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<SEC-DOCUMENT>0000899797-01-000015.txt : 20010223
<SEC-HEADER>0000899797-01-000015.hdr.sgml : 20010223
ACCESSION NUMBER:		0000899797-01-000015
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20001231
FILED AS OF DATE:		20010214

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MOOG INC
		CENTRAL INDEX KEY:			0000067887
		STANDARD INDUSTRIAL CLASSIFICATION:	MISC INDUSTRIAL & COMMERCIAL MACHINERY & EQUIPMENT [3590]
		IRS NUMBER:				160757636
		STATE OF INCORPORATION:			NY
		FISCAL YEAR END:			0927

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		
		SEC FILE NUMBER:	001-05129
		FILM NUMBER:		1542748

	BUSINESS ADDRESS:	
		STREET 1:		PLANT 24
		CITY:			EAST AURORA
		STATE:			NY
		ZIP:			14052-0018
		BUSINESS PHONE:		7166522000

	MAIL ADDRESS:	
		STREET 1:		PLANT 24
		CITY:			EAST AURORA
		STATE:			NY
		ZIP:			14052
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>0001.htm
<DESCRIPTION>FORM 10-Q
<TEXT>


<HTML>
<HEAD>
<TITLE>Moog Inc. Form 10-Q</TITLE>
</HEAD>
<BODY>

<CENTER><B>                                           UNITED STATES SECURITIES AND EXCHANGE COMMISSION<BR>
                                                        WASHINGTON, D.C. 20549</B></CENTER>

<P><CENTER><B>                                                               FORM 10-Q</B></CENTER>

<P>(Mark One)

<P><CENTER>   [X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)<BR> OF THE SECURITIES
         EXCHANGE ACT OF 1934</CENTER>

<P><CENTER>For the quarterly period ended <B>December 31, 2000</B></CENTER>

<P><CENTER>                                                                  OR</CENTER>


<P><CENTER> [  ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)<BR> OF THE SECURITIES    EXCHANGE ACT OF 1934</CENTER>

<P><CENTER>For the transition period from ______________ to ______________</CENTER>

<P><CENTER>Commission File Number:  1-5129</CENTER>


<P><CENTER><B><FONT SIZE=5>MOOG INC.</FONT></B><BR>

                                     <FONT SIZE=1><I>(Exact name of registrant as specified in its charter)</I></FONT></CENTER>


<P><CENTER>New York State<BR>
<FONT SIZE=1><I>(State or other jurisdiction of incorporation or organization)</I></FONT></CENTER>

<P><CENTER>16-0757636<BR>

   <FONT SIZE=1><I>                     (I.R.S. employer identification no.)</I></FONT></CENTER>


<P><CENTER>        East Aurora, New York<BR>
<FONT SIZE=1><I>(Address of principal executive offices)</I></FONT></CENTER>


<P><CENTER>                          14052-0018<BR>

 <FONT SIZE=1><I>              (Zip code)</I></FONT></CENTER>


                 <P><CENTER> Telephone number including area code: (716) 652-2000</CENTER>


<P><CENTER>_______________________________________________________________________________________<BR>
Former name, former address and former fiscal year, if changed since last report.</CENTER>

<P>Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes <U> X </U> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No __<U></U>

<P>The number of shares outstanding of each class of common stock as of  February 8, 2001 were:

<P>Class A Common Stock, $1.00 par value&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7,260,365 shares<BR>
Class B Common Stock, $1.00 par value&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,468,835 shares

<P><CENTER>_______________________________________________________________________________________</CENTER>


<P><CENTER><B>                                  MOOG INC.<BR>
                          QUARTERLY REPORT ON FORM 10-Q</B></CENTER>

<P><CENTER><B>                                TABLE OF CONTENTS</B></CENTER>
<PRE>
<B>                                                                         Page

PART I.  FINANCIAL INFORMATION</B>

         Item 1.  Consolidated Condensed Balance Sheets
                  December 31, 2000 and September 30, 2000 ..............    3

                  Consolidated Condensed Statements of Earnings
                  Three Months Ended December 31, 2000 and 1999 .........    4

                  Consolidated Condensed Statements of Cash Flows
                  Three Months Ended December 31, 2000 and 1999 ..........   5

                  Notes to Consolidated Condensed Financial
                  Statements .............................................  6-9

         Item 2.  Management's Discussion and Analysis of
                  Financial Condition and Results of Operations .......... 10-13

         Item 3.  Quantitative and Qualitative Disclosures about
                  Market Risk ............................................  13


PART II. OTHER INFORMATION ...............................................  14

SIGNATURES ...............................................................  15

</PRE>

<P><CENTER>2</CENTER>

<P><B>Part I.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; FINANCIAL INFORMATION<BR>
Item 1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Financial Statements</B>

<P><CENTER><B>                                   MOOG INC.<BR>
                     CONSOLIDATED CONDENSED BALANCE SHEETS<BR>
                             (dollars in thousands)</B></CENTER>

<FONT SIZE=2>
<PRE>
                                                           Unaudited
                                                             As of           As of
                                                          December 31,     September 30,
                                                             2000             2000
                                                             ----             ----

<U>ASSETS</U>
CURRENT ASSETS
   Cash and cash equivalents .........................   $   8,071       $    13,827
      Receivables ....................................     220,385           211,463
      Inventories ....................................     152,803           147,546
      Other current assets ...........................      31,940            30,665
                                                         ---------       -----------
             TOTAL CURRENT ASSETS ....................     413,199           403,501

PROPERTY, PLANT AND EQUIPMENT, net ...................     192,150           188,584
GOODWILL, net ........................................     183,318           181,303
OTHER ASSETS .........................................      20,915            18,317
                                                         ---------       -----------
TOTAL ASSETS .........................................   $ 809,582       $   791,705
                                                         =========       ===========
<U>LIABILITIES AND SHAREHOLDERS' EQUITY</U>
CURRENT LIABILITIES
   Notes payable .....................................   $   3,496       $     1,581
   Current installments of long-term debt ............      17,281            18,609
   Accounts payable ..................................      38,190            36,253
   Accrued liabilities ...............................      84,496            81,912
   Contract loss reserves ............................      19,563            20,916
   Customer advances .................................       9,436             8,017
                                                         ---------       -----------
            TOTAL CURRENT LIABILITIES ................     172,462           167,288

LONG-TERM DEBT, excluding current installments
   Senior debt .......................................     230,772           226,099
   Senior subordinated notes .........................     120,000           120,000

OTHER LONG-TERM LIABILITIES ..........................      57,918            55,764
                                                         ---------       -----------
            TOTAL LIABILITIES ........................     581,152           569,151
                                                         ---------       -----------
SHAREHOLDERS' EQUITY
   Preferred stock ...................................         100               100
   Common stock ......................................      10,889            10,889
   Other shareholders' equity ........................     217,441           211,565
                                                         ---------       -----------
            TOTAL SHAREHOLDERS' EQUITY ...............     228,430           222,554
                                                         ---------       -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ...........   $ 809,582       $   791,705
                                                         =========       ===========

</PRE>
</FONT>
<P>See accompanying Notes to Consolidated Condensed Financial Statements.

<P><CENTER>3</CENTER>


<P><CENTER><B>                                   MOOG INC.<BR>
                 CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS<BR>
                                  (Unaudited)<BR>
                  (dollars in thousands except per share data)</B></CENTER>

<FONT SIZE=2>
<PRE>
                                                          Three Months Ended
                                                              December 31,
                                                         2000              1999
                                                         ----              ----
Net sales ......................................   $    157,709       $   157,284
Cost of sales ..................................        111,037           109,035
                                                   ------------       -----------
Gross profit ...................................         46,672            48,249


Research and development .......................          4,808             6,089
Selling, general and administrative ............         23,947            24,656
Interest .......................................          8,118             7,932
Other income, net ..............................           (236)             (148)
                                                   ------------       -----------
Earnings before income taxes ...................         10,035             9,720

Income taxes ...................................          3,512             3,402
                                                   ------------       -----------
Net earnings ...................................   $      6,523       $     6,318
                                                   ============       ===========
Net earnings per share
       Basic ...................................   $       0.75       $      0.71
                                                   ============       ===========
       Diluted .................................   $       0.74       $      0.70
                                                   ============       ===========
Average common shares outstanding
       Basic ...................................      8,743,464         8,905,175
                                                   ============       ===========
       Diluted .................................      8,825,097         8,993,260
                                                   ============       ===========

</PRE>
</FONT>
<P>See accompanying Notes to Consolidated Condensed Financial Statements.

<P><CENTER>4</CENTER>


<P><CENTER><B>                                   MOOG INC.<BR>
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS<BR>
                                  (Unaudited)<BR>
                             (dollars in thousands)</B></CENTER>

<FONT SIZE=2>
<PRE>
                                                                          Three Months Ended
                                                                             December 31,
                                                                        2000            1999
                                                                        ----            ----

CASH FLOWS FROM OPERATING ACTIVITIES
   Net earnings ...................................................  $  6,523       $   6,318
   Adjustments  to  reconcile net earnings
   to net cash provided (used) by operating activities:
      Depreciation and amortization ...............................     7,584           7,619
      Other .......................................................    (6,413)        (16,885)
                                                                     --------       ---------
         NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES .........     7,694          (2,948)
                                                                     --------       ---------
CASH FLOWS FROM INVESTING ACTIVITIES
   Acquisition of business ........................................   (10,335)              -
   Acquisition of minority interest ...............................    (1,354)              -
   Purchase of property, plant and equipment ......................    (5,947)         (3,918)
   Proceeds from sale of assets ...................................         -             335
                                                                     --------       ---------
          NET CASH USED BY INVESTING ACTIVITIES ...................   (17,636)         (3,583)
                                                                     --------       ---------
CASH FLOWS FROM FINANCING ACTIVITIES
   Net proceeds from (repayments of) notes payable ...............      1,957          (1,360)
   Net proceeds from (repayments of) revolving lines of credit ...    (20,950)         12,000
   Proceeds from long-term debt                                        31,804              14
   Payments on long-term debt .....................................    (7,479)         (5,540)
   Other ..........................................................      (834)           (614)
                                                                     --------       ---------
             NET CASH PROVIDED BY FINANCING ACTIVITIES ............     4,498           4,500
                                                                     --------       ---------
Effect of exchange rate changes on cash ...........................      (312)           (234)
                                                                     --------       ---------
DECREASE IN CASH AND CASH EQUIVALENTS .............................    (5,756)         (2,265)
Cash and cash equivalents at beginning of period ..................    13,827           9,780
                                                                     --------       ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ........................ $   8,071       $   7,515
                                                                    =========       =========
CASH PAID FOR:
   Interest ....................................................... $  12,681       $  12,108
   Income taxes ...................................................     1,284           2,490

NON-CASH INVESTING AND FINANCING ACTIVITIES:
   Acquisition of business:
     Fair value of assets acquired ................................ $  18,111       $       -
       Cash paid ..................................................    10,335       $       -
                                                                    ---------       ---------
         Liabilities assumed ...................................... $   7,776       $       -
                                                                    =========       =========
</PRE>
</FONT>
See accompanying Notes to Consolidated Condensed Financial Statements.

<P><CENTER>5</CENTER>

<P><CENTER><B>MOOG INC.<BR>

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS <BR>THREE MONTHS ENDED DECEMBER 31,
2000</B></CENTER>

<P><CENTER><B>(Unaudited)<BR>

(dollars in thousands)</B></CENTER>

<P><B>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Basis of Presentation</B>

<P>The accompanying unaudited consolidated condensed financial statements have been prepared by management in
accordance with generally accepted accounting principles and in the opinion of
management contain all adjustments, consisting of normal recurring adjustments,
necessary to present fairly the financial position of Moog Inc. as of December
31, 2000 and the results of its operations and cash flows for the three months
ended December 31, 2000 and 1999. The results of operations for the three months
ended December 31, 2000 are not necessarily indicative of the results expected
for the full year. The accompanying unaudited consolidated condensed financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company&#146;s Form 10-K for the fiscal year ended
September 30, 2000.

<P><B>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Inventories</B>

<P>Inventories consist of the following:

<PRE>
                                                December 31,       September 30,
                                                   2000                2000
                                                   ----                ----
       Raw materials and purchased parts       $   44,192          $    49,868
       Work in process                             84,030               74,430
       Finished goods                              24,581               23,248
                                               ----------          -----------
                                               $  152,803          $   147,546
                                               ==========          ===========

</PRE>
<P><B>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Earnings per Share</B>

<P>Basic and diluted weighted-average shares outstanding are as follows:

<PRE>
                                                   Three Months Ended
                                                       December 31,
                                                 2000               1999
                                            -------------      -------------
    Weighted-average shares
      Outstanding - Basic                       8,743,464          8,905,175
    Dilutive effect of:
      Stock options                                74,441             80,893
      Convertible preferred stock                   7,192              7,192
                                           --------------     --------------
    Shares outstanding - Diluted                8,825,097          8,993,260
                                           ==============     ==============


</PRE>

Preferred stock dividends are deducted from net earnings to calculate income available to
common stockholders for basic earnings per share.

<P><CENTER>6</CENTER>

<P><B>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Shareholders&#146; Equity</B>

<P>                    The changes in shareholders' equity for the three months ended December 31, 2000 are summarized
as follows:

<FONT SIZE=2>
<PRE>
                                                               Number of Shares
                                                               ----------------
                                                                     Class A     Class B
                                                     Preferred       Common      Common
                                         Amount       Shares         Stock       Stock
                                         ------       ------         -----       -----

PREFERRED STOCK
Beginning and end of period ......    $     100       100,000
                                      ---------

COMMON STOCK
Beginning and end of period ......       10,889                    8,427,462   2,461,661
                                      ---------
ADDITIONAL PAID-IN CAPITAL
Beginning of period ..............      102,639
Issuance of Treasury shares at
 less than cost ..................          (23)
                                      ---------
End of period ....................      102,616
                                      ---------
RETAINED EARNINGS
Beginning of period ..............      157,497
Net earnings .....................        6,523
Preferred stock dividends ........           (2)
                                      ---------
End of period ....................      164,018
                                      ---------
TREASURY STOCK
Beginning of period ..............      (37,570)      (16,229)    (1,182,626)   (960,615)
Treasury stock issued ............          154             -         19,000           -
Treasury stock purchased .........         (965)            -         (2,620)    (22,162)
                                      ---------       -------     ----------   ---------
End of period ....................      (38,381)      (16,229)    (1,166,246)   (982,777)
                                      ---------       -------     ----------   ---------
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Beginning of period ..............      (11,001)
Foreign currency translation .....          866
Accumulated derivative
  loss (note 5)...................         (677)
                                      ---------
End of period ....................      (10,812)
                                      ---------       -------     ----------   ---------
TOTAL SHAREHOLDERS' EQUITY .......    $ 228,430        83,771      7,261,216   1,478,884
                                      =========       =======     ==========   =========
</PRE>
</FONT>

<P><CENTER>7</CENTER>
<P><B>5. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Derivative Financial Instruments</B>

<P>On October 1, 2000, the Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended, which requires companies to carry all derivatives on the balance sheet at fair value.  The accounting
for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies
as part of a hedging relationship and, if so, the reason for holding it.

<P>For the quarter ended December 31, 2000, the Company's exposure to derivatives is limited to interest rate swap
agreements.  In order to provide for interest rate risk protection, the Company from time to time enters into interest rate swap agreements to effectively convert variable-rate debt to fixed-rate debt.  Of
the $160,000 of interest rate swap agreements outstanding on October 1, 2000, $40,000 matured during the first
quarter of fiscal 2001, $40,000 matured during January 2001 and $80,000 matures at various
times during fiscal 2002.

<P>The effective portion of the gain or loss on a cash flow hedge is reported in other comprehensive income and
reclassified into earnings in the same period or periods during which the hedged transaction affects earnings,
and the ineffective portion is reported immediately in earnings.  There was no ineffectiveness in the first
quarter of fiscal 2001.

<P>Activity in other comprehensive income related to derivatives held by the Company during the period from October
1, 2000 through December 31, 2000 is summarized below:

<PRE>
         Cumulative effect of adopting SFAS No. 133                $     567
         Net decrease in fair value of derivatives                      (900)
         Reclassification from OCI, net, into interest expense          (344)
                                                                  ----------
         Accumulated derivative loss                               $    (677)
                                                                  ==========
</PRE>
<P>Of the $677 accumulated derivative loss reported in other comprehensive income at December 31, 2000,
$16 of gains are expected to be reclassified to earnings in the next twelve months.

<P><B>6. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Comprehensive Income</B>

<P>For the three months ended December 31, 2000 and 1999, comprehensive income was $6,712, including the $567 cumulative
effect of adopting SFAS No. 133, and $5,504, respectively. The only items of comprehensive income that are not included in
net earnings are accumulated derivative loss and foreign currency translation.

<P><B>7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Acquisitions</B>

<P>On November 15, 2000, the Company purchased the remaining 25% minority interest of Hydrolux SARL and
Moog-Hydrolux Hydraulic Systems, Inc. for $1,354. The impact of this acquisition
on the Company&#146;s results of operations and financial condition is not
significant.

<P>On October 31, 2000, the Company purchased the net assets of the Vickers Electrics Division, an Italian
manufacturer of high-performance electric drives with annual sales of
approximately $20,000, from Aeroquip-Vickers S.p.A. for $10,335 in cash. Based
on a preliminary purchase price allocation, which is subject to finalization, goodwill and other
intangible assets resulting from this acquisition are approximately $3,800 and
will be amortized over periods not exceeding 20 years.

<P><B>8. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit Facility</B>

<P>On October 24, 2000, the Company amended its $340,000 Corporate Revolving and Term Loan Agreement (Credit
Facility). The term loan portion of the Credit Facility, which had a balance of
$48,750 at September 30, 2000, was increased to $75,000 with the difference
added to the unused borrowing capacity of the revolving portion of the facility.
At December 31, 2000, the Company had $94,000 of unused borrowing capacity on
the Credit Facility. The amended Credit Facility expires in December 2005 and
requires quarterly principal payments on the term loan of $3,750, which
commenced in December 2000. Interest on the amended agreement continues at LIBOR
plus 200 basis points.

<P><CENTER>8</CENTER>

<P><B>9. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Segment Information</B>

<P>Below are the sales and operating profit by segment for the three months ended December 31, 2000 and
1999 and a reconciliation of segment operating profit to earnings before income
taxes.

<FONT SIZE=2>
<PRE>
                                                  Three Months Ended
                                                   ------------------
                                               December 31,  December 31,
                                                  2000         1999
                                                  ----         ----
<B>Sales</B>

Aircraft Controls ......................... $    77,260   $    77,235
Space Controls ............................      24,161        28,375
Industrial Controls .......................      56,288        51,674
                                            -----------   -----------

    Total sales ........................... $   157,709   $   157,284
                                            ===========   ===========
<B>Operating Profit and Margins</B>

Aircraft Controls ......................... $    12,341   $    10,627
 ..........................................       16.0%         13.8%
Space Controls ............................       2,819         4,006
 ..........................................       11.7%         14.1%
Industrial Controls .......................       4,776         5,046
 ..........................................        8.5%          9.8%
                                            -----------   -----------
    Total operating profit ................      19,936        19,679
 ..........................................       12.6%         12.5%
<B>Deductions from Operating Profit</B>

    Interest expense ......................       8,118         7,932
    Corporate expenses and other...........       1,783         2,027
                                            -----------   -----------
<B>Earnings before Income Taxes</B> .............. $    10,035   $     9,720
                                            ===========   ===========
</PRE>
</FONT>

<P><B>10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subsequent Events</B>

<P>On February 1, 2001, the Company acquired the net assets of the Bosch Radial Piston Pump product line of
Robert Bosch GmbH for approximately $6,600 in cash, plus the assumption of
$1,700 of pension liabilities. This business has annual sales of
approximately $20,000 in the design and manufacture of pumps that are often
used in combination with the Company&#146;s servovalves, particularly in the
plastics markets.

<P>On January 25, 2001, the Company acquired the stock of Whitton Technology Limited in the U.K. and the
Industrial Gas Turbine assets of Whitton Technology, Inc. in the U.S. for $6,500
in cash and $500 in assumed debt. The Whitton Company is a
designer and manufacturer of pumps and specialty products for producers of
industrial power generating equipment and had sales of approximately $5,000
for the last twelve months.

<P><CENTER>9</CENTER>

<P><B>Item 2.</B>
<B>Management&#146;s Discussion and Analysis of Financial Condition and Results
of Operations </B><BR>[<I>The following should be read in conjunction with
Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company&#146;s Form 10-K for the fiscal year ended
September 30, 2000.]</I> </P>

<P><B><I>Consolidated</I></B>

<P>Sales for the first quarter of 2001 were $158 million compared to $157 million in the first quarter of 2000.
Sales in Industrial Controls increased $5 million. On October 31, 2000, the
Company purchased for approximately $10 million in cash the net assets of the
Vickers Electrics Division which generated $4 million of sales for the two
months ended December 31, 2000. Vickers Electrics Division is an Italian
manufacturer of high-performance electric drives previously owned by
Aeroquip-Vickers S.p.A., an Eaton Corporation subsidiary. This increase was
partially offset by a $4 million decrease in sales in Space Controls.

<P>Cost of sales as a percentage of sales increased to 70.4% in the current quarter from 69.3% in the
comparable quarter in 2000 as redeployment of resources continues in Aircraft
Controls from research and development activities to production. The impact of
the shift of costs from research and development to cost of sales will lessen
during the remainder of the year relative to comparable periods in 2000. To a
lesser extent, pricing pressures on sales of turbine controls contributed to
higher cost of sales as a percentage of sales.

<P>Research and development decreased to $5 million in the first quarter of 2001 from $6 million in the same
quarter a year ago. This decrease is primarily related to the completion of
development efforts on next generation aircraft flight controls. A portion of
the costs associated with these efforts has been redirected to production and
sales-support.

<P>As a percentage of sales, selling, general and administrative expenses decreased to 15.2% in the first
quarter of 2001 from 15.7% in the first quarter of 2000 due to lower sales
support expenses on certain aerospace programs and reduced overhead costs in part
due to lower headcount.

<P>Interest expense was $8 million for the first quarters of 2001 and 2000 as the effect of higher interest
rates was offset by lower average borrowing levels in the current quarter.

<P>Backlog at December 31, 2000 was $356 million compared to $333 million at December 31, 1999. The
increase primarily relates to controls for commercial airplanes and the acquisition of Vickers
Electrics.

<P><B>Segment Operating Review<BR>
(dollars in millions)</B>

<PRE>
                                                 Three Months Ended
                                                     December 31,
                                               2000                 1999
                                           -------------        -------------
Sales

           Aircraft Controls               $       77             $       77
           Space Controls                          24                     28
           Industrial Controls                     57                     52
                                           ----------             ----------
                 Total sales               $      158             $      157
                                           ==========             ==========

</PRE>

<P><CENTER>10</CENTER>
<PRE>
                                            Three Months Ended
                                                December 31,
                                        2000                 1999
                                     ----------           ----------
Operating Profit

           Aircraft Controls         $      12             $     11
                                          16.0%                13.8%
           Space Controls                    3                    4
                                          11.7%                14.1%
           Industrial Controls               5             $      5
                                           8.5%                 9.8%
                                     ----------            ---------
      Total operating profit         $      20             $     20
                                     ==========            =========
                                          12.6%                12.5%
</PRE>

<P><B><I>  Aircraft Controls</I></B>

<P>Sales in Aircraft Controls were $77 million in the first quarters of 2001 and 2000. A $3 million increase
in sales on the F-18 fighter aircraft program and a $2 million increase in sales
related to development work on the Bombardier BD 100 were offset by a $3 million
decrease in OEM sales to Boeing related to lower production levels and a $2
million decrease in sales for the V-22 program related to temporary shipment
delays caused by vendor-supplied components.

<P>Operating margins for Aircraft Controls increased to 16.0% in the first quarter of 2001 from 13.8% in
the same period last year. The improvement in margins resulted from a favorable
product mix and strong cost performance, in part related to strong F-18 sales.

<P><B><I>Space Controls</I></B>

<P>Sales in Space Controls decreased to $24 million in the first quarter of 2001 from $28 million in the
first quarter of 2000 due primarily to the reduced level of work on the Titan IV
launch vehicle program which is nearing completion. Operating margins for Space
Controls decreased to 11.7% in the first quarter of 2001 from 14.1% in the same
quarter a year ago. The lower margins are primarily attributable to the
decreasing level of work on the Titan IV launch vehicle program.

<P><B><I>Industrial Controls</I></B>

<P>Sales in Industrial Controls were $57 million in the first quarter of 2001 compared to $52 million
in the same quarter a year ago. Excluding the impact of a stronger Euro and
British Pound in the first quarter of 2000, sales increased by $10 million. The
Vickers Electrics acquisition generated $4 million of sales in the two months
ended December 31, 2000.

<P>Operating margins for Industrial Controls decreased to 8.5% in the first quarter of 2001 from 9.8% in
the first quarter of 2000 as a result of lower than planned sales in the U.S.
and, to a lesser extent, price reductions on certain turbine controls products.

<P><CENTER>11</CENTER>

<P><B>Financial Condition and Liquidity</B>

<P>On October 24, 2000, the Company amended its $340 million Corporate Revolving and Term Loan Agreement
(Credit Facility). The term loan portion of the Credit Facility, which had a
balance of $48.8 million at September 30, 2000, was increased to $75 million
with the difference added to the unused borrowing capacity of the revolving
portion of the facility. The amended Credit Facility expires in December 2005
and requires quarterly principal payments on the term loan of $3.75 million,
which commenced in December 2000. Interest on the amended agreement continues at
LIBOR plus 200 basis points. At December 31, 2000, the Company had $114 million of unused borrowing capacity
under short and long-term lines of credit, including $94 million from the
revolving portion of the Credit Facility.

<P>Cash on hand at December 31, 2000 was $8 million compared to $14 million at September 30, 2000. Cash
provided by operations was $8 million in the first quarter of 2001 compared to
$3 million of cash used by operations in the first quarter of 2000. Last year's use of cash was due to higher receivable levels in the first
quarter of 2000 related to two long-term launch vehicle programs, one of which
had milestone payment terms, and the continued funding of efforts on development
contracts for certain business jet programs. Long-term debt increased to $351
million at December 31, 2000 from $346 million at September 30, 2000, primarily
as a result of the Vickers Electrics acquisition, while long-term debt to
capitalization increased by less than one percentage point to 61%.

<P>On October 1, 2000, the Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended, which requires companies to carry all derivatives on the balance
sheet at fair value. The accounting for changes in the fair value of a
derivative instrument depends on whether it has been designated and qualifies as
part of a hedging relationship and, if so, the reason for holding it. For the
quarter ended December 31, 2000, the Company's exposure to derivatives is limited
to interest rate swap agreements. At December 31, 2000, the Company had interest
rate swap agreements of $120 million outstanding, of which $40 million matured
in January 2001 and $80 million matures at various times during fiscal 2002.  The adoption of this
pronouncement did not have a material impact on the financial statements for the quarter ended
December 31, 2000.

<P>Capital expenditures for the first quarter of 2001 were $6 million compared with depreciation and
amortization of $8 million. Capital expenditures for the first quarter of 2000
were $4 million compared with depreciation and amortization of $8 million.
Capital expenditures in 2001 are expected to be approximately $25 million.

<P>The Company believes that its cash on hand, cash flows from operations and borrowing availability under
short and long-term lines of credit will continue to be sufficient to meet its
operating needs.

<P><B>Subsequent Events</B>

<P>On February 1, 2001, the Company acquired the net assets of the Bosch Radial Piston Pump product line of
Robert Bosch GmbH for approximately $6.6 million in cash, plus the assumption of
$1.7 million of pension liabilities. This business has annual sales of
approximately $20 million in the design and manufacture of pumps that are often
used in combination with the Company&#146;s servovalves, particularly in the
plastics markets.

<P>On January 25, 2001, the Company acquired the stock of Whitton Technology Limited in the U.K. and the
Industrial Gas Turbine assets of Whitton Technology, Inc. in the U.S. for $6.5 million
in cash and $0.5 million in assumed debt. The Whitton Company is a
designer and manufacturer of pumps and specialty products for producers of
industrial power generating equipment and had sales of approximately $5 million
for the last twelve months.

<P><CENTER>12</CENTER>

<P><B>Outlook</B>

<P>The Company has updated its outlook and is now forecasting sales in 2001 to approximate $698 million, an 8%
increase over 2000. Forecasted sales increases over 2000 of $48 million in
Industrial Controls and $20 million in Aircraft Controls are expected to be
offset by a $14 million decrease in Space Controls. Sales in Industrial Controls
are expected to increase primarily due to the acquisitions of Vickers Electrics,
Whitton, and the Bosch pump product lines. Sales in Aircraft Controls are
expected to grow as a result of increased production rates of the F/A-18E/F,
V-22, and Boeing 7-series commercial airplanes, and development work on regional
aircraft and business jets. Sales in Space Controls are expected to decrease as
increases in the sales of controls for satellites, tactical missiles, and the
Space Station Crew Return Vehicle will not fully offset the decline in sales on various launch vehicle programs including
the Titan IV program which is nearing completion.

<P>The operating margin for 2001 is expected to decrease to 12.2% from 12.4% in 2000. Margins are forecasted
to increase compared to 2000 to 14.6% in Aircraft Controls due to higher
forecasted sales while margins are expected to decrease to 8.8% in Space
Controls as mature programs near completion and to 10.4% in Industrial Controls
from pricing pressures on turbine controls and product mix. Earnings per share
is projected to increase by 11% to $3.16.

<P><B>Cautionary Statement</B>

<P>Information in the &#147;Outlook&#148; paragraph of the Management&#146;s Discussion and Analysis
of Financial Condition and Results of Operations section of this report that are
not historical facts, including statements accompanied by or containing words
such as &#147;believes,&#148; &#147;expects,&#148; &#147;intends,&#148;
&#147;plans,&#148; &#147;projects,&#148; &#147;estimates,&#148;
&#147;outlook,&#148; &#147;forecast,&#148; &#147;anticipates,&#148;
&#147;presume&#148; and &#147;assume,&#148; are forward-looking statements. Such
forward-looking statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. These statements are not
guarantees of future performance and are subject to several factors, risks and
uncertainties, the impact or occurrence of which could cause actual results to
differ materially from the expected results described in the forward-looking
statements. These important factors, risks and uncertainties include (i)
fluctuations in general business cycles, demand for capital goods and government
funding of procurement programs in which the Company participates, (ii) the Company's
dependency on certain major customers, such as Boeing and certain U.S.
Government contractors, for a significant percentage of its sales, (iii) intense
competition in the Company&#146;s business which, depending on product line, may
require the Company to compete by lowering prices or by advancing its
technologies; several of the Company&#146;s competitors are substantially larger
than the Company and have greater financial resources with which to compete,
(iv) the potential for substantial fines and penalties or debarment from future
contracts in the event the U.S. Government&#146;s procurement rules are not followed,
(v) the potential for cost overruns on development jobs and actual results that
may differ from estimates used in contract accounting, (vi) the possibility of a
catastrophic loss of one or more of the Company&#146;s manufacturing facilities,
(vii) the impact of product liability claims related to the Company&#146;s
products used in applications where failure can result in significant property
damage, injury and death, and (viii) foreign currency fluctuations in those
countries in which the Company does business which can adversely affect the
Company&#146;s results of operations and financial condition. The factors
identified above are not exhaustive. New factors, risks and uncertainties may
emerge from time to time that may affect the forward-looking statements made
herein. Given these risks, factors and uncertainties, investors should not place
undue reliance on forward-looking statements as predictive of future results.
The Company disclaims any obligation to update the forward-looking statements
made in this report.

<P><B>Item 3. Quantitative and Qualitative Disclosures about Market Risk</B>

<P>Refer to the Company&#146;s Annual Report on Form 10-K for the year ended September 30, 2000 for a complete
discussion of the Company&#146;s market risk. There have been no material
changes in the current year regarding this market risk information.

<P><CENTER>13</CENTER>

<P><B>PART II. OTHER INFORMATION</B>

<PRE>
Item 1.             Legal Proceedings.
                    -----------------
                           None.


Item 2.             Changes in Securities and Use of Proceeds.
                    -----------------------------------------
                           None.


Item 3.             Defaults Upon Senior Securities.
                    -------------------------------
                           None.


Item 4.             Submission of Matters to a Vote of Security Holders.
                    ---------------------------------------------------
                           None.


Item 5.             Other Information.
                    -----------------
                           None.


Item 6.             Exhibits and Reports on Form 8-K.
                    --------------------------------
                    a.     Exhibits.
                           ---------

                           10.1 Corporate Revolving and Term Loan Agreement
                                among certain lenders, HSBC Securities, Inc.,
                                as arranger, Marine Midland Bank, as agent, and
                                Moog Inc. dated as of November 30, 1998.

                           10.2 Amendment No. 1 to Corporate Revolving and Term
                                Loan Agreement among certain lenders, HSBC
                                Securities, Inc., as arranger, HSBC Bank USA,
                                formerly known as Marine Midland Bank, as agent,
                                and Moog Inc. dated as of October 24, 2000.

                    b.     Reports on Form 8-K.
                           --------------------
                           None.

</PRE>

<P><CENTER>14</CENTER>

<P><CENTER><B>SIGNATURES</B></CENTER>

<P>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.

<PRE>
                                               Moog Inc.
                                    --------------------------
                                             (Registrant)


Date:   February 14, 2001           By        S/Robert R. Banta/S
        -----------------              --------------------------
                                             Robert R. Banta
                                             Executive Vice President
                                             Chief Financial Officer
                                             (Principal Financial Officer)



Date:   February 14, 2001           By        S/Donald R. Fishback/S
        -----------------              -----------------------------
                                             Donald R. Fishback
                                             Controller
                                             (Principal Accounting Officer)
<P><CENTER>15</CENTER>


                                 EXHIBIT INDEX


                  10.1    Corporate Revolving and Term Loan Agreement
                          among certain lenders, HSBC Securities, Inc.,
                          as arranger, Marine Midland Bank, as agent, and
                          Moog Inc. dated as of November 30, 1998.

                  10.2    Amendment No. 1 to Corporate Revolving and Term
                          Loan Agreement among certain lenders, HSBC
                          Securities, Inc., as arranger, HSBC Bank USA,
                          formerly known as Marine Midland Bank, as agent,
                          and Moog Inc. dated as of October 24, 2000.


</PRE>
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<FILENAME>0002.txt
<DESCRIPTION>EXHIBIT 10.1
<TEXT>


                   CORPORATE REVOLVING AND TERM LOAN AGREEMENT

                                      AMONG

                                CERTAIN LENDERS,

                       HSBC SECURITIES, INC. AS ARRANGER,

                          MARINE MIDLAND BANK AS AGENT

                                       AND

                                    MOOG INC.




