or other Environmental Law. Environment includes real property and the physical buildings and structures thereon, and also includes, but is not limited to, ambient air, surface water, drinking water, groundwater, land surface, subsurface strata, river sediment, flora and fauna; Environmental Laws means all Applicable Laws as (now or hereafter in effect) relating to human health or safety or pollution, protection or clean up of the Environment, including, without limiting the generality of the foregoing, the Comprehensive Environmental Response Compensation and Liability Act, the Resource Conservation and Recovery Act, the Toxic Substance Control Act, The Clean Air Act, the Occupational, Safety and Health Act, and the provisions of the laws of the State of Colorado applicable to environmental, health and safety matters and any regulations promulgated thereunder. Release means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing of any Chemical Substance into the Environment. 6.16 Hold Harmless and Indemnity. 6.16.1 HSE shall indemnify, defend and hold harmless UTMC from and against any and all losses, costs, damages, claims, liabilities (whether based on strict liability or otherwise), demands, judgments or expenses whatsoever (including reasonable legal fees and expenses) (Losses) arising out of or in connection with: (i) any personal injury, death or property damage resulting from incidents occurring in or about the Premises and the Common Areas and caused by HSE or its agents, employees or invitees; (ii) any breach or default in the performance of any covenant or obligation to be performed by HSE under this Agreement, other than a breach or default in the performance of the covenants and obligations set forth in Section 6.15.1; (iii)any contamination of soil, water, air or groundwater on or at the Building or the land upon which it is situated to the extent that such contamination is attributable to actions or omissions to take actions of HSE or any of its employees, agents or invitees respecting such land, the Building or Premises during the Term; (iv) any contamination of soil, water, air or groundwater at any property other than the land upon which the Building is situated that is caused by or results from the generation, use, disposal or Release of any Chemical Substance by HSE at or from the Building (including the Premises) or the land upon which it is situated; or (v) any breach or default in the performance of any covenant or obligation to be performed by HSE under Section 6.15.1. provided that, in the case of (i) and (ii) above, HSE receives written notice of UTMCs claim in respect of such Losses, specifying in reasonable detail the basis therefor, on or before the date one (1) year following the earlier of (x) the last day of the Term and (y) the date on which this Agreement is terminated by HSE pursuant to Section 6.10 or 6.11; and that, in the case of (iii), (iv) and (v) above, HSE receives written notice of UTMCs claim in respect of such Losses, specifying in reasonable detail the basis therefor, on or before the date five (5) years following the earlier of (x) the last day of the Term and (y) the date on which this Agreement is terminated by HSE pursuant to Section 6.10 or 6.11. 6.16.2 UTC shall indemnify, defend and hold harmless UTMC from and against any and all Losses arising out of or in connection with any breach or default in the performance of any obligation to be performed by UTC under this Agreement; provided that UTC receives written notice of UTMCs claim in respect of such Losses, specifying in detail the basis therefor, on or before the date one (1) year following the earlier of (x) the last day of the Term and (y) the date on which this Agreement is terminated by HSE pursuant to Section 6.10 or 6.11 if UTMC fails to duly exercise its rights pursuant to Section 6.12. 6.16.3 UTMC shall indemnify, defend and hold harmless HSE and UTC from and against any and all Losses arising out of or in connection with: (i) any personal injury, death or property damage resulting from incidents occurring in or about the Building (including the Premises) and the land upon which it is situated and caused by UTMC or its agents, employees or invitees; (ii) any breach or default in the performance of any obligation to be performed by UTMC under this Agreement, other than a breach or default in the performance of the covenants and obligations set forth in Section 6.15.1; (iii)any contamination of soil, water, air or groundwater on or at the Building or the land upon which it is situated; provided, however, that UTMC shall have no obligation to indemnify HSE for contamination to the extent that such contamination is attributable to actions or omissions to take actions of HSE or any of its agents, employees or invitees respecting such land, the Building or Premises during the Term; (iv) any contamination of soil, water, air or groundwater at any property other than the land upon which the Building is situated that is caused by or results from the generation, use, disposal or Release of any Chemical Substance by UTMC at or from the Land or Building (including the Premises) or the land upon which it is situated; or (v) any breach or default in the performance of any covenant or obligation to be performed by UTMC under Section 6.15.1. provided that, in the case of (i) and (ii) above, UTMC receives written notice of HSEs claim in respect of such Losses, specifying in reasonable detail the basis therefor, on or before the date one (1) year following the earlier of (x) the last day of the Term and (y) the date on which this Agreement is terminated by HSE pursuant to Section 6.10 or 6.11; and that, in the case of (iii), (iv) and (v) above, UTMC receives written notice of HSEs claim in respect of such Losses, specifying in reasonable detail the basis therefor, on or before the date five (5) years following the earlier of (x) the last day of the Term and (y) the date on which this Agreement is terminated by HSE pursuant to Section 6.10 or 6.11; and provided further that, in the case of (i) and (ii) above, UTMC receives written notice of UTCs claim in respect of such Losses, specifying in reasonable detail the basis therefor, on or before the date one (1) year following the earlier of (x) the last day of the Term and (y) the date on which this Agreement is terminated by HSE pursuant to Section 6.10 or 6.11 if UTMC fails to duly exercise its rights pursuant to Section 6.12; and that, in the case of (iii), (iv) and (v) above, UTMC receives written notice of UTCs claim in respect of such Losses, specifying in reasonable detail the basis therefor, on or before the date five (5) years following the earlier of (x) the last day of the Term and (y) the date on which this Agreement is terminated by HSE pursuant to Section 6.10 or 6.11 if UTMC fails to duly exercise its rights pursuant to Section 6.12. 6.16.4 Notwithstanding Sections 6.16.1, 6.16.2 and 6.16.3, any claim for any Loss that HSE, UTC or UTMC may have against another under such Sections shall be reduced to the extent such party files a claim with and actually recovers in respect of such Loss from a third-party insurance carrier. 6.16.5 The rights and remedies under this Section 6.16 shall be deemed to be exclusive of all other rights and remedies that would otherwise be available to the parties hereto; provided that each of the parties hereto shall have the right to enforce their respective rights hereunder by an action or actions for specific performance, injunction or other appropriate equitable remedy. 6.17 Method of Asserting Claims, etc. The party or parties making a claim under Section 6.10 is, for purposes of this Agreement, referred to as the "Indemnified Party" and the party or parties against whom such claims are asserted under such Section is, for the purposes of this Agreement, referred to as the "Indemnifying Party." All claims by an Indemnified Party under this Agreement shall be asserted and resolved only as follows: 6.17.1 In the event that (i) any claim or demand for which an Indemnifying Party would be liable to an Indemnified Party hereunder is asserted against or sought to be collected from such Indemnified Party by a third party (such claim or demand, a "Third Party Claim") or (ii) any Indemnified Party hereunder should have a claim or demand against any Indemnifying Party hereunder which does not involve a claim or demand being asserted against or sought to be collected from it by a third party (such claim or demand a "Direct Claim"), the Indemnified Party shall with reasonable promptness notify in writing the Indemnifying Party of such claim or demand and the amount or the estimated amount thereof to the extent then feasible to determine (which estimate shall not be conclusive of the final amount of such claim or demand) (a "Claim Notice"); provided, however, that any failure to give such notice will not waive any rights of the Indemnified Party except to the extent the rights of the Indemnifying Party are actually prejudiced. 6.17.2 In the event of a Third Party Claim, the Indemnifying Party may, and upon request of the Indemnified Party shall, retain counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party and any others the Indemnifying Party may designate in connection with such claim or demand and shall pay the fees and disbursements of such counsel with regard thereto. In the event an Indemnifying Party shall retain such counsel, an Indemnified Party shall have the right to retain its own counsel, but the fees and disbursements of the Indemnified Party's counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and such Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) representation of such Indemnified Party by the counsel retained by the Indemnifying Party would be inappropriate due to actual or potential differing interests between such Indemnified Party and any other party represented by such counsel in such proceeding. It is understood that the Indemnifying Party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and disbursements of more than one separate firm qualified in such jurisdiction to act as counsel for the Indemnified Party. No Indemnifying Party shall be liable to an Indemnified Party for any settlement of any action or claim without the consent of the Indemnifying Party, which consent shall not be unreasonably withheld. The Indemnifying Party shall not, without the prior written consent of the Indemnified Party, settle or compromise any claim or consent to the entry of any judgment that (i) does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the Indemnified Party a release from all liability in respect of such claim or (ii) includes a statement or an admission of fault, culpability or a failure to act, by or on behalf of the Indemnified Party. 6.17.3 In the event of a Direct Claim, if the Indemnifying Party notifies the Indemnified Party within sixty (60) days of receipt of a Claim Notice that it does not dispute such claim, the amount of such claim shall be conclusively deemed a liability of the Indemnifying Party hereunder and shall be paid to the Indemnified Party immediately. ARTICLE VII MISCELLANEOUS 7.1 Governing Law. This Agreement shall be governed by the laws of the State of New York (regardless of the laws that might be applicable under the principles of conflicts of law) as to all matters, including but not limited to matters of validity, construction, effect and performance. 7.2 Notices. Unless otherwise specifically provided herein, all notices, consents, demands, directions, approvals, instructions, requests and other communications required or permitted by the terms hereof to be given to any party hereto shall be in writing and shall become effective when telecopied (provided a copy thereof is placed in the U.S. mail, postage prepaid, within 24 hours after telecopied), delivered by hand or overnight courier or three (3) business days after being mailed by registered first-class mail, postage prepaid, return receipt requested, and addressed to such party as provided below or at such other address as shall have been designated by such party for purposes of notice hereunder by notice to the other party hereto: If to UTMC: UTMC Microelectronic Systems Inc. 4350 Centennial Boulevard Colorado Springs, Colorado, 80907 Telecopier: 719-594-5541 Attention: President With required copy to: Aeroflex, Incorporated 35 South Service Road Plainview, New York 11803 Telecopier: 516-694-4823 Attention: President If to HSE: Hamilton Standard Electronics, Inc. 4350 Centennial Boulevard Colorado Springs, Colorado, 80907 Telecopier: 719-594-8501 Attention: President With required copy to: United Technologies Corporation Hamilton Standard Division One Hamilton Road, M/S 1-3-BC27 Windsor Locks, CT 06096-1010 Fax: 860-654-2621 Attention: Vice President, Contracts and Counsel If to UTC: United Technologies Corporation Hamilton Standard Division One Hamilton Road, M/S 1-3-BC27 Windsor Locks, CT 06096-1010 Fax: 860-654-2619 Attention: Presidents Office With required copy to: United Technologies Corporation Hamilton Standard Division One Hamilton Road, M/S 1-3-BC27 Windsor Locks, CT 06096-1010 Fax: 860-654-2621 Attention: Vice President, Contracts and Counsel 7.3 Dispute Resolution Procedure. Each party agrees that any legal disagreement, dispute, controversy or claim arising out of or relating to this Agreement, the interpretation hereof, the relationship contemplated hereby, or the breach, termination or invalidity hereof (a Legal Dispute) shall be settled as set forth below. Except as specifically provided in Section 7.3.4, it is understood and agreed that no action at law or equity in respect of any Legal Dispute shall be commenced until the dispute resolution mechanism set forth below has been exhausted completely. 7.3.1 In the event a Legal Dispute arises, upon written request of UTMC, on the one hand, or UTC or HSE, on the other, the President of each of UTMC and HSE shall meet within ten (10) days of such request to attempt through good faith negotiation to reach a common decision concerning the Legal Dispute. If a resolution is reached it will be binding upon the parties hereto. 7.3.2 If the President of UTMC and the President of HSE have not been able to resolve the Legal Dispute within fifteen (15) days following such written request, then the President of the Hamilton Standard Division of UTC shall meet with the President of Aeroflex to attempt through good faith negotiation to reach a common decision concerning the Legal Dispute. If a resolution is reached it will be binding upon the parties hereto. 7.3.3 In the event the President of the Hamilton Standard Division and the President of Aeroflex have not been able to resolve the Legal Dispute within thirty (30) days following such written request, the parties to the Legal Dispute shall be free to pursue any and all available remedies at law or in equity. 7.3.4 This Section 7.3 shall not prohibit or limit in any way any party hereto from seeking or obtaining preliminary or interim injunctive or other equitable relief from a court of competent jurisdiction. 7.4 No Consequential Damages. Notwithstanding anything to the contrary contained in this Agreement, in no event shall a party hereto be liable to another for any special, punitive, incidental or consequential damages. 7.5 Benefits Cumulative. Each and every right, remedy and benefit provided by this Agreement shall be cumulative and shall not be exclusive of any other of said rights, remedies, and benefits allowed by law. 7.6 Waiver. Waiver by any party of strict performance of any provision of this Agreement shall not be a waiver of or prejudice the partys right to require strict performance of the same provision in the future. Any waiver, to be effective, must be in writing and signed by the party waiving compliance. 7.7 Legally Binding. This Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, representatives, successors and permitted assigns. 7.8 Section Headings. Section headings are inserted in this Agreement for convenience only and are not to be construed as restricting the meaning of the section to which they refer. 7.9 Entire Agreement. This Agreement and the Exhibits and Schedules attached hereto (as such Schedules may be updated pursuant to Section 3.3) embody the entire agreement of the parties with regard to the subject matter of this Agreement. This Agreement supersedes all prior communications, representations, or agreements, verbal or written, between the parties to it and may not be amended except in a writing signed by the party affected by the change. 7.10 Recording. At the request of HSE, the parties shall promptly execute and record, at HSEs cost and expense, a short form agreement or memorandum of agreement describing the Premises and stating the Term and such other information as is appropriate to effect a valid filing. 7.11 Severability. If any provision of this Agreement is found by a court of competent jurisdiction to be illegal, invalid or unenforceable, the remainder of this Agreement will not be affected and shall continue in effect and be enforceable to the fullest extent permitted by law. 7.12 Construction Against Drafter. UTMC, UTC, HSE and each of their advisors agree that this Agreement is the product of all of their efforts, that it expresses their agreement, and that it should not be interpreted in favor of UTMC, UTC or HSE or against UTMC, UTC or HSE merely because of their efforts in preparing it. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their officers thereunto duly authorized, as of the day and year first above written. UTMC MICROELECTRONIC SYSTEMS INC. By: /s/ Michael Gorin Name: Title: HAMILTON STANDARD ELECTRONICS, INC. By: /s/ Tom Rogan Name: Title: UNITED TECHNOLOGIES CORPORATION Hamilton Standard Division By: /s/ Chester Paul Beach, Jr. Name: Chester Paul Beach, Jr. Title: Vice President, Contracts and Counsel Agreed with respect to Section 7.3 only: AEROFLEX, INC. By:________________________________ Name: Michael Gorin Title: President EX-10.3 5 ASSIGNMENT AND LICENSE-BACK AGREEMENT ---------------------- This AGREEMENT (this "Agreement") is made as of this 25th day of February, 1999 by and between UTMC MICROELECTRONIC SYSTEMS INC., a Delaware corporation with its principal offices located at 4350 Centennial Boulevard, Colorado Springs, Colorado (hereinafter ("UTMC"), and UNITED TECHNOLOGIES CORPORATION, a Delaware corporation doing business through its HAMILTON STANDARD DIVISION having a place of business at One Hamilton Road, Windsor Locks, Connecticut (hereinafter "UTC"). W I T N E S S E T H: ------------------- WHEREAS, contemporaneously herewith, UTC is entering into a Common Stock Purchase Agreement to sell all of the common stock of UTMC to Aeroflex Incorporated on the terms and subject to the conditions set forth therein (the "Stock Purchase Agreement"); and WHEREAS, in connection with the sale and purchase of UTMC's stock, UTC desires to transfer to UTMC, and UTMC desires to accept, all of UTC's rights, title and interest in, to and under certain intellectual property used by UTMC in connection with its business, subject to the grantback by UTMC to UTC of a non-exclusive, royalty-free license to such intellectual property, on the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the recitals and the mutual promises and covenants contained in this Agreement, the parties agree as follows: 1. Transfer and Assignment. (a) Subject to the terms and conditions of this Agreement, UTC hereby assigns, transfers, conveys, delivers and grants to UTMC, and UTMC hereby accepts, all right, title and interest of UTC in, to and under the patents, patent applications and active patent projects listed on Attachment 1 (the "Intellectual Property"), for UTMC's own use and enjoyment and for the use and enjoyment of UTMC's successors, assigns or other legal representatives. UTC hereby requests the Commissioner of Patents and Trademarks or other appropriate governmental authority (whether foreign or domestic) to record UTMC as the assignee and owner of the Intellectual Property. 2. Further Assurances. Consistent with the terms and conditions hereof, UTC shall execute, acknowledge and deliver to UTMC such deeds, assignments, endorsements, certificates and other further instruments of transfer and conveyance and shall take such further action as may be reasonably necessary to more effectively assign, transfer, convey and grant to UTMC the Intellectual Property. 3. License to UTC. UTMC hereby grants to UTC a perpetual, non-exclusive, royalty-free, worldwide license under the Intellectual Property for the sole purpose of designing, developing and manufacturing integrated circuits and such other products as may fall within the scope of the Intellectual Property (the "Subproducts"), for UTC's internal manufacturing and assembly requirements in connection with the sale by UTC of products into which such Subproducts are incorporated, including the servicing and replacement by UTC of such Subproducts (the "Purpose"). UTC shall have the right to grant sublicenses of its rights hereunder for the Purpose to any individual, corporation, limited liability company, partnership or other entity (each, a "Person") that controls, is controlled by or is under common control with UTC. The term "control" (including, with correlative meaning, the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; provided, that the beneficial ownership of over 50 percent of the issued and outstanding voting securities of a Person shall be conclusively deemed to constitute "control" of such Person. UTC shall also have the right to sublicense the Intellectual Property to any supplier or other third party solely for the Purpose. 4. Transfers. UTMC may not transfer ownership of any Intellectual Property unless such transfer is expressly subject to the license granted to UTC herein. 5. Applications; Maintenance. UTMC shall have no obligation under this Agreement to file any patent applications or to secure any patent or maintain any patent in force. However, in the event UTMC decides to abandon the prosecution of or not pay the maintenance fee for a Patent, UTMC shall give UTC the opportunity to continue the prosecution, or to pay the maintenance fee, at UTC's expense. If UTC should elect to continue such prosecution or to pay such maintenance fee with respect to such Patent, UTMC shall promptly transfer to UTC all of UTMC's right, title and interest in, to and under such Patent, at no cost to UTMC. 6. Disclaimers. (a) EXCEPT AS EXPRESSLY SET FORTH IN THE STOCK PURCHASE AGREEMENT, UTC MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE INTELLECTUAL PROPERTY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OR SCOPE OF ANY OF THE INTELLECTUAL PROPERTY OR THAT ANY OF THE INTELLECTUAL PROPERTY DOES NOT INFRINGE THE RIGHTS OF OTHERS, AND UTC SHALL HAVE NO LIABILITY ARISING OUT OF ANY PRODUCT MADE BY UTMC OR ITS SUBLICENSEES UNDER THE INTELLECTUAL PROPERTY. (b) UTMC MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE INTELLECTUAL PROPERTY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OR SCOPE OF ANY OF THE INTELLECTUAL PROPERTY OR THAT ANY OF THE INTELLECTUAL PROPERTY DOES NOT INFRINGE THE RIGHTS OF OTHERS, AND UTMC SHALL HAVE NO LIABILITY ARISING OUT OF ANY PRODUCT MADE BY UTC OR ITS SUBLICENSEES UNDER THE INTELLECTUAL PROPERTY. 7. Governing Law. This Agreement shall be governed by the laws of the State of New York (regardless of the laws that might be applicable under the principles of conflicts of law), as to all matters, including but not limited to matters of validity, construction, effect and performance. 8. Notices. Unless otherwise specifically provided herein, all notices, consents, demands, directions, approvals, instructions, requests and other communications required or permitted by the terms hereof to be given to any party hereto shall be in writing and shall become effective when telecopied (provided a copy thereof is placed in the U.S. mail, postage prepaid, within 24 hours after telecopied), delivered by hand or overnight courier or three (3) business days after being mailed by registered first-class mail, postage prepaid, return receipt requested, and addressed to such party as provided below or at such other address as shall have been designated by such party for purposes of notice hereunder by notice to the other party hereto: If to UTMC: UTMC Microelectronic Systems Inc. 4350 Centennial Boulevard Colorado Springs, Colorado, 80907 Telecopier: 719-594-5541 Attention: President With required copy to: Aeroflex, Incorporated 35 South Service Road Plainview, New York 11803 Telecopier: 516-694-4823 Attention: President If to UTC: United Technologies Corporation Hamilton Standard Division One Hamilton Road, M/S 1-3-BC27 Windsor Locks, CT 06096-1010 Fax: 860-654-2619 Attention: President's Office With required copy to: United Technologies Corporation Hamilton Standard Division One Hamilton Road, M/S 1-3-BC27 Windsor Locks, CT 06096-1010 Fax: 860-654-2621 Attention: Vice President, Contracts and Counsel 9. No Third-Party Beneficiaries. This Agreement is intended solely for the benefit of the parties hereto and is not intended to confer benefits upon, or create any rights in favor of, any third person or entity and no such third party or entity may bring a claim based on rights or obligations set forth herein. 10. Waiver. Waiver by any party of strict performance of any provision of this Agreement shall not be a waiver of or prejudice the party's right to require strict performance of the same provision in the future. Any waiver, to be effective, must be in writing and signed by the party waiving compliance. 11. Legally Binding. This Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, representatives, successors and permitted assigns. Subject to the provisions of Section 4, UTMC may assign its rights and obligations under this Agreement. UTC may not assign or otherwise transfer any of its rights or obligations hereunder; provided, that UTC may assign this Agreement to any Person resulting from the merger or consolidation of UTC with such Person or to any Person that acquires all or substantially all of UTC's assets as a going concern, as long as such Person assumes the obligations of UTC. In the event of any such assignment of this Agreement by UTC, UTC (to the extent it shall continue in existence) shall guarantee the performance of the assignee's obligations hereunder. 12. Remedies. (a) The parties acknowledges that a breach of this Agreement by a party may cause irreparable and continuing damage to the other party and agree that such other party shall therefore be entitled to injunctive or other equitable relief, without the necessity of posting a bond, from any court of competent jurisdiction restraining any further violation of this Agreement and that such injunctive relief shall be cumulative and in addition to any other rights or remedies to which the non-breaching party may be entitled. (b) UTMC shall have the right to terminate this Agreement if UTC is in material breach of this Agreement and such breach remains uncured for a period of sixty (60) days following written notice thereof to UTC by UTMC. 13. Entire Agreement. This Agreement, together with Attachment 1, embody the entire agreement of the parties with regard to the subject matter of this Agreement. This Agreement supersedes all prior communications, representations, or agreements, verbal or written, between the parties to it and may not be amended except in a writing signed by the party affected by the change. 14. Severability. If any provision of this Agreement is found by a court of competent jurisdiction to be illegal, invalid or unenforceable, the remainder of this Agreement will not be affected and shall continue in effect and be enforceable to the fullest extent permitted by law. 15. Consent to Jurisdiction. UTC and UTMC each irrevocably consent that any legal action or proceeding against either of them under, arising out of or in any manner relating to, this Agreement may be brought in any court of the State of New York located within Nassau County or New York County or in the United States District Court for the Eastern or Southern District of New York. UTC and UTMC by the execution and delivery of this Agreement expressly and irrevocably consent and submit to the personal jurisdiction of any of such courts in any such action or proceeding. UTC and UTMC further irrevocably consent to the service of any complaint, summons, notice or other process relating to any such action or proceeding by delivery thereof to it by hand or by any other manner provided for in Section 8. UTC and UTMC hereby expressly and irrevocably waive any claim or defense in any such action or proceeding based on any alleged lack of personal jurisdiction, improper venue or inconvenient forum or any similar basis. Nothing in this Section shall affect or impair in any manner or to any extent the right of either party to commence legal proceedings or otherwise proceed against the other in any jurisdiction or to serve process in any manner permitted by law. 16. Indemnification. (a) UTMC shall indemnify, defend and hold harmless UTC and its officers, directors, employees and affiliates, on an after-tax benefit basis, from and against any claims, liabilities, losses, damages or expenses that are caused by or arise out of any breach or default in the performance by UTMC of any covenant or agreement of UTMC contained herein. (b) UTC shall indemnify, defend and hold harmless UTMC and its officers, directors, employees and affiliates, on an after-tax benefit basis, from and against any claims, liabilities, losses, damages or expenses that are caused by or arise out of any breach or default in the performance by UTC of any covenant or agreement of UTC contained herein. 17. No Consequential Damages. Notwithstanding anything to the contrary contained in this Agreement, in no event shall a party hereto be liable to another for any special, punitive, incidental or consequential damages. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their officers thereunto duly authorized, as of the day and year first above written. UNITED TECHNOLOGIES CORPORATION Hamilton Standard Division By: /s/ Chester Paul Beach, Jr. --------------------------------------------- Name: Chester Paul Beach, Jr. Title: Vice President, Contracts and Counsel UTMC MICROELECTRONIC SYSTEMS INC. By:/s/ Michael Gorin --------------------------------------------- Name: Title: EX-10.4 6 FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT -among- AEROFLEX INCORPORATED (f/k/a ARX, Inc.), AEROFLEX LABORATORIES INCORPORATED, AEROFLEX INTERNATIONAL INC., AEROFLEX LINTEK CORP. AEROFLEX SYSTEMS CORP., COMSTRON INTERNATIONAL, S.A.R.L., MIC TECHNOLOGY CORPORATION, MIC TECHNOLOGY S.A.R.L., VIBRATION MOUNTINGS AND CONTROLS, INC. and UTMC MICROELECTRONIC SYSTEMS INC., as Borrowers, -and- THE CHASE MANHATTAN BANK and FLEET BANK, N.A., as Banks, -and- FLEET BANK, N.A., as Administrator Dated as of: February 25, 1999 TABLE OF CONTENTS ----------------- Section Title Page - ------- ----- ---- Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Article I Definitions 1.01 Certain Defined Terms. . . . . . . . . . . . . . . . . .2 1.02 Certain Definitions in Other Loan Instruments. . . . . 20 1.03 Pronouns . . . . . . . . . . . . . . . . . . . . . . . 20 Article II Amounts and Terms of the Obligations 2.01 The Revolving Credit Loans. . . . . . . . . . . . . . . 20 2.02 The Term Loans and Mortgage Loans . . . . . . . . . . . 21 2.03 The Notes . . . . . . . . . . . . . . . . . . . . . . . 21 2.04 Interest; Optional Fixed Rates; Additional Interest . . 21 2.05 Voluntary and Mandatory Payments. . . . . . . . . . . . 24 2.06 Commitment Fee; Restructure Fee; Administration Fee; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 26 2.07 Letters of Credit . . . . . . . . . . . . . . . . . . . 26 2.08 Payments and Applications . . . . . . . . . . . . . . . 30 2.09 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 31 2.10 Lost or Damaged Notes . . . . . . . . . . . . . . . . . 31 2.11 Maximum Interest Rate . . . . . . . . . . . . . . . . . 31 2.12 Obligations and Communications of the Borrowers . . . . 31 2.13 Subrogation and Contribution. . . . . . . . . . . . . . 32 2.14 Waiver of Impairment of Contribution and Other Rights . 32 2.15 Guaranty of Payment and Expenses. . . . . . . . . . . . 33 2.16 Continuing Guaranty, Payment in Accordance with Terms, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 33 2.17 Waivers of Notice, Etc. . . . . . . . . . . . . . . . . 33 2.18 Agreement Not Affected. . . . . . . . . . . . . . . . . 34 2.19 Bankruptcy; Reinstatement . . . . . . . . . . . . . . . 34 2.20 Transitional Matters. . . . . . . . . . . . . . . . . . 35 Article III Representations and Warranties 3.01 Organization, Powers, Etc. . . . . . . . . . . . . . . 35 3.02 Authorization, Conflicts and Validity . . . . . . . . . 35 3.03 Consents, Etc. . . . . . . . . . . . . . . . . . . . . 36 3.04 Litigation. . . . . . . . . . . . . . . . . . . . . . . 36 3.05 Financial Statements. . . . . . . . . . . . . . . . . . 36 3.06 Absence of Defaults and Certain Agreements. . . . . . . 37 3.07 Compliance with Applicable Laws . . . . . . . . . . . . 37 3.08 Payment of Debts and Taxes. . . . . . . . . . . . . . . 37 3.09 Indebtedness, Credit Support, ERISA Plans, Etc. . . . . 37 3.10 Assets and Collateral . . . . . . . . . . . . . . . . . 38 3.11 Subsidiaries, Other Ventures, Loans and Other Investments . . . . . . . . . . . . . . . . . . . . . . 41 3.12 Relationship of the Borrowers . . . . . . . . . . . . . 41 3.13 Securities, Etc. . . . . . . . . . . . . . . . . . . . 41 3.14 Federal Reserve Regulations, No Restriction on Borrowing, Etc. . . . . . . . . . . . . . . . . . . . 41 3.15 No Misrepresentation by the Borrowers . . . . . . . . . 41 Article IV Conditions to Lending 4.01 Representations and Warranties. . . . . . . . . . . . . 42 4.02 No Default. . . . . . . . . . . . . . . . . . . . . . . 42 4.03 Borrowers' Bringdown Certificate. . . . . . . . . . . . 43 4.04 Delivery of the Loan Instruments and Collateral . . . . 43 4.05 Opinion of Counsel to the Borrowers, Etc. . . . . . . . 43 4.06 Supporting Documents. . . . . . . . . . . . . . . . . . 43 4.07 Minimum Availability. . . . . . . . . . . . . . . . . . 43 Article V Affirmative Covenants 5.01 Required Notices. . . . . . . . . . . . . . . . . . . . 43 5.02 Accounts and Reports. . . . . . . . . . . . . . . . . . 44 5.03 Access to Premises, Records and Collateral. . . . . . . 47 5.04 Existence, Corporate Documents, Powers, Etc. . . . . . 48 5.05 Compliance with Applicable Laws; Operations . . . . . . 48 5.06 Payment of Debts, Taxes, Etc. . . . . . . . . . . . . . 48 5.07 Maintenance and Insurance . . . . . . . . . . . . . . . 48 5.08 Contracts and Other Collateral. . . . . . . . . . . . . 49 5.09 Defense of Collateral, Etc. . . . . . . . . . . . . . . 49 5.10 Margin Stock Regulation Compliance. . . . . . . . . . . 49 5.11 Maintenance of Borrowing Base . . . . . . . . . . . . . 50 5.12 Additional Subsidiary Borrowers . . . . . . . . . . . . 50 Article VI Negative Covenants 6.01 Certain Financial Requirements. . . . . . . . . . . . . 50 6.02 Indebtedness. . . . . . . . . . . . . . . . . . . . . . 51 6.03 Credit Support. . . . . . . . . . . . . . . . . . . . . 52 6.04 Liens . . . . . . . . . . . . . . . . . . . . . . . . . 52 6.05 Sale or Disposition of Collateral, Etc. . . . . . . . . 52 6.06 Investments, Loans, Advances, Etc. . . . . . . . . . . 52 6.07 Certain Fundamental Changes . . . . . . . . . . . . . . 53 6.08 Distributions to Shareholders . . . . . . . . . . . . . 53 6.09 Use of Loans. . . . . . . . . . . . . . . . . . . . . . 53 6.10 ERISA Plans . . . . . . . . . . . . . . . . . . . . . . 53 6.11 Transactions with Affiliates. . . . . . . . . . . . . . 54 6.12 Modification of the Subordinated Debt Documents, Etc. . 54 6.13 Modification of the Equipment Finance Documents . . . . 54 6.14 Modification of the Purchase Documents. . . . . . . . . 55 6.15 Modification of the Pearl River Financing Documents . . 55 6.16 Modification of the Rights Agreement, Etc.. . . . . . . 55 Article VII Collateral 7.01 Continuation and Grant of Security Interests. . . . . . 55 7.02 Collateral Documentation. . . . . . . . . . . . . . . . 57 7.03 Rights of the Borrowers to the Collateral, Etc. . . . . 59 7.04 Partial Releases. . . . . . . . . . . . . . . . . . . . 60 7.05 Litigation Respecting Collateral. . . . . . . . . . . . 61 7.06 Power of Attorney . . . . . . . . . . . . . . . . . . . 61 7.07 Rights of the Banks to the Collateral, Deficiencies, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 62 7.08 Performance by the Administrator. . . . . . . . . . . . 64 7.09 Certain Acknowledgments and Waivers by the Borrowers. . 64 7.10 Termination of Security Interests . . . . . . . . . . . 65 Article VIII Defaults and Remedies 8.01 Events of Default . . . . . . . . . . . . . . . . . . . 65 8.02 Remedies upon Default . . . . . . . . . . . . . . . . . 67 8.03 Enforcement, Etc. . . . . . . . . . . . . . . . . . . . 68 8.04 Equitable Relief. . . . . . . . . . . . . . . . . . . . 68 8.05 Consent to Jurisdiction, Waiver of Personal Service, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 68 8.06 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . 69 8.07 Waiver of Setoff, Special Damages, Etc. . . . . . . . . 69 8.08 No Fiduciary Relationship, Etc. . . . . . . . . . . . . 69 8.09 Banks' Right of Setoff, Etc.. . . . . . . . . . . . . . 69 Article IX The Administrator and the Banks 9.01 Appointment of Administrator. . . . . . . . . . . . . . 70 9.02 Undivided Interest and Committed Share, Etc. . . . . . 70 9.03 Notice of Intent Not to Advance; Letters of Credit. . . 71 9.04 Collection and Distribution . . . . . . . . . . . . . . 72 9.05 Direct Billing, Fixed Rates, Additional Interest, Etc. 73 9.06 Voting Rights, Etc. . . . . . . . . . . . . . . . . . . 74 9.07 Powers and Duties of the Administrator, Etc. . . . . . 75 9.08 Notices and Knowledge of Events of Default, Etc. . . . 75 9.09 Administration During Certain Events of Default . . . . 76 9.10 Reports and Information . . . . . . . . . . . . . . . . 77 9.11 Banks' Representations, Warranties and Covenants. . . . 77 9.12 Credit Waivers and Exculpations . . . . . . . . . . . . 77 9.13 Reliance on Documents and Experts . . . . . . . . . . . 78 9.14 Status and Liability of the Administrator, Etc. . . . . 78 9.15 Banks' Risk of Loss; Expenses; Indemnification. . . . . 78 9.16 Invalidation of Distributions . . . . . . . . . . . . . 79 9.17 No Waiver of Rights, Independent Transactions, Etc. . . 79 9.18 Communications with the Borrowers . . . . . . . . . . . 80 9.19 Delinquent Banks. . . . . . . . . . . . . . . . . . . . 80 9.20 No Third Party Rights . . . . . . . . . . . . . . . . . 80 9.21 Resignation and Successor Administrator . . . . . . . . 80 9.22 Delegation of Duties by Administrator . . . . . . . . . 81 Article X Miscellaneous 10.01 Notice. . . . . . . . . . . . . . . . . . . . . . . . . 81 10.02 Expenses of the Administrator and the Banks . . . . . . 81 10.03 Further Assurances. . . . . . . . . . . . . . . . . . . 82 10.04 Reliance, Exculpation and Indemnification . . . . . . . 82 10.05 Interpretation. . . . . . . . . . . . . . . . . . . . . 83 10.06 Section and Other Headings. . . . . . . . . . . . . . . 83 10.07 Provisions of the Notes and Collateral Loan Instruments 83 10.08 Governing Law . . . . . . . . . . . . . . . . . . . . . 83 10.09 Severability. . . . . . . . . . . . . . . . . . . . . . 83 10.10 Survival of Representations, Etc. . . . . . . . . . . . 83 10.11 Counterparts. . . . . . . . . . . . . . . . . . . . . . 84 10.12 Effective Date. . . . . . . . . . . . . . . . . . . . . 84 10.13 Successors and Assigns; Assignment. . . . . . . . . . . 85 10.14 Limits on the Administrator's Ability to Act, Etc. . . 86 10.15 No Third Party Rights . . . . . . . . . . . . . . . . . 86 10.16 No Waiver by Action, Etc. . . . . . . . . . . . . . . . 86 10.17 Modification, Amendment, Etc. . . . . . . . . . . . . . 88 10.18 Entire Agreement. . . . . . . . . . . . . . . . . . . . 88 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Acknowledgments. . . . . . . . . . . . . . . . . . . . . . . . . 90 EXHIBITS -------- Item Section Title Page - ---- ------- ----- ---- Exhibit A 2.03(a) Form of Fifth Amended and Restated Revolving Promissory Note . . . . . . A-1 Exhibit B 2.03(b) Form of Term Promissory Note . . . . B-1 Exhibit C 2.03(c) Form of Mortgage Note . . . . . . . . C-1 Exhibit D 4.03 Form of Bringdown Certificate . . . . D-1 Exhibit E-I 5.02(e) Form of Financial Covenants Compliance Certificate . . . . . . . . . . . . . E-I-1 Exhibit E-II 5.02(f) Form of Borrowing Base Certificate. . E-II-1 Exhibit F 9.02(a) Committed Shares . . . . . . . . . . F-1 Exhibit G 9.04(c) Wire Instructions . . . . . . . . . . G-1 Exhibit H 9.21(b) Form of Assignment and Assumption Agreement . . . . . . . . . . . . . . H-1 Exhibit I 10.01 Addresses for Notices and Service . . I-1 SCHEDULES --------- Item Title - ---- ----- Schedule 3.01(c) Qualifications, Licenses and Registrations Schedule 3.03 Required Consents Schedule 3.04 Litigation Schedule 3.06 Certain Existing Defaults and Adverse Agreements Schedule 3.07 Certain Violations of Applicable Law Schedule 3.09(a) Existing Indebtedness Schedule 3.09(b) Existing Credit Support Schedule 3.09(c) Existing ERISA Plans Schedule 3.10(a) Existing Liens and Encumbrances Schedule 3.10(d) Other Locations of Collateral and Other Assets Schedule 3.10(e) Certain Accounts Receivable Schedule 3.10(f) Pledged Securities Schedule 3.10(g) Certain Contracts and other General Intangibles Schedule 3.10(i) Certain Violations of Applicable Law Schedule 3.10(j) Patents and Trademarks Schedule 3.11 Subsidiaries, Partnerships and Other Ventures Schedule 6.02(b) Existing Operating Leases Schedule 6.06(b) Existing Investments Introduction ------------ This Fourth Amended and Restated Loan and Security Agreement, dated as of February 25, 1999, is by and among Aeroflex Incorporated, a Delaware corporation formerly known as ARX, Inc., and currently having an address at 35 South Service Road, Plainview, New York 11803 ("Aeroflex"), Aeroflex Laboratories Incorporated, a Delaware corporation currently having an address at 35 South Service Road, Plainview, New York 11803 ("Laboratories"), Aeroflex International Inc., a Delaware corporation currently having an address at 35 South Service Road, Plainview, New York 11803 ("International"), Aeroflex Lintek Corp., an Ohio corporation currently having an address at 383 North Liberty Road, Powell, Ohio 43065 ("Lintek"), Aeroflex Systems Corp., a Delaware corporation currently having an address at 35 South Service Road, Plainview, New York 11803 ("Systems"), Comstron International, S.A.R.L., a French corporation currently having an address at 4 Centre Administratif Des #7, MARES, 78990, Elancourt, France ("Comstron"), MIC Technology Corporation, a Texas corporation currently having an address at 797 Turnpike Street, North Andover, Massachusetts 01845 ("MIC"), MIC Technology S.A.R.L. (a\k\a S.A.R.L. MIC Technology and S.A.R.L. MIC Technologie), a French corporation currently having an address at 15, Rue Boudeville, Thibaud Center, 31100 Toulouse, France ("MICSARL"), Vibration Mountings and Controls, Inc., a New York corporation currently having an address at 113 Main Street, Box 37, Bloomingdale, New Jersey 07403 ("Vibrations"), and UTMC Microelectronic Systems Inc., a Delaware corporation currently having an address at 4350 Centennial Boulevard, Colorado Springs, Colorado 80907 ("UTMC", and, together with Aeroflex, Laboratories, International, Lintek, Systems, Comstron, MIC, MICSARL, Vibrations and UTMC, individually a "Borrower" and collectively the "Borrowers"), The Chase Manhattan Bank, a New York state banking corporation formerly known as Chemical Bank and currently having an address at 7600 Jericho Turnpike, Suite 306, Woodbury, New York 11797 ("Chase"), Fleet Bank, N.A. as successor to (by merger with) NatWest Bank USA (f/k/a National Westminster Bank USA), a national banking association currently having an address at 300 Broad Hollow Road, Melville, New York 11747 ("Fleet"), and Fleet Bank N.A., as Administrator, as successor to (by merger with) NatWest Bank N.A. (f/k/a National Westminster Bank USA), a national banking association currently having an address at 300 Broad Hollow Road, Melville, New York 11747 (the "Administrator"). Recitals The Borrowers, the Banks (as these and the other capitalized terms used and not otherwise defined in these Recitals are defined in Article I hereof) and the Administrator are parties to the Existing Loan Agreement, pursuant to which the Banks continued a committed revolving credit facility of $27,000,000. The Existing Loan Agreement is secured by the Existing Collateral granted by the Borrowers to the Administrator (for the benefit of all of the Banks) under the Existing Loan Agreement. The Borrowers have requested that the Banks extend the existing facility and modify various financial and other covenants, and the Banks have agreed to do so. The Borrowers also have requested that $4,484,000 in existing revolving credit loans be converted into and continued as Mortgage Loans, and Aeroflex has offered to collateralize the Mortgage Loans with a mortgage on the Plainview facility located at 35 South Service Road, Plainview, New York 11803 under, and the other assets and properties described in, the Plainview Mortgage in favor of the Administrator (for the benefit of all of the Banks). The Borrowers and the Banks have entered into this Agreement in order to (a) provide funds for the acquisition of all of the issued and outstanding common stock of UTMC, continue and restructure the existing loan facilities and provide for the working capital needs of the Borrowers, (b) decrease the maximum principal amount of the Commitment to $23,000,000 ($3,000,000 of which may be requested as Letters of Credit), (c) reinstate a term loan facility and advance $20,000,000 in Term Loans under this Agreement, (d) institute an additional term loan facility and advance $4,484,000 in Mortgage Loans under this Agreement (which Mortgage Loans shall be secured by the Plainview Mortgage), the proceeds of which will be used to refinance $4,484,000 of the Revolving Credit Loans outstanding as of the date hereof under the Existing Loan Agreement, (e) confirm and continue the indebtedness, other obligations and security interests created under the Existing Loan Agreement and other Existing Loan Instruments, (f) provide for continue, modify (in various respects), add to and restate the representations, warranties, covenants and other obligations originally made in or created under the Existing Loan Agreement and other Existing Loan Instruments, and (g) amend, restate and completely replace the Existing Loan Agreement, all upon the terms and provisions and subject to the conditions hereinafter set forth. Agreement --------- In consideration of the foregoing and the mutual covenants and agreements hereinafter set forth, and other good and valuable consideration (the receipt and adequacy of which are hereby acknowledged by the parties hereto), the parties hereto hereby agree as follows: ARTICLE I Definitions ----------- Section 1.01. Certain Defined Terms. As used in this Agreement, the following capitalized terms and non-capitalized words and phrases shall have the meanings respectively assigned to them below, which meanings shall be applicable equally to the singular and plural forms of the terms so defined: "Account Receivable" and "Accounts Receivable" of any referenced person shall respectively mean any and all of the referenced person's accounts and other rights to receive payments for goods and other products sold or leased or for services rendered, whether or not earned by performance, recognized by the referenced person or recorded on its books and records, and irrespective of whether any such items may be characterized as accounts, chattel paper, choses-in-action, contract rights, general intangibles, instruments, invoices, notes or otherwise in any document, by any person or under any Applicable Law. "Adjusted Eurocurrency Rate shall mean the rate of interest equal to the rate per annum (rounded upward to the nearest whole multiple of 1/100th of 1% per annum, if such amount is not such a multiple) obtained by dividing (a) the rate (rounded upwards, if necessary, to the next 1/100th of 1% per annum, if such amount is not such a multiple) at which deposits in United States Dollars (i) approximately equal to Chase's share of the portion of the Loans to which such rate is to apply and (ii) for a duration equal to the proposed Interest Period for such portion (as selected by the Borrowers as provided in Section 2.04 hereof) are offered by Chase in immediately available funds in an interbank market for eurodollars (as selected by Chase) at approximately 11:00 A.M. (New York City time) two (2) Business Days prior to the commencement of such Interest Period, by (b) a percentage equal to 100% minus the applicable Reserve Percentage for such Interest Period. The Adjusted Eurocurrency Rate shall change from time to time simultaneously with each corresponding change in the applicable Reserve Percentage, including (without limitation) changes within Interest Periods. "Adjusted LIBO Rate" shall mean the rate of interest equal to the rate per annum (rounded upward to the nearest whole multiple of 1/100th of 1% per annum, if such amount is not such a multiple) obtained by dividing (a) the rate of interest per annum (rounded upward to the nearest whole multiple of 1/100th of 1% per annum, if such amount is not a multiple) determined by the Administrator at which deposits in United States Dollars are offered in the London interbank market by any reference bank selected by the Administrator (which may be Fleet or any of its affiliates) at 11:00 A.M. (London time) two (2) Business Days before the first day of such Interest Period (i) in an amount approximately equal or comparable to Fleet's share of the portion of the Loans to which such rate is to apply and (ii) with a maturity equal to the Interest Period for such portion (as selected by the Borrowers as provided in Section 2.04 hereof), by (b) a percentage equal to 100% minus the applicable Reserve Percentage for such Interest Period. The Adjusted LIBO Rate shall change from time to time simultaneously with each corresponding change in the applicable Reserve Percentage, including (without limitation) changes within Interest Periods. "Administrator" shall mean Fleet or such other person as from time to time may be designated as "Administrator" in accordance with Section 9.21 hereof. "Advance" shall have the meaning assigned to it in Section 2.01(b) hereof. "Advance Date" shall mean either (a) the date duly requested by the Borrowers under Section 2.01(b) for a particular Advance, or (b) the actual date of the Advance if made, as applicable. "Aeroflex" shall have the meaning assigned to it in the Introduction. "affiliate" of a referenced person shall mean (a) another person controlling, controlled by or under common control with such referenced person, (b) any other person beneficially owning or controlling ten percent (10%) or more of the outstanding voting securities or rights or of the interest in the capital, distributions or profits of the referenced person, or (c) any director, officer or other executive or partner, member or joint venturer in the referenced person. The terms "control", "controlling", "controlled" and the like shall mean the direct or indirect possession of the power to direct or cause the direction of the management or policies of a person or the disposition of its assets or properties, whether through ownership, by contract, arrangement or understanding, or otherwise. "Agreement" shall mean this Fourth Amended and Restated Loan and Security Agreement, together with all schedules and exhibits hereto, as the same may be supplemented, modified, amended, restated or replaced from time to time in the manner provided herein. "Applicable Euro Margin Rate" shall mean the fluctuating rate of interest per annum equal to the rate set forth below for the indicated types of Loans corresponding to the Applicable Pricing Level then applicable:
Applicable Pricing Level Level 1 Level 2 Level 3 - ------------------------ ------- ------- ------- Applicable Euro Margin Rate for Revolving Credit Loans: 1.00% 1.50% 1.75% Applicable Euro Margin Rate for Term Loans: 1.25% 1.75% 2.00% Applicable Euro Margin Rate for Mortgage Loans: 1.50% 1.50% 1.50%
The Applicable Euro Margin Rate shall change from time to time simultaneously with each change in the Applicable Pricing Level. "Applicable Euro Rate" shall mean the rate of interest in effect for a particular Interest Period with respect to the portion of the Loans subject to it, which rate shall be equal to the sum of: (a) the higher of the Adjusted LIBO Rate or the Adjusted Eurocurrency Rate determined (in accordance with the definition thereof) two (2) Business Days before the first day of such Interest Period with respect to the portions of the Loans subject to it; plus (b) the Assessment Rate per annum applicable with respect thereto, if any, for such Interest Period; plus (c) a rate per annum calculated by the Administrator so as to reimburse the affected Bank(s) for any of the increased costs and reduced receipts described in Section 2.04(d) or (f) hereof determined from time to time by the affected Bank(s) in accordance with those Sections (and not otherwise paid or reimbursed pursuant to those Sections), including (without limitation) any capital adequacy assessment (without, however, limiting any Bank's rights under those Sections if no adjustment or an incomplete adjustment is made pursuant to this clause); plus (d) the Applicable Euro Margin Rate for Term Loans in the case of the Term Loans, the Applicable Euro Margin Rate for Mortgage Loans in the case of the Mortgage Loans and the Applicable Euro Margin Rate for Revolving Credit Loans for all other Loans. The Applicable Euro Rate shall change from time to time simultaneously with each corresponding change in the applicable Reserve Percentage (through a change in the Adjusted LIBO Rate or Adjusted Eurocurrency Rate or otherwise), applicable Assessment Rate or Applicable Euro Margin Rate, including, without limitation, changes within Interest Periods. "Applicable Law" shall mean any applicable law, including (without limitation) any: (a) federal, state, territorial, county, municipal or other governmental or quasi-governmental law, statute, ordinance, rule, regulation, requirement or use or disposal classification or restriction, whether domestic or foreign; (b) judicial, administrative or other governmental or quasi-governmental order, injunction, writ, judgment, decree, ruling, interpretation, finding or other directive, whether domestic or foreign; (c) common law or other legal or quasi-legal precedent; (d) arbitrator's, mediator's or referee's decision, finding, award or recommendation; or (e) charter, rule, regulation or other organizational or governance document of any national securities exchange or market or other self-regulatory organization. "Applicable Pricing Level" shall mean the numerically lowest pricing level (i.e., "Level 1", "Level 2" or "Level 3", with Level 1 being the numerically lowest level possible) set forth below where the Borrowers' Consolidated Funded Debt Ratio does not exceed the specified maximum:
Maximum Applicable Consolidated Funded Pricing Level Debt Ratio ------------- ------------------- Level 1 1.00:1 Level 2 2.00:1 Level 3 any ratio over 2.00:1
The Applicable Pricing Level shall change from time to time quarterly on the first Business Day of each fiscal quarter of the Borrowers based upon the certificate (if any) delivered during the preceding quarter to the Banks under Section 5.02(e) hereof containing the required calculation of their Consolidated Funded Debt Ratio; provided, however, that irrespective of the Borrowers' Consolidated Funded Debt Ratio, the Applicable Pricing Level shall be (i) Level 2 from the Effective Date through September 30, 1999, and (ii) Level 3 for any fiscal quarter following a quarter in which the Borrowers shall not have timely delivered the required calculation certificate. (For example, in the event the Borrowers' Consolidated Funded Debt Ratio is 1.10:1 at September 30, 2000, that ratio would be calculated in the Financial Covenant Compliance Certificate delivered in mid-November and that ratio would determine the Applicable Pricing Level for the quarter commencing with the first Business Day in January of 2001, which in this case would be Level 2, as such ratio does not exceed 2.00:1 but does exceed 1.00:1.) "Assessment Rate" for any Interest Period for the corresponding portion of the Loans shall mean the annual assessment rate per annum estimated by Chase or Fleet, as applicable, on the first day of such Interest Period for determining the then current annual assessment payable by such Bank to the Federal Deposit Insurance Corporation (or any successor) for such Corporation's (or such successor's) insuring United States Dollar deposits of such Bank in the United States. "Assignee" shall have the meaning assigned to it in Section 10.13(b) hereof. "Assignment Agreement" shall have the meaning assigned to it in Section 10.13(b) hereof. "Assignor" shall have the meaning assigned to it in Section 10.13(b) hereof. "Authority" shall mean any governmental or quasi-governmental authority, including (without limitation) any federal, state, territorial, county, municipal or other government or governmental or quasi-governmental agency, board, branch, bureau, commission, court, department or other instrumentality or political unit or subdivision, whether domestic or foreign, or any national securities exchange or market or other self-regulatory organization. "ACL" shall mean Auto Club Locator, LLC, a Colorado corporation having an address at 4350 Centennial Boulevard, Colorado Springs, Colorado 80907. "Bank" and "Banks" shall respectively mean any one or more of Chase and Fleet, the Administrator in its capacity as Administrator or a Bank, and any Assignee, but shall exclude any Assignor following its assignment of all of its rights, powers, privileges, remedies and interests in accordance with (and to the extent permitted by) this Agreement. "Base Rate" shall mean the fluctuating annual rate of interest in effect from time to time equal to: (a) in the case of Chase, the rate of interest publicly announced at its principal office from time to time as its "Prime Rate"; and (b) in the case of Fleet or any other Bank (other than Chase), the rate of interest established by Fleet in New York, New York from time to time as its "Prime Rate". Each Borrower acknowledges and agrees that each Bank announces such rate for reference purposes only and such rate may not represent the lowest or best rate available to its customers. "books", "records" and "books and records" of a referenced person each shall mean all of the referenced person's books and records, including (without limitation) financial books, ledgers and other records, corporate books and minutes, stock books and transfer ledgers, records, schedules and other evidence of sales, Inventory and Accounts Receivable and accounts payable, rent rolls, tax returns, registration reports and other filings with governmental authorities, leases, contracts and other agreements, insurance policies, correspondence, invoices, canceled checks and check registers, and other documents and papers, whether on paper or film, in electronic storage or in some other storage medium, and whether or not in the possession of such person. "Borrower" and "Borrowers" shall have the meanings respectively assigned to them in the Introduction. "Borrowing Base" shall mean the amount determined as of a particular date equal to the sum of: (a) the sum of: (i) 85% of the gross book value of all Eligible Receivables of the Borrowers then outstanding, plus (ii) 25% of the net book value of all Eligible Inventory (other than Eligible Gold Inventory and Eligible Lucent Inventory) of the Borrowers at the time (i.e., the gross value of such Inventory, determined at the lower of cost or market, less any and all reserves for obsolescence, damage, theft and the like), plus (iii) 85% of the net book value of all Eligible Gold Inventory and Eligible Lucent Inventory of the Borrowers at the time (i.e., the gross value of such Inventory, determined at the lower of cost or market, less any and all reserves for obsolescence, damage, theft and the like), provided that no more than $5,400,000 of the net book value of the Eligible Lucent Inventory shall be included in the clause (iii) computation, provided further that the Administrator (with the consent of the Majority Banks) at any time and from time to time may modify or add categories of eligibility or ineligibility in order to reflect the composition of and the experience of the Borrowers with their Eligible Receivables, Eligible Inventory, Eligible Gold Inventory and Eligible Lucent Inventory, and provided further that if the Administrator at any time reasonably determines any such method of valuation overstates the actual fair market value at the time, the Administrator may recalculate those values to fair market value; plus (b) the amount of (i) $6,000,000 at any time until December 31, 1999, (ii) $3,000,000 from January 1, 2000 until December 31, 2000, and (iii) $0 thereafter. The Administrator may determine the Borrowing Base at any time and from time to time, which may (but need not) be based upon the periodic report of the Borrowers in the most recently delivered Borrowing Base Certificate required under Section 5.02(f) hereof. "Business Day" shall mean any day during which the Banks are open for business in New York, New York, other than any Saturday, Sunday or other applicable legal holiday; provided, however, that for the purposes of particular Fixed Rate elections or transactions (excluding payments) involving a foreign jurisdiction, "Business Day" shall be further limited to one during which dealings are carried on in the relevant interbank market. "Chase" shall have the meaning assigned to it in the Introduction. "Code" shall mean the Internal Revenue Code of 1986, as amended, or any corresponding provisions of any Applicable Law in any foreign jurisdiction, and as the same may be supplemented, modified, amended, restated or replaced from time to time, and the rules and regulations promulgated thereunder, or any corresponding or succeeding provisions of Applicable Law. "Collateral" shall have the meaning assigned to it in Section 7.01 hereof. "Comar" shall mean Comar Products, Inc., a New Jersey corporation currently having an address at 113 Main Street, Box 37, Bloomingdale, New Jersey 07403. "Commitment" shall mean the commitment to make revolving credit loans to the Borrowers by the Banks, collectively, in the aggregate principal amount outstanding at any one time not to exceed the remainder of (i) $23,000,000 minus (ii) the sum of all voluntary reductions made under Section 2.01(c) hereof (but with the commitment of any particular Bank limited solely to its respective Committed Share of the Commitment), as such amount may be further reduced from time to time or terminated pursuant to the terms of this Agreement. "Commitment Fee" shall have the meaning assigned to it in Section 2.06(a) hereof. "Committed Share" shall have the meaning assigned to it in Section 9.02(a) hereof. "Comstron" shall have the meaning assigned to it in the Introduction. "Consolidated Available Earnings" shall mean, for any period, the remainder of: (a) the sum of (i) the Consolidated EBIT of Aeroflex and its subsidiaries for such period, plus (ii) the consolidated depreciation and amortization of Aeroflex and its subsidiaries included in such Consolidated EBIT for such period, including (without limitation) the amortization of goodwill and other non-cash charges, plus (iii) for each period ended prior to January 1, 2000, the non-cash special charge for the write-offs of purchased in-process research and development; minus (b) the aggregate capital expenditures of Aeroflex and its subsidiaries during such period (excluding capital expenditures funded with Other Debt or the Pearl River Financing); all as determined on a consolidated basis in accordance with GAAP. "Consolidated Debt Service" shall mean, for any period, the sum of: (a) the Consolidated Interest Expense of Aeroflex and its subsidiaries for such period; plus (b) the principal amounts of all long-term Indebtedness payable by them during the next succeeding twelve-month period determined in accordance with GAAP, excluding, however, from such Indebtedness (i) the Revolving Credit Loans during the final twelve months of the Revolving Credit Period, (ii) 80% of the Mortgage Loans during the twelve months preceding the scheduled Maturity Date for the Mortgage Loans, and (iii) the current maturities of Indebtedness secured fully and only by cash and cash equivalents; plus (c) the interest expense of Aeroflex and its subsidiaries respecting discontinued operations for such period and the principal amounts of all Indebtedness payable by them respecting discontinued operations during the next succeeding twelve-month period. "Consolidated Debt Service Ratio" shall mean, for any period, the ratio of: (a) the Consolidated Available Earnings of Aeroflex and its subsidiaries for such period; to (b) the Consolidated Debt Service of Aeroflex and its subsidiaries for such period. "Consolidated EBIT" shall mean, for any period: (a) the net income (or loss) of Aeroflex and its subsidiaries for such period; minus (b) any extraordinary or unusual gains included in net income (or loss) of Aeroflex and its subsidiaries for such period; plus (c) any extraordinary or unusual loss included in such net income (or loss) for such period; plus (d) the sum of any and all amounts that, in the determination of such net income (or loss) for such period, has been deducted for (i) Consolidated Interest Expense, and (ii) total federal, state, local and foreign income and franchise taxes; all as determined on a consolidated basis in accordance with GAAP. "Consolidated Effective Leverage Ratio" shall mean, as at any date of determination, the ratio of: (a) the Consolidated Unsubordinated Liabilities of Aeroflex and its subsidiaries at such date; to (b) the Consolidated Effective Net Worth of Aeroflex and its subsidiaries at such date. "Consolidated Effective Net Worth" shall mean, as at any date of determination, the sum of: (a) the Consolidated Tangible Net Worth of Aeroflex and its subsidiaries at such date; plus (b) the aggregate principal balance outstanding under their Consolidated Subordinated Indebtedness at such date. "Consolidated Funded Debt Ratio" shall mean, as at any date of determination, the ratio of: (a) the Consolidated Senior Funded Indebtedness of Aeroflex and its subsidiaries at such date; to (b) the Consolidated Available Earnings of Aeroflex and its subsidiaries for the fiscal year or rolling four quarter period ending at such date. "Consolidated Interest Expense" shall mean, for any period, the remainder of: (a) the consolidated total interest expense of Aeroflex and its subsidiaries accrued for such period (including the interest component of capitalized leases), including (without limitation) all commissions, discounts and other fees and charges owed with respect to letters of credit and net costs under interest rate contracts; minus (b) the total interest income accrued for such period; all as determined on a consolidated basis in accordance with GAAP. "Consolidated Quick Ratio" shall mean, as at any date of determination, the ratio of: (a) the unencumbered consolidated current assets of Aeroflex and its subsidiaries at such date consisting of cash, marketable securities, Accounts Receivable, Eligible Lucent Inventory and Eligible Gold Inventory (treating as unencumbered for this purpose those assets and properties that are subject only to the security interests of the Administrator for the benefit of all of the Banks); to (b) the consolidated current liabilities of Aeroflex and its subsidiaries at such date (excluding from current liabilities for this purpose (i) the current portion of long term debt and (ii) the principal balance outstanding under the Revolving Credit Loans on such date); all as determined on a consolidated basis in accordance with GAAP. "Consolidated Senior Funded Indebtedness" shall mean any and all Indebtedness of Aeroflex and its subsidiaries with original maturities of one year or more outstanding as at any date of determination, including all current portions, excluding, however, from such Indebtedness (a) Consolidated Subordinated Indebtedness, and (b) any Indebtedness secured fully and only by cash and cash equivalents, all as determined on a consolidated basis in accordance with GAAP. "Consolidated Subordinated Indebtedness" shall mean any and all Indebtedness of Aeroflex and its subsidiaries subordinated to the Obligations and approved by the Banks in their discretion, all as consolidated in accordance with GAAP. "Consolidated Tangible Net Worth" shall mean, as at any date of determination, the remainder of (a) the total assets of Aeroflex and its subsidiaries at such date, excluding goodwill and patents (however classified) and all other assets and properties properly classified as "intangible assets" under GAAP, minus (b) the sum of the aggregate amount of the Consolidated Total Liabilities of Aeroflex and its subsidiaries at such date, all as determined on a consolidated basis in accordance with GAAP. "Consolidated Total Liabilities" shall mean, as at any date of determination, the sum for Aeroflex and its subsidiaries of all of their obligations that would be included in determining their total liabilities (including any liabilities for discontinued operations) at such date as shown on the liabilities side of their balance sheet, all as determined on a consolidated basis in accordance with GAAP. "Consolidated Unsubordinated Liabilities" shall mean, as at any date of determination, the remainder of: (a) the Consolidated Total Liabilities of Aeroflex and its subsidiaries at such date; minus (b) the aggregate principal balance outstanding under the Consolidated Subordinated Indebtedness of Aeroflex and its subsidiaries at such date. "Contract" and "Contracts" shall respectively mean any one or more of the procurement or purchase contracts, purchase orders or similar agreements or arrangements respecting the sale or provision of Inventory or other goods or services by any Borrower, as executed and delivered from time to time, and as the same may be supplemented, modified, amended, restated or replaced from