Loan and Security Agreement between BNS Holding, Inc. and Steel Partners II, L.P. dated October 30, 2006

 Exibit 10.2 ******************************* LOAN AND SECURITY AGREEMENT DATED AS OF OCTOBER 30, 2006 BETWEEN BNS HOLDING, INC. AS THE BORROWER AND STEEL PARTNERS II, L.P., AS THE LENDER *******************************  TABLE OF CONTENTS ----------------- Section Page - ------- ---- ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS....................................1 SECTION 1.1. Certain Defined Terms...............................1 SECTION 1.2. Terms Generally.....................................4 SECTION 1.3. Computation of Time Periods.........................4 SECTION 1.4. Accounting Terms....................................5 ARTICLE II. AMOUNTS AND TERMS OF THE ADVANCE...................................5 SECTION 2.1. Advance.............................................5 SECTION 2.2. The Note............................................5 SECTION 2.3. Interest............................................5 ARTICLE III. PAYMENTS, PREPAYMENTS, INCREASED COSTS AND TAXES.................5 SECTION 3.1. Payments and Computations...........................5 SECTION 3.2. Mandatory Prepayments...............................6 SECTION 3.3. Voluntary Prepayments...............................6 SECTION 3.4. Taxes...............................................6 ARTICLE IV. SECURITY...........................................................7 SECTION 4.1. Grant of Security Interest..........................7 SECTION 4.2. Delivery of Additional Documentation Required.......7 ARTICLE V. CONDITIONS OF LENDING...............................................7 SECTION 5.1. Conditions Precedent to the Advance.................7 ARTICLE VI. REPRESENTATIONS AND WARRANTIES.....................................8 SECTION 6.1. Existence...........................................8 SECTION 6.2. Power and Authorization.............................8 SECTION 6.3. Binding Obligations.................................8 SECTION 6.4. Government Approvals................................8 SECTION 6.5. Taxes; Governmental Charges.........................8 SECTION 6.6. Compliance with Law.................................9 SECTION 6.7. Absence of Financing Statements.....................9 SECTION 6.8. Litigation..........................................9 SECTION 6.9. No Default or Event of Default......................9 ARTICLE VII. AFFIRMATIVE COVENANTS OF THE BORROWER.............................9 SECTION 7.1. Compliance with Laws, Etc...........................9 SECTION 7.2. Reporting and Notice Requirements...................9 SECTION 7.3. Use of Proceeds....................................10 SECTION 7.4. Taxes and Liens....................................10 SECTION 7.5. Maintenance of Property............................10 SECTION 7.6. Right of Inspection................................10 SECTION 7.7. Insurance..........................................11 SECTION 7.8. Notice of Litigation...............................11 SECTION 7.9. Maintenance of Office..............................11 SECTION 7.10. Existence..........................................11 SECTION 7.11. Further Assurances.................................11 i  ARTICLE VIII. NEGATIVE COVENANTS..............................................12 SECTION 8.1. Impairment of Rights...............................12 SECTION 8.2. Restrictions on Debt...............................12 SECTION 8.3. Restrictions on Liens..............................13 SECTION 8.4. Mergers and Acquisitions...........................13 SECTION 8.5. Issuance of Equity Securities......................14 SECTION 8.6. Related Party Transactions.........................14 SECTION 8.7. Issuance of Equity Securities by Collins Holding............14 ARTICLE IX. EVENTS OF DEFAULT.................................................14 SECTION 9.1. Events of Default..................................14 ARTICLE X. MISCELLANEOUS......................................................16 SECTION 10.1. Survival of Representations and Warranties.........16 SECTION 10.2. Amendments, Etc....................................16 SECTION 10.3. Notices, Etc.......................................16 SECTION 10.4. No Waiver; Remedies................................16 SECTION 10.5. Costs, Expenses and Taxes..........................16 SECTION 10.6. Right of Set-off...................................17 SECTION 10.7. Binding Effect.....................................17 SECTION 10.8. Assignments and Participations.....................17 SECTION 10.9. Limitation on Agreements...........................17 SECTION 10.10. Severability.......................................18 SECTION 10.11. Governing Law......................................18 SECTION 10.12. SUBMISSION TO JURISDICTION; WAIVERS................18 SECTION 10.13. Execution in Counterparts..........................19 EXHIBITS: - -------- Exhibit A - Form of Note Exhibit B - Pledge and Security Agreement ii  LOAN AND SECURITY AGREEMENT This Loan and Security Agreement, dated as of October 30, 2006 (this "Agreement"), is made between BNS Holding, Inc., a Delaware corporation (the "Borrower"), and Steel Partners II, L.P., a Delaware limited partnership (the "Lender"). RECITALS: WHEREAS, Lender has agreed to loan money to the Borrower for the purposes of acquiring 80% of the outstanding common stock of Collins I Holding Corp., a Delaware corporation ("Collins Holding"), on the terms and subject to the provisions contained herein. NOW THEREFORE, in consideration of the premises and the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1. CERTAIN DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings: "ADVANCE" means an advance under Section 2.1. "AFFILIATE" means any Person which, directly or indirectly, controls or is controlled by or is under common control with another Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities or by contract or otherwise. "BANKRUPTCY CODE" means The Bankruptcy Reform Act of 1978, as amended, and codified as 11 U.S.C. Sections 101 ET SEQ. "BORROWER" has the meaning in the preamble. "BNS SUBSIDIARIES" means any Subsidiary of the Borrower other than Collins Holding. "BUSINESS DAY" means a day of the year on which banks are not required or authorized to close in New York, New York. "CAPITAL LEASE" means any obligation to pay rent or other amounts under a lease of (or other agreement conveying the right to use) any property (whether real, personal or mixed, immovable or movable) that is required to be classified and accounted for as a capitalized lease obligation under GAAP.  "CODE" means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute. "COMMITMENT" means $14,000,000. "CONTROL" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing. "DEBT" means (without duplication), for any Person, (a) indebtedness of such Person for borrowed money or arising out of any extension of credit to or for the account of such Person (including, without limitation, extensions of credit in the form of reimbursement or payment obligations of such Person relating to letters of credit issued for the account of such Person) or for the deferred purchase price of property or services; (b) indebtedness of the kind described in clause (a) of this definition which is secured by (or for which the holder of such debt has any existing right, contingent or otherwise, to be secured by) any Lien upon or in Property (including, without limitation, accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such indebtedness or obligations; (c) all obligations as lessee under any Capital Lease; (d) all contingent liabilities and obligations under direct or indirect guarantees in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (a) through (c) above; and (e) any monetary obligation of a Person under or in connection with a sale-leaseback or similar arrangement. "DEBTOR LAWS" means all applicable liquidation, conservatorship, bankruptcy, moratorium, arrangement, receivership, insolvency, reorganization or similar laws including the Bankruptcy Code, or general equitable principles from time to time in effect affecting the rights of creditors generally. "DEFAULT" means any event the occurrence of which does, or with the lapse of time or giving of notice or both would, constitute an Event of Default. "EVENTS OF DEFAULT" has the meaning specified in Section 9.1. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants, and statements and pronouncements of the Financial Accounting Standards Board. "GOVERNMENTAL AUTHORITY" means any (domestic or foreign) federal, state, county, municipal, parish, provincial, or other government, or any department, commission, board, court, agency, or any other instrumentality of any of them or any other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory, or administrative functions of, or pertaining to, government, including, without limitation, any arbitration panel, any court, or any commission. 2  "HIGHEST LAWFUL RATE" means the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged, or received with respect to any Note or on other amounts, if any, due to the Lender pursuant to this Agreement or any other Loan Document under laws applicable to the Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect. "ISSUE DATE" means the date on which any Note is issued pursuant to this Agreement. "LEGAL REQUIREMENT" means any order, constitution, law, ordinance, principle of common law, regulation, rule, statute or treaty of any applicable Governmental Authority. "LIEN" means any security interest, mortgage, pledge, hypothecation, charge, claim, option, right to acquire, adverse interest, assignment, deposit arrangement, encumbrance, restriction, statutory or other lien, preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any financing lease involving substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction). "LOAN DOCUMENTS" means this Agreement, any Note, the Pledge and Security Agreement, and any document or instrument executed in connection with any of the foregoing. "MATERIAL ADVERSE EFFECT" means (i) a material adverse effect on the transactions contemplated hereby (including a material adverse effect on the ability of any party hereto to perform its obligations hereunder) or (ii) a material adverse effect on the business, assets, liabilities, operations, results of operations, condition (financial or otherwise) or prospects of the Borrower, if any, that is material to the Borrower, taken as a whole, other than as a result of adverse economic conditions in the United States generally or as a result of any act or omission contemplated by this Agreement. "MATURITY DATE" means the earliest to occur of (a) the fifty-eight month anniversary of the Issue Date, or (b) such earlier time to which the Obligations may be accelerated under Section 9.1. "NOTE" means any promissory note issued under this Agreement pursuant to Section 2.2 or Section 3.1(b). "OBLIGATIONS" means all of the obligations of the Borrower now or hereafter existing under the Loan Documents, whether for principal, interest, fees, expenses, indemnification or otherwise. "PERMITTED LIENS" has the meaning specified in Section 8.3. 3  "PERSON" means an individual, partnership, limited liability company (including a business trust or a real estate investment trust), joint stock company, trust, unincorporated association, corporation, joint venture or other entity, or a government or any political subdivision or agency thereof. "PLEDGE AND SECURITY AGREEMENT" means the pledge and security agreement between the Lender and the Borrower executed and delivered simultaneously with this Agreement, in the form attached hereto as Exhibit B. "PROPERTY" means any interest or right in any kind of property or asset, whether real, personal, or mixed, owned or leased, tangible or intangible, and whether now held or hereafter acquired. "RESPONSIBLE OFFICER" means the chief financial officer or the chief accounting officer of the Borrower, as designated in reports filed by the Borrower with the Securities and Exchange Commission. "SUBSIDIARY" when used with respect to any Person, shall mean any corporation or other organization, whether incorporated or unincorporated, of which such Person or any other Subsidiary of such Person is a general partner or at least 50% of the securities or other interests having by their terms ordinary voting power to elect at least 50% of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Person, by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries. SECTION 1.2. TERMS GENERALLY. The definitions in Section 1.1 apply equally to both the singular and plural forms of the terms defined. Whenever the context requires, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be construed as if followed by the words "without limitation". The words "herein", "hereof" and "hereunder" and words of similar import refer to this Agreement (including the Exhibits hereto) in its entirety and not to any part hereof, unless the context otherwise requires. All references herein to Articles, Sections, and Exhibits are references to Articles and Sections of, and Exhibits to, this Agreement unless the context otherwise requires. Unless the context otherwise requires, any references to any agreement or other instrument or statute or regulation are to such agreement, instrument, statute or regulation as amended and supplemented from time to time (and, in the case of a statute or regulation, to any successor provisions). Any reference in this Agreement to a "day" or number of "days" (without the explicit qualification of "business") shall mean a calendar day or number of calendar days. If any action or notice is to be taken or given on or by a particular day, and such day is not a business day, then such action or notice shall be deferred until, or may be taken or given on, the next Business Day. SECTION 1.3. COMPUTATION OF TIME PERIODS. In this Agreement in the computation of periods of time from a specified date to a later specified date, unless otherwise specified herein the word "from" means "from and including" and the words "to" and "until" each means "to but excluding". 