                         DATED AS OF NOVEMBER 30, 1998


<PAGE>


                   CORPORATE REVOLVING AND TERM LOAN AGREEMENT


     This  Agreement  is made as of the  30th day of  November  1998  among  the
lenders  identified  in Exhibit A attached to and made a part of this  Agreement
(collectively the "Lenders" and individually a "Lender"), HSBC Securities, Inc.,
a Delaware  corporation  having its chief executive office at 140 Broadway,  New
York,  New York 10005,  ("HSBC"),  as arranger,  Marine Midland Bank, a New York
banking  corporation  having its chief  executive  office at One Marine  Midland
Center, Buffalo, New York 14203, ("Marine"),  as agent for the Lenders, and Moog
Inc.,  a New York  business  corporation  having its chief  executive  office at
Jamison  Road  and  Seneca  Street,  East  Aurora,  New  York  14052-0018,  (the
"Borrower").

     The  Lenders,  Marine as agent for the  Lenders and the  Borrower  agree as
follows:

     1. DEFINITIONS. For purposes of this Agreement:

     a. Accumulated Funding Deficiency. "Accumulated Funding Deficiency" has the
meaning given to such term in Section 412(a) of the Internal Revenue Code.

     b. Acquisition.  The "Acquisition" means the acquisition by the Borrower of
all of the issued and outstanding shares of stock of Montek.

     c.  Acquisition  Document.   "Acquisition  Document"  means,  as  may  have
heretofore been modified or supplemented,  (i) a Stock Purchase Agreement, dated
as of October 20,  1998,  between the Borrower  and  Raytheon  Aircraft  Company
pursuant to which the Borrower agrees to make the Acquisition,  (ii) any exhibit
or schedule referred to in such Stock Purchase  Agreement or otherwise  relating
thereto or (iii) any agreement,  instrument or other writing  delivered or to be
delivered pursuant to such Stock Purchase Agreement or in connection therewith.

     d.  Affiliate.   "Affiliate"   means,  other  than  the  Borrower  and  all
Subsidiaries,  (i) any Person who or that now or hereafter  has Control of or is
now or hereafter  under common  Control with the Borrower or any  Subsidiary  or
over whom or which the Borrower or any  Subsidiary now or hereafter has Control,
(ii) any Person who is now or hereafter  related by blood,  adoption or marriage
to any Person  referred to in clause (i) of this  sentence  or now or  hereafter
resides  in the same home as any such  Person,  (iii) any  Person  who is now or
hereafter  a director  or  officer  of the  Borrower  or any  Subsidiary  or has
functions with respect to the Borrower or any  Subsidiary  similar to those of a
director or officer of a corporation  or (iv) any Person who is now or hereafter
related by blood, adoption or marriage to any Person referred to in clause (iii)
of this sentence or now or hereafter resides in the same home as any such Person
or over whom or which any such Person now or hereafter has Control.

     e. Agent.  The "Agent means (i) Marine as agent for the Lenders or (ii) any
direct or indirect successor to Marine as agent for the Lenders.

     f. Applicable Interest Margin.  "Applicable  Interest Margin" means (i) for
the  period  beginning  on the date of this  Agreement  and ending on the day on
which is delivered to each Lending Entity the statement of income, balance sheet
and  certificate  required  pursuant to clauses (i), (ii) and (iv) of Section 7h
with respect to the fiscal  quarter of the Borrower  containing the date that is
the six-month  anniversary  of the date that the first Loan is made, 2% and (ii)
for each day thereafter,  the applicable  margin  corresponding  to the ratio of
Consolidated  Total  Debt to (A) in the case of any such  day  contained  in the
fiscal quarter of the Borrower ending the last Saturday in September,  1999, two
times  Consolidated  Adjusted EBITDA for the two fiscal quarters of the Borrower
ending June 30,  1999,  (B) in the case of any such day  contained in the fiscal
quarter of the  Borrower  ending  December  31, 1999,  one and  one-third  times
Consolidated  Adjusted  EBITDA for the three  fiscal  quarters  of the  Borrower
ending the last Saturday in September,  1999 and (C) in the case of any such day
thereafter,  Consolidated  Adjusted  EBITDA for the four fiscal  quarters of the
Borrower  preceding the fiscal quarter of the Borrower  containing  such day, as
set forth below:

============================================================================

                                 Applicable Margin     Applicable Margin
    Ratio of Consolidated         for Libor Rate     for Marine Prime Rate
   Total Debt/Consolidated          Balances              Balances
      Adjusted EBITDA
- ----------------------------------------------------------------------------
Greater than 4.0                     2.25%                 1.25%
- ----------------------------------------------------------------------------
Greater than 3.5 and equal
to or less than 4.0                  2.00%                 1.00%
- ----------------------------------------------------------------------------
Greater than 3.0 and equal
to or less than 3.5                  1.75%                 0.75%
- ----------------------------------------------------------------------------
Greater than 2.5 and equal
to or less than 3.0                  1.50%                 0.50%
- ----------------------------------------------------------------------------
Equal to or less than 2.5            1.25%                 0.25%
============================================================================

     g. Bankruptcy Law.  "Bankruptcy Law" means any bankruptcy or insolvency Law
or  any  other  Law  relating  to  the  relief  of  debtors,  the  readjustment,
composition or extension of indebtedness, liquidation or reorganization.

     h. Business  Day.  "Business  Day" means any day on which in New York,  New
York banks are open to conduct regular business.

     i.  CERCLA.  "CERCLA"  means  the  Comprehensive   Environmental  Response,
Compensation, and Liability Act of 1980, as amended.

     j. Collateral. "Collateral" means any collateral, subordination,  guaranty,
endorsement or other  security or assurance of payment,  whether now existing or
hereafter  arising,  that now or hereafter  directly or  indirectly  secures the
repayment or payment of or is otherwise now or hereafter  directly or indirectly
applicable  to any of the  principal  amount of any Loan,  any interest  payable
pursuant to this Agreement or any other amount payable by the Borrower  pursuant
to any Loan Document.

     k. Commitment  Percentage.  "Commitment  Percentage" means, with respect to
any Lender, the percentage  obtained by (i) dividing (A) the "Commitment Amount"
shown  opposite the name of such Lender in Exhibit A attached to and made a part
of this Agreement by (B) $340,000,000 and (ii) multiplying the result by 100.

     l. Consolidated Adjusted EBITDA . "Consolidated Adjusted EBITDA" means, for
any period, an amount equal to (i) the sum of the amounts for such period of (A)
Consolidated Net Income, (B) Consolidated  Interest Expense,  (C) provisions for
taxes based on income,  (D) total depreciation  expense,  (E) total amortization
expense and (F) other non-cash items reducing Consolidated Net Income minus (ii)
other non-cash items increasing Consolidated Net Income for such period.

     m. Consolidated Capital  Expenditures.  "Consolidated Capital Expenditures"
means, for any period, the aggregate of all expenditures of the Borrower and all
Subsidiaries  during such period  determined  on a  consolidated  basis that may
properly be classified as capital  expenditures  in  conformity  with  generally
accepted  accounting  principles,  other  than the  purchase  by Moog  GmbH of a
portion of its Plant 1 with proceeds of a deposit held by its landlord  pursuant
to its  lease  thereof  which  deposit,  as of the  date of this  Agreement,  is
approximately DEM 3,000,000.

     n. Consolidated Fixed Charges.  "Consolidated Fixed Charges" means, for any
period,  the sum  (without  duplication)  of the  amounts for such period of (i)
Consolidated  Interest  Expense,  (ii)  provisions for taxes based on income and
(iii) regularly scheduled payments of principal of Debt, all of the foregoing as
determined  on a  consolidated  basis for the Borrower and all  Subsidiaries  in
conformity with generally accepted accounting principles.

     o. Consolidated  Interest Expense.  "Consolidated  Interest Expense" means,
for any period,  total interest expense (including that portion  attributable to
capital leases in accordance with generally accepted  accounting  principles and
capitalized  interest) of the Borrower and all  Subsidiaries  on a  consolidated
basis with  respect to all  outstanding  indebtedness  of the  Borrower  and all
Subsidiaries,  including all  commissions,  discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing and net
costs under interest rate agreements,  but excluding,  however, (i) amortization
of discount and amortization of debt issuance costs and (ii) any amounts payable
on or before the date of this Agreement.

     p.  Consolidated  Net  Income.  "Consolidated  Net Income"  means,  for any
period,  (i) the net income (or loss) of the Borrower and all  Subsidiaries on a
consolidated  basis  for  such  period  taken  as  a  single  accounting  period
determined in conformity with generally  accepted  accounting  principles,  less
(ii) (A) the income (or loss) of any Person (other than a  Subsidiary)  in which
any other Person (other than the Borrower or a Subsidiary) has a joint interest,
except to the extent of the amount of dividends or other Distributions  actually
paid to the Borrower or any  Subsidiary by such Person  during such period,  (B)
the  income  (or  loss) of any  Person  accrued  prior to the date it  becomes a
Subsidiary or is merged into or consolidated with the Borrower or any Subsidiary
or that Person's assets are acquired by the Borrower or any Subsidiary,  (C) the
income of any  Subsidiary  to the  extent  that the  declaration  or  payment of
dividends or similar  Distributions  by that Subsidiary of that income is not at
the time  permitted by  operation of the terms of its charter or any  agreement,
instrument,  judgment,  decree, order or Law applicable to that Subsidiary,  (D)
any after-tax  gains or losses  attributable to asset sales (other than any such
gains or losses  incurred in the ordinary  course of business  aggregating  less
than $500,000 during the fiscal year of the Borrower  containing such period) or
returned  surplus assets of any Pension Plan and (E) (to the extent not included
in clauses (A) through (D) above) any net  extraordinary  gains or net  non-cash
extraordinary losses.

     q.  Consolidated Net Worth.  "Consolidated Net Worth" means, as at any date
of  determination,  the sum of the capital stock and additional  paid-in capital
plus retained earnings (or minus  accumulated  deficits) of the Borrower and all
Subsidiaries  on a consolidated  basis  determined in conformity  with generally
accepted accounting principles.

     r. Consolidated Total Debt. "Consolidated Total Debt" means, as at any date
of determination,  the sum of (i) all Debt of the Borrower and all Subsidiaries,
determined  on a  consolidated  basis  in  accordance  with  generally  accepted
accounting  principles  less aggregate net cash balances of the Borrower and all
Subsidiaries and (ii) Letters of Credit  Outstanding (other than that portion of
Letters of Credit Outstanding  representing the aggregate undrawn face amount of
Letters of Credit which are trade  letters of credit  issued with respect to the
purchase and sale of goods by the Borrower or any Subsidiary).

     s. Control.  "Control" means, with respect to any Person, whether direct or
indirect,  (i) the  power  to vote  20% or more  (on a  weighted  basis)  of the
outstanding  shares of stock of such Person  ordinarily having the power to vote
for the  election  of  directors  of such  Person or 20% or more (on a  weighted
basis) of other ownership  interests in such Person  ordinarily having the power
to vote for the  election  of,  appoint or otherwise  designate  Persons  having
functions  with  respect  to such  Person  similar  to those of  directors  of a
corporation  or the power to direct or cause the direction of the management and
policies of such  Person,  (ii) the  beneficial  ownership of 20% or more of the
outstanding  shares of stock of such  Person  or 20% or more of other  ownership
interests in such Person or (iii) the power to direct or cause the  direction of
the management and policies of such Person, whether by ownership of any stock or
other ownership interest, by agreement or otherwise;  provided, however, that no
Pension  Plan  or  employee  stock  ownership  plan  of the  Borrower  shall  be
considered to have Control of the Borrower or any Subsidiary.

     t. Debt.  "Debt"  means,  with  respect  to any  Person,  any  Indebtedness
resulting  from the  borrowing  of any money or from any deferral of payment for
the acquisition or capital lease of any asset.

     u. Default.  "Default"  means (i) any default by the Borrower  described in
clause (i) or (iii) of Section lbb of this Agreement or (ii) the commencement of
any case or other proceeding against the Borrower or any Subsidiary described in
clause (v) or (vi) of Section lbb of this  Agreement  regardless  of whether any
notice,  lapse  of time or both  notice  and  lapse of time  otherwise  required
pursuant to such clause (i), (iii), (v) or (vi) has been given or occurred.

     v.  Designated  Officer.  "Designated  Officer"  means the  President,  any
Executive Vice President, the Treasurer or the Controller of the Borrower.

     w. Directly-Owned Foreign Subsidiary . "Directly-Owned  Foreign Subsidiary"
means any Foreign Subsidiary over which the Borrower has direct Control.

     x. Distribution.  "Distribution" means, with respect to any Person, (i) any
dividend  or other  distribution,  whether  in cash or in the form of any  other
asset, on account of any of its stock or any other ownership interest therein or
(ii) any payment on account of the  purchase,  redemption,  retirement  or other
acquisition of any of its stock or any other ownership interest therein.

     y. Domestic  Subsidiary.  "Domestic  Subsidiary"  means (i) any  Subsidiary
having  any place of  business  located  in the  United  States  other than Moog
Controls  Corporation or (ii) any Subsidiary that is a foreign sales corporation
(including, but not limited to, Moog FSC Ltd.).

     z. Environmental Law.  "Environmental Law" means any Law relating to public
health or safety or protection of the  environment,  including,  but not limited
to, (i) CERCLA and (ii) the Resource Conservation and Recovery Act, as amended.


     aa. ERISA.  "ERISA" means the Employee  Retirement  Income  Security Act of
1974, as amended.

     bb. Event of Default.  An "Event of  Default"  occurs or exists if (i) the
Borrower  defaults in (A) the repayment when due of any of the principal  amount
of any Loan or the payment of any Letter of Credit Reimbursement  Obligation and
such default  continues uncured for five Business Days, (B) the payment when due
of any interest,  non-usage fee or letter of credit fee payable pursuant to this
Agreement and such default  continues uncured for three Business Days or (C) the
payment  when due of any other amount  payable by the Borrower  pursuant to this
Agreement  or any other Loan  Document and such  default  continues  uncured for
twenty  Business  Days,  (ii) the  Borrower  or any  Subsidiary  defaults in the
payment when due,  whether by  acceleration or otherwise and after giving effect
to any applicable grace period,  of any sum that is now or hereafter  payable by
it to any Person  other than  pursuant to this Loan  Agreement or any other Loan
Document,  whether payable for principal,  for interest or otherwise and whether
the  obligation to make payment  thereof now exists or hereafter  arises,  other
than that the  nonpayment of which is permitted by Section 7i of this  Agreement
or any other Loan Document, the maturity of any such sum is accelerated or there
occurs or exists any event or  condition  that permits the  acceleration  of the
maturity  of any such sum that,  in each case  described  in this  clause  (ii),
involves  a sum that,  when  aggregated  with all other sums  described  in this
clause (ii), exceeds  $5,000,000,  (iii) the Borrower or any Subsidiary defaults
in the performance  when due of any obligation owing by it to any Lending Entity
pursuant to this  Agreement or any other Loan Document  other than an obligation
to pay money and, if such  obligation is not pursuant to clause (ii) or (iii) of
Section 7b of this  Agreement or pursuant to Section 7c, 7d, 7e, 7f, 7m, 7n, 7o,
7p or 7q or Section 8 of this Agreement,  such default continues for thirty days
after notice thereof is given by the Agent to the Borrower, (iv) the Borrower or
any  Subsidiary  is  dissolved,  ceases  to  exist,  participates  or  agrees to
participate in any merger, consolidation or other absorption (other than (A) any
such  dissolution,  merger,  consolidation  or other  absorption of any Domestic
Subsidiary  or  Directly-Owned  Foreign  Subsidiary  that  results in all of the
assets of such Domestic  Subsidiary or Directly-Owned  Foreign  Subsidiary being
transferred  to  the  Borrower  or,  in the  case  of a  Directly-Owned  Foreign
Subsidiary,   to  another  Directly-Owned  Foreign  Subsidiary,   (B)  any  such
dissolution, merger, consolidation or other absorption of any Foreign Subsidiary
other than a Directly-Owned  Foreign  Subsidiary that does not have any Material
Adverse Effect or (C) pursuant to a Permitted  Disposition),  assigns,  sells or
otherwise transfers or disposes of all or substantially all of its assets (other
than  pursuant  to a  Permitted  Disposition),  makes or  permits  a  fraudulent
transfer or  fraudulent  conveyance  of any of its  assets,  makes any bulk sale
(other than pursuant to a Permitted  Disposition),  sends any notice of any such
intended bulk sale,  becomes  insolvent  (however such insolvency is evidenced),
generally  fails to pay its debts as they  become  due,  suspends  or ceases its
present business, has served, filed or recorded against it or against any of its
assets any  attachment,  levy,  tax lien,  warrant or similar  lien other than a
Permitted  Lien or has  entered  against  it or  against  any of its  assets any
judgment, order or award of any Governmental Authority or of any arbitrator, (v)
the Borrower has any receiver, trustee, custodian or similar Person for it or of
any of its assets  appointed  (whether with or without its  consent),  makes any
assignment for the benefit of creditors or commences or has commenced against it
any case or other  proceeding  pursuant to any  Bankruptcy  Law or any formal or
informal  proceeding  for the  dissolution,  liquidation  or  winding  up of the
affairs of, or for the settlement of claims against,  it and, in the case of any
case or other proceeding  commenced against it, such case or other proceeding is
not dismissed within 60 days after being commenced,  (vi) any Subsidiary has any
receiver,  trustee,  custodian or similar  Person for it or of any of its assets
appointed  (whether with or without its consent),  makes any  assignment for the
benefit of creditors or commences or has commenced  against it any case or other
proceeding  pursuant to any Bankruptcy Law or any formal or informal  proceeding
for the  dissolution,  liquidation  or winding up of the  affairs of, or for the
settlement  of  claims  against,  it  and,  in the  case of any  case  or  other
proceeding  commenced against it, such case or other proceeding is not dismissed
within 60 days after being commenced,  other than any such event with respect to
a Foreign  Subsidiary that does not have any Material Adverse Effect,  (vii) any
representation  or warranty made in this Agreement proves, as of any time during
the period  beginning on the date of this  Agreement  and ending at the time any
Loan is made or as of the  time  any Loan is made,  to have  been  incorrect  or
misleading  in  any  material  respect,  except  to  the  extent  updated  in  a
certificate executed by a Designated Officer and received by each Lending Entity
before  the time  such  Loan is made,  (viii)  any  representation  or  warranty
heretofore  or  hereafter  made to any  Lending  Entity  by or on  behalf of the
Borrower  pursuant  to  any  Loan  Document  proves,  as of  the  date  of  such
representation or warranty, to have been incorrect or misleading in any material
respect,  or any financial  statement  heretofore  or hereafter  provided to any
Lending  Entity by or on behalf of the  Borrower  pursuant to any Loan  Document
proves, as of the date of such financial statement, to not have fairly presented
the financial information it contains,  (ix) there occurs or exists with respect
to any Pension Plan any Prohibited Transaction,  Reportable Event or other event
or  condition  that,  in  the  reasonable   opinion  of  the  Required  Lenders,
constitutes  or will  constitute  grounds  for the  institution  by the  Pension
Benefit  Guaranty   Corporation  of  any  proceeding  under  ERISA  seeking  the
termination  of such Pension Plan or the  appointment of a trustee to administer
such Pension Plan,  the Pension  Benefit  Guaranty  Corporation  institutes  any
proceeding  under ERISA  seeking  the  termination  of any  Pension  Plan or the
appointment  of a trustee to administer  any Pension Plan, any Person other than
the Pension Benefit Guaranty  Corporation  institutes any proceeding under ERISA
seeking the  termination of any Pension Plan or the  appointment of a trustee to
administer any Pension Plan that is, in the  reasonable  opinion of the Required
Lenders,  likely to result in the  termination of such Pension Plan, any trustee
is appointed by a United States  District  Court to administer any Pension Plan,
any Pension Plan is terminated or there are vested  unfunded  liabilities  under
any Pension Plan that, in the reasonable  opinion of the Required Lenders,  have
or will have any Material Adverse Effect, (x) there occurs any change in Control
of the  Borrower or of any  Subsidiary  (other than (A) a loss of Control by any
Person  without a gaining of Control by any other Person or (B) as a result of a
Permitted  Disposition)  that  is,  in  the  opinion  of the  Required  Lenders,
materially  adverse  to their  interests  and is not  corrected  to  their  full
satisfaction  within 30 days  after the  Agent  delivers,  gives or sends to the
Borrower a notice that they  consider  such change  materially  adverse to their
interests or (xi) any Loan Document is rendered  invalid in any material respect
or the Borrower or any  Subsidiary  questions  the validity,  enforceability  or
priority of any Loan Document or any security  interest,  mortgage or other lien
or encumbrance imposed or created pursuant to any Loan Document.

     cc. Fixed Charge  Coverage  Ratio.  "Fixed Charge Coverage Ratio" means the
ratio  as of  the  last  day of  any  fiscal  quarter  of  the  Borrower  of (i)
Consolidated Adjusted EBITDA for the four-fiscal quarter period then ended minus
Consolidated  Capital  Expenditures  for such four fiscal quarter period to (ii)
Consolidated Fixed Charges for such four-fiscal  quarter period (except that (A)
in the case of the fiscal  quarter of the  Borrower  ending June 30,  1999,  two
times Consolidated  Adjusted EBITDA, two times Consolidated Capital Expenditures
and two times  Consolidated  Fixed  Charges  for the two fiscal  quarters of the
Borrower  ending on such date  shall  instead be used and (B) in the case of the
fiscal quarter of the Borrower ending the last Saturday in September,  1999, one
and one-third  times  Consolidated  Adjusted  EBITDA,  one and  one-third  times
Consolidated Capital Expenditures and one and one-third times Consolidated Fixed
Charges for the three fiscal  quarters of the Borrower ending on such date shall
instead  be  used),  in each  case as set  forth in the most  recent  compliance
certificate  delivered  by the  Borrower to the Agent  pursuant to Section 7h of
this Agreement.

     dd. Foreign Subsidiary.  "Foreign  Subsidiary" means (i) any Subsidiary not
having  any place of  business  located  in the  United  States  other  than any
Subsidiary that is a foreign sales corporation  (including,  but not limited to,
Moog FSC Ltd.) or (ii) Moog Controls Corporation.

     ee. Governmental Authority.  "Governmental Authority" means any government,
political  subdivision,  court,  agency,  central  bank or other  entity,  body,
organization or group exercising any executive,  legislative,  judicial, fiscal,
monetary, regulatory or administrative function of government.

     ff.  Hazardous  Material.  "Hazardous  Material"  means (i) any  "hazardous
substance"  as such  term  is  defined  in 42  U.S.C.  ss.  9601(14),  (ii)  any
"hazardous  waste" as such term is defined in 42 U.S.C.  ss. 6903(5),  (iii) any
pollutant,  contaminant  or hazardous,  dangerous or toxic  chemical,  material,
waste or other substance for purposes of any other Environmental Law relating to
or imposing any liability or standard of conduct with respect to any  pollutant,
contaminant or hazardous,  dangerous or toxic chemical, material, waste or other
substance or (iv) any petroleum product used for fuel or lubrication.

     gg. Indebtedness. "Indebtedness" means, with respect to any Person, (i) any
indebtedness,  liability or obligation of such Person that should, in accordance
with generally accepted accounting  principles,  be classified and accounted for
as a liability on a balance sheet of such Person, (ii) any indebtedness or other
obligation pursuant to any guaranty or other contingent  obligation  (including,
but not limited to, any  obligation  to (A)  maintain the net worth of any other
Person,  (B) purchase or otherwise  acquire or assume any  indebtedness or other
obligation  or (C)  provide  funds for or  otherwise  assure the  payment of any
indebtedness or other obligation,  whether by means of any investment,  by means
of any  purchase,  sale or other  acquisition  or  disposition  of any  asset or
service or otherwise),  (iii) any indebtedness,  liability or obligation of such
Person pursuant to any conditional  sale contract,  capital lease or other title
retention contract with respect to any asset acquired by such Person even though
the seller, lessor or other creditor pursuant to such conditional sale contract,
capital lease or other title  retention  contract is limited to  repossession or
sale of such asset to satisfy such indebtedness, liability or obligation or (iv)
any indebtedness,  liability or obligation  secured by any security interest in,
or mortgage  or other lien or  encumbrance  upon,  any asset of such Person even
though such  Person is not  obligated  to pay such  indebtedness,  liability  or
obligation.

     hh. Interest Coverage Ratio.  "Interest  Coverage Ratio" means the ratio as
of the  last day of any  fiscal  quarter  of the  Borrower  of (i)  Consolidated
Adjusted  EBITDA  for  the  four-fiscal   quarter  period  then  ended  to  (ii)
Consolidated  Interest Expense for such four-fiscal  quarter period (except that
(A) in the case of the fiscal quarter of the Borrower  ending June 30, 1999, two
times Consolidated  Adjusted EBITDA and two times Consolidated  Interest Expense
for the two fiscal quarters of the Borrower ending on such date shall instead be
used and (B) in the case of the fiscal  quarter of the Borrower  ending the last
Saturday in September,  1999,  one and  one-third  times  Consolidated  Adjusted
EBITDA and one and one-third times  Consolidated  Interest Expense for the three
fiscal  quarters of the Borrower  ending on such date shall instead be used), in
each case as set forth in the most recent  compliance  certificate  delivered by
the Borrower to the Agent pursuant to Section 7h of this Agreement.

     ii. Internal  Revenue Code. The "Internal  Revenue Code" means the Internal
Revenue Code of 1986, as amended.

     jj. Investment.  "Investment"  means, with respect to any Person, any loan,
advance or other  extension of credit (other than unsecured  normal trade credit
extended upon customary terms in the ordinary course of such Person's  business)
or capital contribution to, any purchase or other acquisition of any security of
or interest in, or any other investment in, any other Person.

     kk. Law.   "Law"  means  any   statute,   ordinance,   regulation,   rule,
interpretation,  decision,  guideline or other requirement  enacted or issued by
any Governmental Authority, whether or not having the force of law.

     ll. Lending  Entity.  "Lending  Entity" means (i) any Lender,  (ii) HSBC or
(iii) the Agent.

     mm.  Letter of  Credit.  "Letter  of  Credit"  means  any  letter of credit
requested by the Borrower and issued by the Agent pursuant to Section 3a of this
Agreement.

     nn.  Letter of Credit  Borrowing.  "Letter of Credit  Borrowing"  means any
extension of credit  resulting  from a drawing  under any Letter of Credit which
shall not have been reimbursed on the date when made and shall not have resulted
in the making of any Revolving Loan pursuant to Section 3c of this Agreement.

     oo. Letter of Credit  Drawing Date.  "Letter of Credit  Drawing Date" means
the date on which a Letter of Credit Reimbursement Obligation arises pursuant to
Section 3c of this Agreement.

     pp. Letter of Credit Participation Advance. "Letter of Credit Participation
Advance"  means any advance by any Lender to the Agent pursuant to Section 3d of
this  Agreement  to  acquire a  participation  interest  in any Letter of Credit
Borrowing.

     qq.  Letter  of  Credit   Reimbursement   Obligation.   "Letter  of  Credit
Reimbursement  Obligation" means the obligation of the Borrower to reimburse the
Agent for any Letter of Credit  drawing  under  Section 3c of this  Agreement or
pursuant to any Loan Document  relating to the issuance of the related Letter of
Credit.

     rr. Letters of Credit Outstanding. "Letters of Credit Outstanding" means at
any time the sum of (i) the  aggregate  undrawn  face amount of all  outstanding
Letters of Credit and (ii) the  aggregate  amount of all unpaid and  outstanding
Reimbursement  Obligations  (including,  but not  limited  to,  Letter of Credit
Borrowings).

     ss. Leverage Ratio.  "Leverage  Ratio" means the ratio of (i)  Consolidated
Total Debt as of the last day of any  fiscal  quarter  of the  Borrower  to (ii)
Consolidated  Adjusted  EBITDA for the  four-fiscal  quarter  period  then ended
(except that (A) in the case of the fiscal  quarter of the Borrower  ending June
30, 1999, two times Consolidated  Adjusted EBITDA for the two fiscal quarters of
the  Borrower  ending on such date shall  instead be used and (B) in the case of
the fiscal quarter of the Borrower ending the last Saturday in September,  1999,
one and  one-third  times  Consolidated  Adjusted  EBITDA  for the three  fiscal
quarters of the  Borrower  ending on such date shall  instead be used),  in each
case as set forth in the most recent  compliance  certificate  delivered  by the
Borrower to the Agent pursuant to Section 7h of this Agreement.

     tt. Libor Rate.  "Libor Rate" means,  for any period,  as determined by the
Agent from any broker,  quoting service or commonly available source utilized by
the Agent, the London  interbank  offered rate for United States dollar deposits
in the London interbank  eurodollar  market at approximately  11:00 a.m. London,
England  time (or as soon  thereafter  as  practicable)  on the date that is two
Libor Rate  Business Days before the first day of such period for deposits to be
delivered on the first day of such period for a period equal to such period.

     uu. Libor Rate  Business  Day.  "Libor Rate  Business Day" means any day on
which in both New York,  New York and London,  England banks are open to conduct
regular business.

     vv. Libor Rate Election.  "Libor Rate Election" means any oral  (including,
but not limited to,  telephonic),  written or other (including,  but not limited
to, facsimile) election to have the interest charged for any period on a portion
of the aggregate  outstanding  principal  amounts of all Revolving Loans or Term
Loans determined by reference to the Libor Rate for such period.

     ww.  Libor Rate  Period.  "Libor  Rate  Period"  means any period for which
interest  is to be  charged on any Libor Rate  Portion at a rate  determined  by
reference to the Libor Rate for such period pursuant to a Libor Rate Election.

     xx. Libor Rate Period  Commencement  Date. "Libor Rate Period  Commencement
Date" means the date on which any Libor Rate Period begins.

     yy.  Libor Rate  Portion.  "Libor  Rate  Portion"  means any portion of the
aggregate  outstanding principal amounts of all Revolving Loans or Term Loans on
which interest is to be charged for any period at a rate determined by reference
to the Libor Rate for such period  pursuant to a Libor Rate  Election.  zz.Loan.
"Loan" means any Revolving Loan or Term Loan.

     aaa.  Loan  Document.  "Loan  Document"  means this  Agreement or any other
agreement or  instrument  referred to in Section 3 or 5d of this  Agreement,  as
this  Agreement  or any such  other  agreement  or  instrument  may be  amended,
supplemented,  extended,  renewed, restated, replaced or otherwise modified from
time to time.

     bbb. Marine's Prime Rate. "Marine's Prime Rate" means the higher of (i) the
rate announced by Marine as the prime rate of interest of Marine, whether or not
such rate is actually  the lowest or best rate  charged by Marine in  connection
with any loan or other extension of credit made by Marine,  or (ii) the total of
(A) the highest rate for reserves  traded among  commercial  banks for overnight
use in amounts of $1,000,000 or more and (B) 1/2%.

     ccc.  Material Adverse Effect.  "Material  Adverse Effect" means any set of
circumstances or events which (i) has, has had or will have any material adverse
effect  whatsoever upon the validity or  enforceability of this Agreement or any
other Loan  Document,  (ii) is, has been or will be material  and adverse to the
business,  properties,  assets,  financial  condition,  results of operations or
prospects of the Borrower,  or of the Borrower and all  Subsidiaries  taken as a
whole or (iii)  impairs  materially,  has  impaired  materially  or will  impair
materially  the  ability of any  Lending  Entity,  to the extent  permitted,  to
enforce its rights or  remedies  pursuant  to this  Agreement  or any other Loan
Document.

     ddd.  Maturity Date. The "Maturity Date" means the fifth anniversary of the
date that the first Loan is made.

     eee.  Montek.  "Montek" means Raytheon  Aircraft Montek  Company,  a Kansas
business corporation.

     fff. Net  Proceeds.  "Net  Proceeds"  means (i) with respect to any sale or
other  disposition  of any  asset or  group of  assets  by the  Borrower  or any
Domestic  Subsidiary,  except for (A) sales of any of its  inventory  (including
scrappage) in the ordinary course of its business,  (B) exchanges of assets for,
or sales of assets the net  proceeds of which are used for, the  acquisition  of
similar  assets  and  (C)  Permitted  Dispositions,  (ii)  with  respect  to the
incurring  of any Debt or the issuance or sale of any equity  securities  of the
Borrower  other than through the exercise of any bona fide employee stock option
or to any employee stock ownership plan, (iii) with respect to any recovery with
respect  to  insurance  or  condemnation  or any  similar  recovery  except  for
recoveries  that are promptly  applied  toward repair or  replacement of damaged
property or to costs incurred in connection  with a business  interruption,  and
(iv) with  respect  to any  reversion  of assets  from a Pension  Plan,  the net
proceeds of such sale or other disposition, incurring of indebtedness,  issuance
or sale of debt or equity securities,  recovery or reversion,  after the payment
of the direct expenses thereof.

     ggg. Pension Plan.  "Pension Plan" means (i) any pension plan, as such term
is  defined  in  Section  3(2) of  ERISA,  (A)  that has  heretofore  been or is
hereafter established or maintained by the Borrower, any Subsidiary or any other
Person that is,  together  with the  Borrower or any  Subsidiary,  a member of a
controlled  group of corporations for purposes of Section 414(b) of the Internal
Revenue Code or is under common  control with the Borrower or any Subsidiary for
purposes  of  Section  414(c)  of  the  Internal  Revenue  Code,  (B)  to  which
contributions  have heretofore  been or are hereafter made by the Borrower,  any
Subsidiary or any such other Person or (C) to which the Borrower, any Subsidiary
or any such other Person has heretofore  agreed or hereafter agrees or otherwise
has heretofore incurred or hereafter incurs any obligation to make contributions
or (ii) any trust  heretofore  or hereafter  created under any such pension plan
(except  for any such  plan or trust (I)  maintained  or  previously  maintained
outside of the United States primarily for the benefit of persons  substantially
all of whom are  nonresident  aliens,  within the meaning of Section  4(b)(4) of
ERISA, (II) which is or was unfunded and maintained primarily for a select group
of management or highly  compensated  employees,  within the meaning of Sections
201(2),  301(a)(3) or 401(a)(1) of ERISA, or (III) which is or was maintained by
Montek or any trade or business,  whether or not  incorporated,  which is or was
part of a controlled  group,  under common  control or  affiliated  with Montek,
within the meaning of Sections  414(b),  (c),  (m) or (o) of the Code or Section
4001(b)(1) of ERISA, prior to the Acquisition).

     hhh.  Permitted   Acquisition.   "Permitted   Acquisition"  means  (i)  the
Acquisition,  (ii)  the  acquisition  by  the  Borrower  of (A)  the  25% of the
outstanding  equity interests in Hydrolux S.a.r.l.  and Moog-Hydrolux  Hydraulic
Systems,  Inc.  not  owned  by the  Borrower  on the date of this  Agreement  on
substantially  the terms of that certain letter of intent signed on June 9, 1998
and June 10, 1998 by and between the Borrower and Paul Wurth S.A. or (B) 66 2/3%
of the equity interests in Microset s.r.l. and all remaining equity interests in
Microset  s.r.l.,  in each  case on  substantially  the  terms  of that  certain
Purchase  Agreement  dated as of July 22, 1998 by and between Moog Italiana Srl,
Microset  S.r.l.,  Mario  Bellini  and  Christa  Schwind  and  (iii)  any  other
acquisition by the Borrower or any Subsidiary of all or substantially all of the
assets or stock of any other Person, or assets constituting all or substantially
all of a division or product line of any other Person so long as (A) immediately
prior to contracting for or consummating  such other  acquisition there does not
exist,  and  there  does  not  occur  as a  direct  or  indirect  result  of the
consummation of such other acquisition, any Event of Default or Default, (B) the
aggregate  consideration  paid (whether by means of transfer of assets, by means
of assumption of liabilities or otherwise) by the Borrower and all  Subsidiaries
in connection with all such other acquisitions during the term of this Agreement
does not exceed  $15,000,000  and (C) with respect to any assets or stock of any
Person acquired directly or indirectly  pursuant to any such other  acquisition,
all collateral requirements of the Required Lenders are satisfied.