time to time in the manner provided therein. "Corporate Document" and "Corporate Documents" shall respectively mean any and all of the following: (a) the Certificate of Incorporation or By-Laws of any Borrower; (b) any resolution with continuing effect adopted by the Board of Directors, any management or other committee of directors, or the shareholders of any Borrower; (c) any term or provision of any shareholders' agreement or trust respecting the securities issued by any Borrower or any related rights; or (d) any other instrument, indenture, agreement or other document or any statutory equivalent respecting the organization, governance or operation of any Borrower; in each case whether now or hereafter existing, and irrespective of whether reduced to writing, and as each has been and hereafter may be supplemented, modified, amended, restated or replaced from time to time. "Credit Support" by a referenced person shall respectively mean any and all agreements, arrangements and obligations whereby the referenced person directly or indirectly has guarantied, assumed or otherwise become liable or responsible for the Indebtedness or other obligation of any other person, whether contingent or otherwise, and whether or not recourse is limited to specified amounts or any asset or property of the referenced person, including (without limitation): (a) any guaranty or other assurance of payment or performance of any obligation of any other person; (b) any indemnification, hold harmless or similar agreement, arrangement or obligation respecting any obligation of any other person; (c) any pledge, hypothecation or other encumbrance, or any loan or other availability, of any asset or property of the referenced person in respect of any obligation of any other person; or (d) any agreement, arrangement or other obligation (i) to purchase, repurchase or otherwise acquire any obligation of any other person, (ii) to purchase, repurchase, sell, lease or otherwise provide any securities or other assets and properties in connection with any obligation of any other person, (iii) to provide any discounts, services or other accommodations in connection with any obligation of any other person, (iv) to make any capital contribution, advance or loan in connection with the obligation of any other person, or (v) to otherwise enhance, support, repay or discharge any obligation of any other person; excluding, however, any endorsement of a negotiable instrument for collection or deposit in the ordinary course of the referenced person's business. "Custody Document" shall mean any instrument, indenture, agreement, policy or other document or any statutory equivalent respecting the investment or custody of any of the Pledged Securities with or by any holder thereof, in each case whether now or hereafter existing, and irrespective of whether reduced to writing, and as each has been and hereafter may be supplemented, renewed, extended, modified, amended or restated from time to time. "Default" shall mean any event that, with the giving of notice or the passage of time (or both), would constitute an Event of Default. "Default Declaration" shall mean any notice from the Majority Banks to the Borrowers declaring that an Event of Default has occurred and is continuing (as contemplated in Section 9.08(b) hereof), which may be given by the Administrator if so directed by the Majority Banks. "Delinquent Bank" shall have the meaning assigned to it in Section 9.19 hereof. "Effective Date" shall have the meaning assigned to it in Section 10.12 hereof. "Eligible Assignee" shall mean any: (a) commercial bank that is organized under the laws of the United States, or any state thereof, and has total assets of not less than $1,000,000,000; (b) savings and loan association or savings bank that is organized under the laws of the United States, or any state thereof, and has total assets of not less than $500,000,000; (c) commercial bank that (i) is organized under the laws of the Cayman Islands, or under the laws of any country, or any political subdivision of any country, that is a member of the Organization for Economic Cooperation and Development ("OECD") or that has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to any Borrower, and (ii) has total assets of not less than $1,000,000,000, provided that such bank is acting through a branch or agency located in the United States, in the country in which it is organized or in another country described in this clause (c); (d) central bank of any country that is a member of the OECD; and (e) finance company, insurance company, mutual fund or other financial institution (whether a corporation, partnership or other entity) that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business, and has total assets in excess of $500,000,000. "Eligible Gold Inventory" shall mean all Eligible Inventory consisting of gold used as raw material by MIC, including gold purchased under the Gold Purchase Agreement to the extent the relevant Borrower's obligations thereunder are fully backed by a letter of credit. "Eligible Inventory" as of a particular time shall mean all Inventory of materials and finished goods then owned by any Borrower and held for sale in the ordinary course of business (as then conducted) as determined in accordance with generally accepted accounting principles consistently applied; provided, however, that no item of Inventory will be included in Eligible Inventory if that item: (a) is not in good condition or of merchantable quality; (b) is defective or does not meet the established specifications of such Borrower for its type; (c) is obsolete or infrequently sold (unless the subject of a current purchase order); (d) is in the possession or control of any person other than the Borrowers or a party to a bailment agreement with the Administrator (for the benefit of all of the Banks) in such form and substance as may be acceptable to the Administrator; (e) is located at any location not identified in Schedule 3.10(d) hereto or any supplement thereto accepted by the Banks; (f) is located on any leased premises where the landlord is not a party to a waiver and access agreement with the Administrator (for the benefit of all of the Banks) in such form and substance as may be acceptable to the Administrator; (g) is located at any location outside the United States of America; (h) is one in which the Administrator (for the benefit of all of the Banks) does not have a perfected first priority security interest; (i) is the subject of any financing statement or Lien other than in favor of the Administrator (for the benefit of all of the Banks); (j) is the subject of any other person's claim of ownership or other interest, whether legal, beneficial or otherwise; (k) does not conform at the time to the representations and warranties of the Borrowers respecting Collateral in general or Inventory in particular; or (l) is deemed unacceptable by the Administrator in its reasonable discretion, whether individually or as a function of its type, age or quantity; provided that the Administrator (with the consent of the Majority Banks) in its sole and absolute discretion may permit the partial inclusion of certain excluded items of Inventory having some value, which shall be subject to such criteria, limitations, valuations and discounts as the Administrator (with the consent of the Majority Banks) may establish from time to time. "Eligible Lucent Inventory" shall mean all Eligible Inventory consisting of finished goods manufactured pursuant to the Lucent Supply Agreement. "Eligible Receivables" as of a particular time shall mean all Accounts Receivable of any Borrower then outstanding for Inventory and other goods, merchandise and tangible assets and properties sold or services rendered in the ordinary course of such Borrower's business (as then conducted) (collectively, the "Products") as determined in accordance with generally accepted accounting principles consistently applied; provided, however, that no Account Receivable will be included in Eligible Receivables where: (a) the invoice is more than (i) 120 days past due in the case of those due by their terms no later than 30 days after invoice, and (ii) 60 days past due in the case of those due by their terms later than 30 days after invoice; (b) a final or progress invoice has not been issued; (c) delivery of the invoiced Product(s) (or the progress stage agreed upon with the customer) has not been completed; (d) the invoice is conditional, permits returns or restricts collection rights or assignments in any respect; (e) the invoice permits payment (i) more than 92 days after the invoice date, (ii) in any currency other than United States Dollars, or (iii) at any location outside the United States; (f) the obligation to pay is evidenced by chattel paper or any note or other instrument (unless duly endorsed and delivered to the Administrator (for the benefit of all of the Banks)); (g) the invoiced Product(s) have been rejected, returned or disputed in any way, whether in whole or in part, or the customer has attempted to renegotiate the invoiced price, other than because of mistake or in accordance with the customary credit and collection practices of such Borrower; (h) the customer has asserted any right of reduction, setoff, recoupment, counterclaim or defense; (i) the Account Receivable is one in which the Administrator (for the benefit of all of the Banks) does not have a perfected first priority security interest other than those owed by the United States of America (or any division or department thereof) for which no assignments of claims have been requested pursuant to Section 7.02(h) or any other provision of this Agreement; (j) the invoice or corresponding Account Receivable is the subject of any financing statement or Lien other than in favor of the Administrator (for the benefit of all of the Banks); (k) more than 50% of the Accounts Receivable of the customer and its affiliates are past due by more than that allowed under clause (a); (l) the customer is any other Borrower or an affiliate of any Borrower; (m) the customer is any governmental Authority other than the United States of America or a department or division thereof; (n) the customer is located outside the United States; (o) the customer does not meet the established credit standards of such Borrower; (p) the customer has taken or committed any of the actions specified in Section 8.01(h) hereof in respect of itself or all or substantially all of its assets and properties or has had any of those actions taken against it; (q) the Account Receivable does not conform at the time to the representations and warranties of the Borrowers respecting Collateral in general or Accounts Receivable in particular; or (r) the Administrator has determined in its reasonable discretion that the Account Receivable should be excluded, whether individually, by customer, by amount or otherwise; provided that the Administrator (with the consent of the Majority Banks) in its sole and absolute discretion may permit the partial inclusion of certain excluded Accounts Receivable having some value, which shall be subject to such criteria, limitations, valuations and discounts as the Administrator (with the consent of the Majority Banks) may establish from time to time. "Environmental Claim" shall mean any: (a) responsibility, liability or unlawful act or omission under any Environmental Law (whether alleged or otherwise); (b) tortious act or omission or breach of contract pertaining to any Environmental Substance (whether alleged or otherwise); or (c) other violation or claim under any Environmental Law or in respect of any Environmental Substance (whether alleged or otherwise). "Environmental Law" and "Environmental Laws" shall respectively mean any one or more of the Applicable Laws pertaining to any: (a) emission, discharge, release, runoff, disposal or presence in the environment of any Environmental Substance; (b) cleanup, containment, manufacturing, treatment, handling, transportation, storage or sale of or other activity pertaining to any Environmental Substance; or (c) other peril to public or occupational health or safety or to the environment that may be posed by an Environmental Substance. "Environmental Substance" shall mean any toxic substance, hazardous material, contaminant, waste, pollutant or other similar product or substance reasonably suspected or determined to pose a threat to public or occupational health or safety or to the environment. "Equipment Finance Document" and "Equipment Finance Documents" shall respectively mean any one or more of: (a) the Equipment Lease dated May 11, 1994, between Laboratories and GECC; (b) the Corporate Guaranty dated May 11, 1994, between Aeroflex and GECC in connection with item (a), above; (c) the Master Equipment Lease Agreement dated August 24, 1994, between MIC and Fleet Credit Corporation; (d) the Equipment Lease, dated December 12, 1994, between Laboratories and Fleet Capital Corporation; (e) the Corporate Guaranty dated December 12, 1994, between Aeroflex and Fleet Capital Corporation in connection with item (d), above; (f) the Master Equipment Lease Agreement dated February 20, 1995, between MIC and Fleet Credit Corporation; (g) the Equipment Lease, dated May 21, 1996, between MIC and Fleet Capital Corporation; (h) the Corporate Guaranty dated May 21, 1996, between Aeroflex and Fleet Capital Corporation in connection with item (g), above; (i) the Equipment Lease dated November 18, 1996, between MIC and Fleet Capital Corporation; (j) the Corporate Guaranty dated November 18, 1996, between Aeroflex and Fleet Capital Corporation in connection with item (i), above; (k) the Equipment Lease dated May 13, 1997, among MIC, Laboratories and Fleet Capital Corporation; (l) the Corporate Guaranty dated May 13, 1997 between Aeroflex and Fleet Capital Corporation in connection with item (k), above; (m) the Equipment Loan Agreement dated July 31, 1997, among MIC, Laboratories and Fleet Capital Corporation; (n) the Corporate Guaranty dated July 31, 1997, between Aeroflex and Fleet Capital Corporation in connection with item (m), above; (o) the Promissory Note dated July 29, 1997, from MIC and Laboratories to KeyCorp Leasing Ltd., the Loan Agreement dated July 29, 1997, among MIC, Laboratories and KeyCorp Leasing Ltd. and the Security Agreement dated July 29, 1997, among MIC, Laboratories and KeyCorp Leasing Ltd.; (p) each separate Corporate Guaranty from each Borrower (other than MIC and Laboratories) dated July 29, 1997, to and with KeyCorp Leasing Ltd. in connection with item (o), above; (q) the Nitrogen Bank System Lease dated January 6, 1998, between MIC and Airgas, Inc.; (r) the Ro Water System Lease dated February 4, 1998, between MIC and Water Services Corp.; (s) the Equipment Lease, dated September 28, 1998, among MIC, Laboratories, Vibrations and KeyCorp Leasing Ltd.; (t) the Corporate Guaranty dated September 28, 1998, between Aeroflex and KeyCorp. Leasing Ltd. in connection with item (s), above; (u) the Lucent Supply Agreement; (v) any other equipment lease entered into in any sale/leaseback transaction contemplated under Section 7.03(c) hereof; (w) any other equipment financing approved from time to time by the Majority Banks (in their sole discretion); and (x) any and all waivers, consents, agreements, instruments and other documents executed by the requisite person(s) pursuant to or in connection with any of the foregoing; in each case whether now or hereafter existing, and as each may be supplemented, modified, amended, restated or replaced from time to time. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and as the same may be supplemented, modified, amended, restated or replaced from time to time, and the rules and regulations promulgated thereunder, or any corresponding or succeeding provisions of Applicable Law. "ERISA Affiliate" and "ERISA Affiliates" shall respectively mean any one or more of any: (a) subsidiary of any Borrower; and (b) other trade, business, person or persons that together with any Borrower would be deemed to be a single employer within the meaning of Section 4001 of ERISA. "ERISA Effect" shall mean any material and adverse effect on (a) any Plan, (b) the assets and properties of any Plan, or (c) any funding or other liability of any one or more of the Borrowers or any ERISA Affiliate in respect of any Plan (individually or in the aggregate). "ERISA Event" shall mean any: (a) "accumulated funding deficiency" (whether or not waived), "prohibited transaction", "reportable event" (other than any event for which the 30-day notice requirement has been waived by regulation), "disqualification", "partial withdrawal" or "withdrawal", "partial termination" or "termination", "insolvency", "reorganization", or the imposition of any "penalty" or "withdrawal liability" in respect of any Plan under (and as such words and phrases are defined in) ERISA or the Code, as applicable; (b) other violation of ERISA, the Code or any other Applicable Law in respect of any Plan (whether alleged or otherwise); (c) supplement or amendment to or modification or restatement of any Plan that has had or could have an ERISA Effect; or (d) imposition, increase or other adverse change in any funding obligation or other liability of any one or more of the Borrowers or any ERISA Affiliate in respect of any Plan or to the Pension Benefit Guaranty Corporation (individually or in the aggregate). "Europtest" shall mean Europtest, S.A., a French corporation currently having an address at 5 Rue de Marche, Letriton , 78990, Elancourt, France. "event" shall include (without limitation) any event, occurrence, circumstance, condition or state of facts. "Event of Default" shall have the meaning assigned to it in Section 8.01 hereof. "Excluded Disposition" shall have the meaning assigned to it in Section 2.05(f) hereof. "Existing Collateral" shall mean all of the assets and properties of the Borrowers pledged pursuant to the Existing Loan Agreement (as more particularly described in Section 7.01 of the Existing Loan Agreement), in each case whenever acquired or created, together with the products and proceeds thereof, all payments and other distributions with respect thereto and any and all renewals, substitutions, modifications and extensions of any or all of the foregoing. "Existing Loan Agreement" shall mean the Third Amended and Restated Loan and Security Agreement among the Borrowers, Chase, Fleet and the Administrator dated as of March 15, 1996, as amended by a First Amendment dated as of July 1, 1997, and a Second Amendment dated as of April 30, 1998 (which in turn had amended, restated and completely replaced the "Existing Loan Agreement", as defined therein). "Existing Loan Instruments" shall mean the Existing Loan Agreement, the Existing Notes, the various mortgages, assignments, instruments and other documents creating or evidencing the interest of the Administrator or any other Bank in any collateral securing or intended to secure anyone's obligations under any of the foregoing, and all waivers, consents, agreements, reports, statements, certificates, schedules and other documents executed by the requisite person(s) pursuant to or in connection with any of the foregoing and accepted or delivered by the Administrator thereunder prior to the Effective Date of this Agreement. "Existing Loans" shall have the meaning assigned to it in Section 2.02(b) hereof. "Existing Note" and "Existing Notes"shall respectively mean any one or more of Fourth Amended and Restated Revolving Promissory Notes dated April 30, 1998, issued by the Borrowers to each of (a) Chase in the original principal amount of $10,800,000, and (b) Fleet in the original principal amount of $16,200,000 (which amended, extended, restated and completely replaced the "Existing Notes" as defined therein). "Existing Obligations" shall mean any and all of the "Obligations" under (and as defined in) the Existing Loan Agreement, together with any and all of the Borrowers' other obligations under the Existing Notes and Existing Loan Instruments, which Existing Obligations include (without limitation) the outstanding Loans described in Section 2.01 of this Agreement. "Facility Fee" shall have the meaning assigned to it in Section 2.06(b) hereof. "Federal Funds Rate" shall mean a fluctuating annual rate of interest in effect from time to time that for any day shall be equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrator from three Federal funds brokers of recognized standing selected by it. "Fixed Rate" shall mean the rate of interest in effect for a particular Interest Period with respect to the portion of the Loans subject to such rate, which rate shall be equal to the Applicable Euro Rate as selected in accordance with Sections 2.04(b) and (c) hereof. The Fixed Rate shall change from time to time simultaneously with each corresponding change in the Applicable Euro Margin Rate, applicable Reserve Percentage or applicable Assessment Rate, including, without limitation, changes within Interest Periods. "Fixed Rate Loan" and "Fixed Rate Loans" shall respectively mean any and all portions of the Loans bearing interest at any Fixed Rate(s). "Fleet" shall have the meaning assigned to it in the Introduction. "Fronting Bank" shall have the meaning assigned to it in Section 2.07(a) hereof. "GAAP" shall mean generally accepted accounting principles in the United States of America consistent with those applied in the preparation of the financial statements referred to in Section 3.05 hereof. "GECC" shall mean General Electric Corporation, a Delaware corporation currently having an address at 44-2 Old Ridgebury Road, Danbury, Connecticut 06810. "Gold Purchase Agreement" shall mean the Precious Metals Sales Agreement between Fleet Precious Metals Inc. and MIC, as the same may be supplemented, modified, amended, restated or replaced from time to time. "Gold Purchase L/C" shall mean Irrevocable Standby Letter of Credit No. H158661 dated March 15, 1996, for the account of MIC in the maximum face amount of $2,000,000, with MIC as the applicant, and Fleet Precious Metals Inc. as the beneficiary, as amended from time to time. "Guaranty" shall have the meaning assigned to it in Section 2.15 hereof. "HARX" shall mean HARX, Inc., a New York corporation formerly known as Huxley Envelope Corp. and currently having an address at 35 South Service Road, Plainview, New York 11803. "hereunder", "herein", "hereof" and other words and phrases of like import shall refer to each and every term and provision of this Agreement. "improvements" shall mean all land development, construction and other improvements to real estate, whether planned, authorized, under construction or completed, and whether or not enhancing the value of the referenced real estate, including (without limitation) all demolitions, excavations, fills and other site work, roads and sidewalks, water, sewer and utility lines, buildings and other structures, and all fixtures, furnishings and equipment located on or used in connection with the referenced real estate, whether or not affixed thereto. "Indebtedness" of any referenced person shall mean any and all obligations of the referenced person: (a) for borrowed money, however evidenced; (b) evidenced by any promissory note, bond, debenture or other similar written obligation to pay money; (c) for the deferred purchase price of any asset, property or service; (d) under any interest rate protection, foreign currency exchange, or other interest or exchange rate swap or hedging agreement or arrangement; (e) in respect of any letter of credit or banker's acceptance; (f) to reimburse or compensate any other person respecting any provisional or other temporary credit in advance of collection for deposits of any checks, instruments or other documents made by the referenced person or any of its affiliates; (g) as lessee under leases that have been capitalized or should be capitalized under GAAP; or (h) respecting any preferred stock issued by the referenced person bearing any mandatory dividend, interest or other return, or subject to any repurchase or redemption, that is payable in cash or any other property (other than as payable only with common stock or like preferred stock) (other than any preferred stock that may be issued pursuant to the Rights Agreement); provided, however, that Indebtedness shall not include obligations incurred in the ordinary course of business that are owed by one Borrower to another. In the event the referenced person is a corporation with one or more subsidiaries, the term "Indebtedness" shall mean the Indebtedness of all of them consolidated in accordance with GAAP consistently applied as of the date of calculation. "Independent Transaction" shall have the meaning assigned to it in Section 9.17(b) hereof. "Interest Period" shall mean the period during which a Fixed Rate is applicable to a portion of the Loans, which period shall be as determined pursuant to Sections 2.04(b) and (c) hereof. "International" shall have the meaning assigned to it in the Introduction. "Inventory" shall mean any and all goods, merchandise and other items held by the referenced person (or on its behalf) for manufacture, sale, lease or other delivery or consumption, wherever located, whether raw materials, supplies, parts or other components, work-in-progress, finished goods, returned goods or otherwise. "Investment" shall mean, with respect to any referenced person, any: (a) stock, warrant, option, put, call, bond, debenture, commercial paper, governmental obligation, note, certificate of deposit, partnership interest (general or limited), limited liability company membership interest, trust interest, investment contract, commodity (other than Inventory) or future, any foreign currency or other money, any bank, brokerage, trading or other account, or other security, investment property, financial asset, investment or interest or other obligation or right to acquire any such item; (b) direct or indirect capital or other equity contribution to any other person made or committed to by the referenced person; (c) purchase by the referenced person of all or substantially all of the assets and properties of any other person or any discrete division or other business unit of such other person; (d) agreement or arrangement by or with the referenced person for the purpose of entering into any partnership or joint venture with or providing funds or credit to or for the benefit of any other person; or (e) direct or indirect loan, advance or Credit Support by the referenced person to or for the benefit of any other person, excluding, however, any: (i) current trade liability (other than any Indebtedness) owed to the referenced person by any other person that arose from the purchase or sale by the referenced person of goods or services in the ordinary course of its business, or (ii) prepayment of expenses (A) where such expenses are being incurred by the referenced person in the ordinary course of its business, (B) such expenses are of a type customarily prepaid, and (C) such prepayment is in a commercially reasonable amount for a commercially reasonable period. The amount of any Investment shall be the original cost of such Investment, plus the cost of all additions thereto, and minus the amount of any return of capital or principal to the extent such return is in cash with respect to such Investment, without, however, any adjustments for increases or decreases in value or write-ups, write-downs or write-offs with respect to such Investment. "Investment Company Act" shall mean the Investment Company Act of 1940, as amended, or any corresponding provisions of any Applicable Law in any foreign jurisdiction, and as the same may be supplemented, modified, amended or restated from time to time, and the rules and regulations promulgated thereunder, or any corresponding or succeeding provisions of Applicable Law. "Issuance Date" shall mean either (i) the date duly requested by the Borrowers under Section 2.07(b) for the issuance, renewal or extension of a particular Letter of Credit, or such later date as may be proposed by the Administrator, or (ii) the actual date of issuance, renewal or extension of the Letter of Credit if issued, as applicable. "Laboratories" shall have the meaning assigned to it in the Introduction. "Letter of Credit" and "Letters of Credit" shall mean respectively any one or more of (a) the Gold Purchase L/C and (b) the letters of credit issued for the account of any one or more of the Borrowers pursuant to Section 2.07 hereof, whether issued by or through the actions of one or more of the Banks, as the same may be transferred, renewed, modified, amended, restated or replaced from time to time in the manner provided therein. "Letter of Credit Advance" shall have the meaning assigned to it in Section 2.07(d) hereof. "Letter of Credit Amount" as of a particular date shall mean the sum of (a) the aggregate issued but unadvanced face amount of all Letters of Credit then outstanding under this Agreement, plus (b) the principal balance of the Letter of Credit Advances then outstanding and not converted to Revolving Credit Loans. "Letter of Credit Fee" shall have the meaning assigned to it in Section 2.07(e) hereof. "Letter of Credit Participation" shall have the meaning assigned to it in Section 9.03(b) hereof. "liabilities" of a person shall mean all items (other than shareholders' equity) included in the liabilities section of a balance sheet of that person prepared in accordance with GAAP consistently applied as of the date of calculation, including (without limitation): (a) all Indebtedness secured by any Lien upon or in property owned by that person, to the extent attributable to that person's interest in the property, even though that person has not assumed or become liable for the payment of the Indebtedness; and (b) the aggregate amount of the reserves established or that should have been established on the books of that person in accordance with GAAP in respect of contingent liabilities and other contingencies (except reserves that are properly treated as deductions from assets). In the event the referenced person is a corporation with one or more subsidiaries, the term "liabilities" shall mean the liabilities of all of them consolidated in accordance with GAAP consistently applied as of the date of calculation. "Lien" and "Liens" shall respectively refer to any one or more of the following to which the referenced or relevant person is a party or by which the referenced or relevant person, any of its assets or properties or any other referenced assets or properties may be bound or subject: (a) any assignment, pledge, mortgage, hypothecation or security interest (irrespective of whether the referenced person is personally obligated with respect to any obligation thereby secured); (b) any filed financing statement (other than those for which the referenced or relevant person is the secured party or the lessee under a true operating lease); (c) any consignment, finance lease, conditional sale contract or other title retention agreement; (d) any assignment, pledge or other transfer, restriction or encumbrance of any right to receive any income or other distributions or proceeds; (e) any sale/leaseback transaction in which the referenced person is the seller/lessee; (f) any lien, charge, claim or other encumbrance arising under any Applicable Law, whether in favor of an Authority or otherwise, including (without limitation) liens for taxes, assessments and other governmental charges and liens of mechanics, carriers, warehouses, suppliers and laborers; (g) any restrictive covenant, lease, license, right of use, possession or first refusal, infringement, community property or other joint ownership interest, limitation or restriction on use or transfer, exception to title, or other limitation or restriction on the extent, exercise or enforcement of any right or interest respecting any asset or property; (h) with respect to any real estate, any easement, right-of-way, servitude, encroachment, restrictive covenant, reservation, or other exception to title; (i) any covenant or agreement with any other person to a "Negative Pledge" (i.e., that the referenced or relevant person will not (A) do any one or more of the things specified in the preceding clauses or (B) sell, lease, sublease, transfer, exchange, abandon or otherwise dispose of, surrender management, physical possession or control of, physically alter or relocate all or any portion of its assets or properties); or (j) any other lien, encumbrance or adverse right or claim of any nature in, to or against any asset or property. "Lintek" shall have the meaning assigned to it in the Introduction. "Loan" and "Loans" shall respectively mean any and all principal amounts outstanding from time to time (including future advances) in respect of the Revolving Credit Loans, the Term Loans, the Mortgage Loans, the Letter of Credit Advances and all other amounts advanced from time to time to or on behalf of any one or more of the Borrowers by the Administrator, the Banks or their respective designees pursuant to this Agreement or any other Loan Instrument. "Loan Collateral" shall have the meaning assigned to it in Section 9.02(a) hereof. "Loan Instrument" and "Loan Instruments" shall respectively mean any one or more of this Agreement, the Revolving Credit Notes, the Term Notes, the Mortgage Notes, the Mortgages, the Letters of Credit, the applications for Letters of Credit, and the various other mortgages, assignments, instruments and other documents creating or evidencing any interest of the Administrator or any other Bank in any collateral securing or intended to secure anyone's obligations under any of the foregoing, the Registration Rights Agreement, and all waivers, consents, agreements, reports, statements, certificates, schedules and other documents executed by the requisite person(s) pursuant to or in connection with any of the foregoing and accepted or delivered by the Administrator (with the consent of the Requisite Banks, as and if required) (whether prior to, on or from time to time after the Effective Date), as each may be supplemented, modified, amended, restated or replaced from time to time in the manner provided therein. "Loan Obligations" shall have the meaning assigned to it in Section 9.02(a) hereof. "Lucent" shall mean Lucent Technologies, Inc. "Lucent Equipment Financing" shall mean the Other Debt incurred pursuant to the items referred to in clauses (m) and (o) of the definition of Equipment Finance Document. "Lucent Supply Agreement" shall mean the Supply Agreement between Lucent and MIC dated as of July 1, 1997, as the same may be supplemented, modified, amended, restated or replaced from time to time in the manner provided therein. "Majority Banks" shall have the meaning assigned to it in Section 9.02(d) hereof. "Margin Stock" shall mean any "margin stock" as defined in any applicable Margin Stock Regulations. "Margin Stock Regulations" shall mean Regulation T, U and/or X of the Board of Governors of the Federal Reserve System, as applicable, and the rules and regulations promulgated thereunder, as the same may be supplemented, modified, amended, restated or replaced from time to time, or any corresponding or succeeding provisions of Applicable Law. "Material Adverse Effect" shall mean any material and adverse effect, whether individually or in the aggregate, upon (a) the assets, business, operations, properties or condition, financial or otherwise, of the Borrowers taken as a whole, (b) the collective ability of the Borrowers to make payment of, or to otherwise perform or satisfy, all or any part of the Obligations as and when due, or (c) the Collateral. "Material Contract" and "Material Contracts" shall respectively mean any one or more of the Contracts (including Material Government Contracts), in each case having an aggregate contract amount or payments (per Contract) of $750,000 or more. "Material Contract Schedule" shall mean any schedule prepared by the Borrowers from time to time listing all Material Contracts of each Borrower, noting with respect to each purchaser the date of the Contract and the contract amount and with respect to each Material Contract the gross profit margin, all amounts paid to date, the delivery date(s), the approximate percentage of work completed and the estimated cost to complete. (All Contracts are included in the Collateral whether or not ever listed on any Material Contract Schedule.) "Material Document" shall mean: (a) any Subordinated Debt Document; (b) any Equipment Finance Document; (c) any Purchase Document; or (d) any other material instrument, indenture, agreement, document, arrangement or other obligation (i) to which any Borrower is or may be a party, (ii) by which any Borrower or any of the Collateral is or may be bound or subject, or (iii) by which any of the other assets and properties of any Borrower (if any) is or may be bound or subject, in each case whether now or hereafter existing, and irrespective of whether reduced to writing, and as each has been and hereafter may be supplemented, modified, amended, restated or replaced from time to time. "Material Government Contract" and "Material Government Contracts" shall respectively mean any one or more of the Contracts made directly with any governmental Authority having an aggregate contract amount or payments (per Contract) of $250,000 or more. "Maturity Date" shall mean: (a) with respect to the Mortgage Loans, the earlier of (i) April 30, 2008 and (ii) the date on which the maturity of the Obligations shall have been accelerated pursuant to Section 8.02 hereof; and (b) with respect to all other Loans, the earliest of (i) December 31, 2002, (ii) with respect to the Revolving Credit Loans, the date on which the Commitment shall have been reduced permanently to zero, (iii) the date payment is demanded or otherwise due with respect to any Letter of Credit Advance or reimbursable amount or expense or other advance as provided in Section 2.05(e) hereof, and (iv) with respect to all Obligations the date on which the maturity of the Obligations shall have been accelerated pursuant to Section 8.02 hereof. "MIC" shall have the meaning assigned to it in the Introduction. "mortgage" shall mean any mortgage, deed of trust or other security deed or security interest in real estate. "Mortgage" and "Mortgages" shall respectively mean any one or more of the Plainview Mortgage and any other mortgages from Aeroflex or any other Borrower to the Administrator as mortgagee (for the benefit of all of the Banks), as executed and delivered from time to time, and as the same may be supplemented, modified, amended, restated or replaced from time to time in the manner provided therein. "Mortgage Loans" shall have the meaning assigned to it in Section 2.02(b) hereof. "Mortgage Note" and "Mortgage Notes" shall respectively mean any one or more of the Mortgage Notes dated as of February 25, 1999, issued by the Borrowers to each of the Banks to evidence each Bank's Pro Rata Share of the Mortgage Loans (as referenced in Section 2.03(c) hereof), as each may be modified, amended, restated or replaced from time to time in the manner provided therein. "New York Real Estate Law" shall mean the Real Property Law and the Real Property Actions and Proceedings Law of the State of New York, as amended, and as the same may be supplemented, modified, amended, restated or replaced from time to time, and the rules and regulations promulgated thereunder, or any corresponding or succeeding provisions of Applicable Law. "Note" and "Notes" shall respectively mean any one or more of the Revolving Credit Notes, the Term Notes and the Mortgage Notes. "Obligations" as of any date shall mean any and all of the obligations of the Borrowers (a) to repay the balance of the Loans then outstanding (including future advances), including accrued and unpaid interest thereon (including, without limitation, any and all interest and other amounts accrued during the pendency of any bankruptcy, insolvency, receivership or other similar proceedings, irrespective of whether such interest and other amounts are allowed or allowable as claims in such proceedings), (b) to pay or otherwise perform or satisfy all of the other amounts to be paid and obligations to be performed or otherwise satisfied by the Borrowers (whether individually, jointly, severally or otherwise) under this Agreement and the other Loan Instruments, (c) to pay or otherwise perform or satisfy all of the other amounts to be paid and obligations to be performed or otherwise satisfied by the Borrowers under any interest rate protection, foreign currency exchange, or other interest or exchange rate swap or hedging agreement or arrangement (whether individually, jointly, severally or otherwise) with any of the Banks or any of their affiliates, and (iv) to pay or otherwise satisfy any and all overdrafts of the Borrowers honored by any of the Banks (in the sole and absolute discretion of each Bank) and other indebtedness, liabilities or obligations (whether under any note, Credit Support or other instrument or document or otherwise) now or hereafter owed to any of the Banks by the Borrowers (whether individually, jointly, severally or otherwise). "Old Corp" shall mean Old Corp., a New York corporation formerly known as Filtron Co., Inc., and currently having an address at 35 South Service Road, Plainview, New York 11803. "Organizational Document" shall mean any instrument, indenture, agreement, charter, by-laws, certificate or other document or any statutory equivalent respecting any of the Pledged Securities or the organization, governance or operation of any issuer of any of the Pledged Securities, in each case whether now or hereafter existing, and irrespective of whether reduced to writing, and as each has been and hereafter may be supplemented, renewed, extended, modified, amended or restated from time to time. "Other Debt" shall mean (a) purchase money Indebtedness incurred in the purchase of equipment in the ordinary course of business so long as each is secured only by the equipment purchased (excluding any Loans used for such purposes), (b) Indebtedness secured by equipment and similar tangible assets and properties (other than Collateral) refinanced in the ordinary course of business so long as the net book value of the assets and properties so pledged does not exceed 200% of the original principal amount of such Indebtedness, and (c) obligations arising under leases, whether or not constituting Indebtedness under GAAP, excluding, however, (i) leases (A) of real property or (B) having aggregate rental payments for the initial term (discounted to present value) of less than $100,000 for any lease (with multiple equipment schedules constituting a single lease) or series of related leases, (ii) any refinancing of any Lucent Equipment Financing permitted under Section 6.02(a)(iv) hereof; or (iii) the conversion of any Lucent Equipment Financing into a sale/leaseback transaction contemplated under Section 7.03(c) hereof. "Other Taxes" shall have the meaning assigned to it in Section 2.09 hereof. "Pearl River Financing" shall mean the industrial development bond financing to MIC from the Pearl River Financing Authority secured by a mortgage on the Pearl River Project and secured and enhanced by the Pearl River Financing L/C. "Pearl River Financing Authority" shall mean the County of Rockland (New York) Industrial Development Agency or any successor. "Pearl River Financing Document" and "Pearl River Financing Documents" shall respectively mean any one or more of the bonds issued to evidence and bond the purchase agreement, indenture and other agreements executed to govern the Pearl River Financing, the mortgage(s) encumbering the Pearl River Project executed by MIC to support the Pearl River Financing and/or the Pearl River Financing L/C, the Pearl River Financing L/C and related application(s) and reimbursement agreement(s), and the guaranties executed by Aeroflex respecting the Pearl River Financing or Pearl River Financing L/C, and any and all waivers, consents, agreements, instruments and other documents executed by the requisite person(s) pursuant to or in connection with any of the foregoing; in each case whether now or hereafter existing, and as each may be supplemented, modified, amended, restated or replaced from time to time. "Pearl River Financing L/C" shall mean the letter(s) of credit issued by Mellon Bank, N.A. to support the Pearl River Financing, as the same may be supplemented, modified, amended, restated or replaced from time to time in the manner provided therein. "Pearl River Project" shall mean the acquisition and improvement of MIC's facility in Pearl River, New York. "Permitted Investments" shall mean: (a) certificates of deposit, commercial paper or other market rate instruments with final maturities of one year or less issued by and normal business banking accounts with (i) any commercial bank that (A) is a Bank hereunder, or (B) is organized under the laws of the United States or any state thereof and has total capital and surplus in excess of $1,000,000,000, or (ii) the holding company of any such bank or any subsidiary of such holding company; (b) commercial paper or other debt securities with final maturities of one year or less from the date of acquisition and a rating from Standard & Poor's Corporation or Moody's Investors Services of not less than "A-1" or "P-1", respectively; (c) securities or other obligations with final maturities of one year or less from the date of acquisition issued or unconditionally guarantied by the government of the United States of America or any agency or instrumentality thereof (but only to the extent backed by the full faith and credit of the United States of America); (d) money market preferred stock with a Standard & Poor's Corporation rating of "A" or greater; and (e) shares of money market mutual or similar funds having net assets in excess of $1,000,000,000. "Permitted Lien" for a referenced person shall mean any of the following: (a) statutory Liens incurred in the ordinary course of the referenced person's business (i) for taxes, assessments or other governmental charges, levies or claims, (ii) of mechanics, carriers, warehouses, suppliers and laborers, (iii) respecting worker's compensation, unemployment insurance, statutory obligations or social security legislation, or (iv) required by law as a condition precedent to the transaction of the referenced person's business or the exercise of any of the privileges or licenses by the referenced person subject to such Lien, in each case so long as the underlying obligations are not then required to be paid under Section 5.06 hereof and any reserve has been established and any bond or insurance has been obtained as required by that Section; (b) Liens incurred in respect of judgments and awards discharged within 30 days from the making thereof; (c) in the case of real estate, easements, rights-of-way, restrictions, covenants and other agreements of record and other similar charges or encumbrances not interfering with the ordinary conduct of the business of the referenced person; (d) in the case of personal assets and properties other than Collateral, any deposits made or other security interests incurred in the ordinary course of the referenced person's business to secure the performance of its tenders, bids, leases (other than capitalized leases), contracts (other than for Indebtedness or Credit Support), and similar obligations arising as a result of progress payments under government contracts; (e) the Liens (including leases treated as Liens) encumbering equipment purchased or property leased by the referenced person with Other Debt permitted by Sections 6.02(a)(iv), 6.02(a)(vi) and 6.02(b) hereof so long as they respectively secure only the corresponding purchase money Indebtedness or capitalized lease obligations; (f) the Liens granted from time to time to the Administrator (for the benefit of all of the Banks); and (g) currently existing Liens that are disclosed in Schedule 3.10(a) hereto, including any renewals or extensions thereof, but those Liens shall not be increased or extended to other Indebtedness unless otherwise permitted by the terms and provisions of this Agreement. "person" shall include (without limitation) any manner of association, business trust, company, corporation, estate, governmental or other Authority, joint venture, limited liability company, natural person, partnership, trust or other entity. "Plainview Property" shall mean any and all real estate and improvements located at 35 South Service Road, Plainview, New York 11803, as described in the Plainview Mortgage. "Plainview Mortgage" shall mean the Mortgage, Assignment of Rents and Security Agreement dated as of February 25, 1999, from Aeroflex, as mortgagor, to the Administrator (for the benefit of all of the Banks), as mortgagee, respecting the Plainview Property, as the same may be supplemented, modified, amended, restated or replaced from time to time in the manner provided therein. "Plan" and "Plans" shall have the meanings respectively assigned to them in Section 3.09(c) hereof. "Pledged Permitted Investments" shall have the meaning assigned to it in Section 7.03(g) hereof. "Pledged Security" and "Pledged Securities" for any referenced person shall respectively mean any and all of the following: (a) any and all of the referenced person's Investments and other financial assets in or to or issued by any Borrower (other than Aeroflex), Europtest, Comar, HARX, Old Corp, T-Cas or any subsidiary of any Borrower; (b) any and all dividends, interest and distributions on, under or related to any of the foregoing items (whether cash, stock or otherwise) and splits and reclassifications thereof, including (without limitation) any and all securities, investment property, financial assets, investments, interests or other assets or properties received by the referenced person on account of or related to any of the foregoing items; (c) any and all options, warrants and other rights to acquire any such securities, investment property, financial assets, investments or interests (whether from the issuer or otherwise), provided, however, that the shares of Comar shall be excluded until such time (if ever) as the environmental issues pertaining to its real estate shall have been resolved to the satisfaction of the Majority Banks; (d) any and all advances, indebtedness and other amounts (including interest) directly or indirectly owed to the referenced person on account of or related to any of the foregoing items; and (e) any and all security entitlements and other rights, powers, privileges, remedies and interests of the referenced person in, to and under any and all the foregoing and any and all Organizational Documents and Custody Documents pertaining thereto; in each case to the extent owned or held of record by or beneficially (or otherwise) for the referenced person, whether owned or held individually, jointly or otherwise, and whether now existing or hereafter acquired or created. "Pro Forma Effect" shall mean the effect(s) any action or other event proposed by or on behalf of the Borrowers (if it were to happen as proposed) could have on (a) the assets, business, operations, properties or condition, financial or otherwise, of the Borrowers taken as a whole, (b) the collective ability of the Borrowers to make payment of, or to otherwise perform or satisfy, all or any part of the Obligations as and when due, or (c) the Collateral, including (without limitation) the effect(s) of including any proposed sale or disposition, new or altered Indebtedness or other obligation (and the payments required thereunder), payment or other action or event in a pro forma recalculation of the various financial (among other things) the various financial measurements and covenants set forth in this Agreement for or as at the end of the applicable computation or reporting period then most recently ended (based on the then most recently required compliance calculations and any and all subsequent pro forma calculations on a cumulative basis with respect to other action(s) or event(s), if and to the extent they occurred or continue to be proposed). "Pro Rata Share" shall have the meaning assigned to it in Section 9.02(c) hereof. "Purchase Agreement" shall mean the Common Stock Purchase Agreement between Aeroflex and United Technologies Corporation, the owner of all of the issued and outstanding common stock of UTMC, dated as of February 25, 1999, as the same may be supplemented, modified, amended, restated or replaced from time to time in the manner provided therein. "Purchase Documents" shall mean the Purchase Agreement, and any and all waivers, consents, agreements, instruments and other documents executed by the requisite person(s) pursuant to or in connection with any of the foregoing, in each case whether now or hereafter existing, and irrespective of whether reduced to writing, and as each may be supplemented, modified, amended, restated or replaced from time to time. "real estate" shall include (without limitation) (a) all land, leasehold interests, easements, licenses, rights-of-way or use, appurtenances and other rights and interests in real property, (b) all buildings and other structures and improvements, (c) all fixtures, furnishings, equipment and other personal property (including, without limitation, leasehold interests in such personal property and mobile homes of the type usually installed on a developed site) located on or used in connection therewith, whether or not affixed thereto, (d) all leases and subleases thereof, and (e) all rents, profits and other income, payments and proceeds with respect to any and all of the foregoing. "Registration Rights Agreement" shall mean the Stock Registration Rights Agreement among Aeroflex, Fleet, CBC Capital Partners, Inc., and the Administrator dated as of March 15, 1996, together with all schedules and exhibits thereto, as the same may be supplemented, modified, amended, restated or replaced from time to time in the manner provided therein. "Representative" and "Representatives" shall respectively mean any or all of: (a) in the case of any referenced person (including, without limitation, the Administrator and the Banks), such referenced person's affiliates, directors, officers, employees, attorneys, agents and other representatives; and (b) in addition in the case of the Administrator, any Bank, any issuer or any other financial institution, such referenced person's participants, correspondents, confirming banks, custodians and designees and their respective affiliates, directors, officers, employees, attorneys, agents and other representatives. "Requisite Banks" shall mean such number of Banks (if any) as may have the aggregate applicable shares required for a particular action by Sections 9.06, 9.08 and 9.09 hereof or any other term or provision of this Agreement or any other Loan Instrument. "Reserve Percentage" for any Interest Period for the corresponding portion of the Loans shall mean the percentage established from time to time by the Board of Governors of the Federal Reserve System (or any successor) and then in effect for determining the maximum reserve requirement (including, but not limited to, any marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with deposits exceeding one billion dollars (or any higher threshold) with respect to liabilities consisting of or including (among other liabilities) eurocurrency liabilities or liabilities respecting United States Dollar non-personal time deposits in the United States (whichever may be relevant to the particular Fixed Rate) with maturities equal or comparable to such Interest Period. The Borrowers acknowledge and agree that: (a) any portion of the Loans bearing interest at the Applicable Euro Rate shall be deemed to constitute a "eurocurrency liability" as defined in Regulation D of said Board of Governors and to be subject to the reserve requirements of such Regulation; and (b) the Reserve Percentage shall be calculated without any regard to or benefit of any credit, proration, deduction, offset or other reduction that otherwise may be available from time to time under such Regulation. "Revolving Credit Loans" shall have the meaning assigned to it in Section 2.01(a) hereof. "Revolving Credit Note" and "Revolving Credit Notes" shall respectively mean any one or more of the Fifth Amended and Restated Revolving Promissory Notes dated as of February 25, 1999, issued by the Borrowers to each of the Banks to evidence each Bank's Pro Rata Share of the Revolving Credit Loans (as referenced in Section 2.03(a) hereof), as each may be modified, amended, restated or replaced from time to time in the manner provided therein. "Revolving Credit Period" shall mean that period commencing on the Effective Date and terminating on the earlier of (a) December 31, 2002, or (b) the Maturity Date. "Rights Agreement" shall mean Rights Agreement between Aeroflex and American Stock Transfer and Trust Company dated as of August 13, 1998, together with all schedules and exhibits thereto, as the same may be supplemented, modified, amended, restated or replaced from time to time in the manner provided therein. "Rule 144" shall mean Rule 144 as promulgated by the SEC under the Securities Act, as such rule may be supplemented, modified, amended, restated or replaced from time to time, or any corresponding or succeeding provisions of Applicable Law. "SEC" shall mean the Securities Exchange Commission of the United States. "securities" of any person shall mean any and all equity securities and debt securities, general or limited partnership interests, limited liability company membership interests, investment contracts and any other instrument or interest commonly understood to be a security issued by that person. "Securities Act" shall mean the Securities Act of 1933, as amended, or any corresponding provisions of any Applicable Law in any state or foreign jurisdiction, and as the same may be supplemented, modified, amended, restated or replaced from time to time, and the rules and regulations promulgated thereunder, or any corresponding or succeeding provisions of Applicable Law. "Securities Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any corresponding provisions of any Applicable Law in any state or foreign jurisdiction, and as the same may be supplemented, modified, amended, restated or replaced from time to time, and the rules and regulations promulgated thereunder, or any corresponding or succeeding provisions of Applicable Law. "Subordinated Debt Document" and "Subordinated Debt Documents" shall respectively mean (a) any debentures and indentures respecting subordinated Indebtedness approved from time to time by the Majority Banks (as provided in Section 6.12 hereof), and (b) any and all waivers, consents, agreements, instruments and other documents executed by the requisite person(s) pursuant to or in connection with any of the foregoing, in each case whether now or hereafter existing, and irrespective of whether reduced to writing, and as each may be supplemented, modified, amended, restated or replaced from time to time. "Subordinated Right" and "Subordinated Rights" of any Borrower shall respectively mean any and all subrogation, contribution and other similar rights of such Borrower against or in respect of (a) any other Borrower, (b) any of the assets and properties of any other Borrower or any subsidiary of any Borrower, or (c) any other co-obligor or indemnitor of any of such Borrower's payments or obligations under any of the Loan Instruments, whether now existing or hereafter acquired or created, and whether resulting from any payment made by such Borrower or otherwise (other than as waived in Section 2.14 hereof). "subsidiary" shall mean any corporation or other entity in respect of which a person at the time shall own directly or indirectly (through one or more corporations, nominees or other persons or otherwise) at least one-half of the aggregate voting interests of such corporation or other entity, whether owned or held (a) of record or beneficially or (b) individually, jointly or otherwise. "Systems" shall have the meaning assigned to it in the Introduction. "Taxes" shall have the meaning assigned to it in Section 2.09 hereof. "T-Cas" shall mean T-Cas Corp., a Virginia corporation currently having an address at 35 South Service Road, Plainview, New York 11803. "Term Loans" shall have the meaning assigned to it in Section 2.02(a) hereof. "Term Note" and "Term Notes" shall respectively mean any one or more of the Term Promissory Notes dated as of February 25, 1999, issued by the Borrowers to each of the Banks to evidence each Bank's Pro Rata Share of the Term Loans (as referenced in Section 2.03(b) hereof), as each may be modified, amended, restated or replaced from time to time in the manner provided therein. "UTMC" shall have the meaning assigned to it in the Introduction. "Vibrations" shall have the meaning assigned to it in the Introduction. "VTX" shall mean VTX Electronics Corp., a publicly traded Delaware corporation. "Year 2000 Compatible" shall mean that the referenced computer or other hardware or software of the reference person (a) will not malfunction, cease to function, generate incorrect date dependent or related data or produce incorrect results on or after January 1, 2000 or 2001, (b) applies formulae, calculates, displays, exports, imports, manages, manipulates, operates, provides, processes, recognizes, sorts, and stores all dates and date dependent or related user or interface data, fields, functionalities and values (i) in four-digit year date format (whether "date" or "year" data field or otherwise), (ii) that properly, fully and correctly identifies any year (including, without limitation, the century thereof) and computes any period, value or result (including, without limitation, those spanning the end of any century or millennium), and (iii) without any error, in each case (A) without the necessity of any human intervention or system modification and (B) whether such dates occur on or after January 1, 2000 or 2001, and whether or not such dates are intermixed with or compared to (in calculations or otherwise) dates occurring in the years of or before 1999 or 1899, and (c) will properly interface with other hardware and software of the referenced person without rendering any of them less Year 2000 Compatible or otherwise less functional. Section 1.02. Certain Definitions in Other Loan Instruments. Capitalized terms used and not otherwise defined herein shall have the meanings respectively assigned to them in the other applicable Loan Instruments. Section 1.03. Pronouns. Each use in this Agreement of a neuter pronoun shall be deemed to include references to the masculine and feminine variations thereof, and vice versa, and a singular pronoun shall be deemed to include a reference to the plural variation thereof, and vice versa, in each case as the context may permit or require. ARTICLE II Amounts and Terms of the Obligations ------------------------------------ Section 2.01. The Revolving Credit Loans. -------------------------- (a) Upon the terms and provisions and subject to the conditions contained in this Agreement, each Bank shall make revolving credit loans (with all such loans by the Banks being referred to collectively as the "Revolving Credit Loans") from time to time during the Revolving Credit Period to the Borrowers at their request (as provided in subsection (b), below) up to an aggregate maximum principal amount outstanding (including such Bank's Pro Rata Share of the Letter of Credit Amount) at any one time not to exceed such Bank's Committed Share of the Commitment; provided that if the Borrowing Base is at any time less than the sum of (i) the Commitment plus (ii) the outstanding principal balance of the Term Loans, the maximum obligation of such Bank shall be further limited to the amount equal from time to time to the remainder at such time of (A) such Bank's Committed Share of the Borrowing Base, minus (B) the outstanding principal balance of such Bank's Pro Rata Share of the Term Loans. Subject to the terms and provisions of this Agreement, during the Revolving Credit Period the Borrowers may reborrow Advances previously repaid by them. (b) Aeroflex (without notice to or the consent of any other Borrower) from time to time may request an advance of Revolving Credit Loans from all of the Banks pursuant to subsection (a) of this Section (as made by the Banks, an "Advance") by giving the Banks a signed notice of its request, or by giving the Banks notice of its request both by telephone and telecopy of a signed notice and promptly confirming its request by delivery to each Bank of an original copy of the signed notice. The notice requesting an Advance (i) may be combined with a request under Section 2.04(b) hereof that all or a portion of the Advance bear interest at a Fixed Rate when made, (ii) shall be delivered to the Banks at least one Business Day prior to the requested Advance Date or such greater number of Business Days as may be required under Section 2.04(c) hereof if combined with such a Fixed Rate request, (iii) shall be deemed to have been delivered on the following Business Day unless actually received by each of the Banks prior to 11:00 A.M. (New York City time) on a Business Day, (iv) shall be irrevocable once given, and (v) shall specify (A) the requested Advance Date, (B) the principal amount of the requested Advance and (C) the amount to be advanced by each Bank in accordance with its Committed Share. Each requested Advance shall be for an integral multiple of $50,000 in an amount that is not less than $250,000 or such larger multiple and minimum as may be required under Section 2.04(b) hereof if the Advance is to bear interest at a Fixed Rate. Subject to compliance with the terms and provisions of Article IV of this Agreement, each Bank shall make its Committed Share of the requested Advance on the proposed Advance Date by crediting the demand deposit account maintained by Aeroflex with such Bank at its office at the address set forth in the Introduction. (c) Aeroflex (without notice to or the consent of any other Borrower)may voluntarily elect to permanently reduce the Commitment in whole at any time, or in part from time to time in integral multiples of $100,000 in an amount that is not less than $1,000,000, by giving the Banks a signed notice of its election, or by giving the Banks notice of its election both by telephone and telecopy of a signed notice and promptly confirming its election by delivery to each Bank of an original copy of the signed notice; provided, however, that no such reduction shall be made that would result in the payment or prepayment of any portion of any Fixed Rate Loan unless the Borrowers repay such Fixed Rate Loan in full and concurrently pay all amounts (if any) required under Section 2.04(d) hereof. Notice of such reduction election (i) shall be delivered to the Banks at least three Business Days prior to the requested reduction date, (ii) shall be deemed to have been delivered on the following Business Day unless actually received by each of the Banks prior to 11:00 A.M. (New York City time) on a Business Day, and (iii) shall be irrevocable once given. Each such reduction shall be accompanied by a prepayment of the Revolving Credit Loans in the amount, if any, necessary to make the aggregate outstanding principal balance of the Revolving Credit Loans, after giving effect to the prepayment, not more than the Commitment (as so reduced). Section 2.02. The Term Loans and Mortgage Loans. (a) Upon the terms and provisions and subject to the conditions contained in this Agreement, on the Effective Date each Bank shall make a term loan to the Borrowers equal to the amount of such loan committed by such Bank as set forth in Exhibit F hereto (with all such loans by the Banks, which aggregate $20,000,000, being referred to collectively as the "Term Loans"). Subject to compliance with the terms and provisions of Article IV of this Agreement, each Bank shall make its Committed Share of the Term Loans on the Effective Date by crediting the demand deposit account maintained by the Borrowers with such Bank at its office at the address set forth in the Introduction. (b) The Borrowers hereby acknowledge, certify and agree that: (i) pursuant to the Existing Loan Agreement, the Banks have made loans on a revolving basis to the Borrowers that are outstanding as of the date of this Agreement in the aggregate principal amount of $4,484,000 (the "Existing Loans"); (ii) the obligations of the Borrowers to repay the Existing Loans (with interest) to the Banks and to perform or otherwise satisfy their other obligations under the Existing Loan Agreement and other Existing Loan Instruments are not subject as of the date of this Agreement to any defense, counterclaim, setoff, right of recoupment, abatement, reduction or other claim or determination; and (iii) upon the terms and provisions and subject to the conditions contained in this Agreement, on the Effective Date, the Existing Loans are hereby converted into and shall continue and constitute mortgage loans to the Borrowers (the "Mortgage Loans") under and subject to the terms and provisions of this Agreement, which Agreement has amended, restated and completely replaced the Existing Loan Agreement. Each Bank shall share in the Mortgage Loans, as so converted, in accordance with its Committed Share of the Mortgage Loans on the Effective Date. Section 2.03. The Notes. (a) The obligation of the Borrowers to repay the Revolving Credit Loans, together with interest thereon, shall be evidenced by a Fifth Amended and Restated Revolving Promissory Note issued by the Borrowers to each Bank in the form of Exhibit A hereto in the amount of such Bank's Committed Share of the Commitment and dated as of the date hereof. The Revolving Credit Notes have been issued to amend, extend, restate and completely replace the Existing Notes, to evidence all amounts outstanding under the Existing Notes and to evidence any further advances or readvances of the Revolving Credit Loans. Although issued in substitution for and restatement and replacement of the Existing Notes, the Notes shall not be deemed to have been issued in payment, satisfaction, cancellation or novation of the Existing Notes. The Banks shall be entitled to retain the Existing Notes until all of the Obligations have been fully paid and satisfied, after which time the Existing Notes shall be returned to the Borrowers at the same time as the Notes, unless some other time or manner of delivery shall be provided by any other written agreement between the Borrowers and the Banks. Promptly following the Effective Date, each Bank shall legend the Existing Note issued to it as follows: "This Note is one