4  SECTION 1.4. ACCOUNTING TERMS. All accounting terms not specifically defined herein shall be construed in accordance with GAAP consistent with those applied in the preparation of the financial statements referred to in Section 7.2. ARTICLE II. AMOUNTS AND TERMS OF THE ADVANCE SECTION 2.1. ADVANCE. Lender agrees, on the terms and conditions hereinafter set forth, to make an advance ("Advance") on the date hereof consisting of a term loan in an amount not to exceed the Commitment. The amount outstanding on such Advance shall be payable in accordance with Section 3.1 hereof and shall mature and all outstanding principal thereof, together with accrued and unpaid interest thereon, shall be due and payable on the Maturity Date. SECTION 2.2. THE NOTE. The Borrower shall execute and deliver to the Lender to evidence the Advance, a term note (the "Note") in the amount of the Commitment. The Note shall be substantially in the form of Exhibit A hereto with the blanks appropriately filled, and shall mature on the Maturity Date, at which time all principal and interest then outstanding thereunder shall become due and payable. SECTION 2.3. INTEREST. The Advance shall bear interest from and including the Issue Date, at a rate per annum equal at all times to 15%, payable quarterly commencing three months from the Issue Date in accordance with Section3.1. All computations of interest hereunder pursuant to this Article II shall be made on the basis of a year of 365 or 366 days, as the case may be, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. ARTICLE III. PAYMENTS, PREPAYMENTS, INCREASED COSTS AND TAXES SECTION 3.1. PAYMENTS AND COMPUTATIONS (a) The outstanding principal balance of the Advance shall be payable on the Maturity Date, when all unpaid principal of, and accrued and unpaid interest on, the Advance shall be due and payable. (b) Each quarterly payment of interest due under the Note (other than at the Maturity Date) shall be payable in kind through the issuance and delivery to the Lender by the Borrower of an additional Note in the principal amount of the interest payment then due, bearing interest at the rate of 15% per annum and payable as to principal and all accrued but unpaid interest on the Maturity Date, which Notes shall be substantially in the form of Exhibit A hereto with the blanks appropriately filled. 5  (c) Whenever any payment under any Note shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fee, as the case may be. SECTION 3.2. MANDATORY PREPAYMENTS If, while any amount of principal or accrued but unpaid interest remain outstanding on any Note, Borrower conducts any sales of Borrower's securities or any sale of its assets permitted under the Loan Documents, the Borrower shall, immediately upon receipt of the net proceeds of such sale, pay to the Lender all of such net proceeds up to an amount equal to the aggregate amount of principal of and accrued interest on all Notes. Lender shall apply any such proceeds, in its sole discretion, to prepay amounts of principal of and/or accrued interest on any Note or Notes then outstanding. SECTION 3.3. VOLUNTARY PREPAYMENTS. Following the two year anniversary of the Issue Date, the Borrower may, upon at least five (5) Business Days' prior written notice to the Lender, prepay all or any portion of the principal balance of the Obligations. Such notice shall be irrevocable and the payment amount specified in such notice shall be due and payable on the prepayment date described in such notice. Any amount of the Advance which is prepaid in accordance with this Section may not be reborrowed. SECTION 3.4. TAXES (a) Any and all payments by the Borrower under any Note shall be made, in accordance with Section 3.1, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of the Lender, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which the Lender is organized or any political subdivision thereof. If the Borrower shall be required by law to deduct any such amounts from or in respect of any sum payable under any Note to the Lender, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.4) the Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. The Borrower further agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made under any Note or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any Note. (b) The Borrower will indemnify the Lender for the full amounts payable pursuant to Section 3.4(a) (including, without limitation, any such amounts imposed by any jurisdiction on amounts payable under this Section 3.3) paid by the Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such amounts were correctly or legally asserted. 6  Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 3.4 shall survive the payment in full of principal and interest under all Notes. ARTICLE IV. SECURITY SECTION 4.1. GRANT OF SECURITY INTEREST. The Borrower and Lender have entered into the Pledge and Security Agreement in order to grant to Lender a first priority lien and security interest in and to all Property of the Borrower and any other Collateral (as defined in the Pledge and Security Agreement) to secure prompt repayment of any and all Obligations and in order to secure prompt performance by Borrower of its covenants and duties under the Loan Documents. SECTION 4.2. DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. The Borrower shall execute and deliver to the Lender, prior to or concurrently with the Borrower's execution and delivery of this Agreement and at any time thereafter at the request of the Lender, all financing statements, continuation financing statements, fixture filings, security agreements, assignments, endorsements of certificates of title, applications for title, affidavits, reports, notices, schedules of accounts, letters of authority, and all other documents that the Lender may reasonably request, in form satisfactory to Lender, to perfect and maintain perfected the Lender's security interests in the Property and in order to fully consummate all of the transactions contemplated under the Loan Documents. ARTICLE V. CONDITIONS OF LENDING SECTION 5.1. CONDITIONS PRECEDENT TO THE ADVANCE. The obligation of the Lender to make the Advance is subject to the condition precedent that Lender shall have received on the date hereof, in form and substance satisfactory to the Lender: (a) A Note representing the aggregate amount of the Advance, duly executed by the Borrower and payable to the order of the Lender. (b) This Agreement, duly executed by the Borrower. (c) A certificate of an officer of the Borrower certifying the resolutions of the board of directors of the Borrower approving and authorizing the execution, delivery, and performance by the Borrower of each Loan Document, the notices and other documents to be delivered by the Borrower pursuant to each Loan Document, and the transactions contemplated thereunder. 