     iii. Permitted Disposition. "Permitted Disposition" means any sale or other
disposition  of  any  asset  of  the  Borrower  or any  Subsidiary  which,  when
aggregated with all other such sales or dispositions made during any fiscal year
of the Borrower, does not result in sales and other dispositions by the Borrower
and all Subsidiaries during such fiscal year of assets having an aggregate value
in excess of, or the  receipt of  aggregate  proceeds  in excess of,  $5,000,000
(excluding, for purposes of computing such maximum amount, sales of inventory in
the  ordinary  course of business  and  conveyances  of mere record title to any
asset to a  Governmental  Authority  to save  taxes  where the  Borrower  or any
Subsidiary has an option to require  reconveyance of such property for a nominal
price).

     jjj. Permitted Distribution.  "Permitted  Distribution" means (i) dividends
payable  solely in any of its stock,  (ii) cash dividends paid by any Subsidiary
on a pro rata basis with respect to all of its  outstanding  shares,  (iii) cash
dividends  paid of up to $9,000 in any fiscal year of the Borrower  with respect
to the Borrower's preferred shares and (iv) purchases by the Borrower during the
term of this  Agreement of shares of stock of the  Borrower for purchase  prices
aggregating not more than $7,000,000.

     kkk.  Permitted  Indebtedness.   "Permitted  Indebtedness"  means  (i)  any
Indebtedness  pursuant to this  Agreement,  (ii) any  Indebtedness  constituting
unsecured normal trade debt incurred upon customary terms in the ordinary course
of its business or any other accrued liability (except Debt) described in clause
(i) of Section 1gg of this Agreement,  (iii) any  Indebtedness  arising from the
endorsement  in the  ordinary  course  of its  business  of any  check  or other
negotiable instrument for deposit or collection, (iv) any Indebtedness fully and
accurately described under the heading "Permitted Indebtedness" in Schedule 1kkk
as  originally  attached to and made a part of this  Agreement  or (v) any other
Indebtedness  the  aggregate  outstanding  amount  of  which  is not  more  than
$25,000,000 at any time. lll.Permitted Investment.  "Permitted Investment" means
(i) any  Investment  by the  Borrower  or by any  Subsidiary  in (A) any readily
marketable direct obligation of the United States maturing within one year after
the date of its acquisition  thereof,  (B) any time deposit  maturing within one
year  after  the date of its  acquisition  thereof  and  issued  by any  banking
institution  that is  incorporated  under any statute of the United States or of
any state of the United  States and has a combined  capital  and  surplus of not
less than $100,000,000,  (C) any demand or savings deposit with any such banking
institution,  (D) any United  States  dollar  deposits  in the London  interbank
eurodollar  market with any such banking  institution  or any  subsidiary of any
such  banking  institution,  (E) any  commercial  paper  rated at  least  A-1 by
Standard & Poors Ratings Group or P-1 by Moody's Investors Services, Inc. or (F)
any security of any  Subsidiary  if such  security is owned by it on the date of
this  Agreement or acquired as a result of a Permitted  Acquisition  but only to
the extent of such  investment on the date of this Agreement or the date of such
Permitted Acquisition,  (ii) any Investment by any Foreign Subsidiary in (A) any
readily  marketable  direct  obligation  of the  foreign  country  in which  the
principal  place of  business of such  Foreign  Subsidiary  is located  maturing
within one year after the date of its acquisition  thereof, (B) any time deposit
maturing within one year after the date of its acquisition thereof and issued by
any banking  institution that is incorporated  under any statute of such foreign
country or any political  subdivision of such foreign country and has a combined
capital  and  surplus of not less than  $100,000,000,  (C) any demand or savings
deposit with any such banking  institution or (D) any other Foreign  Subsidiary,
(iii)  any  Investment  by  the  Borrower  or  any  trustee  in  respect  of its
Supplemental  Retirement  Plans,  (iv) any loan,  advance or other  extension of
credit  made  by any  Subsidiary  to the  Borrower  or by  the  Borrower  or any
Subsidiary to any Subsidiary that (A) is a guarantor,  without any limitation as
to amount,  of the payment of all  Indebtedness  of the Borrower to the Lenders,
whether now  existing or hereafter  arising or accruing,  pursuant to a guaranty
agreement in form and substance  satisfactory to the Lenders and (B) has granted
to  the  Lenders  pursuant  to  a  security  agreement  in  form  and  substance
satisfactory to the Lenders as security for the payment,  without any limitation
as to  amount,  of all  such  Indebtedness  a  security  interest  in all of its
personal  property and  fixtures  that has been  perfected  and is subject to no
security  interest,  mortgage or other lien or encumbrance  other than Permitted
Liens,  (v) any deferral of the purchase  price of any inventory or service sold
by the Borrower or any Subsidiary in the ordinary  course of its business,  (vi)
any advance made by the Borrower or any Subsidiary in the ordinary course of its
business  to  any of its  officers  and  employees  for  out-of-pocket  expenses
incurred  by such  officer  or  employee  on its  behalf in the  conduct  of its
business or  operations,  (vii) any Investment  fully and  accurately  described
under  the  heading  "Permitted  Investments"  in  Schedule  1lll as  originally
attached to and made a part of this Agreement,  (viii) any Permitted Acquisition
or (ix) any other Investments  aggregating not more than $20,000,000  during the
term of this Agreement.

     mmm.  Permitted Lien.  "Permitted Lien" means (i) any lease of any asset by
the  Borrower  or any  Subsidiary  as a lessor  in the  ordinary  course  of its
business  and  without   interference  with  the  conduct  of  its  business  or
operations, (ii) any pledge or deposit made by the Borrower or any Subsidiary in
the  ordinary  course  of its  business  (A) in  connection  with  any  workers'
compensation,  unemployment insurance,  social security or similar Law or (B) to
secure the payment of any  indebtedness,  liability or  obligation in connection
with any letter of credit,  bid, tender,  trade or government  contract,  lease,
surety,  appeal or  performance  bond or Law,  or any  similar  indebtedness  or
obligation,  not incurred in  connection  with the borrowing of any money or the
deferral of the  payment of the  purchase  price or capital  lease of any asset,
(iii) any  attachment,  levy or similar lien with respect to the Borrower or any
Subsidiary  arising in connection  with any action or other legal  proceeding so
long as (A) the  validity  of the claim or  judgment  secured  thereby  is being
contested  in good faith by  appropriate  proceedings  promptly  instituted  and
diligently  conducted,   (B)  to  the  extent  required  by  generally  accepted
accounting principles, adequate reserves have been appropriately established for
such  claim  or  judgment,  (C)  the  execution  or  other  enforcement  of such
attachment,  levy or similar  lien is  effectively  stayed and (D) neither  such
claim or judgment  nor such  attachment,  levy or similar  lien has any Material
Adverse  Effect,  (iv) any statutory  lien in favor of the United States for any
amount paid to the Borrower or to any Subsidiary as a progress  payment pursuant
to any government  contract,  (v) any statutory lien securing the payment of any
tax,  assessment,  fee,  charge,  fine or penalty  imposed by any  government or
political  subdivision upon the Borrower,  any Domestic Subsidiary or any of the
assets, income and franchises of the Borrower or any Domestic Subsidiary but not
yet required by Section 7i of this Agreement to be paid, (vi) any statutory lien
securing  the  payment  of any  claim or demand  of any  materialman,  mechanic,
carrier,  warehouseman,  garageman  or  landlord  against  the  Borrower  or any
Domestic  Subsidiary  but not yet required by such Section 7i to be paid,  (vii)
any reservation,  exception,  encroachment,  easement,  right-of-way,  covenant,
condition,   restriction,  lease  or  similar  title  exception  or  encumbrance
affecting the title to any real property of the Borrower or any  Subsidiary  but
not  interfering  with the  conduct of its  business or  operations,  (viii) any
security  interest,  mortgage  or other lien or  encumbrance  imposed or created
pursuant to any Loan Document,  (ix) any purchase money security interest in any
asset securing any Permitted Indebtedness,  (x) any security interest,  mortgage
or other  lien or  encumbrance  granted by any  Subsidiary  to the  Borrower  or
another  Subsidiary  (other  than any such grant by a Domestic  Subsidiary  to a
Foreign  Subsidiary  or by a  Directly-Owned  Foreign  Subsidiary  to a  Foreign
Subsidiary which is not a Directly-Owned Foreign Subsidiary or (xi) any security
interest,  mortgage  or other lien or  encumbrance  existing on the date of this
Agreement and fully and accurately described under the heading "Permitted Liens"
in Schedule 1mmm as originally attached to and made a part of this Agreement.

     nnn. Person. "Person" means (i) any individual,  corporation,  partnership,
limited liability company, joint venture,  trust or unincorporated  association,
(ii) any Governmental Authority or (iii) any other entity, body, organization or
group.

     ooo. Prohibited Transaction.  "Prohibited  Transaction" (i) has the meaning
given to such term in Section  4975(c)  of the  Internal  Revenue  Code and (ii)
means any transaction prohibited by Section 406(a) of ERISA.

     ppp.  Release.  "Release" means any "release" as such term is defined in 42
U.S.C.ss.9601(22).

     qqq.  Reportable  Event.  "Reportable  Event" has the meaning given to such
term in Section 4043(b) of ERISA.

     rrr. Required Lenders.  "Required  Lenders" means  collectively,  as of any
time, (i) if at such time there is any outstanding principal amount of any Loan,
those  of the  Lenders  to  which  are owed in  excess  of 50% of the  aggregate
outstanding  principal amounts of all Loans at such time or (ii) if at such time
there is no such outstanding principal amount, those of the Lenders the total of
the Commitment Percentages of which exceed 50%.

     sss.  Revolving Loan.  "Revolving Loan" means any loan by any Lender to the
Borrower pursuant to Section 2a of this Agreement.

     ttt.  Revolving Loan Maximum Aggregate  Principal  Amount.  "Revolving Loan
Maximum  Aggregate  Principal  Amount"  means (i)  $265,000,000  reduced  by all
amounts by which  reductions  are made  pursuant  to  Sections 2f and 2i of this
Agreement less (ii) Letters of Credit Outstanding.

     uuu.  Solvent.  "Solvent" means, with respect to any Person on a particular
date,  that on such date (i) the fair value of the  property  of such  Person is
greater than the total amount of  liabilities,  including,  without  limitation,
contingent  liabilities,  of such Person, (ii) the present fair salable value of
the assets of such  Person is not less than the amount  that will be required to
pay the probable  liability of such Person on its debts as they become  absolute
and matured,  (iii) such Person does not intend to, and does not believe that it
will, incur debts or liabilities  beyond such Person's ability to pay such debts
and  liabilities  as they mature and (iv) such Person is not engaged in business
or a transaction,  and is not about to engage in business or a transaction,  for
which such Person's property would constitute an unreasonably small capital. The
amount of  contingent  liabilities  at any time shall be  computed as the amount
that,  in the light of all the facts and  circumstances  existing  at such time,
represents  the amount  that can  reasonably  be expected to become an actual or
matured liability.

     vvv.  Subordinated  Indebtedness.  "Subordinated  Indebtedness"  means  all
subordinated  indebtedness  of the  Borrower or any  Subsidiary  pursuant to any
subordinated indenture, note or other agreement, instrument or other writing, as
now  existing  or  hereafter  modified,  or  pursuant  to any direct or indirect
replacement of any such indenture, note or other agreement,  instrument or other
writing, as originally existing or thereafter modified.

     www. Subsidiary.  "Subsidiary" means (i) Montek or (ii) any other Person of
which the Borrower now or hereafter has beneficial ownership,  whether direct or
indirect,  of (A) more than 50% of the outstanding  shares of any class of stock
ordinarily having the power to vote for the election of directors of such Person
or more than 50% of any class of other ownership interest  ordinarily having the
power to vote for the election of, appoint or otherwise designate Persons having
functions  with  respect  to such  Person  similar  to those of  directors  of a
corporation  or the power to direct or cause the direction of the management and
policies of such Person or (B) such lower  percentage of the outstanding  shares
of any class of such stock or any class of such other  ownership  interest as is
sufficient  to render such Person a  subsidiary  of the Borrower for purposes of
generally  accepted   accounting   principles  as  in  effect  at  the  time  of
determination of the status of such Person for purposes of this sentence.

     xxx.  System.  "System"  means,  with  respect to any Person,  any hardware
(including, but not limited to, embedded),  software, firmware or other computer
system,  equipment or application that (i) is now or hereafter owned,  leased or
used by or supplied to such Person or with which any such  hardware  (including,
but not limited to,  embedded),  software,  firmware or other  computer  system,
equipment or application now or hereafter  exchanges data, (ii) now or hereafter
receives, transmits,  retransmits,  processes, manipulates, stores, retrieves or
otherwise uses data and (iii) is now or hereafter material to the conduct of the
business or operations of such Person.

     yyy.  Term Loan.  "Term Loan" means any loan by any Lender to the  Borrower
pursuant to Section 4a of this Agreement.

     zzz. Year 2000 Compliant.  "Year 2000 Compliant" means, with respect to any
System  of any  Person,  that  such  System  is able to  accurately  accommodate
information as to dates after  December 31, 1999 and to accurately  process data
from, into and between the twentieth and twenty-first centuries (including,  but
not limited to, data relating to leap years).

2.     REVOLVING LOANS.

     a. Making and Obtaining  Revolving Loans. Upon and subject to each term and
condition of this Agreement, at any time and from time to time during the period
beginning  on the  date of this  Agreement  and  ending  on the day  before  the
Maturity Date, the Borrower may obtain Revolving Loans from the Lenders, and the
Lenders  shall make  Revolving  Loans to the Borrower.  The aggregate  principal
amounts of all Revolving Loans made on any day shall be at least  $2,000,000 and
an integral multiple of $1,000,000,  and the aggregate  principal amounts of all
Revolving  Loans made by any  Lender on any day shall be equal to such  Lender's
Commitment  Percentage of the aggregate principal amounts of all Revolving Loans
made on such day. The Borrower shall not at any time permit, and no Lender shall
have any obligation to permit, (i) the aggregate  outstanding  principal amounts
of all Revolving Loans to exceed the Revolving Loan Maximum Aggregate  Principal
Amount at such time or (ii) the aggregate  outstanding  principal amounts of all
Revolving Loans made by any Lender to exceed such Lender's Commitment Percentage
of the Revolving  Loan Maximum  Aggregate  Principal  Amount at such time.  Each
request for Revolving  Loans shall be made to the Agent and shall be irrevocable
once made.  Each Lending Entity may treat as made by the Borrower and rely upon,
and the  Borrower  shall be bound by, any oral  (including,  but not limited to,
telephonic), written or other (including, but not limited to, facsimile) request
for  Revolving  Loans that the Agent  believes  in good faith to be valid and to
have  been  made in the name or on  behalf  of the  Borrower  by any  Designated
Officer,  and no Lending Entity shall incur any liability to the Borrower or any
other  Person as a direct or  indirect  result of making  any of such  Revolving
Loans.  Each request for Revolving Loans shall state (i) the amount requested as
the aggregate  principal  amounts of such Revolving  Loans and (ii) the Business
Day on which such  Revolving  Loans are  requested  to be made.  Any request for
Revolving  Loans may be  combined  with a Libor Rate  Election  relating to such
Revolving  Loans.  Any  request for  Revolving  Loans need not be honored by any
Lender  unless such  request is received by the Agent (i) at least three but not
more than five Libor Rate Business Days before the date such Revolving Loans are
requested  to be made if such  request is  combined  with a Libor Rate  Election
relating to such  Revolving  Loans or (ii) by 11:00 A.M.  eastern  United States
time on the date such  Revolving  Loans are requested to be made if such request
is not combined with a Libor Rate Election relating to such Revolving Loans. The
Agent shall, (i) if such request is combined with a Libor Rate Election relating
to such Revolving Loans, not later than the Libor Business Day after the day the
Agent receives such request or (ii) if such request is not combined with a Libor
Rate Election relating to such Revolving Loans, not later than 1:00 P.M. eastern
United  States time on the date such  Revolving  Loans are requested to be made,
notify each Lender of such request and the  information  contained in or derived
from such  request  that such  Lender  requires  to make the  Revolving  Loan or
Revolving Loans to be made by such Lender in response to such request. Not later
than 3:00 P.M.  eastern United States time on the date such Revolving  Loans are
requested  to be made,  each  Lender  shall  make the  principal  amount  of the
Revolving Loan, or the aggregate principal amounts of the Revolving Loans, to be
made by such  Lender  in  response  to such  request  available  to the Agent in
immediately  available  funds by depositing  such principal  amount or aggregate
principal  amounts  in such  account  with the Agent as may at any time and from
time to time be specified in any notice given to such Lender by the Agent,  and,
promptly but not later than 5:00 P.M.  eastern  United States time on such date,
the Agent shall,  to the extent  received from such Lender,  make such principal
amount  or  such  aggregate  principal  amounts  available  to the  Borrower  in
immediately  available  funds.  The  obligation of each Lender to make Revolving
Loans as  provided  in this  Section  2a shall be a several  obligation  of such
Lender  for  itself  alone.  Consequently,  (i) the  Agent  shall  not incur any
liability to the Borrower or any other Person as a direct or indirect  result of
the  failure  of any Lender  that is not the Agent to make,  or any delay by any
Lender that is not the Agent in making, any Revolving Loan, (ii) no Lender shall
incur any such  liability as a direct or indirect  result of any such failure or
delay  of any  other  Lender,  and  (iii)  no  Lender's  obligation  to make any
Revolving Loan and no obligation of the Agent  pursuant to this Agreement  shall
be affected by any such failure or delay of any other  Lender.  If any Revolving
Loan is not made after the  principal  amount  thereof is  received by the Agent
from the  Lender by which such  Revolving  Loan is to be made,  the Agent  shall
promptly return such principal  amount to such Lender.  If any Revolving Loan is
nonetheless  made prior to the principal  amount  thereof being  received by the
Agent from the Lender by which such Revolving Loan is to be made and such Lender
thereafter  fails to make  such  Revolving  Loan as  required  pursuant  to this
Section 2a, the Borrower shall,  upon the request of the Agent,  promptly refund
the amount of such  Revolving  Loan to the Agent and,  pending such refund,  the
Borrower  shall pay to the Agent solely for the account of the Agent interest on
the principal  amount of such Revolving Loan at the rate that would otherwise be
applicable thereto had such Lender not so failed to make such Revolving Loan.

     b.  Termination  of  Obligation.  Any obligation of the Lenders to make the
first Revolving Loans shall terminate no later than December 31, 1998 or, to the
extent  regulatory  delays  encountered in the  consummation  of the Acquisition
extend beyond such date, no later than January 29, 1999.

     c. Revolving Loan Records.  Each Lender shall maintain  records  evidencing
(i) the date and principal  amount of each  Revolving  Loan made by such Lender,
(ii) the date and amount of each payment  applied to the  outstanding  principal
amount of such Revolving Loan,  (iii) such  outstanding  principal  amount after
each  Revolving  Loan and each such  payment,  (iv) each Libor Rate  Portion for
Revolving  Loans made by such  Lender,  (v) each Libor Rate  Period,  Libor Rate
Period  Commencement  Date,  Libor Rate and rate of interest for each Libor Rate
Portion for such  Revolving  Loans and (vi) the date and amount of each  payment
applied to any Libor Rate  Portion for such  Revolving  Loans.  Each such record
shall be presumptively  correct.  No failure of such Lender to maintain any such
record and no error by such Lender in  maintaining  any such record shall affect
the  obligation of the Borrower to repay the principal  amount of each Revolving
Loan,  the  obligation  of the  Borrower  to  pay  interest  on the  outstanding
principal  amount of each Revolving Loan or any other obligation of the Borrower
pursuant to this Agreement.

     d. Repayment.  The Borrower shall repay the aggregate outstanding principal
amounts of all  Revolving  Loans to the Agent for the accounts of the Lenders on
the Maturity Date,  when the Borrower shall pay to the Agent for the accounts of
the Lenders and the Agent all  interest  payable  pursuant to this  Agreement in
connection  with any Revolving  Loan and remaining  unpaid and all other amounts
payable by the  Borrower  pursuant  to this  Agreement  in  connection  with any
Revolving Loan and remaining unpaid.

     e. Optional  Repayment in Advance.  Except during any Libor Rate Period for
any Libor Rate Portion for Revolving  Loans (during which such option shall only
be available upon the payment of each amount required pursuant to Section 10d of
this Agreement), the Borrower shall have the option of repaying to the Agent for
the  accounts of the  Lenders the  aggregate  outstanding  principal  amounts of
Revolving  Loans in advance in full or in part at any time and from time to time
without any premium or penalty;  provided,  however,  that (i) no such repayment
shall be made unless at least three but not more than five  Business Days before
the making thereof the Agent receives a written notice  executed by a Designated
Officer and specifying the date and amount  thereof,  (ii) the total of all such
repayments  in part on any day  shall be at  least  $2,000,000  and an  integral
multiple  of  $1,000,000  and (iii)  immediately  after  the  making of any such
repayment  the  ratio of the  aggregate  outstanding  principal  amounts  of all
Revolving  Loans  made by any  Lender  to the  aggregate  outstanding  principal
amounts  of all  Revolving  Loans  shall be the same as  immediately  before the
making thereof.

     f. Mandatory Repayment in Advance. If at any time the aggregate outstanding
principal  amounts of all Revolving  Loans  exceeds the  Revolving  Loan Maximum
Aggregate  Principal Amount,  the Borrower shall immediately repay in advance to
the Agent for the accounts of the Lenders such aggregate  outstanding  principal
amounts in excess of the Revolving Loan Maximum  Aggregate  Principal Amount. In
addition, upon the receipt by the Borrower or any Subsidiary of any Net Proceeds
not requested by the Borrower to be applied to the full or partial  repayment of
all Term Loans in  accordance  with Section 4f of this  Agreement,  the Borrower
shall  repay in  advance  the  aggregate  outstanding  principal  amounts of all
Revolving Loans by the amount of such Net Proceeds. Immediately after the making
of any such repayment of Revolving Loans, the ratio of the aggregate outstanding
principal  amounts of all  Revolving  Loans made by any Lender to the  aggregate
outstanding  principal  amounts  of all  Revolving  Loans  shall  be the same as
immediately  before the making  thereof.  The  making of any such  repayment  of
Revolving  Loans described in the second  preceding  sentence of this Section 2f
will  permanently   thereafter  reduce  the  Revolving  Loan  Maximum  Aggregate
Principal Amount by an equal amount.

     g. Interest.  From and including the date the first  Revolving Loan is made
by any Lender to but not including the date the aggregate  outstanding principal
amounts  of all  Revolving  Loans made by such  Lender  are repaid in full,  the
Borrower shall pay to the Agent for the account of such Lender  interest on such
aggregate  outstanding  principal  amounts  at a rate per year that shall (i) on
each day beginning before the maturity, whether by acceleration or otherwise, of
such aggregate  outstanding  principal  amounts be (A) except for any Libor Rate
Portion for such Revolving  Loans if such day falls in any Libor Rate Period for
such Libor Rate Portion,  the total of (I) the  Applicable  Interest  Margin and
(II) the rate per year,  expressed as a  percentage,  that is the rate in effect
such day as  Marine's  Prime  Rate or (B) for any Libor  Rate  Portion  for such
Revolving  Loans if such day falls in any Libor Rate  Period for such Libor Rate
Portion, the rate per year, expressed as a percentage and rounded, if necessary,
to the next  higher  .0001%,  that is the total of (I) the  Applicable  Interest
Margin and (II) the rate  obtained by dividing (1) the Libor Rate for such Libor
Rate Period by (2) expressed as a decimal,  the difference  between 100% and the
maximum percentage of reserve  requirement  (including,  but not limited to, any
emergency, supplemental or other marginal percentage of reserve requirement) for
such day  specified  by  Regulation  D of the Board of  Governors of the Federal
Reserve System for such Lender with respect to eurocurrency liabilities and (ii)
on each day  subsequent to the last day described in clause (i) of this sentence
be the total of (A) 2% and (B) the rate per  year,  expressed  as a  percentage,
that is the rate in effect such subsequent day as Marine's Prime Rate; provided,
however,  that (1) such  interest  shall not be  charged as  provided  in clause
(i)(B) of this  sentence,  and shall be charged as provided in clause  (i)(A) of
this sentence,  with respect to any Libor Rate Portion for such Revolving  Loans
during any Libor Rate  Period for such Libor Rate  Portion if before  such Libor
Rate Period begins (a) any Governmental  Authority  asserts that it is unlawful,
or such  Lender  determines  that it is  unlawful,  for such  Lender  to  charge
interest  with respect to such Libor Rate Portion  during such Libor Rate Period
at a rate  determined by reference to a Libor Rate,  (b) such Lender  determines
that  sufficient  United States dollar deposits are not available for such Libor
Rate Period to such Lender or any  participant in such Libor Rate Portion to the
extent of its  interest in such Libor Rate  Portion or (c) the Agent  determines
that information  necessary to determine the rate to be charged pursuant to such
clause (i)(B) is  unavailable,  (2) such  interest  shall cease to be charged as
provided  in such  clause  (i)(B),  and shall begin to be charged as provided in
such clause (i)(A),  during any Libor Rate Period for such Libor Rate Portion if
any  Governmental  Authority  asserts  that  it  is  unlawful,  or  such  Lender
determines  that it is unlawful,  for such Lender to continue to charge interest
with respect to such Libor Rate Portion  during such Libor Rate Period at a rate
determined by reference to a Libor Rate,  (3) in no event shall such interest be
payable at a rate in excess of the maximum rate  permitted by applicable law and
(4) solely to the extent  necessary to result in such interest not being payable
at a rate in excess of such  maximum  rate,  any amount that would be treated as
part of such interest  under a final judicial  interpretation  of applicable law
shall be deemed  to have  been a mistake  and  automatically  canceled  and,  if
received by the Agent or such  Lender,  shall be refunded  to the  Borrower,  it
being the  intention of each Lending  Entity and the Borrower that such interest
not be payable at a rate in excess of such  maximum  rate.  Except as  otherwise
provided in Section 2d of this  Agreement,  (i) a payment of such interest shall
become due on the first day of each calendar  month,  beginning on the first day
of the first  calendar  month after the  calendar  month in which the first such
Revolving Loan is made (unless the first such Revolving Loan is made on the last
day of a calendar  month, in which case such payments of interest shall begin on
the first day of the second  calendar month after the calendar month  containing
such day),  except for any of such  interest  payable  with respect to any Libor
Rate Portion for such  Revolving  Loans for any Libor Rate Period for such Libor
Rate Portion,  and (ii) all of such  interest  payable with respect to any Libor
Rate Portion for such  Revolving  Loans for any Libor Rate Period for such Libor
Rate  Portion  shall become due on the day after the last day in such Libor Rate
Period  and,  if such  Libor  Rate  Period  is six  months,  on the  three-month
anniversary  of the Libor  Rate  Period  Commencement  Date for such  Libor Rate
Period.  Interest  charged as  provided  in clause  (i)(A) or clause (ii) of the
first  sentence of this Section 2g shall be calculated on the basis of a 365-day
year or 366-day year, as  applicable,  for the actual number of days elapsed and
interest  charged as  provided  in clause  (i)(B) of the first  sentence of this
Section  2g shall be  calculated  on the basis of a 360-day  year for the actual
number of days elapsed.

     h.  Non-Usage  Fee.  For  each  period  (i)  beginning  on the date of this
Agreement  and ending on the last day of the calendar  quarter  containing  such
date, (ii) consisting of a calendar quarter beginning after the calendar quarter
containing  the date of this  Agreement and ending  before the calendar  quarter
containing the day before the Maturity Date or (iii)  beginning on the first day
of the calendar  quarter  containing the day before the Maturity Date and ending
on such day, the Borrower shall on demand made by the Agent pay to the Agent for
the  account of each Lender a non-usage  fee equal to such  Lender's  Commitment
Percentage,  on  each  day  during  such  period,  of the  product  obtained  by
multiplying  (A) the  difference  between the Revolving  Loan Maximum  Aggregate
Principal Amount on such day and the aggregate  outstanding principal amounts of
all  Revolving  Loans  on such day  first  by (B)  .50%  and then by (C)  1/360;
provided,  however,  that  (I) in no  event  shall  there  be  payable  any such
non-usage  fee that would result in interest  being  payable on the  outstanding
principal  amount of any Revolving  Loan made by such Lender at a rate in excess
of the maximum rate  permitted by  applicable  law and (II) solely to the extent
necessary to result in such  interest  not being  payable at a rate in excess of
such  maximum  rate,  any amount that would be treated as part of such  interest
under a final judicial  interpretation of applicable law shall be deemed to have
been a mistake and automatically  canceled and, if received by the Agent or such
Lender,  shall be  refunded  to the  Borrower,  it being the  intention  of each
Lending  Entity and the Borrower  that such interest not be payable at a rate in
excess of such maximum rate.

     i.  Voluntary  Reduction of  Revolving  Loan  Maximum  Aggregate  Principal
Amount.  The Borrower shall have the right to reduce  irrevocably  the Revolving
Loan Maximum  Aggregate  Principal Amount at any time or from time to time by an
amount of at least $5,000,000 and in integral  multiples of $1,000,000 by giving
notice to the Agent at least five but not more than eight  Business  Days before
the effective date of such reduction.

     j.  General  Provisions  as to  Repayment  and  Payment.  Repayment  of the
principal  amount  of each  Revolving  Loan,  payment  of all  interest  payable
pursuant to this Agreement in connection  with any Revolving Loan and payment of
all  other  amounts  payable  by the  Borrower  pursuant  to this  Agreement  in
connection  with any Revolving  Loan shall be made in lawful money of the United
States and immediately  available funds by payment to the Agent for the accounts
of the Lenders and the Agent at the banking  office of the Agent  located at One
Marine Midland Center,  Buffalo,  New York, or at such other office of the Agent
as may at any time and from time to time be specified in any notice given to the
Borrower  by the Agent.  Such  repayment  or payment  shall be made  without any
setoff  or  counterclaim  and free and clear of and  without  any  deduction  or
withholding for any tax, assessment, fee, charge, fine or penalty imposed by any
Governmental   Authority;   provided,   however,  that,  if  such  deduction  or
withholding  is required by any Law, (i) such repayment or payment shall include
such  additional  amount  as  necessary  to  result  in the net  amount  of such
repayment or payment after such deduction or withholding not being less than the
amount of such repayment or payment without such deduction or withholding,  (ii)
the Borrower  shall make such  deduction or  withholding  and (iii) the Borrower
shall pay the amount of such  deduction or  withholding as required by such Law.
No such  repayment or payment shall be deemed to have been received by the Agent
until received by the Agent at the office of the Agent  determined in accordance
with the second preceding  sentence,  and any such repayment or payment received
by the Agent at such office after 11:00 A.M.  eastern  United States time on any
day shall be deemed to have been  received  by the Agent at the time such office
opens for  business  on the next  Business  Day. If the time by which any of the
principal  amount of any Revolving Loan is to be repaid is extended by operation
of law or otherwise,  the Borrower shall pay interest on the outstanding portion
thereof  during  such  period of  extension  as  provided  in Section 2g of this
Agreement.

     k. Libor Rate Election. At any time and from time to time, the Borrower may
irrevocably make a Libor Rate Election  relating to Revolving Loans made on that
day that  specifies (i) the Libor Rate Business Day that is to be the Libor Rate
Period  Commencement  Date for the Libor Rate  Period  elected  pursuant to such
Libor Rate Election, (iii) whether a one-month,  three-month or six-month option
is elected as the length of such  Libor  Rate  Period and (iii)  expressed  as a
dollar  amount,  (A) any portion of the principal  amount of any Revolving  Loan
requested to be made on such Libor Rate Period  Commencement  Date to which such
Libor Rate  Election  relates and (B) any portion of the  aggregate  outstanding
principal  amounts of all Revolving  Loans made or requested to be made prior to
such  Libor Rate  Period  Commencement  Date to which  such Libor Rate  Election
relates;  provided,  however,  that (I) such  Libor  Rate  Period may not extend
beyond the  Maturity  Date,  (II) such Libor  Rate  Election  may not change any
election  made  pursuant to any prior Libor Rate  Election  and (III) such Libor
Rate Election  need not be honored by any Lending  Entity if (1) such Libor Rate
Election  is  received by the Agent more than five or less than three Libor Rate
Business Days before such Libor Rate Period  Commencement Date, (2) any Event of
Default  or  Default  occurs  or  exists  before or on such  Libor  Rate  Period
Commencement Date, (3) the total of the dollar amounts specified in clause (iii)
of  this  sentence  is not at  least  $2,000,000  and an  integral  multiple  of
$1,000,000  or (4) such Libor Rate Period  would  overlap  more than eight other
Libor  Rate  Periods.  Each Libor  Rate  Period  shall end on the day before the
numerically corresponding day (or, if there is no numerically corresponding day,
the last day) of the  calendar  month  that is the number of months  (e.g.,  one
month, three months or six months)  corresponding to the option elected pursuant
to such Libor Rate Election,  except that, if such numerically corresponding day
(or such last day) is not a Libor Rate  Business  Day,  such  Libor Rate  Period
shall end on the day before the first Libor Rate  Business  Day  following  such
numerically  corresponding  day (or such last day)  unless such first Libor Rate
Business  Day  does  not fall in the  same  calendar  month as such  numerically
corresponding day (or such last day), in which case such Libor Rate Period shall
end on the date before the Libor Rate Business Day  immediately  preceding  such
numerically  corresponding  day (or such  last  day).  The  total of the  dollar
amounts  specified  in clause  (iii) of the first  sentence  of this  Section 2k
specified in any Libor Rate  Election  shall be allocated by the Agent among the
Lenders so that the  ratio,  expressed  as a  percentage,  of (i) the  aggregate
outstanding  principal amounts of Revolving Loans made by any Lender included in
all Libor Rate Portions to (ii) the total of all Libor Rate Portions is the same
as the  Commitment  Percentage of such Lender.  Each Lending Entity may treat as
made by the Borrower and rely upon, and the Borrower shall be bound by, any oral
(including, but not limited to, telephonic), written (including, but not limited
to,  facsimile)  or other Libor Rate  Election  that the Agent  believes in good
faith to be  valid  and to have  been  made on  behalf  of the  Borrower  by any
Designated  Officer,  and no Lending  Entity  shall incur any  liability  to the
Borrower or any other  Person as a direct or indirect  result of such Libor Rate
Election.