of the Existing Notes that has been superseded by the Fifth Amended and Restated Revolving Promissory Notes of the Borrowers dated as of February 25, 1999, which amended, restated and completely replaced this Note and the other Existing Notes and evidences the Indebtedness formerly evidenced by this Note and the other Existing Notes, but which shall not be deemed or construed to be issued in payment, satisfaction, cancellation or novation of this Note or any other Existing Note. Reference should be made to such new Notes for all purposes, as the terms and provisions of this Note have no further independent force or effect." (b) The obligation of the Borrowers to repay the Term Loans, together with interest thereon, shall be evidenced by a Term Promissory Note issued by the Borrowers to each Bank in the form of Exhibit B hereto in the amount of such Bank's Committed Share of the Term Loans and dated as of the date hereof. (c) The obligation of the Borrowers to repay the Mortgage Loans, together with interest thereon, shall be evidenced by a Mortgage Note issued by the Borrowers to each Bank in the form of Exhibit C hereto in the amount of such Bank's Committed Share of the Mortgage Loans and dated as of the date hereof. Section 2.04. Interest; Optional Fixed Rates; Additional Interest. (a) Except as otherwise provided in this Section, the Loans shall bear interest (computed on the basis of the actual number of days elapsed and a year of 360 days) on the unpaid principal balance of those Loans outstanding from time to time, from and including the date of advance until such principal balance of such Loans is repaid in full (including, without limitation, any and all interest and other amounts accrued during the pendency of any bankruptcy, insolvency, receivership or other similar proceedings, irrespective of whether such interest and other amounts are allowed or allowable as claims in such proceedings), at a fluctuating annual rate that for the Pro Rata Share of the Loans of each Bank shall be equal to such Bank's Base Rate, which fluctuating rate shall change from time to time simultaneously with each corresponding change in the Base Rate. Interest on those Loans shall be payable by the Borrowers in arrears: (i) prior to the relevant Maturity Date, on the last Business Day of each calendar month; (ii) in full on the relevant Maturity Date; and (iii) on demand after the relevant Maturity Date. (b) The Borrowers from time to time may request that a portion of the Loans outstanding bear interest at the Applicable Euro Rate for an Interest Period of one, two, three or six months, which portion must be in an integral multiple of $250,000 in an amount that is not less than $1,250,000. Any portion or portions of the Loans for which a Fixed Rate is in effect shall bear interest for the applicable Interest Period (computed on the basis of the actual number of days elapsed and a year of 360 days) at an annual rate equal to the corresponding Fixed Rate(s). Interest on the Fixed Rate Loans shall be payable by the Borrowers in arrears: (i) prior to the relevant Maturity Date, on the last Business Day of each calendar month and on the last Business Day of the applicable Interest Period, unless the Borrowers and Administrator (with the consent of the Banks participating in such loans) shall otherwise agree in connection with a particular Fixed Rate Loan; (ii) in full on the relevant Maturity Date; and (iii) on demand after the relevant Maturity Date. (c) The Borrowers may elect to have a Fixed Rate apply by giving the Banks a signed notice of their election, or by giving the Banks notice of their election both by telephone and telecopy of a signed notice and promptly confirming their election by delivery to each Bank of an original copy of the signed notice. The notice electing a Fixed Rate (i) may be combined with a request under Section 2.01(b) hereof for an Advance, (ii) shall be delivered to the Banks two Business Days prior to commencement of interest at the Applicable Euro Rate, (iii) shall be deemed to have been delivered on the following Business Day unless actually received by each of the Banks prior to 11:00 A.M. (New York City time) on a Business Day, (iv) shall be irrevocable once given, and (v) shall specify the requested Fixed Rate, date of commencement, duration of Interest Period and portion of the Loans to which the Fixed Rate is to apply. The election by the Borrowers of a Fixed Rate is conditioned upon each of the following: (A) no more than five (5) Interest Periods shall be in effect at any one time unless the Administrator (with the consent of the Banks participating in such loans) in its discretion shall consent otherwise; (B) the portion(s) of the Loans subject to a Fixed Rate(s) shall not exceed an amount equal to the remainder of (1) the principal balance of the Loans outstanding on the date such Fixed Rate(s) would commence (including any concurrent Advance), minus (2) those portions thereof that are scheduled to be paid as set forth in Section 2.05 hereof within the requested Interest Period(s); (C) no Event of Default or Default shall have occurred and be then continuing; and (D) no adverse determination shall have been made by any Bank pursuant to subsection (e) of this Section. From and after the last day of any Interest Period, interest shall accrue at the rate based upon the Base Rate (as provided in subsection (a) of this Section) until that portion of the principal balance is repaid or a new Fixed Rate with respect thereto is adopted hereunder. If any Interest Period ends on a day other than a Business Day, such Interest Period shall be extended to the next succeeding day that is a Business Day unless (in the case of a Loan bearing interest at the Applicable Euro Rate) such succeeding day would fall in the next calendar month, in which event such Interest Period shall end on the immediately preceding Business Day. (d) In addition to the payment of interest as stated above, if there shall be any increase in the direct or indirect costs to any one or more of the Banks of lending, funding or maintaining any Fixed Rate Loan, or any reduction in any amount received or to be received by any one or more of the Banks hereunder, due to: (i) the introduction of or any change in any Applicable Law or the interpretation or administration thereof, including (without limitation) the imposition, modification or application of, or increase in, (A) any reserve, capital adequacy, special deposit, assessment or similar requirements, (B) any requirement to withhold or deduct from any amount payable to any one or more of the Banks any taxes, levies, imposts, duties, fees, deductions, withholdings or charges of a similar nature (other than federal, state and local income and franchise taxes imposed upon any Bank), or any interest thereon or any penalties with respect thereto, imposed, levied, collected, assessed, withheld or deducted by any Authority, including subdivisions and taxing authorities thereof, or (C) any other restriction or condition affecting a Fixed Rate or this Agreement; (ii) the compliance by any one or more of the Banks with any regulation, guideline or request from any central bank or other Authority (whether or not having the force of law); (iii)the failure by the Borrowers to take or accept any requested Advance for which they have also requested a Fixed Rate, or the failure of the Borrowers to satisfy the conditions precedent to the making of any such Advance or the establishment of any requested Fixed Rate; (iv) the repayment, prepayment or other reduction, in whole or in part, of any Fixed Rate Loan prior to the natural expiration of the applicable Interest Period, whether as a result of miscalculation, change in circumstance, consent of the Administrator or the Requisite Banks (as and if required), acceleration of the Obligations or otherwise; or (v) the failure by the Borrowers to pay the accrued and unpaid interest on or repay the outstanding principal balance of any Fixed Rate Loan, or any portion thereof, when required by the terms and provisions of this Agreement; then the Borrowers from time to time, upon demand by the Administrator, shall pay to the Administrator (for the benefit of each affected Bank) additional amounts sufficient to indemnify each such Bank against and reimburse each such Bank for such increased costs and reduced receipts (but only to the extent each such increased cost or reduced receipt has not already been included in the calculation of any interest rate or fee or otherwise reimbursed under any other subsection of this Section), including (without limitation) amounts sufficient to compensate each affected Bank for any breakage or other costs and any decrease in margin or other return incurred in connection with the repayment, prepayment or other reduction of any Fixed Rate Loan and the liquidation or redeployment of the affected deposits or other funding arrangements. A certificate as to the amount of such increased costs and reduced receipts submitted to the Borrowers by the Administrator (which may be the certificate of each relevant Bank) shall be conclusive as to the existence and amount thereof absent manifest error. If the Administrator has not received payment for such amounts within five (5) Business Days of the date of such certificate, the Administrator (with the consent of the Majority Banks) may direct the application of all or a portion of the next succeeding payment or prepayment made by the Borrowers, whether intended by the Borrowers to be interest, principal or otherwise, first to the reduction of the amounts of such increased costs and reduced receipts. (e) If, on or before the date of commencement of any Interest Period, any one or more of the Banks shall have determined (which determination shall be final, conclusive and binding on the Borrowers) that (i) it is impermissible for such Bank to make any Fixed Rate Loan due to any of the circumstances described in clauses (i) and (ii) of subsection (d) of this Section, (ii) deposits in United States Dollars in amounts equal to the portion of the Loans to be subject to a Fixed Rate for that Interest Period are not being offered to such Banks in the applicable market, (iii) by reason of changes affecting the applicable market, the Fixed Rate to be in effect for that period will not adequately and fairly reflect the cost to such Banks of maintaining for that period the portion of the Loans for which the Fixed Rate was requested, or (iv) the Fixed Rate or requested Interest Period is otherwise unavailable, then the portion of the Loans so affected shall continue to bear interest based upon the Base Rate as provided in subsection (a) of this Section. Furthermore, if any one or more of the Banks shall have determined (which determination shall be final, conclusive and binding upon the Borrowers) that it is impermissible for such Bank(s) to continue any Fixed Rate Loan during the relevant Interest Period due to any of the circumstances described in clauses (i) and (ii) of subsection (d) of this Section, then (A) that Interest Period shall be deemed to have been terminated as of the date specified in that determination, (B) the Borrowers shall indemnify each such Bank against and reimburse each such Bank for any increased costs or reduced receipts relating to that termination as provided in subsections (d) and (e) of this Section as if there had been a voluntary prepayment of that Fixed Rate Loan by the Borrowers, and (C) after the date specified in that determination the portion of the Loans so affected shall bear interest based upon the Base Rate as provided in subsection (a) of this Section. The Administrator shall notify the Borrowers in the event any Bank makes such a determination; provided, however, that the failure to give such notice shall not affect the validity of that determination or the continued accrual of interest based upon the Base Rate on the applicable portion of the Loans. (f) In addition to the payment of interest or fees under this Agreement, if one or more of the Banks or any of their respective affiliates determines or has determined that (i) compliance with any existing or future Applicable Law, including (without limitation) any regulation, guideline or request from any central bank or other Authority (whether or not having the force of law), or any change therein or in the interpretation or administration thereof, affects or would affect the amount of capital required or expected to be maintained by such Bank(s) or affiliate(s) (taking into account its policies with respect to capital adequacy and desired rate of return on capital), and (ii) the amount of such capital is increased by or based upon any commitment or funding to the Borrowers or any other obligation of such Bank or affiliate(s) under or related to this Agreement or any other Loan Instrument (using such averaging, attribution and allocation methods as each affected Bank may reasonably deem appropriate), then the Borrowers from time to time, upon demand by the affected Bank(s), shall pay to the affected Bank(s) additional amounts sufficient to compensate the affected Bank(s) for those circumstances (without, however, duplicating any amount paid by the Borrowers pursuant to subsection (d) of this Section). A certificate as to the amount of such compensation submitted to the Borrowers by the affected Bank(s) or affiliate shall be conclusive as to the existence and amount thereof absent manifest error. If the Administrator has not received payment for such amounts within five (5) Business Days of the date of such certificate, the Administrator (with the consent of the Majority Banks) may direct the application of all or a portion of the next succeeding payment or prepayment made by the Borrowers, whether intended by the Borrowers to be interest, principal or otherwise, first to the reduction of such billed amount. (g) In the event any payment of principal, interest or other amount is not paid to any Bank as and when due under this Agreement or any other Loan Instrument prior to the relevant Maturity Date, the overdue amount(s) shall, to the extent permitted by Applicable Law, bear interest until repaid in full at a fluctuating annual rate equal to the rate charged by such Bank under subsection (a) of this Section plus three percent (3.00%) per annum, instead of the rate established by subsection (a) of this Section, and such interest amount(s) shall be payable upon demand, subject, however, to the maximum rate permitted by Applicable Law as provided in Section 2.11 hereof. (h) After notice from the Banks during the continuance of any Event of Default prior to maturity that has not been remedied or waived (i) within five (5) Business Days of occurrence respecting any Event of Default described in Section 8.01(c) hereof, (ii) within thirty (30) days of occurrence respecting any Event of Default resulting from any act or omission within the control of any Borrower or any of its officers, directors, employees, agents and other representatives (it being understood and agreed that the covenants contained in Sections 6.01(a), 6.01(b), 6.01(c), 6.01(d) and 6.01(e) are not within such control), or (iii) within ninety (90) days of occurrence respecting any other Event of Default (it being further understood and agreed that any violation of Sections 6.01(a), 6.01(b), 6.01(c), 6.01(d) or 6.01(e) will cease to be continuing for the purposes of this subsection if and when next satisfied, if ever), in any such case irrespective of whether a Default Declaration has been issued or any other action has been taken by the Administrator or any other Bank, and at all times on and after the Maturity Date, the Loans shall bear additional interest (computed on the basis of the actual number of days elapsed and a year of 360 days) on the unpaid principal balance of the Loans outstanding from time to time during such period(s) (from and including the date such notice is given by the Banks or the Maturity Date, as applicable) at a rate equal to three percent (3.00%) per annum, which interest amounts shall be payable by the Borrowers in addition to, and at the same times as, the regular interest payments on the Loans required pursuant to the preceding subsections of this Section, subject, however, to the maximum rate permitted by Applicable Law as provided in Section 2.11 hereof. Section 2.05. Voluntary and Mandatory Payments. (a) The Borrowers may voluntarily elect to prepay the Loans in full at any time, or in part from time to time in integral multiples of $50,000 in an amount that is not less than $250,000, in either case without premium or penalty or reduction of the Commitment, by giving the Banks a signed notice of their election, or by giving the Banks notice of their election both by telephone and telecopy of a signed notice and promptly confirming their election by delivery to each Bank of an original copy of the signed notice; provided further that the Borrowers shall not in any event prepay any portion of any Fixed Rate Loan unless the Borrowers prepay such Fixed Rate Loan in full and concurrently pay all amounts (if any) required under Section 2.04(d) hereof; provided, however, that the Borrowers may not voluntarily prepay any portion of the Mortgage Loans prior to the relevant Maturity Date so long as any principal balance remains outstanding under the Revolving Credit Loans or Term Loans. Notice of such prepayment election (i) shall be delivered to the Banks at least three Business Days prior to the requested prepayment date, (ii) shall be deemed to have been delivered on the following Business Day unless actually received by each of the Banks prior to 11:00 A.M. (New York City time) on a Business Day, and (iii) shall be irrevocable once given. The Borrowers shall repay the Loans on the date and in the amount specified in such notice of prepayment election. Except as otherwise provided in this Section, and except as the Borrowers may otherwise request with respect to any voluntary prepayment, each voluntary or mandatory prepayment shall be applied first to the outstanding balance of the Revolving Credit Loans, with any excess then applied to the Term Loans. So long as any principal balance remains outstanding under the Revolving Credit Loans and Term Loans, any attempted prepayment of the Mortgage Loans (A) shall be applied to and deemed and construed to have reduced the Revolving Credit Loans and Term Loans and (B) shall not be applied against or deemed or construed to have reduced the Mortgage Loans. (b) The Borrowers shall repay the Revolving Credit Loans (and then the Term Loans if no Revolving Credit Loans are outstanding) immediately at any time and from time to time in an amount equal to the excess (if any) of (i) the sum of (A) the outstanding principal balance of the Revolving Credit Loans, plus (B) the outstanding principal balance of the Term Loans, plus (C) the Letter of Credit Amount, over (ii) the lesser of (A) the sum of (1) the Commitment plus (2) the outstanding principal balance of the Term Loans or (B) the Borrowing Base; provided that the Borrowers instead may cure any such Borrowing Base deficiency through the delivery of additional Collateral as provided in Section 5.11 hereof. In the event the Letter of Credit Amount alone exceeds the lesser of the Commitment or the Borrowing Base, then the Borrowers immediately shall repay the Revolving Credit Loans and Term Loans in full and deposit cash collateral with the Administrator or its designee in an amount equal to the remaining deficiency (which collateral shall be deposited and administered in the manner contemplated in Section 8.02(d) hereof); provided that the Borrowers instead may cure any such Borrowing Base deficiency through the delivery of additional Collateral as provided in Section 5.11 hereof. (c) The Borrowers shall repay the principal balances then outstanding under the Revolving Credit Loans in full on the relevant Maturity Date. (d) The Borrowers shall repay the Term Loans: (i) in the amount of $2,500,000 on June 30, 1999; and (ii) in quarterly installments of $1,250,000 each on the last Business Day of each calendar quarter, commencing with the quarter ending September 30, 1999. The Borrowers shall repay the principal balance then outstanding under the Term Loans in full on the relevant Maturity Date. (e) The Borrowers shall repay the Mortgage Loans: (i) in the amount of $26,222.22 on February 26, 1999; and (ii) in monthly installments of $26,222.22 each on the last Business Day of each calendar month, commencing with March 31, 1999. The Borrowers shall repay the principal balance then outstanding under the Mortgage Loans in full on the relevant Maturity Date. (f) The Borrowers shall make an additional mandatory prepayment of the Loans (to be applied as described below) promptly, but in any event within five Business Days, following: (i) each incurrence of Other Debt by the Borrowers, in an amount equal to one-half of (A) in the case of Indebtedness (including a lease treated as Indebtedness under GAAP), the principal amount (or imputed principal amount) of such Other Debt or (B) in the case of any lease (other than a lease treated as indebtedness under GAAP), the aggregate lease payments during the initial term of such Other Debt, discounted to present value; (ii) each incurrence of additional Indebtedness under any Subordinated Debt Documents by the Borrowers, in an amount equal to (A) the principal amount of such subordinated indebtedness less (B) the issuance and other costs reasonably incurred by the Borrowers in connection therewith; and (iii) each receipt and in an amount equal to the net proceeds received by any of the Borrowers in connection with (1) any voluntary sale, lease, transfer, assignment, liquidation or other disposition of any investment or property, plant or equipment by any Borrower (whether or not Collateral) or (2) any involuntary transfer, assignment, discontinuation, liquidation, condemnation, destruction or other disposition of any Collateral or other business, asset or property of any Borrower, in each case other than any Excluded Disposition (as defined below); provided, however, that the first $500,000 in the aggregate of net proceeds received in connection with any such disposition (other than any Excluded Disposition) within any fiscal year shall be excluded for the purpose of determining such Mandatory Prepayments. To the extent applicable and not already reflected, the Borrowers may deduct reasonable and usual costs of disposition of any asset or property (other than payments to affiliates), and taxes paid or currently payable in respect to the transaction, as well as the principal amount of any permitted Indebtedness secured by Permitted Liens on such asset or property that is repaid from the proceeds of any disposition of such asset or property. The Borrowers shall give the Banks prompt notice of any occurrence that would result or has resulted in any of the events described above involving net proceeds in excess of $500,000, which notice shall specify the material terms thereof, and upon the request of any Bank the Borrower shall give the Banks copies of all related documentation as it becomes available to the Borrowers. "Excluded Disposition" shall mean: (i) any sale of equipment in any sale/leaseback transaction permitted under Section 7.03(c) hereof; or (ii) any sale or other voluntary or involuntary disposition of any Collateral or other asset or property specified in Section 7.03(b) hereof if the conditions of that subsection are satisfied and the repair, rebuilding, replacement or acquisition contemplated by that subsection are completed within 90 days or such additional period of time in the case of involuntary dispositions as may be reasonably necessary for completion. Each such payment shall be applied to reduce the outstanding balance of the Term Loans until repaid in full, and thereafter each such payment (including the remainder after any partial application to the Term Loans) shall be applied to reduce the Revolving Credit Loans. This subsection is not intended, and shall not be deemed or construed, to authorize or permit any sale or other disposition of any Collateral, irrespective of whether any payment is made as required hereunder. (g) Notwithstanding anything to the contrary contained in this Agreement or any other Loan Instrument, and without in any way limiting the applicability of the terms and provisions of this Agreement and the other Loan Instruments in respect of any collateral or any of the other Loans or other Obligations of the Borrowers, the Borrowers acknowledge and agree that: (i) any Letter of Credit Advance, if not paid on the date specified in Section 2.07(d) (as a result of which non-payment it is deemed converted into a Revolving Credit Loan), or any reimbursable amount or expense or other advance that is not described elsewhere in this Section and for which no due date or time period for payment is specified in this Agreement or any other Loan Instrument, together with interest thereon as provided in Section 2.04, shall be due (or in the case of an unreimbursed Letter of Credit Advance, overdue) and payable on demand; and (ii) the representations, warranties, covenants and other terms and provisions set forth in this Agreement and in the other Loan Instruments are not intended and shall not be deemed or construed to limit the demand nature of the Obligations of the Borrowers in respect of any Letter of Credit Advance or any reimbursable amount, expense or other advance hereunder and thereunder. (h) Nothing contained in this Section shall be deemed or construed to be a waiver of any term or provision of this Agreement respecting the reimbursement of any increased costs or reduced receipts of any Bank in the event of any prepayment or repayment (whether mandatory or otherwise) of any portion of any of the Fixed Rate Loans. (i) The Obligations then outstanding shall be due and payable in full on the relevant Maturity Date, and to the extent arising thereafter shall be due and payable on demand, in either event notwithstanding anything in this Article to the contrary. Section 2.06. Commitment Fee; Restructure Fee; Administration Fee; Etc. (a) The Borrowers shall pay to the Banks sharing in the Revolving Credit Loans on the last Business Day of each March, June, September and December of each year during the Revolving Credit Period, and on the last day of the Revolving Credit Period, in arrears, a fee (computed on the basis of the actual number of days elapsed and a year of 360 days) respecting the availability of the Commitment (the "Commitment Fee") equal to one quarter of one percent (0.25%) per annum of the average daily unadvanced portion of the Commitment during the then most recently concluded calendar quarter or portion thereof (with the Letter of Credit Amount being considered an advance under the Commitment). (b) The Borrowers shall pay to the Banks a fee respecting the restructuring of the current loan facilities of the Borrowers equal to $100,000 (the "Facility Fee") payable at closing. (c) The Borrowers shall pay to the Administrator (solely for its benefit and not to be shared by the other Banks) (i) an annual administration fee of $15,000, payable annually in advance on each March 15, and (ii) such other administration, cash management, collateral monitoring and other fees as may be agreed upon from time to time by the Borrowers and the Administrator. Section 2.07. Letters of Credit. (a) Upon the terms and provisions and subject to the conditions contained in this Agreement, in lieu of a cash advance under the Commitment the Administrator (the "Fronting Bank") in its discretion may issue or cause the issuance of Letters of Credit from time to time upon the request of the Borrowers up to a cumulative maximum face amount (whether or not advanced) not to exceed $3,000,000 in order to secure the debts or obligations of the Borrowers; provided that the Fronting Bank's agreement to consider the issuance of Letters of Credit shall terminate on the first to occur of the relevant Maturity Date and the expiration of the Revolving Credit Period; and provided further that the Fronting Bank shall not consider the issuance of any Letter of Credit if (to the actual knowledge of the Fronting Bank) (i) the sum of (A) the face amount of the Letter of Credit to be issued, plus (B) the Letter of Credit Amount, plus (C) the outstanding principal balance of the Revolving Credit Loans, plus (D) the outstanding principal balance of the Term Loans would exceed (ii) the lesser of (A) the sum of (1) the Commitment, plus (2) the outstanding principal balance of the Term Loans or (B) the Borrowing Base. (b) The Borrowers may request that a Letter of Credit be issued pursuant to subsection (a) of this Section by giving the Fronting Bank (with a copy to the Administrator if not the Fronting Bank) a signed notice of their request, or by giving the Fronting Bank notice of their request both by telephone and telecopy of a signed notice and promptly confirming their request by delivery to the Fronting Bank of an original copy of the signed notice (with copies of such telecopy and notice to the Administrator if not the Fronting Bank). The notice requesting a Letter of Credit (i) shall be delivered to the Fronting Bank (with a copy to the Administrator if not the Fronting Bank) at least five Business Days prior to the requested Issuance Date, (ii) shall be deemed to have been delivered on the following Business Day unless actually received by the Fronting Bank prior to 11:00 A.M. (New York City time) on a Business Day, (iii) shall be irrevocable once given, and (iv) shall specify (A) the requested Issuance Date, face amount and expiration date of the desired Letter of Credit, (B) the beneficiary to whom it is to be issued (each, a "Letter of Credit Beneficiary"), and (C) the purpose for which the Letter of Credit is being requested. On or before the requested Issuance Date, the Borrowers also must complete and deliver to the Fronting Bank an application for each requested Letter of Credit in form and substance acceptable to the Fronting Bank and issuer and pay the issuer's normal application and issuance fees for each requested Letter of Credit. Each requested Letter of Credit shall be in a face amount of not less than $10,000 and shall terminate no later than the first anniversary of the Issuance Date or the scheduled expiration of the Revolving Credit Period, whichever occurs first. The issuance of each Letter of Credit is subject to compliance on the Issuance Date with the conditions precedent to obtaining an Advance under this Agreement and subject always to the sole and absolute discretion of the Fronting Bank. Each Letter of Credit will be issued on a standard form of the issuing bank then in effect. Each Letter of Credit shall be governed by and construed in accordance with: (i) the Uniform Customs and Practice for Documentary Credits, 1993 Revision, ICC Publication 500LF, as supplemented, revised and restated from time to time (the "UCP"); and (ii) to the extent the UCP is not dispositive, the Applicable Laws pertaining in the State of New York (including the Uniform Commercial Code). The requested Letter of Credit may be delivered by the Fronting Bank to the Letter of Credit Beneficiary, to the Borrowers or to such other person as the Borrowers reasonably may request. The Letters of Credit may not be transferred or assigned without (i) the prior written consent of the Fronting Bank and issuer, (ii) submission to the Fronting Bank of a notice of transfer in the form annexed to the Letter of Credit, and (iii) the payment of the issuer's normal transfer fee. (c) Each of the Letters of Credit may be drawn upon by presentment to the Fronting Bank, at its office at 175 Water Street, 3rd Floor, New York, New York 10038, Attention: Trade Services Standby Unit (or such other office as may be specified therein), of the original Letter of Credit, duly endorsed by the Letter of Credit Beneficiary (which presentment may be waived by the Fronting Bank with respect to Letters of Credit permitting multiple drawings), together with a sight draft payable to the Letter of Credit Beneficiary or its order and the Letter of Credit Beneficiary's certificate that it is entitled to the amount of the sight draft as a result of nonpayment of the obligations thereby secured, each substantially in the form annexed to the relevant Letter of Credit. The promissory note or other instrument evidencing the obligation thereby secured, duly endorsed to the Fronting Bank, also shall be presented with the Letter of Credit if that obligation will be paid in full as a result of the payment in accordance with the Letter of Credit. If the relevant note or other instrument will not be so paid in full, the Fronting Bank (in its sole and absolute discretion) may require that the person presenting the Letter of Credit present it to the Fronting Bank for copying and return. The Fronting Bank and/or issuer may accept any draft, certificate or other document reasonably conforming in form and substance to the requirements described in the Letter of Credit and the forms annexed thereto, and may afford the Letter of Credit Beneficiary notice of and an opportunity to correct non-conforming items capable of cure, each in the sole and absolute discretion of the Fronting Bank and/or issuer and without any notice to or assent from any Borrower. The Fronting Bank, any other issuer and their respective Representatives may in good faith (without inquiry) with respect to a particular Letter of Credit: (i) act in reliance upon any written, telegraphic, facsimile, electronic, telephonic, oral or other request, notice or communication believed to be from, by, on behalf of or authorized by any Borrower, the Beneficiary or their respective Representatives, successors or assigns, whether or not from or signed by an authorized person; (ii) accept or pay as complying with the terms of the relevant Letter of Credit any drafts or other documents that appear on their face (A) to be reasonably conforming to the required forms or (B) to be issued or signed by the Beneficiary or other proper party or their respective Representatives, successors or assigns (including, without limitation, any bankruptcy trustee or similar official); (iii) reject any presentment, draft or other document that it determines (in its sole and absolute discretion) to not conform to the requirements of the Letter of Credit or this Agreement; or (iv) act or refrain from acting in reliance upon or in accordance with the UCP, Applicable Law or customary practices in effect in the place of issuance, confirmation, presentment, negotiation or payment of the Letter of Credit. (d) Each amount paid by the Fronting Bank or its designee pursuant to a Letter of Credit or otherwise in respect of the obligation thereby secured (a "Letter of Credit Advance") shall be repaid by the Borrowers to the Fronting Bank on the same day payment is made by the Fronting Bank or its designee. If a Letter of Credit Advance is not so repaid (without, however, in any way consenting to such non-payment), (i) such Letter of Credit Advance shall be deemed to be an Advance of a Revolving Credit Loan (as provided in Section 9.03 hereof) and shall be repayable ON DEMAND, together with interest thereon at the rate specified in this Article for overdue payments of the Loans, pursuant to the terms and provisions of this Agreement notwithstanding any term or provision contained in any Letter of Credit application to the contrary, and (ii) the resulting default shall not be deemed or construed to have been cured until payment has been duly made. Nothing in this subsection, however, is intended to limit the ability of the Borrowers to request an Advance prior to an anticipated Letter of Credit payment date or (assuming satisfaction of the requisite conditions) to apply the proceeds thereof to the payment of a Letter of Credit Advance. (e) The Borrowers shall pay to the Administrator (for the benefit of all of the Banks) on each of the anniversaries of the issuance of each outstanding Letter of Credit, in advance, a fee respecting each Letter of Credit (the "Letter of Credit Fee") for the year commencing with that date equal to one and one-half percent (1.50%) per annum (computed on the basis of the actual number of days in such year and a year of 360 days) of the unadvanced face amount thereof, with such amount being determined as of the Business Day immediately preceding the quarterly payment date; provided that the Borrowers shall pay that fee on the Issuance Date, in advance, for the forthcoming year; and provided further that the minimum fee for any Letter of Credit shall be the greater of (i) one-half percent (0.50%) of the face amount or (ii) $1,000, irrespective of any smaller face amount or shorter expiry. The Borrowers also shall pay to the Fronting Bank any and all customary fees (without duplication of the Letter of Credit Fee), commissions and/or charges of the Fronting Bank for any increase, extension, renewal, amendment or transfer of the Letter of Credit. The Borrowers also shall pay to the Fronting Bank any fees or other charges of any other issuer or any participant, correspondent, confirming bank, custodian or designee of the Fronting Bank or other issuer involved with the Letter of Credit. (f) In addition to the payments of principal, interest and fees as stated above, if there shall be any increase in the direct or indirect costs to any one or more of the Banks of issuing, causing the issuance of or maintaining a Letter of Credit, or any reduction in any amount received or to be received with respect to a Letter of Credit by any one or more of the Banks hereunder, due to: (i) the introduction of or any change in any Applicable Law or the interpretation or administration thereof, including (without limitation) the imposition, modification or application of (A) any reserve, capital adequacy, special deposit, assessment or similar requirement respecting Letters of Credit issued by, assets held by, or deposits in or for the account of any one or more of the Banks or other issuer(s) of a Letter of Credit, (B) any requirement to withhold or deduct from any amount payable to any one or more of the Banks hereunder, or payable directly or indirectly to the issuer of a Letter of Credit, any taxes, levies, imposts, duties, fees, deductions, withholdings or charges of a similar nature (other than federal, state and local income and franchise taxes imposed upon any Bank), or any interest thereon or any penalties with respect thereto, imposed, levied, collected, assessed, withheld or deducted by any governmental Authority, including subdivisions and taxing authorities thereof, or (C) any other restriction or condition affecting a Letter of Credit or this Agreement; or (ii) the compliance by any one of more of the Banks or other issuer(s) of a Letter of Credit with any regulation, guideline or request from any central bank or other Authority (whether or not having the force of law); then the Borrowers from time to time, upon demand by the Administrator, shall pay to the Administrator (for the benefit of each affected Bank or other issuer) additional amounts sufficient to indemnify each such Bank or other issuer against and reimburse each such Bank or other issuer for such increased costs and reduced receipts. A certificate as to the amount of such increased costs and reduced receipts submitted to the Borrowers by the Administrator (which may be the certificate of each affected Bank or other issuer) shall be conclusive as to the existence and amount thereof absent manifest error. If the Administrator has not received payment for such amounts by the time it receives from the Borrowers the next succeeding payment or prepayment of a portion of the Obligations, whether intended by the Borrowers to be interest, principal or otherwise, the Administrator (with the consent of the Majority Banks) may apply such payment or prepayment first to the reduction of the amounts of such costs and receipts. (g) The Obligations shall not otherwise be deemed to have been fully paid or satisfied until all of the Letters of Credit have been paid (and the corresponding Letter of Credit Advances repaid by the Borrowers) or have been surrendered to the Fronting Bank or the Administrator for return to and cancellation by the issuer(s) thereof; provided that any Letter of Credit that has not been presented for payment shall be deemed for this purpose to have been canceled on the thirtieth day following the stated expiry date, without, however, relieving the Borrowers of any of the Obligations with respect to any such Letter of Credit that is in the process of payment. (h) In addition to the payment of fees and other amounts as stated above, after notice from the Administrator during the continuance of any Event of Default prior to maturity, and at all times on and after the Maturity Date, the Borrowers shall pay to the Administrator (for the benefit of all of the Banks) a fee respecting the Letters of Credit outstanding from time to time during such period(s) equal to three percent (3.00%) per annum of the outstanding face amount thereof (computed on the basis of the actual number of days elapsed and a year of 360 days), which amounts shall be payable by the Borrowers at the same times as the regular interest payments on the Loans required by Section 2.04 of this Agreement, subject, however, to the maximum rate permitted by Applicable Law as provided in Section 2.11, hereof. (i) Each of the payment obligations, covenants and other obligations and agreements of the Borrowers contained in this Agreement and the other Loan Instruments shall be paid and satisfied by the Borrowers strictly in accordance with their terms in each case without regard to any of the following; none of the Fronting Bank, any other issuer, the Administrator, any Bank and their respective Representatives shall have any liability or responsibility for any of the following; and each Borrower hereby expressly waives any claim or defense against or in respect of each such person with respect to any and all of the following: (i) any payment or other action or inaction under or with respect to any Letter of Credit in accordance with the terms and provisions of the relevant Letter of Credit, this Agreement or any other Loan Instrument; (ii) any payment against presentation of any required draft or other document that does not reference, or incompletely or incorrectly references, the existence, amount, date, number or other aspect of the relevant Letter of Credit; (iii) any presentment or payment under or with respect to any Letter of Credit after the expiry thereof in reliance upon or in accordance with the UCP, Applicable Law or customary practices in effect in the place of issuance, confirmation, presentment, negotiation or payment of the Letter of Credit; (iv) the form, validity, sufficiency, completeness, accuracy, genuineness or legal effect of (A) any Letter of Credit, (B) any draft or other document required or permitted under the relevant Letter of Credit, this Agreement or any other Loan Instrument, or (C) any instrument or document transferring or assigning the Letter of Credit, any rights or benefits thereunder or any proceeds thereof (in whole or in part), or purporting to do so, even if any of them should in fact prove to be in any or all respects invalid, insufficient, ineffective, incomplete, inaccurate, fraudulent or forged; (v) the failure of any person to surrender, obtain, forward or otherwise deal with the Letter of Credit or any other document other than the surrender and obtaining of any drafts or other documents specifically required by the terms of the Letter of Credit; (vi) any failure to note the amount of any draft on the reverse of the Letter of Credit; (vii) any and all errors, omissions, interruptions or delays in transmission or delivery of any notice, request, demand or other communication permitted or required to be given under this Agreement or any other Loan Instrument, whether by mail, cable, telegraph, telex, telecopy or otherwise, whether or not an error in processing, cipher, translation or otherwise or an error in interpretation (of technical terms or otherwise); (viii) any loss or delay in the delivery of any draft, document or proceeds; (ix) the existence, character, quality, quantity, condition, packing, value, or delivery of any goods or other property relating to any Letter of Credit, the time, place, manner or order in which shipment may have been made, the existence, form, validity, sufficiency or legal effect of any insurance covering or purporting or required to cover any such goods, or any act or omission of any insurer, shipper, warehouseman, carrier, correspondent or other person; or (x) without limiting the foregoing, any consequences arising from causes beyond the control of the Administrator, any other issuer or any other Bank or any of their respective Representatives or any act or omission of any of them not done or omitted in bad faith (each of which provision, if contained in the Letter of Credit itself, may be waived by the Fronting Bank or other issuer in its sole and absolute discretion). If the Letter of Credit provides that payment is to be made by a designated Representative of the Fronting Bank or other issuer, none of the Fronting Bank, any other issuer, the Administrator, any Bank and their respective Representatives (other than such designated Representative) shall be responsible or otherwise liable for the failure of any document specified in the Letter of Credit to come into the Fronting Bank's hands or for any delay in connection therewith, and the obligation of the Borrowers to reimburse the Fronting Bank, any other issuer, the Administrator or any other Bank for payments made or obligations incurred shall not be affected by such failure or delay in the receipt by the Fronting Bank or other issuer of any or all of such documents whether sent to the Fronting Bank or other issuer in one or multiple mailings. In any event, neither the Fronting Bank, the Administrator nor any other issuer shall be responsible for any error, neglect, suspension or insolvency of any of the Representatives of the Administrator or other issuer designated to confirm or pay with respect to any Letter of Credit. Each Borrower acknowledges and agrees that this Agreement has been entered into and all Letters of Credit have been and shall be obtained by the Borrowers for commercial purposes. Each Borrower agrees that it will not raise (as a defense or otherwise), and each Borrower hereby expressly waives, any immunity or exemption from liability, jurisdiction, forum or service that may now or hereafter be accorded to any Borrower, its Representatives or any of their respective assets and properties. The preceding agreements and waivers are not intended (and shall not be deemed or construed) to in any way qualify, condition, diminish, restrict, limit or otherwise affect any (and is in addition to each) other release, waiver, consent, waiver, exculpation, indemnification, permitted action or other similar term or provision of this Agreement or any other Loan Instrument. Section 2.08. Payments and Applications. (a) Until such time as either (i) the Borrowers have defaulted in any payment to any Bank for more than five Business Days, (ii) a Default Declaration has been issued, or (iii) any Bank is in any continuing default under Article IX hereof, whichever occurs first, all payments of principal, interest, fees and other amounts due the Banks or the Administrator pursuant to this Agreement and the other Loan Instruments shall be made in United States Dollars in immediately available funds by 12:30 P.M. (New York City time) on the date payment is due directly to each Bank at its offices at the appropriate address set forth in the Introduction or as otherwise instructed by each Bank. During the continuance of any Event of Default prior to maturity, and at any time after the Maturity Date, the Administrator may direct the Borrowers to make all payments covered by this subsection directly to the Administrator pursuant to subsection (c), below. (b) The parties intend that payments of the Obligations that may be directly billed by each Bank under subsection (a) of this Section may be made through the deposit of sufficient amounts by the Borrowers into specified accounts maintained with each Bank or any designated affiliate(s), as and when such Obligations become due, and the debiting of such account by or at the direction of the relevant Bank. Accordingly, each Borrower hereby authorizes each Bank (or such affiliate) from time to time to apply or direct the application of all or any portion of the funds in any such account to the payment of principal and interest on Loans and to all other Obligations of the Borrowers hereunder at each time such payment becomes due and payable under subsection (a) above. In debiting such accounts, the Obligations shall be deemed to have been paid or repaid only to the extent of the immediately available funds actually available in and debited from that account and applied to the Obligations, notwithstanding any internal procedure of the relevant Bank (or such debiting affiliate) to the contrary. (c) All payments of principal, fees and amounts not directly payable under subsections (a) and (b), above (including all payments of interest, fees and other amounts no longer directly payable under such subsections) due the Banks pursuant to this Agreement and the other Loan Instruments shall be made in United States Dollars in immediately available funds by 11:00 A.M. (New York City time) on the date payment is due to the Administrator at its offices at 300 Broad Hollow Road, Melville, New York 11747, or as otherwise instructed by the Administrator. All advances and payments made pursuant to this Agreement and the other Loan Instruments may be recorded by each Bank on its books and records, and such books and records shall be conclusive as to the existence and amounts thereof. (d) Should any payment become due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day, and, in the case of any payment of principal, interest shall be payable thereon at the rate per annum specified in this Agreement during such extension. (e) Except as otherwise provided in this Agreement, so long as no Event of Default is then continuing, any funds received by any of the Banks from or on behalf of any Borrower (whether pursuant to any of the terms and provisions of this Agreement or any other Loan Instrument) shall be applied to the following items in the manner and order reasonably designated by the Borrowers to the extent permitted by Applicable Law; provided, however, that absent such designation or during the continuance of any such event, those funds (including the net proceeds from any Collateral) instead shall be applied to the following items in the following order and manner to the extent permitted by Applicable Law: (i) the payment of due and unpaid principal on the Loans; (ii) the payment of accrued and unpaid interest on the Loans; (iii)the payment to or reimbursement of the Administrator or any other Bank for any fees and expenses for which any of them is entitled to be paid or reimbursed pursuant to any of the provisions of this Agreement and the other Loan Instruments; (iv) the establishment or maintenance of any cash collateral required or permitted under any Loan Instrument; and (v) the payment in full of all other Obligations under this Agreement and the other Loan Instruments. Section 2.09. Taxes. Any and all payments made by the Borrowers under this Agreement or any other Loan Instrument shall be made free and clear of and without any reduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and any and all liabilities with respect thereto, excluding, however, such taxes as are imposed on a Bank (a) by the jurisdiction of its organization or its lending office engaged in the Loans (or any political subdivision thereof) with respect to the income or franchise of such Bank, or (b) by reason of such Bank's failure to comply with the requirements of Section 10.13(d) hereof (all such non-excluded taxes, levies, imposts, deductions, charges or withholdings being hereinafter collectively referred to as the "Taxes"). In addition, the Borrowers shall pay, as and when due, any and all present or future stamp or documentary taxes or other excise or property taxes, charges or similar levies that may arise from any execution, delivery, performance, existence or registration of this Agreement or any other Loan Instrument or any payment made hereunder or thereunder (collectively, "Other Taxes"). If any Borrower shall be required by Applicable Law to deduct any Taxes or Other Taxes from or in respect of any sum payable to the Banks under this Agreement or any other Loan Instrument, (x) the sum payable shall be increased as may be necessary so that, after making all required deductions, the Banks receive an amount equal to the sum they would have received if no such deductions had been made, (y) such Borrower shall make such deductions, and (z) such Borrower shall pay the full amount deducted to the relevant taxation Authority or other Authority in accordance with Applicable Law. Within 30 days after the date of any payment of Taxes or Other Taxes by the Borrowers, the Borrowers will furnish to the Administrator the original or a certified copy of a receipt evidencing payment or other documentation reasonably satisfactory to the Administrator evidencing payment. The Borrowers will furnish to the Administrator, upon the Administrator's request from time to time, an officer's certificate stating that, to the knowledge of the signer, all Taxes and Other Taxes that are or have become due have been paid. The Borrowers shall indemnify and reimburse (on a joint and several basis) each Bank and the Administrator on demand (payable within 30 days of written demand) for the full amount of Taxes or Other Taxes paid by such Bank(s) or the Administrator (as the case may be) and any and all claims, liabilities, losses and expenses (including, without limitation, penalties, interest, and attorneys and other professional fees, disbursements and expenses) of such Bank(s) or the Administrator arising therefrom or related directly or indirectly thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Section 2.10. Lost or Damaged Notes. In the event of the loss, theft or destruction of a Note, the Borrowers shall execute and deliver an identical new Note to the affected Bank in substitution therefor upon the receipt by the Borrowers of (a) notice from the affected Bank confirming such event and (b) if requested by the Borrowers, an indemnity agreement from the affected Bank in such form and substance as may be acceptable to the affected Bank. In the event of the mutilation of or other damage to a Note, the Borrowers shall execute and deliver an identical new Note to the affected Bank in substitution therefor, following which the affected Bank will return the mutilated or damaged Note to the Borrowers. Section 2.11. Maximum Interest Rate. It is the intention of the Banks and the Borrowers that the interest (as defined under Applicable Law) on the Loans that may be charged to, collected from or received from the Borrowers shall not exceed the maximum rate permissible under Applicable Law. Accordingly, anything in this Agreement, any Note or any other Loan Instrument to the contrary notwithstanding, in the event any interest (as so defined) is charged to, collected from or received from the Borrowers by the Banks pursuant hereto or thereto in excess of such maximum lawful rate, then the excess of such payment over that maximum shall be applied to the reduction of the outstanding principal balance of the Loans and the other Obligations (without any prepayment premium or penalty), and any portion of such excess payment remaining after payment and satisfaction in full of the Obligations shall be returned by the Banks to the Borrowers. Section 2.12. Obligations and Communications of the Borrowers. (a) All obligations, representations, warranties, covenants and other agreements of any one or more of the Borrowers under this Agreement, the Notes and the other Loan Instruments shall be joint and several liabilities of all of the Borrowers. Any knowledge held by or imputed to any Borrower shall be deemed to be within the knowledge of all of the Borrowers. Any certificate, notice, request, statement or other document or communication signed or made on behalf or in the name of any one or more of the Borrowers shall be deemed to have been signed or made by all of the Borrowers unless expressly disclaimed in a particular document or communication. (b) Without limiting the generality of the joint and several nature of the Obligations and the other obligations, representations, warranties, covenants and other agreements of the Borrowers under this Agreement and the other Loan Instruments, each Borrower hereby makes, constitutes and appoints Aeroflex and each of its executive officers (Treasurer or Vice President and above), and each of them with full power of substitution, as such Borrower's true and lawful attorney-in-fact with full power and authority from time to time in such Borrower's name, place and stead to (i) pay or otherwise perform any of the other Obligations, (ii) mortgage or grant security interests in any of the assets and properties of such Borrower to secure any of the Obligations, (iii) give notices and other communications under this Agreement and the other Loan Instruments, (iv) agree to waivers, supplements, modifications, amendments, restatements and replacements of and additions to this Agreement and the other Loan Instruments, (v) take or authorize any other action contemplated by this Agreement and the other Loan Instruments, and (vi) sign, execute, acknowledge, swear to, verify, deliver, file, record and publish any one or more of the foregoing. This Power of Attorney is hereby declared to be revocable only with the prior written consent of the Administrator, which will not be withheld unreasonably, with full power of substitution and coupled with an interest. This Power of Attorney shall survive the dissolution, reorganization or bankruptcy of any Borrower and shall extend to and be binding upon each Borrower's successors and assigns. This Power of Attorney may be exercised, among other ways, (i) by any one of the above-named attorneys-in-fact, or by any substitute designated by any of those attorneys-in-fact, and (ii) by signing for the Borrowers individually on any document or instrument or by listing two or more of the persons, including the Borrowers, for whom any document or instrument is being signed and signing once, with a single signature by the attorney-in-fact or substitute being effective to exercise the Powers of Attorney of all persons so listed. A facsimile signature shall be effective if so affixed. Any certificate, notice, request, statement or other document or communication signed or made by either of the above-named attorneys-in-fact shall be deemed to have been signed or made by all of the Borrowers pursuant to this Power of Attorney, irrespective of whether any reference to this power or to one or more of the other Borrowers is made therein, unless such exercise expressly disclaimed in a particular document or communication. In the event of any conflict between the exercise of this power and the one granted to the Administrator in Section 7.06 hereof, the one granted to the Administrator shall prevail. (c) Reference to a single specific Borrower or group of Borrowers, whether by name, officer's title, letterhead or otherwise, shall not constitute an express disclaimer of any of the foregoing. Section 2.13. Subrogation and Contribution. Each Borrower covenants and agrees that until the Obligations of the Borrowers under this Agreement and the other Loan Instruments have been fully paid, performed and satisfied, any and all Subordinated Rights shall be subordinate and inferior in priority and dignity to the Obligations and shall not be entitled to any payment or satisfaction (in whole or in part) until all of the Obligations have been fully paid and satisfied. Until such time (if ever) as the Obligations have been fully paid and satisfied: (x) the Borrowers shall not seek any payment or exercise or enforce any right, power, privilege, remedy or interest that any Borrower may have with respect to any Subordinated Right except with the prior written consent Administrator (with the consent of the Requisite Banks, as and if required) and for the benefit of all of the Banks; and (y) any payment, asset or property delivered to or for the benefit of any Borrower in respect of any Subordinated Right shall be accepted in trust for the benefit of all of the Banks and shall be promptly paid or delivered to the Administrator (for the benefit of all of the Banks) to be credited and applied to the payment and satisfaction of the Obligations, whether contingent, matured or unmatured, or to be held by the Administrator (for the benefit of all of the Banks) as additional collateral, as the Administrator (with the consent of the Requisite Banks, as and if required) may elect in its sole and absolute discretion. Each Borrower acknowledges that pursuant to Section 7.01 of this Agreement it has assigned and granted to the Administrator (for the benefit of all of the Banks) a continuing security interest in and to all Subordinated Rights. Section 2.14. Waiver of Impairment of Contribution and Other Rights. Each Borrower acknowledges and agrees that: (a) the amounts (if any) that potentially could be realized by such Borrower, as well as the enforceability, practicality or value of any right, power, privilege, remedy or interest of such Borrower, under or in respect of any Subordinated Right may be substantially reduced or limited or completely eliminated by any one or more of the following (either individually or in the aggregate): (i) the delay inherent in the subordination of those rights under this Agreement, (ii) payments by any other Borrower or others to the Administrator, any Bank or any other person, (iii) any foreclosure, sale, lease or other disposition or realization respecting any collateral, (iv) any action or inaction by the Administrator, any Bank or any other person authorized or waived by or on behalf of such Borrower, whether under this Agreement or otherwise, or contemplated, permitted or provided for under this Agreement, any other Loan Instrument or Applicable Law, (v) the exercise or enforcement by the Administrator or any other Bank of any one or more of its rights, powers privileges, remedies and interests of the Administrator or any other Bank under any Loan Instrument or Applicable Law, or (vi) any adverse change (however material) in the assets, business, operations, properties, or condition (financial or otherwise) of any other Borrower or any other person arising out of or related directly or indirectly to any of the foregoing; (b) neither the Administrator nor any Bank is acting as an agent, trustee or other representative (regarding collateral or otherwise) with respect to any Subordinated Right; (c) the Administrator or any other Bank may exercise or enforce any of its rights, powers, privileges, remedies or interests under the Loan Instruments and Applicable Law without any consideration of or regard to any Subordinated Right or any direct or indirect adverse effect thereupon (however material); (d) such Borrower shall not be entitled to any payment or other asset or property (or any part thereof) delivered to or otherwise realized by the Administrator or any other Bank on account of any other Obligations or to any accounting thereof; (e) none of the foregoing (whether individually or in the aggregate) shall (i) release, limit or otherwise affect the liability of such Borrower to the Administrator or any other Bank under this Agreement or any other Loan Instrument, or (ii) give rise to any action, claim, counterclaim, right of setoff or recoupment, defense, or other remedy on the part of such Borrower, irrespective of frequency, direct or indirect effect, materiality or direct or indirect consequences; and (f) such Borrower shall not raise any, and hereby expressly waives and releases each and every, such action, claim, counterclaim, right of setoff, or recoupment, defense, or other remedy. Section 2.15. Guaranty of Payment and Expenses. Each Borrower hereby absolutely, unconditionally and irrevocably guaranties to the Banks the full and punctual payment and satisfaction of the Obligations of each and every other Borrower as and when due, whether at stated maturity, by acceleration or otherwise, and agree to pay and satisfy in full any and all expenses that may be paid or incurred by the Administrator or any other Bank in the collection of all or any portion of the Obligations of any Borrower or the exercise or enforcement of any one or more of the other rights, powers, privileges, remedies and interests of the Administrator and the Banks under this Agreement and the other Loan Instruments, irrespective of the manner or success of any such collection, exercise or enforcement, and whether or not such expenses constitute part of the Obligations (collectively, the "Guaranty"). Section 2.16. Continuing Guaranty, Payment in Accordance with Terms, Etc. Each Borrower covenants and agrees that: (a) the Guaranty is a continuing guaranty of payment and satisfaction, and not collectibility only, whether the Obligations are now or hereafter existing, acquired or created, and irrespective of the fact that from time to time under the terms and provisions of the Loan Instruments monies may be advanced, repaid and readvanced and the outstanding balance of the Loans may be zero; (b) the Guaranty may not be revoked or terminated until such time as all of the Obligations shall have been fully paid and satisfied; (c) the Obligations shall not be deemed to have been otherwise fully paid and satisfied so long as any Loan Instrument shall have any continuing force or effect; and (d) the Borrowers' guaranty of those Obligations will be paid and satisfied in full in accordance with the terms and provisions of the Loan Instruments without regard to any Applicable Law now or hereafter in effect in any jurisdiction, including (without limitation) any Applicable Law that might in any manner affect any of those terms and provisions or any of the rights, powers, privileges, remedies and interests of the Administrator or any other Bank with respect thereto, or that might cause or permit to be invoked any alteration in the time, amount or manner of payment of any of the Obligations by any Borrower or any other person (other than any Bank). Section 2.17. Waivers of Notice, Etc. Except for notices expressly required under this Agreement or any other Loan Instrument to the Borrowers, each Borrower hereby expressly waives: (a) notice of acceptance of this Agreement; (b) notice of any action taken or omitted in reliance hereon; (c) presentment; (d) demand for payment; (e) protest or notice of protest; (f) notice of any nonpayment or other Event of Default or the occurrence or continuance of any other default, or any other event that (with the giving of notice or the passage of time or both) could constitute an Event of Default or a default, under any Loan Instrument; (g) notice of any material and adverse effect, whether individually or in the aggregate, upon the assets, business, operations, properties or condition (financial or otherwise) of any Borrower or any other person, or upon any part of any collateral securing the obligations of any Borrower or any other person; (h) any statute of limitations or similar time constraint under any Applicable Law, whether with respect to the Obligations; or (i) any other proof, notice or demand of any kind whatsoever with respect to any or all of the Obligations or promptness in making any claim or demand under this Agreement or any other Loan Instrument. No act or omission of any kind in connection with any of the foregoing shall in any way impair or otherwise affect the legality, validity, binding effect or enforceability of any term or provision of this Agreement or any other Loan Instrument or any of the Borrowers' Obligations under the Guaranty. Section 2.18. Agreement Not Affected. Without limiting the generality of the foregoing Sections or any other term or provision of this Agreement, each Borrower (in its capacity as a guarantor under the Guaranty) covenants, agrees and consents that, at any time, and from time to time: (a) the Loans may be advanced, repaid and readvanced from time to time, or the amount of the Loans, the rate of interest thereon, any other Obligation or the credit availability may be increased or otherwise changed; (b) the time, manner, place and other terms and provisions of payment or performance of any one or more of the Obligations may be extended, modified, amended, restated or otherwise changed; (c) any partial or late payment or any payment during the continuance of any default under any Loan Instrument may be accepted in whole or in part or rejected; (d) any collateral securing or intending to secure anyone's obligations under any Loan Instrument may be surrendered, repossessed, sequestered, judicially or nonjudicially foreclosed, conveyed or assigned (by deed in lieu of foreclosure or otherwise), sold, leased or otherwise realized upon, dealt with or disposed of, in whole or in part, whether to the Administrator or any other Bank, its designee or otherwise; (e) any mortgage or other security interest in any such collateral may be held without due recordation or other perfection (whether intentionally or otherwise), may be recorded or otherwise perfected, or may be assigned, released, subordinated or otherwise impaired, dealt with or disposed of in whole or in part; (f) any one or more payments, distributions and proceeds received from or in respect of such Borrower, any other Borrower or any other person or any collateral, if not expressly designated for or otherwise restricted to a particular obligation, may be applied in the discretion of the Administrator or any other Bank to the Obligations or to other Indebtedness or obligations (including interest) of such Borrower, any other Borrower or any such other person owed to the Administrator or any other Bank or any of its affiliates; (g) the liability of such Borrower, any other Borrower or any other person to pay any and all of the Obligations may be settled, compromised, adjusted, forgiven, released or affected by any other accommodation, in whole or in part, and payment of any and all of the Obligations of any Borrower may be subordinated to the prior payment of any other debts or claims of that or any other person; (h) the respective rights of setoff of the Administrator, any Bank and their