Exhibit 10.35

 

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

Dated as of June 19, 2003

 

among

 

ROLLER BEARING COMPANY OF AMERICA, INC.

 

as Borrower,

 

THE OTHER CREDIT PARTIES SIGNATORY HERETO,

 

as Credit Parties,

 

THE LENDERS SIGNATORY HERETO

 

FROM TIME TO TIME,

 

as Lenders,

 

GENERAL ELECTRIC CAPITAL CORPORATION,

 

as Agent and Lender,

 

and

 

GECC CAPITAL MARKETS GROUP, INC.

 

as Lead Arranger

 

 

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TABLE OF CONTENTS

 

1.

AMOUNT AND TERMS OF CREDIT

 

1.1

Credit Facilities.

 

1.2

Letters of Credit.

 

1.3

Prepayments.

 

1.4

Use of Proceeds

 

1.5

Interest and Applicable Margins.

 

1.6

Eligible Accounts – U.S.; Eligible Accounts – Schaublin.

 

1.7

Eligible Inventory – U.S.; Eligible Inventory – Schaublin.

 

1.8

Cash Management Systems

 

1.9

Fees.

 

1.10

Receipt of Payments

 

1.11

Application and Allocation of Payments.

 

1.12

Loan Account and Accounting

 

1.13

Indemnity.

 

1.14

Access

 

1.15

Taxes.

 

1.16

Capital Adequacy; Increased Costs; Illegality.

 

1.17

Credit Support

 

1.18

Conversion to Dollars

 

1.19

Judgment Currency; Contractual Currency.

 

 

 

2.

CONDITIONS PRECEDENT

 

2.1

Conditions to the Initial Loans

 

2.2

Further Conditions to Each Loan

 

2.3

Conditions to U.S. Revolving Credit Advances Funding Permitted Acquisitions

 

 

 

3.

REPRESENTATIONS AND WARRANTIES

 

3.1

Corporate Existence; Compliance with Law

 

3.2

Executive Offices, Collateral Locations, FEIN

 

3.3

Corporate Power, Authorization, Enforceable Obligations

 

3.4

Financial Statements and Projections

 

3.5

Material Adverse Effect

 

3.6

Ownership of Property; Liens

 

3.7

Labor Matters

 

3.8

Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness

 

3.9

Government Regulation

 

3.10

Margin Regulations

 

3.11

Taxes

 

3.12

ERISA.

 

3.13

No Litigation

 

3.14

Brokers

 

3.15

Intellectual Property

 

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3.16

Full Disclosure

 

3.17

Common Enterprise

 

3.18

Insurance

 

3.19

Deposit and Disbursement Accounts

 

3.20

Government Contracts

 

3.21

Customer and Trade Relations

 

3.22

Agreements and Other Documents

 

3.23

Solvency

 

3.24

Status of Holdings

 

3.25

Status of Schaublin Holding

 

3.26

Subordinated Debt; other Indebtedness

 

3.27

Motor Vehicles

 

3.28

Existing Intercompany Loans

 

 

 

4.

FINANCIAL STATEMENTS AND INFORMATION

 

4.1

Reports and Notices.

 

4.2

Communication with Accountants

 

 

 

5.

AFFIRMATIVE COVENANTS

 

5.1

Maintenance of Existence and Conduct of Business

 

5.2

Payment of Charges.

 

5.3

Books and Records

 

5.4

Insurance; Damage to or Destruction of Collateral.

 

5.5

Compliance with Laws

 

5.6

Supplemental Disclosure

 

5.7

Intellectual Property

 

5.8

[Intentionally Omitted]

 

5.9

Landlords’ Agreements, Mortgagee Agreements, Bailee Letters and Real Estate
Purchases

 

5.10

Motor Vehicles

 

5.11

Further Assurances

 

 

 

6.

NEGATIVE COVENANTS

 

6.1

Mergers, Subsidiaries, Etc.

 

6.2

Investments; Loans and Advances

 

6.3

Indebtedness.

 

6.4

Employee Loans and Affiliate Transactions.

 

6.5

Capital Structure and Business

 

6.6

Guaranteed Indebtedness

 

6.7

Liens

 

6.8

Sale of Stock and Assets

 

6.9

ERISA

 

6.10

Financial Covenants

 

6.11

[RESERVED]

 

6.12

Sale-Leasebacks

 

6.13

Cancellation of Indebtedness

 

6.14

Restricted Payments.

 

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6.15

Change of Corporate Name or Location; Change of Fiscal Year

 

6.16

No Impairment of Intercompany Transfers

 

6.17

No Speculative Transactions

 

6.18

Changes Relating to Subordinated Debt; Material Contracts

 

6.19

Redemptions.

 

6.20

Holdings and Schaublin Holding.

 

 

 

7.

TERM

 

7.1

Termination

 

7.2

Survival of Obligations Upon Termination of Financing Arrangements

 

 

 

8.

EVENTS OF DEFAULT; RIGHTS AND REMEDIES

 

8.1

Events of Default

 

8.2

Remedies.

 

8.3

Waivers by Credit Parties

 

 

 

9.

ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT

 

9.1

Assignment and Participations.

 

9.2

Appointment of Agent

 

9.3

Agent’s Reliance, Etc.

 

9.4

GE Capital and Affiliates

 

9.5

Lender Credit Decision

 

9.6

Indemnification

 

9.7

Successor Agent

 

9.8

Setoff and Sharing of Payments

 

9.9

Advances; Payments; Non-Funding Lenders; Information; Actions in Concert.

 

 

 

10.

SUCCESSORS AND ASSIGNS

 

10.1

Successors and Assigns

 

 

 

11.

MISCELLANEOUS

 

11.1

Complete Agreement; Modification of Agreement

 

11.2

Amendments and Waivers.

 

11.3

Fees and Expenses

 

11.4

No Waiver

 

11.5

Remedies

 

11.6

Severability

 

11.7

Conflict of Terms

 

11.8

Confidentiality

 

11.9

GOVERNING LAW

 

11.10

Notices

 

11.11

Section Titles

 

11.12

Counterparts

 

11.13

WAIVER OF JURY TRIAL

 

11.14

Press Releases and Related Matters

 

11.15

Reinstatement

 

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11.16

Advice of Counsel

 

11.17

No Strict Construction

 

INDEX OF APPENDICES

Annex A (Recitals)

-

Definitions

Annex B (Section 1.2)

-

Letters of Credit

Annex C (Section 1.8)

-

Cash Management System

Annex D (Section 2.1(a))

-

Closing Checklist

Annex E (Section 4.1(a))

-

Financial Statements and Projections -- Reporting

Annex F (Section 4.1(b))

-

Collateral Reports

Annex G (Section 6.10)

-

Financial Covenants

Annex H (Section 9.9(a))

-

Lenders’ Wire Transfer Information

Annex I (Section 11.10)

-

Notice Addresses

Annex J (from Annex A- Commitments definition)

-

Commitments as of Effective Date

 

 

 

Exhibit 1.1(a)(i)

-

Form of Notice of U.S. Revolving Credit Advance

Exhibit 1.1(a)(ii)

-

Form of U.S. Revolving Note

Exhibit 1.1(b)

-

Form of Term Note

Exhibit 1.1(c)(ii)

-

Form of Swing Line Note

Exhibit 1.1(d)(i)

-

Form of Notice of Schaublin Revolving Credit Advance

Exhibit 1.1(d)(ii)

-

Form of Schaublin Revolving Note

Exhibit 1.5(f)

-

Form of Notice of Conversion/Continuation

Exhibit 4.1(b)(i)

-

Form of U.S. Borrowing Base Certificate

Exhibit 4.1(b)(ii)

-

Form of Schaublin Borrowing Base Certificate

Exhibit 6.1

-

Form of Acquisition Compliance Certificate

Exhibit 9.1(a)

-

Form of Assignment Agreement

Exhibit B-1

-

Application for Standby Letter of Credit

Exhibit B-2

-

Application for Documentary Letter of Credit

Exhibit E-1

-

Form of Compliance Certificate

Exhibit E-2

-

Form of Schaublin Intercompany Loan and French Intercompany Loan Certificate

 

 

 

Schedule  1.1

-

Agent’s Representatives

Disclosure Schedule  2.1(d)

-

Capital Structure

Disclosure Schedule  3.1

-

Type of Entity; State of Organization

Disclosure Schedule  3.2

-

Executive Offices, Collateral Locations, FEIN

Disclosure Schedule  3.4(A)

-

Financial Statements

Disclosure Schedule  3.4(B)

-

Pro Forma

Disclosure Schedule  3.4(C)

-

Projections

Disclosure Schedule  3.6

-

Real Estate and Leases

Disclosure Schedule  3.7

-

Labor Matters

Disclosure Schedule  3.8

-

Ventures, Subsidiaries and Affiliates; Outstanding Stock

Disclosure Schedule  3.11

-

Tax Matters

 

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Disclosure Schedule  3.12

-

ERISA Plans

Disclosure Schedule  3.13

-

Litigation

Disclosure Schedule  3.15

-

Intellectual Property

Disclosure Schedule  3.18

-

Insurance

Disclosure Schedule  3.19

-

Deposit and Disbursement Accounts

Disclosure Schedule  3.20

-

Government Contracts

Disclosure Schedule  3.22

-

Material Agreements

Disclosure Schedule  3.28

 

Existing Intercompany Loans

Disclosure Schedule  5.1

-

Trade Names

Disclosure Schedule  6.3

-

Indebtedness

Disclosure Schedule  6.4(a)

-

Transactions with Affiliates

Disclosure Schedule  6.4(b)

-

Transactions with Employees

Disclosure Schedule  6.7

-

Existing Liens

 

v

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This AMENDED AND RESTATED CREDIT AGREEMENT (this “Agreement”) is dated as of
June 19, 2003 and is entered into by and among ROLLER BEARING COMPANY OF
AMERICA, INC., a Delaware corporation (“Borrower”); the other Credit Parties
signatory hereto; GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation
(in its individual capacity, “GE Capital”), for itself, as Lender, and as Agent
for Lenders, and the other Lenders signatory hereto from time to time.

 

RECITALS

 

WHEREAS, certain parties hereto are parties to a Credit Agreement dated as of
May 30, 2002, as amended by a Limited Waiver and Amendment No. 1 to Credit
Agreement dated as of February 5, 2003, Amendment to Credit Agreement and Post
Closing Matters Agreement, dated as of April 23, 2003 and Third Amendment to
Credit and Post Closing Matters Agreement, dated as of May 30, 2003 (the “Prior
Credit Agreement”), pursuant to which the Lenders extended revolving and term
credit facilities to Borrower of up to Ninety-Four Million Dollars ($94,000,000)
in the aggregate for the purpose of refinancing certain Indebtedness of Borrower
and the other Credit Parties and to provide (a) working capital financing for
Borrower and the other Credit Parties, (b) funds for other general corporate
purposes of Borrower and the other Credit Parties and (c) funds for other
purposes not prohibited hereunder, including Redemptions and financing of
Permitted Acquisitions; and for these purposes, Lenders are willing to make
certain loans and other extensions of credit to Borrower of up to such amount
upon the terms and conditions set forth herein;

 

WHEREAS, Borrower desires to create a separate Revolving Loan subfacility under
the existing credit facility in an aggregate amount of up to $7,000,000 that
will be used solely to fund loans from Borrower to Schaublin Holding, which will
in turn use such proceeds solely to fund loans to Schaublin;

 

WHEREAS, the parties hereto desire to amend and restate the Prior Credit
Agreement on the terms set forth herein; and

 

WHEREAS, capitalized terms used in this Agreement shall have the meanings
ascribed to them in Annex A and, for purposes of this Agreement and the other
Loan Documents, the rules of construction set forth in Annex A shall govern. 
All Annexes, Disclosure Schedules, Exhibits and other attachments (collectively,
“Appendices”) hereto, or expressly identified to this Agreement, are
incorporated herein by reference, and taken together with this Agreement, shall
constitute but a single agreement.  These Recitals shall be construed as part of
the Agreement.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
parties hereto agree as follows:

 

1.                                      AMOUNT AND TERMS OF CREDIT

 

1.1                                 CREDIT FACILITIES.

 

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(A)                                  U.S. REVOLVING CREDIT FACILITY.

 

(I)                                     SUBJECT TO THE TERMS AND CONDITIONS
HEREOF, EACH REVOLVING LENDER AGREES TO MAKE AVAILABLE TO BORROWER FROM TIME TO
TIME UNTIL THE COMMITMENT TERMINATION DATE ITS PRO RATA SHARE OF ADVANCES (EACH,
A “U.S. REVOLVING CREDIT ADVANCE”) IN DOLLARS.  THE PRO RATA SHARE OF THE U.S.
REVOLVING LOAN OF ANY REVOLVING LENDER SHALL NOT AT ANY TIME EXCEED ITS SEPARATE
U.S. REVOLVING LOAN COMMITMENT.  THE OBLIGATIONS OF EACH REVOLVING LENDER
HEREUNDER SHALL BE SEVERAL AND NOT JOINT.  UNTIL THE COMMITMENT TERMINATION
DATE, BORROWER MAY FROM TIME TO TIME BORROW, REPAY (WITHOUT NOTICE) AND REBORROW
UNDER THIS SECTION 1.1(A); PROVIDED, THAT THE AMOUNT OF ANY U.S. REVOLVING
CREDIT ADVANCE TO BE MADE AT ANY TIME SHALL NOT EXCEED U.S. BORROWING
AVAILABILITY AT SUCH TIME.  U.S. BORROWING AVAILABILITY MAY BE FURTHER REDUCED
BY RESERVES IMPOSED BY AGENT IN ACCORDANCE WITH THIS AGREEMENT.  EACH
U.S. REVOLVING CREDIT ADVANCE SHALL BE MADE ON NOTICE BY BORROWER TO ONE OF THE
REPRESENTATIVES OF AGENT IDENTIFIED IN SCHEDULE 1.1 AT THE ADDRESS SPECIFIED
THEREIN.  ANY SUCH NOTICE MUST BE GIVEN NO LATER THAN (1) 11:00 A.M. (CHICAGO
TIME) ON THE BUSINESS DAY OF THE PROPOSED U.S. REVOLVING CREDIT ADVANCE, IN THE
CASE OF AN INDEX RATE LOAN, OR (2) 11:00 A.M. (CHICAGO TIME) ON THE DATE WHICH
IS THREE (3) BUSINESS DAYS PRIOR TO THE PROPOSED U.S. REVOLVING CREDIT ADVANCE,
IN THE CASE OF A LIBOR LOAN.  EACH SUCH NOTICE (A ”NOTICE OF U.S. REVOLVING
CREDIT ADVANCE”) MUST BE GIVEN IN WRITING (BY TELECOPY OR OVERNIGHT COURIER)
SUBSTANTIALLY IN THE FORM OF EXHIBIT 1.1(A)(I), AND SHALL INCLUDE THE
INFORMATION REQUIRED IN SUCH EXHIBIT.  IF BORROWER DESIRES TO HAVE THE U.S.
REVOLVING CREDIT ADVANCES BEAR INTEREST BY REFERENCE TO A LIBOR RATE, IT MUST
COMPLY WITH SECTION 1.5(E).

 

(II)                                  EXCEPT AS PROVIDED IN SECTION 1.12,
BORROWER SHALL EXECUTE AND DELIVER TO EACH REVOLVING LENDER A NOTE TO EVIDENCE
THE U.S. REVOLVING LOAN COMMITMENT OF THAT REVOLVING LENDER.  EACH NOTE SHALL BE
IN THE PRINCIPAL AMOUNT OF THE U.S. REVOLVING LOAN COMMITMENT OF THE APPLICABLE
REVOLVING LENDER, DATED THE CLOSING DATE AND SUBSTANTIALLY IN THE FORM OF
EXHIBIT 1.1(A)(II) (EACH A “U.S. REVOLVING NOTE” AND, COLLECTIVELY, THE “U.S.
REVOLVING NOTES”).  EACH U.S. REVOLVING NOTE SHALL REPRESENT THE OBLIGATION OF
BORROWER TO PAY THE AMOUNT OF THE RELEVANT REVOLVING LENDER’S U.S. REVOLVING
LOAN COMMITMENT OR, IF LESS, SUCH REVOLVING LENDER’S PRO RATA SHARE OF THE
AGGREGATE UNPAID PRINCIPAL AMOUNT OF ALL U.S. REVOLVING CREDIT ADVANCES TO
BORROWER TOGETHER WITH INTEREST THEREON AS PRESCRIBED IN SECTION 1.5.  THE
ENTIRE UNPAID BALANCE OF THE U.S. REVOLVING LOAN AND ALL OTHER NON-CONTINGENT
MONETARY OBLIGATIONS SHALL BE IMMEDIATELY DUE AND PAYABLE IN FULL IN IMMEDIATELY
AVAILABLE FUNDS ON THE COMMITMENT TERMINATION DATE.

 

(III)                               ANY PROVISION OF THIS AGREEMENT TO THE
CONTRARY NOTWITHSTANDING, AT THE REQUEST OF BORROWER, IN ITS DISCRETION AGENT
MAY (BUT SHALL HAVE ABSOLUTELY NO OBLIGATION TO) MAKE U.S. REVOLVING CREDIT
ADVANCES TO BORROWER ON BEHALF OF REVOLVING LENDERS IN AMOUNTS THAT CAUSE U.S.
BORROWING AVAILABILITY TO BE LESS THAN THE APPLICABLE AVAILABILITY BLOCK (ANY
SUCH EXCESS U.S. REVOLVING CREDIT ADVANCES ARE HEREIN REFERRED TO COLLECTIVELY
AS “OVERADVANCES”); PROVIDED, THAT (A) NO SUCH EVENT OR OCCURRENCE SHALL CAUSE
OR CONSTITUTE A WAIVER OF AGENT’S, THE SWING LINE LENDER’S OR REVOLVING LENDERS’
RIGHT TO REFUSE TO MAKE ANY FURTHER OVERADVANCES, SWING LINE ADVANCES OR
REVOLVING CREDIT ADVANCES, OR INCUR ANY LETTER OF CREDIT OBLIGATIONS, AS THE
CASE MAY BE, AT ANY TIME THAT AN OVERADVANCE EXISTS, AND (B) NO OVERADVANCE
SHALL RESULT IN A DEFAULT OR EVENT OF DEFAULT DUE TO BORROWER’S FAILURE TO
COMPLY WITH SECTION 1.3(B)(I) FOR SO LONG AS AGENT PERMITS SUCH OVERADVANCE TO
REMAIN OUTSTANDING, BUT

 

2

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SOLELY WITH RESPECT TO THE AMOUNT OF SUCH OVERADVANCE.  IN ADDITION,
OVERADVANCES MAY BE MADE EVEN IF THE CONDITIONS TO LENDING SET FORTH IN SECTION
2 HAVE NOT BEEN MET.  ALL OVERADVANCES SHALL CONSTITUTE INDEX RATE LOANS, SHALL
BEAR INTEREST AT THE DEFAULT RATE AND SHALL BE PAYABLE WITHIN THREE (3) BUSINESS
DAYS AFTER DEMAND.  EXCEPT AS OTHERWISE PROVIDED IN SECTION 1.11(B), THE
AUTHORITY OF AGENT TO MAKE OVERADVANCES IS LIMITED TO AN AGGREGATE AMOUNT NOT TO
EXCEED $2,000,000 AT ANY TIME AND SHALL NOT CAUSE THE REVOLVING LOAN TO EXCEED
THE MAXIMUM AMOUNT.  NO OVERADVANCE SHALL BE OUTSTANDING FOR MORE THAN SIXTY
(60) CONSECUTIVE DAYS, AND NOT MORE THAN TWO OVERADVANCES SHALL BE MADE IN ANY
PERIOD OF ONE HUNDRED EIGHTY (180) CONSECUTIVE DAYS, IN EACH CASE WITHOUT THE
CONSENT OF REQUISITE REVOLVING LENDERS.

 

(B)                                 TERM LOAN.