3.  LETTER OF CREDIT SUBFACILITY

     a.  Issuance  of Letters of Credit . From time to time,  the  Borrower  may
request the issuance of a Letter of Credit on behalf of itself or any Subsidiary
by delivering to the Agent a completed  application and agreement for letters of
credit in the Agent's  standard form by no later than 11:00 A.M.  eastern United
States time at least  three  Business  Days,  or such  shorter  period as may be
agreed to by the Agent, in advance of the proposed date of issuance.  Subject to
the terms and conditions of this Section 3 and subject to the same conditions of
this  Agreement  as are  applicable  to the  making  of  Revolving  Loans and in
reliance on the agreements of the Lenders set forth in this Section 3, the Agent
shall issue such Letter of Credit  provided that (i) such Letter of Credit shall
not expire later than one Business Day prior to the Maturity Date and (ii) at no
time shall the Letters of Credit Outstanding exceed $20,000,000.

     b.  Letter of Credit Fees . For each  period (i)  beginning  on the date of
this  Agreement  and ending on the last day of the calendar  quarter  containing
such date,  (ii) consisting of a calendar  quarter  beginning after the calendar
quarter  containing  the date of this  Agreement  and ending before the calendar
quarter  containing  the day before the Maturity Date or (iii)  beginning on the
first day of the calendar  quarter  containing  the day before the Maturity Date
and ending on such day,  the  Borrower  shall on demand made by the Agent pay to
the Agent for the  account  of each  Lender a letter of credit fee equal to such
Lender's Commitment  Percentage,  on each day during such period, of the product
obtained  by  multiplying  (A) that  portion of  Letters  of Credit  Outstanding
representing the aggregate  undrawn face amount of Letters of Credit on such day
first by (B) the  Applicable  Interest  Margin for Libor Rate Loans for such day
minus 1/4% and then by (C) 1/360.  The Borrower shall also on demand made by the
Agent pay to the Agent for its own account the Agent's then  customary  issuance
and  miscellaneous  fees and  administrative  expenses  payable  with respect to
letters of credit.

     c. Drawings;  Reimbursement . Immediately  upon the issuance of each Letter
of  Credit,  each  Lender  shall  be  deemed  to,  and  hereby  irrevocably  and
unconditionally  agrees to, purchase from the Agent a participation  interest in
such Letter of Credit and each  drawing  thereunder  in an amount  equal to such
Lender's Commitment Percentage of the maximum amount available to be drawn under
such Letter of Credit and the amount of such drawing, respectively. In the event
of any  request  for a drawing  under a Letter of Credit by the  beneficiary  or
transferee thereof,  the Agent shall promptly notify the Borrower.  The Borrower
shall pay its Letter of Credit  Reimbursement  Obligation  to the Agent prior to
11:00 A.M.  eastern  United States time on the related  Letter of Credit Drawing
Date in an amount  equal to the  amount so paid by the  Agent.  In the event the
Borrower  fails to reimburse  the Agent for the full amount of any drawing under
any Letter of Credit by such time, the Agent shall  promptly  notify each Lender
thereof, and the Borrower shall be deemed to have requested that Revolving Loans
without a Libor Rate  Election  be made by the  Lenders to be  disbursed  on the
related Letter of Credit  Drawing Date under such Letter of Credit.  Each Lender
shall upon any notice pursuant to this Section 3c make available to the Agent an
amount in immediately  available funds equal to its Commitment Percentage of the
amount of the drawing,  whereupon  each such Lender shall each be deemed to have
made a Revolving  Loan  without a Libor Rate  Election  to the  Borrower in that
amount.  If any Lender so notified  fails to make available to the Agent for the
account  of the Agent  such  amount by no later  than 3:30 P.M.  eastern  United
States time on the related Letter of Credit Drawing Date, then such Lender shall
pay to the Agent on demand  interest on such  Lender's  obligation  to make such
amount  available  from such Letter of Credit  Drawing Date to the date on which
such Lender makes such amount  available,  accruing at a rate per annum equal to
Marine's Prime Rate in effect from time to time during such period.

     d. Letter of Credit Borrowings;  Letter of Credit Participation  Advances .
With respect to any  unreimbursed  drawing that is not for any reason  converted
into  Revolving  Loans to the  Borrower in whole or in part as  contemplated  by
Section 3c of this Agreement, the Borrower shall be deemed to have incurred from
the Agent a Letter of  Credit  Borrowing  in the  amount of such  drawing.  Such
Letter of Credit  Borrowing  shall be due and payable on demand  (together  with
interest) and shall bear interest at the rate per annum  applicable to Revolving
Loans without a Libor Rate Election.  Each Lender shall upon any notice pursuant
to this  Section  3d make  available  to the  Agent  an  amount  in  immediately
available  funds equal to its Commitment  Percentage of the amount of the Letter
of Credit  Borrowing,  whereupon  each such Lender  shall each be deemed to have
made a Letter of Credit  Participation  Advance in that amount. If any Lender so
notified  fails to make available to the Agent for the account of the Agent such
amount by no later than 3:30 P.M.  eastern  United  States  time on the  related
Letter of Credit  Drawing  Date,  then  interest  shall accrue on such  Lender's
obligation to make such amount available from such Letter of Credit Drawing Date
to the date on which such  Lender  makes such  amount  available,  at a rate per
annum  equal to  Marine's  Prime Rate in effect  from time to time  during  such
period.

     e.  Repayment of Letter of Credit  Participation  Advances . Upon (and only
upon) receipt by the Agent for its account of immediately  available  funds from
the  Borrower  (i) in  reimbursement  of any payment made by the Agent under any
Letter of Credit  with  respect  to which any Lender has made a Letter of Credit
Participation  Advance  to the Agent or (ii) in payment  of  interest  on such a
payment made by the Agent under such a Letter of Credit,  the Agent shall pay to
each  Lender,  in the same funds as those  received by the Agent,  the amount of
such Lender's Commitment Percentage of such funds, except the Agent shall retain
the amount of the Commitment Percentage of such funds of any Lender that did not
make a Letter of Credit  Participation  Advance in  respect  of such  payment by
Agent.  If the Agent is required at any time to return to any Person any portion
of the payments  made by any Lender to the Agent  pursuant to this Section 3e in
reimbursement  of a payment  made under any Letter of Credit or  interest or fee
thereon,  each Lender shall,  on demand of and one Business  Day's notice by the
Agent, forthwith pay to the Agent the amount of its Commitment Percentage of any
amounts so returned by the Agent plus interest thereon from the date such demand
is made to the date such amounts are returned by such Lender to the Agent,  at a
rate per annum equal to Marine's Prime Rate.

     f.  Documentation  . Each  Lender  agrees  to be bound by the  terms of the
Agent's  application and agreement for letters of credit and the Agent's written
regulations and customary  practices relating to letters of credit,  though such
interpretation  may be  different  from  such  Lender's  own.  In the event of a
conflict  between  such  application  or  agreement  and  this  Agreement,  this
Agreement shall govern.  It is understood and agreed that, except in the case of
gross  negligence or willful  misconduct,  the Agent shall not be liable for any
error,   negligence  or  mistakes,   whether  of  omission  or  commission,   in
administering the Letters of Credit.

     g.  Determinations  to Honor Drawing  Requests. In determining  whether to
honor any  request  for  drawing  under any Letter of Credit by the  beneficiary
thereof, the Agent shall be responsible only to determine that the documents and
certificates  required  to be  delivered  under such  Letter of Credit have been
delivered and that they substantially comply on their face with the requirements
of such Letter of Credit.

     h. Nature of Participation  and  Reimbursement  Obligations. Each Lender's
obligation in  accordance  with this  Agreement to make the  Revolving  Loans or
Letter of Credit Participation  Advances, as contemplated by Section 3c or 3d of
this  Agreement,  as a result of a drawing  under a Letter  of  Credit,  and the
obligations  of the  Borrower  pursuant  to a  Letter  of  Credit  Reimbursement
Obligation or a Letter of Credit Borrowing, shall be absolute, unconditional and
irrevocable,  and shall be performed  strictly in  accordance  with the terms of
this Section 3h under all circumstances,  including the following circumstances:
(i) any  setoff,  counterclaim,  recoupment,  defense or other  right  which any
Lender may have  against the Agent,  the  Borrower  or any other  Person for any
reason whatsoever,  (ii) the failure of any Person to comply, in connection with
a Letter of Credit Borrowing, with the conditions set forth in Section 5 of this
Agreement  or as  otherwise  set  forth in this  Agreement  for the  making of a
Revolving Loan, it being  acknowledged that such conditions are not required for
the making of a Letter of Credit  Borrowing and the obligation of the Lenders to
make Letter of Credit Participation Advances under Section 3d of this Agreement,
(iii) any lack of validity or enforceability  of any Letter of Credit,  (iv) the
existence of any claim, setoff, defense or other right which the Borrower or any
Subsidiary  or any  Lender  may have at any time  against a  beneficiary  or any
transferee of any Letter of Credit (or any Persons for whom any such  transferee
may be  acting),  the Agent or any  Lender or any other  Person  or,  whether in
connection  with this Agreement,  the  transactions  contemplated  herein or any
unrelated transaction (including any underlying transaction between the Borrower
or any  Subsidiary  and the  beneficiary  for  which any  Letter  of Credit  was
procured), (v) any draft, demand,  certificate or other document presented under
any Letter of Credit proving to be forged,  fraudulent,  invalid or insufficient
in any  respect or any  statement  therein  being  untrue or  inaccurate  in any
respect even if the Agent has been notified  thereof,  (vi) payment by the Agent
under  any  Letter  of  Credit  against  presentation  of  a  demand,  draft  or
certificate or other  document which does not strictly  comply with the terms of
such Letter of Credit,  (vii) any Material Adverse Effect,  (viii) any breach of
this  Agreement  or any  other  Loan  Document  by any party  thereto,  (ix) the
occurrence or continuance of any proceeding  pursuant to any Bankruptcy Law with
respect to the Borrower or any Subsidiary, (x) the fact that an Event of Default
or a Default  shall  have  occurred  and be  continuing,  (xi) the fact that the
Maturity Date shall have passed or this Agreement shall have been terminated and
(xii) any other circumstance or happening whatsoever,  whether or not similar to
any of the foregoing.

     i. Indemnity. In addition to amounts payable as provided elsewhere in this
Agreement,  the  Borrower  hereby  agrees to  protect,  indemnify,  pay and save
harmless  the Agent from and against any and all claims,  demands,  liabilities,
damages,  losses,  costs,  charges  and  expenses  (including  reasonable  fees,
expenses and  disbursements  of counsel) which the Agent may incur or be subject
to as a  consequence,  direct or indirect,  of (i) the issuance of any Letter of
Credit, other than as a result of (A) the gross negligence or willful misconduct
of the Agent or (B) subject to the following clause (ii), the wrongful  dishonor
by the Agent of a proper demand for payment made under any Letter of Credit,  or
(ii) the failure of the Agent to honor a drawing under any such Letter of Credit
as a  result  of any act or  omission,  whether  rightful  or  wrongful,  of any
Governmental Authority.

     j. Liability for Acts and Omissions. As between the Borrower and the Agent,
and except in the case of gross  negligence or willful  misconduct of the Agent,
the Borrower  assumes all risks of the acts and  omissions  of, or misuse of the
Letters of Credit by, the respective beneficiaries of such Letters of Credit. In
furtherance  and not in  limitation  of the  foregoing,  the Agent  shall not be
responsible for (unless arising from the gross negligence or willful  misconduct
of the Agent), (i) the form,  validity,  sufficiency,  accuracy,  genuineness or
legal  effect of any  document  submitted  by any party in  connection  with the
application  for an issuance of any such Letter of Credit,  even if it should in
fact  prove  to be in any or all  respects  invalid,  insufficient,  inaccurate,
fraudulent or forged (even if the Agent shall have been notified thereof),  (ii)
the  validity or  sufficiency  of any  instrument  transferring  or assigning or
purporting  to  transfer  or assign  any such  Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective  for any reason,  (iii) the failure of the beneficiary
of any such Letter of Credit,  or any other party to which such Letter of Credit
may be  transferred,  to comply fully with any  conditions  required in order to
draw upon such  Letter of Credit or any other  claim of any Lender  against  any
beneficiary  of such Letter of Credit,  or any such  transferee,  or any dispute
between or among any Lender and any  beneficiary  of any Letter of Credit or any
such transferee, (iv) errors, omissions, interruptions or delays in transmission
or delivery of any  messages,  by mail,  cable,  telegraph,  telex or otherwise,
whether or not they be in  cipher,  (v) errors in  interpretation  of  technical
terms,  (vi) any loss or delay in the  transmission or otherwise of any document
required  in order to make a drawing  under any such  Letter of Credit or of the
proceeds thereof, (vii) the misapplication by the beneficiary of any such Letter
of Credit of the  proceeds of any drawing  under such Letter of Credit or (viii)
any  consequences  arising from causes beyond the control of the Agent, and none
of the above  shall  affect or impair,  or prevent  the  vesting  of, any of the
Agent's  rights or powers  hereunder.  In  furtherance  and extension and not in
limitation  of the  specific  provisions  set forth  above,  any action taken or
omitted by the Agent under or in connection with the Letters of Credit issued by
it or any documents and certificates  delivered thereunder,  if taken or omitted
in good faith, without gross negligence or willful misconduct,  shall not render
the Agent liable in any respect to the Borrower or any Lender.

4. TERM LOANS.

     a.  Making and  Obtaining  Term  Loans.  Upon and  subject to each term and
condition of this Agreement,  on the date that the first Revolving Loan is made,
the Lenders shall make Term Loans to the Borrower, and the Borrower shall obtain
Term Loans from the Lenders.  The aggregate  principal amounts of all Term Loans
shall be $75,000,000.  The principal  amount of the Term Loan made by any Lender
shall be such Lender's Commitment Percentage of $75,000,000.

     b.  Termination  of  Obligation.  Any obligation of the Lenders to make the
Term Loans shall  terminate  no later than  December  31, 1998 or, to the extent
regulatory  delays  encountered in the  consummation of the  Acquisition  extend
beyond such date, no later than January 29, 1999.

     c. Term Loan Records.  Each Lender shall  maintain  records  evidencing (i)
each Libor Rate Portion for the Term Loan made by such  Lender,  (ii) each Libor
Rate  Period,  Libor  Rate  Period  Commencement  Date,  Libor  Rate and rate of
interest  for each Libor Rate  Portion for such Term Loan and (iii) the date and
amount of each  payment  applied to any Libor Rate  Portion  for such Term Loan.
Each such record shall be  presumptively  correct.  No failure of such Lender to
maintain  any such  record and no error by such Lender in  maintaining  any such
record shall affect the obligation of the Borrower to repay the principal amount
of each Term  Loan,  the  obligation  of the  Borrower  to pay  interest  on the
outstanding  principal  amount of each Term Loan or any other  obligation of the
Borrower pursuant to this Agreement.

     d.  Repayment.  The Borrower shall repay the principal  amount of each Term
Loan to the Agent for the  account of the Lender  that made such Term Loan in 20
installments,  with the first of such  installments  to become  due on March 31,
1999 and one of such  installments  to become  due on each  succeeding  June 30,
September  30,  December 31 and March 31 and on the  Maturity  Date  through the
earlier of (i) December 31, 2003 or (ii) the  Maturity  Date,  when the Borrower
shall repay the outstanding  principal amount of all Term Loans to the Agent for
the accounts of the Lenders and pay to the Agent for the accounts of the Lenders
and the Agent all interest payable pursuant to this Agreement in connection with
any Term Loan and remaining unpaid and all other amounts payable by the Borrower
pursuant  to this  Agreement  in  connection  with any Term  Loan and  remaining
unpaid. Each of such installments shall be such Lender's  Commitment  Percentage
of $3,750,000.

     e. Optional  Repayment in Advance.  Except during any Libor Rate Period for
any Libor Rate  Portion for Term Loans  (during  which such option shall only be
available  upon the payment of each amount  required  pursuant to Section 10d of
this Agreement), the Borrower shall have the option of repaying to the Agent for
the accounts of the Lenders the aggregate  outstanding principal amounts of Term
Loans in  advance  in full or in part at any time and from time to time  without
any premium or penalty;  provided,  however, that (i) no such repayment shall be
made  unless at least  five but not more than  eight  Business  Days  before the
making  thereof the Agent  receives a written  notice  executed by a  Designated
Officer and specifying the date and amount  thereof,  (ii) the total of all such
repayments in part made on any day shall be at least  $2,000,000 and an integral
multiple  of  $1,000,000  except  when  repaying  the next  regularly  scheduled
installments of principal of all Term Loans,  (iii) immediately after the making
of any such repayment the ratio of the total of the outstanding principal amount
of the Term  Loan  made by any  Lender to the  aggregate  outstanding  principal
amounts of all Term  Loans  shall be the same as  immediately  before the making
thereof and (iv) upon making any such  repayment in full the Borrower  shall pay
to each Lender all interest payable to such Lender pursuant to this Agreement in
connection  with the Term Loan made by such Lender and remaining  unpaid and pay
to each Lending Entity all other amounts payable by the Borrower to such Lending
Entity pursuant to this Agreement and remaining  unpaid.  Each such repayment in
part with respect to any Term Loan shall be applied to the  installments  of the
principal  amount of such Term Loan in the  inverse  order of such  installments
becoming due except when repaying the next  regularly  scheduled  installment of
principal of such Term Loan.

     f. Mandatory Repayment in Advance.  Upon the receipt by the Borrower or any
Subsidiary  of any Net Proceeds not applied to the full or partial  repayment of
all  Revolving  Loans in  accordance  with  Section  2f of this  Agreement,  the
Borrower shall repay to the Agent for the accounts of the Lenders in advance the
aggregate  outstanding principal amounts of all Term Loans by the amount of such
Net  Proceeds.  Immediately  after the making of any such  repayment of all Term
Loans the ratio of the outstanding principal amount of the Term Loan made by any
Lender to the aggregate outstanding principal amounts of all Term Loans shall be
the same as immediately before the making thereof.

     g.  Interest.  From and including the date the Term Loan made by any Lender
is made to but not including the date the outstanding  principal  amount of such
Term Loan is repaid in full, the Borrower shall pay to the Agent for the account
of such Lender interest on such outstanding  principal amount at a rate per year
that  shall  (i)  on  each  day  beginning  before  the  maturity,   whether  by
acceleration or otherwise,  of such  outstanding  principal amount be (A) except
for any  Libor  Rate  Portion  for such Term Loan if such day falls in any Libor
Rate  Period  for such  Libor  Rate  Portion,  the  total of (I) the  Applicable
Interest Margin and (II) the rate per year,  expressed as a percentage,  that is
the rate in effect  such day as  Marine's  Prime  Rate or (B) for any Libor Rate
Portion  for such Term Loan if such day falls in any Libor Rate  Period for such
Libor Rate Portion, the rate per year, expressed as a percentage and rounded, if
necessary,  to the next higher  .0001%,  that is the total of (I) the Applicable
Interest  Margin and (II) the rate  obtained by dividing  (1) the Libor Rate for
such Libor Rate Period by (2)  expressed as a decimal,  the  difference  between
100% and the  maximum  percentage  of reserve  requirement  (including,  but not
limited to, any emergency,  supplemental or other marginal percentage of reserve
requirement) for such day specified by Regulation D of the Board of Governors of
the  Federal  Reserve  System  for such  Lender  with  respect  to  eurocurrency
liabilities  and (ii) on each day subsequent to the last day described in clause
(i) of this sentence be the total of (A) 2% and (B) the rate per year, expressed
as a  percentage,  that is the rate in effect  such  subsequent  day as Marine's
Prime Rate;  provided,  however,  that (1) such interest shall not be charged as
provided in clause (i)(B) of this sentence,  and shall be charged as provided in
clause (i)(A) of this sentence,  with respect to any Libor Rate Portion for such
Term Loan  during  any Libor Rate  Period for such Libor Rate  Portion if before
such Libor Rate Period begins (a) any Governmental  Authority asserts that it is
unlawful,  or such Lender  determines  that it is  unlawful,  for such Lender to
charge  interest with respect to such Libor Rate Portion  during such Libor Rate
Period at a rate  determined  by  reference  to a Libor  Rate,  (b) such  Lender
determines that  sufficient  United States dollar deposits are not available for
such  Libor Rate  Period to such  Lender or any  participant  in such Libor Rate
Portion to the  extent of its  interest  in such  Libor Rate  Portion or (c) the
Agent determines that information  necessary to determine the rate to be charged
pursuant to such clause (i)(B) is unavailable,  (2) such interest shall cease to
be charged as provided in such clause  (i)(B),  and shall begin to be charged as
provided in such clause (i)(A), during any Libor Rate Period for such Libor Rate
Portion if any  Governmental  Authority  asserts  that it is  unlawful,  or such
Lender  determines  that it is  unlawful,  for such Lender to continue to charge
interest  with respect to such Libor Rate Portion  during such Libor Rate Period
at a rate  determined  by reference to a Libor Rate,  (3) in no event shall such
interest  be  payable  at a rate in  excess of the  maximum  rate  permitted  by
applicable law and (4) solely to the extent necessary to result in such interest
not being  payable at a rate in excess of such  maximum  rate,  any amount  that
would be treated as part of such interest under a final judicial  interpretation
of  applicable  law shall be deemed  to have  been a mistake  and  automatically
canceled and, if received by the Agent or such Lender,  shall be refunded to the
Borrower,  it being the  intention of each Lending  Entity and the Borrower that
such interest not be payable at a rate in excess of such maximum rate. Except as
otherwise provided in Section 4d or 4e of this Agreement,  (i) a payment of such
interest shall become due on the first day of each calendar month,  beginning on
the first day of the first calendar month after the calendar month in which such
Term Loan is made  (unless  such Term Loan is made on the last day of a calendar
month,  in which case such payments of interest  shall begin on the first day of
the second calendar month after the calendar month containing such day),  except
for any of such interest payable with respect to any Libor Rate Portion for such
Term Loan for any Libor Rate Period for such Libor Rate Portion, and (ii) all of
such interest  payable with respect to any Libor Rate Portion for such Term Loan
for any Libor Rate Period for such Libor Rate  Portion  shall  become due on the
day after the last day in such Libor Rate  Period and, if such Libor Rate Period
is  six  months,  on  the  three-month  anniversary  of the  Libor  Rate  Period
Commencement  Date for such Libor Rate Period.  Interest  charged as provided in
clause  (i)(A) or clause (ii) of the first  sentence of this Section 4g shall be
calculated on the basis of a 365-day year or 366-day year,  as  applicable,  for
the actual  number of days  elapsed and  interest  charged as provided in clause
(i)(B) of the first sentence of this Section 4g shall be calculated on the basis
of a 360-day year for the actual number of days elapsed.

     h.  General  Provisions  as to  Repayment  and  Payment.  Repayment  of the
principal amount of each Term Loan,  payment of all interest payable pursuant to
this Agreement in connection with any Term Loan and payment of all other amounts
payable by the Borrower  pursuant to this Agreement in connection  with any Term
Loan  shall  be made in  lawful  money  of the  United  States  and  immediately
available  funds by payment to the Agent for the accounts of the Lenders and the
Agent at the banking office of the Agent located at One Marine  Midland  Center,
Buffalo,  New York,  or at such other office of the Agent as may at any time and
from time to time be specified in any notice given to the Borrower by the Agent.
Such repayment or payment shall be made without any setoff or  counterclaim  and
free  and  clear  of and  without  any  deduction  or  withholding  for any tax,
assessment,  fee, charge, fine or penalty imposed by any Governmental Authority;
provided,  however,  that, if such  deduction or  withholding is required by any
Law, (i) such  repayment or payment  shall  include  such  additional  amount as
necessary to result in the net amount of such  repayment  or payment  after such
deduction  or  withholding  not being less than the amount of such  repayment or
payment without such deduction or withholding, (ii) the Borrower shall make such
deduction or  withholding  and (iii) the  Borrower  shall pay the amount of such
deduction or  withholding  as required by such Law. No such repayment or payment
shall be deemed to have been  received by the Agent until  received by the Agent
at the office of the Agent  determined in accordance  with the second  preceding
sentence, and any such repayment or payment received by the Agent at such office
after 11:00 A.M.  eastern  United States time on any day shall be deemed to have
been  received  by the Agent at the time such office  opens for  business on the
next Business Day. If the time by which any of the principal  amount of any Term
Loan is to be repaid is extended by operation of law or otherwise,  the Borrower
shall pay  interest on the  outstanding  portion  thereof  during such period of
extension as provided in Section 4g of this Agreement.

     i. Libor Rate Election. At any time and from time to time, the Borrower may
irrevocably make a Libor Rate Election relating to Term Loans that specifies (i)
expressed as a dollar amount, the portion of the aggregate outstanding principal
amounts of Term Loans to which such Libor Rate Election relates,  (ii) the Libor
Rate Business Day that is to be the Libor Rate Period  Commencement Date for the
Libor Rate Period elected pursuant to such Libor Rate Election and (iii) whether
a one-month, three-month or six-month option is elected as to the length of such
Libor Rate Period;  provided,  however,  that (I) such Libor Rate Period may not
extend  beyond the earlier of (A) December  31, 2003 or (B) the  Maturity  Date,
(II) such Libor Rate  Election may not change any election  made pursuant to any
prior Libor Rate Election and (III) such Libor Rate Election need not be honored
by any Lending  Entity if (1) such Libor Rate  Election is received by the Agent
more than five or less than three  Libor Rate  Business  Days  before such Libor
Rate Period  Commencement  Date,  (2) any Event of Default or Default  occurs or
exists  before or on such Libor Rate Period  Commencement  Date,  (3) the dollar
amount  specified in clause (i) of this sentence is not at least  $2,000,000 and
an integral  multiple of  $1,000,000 or (4) such Libor Rate Period would overlap
more than eight other Libor Rate  Periods.  Each Libor Rate Period  shall end on
the day before the numerically corresponding day (or, if there is no numerically
corresponding  day,  the last day) of the  calendar  month that is the number of
months (e.g., one month, three months or six months) corresponding to the option
elected  pursuant to such Libor Rate Election,  except that, if such numerically
corresponding  day (or such last day) is not a Libor  Rate  Business  Day,  such
Libor Rate Period shall end on the day before the first Libor Rate  Business Day
following  such  numerically  corresponding  day (or such last day)  unless such
first Libor Rate Business Day does not fall in the same  calendar  month as such
numerically  corresponding day (or such last day), in which case such Libor Rate
Period  shall end on the date  before the Libor Rate  Business  Day  immediately
preceding  such  numerically  corresponding  day (or such last day).  The dollar
amount  specified  in  clause  (i) of the  first  sentence  of this  Section  4i
specified in any Libor Rate  Election  shall be allocated by the Agent among the
Lenders so that the ratio,  expressed as a  percentage,  of (i) the  outstanding
principal  amount of the Term Loan made by any Lender included in all Libor Rate
Portions  to (ii)  the  total  of all  Libor  Rate  Portions  is the same as the
Commitment  Percentage of such Lender.  Each Lending Entity may treat as made by
the  Borrower  and rely  upon,  and the  Borrower  shall be bound  by,  any oral
(including, but not limited to, telephonic), written (including, but not limited
to,  facsimile)  or other Libor Rate  Election  that the Agent  believes in good
faith to be  valid  and to have  been  made on  behalf  of the  Borrower  by any
Designated  Officer,  and no Lending  Entity  shall incur any  liability  to the
Borrower or any other  Person as a direct or indirect  result of such Libor Rate
Election.

5. PREREQUISITES TO LOAN. The obligation of any Lender to make any Loan shall be
conditioned upon the following:

     a. No Default.  (i) There not  existing at the time such Loan is to be made
any Event of Default or Default  and (ii) such Lender not  reasonably  believing
that any Event of Default  or  Default so exists or, if such Loan is made,  will
occur or exist;

     b.  Representations  and Warranties.  (i) Each  representation and warranty
made in this  Agreement  being true and correct as of the date of this Agreement
and,  except to the extent  updated in a  certificate  executed by a  Designated
Officer and received by each Lending  Entity  before the time such Loan is to be
made, as of such time, (ii) each other  representation  and warranty made to any
Lending  Entity by or on behalf of the  Borrower  pursuant to any Loan  Document
before the time such Loan is to be made  being  true and  correct as of the date
thereof,  (iii) each financial statement provided to any Lending Entity by or on
behalf of the Borrower  pursuant to any Loan Document  before the time such Loan
is to be made having fairly  presented the financial  information it purports to
reflect as of the date  thereof  and (iv) such Lender not  reasonably  believing
that (A) any such  representation or warranty,  except to the extent so updated,
was or is other than true and correct as of any date or time of determination of
the truth or  correctness  thereof,  (B) any event or condition the  occurrence,
non-occurrence,  existence  or  non-existence  of which is a subject of any such
representation  or warranty  would have any Material  Adverse  Effect or (C) any
such financial  statement did not so fairly  present such  information as of the
date thereof;

     c.  Proceedings.  Such Lender being satisfied as to each corporate or other
proceeding of the Borrower or any Subsidiary in connection  with any transaction
contemplated by this Agreement; and

     d.  Receipt by Lenders . The  receipt by each  Lender at or before the time
such Loan is to be made of the following,  in form and substance satisfactory to
each Lending Entity:

          i. If such Loan is the first  Revolving  Loan made by such  Lender,  a
     Revolving  Loan Note  payable  to the order of such  Lender,  appropriately
     completed and duly executed by the Borrower;

          ii. If such Loan is a Revolving  Loan,  a request  for such  Revolving
     Loan  determined by the Agent to meet the  requirements  for such a request
     set forth in Section 2a of this Agreement;

          iii.  If such Loan is the Term Loan made by such  Lender,  a Term Loan
     Note payable to the order of such Lender,  appropriately completed and duly
     executed by the Borrower;

          iv. If such Loan is the first  Loan made by such  Lender,  Continuing,
     Absolute  and  Unconditional  Guaranty  Agreements  in favor of such Lender
     appropriately  completed  and duly  executed  by each  Domestic  Subsidiary
     (other than Moog-Hydrolux Hydraulic Systems, Inc.), unlimited as to amount;

          v. If such  Loan  is the  first  Loan  made  by such  Lender,  General
     Security Agreements in favor of the Agent, appropriately completed and duly
     executed  by  the  Borrower  and  each  Domestic   Subsidiary  (other  than
     Moog-Hydrolux Hydraulic Systems,  Inc.), covering,  together with all other
     personal  property  and  fixtures  of such  Person,  all of the  issued and
     outstanding shares of each class of stock and other ownership  interests in
     each Domestic  Subsidiary and 65% of the issued and  outstanding  shares of
     each class of stock and other  ownership  interests in each directly  owned
     Foreign  Subsidiary,  together with each  agreement,  instrument  and other
     writing evidencing any security covered thereby;

          vi. If such Loan is the first  Revolving Loan or a Term Loan,  Patent,
     Trademark and Copyright  Collateral  Assignments and Security Agreements in
     favor  of the  Agent,  appropriately  completed  and duly  executed  by the
     Borrower and each Domestic  Subsidiary (other than Moog-Hydrolux  Hydraulic
     Systems, Inc.);

          vii. If such Loan is the first Loan made by such Lender,  Mortgages or
     Deeds of Trust and  Assignments  of Leases and Rents in favor of the Agent,
     appropriately completed and duly executed by, as required, the Borrower and
     Montek, limited, as to the maximum principal amount the payment of which is
     secured thereby, to $12,900,000 with respect to such real property owned or
     leased by the Borrower  located in the State of New York,  covering,  among
     other assets,  the land and improvements  now or hereafter  located at such
     real property,  together with related  Environmental  Indemnity Agreements,
     appropriately completed and duly executed by the Borrower and Montek;

          viii.  If  such  Loan  is the  first  Loan  made  by  such  Lender,  a
     mortgagee's  title insurance policy issued by a title insurer  satisfactory
     to the Agent,  limited, as to the maximum principal amount insured thereby,
     to the amounts  referred to in clause  (vii) of this  Section 5d,  insuring
     each  mortgage  lien or similar  encumbrance  on the assets  covered by the
     Mortgages,  Deeds of Trust and  Assignments of Leases and Rents referred to
     in clause (vii) of this Section 5d;

          ix. If such Loan is the first Loan made by such  Lender,  ALTA surveys
     of the land and improvements  covered by the Mortgages,  Deeds of Trust and
     Assignments of Leases and Rents referred to in clause (vii) of this Section
     5d prepared by a surveyor or surveyors satisfactory to the Agent and to the
     title insurer  referred to in clause (viii) of this Section 5d, except that
     in the case of such land and improvements located in Torrance, California a
     prior  survey and a survey  affidavit  from the  Borrower  may be  provided
     instead of a current survey;

          x. If such  Loan  is the  first  Loan  made  by such  Lender,  Phase 1
     environmental audits of the land and improvements covered by the Mortgages,
     Deeds of Trust and  Assignments  of Leases and Rents  referred to in clause
     (vii)  of this  Section  5d  prepared  by an  environmental  consultant  or
     consultants  satisfactory  to  the  Agent  and,  to the  extent  reasonably
     recommended by any such Phase 1 audits,  Phase 2  environmental  audits and
     other follow up reports;

          xi. If such Loan is the first Loan made by such Lender,  an opinion of
     Phillips,  Lytle,  Hitchcock,  Blaine & Huber LLP, counsel to the Borrower,
     addressed to each Lending Entity;

          xii. If such Loan is the first Loan made by such Lender, a certificate
     executed by the chief  financial  officer of the  Borrower and stating that
     (A) there did not occur or exist at any time during the period beginning on
     the date of this  Agreement  and ending at the time such Loan is to be made
     and  there  does not exist at the time such Loan is to be made any Event of
     Default or  Default,  (B) each  representation  and  warranty  made in this
     Agreement was true and correct as of all times during the period  beginning
     on the date of this  Agreement  and  ending  at the time such Loan is to be
     made and is true and correct as of the time such Loan is to be made, except
     to the extent updated in a certificate executed by a Designated Officer and
     received  by such  Lender  before  the time such Loan is to be made and (C)
     after the  consummation  of the  Acquisition and the use of the proceeds of
     the  Term  Loan  and the  first  Revolving  Loan  made by  each  Lender  in
     accordance  with  Section  6a of  this  Agreement,  the  Borrower  and  all
     Subsidiaries, taken as a whole, will be Solvent;

          xiii.  If such Loan is the first  Loan made by such  Lender,  evidence
     that each of the Borrower and all Domestic Subsidiaries is at the time such
     Loan is to be made (A) in good standing  under the Law of the  jurisdiction
     in which it is organized  and (B) duly  qualified and in good standing as a
     foreign Person of its type  authorized to do business in each  jurisdiction
     in which such  qualification  is  necessary  except where the failure to so
     qualify would not have any Material Adverse Effect;

          xiv. If such Loan is the first Loan made by such Lender, a copy of the
     certificate  or  articles  of  incorporation   or  organization,   by-laws,
     operating or  partnership  agreement or other  charter,  organizational  or
     governing  document of each of the Borrower  and all Domestic  Subsidiaries
     certified by its Secretary or a Person having  functions with respect to it
     similar to those of the  Secretary  of a  corporation  to be  complete  and
     accurate at the time such Loan is to be made;

          xv. If such Loan is the first Loan made by such  Lender,  evidence  of
     the taking and the  continuation  in full force and effect at the time such
     Loan is to be made of each corporate or other action of the Borrower or any
     other  Person  necessary  to  authorize  the  obtaining of all Loans by the
     Borrower, the execution,  delivery and performance of each Loan Document by
     each Person other than any Lending Entity and the imposition or creation of
     each security interest,  mortgage and other lien and encumbrance imposed or
     created pursuant to any Loan Document;


          xvi. If such Loan is the first Loan made by such Lender,  evidence (A)
     that no asset subject to any mortgage,  security  interest or other lien or
     encumbrance pursuant to any Loan Document is at the time such Loan is to be
     made  subject to any other  security  interest,  mortgage  or other lien or
     encumbrance,  except  for  Permitted  Liens,  and (B) of the making of each
     recording  and  filing,  and of the  taking of each  other  action,  deemed
     necessary  or  desirable  by the  Agent at the sole  option of the Agent to
     perfect or  otherwise  establish,  preserve or protect the  priority of any
     such security interest, mortgage or other lien or encumbrance;

          xvii.  If such Loan is the first  Loan made by such  Lender,  evidence
     that each  requirement  contained  in any Loan  Document  with  respect  to
     insurance is being met at the time such Loan is to be made;

          xviii. If such Loan is the first Loan made by such Lender,  payment on
     the date of this  Agreement  of a facility  fee to the Agent,  on behalf of
     each  Lender,  equal for each Lender to the amount  provided for in any fee
     letter or other fee arrangement between the Borrower and such Lender;

          xix.  If such Loan is the first  Loan made by such  Lender,  a copy of
     each Acquisition Document and evidence of the closing of the Acquisition in
     accordance  with the terms  thereof,  including,  but not  limited  to, the
     expiration   of   the   related   waiting   period   therefor   under   the
     Hart-Scott-Rodino  Act and  any  other  applicable  Law,  together  with an
     assignment by the Borrower in favor of the Lenders of all  representations,
     warranties, covenants and indemnities in favor of the Borrower contained in
     any Acquisition Document;

          xx. If such Loan is the first Loan made by such Lender,  (A) a copy of
     each  indenture,  note or other  agreement,  instrument  or  other  writing
     evidencing  or  otherwise   relating  to  the  Subordinated   Indebtedness,
     certified by a  Designated  Officer to be complete and accurate at the time
     such Loan is to be made and (B)  evidence  of the  giving of any  notice of
     this  Agreement  or any other Loan  Document  required to be  delivered  or
     provided to any trustee or other Person in order for (I) this  Agreement to
     qualify as the "Credit  Agreement" for purposes of the Indenture,  dated as
     of May 10,  1996,  between the Borrower and Fleet  National  Bank,  as such
     Indenture may be or have been  amended,  supplemented,  extended,  renewed,
     restated,  replaced or otherwise  modified from time to time,  and (II) the
     obligations under this Agreement or any such other Loan Document to qualify
     for  the  most  preferential  treatment  accorded  to  senior  indebtedness
     pursuant to any document referred to in the preceding clause (A);

          xxi.  Each   additional   agreement,   instrument  and  other  writing
     (including,  but not limited to, (A) each  agreement,  instrument and other
     writing intended to be filed or recorded with any Governmental Authority to
     perfect or  otherwise  establish,  preserve or protect the  priority of any
     security interest, mortgage or other lien or encumbrance created or imposed
     pursuant  to any Loan  Document  and (B) if such Loan is not the first Loan
     made by such  Lender,  each item  referred to in any of clauses (i) through
     (xxi) of this Section 5d required by any Loan Document or reasonably deemed
     necessary or desirable by the Required Lenders; and

          xxii.  Payment of all costs and expenses payable pursuant to the first
     sentence of Section 10a of this  Agreement  at or before the time such Loan
     is to be made.