respective Representatives may be exercised as provided under this Agreement, any other Loan Instrument or Applicable Law against any of the deposits, assets, properties and Indebtedness subject thereto, without any demand on or notice to any Borrower, without regard to the frequency of exercise thereof, and whether or not the relevant obligations shall then be matured; (i) any representation, warranty, covenant or other term or provision of any Loan Instrument, in whole or in part, may be the subject of one or more waivers of applicability or consents to nonperformance, noncompliance or nonobservance, whether or not constituting defaults, or may be otherwise not exercised or enforced (whether intentionally or otherwise); (j) any Loan Instrument, or any term or provision thereof, in whole or in part, may be renewed, extended, supplemented, renewed, extended, modified, amended, restated or otherwise changed in any respect by the respective parties thereto in the manner provided therein; (k) any one or more of this Agreement and the other Loan Instruments, or any one or more of the rights, powers, privileges, remedies and interests of the Administrator or any other Bank herein or therein, may be sold, conveyed, assigned or otherwise transferred in whole or part (including participations or other undivided interests) to any other person; or (l) any other right, power, privilege, remedy or interest of the Administrator or any other Bank under this Agreement, any other Loan Instrument or Applicable Law may be exercised or enforced by the Administrator or any other Bank or its designee, which exercise or enforcement may be delayed, discontinued or otherwise not pursued or exhausted for any or no reason whatsoever, or any such right, power, privilege, remedy or interest may be waived, omitted or otherwise not exercised or enforced (whether intentionally or otherwise); all in such manner and order, upon such terms and provisions and subject to such conditions as the Administrator or any other Bank may deem necessary or desirable in its sole and absolute discretion, all without notice to or further assent from such Borrower, and all without affecting this Agreement or any other Loan Instrument or any of such Borrower's Obligations under the Guaranty, which obligations shall continue in full force and effect until such time as all of the Obligations shall have been fully paid and satisfied. Section 2.19. Bankruptcy; Reinstatement. In the event the Administrator or any other Bank is not permitted or is otherwise unable (because of the pendency of any bankruptcy, insolvency, receivership or other proceeding) to accelerate the Obligations, but otherwise would have been permitted to do so at such time pursuant to any Loan Instrument, the Administrator or such Bank may demand payment in full under the Guaranty and may exercise and enforce the other rights, powers, privileges, remedies and interests of the Administrator or any other Bank under this Agreement or any other Loan Instrument to which the guarantying Borrower is a party as if the Obligations had been duly accelerated, and each guarantying Borrower will not raise, and each hereby expressly waives and releases, any claim or defense with respect to such deemed acceleration. In the event any payment of or any application of any amount, asset or property to any of the Obligations, or any part thereof, at any time is rescinded or must otherwise be restored or returned by the Administrator or any other Bank upon the insolvency, bankruptcy or reorganization of any Borrower or any other person, whether by order of any court, by any settlement approved by any court, or otherwise, then the terms and provisions of this Guaranty shall continue to apply, or shall be reinstated if not then in effect, as the case may be, with respect to the Obligations so rescinded, restored or returned, all as though such payment or application had never been made. Section 2.20. Transitional Matters. On the Effective Date: this Agreement shall have amended, restated and completely replaced the Existing Loan Agreement and the Notes shall have amended, restated and completely replaced the Existing Notes (as more fully described in Sections 2.01, 2.02 and 2.03 hereof); but no such action shall be deemed a repayment, satisfaction, cancellation or novation of the Existing Obligations, which shall continue and constitute Obligations of the Borrowers under and subject to the terms and provisions of this Agreement and the other Loan Instruments. The Loan Instruments are intended, and shall be deemed and construed, to be a continuation (without interruption or recommencement) of the various terms and provisions of the Existing Loan Instruments and the obligations arising or accruing thereunder prior to the Effective Date, subject to any modifications made by the Loan Instruments. For example (and without limitation): (a) all principal interest, fees, reimbursements and other amounts heretofore owed or accruing under the Existing Loan Instruments will continue to be owed, to accrue and to be payable under the Loan Instruments, subject to any modifications made by the Loan Instruments; (b) the Borrowers shall deliver all financial statements and reports required under the Existing Loan Instruments respecting periods ending on or before the Effective Date, and not yet delivered, which shall be deemed to be statements and reports delivered pursuant to this Agreement; (c) any term or provision of any Loan Instrument relating to the 1999 calendar year or the fiscal year ending June 30, 1999, shall include all of the year or fiscal year (even though portions may predate the Effective Date); and (d) any misrepresentation or default by the Borrowers under the Existing Loan Instruments continuing as of the Effective Date shall continue and constitute a corresponding continuing misrepresentation or default by the Borrowers under the Loan Instruments, with any time periods for notice, grace or the like under the Loan Instruments having commenced to run at their inception under the Existing Loan Instruments, subject to any modifications made by the Loan Instruments. ARTICLE III Representations and Warranties ------------------------------ To induce the Banks to enter into this Agreement and the other Loan Instruments to which each is a party and to make and continue the Loans to the Borrowers, the Borrowers jointly and severally represent and warrant to the Banks that: Section 3.01. Organization, Powers, Etc. Each Borrower: (a) is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation; (b) has the power and authority to carry on its business as now conducted and to own or hold under lease the assets and properties it purports to own or hold under lease; (c) is duly qualified, licensed or registered to transact its business and in good standing in every jurisdiction in which failure to be so qualified, licensed or registered has had or would be reasonably likely to have a Material Adverse Effect, and Schedule 3.01(c) hereto contains a complete and accurate list of all jurisdictions in which such Borrower is so qualified, licensed or registered; (d) has the power and authority to execute and deliver this Agreement and each of the other Loan Instruments to which it is or will be a party and to perform all of its obligations hereunder and thereunder; (e) conducts its business exclusively under the name set forth in the Introduction; and (f) has its executive office and principal place of business at the address(es) set forth in the Introduction. Section 3.02. Authorization, Conflicts and Validity. The execution and delivery by each Borrower of this Agreement and each of the other Loan Instruments to which it is or will be a party and the performance by each Borrower of all of its obligations hereunder and thereunder: (a) have been duly authorized by all requisite corporate action; (b) will not violate or be in conflict with any term or provision of (i) any Applicable Law (including, without limitation, any applicable usury or similar law), (ii) any judgment, order, writ, injunction, decree or consent of any court or other judicial Authority, or (iii) any Corporate Document; (c) will not violate, be in conflict with, result in a breach of or constitute a default (with or without the giving of notice or the passage of time or both) under any term or provision of any Material Document; and (d) except as specifically contemplated by this Agreement or any other Loan Instrument, will not result in the creation or imposition of any Lien of any nature upon any of its assets and properties. This Agreement and each Note are, and the other Loan Instruments to which any Borrower is or will be a party (when executed and delivered) will be, legal, valid and binding obligations of each signing Borrower, enforceable in accordance with their respective terms and provisions, except as enforceability may be limited by (1) applicable bankruptcy, insolvency, reorganization and other laws affecting the rights or remedies of creditors generally and (2) rules of equity affecting the enforcement of obligations generally (whether at law or in equity). Section 3.03. Consents, Etc. No consent, approval or authorization of, or registration, declaration or filing with, any governmental Authority or other person (including, without limitation, the shareholders of any Borrower) is required as a condition precedent, concurrent or subsequent to or in connection with the due and valid execution, delivery and performance by any Borrower of this Agreement or any other Loan Instrument to which any Borrower is or will be a party or the legality, validity, binding effect or enforceability of any of their respective representations, warranties, covenants and other terms and provisions, except (i) as listed on Schedule 3.03 hereto, (ii) the recording of the Plainview Mortgage, (iii) the filing of the Uniform Commercial Code financing statements executed and delivered by each Borrower in connection herewith with the authorities listed in the Checklist of Closing Documents (as referred to in Section 4.04(d) hereof), and (iv) the compliance under any applicable assignment of claims statute with respect to any Contract made directly with any governmental Authority. Each franchise, license, certificate, authorization, approval or consent from any governmental Authority material to the present conduct of the business or operations of each Borrower or any of its subsidiaries, or required for the acquisition, ownership, improvement, operation or maintenance by any Borrower of any material portion of the assets and properties it now owns, operates or maintains, has been obtained and validly granted, is in full force and effect and constitutes valid and sufficient authorization therefor. Section 3.04. Litigation. Except as set forth in Schedule 3.04 hereto, there are no actions, suits, investigations or proceedings (whether or not purportedly on behalf of any one or more of the Borrowers) pending or, to the best knowledge of the Borrowers, threatened or contemplated at law, in equity, in arbitration or by or before any other Authority involving or affecting: (a) any Borrower that, if adversely determined, would be reasonably likely to have a Material Adverse Effect; (b) any alleged criminal act or activity (other than a misdemeanor) on the part of any Borrower or any of its representatives; (c) any Material Document (other than Collateral); (d) any Environmental Claim; (e) any Corporate Document; (f) the Obligations; (g) any part of the Collateral or any material part of the other assets or properties of any Borrower (if any); or (h) any of the transactions contemplated in this Agreement and the other Loan Instruments; nor, to the best knowledge of the Borrowers, is there any basis for the institution of any such action, suit, investigation or proceeding. None of the Borrowers is in default with respect to any judgment, order, writ, injunction, decree or consent of any court or other judicial Authority, which default has had or would be reasonably likely to have a Material Adverse Effect. Section 3.05. Financial Statements. (a) The Borrowers heretofore have provided to the Banks the consolidated balance sheet of the Borrowers as at June 30, 1998, and the related consolidated statements of earnings, shareholders' equity, and cash flow for the fiscal year ended on that date, audited and reported upon by KPMG Peat Marwick LLP, independent certified public accountants. Those financial statements and reports and the related notes and schedules, as well as those related to later periods (whenever delivered), (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) are complete, accurate and a fair presentation of the financial condition of the Borrowers as of the date thereof and the results of their operations for the period covered thereby (subject in the case of interim statements to normal year-end audit adjustments). Since June 30, 1998, no event or events have occurred that individually or in the aggregate has had or would be reasonably likely to have a Material Adverse Effect. (b) All of the computer and other hardware and software (including, without limitation, embedded chips, circuits and programs) owned or used by any Borrower and (to the knowledge of each Borrower after due inquiry) by any other person in (i) interfacing with any hardware or software of any Borrower or (ii) utilizing computer and other hardware and software in the provision of any material accounting, portfolio, payroll or other services to or on behalf of any Borrower, in each case (A) are Year 2000 Compatible, or (B) will be Year 2000 Compatible by no later than June 30, 1999, in each case except to the extent that the failure to be or timely become Year 2000 Compatible (individually or together with all similar events) has not had and would not be reasonably likely to have a Material Adverse Effect. Any and all expenditures in endeavoring to make any such hardware or software Year 2000 Compatible (including, without limitation, those for replacements, upgrades, reprogramming or testing) made by or charged to, or reasonably likely to be made by or chargeable to, the Borrowers after the date of the applicable financial statements referenced above in clause (a) of this Section 3.05: (i) are not and will not be reasonably likely to be material in the aggregate; and (ii) have not resulted and will not result in any Event of Default. Section 3.06. Absence of Defaults and Certain Agreements. (a) Except as set forth in Schedule 3.06 hereto, no act or event has occurred and is continuing that violates, is in conflict with, results in a breach of or constitutes a default (with or without the giving of notice or the passage of time or both) under any term or provision of (a) this Agreement or any other Loan Instrument, (b) any Material Contract in any material respect for more than 30 days, or any applicable grace period thereunder, whichever is less, (c) any other Material Document, or (d) any Corporate Document. None of the Borrowers is a party to any instrument, indenture, agreement, document, arrangement or other obligation, or subject to any charter or other restriction, that has had or would be reasonably likely to have a Material Adverse Effect. (b) The Borrowers heretofore have provided to the Banks true, complete and correct copies of each Subordinated Debt Document, Equipment Finance Document, Purchase Document and Pearl River Financing Document. Section 3.07. Compliance with Applicable Laws. Except as otherwise set forth in Schedule 3.07 hereto, each Borrower is in compliance with and conforms to all Applicable Laws, other than to the extent that the noncompliance therewith or violation thereof has not had and could not have a Material Adverse Effect. Section 3.08. Payment of Debts and Taxes. (a) Each Borrower: (i) has filed all required tax returns with the appropriate taxing authorities respecting its operations, assets and properties; and (ii) has paid or caused to be paid all taxes shown on those returns to the extent due; except in either case to the extent that (A) extensions of time to make such filing have been duly granted by the appropriate taxing authorities and those extensions have not expired, or (B) payment is not yet required pursuant to Section 5.06 hereof. (b) Each Borrower is current in its payment of debts and performance of obligations (other than taxes) except to the extent payment or performance is not yet required pursuant to Section 5.06 hereof. Section 3.09. Indebtedness, Credit Support, ERISA Plans, Etc. (a) Schedule 3.09(a) hereto (as and if updated pursuant to Section 5.02 hereof) contains a complete and accurate list of all direct and indirect Indebtedness of each Borrower (whether individual, joint, several or otherwise), including commitments, lines of credit and other credit availabilities, identifying with respect to each the respective parties, amounts and maturities, excluding, however, (i) the Loans, (ii) all Credit Support, and (iii) all intercompany Indebtedness among the Borrowers. (b) Schedule 3.09(b) hereto (as and if updated pursuant to Section 5.02 hereof) contains a complete and accurate list of all Credit Support of each Borrower (whether individual, joint, several or otherwise), identifying with respect to each the respective parties to such Credit Support and the respective parties, amounts and maturities of the underlying obligations, excluding, however, (i) negotiable instruments endorsed for collection or deposit in the ordinary course of business, (ii) all intercompany Indebtedness among the Borrowers and (iii) Credit Support pursuant to the Guaranty. (c) Schedule 3.09(c) hereto contains a complete and accurate list of all "employee pension benefit plans" (as defined in ERISA) established, funded or maintained by any Borrower or any ERISA Affiliate or to which any Borrower or any ERISA Affiliate is required to contribute (as each may be supplemented, modified, amended, restated or replaced from time to time pursuant to ERISA or the Code, as applicable, a "Plan", and collectively, the "Plans"). Except as set forth in that schedule: (i) each Plan is in full force and effect and has been (or is expected to be) determined to be duly qualified under ERISA and the Code, as applicable; (ii) no ERISA Event is currently continuing, and none has occurred within the past five years, in any material respect; (iii) each material report, statement or other document has been timely prepared and delivered in accordance with, and conforms in form and substance to the requirements of, ERISA and the Code; (iv) each Plan complies with ERISA, the Code and all other Applicable Laws in all other material respects; (v) the present value of all accrued benefits under each Plan subject to Title IV of ERISA does not, and did not as of the last annual valuation date, exceed the value of the assets of such Plan allocable to such accrued benefits (which benefit value shall be determined either on an ongoing basis, using the Plan's reasonable actuarial assumptions, or on a termination basis, using the assumptions employed by the Pension Benefit Guaranty Corporation in connection with plan terminations, as applicable); (vi) there are no actions, suits, investigations or proceedings (whether or not purportedly on behalf of any fiduciary, sponsor, participant or beneficiary) pending, or to the best knowledge of the Borrowers, threatened or contemplated at law, in equity, in arbitration or by or before any Authority involving or affecting any Plan or any assets and properties of a Plan that, if adversely determined, would be reasonably likely to have an ERISA Effect; (vii) to the best knowledge of the Borrowers, there are no facts or circumstances that might give rise to any material liability of or material claim against any Borrower, any of its subsidiaries or the Collateral under Title IV of ERISA; and (viii) none of the Plans is, and no Borrower or ERISA Affiliate in the past established, funded, maintained, contributed or was required to contribute to, any "multiemployer plan" (as defined in ERISA); provided, however, that the provisions of this sentence shall be to the best knowledge of the Borrowers with respect to any multiemployer plan administered by a person other than any Borrower or any ERISA Affiliate. The present value of all accrued post-retirement benefits under each "employee welfare benefit plan" (as defined in ERISA) to which one or more of the Borrowers and their ERISA Affiliates is required to contribute does not in the aggregate exceed the assets of such plan allocable to such benefits by more than $50,000 (determined using the actuarial and other assumptions required under FAS106). (d) After giving effect to the direct and indirect Indebtedness and other liabilities and obligations of each Borrower and its subsidiaries arising under this Agreement and the other Loan Instruments, whether absolute or contingent, each Borrower: (i) is solvent (i.e., the aggregate fair value of its assets exceeds the sum of its liabilities); (ii) has adequate working capital; and (iii) is able to pay its debts as they mature. No Borrower is currently considering or planning, and has ever considered or planned, to take any of the actions specified in Section 8.01(h) hereof, and to the knowledge of each Borrower no other person is currently considering or planning, or has ever considered or planned, to take any of the actions specified in Section 8.01(i) hereof Section 3.10. Assets and Collateral. (a) The Borrowers are the holders and severally are the legal and beneficial owners of, and have good title to: (i) the Collateral; and (ii) all of the other assets and properties of the Borrowers (A) reflected on the most recent report or financial statement furnished to the Banks or (B) subsequently acquired, excluding, however, such assets and properties as may have been sold or otherwise disposed of (1) in the ordinary course of business prior to the date of this Agreement or (2) as permitted by this Agreement after the date hereof. Each Borrower has full corporate power and authority and the unconditional right to grant to the Administrator (for the benefit of all of the Banks) the mortgages and other security interests respecting the Collateral contemplated in this Agreement, the Plainview Mortgage and the other Loan Instruments. The Administrator (for the benefit of all of the Banks) has received legal, valid, binding and enforceable security interests in and to the Collateral pursuant to this Agreement, the Plainview Mortgage and the other Loan Instruments, which security interests shall be perfected upon the recording of the Plainview Mortgage, the delivery of the certificated Pledged Securities and the filing of the Uniform Commercial Code financing statements listed in the Checklist of Closing Documents. No part of the Collateral and such other assets and properties is subject to any Lien or any adverse claim (other than any claim of any party to a Contract made thereunder) of any kind whatsoever, except (x) those in favor of the Administrator (for the benefit of all of the Banks) under the Loan Instruments, (y) those permitted by Section 6.04 hereof (if any), and (z) those described in Schedule 3.10(a) annexed hereto. (b) There are no claims (other than any claim of any party to a Contract made thereunder) of third parties that would prevent any assignee or purchaser of all or any portion of the Collateral from receiving any payments, distributions and proceeds with respect thereto, if any, without any defense, counterclaim, setoff, right of recoupment, abatement or other claim or determination whatsoever. (c) All of the Collateral and the other material assets and properties of each Borrower (if any) have been and currently are operated, maintained and insured as respectively required by Sections 5.05, 5.07(a) and 5.07(b) hereof. Each Borrower and each of its subsidiaries currently is, and since the Effective Date has been, insured as required by Section 5.07(b) hereof, and for at least the five-year period ending with the Effective Date or, with respect to any subsidiary or Collateral owned by any Borrower for less than five years, since the date of ownership of such subsidiary or Collateral, was insured in a comparable manner. No fact, circumstance or other event currently exists or has occurred that (i) has violated or could violate any term or provision of any insurance policy in any material respect, (ii) has been or could be reasonably likely to permit any insurer to cancel or refuse to renew (upon similar terms) any such insurance policy, or (iii) has been or could be reasonable likely to prevent any Borrower from obtaining a similar insurance policy on similar terms. (d) The Borrowers have full possession and control of the Collateral and their other assets and properties (if any), and all of the Collateral and their other assets and properties (if any) are located (or in the case of accounts and general intangibles are deemed to be located) at the addresses of the Borrowers set forth in the Introduction, except (i) that certain items may be physically located at the other locations listed in Schedule 3.10(d) hereto, which schedule contains a complete and accurate description of each other location and the items located there, (ii) samples in reasonable quantities (or physically held by salesmen and other sales representatives, (iii) for items physically held by the Administrator or its designee, and (iv) for items physically held for the benefit and at the direction of the Borrowers by the persons identified in that schedule. (e) Each Account Receivable of each Borrower arose in the ordinary course of business in a bona fide arm's-length transaction, has been reflected on its books and records in accordance with GAAP consistently applied, and is represented by a written invoice or other written document that: (i) was duly executed and delivered and to the best knowledge of the Borrowers contains no forgeries or unauthorized signatures; (ii) is legal, valid, binding and enforceable against the customer in accordance with its terms and provisions, except as enforceability may be limited by (A) applicable bankruptcy, insolvency, reorganization and other laws affecting the rights or remedies of creditors generally and (B) rules of equity affecting the enforcement of obligations generally (whether at law or in equity); (iii) does not violate or conflict with any provision of Applicable Law; (iv) has not been amended or modified in any material respect; (v) except as set forth in Schedule 3.10(e) hereto, fully reflects all agreements and understandings with the customer with respect thereto; (vi) is assignable, and has been duly assigned to the Administrator (for the benefit of all of the Banks) pursuant to Section 7.01 hereof, in accordance with the terms and provisions hereof and thereof; and (viii) is maintained at the office(s) of the relevant Borrower (or at such other office as may have been specified in a notice to the Administrator) in a file and location that would be readily identifiable by anyone examining the Accounts Receivable of the Borrowers. The reserves for uncollectible accounts established by the Borrowers are adequate in the judgment of the Borrowers to fully cover current and future uncollectible Accounts Receivable. (f) Schedule 3.10(f) hereto contains a complete and accurate list of all Pledged Securities currently owned of record and/or beneficially by the Borrowers (whether individually, jointly or otherwise), identifying with respect to each the owner(s), issuer, type, amount(s) and certificate or other identifying number(s), or account number(s) and name(s) and address(s) of the relevant office(s) if held by a clearing corporation, custodian or other financial intermediary. All of the capital stock issued by each Borrower (other than Aeroflex) and Europtest is listed on that schedule, and those Borrowers and Europtest constitute all of the direct and indirect subsidiaries of Aeroflex. There are no other outstanding securities issued by any Borrower (other than Aeroflex) or any outstanding warrants, options or other rights to acquire any securities issued by any Borrower (other than Aeroflex) or Europtest, whether from the issuer or anyone else. Each Pledged Security is owned beneficially and of record by the Borrower indicated on that schedule, is assignable, and has been duly assigned and transferred as collateral to the Administrator (for the benefit of all of the Banks). Each of the Pledged Securities was duly authorized and validly issued, is fully paid and non-assessable and was acquired from the issuer in a transaction in compliance with and exempt from registration under the Securities Act and other Applicable Laws. None of the Pledged Securities: (i) is subject to any warrant, option, put, call or other right to acquire, redeem, sell, transfer or encumber it (other than such call and redemption rights as may be intrinsic to such securities where issued by a person not affiliated with the Borrowers); (ii) is governed by or otherwise subject to any shareholders agreement, voting trust or similar agreement or arrangement (other than such call and redemption rights as may be intrinsic to such securities where issued by a person not affiliated with the Borrowers); and (iii) is limited or otherwise restricted in any way respecting assignability, transferability or any voting, dividend, distribution or other ownership right (whether or not reflected on the face of the certificate, in any Organizational Document, in any instruction or other communication to or agreement or arrangement with any transfer agent, clearing corporation, custodial bank or other financial intermediary, or otherwise). Each of the Pledged Securities is not and will not be subject to any preemptive or similar right or restriction. The Borrowers have delivered (1) stock certificates to the Administrator (for the benefit of all of the Banks) representing all of the Pledged Securities (other than those issued by Comstron, MICSARL or Europtest), together with stock powers duly endorsed in blank representing those certificates and (2) with respect to the Pledged Securities issued by each of Comstron, MICSARL and Europtest, documentation satisfactory to the Administrator evidencing the registration on the books of each such issuer and any required Authority of the pledge by the Borrowers to the Administrator (for the benefit of all of the Banks) of the Pledged Securities issued by such issuer. (g) The Borrowers have delivered to the Banks a Material Contract Schedule dated as of December 31, 1998. That Schedule, and each other Material Contract Schedule (whenever delivered), (i) contains a complete and accurate list of each Material Contract as of the date of such Schedule, (ii) with respect to each such Contract accurately states the purchaser, the date of the Contract and the Contract amount, and (iii) with respect to each Material Contract accurately states the gross profit margin, all amounts paid to date, the delivery date(s), the approximate percentage of work completed to date, and the estimated cost to complete. Each Contract, each other note, stock certificate or other instrument included in the Collateral, and each other material Account Receivable, agreement, document or intangible included in the Collateral: (i) was duly executed and delivered in a written instrument or document and to the best knowledge of the Borrowers contains no forgeries or unauthorized signatures; (ii) is legal, valid, binding and enforceable against the signer in accordance with its terms and provisions, except as enforceability may be limited by (A) applicable bankruptcy, insolvency, reorganization and other laws affecting the rights or remedies of creditors generally and (B) rules of equity affecting the enforcement of obligations generally (whether at law or in equity); (iii) does not violate or conflict with any provision of Applicable Law in any material respect; (iv) except as set forth in Schedule 3.10(g) hereto, fully reflects all amendments and material agreements and understandings with the signer with respect thereto; (v) is assignable, and has been duly assigned to the Administrator (for the benefit of all of the Banks) pursuant to Section 7.01 hereof, in accordance with the terms and provisions hereof and thereof; and (vi) is maintained at the relevant office of the relevant Borrower (or at such other office as may have been specified in a notice to the Banks) in a file and location that would be readily identifiable by anyone examining the books and records of the Borrowers, except (A) that certain items may be physically located at the other locations listed in Schedule 3.10(d) hereto, which schedule contains a complete and accurate description of each other location and the items located there, and (B) for items physically held by the Administrator or its designee (for the benefit of all of the Banks). (h) The machinery, equipment and other fixed assets owned or leased by each Borrower are in good working order and condition (ordinary wear and tear and retirement excepted), all of the machinery, equipment and other fixed assets owned or leased by each Borrower are used or usable in the current conduct of its business, and each Borrower has all of the machinery, equipment and other fixed assets necessary for the current conduct of its business. (i) Except as set forth in Schedule 3.10(i) hereto, to the best knowledge of the Borrowers, the procurement, storage, containment, presence, manufacture, distribution, removal and disposition of all Inventory and Environmental Substances by or on behalf of the Borrowers and the use and operation of all assets and properties owned, leased or used by or on behalf of the Borrowers (including, without limitation, machinery, equipment, real estate and improvements), as now or previously existing (whenever created), as conducted by or for any Borrower, or as contemplated, are in full compliance with and conform to all Environmental Laws and other Applicable Laws in all material respects. Without limiting the generality of the foregoing, except as set forth in Schedule 3.10(i) hereto: (i) all permits, licenses, authorizations, consents or approvals of authorities necessary for such activities have been obtained and they are in full force and effect; (ii) no part of those activities, the Collateral or the other assets or properties of any Borrower is in violation of any Environmental Law or other Applicable Law in any material respect; and (iii) no notice has been served upon any Borrower (other than a notice subsequently withdrawn or with regard to a violation subsequently cured) from any governmental Authority or other person claiming, nor does there currently exist, any violation of any Environmental Law or other Applicable Law in any material respect in connection with any of those activities, the Collateral or the other assets or properties of any Borrower. (j) Schedule 3.10(j) contains a complete and accurate list of all patents, trademarks and tradenames licensed to or owned or otherwise used by any Borrower, which indicates for each Borrower the relevant jurisdiction and the extent of such Borrower's interest in each such patent, trademark or tradename. Except as set forth in Schedule 3.10(j) hereto, each patent, trademark and tradename owned by or licensed to any Borrower: (i) is subsisting and has not been determined to be invalid or unenforceable by any Authority; (ii) to the best knowledge of the Borrowers is valid, binding and enforceable; (iii) is not and has not been the subject of any claim of infringement or other material adverse claim; (iv) has been maintained and used in accordance with all Applicable Laws; and (v) is licensable, and has been duly licensed, to the Administrator (for the benefit of all of the Banks) in accordance with the terms and provisions of this Agreement and the other Loan Instruments. Each Borrower has all of the patents, trademarks, tradenames and other intellectual property rights necessary for the current conduct of its business. (k) Each Mortgage contains a complete and accurate description of all of the real estate intended to be covered thereby and (to the extent applicable) the lot, block and section or other identifying numbers, and the Borrower granting such Mortgage has good and marketable fee or leasehold title (as applicable) to the real estate listed for it on that schedule. All portions of the improvements, if any, to such real estate have been, are being or will be constructed and completed within the perimeter of the land owned or leased by the indicated Borrower and in accordance with: (i) all zoning ordinances and other Applicable Laws; (ii) the requirements of governmental authorities having jurisdiction, including all land use and construction licenses, permits and approvals relating to the improvements; (iii) accepted standards of good materials and workmanship; (iv) the plans and specifications for such work as furnished to the authorities having jurisdiction, if any; and (v) all covenants, conditions, restrictions and agreements of any kind or nature affecting the improvements, including the applicable contracts and construction loan agreements and instruments. To the best knowledge of the Borrowers there are no material design or structural defects in any part of the improvements. Each Borrower's real estate and improvements are, or are capable of being, connected to and serviced by water, sewage disposal, gas, electric, transportation and communication facilities that are adequate for the intended use of the improvements. There is no existing, or to the best knowledge of the Borrowers, proposed or contemplated eminent domain proceeding or public improvement that would affect any Borrower's real estate or improvements in any way, including (without limitation) any plan that would widen, modify or realign any street, highway, park, wetlands, preserve or other public or utility easement or other right of access or enjoyment, whether public or private. (l) To the best knowledge of the Borrowers, there is no existing, proposed or contemplated plan, study or effort by any governmental Authority or other person that in any way has affected or could affect the continued authorization of the present or contemplated ownership, financing, construction, use or operation of any part of the Collateral or the other material assets or properties of any Borrower, or that has resulted or could result in any tax or other charge being levied or assessed against, or in the creation of any Lien upon, any part of the Collateral or the other material assets or properties of any Borrower. Section 3.11. Subsidiaries, Other Ventures, Loans and Other Investments. Schedule 3.11 hereto contains a complete and accurate list of: (a) all of the direct and indirect subsidiaries of the Borrowers, including with respect to each subsidiary (i) its jurisdiction of incorporation, (ii) all jurisdictions (if any) in which such subsidiary is qualified to do business as a foreign corporation, (iii) the name of the owner and the number of shares of capital stock of such subsidiary owned, specifying whether owned beneficially and/or of record, and if that is less than all of the outstanding shares issued by the subsidiary, stating the total outstandings, and (iv) all obligations of any Borrower and/or any subsidiary of any Borrower to contribute capital or other funds to such subsidiary; (b) all partnerships and other ventures in which any Borrower or any subsidiary of any Borrower is a member or venturer, including with respect to each such partnership or venture (i) its jurisdiction of organization and any other jurisdiction in which it is qualified to do business as a foreign entity, (ii) the name of the owner and the percentage and type of interest in such partnership or venture owned, specifying whether owned beneficially and/or of record, (iii) all obligations of any Borrower and/or any subsidiary of any Borrower to contribute capital or other funds to such venture, and (iv) the names and addresses of the other members or venturers; (c) any and all loans or advances from the Borrowers to any of the affiliates of the Borrowers, identifying with respect to each of the respective parties, amounts and maturities; and (d) all other Investments of the Borrowers other than Permitted Investments; excluding, however, (i) all loans and advances by any Borrower to any other Borrower and (ii) all loans or advances of salary to any officer or employee of any Borrower in the ordinary course of business that in the aggregate for any such officer or employee does not exceed $100,000. Section 3.12. Relationship of the Borrowers. Aeroflex and the other Borrowers (which are subsidiaries of Aeroflex) are engaged as an integrated group in the business of, among other things, developing, manufacturing and selling mechanical and electronic components systems and services to government and industry and of providing the required services and other facilities for those integrated operations. The Borrowers are seeking to continue the existing facilities from the Banks in order that funds may continue to be made available from time to time for working capital and other purposes. Each Borrower expects to derive financial and other benefit, directly or indirectly, in return for undertaking its respective obligations under this Agreement and the other Loan Instruments, both individually and as a member of the integrated group. Section 3.13. Securities, Etc. Aeroflex is authorized to issue 40,000,000 shares of common stock with a par value of $0.10 per share, of which 17,785,419 shares are currently issued and outstanding. Section 3.14. Federal Reserve Regulations, No Restriction on Borrowing, Etc. (a) Except as expressly permitted by Section 6.09 hereof, no part of the proceeds of the Loans will be used to purchase or carry any Margin Stock or to extend credit to any other person for the purpose of purchasing or carrying any Margin Stock or in any way or for any purpose that otherwise violates or is inconsistent with any applicable Margin Stock Regulations. No Borrower is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. (b) No Borrower is an "investment company", an "affiliated person", "promoter" or "principal underwriter" of an "investment company", or "controlled" by an "investment company" (as such terms are defined in the Investment Company Act). None of the transactions contemplated by this Agreement and the other Loan Instruments (including the making of the Loans and the permitted use of the proceeds thereof) will violate any provision of the Investment Company Act. (c) No Borrower is a "holding company" or an "affiliate" or a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended, or any corresponding provisions of any Applicable Law in any foreign jurisdiction, and as the same may be supplemented, modified, amended or restated from time to time, and the rules and regulations promulgated thereunder, or any corresponding or succeeding provisions of Applicable Law. (d) No Borrower is an "employee benefit plan" governed by (and as defined in) ERISA, and none of the assets or properties of any Borrower constitutes or will constitute "plan assets" governed by (and as defined in) ERISA. (e) No Borrower is a "foreign person" under (and as defined in) Section 1455(f)(3) of the Code or any successor provision. (f) No Borrower is regulated by or otherwise subject to any Applicable Law that directly or indirectly limits or otherwise restricts its ability to incur, continue or repay Indebtedness, to provide Credit Support or to grant Liens in or to any of its assets and properties as security for the Indebtedness of itself or its Credit Support for others. Section 3.15. No Misrepresentation by the Borrowers. No representation or warranty of any Borrower made or contained in this Agreement or any other Loan Instrument (whether with respect to such Borrower or otherwise) and no report, statement, certificate, schedule or other document or information furnished or to be furnished by or on behalf of any Borrower in connection with the transactions contemplated by this Agreement and the other Loan Instruments (whether with respect to such Borrower or otherwise) contains or will contain a misstatement of a material fact or omits or will omit to state a material fact required to be stated therein in order to make it, in the light of the circumstances under which made, not misleading. ARTICLE IV Conditions to Lending --------------------- The obligation of the Banks to make any Loan and consider the issuance of any requested Letter of Credit hereunder is subject to the satisfaction in full of all of the conditions precedent set forth in and the other terms and provisions of each of the Sections of this Article, unless the Administrator (with the consent of the Requisite Banks, as and if required) shall consent otherwise in writing (as provided in Section 10.16 hereof): Section 4.01. Representations and Warranties. (a) On the Effective Date and the first Advance Date, both prior to and after giving effect to any requested Advance, Term Loan advance, Mortgage Loan advance or Letter of Credit issuance, the representations and warranties of each of the Borrowers set forth in this Agreement and the other Loan Instruments shall be true and correct in all respects on and as of that date with the same effect as though those representations and warranties had been made on and as of the first Advance Date. (b) On each Advance Date and Issuance Date after the first Advance Date, both prior to and after giving effect to any requested Advance or Letter of Credit issuance, the representations and warranties of each of the Borrowers set forth in this Agreement and the other Loan Instruments shall be true and correct in all material respects on and as of that Advance Date or Issuance Date with the same effect as though those representations and warranties had been made on and as of that date, subject, however, in the case of the representations and warranties set forth in Sections 3.04, 3.06(b), 3.06(c), 3.07, 3.09(a) and 3.09(b) hereof, to any updated information respecting any event(s) occurring after the first Advance Date respectively affecting any of the representations contained in Sections 3.04, 3.06 and 3.11 hereof and specifically disclosed in any signed notice or bringdown, Indebtedness or Credit Support certificate required hereunder and delivered to and accepted by the Administrator (with the consent of the Requisite Banks, as and if required) on or prior to such Advance Date or Issuance Date (which notice or certificate may be telecopied to the Administrator if promptly confirmed by delivery of the signed original), provided that neither such delivery nor such acceptance shall constitute a waiver of or consent to any event so disclosed. Section 4.02. No Default. On the Effective Date, and on each Advance Date and Issuance Date after the Effective Date, both prior to and after giving effect to any requested Advance or Letter of Credit issuance, no Event of Default or Default shall have occurred and be continuing. Section 4.03. Borrowers' Bringdown Certificate. On the Effective Date and the first Advance Date, the Borrowers shall have delivered to the Banks a bringdown certificate substantially in the form of Exhibit D hereto, dated that date and signed by an executive officer of the Borrowers, and by each request for an Advance or Letter of Credit issuance, the Borrowers shall be deemed to have delivered to the Banks such a certificate dated the Advance Date or Issuance Date. A Bank in its discretion may accept the certificate of an officer of a Borrower delivered (or deemed to be delivered) pursuant to this Section as evidence of the satisfaction of the conditions precedent specified in Sections 4.01 and 4.02 hereof without in any way waiving or limiting any of the Banks' rights, powers, privileges, remedies and interests under any term or provision of this Agreement or any other Loan Instrument. Section 4.04. Delivery of the Loan Instruments and Collateral. On or before the Effective Date, the Administrator or its designee (for the benefit of all of the Banks) shall have received delivery of: (a) the Notes provided for in Section 2.03 hereof, duly executed by the Borrowers; (b) certificates evidencing the insurance policies required by Section 5.07(b) hereof; (c) the Purchase Documents; (d) the other instruments and documents required by this Agreement or any other Loan Instrument or listed in the final version of the Checklist of Closing Documents delivered to the Borrowers on or before the Effective Date, which instruments and documents shall have been duly executed by the appropriate parties; and (e) payment of the Facility Fee. Each of the foregoing instruments and documents shall be in such form and substance as may be acceptable to the Banks and a copy of each shall have been delivered to each Bank. Section 4.05. Opinion of Counsel to the Borrowers, Etc. On the Effective Date, the Banks shall have received the favorable written opinion of counsel to the Borrowers, dated the Effective Date, addressed to the Banks and in such form and substance as may be acceptable to the Banks relating to such matters as the Administrator and the other Banks may deem necessary or appropriate, which also shall provide that it may be relied upon by the successors, assigns, participants of each Bank and by counsel to the Administrator in rendering any opinion or advice requested from them. Section 4.06. Supporting Documents. On or before the Effective Date, the Borrowers shall have furnished to the Banks the following certificates and other documents with respect to each Borrower: (a) a copy of its certificate of incorporation and all modifications, amendments and restatements thereof, certified as of a recent date by the Secretary of State or comparable official of its jurisdiction of incorporation; (b) a copy of its by-laws, together with all modifications, amendments and restatements thereof, certified as of a recent date by its Secretary; (c) a certificate of the Secretary of State or comparable official of its jurisdiction of incorporation, dated as of a recent date, as to its existence and good standing; (d) a certificate of its Secretary or an Assistant Secretary, dated the Effective Date, as to the due authorization of the negotiation, execution, delivery and performance by it of this Agreement and each of the other Loan Instruments to which it is or becomes a party (with the appropriate resolutions attached) and the incumbency and signatures of its officers and directors who are authorized to execute any instrument, agreement or other document in connection with the transactions contemplated by this Agreement and the other Loan Instruments; (e) copies of all shareholders' agreements and trusts respecting securities of its issue or related rights, together with all modifications, amendments and restatements thereof, certified as of a recent date by its Secretary; and (f) such additional supporting documents and other information with respect to the Collateral, the other assets or properties of each Borrower, or the organization, operations and affairs of each of the Borrowers and those of their respective subsidiaries, partnerships and other ventures as any Bank may request. All certificates and other documents provided to the Administrator or any other Bank pursuant to this Article shall be in such form and substance as may be acceptable to the Administrator and the Majority Banks. ARTICLE V Affirmative Covenants --------------------- The Borrowers jointly and severally covenant and agree that they will comply in all respects on a timely basis (except as otherwise expressly provided) and at their expense with each, and will not cause, suffer or permit any violation of any, of the terms and provisions of each section in this Article, from the date hereof and until the Obligations have been fully paid and satisfied, unless the Administrator (with the consent of the Requisite Banks, as and if required) shall consent otherwise in writing (as provided in Section 10.16 hereof): Section 5.01. Required Notices. The Borrowers shall give, or cause to be given, immediate written notice to each of the Banks of: (a) any change in the name or the location of the executive office or principal place of business of any Borrower; (b) the institution or, to the best knowledge of the Borrowers, the threat or contemplation of , or any material adverse determination or change in, any action, suit, investigation or proceeding (whether or not purportedly on behalf of any Borrower) at law, in equity, in arbitration or by or before any other Authority involving or affecting (i) any Borrower that, if adversely determined, would have a Material Adverse Effect, (ii) any alleged criminal act or activity (other than a misdemeanor) on the part of any Borrower or any of its representatives, (iii) any Material Document (other than Collateral), (iii) any Environmental Claim, (iv) any Plan or any assets and properties of a Plan that, if adversely determined, would be reasonably likely to have an ERISA Effect, (v) any Corporate Document, (vi) any Organizational Document; (vii) any Material Contract or any other part of the Collateral or any material part of any other assets or properties of any Borrower (if any), (viii) any of the Obligations, or (ix) any of the transactions contemplated in this Agreement and the other Loan Instruments; (c) the occurrence of any material ERISA Event; (d) the occurrence of any act or event that violates, is in conflict with, results in a breach of or constitutes a default (with or without the giving of notice or the passage of time or both) under any term or provision of (i) this Agreement or any other Loan Instrument, (ii) any Material Contract in any material respect for more than 30 days or any applicable grace period thereunder, whichever is less, (iii) any Material Document, (iv) any Corporate Document, or (v) any Organizational Document; (e) any material labor dispute to which any of the Borrowers may become a party, any strikes or walkouts relating to any of their respective offices, plants or other facilities, or the expiration of any labor contract; (f) any change in location or material change in the status of the Collateral other than as expressly permitted in Section 7.03 or 7.04 hereof; and immediate notice of any new Material Government Contract if the Banks have requested claim assignments under Section 7.02(h) hereof; (g) any attachment, confiscation, detention, levy, requisition, seizure or other taking of any part of the Collateral or any material part of the other assets or properties of any Borrower (if any), whether through process of law or otherwise, the filing or other imposition of any Lien known to the Borrowers against any part of the Collateral or any material part of the other assets or properties of any Borrower (if any) (other than as expressly permitted by Section 6.04 hereof), or any destruction or other loss of or any material damage to any part of the Collateral or any material part of any other assets or properties of any Borrower (if any); or (h) to the extent not otherwise enumerated in this Section, the occurrence of any other act or event that (i) has resulted or could result in any Default or Event of Default, or (ii) has had or would be reasonably likely to have a Material Adverse Effect. Section 5.02. Accounts and Reports. The Borrowers shall maintain a standard system of accounting in accordance with GAAP consistently applied, and the Borrowers shall provide to each of the Banks the following: (a) as soon as available and in any event within 90 days after the end of each fiscal year of Aeroflex, a consolidated balance sheet of Aeroflex and its subsidiaries as at the end of that fiscal year and the related consolidated statements of earnings, shareholders' equity and cash flow for such fiscal year, all with accompanying notes, in reasonable detail and stating in comparative form the figures as at the end of and for the previous fiscal year, prepared in accordance with GAAP consistently applied, and audited and reported upon by KPMG Peat Marwick LLP, or other independent certified public accountants of recognized standing regularly retained by Aeroflex and its subsidiaries to audit their books, provided that such financial statements may be delivered within 105 days after the end of any fiscal year in which a 15-day extension has been obtained for the filing thereof pursuant to the Securities Exchange Act; (b) concurrently with the delivery of the financial statements described in subsection (a) above, the annual auditor's report prepared by those independent certified public accountants and a letter to the Banks signed by those accountants to the effect that, having read this Agreement, nothing came to their attention during the course of their regular examination that caused them to believe any Event of Default or Default had occurred and had not theretofore been reported and remedied, or if any such Event of Default or other event had occurred and was continuing or was not previously reported, specifying the facts with respect thereto; (c) as soon as available, and in any event within 90 days after the end of each fiscal year of Aeroflex, a consolidating balance sheet of Aeroflex and its subsidiaries as at the end of that fiscal year and the corresponding consolidating statements of earnings for such year, all in rea sonable detail, unaudited but certified by the President and the chief financial officer of Aeroflex (i) to have been prepared in accordance with GAAP consistently applied, and (ii) as complete, accurate and a fair presentation of the financial condition of Aeroflex and its subsidiaries as of such date and the results of operations for the period covered thereby, provided that such financial statements may be delivered within 105 days after the end of any fiscal year in which a 15-day extension has been obtained for the filing thereof pursuant to the Securities Exchange Act; (d) as soon as available, and in any event within 45 days after the end of each of the first three quarters of each fiscal year of Aeroflex, a consolidated and consolidating balance sheet of Aeroflex and its subsidiaries as at the end of such quarter, and the related consolidated and consolidating statements of earnings and consolidated statements of shareholders' equity and cash flow for the period from the beginning of such fiscal year to the end of such quarter, unaudited but certified by the President and the chief financial officer of Aeroflex (i) to have been prepared in accordance with GAAP consistently applied, and (ii) as complete, accurate and a fair presentation of the financial condition of Aeroflex and its subsidiaries as of such date and the results of operations for the period covered thereby, subject to normal year-end audit adjustments, provided that such financial statements may be delivered within 50 days after the end of any quarter in which a 5-day extension has been obtained for the filing thereof pursuant to the Securities Exchange Act; (e) concurrently with the delivery of the documents described in subsections (a) and (d), above, (i) a bringdown certificate substantially in the form of Exhibit D hereto, and (ii) a certificate substantially in the form of Exhibit E-I hereto setting forth the calculations of and establishing (among other things) the compliance by the Borrowers with the financial covenants set forth in Section 6.01 and 6.02 of this Agreement, with each such certificate being dated as of the last day of the relevant reporting period and signed by the President and chief financial officer of Aeroflex (who shall have read this Agreement and made an examination sufficient in the opinion of the signer(s) to make informed statements therein); (f) as soon as available, and in any event within (i) 45 days after the end of each calendar quarter, or 25 days after the end of each calendar month in which the Revolving Credit Loans and Term Loans equal or exceed $5,000,000, an operating statement for the period and year-to-date just ended, compared to budget, (ii) 25 days after the end of each calendar quarter, or 25 days after the end of each calendar month in which the Revolving Credit Loans and Term Loans equal or exceed $5,000,000, a Borrowing Base Certificate substantially in the form of Exhibit E-II hereto setting forth the Borrowing Base as at the end of such period, provided that the Borrowing Base Certificate may be required as frequently as weekly, and (iii) 25 days after the end of each calendar quarter, an Accounts Receivable aging report with respect to the quarter just ended, with each of the foregoing being certified by the President and the chief financial officer of Aeroflex (who shall have read this Agreement and made an examination sufficient in the opinion of the signers to make informed statements therein); (g) as soon as available, and in any event within 60 days after the end of each of the first three fiscal quarters and within 105 days after the end of each fiscal year of the Borrowers, (i) a certificate substantially in the same form as Schedules 3.09(a) and (b) hereto listing all Indebtedness of each Borrower (whether individual, joint, several or otherwise), including commitments, lines of credit and other credit availabilities, other than Indebtedness excluded from the schedule required under Section 3.09(a) hereof, and all Credit Support of each Borrower (whether individual, joint, several or otherwise) other than Credit Support excluded from the schedule required under Section 3.09(b) hereof, and (ii) upon the request of any Bank (but no more frequently than quarterly) a reconciliation of the consolidated balance sheet and income statement most recently submitted to the corresponding budget and projections previously submitted, with explanations of all significant variances, with each such certificate being dated as of the last day of the relevant reporting period and signed by the President and chief financial officer of Aeroflex (who shall have read this Agreement and made an examination sufficient in the opinion of the signer(s) to make informed statements therein); (h) as soon as available, and in any event within 30 days after the end of each fiscal quarter, a Material Contract Schedule dated as of or after the last day of such quarter, in each case certified by the President and the chief financial officer of Aeroflex (who shall have read this Agreement and made an examination sufficient in the opinion of the signers to make informed statements therein); (i) as soon as available, and in any event within 90 days after the commencement of each fiscal year of the Borrowers, a consolidated and consolidating annual budget and projections for the Borrowers for the forthcoming fiscal year (projected quarterly), including consolidated and consolidating cash flows of the Borrowers projected quarterly, certified by the chief financial officer of Aeroflex; (j) as soon as available, a copy of any annual management letter issued by any accountant or auditor to Aeroflex or any of its subsidiaries; (k) on or before each anniversary of the date of this Agreement, an independent insurance broker's certificate stating (i) that the insurance required by this Agreement is in full force and effect, (ii) that all premiums under those policies have been paid to the extent due through the date of the certificate, and (iii) the amounts and due dates of premiums due within the following 12-month period; and, as soon as received, copies of all insurance policies, endorsements and certificates received from time to time by any Borrower; (l) promptly upon request by any Bank, copies of all loan, security and other instruments, agreements and documents respecting Indebtedness of any Borrower in excess of $100,000, including commitments, lines of credit and other credit availabilities, and of all Credit Support by any Borrower respecting any Indebtedness or other obligation of any other person in excess of $50,000, except those to which the Administrator (for the benefit of all of the Banks) or all of the Banks also are a party; (m) as soon as available, a copy of any notice or other communication alleging any nonpayment or other material breach or default, or any foreclosure or other action respecting any material part of its assets and properties, received respecting any of the Indebtedness of any Borrower (other than the Obligations), or any demand or other request for payment under any Credit Support by any Borrower respecting any Indebtedness or other obligation of any other person, including any received from any person acting on behalf of the holder or beneficiary thereof, provided that the Borrowers shall not wait for such copies to become available to give any notice required under the circumstances by Section 5.01 hereof; (n) as soon as available, and in any event not more than five Business Days after receipt, a copy of any summons or complaint, or any other notice of any action, suit, investigation or proceeding, involving or affecting any Borrower or any subsidiary of any Borrower where the damages sought exceed, or if unspecified reasonably could exceed, $100,000; (o) as soon as available, a copy of any notice or other communication alleging the invalidity, non-binding effect or unenforceability of, any material error or other material defect in, any material omission from, or any nonpayment or other material breach or default under any note, instrument or stock certificate included in the Collateral or under any material Account Receivable, contract or other intangible included in the Collateral, provided that the Borrowers shall not wait for such copies to become available to give any notice required under the circumstances by Section 5.01 hereof; (p) as soon as available, and in any event not less than 15 days prior to execution, copies of each proposed modification, waiver, amendment or termination of any of the terms and provisions of any note, instrument or stock certificate included in the Collateral or under any material Account Receivable (except in the ordinary course of business), contract or other intangible included in the Collateral that would be reasonably likely to conflict with or prejudice the continued perfection of any security interest of the Administrator or any other Bank or materially diminish any of the rights, powers, privileges, remedies or interests of any Borrower in any such item; and promptly following execution, copies of each of the foregoing certified as to the accuracy thereof by the Secretary of the relevant Borrower; (q) as soon as available, and in any event not less than 30 days prior to adoption, copies of each proposed modification, waiver, amendment or termination of any of the terms and provisions of any (i) Corporate Document of Aeroflex (A) requiring the approval of its shareholders or (B) designating preferred stock constituting Indebtedness, (ii) Corporate Document of any other Borrower or (iii) agreement among the shareholders of any Borrower; and promptly following adoption, copies of each of the foregoing certified as to the accuracy thereof by the Secretary of State or comparable official of its jurisdiction of incorporation or the Secretary of the relevant Borrower, as applicable; and such other supporting documents of the kind specified in Section 4.06 hereof as the Administrator from time to time may request; (r) as soon as possible, if and to the extent requested by any Bank, copies of all tax returns, informational statements and reports filed by any Borrower with the Internal Revenue Service of the United States of America; (s) promptly upon the request of any Bank, copies of each notice, report, statement or other document or communication, whether periodic or otherwise, concerning the occurrence, existence or correction of any ERISA Event in any material respect, any responsive communication on the part of any Borrower or any of its ERISA Affiliates, or any preliminary or final determination of any Authority in respect thereof, provided that the Borrowers shall not wait for such request or copies to become available to give any notice required under the circumstances by Section 5.01 hereof; (t) contemporaneously with each submission or filing, a copy of any report, registration statement, proxy statement, financial statement, notice or other document, whether periodic or otherwise: (i) submitted to the shareholders of any Borrower in their capacities as shareholders; or (ii) submitted to or filed by any Borrower with any governmental or self-regulatory Authority (other than those items referenced in subsections (r) and (s), above) involving or affecting (A) any securities registration of any Borrower or its securities, (B) any Borrower that has had or would be reasonably likely to have a Material Adverse Effect, (C) the Obligations, (D) any part of the Collateral or any of the other material assets and properties of any Borrower or (E) any of the transactions contemplated in this Agreement or the other Loan Instruments, provided that the Borrowers shall not wait for such copies to become available to give any notice required under the circumstances by any other subsection of this Section or Section 5.01 hereof; and (u) as soon as available, but in any event within 60 days after the Effective Date, a balance sheet of UTMC as of the date of the acquisition of all of the issued and outstanding stock of UTMC, unaudited but certified by the President and the chief financial officer of Aeroflex (i) to have been prepared in accordance with GAAP consistently applied, and (ii) as complete, accurate and a fair presentation of the financial condition of UTMC as of such date, subject to normal year-end audit adjustments; together with such supplements to the aforementioned documents and additional accounts, reports, certificates, statements, documents and information as any Bank from time to time reasonably may request, each in such form and substance as may be acceptable to the Administrator and the Majority Banks. Section 5.03. Access to Premises, Records and Collateral. At all reasonable times and as often as the Administrator or any other Bank reasonably may request, each Borrower shall permit representatives designated by the requesting Bank to (a) have complete and unrestricted access to the premises of each Borrower, the books and records of each Borrower and the Collateral, except to the extent such access may be limited by Applicable Laws pertaining to United States defense matters, (b) make copies of, or excerpts from, those books and records and (c) discuss the Collateral or the accounts, assets, business, operations, properties or condition, financial or otherwise, of each Borrower with their respective officers, directors, employees, accountants and agents. Section 5.04. Existence, Corporate