 

(I)                                     SUBJECT TO THE TERMS AND CONDITIONS
HEREOF, EACH TERM LENDER AGREES TO MAKE A TERM LOAN (COLLECTIVELY, THE “TERM
LOAN”) ON THE CLOSING DATE TO BORROWER IN THE ORIGINAL PRINCIPAL AMOUNT OF ITS
TERM LOAN COMMITMENT.  THE OBLIGATIONS OF EACH TERM LENDER HEREUNDER SHALL BE
SEVERAL AND NOT JOINT.  THE TERM LOAN SHALL BE EVIDENCED BY PROMISSORY NOTES
SUBSTANTIALLY IN THE FORM OF EXHIBIT 1.1(B) (EACH A “TERM NOTE” AND COLLECTIVELY
THE “TERM NOTES”), AND, EXCEPT AS PROVIDED IN SECTION 1.12, BORROWER SHALL
EXECUTE AND DELIVER EACH TERM NOTE TO THE APPLICABLE TERM LENDER.  EACH TERM
NOTE SHALL REPRESENT THE OBLIGATION OF BORROWER TO PAY THE AMOUNT OF THE
APPLICABLE TERM LENDER’S TERM LOAN COMMITMENT, TOGETHER WITH INTEREST THEREON AS
PRESCRIBED IN SECTION 1.5.

 

(II)                                  BORROWER SHALL REPAY THE PRINCIPAL AMOUNT
OF THE TERM LOAN IN NINETEEN (19) CONSECUTIVE QUARTERLY INSTALLMENTS ON THE LAST
DAY OF SEPTEMBER, DECEMBER, MARCH AND JUNE OF EACH YEAR, COMMENCING SEPTEMBER
30, 2002, AS FOLLOWS:

 

Payment Dates

 

Installment Amounts

 

 

 

September 30, 2002 through and including March 31, 2007

 

$

1,428,570 each

 

and by making the final payment, which shall be due on May 30, 2007 and shall be
in the amount of $12,857,170 or, if different, the remaining principal balance
of the Term Loan.

 

(III)                               NOTWITHSTANDING SECTION 1.1(B)(II), THE
AGGREGATE OUTSTANDING PRINCIPAL BALANCE OF THE TERM LOAN SHALL BE DUE AND
PAYABLE IN FULL IN IMMEDIATELY AVAILABLE FUNDS ON THE COMMITMENT TERMINATION
DATE, IF NOT SOONER PAID IN FULL.  NO PAYMENT WITH RESPECT TO THE TERM LOAN MAY
BE REBORROWED.

 

(IV)                              EACH PAYMENT OF PRINCIPAL WITH RESPECT TO THE
TERM LOAN SHALL BE PAID TO AGENT FOR THE RATABLE BENEFIT OF EACH TERM LENDER,
RATABLY IN PROPORTION TO EACH SUCH TERM LENDER’S RESPECTIVE TERM LOAN
COMMITMENT.

 

(C)                                  SWING LINE FACILITY.

 

(I)                                     AGENT SHALL NOTIFY THE SWING LINE LENDER
UPON AGENT’S RECEIPT OF ANY NOTICE OF U.S. REVOLVING CREDIT ADVANCE.  SUBJECT TO
THE TERMS AND CONDITIONS HEREOF, THE SWING LINE LENDER MAY, IN ITS DISCRETION,
MAKE AVAILABLE FROM TIME TO TIME UNTIL THE

 

3

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COMMITMENT TERMINATION DATE ADVANCES (EACH, A “SWING LINE ADVANCE”) IN
ACCORDANCE WITH ANY SUCH NOTICE.  THE PROVISIONS OF THIS SECTION 1.1(C) SHALL
NOT RELIEVE REVOLVING LENDERS OF THEIR OBLIGATIONS TO MAKE U.S. REVOLVING CREDIT
ADVANCES UNDER SECTION 1.1(A); PROVIDED, THAT IF THE SWING LINE LENDER MAKES A
SWING LINE ADVANCE PURSUANT TO ANY SUCH NOTICE, SUCH SWING LINE ADVANCE SHALL BE
IN LIEU OF ANY U.S. REVOLVING CREDIT ADVANCE THAT OTHERWISE MAY BE MADE BY
REVOLVING CREDIT LENDERS PURSUANT TO SUCH NOTICE.  THE AGGREGATE AMOUNT OF SWING
LINE ADVANCES OUTSTANDING SHALL NOT EXCEED AT ANY TIME THE LESSER OF (A) THE
SWING LINE COMMITMENT AND (B) THE LESSER OF THE MAXIMUM AMOUNT AND (EXCEPT FOR
OVERADVANCES) THE U.S. BORROWING BASE, IN EACH CASE, LESS THE OUTSTANDING
BALANCE OF THE U.S. REVOLVING LOAN AT SUCH TIME (“SWING LINE AVAILABILITY”). 
UNTIL THE COMMITMENT TERMINATION DATE, BORROWER MAY FROM TIME TO TIME BORROW,
REPAY AND REBORROW UNDER THIS SECTION 1.1(C).  EACH SWING LINE ADVANCE SHALL BE
MADE PURSUANT TO A NOTICE OF REVOLVING CREDIT ADVANCE DELIVERED BY BORROWER TO
AGENT IN ACCORDANCE WITH SECTION 1.1(A).  ANY SUCH NOTICE MUST BE GIVEN NO LATER
THAN 11:00 A.M. (CHICAGO TIME) ON THE BUSINESS DAY OF THE PROPOSED SWING LINE
ADVANCE.  UNLESS THE SWING LINE LENDER HAS RECEIVED AT LEAST ONE BUSINESS DAY’S
PRIOR WRITTEN NOTICE FROM REQUISITE REVOLVING LENDERS INSTRUCTING IT NOT TO MAKE
A SWING LINE ADVANCE, THE SWING LINE LENDER SHALL, NOTWITHSTANDING THE FAILURE
OF ANY CONDITION PRECEDENT SET FORTH IN SECTIONS 2.2, BE ENTITLED TO FUND THAT
SWING LINE ADVANCE, AND TO HAVE EACH REVOLVING LENDER MAKE U.S. REVOLVING CREDIT
ADVANCES IN ACCORDANCE WITH SECTION 1.1(C)(III) OR PURCHASE PARTICIPATING
INTERESTS IN ACCORDANCE WITH SECTION 1.1(C)(IV).  NOTWITHSTANDING ANY OTHER
PROVISION OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, THE SWING LINE LOAN
SHALL CONSTITUTE AN INDEX RATE LOAN.  BORROWER SHALL REPAY THE AGGREGATE
OUTSTANDING PRINCIPAL AMOUNT OF THE SWING LINE LOAN UPON DEMAND THEREFOR BY
AGENT.

 

(II)                                  BORROWER SHALL EXECUTE AND DELIVER TO THE
SWING LINE LENDER A PROMISSORY NOTE TO EVIDENCE THE SWING LINE COMMITMENT.  SUCH
NOTE SHALL BE IN THE PRINCIPAL AMOUNT OF THE SWING LINE COMMITMENT OF THE SWING
LINE LENDER, DATED THE CLOSING DATE AND SUBSTANTIALLY IN THE FORM OF EXHIBIT
1.1(C)(II)  (THE “SWING LINE NOTE”). THE SWING LINE NOTE SHALL REPRESENT THE
OBLIGATION OF BORROWER TO PAY THE AMOUNT OF THE SWING LINE COMMITMENT OR, IF
LESS, THE AGGREGATE UNPAID PRINCIPAL AMOUNT OF ALL SWING LINE ADVANCES MADE TO
BORROWER TOGETHER WITH INTEREST THEREON AS PRESCRIBED IN SECTION 1.5.  THE
ENTIRE UNPAID BALANCE OF THE SWING LINE LOAN AND ALL OTHER NON-CONTINGENT
OBLIGATIONS SHALL BE IMMEDIATELY DUE AND PAYABLE IN FULL IN IMMEDIATELY
AVAILABLE FUNDS ON THE COMMITMENT TERMINATION DATE IF NOT SOONER PAID IN FULL.

 

(III)                               THE SWING LINE LENDER, AT ANY TIME AND FROM
TIME TO TIME IN ITS SOLE AND ABSOLUTE DISCRETION, BUT NOT LESS FREQUENTLY THAN
ONCE EACH WEEK, SHALL ON BEHALF OF BORROWER (AND BORROWER HEREBY IRREVOCABLY
AUTHORIZES THE SWING LINE LENDER TO SO ACT ON ITS BEHALF) REQUEST EACH REVOLVING
LENDER (INCLUDING THE SWING LINE LENDER) TO MAKE A U.S. REVOLVING CREDIT ADVANCE
TO BORROWER (WHICH SHALL BE AN INDEX RATE LOAN) IN AN AMOUNT EQUAL TO THAT
REVOLVING LENDER’S PRO RATA SHARE OF THE PRINCIPAL AMOUNT OF THE SWING LINE LOAN
(THE “REFUNDED SWING LINE LOAN”) OUTSTANDING ON THE DATE SUCH NOTICE IS GIVEN. 
UNLESS ANY OF THE EVENTS DESCRIBED IN SECTIONS 8.1(H) OR 8.1(I) HAS OCCURRED (IN
WHICH EVENT THE PROCEDURES OF SECTION 1.1(C)(IV) SHALL APPLY) AND REGARDLESS OF
WHETHER THE CONDITIONS PRECEDENT SET FORTH IN THIS AGREEMENT TO THE MAKING OF A
U.S. REVOLVING CREDIT ADVANCE ARE THEN SATISFIED, EACH REVOLVING LENDER SHALL
DISBURSE DIRECTLY TO AGENT, ITS PRO RATA SHARE OF A U.S. REVOLVING CREDIT
ADVANCE ON BEHALF OF THE SWING LINE LENDER, PRIOR TO 2:00 P.M. (CHICAGO TIME),
IN IMMEDIATELY AVAILABLE FUNDS ON THE BUSINESS DAY NEXT SUCCEEDING THE DATE THAT
NOTICE IS GIVEN.  THE PROCEEDS OF THOSE

 

4

--------------------------------------------------------------------------------

 

U.S. REVOLVING CREDIT ADVANCES SHALL BE IMMEDIATELY PAID TO THE SWING LINE
LENDER AND APPLIED TO REPAY THE REFUNDED SWING LINE LOAN.

 

(IV)                              IF, PRIOR TO REFUNDING A SWING LINE LOAN WITH
A U.S. REVOLVING CREDIT ADVANCE PURSUANT TO SECTION 1.1(C)(III), ONE OF THE
EVENTS DESCRIBED IN SECTIONS 8.1(H) OR 8.1(I) HAS OCCURRED, THEN, SUBJECT TO THE
PROVISIONS OF SECTION 1.1(C)(V) BELOW, EACH REVOLVING LENDER SHALL, ON THE DATE
SUCH U.S. REVOLVING CREDIT ADVANCE WAS TO HAVE BEEN MADE FOR THE BENEFIT OF
BORROWER, PURCHASE FROM THE SWING LINE LENDER AN UNDIVIDED PARTICIPATION
INTEREST IN THE SWING LINE LOAN IN AN AMOUNT EQUAL TO ITS PRO RATA SHARE OF SUCH
SWING LINE LOAN.  UPON REQUEST, EACH REVOLVING LENDER SHALL PROMPTLY TRANSFER TO
THE SWING LINE LENDER, IN IMMEDIATELY AVAILABLE FUNDS, THE AMOUNT OF ITS
PARTICIPATION INTEREST.

 

(V)                                 EACH REVOLVING LENDER’S OBLIGATION TO MAKE
U.S. REVOLVING CREDIT ADVANCES IN ACCORDANCE WITH SECTION 1.1(C)(III) AND TO
PURCHASE PARTICIPATION INTERESTS IN ACCORDANCE WITH SECTION 1.1(C)(IV) SHALL BE
ABSOLUTE AND UNCONDITIONAL AND SHALL NOT BE AFFECTED BY ANY CIRCUMSTANCE,
INCLUDING (A) ANY SETOFF, COUNTERCLAIM, RECOUPMENT, DEFENSE OR OTHER RIGHT THAT
SUCH REVOLVING LENDER MAY HAVE AGAINST THE SWING LINE LENDER, BORROWER OR ANY
OTHER PERSON FOR ANY REASON WHATSOEVER; (B) THE OCCURRENCE OR CONTINUANCE OF ANY
DEFAULT OR EVENT OF DEFAULT; (C) ANY INABILITY OF BORROWER TO SATISFY THE
CONDITIONS PRECEDENT TO BORROWING SET FORTH IN THIS AGREEMENT AT ANY TIME OR (D)
ANY OTHER CIRCUMSTANCE, HAPPENING OR EVENT WHATSOEVER, WHETHER OR NOT SIMILAR TO
ANY OF THE FOREGOING.  IF ANY REVOLVING LENDER DOES NOT MAKE AVAILABLE TO AGENT
OR THE SWING LINE LENDER, AS APPLICABLE,  THE AMOUNT REQUIRED PURSUANT TO
SECTIONS 1.1(C)(III) OR 1.1(C)(IV), AS THE CASE MAY BE, THE SWING LINE LENDER
SHALL BE ENTITLED TO RECOVER SUCH AMOUNT ON DEMAND FROM SUCH REVOLVING LENDER,
TOGETHER WITH INTEREST THEREON FOR EACH DAY FROM THE DATE OF NON-PAYMENT UNTIL
SUCH AMOUNT IS PAID IN FULL AT THE FEDERAL FUNDS RATE FOR THE FIRST TWO (2)
BUSINESS DAYS AND AT THE INDEX RATE THEREAFTER.

 

(D)                                 SCHAUBLIN REVOLVING CREDIT FACILITY.

 

(I)                                     SUBJECT TO THE TERMS AND CONDITIONS
HEREOF, EACH REVOLVING LENDER AGREES TO MAKE AVAILABLE TO BORROWER FROM TIME TO
TIME UNTIL THE COMMITMENT TERMINATION DATE ITS PRO RATA SHARE OF ADVANCES (EACH,
A “SCHAUBLIN REVOLVING CREDIT ADVANCE”) IN DOLLARS.  UNTIL THE COMMITMENT
TERMINATION DATE, BORROWER MAY FROM TIME TO TIME BORROW, REPAY (WITHOUT NOTICE)
AND REBORROW UNDER THIS SECTION 1.1(D); PROVIDED, THAT THE AMOUNT OF ANY
SCHAUBLIN REVOLVING CREDIT ADVANCE TO BE MADE AT ANY TIME SHALL NOT EXCEED THE
SCHAUBLIN BORROWING AVAILABILITY AT SUCH TIME.  SCHAUBLIN BORROWING AVAILABILITY
MAY BE REDUCED BY RESERVES IMPOSED BY AGENT IN ACCORDANCE WITH THIS AGREEMENT. 
EACH SCHAUBLIN REVOLVING CREDIT ADVANCE SHALL BE MADE ON NOTICE BY BORROWER TO
ONE OF THE REPRESENTATIVES OF AGENT IDENTIFIED IN SCHEDULE 1.1 AT THE ADDRESS
SPECIFIED THEREIN.  ANY SUCH NOTICE MUST BE GIVEN NO LATER THAN (1) 11:00 A.M.
(CHICAGO TIME) ON THE BUSINESS DAY OF THE PROPOSED SCHAUBLIN REVOLVING CREDIT
ADVANCE, IN THE CASE OF AN INDEX RATE LOAN, OR (2) 11:00 A.M. (CHICAGO TIME) ON
THE DATE WHICH IS 3 (THREE) BUSINESS DAYS PRIOR TO THE PROPOSED SCHAUBLIN
REVOLVING CREDIT ADVANCE, IN THE CASE OF A LIBOR LOAN.  EACH SUCH NOTICE
(A ”NOTICE OF SCHAUBLIN REVOLVING CREDIT ADVANCE”) MUST BE GIVEN IN WRITING (BY
TELECOPY OR OVERNIGHT COURIER) SUBSTANTIALLY IN THE FORM OF EXHIBIT 1.1(D)(I),
AND SHALL INCLUDE THE INFORMATION REQUIRED IN SUCH EXHIBIT.  IF BORROWER DESIRES
TO HAVE THE SCHAUBLIN REVOLVING CREDIT ADVANCES BEAR INTEREST BY REFERENCE TO A
LIBOR RATE, IT MUST COMPLY WITH SECTION 1.5(E).

 

5

--------------------------------------------------------------------------------

 

(II)                                  EXCEPT AS PROVIDED IN SECTION 1.12,
BORROWER SHALL EXECUTE AND DELIVER TO EACH REVOLVING LENDER A NOTE TO EVIDENCE
THE SCHAUBLIN REVOLVING LOAN COMMITMENT OF THAT REVOLVING LENDER.  EACH NOTE
SHALL BE IN THE PRINCIPAL AMOUNT OF THE SCHAUBLIN REVOLVING LOAN COMMITMENT OF
THE APPLICABLE REVOLVING LENDER, DATED THE EFFECTIVE DATE AND SUBSTANTIALLY IN
THE FORM OF EXHIBIT 1.1(D)(II) (EACH A “SCHAUBLIN REVOLVING NOTE” AND,
COLLECTIVELY, THE “SCHAUBLIN REVOLVING NOTES”).  EACH SCHAUBLIN REVOLVING NOTE
SHALL REPRESENT THE OBLIGATION OF BORROWER TO PAY THE AMOUNT OF THE RELEVANT
REVOLVING LENDER’S SCHAUBLIN REVOLVING LOAN COMMITMENT OR, IF LESS, SUCH
REVOLVING LENDER’S PRO RATA SHARE OF THE AGGREGATE UNPAID PRINCIPAL AMOUNT OF
ALL SCHAUBLIN REVOLVING CREDIT ADVANCES TO BORROWER TOGETHER WITH INTEREST
THEREON AS PRESCRIBED IN SECTION 1.5.  THE ENTIRE UNPAID BALANCE OF THE
SCHAUBLIN REVOLVING LOAN AND ALL OTHER NON-CONTINGENT MONETARY OBLIGATIONS SHALL
BE IMMEDIATELY DUE AND PAYABLE IN FULL IN IMMEDIATELY AVAILABLE FUNDS ON THE
COMMITMENT TERMINATION DATE.

 

(E)                                  RELIANCE ON NOTICES.  AGENT SHALL BE
ENTITLED TO RELY UPON, AND SHALL BE FULLY PROTECTED IN RELYING UPON, ANY NOTICE
OF U.S. REVOLVING CREDIT ADVANCE, NOTICE OF SCHAUBLIN REVOLVING CREDIT ADVANCE,
NOTICE OF CONVERSION/CONTINUATION OR SIMILAR NOTICE REASONABLY BELIEVED BY AGENT
TO BE GENUINE.  AGENT MAY ASSUME THAT EACH PERSON EXECUTING AND DELIVERING ANY
NOTICE IN ACCORDANCE HEREWITH WAS DULY AUTHORIZED, UNLESS THE RESPONSIBLE
INDIVIDUAL ACTING THEREON FOR AGENT HAS ACTUAL KNOWLEDGE TO THE CONTRARY.

 

1.2                                 LETTERS OF CREDIT.

 

Subject to and in accordance with the terms and conditions contained herein and
in Annex B, Borrower shall have the right to request, and Revolving Lenders
agree to incur, or purchase participations in, Letter of Credit Obligations in
respect of Borrower or any Secured Guarantor.