6.  REPRESENTATIONS AND WARRANTIES.  Except as fully and accurately described or
referred  to in the  related  Schedules  attached  to and  made a part  of  this
Agreement,  the Borrower  represents and warrants to each Lending  Entity,  and,
except to the extent updated in a certificate  executed by a Designated  Officer
and received by the Agent before the time any Loan is made,  the Borrower  shall
be deemed to represent  and warrant to each Lending  Entity as of such time,  as
follows:

     a. Use of Proceeds.  The proceeds of the Term Loan and first Revolving Loan
made by each Lender will be used only to (i) finance the  Acquisition,  (ii) pay
fees and  expenses  (including,  but not  limited to,  amounts  paid for prepaid
services)  incurred by the Borrower in connection with the Acquisition and (iii)
refinance and pay in full existing  indebtedness of the Borrower pursuant to its
existing revolving credit facility,  which thereafter shall be automatically and
irrevocably  canceled and terminated.  The proceeds of each subsequent Revolving
Loan will be used only for working capital of the Borrower or any Subsidiary and
other cash  needs of the  Borrower  or any  Subsidiary  arising in the  ordinary
course of its business or in  furtherance  of any other act expressly  permitted
pursuant to this  Agreement  (not  including any corporate or other  acquisition
other  than  pursuant  to  a  Permitted  Acquisition  by  the  Borrower  or  any
Subsidiary).

     b.  Consummation  of  Acquisition.  The  Acquisition  is being  consummated
simultaneously  with the  making  of the  first  Loan in  accordance  with  each
requirement of any Acquisition Document.

     c. Subsidiaries; Affiliates. The Borrower has (i) no Subsidiary and (ii) no
Affiliate that is not an individual.

     d. Good Standing;  Qualification;  Authority.  Each of the Borrower and all
Domestic  Subsidiaries  (i) is  duly  organized,  validly  existing  and in good
standing  under the law of the  jurisdiction  in which it is organized,  (ii) is
duly qualified and in good standing as a foreign  Person of its type  authorized
to do business in each  jurisdiction  in which such  qualification  is necessary
except  where the  failure to so  qualify  would not have any  Material  Adverse
Effect  and (iii) has the  power and  authority  to  conduct  its  business  and
operations  as now and as  anticipated  that its  business and  operations  will
hereafter be conducted, own each of its assets and use each of its assets as now
and as anticipated that such asset will hereafter be used.

     e. Control. There is no Person other than the Borrower and all Subsidiaries
who or that,  insofar as the  Borrower  has  knowledge  or reason to know in the
ordinary  course of its  business,  has (i)  Control  over the  Borrower  or any
Subsidiary or (ii) the right  pursuant to any  agreement  with any Person having
such Control to acquire such Control.

     f.  Compliance.  The present and  anticipated  conduct of the  business and
operations  of the  Borrower  and each  Domestic  Subsidiary,  the  present  and
anticipated  ownership  and use of each asset of the Borrower and each  Domestic
Subsidiary, the present and anticipated use of each asset leased by the Borrower
or any Domestic Subsidiary as a lessee and the generation,  treatment,  storage,
recycling,   transportation  and  disposal  by  the  Borrower  or  any  Domestic
Subsidiary of any Hazardous  Material are in compliance in each material respect
with each  applicable  Law  (including,  but not  limited  to,  each  applicable
Environmental Law). Each material  trademark,  service mark, trade name, patent,
copyright,   license   and   franchise,   and   each   material   authorization,
certification,  certificate, approval, permit and consent from, registration and
filing with,  declaration,  report and notice to and other act by or relating to
any Person,  necessary for the present or anticipated conduct of the business or
operations  of  the  Borrower  or  any  Domestic  Subsidiary,   the  present  or
anticipated  ownership  or use of any  asset  of the  Borrower  or any  Domestic
Subsidiary,  the present or anticipated  use of any asset leased by the Borrower
or any Domestic  Subsidiary as a lessee or the generation,  treatment,  storage,
recycling, transportation or disposal by the Borrower or any Domestic Subsidiary
of any Hazardous Material has been duly obtained,  made, given or done and is in
full force and effect.  Each of the Borrower and all Domestic  Subsidiaries  (i)
has taken or caused to be taken each action  necessary  to preserve  and protect
each such material  trademark,  service  mark,  trade name,  patent,  copyright,
license  and  franchise  with  respect to it and (ii) is in  compliance  in each
material  respect  with (A) each  such  material  authorization,  certification,
certificate,  approval,  permit  and  consent  with  respect  to  it,  (B)  each
certificate or articles of incorporation or organization,  by-laws, operating or
partnership agreement or other charter,  organizational or governing document of
it and (C) each material  agreement and  instrument to which it is a party or by
which it or any of its assets is bound.

     g.  Environmental  Matters.  To the best of the  knowledge  of the Borrower
after due inquiry:

          i.  There  has not been  any  Release  or  threatened  Release  of any
     Hazardous  Material  at,  in, on or under any  property  now or  previously
     owned,  leased  as a  lessee  or  used  by the  Borrower  or  any  Domestic
     Subsidiary  that,  whether alone or together with any other such Release or
     threatened Release or other such Releases and threatened Releases,  has had
     or will have any Material Adverse Effect;

          ii. No property now or previously owned, leased as a lessee or used by
     the  Borrower or any Domestic  Subsidiary  and no property to or from which
     the Borrower or any Domestic Subsidiary has transported or arranged for the
     transportation  of any  Hazardous  Material has been listed or proposed for
     listing  on  the  National   Priorities   List  pursuant  to  CERCLA,   the
     Comprehensive   Environmental   Response,    Compensation   and   Liability
     Information  System or any other list of sites requiring  investigation  or
     clean-up that is maintained by any Governmental  Authority,  except for any
     such  listing  that has not had and will  not  have  any  Material  Adverse
     Effect;

          iii. There is no active or abandoned  underground storage tank at, in,
     on or under any property  now or  previously  owned,  leased as a lessee or
     used by the  Borrower or any Domestic  Subsidiary  that,  whether  alone or
     together with any other such storage tank or other such storage tanks,  has
     had or will have any Material Adverse Effect;

          iv. There is no  polychlorinated  biphenyl or friable asbestos present
     at,  in, on or under any  property  now or  previously  owned,  leased as a
     lessee or used by the Borrower or any  Domestic  Subsidiary  that,  whether
     alone or together with any other such polychlorinated  biphenyl, other such
     polychlorinated  biphenyls or any other friable  asbestos,  has had or will
     have any Material Adverse Effect; and

          v. There exists no  condition  at, in, on or under any property now or
     previously  owned,  leased  as a  lessee  or  used by the  Borrower  or any
     Domestic  Subsidiary that,  after notice,  lapse of time or both notice and
     lapse of time,  would or might  reasonably  be expected to give rise to any
     liability under any  Environmental  Law that will have any Material Adverse
     Effect.

     h. Legality. The Acquisition and the obtaining of each Loan by the Borrower
(i) are and will be in  furtherance  of the  purposes of the Borrower and within
the power and authority of the Borrower, (ii) do not and will not (A) violate or
result  in any  violation  of any Law or any  judgment,  order  or  award of any
Governmental Authority or arbitrator or (B) violate, result in any violation of,
constitute  (whether  immediately or after notice,  lapse of time or both notice
and lapse of time) any default  under or result in or require the  imposition or
creation of any  security  interest in or mortgage or other lien or  encumbrance
upon any asset of the Borrower  pursuant to (I) the  certificate  or articles of
incorporation  or other charter  document of the  Borrower,  (II) the by-laws or
other organizational document of the Borrower,  (III) any shareholder agreement,
voting trust or similar  arrangement  applicable  to any stock of the  Borrower,
(IV) any  resolution or other action of record of the  shareholders  or board of
directors of the Borrower or (V) any material  agreement or  instrument to which
the Borrower is a party or by which the  Borrower or any  material  asset of the
Borrower is bound and (iii) have been duly  authorized by each necessary  action
of the  shareholders  or board of  directors  of the  Borrower.  The  execution,
delivery to the Agent and  performance  of each Loan Document by, other than all
Lending  Entities,  each Person that is  contemplated by such Loan Document as a
party thereto and the imposition or creation of each security interest, mortgage
and other lien and encumbrance  imposed or created  pursuant thereto (i) are and
will be in  furtherance  of the purposes of such Person and within the power and
authority of such Person,  (ii) do not and will not (A) violate or result in any
violation  of any  Law or any  judgment,  order  or  award  of any  Governmental
Authority or arbitrator or (B) violate,  result in any violation of,  constitute
(whether  immediately or after notice, lapse of time or both notice and lapse of
time) any default under or, other than pursuant to any Loan Document,  result in
or require the imposition or creation of any security interest in or mortgage or
other lien or  encumbrance  upon any asset of such  Person  pursuant  to (I) any
certificate or articles of incorporation or organization,  by-laws, operating or
partnership agreement or other charter,  organizational or governing document of
such Person, (II) any shareholder agreement, voting trust or similar arrangement
applicable to any stock of or other ownership interest in such Person, (III) any
resolution or other action of record of any such shareholders or members of such
Person,  any board of  directors  or trustees of such Person or any other Person
responsible  for  governing  such  Person  or (IV)  any  material  agreement  or
instrument  to which  such  Person  is a party or by which  such  Person  or any
material  asset of such Person is bound and (iii) have been duly  authorized  by
each necessary action of any such shareholders,  members,  board of directors or
trustees  or  other  Person.  Each  authorization,  certification,  certificate,
approval,  permit, consent,  franchise and license from, registration and filing
with,  declaration,  report  and notice to and other act by or  relating  to any
Person required as a condition of the Acquisition,  the obtaining of any Loan by
the Borrower,  the  execution,  delivery to the Agent or performance of any Loan
Document by, other than all Lending Entities, any Person that is contemplated by
such Loan  Document  as a party  thereto or the  imposition  or  creation of any
security  interest,  mortgage  or other lien or  encumbrance  imposed or created
pursuant to any Loan Document has been duly obtained, made, given or done and is
in full  force  and  effect.  Each Loan  Document  has been  duly  executed  and
delivered to the Agent by, other than all Lending Entities,  each Person that is
contemplated by such Loan Document as a party thereto.

     i.  Acquisition  Documents.  The Borrower has  heretofore  delivered to the
Agent a correct and complete copy of each Acquisition Document.

     j. No Waiver or Default.  The  Borrower  (i) except with the prior  written
consent of the Required Lenders,  has not waived any condition of the Borrower's
obligation  to  consummate  the  Acquisition  and (ii) is not and will not be in
default under any Acquisition Document.

     k. Representations and Warranties. Each representation and warranty made in
any  Acquisition  Document by the  Borrower is true and correct in all  material
respects  and,  to  the  best  of  the  knowledge  of the  Borrower,  all  other
representations  and warranties made in any  Acquisition  Document by any Person
other than the Borrower are materially true and correct taken as a whole.

     l.  Fiscal  Year.  The  fiscal  year  of the  Borrower  and  each  Domestic
Subsidiary is the year ending on the last Saturday in September.

     m.  Financial  Statements.  The Borrower has  heretofore  delivered to each
Lender a copy of each of the following financial statements:

          i. Audited  consolidated  and  unaudited  consolidating  statements of
     income,  and an  audited  consolidated  statement  of  cash  flows,  of the
     Borrower for its fiscal year ended the last Saturday in September, 1997;

          ii. An audited consolidated and unaudited  consolidating balance sheet
     of the Borrower dated as of the last Saturday in September, 1997;

          iii. An unaudited consolidated statement of cash flows of the Borrower
     for its fiscal period ended June 30, 1998;

          iv. Preliminary unaudited consolidated and consolidating statements of
     income of the  Borrower  for its  fiscal  year ended the last  Saturday  in
     September, 1998; and

          v. A preliminary  unaudited  consolidated  and  consolidating  balance
     sheet of the Borrower dated as of the last Saturday in September, 1998.

Each such  financial  statement  (i) is in  accordance  with the  records of the
Borrower  and each  Subsidiary  and (ii)  presents  fairly  taken as a whole the
results of the  operations  and cash flows of the Borrower and all  Subsidiaries
for the fiscal period covered thereby, or the financial position of the Borrower
and all  Subsidiaries  as of the date  thereof,  in  conformity  with  generally
accepted accounting principles applied consistently with the application of such
principles with respect to the preceding fiscal period of the Borrower,  subject
(in the  case of  unaudited  financial  statements)  to  normal  year-end  audit
adjustments.

     n. Projections. The Borrower has heretofore delivered to each Lender a copy
of  projections  contained in a book prepared for a bank meeting held on October
6, 1998. Each such projection  presented  fairly taken as a whole the Borrower's
estimate  as of the date of its  preparation  of the  projected  results  of the
operations,  and the projected cash flows, of the Borrower and all  Subsidiaries
for the fiscal years covered thereby, or the projected financial position of the
Borrower  and all  Subsidiaries  as of the  date  thereof,  in  conformity  with
generally  accepted   accounting   principles  applied   consistently  with  the
application of such  principles  with respect to the fiscal year of the Borrower
ended the last Saturday in September,  1997,  subject to the  limitations  as to
assumptions and other matters described in such book.

     o. Material Adverse Effects; Distributions. Since the later of (i) the last
Saturday in September,  1997 or (ii) the date of the financial  statements  most
recently  provided  pursuant to clause (ii)  Section 7h of this  Agreement,  (A)
there has not  occurred or existed any event or  condition  that has had or will
have any Material Adverse Effect and (B) neither the Borrower nor any Subsidiary
has  declared,  paid,  made or agreed or otherwise  incurred any  obligation  to
declare, pay or make any Distribution other than a Permitted Distribution.

     p.  Tax  Returns  and  Payments.  Each of the  Borrower  and  all  Domestic
Subsidiaries  has duly (i) filed each tax return  required to be filed by it and
(ii)  paid or caused to be paid each  tax,  assessment,  fee,  charge,  fine and
penalty that has been imposed by any  Governmental  Authority  upon it or any of
its assets,  income and franchises and has become due,  except for any such tax,
assessment,  fee, charge or penalty (A) the validity of which is being contested
in good faith by  appropriate  proceedings  promptly  instituted  and diligently
conducted,  (B) for which adequate reserves have been appropriately  established
in accordance with generally accepted accounting  principles,  (C) not resulting
in any lien that is not effectively  stayed and (D) the nonpayment of which does
not have any Material Adverse Effect.

     q. Certain  Indebtedness.  Neither the Borrower nor any  Subsidiary has any
Indebtedness except for Permitted Indebtedness.

     r. Pension Obligations.  No Pension Plan was or is a multiemployer plan, as
such term is  defined  in  Section  3(37) of  ERISA.  The  present  value of all
benefits  vested  under any Pension Plan does not exceed the value of the assets
of such Pension Plan allocable to such vested  benefits by any amount that would
have a Material  Adverse  Effect.  Since  September 2,  1974,  (i) no Prohibited
Transaction  that could  subject any Pension Plan to any tax or penalty  imposed
pursuant  to the  Internal  Revenue  Code or ERISA  has been  engaged  in by any
Pension Plan, (ii) there has not occurred or existed with respect to any Pension
Plan any  Reportable  Event or  Accumulated  Funding  Deficiency or any event or
condition  that (A) but for a  waiver  by the  Internal  Revenue  Service  would
constitute an Accumulated Funding Deficiency, (B) after notice, lapse of time or
both notice and lapse of time will or might constitute a Reportable Event or (C)
constituted  or will or might  constitute  grounds  for the  institution  by the
Pension Benefit  Guaranty  Corporation of any proceeding under ERISA seeking the
termination  of such Pension Plan or the  appointment of a trustee to administer
such Pension Plan,  (iii) no Pension Plan has been  terminated,  (iv) no trustee
has been  appointed by a United States  District Court to administer any Pension
Plan,  (v) no  proceeding  seeking the  termination  of any Pension  Plan or the
appointment of a trustee to administer any Pension Plan has been instituted, and
(vi) neither the Borrower  nor any  Subsidiary  has made any complete or partial
withdrawal  from any Pension  Plan.  s.ab Capital  Leases.  Each  capital  lease
pursuant to which the Borrower or any Domestic  Subsidiary is obligated (whether
as a lessee  or  otherwise)  entitles  each  lessee  thereunder  to  undisturbed
possession of each asset leased thereby during the full term thereof.

     t. Assets;  Liens and  Encumbrances.  Immediately after the consummation of
the Acquisition,  the Borrower will have good and marketable title to all of the
issued and outstanding  shares of stock of Montek,  and none of such shares will
be subject to any  security  interest,  mortgage  or other lien or  encumbrance,
except in favor of the Agent. Each of the Borrower and all Domestic Subsidiaries
and  Directly-Owned  Foreign  Subsidiaries has good and marketable title to each
material  asset it purports to own, and no such asset is subject to any security
interest, mortgage or other lien or encumbrance, except for Permitted Liens.

     u. Investments.  Neither the Borrower nor any Subsidiary has any Investment
in any other Person, except for Permitted Investments.

     v. Judgments and  Litigation.  There is no outstanding  judgment,  order or
award of any Governmental Authority or arbitrator,  and no pending or threatened
claim, audit, investigation or action or other legal proceeding by or before any
Governmental  Authority  or  before  any  arbitrator,  that  (i) is  against  or
otherwise  involves the Borrower or any  Subsidiary or any asset of the Borrower
or any Subsidiary  and has had or will have any Material  Adverse Effect or (ii)
renders  invalid or questions the validity of any  Acquisition  Document or Loan
Document or any action taken or to be taken pursuant to any Acquisition Document
or Loan Document.  No such  outstanding  judgment,  order or award,  and no such
audit,  investigation  or action or other legal  proceeding has had or will have
any Material Adverse Effect.

     w. Transactions with Affiliates and Foreign  Subsidiaries.  There exists no
agreement, arrangement, transaction or other dealing (including, but not limited
to, the purchase,  sale, lease,  exchange or other acquisition or disposition of
any  asset  and the  rendering  of any  service)  between  the  Borrower  or any
Subsidiary  and any  Affiliate  or Foreign  Subsidiary,  except for  agreements,
arrangements, transactions and other dealings in the ordinary course of business
of the  Borrower  or any  Subsidiary  upon  fair  and  reasonable  terms no less
favorable  to it than  would  apply  in a  comparable  arm's  length  agreement,
arrangement,  transaction  or other  dealing with a Person who or that is not an
Affiliate or Foreign Subsidiary.

     x. Year 2000 Compliance . Each of the Borrower,  all Domestic  Subsidiaries
(other than Montek) and all Directly-Owned  Foreign Subsidiaries has assessed or
is assessing  all Systems  relating to it to determine  the extent to which such
Systems are Year 2000 Compliant.  The expense of correcting and deploying all of
such  Systems  that are not Year 2000  Compliant  and  testing  such  Systems to
confirm that such Systems are Year 2000 Compliant and the consequences of all of
such  Systems  that fail to be Year 2000  Compliant so failing will not have any
Material Adverse Effect.

     y. Subordinated  Debt. The Borrower has given each notice of this Agreement
or any other Loan  Document  required to be delivered or provided to any trustee
or other Person and has taken each other  required  action in order for (i) this
Agreement to qualify as the "Credit  Agreement"  for purposes of the  Indenture,
dated as of May 10, 1996,  between the Borrower and Fleet National Bank, as such
Indenture  may  be  or  have  been  amended,  supplemented,  extended,  renewed,
restated,  replaced  or  otherwise  modified  from  time to  time,  and (ii) the
obligations  under this Agreement or any such other Loan Document to qualify for
the most preferential  treatment accorded to senior indebtedness pursuant to any
document referred to in clause (xx)(A) of Section 5d of this Agreement.

     z. Default. There does not exist, and immediately after the consummation of
the Acquisition there will not have occurred or existed, any Event of Default or
Default.

     aa. Solvency.  Each of the Borrower and the Borrower and all  Subsidiaries,
taken as a whole, are, and upon the incurrence of any obligation by the Borrower
or any Subsidiary on any date on which this representation and warranty is made,
will be, Solvent.

     bb. Full Disclosure.  Neither any Acquisition Document or Loan Document nor
any certificate or other writing heretofore provided to any Lending Entity by or
on behalf of the Borrower  pursuant to any Loan Document  contains any statement
of fact that is incorrect  or  misleading  in any  material  respect or omits to
state any fact  necessary to make any  statement of fact  contained  therein not
incorrect or misleading in any material respect.  The Borrower has not failed to
disclose  to the Agent any fact that has had or will have any  Material  Adverse
Effect.

     7. AFFIRMATIVE COVENANTS.  During the term of this Agreement,  the Borrower
shall do the following  unless the prior written consent of the Required Lenders
to not doing so shall  have been  obtained  by the  Borrower  from the  Required
Lenders:

     a.  Good  Standing;  Qualification.  Cause  each  of the  Borrower  and all
Domestic Subsidiaries at all times to (i) maintain its corporate, partnership or
other  existence  in good  standing  and (ii)  remain or become and remain  duly
qualified and in good standing as a foreign Person of its type  authorized to do
business  in  each  jurisdiction  in  which  such  qualification  is or  becomes
necessary  except  where the failure to so qualify  would not have any  Material
Adverse Effect;

     b. Compliance. (i) Cause each of the Borrower and all Domestic Subsidiaries
at all times to (A) conduct its business and operations, own and use each of its
assets,  use each asset leased by it as a lessee,  and generate,  treat,  store,
recycle,  transport and dispose of all Hazardous  Material in its  possession or
control,  in  compliance  in each  material  respect  with each  applicable  Law
(including,  but not limited to, each applicable Environmental Law) (except that
to the extent of any  non-compliance  involving  Montek existing on the date of,
and disclosed  in, this  Agreement or any other Loan Document that does not have
any Material  Adverse Effect,  the Borrower shall cause correct,  or shall cause
Montek to  correct,  such  non-compliance  promptly  in the  ordinary  course of
business),  (B)  maintain in full force and effect,  preserve  and protect  each
material  trademark,  service mark, trade name, patent,  copyright,  license and
franchise,  and obtain,  make,  give or do and maintain in full force and effect
each material authorization,  certification,  certificate,  approval, permit and
consent from,  registration and filing with,  declaration,  report and notice to
and other act by or  relating to any  Person,  necessary  for the conduct of its
business or  operations,  the ownership or use of any of its assets,  the use of
any  asset  leased  by it as a lessee  or the  generation,  treatment,  storage,
recycling,   transportation  or  disposal  of  any  Hazardous  Material  in  its
possession or control and (C) remain in compliance in each material respect with
(I) each such  material  authorization,  certification,  certificate,  approval,
permit,  consent,  franchise and license,  (II) each  certificate or articles of
incorporation or organization,  by-laws,  operating or partnership  agreement or
other  charter,  organizational  or  governing  document  of it and  (III)  each
material  agreement and  instrument to which it is a party or by which it or any
of its material  assets is bound,  (ii)  promptly  upon  acquiring  knowledge or
reason to know of any notice or  allegation  that the  Borrower or any  Domestic
Subsidiary (A) has not complied in any material  respect with any applicable Law
(including,  but not  limited to, any  Environmental  Law) in the conduct of its
business or  operations,  the ownership or use of any of its assets,  the use of
any  asset  leased  by it as a lessee  or the  generation,  treatment,  storage,
recycling,   transportation  or  disposal  of  any  Hazardous  Material  in  its
possession  or  control,  (B)  has not  maintained  in full  force  and  effect,
preserved or protected any such material  trademark,  service mark,  trade name,
patent,  copyright,  license or  franchise  or obtained,  made,  given,  done or
maintained   in  full  force  and  effect  any  such   material   authorization,
certification,  certificate,  approval, permit, consent,  registration,  filing,
declaration, report, notice or act, (C) has not complied in any material respect
with  any  such  material  license,  franchise,  authorization,   certification,
certificate, approval, permit, consent, certificate or articles of incorporation
or organization,  by-laws,  operating or partnership  agreement,  other charter,
organizational or governing  document or material agreement or instrument or (D)
is or may be liable for any cost  associated  with or damage  resulting from any
Release,  threatened Release or clean-up of any Hazardous  Material,  provide to
the Agent a  certificate  executed by a Designated  Officer and  specifying  the
nature of such notice or allegation  and what action the Borrower has taken,  is
taking or  proposes  to take  with  respect  thereto  and  (iii)  promptly  upon
acquiring  knowledge or reason to know in the ordinary course of its business of
any  development  with  respect  to any such  notice or  allegation  theretofore
disclosed  by the  Borrower  to the  Agent  that has or will  have any  Material
Adverse  Effect,  provide to the Agent a  certificate  executed by a  Designated
Officer  and  specifying  the  nature of such  development  and what  action the
Borrower has taken, is taking or proposes to take with respect thereto;

     c.  Consolidated  Net Worth.  Assure  that at as of the end of each  fiscal
quarter  of the  Borrower  set  forth  below the  Consolidated  Net Worth of the
Borrower is not less than the minimum dollar amount set forth below:

=========================================================================

FISCAL QUARTER      4th Qtr. 1998 -    4th Qtr. 2000-    4th Qtr. 2001
                    3rd Qtr. 2000      3rd Qtr. 2001     and thereafter

- -------------------------------------------------------------------------
Minimum Amount         170.0               190.0             200.0
($ millions)

=========================================================================

     d.  Interest  Coverage  Ratio.  Assure  that as of the  end of each  fiscal
quarter of the Borrower set forth below the Interest  Coverage Ratio is not less
than the following minimum applicable ratio:

=================================================================

FISCAL QUARTER                3rd Qtr. 1999 -    4th Qtr. 2000
                              3rd Qtr. 2000      and thereafter
- -----------------------------------------------------------------
Minimum Applicable Ratio          2.75                3.00
=================================================================

     e. Fixed Charge  Coverage  Ratio.  Assure that as of the end of each fiscal
quarter of the Borrower set forth below the Fixed Charge  Coverage  Ratio is not
less than the following minimum applicable ratio:

===================================================================

FISCAL QUARTER                3rd Qtr. 1999 -    4th Qtr. 2001
                              3rd Qtr. 2001      and thereafter
- -------------------------------------------------------------------
Minimum Applicable Ratio          1.10               1.20
===================================================================

     f. Leverage Ratio.  Assure that as of the end of each fiscal quarter of the
Borrower  set forth  below the  Leverage  Ratio does not  exceed  the  following
maximum applicable ratio:

================================================================================

FISCAL QUARTER              3rd Qtr.    4th Qtr.     4th Qtr.    4th Qtr.   4th
                            1999 -     2000 - 3rd   2001 - 3rd   2002 -     Qtr.
                            3rd Qtr.   Qtr. 2001    Qtr. 2002   3rd Qtr.    2003
                             2000                                  2003
- --------------------------------------------------------------------------------
Maximum Applicable Ratio     4.50        4.25         4.00         3.50     3.00
================================================================================

     g. Accounting;  Reserves;  Tax Returns.  Cause each of the Borrower and all
Subsidiaries at all times to (i) maintain a system of accounting established and
administered in accordance  with generally  accepted  accounting  principles and
(ii) file each tax return it is required to file;

     h. Financial and Other Information; Certificates of No Default . Provide to
each Lending Entity, in form satisfactory to the Required Lenders, (i) within 60
days after the end of each of the first  three  fiscal  quarters  of each fiscal
year of the Borrower, consolidating and consolidated statements of income, and a
consolidated  statement of cash flows, of the Borrower and all Subsidiaries for,
with respect to statements of income,  such fiscal  quarter and, with respect to
statements  of income and cash  flows,  the period  from the  beginning  of such
fiscal  year  to  the  end  of  such  fiscal  quarter  and a  consolidating  and
consolidated balance sheet of the Borrower and all Subsidiaries as of the end of
such fiscal quarter, each to be in reasonable detail, to set forth to the extent
required  in  securities  filings  prepared  by or on  behalf  of  the  Borrower
comparative  consolidated  figures for the corresponding period in the preceding
fiscal year of the Borrower,  to be certified by the chief financial  officer of
the  Borrower  to be in  accordance  with the records of the  Borrower  and each
Subsidiary  and to present fairly taken as a whole the results of the operations
and cash flows of the Borrower and all  Subsidiaries  for, as  applicable,  such
fiscal  quarter and the period from the beginning of such fiscal year to the end
of such fiscal  quarter,  and the  financial  position of the  Borrower  and all
Subsidiaries as of the end of such fiscal quarter,  in conformity with generally
accepted accounting principles applied consistently with the application of such
principles with respect to the preceding fiscal quarter of the Borrower,  except
for any intervening changes in generally accepted accounting principles, subject
to normal year-end audit adjustments, (ii) within 120 days after the end of each
fiscal  year of the  Borrower,  consolidating  and  consolidated  statements  of
income,  and a  consolidated  statement of cash flows,  of the Borrower for such
fiscal year and a consolidating  and consolidated  balance sheet of the Borrower
as of the end of such fiscal year, each to be in reasonable detail, to set forth
(A)  variances  from the budget  with  respect to such  fiscal  year  previously
provided by the  Borrower  pursuant to clause  (iii) of this  Section 7h and (B)
comparative  consolidated figures for the preceding fiscal year of the Borrower,
to be audited by an independent  nationally  recognized public accountant and to
present  fairly taken as a whole the results of the operations and cash flows of
the  Borrower  and all  Subsidiaries  for such fiscal  year,  and the  financial
position of the Borrower and all Subsidiaries as of the end of such fiscal year,
in conformity with generally accepted accounting principles applied consistently
with the  application of such  principles  with respect to the preceding  fiscal
year of the Borrower,  except for any intervening  changes in generally accepted
accounting  principles,  and to have been based upon an audit by such accountant
that was made in accordance with generally accepted auditing standards, (iii) no
later than 45 days after the start of each fiscal year of the Borrower, a budget
for each fiscal  quarter of such fiscal year,  (iv) together with each statement
of income and balance  sheet  required to be  delivered  by the Borrower to each
Lending Entity  pursuant to clause (i) or (ii) of this Section 7h, a certificate
(A) executed by a Designated  Officer,  (B) setting forth in  substantially  the
form  attached  to and  made a part of this  Agreement  as  Exhibit  B  whatever
computations  are required to establish  whether the Borrower was in  compliance
with each of the  covenants  contained in Sections 7c, 7d, 7e, 7f and 8j of this
Agreement  during the period  covered by such  statement of income,  (C) stating
that the signers of such  certificate have reviewed this Agreement and have made
or have  caused to be made under  their  supervision  a review of the  business,
operations,  assets,  affairs and condition  (financial or other) of each of the
Borrower  and all  Subsidiaries  during the period  beginning  on the first date
covered by such  statement of income and ending on the date of such  certificate
and (D) if during the period  described  in clause  (iii)(C) of this  Section 7h
there did not occur or exist and there  does not then exist any Event of Default
or Default, so stating or, if during such period any Event of Default or Default
occurred or existed or any Event of Default or Default then exists,  stating the
nature thereof,  the date of occurrence or period of existence  thereof and what
action  the  Borrower  has taken,  is taking or  proposes  to take with  respect
thereto, (v) as soon as available, (A) each financial statement,  report, notice
and proxy  statement  sent or made  available  by the Borrower to holders of its
securities generally and (B) each publicly available periodic or special report,
registration statement,  prospectus and other written communication other than a
transmittal  letter  filed by the  Borrower  with and  each  publicly  available
written  communication  received by the Borrower from any securities exchange or
the  Securities and Exchange  Commission,  (vi) within 30 days after the date of
this  Agreement,  a true  and  correct  copy of each  Acquisition  Document  not
heretofore  provided to each Lender and (vii)  promptly  upon the request of the
Agent and  subject  to any  applicable  Law that  restricts,  or any  applicable
agreement with any Person other than all  Subsidiaries  and  Affiliates  that in
good faith restricts, the disclosure of information,  all additional information
relating to the Borrower,  any Subsidiary or the business,  operations,  assets,
affairs or condition (financial or other) of the Borrower or any Subsidiary that
is reasonably requested by the Agent;

     i.  Payment of Certain  Indebtedness.  Cause each of the  Borrower  and all
Domestic  Subsidiaries  to pay,  before the end of any applicable  grace period,
each tax, assessment,  fee, charge, fine and penalty imposed by any Governmental
Authority upon it or any of its assets, income and franchises and each claim and
demand  of  any  materialman,  mechanic,  carrier,  warehouseman,  garageman  or
landlord  against it;  provided,  however,  that no such tax,  assessment,  fee,
charge,  fine, penalty,  claim or demand shall be required to be so paid so long
as (i) the  validity  thereof is being  contested  in good faith by  appropriate
proceedings  promptly  instituted and diligently  conducted,  (ii) to the extent
required by generally  accepted  accounting  principles,  adequate reserves have
been  appropriately   established   therefor,   (iii)  the  execution  or  other
enforcement of any lien resulting  therefrom is effectively  stayed and (iv) the
nonpayment thereof does not have any Material Adverse Effect;

     j. Maintenance of Title and Assets;  Insurance.  Cause each of the Borrower
and all  Subsidiaries to (i) at all times maintain good and marketable  title to
each material  asset it purports to own, (ii) at all times  maintain each of its
material tangible assets in good working order and condition,  (iii) at any time
and from  time to time  make  each  replacement  of any of its  tangible  assets
necessary or desirable  for the conduct of its business or  operations,  (iv) at
all times keep each of its insurable  tangible  assets insured with  financially
sound and reputable  insurance  carriers  against fire and such other hazards as
are insured by prudent  companies in similar  circumstances  carrying on similar
businesses  and  (v)  at  all  times  keep  similarly  adequately  insured  with
financially sound and reputable insurance carriers against business interruption
and  liability  on account of damage to any Person or asset or  pursuant  to any
applicable workers' compensation Law;

     k.  Inspections.  Upon the  reasonable  prior  request  of the Agent or the
Required  Lenders and subject to (i) any applicable Law that  restricts,  or any
applicable  agreement with any Person other than all Subsidiaries and Affiliates
that in  good  faith  restricts,  the  disclosure  of any  information  obtained
pursuant to such request and (ii) the maintenance of the  confidentiality of any
such information by each Lending Entity, promptly permit each officer, employee,
accountant,  attorney  and  other  agent  of each  Lending  Entity  to,  without
unreasonably  disrupting  the  business or  operations  of the  Borrower or such
Domestic Subsidiary,  (A) visit and inspect each of the premises of the Borrower
and each Domestic  Subsidiary,  (B) subject to, if  reasonably  requested by the
Borrower,  the execution and delivery of a confidentiality  agreement similar to
those generally used in significant corporate acquisitions and mergers, examine,
audit, copy and extract each record of the Borrower and each Domestic Subsidiary
and  (C)  discuss  the  business,  operations,  assets,  affairs  and  condition
(financial  or other) of the Borrower  and each  Domestic  Subsidiary  with each
responsible  officer  of the  Borrower  and each  Domestic  Subsidiary  and each
independent accountant of the Borrower and each Domestic Subsidiary;

     l. Pension Obligations.  (i) Promptly upon acquiring knowledge or reason to
know in the ordinary  course of its business of the occurrence or existence with
respect to any Pension Plan of any Prohibited  Transaction,  Reportable Event or
Accumulated  Funding  Deficiency  or any event or  condition  that (A) but for a
waiver by the Internal Revenue Service would  constitute an Accumulated  Funding
Deficiency,  (B) after  notice,  lapse of time or both  notice and lapse of time
will or might  constitute a Reportable Event or (C) constitutes or will or might
constitute   grounds  for  the  initiation  by  the  Pension  Benefit   Guaranty
Corporation  of any  proceeding  under  ERISA  seeking the  termination  of such
Pension Plan or the  appointment  of a trustee to administer  such Pension Plan,
provide to each Lending  Entity a certificate  executed by a Designated  Officer
and  specifying the nature of such  Prohibited  Transaction,  Reportable  Event,
Accumulated Funding Deficiency, event or condition, what action the Borrower has
taken, is taking or proposes to take with respect  thereto and, when known,  any
action taken or threatened by the Internal  Revenue  Service,  the Department of
Labor or the Pension Benefit Guaranty  Corporation with respect thereto and (ii)
promptly upon  acquiring  knowledge or reason to know in the ordinary  course of
its business of (A) the institution by the Pension Benefit Guaranty  Corporation
or any other Person of any proceeding under ERISA seeking the termination of any
Pension Plan or the  appointment  of a trustee to administer any Pension Plan or
(B)  the  complete  or  partial  withdrawal  or  proposed  complete  or  partial
withdrawal by the Borrower or any Subsidiary  from any Pension Plan,  provide to
each Lending Entity a certificate  executed by a Designated  Officer  describing
such proceeding, withdrawal or proposed withdrawal;

     m. Changes in Control.  Promptly upon any change in Control of the Borrower
or any Subsidiary,  provide to the Agent a certificate  executed by a Designated
Officer and specifying such change;

     n.  Judgments.  Promptly upon acquiring  knowledge or reason to know in the
ordinary  course  of its  business  of  any  judgment,  order  or  award  of any
Governmental  Authority or arbitrator that (i) is against or otherwise  involves
the Borrower or any  Subsidiary  or any asset of the Borrower or any  Subsidiary
and has or will have any Material  Adverse  Effect or (ii)  renders  invalid any
Acquisition  Document  or Loan  Document  or any  action  taken  or to be  taken
pursuant to any  Acquisition  Document or Loan Document,  provide to the Agent a
certificate  executed by a Designated  Officer and specifying the nature of such
judgment,  order or award and what action the Borrower  has taken,  is taking or
proposes to take with respect thereto;

     o. Litigation.  (i) Promptly upon acquiring  knowledge or reason to know in
the ordinary course of its business of the  commencement or threat of any claim,
audit  or  investigation  (other  than  a tax  audit  or  any  claim,  audit  or
investigation  that is a normal part of the review  process for any  contract of
the Borrower or any Subsidiary) or action or other legal proceeding by or before
any  Governmental  Authority  or before  any  arbitrator  that (A) is against or
otherwise  involves the Borrower or any  Subsidiary or any asset of the Borrower
or any  Subsidiary  and (I) involves in excess of $3,000,000  beyond  applicable
insurance  coverages,  if  any,  or  results  in  excess  of  $3,000,000  beyond
applicable  insurance  coverages,  if any, in the aggregate for the Borrower and
all  Subsidiaries  being  involved in all  claims,  audits,  investigations  and
actions and other legal  proceedings by or before any Governmental  Authority or
before any  arbitrator  against  or  otherwise  involving  the  Borrower  or any
Subsidiary or any asset of the Borrower or any Subsidiary, (II) seeks injunctive
or similar relief which, if granted,  would have any Material  Adverse Effect or
(III) relates or may relate to any Environmental Law and would have any Material
Adverse  Effect,  (B) otherwise has or will have any Material  Adverse Effect or
(C) questions the validity of any  Acquisition  Document or Loan Document or any
action  taken  or to be  taken  pursuant  to any  Acquisition  Document  or Loan
Document,  provide to the Agent a certificate  executed by a Designated  Officer
and specifying the nature of such claim, audit, investigation or action or other
legal  proceeding and what action the Borrower has taken,  is taking or proposes
to take with  respect  thereto and (ii)  promptly  upon  acquiring  knowledge or
reason to know in the ordinary  course of its business of any  development  with
respect to any claim,  audit,  investigation or action or other legal proceeding
theretofore disclosed by the Borrower to the Agent, or any settlement of any tax
audit, that has or will have any Material Adverse Effect, provide to the Agent a
certificate  executed by a Designated  Officer and specifying the nature of such
development or settlement  and what action the Borrower has taken,  is taking or
proposes to take with respect thereto;

     p. Liens and Encumbrances.  Promptly upon acquiring  knowledge or reason to
know in the ordinary  course of its  business  that any asset of the Borrower or
any Subsidiary has or may become subject to any security  interest,  mortgage or
other lien or encumbrance  other than Permitted  Liens,  provide to each Lending
Entity a certificate  executed by a Designated Officer and specifying the nature
of such security interest, mortgage or other lien or encumbrance and what action
the Borrower has taken, is taking or proposes to take with respect thereto;

     q. Defaults and Material Adverse Effects. Promptly upon acquiring knowledge
or reason to know in the ordinary  course of its business of the  occurrence  or
existence  of (i) any Event of Default or Default or (ii) any event or condition
that has or will have any  Material  Adverse  Effect,  provide  to each  Lending
Entity a certificate  executed by a Designated Officer and specifying the nature
of such Event of Default, Default, event or condition, the date of occurrence or
period of existence thereof and what action the Borrower has taken, is taking or
proposes to take with respect thereto;

     r. Additional  Guaranties and Security  Agreements.  Cause each Person that
becomes a Domestic  Subsidiary  after the date of this  Agreement to execute and
deliver  to the  Agent,  in form  and  substance  satisfactory  to the  Required
Lenders,  (i) a guaranty  agreement  guaranteeing,  without any limitation as to
amount, the payment of all indebtedness and other obligations of the Borrower to
all Lending Entities,  whether then existing or thereafter  arising or accruing,
and (ii) a security agreement (A) securing, without any limitation as to amount,
the payment of all such  indebtedness  and other  obligations and (B) granting a
first perfected security  interest,  subject to Permitted Liens, in all personal
property and fixtures of such Person;

     s. Year 2000 Compliance.  In sufficient time before December 31, 1999 cause
each of the Borrower and all Domestic  Subsidiaries and  Directly-Owned  Foreign
Subsidiaries  to (i) correct and  redeploy  all Systems  relating to such Person
that are not Year 2000  Compliant  and (ii) test all  Systems  relating  to such
Person to confirm that such Systems are Year 2000 Compliant; and

     t. Further  Actions.  Promptly  upon the request of the Agent,  execute and
deliver or cause to be executed and delivered each writing, and take or cause to
be taken each other action,  that the Agent shall deem necessary or desirable at
the sole  option of the Agent to perfect or  otherwise  preserve  or protect the
priority of any security interest, mortgage or other lien or encumbrance imposed
or created  pursuant  to any Loan  Document  or to correct any error in any Loan
Document.

8. NEGATIVE  COVENANTS.  During the term of this  Agreement,  the Borrower shall
not, without the prior written consent of the Required  Lenders,  do, attempt to
do or agree or otherwise  incur,  assume or have any  obligation  to do, and the
Borrower shall assure that,  without  obtaining from the Agent the prior written
consent of the Required Lenders, no Subsidiary does, attempts to do or agrees or
otherwise incurs, assumes or has any obligation to do, any of the following:

     a. Fiscal Year. Unless a Foreign Subsidiary, change its fiscal year;

     b. Certain  Indebtedness.  Create,  incur,  assume or have any Indebtedness
other than Permitted Indebtedness;

     c.  Pension  Obligations.  (i) Engage in any  Prohibited  Transaction  with
respect to any Pension  Plan,  (ii) permit to occur or exist with respect to any
Pension Plan any Accumulated  Funding  Deficiency or any event or condition that
(A) but for a  waiver  by the  Internal  Revenue  Service  would  constitute  an
Accumulated  Funding  Deficiency or (B) constitutes or will or might  constitute
grounds for the institution by the Pension Benefit  Guaranty  Corporation of any
proceeding  under ERISA  seeking the  termination  of such  Pension  Plan or the
appointment  of a trustee  to  administer  such  Pension  Plan,  (iii)  make any
complete or partial  withdrawal  from any Pension Plan, (iv) fail to make to any
Pension Plan any contribution  that it is required to make,  whether to meet any
minimum funding  standard under ERISA or any requirement of such Pension Plan or
otherwise, or (v) terminate any Pension Plan in any manner, or otherwise take or
omit to take any action with  respect to any Pension  Plan,  that would or might
result  in the  imposition  of any lien upon any  asset of the  Borrower  or any
Subsidiary pursuant to ERISA;

     d. Liens and Encumbrances.  Cause or permit,  whether upon the happening of
any  contingency  or otherwise,  any of its assets to be subject to any security
interest, mortgage or other lien or encumbrance, except for Permitted Liens;

     e.  Investments.  Make any  Investment in any Person,  except for Permitted
Investments;

     f. Transactions with Affiliates and Foreign  Subsidiaries.  In the ordinary
course of its business or otherwise,  enter into,  assume or permit to exist any
agreement, arrangement, transaction or other dealing (including, but not limited
to, the purchase,  sale, lease,  exchange or other acquisition or disposition of
any asset and the  rendering  of any  service)  between it and any  Affiliate or
Foreign  Subsidiary or otherwise deal with any Affiliate or Foreign  Subsidiary,
except for (i)  reasonable  compensation  for services  actually  performed  and
customary and ordinary levels of severance and benefits packages,  (ii) advances
made in the ordinary  course of its business to any  Affiliate who is one of its
officers and employees for out-of-pocket  expenses incurred by such Affiliate on
its behalf in the conduct of its business or  operations  and (iii)  agreements,
arrangements,  transactions  and other  dealings in the  ordinary  course of its
business upon fair and reasonable terms no less favorable to it than would apply
in a  comparable  arm's-length  agreement,  arrangement,  transaction  or  other
dealing with a Person who or that is not an Affiliate or Foreign Subsidiary;

     g.  Distributions.  Declare,  pay or  make  any  Distribution,  except  for
Permitted Distributions;

     h.  Corporate and Other  Changes.  (i) Assign,  sell,  lease as a lessor or
otherwise  transfer or dispose of all or substantially all of its assets,  other
than pursuant to a Permitted  Disposition,  (ii) dissolve or  participate in any
merger,  consolidation or other absorption (other than (A) any such dissolution,
merger,  consolidation  or  other  absorption  of  any  Domestic  Subsidiary  or
Directly-Owned  Foreign  Subsidiary  that  results  in all of the assets of such
Domestic  Subsidiary or Directly-Owned  Foreign  Subsidiary being transferred to
the Borrower or, in the case of a Directly-Owned Foreign Subsidiary,  to another
Directly-Owned   Foreign   Subsidiary,   (B)  any  such   dissolution,   merger,
consolidation  or  other  absorption  of any  Foreign  Subsidiary  other  than a
Directly-Owned Foreign Subsidiary that does not have any Material Adverse Effect
or (C) pursuant to a Permitted Disposition),  (iii) acquire all or substantially
all of the assets or stock of any other Person,  or assets  constituting  all or
substantially all of a division or product line of any other Person,  other than
pursuant to a Permitted Acquisition, (iv) do business under or otherwise use any
name  other than its true name and names  listed in  Schedule  8h as  originally
attached to and made a part of this  Agreement  without first having given prior
written notice to each Lending  Entity,  (v) make any change in its corporate or
other business  structure or its operation of a precision  control business that
would have any Material Adverse Effect or (vi) have any Subsidiary that is not a
Subsidiary on the date of this  Agreement  other than a Subsidiary  that becomes
such as a result of a Permitted Acquisition;

     i. Sale of  Receivables.  Unless a Foreign  Subsidiary,  sell or  otherwise
transfer  or dispose of any of its notes  receivable,  accounts  receivable  and
chattel paper, whether with or without recourse;

     j.   Consolidated   Capital   Expenditures.   Make   Consolidated   Capital
Expenditures,  other  than  for  any  Permitted  Acquisition,  exceeding  in the
aggregate for the Borrower and all Subsidiaries the following maximum applicable
dollar amount for the fiscal year of the Borrower set forth below:

=====================================================================
                                                         2003 and
FISCAL YEAR                 1999   2000   2001   2002    thereafter
- ---------------------------------------------------------------------
Maximum Applicable Amount
 ($ millions)               25.0   25.0   27.5   30.0     30.0
=====================================================================

     k. Stock of or  Ownership  Interest  in  Subsidiary.  Issue any stock of or
other  ownership  interest in any  Subsidiary,  except (i) to the minimum extent
required by any  applicable  Law to enable any individual to serve as a director
of such Subsidiary,  (ii) as a Distribution to the shareholders of or holders of
other  ownership  interests  in such  Subsidiary  and (iii) to the  Borrower or,
unless the  issuing  Subsidiary  is a Domestic  Subsidiary  or a  Directly-Owned
Foreign Subsidiary, to another Subsidiary;

     l.  Subordinated  Indebtedness.  Prepay,  or modify any indenture,  note or
other  agreement,  instrument  or other  writing  relating to, the  Subordinated
Indebtedness  or take, or omit to take, any action that would result in (i) this
Agreement  failing to qualify as the  "Credit  Agreement"  for  purposes  of the
Indenture,  dated as of May 10, 1996,  between the  Borrower and Fleet  National
Bank, as such  Indenture may be or have been  amended,  supplemented,  extended,
renewed, restated, replaced or otherwise modified from time to time, or (ii) the
obligations  under this Agreement or any other Loan Document  failing to qualify
for the most preferential  treatment accorded to senior indebtedness pursuant to
any document referred to in clause (xx)(A) of Section 5d of this Agreement; or

     m. Full Disclosure.  Provide to any Lending Entity or permit to be provided
to any  Lending  Entity  on its  behalf  pursuant  to  this  Agreement  (i)  any
certificate  or other  writing  that  contains  any  statement  of fact  that is
incorrect or misleading in any material  respect or knowingly omits to state any
fact necessary to make any statement of fact contained  therein not incorrect or
misleading in any material respect or (ii) any financial statement that does not
fairly present the financial  information  that it purports to reflect as of the
date thereof.

9. INDEBTEDNESS  IMMEDIATELY DUE. Upon or at any time or from time to time after
the occurrence or existence of any Event of Default other than,  with respect to
the Borrower, an Event of Default described in clause (v) of Section 1bb of this
Agreement,  the  aggregate  outstanding  principal  amounts  of all  Loans,  all
interest  payable  pursuant to this Agreement and remaining unpaid and all other
amounts payable by the Borrower  pursuant to this Agreement and remaining unpaid
shall,  at the sole  option of the  Required  Lenders  and  without  any notice,
demand,  presentment  or  protest  of any kind  (each  of  which  is  knowingly,
voluntarily,  intentionally  and  irrevocably  waived by the  Borrower),  become
immediately  due.  Upon the  occurrence  or  existence  of, with  respect to the
Borrower,  any Event of Default  described  in such clause (v),  such  aggregate
outstanding  principal  amounts,  all such  interest and all such other  amounts
shall, without any notice,  demand,  presentment or protest of any kind (each of
which is knowingly,  voluntarily,  intentionally  and irrevocably  waived by the
Borrower), automatically become immediately due. Upon such aggregate outstanding
principal  amounts,  all such  interest  and all  such  other  amounts  becoming
immediately due, any obligation of the Lenders to make any additional Loan shall
terminate.

10. EXPENSES; INDEMNIFICATION.

     a. Loan Document Expenses;  Agent Fees. The Borrower shall pay to the Agent
on demand made by the Agent (i) each out-of-pocket cost and expense  (including,
but not  limited to, the  reasonable  fees and  disbursements  of counsel to the
Agent and each  documentary  stamp or other excise or property tax,  assessment,
fee and charge) incurred by the Agent in connection with (A) the preparation of,
entry into or performance of any Loan Document, whether or not any Loan is made,
or (B) any  modification  of or release,  consent or waiver relating to any Loan
Document,  whether or not such modification,  release, consent or waiver becomes
effective  and (ii) each fee payable to the Agent  pursuant to any  separate fee
letter or other fee arrangement between the Borrower and the Agent.

     b. Collection Expenses.  The Borrower shall pay to the Agent on demand made
by the  Agent  each  cost  and  expense  (including,  but not  limited  to,  the
reasonable fees and disbursements of counsel to the Agent,  whether retained for
advice, litigation or any other purpose) incurred by the Agent in endeavoring to
(i) collect any of the  outstanding  principal  amount of any Loan, any interest
payable  pursuant to this  Agreement  and  remaining  unpaid or any other amount
payable by the Borrower  pursuant to this Agreement and remaining  unpaid,  (ii)
preserve or  exercise  any right or remedy of any Lending  Entity  relating  to,
enforce or realize upon any Collateral,  (iii) preserve or exercise any right or
remedy of any  Lending  Entity  pursuant  to any Loan  Document  or (iv)  defend
against any claim, regardless of the basis or outcome thereof,  asserted against
any  Lending  Entity as a direct or  indirect  result of the entry into any Loan
Document, except for any claim for any tax imposed by any Governmental Authority
upon any income of any Lending Entity or any interest or penalty relating to any
such tax.

     c.  Expenses Due to Law Changes.  The Borrower  shall pay to each Lender on
demand made by such Lender each amount  necessary to compensate  such Lender for
any  liability,  cost or expense that is a direct or indirect  result of (i) any
increase in the amount of capital  required or expected to be maintained by such
Lender or any bank  holding  company of such Lender with  respect to any Loan or
the obligation of such Lender to make any Loan that is due to (A) after the date
of this  Agreement,  the  enactment  or  issuance  of or any  change  in any Law
relating to capital  adequacy of banks and banking holding  companies or (B) the
compliance  by such  Lender or such bank  holding  company  with any  request or
direction relating to such capital made or issued by any Governmental  Authority
after the date of this  Agreement,  (ii) any change in the basis of  taxation of
repayments  of the  principal  amount of any Loan or the payment of any interest
payable  pursuant to this  Agreement or any other amount payable by the Borrower
to such Lender pursuant to this Agreement that is due to, after the date of this
Agreement, any such change other than any change in the basis of taxation of the
overall net income of such Lender in the  jurisdiction  in which such Lender has
its  principal  place of business,  (iii) any  imposition or  application  of or
increase  in  any  reserve  or  similar  requirement  applicable  to  assets  or
liabilities  of,  deposits  with or credit  extended by such Lender,  or for the
account  of such  Lender,  that  increases  the cost to such  Lender of  making,
funding or maintaining any Loan and is due to, after the date of this Agreement,
the enactment or issuance of or any change in any Law, except for any reserve or
similar requirement  reflected in the rate of interest charged on any Libor Rate
Portion,  (iv) any  imposition or  application  of,  increase in or deduction or
withholding for any tax, assessment, fee, charge, fine or penalty imposed by any
Governmental  Authority  that is due to, after the date of this  Agreement,  the
enactment or issuance of or any change in any Law or (v) without limiting any of
clauses (i) through (iv) of this sentence, after the date of this Agreement, any
enactment  or issuance of or any change in any Law that  directly or  indirectly
(A) results in any  increase  in the cost to such  Lender of making,  funding or
maintaining  any Loan or (B)  reduces  that amount of,  requires  such Lender to
forego or,  except for any tax on the  overall  net income of such Lender in the
jurisdiction in which such Lender has its principal place of business,  make any
payment  with respect to any  repayment by the Borrower of any of the  principal
amount  of any Loan or the  payment  by the  Borrower  of any  interest  payable
pursuant to this  Agreement or any other amount  payable by the Borrower to such
Lender pursuant to this Agreement except to the extent that such liability, cost
or  expense  results  from the gross  negligence  or wilful  misconduct  of such
Lender.  Each Lender shall  allocate  the amounts  described in this Section 10c
among its customers in good faith and on an equitable basis.  The  determination
by such Lender of the amount  necessary to  compensate  such Lender for any such
liability,  cost or expense shall be presumptively  correct,  provided that such
Lender provides the Borrower a statement setting forth the calculation thereof.

     d. Libor  Expenses.  The Borrower shall pay to each Lender upon demand made
by  such  Lender  each  amount  necessary  to  compensate  such  Lender  for any
liability,  cost or expense that is a direct or indirect  result of,  whether by
reason of any reduction in yield,  by reason of the  liquidation or reemployment
of any deposit or other funds  acquired by such Lender,  by reason of the fixing
of the rate of interest payable on any Libor Rate Portion or otherwise,  (i) any
attempt by the  Borrower  to revoke any Libor Rate  Election or repay in full or
part any Libor Rate  Portion  during  any Libor Rate  Period for such Libor Rate
Portion,  (ii) any failure by the  Borrower to fulfill by the date that any Loan
the request for which is  combined  with a Libor Rate  Election is to be made by
such Lender any condition  upon which the making of such Loan is  conditioned or
(iii) the  maturity,  whether by  acceleration  or  otherwise,  of the aggregate
outstanding  principal amount of all Loans. The  determination by such Lender of
the amount  necessary to compensate such Lender for any such liability,  cost or
expense shall be presumptively  correct,  provided that such Lender provides the
Borrower a statement setting forth the calculation thereof.

     e. Environmental Indemnification. The Borrower shall indemnify each Lending
Entity and each officer, employee, accountant,  attorney and other agent of such
Lending  Entity on demand made by such Lending  Entity  against each  liability,
cost and  expense  (including,  but not  limited  to,  the  reasonable  fees and
disbursements  of  counsel to such  Lending  Entity or such  officer,  employee,
accountant,  attorney or other agent, whether retained for advice, litigation or
any other  purpose,  and all costs of any  investigation,  monitoring,  removal,
remediation or  restoration)  imposed on,  incurred by or asserted  against such
Lending Entity or such officer, employee, accountant, attorney or other agent as
a direct or  indirect  result of (i) any  Release or  threatened  Release of any
Hazardous  Material at, in, on or under any property  now or  previously  owned,
leased as a lessee or used by the Borrower or any Subsidiary, (ii) any active or
abandoned underground storage tank at, in, on or under any such property,  (iii)
any  polychlorinated  biphenyl or friable  asbestos at, in, on or under any such
property,  (iv) the  existence  of any  condition  at,  in, on or under any such
property  that  gives  or  might  give  rise to any  liability  pursuant  to any
Environmental  Law  or  (v)  the  Borrower  or any  Subsidiary  transporting  or
arranging  for the  transportation  of any  Hazardous  Material  to or from  any
property except to the extent that such liability,  cost or expense results from
the gross negligence or wilful misconduct of such Lender.

     f. Reasonable  Efforts to Mitigate.  Each Lender agrees that as promptly as
practicable  after it becomes aware of any  circumstances  that would prevent it
from making available,  or require it to convert,  any Libor Rate Portion of any
Loan pursuant to Sections 2g or 4g of this Agreement or that would entitle it to
be paid additional  moneys pursuant to Sections 2j, 4h or 10c of this Agreement,
such Lender shall give notice thereof to the Borrower,  with a copy to the Agent
and,  to the extent so  requested  by the  Borrower  and not  inconsistent  with
regulatory  policies applicable to such Lender, such Lender shall use reasonable
efforts  and take such  actions as are  reasonably  appropriate  (including  the
changing  of  its  lending  office  or  branch)  if  as  a  result  thereof  the
circumstances  which would  otherwise so prevent or require a conversion of such
Loan  pursuant  would  cease to  exist  or the  additional  moneys  which  would
otherwise be so required to be paid to such Lender would be reduced  (other than
for de minimis  amounts),  in each case if, as  determined by such Lender in its
sole  discretion,  the taking of such actions  would not  adversely  affect such
Loan.

     g. Replacement of Lenders.  If any Lender (an "Affected  Lender") (i) makes
demand upon the Borrower  for (or if the Borrower is otherwise  required to pay)
additional moneys pursuant to Sections 2j, 4h or 10c of this Agreement,  or (ii)
is unable to make or  maintain  any Libor Rate  Portion of any Loan  pursuant to
Sections 2g or 4g of this Agreement as a result of any  circumstances  described
therein,  the Borrower may, within 90 days of receipt of such demand,  by notice
(a  "Replacement  Notice") in writing to the Agent and such Affected  Lender (A)
request the  Affected  Lender to  cooperate  with the  Borrower  in  obtaining a
replacement lender  satisfactory to the Agent and the Borrower (the "Replacement
Lender"),  (B)  request  the  Lenders  other  than  such  Affected  Lender  (the
"Non-Affected  Lenders")  to acquire  and assume all of such  Affected  Lender's
Loans and  obligations  pursuant to this Agreement and each other Loan Document,
provided, however, that no Lender shall be under any obligations to do so or (C)
designate  a  Replacement  Lender  which is eligible  under  Section 13d of this
Agreement and is reasonably  satisfactory  to the Agent other than when an Event
of Default has occurred and is continuing  and  absolutely  satisfactory  to the
Agent  when  an  Event  of  Default  has  occurred  and  is  continuing.  If any
satisfactory Replacement Lender shall be so obtained, or any of the Non-Affected
Lenders shall agree to acquire and assume all of the Affected Lender's Loans and
obligations  pursuant to this Agreement and each other Loan Document,  then such
Affected Lender shall assign,  in accordance with Section 13d of this Agreement,
all of its Loans and rights and obligations  under this Agreement and each other
Loan Document to such Replacement  Lender or Non-Affected  Lenders,  as the case
may be, in exchange  for  payment of the  principal  amount so assigned  and all
interest and fees accrued on the amount so assigned,  plus all other obligations
pursuant to this  Agreement and each other Loan Document then due and payable to
such Affected Lender;  provided,  however,  that (I) such assignment shall be in
accordance  with the  provisions  of Section  13d,  shall be  without  recourse,
representation  or  warranty  and  shall be on terms and  conditions  reasonably
satisfactory to such Affected Lender and such Replacement Lender or Non-Affected
Lenders,as the case may be, and (II) prior to any such assignment,  the Borrower
shall  have paid to such  Affected  Lender all  amounts  properly  demanded  and
unreimbursed under this Agreement and each other Loan Document.

11. NOTICES.  Each notice and other  communication  by any Lending Entity to the
Borrower or any other  Lending  Entity or by the Borrower to any Lending  Entity
relating to this Agreement shall be (i) in writing,  (ii) delivered in person or
sent by mail,  established  overnight  courier  service or  facsimile  and (iii)
directed as follows or as may at any time and from time to time be  specified in
any notice so sent by the recipient:

         Moog Inc.                                     Fax: 716-687-4457
         Jamison Road and Seneca Street
         East Aurora, New York  14052-0018
         Attention:  William P. Burke, Treasurer


         HSBC Securities, Inc.                         Fax:     212-658-4407
         140 Broadway - 5th Floor
         New York, New York 10005
         Attention:  Loan Syndications

         Marine Midland Bank                           Fax:     716-855-0384
         One Marine Midland Center
         Buffalo, New York  14203
         Attention:  Regional Commercial
                     Banking Department

         Manufacturers and Traders                     Fax:     716-848-7318
           Trust Company
         One Fountain Plaza
         Buffalo, New York  14203
         Attention:  Western New York Commercial
                     Banking Department

         Fleet National Bank                           Fax:     716-847-4491
         10 Fountain Plaza
         Buffalo, New York  14202
         Attention:  Thomas L. Giles,
                     Vice President

         Bank of Tokyo-Mitsubishi Trust Company        Fax:     212-782-4979
         1251 Avenue of the Americas
         New York, New York  10020
         Attention:  Joseph P. Devoe,
                     Vice President

         KeyBank National Association                  Fax:     216-689-4981
         127 Public Square
         Mailcode:  OH-01-27-0606
         Cleveland, Ohio 44114
         Attention:  Francis W. Lutz,
                     Portfolio Manager

         Landesgirokasse oeffentliche Bank
           und Landessparkasse                         Fax:     49-711-124-7808
         Kronenstr. 20
         70173 Stuttgart, Germany
         Attention:  Hartmut Armingeon
                     Joachim Erdle

         National Bank of Canada                       Fax:     716-852-6832
         Suite 2540 - Main Place Tower
         350 Main Street
         Buffalo, New York  14202
         Attention:  Robert G. Uhrig, Vice President

         The Chase Manhattan Bank                      Fax:     716-843-4939
         2300 Main Place Tower
         Buffalo, New York  14202
         Attention:  Michael E. Wolfram, Vice
                     President

Each such notice,  demand and other  communication  shall be deemed to have been
given (i) if delivered in person, when delivered, (ii) if sent by mail, two days
after when  deposited in the mail,  certified  postage  prepaid,  return receipt
requested,  or two days after when  delivered  to any post office for sending by
registered mail, return receipt requested, directed as described in this Section
11,  (iii) if sent by  established  overnight  courier  service,  one day  after
delivered to any office of such service directed as described in this Section 11
or (iv) if sent by facsimile,  upon  transmission  directed as described in this
Section 11.