Documents, Powers, Etc. (a) Each Borrower shall do or cause to be done all things, or proceed with due diligence with any actions or courses of action, that may be necessary (i) to maintain its due organization, valid existence and good standing under the laws of its jurisdiction of incorporation, and (ii) to preserve and keep in full force and effect all qualifications, licenses and registrations in those jurisdictions in which the failure to do so would be reasonably likely to have a Material Adverse Effect; (b) no Borrower shall cause, suffer or permit any supplement, modification or amendment to, or any waiver of, any term or provision of any of its Corporate Documents, except that any Borrower may merge with any one or more of the other Borrowers, provided that in the event of any merger with Aeroflex, (i) Aeroflex shall be the surviving corporation and (ii) the capital stock and Corporate Documents of the surviving corporation shall be those of Aeroflex prior to any such merger; and (c) no Borrower shall do, or cause, suffer or permit to be done (by itself or otherwise), any act impairing its power or authority (i) to carry on its business as now conducted or (ii) to execute or deliver this Agreement or any other Loan Instrument to which it is or will be a party, or to perform any of its obligations hereunder or thereunder. Section 5.05. Compliance with Applicable Laws; Operations. Each Borrower shall promptly and fully comply with, conform to and obey any and all Applicable Laws now or hereafter in effect, other than to the extent the noncompliance therewith or violation thereof could not be reasonably likely to have a Material Adverse Effect. In any event, each Borrower shall procure, store, contain, manufacture, distribute, remove and dispose of all Inventory and Environmental Substances and use and operate all assets and properties (including, without limitation, machinery, equipment, real estate and improvements) in full compliance with and conformity to all Environmental Laws and other Applicable Laws in all material respects, including (without limitation) all applicable permits, licenses, and other authorizations, consents or approvals of authorities. Section 5.06. Payment of Debts, Taxes, Etc. Each Borrower shall (a) pay, or cause to be paid, all of its Indebtedness and other liabilities and lawful claims (whether for services, labor, materials, supplies or otherwise) as and when due, (b) perform, or cause to be performed, all of its obligations promptly and in accordance with the respective terms and provisions thereof, and (c) promptly pay and discharge, or cause to be paid and discharged, all taxes, assessments and other governmental charges and levies imposed upon any of the Borrowers, upon their respective income or receipts or upon any of their respective assets and properties on or before the last day on which the same may be paid without penalty; provided, however, that it shall not constitute a breach of this Section if any Borrower fails to perform any such obligation or to pay any such Indebtedness or other liability (except for the Obligations), tax, assessment, or governmental or other charge, levy or claim (i) that is being (A) delayed, in the case of trade payables (but not other obligations), in accordance with the normal payment practices of such Borrower, but not beyond any demand in payment therefor, or (B) contested in good faith and by proper proceedings diligently pursued, (ii) if the effect of such failure to pay or perform will not (A) cause or permit the acceleration of the maturity of any other Indebtedness or obligation of any Borrower (i.e., other than the one being contested) or (B) subject any part of the assets and properties of any Borrower to attachment, levy or forfeiture, (iii) for which such Borrower or such subsidiary has obtained a bond or insurance, or established a reserve, in an amount that in the judgment of the Banks is adequate and satisfactory, and (iv) so long as the aggregate amount of such unpaid overdue items for all of the Borrowers does not at any time exceed $500,000. Section 5.07. Maintenance and Insurance. (a) Each Borrower shall maintain or cause to be maintained, at its own expense, all of its assets and properties in good working order and condition (ordinary wear and tear and retirement excepted), making all necessary repairs thereto and renewals and replacements thereof. Each Borrower shall perform all servicing, repairs, overhauls, replacements, modifications, improvements and tests, or shall cause them to be performed, (i) with personnel duly qualified for the applicable task, (ii) in accordance and compliance with the manuals and service bulletins of the applicable manufacturer(s) and (iii) with suitable replacement, substitute or additional parts or components (A) in good operating condition, (B) reasonably anticipated to be of equivalent or better performance, durability, utility and value than the item replaced, (C) owned solely by such Borrower, and (D) free of any Lien other than any Permitted Lien. (b) Each Borrower shall maintain or cause to be maintained, at its own expense, insurance (to the extent available) in form, substance and amounts (including deductibles) reasonably acceptable to the Majority Banks (i) adequate to insure all assets and properties of the Borrowers, which assets and properties are of a character usually insured by persons engaged in the same or similar business, against loss or damage resulting from fire, flood, hurricanes or other risks included in an extended coverage policy, (ii) against public liability and other tort claims that may be incurred by or asserted against such Borrower, (iii) as may be required by the other Loan Instruments or Applicable Law and (iv) as may be reasonably requested by the Banks, all with adequate, financially sound and reputable insurers, and all naming the Banks as additional insureds and the Administrator (for the benefit of all of the Banks) as loss payee under a standard mortgagee's endorsement as their respective interests may appear. In the event the Administrator receives any insurance proceeds respecting any loss, damage or destruction of any insured Collateral, the Administrator at its option may (1) hold and disburse the proceeds (or a portion thereof) in accordance with Section 7.03(b) hereof or (2) apply the proceeds (or any remaining balance) to reduce the Loans as required by Sections 2.05(b) and 7.03(b) hereof. In the event any Borrower receives any such insurance proceeds (other than disbursements from the Administrator), such Borrower shall accept and hold those funds in trust for the benefit of the Banks and shall promptly pay or deliver those proceeds to the Administrator (for the benefit of all of the Banks) for application as provided above. (c) Each Borrower shall maintain or cause to be maintained, at its own expense, all of its patent, trademark and trade name rights and applications, including (without limitation) the diligent pursuit of all applications, the payment of all maintenance, license or other fees and expenses, and the vigorous prosecution of suits and proceedings to enforce those rights and applications and to object or oppose the conflicting rights or applications of any other person, except in each case where such Borrower decides in good faith that a particular trademark or tradename is of negligible economic value to the business of such Borrower. Each Borrower (i) shall continue to use each trademark and tradename of such Borrower in its business and on its goods, (ii) shall use the appropriate symbol of registration with each use of a trademark or tradename by such Borrower, (iii) shall not reduce the quality of existing goods or services bearing a trademark or tradename or use any existing trademark or tradename with any other goods or services of less than comparable quality, and (iv) shall not take, or cause suffer, suffer or permit anyone else to take, any action that may invalidate the registration of any trademark or tradename, except in each case where such Borrower decides in good faith that a particular trademark or tradename is of negligible economic value to the business of such Borrower. Each Borrower shall seek or cause to be sought, at its own expense, (A) patent applications and patents respecting all unpatented but patentable inventions made or obtained by such Borrower, (B) trademark applications and registered trademarks on registrable but unregistered trademarks developed, used or obtained by such Borrower, and (C) tradename applications and registered trade names on registrable but unregistered tradenames developed, used or obtained by such Borrower, except in each case where such Borrower decides in good faith that such pursuit would not be useful to its business. Section 5.08. Contracts and Other Collateral. Each Borrower shall in good faith maintain, enforce, preserve and defend any and all of its rights, powers, privileges, remedies and interests under or with respect to each Material Contract and each other note, stock certificate and other instrument, as well as each other material account, agreement, document and intangible of such Borrower included in the Collateral to the full extent permitted by Applicable Law, except as otherwise provided in Section 7.03(a) hereof. Section 5.09. Defense of Collateral, Etc. Each Borrower shall enforce, preserve and defend all of its right, title and interest in and to each and every part of (a) the Collateral, and (b) the other material assets or properties of such Borrower (if any), and the Borrowers shall defend all of the right, title and interest of each Bank in and to each and every part of the Collateral, each against all manner of claims and demands on a timely basis to the full extent permitted by Applicable Law. In the event any of the Collateral or any of the other material assets or properties of any Borrower (if any) is attached or levied or any Lien is imposed on any of the Collateral or such other assets or properties (other than as permitted by Section 6.04 hereof), then (without limiting the generality of the preceding sentence) the Borrowers shall pay, discharge or bond the underlying obligation and cause the release of such Collateral or such other assets or properties therefrom within five days of any attachment or levy or thirty days of the imposition of any Lien, but in any case before the claimant may defeat the right of the relevant Borrower to bond, contest or redeem. Section 5.10. Maintenance of Borrowing Base. The Borrowers shall maintain, or cause to be maintained, a Borrowing Base at all times that is equal to or exceeds the sum of (a) the principal balance outstanding under the Revolving Credit Loans, plus (b) the principal balance outstanding under the Term Loans, plus (c) the Letter of Credit Amount. If at any time the Borrowing Base is less than that minimum (whether through (i) any change in or redetermination of value, (ii) any loss, destruction, termination, foreclosure or other impairment, deterioration or diminution, (iii) any new or newly discovered Lien, adverse claim or title defect, or (iv) exclusion from the Borrowing Base for any untrue representation, or otherwise), which events and resulting effects and amounts may be determined at any time and from time to time by the Banks (in their sole and absolute discretion), the Borrowers shall immediately after receipt of notice from the Administrator (A) grant and deliver to the Administrator or its designee (for the benefit of all of the Banks) additional Collateral consisting of such assets or properties as may be acceptable to the Administrator and the Majority Banks in their sole and absolute discretion and having an aggregate current fair market value sufficient (when included in the calculation of the Borrowing Base) to eliminate the Borrowing Base deficiency, or (B) repay the Loans and/or deposit cash collateral as contemplated in Section 2.05(b) hereof in such amount(s) as the Administrator may have requested in such notice to eliminate the Borrowing Base deficiency. This Section imposes a continuing test and the Administrator at any time and from time to time may demand such payment and delivery whenever such a deficiency is determined by the Administrator. All additional Collateral pledged to the Administrator or its designee pursuant to this subsection shall be documented, delivered and perfected in the manner required by this Agreement and Applicable Law before that deficiency may be deemed to have been reduced or extinguished by such Collateral. Section 5.11. Additional Subsidiary Borrowers. As soon as practicable, and in any event within thirty days following the request of the Majority Banks, the Borrowers shall cause any subsidiary that is not a Borrower or any newly formed or acquired corporation, venture or other person meeting the definition of "subsidiary" to execute and deliver to the Banks an agreement, in form and substance acceptable to the Majority Banks, in which such person agrees to become, and assumes all of the Obligations of, a Borrower under this Agreement and the other Loan Instruments; provided, however, that: (a) Comar shall not become a Borrower hereunder until such time (if ever) as the Majority Banks desire that Comar become a Borrower hereunder and the Administrator shall have given the Borrowers notice to that effect; and (b) Europtest shall not become a Borrower hereunder until the earlier to occur of (i) the acquisition by Aeroflex of the remaining 10% of the capital stock of Europtest or (ii) the annual sales or gross assets of Europtest equal or exceed $3,000,000. The Borrowers represent and warrant to the Banks that each of ACL, HARX, International, Old Corp and T-Cas are inactive subsidiaries and own no assets or properties. The Borrowers shall give the Banks prompt notice of (i) any such formation or acquisition or (ii) any change in status of any inactive subsidiary or any acquisition by it of any asset or property. ARTICLE VI Negative Covenants ------------------ The Borrowers jointly and severally covenant and agree that they will comply in all respects with each, and will not cause, suffer or permit any violation of any, of the terms and provisions of each Section in this Article, from the date hereof until the Obligations have been fully paid and satisfied, unless the Administrator (with the consent of the Requisite Banks, as and if required) shall consent otherwise in writing (as provided in Section 10.16 hereof): Section 6.01. Certain Financial Requirements. The financial measurements used in the following covenants: (i) shall be determined in accordance with GAAP (as of the date of calculation) consistently applied except to the extent otherwise specified in a particular definition or provision; (ii) shall be computed for the Borrowers and all of the respective subsidiaries (if any) on a consolidated basis in accordance with GAAP except to the extent otherwise specified by a particular definition or provision; and (iii) shall refer to the corresponding items in the financial statements of the Borrowers and all of their respective subsidiaries (if any) for the relevant periods except to the extent otherwise specified or defined herein. (The Borrowers and the Banks covenant and agree to reset in good faith the financial covenants set forth in this Section, as well as the corresponding provisions of the financial covenants compliance certificate required by Section 5.02(e) hereof, from time to time with each material change in GAAP so as to maintain the integrity and intent of such covenants.) (a) The Borrowers shall not permit their Consolidated Effective Net Worth: (i) at the Effective Date, or at any time thereafter through June 29, 1999 to be less than $60,000,000; (ii) at June 30, 1999, or at any time thereafter through June 29, 2000, to be less than $ 63,000,000; and (iii) at June 30, 2000, and at the end of each subsequent fiscal year of the Borrowers, or at any time after the end of such fiscal year through the next succeeding June 29, to be less than the sum of $6,000,000 plus the Borrowers' actual Consolidated Effective Net Worth as at the end of the immediately preceding fiscal year (for example, at June 30, 2001, or at any time thereafter through June 29, 2002, the sum of $6,000,000 plus the Borrowers' actual Consolidated Effective Net Worth as at June 30, 2000). (b) The Borrowers shall not cause, suffer or permit their Consolidated Effective Leverage Ratio to exceed 1.50:1 at any time. (c) The Borrowers shall not permit their Consolidated Funded Debt Ratio for any fiscal year or other period of four consecutive fiscal quarters to be more than 2.75:1 at any time. (d) The Borrowers shall not permit their Consolidated Debt Service Ratio for any fiscal year or any other period of four consecutive fiscal quarters to be less than 1.00:1 at any time (e) The Borrowers shall not permit their Consolidated Quick Ratio to be less than 1.00:1 at any time. (f) The Borrowers shall not permit their consolidated income before taxes, plus for the fiscal year ending June 30, 1999, the non-cash special charge for the write-offs of purchased in-process research, to be less than $8,000,000.00 for any fiscal year, as determined in accordance with GAAP. (g) The Borrowers shall not directly or indirectly make, incur or permit their consolidated capital expenditures to be more than: (i) $8,500,000 for the fiscal year ending June 30, 1999, excluding capital expenditures relating to the Pearl River Project; (ii) $10,500,000 for the fiscal year ending June 30, 2000; and (iii) $11,500,000 for the fiscal year ending June 30, 2001, or for any fiscal year thereafter; as determined on a consolidated basis in accordance with GAAP. (h) No Borrower shall cause or permit any change of its fiscal year from June 30 of each year without the prior written consent of the Banks, which will not be withheld unreasonably. Section 6.02. Indebtedness. (a) The Borrowers shall not directly or indirectly create, incur, assume, permit to exist, increase, renew or extend any Indebtedness on their respective parts, including commitments, lines of credit and other credit availabilities, or apply for, offer, commit or agree to do any of the foregoing, excluding, however: (i) Indebtedness owed to the Administrator or any other Bank under any of the Loan Instruments; (ii) Indebtedness incurred as permitted as Other Debt under subsection (b) of this Section, provided that the Borrowers may continue such Indebtedness, but without any increase, once incurred as so permitted; (iii) loans or advances from one Borrower to another Borrower; (iv) the Indebtedness outstanding under the Equipment Finance Documents, including any renewal or extension thereof, but excluding any increase therein; (v) any Indebtedness incurred under any new Subordinated Debt Documents approved by the Majority Banks as provided in Section 6.12 hereof so long as no Event of Default or Default then exists or would result therefrom (whether through any Pro Forma Effect or otherwise), provided that the Borrowers may continue such Indebtedness, but without any increase, once incurred as so permitted; (vi) sale/leaseback transactions permitted under Section 7.03(c); and (vii) the existing Indebtedness listed in Schedule 3.09(a) hereto, including any renewal or extension thereof, but excluding any increase therein or the continuation of any Indebtedness being retired with the proceeds of the Loans. (b) The Borrowers shall not directly or indirectly create, incur, assume, permit to exist, increase, renew or extend any Other Debt, except for: (i) Other Debt so long as no Event of Default or Default then exists or would result therefrom (whether through any Pro Forma Effect or otherwise), and so long as the aggregate amount of all such Other Debt (with the amount of each item equal to the principal amount of any Indebtedness, the imputed principal amount of any lease treated as Indebtedness under GAAP or the aggregate rental payments for the initial term of any other lease (discounted to present value), as applicable) incurred during any fiscal year does not exceed $5,000,000, provided that the Borrowers may continue such obligations within those limits, but without any increase, once incurred as so permitted; (ii) leases of assets or properties from one Borrower to another Borrower; and (iii) the leases under the Equipment Finance Documents and the existing operating leases listed in Schedule 6.02(b) hereto, including any renewal or extension thereof, but excluding any increase therein or the continuation of any Indebtedness or obligation being retired or extinguished with the proceeds of the Loans. (c) The Borrowers shall not prepay, acquire or otherwise satisfy, in whole or in part, any of its Indebtedness, except (i) Indebtedness owed to the Administrator or any other Bank under any of the Loan Instruments, (ii) loans or advances owed by one Borrower to another Borrower, (iii) leases, provided that such prepayment of any lease results from the exercise of an early purchase option, or (iv) as permitted by agreement or consent of the Majority Banks. Section 6.03. Credit Support. The Borrowers shall not directly or indirectly make, create, incur, assume, permit to exist, increase, renew or extend any Credit Support on their respective parts of any Indebtedness or other obligation of any other person, or offer, commit or agree to do so, excluding, however: (a) any Credit Support relating to Indebtedness or other obligations owed to the Administrator or any other Bank under any of the Loan Instruments; (b) the Credit Support listed in Schedule 3.09(b) hereto, including any renewal or extension thereof, but excluding any increase therein; (c) the Credit Support under the Equipment Finance Documents, including any renewal or extension thereof, but excluding any increase in the guarantied obligations; (d) the endorsement of negotiable instruments for collection or deposit in the ordinary course of the business of each Borrower; or (e) any Credit Support of the Indebtedness or other obligations of any Borrower if the Credit Support provider would have been permitted to have incurred the Indebtedness or other obligation directly and transferred the proceeds or other assets and properties to such Borrower under this Agreement and the other Loan Instruments. Section 6.04. Liens. The Borrowers shall not directly or indirectly make, create, incur, assume or permit to exist any Lien of any nature in, to or against any part of the Collateral or any other asset or property of the Borrowers (if any) or offer, commit or agree to or cause or assist the inception or continuation of any such Lien, excluding, however, any Permitted Lien to the extent not otherwise prohibited by this Agreement or any other Loan Instrument. Section 6.05. Sale or Disposition of Collateral, Etc. The Borrowers shall not directly or indirectly: (a) sell, lease, sublease, transfer, exchange, abandon or otherwise dispose of, surrender management, physical possession or control of, physically alter or relocate all or any portion of the Collateral, or offer or agree to do so, other than as expressly permitted by Sections 7.03 and 7.04 hereof; (b) cause, suffer or permit any supplement, modification or amendment to, or any waiver of any term or provision or any termination of, any Contract, any other note, stock certificate, instrument or other material account, agreement, document or intangible of the Borrowers included in the Collateral, other than as expressly permitted by Sections 7.03 and 7.04 hereof; (c) sell, lease, sublease, transfer, exchange or otherwise dispose of any material part of its other assets or properties (individually or in a series of transactions), except for any sale of assets or properties other than any Collateral (whether in a single transaction or a series of related transactions) so long as (i) the consideration for such permitted sale is not less than fair market value, (ii) at least 90% of such consideration is paid in cash, and (iii) no Event of Default or Default then exists or could result therefrom (whether through any Pro Forma Effect or otherwise); (d) enter into any shareholders agreement, voting trust or similar agreement or arrangement or any other restriction or limitation in any way respecting assignability, transferability or any voting, dividend, distribution or other ownership right with respect to any of the Pledged Securities (whether on the face of any certificate, in any Corporate Document, in any instruction or other communication to or agreement or arrangement with any transfer agent, clearing corporation, custodial bank or other financial intermediary, or otherwise), or cause, suffer or permit any such restriction or limitation to be imposed upon or continue with respect to any of the Pledged Securities; or (e) offer or agree to or cause or assist the inception or continuation of any of the foregoing. Section 6.06. Investments, Loans, Advances, Etc. The Borrowers shall not directly or indirectly purchase or otherwise acquire or hold any Investment or make any Investment in or for the benefit of any other person, or offer, commit or agree to do so, except for: (a) securities received in connection with past contributions to or Investments in the subsidiaries and ventures listed in Schedule 3.11 hereto, and loans and advances (and any repayment thereof) by a Borrower to any other Borrower; (b) the continuation of the existing Investments listed on Schedule 6.06(b) hereto; (c) the Permitted Investments, provided that the aggregate deposits and other Investments with banks and other financial institutions other than the Banks do not at any time exceed the amounts permitted by subsection (g) or (i) of this Section; (d) any Credit Support permitted under Section 6.03 hereof; (e) any collateral account established under this Agreement or any other Loan Instrument; (f) loans or advances of salary to any officer or employee of any Borrower in the ordinary course of its business that in the aggregate for all employees does not at any time exceed $250,000; (g) normal business banking accounts (i) for Aeroflex, Laboratories, Systems, Lintek, Vibrations, MIC and UTMC, in any federally insured United States commercial bank so long as the amounts on deposit with all such institutions do not exceed $100,000 for Aeroflex, Laboratories, Systems or Lintek, $150,000 for Vibrations and $250,000 for MIC or UTMC, (ii) for Comstron and MICSARL, in any commercial bank organized under the laws of France so long as the amounts on deposit with all such institutions do not exceed $100,000 in the aggregate for both Comstron and MICSARL, or (iii) in any Bank; (h) the payroll accounts maintained by the Borrowers in the ordinary course of business so long as the aggregate amount of all such accounts does not exceed $1,000,000 at any time during the period June 20 to August 20 of each year or $300,000 at any other time, provided that such payroll accounts are maintained with a commercial bank in which Permitted Investments may otherwise be made at the time; (i) the acquisition by Aeroflex of the remaining 10% of the capital stock of Europtest for a purchase price not to exceed 3,900,000 French francs; and (j) other Investments not exceeding $25,000 in the aggregate for all of the Borrowers at any one time in persons not affiliated with any Borrower. Section 6.07. Certain Fundamental Changes. The Borrowers shall not, and the Borrowers shall not cause, suffer or permit any of their subsidiaries to, directly or indirectly effect, enter into or offer, commit or agree to: (a) any issuance, sale, transfer, pledge or other disposition or encumbrance of any capital stock, partnership or membership interests or other securities issued by any of the Borrowers or any of their subsidiaries or the issuance of any option, warrant or other right to acquire any such securities, except that Aeroflex may (i) issue capital stock (A) pursuant to the Plans and (B) in any public offering registered, or any arm's-length private placement exempt from registration, under the Securities Act and (ii) issue common stock and options, warrants and other rights to acquire common stock; (b) any capital reorganization or reclassification of the capital stock, partnership or membership interests or other equity securities issued by any of the Borrowers or any of their subsidiaries; (c) any transaction in which the capital stock, partnership or membership interests or other equity securities issued by any of the Borrowers or any of their subsidiaries prior to the transaction would be changed into or exchanged for different securities, whether of that or any other person, or for any other assets or properties; (d) any sale, lease, assignment, conveyance, spin-off or other transfer or disposition of all or any material part of the business or assets and properties of any of the Borrowers or any of their subsidiaries; (e) any merger, consolidation, dissolution, liquidation or winding up of any of the Borrowers or any of their subsidiaries, except that (i) any Borrower may merge with any one or more of the other Borrowers, provided that in the event of any merger with Aeroflex, (A) Aeroflex shall be the surviving corporation and (B) the capital stock and Corporate Documents of the surviving corporation shall be those of Aeroflex prior to any such merger, and (ii) so long as they are inactive subsidiaries and own no assets or properties, any of ACL, HARX, International, Old Corp or T-Cas may be dissolved; (f) the acquisition or establishment of any new subsidiary or joint venture by any of the Borrowers or any of their subsidiaries; (g) the acquisition by any of the Borrowers or any of their subsidiaries of all or substantially all of the assets and properties of any other person or any discrete division or other business unit thereof, whether by any of the Borrowers or any of their subsidiaries; or (h) any material change in the character of the business of any of the Borrowers or any of their subsidiaries as conducted on the date of this Agreement or any adverse change in the method by which that business is conducted. Section 6.08. Distributions to Shareholders. The Borrowers shall not directly or indirectly: (a) declare or make any dividend, payment or other distribution of cash, assets or property with respect to any equity securities issued by any of the Borrowers, whether now or hereafter outstanding, other than such payments or other distributions as may be made to a Borrower from any of its subsidiaries, except that Aeroflex may declare or make any dividend or other distribution with respect to its common stock payable in common stock, preferred stock (other than preferred stock that would be considered Indebtedness hereunder) or any option, warrant or other right to acquire such securities; (b) redeem, purchase or otherwise acquire any securities issued by any of the Borrowers or any option or other right to acquire any such securities; (c) covenant or otherwise arrange with any person (other than with the Banks in any Loan Instrument) to directly or indirectly limit or otherwise restrict any dividend, advance or other payment on distribution (whether of cash or otherwise); or (d) offer or agree to do any of the foregoing; provided however that so long as no Event of Default or Default then exists or would result therefrom (whether through any Pro Forma Effect or otherwise), Aeroflex may redeem fractional shares of preferred stock as required under the Rights Agreement and pay the $1.00 per share preferred dividend due under any preferred stock acquired pursuant to the Rights Agreement. Section 6.09. Use of Loans. (a) The Borrowers shall not directly or indirectly use any portion of the Loans, or cause, assist, suffer or permit the use of any portion of the Loans, in whole or in part, other than use of the Loans for the continuation of the existing Indebtedness that arose under the Existing Loan Instruments and use of the Revolving Credit Loans for the funding of the working capital needs and other general corporate purposes of the Borrowers. (b) No part of the proceeds of the Loans shall be used directly or indirectly to finance any hostile acquisition. (c) No part of the proceeds of the Loans or other credit from the Banks shall be used at any time directly or indirectly to purchase or carry any Margin Stock or otherwise in any way or for any purpose that violates, or is inconsistent with, any applicable Margin Stock Regulations. Section 6.10. ERISA Plans. Except for the Plans, the Borrowers shall not, and the Borrowers shall not cause, suffer or permit any of their ERISA Affiliates to, directly or indirectly establish, maintain, participate in, contribute to or permit to exist any "employee pension benefit plan" (as defined in ERISA) for any employees of any Borrower or any ERISA Affiliate; provided, however, that any Borrower or any ERISA Affiliate from time to time may establish any such plan in accordance with Applicable Law (including ERISA and the Code) with the prior written consent of the Banks (which consent will not be unreasonably withheld). The Borrowers shall use their best efforts to obtain or continue the qualification of each Plan under ERISA and the Code, as applicable, shall prepare and deliver each material report, statement or other document required by ERISA and the Code within the periods specified therein and conforming in form and substance to the provisions thereof, and shall administer each Plan in all material respects in accordance with ERISA, the Code and all other Applicable Laws, as applicable; and shall use their best efforts to cause their respective ERISA Affiliates to do each of the foregoing. In any event, no Borrower shall, and no Borrower shall cause, suffer or permit any of its ERISA Affiliates to: (i) incur, continue or fail to correct any ERISA Event in any material respect; (ii) fail to file with the appropriate Authority any required notice or report respecting any Plan as and when due; (iii) fail to respond in a timely fashion to any notice or other communication respecting any Plan from any Authority; (iv) materially increase or materially and adversely modify any funding obligation or other liability of any one or more of the Borrowers or any ERISA Affiliate (individually or in the aggregate) under any Plan (whether through amendment or termination) without the prior written consent of the Administrator (which will not be withheld unreasonably); (v) permit the present value of all accrued benefits under each Plan subject to Title IV of ERISA to exceed the value of the assets of such Plan allocable to such accrued benefits (which benefit value shall be determined either on an ongoing basis, using the Plan's reasonable actuarial assumptions, or on a termination basis, using the assumptions employed by the Pension Benefit Guaranty Corporation in connection with plan terminations, as applicable); or (vi) permit the present value of all accrued post-retirement benefits under each "employee welfare benefit plan" (as defined in ERISA) to which one or more of the Borrowers and their ERISA Affiliates is required to contribute in the aggregate to exceed the assets of such plan allocable to such benefits by more than $50,000 (determined by using the actuarial and other assumptions required under FAS 106). Section 6.11. Transactions with Affiliates. The Borrowers shall not directly or indirectly enter into any transaction (including, without limitation, the lease, purchase, sale or exchange of any asset or property, the making of any advance or loan or the entering into of any agreement or arrangement for any payment in respect of any fee, charge or other expense for the provision of any services or any allocation of administrative salaries, expenses and other general overhead) with any affiliate (other than a Borrower) of any Borrower other than in the ordinary course and pursuant to the reasonable requirements of the business of the transacting party and upon fair and reasonable terms and provisions no less favorable to the transacting party than it would have been reasonably likely to have obtained in a comparable arm's-length transaction with a person who is not an affiliate (other than a Borrower) of any Borrower; provided that the foregoing restriction shall not apply to (i) the payment of reasonable and customary regular fees to directors of any of the Borrowers who are not employees of any of the Borrowers, (ii) loans and advances to officers of the Borrowers approved by the Boards of Directors of the relevant Borrowers and permitted by Section 6.06 hereof, (iii) reasonable employment arrangements and benefit programs for employees of the Borrowers approved by the Boards of Directors of the relevant Borrowers, (iv) the grant of reasonable stock options or similar rights to employees and directors of any of the Borrowers pursuant to plans approved by the Boards of Directors of the relevant Borrowers, (v) any intercompany Indebtedness permitted by Sections 6.02 and 6.06 hereof, (vi) any transfer of assets to another Borrower permitted by Section 6.05 or 6.07 hereof, and (vii) any merger, consolidation or liquidation permitted by Section 6.07 hereof. Section 6.12. Modification of the Subordinated Debt Documents, Etc. The Borrowers shall not directly or indirectly agree to, enter into or cause, suffer or permit, any supplement to or any waiver (of their rights), modification, amendment, restatement or replacement of any Subordinated Debt Document existing on the date hereof or hereafter approved by the Banks, or enter into any new Subordinated Debt Document, or offer, commit or agree to do any of the foregoing, without the prior written consent of the Majority Banks; provided that the Majority Banks shall not unreasonably withhold their consent respecting any new Subordinated Debt Documents for new Indebtedness. The inclusion of supplements, modifications, amendments, restatements, replacements and the like in the various definitions of the Subordinated Debt Documents is not intended and shall not be deemed or construed to be permission for or acceptance of any of the foregoing by the Majority Banks. In any event, no Borrower shall cause, suffer or permit: (a) any of the obligations of any Borrower under any Subordinated Debt Document to be (i) secured by any asset or property of any Borrower or (ii) less than fully subordinated (in the judgment of the Majority Banks) to the prior payment and satisfaction of the Obligations; or (b) any payment to be made or action to be taken under any Subordinated Debt Document without notice of any proposed action, suit or proceeding to the Banks. Section 6.13. Modification of the Equipment Finance Documents. The Borrowers shall not directly or indirectly agree to, enter into or cause, suffer or permit, any supplement to or any waiver (of their rights), modification, amendment, restatement or replacement of any Equipment Finance Document existing on the date hereof or hereafter approved by the Banks (other than any renewal or extension thereof permitted under Section 6.02(a)(iv) hereof or the conversion of any Lucent Equipment Financing into a sale/leaseback transaction contemplated under Section 7.03(c) hereof), or enter into any new Equipment Finance Document, or offer, commit or agree to do any of the foregoing, without the prior written consent of the Majority Banks. The inclusion of supplements, modifications, amendments, restatements, replacements and the like in the various definitions of the Equipment Finance Documents is not intended and shall not be deemed or construed to be permission for or acceptance of any of the foregoing by the Majority Banks. Section 6.14. Modification of the Purchase Documents. The Borrowers shall not directly or indirectly agree to, enter into or cause, suffer or permit, any supplement to or any waiver (of their rights), modification, amendment, restatement or replacement of any Purchase Document existing on the date hereof or hereafter approved by the Banks, or enter into any new Purchase Document, or offer, commit or agree to do any of the foregoing, without the prior written consent of the Majority Banks. The inclusion of supplements, modifications, amendments, restatements, replacements and the like in the various definitions of the Purchase Documents is not intended and shall not be deemed or construed to be permission for or acceptance of any of the foregoing by the Majority Banks. Section 6.15. Modification of the Pearl River Financing Documents, Etc. The Borrowers shall not directly or indirectly agree to, enter into or cause, suffer or permit, any supplement to or any waiver (of their rights), modification, amendment, restatement or replacement of any Pearl River Financing Document existing on the date hereof or hereafter approved by the Banks, or enter into any new Pearl River Financing Document, or offer, commit or agree to do any of the foregoing, without the prior written consent of the Majority Banks. The inclusion of supplements, modifications, amendments, restatements, replacements and the like in the various definitions of the Pearl River Financing Documents is not intended and shall not be deemed or construed to be permission for or acceptance of any of the foregoing by the Majority Banks. Section 6.16. Modification of the Rights Agreement, Etc. The Borrowers shall not directly or indirectly agree to, enter into or cause, suffer or permit, any supplement to or any waiver (of their rights), modification, amendment, restatement or replacement of the Rights Agreement, the rights issued thereunder or the preferred stock to be issued thereunder, or offer, commit or agree to do any of the foregoing, without the prior written consent of the Majority Banks. The inclusion of supplements, modifications, amendments, restatements, replacements and the like in the definition of the Rights Agreement is not intended and shall not be deemed or construed to be permission for or acceptance of any of the foregoing by the Majority Banks. ARTICLE VII Collateral ---------- Section 7.01. Continuation and Grant of Security Interests. (a) Pursuant to the Existing Loan Agreement, the Borrowers granted to the Administrator (for the benefit of all of the Banks) pledges, assignments, conveyances, mortgages and other security interests in and to (among other things) the Existing Collateral in order to secure the timely and full payment of the Existing Obligations, which obligations include the outstanding loans respectively described in Sections 2.01 of this Agreement and continue as part of the Obligations as described in Sections 2.01, 2.02, 2.03 and 2.13 hereof. The Borrowers hereby restate, reaffirm and continue those grants of the Existing Collateral pursuant to subsection (b) of this Section, and the Administrator (for the benefit of all of the Banks) shall retain its interests in the Existing Collateral in order to secure the timely and full payment and satisfaction of the Obligations in accordance with the respective terms and provisions of this Agreement and the other Loan Instruments. To the extent the Collateral described in subsection (b) of this Section includes assets and properties not included in the Existing Collateral, each Borrower intends to grant, and pursuant to subsection (b) of the Section grants, to the Administrator (for the benefit of all of the Banks) a continuing security interest in and to those assets and properties. (b) Each Borrower hereby pledges, assigns, conveys, mortgages, transfers and delivers to the Administrator (for the benefit of all of the Banks), and grants to the Administrator (for the benefit of all of the Banks) a continuing security interest in and to, all of the assets and properties of such Borrower, including (without limitation) the following: (i) any and all Accounts Receivable of such Borrower, and any and all Contracts or other orders, agreements or arrangements from or with any other person to purchase or procure Inventory, goods or services from such Borrower; (ii) any and all Inventory of such Borrower, wherever located, including any and all raw materials, work-in-progress and finished goods; (iii)any and all of the real estate of such Borrower described in any Mortgage, any and all fixtures and improvements thereto, and any and all interests therein; (iv) any and all tangible personal assets and properties of such Borrower, wherever located, including (without limitation) any and all accessions, accessories, additions, equipment, fixtures, furnishings, machinery, parts, replacements, supplies, tools and vehicles, whether or not located upon or affixed to any of the foregoing items; (v) any and all Pledged Securities and any and all securities issued by each of the other Borrowers (other than Aeroflex) and by each subsidiary of each Borrower, any and all other interests of such Borrower in other corporations, partnerships and ventures, any and all dividends and other distributions with respect thereto (whether cash, stock or otherwise) and splits thereof, and any and all options, warrants and other rights to acquire securities issued by any of the foregoing persons (whether from the issuer or otherwise); provided, however, that the voting capital stock issued by Comar shall not become Collateral hereunder until such time (if ever) as the Administrator has given the Borrowers notice that the Majority Banks desire that (A) Comar become a Borrower hereunder (as contemplated in Section 5.12 hereof) or (B) such stock issued by Comar be included in the Collateral hereunder; (vi) any and all securities issued by VTX and any and all investments issued by the Federal National Mortgage Association, Government National Mortgage Association or any other issuer (other than the voting capital stock of Comar to the extent excluded by clause (v), above) owned by such Borrower; (vii)any and all security entitlements and other rights, powers, privileges, remedies and interests of the referenced person in, to and under any and all of the items described above in subsections (v) and (vi) and any and all Organizational Documents pertaining thereto; (viii) any and all Pledged Permitted Investments of any Borrower; (ix) any and all patents, trademarks, tradenames, copyrights and other intellectual properties of such Borrower, including (without limitation) any and all applications and pending items, any and all license royalties, any and all reissues, divisions, continuations, renewals and extensions thereof (whether in whole or in part), and any and all rights corresponding to any of the foregoing throughout the world, and in the case of trademarks and copyrights the good will of the business to which each of them relates (without, however, in any way limiting the licenses granted under Section 7.02(f) hereof); and (x) any and all cash, cash equivalents and other instruments; (xi) the Purchase Agreement and other Purchase Documents; (xii)any and all (A) advances, loans and other Indebtedness and other amounts (including interest) directly or indirectly owed to such Borrower by any other Borrower, any subsidiary of any Borrower or any other co-obligor, surety or pledgor, (B) Subordinated Rights, whether resulting from any payment made by such Borrower or any subsidiary of any Borrower or otherwise, and (C) Liens or Credit Support securing any such advances, loans, Indebtedness, amounts or rights; (xiii) any and all instruments, chattel paper, documents of title and trust receipts (and the goods covered thereby, wherever located), contract rights, warranties, casualty and other insurance policies and rights, litigation claims and rights, tradenames and other general intangibles of such Borrower and any and all computer programming data and other books and records of such Borrower, in each case arising from or with respect to all or any part of any of the items in the foregoing subsections; and (xiv)any and all deposits of such Borrower (whether general or special, time or demand, provisional or final, or individual or joint) maintained with any Bank or any of its affiliates, custodians, participants or designees; any and all Indebtedness and other amounts and obligations at any time owing by any Bank or any of its affiliates or participants to or for the credit, account or benefit of such Borrower; and any and all assets and properties of such Borrower in the possession, custody or control of any Bank or any of the affiliates, custodians, participants or designees of any Bank, including (without limitation) other monies, certificates of deposit, securities, instruments of debt or credit, documents of title and trust receipts (and the goods covered thereby, wherever located), and other instruments and documents; in each case whether now existing or hereafter acquired or created, whether owned beneficially or of record and whether owned individually, jointly, as a security entitlement or otherwise, together with all products and proceeds thereof, all collections, payments and other distributions and realizations with respect thereto, any and all other rights, powers, privileges, remedies and interests of such Borrower therein, thereto or thereunder, and any and all renewals, substitutions, modifications and extensions of any and all of the items in the foregoing subsections (the foregoing items will be referred to collectively, together with the Existing Collateral and the Plainview Property, as the "Collateral"), as security for the timely and full payment and satisfaction of the Obligations as and when due; provided, however, that the Plainview Property by its terms serves as Collateral for the Mortgage Loans, interest thereon and the other related Obligations as provided in the Plainview Mortgage. However, items released from time to time from the Lien of this Agreement and the other Loan Instruments pursuant to Section 7.04 hereof or in writing by the Administrator (with the consent of the Requisite Banks, as and if required) shall no longer be considered to be "Collateral" hereunder. Section 7.02. Collateral Documentation. (a) The Borrowers shall deliver to the Administrator or its designee (for the benefit of all of the Banks) on or before the Effective Date, and thereafter concurrently with any asset or property becoming Collateral, such assignments, pledges, deeds, mortgages, financing statements, attornments, estoppels, waivers, consents, recognitions, bailments and other instruments, documents and agreements as the Administrator from time to time may deem necessary or appropriate to evidence, confirm, effect or perfect any mortgage or other security interest granted or required to be granted under this Agreement or any other Loan Instrument, each in such form and substance as may be acceptable to the Administrator and the Majority Banks; and, at the request of the Administrator, an accompanying opinion of counsel respecting the Borrowers and such additional Collateral to the same effect as the opinion required by Section 4.05 of this Agreement, in such form and substance and from such counsel as may be acceptable to the Banks. (b) Each Borrower hereby irrevocably authorizes the Administrator in its discretion: (i) to file without the signature of such Borrower any and all financing statements, modifications and continuations in respect of the Collateral and the transactions contemplated by this Agreement and the other Loan Instruments; (ii) to sign any such statement, modification or continuation on behalf of such Borrower if the Administrator deems such signature necessary or desirable under Applicable Law; and (iii) to file a carbon, photographic or other reproduction of any financing statement or modification if the Administrator deems such filing necessary or desirable under Applicable Law; provided that so long as no Event of Default is then continuing, the Administrator shall accord each Borrower an opportunity to review and sign any proposed financing statement or modification (but not continuation) to be filed against it, with the Administrator exercising its authority hereof to sign on behalf of any Borrower if such Borrower has not signed within a reasonable period of time (not to exceed 30 days); and provided further that the failure to send any such copy for review or signature shall not affect the validity or enforceability of any such signature and filing by the Administrator. The Borrowers shall promptly reimburse the Administrator for all costs and expenses incurred in connection with the preparation and filing of any such document. The Administrator shall send a copy of any such filing to the Borrowers; provided, however, that the failure to send that copy shall not affect the validity or enforceability of any such filing. The Administrator shall not be liable for any mistake in or failure to file any financing statement, modification or continuation. (c) The Administrator may request that material items of Collateral be legended or otherwise marked from time to time to reflect the Administrator's security interests therein (for the benefit of all of the Banks), and the Borrowers shall promptly mark each requested item in a prominent location with such legend as the Administrator may direct, which may be affixed directly or on a permanently attached plaque of customary size. The Borrowers shall not, and shall not cause, suffer or permit anyone else to, alter, cover, deface or remove any such legend without the prior written consent of the Administrator, except that such legend may be removed from items released in writing by the Administrator (with the consent of the Requisite Banks, as and if required) from time to time from the security interests created under this Agreement and the other Loan Instruments as provided herein or therein. (d) The Borrowers shall enter into one or more cash management agreements with the Administrator, which agreements shall be in such form and substance as may be acceptable to the Administrator. The payments under all Accounts Receivable shall be deposited in or periodically transferred to the Borrowers' accounts with the Administrator (other than the deposits permitted with other financial institutions under Section 6.06(g)(i) hereof), from which the Borrowers from time to time may make transfers or withdrawals subject to the rights, powers, privileges, remedies and interests of the Banks under this Agreement, the other Loan Instruments and Applicable Law during the continuance of any Event of Default. Nothing contained in this subsection, however, shall be deemed to alter or amend the Obligations of the Borrowers, and neither the assignment of the Accounts Receivable nor any receipt of any payments thereunder shall be deemed to constitute a payment with respect to any of the Obligations absent an exercise by the Administrator of its rights to make any such application under this Agreement. (e) The Banks at any time and from time to time may conduct an audit or field examination of or otherwise verify or examine the sales and Accounts Receivable, Inventory and equipment of the Borrowers in any manner such Bank may deem necessary or desirable; provided, however, that absent the continuance of any Default or Event of Default (i) the Banks will limit their audits to one per year, and (ii) the Borrowers shall be obligated to pay or reimburse such Bank(s) for the costs and expenses of such audit or field examination once by the Administrator every other year following the Effective Date, based upon when such costs and expenses were predominately incurred rather than when actually paid or reimbursed, and subject in each case to minor fluctuations in timing. If requested by the Administrator, the Borrowers promptly shall deliver to the Administrator or its designee any and all sales slips, orders, invoices and other documents evidencing the Accounts Receivable, and shall make deliveries of subsequent materials at least as frequently as requested. However, irrespective of any examination by or pledge or delivery to any Bank, no Bank (including the Administrator) shall have any obligation or liability with respect to any Account Receivable of any Borrower, including (without limitation) any obligation or liability (A) to perform any obligation of any Borrower, (B) for the enforceability or collectibility of the Account Receivable or the existence or sufficiency of any documentation, (C) for the creditworthiness of any account party, (D) for the sufficiency or reconciliation of any payment received, or (E) to make any inquiry or demand, make or file any claim, or take any other action to collect or otherwise enforce any Account Receivable. (f) Each Borrower hereby grants to the Administrator (for the benefit of all of the Banks) a royalty-free exclusive license, to use and assign for use in connection with any exercise or enforcement by the Administrator or any other Bank of any of its or their rights, powers, privileges, remedies and interests under this Agreement or any other Loan Instrument, in and to any and all patents, trademarks, trade names, copyrights and other intellectual properties of such Borrower, including (without limitation) any and all applications and pending items, any and all licenses held by such Borrower in and to such kinds of properties, any and all reissues, divisions, continuations and extensions thereof (whether in whole or in part) and any and all rights corresponding to any of the foregoing throughout the world. (g) In the event any Borrower in its discretion, or as a result of its negotiations with the Banks after the date hereof, has agreed to grant a Mortgage on additional real estate, the indicated Borrower shall execute and deliver a mortgage, in form and substance acceptable to the Banks, naming the Administrator as mortgagee (for the benefit of all of the Banks) securing the Obligations (or such portion thereof as may be identified therein) and encumbering all or such portion of the real estate of such Borrower as the Banks specified in such request, together with such title insurance, surveys, environmental reports, flood certificates, and other instruments and documents as the Banks may request. Promptly following each specific request to the Banks hereunder, any Borrower under a mortgage shall procure (at its own cost and expense, but not more frequently than annually) an appraisal of the mortgaged property from a certified appraiser of recognized national standing acceptable to the Banks. (h) Promptly following each specific written request of the Banks hereunder, the indicated Borrower shall execute and deliver assignments of its claims under any requested Material Government Contracts in form and substance suitable for submission to the appropriate federal Authority and acceptable to the Banks, assigning all or such portion of the payments under such Material Government Contract(s) as the Banks specified in such request. Section 7.03. Rights of the Borrowers to the Collateral, Etc. Subject to the terms and provisions of this Agreement and until such time as the Administrator (with the consent of the Requisite Banks, as and if required) shall give notice to the Borrowers to the contrary during the continuance of any Event of Default and after (or in combination with) any Default Declaration, without regard to whether any other action has been taken by the Administrator or any other Bank under this Agreement or any other Loan Instrument, the Borrowers shall have the right to do the things expressly permitted by any subsection of this Section notwithstanding the restrictions contained in Section 6.05 hereof (but shall not have such right after such notice has been given to the extent specified in such notice): (a) The Borrowers shall have the full power and authority in the ordinary course of business (i) to use in their business any item of Collateral (other than instruments, securities and other general intangibles in the possession of the Administrator or its designee for the benefit of all of the Banks), (ii) to maintain, repair, replace and retire equipment in accordance with Section 5.07(a) hereof, (iii) to temporarily deliver work-in-progress to one or more subcontractors for processing, and to relocate finished goods Inventory to one or more public warehouses from which any Borrower has obtained recognition and access agreements in form and substance reasonably acceptable to the Banks, (iv) to sell or lease any Inventory, (v) to sell or otherwise voluntarily dispose of any equipment or goods (other than Inventory) or any obsolete or defective Inventory for fair value (if any) if the sale or other disposition will not materially and adversely affect the business or operations of the Borrowers (which sale or other disposition need not be repetitive to be in the normal course), subject, however, to Section 2.05(f) hereof, (vi) to modify or amend any Contract or other agreement or document included in the Collateral, (vii) to reduce any payment or otherwise settle any dispute under any Contract or other material Account Receivable or other account, note, stock certificate, instrument, agreement, document or intangible included in the Collateral if such action will not have a Material Adverse Effect and the Borrowers determine in good faith that it is in their best interest to do so, (viii) to license or sublicense any patent, trademark, trade name or other technological or intellectual property if the Borrowers determines in good faith that it is in their best interest to do so, (ix) to diligently service and collect the proceeds of any Accounts Receivable, which may include such discounts and reductions as may be usual and customary, (x) to use in their business the cash proceeds from such Inventory and Accounts Receivable, and (xi) to deposit, withdraw and use in their business funds and other cash equivalents constituting Collateral under Section 7.01(b)(ix) hereof; provided, however, that such power shall not be exercised to the extent (A) such exercise could conflict with or prejudice the continued perfection of any security interest in any item of the Collateral (other than through such sales, use of cash proceeds or withdrawals or use of funds) or (B) any Event of Default or Default could result therefrom (whether through any Pro Forma Effect or otherwise). (b) In the event of any (i) sale or other voluntary disposition of any Collateral or other asset or property of any Borrower (other than Inventory in the ordinary course of business) in any transaction permitted by subsection (a) of this Section or any other provision of this Agreement or any other Loan Instrument, (ii) damage, destruction or other loss, or condemnation or other involuntary disposition, of any Collateral or other asset or property of any Borrower so long as it does not constitute a default under Section 8.01(l) of this Agreement, in each case whether in whole or in part, the affected Borrower shall have the right to apply the amounts received therefrom (whether payments, proceeds or otherwise) to the repair, rebuilding or replacement of those assets or the acquisition of additional assets if, and only if: (A) the affected Borrower in its discretion has elected to repair, rebuild or replace those assets or acquire additional assets of at least equivalent value and business utility; (B) the affected Borrower has sufficient additional funds with which to do so (if the amounts received and to be received are not sufficient to do so); and (C) if the affected Borrower does so, (1) those assets would constitute (or continue to constitute) Collateral (unless repairing, rebuilding or replacing any asset or property not constituting Collateral), (2) the representations and warranties of the Borrowers pertaining to that Collateral or other asset or property in this Agreement and the other Loan Instruments would (upon completion) be true and correct, and (3) no Event of Default or Default could result therefrom (whether through any Pro Forma Effect or otherwise). If those amounts are to be applied to such repair, rebuilding, replacement or acquisition and are received by any Bank, then the receiving Bank shall promptly remit those amounts to the affected Borrower for such use; provided that if such amounts exceed $100,000, the Administrator (at the request of any Bank in its discretion) shall hold such proceeds as received and disburse them to the affected Borrower for such purposes upon delivery to the Banks of satisfactory evidence of (x) full payment to the requisite third parties, (y) good title and the absence of competing security interests and other encumbrances and adverse claims, and (z) the satisfaction of such other conditions as may be required by the Loan Instruments or reasonably requested by the Banks. In the event any Borrower receives any such payments or proceeds (other than disbursements from the Administrator or remittances from any such receiving Bank), such Borrower shall accept and hold those funds in trust for the benefit of the Banks and shall promptly pay or deliver those proceeds to the Administrator for application as provided above. (c) The Borrowers shall have the right to sell any equipment in any sale/leaseback transaction (i.e., in a transaction where a Borrower will immediately lease the equipment back) so long as: (i) no Default or Event of Default is then continuing or would result therefrom; (ii) the aggregate amount of such transactions do not exceed $5,000,000 in the aggregate in any fiscal year, provided, however, that the conversion of any Lucent Equipment Financing into a sale/leaseback transaction shall be in addition to and not counted against such $5,000,000 amount; (iii) the consideration for such permitted sale is not less than fair market value; (iv) such consideration is paid in cash; and (v) the Borrowers pay to the Banks the amount required under Section 2.05(f) with respect to the incurrence of the Other Debt in such transaction. (d) The Borrowers shall have the right to sell any securities issued by VTX and any investments issued by the Federal National Mortgage Association or Government National Mortgage Association so long as: (i) no Default or Event is then continuing or would result therefrom; (ii) the consideration for such permitted sale is not less than fair market value; and (iii) at least 90% of such consideration is paid in cash. (e) In instances not involving a permitted sale or disposition, the Borrowers shall have the full power and authority to relocate any item of Collateral, except for Collateral held by the Administrator or its designee (for the benefit of all of the Banks), so long as (i) the new location is within the continental United States or Puerto Rico, (ii) the relocation will be made at the sole cost and expense of the Borrowers, which shall bear all risk of loss and any and all other liabilities related thereto, (iii) the Borrowers give the Banks at least thirty (30) days' prior written notice of any proposed relocation, (iv) prior to relocation the Borrowers execute and deliver to the Administrator such financing statements and other instruments and documents as the Administrator may deem necessary or desirable, (v) prior to relocation the Borrowers provide evidence satisfactory to the Banks that all insurance will be applicable in the new location to the extent required by this Agreement and the other Loan Instruments, and (vi) immediately following the relocation as proposed, the representations and warranties set forth in this Agreement (as and if updated by way of supplements to the schedules, statements, reports, certificates or notices required hereunder and previously delivered to and accepted by the Administrator) shall be true and correct in all material respects on and as of that date with the same effect as though those representations and warranties had been made on and as of that date; provided, however, that the Borrowers will not make any relocation to which the Banks give written notice of their objection. (f) The Borrowers shall be entitled to exercise in good faith any and all voting, waiver or consensual rights and powers relating or pertaining to the Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement; provided, however, that the Borrowers shall not be permitted to exercise or refrain from exercising any such right or power to the extent such exercise or nonexercise could (i) have a material and adverse effect on the value of the Collateral or any part thereof or (ii) result in any Default or Event of Default. (g) The Borrowers shall be entitled to receive and retain any and all dividends, other distributions of profit and interest payable in cash on the securities constituting part of the Collateral; provided, however, that any and all stock or liquidating dividends, returns of capital or other distributions of cash or other assets or properties made on, in respect of, upon, in redemption of, in exchange for or in payment of principal of any such Collateral (whether resulting from a subdivision, combination or reclassification of the outstanding capital stock of any issuer thereof, any merger, consolidation, acquisition or other exchange of assets or securities to which any such issuer may be a party, any conversion, call or redemption, or otherwise) shall be and become part of the Collateral pledged under this Agreement (whether or not any Default or Event of Default is then continuing), and, if received by any Borrower, shall be (i) delivered immediately to the Administrator or its designee (accompanied by the documentation required under this Agreement) to be held as Collateral pursuant to this Agreement or (ii) invested in Permitted Investments in accordance with Section 6.06 hereof, which Permitted Investments shall be and become Collateral pledged under this Agreement (collectively, the "Pledged Permitted Investments"). Section 7.04. Partial Releases. The Administrator from time to time shall release portions of the Collateral from the Liens granted under this Agreement and the other Loan Instruments qualifying for release under and subject to the terms and conditions of subsection (a), (b) or (c) of this Section, shall execute and deliver the documentation reasonably required to effect each such release (in such form and substance as may be acceptable to the Administrator and the Majority Banks), and shall return the applicable instruments and other documents to the Borrowers or their designee, in each case subject to receipt of evidence and documentation in such form and substance as may be acceptable to the Administrator and the Majority Banks, that those terms and conditions have been satisfied; provided that no Event of Default or Default then exists or could result therefrom (whether through any Pro Forma Effect or otherwise). Any and all actions under this Section shall be without any recourse to or representation or warranty by the Administrator or any other Bank and shall be at the sole cost and expense of the Borrowers. (a) In the event of any sale or other disposition of any Collateral expressly