 

1.3                                 PREPAYMENTS.

 

(A)                                  VOLUNTARY PREPAYMENTS; REDUCTIONS IN
REVOLVING LOAN COMMITMENTS.  BORROWER MAY AT ANY TIME ON AT LEAST THREE (3)
DAYS’ PRIOR WRITTEN NOTICE TO AGENT (I) VOLUNTARILY PREPAY ALL OR PART OF THE
TERM LOAN AND/OR (II) PERMANENTLY REDUCE (BUT NOT TERMINATE) THE REVOLVING LOAN
COMMITMENTS; PROVIDED, THAT (A) ANY SUCH PREPAYMENTS OR REDUCTIONS SHALL BE IN A
MINIMUM AMOUNT OF $500,000 AND INTEGRAL MULTIPLES OF $100,000 IN EXCESS OF SUCH
AMOUNT, (B) THE REVOLVING LOAN COMMITMENTS SHALL NOT BE REDUCED TO AN AMOUNT
LESS THAN THE GREATER OF THE AMOUNT OF THE REVOLVING LOANS OUTSTANDING OR
$30,000,000; (C) THE U.S. REVOLVING LOAN COMMITMENT AND THE SCHAUBLIN REVOLVING
LOAN COMMITMENT SHALL BE REDUCED PRO RATA; AND (D) AFTER GIVING EFFECT TO SUCH
REDUCTIONS, BORROWER SHALL COMPLY WITH SECTION 1.3(B)(I).  IN ADDITION, BORROWER
MAY AT ANY TIME ON AT LEAST TEN (10) DAYS’ PRIOR WRITTEN NOTICE TO AGENT
TERMINATE THE REVOLVING LOAN COMMITMENTS, PROVIDED, THAT UPON SUCH TERMINATION
ALL LOANS AND OTHER OBLIGATIONS SHALL BE IMMEDIATELY DUE AND PAYABLE IN FULL AND
ALL LETTER OF CREDIT OBLIGATIONS SHALL BE CASH COLLATERALIZED OR OTHERWISE
SATISFIED IN ACCORDANCE WITH ANNEX B HERETO.  ANY SUCH VOLUNTARY PREPAYMENT AND
ANY REDUCTION OR TERMINATION OF THE REVOLVING LOAN COMMITMENTS MUST BE
ACCOMPANIED BY THE PAYMENT OF ANY APPLICABLE LIBOR FUNDING BREAKAGE COSTS IN
ACCORDANCE WITH SECTION 1.13(B).  UPON ANY SUCH REDUCTION OR TERMINATION OF THE
REVOLVING LOAN COMMITMENTS, BORROWER’S RIGHT TO REQUEST REVOLVING CREDIT
ADVANCES OR

 

6

--------------------------------------------------------------------------------

 

REQUEST THAT LETTER OF CREDIT OBLIGATIONS BE INCURRED ON ITS BEHALF, OR REQUEST
SWING LINE ADVANCES, SHALL SIMULTANEOUSLY BE PERMANENTLY REDUCED OR TERMINATED,
AS THE CASE MAY BE.  EACH NOTICE OF PARTIAL PREPAYMENT SHALL DESIGNATE THE LOAN
OR OTHER OBLIGATIONS TO WHICH SUCH PREPAYMENT IS TO BE APPLIED; PROVIDED, THAT
ANY PARTIAL PREPAYMENTS OF THE TERM LOAN MADE BY BORROWER SHALL BE APPLIED TO
PREPAY THE SCHEDULED INSTALLMENTS OF THE TERM LOAN IN INVERSE ORDER OF MATURITY.

 

(B)                                 MANDATORY PREPAYMENTS.

 

(I)                                     IF AT ANY TIME THE U.S. BORROWING
AVAILABILITY OR SCHAUBLIN BORROWING AVAILABILITY IS LESS THAN THE APPLICABLE
AVAILABILITY BLOCK, BORROWER SHALL IMMEDIATELY REPAY THE AGGREGATE OUTSTANDING
U.S. REVOLVING CREDIT ADVANCES AND SCHAUBLIN REVOLVING CREDIT ADVANCES, AS THE
CASE MAY BE, TO THE EXTENT REQUIRED TO ELIMINATE SUCH DEFICIENCY.  IF ANY SUCH
DEFICIENCY REMAINS AFTER REPAYMENT IN FULL OF THE AGGREGATE OUTSTANDING
REVOLVING CREDIT ADVANCES, BORROWER SHALL PROVIDE CASH COLLATERAL FOR THE LETTER
OF CREDIT OBLIGATIONS IN THE MANNER SET FORTH IN ANNEX B TO THE EXTENT REQUIRED
TO ELIMINATE SUCH EXCESS OR DEFICIENCY.  NOTWITHSTANDING THE FOREGOING, ANY
OVERADVANCE MADE PURSUANT TO SECTION 1.1(A)(III) SHALL BE REPAID ONLY ON DEMAND
IN ACCORDANCE WITH SUCH SECTION.

 

(II)                                  IMMEDIATELY UPON RECEIPT BY BORROWER, ANY
SECURED GUARANTOR OR ANY RBC SWISS GROUP MEMBER OF ANY PROCEEDS OF ANY CASH
ASSET DISPOSITION (EXCLUDING PROCEEDS OF ASSET DISPOSITIONS PERMITTED BY SECTION
6.8(A)) TO THE EXTENT THE NET PROCEEDS OF SUCH ASSET DISPOSITIONS EXCEED THE
DOLLAR EQUIVALENT OF $250,000 IN THE AGGREGATE IN ANY FISCAL YEAR, BORROWER
SHALL PREPAY THE OBLIGATIONS IN AN AMOUNT EQUAL TO ALL SUCH PROCEEDS, NET OF (A)
COMMISSIONS AND OTHER REASONABLE AND CUSTOMARY TRANSACTION COSTS, FEES AND
EXPENSES PROPERLY ATTRIBUTABLE TO SUCH TRANSACTION AND PAYABLE BY BORROWER, ANY
SECURED GUARANTOR OR ANY RBC SWISS GROUP MEMBER IN CONNECTION THEREWITH (IN EACH
CASE, PAID TO NON-AFFILIATES), (B) TRANSFER TAXES, (C) AMOUNTS PAYABLE TO
HOLDERS OF SENIOR LIENS (TO THE EXTENT SUCH LIENS CONSTITUTE PERMITTED
ENCUMBRANCES HEREUNDER), IF ANY, AND (D) AN APPROPRIATE RESERVE FOR INCOME TAXES
PAYABLE IN CASH IN CONNECTION THEREWITH; PROVIDED, THAT IF BORROWER, THE
APPLICABLE SECURED GUARANTOR OR RBC SWISS GROUP MEMBER INTENDS TO REINVEST ALL
OR ANY PORTION OF THE NET PROCEEDS OF ANY ASSET DISPOSITION WITHIN 270 DAYS
THEREAFTER IN FIXED ASSETS AND BORROWER PROMPTLY NOTIFIES AGENT OF THAT
INTENTION IN WRITING, AND IF (X) NO EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE
CONTINUING AT THE DATE OF SUCH WRITTEN NOTIFICATION, AND (Y) BORROWER, SUCH
SECURED GUARANTOR OR RBC SWISS GROUP MEMBER, AS THE CASE MAY BE, GRANTS A FIRST
SECURITY INTEREST TO AGENT IN SUCH REPLACEMENT ASSETS WHEN ACQUIRED, THEN THE
AMOUNT OF ANY SUCH MANDATORY PREPAYMENT SHALL BE REDUCED BY THE AMOUNT TO BE
REINVESTED; PROVIDED, FURTHER, THAT IF AND TO THE EXTENT THAT BORROWER, SUCH
SECURED GUARANTOR OR RBC SWISS GROUP MEMBER, AS THE CASE MAY BE, DOES NOT
REINVEST SUCH NET PROCEEDS WITHIN THAT 270-DAY PERIOD, BORROWER SHALL THEN REPAY
THE LOANS, WITH NET PROCEEDS THAT HAVE NOT BEEN REINVESTED ON THE LAST DAY OF
SUCH 270-DAY PERIOD.  ANY SUCH PREPAYMENT SHALL BE APPLIED IN ACCORDANCE WITH
SECTION 1.3(C).

 

(III)                               IF BORROWER, ANY SECURED GUARANTOR OR ANY
RBC SWISS GROUP MEMBER SHALL SUFFER ANY EVENT OF LOSS, THEN SUCH PERSON SHALL
(A) PROMPTLY NOTIFY AGENT OF SUCH EVENT OF LOSS WITH ANTICIPATED NET PROCEEDS IN
EXCESS OF THE DOLLAR EQUIVALENT OF $1,000,000 (INCLUDING THE AMOUNT OF THE
ESTIMATED NET INSURANCE PROCEEDS NET OF AMOUNTS PAYABLE TO HOLDERS OF SENIOR
LIENS (TO THE EXTENT SUCH LIENS CONSTITUTE PERMITTED ENCUMBRANCES

 

7

--------------------------------------------------------------------------------

 

HEREUNDER, IF ANY) OR OTHER AWARDS PAYABLE IN CONNECTION WITH SUCH EVENT OF
LOSS) AND (B) PROMPTLY UPON RECEIPT OF SUCH PROCEEDS BY SUCH PERSON, BORROWER
SHALL PREPAY THE OBLIGATIONS, IN AN AMOUNT EQUAL TO SUCH PROCEEDS NET OF (X) ALL
MONEY ACTUALLY APPLIED (OR HELD IN RESERVE PENDING SUCH APPLICATION) TO REPAIR
OR RECONSTRUCT THE DAMAGED PROPERTY OR PROPERTY AFFECTED BY CONDEMNATION OR
TAKING BUT SUBJECT TO THE TERMS OF SECTION 5.4(C) AND (Y) ALL OUT-OF-POCKET
TRANSACTION COSTS AND (Z) RELATED CASH TAXES.  ANY SUCH PREPAYMENT SHALL BE
APPLIED IN ACCORDANCE WITH SECTION 1.3(D).

 

(IV)                              PROCEEDS OF KEYMAN LIFE INSURANCE PLEDGED TO
AGENT SHALL BE IMMEDIATELY USED TO PREPAY THE OBLIGATIONS IN AN AMOUNT EQUAL TO
SUCH PROCEEDS, WHICH SHALL BE APPLIED IN ACCORDANCE WITH SECTION 1.3(C).

 

(V)                                 IF HOLDINGS OR BORROWER ISSUES STOCK, NO
LATER THAN THE BUSINESS DAY FOLLOWING THE DATE OF RECEIPT OF ANY CASH PROCEEDS
THEREOF NET OF UNDERWRITING DISCOUNTS AND COMMISSIONS AND OTHER REASONABLE COSTS
PAID TO NON-AFFILIATES IN CONNECTION THEREWITH, BORROWER SHALL PREPAY THE
OBLIGATIONS IN AN AMOUNT EQUAL TO 50% OF SUCH NET PROCEEDS.  ANY SUCH PREPAYMENT
SHALL BE APPLIED IN ACCORDANCE WITH SECTION 1.3(C).  NOTWITHSTANDING THE
FOREGOING TWO SENTENCES, BORROWER NEED NOT PREPAY THE OBLIGATIONS IN ACCORDANCE
WITH THIS SECTION 1.3(B)(V) IN CONNECTION WITH (A) ISSUANCES OF STOCK OF
HOLDINGS TO THE EXTENT (BUT ONLY TO THE EXTENT) THE PROCEEDS THEREOF ARE USED TO
PURCHASE, RETIRE, REDEEM OR OTHERWISE ACQUIRE FOR VALUE ALL OR ANY PORTION OF
THE ZERO COUPON DEBT, (B) ISSUANCES OF STOCK OF HOLDINGS TO THE EXISTING
STOCKHOLDERS OF HOLDINGS OR TO SELLER(S) INVOLVED IN A PERMITTED ACQUISITION, IN
EACH CASE TO THE EXTENT (BUT ONLY TO THE EXTENT) THAT SUCH STOCK OR THE PROCEEDS
THEREOF ARE IMMEDIATELY USED AS A CONSIDERATION FOR ALL OR A PORTION OF THE
PURCHASE PRICE OF A PERMITTED ACQUISITION, SO LONG AS NO CHANGE OF CONTROL
RESULTS AFTER GIVING EFFECT TO SUCH ISSUANCE OR SERIES OF RELATED ISSUANCES, (C)
ISSUANCE OF DIRECTORS’ QUALIFYING SHARES, (D) ISSUANCES OF STOCK OF HOLDINGS
ISSUED TO ANY HOLDER OF INDEBTEDNESS OF HOLDINGS OR BORROWER TO THE EXTENT (BUT
ONLY TO THE EXTENT) ISSUED IN CONNECTION WITH AN ISSUANCE, REFINANCING OR
RESTRUCTURING OF INDEBTEDNESS PERMITTED HEREUNDER, SO LONG AS NO CHANGE OF
CONTROL RESULTS AFTER GIVING EFFECT TO SUCH ISSUANCE OR A SERIES OF RELATED
ISSUANCES, AND (E) SALES OR ISSUANCES OF COMMON STOCK TO OFFICERS, DIRECTORS OR
EMPLOYEES OF HOLDINGS, BORROWER OR ANY SUBSIDIARY, AS THE CASE MAY BE, PURSUANT
TO A MANAGEMENT OR EMPLOYEE BENEFIT PLAN, TO THE EXTENT THE AGGREGATE PROCEEDS
OF ALL COMMON STOCK SO ISSUED IN EXCESS OF THE REDEMPTIONS OF COMMON STOCK OF
EMPLOYEES SHALL NOT EXCEED THE DOLLAR EQUIVALENT OF $2,000,000 IN ANY FISCAL
YEAR.

 

(C)                                  APPLICATION OF CERTAIN MANDATORY
PREPAYMENTS.  ANY PREPAYMENTS MADE BY BORROWER PURSUANT TO SECTIONS 1.3(B)(II),
1.3(B)(IV) OR 1.3(B)(V) ABOVE SHALL BE APPLIED AS FOLLOWS: FIRST, TO FEES AND
REIMBURSABLE EXPENSES OF AGENT THEN DUE AND PAYABLE PURSUANT TO ANY OF THE LOAN
DOCUMENTS; SECOND, TO INTEREST THEN DUE AND PAYABLE ON THE TERM LOAN; THIRD, TO
PREPAY THE SCHEDULED PRINCIPAL INSTALLMENTS OF THE TERM LOAN IN INVERSE ORDER OF
MATURITY, UNTIL SUCH TERM LOAN SHALL HAVE BEEN PREPAID IN FULL; FOURTH, TO
INTEREST THEN DUE AND PAYABLE ON THE SWING LINE LOAN; FIFTH, TO THE PRINCIPAL
BALANCE OF THE SWING LINE LOAN UNTIL THE SAME HAS BEEN REPAID IN FULL; SIXTH, TO
INTEREST THEN DUE AND PAYABLE ON THE REVOLVING CREDIT ADVANCES; SEVENTH, TO THE
OUTSTANDING PRINCIPAL BALANCE OF REVOLVING CREDIT ADVANCES UNTIL THE SAME HAS
BEEN PAID IN FULL; AND EIGHTH, TO ANY LETTER OF CREDIT OBLIGATIONS, TO PROVIDE
CASH COLLATERAL THEREFOR IN THE MANNER SET FORTH IN ANNEX B, UNTIL ALL SUCH
LETTER OF CREDIT OBLIGATIONS HAVE BEEN FULLY CASH COLLATERALIZED IN THE MANNER
SET FORTH IN ANNEX B; PROVIDED, THAT (X) ANY MANDATORY PREPAYMENTS

 

8

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MADE BY BORROWER PURSUANT TO SECTIONS 1.3(B)(II) OR (III) FROM THE PROCEEDS OF
ASSETS OWNED BY THE RBC SWISS GROUP MEMBERS SHALL BE APPLIED FIRST TO THE
SCHAUBLIN REVOLVING CREDIT ADVANCES (WHICH APPLICATION SHALL RESPECTIVELY REDUCE
EACH OF THE SCHAUBLIN INTERCOMPANY LOANS) UNTIL THE SAME HAVE BEEN PAID IN FULL
AND THEN TO THE OTHER OBLIGATIONS IN THE ORDER SET FORTH ABOVE OR IN THE ORDER
SET FORTH IN CLAUSE (D) BELOW (AS APPLICABLE); AND (Y) ANY MANDATORY PREPAYMENTS
MADE BY BORROWER PURSUANT TO SECTIONS 1.3(B)(II) OR (III) FROM THE PROCEEDS OF
ASSETS OWNED BY BORROWER OR ITS DOMESTIC SUBSIDIARIES SHALL BE APPLIED AS SET
FORTH ABOVE OR AS SET FORTH IN CLAUSE (D) BELOW (AS APPLICABLE), EXCEPT THAT NO
AMOUNTS SHALL BE APPLIED TO THE SCHAUBLIN REVOLVING CREDIT ADVANCES UNTIL THE
U.S. REVOLVING CREDIT ADVANCES HAVE BEEN PAID IN FULL AND THE LETTER OF CREDIT
OBLIGATIONS HAVE BEEN CASH COLLATERALIZED.  NEITHER THE REVOLVING LOAN
COMMITMENTS NOR THE SWING LINE LOAN COMMITMENT SHALL BE PERMANENTLY REDUCED BY
THE AMOUNT OF ANY SUCH PREPAYMENTS.

 

(D)                                 APPLICATION OF PREPAYMENTS FROM INSURANCE
PROCEEDS AND CONDEMNATION PROCEEDS.  PREPAYMENTS FROM INSURANCE OR CONDEMNATION
PROCEEDS IN CONNECTION WITH AN EVENT OF LOSS IN ACCORDANCE WITH SECTIONS
1.3(B)(III) AND 5.4(C) AND THE MORTGAGE(S), RESPECTIVELY, SHALL BE APPLIED AS
FOLLOWS:  INSURANCE PROCEEDS FROM CASUALTIES OR LOSSES TO CASH OR INVENTORY
LOCATED IN THE UNITED STATES SHALL BE APPLIED FIRST, TO THE SWING LINE LOANS
AND, SECOND, TO U.S. REVOLVING CREDIT ADVANCES; INSURANCE OR CONDEMNATION
PROCEEDS FROM CASUALTIES OR LOSSES TO EQUIPMENT, FIXTURES AND REAL ESTATE (OTHER
THAN EQUIPMENT, FIXTURES AND REAL ESTATE OWNED BY SCHAUBLIN OR ANY OF THE FRENCH
OPERATING COMPANIES) SHALL BE APPLIED TO SCHEDULED INSTALLMENTS OF THE TERM LOAN
IN INVERSE ORDER OF MATURITY.  ALL INSURANCE OR CONDEMNATION PROCEEDS OF ASSETS
OF THE RBC SWISS GROUP MEMBERS SHALL, SUBJECT TO SECTIONS 1.3(B)(III) AND
5.4(C), BE APPLIED TO THE SCHAUBLIN REVOLVING LOAN (WHICH APPLICATION SHALL
RESPECTIVELY REDUCE EACH OF THE SCHAUBLIN INTERCOMPANY LOANS).  NEITHER THE
REVOLVING LOAN COMMITMENTS NOR THE SWING LINE LOAN COMMITMENT SHALL BE
PERMANENTLY REDUCED BY THE AMOUNT OF ANY SUCH PREPAYMENTS.  IF THE PRECISE
AMOUNT OF INSURANCE OR CONDEMNATION PROCEEDS ALLOCABLE TO INVENTORY AS COMPARED
TO EQUIPMENT, FIXTURES AND REAL ESTATE ARE NOT OTHERWISE DETERMINED, THE
ALLOCATION AND APPLICATION OF THOSE PROCEEDS SHALL BE JOINTLY DETERMINED BY
AGENT AND BORROWER.

 

(E)                                  NO IMPLIED CONSENT.  NOTHING IN THIS
SECTION 1.3 SHALL BE CONSTRUED TO CONSTITUTE AGENT’S OR ANY LENDER’S CONSENT TO
ANY TRANSACTION THAT IS NOT PERMITTED BY OTHER PROVISIONS OF THIS AGREEMENT OR
THE OTHER LOAN DOCUMENTS.

 

1.4                                 Use of Proceeds.  Borrower shall use the
proceeds of the Term Loan, the U.S. Revolving Loan and the Swing Line Loan for
the Refinancing, Redemptions (including Recapitalization) and any related
transaction expenses, for the financing of Borrower’s ordinary working capital
and general corporate needs and for any other purpose not prohibited hereunder,
and Borrower may use the proceeds of the U.S. Revolving Loan to finance
Permitted Acquisitions, subject to the terms and conditions set forth herein. 
Borrower shall use the proceeds of the Schaublin Revolving Loan to fund the
Schaublin Intercompany Loans and Schaublin shall use the proceeds of the
Schaublin Intercompany Loans for the ordinary working capital and general
corporate needs of Schaublin and for the making of Intercompany Loans to the
French Operating Companies.

 

9

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1.5                                 INTEREST AND APPLICABLE MARGINS.

 

(A)                                  BORROWER SHALL PAY INTEREST TO AGENT, FOR
THE RATABLE BENEFIT OF LENDERS IN ACCORDANCE WITH THE VARIOUS LOANS BEING MADE
BY EACH LENDER, IN ARREARS ON EACH APPLICABLE INTEREST PAYMENT DATE, AT THE
FOLLOWING RATES:  (I) WITH RESPECT TO THE REVOLVING CREDIT ADVANCES, THE INDEX
RATE PLUS THE APPLICABLE REVOLVER INDEX MARGIN PER ANNUM OR, AT THE ELECTION OF
BORROWER, THE APPLICABLE LIBOR RATE PLUS THE APPLICABLE REVOLVER LIBOR MARGIN
PER ANNUM, BASED ON THE AGGREGATE REVOLVING CREDIT ADVANCES OUTSTANDING FROM
TIME TO TIME;  (II) WITH RESPECT TO THE TERM LOAN, THE INDEX RATE PLUS THE
APPLICABLE TERM LOAN INDEX MARGIN PER ANNUM OR, AT THE ELECTION OF BORROWER, THE
APPLICABLE LIBOR RATE PLUS THE APPLICABLE TERM LOAN LIBOR MARGIN PER ANNUM; AND
(III) WITH RESPECT TO THE SWING LINE LOAN, THE INDEX RATE PLUS THE APPLICABLE
REVOLVER INDEX MARGIN PER ANNUM.