7  (d) Certificates of appropriate officials as to the existence and good standing of the Borrower in its jurisdiction of incorporation. (e) The duly executed Pledge and Security Agreement. (f) Such other documents and instruments with respect to the transactions contemplated hereby as the Lender may reasonably request. ARTICLE VI. REPRESENTATIONS AND WARRANTIES In order to induce the Lender to enter into this Agreement, the Borrower represents and warrants to the Lender as of the date hereof that: SECTION 6.1. EXISTENCE. The Borrower, each of the BNS Subsidiaries and Collins Holding is duly organized, validly existing, and in good standing under the laws of the jurisdiction in which it is incorporated or organized and is duly qualified or licensed to do business in all jurisdictions where the Property owned or the business transacted by it makes such qualification necessary and where the failure to be so qualified would have a Material Adverse Effect. SECTION 6.2. POWER AND AUTHORIZATION. The Borrower is duly authorized and empowered to execute, deliver, and perform its obligations under each Loan Document and all corporate or other action on the Borrower's part requisite for the due execution, delivery, and performance of each Loan Document has been duly and effectively taken. SECTION 6.3. BINDING OBLIGATIONS. Each Loan Document constitutes the legal, valid and binding obligation of the Borrower enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally, or by principles governing the availability of equitable remedies. SECTION 6.4. GOVERNMENT APPROVALS. The execution, delivery and performance by the Borrower of this Agreement and the other Loan Documents to which the Borrower is or is to become a party and the transactions contemplated hereby and thereby do not require the approval or consent of, or filing with, any governmental agency or authority other than those already obtained. SECTION 6.5. TAXES; GOVERNMENTAL CHARGES. The Borrower, each of the BNS Subsidiaries and Collins Holding has timely filed or caused to be timely filed all federal, state, and foreign income tax returns which are required to be filed, and has paid or caused to be paid all taxes as shown on such returns or on any assessment received by it to the extent that such taxes have become due, except for such taxes and assessments as are being contested in good faith in appropriate proceedings and reserved for in accordance with GAAP. 8  SECTION 6.6. COMPLIANCE WITH LAW. The business and operations of the Borrower, each of the BNS Subsidiaries and Collins Holding, as conducted, are in compliance in all material respects with all Legal Requirements. SECTION 6.7. ABSENCE OF FINANCING STATEMENTS. Except as provided herein, there is no financing statement, security agreement, chattel mortgage, real estate mortgage or other document filed or recorded with any filing records, registry or other public office, that purports to cover, affect or give notice of any present or possible future lien on, or security interest in, the Property of the Borrower or any rights relating thereto. SECTION 6.8. LITIGATION. There are no actions, suits, proceedings or investigations of any kind pending or threatened against the Borrower, any of the BNS Subsidiaries or Collins Holding before any court, tribunal or administrative agency or board that, if adversely determined, might, either in any case or in the aggregate, reasonably be expected to materially adversely affect the properties, assets, financial condition or business of the Borrower or its Subsidiaries or materially impair the right of the Borrower, its Subsidiaries and Collins Holding, considered as a whole, to carry on business substantially as now conducted by them, or result in any substantial liability not adequately covered by insurance, or for which adequate reserves are not maintained on the consolidated balance sheet of the Borrower, or which question the validity of this Agreement or any of the other Loan Documents, or might impair or prevent any action taken or to be taken pursuant hereto or thereto. SECTION 6.9. NO DEFAULT OR EVENT OF DEFAULT. No event has occurred or is continuing which constitutes a Default or Event of Default hereunder. ARTICLE VII. AFFIRMATIVE COVENANTS OF THE BORROWER So long as any Obligation shall remain unpaid, the Borrower covenants and agrees that, unless the Lender shall otherwise consent in writing: SECTION 7.1. COMPLIANCE WITH LAWS, ETC. The Borrower will comply, in all material respects with all applicable Legal Requirements. SECTION 7.2. REPORTING AND NOTICE REQUIREMENTS. The Borrower will furnish to the Lender: (a) QUARTERLY FINANCIAL STATEMENTS. As soon as available and in any event within forty-five (45) days after the end of each fiscal quarter of the Borrower (excluding the fourth quarter), balance sheets (which are to be consolidated, if applicable) of the Borrower as of the end of such quarter and statements of income (or loss), stockholder's equity (or deficiency) and cash flow (which are to be consolidated, if applicable) of the Borrower for the period commencing at the end of the previous fiscal year of the Borrower and ending with the end of such fiscal quarter, all in reasonable detail and certified by a Responsible Officer as presenting fairly the financial position (on a consolidated basis, if applicable) of the Borrower as of the date indicated and the results of their operations and changes in financial position (on a consolidated basis, if applicable) for the period indicated in conformity with GAAP, consistently applied, subject to changes resulting from year-end adjustments. 9  (b) ANNUAL FINANCIAL STATEMENTS. As soon as available and in any event within ninety (90) days after the end of each fiscal year of the Borrower, statements of income (or loss), shareholder's equity (or deficiency) and cash flow (which are to be consolidated, if applicable) of the Borrower for such fiscal year, and balance sheets (which are to be consolidated, if applicable) of the Borrower as of the end of such fiscal year, all in reasonable detail and satisfactory in form, substance, and scope to the Lender and certified by a Responsible Officer as presenting fairly the financial position (on a consolidated basis, if applicable) of the Borrower as of the date indicated and the results of their operations and changes in financial position (on a consolidated basis, if applicable) for the period indicated in conformity with GAAP, consistently applied (except for such inconsistencies which may be disclosed in such report). (c) NOTICE OF DEFAULT. Promptly after any officer of the Borrower knows or has reason to know that any Default or Event of Default has occurred, a written statement of such officer of the Borrower setting forth the details of such Default or Event of Default and the action which the Borrower