12. AGENT; RELATIONS AMONG LENDING ENTITIES.

     a. Authorization.  Each Lender authorizes the Agent to (i) act on behalf of
such Lender in connection with the  administration  and collection of all Loans,
in  connection  with the  holding of and  realization  upon all  Collateral  and
pursuant to and otherwise in  connection  with each Loan Document and (ii) in so
acting,  take each action and  exercise  each right and remedy that is expressly
delegated  to or  expressly  required  to be taken  or  exercised  by the  Agent
pursuant to any Loan Document, together with each other action, right and remedy
that is reasonably incidental thereto.

     b.  Acting at  Direction  of  Required  Lenders.  At the  direction  of the
Required  Lenders,  the Agent shall make any request referred to in clause (vii)
of Section 7h of this Agreement or Section 7k or 7t of this Agreement that it is
so directed to make.

     c.  Non-Relationship.  In acting on behalf of any Lender in connection with
the  administration or collection of any Loan, in connection with the holding of
or  realization  upon any  Collateral  or pursuant to or otherwise in connection
with any Loan  Document,  the Agent  shall not be deemed to be acting in (i) any
partnership  or fiduciary  relationship  with respect to such Lender or (ii) any
agency,  partnership or fiduciary  relationship  with respect to the Borrower or
any Subsidiary.

     d.  Rights of Agent.  The Agent (i) shall  have the right to make any loan,
advance or other  extension  of credit to the  Borrower  or any  Subsidiary,  to
accept any deposit from the Borrower or any  Subsidiary  and generally to engage
in any kind of  banking,  trust  or other  business  with  the  Borrower  or any
Subsidiary,  and to accept fees and other consideration from the Borrower or any
Subsidiary in connection therewith, as though the Agent were not the Agent, (ii)
shall  have the  right to treat  any  payment  received  by the  Agent  from the
Borrower  prior to the  aggregate  outstanding  principal  amounts  of all Loans
becoming due pursuant to Section 9 of this  Agreement as having been received in
connection with any such loan,  advance or other extension of credit unless such
payment is designated by the Borrower as made in  connection  with Loans,  (iii)
shall have and may exercise  each right and remedy with respect to Loans made by
the Agent as a Lender as though the Agent were not the Agent and (iv) shall have
the  right to accept  fees and  other  consideration  from the  Borrower  or any
Subsidiary  in connection  with its role as the Agent without  having to account
therefor to any Lender.

     e.  Limitations on Obligations and Liability.  The Agent (i) shall not have
any obligation to take any action,  or to exercise any right or remedy,  that is
not expressly delegated to or expressly required to be taken or exercised by the
Agent  pursuant to any Loan  Document and (ii) shall not be liable to any Lender
or any other Person for omitting to take any action, or to exercise any right or
remedy,  that is not so expressly delegated or so expressly required to be taken
or exercised.  Without  limiting the generality of the preceding  sentence,  the
Agent shall not have any  obligation to do and shall not be liable to any Lender
or any other  Person for failing to do any of the  following  things,  except as
expressly required by this Section 12: (i) provide to any Lender any information
relating to the Borrower,  any Subsidiary or the business,  operations,  assets,
affairs or condition  (financial  or other) of the  Borrower or any  Subsidiary,
(ii) request any  information  relating to the Borrower,  any  Subsidiary or the
business,  operations, assets, affairs or condition (financial and other) of the
Borrower or any Subsidiary, (iii) inspect any of the premises and records of the
Borrower or any  Subsidiary,  (iv)  discuss the  business,  operations,  assets,
affairs or  condition  of the  Borrower  or any  Subsidiary  with any officer or
accountant of the Borrower or any Subsidiary,  (v) investigate whether any Event
of Default or Default has  occurred or existed,  (vi)  account to any Lender for
any money or other asset  received by the Agent in connection  with any lending,
deposit,  fiduciary or other  relationship now or hereafter existing between the
Agent and the Borrower or any Subsidiary, except insofar as required pursuant to
any  Loan  Document,  or (vii)  disclose  to any  Lender  or  other  Person  any
information   relating  to  the  Borrower,   any  Subsidiary  or  the  business,
operations, assets, affairs or condition (financial or other) of the Borrower or
any  Subsidiary  if such  disclosure  would  violate any Law or give rise to any
claim against the Agent by the Borrower or any  Subsidiary or other Person.  The
Agent shall not be liable to (i) the Borrower or any  Subsidiary or other Person
on account of any  failure of any Lender that is not the Agent to perform or any
delay by any Lender that is not the Agent in performing  any  obligation of such
Lender pursuant to any Loan Document, (ii) any Lender or other Person on account
of (A) any failure of the Borrower or any  Subsidiary to perform or any delay by
the Borrower or any Subsidiary in performing any of its obligations  pursuant to
any Loan Document,  (B) the  inaccuracy or  incompleteness  of any  certificate,
financial  statement  or  other  writing,  or  any  information,  heretofore  or
hereafter provided to any Lender, whether through the Agent or otherwise,  by or
on behalf of the Borrower in connection with the administration of collection of
any Loan, in connection  with the holding of or realization  upon any Collateral
or pursuant to or  otherwise  in  connection  with any Loan  Document or (C) the
inaccuracy or  incompleteness of any  representation  or warranty  heretofore or
hereafter made to any Lender by or on behalf of the Borrower in connection  with
the  administration or collection of any Loan, in connection with the holding of
or  realization  upon any  Collateral  or pursuant to or otherwise in connection
with  any Loan  Document  or  (iii)  any  Lender  or  other  Person  for (A) the
performance  by the Borrower or any  Subsidiary  of any Loan  Document,  (B) the
existence, validity, enforceability, sufficiency or value of or any title to any
Collateral,  (C)  the  legality,   validity,  binding  effect,   enforceability,
sufficiency or effectiveness of any Loan Document or (D) the  collectability  of
any  amount  owing  by the  Borrower  or any  Subsidiary  pursuant  to any  Loan
Document.

     f. Instructions and Advice. If the Agent requests any instruction or advice
from any Lender,  the Required Lenders or all Lenders with respect to the taking
of or  omission  to take any action in  connection  with the  administration  or
collection of any Loan, in connection  with the holding of or  realization  upon
any Collateral or pursuant to or otherwise in connection with any Loan Document,
the Agent (i) shall be entitled to refrain  from taking or omitting to take such
action until the Agent receives such instruction or advice and (ii) shall not be
liable to any Lender or other Person for so refraining.

     g. Failure to Act.  The Agent shall be fully  justified in omitting to take
any action (including,  but not limited to, commencing any action or other legal
proceeding) in connection with the  administration or collection of any Loan, in
connection with the holding of or realization upon any Collateral or pursuant to
or otherwise in connection  with any Loan  Document,  and shall not be liable to
any  Lender or other  Person for  omitting  to take such  action,  if (i) in the
opinion of the Agent based upon a written opinion received by the Agent from any
attorney,  whether or not  selected or retained by the Agent,  such action would
violate any Law or any provision of any Loan  Document,  (ii) the Agent requests
any instruction or advice from any Lender,  the Required  Lenders or all Lenders
with respect to the taking of such action and has not received such  instruction
or  advice  or (iii)  the Agent is not,  upon its  request,  indemnified  to its
satisfaction by all Lenders against each liability, cost and expense (including,
but not  limited to, the  reasonable  fees and  disbursements  of counsel to the
Agent)  imposed on,  incurred by or asserted  against it as a direct or indirect
result of the taking of such action.

     h. Reliance. The Agent shall be fully justified in relying on and shall not
be liable to any  Lender or other  Person  for  relying in good faith on (i) any
oral (including,  but not limited to, telephonic),  written or other (including,
but  not  limited  to,  facsimile)   notice,   request,   certificate  or  other
communication that the Agent believes to be genuine and correct and to have been
given by the Person or Persons by whom or which it  purports  to have been given
and (ii) any  advice or  opinion  received  by the Agent  from any  professional
advisor  (including,  but not limited  to, any  attorney,  accountant,  or other
expert), whether or not selected or retained by the Agent.

     i.  Defaults.  The  Agent  shall not be  deemed  to have  knowledge  of the
occurrence  or  existence  of any Event of Default or Default  other than (i) an
Event of Default  described in clause (i) of Section 1bb of this Agreement or an
Event of Default with respect to any obligation  owing by the Borrower  pursuant
to clause (i), (ii), (iii), (iv) or (vi) of Section 7h of this Agreement or (ii)
an Event of Default or Default identified as such in a certificate  described in
clause (iv) of Section 7h of this  Agreement.  Subject to any other provision of
this Section 12 (including,  but not limited to, Section 12f of this Agreement),
the Agent shall take such action with respect to any Event of Default or Default
as is directed by the Required Lenders; provided,  however, that until the Agent
receives any such direction, it may, but shall not be obligated to, take or omit
to take such action with respect to such Event of Default or Default as it deems
to be in the best interests of the Lenders, except pursuant to Section 9 of this
Agreement.

     j. Provision of Information. Subject to any other provision of this Section
12,  the  Agent  shall  (i)  promptly  forward  to  each  Lender  a copy  of any
certificate or other writing that is required to be provided to the Agent by the
Borrower or any officer of the Borrower  pursuant to this  Agreement and that is
so provided (including,  but not limited to, any certificate from any officer of
the Borrower  referred to in Section 12i of this  Agreement)  and (ii)  promptly
notify  each Lender of any Event of Default  described  in clause (i) of Section
1bb of this Agreement.

     k. Non-Reliance.  Each Lender represents and warrants to the Agent and each
other Lender that it has (i) independently  made its own  investigation  into an
appraisal of the business, operations, assets, affairs and conditions (financial
or other) of the Borrower and each Subsidiary,  (ii)  independently made its own
analysis  and  judgment  as to  the  creditworthiness  of  the  Borrower,  (iii)
independently  made its own  decision  concerning  whether  to enter  into  this
Agreement  and (iv) not relied upon any  representation  or warranty  made,  any
action taken or omitted to be taken, or any information  provided,  by the Agent
or any other Lender in doing any of the things  described in clauses (i) through
(iii) of this  sentence and shall not rely upon any  representation  or warranty
made, any action taken or omitted to be taken, or any information  provided,  by
the Agent or any other Lender in doing any of such things.

     l. Exculpation.  Neither the Agent nor any officer,  employee,  accountant,
attorney  or other  agent of the Agent  shall be liable for any action  taken or
omitted  to be  taken  by it,  him or her in  connection  with  the  holding  or
realization  upon any Collateral or pursuant to or otherwise in connection  with
any Loan Document unless such action directly results from its, his or her gross
negligence or willful misconduct.

     m. Expenses. Each Lender shall pay to the Agent on demand made by the Agent
each reasonable cost and expense (including,  but not limited to, the reasonable
fees and  disbursements  of  counsel  to the  Agent)  incurred  by the  Agent in
connection  with the Agent's  acting on behalf of any Lender in connection  with
the  administration or collection of any Loan, in connection with the holding of
or  realization  upon any  Collateral  or pursuant to or otherwise in connection
with any Loan Document to the extent that the Agent is not  reimbursed  for such
cost or expense by the Borrower; provided, however, that such Lender's liability
pursuant to this sentence shall be limited to its  Commitment  Percentage at the
time such cost or expense is so incurred.

     n. Indemnification.  Each Lender shall indemnify HSBC and the Agent against
each liability and each reasonable cost and expense (including,  but not limited
to,  the  reasonable  fees and  disbursements  of  counsel to HSBC or the Agent)
imposed on,  incurred  by or asserted  against the Agent as a direct or indirect
result of HSBC's or the Agent's (i) acting on behalf of any Lender in connection
with the  administration  or  collection  of any Loan,  in  connection  with the
holding of or  realization  upon any  Collateral  or pursuant to or otherwise in
connection  with any Loan  Document or (ii) in so acting,  taking or omitting to
take any action  unless  such  acting,  taking or  omitting  to take such action
results  from  HSBC's or the Agent's  gross  negligence  or willful  misconduct;
provided,  however, that such Lender's liability pursuant to this sentence shall
be limited to its  Commitment  Percentage  at the time such  liability,  cost or
expense is so imposed, incurred or asserted.

     o. Successor.  Any Person serving as the Agent may resign from such service
at any time,  effective  upon giving notice of such  resignation to the Borrower
and each  Lender and the  appointment  of a  successor  Agent  pursuant  to this
Section  12o.  Upon  any such  resignation,  the  Required  Lenders  may,  after
consultation among the Lenders and with the Borrower,  appoint another Lender as
the Agent.  If no other  Lender is so  appointed  and accepts  such  appointment
within 30 days after the date of such resignation,  then the Person resigning as
the Agent may, on behalf of the Lenders, after consultation with the Lenders and
the  Borrower,  appoint  as the Agent  another  Lender  or any other  commercial
banking institution organized under any Law of the United States or any state of
the  United  States  and  having a  combined  capital  and  surplus  of at least
$500,000,000.  In either  case,  reasonable  efforts  shall be made to appoint a
successor  Agent  having  an  office  in  Buffalo,   New  York.  Upon  accepting
appointment  as the Agent,  (i) any Person shall be entitled to receive from its
predecessor  as the Agent such documents of assignment or other transfer as such
Person  reasonably  requests and shall succeed to all rights and  obligations of
such  predecessor,  and  (ii)  such  predecessor  shall be  discharged  from all
obligations as the Agent.  After any Person resigns as the Agent, the provisions
of this Section 12 (including,  but not limited to, Sections 12m and 12n of this
Agreement)  shall inure to its benefit as to all actions  taken or omitted to be
taken by it while it was the Agent.

     p. Cooperation of Lenders. Each Lender shall (i) promptly notify each other
Lending Entity of each Event of Default or Default of which such Lender acquires
knowledge,  (ii)  provide each other  Lending  Entity with all  information  and
documentation  that such other Lending Entity reasonably  requests in connection
with the  performance  by such other  Lending  Entity of any  obligation of such
other Lending Entity  pursuant to any Loan Document and (iii) cooperate with the
Agent  in  connection  with  all  matters  relating  to  the  administration  or
collection of any Loan or to any Loan Document.  q.ab Sharing of Amounts. If any
Lender shall obtain any amount (whether by voluntary or involuntary  payment, by
operation of law, by realization  upon any Collateral,  by exercise of any right
of setoff or  otherwise)  on  account of any Loan that  results  in all  amounts
received by such Lender on account of Loans exceeding its Commitment Percentage,
then such Lender shall purchase or repurchase  from the rest of the Lenders such
participation  interests  in the  Loans  made by them as shall be  necessary  to
result in such ratio being the same as  immediately  before such receipt of such
amount.

     r. Benefit. The provisions of this Section 12 are solely for the benefit of
each  Lending  Entity,  and the  Borrower  shall not be  entitled to any benefit
because  of the  existence  of,  to rely on or to assert  any  claim or  defense
against any Lending Entity based upon any such provision. Such provisions may be
modified  without any consent of or notice to the Borrower;  provided,  however,
that,  without the written  consent of the  Borrower,  there may not be any such
modification  that would (i) modify this sentence or (ii) modify the requirement
of Section 12o of this Agreement of notice to the Borrower of any resignation of
any Person serving as the Agent from such service.

     s.  Tax  Withholding  Clause.  Each  Lender  that  is not  incorporated  or
organized  under the laws of the United  States of America or a state thereof or
the District of Columbia (a "Non-U.S.  Lender") agrees that,  prior to the first
date on  which  any  payment  is due to it  hereunder,  it will  deliver  to the
Borrower  and the Agent two duly  completed  copies  of United  States  Internal
Revenue Service Form 1001 or 4224 or any successor  applicable form, as the case
may be, certifying in each case that such Non-U.S. Lender is entitled to receive
payments under this Agreement and each other Loan Document, without deduction or
withholding of any United States federal income taxes. Each Non-U.S. Lender that
so delivers a Form 1001 or 4224 or any  successor  applicable  form, as the case
may be, pursuant to the preceding sentence further undertakes to deliver to each
of the  Borrower  and the Agent two further  copies of Form 1001 or 4224 or such
successor applicable form, or other manner of certification, as the case may be,
on or before the date that any such letter or form  expires or becomes  obsolete
or after the occurrence of any event  requiring a change in the most recent form
previously  delivered  by it, and such  extensions  or  renewals  thereof as may
reasonably be requested by the Borrower or the Agent,  certifying in the case of
a Form 1001 or 4224 or such successor applicable form that such Non-U.S.  Lender
is  entitled  to  receive  payments  under  this  Agreement  and each other Loan
Document  without  deduction or  withholding of any United States federal income
taxes,  unless in any such case an event  (including,  without  limitation,  any
change in treaty, law or regulation) has occurred prior to the date on which any
such  delivery  would  otherwise  be  required  which  renders  all  such  forms
inapplicable  or which would prevent such Non-U.S.  Lender from duly  completing
and delivering any such form with respect to it and such Non-U.S. Lender advises
the Borrower and the Agent that it is not capable of receiving  payments without
any deduction or  withholding  of United States federal income tax. The Borrower
shall not be required to pay any  additional  amounts to any Non-U.S.  Lender in
respect of United States Federal  withholding tax pursuant to Sections 2j, 4h or
10c of this Agreement to the extent that (i) the obligation to withhold  amounts
with respect to United States Federal  withholding  tax existed on the date such
Non-U.S. Lender became a party to this Agreement or, with respect to payments to
a different lending office  designated by the Non-U.S.  Lender as its applicable
lending  office  (a  "New  Lending  Office"),  the  date  such  Non-U.S.  Lender
designated such New Lending Office with respect to the Loans (provided, however,
that this clause (i) shall not apply to any  transferee or New Lending Office as
a result of an assignment,  transfer or  designation  made at the request of the
Borrower; and provided further, however, that this clause (i) shall not apply to
the extent the indemnity payment or additional amounts any transferee, or Lender
through a New Lending  Office,  would be entitled to receive  without  regard to
this clause (i) do not exceed the indemnity  payment or additional  amounts that
the Person  making the  assignment  or  transfer to such  transferee,  or Lender
making the designation of such New Lending  Office,  would have been entitled to
receive in the absence of such assignment,  transfer or designation) or (ii) the
obligation  to pay such  additional  amounts  would  not have  arisen  but for a
failure by such  Non-U.S.  Lender to comply with the  provisions of this Section
12s.

13. MISCELLANEOUS.

     a. Term; Survival. The term of this Agreement shall be the period beginning
on the date of this  Agreement  and ending on the later of (i) the Maturity Date
or (ii) the  date the  principal  amount  of each  Loan,  all  interest  payable
pursuant  to this  Agreement  and all  other  amounts  payable  by the  Borrower
pursuant to this  Agreement  have been fully and  indefeasibly  repaid,  paid or
otherwise discharged.  The obligation of the Borrower to pay liabilities,  costs
and expenses  described in Section 10 of this Agreement shall survive beyond the
term of this Agreement.

     b.  Survival;   Reliance.  Each  representation,   warranty,  covenant  and
agreement of the Borrower  contained in this Agreement  shall survive the making
of each Loan and the  execution and delivery to the Lenders and the Agent of all
Loan  Documents  and shall  continue in full force and effect during the term of
this Agreement  except to the extent  modified in accordance with the provisions
of this Agreement.  Each such representation,  warranty,  covenant and agreement
shall be presumed to have been relied upon by each Lending Entity  regardless of
any  investigation  made  or not  made,  or  any  information  possessed  or not
possessed, by such Lending Entity.

     c.  Right of  Setoff.  Upon and at any time and from time to time after any
occurrence or existence of any Event of Default,  (i) each Lender shall have the
right, at the sole option of such Lender and without any notice or demand of any
kind (each of which is knowingly,  voluntarily,  intentionally  and  irrevocably
waived by the Borrower), to place an administrative hold on, and set off against
the aggregate  outstanding  principal  amounts of all Loans made by such Lender,
all interest  payable  pursuant to this  Agreement and remaining  unpaid and all
other amounts  payable by the Borrower to such Lender pursuant to this Agreement
and remaining  unpaid,  each indebtedness and other obligation of such Lender in
any capacity to, in any capacity and whether alone or  otherwise,  the Borrower,
whether now existing or hereafter  arising or accruing,  whether or not then due
and whether pursuant to any deposit account or otherwise, except pursuant to any
payroll or employee benefits account,  and (ii) each holder of any participation
in any unpaid  indebtedness  of the  Borrower  to such  Lender  pursuant to this
Agreement  shall have the right,  at the sole  option of such holder and without
any  notice  or  demand of any kind  (each of which is  knowingly,  voluntarily,
intentionally   and   irrevocably   waived  by  the   Borrower),   to  place  an
administrative  hold on, and set off against  such unpaid  indebtedness,  to the
extent  of  such  holder's  participation  in  such  unpaid  indebtedness,  each
indebtedness  and other  obligation  of such holder in any  capacity  to, in any
capacity and whether alone or otherwise,  the Borrower,  whether now existing or
hereafter  arising or accruing,  whether or not then due and whether pursuant to
any deposit  account or  otherwise,  except  pursuant to any payroll or employee
benefits account.  Such setoff shall become effective at the time such Lender or
such holder opts  therefor  even though  evidence  thereof is not entered on the
records of such Lender or such holder until later.

     d.  Assignment  or  Grant of  Participation.  No  Lender  shall  assign  or
otherwise  transfer or grant any  participation  in this  Agreement or any Other
Loan Document,  any indebtedness or other obligation of the Borrower pursuant to
this  Agreement or any Other Loan Document or any right or remedy of such Lender
pursuant to this  Agreement or any Other Loan Document  unless (i) the amount of
the  indebtedness  that is the subject of such  assignment or other  transfer or
grant of  participation  is at least the lesser of (A) $5,000,000 or (B) the sum
of (I) the product of such  Lender's  Commitment  Percentage  multiplied  by the
Revolving  Loan Maximum  Aggregate  Principal  Amount plus (II) the  outstanding
principal amount of the Term Loans made by such Lender, (ii) except with respect
to any such  assignment  or other  transfer  or  grant of  participation  to any
affiliate of such Lender or another  Lending  Entity,  such Lender  obtains with
respect  thereto the prior  written  consent,  which  shall not be  unreasonably
withheld, of (A) the Agent and (B) provided that there has not have occurred any
Event  of  Default  or  Default  that is  uncured,  the  Borrower,  and any such
assignment or other transfer or grant of participation without any such required
prior written  consent shall,  unless such prior written consent is unreasonably
withheld,  be void and  (iii)  such  Lender  and such  assignee,  transferee  or
participant,  promptly upon the request of the Agent, executes and delivers each
writing,  and takes each other  action,  that the Agent shall deem  necessary or
desirable at the sole option of the Agent in  connection  with such  assignment,
transfer or participation;  provided,  however,  that any Lender may at any time
pledge  or  assign a  security  interest  in all or any  portion  of its  rights
pursuant to this Agreement or any Other Loan Document to secure obligations to a
Federal Reserve Bank, and this Section 13d shall not apply to any such pledge or
assignment of a security interest;  and provided further,  however, that no such
pledge or assignment of a security  interest  shall release such Lender from any
of its  obligations  pursuant to this  Agreement  or any Other Loan  Document or
substitute  any such  pledgee  or  assignee  for such  Lender as a party to this
Agreement or any Other Loan Document. The Borrower shall not assign or otherwise
transfer any right or indebtedness or other obligation of the Borrower  pursuant
to this Agreement or any Other Loan Document  without the prior written  consent
of the Lenders,  and any such  assignment or other  transfer  without such prior
written  consent shall be void. No consent by the Lenders to any such assignment
or other transfer shall release the Borrower from any such indebtedness or other
obligation.

     e. Binding  Effect.  This Agreement  shall be binding upon the Borrower and
each direct or indirect  successor  and assignee of the Borrower and shall inure
to the benefit of and be  enforceable  by each Lending Entity and each direct or
indirect successor and assignee of any Lending Entity.

     f. Entire Agreement, Modifications and Waivers. This Agreement contains the
entire  agreement  among the  Lenders,  Marine as agent for the  Lenders and the
Borrower with respect to the subject  matter of this  Agreement  and  supersedes
each action  heretofore  taken or not taken,  each course of conduct  heretofore
pursued,  accepted  or  acquiesced  in, and each oral or written  agreement  and
representation heretofore made, by or on behalf of any Lender or Marine as agent
for the Lenders with respect thereto. No action heretofore or hereafter taken or
not taken,  no course of conduct  heretofore or hereafter  pursued,  accepted or
acquiesced in, no oral or written agreement or  representation  heretofore made,
and no oral agreement or  representation  hereafter made, by or on behalf of any
Lending  Entity shall modify or terminate  this  Agreement,  impair or otherwise
adversely affect any  indebtedness or other obligation of the Borrower  pursuant
to this Agreement or any right or remedy of any Lending Entity  pursuant to this
Agreement or arising as a result of this Agreement or operate as a waiver of any
such right or remedy.  No  modification  of this Agreement or waiver of any such
right or  remedy  shall  be  effective  unless  made in a  writing  specifically
referring to such  modification  or waiver and duly executed by (i) each Lending
Entity if such  modification  or waiver  would (A)  change or have the effect of
changing this clause (i) or (B) adversely affect any right, remedy or obligation
of HSBC or the Agent with respect to the Lenders, whether pursuant to Section 12
of this Agreement or otherwise,  (ii) each Lender if such modification or waiver
would (A) modify this  clause  (ii),  (B)  release  any asset from any  security
interest,  mortgage or other lien or encumbrance  imposed or created pursuant to
any  Loan  Document,  (C)  reduce  (I)  the  rate  of  interest  payable  on the
outstanding principal amount of any Loan or (II) any fee payable pursuant to any
Lender  pursuant  to this  Agreement,  (D)  extend  the due date,  or change the
amount,  of any repayment or payment  required to be made to any Lender pursuant
to this Agreement or (E) reduce,  or have the effect of reducing,  the number of
Lenders or percentage of the total  outstanding  principal  amounts of all Loans
required  for any  action  to be taken  pursuant  to this  Agreement,  (iii) the
Required Lenders and each Lender directly  affected thereby if such modification
or waiver would (A) increase the "Commitment  Amount" shown opposite the name of
such affected  Lender in Exhibit A attached to and made a part of this Agreement
or (B) decrease such "Commitment  Amount" on other than a pro rata basis or (iv)
the Required Lenders in any other case.

     g. Rights and Remedies  Cumulative.  All rights and remedies of any Lending
Entity pursuant to this Agreement or arising as a result of this Agreement shall
be cumulative,  and no such right or remedy shall be exclusive of any other such
right or remedy.

     h. Requests.  Each request of any Lending Entity pursuant to this Agreement
may be made (i) at any time and from  time to time,  (ii) at the sole  option of
such Lending  Entity,  whether  acting alone or upon the request of the Required
Lenders,  and (iii)  whether or not any Event of Default or Default has occurred
or existed.

     i. Extent of Consents and  Waivers.  Each consent and waiver of any Lending
Entity or the Borrower  contained in this Agreement shall be deemed to have been
given to the extent permitted by applicable law.

     j. Directly or  Indirectly.  Any provision of this Agreement that prohibits
or has the effect of prohibiting  the Borrower or any Subsidiary from taking any
action  shall be  construed  to prohibit it from taking such action  directly or
indirectly.

     k.  Accounting  Terms and  Computations.  Each accounting term used in this
Agreement  shall  be  construed  as of any  time in  accordance  with  generally
accepted  accounting  principles  as in effect  at such  time.  Each  accounting
computation that this Agreement requires to be made as of any time shall be made
in accordance with such principles as in effect at such time,  except where such
principles are incompatible with any requirement of this Agreement.

     l.  Reference to Law. Any  reference in this  Agreement to any Law shall be
deemed  to be as of any time a  reference  to such Law as in effect at such time
or, if such Law is not in effect at such time, a reference to any similar Law in
effect at such time.

     m. Reference to Governmental Authority.  Any reference in this Agreement to
any  Governmental  Authority  shall be  deemed to be as of any time  after  such
Governmental  Authority  ceases to exist a reference  to the  successor  of such
Governmental Authority at such time.

     n.  Classified  Programs.  Notwithstanding  any  other  provision  of  this
Agreement,  no  provision  of  this  Agreement  shall  operate  to  require  the
disclosure of any information  relating to any classified  program involving the
United  States  Department  of  Defense  in  contravention  of  any  restriction
described  in clause  (vii) of Section 7h of this  Agreement  or to require  any
party to any contract relating to any such classified program to be performed by
the Borrower or any Subsidiary to accept performance by any other Person without
any prior consent required under such classified program.

     o. Severability.  Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law.
If,  however,  any such  provision  shall be prohibited by or invalid under such
law, it shall be deemed modified to conform to the minimum  requirements of such
law, or, if for any reason it is not deemed so modified,  it shall be prohibited
or invalid  only to the extent of such  prohibition  or  invalidity  without the
remainder thereof or any other such provision being prohibited or invalid.  p.ab
Governing  Law. This Agreement  shall be governed by and construed,  interpreted
and enforced in accordance with the law of the State of New York and the federal
law of the United States without regard to the law of any other jurisdiction.

     q. Headings. In this Agreement, headings of sections are for convenience of
reference only and have no substantive effect.

     r.  Counterparts.   This  Agreement  may  be  executed  in  any  number  of
counterparts and signature pages,  but all of such  counterparts  shall together
constitute a single agreement.

14. CONSENTS AND WAIVERS RELATING TO LEGAL PROCEEDINGS.

     a.   JURISDICTIONAL   CONSENTS  AND  WAIVERS  .  THE  BORROWER   KNOWINGLY,
VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY (i) CONSENTS IN EACH ACTION AND OTHER
LEGAL  PROCEEDING  COMMENCED BY ANY LENDING  ENTITY  ARISING OUT OF OR OTHERWISE
RELATING TO ANY LOAN,  ANY LOAN  DOCUMENT  OR ANY  COLLATERAL,  TO THE  PERSONAL
JURISDICTION  OF ANY COURT  THAT IS EITHER A COURT OF RECORD OF THE STATE OF NEW
YORK OR A COURT OF THE  UNITED  STATES  LOCATED  IN THE STATE OF NEW YORK,  (ii)
WAIVES EACH  OBJECTION  TO THE LAYING OF VENUE OF ANY SUCH ACTION OR OTHER LEGAL
PROCEEDING,  (iii)  WAIVES  PERSONAL  SERVICE OF PROCESS IN EACH SUCH ACTION AND
OTHER  LEGAL  PROCEEDING  AND (iv)  WAIVES IN EACH SUCH  ACTION AND OTHER  LEGAL
PROCEEDING  EACH RIGHT TO ASSERT ANY  NON-MANDATORY  COUNTERCLAIM  OR ANY SETOFF
WHICH MAY BE ASSERTED AS A SEPARATE CLAIM IN A SEPARATE ACTION IF NOT SO SETOFF.

     b.  WAIVER  OF TRIAL BY JURY AND  CLAIMS TO  CERTAIN  DAMAGES . EACH OF THE
LENDERS,   MARINE  AS  AGENT  FOR  THE  LENDERS  AND  THE  BORROWER   KNOWINGLY,
VOLUNTARILY,  INTENTIONALLY  AND IRREVOCABLY  WAIVES EACH RIGHT IT MAY HAVE TO A
TRIAL BY JURY WITH  RESPECT  TO, AND EACH RIGHT TO ASSERT ANY CLAIM FOR  DAMAGES
(INCLUDING,  BUT NOT  LIMITED  TO,  PUNITIVE  DAMAGES)  OTHER  THAN  ACTUAL  AND
CONSEQUENTIAL DAMAGES IN, ANY ACTION OR OTHER LEGAL PROCEEDING, WHETHER BASED ON
ANY CONTRACT OR NEGLIGENT,  INTENTIONAL OR OTHER TORT OR OTHERWISE,  ARISING OUT
OF OR OTHERWISE  RELATING TO (i) ANY LOAN, ANY LOAN DOCUMENT OR ANY  COLLATERAL,
(ii) ANY TRANSACTION  ARISING OUT OF OR OTHERWISE RELATING TO ANY LOAN, ANY LOAN
DOCUMENT OR ANY COLLATERAL OR (iii) ANY NEGOTIATION, ADMINISTRATION, PERFORMANCE
OR ENFORCEMENT OF ANY LOAN DOCUMENT OR ANY COLLATERAL.

     The  Lenders,  HSBC as arranger  for the  Lenders,  Marine as agent for the
Lenders and the Borrower  have caused this  Agreement to be duly  executed as of
the date shown at the beginning of this Agreement.



                               MARINE MIDLAND BANK


                               By /S/
                                  -------------------------------
                                                            Title


                               MANUFACTURERS AND TRADERS TRUST COMPANY


                               By /S/
                                  -------------------------------
                                                            Title


                               FLEET NATIONAL BANK


                               By /S/
                                  -------------------------------
                                                            Title



                               BANK OF TOKYO-MITSUBISHI TRUST COMPANY


                               By /S/
                                  -------------------------------
                                                            Title


                               KEYBANK NATIONAL ASSOCIATION


                               By /S/
                                  -------------------------------
                                                            Title


                               LANDESGIROKASSE OEFFENTLICHE BANK UND
                               LANDESSPARKASSE


                               By /S/
                                  -------------------------------
                                                            Title


                               NATIONAL BANK OF CANADA


                               By /S/
                                  -------------------------------
                                                            Title


                               By /S/
                                  -------------------------------
                                                            Title


                               THE CHASE MANHATTAN BANK


                               By /S/
                                  -------------------------------
                                                            Title



                               HSBC SECURITIES, INC., AS ARRANGER


                               By /S/
                                  -------------------------------
                                                            Title


                               MARINE MIDLAND BANK, AS AGENT


                               By /S/
                                  -------------------------------
                                                            Title




                               MOOG INC.


                               By /S/
                                  -------------------------------
                                       Robert R. Banta
                                       Executive Vice President

<PAGE>


                                 ACKNOWLEDGMENTS


Marine Midland Bank:


STATE OF NEW YORK )
                  : SS.
COUNTY OF ERIE    )


     On the _____ day of November, in the year 1998, before me, the undersigned,
a   notary    public   in   and   for   said    state,    personally    appeared
____________________________,  personally  known  to me or  proved  to me on the
basis of satisfactory  evidence to be the  individual(s)  whose name(s) is (are)
subscribed to the within  instrument  and  acknowledged  to me that  he/she/they
executed  the same in  his/her/their  capacity(ies),  and that by  his/her/their
signature(s) on the instrument, the individual(s),  or the person upon behalf of
which the individual(s) acted, executed the instrument.


                                             ___________________________________
                                                         Notary Public



Manufacturers and Traders Trust Company:


STATE OF NEW YORK )
                  : SS.
COUNTY OF ERIE    )


     On the _____ day of November, in the year 1998, before me, the undersigned,
a   notary    public   in   and   for   said    state,    personally    appeared
____________________________,  personally  known  to me or  proved  to me on the
basis of satisfactory  evidence to be the  individual(s)  whose name(s) is (are)
subscribed to the within  instrument  and  acknowledged  to me that  he/she/they
executed  the same in  his/her/their  capacity(ies),  and that by  his/her/their
signature(s) on the instrument, the individual(s),  or the person upon behalf of
which the individual(s) acted, executed the instrument.


                                             ___________________________________
                                                         Notary Public



Fleet National Bank:


STATE OF NEW YORK )
                  : SS.
COUNTY OF ERIE    )


     On the _____ day of November, in the year 1998, before me, the undersigned,
a   notary    public   in   and   for   said    state,    personally    appeared
____________________________,  personally  known  to me or  proved  to me on the
basis of satisfactory  evidence to be the  individual(s)  whose name(s) is (are)
subscribed to the within  instrument  and  acknowledged  to me that  he/she/they
executed  the same in  his/her/their  capacity(ies),  and that by  his/her/their
signature(s) on the instrument, the individual(s),  or the person upon behalf of
which the individual(s) acted, executed the instrument.


                                             ___________________________________
                                                         Notary Public



Bank of Tokyo-Mitsubishi Trust Company:


STATE OF NEW YORK  )
                   : SS.
COUNTY OF NEW YORK )


     On the _____ day of November, in the year 1998, before me, the undersigned,
a   notary    public   in   and   for   said    state,    personally    appeared
____________________________,  personally  known  to me or  proved  to me on the
basis of satisfactory  evidence to be the  individual(s)  whose name(s) is (are)
subscribed to the within  instrument  and  acknowledged  to me that  he/she/they
executed  the same in  his/her/their  capacity(ies),  and that by  his/her/their
signature(s) on the instrument, the individual(s),  or the person upon behalf of
which the individual(s) acted, executed the instrument.


                                             ___________________________________
                                                         Notary Public



KeyBank National Association:


STATE OF NEW YORK )
                  : SS.
COUNTY OF ERIE    )


     On the _____ day of November, in the year 1998, before me, the undersigned,
a   notary    public   in   and   for   said    state,    personally    appeared
____________________________,  personally  known  to me or  proved  to me on the
basis of satisfactory  evidence to be the  individual(s)  whose name(s) is (are)
subscribed to the within  instrument  and  acknowledged  to me that  he/she/they
executed  the same in  his/her/their  capacity(ies),  and that by  his/her/their
signature(s) on the instrument, the individual(s),  or the person upon behalf of
which the individual(s) acted, executed the instrument.