permitted under Section 7.03(a) hereof or any other term or provision of this Agreement or any other Loan Instrument, the Administrator will release that item, subject to receipt by the Administrator of any payment or prepayment from the Borrowers required by this Agreement or any other Loan Instrument. (b) In the event any debtor under any indenture, agreement, note, instrument or Account Receivable pledged to the Administrator (for the benefit of all of the Banks) pursuant to this Agreement shall have paid all amounts due thereunder in full and shall have complied with all other terms and conditions thereof, then, subject to receipt by the Administrator of any payment or prepayment from the Borrowers required by this Agreement or any other Loan Instrument, those items shall be deemed to have been automatically released as Collateral from the security interests created by this Agreement, and if requested the Administrator will return the applicable instruments and other documents to the Borrowers or their designee. (c) In the event any items of parts or equipment shall have been replaced or removed and sold or otherwise disposed of by any Borrower in the ordinary course of maintenance pursuant to Section 5.07(a) hereof, then, subject to receipt by the Administrator of any payment or prepayment from the Borrowers required by this Agreement, those items shall have been deemed to have been automatically released as Collateral from the security interests created by this Agreement. Section 7.05. Litigation Respecting Collateral. (a) In the event that any action, suit or other proceeding (whether or not purportedly on behalf of any Borrower) at law, in equity, in arbitration or before any other Authority involving or affecting the Collateral (a "Proceeding") is contemplated by any Borrower or is otherwise commenced by or against any party hereto, the Borrowers shall give the Banks immediate notice thereof. Within twenty (20) Business Days after its receipt of such notice, the Administrator (with the consent of the Majority Banks) shall notify the Borrowers that either (i) the Administrator will join in the Proceeding, (ii) a specified designee of the Administrator or any other Bank will join in the Proceeding, or (iii) the Borrowers may prosecute the Proceeding without the participation of any Bank or its designee, which Proceeding in any event shall be conducted in accordance with the provisions of subsection (b) of this Section. In the event the Administrator fails to respond to such notice of the Proceeding within that period, the Banks shall be deemed to have elected alternative (iii) above, without, however, waiving any other right, power, privilege, remedy or interest of the Banks under this Agreement, the other Loan Instruments and Applicable Law. (b) If any Borrower elects to commence a Proceeding or a Proceeding has otherwise been commenced by or against any party hereto, the Borrowers shall cause the same to be prosecuted (i) in such a manner that all the rights of the Banks are preserved and protected to the fullest extent reasonably possible and (ii) with counsel to such Borrower that is acceptable to the Administrator and the Majority Banks and represents both such Borrower and the Banks. Subject to compliance by the Borrowers with the foregoing: (A) the Administrator (if named as a party by someone other than any Borrower) shall join in the Proceeding and take any other action reasonably requested by counsel to such Borrower to facilitate the prosecution thereof, all at the sole cost and expense of the Borrowers; and (B) the Proceeding may be prosecuted by such Borrower in such manner as such Borrower and its counsel reasonably deem appropriate. In any event, if the Administrator or any other Bank determines at any time during the pendency of a Proceeding (after consultation with counsel to the Administrator) that the interests of one or more of the Banks are at variance with the interests of any Borrower, the Administrator (with the consent of the Majority Banks) may appoint its own counsel (at the expense of the Borrowers) to represent the Banks in the Proceeding, and the Borrowers and their counsel shall cooperate with the Banks and their counsel to the fullest extent possible in that Proceeding. Section 7.06. Power of Attorney. With respect to the various assets and properties included or required to be included in the Collateral hereunder, each Borrower hereby irrevocably makes, constitutes and appoints the Administrator and the Administrator's executive officers (Vice President or above), and each of them, with full power of substitution, as the true and lawful attorney-in-fact of such Borrower, with full power and authority from time to time in the name, place and stead of such Borrower to: (a) take possession of and execute or endorse (to any Bank or otherwise) any one or more contracts, mortgages, deeds, pledges, assignments, instruments and other documents, and any one or more notes, checks, drafts, bills of exchange, money orders or other documents received in payment for or on account of those assets and properties; (b) receive, open and dispose of the mail and other deliveries of such Borrower respecting the Collateral and request postal authorities and others to change the delivery address(es) for such Borrower to such address(es) as the Administrator may deem necessary or desirable; (c) demand, collect and receive any monies due on account of those assets and properties and give receipts and acquittances in connection therewith; (d) negotiate and compromise any claim, and commence, prosecute, defend, settle or withdraw any claims, suits or proceedings, pertaining to or arising out of those assets and properties; (e) pay any Indebtedness or other liability or perform any other obligation required to be paid or performed under this Agreement or any other Loan Instrument by the Borrowers or any other person (other than the Administrator); (f) prepare and execute on behalf of the Borrowers any mortgage, financing statement or other evidence of a security interest contemplated by this Agreement, or any modification, refiling, continuation or extension thereof; (g) take any other action contemplated by this Agreement or any other Loan Instrument; and (h) sign, execute, acknowledge, swear to, verify, deliver, file, record and publish any one or more of the foregoing; provided, however, that the above-named attorneys-in-fact may exercise the powers set forth in this Section only following the written notice of the Administrator or any other Bank pursuant to Section 7.07(a) of this Agreement and during the continuance of the subject Event of Default, whether or not any reference to this Power of Attorney is made in that notice, and without regard to whether any other action has been taken by the Administrator or any other Bank under this Agreement or any other Loan Instrument. This Power of Attorney is hereby declared to be irrevocable, with full power of substitution and coupled with an interest. This Power of Attorney shall survive the dissolution, reorganization or bankruptcy of any Borrower and shall extend to and be binding upon the successors, assigns, heirs and legal representatives of each Borrower. This Power of Attorney may be exercised (i) by any one of the above-named attorneys-in-fact, or by any substitute designated by any of those attorneys-in-fact, and (ii) by signing for any Borrower individually on any document or instrument, or by listing two or more of the persons (including the Borrowers) for whom any document or instrument is being signed and signing once, with a single signature by the attorney-in-fact or substitute being effective to exercise the Powers of Attorney of all persons so listed. A facsimile signature shall be effective if so affixed. The Administrator shall not be liable for any failure to collect or enforce the payment of any of those assets and properties. Section 7.07. Rights of the Banks to the Collateral, Deficiencies, Etc. (a) If any Event of Default shall have occurred and is then continuing and a Default Declaration has been issued, the Administrator (with the consent of the Requisite Banks, as and if required) may take (and/or may cause one or more of its designees to take) any or all of the following actions, after giving the Borrowers prior written notice, or in the case of clauses (v), (vi) or (ix) after giving the Borrowers at least three (3) Business Days' prior written notice (which notice period each Borrower acknowledges and agrees to be adequate and reasonable, and which notice may be combined with a Default Declaration) to the Borrowers, with a single such notice being sufficient to entitle the Administrator from time to time thereafter to take any one or more of the actions described below): (i) prohibit any Borrower from taking any action with respect to the Collateral otherwise permitted by this Agreement and the other Loan Instruments; (ii) notify each of the mortgagors, obligors, lessees, issuers, custodians and other parties with respect to or interested in any item of the Collateral of the interest of the Administrator or Banks therein or of any action proposed to be taken with respect thereto, and direct one or more of those parties to make all payments, distributions and proceeds otherwise payable to any Borrower with respect thereto directly to the Administrator (for the benefit of all of the Banks) or its order until notified by the Administrator that all the Obligations have been fully paid and satisfied; (iii)receive and retain all payments, distributions and proceeds of any kind with respect to any and all of the Collateral; (iv) direct the Borrowers or any other holder of Collateral to assemble and deliver such Collateral to the Administrator or its designee at such time(s) and place(s) as the Administrator from time to time may specify, all without any risk or expense to the Administrator or any other Bank; or enter any premises where any item of Collateral may be located (to the extent permitted by Applicable Law with respect to classified areas), with or without permission or process of law but without breach of the peace, and seize and remove such Collateral or remain upon such premises and use or dispose of such Collateral as contemplated under this Agreement and the other Loan Instruments; (v) request the judicial appointment of a receiver respecting the Collateral (excluding funds in the possession of any Bank or its designee and such other Collateral as the Administrator (with the consent of the Requisite Banks, as and if required) may specify in its request) in any action, suit or proceeding in which claims are asserted against the Collateral by the Administrator or its designee, irrespective of the solvency of any Borrower or any other person or the adequacy of any collateral, and without notice to or the approval of any Borrower, which receiver shall have the power to manufacture, operate, sell, lease or rent such items of Collateral pending the sale of all of the Collateral and to collect the rent, issues and profits therefrom, together with such other powers as may have been requested by the Administrator (with the consent of the Requisite Banks, as and if required), and shall apply the amounts received (net of all proper charges and expenses) to the Obligations as provided in this Agreement; (vi) except to the extent provided otherwise by the New York Real Estate Law, with respect to Collateral that is not subject to foreclosure and the like, take any action with respect to the offer, sale, lease or other disposition, and delivery of the whole of, or from time to time any one or more items of, the Collateral, including, without limitation: (A) to sell, commit, assign, lease or otherwise dispose of the whole of, or from time to time any part of, the Collateral, or offer, commit or agree to do so, in any established market or at any broker's board, private sale or public auction or sale (with or without demand on any Borrower or any advertisement or other notice of the time, place or terms of sale) for cash, credit or any other asset or property, for immediate or future delivery, and for such consideration and upon such terms and subject to such conditions as the Administrator (with the consent of the Requisite Banks, as and if required) in its sole and absolute discretion may determine, and any Bank (with the consent of the Majority Banks) may purchase (the consideration for which may consist in whole or in part of cancellation of Indebtedness) or any other person may purchase the whole or any one or more items of the Collateral, and all items purchased shall be free and clear of any and all rights, powers, privileges, remedies and interests of the Borrowers (whether individual, joint, several or otherwise), which each Borrower has expressly waived pursuant to Section 7.09 hereof; (B) to postpone or adjourn any such auction, sale or other disposition, to cause the same to be postponed or adjourned from time to time to a subsequent time and place, or to abandon or cause the abandonment of the same, all without any advertisement or other notice thereof; and (C) to carry out any agreement to sell any item or items of the Collateral in accordance with the terms and provisions of such agreement, notwithstanding that, after the Administrator shall have entered into such an agreement, all the Obligations may have been paid and satisfied in full; (vii)exercise any voting, consent, enforcement or other right, power, privilege, remedy or interest of any Borrower pertaining to any item of Collateral to the same extent as if the Administrator were the outright owner thereof (for the benefit of all of the Banks), provided that the Administrator shall not be entitled to exercise any of the voting rights of any Borrower pertaining to any equity interest in another person unless and until the Administrator has given specific written notice to the Borrowers, apart from the notice first referred to in this subsection, of the Administrator's election to exercise one or more, or all, such voting rights; (viii) take possession of and thereafter deal with or use from time to time all or any part of the Collateral in all respects as if the Administrator were the outright owner thereof (for the benefit of all the Banks), which shall include (without limitation) the right to manufacture, operate, sell, lease or rent items of Collateral, as well as to sell parts of the Collateral pending the sale of all of the Collateral, and to collect the rent, issues and profits therefrom; (ix) transfer or cause the transfer of the ownership of all or any part of the Collateral (with the consent of the Majority Banks) to its own name, the name of any other Bank or any designee and have such transfer recorded in any jurisdiction(s) and publicized in any manner deemed appropriate by the Administrator; and (x) in addition to, and not by way of limitation of, any of the rights specified above, exercise or enforce any and all rights, powers, privileges, remedies and interests afforded to the Administrator or any other Bank under this Agreement, the other Loan Instruments and any and all provisions of Applicable Law (including, without limitation, the Uniform Commercial Code and the New York Real Estate Law), whether as a secured party or mortgagee in possession of collateral or otherwise. (b) The Administrator shall collect the cash proceeds received from any sale or other disposition or from any other source contemplated by subsection (a) above and/or the Plainview Mortgage, and, after deducting all costs and expenses incurred by the Administrator and any person designated by the Administrator to take any of the actions enumerated in subsection (a) above in connection with such collection and sale or disposition (including attorneys' disbursements, expenses and fees), the Administrator shall apply the same in accordance with the terms and provisions of this Agreement unless the Administrator (with the consent of the Majority Banks) shall elect to retain the same as additional or substitute Collateral to the extent such retention is permitted by this Agreement or any other Loan Instrument. In the event any funds remain after satisfaction in full of the Obligations, then the remainder shall be returned to the Borrowers, subject, however, to any other rights or interests any one or more of the Banks may have therein under any other instrument, agreement or document or Applicable Law. (c) If the amount of all proceeds received with respect to and in liquidation of the Collateral that shall be applied to payment of the Obligations shall be insufficient to pay and satisfy all of the Obligations in full, the Borrowers acknowledge and agree that they shall remain jointly and severally liable for any deficiency, together with interest thereon and costs of collection thereof (including attorneys' disbursements, expenses and fees), in accordance with the terms and provisions of this Agreement and the other Loan Instruments. Section 7.08. Performance by the Administrator. In the event any Borrower fails to pay or otherwise perform or satisfy any of its obligations to others or under or in respect of any of the Collateral or any other material asset or property of such Borrower as required by this Agreement or any other Loan Instrument, the Administrator (with the consent of the Majority Banks, time permitting) shall have the right in its sole and absolute discretion) (but shall be under no duty or obligation) to make any such payment or cause the performance or satisfaction of any other such obligation, including (without limitation) the payment of any tax, claim or insurance premium, the maintenance or defense of any part of the Collateral or the purchase or discharge of any Lien on any part of the Collateral. The Administrator will endeavor to give the Borrowers prior notice (which may be by telephone or telecopy) of any such payment or action; provided, however, that the failure to give such notice shall not affect the validity of the payment or action or the reimbursement obligations of the Borrowers with respect thereto. The Borrowers shall pay or reimburse on demand any and all amounts advanced or expenses incurred by the Administrator or its designee under this subsection, which shall constitute additional Loans under (and secured by) this Agreement and shall bear interest at the rate applicable to the Loans. No payment made or action taken by the Administrator, any other Bank or its designee shall be deemed or construed to be a waiver, cure or satisfaction of the underlying default, which default shall be deemed to be continuing until such time (if ever) as the Borrowers have, prior to the Maturity Date, (i) resumed the payment, performance and satisfaction required by this Agreement and the other Loan Instruments and (ii) repaid all Loans advanced for such payments and actions, together with interest thereon, and paid all others to whom the Administrator has requested direct payment respecting such payments and actions. Section 7.09. Certain Acknowledgments and Waivers by the Borrowers. (a) Each Borrower acknowledges and agrees that the rights, powers, privileges, remedies and interests granted to or conferred upon the Administrator or any other Bank in respect of any of the Collateral by this Agreement, the other Loan Instruments and Applicable Law are purely discretionary and shall not, and shall not be deemed or construed to, impose upon the Administrator or any other Bank any duty or other obligation (A) to sell, foreclose or otherwise realize upon any of the Collateral, (B) to protect or preserve any of the Collateral, (C) to perform or satisfy any obligation under or respecting any of the Collateral or any Borrower, (D) to mitigate or otherwise reduce any damage or other loss, or (E) to otherwise exercise or enforce any such right, power, privilege, remedy or interest. Any sale, foreclosure or other realization upon any of the Collateral, or any other exercise or enforcement of any such right, power, privilege, remedy or interest, if undertaken by the Administrator or any other Bank in its discretion (with the consent of the Requisite Banks, as and if required), may be delayed, discontinued or otherwise not pursued or exhausted for any reason whatsoever (whether intentionally or otherwise). Without limiting the generality of the foregoing, to the extent waiver is not limited under Applicable Law, each Borrower hereby expressly waives each and every claim or defense, and agrees that it will not assert or pursue (by action, suit, counterclaim or otherwise) any claim or defense, respecting (i) any settlement or compromise with any obligor or other third party under any Account Receivable, account, note, instrument, agreement, document or general intangible included in the Collateral, irrespective of any reduction in the potential proceeds therefrom, (ii) the selection or order of disposition of any of the Collateral (which may be at random or in any order(s) the Administrator (with the consent of the Requisite Banks, as and if required) may select in its sole and absolute discretion), (iii) any private sale of any of the Collateral, whether or not any public market exists, (iv) the choice or timing of any sale date (which the Administrator (with the consent of the Requisite Banks, as and if required) may select in its sole and absolute discretion), irrespective of whether greater sale proceeds would be realizable on a different sale date, (v) the adequacy of the sale price of any of the Collateral, (vi) any insufficiency of the proceeds to fully satisfy the Obligations, (vii) any sale of any of the Collateral to the first person to receive an offer or make a bid, (viii) the selection of any purchaser of any of the Collateral, or (ix) any default by any purchaser of any of the Collateral. Neither the Administrator, nor any other Bank nor any of their respective representatives shall incur any liability in connection with any sale of or other action taken respecting any of the Collateral in accordance with the provisions of this Agreement, any other Loan Instrument or Applicable Law. (b) Each Borrower hereby expressly waives the applicability of any and all Applicable Laws respecting collateral or its disposition that are or may be in conflict with the terms and provisions of this Agreement and the other Loan Instruments now or at any time in the future to the extent waiver is not limited under Applicable Law, including (without limitation) those pertaining to notice (other than notices required by this Agreement or any other Loan Instrument), appraisal, valuation, stay, extension, moratorium, marshaling of assets, exemption and equity of redemption; provided, however, that the preceding provision is not intended to confer upon any Bank any right, power, privilege, remedy or interest not permissible under Applicable Law notwithstanding the foregoing waivers. Section 7.10. Termination of Security Interests. The security interests granted to the Administrator (for the benefit of all of the Banks) hereunder shall terminate when the Obligations shall have been fully paid and satisfied. Upon such complete payment and satisfaction: the Administrator shall reassign, release and/or deliver to the Borrowers all Collateral then held by or at the direction of the Administrator (for the benefit of all of the Banks) under the Loan Instruments; and, if requested by the Borrowers, the Administrator shall execute and deliver to the Borrowers for filing in each office in which any financing statement, mortgage, or lease, or assignment thereof, relating to the Collateral, or any part thereof, shall have been filed, a termination statement under the Uniform Commercial Code or an appropriate satisfaction, release, reconveyance or reassignment releasing the Administrator's interest therein, and any other instrument or document that the Borrowers deem reasonably necessary to evidence the termination of the Administrator's security interest, each in such form and substance as may be acceptable to the Administrator. Any and all actions under this Section shall be without any recourse to or representation or warranty by any Bank (including the Administrator) and shall be at the sole cost and expense of the Borrowers. ARTICLE VIII Defaults and Remedies --------------------- Section 8.01. Events of Default. Each of the following events shall constitute a default under this Agreement (each an "Event of Default"): (a) any representation or warranty made in this Agreement or any other Loan Instrument shall prove to have been false or misleading in any material respect when made (or deemed made); (b) any report, statement, certificate, schedule or other document or information furnished (whether prior to, on or after the Effective Date) in connection with this Agreement or any of the other Loan Instruments shall prove to have been false or misleading in any material respect when furnished (or deemed furnished); (c) any default, whether in whole or in part, shall occur in the payment of the principal of, the interest on or any other amount respecting: (i) the Loans or any of the other Obligations; (ii) any other Indebtedness of any Borrower to any Bank or any of its affiliates; or (iii) any Credit Support from any Borrower to any Bank or any of its affiliates respecting any Indebtedness of any other person; (d) any default, whether in whole or in part, shall occur in the due observance or performance of any covenant, term or provision to be performed under Article VI of this Agreement (other than under Section 6.10 or 6.11 hereof), and such default shall continue for a period of five (5) days after the earlier of notice thereof to or knowledge thereof by any Borrower; provided, however, that if such default is capable of being cured and if any Borrower shall have commenced to cure such default within such period and shall proceed continuously in good faith and with due diligence to cure such default, then such period instead shall be fifteen (15) days; (e) any default, whether in whole or in part, shall occur in the due observance or performance of any other covenant, term or provision to be performed under this Agreement and the other Loan Instruments by any Borrower or any other party thereto (other than any Bank), which default is not described in any other subsection of this Section, and such default shall continue for a period of ten (10) days after the earlier of notice thereof to or knowledge thereof by any Borrower; provided, however, that if such default is capable of being cured and if such Borrower or such other party shall have commenced to cure such default within such period and shall proceed continuously in good faith and with due diligence to cure such default, then such period instead shall be thirty (30) days; (f) any "Event of Default" shall occur under (and as defined in) any Mortgage, whether in whole or in part, or any principal payment thereunder (in whole or in part) shall be accelerated or otherwise become due or payable prior to the scheduled payment date; or any "Event of Default" (or similarly defined term) shall occur under (and as defined in) any Pearl River Financing Document or Subordinated Debt Document, whether in whole or in part, or any principal payment thereunder (in whole or in part) shall be accelerated or otherwise become due or payable prior to the scheduled payment date; (g) any default, whether in whole or in part, shall occur in the due observance or performance of any term or provision of any instrument(s) or agreement(s) (other than a Loan Instrument) respecting any Indebtedness of any one or more of the Borrowers if such Indebtedness is in excess of $500,000 in the aggregate or arises under any Equipment Finance Document or any Credit Support by any one or more of the Borrowers of the Indebtedness or other obligations of any other person(s) if such Indebtedness is in excess of $500,000 in the aggregate or arises under any Equipment Finance Document, that shall cause or permit acceleration of any such Indebtedness or demand for payment under any such Indebtedness or Credit Support, which default is not described in any other subsection of this Section, unless payment shall be made or action shall be taken in an amount or manner sufficient to cure it within ten (10) days after the earlier of notice of such default to or knowledge thereof by any Borrower, or such lesser period as may be provided thereunder, provided that such payment or action would not result in a breach of any term or provision of this Agreement and the other Loan Instruments; provided, however, that if such default is capable of being cured and if the relevant Borrower shall have commenced to cure such default within such period and shall proceed continuously in good faith and with due diligence to cure such default, then such period instead shall be thirty (30) days or such lesser period as may be provided thereunder; (h) any Borrower shall (i) fail or be unable to pay its debts generally as they become due, (ii) conceal, remove or transfer any of its assets and properties in violation or evasion of any bankruptcy, fraudulent conveyance or similar Applicable Law, (iii) make a general assignment for the benefit of its creditors, (iv) apply for or consent to the appointment of a receiver, trustee, assignee, custodian, sequestrator, liquidator or similar official for itself or any of its assets and properties, (v) commence a voluntary case for relief as a debtor under the United States Bankruptcy Code, (vi) file with or otherwise submit to any governmental Authority any petition, answer or other document seeking (A) reorganization, (B) an arrangement with creditors or (C) to take advantage of any other present or future Applicable Law respecting bankruptcy, reorganization, insolvency, readjustment of debts, relief of debtors, dissolution or liquidation, (vii) file or otherwise submit any answer or other document admitting or failing to contest the material allegations of a petition or other document filed or otherwise submitted against it in any proceeding under any such Applicable Law, (viii) be adjudicated a bankrupt or insolvent, or (ix) take any action for the purpose of effecting any of the foregoing; (i) any case, proceeding or other action shall be commenced against any Borrower for the purpose of effecting, or an order, judgment or decree shall be entered by any court of competent jurisdiction approving (in whole or in part), anything specified in subsection (h) of this Section, or any receiver, trustee, assignee, custodian, sequestrator, liquidator or other official shall be appointed with respect to any Borrower, or shall be appointed to take or shall otherwise acquire possession or control of all or a substantial part of the assets and properties of any Borrower, and any of the foregoing shall continue unstayed and in effect for any period of 30 days; (j) one or more final judgments for the payment of money in excess of an aggregate of $500,000 shall be rendered against any Borrower and the same shall remain undischarged for a period of 30 days during which levy and execution shall not be effectively stayed or contested in good faith; (k) any action, suit, investigation or proceeding involving or affecting any Plan or any assets of properties of any Plan shall be adversely determined; any fiduciary or sponsor of, or participant in, any Plan shall take or commit any of the actions specified in subsection (h) of this Section in respect of the Plan or all or substantially all of its assets and properties; or any action, suit or proceeding shall otherwise be commenced against any Plan or any of its fiduciaries, sponsors or participants for the purpose of effecting, or any order, judgment or decree shall be entered by any court of competent jurisdiction approving (in whole or in part), anything specified in subsection (h) of this Section in respect of any Plan or all or substantially all of its assets and properties, or any receiver, trustee, assignor, custodian, sequestrator, liquidator or other official shall be appointed with respect to any Plan or all or a substantial part of its assets and properties, or shall be appointed to take or shall otherwise acquire possession or control of all or a substantial part of the assets and properties of any Plan, and any of the foregoing shall continue unstayed and in effect for any period of 30 days; provided that any such event (individually or in the aggregate with any other such event(s)) has had or could have (in the reasonable judgment of the Administrator and the Majority Banks) an ERISA Effect; (l) any loss, damage, destruction or other material impairment, deterioration or diminution, or any termination, foreclosure, condemnation or other involuntary disposition, in whole or in part, shall occur with respect to all or any part of the Collateral (other than fully insured casualty losses to the extent the Administrator has a perfected first priority security interest in and actually receives all insurance proceeds with respect thereto to the extent required by this Agreement and the other Loan Instruments), or the Administrator's perfected security interest therein, or any Borrower shall do or fail to do or resist, or cause, suffer or permit anyone else to do, anything that would so affect any such collateral or security interest; (m) any Loan Instrument (in whole or in part) at any time and for any reason whatsoever (i) shall cease to be in full force and effect, (ii) shall be declared null and void, (iii) shall be contested or otherwise challenged as to its validity or enforceability by any of the Borrowers or (iv) shall be the subject of any denial by any of the Borrowers of any liability or obligation of such party thereunder; (n) any of the Borrowers shall be or become the subject of or a party to any criminal conviction in any material respect (other than a misdemeanor); (o) a change shall occur in the control of Aeroflex or any other Borrower, whether by a change in ownership or otherwise; or (p) there shall occur any event or events that (individually or in the aggregate with any other event(s)) has had or could have a Material Adverse Effect as determined by the Administrator and the Majority Banks in the exercise of their reasonable judgment. Section 8.02. Remedies upon Default. Upon the occurrence or at any time thereafter during the continuance of any Event of Default and the issuance of a Default Declaration, the Administrator (with the consent of the Requisite Banks, as and if required), upon notice to the Borrowers (which may be combined with the Default Declaration), shall be entitled, without limiting the ability to do so at other times (each Borrower hereby acknowledging that all Letter of Credit Advances and interest thereon and certain other Obligations are payable on demand as provided in Article II hereof notwithstanding anything in this Section or in Section 8.01 to the contrary): (a) to terminate the Commitment; (b) to declare the Loans and all other Obligations to be immediately due and payable, whether principal, interest or otherwise, without presentment, demand, protest or other notice of any kind (all of which are hereby expressly waived by each Borrower), notwithstanding anything contained in this Agreement, any Note or any of the other Loan Instruments to the contrary; (c) to exercise or enforce any one or more of the rights, powers, privileges, remedies and interests of the Administrator or any other Bank under this Agreement, each Note, the other Loan Instruments and Applicable Law; and (d) to demand the immediate deposit by any Borrower of cash Collateral in a non-interest-bearing demand deposit account with the Administrator or such other institution as the Administrator may designate in an amount equal to the aggregate unadvanced face amounts of the Letters of Credit then outstanding in order to further secure repayment of all advances under the Letters of Credit, together with interest thereon, and all of the other Obligations in full, which deposits shall remain Collateral until the all of the Letters of Credit have been paid (and the corresponding Letter of Credit Advances repaid by the Borrowers) or surrendered to the Fronting Bank or the Administrator for return to and cancellation by the issuers thereof (provided that any Letter of Credit that has not been presented for payment shall be deemed for this purpose to have been canceled on the thirtieth day following the stated expiry date, without, however, relieving the Borrowers of any of the Obligations with respect to any such Letter of Credit that is in the process of payment) and all of the other Obligations have been fully paid and satisfied, and which obligation to deposit is itself secured by the Collateral pursuant to this Agreement and the other Loan Instruments; provided, however, that in the event of the occurrence of any of the Events of Default respecting any Borrower set forth in subsections (h) and (i) of Section 8.01, then simultaneously with that event, and without the necessity of any notice or other action by the Administrator or the other Banks, (i) the Commitment shall be terminated, (ii) the Loans and all of the other Obligations shall be accelerated and immediately due and payable as stated above, and (iii) the Borrowers shall be required to make the deposit of the additional cash Collateral further securing the Letters of Credit and the other Obligations as provided above. If the Borrowers have not delivered the cash Collateral specified above within five (5) Business Days after it was due, at any time and from time to time thereafter the Banks in their sole and absolute discretion may (but shall not be obligated to) advance to the Borrowers all or any portion of the required cash Collateral, by credit to any accounts of the Borrowers with the Administrator or otherwise; and amounts advanced by the Banks pursuant to this option and outstanding from time to time shall be due and payable, together with interest and additional interest thereon at the rates provided in Section 2.04 of this Agreement, ON DEMAND, and shall otherwise constitute "Letter of Credit Advances" for all purposes under this Agreement and the other Loan Instruments. Section 8.03. Enforcement, Etc. The Administrator (with the consent of the Requisite Banks, as and if required), in its or their sole discretion, may proceed to exercise or enforce any right, power, privilege, remedy or interest that the Administrator or any other Bank may have under this Agreement, any other Loan Instrument or Applicable Law: at law, in equity, in rem or in any other forum available under Applicable Law; without notice except as otherwise expressly provided herein; without pursuing, exhausting or otherwise exercising or enforcing any other right, power, privilege, remedy or interest that the Administrator or any other Bank may have against or in respect of any Borrower, the Collateral, or any other co-obligor, guarantor, surety, pledgor, collateral or other person or thing; without regard to any act or omission of the Administrator, any other Bank or any other person; and without delivery to any Borrower or any other person or production in any action, suit or proceeding of any consent or approval of one or more of the Banks required under this Agreement or any other Loan Instrument (without, however, in any way limiting the rights and remedies of any Bank thereunder against the Administrator or any other Bank), and no Borrower will raise, and each Borrower hereby waives, any objection or defense respecting the need for any such delivery or production. The Administrator (with the consent of the Requisite Banks, as and if required) may institute one or more proceedings (which may be separate proceedings) with respect to this Agreement and each of the other Loan Instruments in such order and at such times as may be selected in its or their sole and absolute discretion. This Agreement and the other Loan Instruments may be enforced without possession of any Note or its production in any action, suit or proceeding. This Agreement and the other Loan Instruments may be enforced with respect to any Borrower without the presence or participation of any other Borrower, or any other co-obligor (joint or several), guarantor, pledgor or surety, whether through lack of jurisdiction, venue or service or otherwise, and no Borrower will raise, and each Borrower hereby expressly waives, any objection or defense respecting the need for any such presence or participation. Section 8.04. Equitable Relief. Each Borrower acknowledges and agrees that it may be impossible to measure in money the damage to the Banks in the event of a breach of or default under any of the terms and provisions of Sections 6.04, 6.05, 6.07, 6.08, 6.09, 7.03, 7.05, 7.07(a) and 8.02(d) of this Agreement, and that, in the event of any such breach or default, the Administrator, in addition to all other rights, powers, privileges and remedies that the Administrator or any other Bank may have, shall be entitled to injunctive relief, specific performance or such other equitable relief as the Administrator (with the consent of the Requisite Banks, as and if required), may request to exercise or otherwise enforce any of the terms and provisions of those Sections and to enjoin or otherwise restrain any act prohibited thereby, and no Borrower will raise, and each Borrower hereby expressly waives, any objection or defense that there is an adequate remedy available at law. Section 8.05. Consent to Jurisdiction, Waiver of Personal Service, Etc. Each Borrower hereby consents and agrees that the Supreme Court of the State of New York for the County of Nassau and the United States District Court for the Eastern District of New York each shall have personal jurisdiction and proper venue with respect to any dispute between the Administrator (or any other Bank) and any Borrower under any Loan Instrument; provided that the foregoing consent shall not deprive the Administrator (on behalf of the Banks) of the right in its sole discretion to voluntarily commence or participate in any action, suit or proceeding in any other court having jurisdiction and venue over any Borrower. In any dispute with the Administrator or any other Bank, no Borrower will raise, and each Borrower hereby expressly waives, any objection or defense to any such jurisdiction as an inconvenient forum. Without in any way limiting the preceding consents to jurisdiction and venue, the parties intend (among other things) to thereby avail themselves of the benefit of Section 5-1402 of the General Obligations Law of the State of New York. Each Borrower hereby expressly waives personal service of any summons, complaint or other process, which may be delivered by any of the means permitted for notices under Section 10.01 hereof. In addition (and without limitation of any such delivery or any other delivery permitted under Applicable Law), each Borrower has executed and delivered to the Administrator a Designation of Administrator for Service appointing Blau, Kramer, Wactlar & Lieberman, P.C., as the agent of such Borrower for service in the State of New York, which each Borrower hereby irrevocably authorizes the Administrator to date with such date (if undated) and file with the appropriate Authority at such time as the Administrator in its discretion (with the consent of the Requisite Banks, as and if required) may elect. Within thirty (30) days after service of process, each Borrower agrees to appear or answer any summons or complaint of the Banks, or the Administrator (on behalf of the Banks), and should such Borrower fail to appear or answer within said thirty-day period, such Borrower shall be deemed in default under that action and judgment may be requested by the Administrator and entered in favor of the Banks against such Borrower for the relief demanded in any complaint so served. Each Borrower acknowledges and agrees that a final judgment in any such action, suit or proceeding shall be conclusive and binding upon such Borrower and may be enforced against such Borrower or any of its assets or properties in any other appropriate jurisdiction selected by the Administrator in its discretion (with the consent of the Requisite Banks, as and if required) by an action, suit or proceeding in such other jurisdiction. To the extent that any Borrower may be entitled to immunity (whether by reason of sovereignty or otherwise) from suit in any jurisdiction, from the jurisdiction of any court or from any other legal process, each Borrower hereby expressly and irrevocably waives such immunity. Section 8.06. Waiver of Jury Trial. In any action, suit or proceeding in any jurisdiction brought by the Administrator or any other Bank against any one or mote of the Borrowers under the Loan Instruments, or by any Borrower against any one or more of the Administrator and the other Banks, each Borrower hereby expressly waives trial by jury. Section 8.07. Waiver of Setoff, Special Damages, Etc. (a) Each Borrower hereby expressly waives, and agrees that it will not exercise, any and all rights of setoff, recoupment, abatement or reduction respecting any payment due (whether as scheduled or required, upon acceleration or as sought in any action, suit or proceeding by any Bank) under this Agreement, any other Loan Instrument or any other agreement, facility or relationship with the Administrator or any other Bank that may now or hereafter be accorded to such Borrower under Applicable Law or otherwise. To the extent not required as a compulsory counterclaim in any related ongoing proceeding, each Borrower (i) shall pursue separate exercise and enforcement of any right, power, privilege, remedy or interest retained (and not waived) by such Borrower under this Agreement, the other Loan Instruments, any other agreement, facility or relationship with the Administrator or any other Bank and Applicable Law, and (ii) shall not seek to exercise or enforce any such right, power, privilege, remedy or interest in any proceeding instituted by the Administrator or any of the other Banks under or in respect of any Loan Instrument, whether through joinder, consolidation, setoff, recoupment, abatement, reduction, counterclaim, defense or otherwise. (b) In any dispute with the Administrator or any other Bank, each Borrower covenants and agrees that it will not seek, recover or retain any, and each Borrower each hereby expressly waives any and all, special, exemplary, punitive and/or consequential damages (whether through action, suit, counterclaim or otherwise) to the extent waiver is not limited under Applicable Law. Section 8.08. No Fiduciary Relationship, Etc. Each Borrower acknowledges and agrees that its sole relationship with the Administrator and Banks is that of debtor and creditor, respectively, and that no term or provision of this Agreement or any other Loan Instrument is intended to create, nor shall any such term or provision be deemed or construed to have created, any joint venture, partnership, trust, agency or other fiduciary relationship with any Borrower or any subsidiary of any Borrower. Each Borrower acknowledges and agrees that the Borrowers have independently and fully reviewed and evaluated the Loan Instruments, the transactions contemplated thereunder and the potential effects of such transactions on the assets, business, operations, properties and condition (financial or otherwise) of each of the Borrowers and their subsidiaries, which review and evaluation was made (i) together with counsel and (to the extent deemed prudent by the Borrowers) financial and other advisors to the Borrowers and their subsidiaries, and (ii) without any reliance upon any oral or written advice, analysis or assurance of any kind whatsoever from the Administrator or any other Bank. Section 8.09. Banks' Right of Setoff, Etc. Upon the occurrence and during the continuance of any Event of Default, each Bank hereby is authorized at any time and from time to time, without notice to the Borrowers (any such notice being hereby expressly waived by each Borrower), to set off and apply, directly or through any of its affiliates, custodians, participants and designees, any and all deposits (whether general or special, time or demand, provisional or final, or individual or joint) and other assets and properties at any time held in the possession, custody or control of such Bank or any of its affiliates, custodians, participants and designees, and any Indebtedness or other amount or obligation (including, without limitation, any obligation under any interest rate protection, foreign currency exchange or other interest rate or exchange rate swap or hedging agreement or arrangement) at any time owing by such Bank or any of its affiliates or participants, to or for the credit, account or benefit of any Borrower against any and all of the Obligations now or hereafter existing under this Agreement or the other Loan Instruments, whether or not the Administrator or any other Bank shall have declared a default, accelerated the obligations or made any demand or taken any other action under this Agreement or any other Loan Instrument, and although such obligations may be contingent or unmatured. Each Borrower acknowledges that pursuant to Section 7.01 hereof it granted to the Administrator (for the benefit of all of the Banks) a senior security interest in and to, among other things, all such deposits, assets, properties and Indebtedness in the possession of each of the affiliates, custodians, participants and designees of each Bank, and each Borrower hereby authorizes each such person to so set off and apply such amounts at such times and in such manner as the Administrator may direct pursuant to this Section, in each case to the fullest extent possible as if the person making the setoff were a direct creditor of such Borrower in the full amount of the Obligations. The debiting Bank shall notify the Borrowers after any such setoff and application; provided, however, that the failure to give such notice shall not affect the validity of such setoff and application. In debiting any such account, the Obligations shall be deemed to have been paid or repaid only to the extent of the funds actually available in that account notwithstanding any internal procedure of the debiting Bank or any of its affiliates, custodians, participants and designees to the contrary. The rights of the Administrator and the other Banks under this Section are in addition to and without limitation of any other rights, powers, privileges, remedies and other interests (including, without limitation, other rights of setoff and security interests) that the Administrator or the other Banks may have under this Agreement, the other Loan Instruments and Applicable Law. ARTICLE IX The Administrator and the Banks ------------------------------- Section 9.01. Appointment of Administrator. Upon the terms and provisions and subject to the conditions contained in this Agreement, the Banks hereby appoint Fleet to act as Administrator under this Agreement and the other Loan Instruments, and Fleet hereby accepts such appointment. Section 9.02. Undivided Interest and Committed Share, Etc. (a) Upon the terms and provisions and subject to the conditions contained in this Article, the Banks agree that each has an undivided interest in the Loans and other Obligations under this Agreement and the obligations of the Borrowers and the other parties (other than the Banks) under the other Loan Instruments (collectively, the "Loan Obligations"), any asset or property securing the Loan Obligations, whether through pledge, attachment, mortgage or otherwise (the "Loan Collateral"), and the rights, powers, privileges, remedies and interests of the Banks in and to this Agreement and other Loan Instruments, as well as the risks, liabilities and expenses related thereto, such that each Bank shall have and be committed to an undivided fractional interest therein and in the Commitment, Revolving Credit Loans and related items and/or in the Term Loans and related items equal to the respective maximum principal amounts and percentages set forth on Exhibit F hereto, as the same may be recomputed from time to time to reflect departing or additional Banks pursuant to this Agreement (which undivided fractional interest will be referred to as such Bank's "Committed Share" of the Commitment, the Term Loans or the Mortgage Loans, as applicable). In order to arrive at the Committed Shares set forth on Exhibit F hereto, Chase is hereby purchasing from Fleet, and Fleet is hereby selling to Chase, as if pursuant to an Assignment and Assumption Agreement in the form of Exhibit H hereto, an assignment of the Loans, Commitment and Loan Instruments in an amount equal to the difference between Chase's Committed Shares of the Loans under the Existing Loan Agreement and such Committed Shares of the Loans under this Agreement. Chase shall wire the purchase price therefore (equal to the principal balances of the Loans and any accrued interest and fees so purchased) to Fleet on the Effective Date. (b) With respect to payments made to the Administrator (generally following the circumstances described in Section 2.07(a) hereof), the Administrator will mark its books and records to reflect the respective interests of the Banks, all payments received from and made to each Bank from time to time pursuant to this Agreement may be recorded by the Administrator, and such records shall be presumptively correct as to the existence and amounts thereof absent manifest error. (c) "Pro Rata Share" at a particular time for a particular Bank shall mean a share of the referenced item proportional to the percentage obtained by dividing (A) that portion of the principal balance then outstanding under the referenced Loans attributable to principal amounts received by one or more of the Borrowers from such Bank (or its predecessor) under this Agreement or any other Loan Instrument (including those made under the Existing Loan Agreement and other Existing Loan Instruments) and not theretofore repaid, by (B) the aggregate principal balance then outstanding under the referenced Loans; provided that if there is no principal balance then outstanding under the referenced Loans (or deemed outstanding as provided in this subsection) and with respect to each outstanding Letter of Credit, a Bank's Pro Rata Share shall be equal to (1) its Committed Share of the Term Loans with respect to the Term Loans, (2) its Committed Share of the Mortgage Loans with respect to the Mortgage Loans, and (3) to its Committed Share of the Commitment (i.e., the Revolving Credit Loans) with respect to the Revolving Credit Loans and the Letters of Credit. (d) "Majority Banks" at a particular time shall mean the Banks (which may include the Administrator) then having an aggregate Pro Rata Share of more than 80.00%. Section 9.03. Notice of Intent Not to Advance; Letters of Credit. (a) In the event a Bank determines that it will not make its Committed Share of any Advance requested by the Borrowers, such Bank shall immediately notify the other Banks by telephone and telecopy of a signed notice, and shall promptly confirm such notice by delivery to each of the other Banks of an original copy of such signed notice, which notice shall specify the Bank's reasons (if any) for such decision. No Bank, however, may refuse to make any payment under its Letter of Credit Participation (as hereinafter defined), which each Bank acknowledges and agrees will result in additional Advances of Revolving Credit Loans. (b) By the issuance or extension of any Letter of Credit, the Fronting Bank hereby sells and grants (and continues, in the case of each existing Letter of Credit) to each Bank, and each Bank hereby unconditionally purchases and acquires (and continues, in the case of each existing Letter of Credit) from the Fronting Bank, without any further action on the part of the Fronting Bank or acquiring Bank, a participation in such Letter of Credit equal to such Bank's Committed Share of the face amount of such Letter of Credit (each a "Letter of Credit Participation"), effective upon the issuance or extension of such Letter of Credit (or on the Effective Date in the case of each existing Letter of Credit). In consideration and in furtherance of the foregoing, each Bank hereby absolutely and unconditionally agrees to pay to the Administrator, on behalf of each Fronting Bank, in accordance with subsection (c) below, such Bank's Pro Rata Share of each unreimbursed Letter of Credit Advance made by the Fronting Bank; provided, however, that the Banks shall not be obligated to make any such payment with respect to any wrongful payment or disbursement made under any Letter of Credit as a result of the gross negligence or wilful misconduct of the Fronting Bank. (c) If the Fronting Bank (other than the Administrator) has directly billed the Borrowers for a Letter of Credit Advance as permitted by Section 9.05 (a) hereof and has not received from the Borrowers the payment required by Section 2.07(d) hereof by 11:00 A.M. (New York City time) on the day such payment is due, the Fronting Bank will promptly notify the Administrator of the Letter of Credit Advance and such non- receipt of payment. If the Borrowers have not previously requested an Advance and complied with the related conditions in order to fund such payment, the Administrator will promptly notify each Bank of such Letter of Credit Advance and its Pro Rata Share thereof. Each such unreimbursed payment made in accordance with Section 2.07(d) hereof shall for all purposes hereunder be deemed to be an Advance of a Revolving Credit Loan. Each Bank will pay to the Administrator, by not later than 4:00 p.m. (New York City time) on such date (or, if the Banks shall have received such notice later than 2:00 p.m. (New York City time) on such date, then by not later than 10:00 a.m. (New York City time) on the immediately following Business Day), an amount equal to such Bank's Pro Rata Share of such Letter of Credit Advance (it being understood and agreed that such amount shall constitute funding of an Advance of a Revolving Credit Loan by each such Bank), and the Administrator will promptly pay such amount to the Fronting Bank. If any Bank shall not have made its Pro Rata Share of such Letter of Credit Advance available to the Fronting Bank as provided above, such Bank agrees to pay interest on such amount, for each day from and including the date such amount is required to be paid in accordance with this subsection to but excluding the date an amount equal to such amount is paid to the Administrator for prompt payment to the Fronting Bank at the Federal Funds Rate for the first such day and at the rate applicable to Loans under Section 2.04(a) hereof for each day thereafter. (d) Each Bank acknowledges and agrees that each Letter of Credit Participation and its payment and other obligations with respect thereto: (i) is absolute and unconditional; (ii) shall remain and continue in full force and effect without regard (A) to any waiver, modification, extension, renewal, amendment or restatement of any other term or provision of any Letter of Credit, (B) to any act or circumstance respecting any Letter of Credit consented to or waived by any Borrower under Section 2.07 hereto, (C) to any full, partial or non-exercise of any of the rights, powers, privileges, remedies and interests of the Fronting Bank respecting any Letter of Credit or under any related application, any Loan Instrument or Applicable Law, against any person or with respect to any collateral, (D) to any release or subordination of any obligations or collateral, (E) to any statute of limitations or similar time constraint under any Applicable Law, (F) to any investigation, analysis or evaluation by any Bank or its designees of the assets, business, operations, properties or condition (financial or otherwise) of any Borrower, the Guarantor or any other person, (G) to any Default or Event of Default, whenever occurring or continuing, (H) to any act or omission on the part of the Fronting Bank, the Administrator, any Bank or any other person, or (I) to any other event that otherwise might constitute a legal or equitable counterclaim, defense or discharge of a participant or surety; (iii) shall not be subject to any defense, counterclaim, set off, right of recoupment, abatement, reduction or other claim or determination that such Bank may have against the Administrator, any other Bank, any Borrower or any other person; (iv) shall not be diminished or qualified by the death, disability, dissolution, reorganization, insolvency, bankruptcy, custodianship or receivership of the Fronting Bank, the participating Bank, any Borrower, any other co-obligor, guarantor, surety or pledgor or any other person, or the inability of any of them to pay its debts or perform or otherwise satisfy its obligations as they become due for any reason whatsoever; and (v) shall not be affected by any other circumstance whatsoever. Section 9.04. Collection and Distribution. (a) Except as otherwise provided in this Article, each Bank shall be entitled from time to time to a share of all payments of principal, interest, commitment and other fees and other amounts received in respect of the Loan Obligations, as well as the net proceeds from all Loan Collateral, which share for a particular Bank at any particular time shall be: (i) its Pro Rata Share of all principal payments on the Revolving Credit Loans, Term Loans, Mortgage Loans or other Loans to which any voluntary or mandatory payments or prepayments are to be applied; (ii) its Pro Rata Share of interest paid on the Revolving Credit Loans, Term Loans, Mortgage Loans or other Loans to which the payments relate, which shall be adjusted to reflect any rate differentials among the Banks so as to approximate the amounts that would have resulted from direct billings; (iii) its Committed Share of the Commitment Fee and other fees respecting Loans in which it shares; (iv) its Pro Rata Share of all net proceeds and other amounts received from the Loan Collateral following acceleration of the Loans; and (v) its Pro Rata Share of all other amounts received in respect of the Loan Obligations. (b) Notwithstanding the provisions of subsection (a), above, no other Bank shall be entitled to any share of: (i) any amount that may be directly billed in accordance with Section 9.05 hereof, subject to the terms and provisions of such Section; (ii) any payment, reimbursement or other indemnity to the Administrator or any other indemnified person under this Agreement or any other Loan Instrument with respect to any claims, liabilities, losses or expenses not theretofore funded by the claiming Bank(s); (iii) any administrative or other fees payable to the Administrator in accordance with Section 2.06 or 10.13(b) of this Agreement; (iv) any payment under or other right respecting any Independent Transaction (as defined in Section 9.17(b) hereof); (v) any payment to any Fronting Bank of any and all customary fees (other than the Letter of Credit Fee), commissions and/or charges of the Fronting Bank for any increase, extension, renewal, amendment or transfer of any of its Letter of Credit and any fees or other charges of any other issuer or any participant, correspondent, confirming bank, custodian or designee of the Fronting Bank or other issuer involved with the Letter of Credit; or (vi) any exercise by a Bank or its affiliates of their respective rights of setoff or banker's Lien with respect to an Independent Transaction against any general deposits, assets and properties (other than Loan Collateral) of any Borrower or any other person. Furthermore, except as otherwise provided in this Article, any payment received in respect of the obligation (if any) of the Borrowers to reimburse the Banks for certain increased costs and reduced receipts under Section 2.04 of this Agreement, as well as any net proceeds from Loan Collateral to be applied to such Loan Obligations, shall be shared by the Banks in proportion to their respective increased costs and reduced receipts. (c) Except as otherwise provided in this Article, the Administrator shall receive all payments of principal and other distributable amounts in respect of the Loan Obligations, all net proceeds realized from the Loan Collateral and all amounts received by the Banks and delivered to the Administrator pursuant to the provisions of this Article, and the Administrator shall hold each such amount in an account for the benefit of all of the Banks until distributed as hereinafter provided. As soon as practicable after each such receipt, the Administrator shall determine the respective amounts to be distributed and promptly thereafter shall credit to itself the amount to which it is entitled and wire the amounts to which the other Banks are entitled to them in accordance with the instructions annexed as Exhibit G hereto, or in accordance with such subsequent written instruction (in substantially the same form) as a Bank from time to time may deliver to the Administrator. (d) Unless the Administrator shall have received notice from the Borrowers prior to the date on which any payment is due to the Banks hereunder that the Borrowers will not make such payment in full, the Administrator may assume that the Borrowers have made such payment in full to the Administrator on such date, and the Administrator may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent the Borrowers shall not have so made such payment in full to the Administrator, each Bank shall repay to the Administrator forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Administrator, at the Federal Funds Rate. (e) Each Bank agrees that if it shall receive or otherwise obtain any Excess Amount in any Payment Event (as such terms are hereinafter defined), such Bank (the "Receiving Bank"): (i) shall (except as otherwise permitted by this Article) receive and hold such Excess Amount in trust for the benefit of all of the Banks and promptly deliver such Excess Amount to the Administrator; and (ii) shall in all other cases be deemed (simultaneously with such Payment Event) to have purchased from each other Bank (a "Selling Bank") at face value, and shall promptly pay to each Selling Bank the purchase price for, a participation in the Revolving Credit Loans, Term Loans, Mortgage Loans or Letter of Credit, as applicable, in the amount(s) necessary so that the Pro Rata Shares of the Receiving Bank and each Selling Bank with respect thereto (taking into account such participations as if they were assignments) are maintained at the same percentage after such Payment Event as they were before such Payment Event. If any such participation shall be purchased pursuant to this subsection by a Receiving Bank and a Selling Bank shall thereafter recover, receive or otherwise obtain from or in respect of any Borrower any Excess Amount when compared to the Receiving Bank, such participation shall be deemed to have been repurchased by the Selling Bank at face value to the extent of such later Excess Amount allocable to the Receiving Bank, without interest, and if the Excess Amount so recovered, received or otherwise obtained by such Selling Bank exceeds the amount necessary to restore the Banks' respective Pro Rata Shares, then such excess itself shall be treated as an Excess Amount under this subsection. Each Borrower expressly consents to the foregoing arrangements and agrees that any Bank holding a participation in a Revolving Credit Loan, Term Loans, Mortgage Loans or Letter of Credit deemed to have been so purchased may exercise any and all rights of banker's Lien, set off or counterclaim with respect to any and all moneys owing by such Borrower to such Bank by reason thereof as fully as if such Bank had made a Revolving Credit Loan, Term Loans or Mortgage Loans or issued a Letter of Credit, as applicable, directly to such Borrower in the amount of such participation. "Excess Amount" shall mean the amount by which: (A) any payment or amount received or otherwise obtained by any Bank in respect of any Revolving Credit Loans, Term Loans, Mortgage Loans or Letter of Credit, whether voluntary, involuntary, through the exercise of any right of set-off, banker's Lien, counterclaim or otherwise, or pursuant to any secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim received by such Bank under any applicable bankruptcy, insolvency or other similar law or otherwise (any of which may be referred to as a "Payment Event"); exceeds (B) the portion of such payment or amount that would have maintained such Bank's Pro Rata Share of the Revolving Credit Loans, Term Loans, Mortgage Loans or Letters of Credit at the same percentage after such Payment Event as it was before such Payment Event; provided, however, that Excess Amount shall not include any amount that a Bank (1) is expressly permitted to receive and retain hereunder, (2) receives from the assignment of or sale of a participation in any Revolving Credit Loans, Term Loans, Mortgage Loans or Letter of Credit to anyone other than any Borrower or its affiliates, or (3) receives or otherwise obtains in any Independent Transaction. Section 9.05. Direct Billing, Fixed Rates, Additional Interest, Etc. (a) Except as otherwise provided herein, so long as it has not received notice from the Administrator to the contrary (as contemplated in Section 2.07(a) hereof or in the proviso below), each Bank may directly bill, receive and retain payment of: (i) the interest due it under Sections 2.04(a), (b) and (c) hereof with respect to its Pro Rata Share of the Loans (based upon its own Base Rate or Fixed Rate); (ii) any compensation due it respecting increased costs, reduced receipts and capital adequacy under Sections 2.04(d) and (f) hereof; (iii) any principal amount due it as a Fronting Bank respecting any Letter of Credit Advance (other than to the extent converted into an actual or deemed Revolving Credit Loan), and any and all customary fees (other than the Letter of Credit Fee), commissions and/or charges of the Fronting Bank for any increase, extension, renewal, amendment or transfer of the Letter of Credit and any fees or other charges of any other issuer or any participant, correspondent, confirming bank, custodian or designee of the Fronting Bank or other issuer involved with the Letter of Credit; and (iv) any expense reimbursement due it under Section 10.03 hereof; provided, however, that the Administrator shall also have the right in its discretion from time to time to elect (by written notice) to bill and receive any one or more of the foregoing items on behalf of any Bank other than Chase or Fleet. If a Bank has not received payment of any amount billed directly under this provision as and when due under the Loan Agreement, such Bank shall give prompt notice thereof to the other Banks, as well as prompt notice of any payment subsequently received. (b) If any Bank receives less than full payment