 

The Applicable Margins are as follows:

 

Applicable Revolver Index Margin

1.25

%

 

 

 

Applicable Revolver Index Margin

1.25

%

 

 

 

Applicable Revolver LIBOR Margin

2.25

%

 

 

 

Applicable Term Loan Index Margin

1.25

%

 

 

 

Applicable Term Loan LIBOR Margin

2.25

%

 

(B)                                 IF ANY PAYMENT ON ANY LOAN BECOMES DUE AND
PAYABLE ON A DAY OTHER THAN A BUSINESS DAY, THE MATURITY THEREOF WILL BE
EXTENDED TO THE NEXT SUCCEEDING BUSINESS DAY (EXCEPT AS SET FORTH IN THE
DEFINITION OF LIBOR PERIOD) AND, WITH RESPECT TO PAYMENTS OF PRINCIPAL, INTEREST
THEREON SHALL BE PAYABLE AT THE THEN APPLICABLE RATE DURING SUCH EXTENSION.

 

(C)                                  ALL COMPUTATIONS OF FEES CALCULATED ON A
PER ANNUM BASIS AND INTEREST SHALL BE MADE BY AGENT ON THE BASIS OF A 360-DAY
YEAR, IN EACH CASE FOR THE ACTUAL NUMBER OF DAYS OCCURRING IN THE PERIOD FOR
WHICH SUCH INTEREST AND FEES ARE PAYABLE.  THE INDEX RATE IS A FLOATING RATE
DETERMINED FOR EACH DAY.  EACH DETERMINATION BY AGENT OF AN INTEREST RATE AND
FEES HEREUNDER SHALL BE PRESUMED TO BE CORRECT.

 

(D)                                 SO LONG AS AN EVENT OF DEFAULT HAS OCCURRED
AND IS CONTINUING UNDER SECTION 8.1(A), (H) OR (I), OR SO LONG AS ANY OTHER
DEFAULT OR EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING AND AT THE ELECTION
OF AGENT (OR UPON THE WRITTEN REQUEST OF REQUISITE LENDERS) CONFIRMED BY WRITTEN
NOTICE FROM AGENT TO BORROWER, THE INTEREST RATES APPLICABLE TO THE LOANS AND
THE LETTER OF CREDIT FEES SHALL BE INCREASED BY TWO PERCENTAGE POINTS (2%) PER
ANNUM ABOVE THE RATES OF INTEREST OR THE RATE OF SUCH FEES OTHERWISE APPLICABLE
HEREUNDER (“DEFAULT RATE”). INTEREST AND LETTER OF CREDIT FEES AT THE DEFAULT
RATE SHALL ACCRUE FROM THE INITIAL DATE OF SUCH EVENT OF DEFAULT IF SUCH EVENT
OF DEFAULT AROSE UNDER SECTION 8.1(A), (H) OR (I) OR FROM THE DATE OF THE
DELIVERY OF THE WRITTEN NOTICE FROM AGENT TO BORROWER FOR ALL OTHER EVENTS OF
DEFAULT, UNTIL THAT EVENT OF DEFAULT IS CURED OR WAIVED AND SHALL BE PAYABLE
UPON DEMAND.

 

(E)                                  SUBJECT TO THE CONDITIONS PRECEDENT SET
FORTH IN SECTION 2.2, BORROWER SHALL HAVE THE OPTION TO (I) REQUEST THAT ANY
REVOLVING CREDIT ADVANCE BE MADE AS A LIBOR LOAN,

10

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(II) CONVERT AT ANY TIME ALL OR ANY PART OF OUTSTANDING LOANS (OTHER THAN THE
SWING LINE LOAN) FROM INDEX RATE LOANS TO LIBOR LOANS, (III) CONVERT ANY LIBOR
LOAN TO AN INDEX RATE LOAN, SUBJECT TO PAYMENT OF LIBOR BREAKAGE COSTS IN
ACCORDANCE WITH SECTION 1.13(B) IF SUCH CONVERSION IS MADE PRIOR TO THE
EXPIRATION OF THE LIBOR PERIOD APPLICABLE THERETO, OR (IV) CONTINUE ALL OR ANY
PORTION OF ANY LOAN (OTHER THAN THE SWING LINE LOAN) AS A LIBOR LOAN UPON THE
EXPIRATION OF THE APPLICABLE LIBOR PERIOD AND THE SUCCEEDING LIBOR PERIOD OF
THAT CONTINUED LOAN SHALL COMMENCE ON THE FIRST DAY AFTER THE LAST DAY OF THE
LIBOR PERIOD OF THE LOAN TO BE CONTINUED.  ANY LOAN OR GROUP OF LOANS HAVING THE
SAME PROPOSED LIBOR PERIOD TO BE MADE OR CONTINUED AS, OR CONVERTED INTO, A
LIBOR LOAN MUST BE IN A MINIMUM AMOUNT OF $1,000,000 AND INTEGRAL MULTIPLES OF
$250,000 IN EXCESS OF SUCH AMOUNT.  ANY SUCH ELECTION MUST BE MADE BY 11:00 A.M.
(CHICAGO TIME) ON THE 3RD BUSINESS DAY PRIOR TO (1) THE DATE OF ANY PROPOSED
ADVANCE WHICH IS TO BEAR INTEREST AT THE LIBOR RATE, (2) THE END OF EACH LIBOR
PERIOD WITH RESPECT TO ANY LIBOR LOANS TO BE CONTINUED AS SUCH, OR (3) THE DATE
ON WHICH BORROWER WISHES TO CONVERT ANY INDEX RATE LOAN TO A LIBOR LOAN FOR A
LIBOR PERIOD DESIGNATED BY BORROWER IN SUCH ELECTION.  IF NO ELECTION IS
RECEIVED WITH RESPECT TO A LIBOR LOAN BY 11:00 A.M. (CHICAGO TIME) ON THE 3RD
BUSINESS DAY PRIOR TO THE END OF THE LIBOR PERIOD WITH RESPECT THERETO (OR IF A
DEFAULT OR AN EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING OR IF THE
ADDITIONAL CONDITIONS PRECEDENT SET FORTH IN SECTION 2.2 SHALL NOT HAVE BEEN
SATISFIED), THAT LIBOR LOAN SHALL BE CONVERTED TO AN INDEX RATE LOAN AT THE END
OF ITS LIBOR PERIOD.  BORROWER MUST MAKE SUCH ELECTION BY NOTICE TO AGENT IN
WRITING, BY TELECOPY OR OVERNIGHT COURIER.  IN THE CASE OF ANY CONVERSION OR
CONTINUATION, SUCH ELECTION MUST BE MADE PURSUANT TO A WRITTEN NOTICE (A “NOTICE
OF CONVERSION/CONTINUATION”) IN THE FORM OF EXHIBIT 1.5(E).

 

(F)                                    NOTWITHSTANDING ANYTHING TO THE CONTRARY
SET FORTH IN THIS SECTION 1.5, IF A COURT OF COMPETENT JURISDICTION DETERMINES
IN A FINAL ORDER THAT THE RATE OF INTEREST PAYABLE HEREUNDER EXCEEDS THE HIGHEST
RATE OF INTEREST PERMISSIBLE UNDER LAW (THE “MAXIMUM LAWFUL RATE”), THEN SO LONG
AS THE MAXIMUM LAWFUL RATE WOULD BE SO EXCEEDED, THE RATE OF INTEREST PAYABLE
HEREUNDER SHALL BE EQUAL TO THE MAXIMUM LAWFUL RATE; PROVIDED, HOWEVER, THAT IF
AT ANY TIME THEREAFTER THE RATE OF INTEREST PAYABLE HEREUNDER IS LESS THAN THE
MAXIMUM LAWFUL RATE, BORROWER SHALL CONTINUE TO PAY INTEREST HEREUNDER AT THE
MAXIMUM LAWFUL RATE UNTIL SUCH TIME AS THE TOTAL INTEREST RECEIVED BY AGENT, ON
BEHALF OF LENDERS, IS EQUAL TO THE TOTAL INTEREST THAT WOULD HAVE BEEN RECEIVED
HAD THE INTEREST RATE PAYABLE HEREUNDER BEEN (BUT FOR THE OPERATION OF THIS
PARAGRAPH) THE INTEREST RATE PAYABLE SINCE THE CLOSING DATE AS OTHERWISE
PROVIDED IN THIS AGREEMENT. THEREAFTER, INTEREST HEREUNDER SHALL BE PAID AT THE
RATE(S) OF INTEREST AND IN THE MANNER PROVIDED IN SECTIONS 1.5(A) THROUGH (E),
UNLESS AND UNTIL THE RATE OF INTEREST AGAIN EXCEEDS THE MAXIMUM LAWFUL RATE, AND
AT THAT TIME THIS PARAGRAPH SHALL AGAIN APPLY.  IN NO EVENT SHALL THE TOTAL
INTEREST RECEIVED BY ANY LENDER PURSUANT TO THE TERMS HEREOF EXCEED THE AMOUNT
THAT SUCH LENDER COULD LAWFULLY HAVE RECEIVED HAD THE INTEREST DUE HEREUNDER
BEEN CALCULATED FOR THE FULL TERM HEREOF AT THE MAXIMUM LAWFUL RATE.  IF THE
MAXIMUM LAWFUL RATE IS CALCULATED PURSUANT TO THIS PARAGRAPH, SUCH INTEREST
SHALL BE CALCULATED AT A DAILY RATE EQUAL TO THE MAXIMUM LAWFUL RATE DIVIDED BY
THE NUMBER OF DAYS IN THE YEAR IN WHICH SUCH CALCULATION IS MADE.  IF,
NOTWITHSTANDING THE PROVISIONS OF THIS SECTION 1.5(F), A COURT OF COMPETENT
JURISDICTION SHALL FINALLY DETERMINE THAT A LENDER HAS RECEIVED INTEREST
HEREUNDER IN EXCESS OF THE MAXIMUM LAWFUL RATE, AGENT SHALL, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, PROMPTLY APPLY SUCH EXCESS IN THE ORDER SPECIFIED
IN SECTION 1.11 AND THEREAFTER SHALL REFUND ANY EXCESS TO BORROWER OR AS A COURT
OF COMPETENT JURISDICTION MAY OTHERWISE ORDER.

 

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1.6                                 ELIGIBLE ACCOUNTS – U.S.; ELIGIBLE ACCOUNTS
– SCHAUBLIN.

 

(A)                                  ELIGIBLE ACCOUNTS – U.S.  ALL OF THE
ACCOUNTS OWNED BY BORROWER OR ANY SECURED GUARANTOR AND REFLECTED IN THE MOST
RECENT U.S. BORROWING BASE CERTIFICATE DELIVERED BY BORROWER TO AGENT SHALL BE
“ELIGIBLE ACCOUNTS – U.S.” FOR PURPOSES OF THIS AGREEMENT, EXCEPT ANY ACCOUNT TO
WHICH ANY OF THE EXCLUSIONARY CRITERIA SET FORTH BELOW APPLIES.  AGENT SHALL
HAVE THE RIGHT TO ESTABLISH OR MODIFY OR ELIMINATE RESERVES AGAINST ELIGIBLE
ACCOUNTS – U.S. FROM TIME TO TIME IN ITS REASONABLE CREDIT JUDGMENT TO REFLECT
ISSUES WITH RESPECT TO THE COLLECTABILITY OF ACCOUNTS ARISING OR DISCOVERED BY
AGENT AFTER THE CLOSING DATE.  IN ADDITION, AGENT RESERVES THE RIGHT, AT ANY
TIME AND FROM TIME TO TIME AFTER THE CLOSING DATE, TO ADJUST ANY OF THE CRITERIA
SET FORTH BELOW OR TO ESTABLISH NEW CRITERIA IN ITS REASONABLE CREDIT JUDGMENT
TO REFLECT CHANGES IN BORROWER’S OR THE APPLICABLE SECURED GUARANTOR’S BUSINESS
OPERATIONS OR THE COLLECTABILITY OF ACCOUNTS, SUBJECT TO THE APPROVAL OF
REQUISITE REVOLVING LENDERS IN THE CASE OF ADJUSTMENTS OR NEW CRITERIA WHICH
HAVE THE EFFECT OF MAKING MORE CREDIT AVAILABLE.  ELIGIBLE ACCOUNTS – U.S. SHALL
NOT INCLUDE ANY ACCOUNT OF BORROWER OR A SECURED GUARANTOR:

 

(I)                                     THAT DOES NOT ARISE FROM THE SALE OF
GOODS OR THE PERFORMANCE OF SERVICES BY BORROWER OR A SECURED GUARANTOR IN THE
ORDINARY COURSE OF ITS BUSINESS;

 

(II)                                  (A) UPON WHICH BORROWER’S OR THE
APPLICABLE SECURED GUARANTOR’S RIGHT TO RECEIVE PAYMENT IS NOT ABSOLUTE OR IS
CONTINGENT UPON THE FULFILLMENT OF ANY CONDITION WHATSOEVER OR (B) AS TO WHICH
BORROWER OR THE APPLICABLE SECURED GUARANTOR IS NOT ABLE TO BRING SUIT OR
OTHERWISE ENFORCE ITS REMEDIES AGAINST THE ACCOUNT DEBTOR THROUGH JUDICIAL
PROCESS, OR (C) IF THE ACCOUNT REPRESENTS A PROGRESS BILLING CONSISTING OF AN
INVOICE FOR GOODS SOLD OR USED OR SERVICES RENDERED PURSUANT TO A CONTRACT UNDER
WHICH THE ACCOUNT DEBTOR’S OBLIGATION TO PAY THAT INVOICE IS SUBJECT TO
BORROWER’S OR THE APPLICABLE SECURED GUARANTOR’S COMPLETION OF FURTHER
PERFORMANCE UNDER SUCH CONTRACT OR IS SUBJECT TO THE EQUITABLE LIEN OF A SURETY
BOND ISSUER;

 

(III)                               TO THE EXTENT THAT ANY DEFENSE,
COUNTERCLAIM, SETOFF OR DISPUTE IS ASSERTED AS TO SUCH ACCOUNT;

 

(IV)                              THAT IS NOT A TRUE AND CORRECT STATEMENT OF
BONA FIDE INDEBTEDNESS INCURRED IN THE AMOUNT OF THE ACCOUNT FOR MERCHANDISE
SOLD TO OR SERVICES RENDERED AND ACCEPTED BY THE APPLICABLE ACCOUNT DEBTOR;

 

(V)                                 WITH RESPECT TO WHICH AN INVOICE HAS NOT
BEEN SENT TO THE APPLICABLE ACCOUNT DEBTOR;

 

(VI)                              THAT (A) IS NOT OWNED BY BORROWER OR A SECURED
GUARANTOR OR (B) IS SUBJECT TO ANY RIGHT, CLAIM, SECURITY INTEREST OR OTHER
INTEREST OF ANY OTHER PERSON, OTHER THAN LIENS DESCRIBED IN CLAUSES (A) AND (G)
OF THE DEFINITION OF PERMITTED ENCUMBRANCES AND LIENS IN FAVOR OF AGENT, ON
BEHALF OF ITSELF AND LENDERS BUT ONLY TO THE EXTENT OF SUCH RIGHT, CLAIM,
SECURITY INTEREST OR OTHER INTEREST;

 

(VII)                           THAT ARISES FROM A SALE TO ANY DIRECTOR,
OFFICER, OTHER EMPLOYEE OR AFFILIATE OF ANY CREDIT PARTY, OR TO ANY ENTITY THAT
HAS ANY COMMON OFFICER WITH ANY CREDIT PARTY;

 

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(VIII)                        THAT IS THE OBLIGATION OF AN ACCOUNT DEBTOR THAT
IS THE UNITED STATES GOVERNMENT OR A POLITICAL SUBDIVISION THEREOF, OR ANY
STATE, COUNTY OR MUNICIPALITY OR DEPARTMENT, AGENCY OR INSTRUMENTALITY THEREOF,
UNLESS BORROWER OR THE APPLICABLE SECURED GUARANTOR HAS COMPLIED WITH RESPECT TO
SUCH OBLIGATION WITH THE FEDERAL ASSIGNMENT OF CLAIMS ACT OF 1940, OR ANY
APPLICABLE STATE, COUNTY OR MUNICIPAL LAW RESTRICTING ASSIGNMENT THEREOF,
PROVIDED, THAT THE BORROWING AVAILABILITY BASED ON SUCH OBLIGATIONS SHALL NOT IN
ANY EVENT EXCEED $7,500,000 IN THE AGGREGATE;

 

(IX)                                THAT IS THE OBLIGATION OF AN ACCOUNT DEBTOR
LOCATED IN A FOREIGN COUNTRY OTHER THAN CANADA OR THE UNITED KINGDOM, UNLESS
PAYMENT THEREOF IS ASSURED BY A LETTER OF CREDIT OR CREDIT INSURANCE ASSIGNED
AND DELIVERED TO AGENT, SATISFACTORY TO AGENT AS TO FORM, AMOUNT AND ISSUER;

 

(X)                                   TO THE EXTENT BORROWER OR ANY SECURED
GUARANTOR OR ANY SUBSIDIARY THEREOF IS LIABLE FOR GOODS SOLD OR SERVICES
RENDERED BY THE APPLICABLE ACCOUNT DEBTOR TO BORROWER OR ANY SECURED GUARANTOR
OR ANY SUBSIDIARY THEREOF BUT ONLY TO THE EXTENT OF THE POTENTIAL OFFSET;

 

(XI)                                THAT ARISES WITH RESPECT TO GOODS THAT ARE
DELIVERED ON A BILL-AND-HOLD, CASH-ON-DELIVERY BASIS OR PLACED ON CONSIGNMENT,
GUARANTEED SALE OR OTHER TERMS BY REASON OF WHICH THE PAYMENT BY THE ACCOUNT
DEBTOR IS OR MAY BE CONDITIONAL;

 

(XII)                             THAT IS IN DEFAULT; PROVIDED, THAT AN ACCOUNT
SHALL BE DEEMED IN DEFAULT UPON THE OCCURRENCE OF ANY OF THE FOLLOWING:

 

(A)                              THE ACCOUNT IS NOT PAID WITHIN THE EARLIER OF: 
SIXTY (60) DAYS FOLLOWING ITS DUE DATE OR 120 DAYS FOLLOWING ITS ORIGINAL
INVOICE DATE UNLESS PAYMENT THEREOF IS SECURED BY A LETTER OF CREDIT
SATISFACTORY TO AGENT AS TO FORM, SUBSTANCE AND ISSUER;

 

(B)                                THE ACCOUNT DEBTOR OBLIGATED UPON SUCH
ACCOUNT SUSPENDS BUSINESS, MAKES A GENERAL ASSIGNMENT FOR THE BENEFIT OF
CREDITORS OR FAILS TO PAY ITS DEBTS GENERALLY AS THEY COME DUE; OR

 

(C)                                A PETITION IS FILED BY OR AGAINST ANY ACCOUNT
DEBTOR OBLIGATED UPON SUCH ACCOUNT UNDER ANY BANKRUPTCY LAW OR ANY OTHER
FEDERAL, STATE OR FOREIGN (INCLUDING ANY PROVINCIAL) RECEIVERSHIP, INSOLVENCY
RELIEF OR OTHER LAW OR LAWS FOR THE RELIEF OF DEBTORS;

 

(XIII)                          THAT IS THE OBLIGATION OF AN ACCOUNT DEBTOR IF
50% OR MORE OF THE DOLLAR AMOUNT OF ALL ACCOUNTS OWING BY THAT ACCOUNT DEBTOR
ARE INELIGIBLE UNDER THE CRITERIA SET FORTH IN CLAUSE (XII) ABOVE;

 

(XIV)                         AS TO WHICH AGENT’S LIEN THEREON, ON BEHALF OF
ITSELF AND LENDERS, IS NOT A FIRST PRIORITY PERFECTED LIEN;

 

(XV)                            AS TO WHICH ANY OF THE REPRESENTATIONS OR
WARRANTIES IN THE LOAN DOCUMENTS ARE UNTRUE IN ANY MATERIAL RESPECT;

 

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(XVI)                         TO THE EXTENT SUCH ACCOUNT IS EVIDENCED BY A
JUDGMENT, INSTRUMENT OR CHATTEL PAPER;

 

(XVII)                      TO THE EXTENT THAT SUCH ACCOUNT, TOGETHER WITH ALL
OTHER ACCOUNTS OWING BY SUCH ACCOUNT DEBTOR AND ITS AFFILIATES (EXCLUDING THE
UNITED STATES GOVERNMENT AS ACCOUNT DEBTOR) AS OF ANY DATE OF DETERMINATION
EXCEED 15% OF ALL ELIGIBLE ACCOUNTS-U.S.; OR

 

(XVIII)                   THAT IS PAYABLE IN ANY CURRENCY OTHER THAN DOLLARS OR
ACCEPTABLE FOREIGN CURRENCY.