                                             ___________________________________
                                                         Notary Public



Landesgirokasse:

                             [Intentionally Omitted]


National Bank of Canada:


STATE OF NEW YORK )
                  : SS.
COUNTY OF ERIE    )


     On the _____ day of November, in the year 1998, before me, the undersigned,
a   notary    public   in   and   for   said    state,    personally    appeared
____________________________,  personally  known  to me or  proved  to me on the
basis of satisfactory  evidence to be the  individual(s)  whose name(s) is (are)
subscribed to the within  instrument  and  acknowledged  to me that  he/she/they
executed  the same in  his/her/their  capacity(ies),  and that by  his/her/their
signature(s) on the instrument, the individual(s),  or the person upon behalf of
which the individual(s) acted, executed the instrument.


                                             ___________________________________
                                                         Notary Public



National Bank of Canada:


STATE OF NEW YORK )
                  : SS.
COUNTY OF ERIE    )


     On the _____ day of November, in the year 1998, before me, the undersigned,
a   notary    public   in   and   for   said    state,    personally    appeared
____________________________,  personally  known  to me or  proved  to me on the
basis of satisfactory  evidence to be the  individual(s)  whose name(s) is (are)
subscribed to the within  instrument  and  acknowledged  to me that  he/she/they
executed  the same in  his/her/their  capacity(ies),  and that by  his/her/their
signature(s) on the instrument, the individual(s),  or the person upon behalf of
which the individual(s) acted, executed the instrument.


                                             ___________________________________
                                                         Notary Public



The Chase Manhattan Bank:


STATE OF NEW YORK )
                  : SS.
COUNTY OF ERIE    )


     On the _____ day of November, in the year 1998, before me, the undersigned,
a   notary    public   in   and   for   said    state,    personally    appeared
____________________________,  personally  known  to me or  proved  to me on the
basis of satisfactory  evidence to be the  individual(s)  whose name(s) is (are)
subscribed to the within  instrument  and  acknowledged  to me that  he/she/they
executed  the same in  his/her/their  capacity(ies),  and that by  his/her/their
signature(s) on the instrument, the individual(s),  or the person upon behalf of
which the individual(s) acted, executed the instrument.


                                             ___________________________________
                                                         Notary Public



HSBC Securities, Inc., as Arranger:


STATE OF NEW YORK )
                  : SS.
COUNTY OF NEW YORK)


     On the _____ day of November, in the year 1998, before me, the undersigned,
a   notary    public   in   and   for   said    state,    personally    appeared
____________________________,  personally  known  to me or  proved  to me on the
basis of satisfactory  evidence to be the  individual(s)  whose name(s) is (are)
subscribed to the within  instrument  and  acknowledged  to me that  he/she/they
executed  the same in  his/her/their  capacity(ies),  and that by  his/her/their
signature(s) on the instrument, the individual(s),  or the person upon behalf of
which the individual(s) acted, executed the instrument.


                                             ___________________________________
                                                         Notary Public


Marine Midland Bank, as Agent:


STATE OF NEW YORK )
                  : SS.
COUNTY OF ERIE    )


     On the _____ day of November, in the year 1998, before me, the undersigned,
a   notary    public   in   and   for   said    state,    personally    appeared
____________________________,  personally  known  to me or  proved  to me on the
basis of satisfactory  evidence to be the  individual(s)  whose name(s) is (are)
subscribed to the within  instrument  and  acknowledged  to me that  he/she/they
executed  the same in  his/her/their  capacity(ies),  and that by  his/her/their
signature(s) on the instrument, the individual(s),  or the person upon behalf of
which the individual(s) acted, executed the instrument.


                                             ___________________________________
                                                         Notary Public


Moog Inc.:


STATE OF NEW YORK )
                  : SS.
COUNTY OF ERIE    )


     On the _____ day of November, in the year 1998, before me, the undersigned,
a notary  public in and for said  state,  personally  appeared  Robert R. Banta,
personally known to me or proved to me on the basis of satisfactory  evidence to
be the individual(s)  whose name(s) is (are) subscribed to the within instrument
and  acknowledged  to me that  he/she/they  executed  the same in  his/her/their
capacity(ies),  and that by  his/her/their  signature(s) on the instrument,  the
individual(s),  or the  person  upon  behalf of which the  individual(s)  acted,
executed the instrument.


                                             ___________________________________
                                                         Notary Public



                                 EXHIBIT A

========================================================================
           Lender                                      Commitment Amount
- ------------------------------------------------------------------------
Marine Midland Bank                                      $75,000,000
- ------------------------------------------------------------------------
Manufacturers and Traders Trust Company                  $75,000,000
- ------------------------------------------------------------------------
Fleet National Bank                                      $50,000,000
- ------------------------------------------------------------------------
KeyBank National Association                             $40,000,000
- ------------------------------------------------------------------------
Bank of Tokyo-Mitsubishi Trust Company                   $25,000,000
- ------------------------------------------------------------------------
Landesgirokasse oeffentliche Bank und Landessparkasse    $25,000,000
- ------------------------------------------------------------------------
National Bank of Canada                                  $25,000,000
- ------------------------------------------------------------------------
The Chase Manhattan Bank                                 $25,000,000
========================================================================

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>EXHIBIT 10.2
<TEXT>


                                 Amendment No. 1
                                       to
                   Corporate Revolving and Term Loan Agreement
                                      Among
                                Certain Lenders,
                      HSBC Securities (USA) Inc., formerly
                  known as HSBC Securities, Inc., As Arranger,
                             HSBC Bank USA, formerly
                     known as Marine Midland Bank, As Agent
                                       And
                                    Moog Inc.

     This Amendment dated as of October 24, 2000  ("Amendment") to the Corporate
Revolving and Term Loan Agreement dated as of November 30, 1998 ("Agreement") is
entered  into  by  and  among  MOOG  INC.,  a  New  York  business   corporation
("Borrower"),  certain  lenders  which are  currently  parties to the  Agreement
("Lenders"), HSBC SECURITIES (USA) INC., a Delaware corporation,  formerly known
as HSBC Securities, Inc., as arranger ("HSBC Securities"),  and HSBC BANK USA, a
New York banking  corporation,  formerly  known as Marine Midland Bank, as agent
for the Lenders ("HSBC Bank").

                                    RECITALS

     1.   Borrower has requested that HSBC Bank, HSBC Securities and the Lenders
amend the Agreement in order to, among other things, extend the maturity date of
the Agreement  and the  Revolving  Loans to December 31, 2005 which will require
replacement  of the existing  Revolving Loan Notes;  re-establish  the Term Loan
Facility at $75,000,000 and replace the existing Term Loan Notes; modify certain
covenants with respect to permitted  acquisitions  and permitted  distributions;
modify  certain of the  financial  covenants;  and  consent to certain  proposed
acquisitions and the proposed financing thereof.

     2.  HSBC  Bank,  HSBC  Securities  and the  Lenders  are  agreeable  to the
foregoing to the extent set forth in this  Amendment  and subject to each of the
terms and conditions stated herein.

     3.  The  Borrower  and  each  of  the   guarantors   under  the   Agreement
("Guarantors") will benefit from the extension of the term of, and other changes
to, the Agreement set forth in this Amendment.

     NOW, THEREFORE,  in consideration of the foregoing and the mutual covenants
set forth herein, and of the loans or other extensions of credit heretofore, now
or hereafter made by the Lenders, to, or for the benefit of the Borrower and its
Subsidiaries, the parties hereto agree as follows:

     1.   Definitions.   Except  to  the  extent  otherwise   specified  herein,
capitalized terms used in this Amendment shall have the same meanings  specified
in the Agreement.

     2.   Amendments.

     2.1 Section 1 entitled "Definitions" is amended by adding the following new
definition:

          "aaaa.  Amendment No. 1.  "Amendment  No. 1" means the Amendment No. 1
          dated as of October  24,  2000 by and among the  Borrower,  the Agent,
          HSBC as Arranger and the Lenders  amending  this  Agreement to provide
          for,   among  other  things,   an  extension  of  the  Maturity  Date,
          replacement term loans in the aggregate amount of $75,000,000, certain
          covenant modifications and certain consents."

     2.2  Section 1 hhh.  entitled  "Permitted  Acquisition"  is  deleted in its
entirety and replaced with the following:

          "hhh.  Permitted  Acquisition.  "Permitted  Acquisition" means (i) the
          acquisition by Borrower or a Foreign Subsidiary from  Aeroquip-Vickers
          S.p.A.  of the  assets  and  the  assumption  of  certain  liabilities
          comprising  the  line  of  business   relating  to  the   development,
          manufacture and sale of electric motors and drives from Casella, Italy
          for a purchase price of approximately  $9,840,000 and on substantially
          the terms of that  certain  Agreement  for the Sale and  Purchase of a
          Business  dated  September  15, 2000 by and between the  Borrower  and
          Aeroquip-Vickers  S.p.A.,  which agreement may be assigned by Borrower
          to Moog Italiana S.r.l. ("Casella Acquisition");  (ii) the acquisition
          by the Borrower or a Domestic  Subsidiary  of 100% of the  outstanding
          equity  interests not owned by Borrower on the date of Amendment No. 1
          in  Tecstar  Electro  Systems,  Inc.,  a Delaware  corporation,  for a
          purchase price of approximately  $12,500,000  ("Tecstar  Acquisition")
          plus the  assumption of  liabilities  consisting of trade payables and
          approximately  $2,500,000 in unfunded pension  liabilities;  (iii) the
          acquisition  by the  Borrower  of the  25% of the  outstanding  equity
          interests in Hydrolux S.a.r.l.  and Moog-Hydrolux  Hydraulic  Systems,
          Inc.  not  owned by the  Borrower  on the date of  Amendment  No. 1 on
          substantially  the terms of that  certain  letter of intent  signed on
          June 9, 1998 and June 10, 1998 by and between  the  Borrower  and Paul
          Wurth S.A. ("Hydrolux Acquisition"); and (iv) any other acquisition by
          the  Borrower or any  Subsidiary  of all or  substantially  all of the
          assets or stock of any other  Person,  or assets  constituting  all or
          substantially all of a division or product line of any other Person so
          long as (A) immediately  prior to contracting for or consummating such
          other  acquisition there does not exist, and there does not occur as a
          direct  or  indirect   result  of  the   consummation  of  such  other
          acquisition,  any  Event of  Default  or  Default,  (B) the  aggregate
          consideration  paid (whether by means of transfer of assets,  by means
          of  assumption  of  liabilities  or otherwise) by the Borrower and all
          Subsidiaries in connection with all such other  acquisitions  from the
          date  of  Amendment  No.  1 to  the  Maturity  Date  does  not  exceed
          $25,000,000  and no  single  acquisition  exceeds  $15,000,000  unless
          specifically  consented  to in writing  by the Agent and the  Required
          Lenders  and (C) with  respect  to any  assets or stock of any  Person
          acquired   directly   or   indirectly   pursuant  to  any  such  other
          acquisition,  all collateral  requirements of the Required Lenders are
          satisfied."

     2.3 The Consent  Letter from the Agent and the Lenders  dated  February 25,
2000 regarding  Additional  Share Purchases (as defined therein) by the Borrower
is hereby cancelled with respect to any  Distribution  made on or after the date
of Amendment No. 1.

     2.4  Section 1 jjj.  entitled  "Permitted  Distribution"  is deleted in its
entirety and replaced with the following:

          "jjj.  Permitted  Distribution.  "Permitted  Distribution"  means  (i)
          dividends payable solely in any of its stock, (ii) cash dividends paid
          by any  Subsidiary  on a pro rata  basis  with  respect  to all of its
          outstanding  shares,  (iii) cash dividends paid of up to $9,000 in any
          fiscal year of the Borrower with respect to the  Borrower's  preferred
          shares and (iv)  purchases by the Borrower  from the date of Amendment
          No. 1 to the  Maturity  Date of  shares of stock of the  Borrower  for
          purchase prices aggregating not more than $15,000,000."

     2.5 The existing Section 1 ddd. entitled  "Maturity Date" is deleted in its
entirety and replaced with the following:

          "ddd. Maturity Date. The "Maturity Date means December 31, 2005."

     2.6 The existing Section 4 a. entitled "Making and Obtaining Term Loans" is
deleted in its entirety and replaced with the following:

          "4 a. Making and Obtaining Replacement Term Loans. Upon and subject to
          each term and condition of this Agreement,  on the date that Amendment
          No. 1 becomes effective, the Lenders shall make replacement Term Loans
          to the Borrower,  and the Borrower shall obtain replacement Term Loans
          from the Lenders.  The aggregate  principal amounts of all replacement
          Term  Loans  shall  be  $75,000,000.   The  principal  amount  of  the
          replacement  Term  Loan  made by any  Lender  shall  be such  Lender's
          Commitment Percentage of $75,000,000."

     2.7 The existing  Section 4 b.  entitled  "Termination  of  Obligation"  is
deleted in its entirety.

     2.8 A new  Section 4 b.  entitled  "Purpose of  Replacement  Term Loans" is
added as follows:

          "4  b.  Purpose  of  Replacement  Term  Loans.  The  proceeds  of  the
          replacement  Term  Loans  made on the date  Amendment  No.  1  becomes
          effective  shall be used by the Borrower to refinance the  outstanding
          principal  balances of the original Term Loans under the Agreement and
          for general corporate purposes."

     2.9 The  existing  Section 4 d.  entitled  "Repayment  "is  deleted  in its
entirety and replaced with the following:

          "4 d. Repayment. The Borrower shall repay the principal amount of each
          replacement  Term Loan to the Agent for the account of the Lender that
          made such replacement Term Loan in twenty (20) installments,  with the
          first of such  installments to become due on December 31, 2000 and one
          of such  installments to become due on each succeeding  March 31, June
          30, September 30 and December 31 through  September 30, 2005, when the
          Borrower  shall  repay  the  outstanding   principal   amount  of  all
          replacement  Term Loans to the Agent for the  accounts  of the Lenders
          and pay to the Agent all interest  payable pursuant to this Agreement,
          as amended,  in connection with any Term Loan and remaining unpaid and
          all other amounts payable by the Borrower  pursuant to this Agreement,
          as amended, in connection with any replacement Term Loan and remaining
          unpaid.  Each of such installments  shall be such Lender's  Commitment
          Percentage of $3,750,000."

     2.10  Section 7 c.  entitled  "Consolidated  Net  Worth" is  deleted in its
entirety and replaced with the following:

          "7 c. Consolidated Net Worth. Assure that as of the end of each fiscal
          quarter of the Borrower set forth below the  Consolidated Net Worth of
          the  Borrower  is not less than the  minimum  dollar  amount set forth
          below:

                Fiscal Quarters                             Amount in Millions
                ---------------                             ------------------
          First Quarter 2001 - Third Quarter 2002                 $200.0
          Fourth Quarter 2002 - Third Quarter 2003                $210.0
          Fourth Quarter 2003 - Third Quarter 2004
           and each fiscal quarter thereafter                     $220.0."

     2.11  Section 7 d.  entitled  "Interest  Coverage  Ratio" is deleted in its
entirety and replaced with the following:

          "7 d.  Interest  Coverage  Ratio.  Assure  that  as of the end of each
          fiscal  quarter of the Borrower set forth below the Interest  Coverage
          Ratio is not less than the following minimum ratio:

                Fiscal Quarters                               Ratio
                ---------------                               -----
          First Quarter 2001 - Third Quarter 2002              2.60
          Fourth Quarter 2002 - Third Quarter 2003             2.80
          Fourth Quarter 2003 - Third Quarter 2004
           and each fiscal quarter thereafter                  3.00."

     2.12 Section 7 e. entitled  "Fixed Charge Coverage Ratio" is deleted in its
entirety and replaced with the following:

          "7 e. Fixed Charge Coverage  Ratio.  Assure that as of the end of each
          fiscal  quarter  of the  Borrower  set forth  below  the Fixed  Charge
          Coverage  Ratio is not  less  than the  following  minimum  applicable
          ratio:

                 Fiscal Quarters                             Ratio
                 ---------------                             -----
          First Quarter 2001 - Third Quarter 2002              1.10
          Fourth Quarter 2002 - Third Quarter 2003             1.15
          Fourth Quarter 2003 - Third Quarter 2004
           and each fiscal quarter thereafter                  1.20."

     2.13 Section 7 f. entitled  "Leverage Ratio" is deleted in its entirety and
replaced with the following:

          "7 f. Leverage Ratio. Assure that as of the end of each fiscal quarter
          of the Borrower set forth below the Leverage Ratio does not exceed the
          following maximum applicable ratio:

                 Fiscal Quarters                              Ratio
                 ---------------                              -----
          First Quarter 2001 - Third Quarter 2002              4.25
          Fourth Quarter 2002 - Third Quarter 2003             4.00
          Fourth Quarter 2003 - Third Quarter 2004
            and each fiscal quarter thereafter                 3.50."

     2.14 Section 8 j. entitled  "Consolidated  Capital Expenditures" is deleted
in its entirety and replaced with the following:

          "8 j. Consolidated  Capital  Expenditures.  Make Consolidated  Capital
          Expenditures,  other than for any Permitted Acquisition,  exceeding in
          the  aggregate  for the Borrower and all  Subsidiaries  the  following
          maximum  applicable  dollar amount for the fiscal year of the Borrower
          set forth below:

                 Fiscal Year               Amount in Millions
                 -----------               ------------------
                    2001                         $25.0
                    2002                         $26.0
                    2003 and each
                    fiscal year thereafter       $27.0."

     2.15 Section 11 entitled  "Notices" is revised to delete the entire portion
thereof  with  respect  to  Marine  Midland  Bank,  HSBC  Securities,  Inc.  and
Landesgirokasse  offentliche  Bank  und  Landessparkasse  and  to  replace  such
portions with the following:

                  "HSBC Bank USA
                   One HSBC Center                   Fax:  716-855-0384
                   Buffalo, New York 14203
                   Attn:  Regional Commercial
                            Banking Department

                   HSBC Securities (USA) Inc.
                   140 Broadway                      Fax:  212-658-4409
                   New York, New York  10005
                   Attn:  Loan Syndications

                   Landesbank Baden-Wurttemberg
                   535 Madison Avenue                Fax:  212-584-1799
                   6th Floor
                   New York, New York  10022
                   Attn: Karen Richard
                           Senior Credit Officer."

3.       Consents.
         --------

     3.1 Acquisitions.  The Agreement has certain restrictions on the ability of
the Borrower and its  Subsidiaries to make  acquisitions  without the consent of
the Lenders,  the Arranger and the Agent.  Notwithstanding  such restrictions in
the  Agreement,  the Lenders,  the Arranger and the Agent hereby  consent to the
Casella Acquisition,  the Tecstar  Acquisition,  and the Hydrolux Acquisition as
such terms are  defined in Section 1 hhh.  of the  Agreement  as amended by this
Amendment.

     3.2 Acquisition  Financing.  The Agreement has certain  restrictions on the
ability of the Borrower and its Foreign  Subsidiaries  to obtain  financing  and
grant security for such  financing.  Notwithstanding  such  restrictions  in the
Agreement,  the Lenders,  the  Arranger and the Agent hereby  consent to (i) not
more than  $6,000,000 in loans being obtained by Moog Italiana S.r.l. or another
Foreign Subsidiary to finance the Casella Acquisition; and (ii) such loans being
secured  by  collateral  consisting  of  liens  on  assets  of  certain  Foreign
Subsidiaries if required by the lender providing such loans.

     3.3 Limitation on Consents.  The foregoing consents are only applicable and
shall only be effective in the  specific  instance and for the specific  purpose
for which made, are expressly limited to the facts and circumstances referred to
herein,  and shall not operate as (i) a waiver of, or consent to  non-compliance
with any other  provision of the  Agreement or any other Loan  Document,  (ii) a
waiver of any right,  power or remedy of either the Agent,  the  Arranger or any
Lender under the Agreement or any Loan Document, or (iii) a waiver of or consent
to any Event of Default or Default under the Agreement or any Loan Document.

4. Conditions Precedent to this Amendment.  The effectiveness of each and all of
the  amendments  and  consents  contained  in this  Amendment  is subject to the
satisfaction,  in form and substance  satisfactory  to the Agent, of each of the
following conditions precedent:

     4.1 Amendment Documentation.

          (a)  Borrower,  the Arranger and the Lenders  shall have duly executed
and  delivered  to the  Agent  eleven  (11)  duplicate  originals  of  this
Amendment.

          (b)  Borrower   shall  have   executed  and  delivered  to  the  Agent
replacement Term Loan Notes in the appropriate amount payable to each Lender and
replacement  Revolving  Loan  Notes in the  appropriate  amount  payable to each
Lender.

          (c)  Borrower shall have executed and delivered to the Agent a General
Certificate  and  Resolutions,  in form and content  satisfactory  to the Agent,
evidencing the corporate action of Borrower authorizing the execution,  delivery
and performance of Amendment No. 1 and each of the  replacement  Term Loan Notes
and  the  replacement  Revolving  Loan  Notes  (collectively,  the  "Replacement
Notes").

     4.2 Upfront Fee.  Borrower  shall have paid to the Agent for the account of
the Lenders an upfront fee of $1,275,000  in  consideration  for the Agent,  the
Arranger and the Lenders entering into this Amendment.

     4.3 Counsel Opinion. Counsel to the Borrower, Hodgson, Russ, Andrews, Woods
& Goodyear, LLP, shall have delivered to the Agent a counsel opinion in form and
content satisfactory to the Agent addressed to each Lending Entity, and covering
such  matters as are  requested  by the Agent and its  counsel and to include an
express  statement to the effect that the Lending  Entities' and Agent's counsel
are authorized to rely on such opinion.

     4.4 No Default.  As of the effective date of this Amendment,  no Default or
Event of Default shall have occurred and be continuing.

     4.5  Representations  and  Warranties.  The  representation  and warranties
contained  in Section 5 of this  Amendment  and in the  Agreement  shall be true
correct and complete as of the effective  date of this  Amendment as though made
on such date.

     4.6 Other. The Agent shall have received such other approvals,  opinions or
documents as any Lender through the Agent may reasonably request,  and all legal
matters  incident to the foregoing  shall be  satisfactory  to the Agent and its
counsel.

5.  Representations  and Warranties of Borrower.  Borrower hereby represents and
warrants as follows:

     5.1 Each of the  representations  and warranties set forth in the Agreement
is true,  correct,  and  complete on and as of the date hereof as though made on
the date hereof,  and the Agreement and each of the other Loan Documents remains
in full force and effect.

     5.2 As of the date hereof,  there exists and will exist no Default or Event
of Default under the Agreement or any other Loan  Document,  and no event which,
with the giving of notice or lapse of time, or both,  would constitute a Default
or Event of Default.

     5.3  The  execution,  delivery  and  performance  by the  Borrower  of this
Amendment and the Replacement Notes are within Borrower's corporate powers, have
been duly  authorized by all necessary  corporate  action,  and do not, and will
not, (i) contravene  Borrower's  certificate of incorporation  or by-laws,  (ii)
violate any law,  including  without  limitation  the Securities Act of 1933, as
amended,  or the  Securities  Exchange  Act of 1934,  as  amended,  or any rule,
regulation  (including  Regulations  T, U or X of the Board of  Governors of the
Federal   Reserve   System)  order,   writ,   judgement,   injunction,   decree,
determination  or award,  (iii)  conflict  with or result in the  breach  of, or
constitute a default under,  any material  contract,  loan agreement,  mortgage,
deed of trust or any other material  instrument or agreement binding on Borrower
or any  Subsidiary  or any of their  properties  or  result  in or  require  the
creation  or  imposition  of any  lien  upon or  with  respect  to any of  their
properties.

     5.4 Each of this Amendment and each of the Replacement Notes have been duly
executed and delivered by the Borrower and this Amendment has been duly executed
by the Guarantors.  This Amendment is the legal, valid and binding obligation of
the Borrower and the Guarantors enforceable against the Borrower and each of the
Guarantors in accordance with its terms.  Each of the  Replacement  Notes is the
legal,  valid and binding  obligation  of the Borrower  enforceable  against the
Borrower in accordance with its terms.

     5.5 No  authorization  or approval or other  action by, and no notice to or
filing with, any  governmental  authority or regulatory  body or any other third
party is required  for (i) the due  execution,  delivery or  performance  by the
Borrower and the Guarantors of this  Amendment,  the  Replacement  Notes, or any
other agreement or document  related hereto or contemplated  hereby to which the
Borrower or any of the  Guarantors is or is to be a party or otherwise  bound or
(ii) the  exercise by the Agent,  the Arranger or any Lender of its rights under
the Agreement as amended by this Amendment.

6. Acknowledgments and Reaffirmations.


     6.1 The Borrower,  the Agent, the Arranger and the Lenders  acknowledge and
agree that each reference to "Marine  Midland Bank" or "Marine" in the Agreement
and  the  documents   executed  in  connection   therewith,   including  without
limitation,  the Loan Documents and the guaranties,  shall be deemed to refer to
HSBC Bank USA; each reference to "HSBC Securities, Inc." therein shall be deemed
to refer to HSBC Securities  (USA) Inc.; and each reference to  "Landesgirokasse
offentliche  Bank  und  Landessparkasse"  therein  shall be  deemed  to refer to
Landesbank Baden-Wurttemberg.

     6.2 The Borrower hereby reaffirms the Loan Documents to which it is a party
and agrees that such Loan Documents remain in full force and effect.

     6.3 By their signatures below, each of the Guarantors specifically consents
to each of the  amendments,  consents and  agreements  herein and  reaffirms the
continuing   effectiveness  of  their  respective  guaranty,   general  security
agreement  and UCC  financing  statements  originally  executed and delivered in
connection with the Agreement,  and agrees that such guaranty,  general security
agreement and UCC financing  statements cover payment of any and all Obligations
under the Agreement as amended hereby and under the Replacement Notes.

7. Other.

     7.1 Borrower agrees to pay all out-of-pocket expenses and fees of the Agent
in connection with the  preparation of this Amendment and the Replacement  Notes
including the reasonable fees and disbursements of counsel to the Agent.

     7.2 This Amendment may be executed in any number of counterparts and by the
parties  hereto on separate  counterparts,  each of which when so  executed  and
delivered  shall  be an  original,  but all  such  counterparts  shall  together
constitute one and the same agreement.

     7.3 This  Amendment  shall be governed by and construed  under the internal
laws of the State of New York,  as the same may be from time to time in  effect,
without regard to principles of conflicts of laws.

     The Lenders, the Arranger,  the Agent, the Borrower and the Guarantors have
caused this  Amendment to be duly executed as of the date shown at the beginning
of this Amendment.


                                    HSBC BANK USA

                                    By /S/
                                       ---------------------
                                    Name:  Hugh C. McLean
                                    Title: Vice President


                                    MANUFACTURERS AND TRADERS TRUST COMPANY

                                    By /S/
                                       -------------------------
                                    Name:  Sean Timms
                                    Title:______________________


                                    FLEET NATIONAL BANK

                                    By /S/
                                       -------------------------
                                    Name:  John Larry
                                    Title:______________________


                                    BANK OF TOKYO-MITSUBISHI
                                    TRUST COMPANY

                                    By /S/
                                       -------------------------
                                    Name:_______________________
                                    Title:______________________


                                     KEYBANK NATIONAL ASSOCIATION

                                     By /S/
                                        -------------------------
                                     Name:  Francis Lutz
                                     Title:_____________________


                                     LANDESBANK BADEN-WURTTEMBERG

                                     By /S/
                                        -------------------------
                                     Name:  Terry Blagden
                                     Title:_____________________


                                     By /S/
                                        -------------------------
                                     Name:  Burkhard Wittmacher
                                     Title:_____________________


                                     NATIONAL BANK OF CANADA

                                     By /S/
                                        -------------------------
                                      Name:   Robert G. Uhrig
                                      Title:  Vice President & Representative


                                     By /S/
                                        -------------------------
                                      Name:  Michael S. Woodard
                                      Title:  Vice President - Marketing


                                      THE CHASE MANHATTAN BANK

                                      By /S/
                                         -------------------------
                                      Name:  Michael Wolfram
                                      Title:

                                      HSBC SECURITIES (USA) INC., As Arranger

                                      By /S/
                                         -------------------------
                                      Name:   Martin F. Brown
                                      Title:  Managing Director


                                      HSBC BANK USA, As Agent

                                      By /S/
                                         -------------------------
                                      Name:  Hugh C. McLean
                                      Title: Vice President

                                      MOOG INC.

                                      By /S/
                                         -------------------------
                                      Name:   Robert R. Banta
                                      Title:  Executive Vice President


                                      MOOG FSC LTD., as a guarantor

                                      By /S/
                                         -------------------------
                                      Name:   Donald R. Fishback
                                      Title:  Vice President


                                      MOOG PROPERTIES, INC.,
                                      as a guarantor

                                      By /S/
                                         -------------------------
                                       Name:   Donald R. Fishback
                                      Title:  Vice President


                                      MOOG INDUSTRIAL CONTROLS
                                      CORPORATION, as a guarantor

                                      By /S/
                                         -------------------------
                                      Name:   Donald R. Fishback
                                      Title:  Vice President

HSBC Bank USA:

STATE OF NEW YORK                                )
                                                 )SS.:
COUNTY OF ERIE                                   )


     On the ____ day of October in the year 2000, before me, the undersigned,  a
notary  public  in and for  said  state,  personally  appeared  Hugh C.  McLean,
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,  and that by his
signature on the instrument,  the individual, or the person upon behalf of which
the individual acted, executed the instrument.


                                 -----------------------------------------------
                                                  Notary Public


Manufacturers and Traders Trust Company:

STATE OF NEW YORK )
                  )SS.:
COUNTY OF ERIE    )


     On the ____ day of October in the year 2000, before me, the undersigned,  a
notary public in and for said state,  personally appeared Sean Timms, 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,  and that by his signature on the
instrument,  the  individual,  or the person upon behalf of which the individual
acted, executed the instrument.


                                -----------------------------------------------
                                                  Notary Public


Fleet National Bank:


STATE OF NEW YORK )
                  )SS.:
COUNTY OF ERIE    )


     On the ____ day of October in the year 2000, before me, the undersigned,  a
notary public in and for said state,  personally appeared John Larry, 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,  and that by his signature on the
instrument,  the  individual,  or the person upon behalf of which the individual
acted, executed the instrument.


                                 -----------------------------------------------
                                                  Notary Public


Bank of Tokyo-Mitsubishi Trust Company:


STATE OF NEW YORK  )
                   )SS.:
COUNTY OF NEW YORK )


     On the ____ day of October in the year 2000, before me, the undersigned,  a
notary public in and for said state,  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 executed the same in his  capacity,  and that by his
signature on the instrument,  the individual, or the person upon behalf of which
the individual acted, executed the instrument.


                                 -----------------------------------------------
                                                  Notary Public


KeyBank National Association:


STATE OF OHIO              )
                           )SS.:
COUNTY OF __________       )


     On the ____ day of October in the year 2000, before me, the undersigned,  a
notary  public  in  and  for  said  state,  personally  appeared  Francis  Lutz,
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,  and that by his
signature on the instrument,  the individual, or the person upon behalf of which
the individual acted, executed the instrument.


                                 -----------------------------------------------
                                                   Notary Public


Landesbank Baden-Wurttemberg:


STATE OF NEW YORK  )
                   )SS.:
COUNTY OF NEW YORK )


     On the ____ day of October in the year 2000, before me, the undersigned,  a
notary  public in and for said  state,  personally  appeared  Terry  Blagden and
Burkhard  Wittmacher,  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,  and that by his signature on the instrument,  the individual,  or the
person upon behalf of which the individual acted, executed the instrument.


                                 -----------------------------------------------
                                                  Notary Public


National Bank of Canada:


STATE OF NEW YORK )
                  )SS.:
COUNTY OF ERIE    )


     On the ____ day of October in the year 2000, before me, the undersigned,  a
notary  public in and for said state,  personally  appeared  Robert G. Uhrig and
Michael  S.  Woodard,  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,  and that by his signature on the instrument,  the individual,  or the
person upon behalf of which the individual acted, executed the instrument.


                                 -----------------------------------------------
                                                  Notary Public


The Chase Manhattan Bank:


STATE OF NEW YORK )
                  )SS.:
COUNTY OF ERIE    )


     On the ___ day of October in the year 2000,  before me, the undersigned,  a
notary  public  in and for said  state,  personally  appeared  Michael  Wolfram,
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,  and that by his
signature on the instrument,  the individual, or the person upon behalf of which
the individual acted, executed the instrument.


                                 -----------------------------------------------
                                                  Notary Public

HSBC Securities (USA) INC.:

STATE OF NEW YORK )
                  )SS.:
COUNTY OF _______ )


     On the ____ day of October in the year 2000, before me, the undersigned,  a
notary  public in and for said  state,  personally  appeared  Martin  F.  Brown,
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,  and that by his
signature on the instrument,  the individual, or the person upon behalf of which
the individual acted, executed the instrument.


                                 -----------------------------------------------
                                                   Notary Public


HSBC Bank USA:

STATE OF NEW YORK )
                  )SS.:
COUNTY OF ERIE    )


     On the ____ day of October in the year 2000, before me, the undersigned,  a
notary  public  in and for  said  state,  personally  appeared  Hugh C.  McLean,
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,  and that by his
signature on the instrument,  the individual, or the person upon behalf of which
the individual acted, executed the instrument.


                                 -----------------------------------------------
                                                     Notary Public


Moog Inc.:

STATE OF NEW YORK )
                  )SS.:
COUNTY OF ERIE    )


     On the ____ day of October in the year 2000, before me, the undersigned,  a
notary  public in and for said  state,  personally  appeared  Robert  R.  Banta,
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,  and that by his
signature on the instrument,  the individual, or the person upon behalf of which
the individual acted, executed the instrument.


                                 -----------------------------------------------
                                                    Notary Public


Moog FSC Ltd.:

STATE OF NEW YORK )
                  )SS.:
COUNTY OF ERIE    )


     On the ____ day of October in the year 2000, before me, the undersigned,  a
notary public in and for said state,  personally  appeared  Donald R.  Fishback,
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,  and that by his
signature on the instrument,  the individual, or the person upon behalf of which
the individual acted, executed the instrument.


                                 -----------------------------------------------
                                                    Notary Public


Moog Properties, Inc.:

STATE OF NEW YORK )
                  )SS.:
COUNTY OF ERIE    )


     On the 24th day of October in the year 2000, before me, the undersigned,  a
notary public in and for said state,  personally  appeared  Donald R.  Fishback,
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,  and that by his
signature on the instrument,  the individual, or the person upon behalf of which
the individual acted, executed the instrument.


                                 -----------------------------------------------
                                                     Notary Public


Moog Industrial Controls Corporation:

STATE OF NEW YORK )
                  )SS.:
COUNTY OF ERIE    )


     On the 24th day of October in the year 2000, before me, the undersigned,  a
notary public in and for said state,  personally  appeared  Donald R.  Fishback,
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,  and that by his
signature on the instrument,  the individual, or the person upon behalf of which
the individual acted, executed the instrument.


                                 -----------------------------------------------
                                                   Notary Public


</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