has taken or proposes to take with respect thereto. (d) NOTIFICATION OF CLAIM AGAINST PROPERTY. The Borrower will, immediately upon becoming aware thereof, notify the Lender in writing of any setoff, withholdings or other defenses to which any of the Property, or the Lender's rights with respect to the Property, are subject. SECTION 7.3. USE OF PROCEEDS. The proceeds of the Advance will be exclusively used by the Borrower to acquire 80% of the outstanding common stock of Collins Holding. SECTION 7.4. TAXES AND LIENS. The Borrower will pay and discharge, or will cause to be paid and discharged, promptly all taxes, assessments, and governmental charges or levies imposed upon the Borrower or upon the income of any Property of the Borrower as well as all claims of any kind (including, without limitation, claims for labor, materials, supplies, and rent) which, if unpaid, might become a Lien upon any Property of the Borrower, except such taxes, assessments, governmental charges or levies contested in good faith by the Borrower. SECTION 7.5. MAINTENANCE OF PROPERTY. The Borrower will at all times maintain, preserve, protect, and keep, or cause to be maintained, preserved, protected, and kept, its Property in good repair, working order, and condition (ordinary wear and tear excepted) and consistent with past practice. 10  SECTION 7.6. RIGHT OF INSPECTION. From time to time upon reasonable notice to the Borrower, the Borrower will permit any officer or employee of, or agent designated by, the Lender to visit and inspect any of the Properties of the Borrower, examine the Borrower's corporate books or financial records, take copies and extracts therefrom, and discuss the affairs, finances, and accounts of the Borrower with the Borrower's officers or certified public accountants, all as often as the Lender may reasonably desire, provided that such visits and inspections shall be made only during business hours and so as not to interfere unreasonably with the business and operations of the Borrower. All confidential or proprietary information provided to or obtained by the Lender under this section or under this Agreement shall be held in confidence by the Lender in the same manner and with the same degree of protection as the Lender exercises with respect to its own confidential or proprietary information. For purposes of this section, all information provided to the Lender pursuant hereto shall be presumed to constitute "confidential and proprietary information" unless (i) the Borrower indicates otherwise in writing, (ii) the information was or becomes generally available to the public other than as a result of a disclosure in violation of this section by the Lender or its representatives, (iii) the information was or becomes available to the Lender or its representatives on a non-confidential basis from a source other than the Borrower, (iv) the information was within the possession of the Lender or any of its representatives prior to being furnished by or on behalf of the Borrower, provided that in each case the source of such information was not bound by a confidentiality agreement in respect thereof preventing disclosure to the Lender or its representatives or (v) the information is independently developed by the Lender (but only if it does not contain or reflect, and is not based upon, in whole or in part, any information furnished hereunder which constitutes "confidential or proprietary information"). SECTION 7.7. INSURANCE. The Borrower will maintain insurance of similar types and coverages as maintained on the date hereof and consistent with past practice with financially sound and reputable insurance companies and associations acceptable to the Lender based on the Lender's reasonable judgment (or as to workers' compensation or similar insurance, in an insurance fund or by self-insurance authorized by the jurisdiction in which its operations are carried on). SECTION 7.8. NOTICE OF LITIGATION. The Borrower will promptly notify Lender in writing of any litigation, legal proceeding or dispute, other than disputes in the ordinary course of business or, whether or not in the ordinary course of business, involving amounts in excess of $25,000, and any investigation of Borrower by any Governmental Authority, adversely affecting the Borrower or any of the BNS Subsidiaries whether or not fully covered by insurance, and regardless of the subject matter thereof. SECTION 7.9. MAINTENANCE OF OFFICE. The Borrower will maintain its chief executive office in Middletown, Rhode Island, or at such other place in the United States of America as the Borrower shall designate upon written notice to the Lender, where notices, presentations and demands to or upon the Borrower in respect of the Loan Documents to which the Borrower is a party may be given or made. The Borrower shall notify the Lender in writing of the intent of the Borrow to relocate any of its Property at least five Business Days prior to the date of such proposed relocation. SECTION 7.10. EXISTENCE. The Borrower shall preserve and maintain its legal existence and all of its material rights, privileges, licenses, contracts and property and assets used or useful to its business. SECTION 7.11. FURTHER ASSURANCES. The Borrower will cooperate with the Lender and execute such further instruments and documents as the Lender shall reasonably request to carry out to its satisfaction the transactions contemplated by this Agreement and the other Loan Documents. 11  ARTICLE VIII. NEGATIVE COVENANTS So long as any Obligation shall remain unpaid, the Borrower covenants and agrees that, without the written consent of the Lender: SECTION 8.1. IMPAIRMENT OF RIGHTS. The Borrower will not undertake any action or engage in any transaction or activity to impair the Lender's rights hereunder. SECTION 8.2. RESTRICTIONS ON DEBT. The Borrower will not, and will not permit any of the BNS Subsidiaries to, create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Debt other than: (a) Debt to the Lender arising under any of the Loan Documents; (b) current liabilities of the Borrower or such Subsidiary incurred in the ordinary course of business not incurred through (i) the borrowing of money, or (ii) the obtaining of credit except for credit on an open account basis customarily extended and in fact extended in connection with normal purchases of goods and services; (c) Debt in respect of taxes, assessments, governmental charges or levies and claims for labor, materials and supplies to the extent that payment therefor shall not at the time be required to be made in accordance with the provisions of Section 7.4; (d) Debt in respect of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as execution is not levied thereunder or in respect of which the Borrower or such BNS Subsidiary shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review; (e) endorsements for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business; and (f) Debt owed by the Borrower or any of the BNS Subsidiaries to trade vendors, in the amount of the cost to the Borrower or such BNS Subsidiary of inventory held on consignment from such trade vendors, including, without limitation, in connection with and pursuant to agreements with the Borrower's trade vendors. 