 

It is understood and agreed that any Account excluded from eligibility under
clause (xii) above shall be excluded in its entirety, meaning that any past due
credits with respect thereto shall also be excluded thereunder.

 

(B)                                 ELIGIBLE ACCOUNTS – SCHAUBLIN.  ALL OF THE
ACCOUNTS OWNED BY SCHAUBLIN AND REFLECTED IN THE MOST RECENT SCHAUBLIN BORROWING
BASE CERTIFICATE DELIVERED BY BORROWER TO AGENT SHALL BE “ELIGIBLE ACCOUNTS –
SCHAUBLIN” FOR PURPOSES OF THIS AGREEMENT, EXCEPT ANY ACCOUNT TO WHICH ANY OF
THE EXCLUSIONARY CRITERIA SET FORTH BELOW APPLIES.  AGENT SHALL HAVE THE RIGHT
TO ESTABLISH OR MODIFY OR ELIMINATE RESERVES AGAINST ELIGIBLE
ACCOUNTS – SCHAUBLIN FROM TIME TO TIME IN ITS REASONABLE CREDIT JUDGMENT TO
REFLECT ISSUES WITH RESPECT TO THE COLLECTABILITY OF ACCOUNTS ARISING OR
DISCOVERED BY AGENT AFTER THE EFFECTIVE DATE (INCLUDING PURSUANT TO COLLATERAL
AUDITS CONDUCTED AFTER THE EFFECTIVE DATE).  IN ADDITION, AGENT RESERVES THE
RIGHT, AT ANY TIME AND FROM TIME TO TIME AFTER THE EFFECTIVE DATE, TO ADJUST ANY
OF THE CRITERIA SET FORTH BELOW OR TO ESTABLISH NEW CRITERIA IN ITS REASONABLE
CREDIT JUDGMENT TO REFLECT CHANGES IN SCHAUBLIN’S BUSINESS OPERATIONS OR THE
COLLECTABILITY OF ACCOUNTS, SUBJECT TO THE APPROVAL OF REQUISITE REVOLVING
LENDERS IN THE CASE OF ADJUSTMENTS OR NEW CRITERIA WHICH HAVE THE EFFECT OF
MAKING MORE CREDIT AVAILABLE.  ELIGIBLE ACCOUNTS – SCHAUBLIN SHALL NOT INCLUDE
ANY ACCOUNT OF SCHAUBLIN:

 

(I)                                     THAT DOES NOT ARISE FROM THE SALE OF
GOODS OR THE PERFORMANCE OF SERVICES BY SCHAUBLIN IN THE ORDINARY COURSE OF ITS
BUSINESS;

 

(II)                                  (A) UPON WHICH SCHAUBLIN’S RIGHT TO
RECEIVE PAYMENT IS NOT ABSOLUTE OR IS CONTINGENT UPON THE FULFILLMENT OF ANY
CONDITION WHATSOEVER OR (B) AS TO WHICH SCHAUBLIN IS NOT ABLE TO BRING SUIT OR
OTHERWISE ENFORCE ITS REMEDIES AGAINST THE ACCOUNT DEBTOR THROUGH JUDICIAL
PROCESS, OR (C) IF THE ACCOUNT REPRESENTS A PROGRESS BILLING CONSISTING OF AN
INVOICE FOR GOODS SOLD OR USED OR SERVICES RENDERED PURSUANT TO A CONTRACT UNDER
WHICH THE ACCOUNT DEBTOR’S OBLIGATION TO PAY THAT INVOICE IS SUBJECT TO
SCHAUBLIN’S COMPLETION OF FURTHER PERFORMANCE UNDER SUCH CONTRACT OR IS SUBJECT
TO THE EQUITABLE LIEN OF A SURETY BOND ISSUER;

 

(III)                               TO THE EXTENT THAT ANY DEFENSE,
COUNTERCLAIM, SETOFF OR DISPUTE IS ASSERTED AS TO SUCH ACCOUNT;

 

(IV)                              THAT IS NOT A TRUE AND CORRECT STATEMENT OF
BONA FIDE INDEBTEDNESS INCURRED IN THE AMOUNT OF THE ACCOUNT FOR MERCHANDISE
SOLD TO OR SERVICES RENDERED AND ACCEPTED BY THE APPLICABLE ACCOUNT DEBTOR;

 

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(V)                                 WITH RESPECT TO WHICH AN INVOICE HAS NOT
BEEN SENT TO THE APPLICABLE ACCOUNT DEBTOR;

 

(VI)                              THAT (A) IS NOT OWNED BY SCHAUBLIN OR (B) IS
SUBJECT TO ANY RIGHT, CLAIM, SECURITY INTEREST OR OTHER INTEREST OF ANY OTHER
PERSON, OTHER THAN LIENS DESCRIBED IN CLAUSES (A) AND (G) OF THE DEFINITION OF
PERMITTED ENCUMBRANCES AND LIENS IN FAVOR OF AGENT, ON BEHALF OF ITSELF AND
LENDERS BUT ONLY TO THE EXTENT OF SUCH RIGHT, CLAIM, SECURITY INTEREST OR OTHER
INTEREST;

 

(VII)                           THAT ARISES FROM A SALE TO ANY DIRECTOR,
OFFICER, OTHER EMPLOYEE OR AFFILIATE OF ANY CREDIT PARTY, OR TO ANY ENTITY THAT
HAS ANY COMMON OFFICER WITH ANY CREDIT PARTY;

 

(VIII)                        THAT IS THE OBLIGATION OF AN ACCOUNT DEBTOR THAT
IS A GOVERNMENTAL ENTITY, UNLESS SCHAUBLIN HAS COMPLIED WITH RESPECT TO SUCH
OBLIGATION WITH ANY APPLICABLE LAW RESTRICTING ASSIGNMENT THEREOF;

 

(IX)                                THAT IS THE OBLIGATION OF AN ACCOUNT DEBTOR
LOCATED IN A COUNTRY OTHER THAN THE UNITED STATES, CANADA, SWITZERLAND, FRANCE,
THE UNITED KINGDOM, GERMANY, ITALY, SPAIN, AUSTRALIA, DENMARK, THE NETHERLANDS
OR LUXEMBURG UNLESS PAYMENT THEREOF IS ASSURED BY A LETTER OF CREDIT OR CREDIT
INSURANCE ASSIGNED AND DELIVERED TO AGENT, SATISFACTORY TO AGENT AS TO FORM,
AMOUNT AND ISSUER;

 

(X)                                   TO THE EXTENT BORROWER OR SCHAUBLIN OR ANY
SUBSIDIARY THEREOF IS LIABLE FOR GOODS SOLD OR SERVICES RENDERED BY THE
APPLICABLE ACCOUNT DEBTOR TO BORROWER OR SCHAUBLIN OR ANY SUBSIDIARY THEREOF BUT
ONLY TO THE EXTENT OF THE POTENTIAL OFFSET;

 

(XI)                                THAT ARISES WITH RESPECT TO GOODS THAT ARE
DELIVERED ON A BILL-AND-HOLD, CASH-ON-DELIVERY BASIS OR PLACED ON CONSIGNMENT,
GUARANTEED SALE OR OTHER TERMS BY REASON OF WHICH THE PAYMENT BY THE ACCOUNT
DEBTOR IS OR MAY BE CONDITIONAL;

 

(XII)                             THAT IS IN DEFAULT; PROVIDED, THAT AN ACCOUNT
SHALL BE DEEMED IN DEFAULT UPON THE OCCURRENCE OF ANY OF THE FOLLOWING:

 

(A)                         THE ACCOUNT IS NOT PAID WITHIN THE EARLIER OF: SIXTY
(60) DAYS FOLLOWING ITS DUE DATE OR 120 DAYS FOLLOWING ITS ORIGINAL INVOICE DATE
UNLESS PAYMENT THEREOF IS SECURED BY A LETTER OF CREDIT SATISFACTORY TO AGENT AS
TO FORM, SUBSTANCE AND ISSUER;

 

(B)                           THE ACCOUNT DEBTOR OBLIGATED UPON SUCH ACCOUNT
SUSPENDS BUSINESS, MAKES A GENERAL ASSIGNMENT FOR THE BENEFIT OF CREDITORS OR
FAILS TO PAY ITS DEBTS GENERALLY AS THEY COME DUE; OR

 

(C)                           A PETITION IS FILED BY OR AGAINST ANY ACCOUNT
DEBTOR OBLIGATED UPON SUCH ACCOUNT UNDER ANY BANKRUPTCY LAW OR ANY OTHER
FEDERAL, STATE OR FOREIGN (INCLUDING ANY PROVINCIAL) RECEIVERSHIP, INSOLVENCY
RELIEF OR OTHER LAW OR LAWS FOR THE RELIEF OF DEBTORS;

 

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(XIII)                          THAT IS THE OBLIGATION OF AN ACCOUNT DEBTOR IF
50% OR MORE OF THE DOLLAR AMOUNT OF ALL ACCOUNTS OWING BY THAT ACCOUNT DEBTOR
ARE INELIGIBLE UNDER THE CRITERIA SET FORTH IN CLAUSE (XII) ABOVE;

 

(XIV)                         AS TO WHICH AGENT’S LIEN THEREON, ON BEHALF OF
ITSELF AND LENDERS, OR THE LIEN CREATED BY THE FOREIGN COLLATERAL DOCUMENTS IS
NOT A FIRST PRIORITY PERFECTED LIEN;

 

(XV)                            AS TO WHICH ANY OF THE REPRESENTATIONS OR
WARRANTIES IN THE LOAN DOCUMENTS ARE UNTRUE IN ANY MATERIAL RESPECT;

 

(XVI)                         TO THE EXTENT SUCH ACCOUNT IS EVIDENCED BY A
JUDGMENT, INSTRUMENT OR CHATTEL PAPER;

 

(XVII)                      TO THE EXTENT THAT SUCH ACCOUNT, TOGETHER WITH ALL
OTHER ACCOUNTS OWING BY SUCH ACCOUNT DEBTOR AND ITS AFFILIATES AS OF ANY DATE OF
DETERMINATION EXCEED 15% OF ALL ELIGIBLE ACCOUNTS – SCHAUBLIN;

 

(XVIII)                   THAT IS PAYABLE IN ANY CURRENCY OTHER THAN DOLLARS OR
AN ACCEPTABLE FOREIGN CURRENCY; OR

 

(XIX)                           TO THE EXTENT THAT A SUPPLIER OF SCHAUBLIN CAN
ASSERT ANY RIGHT AS TO SUCH ACCOUNT BY REASON OF AN EXTENDED RESERVATION OF
TITLE.

 

It is understood and agreed that any Account excluded from eligibility under
clause (xii) above shall be excluded in its entirety, meaning that any past due
credits with respect thereto shall also be excluded thereunder.

 

1.7                                 ELIGIBLE INVENTORY – U.S.; ELIGIBLE
INVENTORY – SCHAUBLIN.

 

(A)                                  ELIGIBLE INVENTORY – U.S.  ALL OF THE
INVENTORY OWNED BY BORROWER OR ANY SECURED GUARANTOR AND REFLECTED IN THE MOST
RECENT U.S. BORROWING BASE CERTIFICATE DELIVERED BY BORROWER TO AGENT SHALL BE
“ELIGIBLE INVENTORY – U.S.” FOR PURPOSES OF THIS AGREEMENT, EXCEPT ANY INVENTORY
TO WHICH ANY OF THE EXCLUSIONARY CRITERIA SET FORTH BELOW APPLIES.  AGENT SHALL
HAVE THE RIGHT TO ESTABLISH, MODIFY, OR ELIMINATE RESERVES AGAINST ELIGIBLE
INVENTORY – U.S. FROM TIME TO TIME IN ITS REASONABLE CREDIT JUDGMENT TO REFLECT
ISSUES WITH RESPECT TO THE SALABILITY OF INVENTORY ARISING OR DISCOVERED BY
AGENT AFTER THE CLOSING DATE.  IN ADDITION, AGENT RESERVES THE RIGHT, AT ANY
TIME AND FROM TIME TO TIME AFTER THE CLOSING DATE, TO ADJUST ANY OF THE CRITERIA
SET FORTH BELOW OR TO ESTABLISH NEW CRITERIA IN ITS REASONABLE CREDIT JUDGMENT
TO REFLECT CHANGES IN BORROWER’S OR THE APPLICABLE SECURED GUARANTOR’S BUSINESS
OPERATIONS OR SALABILITY OF INVENTORY, SUBJECT TO THE APPROVAL OF REQUISITE
REVOLVING LENDERS IN THE CASE OF ADJUSTMENTS OR NEW CRITERIA WHICH HAVE THE
EFFECT OF MAKING MORE CREDIT AVAILABLE.  ELIGIBLE INVENTORY – U.S. SHALL NOT
INCLUDE ANY INVENTORY OF BORROWER OR ANY SECURED GUARANTOR THAT:

 

(I)                                     IS NOT OWNED BY BORROWER OR ANY SECURED
GUARANTOR FREE AND CLEAR OF ALL LIENS AND RIGHTS OF ANY OTHER PERSON (INCLUDING
THE RIGHTS OF A PURCHASER THAT HAS MADE PROGRESS PAYMENTS AND THE RIGHTS OF A
SURETY THAT HAS ISSUED A BOND TO ASSURE BORROWER’S OR A SECURED GUARANTOR’S
PERFORMANCE WITH RESPECT TO THAT INVENTORY), EXCEPT LIENS DESCRIBED IN

 

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CLAUSES (A), (D), (E) AND (G) OF THE DEFINITION OF PERMITTED ENCUMBRANCES AND
THE LIENS IN FAVOR OF AGENT, ON BEHALF OF ITSELF AND LENDERS;

 

(II)                                  (A) IS NOT LOCATED ON PREMISES OWNED,
LEASED OR RENTED BY BORROWER OR ANY SECURED GUARANTOR AND SET FORTH IN
DISCLOSURE SCHEDULE (3.2), OR (B) IS NOT LOCATED ON PREMISES ACQUIRED OR LEASED
BY BORROWER OR ANY SECURED GUARANTOR IN CONNECTION WITH ANY PERMITTED
ACQUISITION, OR (C) IS STORED AT A LEASED LOCATION, UNLESS AGENT HAS GIVEN ITS
PRIOR CONSENT THERETO AND UNLESS EITHER (X) A REASONABLY SATISFACTORY LANDLORD
WAIVER HAS BEEN DELIVERED TO AGENT, OR (Y) RESERVES REASONABLY SATISFACTORY TO
AGENT HAVE BEEN ESTABLISHED WITH RESPECT THERETO, OR (D) IS STORED WITH A BAILEE
OR WAREHOUSEMAN UNLESS A REASONABLY SATISFACTORY, ACKNOWLEDGED BAILEE LETTER HAS
BEEN RECEIVED BY AGENT AND RESERVES REASONABLY SATISFACTORY TO AGENT HAVE BEEN
ESTABLISHED WITH RESPECT THERETO, OR (E) IS LOCATED AT A LOCATION OWNED BY
BORROWER OR ANY SECURED GUARANTOR SUBJECT TO A MORTGAGE IN FAVOR OF A LENDER
OTHER THAN AGENT, UNLESS A REASONABLY SATISFACTORY MORTGAGEE WAIVER HAS BEEN
DELIVERED TO AGENT, OR (F) IS LOCATED AT ANY SITE IF THE AGGREGATE BOOK VALUE OF
INVENTORY AT ANY SUCH LOCATION IS LESS THAN THE DOLLAR EQUIVALENT OF $50,000;

 

(III)                               IS PLACED ON CONSIGNMENT OR IS IN TRANSIT,
EXCEPT FOR INVENTORY IN TRANSIT BETWEEN DOMESTIC LOCATIONS OF CREDIT PARTIES AS
TO WHICH AGENT’S LIENS HAVE BEEN PERFECTED AT ORIGIN AND DESTINATION;

 

(IV)                              IS COVERED BY A NEGOTIABLE DOCUMENT OF TITLE,
UNLESS SUCH DOCUMENT HAS BEEN DELIVERED TO AGENT WITH ALL NECESSARY
ENDORSEMENTS, FREE AND CLEAR OF ALL LIENS EXCEPT THOSE IN FAVOR OF AGENT AND
LENDERS;

 

(V)                                 IS EXCESS, OBSOLETE, SLOW MOVING (IN EXCESS
OF 2-YEARS’ SUPPLY), UNSALABLE, SHOPWORN, SECONDS, DAMAGED OR UNFIT FOR SALE;

 

(VI)                              CONSISTS OF DISPLAY ITEMS OR PACKING OR
SHIPPING MATERIALS, MANUFACTURING SUPPLIES, CUSTOM-MADE INVENTORY WHICH IS NOT
SUBJECT TO AN OUTSTANDING PURCHASE ORDER THAT IS NOT REVOCABLE BY ITS TERMS OR
IS NOT SOLD IN THE ORDINARY COURSE OF BUSINESS, WORK-IN-PROCESS INVENTORY OR
REPLACEMENT PARTS (EXCLUDING COMPONENT PARTS AND PURCHASED PARTS);

 

(VII)                           IS NOT OF A TYPE HELD FOR SALE IN THE ORDINARY
COURSE OF BORROWER’S OR THE APPLICABLE SECURED GUARANTOR’S BUSINESS;

 

(VIII)                        IS NOT SUBJECT TO A FIRST PRIORITY LIEN IN FAVOR
OF AGENT ON BEHALF OF ITSELF AND LENDERS SUBJECT TO PERMITTED ENCUMBRANCES;

 

(IX)                                BREACHES IN ANY MATERIAL RESPECT ANY OF THE
REPRESENTATIONS OR WARRANTIES PERTAINING TO INVENTORY SET FORTH IN THE LOAN
DOCUMENTS;

 

(X)                                   CONSISTS OF ANY COSTS ASSOCIATED WITH
“FREIGHT-IN” CHARGES;

 

(XI)                                CONSISTS OF HAZARDOUS MATERIALS OR GOODS
THAT CAN BE TRANSPORTED OR SOLD ONLY WITH LICENSES THAT ARE NOT READILY
AVAILABLE; OR

 

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(XII)                             IS NOT COVERED BY CASUALTY INSURANCE IN
ACCORDANCE WITH SECTION 5.4.