of any directly billed amount, and after communication with the Borrowers any amount remains unpaid, such Bank shall promptly notify the Administrator and the other Banks. If the Banks did not suffer such payment shortfalls ratably, the Administrator shall immediately give notice to the Banks to cease direct billing and collection (as contemplated in Section 2.07(a) hereof and subsection (c) below), and the Banks shall deliver all such disproportionate payments to the Administrator for redistribution to the Banks in accordance with the sharing provisions of this Agreement. (c) If any Bank has received notice from the Administrator that it may no longer receive and retain direct payments from the Borrowers as contemplated in subsection (a) of this Section, such Bank thereafter shall (i) direct the Borrowers to make all payments to the Administrator, (ii) receive and hold any payment or other amount received from or for the benefit of the Borrowers (whether as a result of past bills or otherwise) in trust for the benefit of all of the Banks and (iii) promptly deliver all such amounts to the Administrator. Unless the Administrator directs otherwise, the Banks shall continue to render bills and statements to the Borrowers as contemplated in subsection (a) of this Section, which shall contain the direction to make all payments to the Administrator, and shall concurrently send a copy of such bills to the Administrator. If any Bank has been receiving payments from the Borrowers through account debits, then unless the Administrator directs otherwise, such Bank shall continue to debit the accounts of the Borrowers for such payments but shall hold in trust and promptly deliver the proceeds to the Administrator as provided above. (d) Any Bank in its discretion may elect to impose or waive the additional interest due to it on any late payment as provided in Section 2.04(c) hereof. (e) No Bank may unilaterally impose the additional interest during a default as provided by Section 2.04(d) of this Agreement. The Administrator shall be responsible for the imposition and billing of such additional interest, which imposition prior to the Maturity Date shall require the prior written consent (which may be sent by telecopy) of the Majority Banks. The imposition of such additional interest may be rescinded or waived with the approval (which may be sent by telecopy) of the Majority Banks. The Administrator also may rescind or waive any such additional interest if the underlying default is cured within ten Business Days of the date it became a default (after the expiration of all applicable grace periods). Section 9.06. Voting Rights, Etc. (a) Except as otherwise provided in this Agreement or any other Loan Instrument, the prior written consent of each affected Bank shall be required for any action that would (i) modify the calculation, decrease the amount, extend the Revolving Credit Period, extend the due date or waive any nonpayment of any payment of principal, interest or fees under any Loan Instrument, (ii) release or subordinate any interest under any Loan Instrument in any material part of the Loan Collateral other than (A) in accordance with Section 9.07(b) of this Agreement, (B) in connection with any disposition pursuant to Section 9.09 of this Agreement, or (C) as otherwise required, contemplated or permitted by this Agreement or any other Loan Instrument, (iii) release any Borrower or any guarantor, surety or pledgor from personal liability under any Loan Instrument, (iv) waive any conditions precedent to an Advance under Article IV of this Agreement (without, however, in any way limiting the ability of the Majority Banks to waive or consent to any matter within their power or the ability of the Administrator in its discretion to waive any of the technical conditions precedent imposed by Article II of this Agreement), or (v) alter any Bank's Committed Share or the manner of determining any Bank's Pro Rata Share. (b) Except as otherwise provided in this Agreement or any other Loan Instrument, the prior written consent of the Majority Banks shall be required for any action that would (A) waive any Event of Default, (B) waive or consent to any departure from any other term or provision of this Agreement, any Note or any other Loan Instrument signed by the Banks, or (C) otherwise amend or restate this Agreement, any Note or any other Loan Instrument signed by the Banks; provided that the Administrator in its discretion nevertheless from time to time (i) may waive (in whole or in part) any of the technical conditions precedent to any Advance or Fixed Rate election imposed by Article II hereof and (ii) may grant temporary waivers or consents respecting the late delivery of notices, financial statements and similar documents and consent to non-substantive changes in the form thereof. (c) Except as otherwise provided in this Agreement or any other Loan Instrument, the Administrator shall have the right (but shall be under no duty or obligation) to make any and all decisions with respect to the terms and provisions of the Loan Instruments other than those requiring the approval of the affected Banks or the Majority Banks, including (without limitation) the right to give any notice, to otherwise communicate with any Borrower or any guarantor, surety or pledgor under any Loan Instrument and to waive or consent to any departure from any of those terms or provisions, all without notice to or consent from any Bank. (d) Each Bank shall be bound by such notices, consents, waivers, releases, supplements, modifications, amendments, restatements and other agreements and communications as so made by the Administrator or the Majority Banks, or by the Administrator with the consent of the Requisite Banks, as and if required to the same extent as if each Bank had been a party thereto. A separate consent from a Bank shall not be required for any document signed by it. Section 9.07. Powers and Duties of the Administrator, Etc. (a) With the consent of the Requisite Banks (if any) specified in this Agreement or any other Loan Instrument, the Administrator from time to time in its discretion may exercise or otherwise enforce any right, power, privilege, remedy or interest under this Agreement and the other Loan Instruments and Applicable Law, and shall perform all duties specifically required of it by the terms of this Article, in all cases together with such rights, powers, privileges and remedies as are incidental thereto, and all in accordance with the usual practices employed by the Administrator in the servicing of loans of a similar nature for its own account. The other Loan Instruments may be executed and delivered by the Administrator in the name of the Banks, the Administrator or a nominee, each Note may be made payable severally to the Banks or solely to the order of the Administrator or its nominee, and the originals (or original counterparts) of each Note, one set of this Agreement and the other Loan Instruments, and all other documents, reports and communications respecting the Loan Instruments delivered to or from any Borrower or any other guarantor, surety or pledgor shall be held by the Administrator for the benefit of all of the Banks in accordance with the terms and provisions of this Article, which items may be held by the Administrator or its designee and from time to time warehoused or disposed of in accordance with the usual practices employed by the Administrator. (b) To the extent possession of the Loan Collateral may be required or permitted under any of the Loan Instruments, the Administrator shall hold such Loan Collateral as collateral Administrator for any other Bank, including (without limitation) any deposits with the Administrator of the Borrowers, any of their respective subsidiaries, or any other guarantor, surety or pledgor under any Loan Instrument, or in instances where a Bank (other than the Administrator) holds funds constituting Loan Collateral in local operating or other accounts of any such person(s), such Bank shall act as collateral administrator for any other Bank; provided that the deposits and other accounts of any such person(s) need not be blocked or otherwise restricted as to access unless (i) specifically required with respect to a specified account by this Agreement or any other Loan Instrument or (ii) directed by the Majority Banks. The Administrator also may be designated as the secured party for the purpose of any Uniform Commercial Code, mortgage or other filing. Each such collateral agency shall be for the limited purpose of perfecting the Banks' security interest in the Loan Collateral for the benefit of the Banks and shall be subject to the rights of the Banks and the pledgors under the relevant Loan Instruments. Except as otherwise provided in this Agreement or any other Loan Instrument, the Administrator shall have the right (but shall be under no duty or obligation) to administer the Loan Collateral and the security interests with respect thereto in such manner as the Administrator may deem necessary or desirable. The Administrator, without notice to or consent from any Bank, from time to time may execute and deliver releases, subordinations, satisfactions, assignments, reassignments and similar instruments and documents in respect of any Loan Collateral and take any other action that may be necessary or desirable in connection therewith so long as such instruments, documents or actions are required, contemplated or permitted by the terms and provisions of the relevant Loan Instrument(s). (c) Without limiting its right to do so in its discretion, the Administrator shall be fully justified in failing or refusing to take or continue any action under this Agreement or any other Loan Instrument unless the Administrator first shall be reimbursed or otherwise indemnified to its reasonable satisfaction (which may include the deposit of funds) by the Banks (other than itself) in accordance with their respective Committed Shares against any and all liabilities and expenses that the Administrator reasonably estimates may be incurred by the Administrator by reason of taking or continuing to take any such action. Section 9.08. Notices and Knowledge of Events of Default, Etc. (a) Each Bank shall give prompt notice to the other Banks of the occurrence and continuance of any Event of Default, unless it reasonably believes that notice was sent directly to the other Banks, to the extent any officer of such Bank active with respect to any Borrower's account: (i) obtains actual knowledge of any such event; or (ii) receives specific notice of any such event from any Borrower or any other person. Each Bank shall be entitled to assume that no Event of Default or other event that, with or without the giving of notice or the passage of time or both, would constitute an Event of Default has occurred and is continuing, unless: (A) the officers of such Bank active with respect to any Borrower's account have obtained actual knowledge of such an event; or (B) notice has been given to such Bank by any Borrower or another Bank specifically stating its belief that such an event has occurred and is continuing and specifying the nature thereof. (b) At any time after the occurrence and during the continuance of any Event of Default, the Administrator may (but shall be under no duty or obligation to), or upon the written consent or direction of the Majority Banks the Administrator shall, give the Borrowers a written Default Declaration expressly declaring that an Event of Default has occurred and is continuing, giving a copy of such notice to the other Banks; provided that the failure to send such copy to any Bank shall not affect the validity of any such notice of declaration of an Event of Default. The Administrator and each of the other Banks (individually or collectively) also may communicate with the Borrowers and the other Banks respecting any Event of Default or potential resolution, which shall not be deemed or construed to be a Default Declaration (which may only be made by Default Declaration respecting an Event of Default). If any Event of Default shall have occurred and continued after notice to the Administrator for more than three (3) Business Days respecting any payment default or for more than ten (10) Business Days respecting any other default requiring the approval of the Majority Banks or all of the Banks for waiver, then the Majority Banks may direct the Administrator to send the written notice of declaration of an Event of Default to the Borrowers by giving the Administrator a signed notice of their request, or by giving the Administrator notice of their request by telecopy of a signed notice and promptly confirming their request by delivery to the Administrator of the original signed notice (which may be in counterparts). (c) At any time during the continuance of any Event of Default declared pursuant to subsection (b), above, whether or not the Administrator or the Majority Banks shall have declared a default, accelerated the maturity of any of the Loan Obligations or taken any other action with respect thereto, all amounts received by a Bank from or with respect to the Loan Obligations, whether through payment, the exercise of any right of setoff in respect of any Loan Obligation or Loan Collateral, or otherwise, shall be received in trust by such Bank for the benefit of all of the Banks and promptly delivered to the Administrator. (d) At any time during the continuance of any Event of Default declared in any Default Declaration, any Bank shall have the absolute and unconditional right (but shall be under no duty or obligation) to purchase at any time the entire interest of any or more of the other Banks in the Loan Obligations, Loan Collateral and Loan Instruments and under this Agreement and the other Loan Instruments, exercisable by written notice to the other Bank(s), and effective upon payment to each such Bank of its Pro Rata Share of the Loans, together with interest thereon, following which such Bank(s) shall have no further right, interest or obligation in the Loan Obligations, Loan Collateral and Loan Instruments. The Committed Share and Pro Rata Share of the purchasing Bank shall be adjusted to reflect any such repurchase. No Bank shall have any liability or obligation to indemnify or reimburse the Administrator for any such purchase or any part thereof. Section 9.09. Administration During Certain Events of Default. (a) Upon the occurrence and during the continuance of any Event of Default, the Administrator shall consult with the Banks to determine a course of action with respect to that Event of Default acceptable to the Majority Banks. Once determined, the Administrator shall use reasonable efforts to pursue that course of action in a manner consistent with and otherwise permissible under this Agreement, the other Loan Instruments and Applicable Law, subject, however, to the limitations imposed hereunder and thereunder and the other terms and provisions of this Agreement. (b) Subject to the foregoing and the other terms and provisions of this Agreement and the other Loan Instruments, the Administrator in its discretion from time to time may (but shall be under no duty or obligation to), or at the written direction of the Majority Banks the Administrator shall, use reasonable efforts to effect the offer, sale, lease or other disposition and delivery of the whole or any part of the Loan Collateral, whether as a secured party in possession of collateral or otherwise, and may otherwise exercise and enforce any and all rights, powers, privileges, remedies and interests afforded to it under this Agreement, the other Loan Instruments and any and all provisions of Applicable Law. (c) The Administrator shall receive the proceeds or other amounts realized from any judgment or other judicial award, any settlement (with the consent of the Requisite Banks, as and if required), or any sale or other disposition of any Loan Collateral and, after deducting all costs and expenses incurred in connection therewith (including attorneys' disbursements, expenses and fees), the Administrator shall distribute the remainder in accordance with Section 9.04 of this Agreement. Section 9.10. Reports and Information. Each Bank shall send to the other Banks copies of any correspondence sent or received to or from the Borrowers with respect to any Event of Default (other than items that would have or appear to have been sent directly to the other Banks). At the request of the Administrator, each Bank promptly shall send to the Administrator copies of all notices of debiting any accounts and other correspondence delivered by a Bank to any Borrower or any guarantor, surety or pledgor under this Agreement or any other Loan Instrument. Upon the specific request and at the expense of a Bank, the Administrator shall furnish to such Bank copies of any report or other documents received by the Administrator and not separately delivered by the Borrowers to such Bank. Each Bank acknowledges and agrees that: (a) any report or other information that the Administrator in its sole discretion elects to prepare will be prepared by the personnel of the Administrator from information made available by the Borrowers, which personnel are not acting as auditors and who are not verifying the information so supplied; (b) any report, document or other information provided by the Administrator to any Bank, whether in writing or orally, and whether pursuant to this Article or otherwise, shall be without representation or warranty by or any recourse whatsoever to the Administrator with respect to its authenticity, validity, accuracy, completeness, contents or conformity to any requirements of this Agreement and the other Loan Instruments; and (c) all reports, documents and other information shall be provided and received strictly on a confidential basis for the exclusive use of each Bank, and no Bank shall make any such information available to any other person, except (i) in connection with any assignment or participation permitted under Section 10.14 hereof, (ii) for bank auditors and bank regulatory authorities, (iii) the accountants and attorneys of the disclosing Bank, or (iv) as otherwise required by Applicable Law. Section 9.11. Bank's Representations, Warranties and Covenants. Each Bank hereby represents, warrants and covenants to the other Banks, solely for their benefit, that such Bank: (a) has the power and authority to execute, deliver and perform, and has duly authorized its execution, delivery and performance, of this Agreement and the other Loan Instruments to which it is a party, and will not restrict or otherwise impair that power, authority or authorization; (b) is a sophisticated and knowledgeable institution, both generally and with respect to transactions of this type; (c) has received, (i) copies of this Agreement, the Notes and such other Loan Instruments as such Bank deemed necessary or prudent, and (ii) such financial and other information from the Borrowers relating to the Borrowers and each guarantor, surety or pledgor (if any) as it deemed necessary or prudent, has had an opportunity to review and evaluate, and in fact has independently reviewed and evaluated such documents and information, and will continue to independently review and evaluate such of the foregoing as it deems necessary or prudent, all in order to make its own credit determination and other decisions; (d) has made, and will continue to make, that independent review, evaluation and credit determination and other decisions under this Agreement and the other Loan Instruments (i) without any reliance upon any oral or written representation, warranty, advice or analysis of any kind whatsoever from the Administrator or any other person (other than the Borrowers), however obtained, and (ii) without any regard to any decision or adverse circumstance or change respecting any other banking, trust, lending or other relationship that it may have with any Borrower or any of their respective affiliates; (e) has made its loans and acquired its interests, and will continue to make its loans and hold its interests, under this Agreement and the other Loan Instruments for its own account; (f) has no present intent to, and will not at any time in whole or in part, sell, convey, assign, transfer, further participate or otherwise dispose of those loans or interests or any part thereof, other than assignments and participations expressly permitted by Section 10.13 hereof; and (g) has executed and delivered this Agreement and the other Loan Instruments to which it is a party, has made its loans, acquired its interests and made its commitments and other agreements under this Agreement and the other Loan Instruments, and will continue to hold those interests and perform those commitments and agreements in accordance with all Applicable Laws, including (without limitation) any legal lending limits applicable to it. Section 9.12. Credit Waivers and Exculpations. None of the Administrator and the other Banks has, and none of them shall be deemed or construed to have, made any representation or warranty, offered any advice or analysis, made any assumption of any liability or responsibility or made any guaranty, whether orally or otherwise, and whether express or implied, to any other Bank with respect to: (a) any recital, statement, representation or warranty made by any Borrower, any of their respective affiliates or any guarantor, surety or pledgor under any Loan Instrument, any certificate delivered by any officer of any such person(s), or any report, document or other information delivered from time to time by any such person(s) or furnished on their behalf; (b) the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, any Note or any other Loan Instrument; (c) the existing or future financial condition of any Borrower, any of their respective affiliates or any guarantor, surety or pledgor under any Loan Instrument; (d) the existence or value of any Loan Collateral, or the validity, sufficiency, priority or effectiveness of any Lien intended to be created under or by any Loan Instrument; (e) the performance by any Borrower or any of their respective affiliates, or by any guarantor, surety or pledgor, of, or the willingness, ability or likelihood of any of them to perform, their respective obligations under this Agreement or any other Loan Instrument; or (f) the validity, enforceability or collectibility of any of the Loan Obligations. Section 9.13. Reliance on Documents and Experts. The Administrator shall be entitled to rely upon any notice, consent, certificate, affidavit, statement, paper, document, writing or other communication (which may be by telegram, cable, telex, telecopier or telephone) reasonably believed by it to be genuine and to have been signed, sent or made by the proper person or persons, and upon opinions and advice of legal counsel (including counsel for any Borrower), independent public accountants and other experts selected by the Administrator or any other Bank. Section 9.14. Status and Liability of the Administrator, Etc. The Administrator shall be considered an independent contractor with respect to the Banks, and no term or provision of this Agreement or any other Loan Instrument is intended to create, nor shall any such term or provision be deemed or construed to have created, any general common law agency, joint venture, partnership or debtor-creditor relationship between or among the Administrator and the Banks or any Investment contract or other security. The Administrator may exercise or otherwise enforce any of its rights, powers, privileges, remedies and interests under this Agreement, the other Loan Instruments and Applicable Law or perform any of its duties under this Agreement and the other Loan Instruments by or through its directors, officers, employees, attorneys, agents or designees. The Administrator and its designees, and their respective directors, officers, employees, attorneys and Administrators, shall not incur any liability (other than for a person's own acts or omissions breaching a duty owed to the injured Bank and amounting to gross negligence or willful misconduct as finally determined pursuant to Applicable Law by a governmental Authority having jurisdiction) for acts and omissions arising out of or related directly or indirectly to this Agreement, any Note, any other Loan Instrument, any part of the Loan Collateral, any of the Loans or the application of any proceeds thereof, or any Environmental Claim; and each Bank hereby expressly waives any and all claims and actions (other than to the extent occasioned by a person's own acts or omissions breaching a duty owed to the injured Bank and amounting to gross negligence or willful misconduct as finally determined pursuant to Applicable Law by a governmental Authority having jurisdiction) against the Administrator or its designees, and their respective directors, officers, employees, attorneys and agents, arising out of or related directly or indirectly to any and all of the foregoing acts, omissions and circumstances. Section 9.15. Bank's Risk of Loss; Expenses; Indemnification. (a) Each Bank hereby acknowledges and agrees that it has assumed all risk of loss to the extent of its Pro Rata Share of the Loans and all risk of further expense and liability ratably in accordance with its Committed Share of the Loans as of the date of the expense or the date on which the event giving rise to the liability occurred, as the case may be. (b) The Banks shall use reasonable efforts to obtain prompt reimbursement from the Borrowers, or from the proceeds of the Loan Collateral, if any, realized in connection with any sale or other disposition, to the extent such reimbursement is required by this Agreement and the other Loan Instruments, for all costs and expenses incurred by the Administrator in connection with the preparation, execution and closing of this Agreement and the other Loan Instruments, all waivers, releases, discharges, satisfactions, modifications and amendments thereof and consents with respect thereto, all payments made and actions taken thereunder in the name or on behalf of any Borrower, any of their respective affiliates or any guarantor, surety or pledgor under any Loan Instrument, all periodic collateral audits and other evaluations and the ongoing monitoring of the Accounts Receivable, Inventory and other Loan Collateral (including, without limitation, the per diem fees and expenses of the Administrator and its designees in performing such audits and other evaluations), all annual and other appraisals of the real estate included in the Loan Collateral, and the administration, enforcement, protection and adjudication of this Agreement and the other Loan Instruments and the rights, powers, privileges, remedies and other interests of the Banks thereunder and under Applicable Law, and the acquisition, operation, development, improvement or disposition of any Loan Collateral, including (without limitation) insurance premiums, mortgage recording, documentary, transfer, intangible, note or other similar taxes or revenue stamps, filing and recording expenses, and the disbursements, expenses and fees of counsel to the Administrator and the other Banks, including Parker Chapin Flattau & Klimpl, LLP and the disbursements, expenses and fees of any local or special counsel retained by any of them. In the event such reimbursement is not obtained by the Administrator within a reasonable time after demand for such reimbursement from the Borrowers, each Bank promptly upon demand shall pay to the Administrator a portion of such unreimbursed fees, costs and expenses proportional to its Committed Share(s) of the Loans. The Banks, or the Administrator, as the case may be, promptly shall distribute to each Bank a reimbursement proportional to such payments received from such Bank in respect of any such fee, cost and expense subsequently reimbursed by the Borrowers. (c) To the extent not promptly reimbursed or otherwise indemnified by the Borrowers, the Administrator and its designees, and their respective directors, officers, employees, attorneys and agents, shall be indemnified, reimbursed and held harmless by the Banks, and (at the request of the Administrator) defended at the expense of the Banks with counsel selected by the Administrator, promptly upon request and ratably in accordance with their respective Committed Shares of the Loans as of the date the event giving rise to the claim occurred, from and against any and all claims, liabilities, losses and expenses of any kind or nature whatsoever that may be imposed on, incurred by or asserted against any of them, or any of their respective directors, officers, employees, attorneys and agents, arising out of or related directly or indirectly to this Agreement, any Note, any of the other Loan Instruments, any part of the Loan Collateral, any part of the Loans or the application of any proceeds thereof, or any Environmental Claim, except such as are occasioned by the indemnified person's own acts or omissions breaching a duty owed to a Bank and amounting to gross negligence or willful misconduct as finally determined pursuant to Applicable Law by a governmental Authority having jurisdiction; provided, however, that nothing herein shall be deemed to relieve the Administrator from bearing its Committed Share of the Loans as a Bank of any of the foregoing liabilities. Section 9.16. Invalidation of Distributions. In the event any amount paid or otherwise distributed to or received by any of the Banks in respect of the Obligations or otherwise (a) must be returned or refunded to any Borrower by the Administrator or any other Bank pursuant this Agreement or any other Loan Instrument (including, without limitation, the return of any amount due to miscalculation or other mistake or the return of any prepaid Letter of Credit Fees upon the early termination of any Letter of Credit), or (b) is invalidated, declared to be fraudulent or preferential or must otherwise be restored or returned by the Administrator or any other Bank upon the early termination of any Letter of Credit) or upon the insolvency, bankruptcy or reorganization of any Borrower, any of their respective affiliates, any guarantor, surety or pledgor under any other Loan Instrument, or any other person, whether by order of any court, by any settlement approved by any court, or otherwise, each Bank shall contribute back to the Administrator an amount such that each Bank will be affected by that invalidation, declaration, restoration, refund, or return ratably in accordance with its Pro Rata Share(s) of the relevant Loans as of the date of the subject payment, distribution or receipt. Section 9.17. No Waiver of Rights, Independent Transactions, Etc. (a) With respect to its Pro Rata Share of the Loans the Administrator shall have the same rights, powers, privileges, remedies and interests under this Agreement and the other Loan Instruments as the other Banks, and may exercise the same as though it were not the Administrator. Accordingly, the terms "Bank" or "Banks" as used in this Agreement or any other Loan Instrument shall not be deemed to exclude any Bank because it is or may have been the Administrator hereunder. (b) Except as any term or provision of this Agreement or any other Loan Instrument may be breached thereby: each Bank also may accept deposits from, lend money to (on a secured or unsecured basis) and generally engage in any kind of banking, trust, lending or other business with any Borrower, any of their respective affiliates or any guarantor, surety or pledgor under any Loan Instrument (each an "Independent Transaction"); and from time to time a Bank or its affiliates may accept and retain, without any obligation to report or otherwise account to any other Bank, any and all payments and other amounts received from or in respect of any such person(s) under any Independent Transaction and any and all payments, distributions and proceeds received respecting any collateral (other than Loan Collateral) securing or intending to secure any of the obligations under any Independent Transaction. Any payment or other amount received by the Administrator from or in respect of any Borrower, any of their respective affiliates or any guarantor, surety or pledgor under any Loan Instrument that is not designated or reasonably ascertainable from the circumstances as being applicable to the Loan Obligations may be arbitrarily applied by the Administrator in its discretion to the Loan Obligations or to any of the obligations of any such person(s) under any Independent Transaction with it. Neither the Administrator nor any other Bank shall be deemed by the execution of this Agreement or any other Loan Instrument to have waived any right, power, privilege, remedy or interest under, or other term or provision of, any Independent Transaction, except that to the extent the execution, delivery or performance of this Agreement or any other Loan Instrument by any party thereto may violate or constitute a default under any term or provision of any Independent Transaction of any Bank, that violation or default shall be deemed to have been permanently waived by such Bank's execution of this Agreement. Section 9.18. Communications with the Borrowers. Except as otherwise provided in this Agreement or any other Loan Instrument, no Bank shall give any notice or waiver to or otherwise communicate on behalf of all of the Banks directly with any Borrower, any of their respective affiliates, or any guarantor, surety or pledgor under any Loan Instrument without the prior written consent of the Administrator or the Majority Banks, as the case may be. A Bank may request that a particular demand, notice, waiver or other communication be given to any such person(s) as required or permitted pursuant to this Agreement or any other Loan Instrument by giving the Administrator and the other Banks a signed notice of its request, or by giving the Administrator and the other Banks notice of its request both by telephone and or telecopy of a signed notice and promptly confirming its request by delivery to the Administrator and each other Bank of an original copy of the signed notice, which notice shall specify the desired communication and contents and the reasons therefore. The Administrator in its discretion may, or at the request of the Majority Banks shall, give such communication(s) to such person(s) (subject to the satisfaction of the requirements of Section 9.06 hereof respecting certain waivers and other items); provided, however, that if the Administrator fails to give any such communication(s) to any such person(s) within a reasonable period of time after being so required by the requisite number of Banks, the Bank(s) so desiring such communication(s) be given may give it directly to such person(s). Section 9.19. Delinquent Banks. Any Bank that fails to deliver funds to or reimburse or otherwise indemnify the Administrator or other indemnified person as, when, and to the full extent required under this Article shall be deemed delinquent under this Article until such time as that obligation is satisfied in full (a Bank that is so delinquent will be referred to in this Section as a "Delinquent Bank"). A Delinquent Bank shall be deemed to have assigned any and all payments thereafter due to it in respect of the Loan Obligations, whether on account of principal, interest, fees or otherwise, as well as the proceeds of all Loan Collateral, to the nondelinquent Banks, and the Delinquent Bank hereby authorizes the Administrator to distribute those assigned amounts to the nondelinquent Banks in proportion to their respective Pro Rata Shares, except that amounts assigned on account of a Delinquent Bank's failure to reimburse or otherwise indemnify may instead in the discretion of the Administrator be allocated and distributed to the nondelinquent Banks or directly to any other indemnified person in such amounts as the Administrator deems appropriate to reflect the respective assumptions of liability of the Banks under this Article. A Delinquent Bank shall be deemed to have satisfied in full any such delinquency when and if, as a result of the distribution of the assigned amounts, the Banks' respective Pro Rata Shares shall have returned to those in effect immediately prior to the delinquency, and refunds and direct payments respecting reimbursements and indemnification shall have been made in an amount equal to that not paid by the Delinquent Bank with respect thereto. This assignment and authorization shall be deemed to be a power coupled with an interest, shall be absolute and irrevocable and shall be effective during any period of delinquency. A Delinquent Bank's approval shall not be required for any reason whatsoever under this Agreement, any other Loan Instrument or Applicable Law, including (without limitation) any required or permitted approval, consent or vote, and any requirement for joint action, unanimity or majority or other approval may be satisfied by the nondelinquent Banks with their respective Pro Rata Shares recomputed by excluding the Pro Rata Share of each Delinquent Bank. A Delinquent Bank may not make any assignment or sell any participation pursuant to Section 10.13 hereof. Section 9.20. No Third Party Rights. The representations, warranties and other terms and provisions of Sections 9.02 to 9.20 of this Article are for the exclusive benefit of the Banks. Accordingly, without limiting the generality of the foregoing, no Borrower, affiliate, other guarantor, surety or pledgor, or other person shall be entitled to rely upon, or to raise as a defense, the failure of the Administrator or any other Bank to comply with those terms and provisions, shall have any right or claim against the Administrator or any other Bank by reason of any of those terms and provisions or shall be entitled to enforce any of those terms and provisions against the Administrator or any other Bank. Section 9.21. Resignation and Successor Administrator. (a) The Administrator may resign at any time by giving written notice to the Banks and the Borrowers. Upon such resignation, the Majority Banks shall have the right to designate a successor Administrator with the consent of the Borrowers, which shall not be unreasonably withheld. In the event no one has been approved (or accepted the appointment) as successor Administrator within thirty days of the Administrator's notice of resignation, the Administrator in its discretion may (on behalf of all of the Banks) appoint an Eligible Assignee (but only if organized under the laws of the United States or any state thereof) as successor Administrator. Upon the acceptance of any appointment as Administrator hereunder, the successor Administrator shall thereupon succeed to and become vested with all of the rights, powers, privileges, interest and duties of the resigning Administrator, and the resigning Administrator shall be discharged from its duties and obligations as "Administrator" under this Agreement and the other Loan Instruments. After resigning as Administrator, the terms and provisions of this Agreement and the other Loan Instruments shall nevertheless inure to the resigned Administrator's benefit as to any actions taken or omitted while it was Administrator. (b) If the successor Administrator is not otherwise a Bank at the time it accepts appointment as successor Administrator under this Agreement, then contemporaneously with such appointment the successor Administrator shall purchase from the other Banks an aggregate interest in the Loans equal to a Committed Share and Pro Rata Share of $5,000,000. Each Bank shall be obligated to sell a pro rata portion of such Loans to the successor Administrator (although two or more Banks by mutual agreement may redistribute among themselves their collective pro rata obligation). The successor Administrator shall pay to each selling Bank an acquisition price equal to the applicable percentage of the seller's Pro Rata Share of (i) the principal balance of the Loans then outstanding under this Agreement and other Loan Instruments and (ii) all shared interest, fees and other amounts accrued but unpaid through the closing of the acquisition. A Bank shall not be relieved of its pro rata obligation hereunder by virtue of having sold all or any portion of its interest to one or more participants. The purchase and sale required hereby shall be effected by an Assignment and Assumption Agreement in the form of Exhibit H hereto. Section 9.22. Delegation of Duties by Administrator. The Administrator from time to time may delegate in whole or in part any one or more of its rights, powers, privileges, remedies and duties under this Agreement and the other Loan Instruments to another Bank, with its consent, which delegation may be general or specific and may be subject to such conditions and limitations as may be specified, and which delegation may be terminated at any time by the Administrator. Any such delegation or termination shall be effective upon written notice from the Administrator to the parties hereto. Any Bank to whom such a delegation has been made may elect at any time to terminate that delegation by written notice to the parties hereto, effective upon their receipt of that notice. Any Bank to whom such a delegation has been made shall be deemed to be the "Administrator" hereunder, and individually may exercise the Administrator's rights, powers, privileges and remedies and shall perform its duties under this Agreement and the other Loan Instruments, to the extent and for the duration of that delegation with the same binding effect as exercise or performance by the delegating Administrator; and provided further that (A) such successor pays to such foreign person an acquisition price equal to the sum of the seller's Pro Rata Share of (1) the principal balance of the Loans then outstanding under this Agreement and other Loan Instruments, and (2) all shared interest fees and other amounts accrued but unpaid through the date of the closing of such sale, and (B) the Borrowers pay to such foreign person all amounts (if any) required under Section 2.04(d) hereof under the circumstances. ARTICLE X Miscellaneous ------------- Section 10.01. Notice. Except as otherwise expressly provided, any notice, request, demand or other communication permitted or required to be given under this Agreement or any other Loan Instrument shall be in writing, shall be sent by one of the following means to the addressee at the address set forth in Exhibit I hereto (or at such other address as shall be designated hereunder by notice to the other parties and persons receiving copies, effective upon actual receipt) and shall be deemed conclusively to have been given: (i) on the first Business Day following the day timely deposited with Federal Express (or other equivalent national overnight courier) or United States Express Mail for overnight delivery, with the cost of delivery prepaid or for the account of the sender; (ii) on the fifth Business Day following the day duly sent by certified or registered United States mail, postage prepaid and return receipt requested; or (iii) when otherwise actually received by the addressee on a Business Day (or on the next Business Day if received after the close of normal business hours or on any non-Business Day). If a certificate, signed notice or other signed item is expressly required by another provision of this Agreement or any other Loan Instrument, a manually signed original must be delivered by the party giving it; any other notice, request, demand or other communication instead may be sent by telecopy, with the cost of transmission prepaid or for the account of the sender, and shall (except as otherwise specified in this Agreement or any other Loan Instrument) be deemed conclusively to have been given on the first Business Day following the day duly sent. Copies of notices to the persons specified in Exhibit I hereto (if any) may be sent by regular first-class mail, postage prepaid, to such persons, but any failure or delay in sending copies shall not affect the validity of any such notice, request, demand or other communication so given to a party. Section 10.02. Expenses of the Administrator and the Banks. The Borrowers shall pay or reimburse on demand any and all costs and expenses incurred by the Administrator or any other Bank, whether directly or indirectly, in connection with the preparation, execution and delivery of the commitment, the preparation, execution and closing of this Agreement and the other Loan Instruments, all waivers, releases, discharges, satisfactions, modifications and amendments thereof and consents with respect thereto, all payments made and actions taken thereunder in the name or on behalf of any Borrower or any guarantor, surety or pledgor under any Loan Instrument, all periodic collateral audits and other evaluations and the ongoing monitoring of the Accounts Receivable, Inventory and other Loan Collateral (including, without limitation, the per diem fees and expenses of the Administrator and its designees in performing such audits and other evaluations), all annual and other appraisals of the real estate included in the Loan Collateral, and the administration, maintenance, enforcement and adjudication of this Agreement, the other Loan Instruments and the rights, powers, privileges, remedies and other interests of the Administrator or any other Bank thereunder and under Applicable Law, including (without limitation) insurance premiums, searches respecting financing statements, unpaid taxes and other Liens, appraisers' and surveyors' fees and expenses, title examination and insurance premiums, surety bond premiums, mortgage recording, documentary, transfer, intangible, note or other similar taxes and revenue stamps, filing and recording expenses and charges, and the disbursements, expenses and fees of counsel to the Administrator or any other Bank, including Parker Chapin Flattau & Klimpl, and the disbursements, expenses and fees of any local or special counsel retained by any of them; provided that the Banks agree that absent the continuation of an Event of Default the Borrowers shall not be required to pay for more than one field audit per year. Section 10.03. Further Assurances. Each Borrower agrees to do such further acts and things and to execute and deliver such statements, assignments, agreements, instruments and other documents as the Majority Banks or Administrator from time to time reasonably may request in connection with the administration, maintenance, enforcement or adjudication of this Agreement and the other Loan Instruments in order (a) to evidence, confirm, perfect or protect any security interest or other Lien granted or required to have been granted under this Agreement and the other Loan Instruments, (b) to give the Administrator, the Banks or their respective designees confirmation and assurance of their rights, powers, privileges, remedies and interests under this Agreement, the other Loan Instruments and Applicable Law, (c) to better enable the Administrator, the Banks or their respective designees to exercise any such right, power, privilege or remedy, or (d) to otherwise effectuate the purpose and the terms and provisions of this Agreement and the other Loan Instruments, each in such form and substance as may be acceptable to the Administrator and the Majority Banks. Section 10.04. Reliance, Exculpation and Indemnification. (a) The Administrator and each of the other Banks shall be entitled to rely upon any notice, consent, certificate, affidavit, statement, paper, document, writing or other communication (which to the extent permitted hereunder may be by telecopy or telephone) reasonably believed by such Bank to be genuine and to have been signed, sent or made by the proper person or persons, and upon opinions and advice of legal counsel (including counsel for any Borrower), independent public accountants and other experts selected by the Administrator. Each Bank shall be entitled to rely, and in entering into this Agreement and the other Loan Instruments in fact has relied, upon the representations, warranties and other information respecting each Borrower contained in this Agreement and the other Loan Instruments notwithstanding any investigation, analysis or evaluation that may have been made or from time to time may be made by any Bank or its designees of all or any part of the assets, business, operations, properties or condition (financial or otherwise) of any Borrower or any other person. (b) The Administrator and each of the other Banks and their respective participants and designees, and their respective directors, officers, employees, attorneys and agents, shall not incur any liability (other than to the extent occasioned by a person's own acts or omissions breaching a duty owed to the Borrowers and amounting to gross negligence or willful misconduct as finally determined pursuant to Applicable Law by a governmental Authority having jurisdiction) for acts and omissions arising out of or related directly or indirectly to this Agreement, any other Loan Instrument, any part of Collateral, any of the Loans or the application of any proceeds thereof, or any Environmental Claim; and each Borrower hereby expressly waives any and all claims and actions (other than to the extent occasioned by a person's own acts or omissions breaching a duty owed to the Borrowers and amounting to gross negligence or willful misconduct as finally determined pursuant to Applicable Law by a governmental Authority having jurisdiction) against the Administrator and each of the other Banks and their respective participants and designees, and their respective directors, officers, employees, attorneys and agents, arising out of or related directly or indirectly to any and all of the foregoing acts, omissions and circumstances. (c) The Administrator and each of the other Banks and their respective participants and designees, and their respective directors, officers, employees, attorneys and agents, each shall be indemnified, reimbursed and held harmless by the Borrowers, and (at the request of such Bank) defended at the expense of the Borrowers with counsel selected by such Bank, from and against any and all claims, liabilities, losses and expenses (including, without limitation, the disbursements, expenses and fees of their respective attorneys) that may be imposed upon, incurred by, or asserted against any of them, or any of their respective directors, officers, employees, attorneys and agents, arising out of or related directly or indirectly to this Agreement, any other Loan Instrument, any part of Collateral, any of the Loans or the application of any proceeds thereof, or any Environmental Claim, except to the extent occasioned by the indemnified person's own acts or omissions breaching a duty owed to the Borrowers and amounting to gross negligence or willful misconduct as finally determined pursuant to Applicable Law by a governmental Authority having jurisdiction. Section 10.05. Interpretation. The parties acknowledge and agree that: each party and its counsel have reviewed and negotiated the terms and provisions of this Agreement (excluding schedules) and have contributed to its revision; the normal rule of construction, to the effect that any ambiguities are resolved against the drafting party, shall not be employed in the interpretation of it; and its terms and provisions shall be construed fairly as to all parties hereto and not in favor of or against any party, regardless of which party was generally responsible for the preparation of this Agreement. Section 10.06. Section and Other Headings. The table of contents and section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. Section 10.07. Provisions of the Notes and Collateral Loan Instruments. The Notes and the various Loan Instruments creating or evidencing the Administrator's interest in the Collateral (for the benefit of all of the Banks) are each subject to the covenants and other terms and provisions contained in this Agreement to the same extent and effect as if fully set forth therein; and in the event that any term or provision of those instruments and documents conflicts or is inconsistent with any term or provision of this Agreement, the term or provision of this Agreement shall control and be given effect. Section 10.08. Governing Law. This Agreement and the other Loan Instruments: have been executed and delivered in the State of New York; and shall be governed by and construed in accordance with the Applicable Laws pertaining in the State of New York (other than those that would defer to the substantive laws of another jurisdiction). Without in any way limiting the preceding choice of law, the parties intend (among other things) to thereby avail themselves of the benefit of Section 5-1401 of the General Obligations Law of the State of New York. Section 10.09. Severability. In the event that any term or provision of this Agreement or any other Loan Instrument shall be finally determined to be superseded, invalid, illegal or otherwise unenforceable pursuant to Applicable Law by a governmental Authority having jurisdiction and venue, that determination shall not impair or otherwise affect the validity, legality or enforceability (a) by or before that Authority of the remaining terms and provisions of this Agreement and the other Loan Instruments, which shall be enforced as if the unenforceable term or provision were deleted, or (b) by or before any other Authority of any of the terms and provisions of this Agreement and the other Loan Instruments. Section 10.10. Survival of Representations, Etc. (a) Each of the representations, warranties, covenants, waivers and other agreements of each Borrower contained in this Agreement and the other Loan Instruments: (i) shall be absolute, irrevocable and unconditional; (ii) shall survive the execution and delivery of this Agreement and the other Loan Instruments, and the advance, repayment and readvance of any or all of the monies to be lent hereunder and thereunder; (iii) shall remain and continue in full force and effect without regard (A) to whether the Loans or other Obligations are now or hereafter existing, acquired or created, and irrespective of the fact that from time to time under the terms and provisions of the Loan Instruments monies may be advanced, repaid and readvanced and the outstanding balance of the Loans may be zero, (B) to any extension or change in the time, manner, place and other terms and provisions of payment or performance of any one or more of the Loans or other Obligations, Obligations, (C) to any waiver, modification, extension, renewal, consolidation, spreading, amendment or restatement of any other term or provision of any Loan Instrument, (D) to any full, partial or non-exercise of any of the rights, powers, privileges, remedies and interests of the Administrator or any other Bank under any Loan Instrument or Applicable Law, against any Borrower or any other person or with respect to any of the Obligations, any other obligations or any collateral or security interest therein, which exercise or enforcement may be delayed, discontinued or otherwise not pursued or exhausted for any or no reason whatsoever, or which may be waived, omitted or otherwise not exercised or enforced (whether intentionally or otherwise), (E) to any surrender, repossession, sequestration, foreclosure, conveyance or assignment (by deed in lieu or otherwise), sale, lease or other realization, dealing or disposition respecting any collateral, (F) to any release, subordination or impairment of all or any part of the Obligations, any other obligations or any collateral or any security interest therein (whether intentionally or otherwise), (G) to any statute of limitations or similar time constraint under any Applicable Law, (H) to any investigation, analysis or evaluation by any Bank or its designees of the assets, business, operations, properties or condition (financial or otherwise) of any Borrower or any other person, (I) to any act or omission on the part of the Administrator, any Bank or any other person, or (J) to any other event that otherwise might constitute a legal or equitable counterclaim, defense or discharge of a borrower, co-obligor, indemnitor, guarantor, surety or pledgor; (iv) shall not be subject to any defense, counterclaim, setoff, right of recoupment, abatement, reduction or other claim or determination that any Borrower may have against any other Borrower, the Administrator, any Bank or any other person; (v) shall not be diminished or qualified by the death, disability, dissolution, reorganization, insolvency, bankruptcy, custodianship or receivership of any Borrower, any other co-obligor, guarantor, surety or pledgor or any other person, or the inability of any of them to pay its debts or perform or otherwise satisfy its obligations as they become due for any reason whatsoever; and (vi) shall remain and continue in full force and effect until all of the Obligations have been fully paid and satisfied and thereafter with respect to events occurring prior to such payment and satisfaction. (b) Without limiting the generality of subsection (a) of this Section or any other term or provision of this Agreement, each Borrower covenants, agrees and consents that, at any time, and from time to time: (i) any collateral securing or intended to secure anyone's obligations under any Loan Instrument may be surrendered, repossessed, sequestered, judicially or nonjudicially foreclosed, sold, conveyed, assigned (by deed in lieu of foreclosure or otherwise), sold, leased or otherwise realized upon, dealt with or disposed of, in whole or in part, whether to the Administrator, its designee or otherwise as respectively contemplated thereunder; (ii) any mortgage or other security interest in any such collateral may be held without due recordation or other perfection (whether intentionally or otherwise), may be recorded or otherwise perfected, or may be assigned, released, subordinated or otherwise impaired, dealt with or disposed of in whole or in part; (iii) the liability of any other Borrower, any other co-obligor, guarantor, surety or pledgor or any other person to pay any and all of the Obligations may be settled, compromised, adjusted, forgiven, released or affected by any other accommodation or released, in whole or in part, or subordinated to the prior payment of any other debts or claims of that or any other person; (iv) any one or more of this Agreement and the other Loan Instruments, or any one or more of the rights, powers, privileges, remedies and interests of any Bank herein or therein, may be sold, conveyed, assigned or otherwise transferred by such Bank in whole or in part (including participations or other undivided interests) to any other person as provided in this Agreement or any other Loan Instrument; or (v) any other right, power, privilege, remedy or interest of the Administrator or any other Bank under this Agreement, any other Loan Instrument or Applicable Law may be exercised or enforced by the Administrator (with the consent of the Requisite Banks, as and if required), the Banks or their respective designees, which exercise or enforcement may be delayed, discontinued or otherwise not pursued or exhausted for any or no reason whatsoever, or any such right, power, privilege, remedy or interest may be waived, omitted or otherwise not exercised or enforced (whether intentionally or otherwise); all in such manner and order, upon such terms and provisions and subject to such conditions as the Administrator (with the consent of the Requisite Banks, as and if required) or any other Bank may deem necessary or desirable in its or their sole and absolute discretion, all without notice to or further assent from any Borrower except as otherwise expressly provided in this Agreement, and all without affecting this Agreement and the other Loan Instruments or any of the obligations hereunder or thereunder. As between the Administrator and the Banks, however, the preceding provisions are not intended and shall not be deemed or construed as modifying the relative rights and obligations of the Administrator and the Banks under this Agreement or any other Loan Instrument. Section 10.11. Counterparts. This Agreement or any other Loan Instrument may be executed in two or more counterpart copies of the entire document or of signature pages to the document, each of which may be executed by one or more of the parties hereto or thereto, but all of which, when taken together, shall constitute a single agreement binding upon all of the parties hereto or thereto (as the case may be). Section 10.12. Effective Date. This Agreement shall be effective on the date (the "Effective Date") as of which (a) this Agreement shall be executed by all the parties hereto and delivered to the Administrator and (b) all the conditions precedent required to have been satisfied on or before the Effective Date pursuant to Article IV hereof shall have been satisfied or waived (whether temporarily or otherwise) in writing by the Administrator (with the consent of the Requisite Banks, as and if required). The Administrator shall notify the Borrowers of the Effective Date if other than the date of the closing of this Agreement; provided, however, that the failure to give such notice shall not alter the Effective Date. Section 10.13. Successors and Assigns; Assignment. (a) Whenever in this Agreement or any other Loan Instrument reference is made to any party, such reference shall be deemed to include the successors, assigns, heirs and legal representatives of such party, and, without limiting the generality of the foregoing, all representations, warranties, covenants and other agreements made by or on behalf of each Borrower in this Agreement and the other Loan Instruments shall inure to the benefit of the successors and assigns of the Banks; provided, however, that nothing herein shall be deemed to authorize or permit any Borrower to assign any of its rights or obligations under this Agreement or any other Loan Instrument to any other person (whether or not an affiliate of such Borrower), and each Borrower covenants and agrees that it shall not make any such assignment. Any Bank from time to time: (a) may assign or sell a participation interest in all or any portion(s) of the rights, powers, privileges, remedies and interests of, and/or the loans and other obligations owed to such Bank under, this Agreement or any other Loan Instrument (i) to any affiliate of such Bank or to any Federal Reserve Bank (as collateral or otherwise), or (ii) to any other person with the consent of the Borrowers, which shall not be unreasonably withheld; (b) may furnish and disclose financial statements, documents and other information pertaining to any Borrower or any Surety to any potential assignee or participant permitted hereunder; and (c) may take any and all other actions that such Bank may determine (in its sole and absolute discretion) to be necessary or appropriate in connection with any such assignment, or participation; in each case without notice to or consent of any Borrower or any other person. (b) Subject to the terms and provisions of this Agreement, each Bank (an "Assignor") from time to time may assign to any Eligible Assignee (an "Assignee") an undivided constant portion of the rights, powers, privileges, remedies and interests, together with the same portion of the duties, obligations and liabilities, of the Assignor under this Agreement and the other Loan Instruments, in any case without notice to or the consent of any Borrower; provided that the Administrator shall retain and exercise various administrative functions and continue to hold the various security interests granted under this Agreement and the other Loan Instruments in the manner and to the extent contemplated by this Agreement and the other Loan Instruments. The Assignor will enter into an Assignment and Assumption Agreement (an "Assignment Agreement") in the form of Exhibit H hereto with any such Assignee. Upon the execution and delivery of an Assignment Agreement by an Assignee, the satisfaction of any conditions required in the Assignment Agreement, the execution and delivery of any tax forms required by subsection (d) of this Section, and the delivery of the Assignment Agreement to the Administrator: (i) the Assignee (and its successors and assigns) shall succeed to the stipulated portion of the Assignor's rights, powers, privileges, remedies and interests, and shall be bound by and liable for the same portion of the Assignor's specific agreements, duties, obligations and liabilities, under this Agreement and other Loan Instruments, including (without limitation) the assigned portion of the Commitment; (ii) the Assignee shall be a "Bank" for all purposes under and with respect to this Agreement and the other Loan Instruments, entitled to all of the general rights, powers, privileges, remedies and other interests and subject to all of the general agreements, duties, obligations and liabilities of a Bank hereunder and thereunder; and (iii) the Assignor shall be and hereby is forever acquitted and released by each Borrower from the assigned portion of its agreements, duties, obligations and liabilities under this Agreement and the other Loan Instruments and all related acts and omissions. Each Borrower agrees to execute and deliver such amendments to or restatements of this Agreement and the other Loan Instruments as may be reasonably required to reflect any such assignment. The Assignor shall give a copy of any Assignment Agreement to the Borrowers; provided that any failure or delay in giving any such copy shall not affect the validity of any such assignment. (c) Except for an assignment required to be effected under Section 9.21 hereof, no assignment described in subsection (b) of this Section shall be effected: (i) for a Committed Share and Pro Rata Share of less than $4,000,000, unless constituting the entire then-remaining interest of the Assignor; (ii) if the Assignor is a Delinquent Bank; or (iii) without the prior written consent of the other Banks. (d) Any Eligible Assignee (other than one organized under the laws of the United States or any state thereof) that is exempt from United States federal withholding tax or subject to a reduced rate by treaty shall, on or before the date it becomes a Bank hereunder, complete, execute and deliver to the Administrator and the Borrowers (one original to each) Internal Revenue Service Form 1001 or 4224, as applicable, and Form W-8 or W-9, as applicable, or any successor form, and such other form(s), certificate(s) and document(s) as may be required under the Code to establish such Eligible Assignee's entitlement to such exemption or reduced rate. If any such Eligible Assignee is not entitled to any such exemption or reduced rate, the Bank proposing to assign to such Eligible Assignee shall give the Administrator and the Borrowers notice of that determination promptly but in any event not less than three Business Days prior to the date it executes and delivers its Assignment Agreement. Any such Eligible Assignee that becomes a Bank shall, from time to time, complete, execute and deliver such updates or extensions to or renewals or replacements of those forms, certificates and documents as may be necessary to reflect any change in circumstance or Applicable Law or to continue any such exemption or reduced rate. (e) Subject to the terms and provisions of this Agreement, each Bank and its participants (other than a Delinquent Bank) from time to time may sell to one or more other financial institutions or institutional investors Eligible Assignees a participation interest in all or an undivided portion of its rights, powers, privileges, remedies and interests under this Agreement and the other Loan Instruments, in any case without any notice to or consent of any Borrower; provided that the selling Bank shall give the Administrator written notice of each such sale, specifying the purchaser and share purchased; and provided further that no Bank shall permit its direct or indirect participant to further assign or participate its interests hereunder without prior written notice to the Administrator. However, the sale or other transfer of a participation shall not reduce, shift or otherwise affect any of the agreements, duties, obligations or liabilities of the selling Bank under this Agreement or any other Loan Instrument, which shall continue in full force and effect and remain the sole responsibility of the selling Bank, and each such selling Bank agrees that it will not raise (and hereby expressly waives) any defense relating to any such participation. Furthermore, no Bank shall grant to any participant the right to approve any supplement to, modification, amendment, restatement or waiver of or departure from this Agreement or any other Loan Instrument other than with respect to (i) any reduction in the principal of the Loans or in the calculation of interest thereon (other than default interest), or any postponement of any date fixed for any payment of principal or interest on the Loans (other than default interest), to the extent the participant has an interest in such Loans, or (ii) release all or substantially all of the Loan Collateral other than as contemplated by the terms and provisions of this Agreement and other Loan Instruments. The Administrator and other Banks and parties may continue to deal directly and exclusively with any such selling Bank. (f) Each Bank and its participants from time to time may furnish and disclose financial statements, documents and other information pertaining to the Borrowers to any potential assignee or participant. Each Borrower covenants and agrees to furnish copies of financial statements, reports and other documents required under this Agreement directly to such potential assignees and participants as any Bank from time to time may request. (g) Each Borrower acknowledges and agrees that any Bank's source of funds may derive in part from its participants. Accordingly, references in Sections 1.01 and 2.04 and the other terms and provisions of this Agreement and the other Loan Instruments to rates, determinations, reserve and capital adequacy requirements, expenses, increased costs, reduced receipts and the like as they pertain to any Bank shall be deemed also to include those of each of its participants (subject, in each case, to the maximum amount that would have been incurred by or attributable to such Bank directly if such Bank, rather than the participant, had held the interest participated). Section 10.14. Limits on the Administrator's Ability to Act, Etc. Notwithstanding anything in this Agreement or any other Loan Instrument to the contrary, each Borrower acknowledges and agrees that Article IX hereof and other terms and provisions of this Agreement and the other Loan Instruments generally limit the authority of the Administrator to act without the consent of certain or all of the other Banks. Each Borrower acknowledges and agrees that the Administrator shall have no duty or obligation under this Agreement, any other Loan Instrument or Applicable Law to act in disregard or contravention of those terms and provisions. Section 10.15. No Third Party Rights. The representations, warranties and other terms and provisions of this Agreement and the other Loan Instruments are for the exclusive benefit of the parties hereto, and, except as otherwise expressly provided herein or therein, no other person, including creditors of any party hereto, shall have any right or claim against any party by reason of any of those terms and provisions or be entitled to enforce any of those terms and provisions against any party. Section 10.16. No Waiver by Action, Etc. Any waiver or consent respecting any representation, warranty, covenant or other term or provision of this Agreement or any other Loan Instrument shall be effective only in the specific instance and for the specific purpose for which given and shall not be deemed, regardless of frequency given, to be a further or continuing waiver or consent. The failure or delay of a party at any time or times to require performance of, or to exercise its rights with respect to, any representation, warranty, covenant or other term or provision of this Agreement or other Loan Instrument in no manner (except as otherwise expressly provided herein) shall affect its right at a later time to enforce any such provision. No notice to or demand on any Borrower in any case shall entitle such party to any other or further notice or demand in the same, similar or other circumstances. The acceptance by the Administrator or any other Bank of (a) any partial or late payment shall not constitute a satisfaction or waiver of the full amount then due or the resulting Event of Default or (b) any payment during the continuance of an Event of Default shall not constitute a waiver or cure thereof; and the Administrator or any other Bank may accept or reject any such payment without affecting any of its rights, powers, privileges, remedies and other interests under this Agreement, the other Loan Instruments and Applicable Law. All rights, powers, privileges, remedies and other interests of the Administrator or any other Bank hereunder are cumulative and not alternatives, and they are in addition to and shall not limit (except as otherwise expressly provided herein) any other right, power, privilege, remedy or other interest of the Administrator or any other Bank under this Agreement, any other Loan Instrument or Applicable Law. [End of Page] Section 10.17. Modification, Amendment, Etc. Except to the extent that the approval or signatures of all of the Banks is not required as provided below or in any other term or provision of this Agreement or any other Loan Instrument, each and every supplement or amendment to or modification or restatement of this Agreement or any other Loan Instrument shall be in writing and signed by the parties hereto or thereto, respectively, and each and every waiver of, or consent to any departure from, any representation, warranty, covenant or other term or provision of this Agreement or any other Loan Instrument shall be in writing and signed by the affected parties hereto or thereto, respectively; provided, however, that (a) the Administrator (with the consent of the Requisite Banks, as and if required) may sign all waivers and consents on behalf of all of the Banks, and (b) the Requisite Banks may approve and sign (or authorize the Administrator to sign) on behalf of all of the Banks certain waivers, supplements, modifications, amendments and restatements of this Agreement and the other Loan Instruments in accordance with Article IX hereof and the other applicable terms and provisions of this Agreement and the other Loan Instruments. Section 10.18. Entire Agreement. This Agreement and the other Loan Instruments contain the entire agreement of the parties and supersede all other representations, warranties, agreements and understandings, oral or otherwise, among the parties with respect to the matters contained herein and therein. In Witness Whereof, the parties hereto have executed and delivered this Agreement as of the date first written above. Aeroflex Incorporated (f/k/a ARX, Inc.) By: /s/ Charles Badlato ----------------------------------------- Charles T. Badlato, Treasurer Aeroflex Laboratories Incorporated By: /s/ Charles Badlato ----------------------------------------- Charles T. Badlato, Assistant Secretary Aeroflex International Inc. By: /s/ Charles Badlato ----------------------------------------- Charles T. Badlato, Assistant Secretary Aeroflex Lintek Corp. By: /s/ Charles Badlato ----------------------------------------- Charles T. Badlato, Assistant Secretary Aeroflex Systems Corp. By: /s/ Charles Badlato ----------------------------------------- Charles T. Badlato, Assistant Secretary Comstron International, S.A.R.L. By: /s/ Charles Badlato ----------------------------------------- Charles T. Badlato, Assistant Secretary [Signatures Continued] MIC Technology Corporation By: /s/ Charles Badlato ----------------------------------------- Charles T. Badlato, Secretary MIC Technology S.A.R.L. By: /s/ Charles Badlato ----------------------------------------- Charles T. Badlato, Assistant Secretary Vibration Mountings and Controls, Inc. By: /s/ Charles Badlato ----------------------------------------- Charles T. Badlato, Assistant Secretary UTMC Microelectronic Systems Inc. By: /s/ Charles Badlato ----------------------------------------- Charles T. Badlato, Assistant Secretary The Chase Manhattan Bank By: /s/ Barbara G. Bertschi ----------------------------------------- Barbara G. Bertschi, Vice President Fleet Bank, N.A. By: /s/ Christopher Mendelsohn ----------------------------------------- Christopher Mendelsohn, Vice President Fleet Bank, N.A., as Administrator By: /s/ Christopher Mendelsohn ----------------------------------------- Christopher Mendelsohn, Vice President STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Treasurer), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Aeroflex Incorporated (f/k/a ARX, Inc.)) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Aeroflex Laboratories Incorporated) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Aeroflex International Incorporated) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Aeroflex Lintek Corp.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Aeroflex Systems Corp.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Comstron International, S.A.R.L.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., MIC Technology Corporation) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., MIC Technology S.A.R.L.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Vibration Mountings and Controls, Inc.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., UTMC Microelectronic Systems Inc.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Barbara G. Bertschi, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as a Vice President), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., The Chase Manhattan Bank) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Christopher Mendelsohn, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as a Vice President), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Fleet Bank, N.A.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Christopher Mendelsohn, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as a Vice President), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Fleet Bank, N.A., as Administrator) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: EXHIBIT A to FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT ------------------------------------------------------- FIFTH AMENDED AND RESTATED REVOLVING PROMISSORY NOTE $ ______________ Jericho, New York Dated as of February 25, 1999 FOR VALUE RECEIVED, Aeroflex Incorporated (f/k/a ARX, Inc.), Aeroflex Laboratories Incorporated, Aeroflex International Inc., Aeroflex Lintek Corp., Aeroflex Systems Corp., Comstron International, S.A.R.L., MIC Technology Corporation, MIC Technology S.A.R.L., Vibration Mountings and Controls, Inc., and UTMC Microelectronic Systems Inc. (individually, a "Borrower", and collectively, the "Borrowers"), jointly and severally promise to pay to the order of [NAME OF BANK], at [BANK ADDRESS], or at such other place as may be designated in writing by the holder of this Note, the principal sum of DOLLARS ($__________), or so much thereof as may be advanced and outstanding, with interest thereon, to be computed on each advance from the date of its disbursement, all as provided in that certain Fourth Amended and Restated Loan and Security Agreement dated as of February 25, 1999, among the Borrowers, Fleet Bank N.A., as Administrator (the "Administrator"), the holder of this Note and the other Banks identified therein (as the same may be supplemented, modified, amended, restated or replaced from time to time in the manner provided therein, the "Loan Agreement"). Capitalized terms used and not otherwise defined in this Note shall have the meanings respectively assigned to them in the Loan Agreement. This Note is one of the Revolving Credit Notes and one of the Notes referred to in the Loan Agreement. Principal and interest shall be due and payable as provided in the Loan Agreement, and all of the terms and provisions of the Loan Agreement, including (without limitation) provision for prepayment and acceleration of maturity, are incorporated herein by reference and made a part hereof. This Note is secured by certain collateral pledged by the Borrowers to the Administrator (for the benefit of all of the Banks) pursuant to the Loan Agreement and the other Loan Instruments. This Note is one of the Revolving Credit Notes issued by the Borrowers in order to amend, extend and completely replace the Existing Notes to evidence the Indebtedness outstanding under the Existing Notes and to be a substitute and replacement for the Existing Notes, but the Revolving Credit Notes are not intended and shall not be deemed or construed to be a payment, satisfaction, cancellation or violation of such Indebtedness. Presentment for payment, notice of dishonor, protest, notice of protest and all similar notices are hereby waived by each Borrower. This Note has been made and delivered in the City, County and State of New York, where all advances and repayments shall be made. This Note shall be governed by and construed in accordance with the applicable laws pertaining in the State of New York (other than those that would defer to the substantive laws of another jurisdiction). This Note is a Loan Instrument and shall be governed by and construed in accordance with the applicable terms and provisions of the Loan Agreement. This Note may not be changed or terminated orally, and in any event may not be changed without the written consent of the holder hereof. Aeroflex Incorporated (f/k/a ARX, Inc.) By: ------------------------------------------ Charles T. Badlato, Treasurer Aeroflex Laboratories Incorporated By: ------------------------------------------ Charles T. Badlato, Assistant Secretary [Signatures Continued] Aeroflex International Inc. By: ------------------------------------------ Charles T. Badlato, Assistant Secretary Aeroflex Lintek Corp. By: ------------------------------------------ Charles T. Badlato, Assistant Secretary Aeroflex Systems Corp. By: ------------------------------------------ Charles T. Badlato, Assistant Secretary Comstron International, S.A.R.L. By: ------------------------------------------ Charles T. Badlato, Assistant Secretary MIC Technology Corporation By: ------------------------------------------ Charles T. Badlato, Secretary MIC Technology S.A.R.L. By: ------------------------------------------ Charles T. Badlato, Assistant Secretary Vibration Mountings and Controls, Inc. By: ------------------------------------------ Charles T. Badlato, Assistant Secretary UTMC Microelectronic Systems Inc. By: ------------------------------------------ Charles T. Badlato, Assistant Secretary STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Aeroflex Incorporated (f/k/a ARX, Inc.)) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Aeroflex Laboratories Incorporated) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Aeroflex International Incorporated) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Aeroflex Lintek Corp.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Aeroflex Systems Corp.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Comstron International, S.A.R.L.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., MIC Technology Corporation) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., MIC Technology S.A.R.L.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Vibration Mountings and Controls, Inc.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., UTMC Microelectronic Systems Inc.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: EXHIBIT B to FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT TERM PROMISSORY NOTE $ ____________ Jericho, New York Dated as of February 25, 1999 FOR VALUE RECEIVED, Aeroflex Incorporated (f/k/a ARX, Inc.), Aeroflex Laboratories Incorporated, Aeroflex International Inc., Aeroflex Lintek Corp., Aeroflex Systems Corp., Comstron International, S.A.R.L., MIC Technology Corporation, MIC Technology S.A.R.L., Vibration Mountings and Controls, Inc., and UTMC Microelectronic Systems Inc. (individually, a "Borrower", and collectively, the "Borrowers"), jointly and severally promise to pay to the order of [NAME OF BANK], at [BANK ADDRESS],or at such other place as may be designated in writing by the holder of this Note, the principal sum of DOLLARS ($__________), or so much thereof as may be advanced and outstanding, with interest thereon, to be computed on each advance from the date of its disbursement, all as provided in that certain Fourth Amended and Restated Loan and Security Agreement dated as of February 25, 1999, among the Borrowers, Fleet Bank N.A., as Administrator (the "Administrator"), the holder of this Note and the other Banks identified therein (as the same may be supplemented, modified, amended, restated or replaced from time to time in the manner provided therein, the "Loan Agreement"). Capitalized terms used and not otherwise defined in this Note shall have the meanings respectively assigned to them in the Loan Agreement. This Note is one of the Term Notes and one of the Notes referred to in the Loan Agreement. Principal and interest shall be due and payable as provided in the Loan Agreement, and all of the terms and provisions of the Loan Agreement, including (without limitation) provision for prepayment and acceleration of maturity, are incorporated herein by reference and made a part hereof. This Note is secured by certain collateral pledged by the Borrowers to the Administrator (for the benefit of all the Banks) pursuant to the Loan Agreement and the other Loan Instruments. Presentment for payment, notice of dishonor, protest, notice of protest and all similar notices are hereby waived by each Borrower. This Note has been made and delivered in the City, County and State of New York, where all advances and repayments shall be made. This Note shall be governed by and construed in accordance with the applicable laws pertaining in the State of New York (other than those that would defer to the substantive laws of another jurisdiction). This Note is a Loan Instrument and shall be governed by and construed in accordance with the applicable terms and provisions of the Loan Agreement. This Note may not be changed or terminated orally, and in any event may not be changed without the written consent of the holder hereof. Aeroflex Incorporated (f/k/a ARX, Inc.) By: ------------------------------------------- Charles T. Badlato, Treasurer Aeroflex Laboratories Incorporated By: ------------------------------------------- Charles T. Badlato, Assistant Secretary [Signatures Continued] Aeroflex International Inc. By: ------------------------------------------- Charles T. Badlato, Assistant Secretary Aeroflex Lintek Corp. By: ------------------------------------------- Charles T. Badlato, Assistant Secretary Aeroflex Systems Corp. By: ------------------------------------------- Charles T. Badlato, Assistant Secretary Comstron International, S.A.R.L. By: ------------------------------------------- Charles T. Badlato, Assistant Secretary MIC Technology Corporation By: ------------------------------------------- Charles T. Badlato, Secretary MIC Technology S.A.R.L. By: ------------------------------------------- Charles T. Badlato, Assistant Secretary Vibration Mountings and Controls, Inc. By: ------------------------------------------- Charles T. Badlato, Assistant Secretary UTMC Microelectronic Systems Inc. By: ------------------------------------------- Charles T. Badlato, Assistant Secretary STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Treasurer), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Aeroflex Incorporated (f/k/a ARX, Inc.)) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Aeroflex Laboratories Incorporated) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Aeroflex International Incorporated) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Aeroflex Lintek Corp.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Aeroflex Systems Corp.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Comstron International, S.A.R.L.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., MIC Technology Corporation) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., MIC Technology S.A.R.L.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Vibration Mountings and Controls, Inc.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., UTMC Microelectronic Systems Inc.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: EXHIBIT C to FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT ------------------------------------------------------- MORTGAGE NOTE $_____________ Jericho, New York Dated as of February 25, 1999 FOR VALUE RECEIVED, Aeroflex Incorporated (f/k/a ARX, Inc.) ("Aeroflex"), Aeroflex Laboratories Incorporated, Aeroflex International Inc., Aeroflex Lintek Corp., Aeroflex Systems Corp., Comstron International, S.A.R.L., MIC Technology Corporation, MIC Technology S.A.R.L., Vibration Mountings and Controls, Inc., and UTMC Microelectronic Systems Inc. (individually, a "Borrower", and collectively, the "Borrowers"), jointly and severally promise to pay to the order of [NAME OF BANK], at [BANK ADDRESS],or at such other place as may be designated in writing by the holder of this Note, the principal sum of DOLLARS ($__________), or so much thereof as may be advanced and outstanding, with interest thereon, to be computed on each advance from the date of its disbursement, all as provided in that certain Fourth Amended and Restated Loan and Security Agreement dated as of February 25, 1999, among the Borrowers, Fleet Bank N.A., as Administrator (the "Administrator"), the holder of this Note and the other Banks identified therein (as the same may be supplemented, modified, amended, restated or replaced from time to time in the manner provided therein, the "Loan Agreement"). Capitalized terms used and not otherwise defined in this Note shall have the meanings respectively assigned to them in the Loan Agreement. This Note is one of the Mortgage Notes and one of the Notes referred to in the Loan Agreement. Principal and interest shall be due and payable as provided in the Loan Agreement, and all of the terms and provisions of the Loan Agreement, including (without limitation) provision for prepayment and acceleration of maturity, are incorporated herein by reference and made a part hereof. This Note is secured by certain collateral pledged by Aeroflex to the Administrator (for the benefit of all the Banks) pursuant to the Plainview Mortgage, the Loan Agreement and the other Loan Instruments. Presentment for payment, notice of dishonor, protest, notice of protest and all similar notices are hereby waived by each Borrower. This Note has been made and delivered in the City, County and State of New York, where all advances and repayments shall be made. This Note shall be governed by and construed in accordance with the applicable laws pertaining in the State of New York (other than those that would defer to the substantive laws of another jurisdiction). This Note is a Loan Instrument and shall be governed by and construed in accordance with the applicable terms and provisions of the Loan Agreement. This Note may not be changed or terminated orally, and in any event may not be changed without the written consent of the holder hereof. Aeroflex Incorporated (f/k/a ARX, Inc.) By: ------------------------------------------ Charles T. Badlato, Treasurer Aeroflex Laboratories Incorporated By: ------------------------------------------ Charles T. Badlato, Assistant Secretary [Signatures Continued] Aeroflex International Inc. By: ------------------------------------------ Charles T. Badlato, Assistant Secretary Aeroflex Lintek Corp. By: ------------------------------------------ Charles T. Badlato, Assistant Secretary Aeroflex Systems Corp. By: ------------------------------------------ Charles T. Badlato, Assistant Secretary Comstron International, S.A.R.L. By: ------------------------------------------ Charles T. Badlato, Assistant Secretary MIC Technology Corporation By: ------------------------------------------ Charles T. Badlato, Secretary MIC Technology S.A.R.L. By: ------------------------------------------ Charles T. Badlato, Assistant Secretary Vibration Mountings and Controls, Inc. By: ------------------------------------------ Charles T. Badlato, Assistant Secretary UTMC Microelectronic Systems Inc. By: ------------------------------------------ Charles T. Badlato, Assistant Secretary STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Treasurer), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Aeroflex Incorporated (f/k/a ARX, Inc.)) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Aeroflex Laboratories Incorporated) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Aeroflex International Incorporated) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Aeroflex Lintek Corp.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Aeroflex Systems Corp.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Comstron International, S.A.R.L.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., MIC Technology Corporation) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., MIC Technology S.A.R.L.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., Vibration Mountings and Controls, Inc.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 18th day of February in the year 1999, before me, the undersigned, personally appeared Charles T. Badlato, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity (i.e., as Assistant Secretary), and that by his signature on the instrument, the person upon behalf of which the individual acted (i.e., UTMC Microelectronic Systems Inc.) executed the instrument. ------------------------------------------------- Notary Public, State of New York My Commission Expires: EXHIBIT D to FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT ------------------------------------------------------- OFFICER'S BRINGDOWN CERTIFICATE respecting AEROFLEX INCORPORATED (f/k/a ARX, Inc.), AEROFLEX LABORATORIES INCORPORATED, AEROFLEX INTERNATIONAL INC., AEROFLEX LINTEK CORP., AEROFLEX SYSTEMS CORP., COMSTRON INTERNATIONAL, S.A.R.L., MIC TECHNOLOGY CORPORATION, MIC TECHNOLOGY S.A.R.L., VIBRATION MOUNTINGS AND CONTROLS, INC., and UTMC MICROELECTRONIC SYSTEMS INC. [MONTH, DATE AND YEAR] Pursuant to the Fourth Amended and Restated Loan and Security Agreement dated as of February 25, 1999 (as the same may be supplemented, modified, amended, restated or replaced from time to time in the manner provided therein, the "Loan Agreement"), I, [Print Name] , the [Print Title] of Aeroflex Incorporated (f/k/a ARX, Inc.), and the [Print Title] of Aeroflex Laboratories Incorporated, Aeroflex International Inc., Aeroflex Lintek Corp., Aeroflex Systems Corp., Comstron International, S.A.R.L., MIC Technology Corporation, MIC Technology S.A.R.L., Vibration Mountings and Controls, Inc., and UTMC Microelectronic Systems Inc. (individually, a "Borrower", and collectively, the "Borrowers"), hereby certify to Fleet Bank N.A., as Administrator (the "Administrator"), and to each of the Banks, as of the date hereof that[, except as set forth on Schedule I hereto]: (a) [both prior and after giving effect to any requested Advance [Term Loan advance or Letter of Credit issuance] in connection herewith,] the representations and warranties of each of the Borrowers set forth in the Loan Agreement and other Loan Instruments (as to any Advance Date [and Issuance Date] are true and correct in all material respects with the same effect as though those representations and warranties had been made on and as of the date hereof, subject, however, to any updated information respecting any event(s) occurring after the Effective Date affecting any of the representations and warranties contained in Sections 3.04, 3.06 and 3.11 hereof and specifically disclosed in any signed notice or bringdown, Indebtedness or Credit Support certificate required hereunder and delivered to and accepted by the Administrator (with the consent of the Requisite Banks, as and if required) on or prior to the date hereof, although it is acknowledged and agreed that neither such delivery nor such acceptance shall constitute a waiver of or consent to any event so disclosed; (b) [both prior and after giving effect to any requested Advance [Term Loan advance or Letter of Credit issuance] in connection herewith,] no Event of Default or Default has occurred and is continuing, excluding, however, those events subject to an express written waiver or consent from the Administrator (with the consent of the Requisite Banks, as and if required), if any; (c) the information set forth in the Secretary's or Officer's Certificate most recently delivered to the Administrator or any other Bank respecting (among other things) the authorizing resolutions, organizational and governing documents and the incumbency of the officers of each of the Borrowers is true and complete in all material respects as if those certificates had been delivered on and as of the date hereof; (d) there are no actions, suits or proceedings pending or, to the best knowledge of the undersigned, threatened or contemplated by any person for the liquidation or dissolution of any Borrower or otherwise threatening their respective existences or challenging or calling into question the power or authority of any Borrower to execute or deliver any Loan Instrument to which it is or will be a party or to perform any of its obligations thereunder; and (e) the Obligations of the Borrowers under the Loan Agreement, Note and other Loan Instruments (i) are not subject as of the date of this Certificate to any defense, counterclaim, setoff, right of recoupment, abatement, reduction or other claim or determination against the Administrator, any Bank or any other person and (ii) remain and are currently in full force and effect, enforceable against them in accordance with their respective terms and provisions. Capitalized terms and non-capitalized words and phrases used and not otherwise defined in this Certificate shall have the meanings respectively assigned to them in the Loan Agreement. This Certificate may be relied upon by the successors, assigns and participants of each Bank and by counsel to the Administrator in giving any opinion or advice requested of such counsel. ------------------------------------------------- (SIGNATURE) DATE SIGNED:____________ ___, ____ EXHIBIT E-I to FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT ------------------------------------------------------- FINANCIAL COVENANTS COMPLIANCE CERTIFICATE respecting AEROFLEX INCORPORATED (f/k/a ARX, Inc.), AEROFLEX LABORATORIES INCORPORATED, AEROFLEX INTERNATIONAL INC., AEROFLEX LINTEK CORP., AEROFLEX SYSTEMS CORP., COMSTRON INTERNATIONAL, S.A.R.L., MIC TECHNOLOGY CORPORATION, MIC TECHNOLOGY S.A.R.L., VIBRATION MOUNTINGS AND CONTROLS, INC., and UTMC MICROELECTRONIC SYSTEMS INC. [MONTH, DATE AND YEAR] Pursuant to the Fourth Amended and Restated Loan and Security Agreement dated as of February 25, 1999 (as the same may be supplemented, modified, amended, restated or replaced from time to time in the manner provided therein, the "Loan Agreement"), I, [Print Name] , the [Print Title] of Aeroflex Incorporated (f/k/a ARX, Inc.), Aeroflex Laboratories Incorporated, Aeroflex International Inc., Aeroflex Lintek Corp., Aeroflex Systems Corp., Comstron International, S.A.R.L., MIC Technology Corporation, MIC Technology S.A.R.L., Vibration Mountings and Controls, Inc., and UTMC Microelectronic Systems Inc. (individually, a "Borrower", and collectively, the "Borrowers"), hereby certify to Fleet Bank N.A., as Administrator (the "Administrator"), and to each of the Banks, as of the date hereof that: (a) The Consolidated Effective Net Worth of the Borrowers as at __________ __, ____ (the "Reporting Date"), was not less than the minimum required for such date by Section 6.01(a) of the Loan Agreement, with compliance calculated as follows: (i) Aggregate amount of all tangible assets and properties (A) Aggregate amount of all assets and properties $________ (B) Minus the sum of: patents $________ goodwill $________ other intangible assets $________ Total Intangible Assets [$________] (C) Aggregate amount of all tangible assets and properties $________ (item (A) minus item (B), above) (ii) Minus: Consolidated Total Liabilities [$________] (iii) Tangible Net Worth $ (item (i) minus item (ii), above) ======== (iv) Plus: Consolidated Subordinated Indebtedness $________ (v) Consolidated Effective Net Worth $ (item (iii) $ plus items (iv) and (v), above) ======== (b) The Consolidated Effective Leverage Ratio as at the Reporting Date was not more than the maximum for such date permitted by Section 6.01(b) of the Loan Agreement with compliance calculated as follows: (i) Consolidated Unsubordinated Liabilities: (A) Total Liabilities $_________ (B) Minus: Consolidated Subordinated Indebtedness [$_______] (C) Consolidated Unsubordinated Liabilities $ (item (i) minus item ========= (ii), above) (ii) Consolidated Effective Net Worth $ (from part (a)(vi), above) ========= (iii) Consolidated Effective Leverage Ratio __ :1 (the ratio of item (i)(C) to item (ii), above) (c) The Consolidated Funded Debt Ratio for the fiscal year or other period of four consecutive fiscal quarters ended on the Reporting Date did not exceed the maximum permitted for such date by Section 6.01(c) of the Loan Agreement, with compliance calculated as follows: (i) Consolidated Senior Funded Indebtedness: (A) Indebtedness payable in one year or more $________ (including current portions) (B) Minus: Consolidated Subordinated [$_______] Indebtedness included in item (A), above (C) Minus: any Indebtedness included [$_______] in item (A), above, secured fully and only by cash and cash equivalents (D) Consolidated Senior Funded Indebtedness $________ (item (A) minus item (B), and then minus item (C), above) (ii) Consolidated Available Earnings: (A) Net Income (or Loss) for such period $________ (B) Minus: Extraordinary or unusual gain(s) $________ included in determining item (A), above (C) Plus: Extraordinary or unusual loss(es)$________ included in determining item (A), above (D) Plus: Consolidated Interest Expense $________ included in determining item (A), above (E) Plus: Total federal, state, local and $________ foreign income and franchise taxes accrued and/or paid during such period and deducted in computing (A), above (F) Consolidated EBIT (item (A) minus item $ (B), then$ plus items (C), (D), and ========= (E), above) (G) Plus: Consolidated Depreciation and $________ Amortization included in determining item (F), above (H) Minus: Aggregate Capital Expenditures $________ for such period (I) Consolidated Available Earnings $ (item (F) plus item (G), and then ========= minus item (H), above) (iii) Consolidated Funded Debt Ratio (the ratio of ___ :1 item (i)(D) to item (ii)(I), above) (d) The Consolidated Debt Service Ratio of the Borrowers for the fiscal year or other period of four consecutive fiscal quarters ended on the Reporting Date was not less than the minimum for such period required by Section 6.01(d) of the Loan Agreement, with compliance calculated as follows: (i) Adjusted Consolidated Available Earnings (A) Consolidated Available Earnings $________ (from part (c)(ii)(I), above) (B) Plus: Capital Expenditures $________ financed through Other Debt (which expenditures are reflected in item (c)(ii)(H), above) (C) Adjusted Consolidated Available Earnings $________ (item (A) minus item (B) above) (ii) Consolidated Debt Service: (A) Consolidated Interest Expense for $________ such period (B) Plus: Long-Term Indebtedness $________ payable during twelve-month period (C) Minus: the principal balance of the $________ Revolving Credit Loans (only during final twelve months of the Revolving Credit Period) to the extent included in item (B), above (D) Minus: the principal balance of $________ Indebtedness secured fully and only by cash and cash equivalents to the extent included in item (B), above (E) Plus: interest expense re discontinued $________ business operations (F) Plus: Indebtedness payable during $________ the next succeeding twelve-month period re discontinued business operations (G) Consolidated Debt Service $ (the sum of items (A), (B), (E) and ========= (F), then minus items (C) and (D), above) (iii) Consolidated Debt Service Ratio ___ :1 (the ratio of item (i)(C) to item (ii)(G), above) (e) The Consolidated Quick Ratio of the Borrowers at the Reporting Date was not less than the minimum required for such date by Section 6.01(e) of the Loan Agreement, with compliance calculated as follows: (i) Consolidated Quick Assets (consisting of the following) (A) cash $_________ (B) marketable securities $_________ (C) Accounts Receivable $_________ (D) Minus: current assets $_________ listed above that are encumbered by security interests other under the Loan Agreement (E) Consolidated Quick Assets $ (the sum of items (A), (B) and ========= (C), minus item (D), above) (ii) Consolidated Current Liabilities $ (excluding the current portion of long-term debt) ========= (iii) Consolidated Quick Ratio (the ratio of item (i) ___ :1 to item (ii), above) (f) The consolidated income before taxes of the Borrowers for the fiscal year ended on the Reporting Date was not less than the minimum required for the fiscal year by Section 6.01(f) of the Loan Agreement ($6,000,000), with compliance calculated as follows: (i) Net Income (or Loss) for such period $_________ (same as item (c)(ii)(A), above) (ii) Plus: Total federal, state, local $_________ and foreign income and franchise taxes accrued and/or paid during such period and deducted in computing (i), above (same as item (c)(ii)(E), above) (iii) Consolidated income before taxes (item (i) plus $ item (ii), above) ========= (g) The Consolidated Capital Expenditures of the Borrowers for the period commencing with the beginning of the fiscal year and ended on the Reporting Date did not exceed the maximum permitted for the fiscal year by Section 6.01(g) of the Loan Agreement, with compliance calculated as follows: (i) Consolidated Capital Expenditures $ ========= (h) The Applicable Pricing Level for the forthcoming fiscal quarter is calculated as follows: (i) Consolidated Effective Leverage Ratio ___ :1 (from item (b)(iii), above) (ii) Applicable Pricing Level Level _____ (the numerically lowest pricing level where item (i) does not exceed the specified maximum in the definition of Applicable Pricing Level) (i) The Other Debt incurred by the Borrowers pursuant to Section 6.02(b)(i) of the Loan Agreement during the period commencing with the beginning of the fiscal year and ended on the Reporting Date did not exceed the maximum amount for the fiscal year permitted by that section, with compliance calculated as follows: (i) purchase money Indebtedness $________ (ii) refinancings secured by equipment, etc. $________ (iii) leases, whether or not constituting Indebtedness $________ under GAAP (excluding, however, leases (i) of real property or (ii) having aggregate rental payments for the initial term (discounted to present value) of less than $100,000 for any lease (with multiple equipment schedules constituting a single lease) or series of related leases) (iv) total Other Debt $________ (the sum of items (i), (ii) and (iii), above) (j) The Borrowers mandatory prepayment of the Loans under Section 2.05 (e) is calculated as follows: (i) net proceeds received by any of the Borrowers since the beginning of the fiscal year in connection with: (A) any voluntary sale, lease, transfer, $_________ assignment, liquidation, or other disposition of any Investment or property, plant or equipment (whether or not) Collateral (B) any involuntary transfer, $_________ assignment, discontinuation, liquidation, condemnation, destruction or other disposition of any Collateral or other business, asset or property (C) total disposition proceeds $_________ (ii) Annual Threshold Amount $100,000 (iii) Excluded Dispositions since the beginning of the fiscal year (A) sales of equipment in any sale/leaseback transaction permitted under Section 7.03(c) of the Loan Agreement $_________ (B) dispositions of any Collateral or other asset or property specified in Section 7.03(b) of the Loan Agreement if the conditions of that subsection are satisfied and the repair, rebuilding, replacement or acquisition contemplated by that subsection are completed within the specified time $_________ (C) Total Excluded Disposition Amount $_________ (iv) Mandatory Prepayments previously made since the beginning of the fiscal year (v) Mandatory Prepayment currently due $_________ (item (i)(C) minus the sum of items (ii), (iii) and (iv), above)
The preceding calculations are summarized from the Loan Agreement; in the event of any conflict, the actual provisions of the Loan Agreement shall control. Capitalized terms and noncapitalized words and phrases used and not otherwise defined in this Certificate shall have the meanings respectively assigned to them in the Loan Agreement, except that certain terms refer to the applicable captions or headings of the Borrowers' financial statements and reports. This Certificate may be relied upon by the successors, assigns and participants of each Bank and by counsel to the Administrator in giving any opinion or advice requested of such counsel. -------------------------------------------------- (SIGNATURE) DATE SIGNED:____________ ___, ____ EXHIBIT E-II to FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT ------------------------------------------------------- BORROWING BASE CERTIFICATE respecting AEROFLEX INCORPORATED (f/k/a ARX, Inc.), AEROFLEX LABORATORIES INCORPORATED, AEROFLEX INTERNATIONAL INC., AEROFLEX LINTEK CORP., AEROFLEX SYSTEMS CORP., COMSTRON INTERNATIONAL, S.A.R.L., MIC TECHNOLOGY CORPORATION, MIC TECHNOLOGY S.A.R.L., VIBRATION MOUNTINGS AND CONTROLS, INC., and UTMC MICROELECTRONIC SYSTEMS INC. [MONTH, DATE AND YEAR] -------------------- Pursuant to the Fourth Amended and Restated Loan and Security Agreement dated as of February 25, 1999 (as the same may be supplemented, modified, amended, restated or replaced from time to time in the manner provided therein, the "Loan Agreement"), I, [Print Name] , the [Print Title] of Aeroflex Incorporated (f/k/a ARX, Inc.), Aeroflex Laboratories Incorporated, Aeroflex International Inc., Aeroflex Lintek Corp., Aeroflex Systems Corp., Comstron International, S.A.R.L., MIC Technology Corporation, MIC Technology S.A.R.L., Vibration Mountings and Controls, Inc., and UTMC Microelectronic Systems Inc. (individually, a "Borrower", and collectively, the "Borrowers"), hereby certify to Fleet Bank N.A., as Administrator (the "Administrator"), and to each of the Banks, as of the date hereof that: (k) Determination of Discounted Eligible Receivables Amount (i) Accounts Receivable Amount (gross book value) $________ (ii) Ineligible Receivable Amounts (The following categories are summarized from the Loan Agreement; the actual provisions of the Loan Agreement shall control.) If a receivable would be includible in more than one category below, include it in the first appropriate category only (i.e., do not count the same one more than once) (A) Less than or equal to 30 day invoices more than 120 days past due $________ (B) >30 day invoices more than 60 days past due $________ (C) invoice permits payment more than 92 days after invoice date $________ (D) receivables of customers where more than 50% of the receivables of the customer and its affiliates are past due beyond the permitted 60 or 120 day periods, as applicable $________ (E) no final or progress invoice issued $________ (F) delivery or agreed upon progress stage not completed $________ (G) invoice is conditional, permits returns, or restricts collection rights or assignments in any respect $________ (H) payment permitted in other than United States Dollars $________ (I) payment permitted outside the United States $________ (J) obligation evidenced by chattel paper, note or other instrument (unless duly endorsed and delivered to the Administrator) $________ (K) invoiced items have been rejected, returned or disputed $________ (L) customer has attempted to renegotiate the invoiced price (other than claiming mistake or in accord with customary credit and collection practices of such Borrower) $________ (M) receivable where customer has asserted any right of reduction, setoff, recoupment, counterclaim or defense $________ (N) receivables in which the Administrator does not have a perfected first priority security interest (other than those owed by the United States Government for which no Assignments of Claims have been requested pursuant to the Loan Agreement) $________ (O) receivables subject to any financing statement or Lien other than in favor of the Administrator $________ (P) receivables from any governmental Authority other than the United States of America or a department or division thereof $________ (Q) receivables from customer located outside the United States $________ (R) receivables from customer not meeting established credit standards of such Borrower $________ (S) receivables from any customer that is insolvent or bankrupt (or has taken or is the subject of any of the actions specified in Section 8.01(h) of the Loan Agreement) $________ (T) receivables not conforming to the representations and warranties respecting Collateral in general or Accounts Receivable in particular $________ (U) receivables excluded by notice from the Administrator $________ (V) TOTAL INELIGIBLE RECEIVABLES AMOUNT $________ (sum of items (A) - (U), above) (iii) Eligible Receivables Amount (item (i) minus item (ii)(V), above) $________ (iv) Discount Factor 0.85 (v) Discounted Eligible Receivables Amount included in Borrowing Base (item (iii) times item (iv), above) $________ (l) Determination of Discounted Eligible Inventory Amount (i) Inventory (net book value) (consisting of eligible classes of finished goods Inventory and raw materials) (i.e., the gross value of such Inventory, determined at the lower of cost or market, less any and all reserves for obsolescence, damage, theft and the like) (A) Finished Goods Inventory $________ (B) Raw Materials $________ (C) Total Eligible Inventory (item (A) plus item (B), above) $________ (ii) Ineligible Inventory Amounts (The following categories are summarized from the Loan Agreement; the actual provisions of the Loan Agreement shall control.) If an item would be includible in more than one category below, include it in the first appropriate category only (i.e., do not count the same one more than once) (A) Inventory not in good condition or of merchantable quality $________ (B) Inventory is defective or does not meet the established specs $________ (C) Inventory is obsolete or infrequently sold $________ (D) Inventory in the possession or control of any non-Borrower $________ (E) Inventory located at any location not identified in Loan Agreement Schedule 3.10(d) (or otherwise approved) $________ (F) Inventory located on any leased premises without landlord access agreement $________ (G) Inventory located at any location outside the United States $________ (H) Inventory in which the Administrator does not have a perfected first priority security interest $________ (I) Inventory subject to any financing statement or Lien other than in favor of the Administrator $________ (J) Inventory subject to any other person's claim of ownership or other interest $________ (K) Inventory not conforming to the representations and warranties respecting Collateral in general or Inventory in particular $________ (L) Inventory excluded by notice from the Administrator $________ (M) TOTAL INELIGIBLE INVENTORY AMOUNT $________ (sum of items (A) - (L), above) (iii) Eligible Inventory Amount (item (i)(C) minus item (ii)(M), above) $________ (iv) Amount of Eligible Gold Inventory included in item (iii), above $________ (v) Eligible (Non-Gold) Inventory Amount (item (iii) minus item (iv), above) $________ (vi) Discount Factor (prior to July 25, 1996, 0.40, and on and after July 25, 1996, 0.25) ________ (vii) Discounted Eligible Inventory Amount included in Borrowing Base (item (v) times item (vi), above) $________ (m) Eligible Gold Inventory (i) Eligible Gold Inventory Amount (from item (b)(iv), above) $________ (ii) Discount Factor 0.85 (iii) Discounted Eligible Gold Inventory Amount included in Borrowing Base (item (i) times item (ii), above) $________ (n) Gross Discounted Borrowing Base $________ (item (a)(v) plus item (b)(vii) plus item (c)(iii), above) (o) Borrowing Base (item (d) minus item (e), above) $________ (p) Outstandings (i) Revolving Credit Loans outstanding $________ (ii) Letters of Credit (unadvanced face amount) outstanding $________ (iii) Total Usage $________ (q) Determination of Remaining Availability, if any (i) Gross Availability (smaller of the $________ Commitment (from the Loan Agreement) or the Borrowing Base from item (f), above) (ii) Total Usage (from item (g)(iii), above) $________ (iii) REMAINING AVAILABILITY $________ (item (i) minus item (ii), above, if (i) is larger than (ii)) (iv) PAYMENT OR ADDITIONAL COLLATERAL DUE $________ (item (ii) minus item (i), above, if (ii) is larger than (i))
Capitalized terms and noncapitalized words and phrases used and not otherwise defined in this Certificate shall have the meanings respectively assigned to them in the Loan Agreement, except that certain terms refer to the applicable captions or headings of the Borrowers' financial statements and reports. This Certificate may be relied upon by the successors, assigns and participants of each Bank and by counsel to the Administrator in giving any opinion or advice requested of such counsel. ---------------------------------------- (SIGNATURE) DATE SIGNED:____________ ___, ____ EXHIBIT F to FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT with AEROFLEX INCORPORATED (f/k/a ARX, Inc.), AND CERTAIN SUBSIDIARIES RESPECTIVE COMMITTED SHARES ON EFFECTIVE DATE --------------------------------------------- Set forth below are the respective maximum principal amounts of the Commitment and/or the Term Loans committed by each referenced Bank, and the corresponding percentage of the aggregate maximum principal amount so committed. These amounts and percentages are as of the Effective Date only. Capitalized terms used herein are used as defined in the Loan Agreement.
Percentage of Aggregate Maximum Principal Maximum Principal Bank Amount Committed Amount Committed* ---- ---------------- ----------------------- - ---------------------------------------------------------------------------------------------- Commitment and Revolving Credit Loans: The Chase Manhattan Bank $ 9,200,000 40.00% Fleet Bank N.A $13,800,000 60.00% ----------- ------ Total Commitment for Revolving Credit Loans: $23,000,000 100.00% =========== ====== - ---------------------------------------------------------------------------------------------- Term Loans: - ---------------------------------------------------------------------------------------------- The Chase Manhattan Bank $ 8,000,000 40.00% Fleet Bank N.A $12,000,000 60.00% ----------- ------ Total Term Loans $20,000,000 100.00% =========== ====== - ---------------------------------------------------------------------------------------------- Mortgage Loans: - ---------------------------------------------------------------------------------------------- The Chase Manhattan Bank $ 1,793,600 40.00% Fleet Bank N.A $ 2,690,400 60.00% ----------- ------ Total Mortgage Loans $ 4,484,000 100.00% =========== ====== * Rounded to the nearest basis point for the convenience of this Exhibit. (The Administrator reserves the right to calculate these percentages to further decimal places.)
EXHIBIT G to FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT with AEROFLEX INCORPORATED (f/k/a ARX, Inc.), AND CERTAIN SUBSIDIARIES ------------------------ Wire Transfer Instructions [PLEASE PROVIDE] EXHIBIT H to FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT with AEROFLEX INCORPORATED (f/k/a ARX, Inc.), AND CERTAIN SUBSIDIARIES ------------------------ ------------------------------------ ASSIGNMENT AND ASSUMPTION AGREEMENT ----------------------------------- This Agreement, dated as of __________ __, ____, is by and between [Name of Purchaser], a [national banking association] having an address at _________________________ (the "Purchaser"), and [Name of Seller], a [national banking association] having an address at _______________________________ (the "Seller"). Recitals -------- Aeroflex Incorporated, a Delaware corporation formerly known as ARX, Inc., and currently having an address at 35 South Service Road, Plainview, New York 11803 ("Aeroflex"), Aeroflex Laboratories Incorporated, a Delaware corporation currently having an address at 35 South Service Road, Plainview, New York 11803 ("Laboratories"), Aeroflex International Inc., a Delaware corporation currently having an address at State Road No. 155 KM 58.6, Caguas West Industrial Park, Caguas, Puerto Rico 00625 ("International"), Aeroflex Lintek Corp., an Ohio corporation currently having an address at 35 South Service Road, Plainview, New York 11803 ("Lintek"), Aeroflex Systems Corp., a Delaware corporation currently having an address at 1749 Old Meadow Road, McLean, Virginia 22102 ("Systems"), Comstron International, S.A.R.L., a French corporation currently having an address at 4 Centre Administratif Des #7, MARES, 78990, Elancourt, France ("Comstron"), MIC Technology Corporation, a Texas corporation currently having an address at 797 Turnpike Street, North Andover, Massachusetts 01845 ("MIC"), MIC Technology S.A.R.L. (a\k\a S.A.R.L. MIC Technology and S.A.R.L. MIC Technologie), a French corporation currently having an address at 15, Rue Boudeville, 31100 Toulouse, France ("MICSARL"), Vibration Mountings and Controls, Inc., a New York corporation currently having an address at 113 Main Street, Box 37, Bloomingdale, New Jersey 07403 ("Vibrations"), and UTMC Microelectronic Systems Inc., a Delaware corporation currently having an address at 4350 Centennial Boulevard, Colorado Springs, Colorado 80907 ("UTMC", and, together with Aeroflex, Laboratories, International, Lintek, Systems, Comstron, MIC, MICSARL, Vibrations and UTMC individually a "Borrower" and collectively the "Borrowers"), and the Seller (among others) are parties to a Fourth Amended and Restated Loan and Security Agreement dated as of February 25, 1999, [as amended by a First Amendment dated as of __________ ___, ____, a Second Amendment dated as of __________ ___, ____, ETC. (as amended,] (the "Loan Agreement"), under which the Seller is a "Bank" and Fleet Bank N.A. is the current "Administrator". Capitalized terms used and not otherwise defined in this Agreement shall have the meanings respectively assigned to them in the Loan Agreement, as applicable. The Purchaser has agreed to purchase $___________ (approximately ____%) of the Seller's interest in the Loan Agreement, the other Loan Instruments and the Loans outstanding thereunder, as well as to assume the same percentage of the Seller's duties, liabilities and obligations with respect thereto, and the Seller has agreed to sell such interest to the Purchaser without any representation or warranty (except as otherwise expressly provided) by or recourse to the Seller. The Purchaser has agreed to pay the Seller an acquisition price equal to that percentage of the Seller's Pro Rata Share of (i) the principal balance of the Loans then outstanding under the Loan Agreement and other Loan Instruments and (ii) all shared interest, fees and other amounts accrued but unpaid through the closing of the acquisition. The parties have entered into this Agreement in order to reflect the terms of that acquisition, and the assumption of the stipulated portion of the Seller's obligations under the Loan Agreement and other Loan Instruments by the Purchaser, all upon the terms and provisions and subject to the conditions hereinafter set forth. Agreement --------- In consideration of the foregoing, the mutual covenants and agreements hereinafter set forth and other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged), the parties hereto hereby agree as follows: Section 1. Assignment and Assumption. Upon the terms and provisions and subject to the conditions contained in this Agreement, effective as of the Effective Date (as defined in Section 3 hereof): (a) The Seller hereby sells, assigns, transfers and conveys to the Purchaser, and the Purchaser hereby purchases and accepts, that interest in and to the Seller's entire right, title and interest as a Bank in and to the Loan Agreement and the other Loan Instruments corresponding to a $_________ Committed Share (approximately _____% of the total Commitment) [and a $____________ share of the Term Loans (approximately _____% of the total Term Loans] (the "Stipulated Portion"), together with the Stipulated Portion of the Seller's Pro Rata Share of all principal amounts outstanding thereunder on the Effective Date and all interest, fees and other amounts accrued but unpaid thereunder through and accruing thereunder after the Effective Date (collectively, the "Monetary Obligations"), and all collateral securing the Monetary Obligations and all guaranties thereof. (b) The Purchaser hereby expressly assumes and agrees to be bound by and liable for: (i) the Stipulated Portion of the Seller's specific agreements, duties, obligations and liabilities under the Loan Agreement and the other Loan Instruments, including (without limitation) the Stipulated Portion of the Seller's Committed Share of the Commitment; (ii) all of the general agreements, duties, obligations and liabilities of, and all other terms and provisions applicable to, a "Bank" under the Loan Agreement and the other Loan Instruments, in all cases as if the Purchaser had become an express signatory thereto on the Effective Date; and (iii) all attendant risks, including (without limitation) those pertaining to the enforceability of the Loan Instruments, the collectibility of the Monetary Obligations, and the existence, perfection and sufficiency of any [Loan] Collateral. (c) The Banks, the Borrowers and the other parties to the Loan Instruments are intended beneficiaries of the Purchaser's assumptions under this Agreement and may rely upon those assumptions as if the Purchaser had signed the relevant Loan Instruments as a "Bank" on the Effective Date. Section 2. Purchase Price. (a) In consideration of the assignment contemplated by this Agreement, the Purchaser shall pay to the Seller the sum of ____________________ DOLLARS and _______________CENTS ($____________) (the "Purchase Price") in immediately available funds on the Effective Date, which amount consists of the Stipulated Portion of the Seller's Pro Rata Share of (i) the aggregate principal amount of the Loans outstanding under the Loan Agreement and other Loan Instruments on the Effective Date and (ii) all shared interest, fees and other amounts accrued under the Loan Agreement and other Loan Instruments through the Effective Date. [The Seller hereby assigns to the Purchaser, and waives any right to any payment for, any additional interest that may have been due it as a result of any continuing default under the Loan Agreement having occurred prior to the Effective Date.] (b) All payments under this Agreement shall be made free and clear of, and without any deduction for, any present or future taxes, levies, imposts, deductions, charges or withholdings, and shall not be subject to any counterclaim, setoff, right of recoupment, abatement or other reduction. If an obligor is prohibited by law from paying such sums free and clear of any such deductions or withholdings, then the sum payable shall be increased as necessary so that, after making all required deductions and withholdings, the Seller receives an amount equal to the sum it would have received had no such deduction or withholding been made. Section 3. Conditions to Effectiveness. As a condition precedent to the effectiveness of this Agreement: (a) the parties shall have executed this Agreement; (b) the Seller shall have received the full payment of the Purchase Price from the Purchaser under Section 2(a) hereof (exclusive of any post-closing recalculations); (c) the consent of the Borrowers shall have been obtained to the extent required under Section 10.14 or 9.21 of the Loan Agreement; and (d) the Administrator shall have received (i) an executed original copy of this Agreement, which shall permit the Administrator to record the assignment as of the date received (which the Administrator may rely upon as being the Effective Date unless given concurrent written notice by the Purchaser or Seller to the contrary) and reflect the adjusted Committed Shares and Pro Rata Shares and other interests of the Purchaser and Seller under the Loan Agreement and other Loan Instruments, (ii) the documents specified in Section 10.14(d) of the Loan Agreement, (iii) payment of the Administrator's customary processing and recording fees[, and (iv) the Note[s] issued by the Borrowers to the Seller to exchange for new notes to the Purchaser [and Seller] in denominations reflecting the assignment under this Agreement, which exchange will be effected by the Administrator after the Effective Date, who will forward the new Note[s] to Purchaser [and Seller] [and return the old Note[s] to the Borrowers for cancellation]. This Agreement shall take effect when all of the preceding conditions have been fully satisfied (the "Effective Date"). Section 4. Purchaser's Representations and Warranties. The Purchaser hereby represents and warrants to the Seller that the Purchaser: (a) has the power and authority to execute, deliver and perform this Agreement, and has duly authorized its execution, delivery and performance; (b) is a sophisticated and knowledgeable financial institution, both generally and with respect to transactions of this type; (c) is an Eligible Assignee; (d) has received [directly from the Borrowers], had an opportunity to review and evaluate, and in fact has independently reviewed and evaluated (i) copies of the Loan Agreement and all other Loan Instruments and (ii) such financial and other information relating to each of the Borrowers, all other relevant persons and all collateral as it deemed necessary or prudent; (e) has made that independent review, evaluation and credit determination, as well as its other decisions pertaining to or under this Agreement and the assignment and assumption contemplated hereby, without any reliance upon any oral or written representation, warranty, advice or analysis of any kind whatsoever from the Seller, however obtained; (f) has acquired the interests of the Seller hereunder for its own account; and (g) has executed and delivered this Agreement and acquired its interests hereunder in accordance with all Applicable Laws, including (without limitation) any legal lending limitation applicable to it. Section 5. Seller's Limited Representations and Warranties. The Seller hereby represents and warrants to the Purchaser that: (a) the Seller has the power and authority to execute, deliver and perform this Agreement, and has duly authorized its execution, delivery and performance; (b) the assignment affected by this Agreement satisfies the terms of Section 10.14 of the Loan Agreement; (c) as of the date hereof the Seller is not [to its knowledge] a Delinquent Bank; (d) the Seller is the legal and beneficial owner of the interests being assigned by it under this Agreement and those interests have not been assigned or pledged to anyone else; and (e) as of the date of this Agreement (without giving effect to this or any other assignment not yet effective) the Seller's share of the total Commitment is $____________, which represents a Committed Share of approximately _____%, [and] share of the total principal balance(s) outstanding under the [Revolving Credit] Loans is $____________, which represents a Pro Rata Share of such Loans approximately _____% [and share of the total principal balance outstanding under the Term Loans is $____________, which represents a Pro Rata Share of such Loans of approximately _____%]. Section 6. No Recourse to Seller; Investment Waivers and Exculpation. The Purchaser acknowledges and agrees that the Seller's assignments and Purchaser's assumptions made under this Agreement are without any representation, warranty or covenant by or any recourse to the Seller of any kind whatsoever (except for the limited representation and warranties set forth in Section 5 hereof). Without limiting the generality of the foregoing, the Purchaser acknowledges that the Seller has not, and the Purchaser agrees that the Seller shall not be deemed or construed to have, made any representation or warranty (except for the Seller's limited representations and warranties expressly set forth in Section 5, above), offered any advice or analysis, assumed any liability or responsibility or made any Credit Support or other agreement, whether orally or otherwise, and whether express or implied, to the Purchaser with respect to: (a) any recital, statement, representation or warranty made by any of the Borrowers or any other person, any certificate delivered by any officer of any of the Borrowers or any other person, or any report, document or other information delivered from time to time by any of the Borrowers or any other person, or furnished on their behalf; (b) the value, validity, effectiveness, genuineness, enforceability or sufficiency of the Loan Agreement or any of the other Loan Instruments; (c) the existing or future financial condition of any of the Borrowers or any other person; (d) the existence or value of any collateral, or the validity, sufficiency, priority or effectiveness of any Lien created or intended to be created under or by any Loan Instruments; (e) the performance by any of the Borrowers or any other person of, or the willingness, ability or likelihood of any of the Borrowers or any other person to perform, their respective obligations under the Loan Agreement and the other Loan Instruments; or (f) the validity, enforceability or collectibility of any of the Monetary Obligations and other obligations of any of the Borrowers under the Loan Agreement and other Loan Instruments. Section 7. Further Assurances. The Seller agrees to do such further acts and things and to execute and deliver such further statements, assignments, agreements, instruments and other documents as the Purchaser from time to time reasonably may request in order to evidence, confirm or perfect the assignments made pursuant to this Agreement, which shall be without any representation, warranty or covenant by or recourse to the Seller of any kind whatsoever, shall be consistent with the terms and provisions of this Agreement and shall otherwise be in such form and substance as may be acceptable to the Seller in its sole and absolute discretion, and in each case shall be at the sole cost and expense of the Purchaser. Section 8. Notice. Except as otherwise expressly provided, any notice, request, demand or other communication permitted or required to be given under this Agreement shall be in writing, shall be sent by one of the following means to the addressee at the address set forth above (or at such other address as shall be designated hereunder by notice to the other parties, effective upon actual receipt) and shall be deemed conclusively to have been given: (i) on the first Business Day following the day timely deposited with Federal Express (or other equivalent national overnight courier) or United States Express Mail, with the cost of delivery prepaid or for the account of the sender; (ii) on the fifth Business Day following the day duly sent by certified or registered United States mail, postage prepaid and return receipt requested; or (iii) when otherwise actually received by the addressee on a Business Day (or on the next Business Day if received after the close of normal business hours on any non-Business Day). If a certificate, signed notice or other signed item is expressly required by another provision of this Agreement, a manually signed original must be delivered by the party giving it; any other notice, request, demand or other communication instead may be sent by telecopy, with the cost of transmission prepaid or for the account of the sender, and shall (except as otherwise provided in this Agreement) be deemed conclusively to have been given on the first Business Day following the day duly sent. Section 9. Section and Other Headings. The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. Section 10. Governing Law. This Agreement has been executed and delivered, and shall be governed by and construed in accordance with the Applicable Laws pertaining, in the State of New York. Section 11. Counterparts. This Agreement may be executed in two or more counterpart copies of the entire document or of the signature pages to the document, each of which may be executed by one or more of the parties hereto, but all of which, when taken together, shall constitute but one agreement binding upon all of the parties hereto. Section 12. Successors and Assigns; Assignment. Whenever in this Agreement reference is made to any party, such reference shall be deemed to include the successors, assigns, heirs and legal representatives of such party, and, without limiting the generality of the foregoing, all representations, warranties, covenants and other agreements made by or on behalf of any party in this Agreement shall inure to the benefit of the successors and assigns of the other parties. [End of Page] Section 13. Modification, Amendment, Etc. Each and every modification and amendment of this Agreement shall be in writing and signed by all of the parties hereto, and each and every waiver of, or consent to any departure from, any representation, warranty, covenant or other term or provision of this Agreement shall be in writing and signed by each adversely affected party hereto. Section 14. Entire Agreement. This Agreement contains the entire agreement of the parties and supersedes all other representations, warranties, agreements and understandings, oral or otherwise, among the parties with respect to the matters contained herein. In Witness Whereof, the parties hereto have executed and delivered this Agreement as of the date first written above. [Name of Purchaser] By: ---------------------------------------------- [Name of Seller] By: ---------------------------------------------- [FORM OF BANK ACKNOWLEDGMENT WITHOUT SEAL] STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the _____ day of _______________ in the year ______, before me, the undersigned, personally appeared _________________________, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he (OR SHE) executed the same in his (OR HER) capacity (i.e., as a Vice President), and that by his (OR HER) signature on the instrument, the person upon behalf of which the individual acted (i.e., [Name of Purchaser]) executed the instrument. ---------------------------------------------- Notary Public, State of New York My Commission Expires: [FORM OF BANK ACKNOWLEDGMENT WITHOUT SEAL] STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the _____ day of _______________ in the year ______, before me, the undersigned, personally appeared _________________________, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he (OR SHE) executed the same in his (OR HER) capacity (i.e., as a Vice President), and that by his (OR HER) signature on the instrument, the person upon behalf of which the individual acted (i.e., [Name of Purchaser]) executed the instrument. ---------------------------------------------- Notary Public, State of New York My Commission Expires: EXHIBIT I to FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT with AEROFLEX INCORPORATED (f/k/a ARX, Inc.) AND CERTAIN SUBSIDIARIES ------------------------ ADDRESSES FOR NOTICE AND SERVICE I. Address for Notices and Service to the Borrowers: c/o Aeroflex Incorporated (f/k/a ARX, Inc.) 35 South Service Road Plainview, New York 11803 Attention: Mr. Michael Gorin, President Telephone: (516) 694-6700 Telecopy: (516) 694-4823 With a copy of notices from the Administrator under Section 7.07(a) or 8.02 to: Blau, Kramer, Wactlar & Lieberman, P.C. 100 Jericho Quadrangle Jericho, New York 11753 Attention: Edward I. Kramer, Esq. Telephone: (516) 822-4820 Telecopy: (516) 822-4824 II. Address for notices to the Administrator: Fleet Bank, N.A. 300 Broad Hollow Road Melville, New York 11747 Attention: Mr. Christopher Mendelsohn, Vice President Telephone: (516) 349-2065 Telecopy: (516) 349-2098/2087 With a copy of any default notice or other notice under Section 5.01 to: Parker Chapin Flattau & Klimpl, LLP 1211 Avenue of the Americas New York, New York 10036 Attention: Lawrence David Swift, Esq. Telephone: (212) 704-6147 Telecopy: (212) 704-6159/6288 E-Mail: LDSwift@PCFK.com III. Addresses for notices to the Banks: The Chase Manhattan Bank 7600 Jericho Turnpike, Suite 306 Woodbury, New York 11797 Attention: Ms. Barbara G. Bertschi, Vice President Telephone: (516) 677-4509 Telephone: (516) 364-3307 Fleet Bank, N.A. 300 Broad Hollow Road Melville, New York 11747 Attention: Mr. Christopher J. Mendelsohn, Vice President Telephone: (516) 349-2065 Telecopy: (516) 349-2098/2087 -----END PRIVACY-ENHANCED MESSAGE-----