12  SECTION 8.3. RESTRICTIONS ON LIENS. The Borrower will not, and will not permit any of the BNS Subsidiaries to, (i) create or incur or suffer to be created or incurred or to exist any Lien upon any of its Property, or upon the income or profits therefrom; (ii) transfer any of such Property or the income or profits therefrom for the purpose of subjecting the same to the payment of Debt or performance of any other obligation in priority to payment of its general creditors; (iii) acquire, or agree or have an option to acquire, any property or assets upon conditional sale or other title retention or purchase money security agreement, device or arrangement; (iv) suffer to exist for a period of more than thirty (30) days after the same shall have been incurred any Debt or claim or demand against it that if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given any priority whatsoever over its general creditors; or (v) sell, assign, pledge or otherwise transfer any accounts, contract rights, general intangibles, chattel paper or instruments, with or without recourse; provided that the Borrower and any Subsidiary of the Borrower may create or incur or suffer to be created or incurred or to exist (the "Permitted Liens"): (a) liens to secure taxes, assessments and other government charges in respect of obligations not overdue or liens on properties to secure claims for labor, material or supplies in respect of obligations not overdue; (b) deposits or pledges made in connection with, or to secure payment of, workmen's compensation, unemployment insurance, old age pensions or other social security obligations; (c) liens on properties in respect of judgments or awards, the Debt with respect to which is permitted by Section 8.2(d); and (d) encumbrances on real estate consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property and defects and irregularities in the title thereto, landlord's or lessor's liens under leases to which the Borrower or any BNS Subsidiary is a party, and other minor liens or encumbrances none of which in the opinion of the Borrower interferes materially with the use of the property affected in the ordinary conduct of the business of the Borrower or any BNS Subsidiary, which defects do not individually or in the aggregate have a materially adverse effect on the business of the Borrower individually or of the Borrower and the BNS Subsidiaries on a consolidated basis. SECTION 8.4. MERGERS AND ACQUISITIONS. The Borrower will not, and will not permit any of the BNS Subsidiaries to, become a party to any merger or consolidation, or agree to or effect any asset acquisition or stock acquisition (other than the acquisition of assets in the ordinary course of business consistent with past practices). The Borrower will not, and will not permit any of the BNS Subsidiaries to, agree to or effect any asset acquisition or stock acquisition without the prior written consent of the Lender. The Borrower will not create or form any subsidiaries without the consent of Lender; PROVIDED, HOWEVER, this shall in no way effect or limit the ability of Collins Holding, or any of its Subsidiaries, to take any actions they shall deem necessary or advisable. 13  SECTION 8.5. ISSUANCE OF EQUITY SECURITIES. The Borrower will not issue any equity securities, including, without limitation, any issuance of warrants, options or subscription or conversion rights, unless (i) the Borrower receives solely cash proceeds from each such issuance, (ii) the net proceeds from such issuance are applied in accordance with Section 3.2 hereof and (iii) no Default or Event of Default has occurred and is continuing at the time any such issuance is consummated and none would exist (whether or not after the expiration of time or giving of notice or both) after giving effect thereto. SECTION 8.6. RELATED PARTY TRANSACTIONS. The Borrower will not undertake any action or engage in any transaction or activity with any Affiliate, other than those contemplated by the Loan Documents, without the prior written approval of Lender, which approval shall not be unreasonably withheld. SECTION 8.7. ISSUANCE OF EQUITY SECURITIES BY COLLINS HOLDING. The Borrower will not consent to the issuance by Collins Holding of any equity securities or any warrants, options or subscription or conversion rights entitling the holder thereof to purchase or obtain any equity securities of Collins Holding, without the prior written consent of the Lender, which consent will not be unreasonably withheld. ARTICLE IX. EVENTS OF DEFAULT SECTION 9.1. EVENTS OF DEFAULT. If any of the following events ("Events of Default") shall occur and, after written notice thereof by the Lender to the Borrower, shall not have been cured within five calendar days (in the case of monetary defaults) or 15 calendar days (in the case of all other defaults) unless a shorter period of time is specified below: (a) the Borrower shall fail to pay principal of or interest on any Note or other amounts due under any Note or this Agreement or any other Loan Document, when the same becomes due and payable; or (b) the Borrower shall enter into any agreement or arrangement to sell, dispose, assign, exchange, gift, lease, pledge, hypothecate or otherwise transfer, directly or indirectly, in one transaction or a series of transactions, all or substantially all of the assets of the Borrower, without prior written consent of Lender; or (c) any representation or warranty made by the Borrower (or any of its officers) under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made or deemed made; or (d) the Borrower shall fail to perform or observe any term, covenant or agreement contained herein or in any other Loan Document within 10 days after written notice of the Lender to cure same; or 14  (e) the Borrower or any of its Subsidiaries shall fail to pay any principal of, or premium or interest on, any Debt when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) unless being contested in good faith, and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event constituting a default (however defined) shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, which would give rise to a right to accelerate such Debt; or (f) the Borrower fails to use the proceeds from the Advance in accordance with the stated use therefor as contemplated by Section 7.3; or (g) the Borrower shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower under the Bankruptcy Law or any other Debtor Law seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any Debtor Laws, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its Property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 30 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its