 

(B)                                 ELIGIBLE INVENTORY – SCHAUBLIN.  ALL OF THE
INVENTORY OWNED BY SCHAUBLIN AND REFLECTED IN THE MOST RECENT SCHAUBLIN
BORROWING BASE CERTIFICATE DELIVERED BY BORROWER TO AGENT SHALL BE “ELIGIBLE
INVENTORY – SCHAUBLIN” FOR PURPOSES OF THIS AGREEMENT, EXCEPT ANY INVENTORY TO
WHICH ANY OF THE EXCLUSIONARY CRITERIA SET FORTH BELOW APPLIES.  AGENT SHALL
HAVE THE RIGHT TO ESTABLISH, MODIFY, OR ELIMINATE RESERVES AGAINST ELIGIBLE
INVENTORY – SCHAUBLIN FROM TIME TO TIME IN ITS REASONABLE CREDIT JUDGMENT TO
REFLECT ISSUES WITH RESPECT TO THE SALABILITY OF INVENTORY ARISING OR DISCOVERED
BY AGENT AFTER THE EFFECTIVE DATE (INCLUDING PURSUANT TO COLLATERAL AUDITS
CONDUCTED AFTER THE EFFECTIVE DATE).  IN ADDITION, AGENT RESERVES THE RIGHT, AT
ANY TIME AND FROM TIME TO TIME AFTER THE EFFECTIVE DATE, TO ADJUST ANY OF THE
CRITERIA SET FORTH BELOW OR TO ESTABLISH NEW CRITERIA IN ITS REASONABLE CREDIT
JUDGMENT TO REFLECT CHANGES IN SCHAUBLIN’S BUSINESS OPERATIONS OR SALABILITY OF
INVENTORY, SUBJECT TO THE APPROVAL OF REQUISITE REVOLVING LENDERS IN THE CASE OF
ADJUSTMENTS OR NEW CRITERIA WHICH HAVE THE EFFECT OF MAKING MORE CREDIT
AVAILABLE.  ELIGIBLE INVENTORY – SCHAUBLIN SHALL NOT INCLUDE ANY INVENTORY OF
SCHAUBLIN THAT:

 

(I)                                     IS NOT OWNED BY SCHAUBLIN FREE AND CLEAR
OF ALL LIENS AND RIGHTS OF ANY OTHER PERSON (INCLUDING THE RIGHTS OF A PURCHASER
THAT HAS MADE PROGRESS PAYMENTS AND THE RIGHTS OF A SURETY THAT HAS ISSUED A
BOND TO ASSURE BORROWER’S OR SCHAUBLIN’S PERFORMANCE WITH RESPECT TO THAT
INVENTORY), EXCEPT LIENS DESCRIBED IN CLAUSE (E) OF THE DEFINITION OF PERMITTED
ENCUMBRANCES AND THE LIENS IN FAVOR OF AGENT, ON BEHALF OF ITSELF AND LENDERS;

 

(II)                                  (A) IS LOCATED AT ANY SITE IF THE
AGGREGATE BOOK VALUE OF INVENTORY AT ANY SUCH LOCATION IS LESS THAN THE DOLLAR
EQUIVALENT OF $50,000 OR (B) IS LOCATED AT ANY SITE OTHER THAN A WAREHOUSE WITH
RESPECT TO WHICH A SWISS WAREHOUSE CONTROL AGREEMENT HAS BEEN EXECUTED AND
DELIVERED;

 

(III)                               IS PLACED ON CONSIGNMENT OR IS IN TRANSIT;

 

(IV)                              IS COVERED BY A NEGOTIABLE DOCUMENT OF TITLE,
UNLESS SUCH DOCUMENT HAS BEEN DELIVERED TO AGENT WITH ALL NECESSARY
ENDORSEMENTS, FREE AND CLEAR OF ALL LIENS EXCEPT THOSE IN FAVOR OF AGENT AND
LENDERS;

 

(V)                                 IS EXCESS, OBSOLETE, SLOW MOVING (IN EXCESS
OF 2-YEARS’ SUPPLY), UNSALABLE, SHOPWORN, SECONDS, DAMAGED OR UNFIT FOR SALE;

 

(VI)                              CONSISTS OF DISPLAY ITEMS OR PACKING OR
SHIPPING MATERIALS, MANUFACTURING SUPPLIES, CUSTOM-MADE INVENTORY WHICH IS NOT
SUBJECT TO AN OUTSTANDING PURCHASE ORDER THAT IS NOT REVOCABLE BY ITS TERMS OR
IS NOT SOLD IN THE ORDINARY COURSE OF BUSINESS, WORK-IN-PROCESS INVENTORY OR
REPLACEMENT PARTS (EXCLUDING COMPONENT PARTS AND PURCHASED PARTS);

 

(VII)                           IS NOT OF A TYPE HELD FOR SALE IN THE ORDINARY
COURSE OF SCHAUBLIN’S BUSINESS;

 

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(VIII)                        IS NOT SUBJECT TO A FIRST PRIORITY LIEN IN FAVOR
OF AGENT, ON BEHALF OF ITSELF AND LENDERS, OR THE FIRST PRIORITY LIEN CREATED BY
THE FOREIGN COLLATERAL DOCUMENTS, SUBJECT TO PERMITTED ENCUMBRANCES;

 

(IX)                                BREACHES IN ANY MATERIAL RESPECT ANY OF THE
REPRESENTATIONS OR WARRANTIES PERTAINING TO INVENTORY SET FORTH IN THE LOAN
DOCUMENTS;

 

(X)                                   CONSISTS OF ANY COSTS ASSOCIATED WITH
“FREIGHT-IN” CHARGES;

 

(XI)                                CONSISTS OF HAZARDOUS MATERIALS OR GOODS
THAT CAN BE TRANSPORTED OR SOLD ONLY WITH LICENSES THAT ARE NOT READILY
AVAILABLE; OR

 

(XII)                             IS NOT COVERED BY CASUALTY INSURANCE IN
ACCORDANCE WITH SECTION 5.4.

 

1.8                                 Cash Management Systems.  On or prior to the
Closing Date, Borrower will establish and will maintain until the Termination
Date, the cash management systems described in Annex C (the “Cash Management
Systems”).

 

1.9                                   FEES.

 

(A)                                  BORROWER HAS PAID AND SHALL PAY TO GE
CAPITAL, INDIVIDUALLY, THE FEES SPECIFIED IN THE GE CAPITAL FEE LETTER, AT THE
TIMES SPECIFIED FOR PAYMENT THEREIN.

 

(B)                                 AS ADDITIONAL COMPENSATION FOR THE REVOLVING
LENDERS, BORROWER SHALL PAY TO AGENT, FOR THE RATABLE BENEFIT OF SUCH LENDERS,
IN ARREARS, ON THE FIRST BUSINESS DAY OF EACH MONTH PRIOR TO THE COMMITMENT
TERMINATION DATE AND ON THE COMMITMENT TERMINATION DATE, A FEE FOR BORROWER’S
NON-USE OF AVAILABLE FUNDS IN AN AMOUNT EQUAL TO:

 

(I)                                     ONE-HALF OF ONE PERCENT (0.50%) PER
ANNUM, IF THE AMOUNT OF THE REVOLVING LOANS, INCLUDING THE SWING LINE LOAN, IS
EQUAL TO OR GREATER THAN 50% OF THE MAXIMUM AMOUNT, OR

 

(II)                                  THREE-FOURTHS OF ONE PERCENT (0.75%) PER
ANNUM, IF THE AMOUNT OF THE REVOLVING LOANS, INCLUDING THE SWING LINE LOAN, IS
LESS THAN 50% OF THE MAXIMUM AMOUNT,

 

(in each case, calculated on the basis of a 360 day year for actual days
elapsed) multiplied by the difference between (x) the Maximum Amount (as it may
be reduced from time to time) and (y) the average for the period of the daily
closing balances of the Revolving Loans and the Swing Line Loan outstanding
during the period for which such Fee is due.

 

(C)                                  BORROWER SHALL PAY TO AGENT, FOR THE
RATABLE BENEFIT OF REVOLVING LENDERS, THE LETTER OF CREDIT FEE AS PROVIDED IN
ANNEX B.

 

(D)                                 BORROWER SHALL PAY TO AGENT, FOR THE RATABLE
BENEFIT OF LENDERS, AN AMENDMENT FEE ON THE EFFECTIVE DATE EQUAL TO 0.10% OF THE
AGGREGATE COMMITMENTS.

 

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1.10                           Receipt of Payments.  Borrower shall make each
payment under this Agreement not later than 1:00 p.m. (Chicago time) on the day
when due in immediately available funds in Dollars to the Collection Account. 
For purposes of computing interest and Fees and determining U.S. Borrowing
Availability and Schaublin Borrowing Availability as of any date, all payments
shall be deemed received on the Business Day on which immediately available
funds therefor are received in the Collection Account prior to 1:00 p.m.
(Chicago time).  Payments received after 1:00 p.m. (Chicago time) on any
Business Day or on a day that is not a Business Day shall be deemed to have been
received on the following Business Day.

 

1.11                           APPLICATION AND ALLOCATION OF PAYMENTS.

 

(A)                                  SO LONG AS NO EVENT OF DEFAULT HAS OCCURRED
AND IS CONTINUING, (I) PAYMENTS RECEIVED IN THE ORDINARY COURSE OF BUSINESS AND
NOT SUBJECT TO CLAUSES (II), (III) AND (IV) BELOW SHALL BE APPLIED, FIRST, TO
THE SWING LINE LOAN AND, SECOND, TO THE REVOLVING LOANS; (II) PAYMENTS MATCHING
SPECIFIC SCHEDULED PAYMENTS THEN DUE SHALL BE APPLIED TO THOSE SCHEDULED
PAYMENTS; (III) VOLUNTARY PREPAYMENTS SHALL BE APPLIED AS DETERMINED BY
BORROWER, SUBJECT TO THE PROVISIONS OF SECTION 1.3(A); AND (IV) MANDATORY
PREPAYMENTS SHALL BE APPLIED AS SET FORTH IN SECTIONS 1.3(C) AND 1.3(D).  ALL
PAYMENTS AND PREPAYMENTS APPLIED TO A PARTICULAR LOAN SHALL BE APPLIED RATABLY
TO THE PORTION THEREOF HELD BY EACH LENDER AS DETERMINED BY ITS PRO RATA SHARE. 
AS TO ANY OTHER PAYMENT, AND AS TO ALL PAYMENTS MADE FOLLOWING THE COMMITMENT
TERMINATION DATE, BORROWER HEREBY IRREVOCABLY WAIVES THE RIGHT TO DIRECT THE
APPLICATION OF ANY AND ALL PAYMENTS RECEIVED FROM OR ON BEHALF OF BORROWER, AND
BORROWER HEREBY IRREVOCABLY AGREES THAT AGENT SHALL HAVE THE CONTINUING
EXCLUSIVE RIGHT TO APPLY ANY AND ALL SUCH PAYMENTS AGAINST THE OBLIGATIONS AS
AGENT MAY DEEM ADVISABLE NOTWITHSTANDING ANY PREVIOUS ENTRY BY AGENT IN THE LOAN
ACCOUNT OR ANY OTHER BOOKS AND RECORDS.  IN THE ABSENCE OF A SPECIFIC
DETERMINATION BY AGENT WITH RESPECT THERETO, PAYMENTS MADE WHEN AN EVENT OF
DEFAULT HAS OCCURRED AND IS CONTINUING OR FOLLOWING THE COMMITMENT TERMINATION
DATE SHALL BE APPLIED TO AMOUNTS THEN DUE AND PAYABLE IN THE FOLLOWING ORDER:
(1) TO FEES AND AGENT’S EXPENSES REIMBURSABLE HEREUNDER; (2) TO INTEREST ON THE
SWING LINE LOAN; (3) TO PRINCIPAL PAYMENTS ON THE SWING LINE LOAN; (4) TO
INTEREST ON THE OTHER LOANS, RATABLY IN PROPORTION TO THE INTEREST ACCRUED AS TO
EACH LOAN; (5) TO PRINCIPAL PAYMENTS ON THE OTHER LOANS AND TO PROVIDE CASH
COLLATERAL FOR LETTER OF CREDIT OBLIGATIONS IN THE MANNER DESCRIBED IN ANNEX B,
RATABLY TO THE AGGREGATE, COMBINED PRINCIPAL BALANCE OF THE OTHER LOANS AND
OUTSTANDING LETTER OF CREDIT OBLIGATIONS; AND (6) TO ALL OTHER OBLIGATIONS
INCLUDING EXPENSES OF LENDERS TO THE EXTENT REIMBURSABLE UNDER SECTION 11.3;
PROVIDED, THAT, AS TO ITEMS (2) THROUGH (5) ABOVE, (X) PAYMENTS FUNDED FROM THE
ASSETS OR OPERATIONS OF BORROWER AND ITS SUBSIDIARIES (EXCLUDING THE RBC SWISS
GROUP MEMBERS) SHALL BE APPLIED FIRST TO INTEREST AND PRINCIPAL OF THE LOANS
OTHER THAN THE INTEREST AND PRINCIPAL OF THE SCHAUBLIN REVOLVING LOAN AND TO
CASH COLLATERALIZE THE LETTER OF CREDIT OBLIGATIONS AND THEN TO INTEREST AND
PRINCIPAL OF THE SCHAUBLIN REVOLVING LOAN (WHICH APPLICATION SHALL CORRESPONDING
REDUCE EACH OF THE SCHAUBLIN INTERCOMPANY LOANS) AND (Y) PAYMENTS FUNDED FROM
THE ASSETS OR OPERATIONS OF THE RBC SWISS GROUP MEMBERS SHALL BE APPLIED FIRST
TO INTEREST AND PRINCIPAL OF THE SCHAUBLIN REVOLVING LOAN (WHICH APPLICATION
SHALL CORRESPONDING REDUCE EACH OF THE SCHAUBLIN INTERCOMPANY LOANS) AND THEN,
SUBJECT TO APPLICABLE LAWS, TO INTEREST AND PRINCIPAL OF THE OTHER LOANS AND TO
CASH COLLATERALIZE THE LETTER OF CREDIT OBLIGATIONS.

 

(B)                                 AGENT IS AUTHORIZED TO, AND AT ITS SOLE
ELECTION MAY, CHARGE TO THE U.S. REVOLVING LOAN BALANCE ON BEHALF OF BORROWER
AND CAUSE TO BE PAID ALL FEES, CHARGES,

 

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REIMBURSABLE EXPENSES (INCLUDING INSURANCE PREMIUMS IN ACCORDANCE WITH SECTION
5.4(A)) AND INTEREST AND PRINCIPAL, OTHER THAN PRINCIPAL OF THE REVOLVING LOANS,
OWING BY BORROWER UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS IF AND
TO THE EXTENT BORROWER FAILS TO PAY PROMPTLY ANY SUCH AMOUNTS AS AND WHEN DUE,
EVEN IF THE AMOUNT OF SUCH CHARGES WOULD EXCEED U.S. BORROWING AVAILABILITY AT
SUCH TIME.  AT AGENT’S OPTION AND TO THE EXTENT PERMITTED BY LAW, ANY CHARGES SO
MADE SHALL CONSTITUTE PART OF THE U.S. REVOLVING LOAN HEREUNDER.

 

1.12                           Loan Account and Accounting.  Agent shall
maintain a loan account (the “Loan Account”) on its books to record all Advances
and the Term Loan, all payments made by or on behalf of Borrower, and all other
debits and credits as provided in this Agreement with respect to the Loans or
any other Obligations.  All entries in the Loan Account shall be made in
accordance with Agent’s customary accounting practices as in effect from time to
time. The balance in the Loan Account, as recorded on Agent’s most recent
printout or other written statement, shall be presumptive evidence of the
amounts due and owing to Agent and Lenders by Borrower; provided, that any
failure to so record or any error in so recording shall not limit or otherwise
affect Borrower’s duty to pay the Obligations.  Agent shall render to Borrower a
monthly accounting of transactions with respect to the Loans setting forth the
balance of the Loan Account for the immediately preceding month.  Unless
Borrower notifies Agent in writing of any objection to any such accounting
(specifically describing the basis for such objection), within 90 days after the
date thereof, each and every such accounting shall, absent manifest error, be
deemed conclusive.  Only those items expressly objected to in such notice shall
be deemed to be disputed by Borrower.  Notwithstanding any provision herein
contained to the contrary, any Lender may elect (which election may be revoked)
to dispense with the issuance of Notes to that Lender and may rely on the Loan
Account as evidence of the amount of Obligations from time to time owing to it.

 

1.13                           INDEMNITY.

 

(A)                                  EACH DOMESTIC CREDIT PARTY THAT IS A
SIGNATORY HERETO SHALL JOINTLY AND SEVERALLY INDEMNIFY AND HOLD HARMLESS EACH OF
AGENT, LENDERS AND THEIR RESPECTIVE AFFILIATES, AND EACH SUCH PERSON’S
RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS, AGENTS AND REPRESENTATIVES
(EACH, AN “INDEMNIFIED PERSON”), FROM AND AGAINST ANY AND ALL SUITS, ACTIONS,
PROCEEDINGS, CLAIMS, DAMAGES, LOSSES, LIABILITIES AND EXPENSES (INCLUDING
REASONABLE ATTORNEYS’ FEES AND DISBURSEMENTS AND OTHER COSTS OF INVESTIGATION OR
DEFENSE, INCLUDING THOSE INCURRED UPON ANY APPEAL) THAT MAY BE INSTITUTED OR
ASSERTED AGAINST OR INCURRED BY ANY SUCH INDEMNIFIED PERSON AS THE RESULT OF
CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS AND THE ADMINISTRATION OF SUCH CREDIT, AND IN
CONNECTION WITH OR ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREUNDER AND
THEREUNDER AND ANY ACTIONS OR FAILURES TO ACT IN CONNECTION THEREWITH, AND LEGAL
COSTS AND EXPENSES ARISING OUT OF OR INCURRED IN CONNECTION WITH DISPUTES
BETWEEN OR AMONG ANY PARTIES TO ANY OF THE LOAN DOCUMENTS (OTHER THAN DISPUTES
BETWEEN AND AMONG AGENT/OR THE LENDERS ARISING WHEN NO EVENT OF DEFAULT HAS
OCCURRED AND IS CONTINUING) (COLLECTIVELY, “INDEMNIFIED LIABILITIES”); PROVIDED,
THAT NO SUCH DOMESTIC CREDIT PARTY SHALL BE LIABLE FOR ANY INDEMNIFICATION TO AN
INDEMNIFIED PERSON TO THE EXTENT THAT ANY SUCH SUIT, ACTION, PROCEEDING, CLAIM,
DAMAGE, LOSS, LIABILITY OR EXPENSE RESULTS FROM THAT INDEMNIFIED PERSON’S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT; PROVIDED, FURTHER, THAT ANY OBLIGATIONS OF THE
DOMESTIC CREDIT PARTIES TO THE INDEMNIFIED PERSONS WITH RESPECT TO ENVIRONMENTAL
LIABILITIES AND HAZARDOUS MATERIALS SHALL BE GOVERNED EXCLUSIVELY BY THE TERMS

 

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AND PROVISIONS OF THE ENVIRONMENTAL INDEMNITY AGREEMENT AND NOT BY THE TERMS AND
PROVISIONS OF THIS SECTION 1.13 OR ANY OTHER TERM AND PROVISION OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OTHER THAN THE ENVIRONMENTAL INDEMNITY
AGREEMENT.  NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER
PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY
OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH
PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE
ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED
UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED
HEREUNDER OR THEREUNDER.

 

(B)                                 TO INDUCE LENDERS TO PROVIDE THE LIBOR RATE
OPTION ON THE TERMS PROVIDED HEREIN, IF (I) ANY LIBOR LOANS ARE REPAID IN WHOLE
OR IN PART PRIOR TO THE LAST DAY OF ANY APPLICABLE LIBOR PERIOD (WHETHER THAT
REPAYMENT IS MADE PURSUANT TO ANY PROVISION OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR OCCURS AS A RESULT OF ACCELERATION, BY OPERATION OF LAW OR
OTHERWISE); (II) BORROWER SHALL DEFAULT IN PAYMENT WHEN DUE OF THE PRINCIPAL
AMOUNT OF OR INTEREST ON ANY LIBOR LOAN; (III) BORROWER SHALL REFUSE TO ACCEPT
ANY BORROWING OF, OR SHALL REQUEST A TERMINATION OF ANY BORROWING, CONVERSION
INTO OR CONTINUATION OF LIBOR LOANS AFTER BORROWER HAS GIVEN NOTICE REQUESTING
THE SAME IN ACCORDANCE HEREWITH; OR (IV) BORROWER SHALL FAIL TO MAKE ANY
PREPAYMENT OF A LIBOR LOAN AFTER BORROWER HAS GIVEN A NOTICE THEREOF IN
ACCORDANCE HEREWITH, THEN BORROWER SHALL INDEMNIFY AND HOLD HARMLESS EACH LENDER
FROM AND AGAINST ALL LOSSES, COSTS AND EXPENSES RESULTING FROM OR ARISING FROM
ANY OF THE FOREGOING.  SUCH INDEMNIFICATION SHALL INCLUDE ANY LOSS (INCLUDING
LOSS OF MARGIN) OR EXPENSE ARISING FROM THE REEMPLOYMENT OF FUNDS OBTAINED BY IT
OR FROM FEES PAYABLE TO TERMINATE DEPOSITS FROM WHICH SUCH FUNDS WERE OBTAINED. 
FOR THE PURPOSE OF CALCULATING AMOUNTS PAYABLE TO A LENDER UNDER THIS
SUBSECTION, EACH LENDER SHALL BE DEEMED TO HAVE ACTUALLY FUNDED ITS RELEVANT
LIBOR LOAN THROUGH THE PURCHASE OF A DEPOSIT BEARING INTEREST AT THE LIBOR RATE
IN AN AMOUNT EQUAL TO THE AMOUNT OF THAT LIBOR LOAN AND HAVING A MATURITY
COMPARABLE TO THE RELEVANT LIBOR PERIOD; PROVIDED, THAT EACH LENDER MAY FUND
EACH OF ITS LIBOR LOANS IN ANY MANNER IT SEES FIT, AND THE FOREGOING ASSUMPTION
SHALL BE UTILIZED ONLY FOR THE CALCULATION OF AMOUNTS PAYABLE UNDER THIS
SUBSECTION.  THIS COVENANT SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT AND
THE PAYMENT OF THE NOTES AND ALL OTHER AMOUNTS PAYABLE HEREUNDER.  AS PROMPTLY
AS PRACTICABLE UNDER THE CIRCUMSTANCES, EACH LENDER SHALL PROVIDE BORROWER WITH
ITS WRITTEN CALCULATION OF ALL AMOUNTS PAYABLE PURSUANT TO THIS SECTION 1.13(B),
AND SUCH CALCULATION SHALL BE PRESUMED TO BE CORRECT UNLESS BORROWER SHALL
OBJECT IN WRITING WITHIN TWENTY (20) BUSINESS DAYS OF RECEIPT THEREOF,
SPECIFYING THE BASIS FOR SUCH OBJECTION IN DETAIL.

 

1.14                           Access.  Each Credit Party that is a party hereto
shall, during normal business hours, from time to time upon three (3) Business
Days’ prior notice as frequently as Agent determines to be appropriate: (a)
provide Agent and any of its officers, employees and agents access to its
properties, facilities, advisors, officers, employees of each Credit Party and
to the Collateral, (b) permit Agent, and any of its officers, employees and
agents, to inspect, audit and make extracts from any Credit Party’s books and
records, and (c) permit Agent, and its officers, employees and agents, to
inspect, review, evaluate and make test verifications and counts of the
Accounts, Inventory and other Collateral of any Credit Party.  If an Event of
Default has occurred and is continuing or if access is necessary to preserve or
protect the Collateral as

 

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determined by Agent, each such Credit Party shall provide such access to Agent
and to each Lender at all times and without advance notice.  Furthermore, so
long as any Event of Default has occurred and is continuing, Borrower shall
provide Agent and each Lender with access to its suppliers and customers. Each
Credit Party shall make available to Agent and its counsel, as quickly as is
possible under the circumstances, originals or copies of all books and records
of the Credit Parties that Agent may reasonably request.  Each Credit Party
shall deliver any document or instrument necessary for Agent, as it may from
time to time reasonably request, to obtain records from any service bureau or
other Person that maintains records for such Credit Party.  Agent and Lenders
agree that Agent shall conduct three field Collateral audits of Borrower and the
Secured Guarantors (approximately every six months) during the first eighteen
months following the Closing Date and, as long as a Trigger Event has occurred
and is continuing thereafter, Agent and Lenders agree that Agent shall conduct a
field Collateral audit of Borrower, the Secured Guarantors and Schaublin every
six months from the date of the last field Collateral audit.  Agent will give
Lenders at least five (5) days’ prior written notice of regularly scheduled
audits.  Representatives of other Lenders may accompany Agent’s representatives
on regularly scheduled audits at no charge to Borrower.

 

1.15                           TAXES.

 

(A)                                  ANY AND ALL PAYMENTS BY BORROWER HEREUNDER
OR UNDER THE NOTES SHALL BE MADE, IN ACCORDANCE WITH THIS SECTION 1.15, FREE AND
CLEAR OF AND WITHOUT DEDUCTION FOR ANY AND ALL PRESENT OR FUTURE TAXES.  IF
BORROWER SHALL BE REQUIRED BY LAW TO DEDUCT ANY TAXES FROM OR IN RESPECT OF ANY
SUM PAYABLE HEREUNDER OR UNDER THE NOTES, (I) THE SUM PAYABLE SHALL BE INCREASED
AS MUCH AS SHALL BE NECESSARY SO THAT AFTER MAKING ALL REQUIRED DEDUCTIONS
(INCLUDING DEDUCTIONS APPLICABLE TO ADDITIONAL SUMS PAYABLE UNDER THIS SECTION
1.15) AGENT OR LENDERS, AS APPLICABLE, RECEIVE AN AMOUNT EQUAL TO THE SUM THEY
WOULD HAVE RECEIVED HAD NO SUCH DEDUCTIONS BEEN MADE, (II) BORROWER SHALL MAKE
SUCH DEDUCTIONS, AND (III) BORROWER SHALL PAY THE FULL AMOUNT DEDUCTED TO THE
RELEVANT TAXING OR OTHER AUTHORITY IN ACCORDANCE WITH APPLICABLE LAW.  WITHIN
THIRTY (30) DAYS AFTER THE DATE OF ANY PAYMENT OF ANY SUCH TAXES, BORROWER SHALL
FURNISH TO AGENT THE ORIGINAL OR A CERTIFIED COPY OF A RECEIPT EVIDENCING
PAYMENT THEREOF.

 

(B)                                 EACH DOMESTIC CREDIT PARTY THAT IS A
SIGNATORY HERETO SHALL INDEMNIFY AND, WITHIN THIRTY (30) DAYS OF DEMAND
THEREFOR, PAY AGENT AND EACH LENDER FOR THE FULL AMOUNT OF TAXES (INCLUDING ANY
TAXES IMPOSED BY ANY JURISDICTION ON AMOUNTS PAYABLE UNDER THIS SECTION 1.15)
PAID BY AGENT OR SUCH LENDER, AS APPROPRIATE, AND ANY LIABILITY (INCLUDING
PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH RESPECT THERETO,
WHETHER OR NOT SUCH TAXES WERE CORRECTLY OR LEGALLY ASSERTED.

 

(C)                                  EACH LENDER ORGANIZED UNDER THE LAWS OF A
JURISDICTION OUTSIDE THE UNITED STATES (A “FOREIGN LENDER”) AS TO WHICH PAYMENTS
TO BE MADE UNDER THIS AGREEMENT OR UNDER THE NOTES ARE EXEMPT FROM UNITED STATES
WITHHOLDING TAX UNDER AN APPLICABLE STATUTE OR TAX TREATY SHALL PROVIDE TO
BORROWER AND AGENT A PROPERLY COMPLETED AND EXECUTED IRS FORM W-8ECI OR FORM
W-8BEN OR OTHER APPLICABLE FORM, CERTIFICATE OR DOCUMENT PRESCRIBED BY THE IRS
OR THE UNITED STATES CERTIFYING AS TO SUCH FOREIGN LENDER’S ENTITLEMENT TO SUCH
EXEMPTION (A “CERTIFICATE OF EXEMPTION”).  ANY FOREIGN PERSON THAT SEEKS TO
BECOME A LENDER UNDER THIS AGREEMENT SHALL PROVIDE A CERTIFICATE OF EXEMPTION TO
BORROWER AND AGENT PRIOR TO BECOMING A

 

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LENDER HEREUNDER.  NO FOREIGN PERSON MAY BECOME A LENDER HEREUNDER IF SUCH
PERSON FAILS TO DELIVER A CERTIFICATE OF EXEMPTION IN ADVANCE OF BECOMING A
LENDER.

 

1.16                           CAPITAL ADEQUACY; INCREASED COSTS; ILLEGALITY.

 

(A)                                  IF ANY LENDER SHALL HAVE DETERMINED THAT
ANY LAW, TREATY, GOVERNMENTAL (OR QUASI-GOVERNMENTAL) RULE, REGULATION,
GUIDELINE OR ORDER REGARDING CAPITAL ADEQUACY, RESERVE REQUIREMENTS OR SIMILAR
REQUIREMENTS OR COMPLIANCE BY ANY LENDER WITH ANY REQUEST OR DIRECTIVE REGARDING
CAPITAL ADEQUACY, RESERVE REQUIREMENTS OR SIMILAR REQUIREMENTS (WHETHER OR NOT
HAVING THE FORCE OF LAW), IN EACH CASE, ADOPTED AFTER THE CLOSING DATE, FROM ANY
CENTRAL BANK OR OTHER GOVERNMENTAL AUTHORITY INCREASES OR WOULD HAVE THE EFFECT
OF INCREASING THE AMOUNT OF CAPITAL, RESERVES OR OTHER FUNDS REQUIRED TO BE
MAINTAINED BY SUCH LENDER AND THEREBY REDUCING THE RATE OF RETURN ON SUCH
LENDER’S CAPITAL AS A CONSEQUENCE OF ITS OBLIGATIONS HEREUNDER, THEN BORROWER
SHALL FROM TIME TO TIME UPON DEMAND BY SUCH LENDER ISSUED WITHIN NINETY (90)
DAYS AFTER ADOPTION THEREOF AND SETTING FORTH A CALCULATION OF THE REDUCTION
(WITH A COPY OF SUCH DEMAND TO AGENT) PAY TO AGENT, FOR THE ACCOUNT OF SUCH
LENDER, ADDITIONAL AMOUNTS SUFFICIENT TO COMPENSATE SUCH LENDER FOR SUCH
REDUCTION.  A CERTIFICATE AS TO THE AMOUNT OF THAT REDUCTION AND SHOWING THE
BASIS OF THE COMPUTATION THEREOF SUBMITTED BY SUCH LENDER TO BORROWER AND TO
AGENT SHALL, ABSENT MANIFEST ERROR, BE PRESUMPTIVE EVIDENCE OF THE MATTERS SET
FORTH THEREIN.

 

(B)                                 IF, DUE TO EITHER (I) THE INTRODUCTION OF OR
ANY CHANGE IN ANY LAW OR REGULATION (OR ANY CHANGE IN THE INTERPRETATION
THEREOF) OR (II) THE COMPLIANCE WITH ANY GUIDELINE OR REQUEST FROM ANY CENTRAL
BANK OR OTHER GOVERNMENTAL AUTHORITY (WHETHER OR NOT HAVING THE FORCE OF LAW),
IN EACH CASE ADOPTED AFTER THE CLOSING DATE, THERE SHALL BE ANY INCREASE IN THE
COST TO ANY LENDER OF AGREEING TO MAKE OR MAKING, FUNDING OR MAINTAINING ANY
LOAN, THEN BORROWER SHALL FROM TIME TO TIME, UPON DEMAND BY SUCH LENDER ISSUED
WITHIN NINETY (90) DAYS AFTER THE INTRODUCTION THEREOF OR COMPLIANCE THEREWITH
AND SETTING FORTH A CALCULATION OF SUCH INCREASED COSTS (WITH A COPY OF SUCH
DEMAND TO AGENT), PAY TO AGENT FOR THE ACCOUNT OF SUCH LENDER ADDITIONAL AMOUNTS
SUFFICIENT TO COMPENSATE SUCH LENDER FOR SUCH INCREASED COST.  A CERTIFICATE AS
TO THE AMOUNT OF SUCH INCREASED COST, SUBMITTED TO BORROWER AND TO AGENT BY SUCH
LENDER, SHALL BE PRESUMPTIVE EVIDENCE OF THE MATTERS SET FORTH THEREIN, ABSENT
MANIFEST ERROR.  EACH LENDER AGREES THAT, AS PROMPTLY AS PRACTICABLE AFTER IT
BECOMES AWARE OF ANY CIRCUMSTANCES REFERRED TO ABOVE WHICH WOULD RESULT IN ANY
SUCH INCREASED COST, THE AFFECTED LENDER SHALL, TO THE EXTENT NOT INCONSISTENT
WITH SUCH LENDER’S INTERNAL POLICIES OF GENERAL APPLICATION, USE REASONABLE
COMMERCIAL EFFORTS TO MINIMIZE COSTS AND EXPENSES INCURRED BY IT AND PAYABLE TO
IT BY BORROWER PURSUANT TO THIS SECTION 1.16(B).

 

(C)                                  NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED HEREIN, IF THE INTRODUCTION OF OR ANY CHANGE IN ANY LAW OR REGULATION
(OR ANY CHANGE IN THE INTERPRETATION THEREOF) SHALL MAKE IT UNLAWFUL, OR ANY
CENTRAL BANK OR OTHER GOVERNMENTAL AUTHORITY SHALL ASSERT THAT IT IS UNLAWFUL,
FOR ANY LENDER TO AGREE TO MAKE OR TO MAKE OR TO CONTINUE TO FUND OR MAINTAIN
ANY LIBOR LOAN, THEN, UNLESS THAT LENDER IS ABLE TO MAKE OR TO CONTINUE TO FUND
OR TO MAINTAIN SUCH LIBOR LOAN AT ANOTHER BRANCH OR OFFICE OF THAT LENDER
WITHOUT, IN THAT LENDER’S OPINION, ADVERSELY AFFECTING IT OR ITS LOANS OR THE
INCOME OBTAINED THEREFROM, ON NOTICE THEREOF AND DEMAND THEREFOR BY SUCH LENDER
TO BORROWER THROUGH AGENT, (I) THE OBLIGATION OF SUCH LENDER TO AGREE TO MAKE OR
TO MAKE OR TO CONTINUE TO FUND OR MAINTAIN LIBOR LOANS SHALL TERMINATE AND
(II) BORROWER SHALL FORTHWITH PREPAY IN FULL ALL OUTSTANDING LIBOR LOANS OWING
TO SUCH LENDER,

 

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TOGETHER WITH INTEREST ACCRUED THEREON, UNLESS BORROWER, WITHIN FIVE (5)
BUSINESS DAYS AFTER THE DELIVERY OF SUCH NOTICE AND DEMAND, CONVERTS ALL LIBOR
LOANS INTO INDEX RATE LOANS.

 

(D)                                 WITHIN FIFTEEN (15) DAYS AFTER RECEIPT BY
BORROWER OF WRITTEN NOTICE AND DEMAND FROM ANY LENDER (AN “AFFECTED LENDER”) AS
PROVIDED IN SECTIONS 1.15(A), 1.15(B), 1.16(A) OR 1.16(B), BORROWER MAY, AT ITS
OPTION, NOTIFY AGENT AND SUCH AFFECTED LENDER OF ITS INTENTION TO REPLACE THE
AFFECTED LENDER.  SO LONG AS NO DEFAULT OR EVENT OF DEFAULT HAS OCCURRED AND IS
CONTINUING, BORROWER, WITH THE CONSENT OF AGENT, MAY OBTAIN, AT BORROWER’S
EXPENSE, A REPLACEMENT LENDER (“REPLACEMENT LENDER”) FOR THE AFFECTED LENDER,
WHICH REPLACEMENT LENDER MUST BE REASONABLY SATISFACTORY TO AGENT.  IF BORROWER
OBTAINS A REPLACEMENT LENDER WITHIN 180 DAYS FOLLOWING NOTICE OF ITS INTENTION
TO DO SO, THE AFFECTED LENDER MUST SELL AND ASSIGN ITS LOANS AND COMMITMENTS TO
SUCH REPLACEMENT LENDER FOR AN AMOUNT EQUAL TO THE PRINCIPAL BALANCE OF ALL
LOANS HELD BY THE AFFECTED LENDER AND ALL ACCRUED INTEREST AND FEES WITH RESPECT
THERETO THROUGH THE DATE OF SUCH SALE; PROVIDED, THAT BORROWER SHALL HAVE
REIMBURSED SUCH AFFECTED LENDER FOR THE ADDITIONAL AMOUNTS OR INCREASED COSTS
THAT IT IS ENTITLED TO RECEIVE UNDER SECTIONS 1.15(A), 1.15(B), 1.16(A) OR
1.16(B) THROUGH THE DATE OF SUCH SALE AND ASSIGNMENT.  NOTWITHSTANDING THE
FOREGOING, BORROWER SHALL NOT HAVE THE RIGHT TO OBTAIN A REPLACEMENT LENDER IF
THE AFFECTED LENDER RESCINDS ITS DEMAND FOR INCREASED COSTS OR ADDITIONAL
AMOUNTS WITHIN 15 DAYS FOLLOWING ITS RECEIPT OF BORROWER’S NOTICE OF INTENTION
TO REPLACE SUCH AFFECTED LENDER.  FURTHERMORE, IF BORROWER GIVES A NOTICE OF
INTENTION TO REPLACE AND DOES NOT SO REPLACE SUCH AFFECTED LENDER WITHIN 180
DAYS THEREAFTER, BORROWER’S RIGHTS UNDER THIS SECTION 1.16(D) SHALL TERMINATE
WITH RESPECT TO THE INCREASED COSTS OR ADDITIONAL AMOUNTS OF SUCH AFFECTED
LENDER GIVING RISE TO SUCH NOTICE TO REPLACE SUCH AFFECTED LENDER AND BORROWER
SHALL PROMPTLY PAY ALL INCREASED COSTS AND OR ADDITIONAL AMOUNTS DEMANDED BY
SUCH AFFECTED LENDER PURSUANT TO SECTIONS 1.15(A), 1.15(B), 1.16(A) AND 1.16(B).

 

1.17                           CREDIT SUPPORT

 

(A)                                  ALL LOANS TO BORROWER AND ALL OF THE OTHER
OBLIGATIONS OF BORROWER AND THE OBLIGATIONS OF SECURED GUARANTORS ARISING UNDER
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL CONSTITUTE ONE GENERAL
OBLIGATION OF BORROWER AND SECURED GUARANTORS SECURED, UNTIL THE TERMINATION
DATE, BY ALL OF THE U.S. COLLATERAL.

 

(B)                                 ALL OBLIGATIONS OF SCHAUBLIN FOR THE
REPAYMENT OF THE SCHAUBLIN INTERCOMPANY LOANS SHALL BE SECURED BY THE FOREIGN
COLLATERAL OF SCHAUBLIN GRANTED TO SCHAUBLIN HOLDING PURSUANT TO THE SCHAUBLIN
SWISS PLEDGE AGREEMENT, SCHAUBLIN FRENCH PLEDGE AGREEMENT (RBC FRANCE),
SCHAUBLIN FRENCH PLEDGE AGREEMENT (BOVAGNET), THE SWISS WAREHOUSE CONTROL
AGREEMENT, BY AN ASSIGNMENT TO SCHAUBLIN HOLDING, IN FORM AND SUBSTANCE
SATISFACTORY TO AGENT (THE “SCHAUBLIN ASSIGNMENT”), OF ALL RIGHTS AND REMEDIES
OF SCHAUBLIN UNDER THE INTERCOMPANY NOTES EXECUTED AND DELIVERED BY EACH OF THE
FRENCH OPERATING COMPANIES AND THE OTHER FOREIGN COLLATERAL DOCUMENTS EXECUTED
AND/OR DELIVERED BY SCHAUBLIN.

 

(C)                                  ALL OBLIGATIONS OF SCHAUBLIN HOLDING FOR
THE REPAYMENT OF THE SCHAUBLIN INTERCOMPANY LOANS SHALL BE SECURED BY THE
FOREIGN COLLATERAL OF SCHAUBLIN HOLDING GRANTED TO BORROWER PURSUANT TO THE
SCHAUBLIN HOLDING SWISS PLEDGE AGREEMENT BY AN ASSIGNMENT TO BORROWER, IN FORM
AND SUBSTANCE SATISFACTORY TO AGENT (THE “SCHAUBLIN HOLDING ASSIGNMENT”), OF ALL
RIGHTS AND REMEDIES OF SCHAUBLIN HOLDING UNDER THE FOREIGN COLLATERAL DOCUMENTS
DESCRIBED

 

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IN CLAUSE (B) ABOVE AND THE OTHER FOREIGN COLLATERAL DOCUMENTS EXECUTED AND/OR
DELIVERED BY SCHAUBLIN HOLDING.

 

(D)                                 ALL OBLIGATIONS OF BORROWER (INCLUDING THE
SCHAUBLIN REVOLVING LOAN) SHALL BE SECURED, IN ADDITION TO THE U.S. COLLATERAL,
BY AN ASSIGNMENT TO AGENT, ON BEHALF OF ITSELF AND LENDERS, IN FORM AND
SUBSTANCE SATISFACTORY TO AGENT (THE “BORROWER ASSIGNMENT”), OF ALL RIGHTS AND
REMEDIES OF BORROWER UNDER THE FOREIGN COLLATERAL DOCUMENTS AND THE SCHAUBLIN
HOLDING ASSIGNMENT DESCRIBED IN CLAUSE (C) ABOVE.

 

(E)                                  EACH CREDIT PARTY HEREBY CONSENTS TO THE
SCHAUBLIN ASSIGNMENT, THE SCHAUBLIN HOLDING ASSIGNMENT AND THE BORROWER
ASSIGNMENT AND TO ANY FURTHER ASSIGNMENT OF RIGHTS AND REMEDIES UNDER THE
FOREIGN COLLATERAL DOCUMENTS BY AGENT, AS APPLICABLE.