Property) shall occur; or the Borrower shall take any corporate action to authorize any of the actions set forth above in this subsection (g); (h) the Pledge and Security Agreement or any interest of the Lender thereunder shall for any reason be terminated, invalidated, void or unenforceable or the Borrower shall fail to perform any obligation thereunder; or (i) the Borrower shall change (i) the number of authorized or outstanding shares of its common stock or (ii) attempt to liquidate or dissolve itself, without the prior written consent of the Lender; then, and in any such event, Lender (after providing the notice and opportunity to cure set forth in the first clause of this Section) may, by notice to the Borrower, declare the principal amount of any Notes, all interest thereon and all other Obligations or amounts payable under this Agreement or any other Loan Document to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower and all interest on and principal of all other Debt owed by the Borrower to the Lender shall likewise become and be forthwith due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; PROVIDED HOWEVER, that in the case of any Default pursuant to Subsection (g) of this Section 9.1, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower.. 15  ARTICLE X. MISCELLANEOUS SECTION 10.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties in each Loan Document shall survive the delivery of the Notes and the making of the Advance, and shall continue after the repayment of the Notes and the Maturity Date until all Obligations are indefeasibly paid in full, and any investigation at any time made by or on behalf of the Lender shall not diminish the Lender's right to rely thereon. SECTION 10.2. AMENDMENTS, ETC. No amendment or waiver of any provision of this Agreement or any Note, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 10.3. NOTICES, ETC. All notices and other communications provided for hereunder shall be in writing (including by telex or telefacsimile transmission) and shall be effective when actually delivered, or in the case of telex notice, when sent, answerback received, or in the case of telefacsimile transmission, when received and telephonically confirmed, addressed as follows: if to the Borrower, at their address at 25 Enterprise Center, Suite 104, Middletown, Rhode Island 02842, Attention: Michael Warren, facsimile number ###-###-####; if to the Lender, at its address at 590 Madison Avenue, 32nd floor, New York, NY 10022 , Attention: John McNamara, facsimile number ###-###-####; or as to the Borrower or the Lender at such other address as shall be designated by such party in a written notice to the other parties. SECTION 10.4. NO WAIVER; REMEDIES. No failure on the part of the Lender to exercise, and no delay in exercising, any right under any Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 10.5. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay all reasonable fees and out-of-pocket expenses of the Lender incurred in connection with the preparation and execution of this Agreement. The Borrower agrees to pay on demand all costs and expenses, if any (including, without limitation, reasonable counsel fees and expenses), reasonably incurred in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of the Loan Documents and the other documents to be delivered under the Loan Documents, including, without limitation, reasonable counsel fees and expenses in connection with the enforcement of rights under this Section 10.5. The Borrower shall not be responsible to the Lender for any expenses other than those set forth in this Agreement. 16  SECTION 10.6. RIGHT OF SET-OFF. Upon the occurrence and during the continuance of any Event of Default, the Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other Debt at any time owing by the Lender to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under any Loan Document, whether or not the Lender shall have made any demand under any Note and although such obligations may be unmatured. Lender agrees promptly to notify the Borrower after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which such the Lender may have. SECTION 10.7. BINDING EFFECT. This Agreement shall become effective when it shall have been executed by the Borrower and the Lender and thereafter shall be binding upon and inure to the benefit of the Borrower, the Lender and their respective successors and assigns, except that neither the Borrower nor the Lender (except as provided in Section 10.8) shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the other. SECTION 10.8. ASSIGNMENTS AND PARTICIPATIONS. The Lender may assign all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of any Note held by it) to any Affiliate of Lender. SECTION 10.9. LIMITATION ON AGREEMENTS. All agreements between the Borrower or the Lender, whether now existing or hereafter arising and whether written or oral, are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of demand being made in respect of an amount due under any Loan Document or otherwise, shall the amount paid, or agreed to be paid, to the Lender for the use, forbearance, or detention of the money to be loaned under the Notes or any other Loan Document or otherwise or for the payment or performance of any covenant or obligation contained herein or in any other Loan Document exceed the Highest Lawful Rate. If, as a result of any circumstance whatsoever, fulfillment of or compliance with any provision hereof or of any of such documents at the time performance of such provision shall be due or at any other time shall involve exceeding the amount permitted to be contracted for, taken, reserved, charged or received by the Lender under applicable usury law, then, ipso facto, the obligation to be fulfilled or complied with shall be reduced to the limit prescribed by such applicable usury law, and if, from any such circumstance, the Lender shall ever receive interest or anything which might be deemed interest under applicable law which would exceed the Highest Lawful Rate, such amount which would be excessive interest shall be applied to the reduction of the principal amount owing on account of the Notes or the amounts owing on other obligations of the Borrower to the Lender under any Loan Document and not to the payment of interest, or if such excessive interest exceeds the unpaid principal balance of the Notes and the amounts owing on other obligations of the Borrower to the Lender under any Loan Document, as the case may be, such excess shall be refunded to the Borrower. All sums paid or agreed to be paid to the Lender for the use, forbearance, or detention of the indebtedness of the Borrower to the Lender shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full term of such indebtedness until payment in full of the 17  principal (including the period of any renewal or extension thereof) so that the interest on account of such indebtedness shall not exceed the Highest Lawful Rate. Notwithstanding anything to the contrary contained in any Loan Document, it is understood and agreed that if at any time the rate of interest which accrues on the outstanding principal balance of the Notes shall exceed the Highest Lawful Rate, the rate of interest which accrues on the outstanding principal balance of the Note shall be limited to the Highest Lawful Rate, but any subsequent reductions in the rate of interest which accrues on the outstanding principal balance of any Note shall not reduce the rate of interest which accrues on the outstanding principal balance of such Note below the Highest Lawful Rate until the total amount of interest accrued on the outstanding principal balance of all Notes, taken in the aggregate, equals the amount of interest which would have accrued if such interest rate had at all times been in effect and not been reduced. In the event that any rate of interest under any Note or any Loan Document is reduced due to the effect of this Section 10.9 and there is a subsequent increase in the Highest Lawful Rate, such interest rate shall, automatically without any action of the Borrower or Lender, be increased to the then applicable Highest Lawful Rate. The terms and provisions of this Section 10.9 shall control and supersede every other provision of all Loan Documents. SECTION 10.10. SEVERABILITY. In case any one or more of the provisions contained in any Loan Document to which the Borrower is a party or in any instrument contemplated thereby, or any application thereof, shall be invalid, illegal, or unenforceable in any respect, the validity, legality, and enforceability of the remaining provisions contained therein, and any other application thereof, shall not in any way be affected or impaired thereby. SECTION 10.11. GOVERNING LAW. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and to be performed entirely within such state. SECTION 10.12. SUBMISSION TO JURISDICTION; WAIVERS. THE BORROWER AND THE LENDER IRREVOCABLY AND UNCONDITIONALLY: (a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF; (b) WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH PROCEEDING WAS BROUGHT IN AN INCONVENIENT FORUM AND AGREES NOT TO PLEAD OR CLAIM THE SAME; 18  (c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH LEGAL ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING OF A COPY THEREOF (BY REGISTERED OR CERTIFIED MAIL OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL POSTAGE PREPAID) TO THE ADDRESS SET FORTH IN SECTION 10.3 HEREOF OR AT SUCH OTHER ADDRESS OF WHICH THE OTHER PARTIES HERETO SHALL HAVE BEEN NOTIFIED IN WRITING PURSUANT TO SECTION 10.3. (d) THE BORROWER AND THE LENDER EACH WAIVES ITS RIGHT TO JURY TRIAL WITH RESPECT TO ANY LEGAL ACTION ARISING UNDER THIS AGREEMENT. SECTION 10.13. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 19  IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. BNS HOLDING, INC. By: /s/ Michael Warren --------------------------- Name: Michael Warren Title: President and CEO STEEL PARTNERS II, L.P. By: Steel Partners, L.L.C. General Partner By: /s/ Warren G. Lichtenstein --------------------------- Name: Warren G. Lichtenstein Title: Managing Member 20  EXHIBIT A --------- NOTE ---- $14,000,000 October __, 2006 FOR VALUE RECEIVED, the undersigned (the "Borrower"), HEREBY PROMISES TO PAY to the order of Steel Partners II, L.P. (the "Lender"), on or before the Maturity Date (as such term is defined in the Loan Agreement), the principal sum of Fourteen Million and No/100 Dollars ($14,000,000.00) in accordance with the terms and provisions of that certain Loan Agreement dated as of October __, 2006 by and between the Borrower and the Lender (as same may be amended, modified, increased, supplemented and/or restated from time to time, the "Loan Agreement"; capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Loan Agreement). The outstanding principal balance of this Note, together with all accrued and unpaid interest thereon, shall be due and payable on the Maturity Date. The Borrower promises to pay interest on the unpaid principal balance of this Note from the Issue Date until the principal balance thereof is paid in full. Interest shall accrue on the outstanding principal balance of this Note from and including the Issue Date to but not including the Maturity Date at the rate or rates, and shall be due and payable on the dates and paid in accordance with the terms and conditions, set forth in the Loan Agreement. Payments of principal, and all amounts due with respect to costs and expenses pursuant to the Loan Agreement, shall be made in lawful money of the United States of America in immediately available funds, without deduction, set-off or counterclaim to the Lender to the account maintained by the Lender not later than 11:59 a.m. (New York time) on the dates on which such payments shall become due pursuant to the terms and provisions set forth in the Loan Agreement. Payments of interest (other than those due on the Maturity Date, which shall be paid in accordance with the terms of the immediately preceding sentence) shall be payable in kind through the issuance of additional notes, substantially in the form hereof, in the aggregate principal amount equal to such amount of interest that would otherwise be payable and shall mature on the Maturity Date. The Obligations of the Borrower under this Note and any additional note issued hereunder are secured in accordance with the terms of the Pledge and Security Agreement. If any payment of principal or interest on this Note shall become due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall in such case be included in computing interest in connection with such payment. 1 of 2  This Note is the Note provided for in, and is entitled to the benefits of the Loan Agreement, which Loan Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the happening of certain stated events, for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions and with the effect therein specified, and provisions to the effect that no provision of the Loan Agreement or this Note shall require the payment or permit the collection of interest in excess of the Highest Lawful Rate. The Borrower and any and all endorsers, guarantors and sureties severally waive grace, demand, presentment for payment, notice of dishonor or default, protest, notice of protest, notice of intent to accelerate, notice of acceleration and diligence in collecting and bringing of suit against any party hereto, and agree to all renewals, extensions or partial payments hereon and to any release or substitution of security hereof, in whole or in part, with or without notice, before or after maturity. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE. IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed and delivered effective as of the date first above written. BNS HOLDING, INC. By: --------------------------- Name: Title: 2 of 2  EXHIBIT B --------- Pledge and Security Agreement