 

(F)                                    EACH CREDIT PARTY ACKNOWLEDGES AND AGREES
THAT (I) THE ULTIMATE ASSIGNEE OF ALL RIGHTS AND REMEDIES UNDER THE FOREIGN
COLLATERAL DOCUMENTS (AND OF THE “CONTROL” OF INVENTORY UNDER THE SWISS
WAREHOUSE CONTROL AGREEMENT, AS SUCH TERM IS DEFINED THEREIN) IS AGENT, ON
BEHALF OF ITSELF AND THE LENDERS, (II) IT SHALL NOT WAIVE, AMEND OR OTHERWISE
MODIFY ANY OF ITS RIGHTS OR REMEDIES UNDER THE FOREIGN COLLATERAL DOCUMENTS
WITHOUT THE EXPRESS PRIOR WRITTEN CONSENT THERETO OF AGENT AND LENDERS (AND EACH
CREDIT PARTY ACKNOWLEDGES THAT AGENT AND LENDERS ARE ENTERING INTO THIS
AGREEMENT AND EXTENDING THE COMMITMENTS IN RELIANCE UPON THE FOREGOING COVENANT
OF CREDIT PARTIES IN THIS CLAUSE (F)) AND (III) SO LONG AS AN EVENT OF DEFAULT
HAS OCCURRED AND IS CONTINUING, AGENT AND ITS ASSIGNEES MAY ENFORCE ALL RIGHTS
AND REMEDIES OF CREDIT PARTIES UNDER THE FOREIGN COLLATERAL DOCUMENTS.

 

(G)                                 SO LONG AS NO EVENT OF DEFAULT HAS OCCURRED
AND IS CONTINUING, AGENT AND LENDERS SHALL NOT DEMAND PAYMENT UNDER ANY OF THE
INTERCOMPANY NOTES EVIDENCING THE SCHAUBLIN INTERCOMPANY LOANS AND THE FRENCH
INTERCOMPANY LOANS.

 

1.18                           Conversion to Dollars.  All valuations or
computations of monetary amounts set forth in this Agreement shall include the
Dollar Equivalent of amounts in any Acceptable Foreign Currency.  In connection
with such valuations and computations all Dollar amounts set forth in this
Agreement and the U.S. Borrowing Base and Schaublin Borrowing Base calculations,
any Acceptable Foreign Currency shall be converted to Dollars in accordance with
the following procedure:

 

(I)                                     CONVERSIONS TO DOLLARS SHALL OCCUR IN
ACCORDANCE WITH PREVAILING EXCHANGE RATES, AS DETERMINED BY AGENT IN ITS
REASONABLE DISCRETION, ON THE APPLICABLE DATE;

 

(II)                                  (A) THE DOLLAR EQUIVALENT OF SCHAUBLIN
HOLDING INTERCOMPANY LOANS, SCHAUBLIN INTERCOMPANY LOANS AND FRENCH INTERCOMPANY
LOANS DENOMINATED IN CURRENCIES OTHER THAN DOLLARS SHALL BE MARKED TO MARKET ON
THE LAST DAY OF EACH FISCAL MONTH TAKING INTO ACCOUNT IN EACH CASE THE DOLLAR
EQUIVALENT OF ALL SCHAUBLIN HOLDING INTERCOMPANY LOANS, SCHAUBLIN INTERCOMPANY
LOANS, AND FRENCH INTERCOMPANY LOANS AND REPORTED TO AGENT WITHIN TEN (10)
BUSINESS DAYS AFTER THE END OF EACH FISCAL MONTH AND (B) THE DOLLAR EQUIVALENT
OF EACH BORROWING BASE SHALL BE MARKED TO MARKET ON THE LAST DAY OF EACH FISCAL
MONTH AND REPORTED TO AGENT WITHIN TEN (10) BUSINESS DAYS AFTER THE END OF EACH
FISCAL MONTH; AND, IN

 

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ADDITION, IF BORROWING AVAILABILITY IS LESS THAN $5,500,000, THE DOLLAR
EQUIVALENTS DESCRIBED IN CLAUSES (A) AND (B) SHALL BE MARKED TO MARKET ON EACH
FRIDAY AND REPORTED TO AGENT WITHIN FIVE (5) BUSINESS DAYS SO LONG AS BORROWING
AVAILABILITY REMAINS LESS THAN $5,500,000.

 

(III)                               UNLESS OTHERWISE SPECIFICALLY SET FORTH IN
THIS AGREEMENT, ALL MONETARY AMOUNTS SHALL BE IN DOLLARS AND ALL OBLIGATIONS
SHALL BE PAID IN DOLLARS.

 

1.19                           JUDGMENT CURRENCY; CONTRACTUAL CURRENCY.

 

(A)                                  IF, FOR THE PURPOSE OF OBTAINING OR
ENFORCING JUDGMENT AGAINST ANY CREDIT PARTY IN ANY COURT IN ANY JURISDICTION, IT
BECOMES NECESSARY TO CONVERT INTO ANY OTHER CURRENCY (SUCH OTHER CURRENCY BEING
HEREINAFTER IN THIS SECTION 1.19 REFERRED TO AS THE “JUDGMENT CURRENCY”) AN
AMOUNT DUE UNDER ANY LOAN DOCUMENT IN ANY CURRENCY (THE “OBLIGATION CURRENCY”)
OTHER THAN THE JUDGMENT CURRENCY, THE CONVERSION SHALL BE MADE AT THE RATE OF
EXCHANGE PREVAILING ON THE BUSINESS DAY IMMEDIATELY PRECEDING (I) THE DATE OF
ACTUAL PAYMENT OF THE AMOUNT DUE, IN THE CASE OF ANY PROCEEDING IN THE COURTS OF
ANY JURISDICTION THAT WILL GIVE EFFECT TO SUCH CONVERSION BEING MADE ON SUCH
DATE, OR (II) THE DATE ON WHICH THE JUDGMENT IS GIVEN, IN THE CASE OF ANY
PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION (THE APPLICABLE DATE AS OF
WHICH SUCH CONVERSION IS MADE PURSUANT TO THIS SECTION 1.19 BEING HEREINAFTER
REFERRED TO AS THE “JUDGMENT CONVERSION DATE”).

 

(B)                                 IF, IN THE CASE OF ANY PROCEEDING IN THE
COURT OF ANY JURISDICTION REFERRED TO IN SECTION 1.19(A), THERE IS A CHANGE IN
THE RATE OF EXCHANGE PREVAILING BETWEEN THE JUDGMENT CONVERSION DATE AND THE
DATE OF ACTUAL RECEIPT FOR VALUE OF THE AMOUNT DUE, THE APPLICABLE CREDIT PARTY
SHALL PAY SUCH ADDITIONAL AMOUNT (IF ANY, BUT IN ANY EVENT NOT A LESSER AMOUNT)
AS MAY BE NECESSARY TO ENSURE THAT THE AMOUNT ACTUALLY RECEIVED IN THE JUDGMENT
CURRENCY, WHEN CONVERTED AT THE RATE OF EXCHANGE PREVAILING ON THE DATE OF
PAYMENT, WILL PRODUCE THE AMOUNT OF THE OBLIGATION CURRENCY WHICH COULD HAVE
BEEN PURCHASED WITH THE AMOUNT OF THE JUDGMENT CURRENCY STIPULATED IN THE
JUDGMENT OR JUDICIAL ORDER AT THE RATE OF EXCHANGE PREVAILING ON THE JUDGMENT
CONVERSION DATE.  ANY AMOUNT DUE FROM A CREDIT PARTY UNDER THIS SECTION 1.19(B)
SHALL BE DUE AS A SEPARATE DEBT AND SHALL NOT BE AFFECTED BY JUDGMENT BEING
OBTAINED FOR ANY OTHER AMOUNTS DUE UNDER OR IN RESPECT OF ANY OF THE LOAN
DOCUMENTS.

 

(C)                                  THE TERM “RATE OF EXCHANGE” IN THIS
SECTION 1.19 MEANS THE RATE OF EXCHANGE AT WHICH AGENT WOULD, ON THE RELEVANT
DATE AT OR ABOUT NOON (NEW YORK CITY TIME), BE PREPARED TO SELL THE OBLIGATION
CURRENCY AGAINST THE JUDGMENT CURRENCY.

 

(D)                                 ANY AMOUNT RECEIVED OR RECOVERED BY AGENT IN
RESPECT OF ANY SUM EXPRESSED TO BE DUE TO IT (WHETHER FOR ITSELF OR AS TRUSTEE
FOR ANY OTHER PERSON) FROM ANY CREDIT PARTY UNDER THIS AGREEMENT OR UNDER ANY OF
THE OTHER LOAN DOCUMENTS IN A CURRENCY OTHER THAN THE CURRENCY (THE “CONTRACTUAL
CURRENCY”) IN WHICH SUCH SUM IS SO EXPRESSED TO BE DUE (WHETHER AS A RESULT OF,
OR FROM THE ENFORCEMENT OF, ANY JUDGMENT OR ORDER OF A COURT OR TRIBUNAL OF ANY
JURISDICTION, THE WINDING-UP OF BORROWER OR OTHERWISE) SHALL ONLY CONSTITUTE A
DISCHARGE OF BORROWER TO THE EXTENT OF THE AMOUNT OF THE CONTRACTUAL CURRENCY
THAT AGENT IS ABLE, IN ACCORDANCE WITH ITS USUAL PRACTICE, TO PURCHASE WITH THE
AMOUNT OF THE CURRENCY SO RECEIVED OR RECOVERED ON THE DATE OF RECEIPT OR
RECOVERY (OR, IF LATER, THE FIRST DATE ON WHICH SUCH PURCHASE IS PRACTICABLE). 
IF THE AMOUNT OF THE CONTRACTUAL CURRENCY SO PURCHASED IS LESS THAN THE AMOUNT
OF

 

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THE CONTRACTUAL CURRENCY SO EXPRESSED TO BE DUE, BORROWER SHALL INDEMNIFY AGENT
AGAINST ANY LOSS SUSTAINED BY IT AS A RESULT, INCLUDING THE COST OF MAKING ANY
SUCH PURCHASE.

 

2.                                      CONDITIONS PRECEDENT

 

2.1                                 Conditions to the Initial Loans.  No Lender
shall be obligated to make any Loan or incur any Letter of Credit Obligations on
the Effective Date, or to take, fulfill, or perform any other action hereunder,
until the following conditions have been satisfied or provided for in a manner
satisfactory to Agent, or waived in writing by Agent and Requisite Lenders:

 

(A)                                  CREDIT AGREEMENT; LOAN DOCUMENTS.  THIS
AGREEMENT OR COUNTERPARTS HEREOF SHALL HAVE BEEN DULY EXECUTED BY, AND DELIVERED
TO, BORROWER, AGENT AND LENDERS; AND AGENT SHALL HAVE RECEIVED SUCH DOCUMENTS,
INSTRUMENTS, AGREEMENTS AND LEGAL OPINIONS AS AGENT SHALL REASONABLY REQUEST IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS, INCLUDING ALL THOSE LISTED IN THE CLOSING CHECKLIST ATTACHED
HERETO AS ANNEX D, EACH IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO AGENT.

 

(B)                                 APPROVALS.  AGENT SHALL HAVE RECEIVED (I)
SATISFACTORY EVIDENCE THAT THE CREDIT PARTIES HAVE OBTAINED ALL REQUIRED
CONSENTS AND APPROVALS OF ALL PERSONS (INCLUDING ALL REQUISITE GOVERNMENTAL
AUTHORITIES) TO THE EXECUTION, DELIVERY AND PERFORMANCE OF THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS OR (II) AN OFFICER’S CERTIFICATE IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO AGENT AFFIRMING THAT NO SUCH CONSENTS OR APPROVALS
ARE REQUIRED.  IN ADDITION, AGENT SHALL HAVE RECEIVED AN OFFICER’S CERTIFICATE
IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO AGENT AFFIRMING THAT EXECUTION,
DELIVERY AND PERFORMANCE OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS DO NOT
VIOLATE ANY TERM OR PROVISION OF ANY OF (I) THE SUBORDINATED DEBT DOCUMENTS AND
(II) THE DISCOUNT DEBENTURES DOCUMENTS, INCLUDING, WITHOUT LIMITATION, A
REPRESENTATION AND WARRANTY THAT THE EXTENSION OF LOANS AND THE OBLIGATIONS
UNDER AND IN ACCORDANCE WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ARE
PERMITTED BY THE TERMS AND PROVISIONS OF (X) THE SUBORDINATED DEBT DOCUMENTS AND
(Y) THE DISCOUNT DEBENTURES DOCUMENTS.

 

(C)                                  CAPITAL STRUCTURE: OTHER INDEBTEDNESS. 
EXCEPT AS DESCRIBED ON DISCLOSURE SCHEDULE 2.1(D) THE CAPITAL STRUCTURE OF EACH
CREDIT PARTY HAS NOT MATERIALLY CHANGED SINCE MARCH 30, 2002 AND THE TERMS AND
CONDITIONS OF ALL INDEBTEDNESS OF EACH CREDIT PARTY SHALL BE ACCEPTABLE TO AGENT
IN ITS SOLE DISCRETION.

 

(D)                                 FINANCIAL COVENANT COMPLIANCE.  AGENT SHALL
HAVE RECEIVED A COMPLIANCE CERTIFICATE FOR THE 12-MONTH PERIOD ENDED AT THE END
OF THE FISCAL QUARTER ENDED ON DECEMBER 31, 2002 WHICH SHOWS COMPLIANCE WITH THE
FIXED CHARGE COVERAGE RATIO FINANCIAL COVENANT SET FORTH ON ANNEX G.

 

(E)                                  THE EFFECTIVE DATE TRANSACTIONS SHALL HAVE
BEEN CONCURRENTLY CONSUMMATED ON THE EFFECTIVE DATE.

 

2.2                                 Further Conditions to Each Loan.  Except as
otherwise expressly provided herein, no Lender shall be obligated to fund any
Advance or incur any Letter of Credit Obligation, if, as of the date thereof:

 

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(A)                                  ANY REPRESENTATION OR WARRANTY BY ANY
CREDIT PARTY CONTAINED HEREIN OR IN ANY OTHER LOAN DOCUMENT IS UNTRUE OR
INCORRECT AS OF SUCH DATE IN ANY MATERIAL RESPECT, EXCEPT TO THE EXTENT THAT
SUCH REPRESENTATION OR WARRANTY EXPRESSLY RELATES TO AN EARLIER DATE AND EXCEPT
FOR CHANGES THEREIN EXPRESSLY PERMITTED OR EXPRESSLY CONTEMPLATED BY THIS
AGREEMENT, AND AGENT OR REQUISITE REVOLVING LENDERS HAVE DETERMINED NOT TO MAKE
SUCH ADVANCE OR INCUR SUCH LETTER OF CREDIT OBLIGATION AS A RESULT OF THE FACT
THAT SUCH WARRANTY OR REPRESENTATION IS UNTRUE OR INCORRECT;

 

(B)                                 ANY EVENT OR CIRCUMSTANCE (I) HAVING A
MATERIAL ADVERSE EFFECT AS SET FORTH IN CLAUSES (C) OR (D) OF THE DEFINITION
THEREOF OR (II) WHICH COULD REASONABLY BE EXPECTED TO RESULT IN COSTS,
LIABILITIES OR DAMAGES, INDIVIDUALLY OR IN THE AGGREGATE, TO ANY CREDIT PARTY OR
CREDIT PARTIES IN AN AMOUNT THAT WOULD HAVE CAUSED THE FIXED CHARGE COVENANT
RATIO FINANCIAL COVENANT TO HAVE BEEN BREACHED IF SUCH EVENT OR OCCURRENCE HAD
OCCURRED AND SUCH COSTS, LIABILITIES OR DAMAGES HAD BEEN PAID ON THE FIRST DAY
OF THE FISCAL QUARTER MOST RECENTLY ENDED OR (III) WHICH RESULTS IN AN UNINSURED
LOSS OF TANGIBLE ASSETS WITH A VALUE IN EXCESS OF $4,000,000 HAS OCCURRED SINCE
THE DATE HEREOF AS DETERMINED BY THE REQUISITE REVOLVING LENDERS, AND AGENT OR
REQUISITE REVOLVING LENDERS HAVE DETERMINED NOT TO MAKE SUCH ADVANCE OR INCUR
SUCH LETTER OF CREDIT OBLIGATION AS A RESULT OF THE FACT THAT SUCH EVENT OR
CIRCUMSTANCE HAS OCCURRED;

 

(C)                                  ANY EVENT OF DEFAULT HAS OCCURRED AND IS
CONTINUING OR WOULD RESULT AFTER GIVING EFFECT TO ANY ADVANCE (OR THE INCURRENCE
OF ANY LETTER OF CREDIT OBLIGATION), AND AGENT OR REQUISITE REVOLVING LENDERS
SHALL HAVE DETERMINED NOT TO MAKE ANY ADVANCE OR INCUR ANY LETTER OF CREDIT
OBLIGATION AS A RESULT OF THAT EVENT OF DEFAULT; OR

 

(D)                                 AFTER GIVING EFFECT TO ANY U.S. REVOLVING
CREDIT ADVANCE (OR THE INCURRENCE OF ANY LETTER OF CREDIT OBLIGATIONS (OTHER
THAN THE OVERADVANCES)) OR AFTER GIVING EFFECT TO ANY SCHAUBLIN REVOLVING CREDIT
ADVANCE, U.S. BORROWING AVAILABILITY OR SCHAUBLIN BORROWING AVAILABILITY SHALL
BE LESS THAN THE APPLICABLE AVAILABILITY BLOCK.

 

The request and acceptance by Borrower of the proceeds of any Advance, the
incurrence of any Letter of Credit Obligations or the conversion or continuation
of any Loan into, or as, a LIBOR Loan shall be deemed to constitute, as of the
date thereof, (i) a representation and warranty by Borrower that the conditions
in this Section 2.2  have been satisfied and (ii) a reaffirmation by Borrower of
the granting and continuance of Agent’s Liens, on behalf of itself and Lenders,
pursuant to the Collateral Documents.

 

2.3                                 Conditions to U.S. Revolving Credit Advances
Funding Permitted Acquisitions.  In addition to the conditions set forth in
Section 2.2 with respect to all Advances, no Lender shall be obligated to
advance its Pro Rata Share of any U.S. Revolving Credit Advance used for the
purpose of funding all or part of the purchase price of any acquisition of
Stock, any purchase of all or substantially all of the assets of any Person, or
any business or division of any Person or any acquisition of a Person by a
merger, consolidation or any other combination unless the conditions set forth
in Section 6.1 hereof have been satisfied or provided for in a manner
satisfactory to Agent or waived in writing by Agent and Lenders.

 

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3.                                      REPRESENTATIONS AND WARRANTIES

 

To induce Lenders to make the Loans and to incur Letter of Credit Obligations,
the Domestic Credit Parties executing this Agreement, jointly and severally,
make the following representations and warranties to Agent and each Lender with
respect to all Credit Parties (regardless of whether the text of any provision
of this Article 3 speaks to one party only), and the Foreign Credit Parties,
severally, make the following representations and warranties to Agent and each
Lender only with respect to itself (regardless of whether the text of any
provision of this Article 3 speaks to more than one party), each and all of
which shall survive the execution and delivery of this Agreement:

 

3.1                                 Corporate Existence; Compliance with Law. 
Such Credit Party (a) is a corporation, limited liability company or limited
partnership duly organized, validly existing and in good standing (if it is a
Domestic Credit Party or, if it is a Foreign Credit Party, it is in good
standing only to the extent applicable) under the laws of its respective
jurisdiction of incorporation or organization set forth in Disclosure Schedule
(3.1); (b) is duly qualified to conduct business and is in good standing in each
other jurisdiction where its ownership or lease of property or the conduct of
its business requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect; (c) has the requisite power
and authority and the legal right to own, pledge, mortgage or otherwise encumber
and operate its properties, to lease the property it operates under lease and to
conduct its business as now conducted; (d) subject to specific representations
regarding Environmental Laws contained in the Environmental Indemnity Agreement,
has all material licenses, permits, consents or approvals from or by, and has
made all material filings with, and has given all material notices to, all
Governmental Authorities having jurisdiction, to the extent required for such
ownership, operation and conduct, except as could not reasonably be expected to
have a Material Adverse Effect; (e) is in compliance with its charter and bylaws
or partnership or operating agreement, as applicable; and (f) subject to
specific representations set forth herein regarding ERISA, tax and other laws,
or specific representations regarding Environmental Laws set forth in the
Environmental Indemnity Agreement, is in compliance with all applicable
provisions of law, except where the failure to comply, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

3.2                                 Executive Offices, Collateral Locations,
FEIN.  As of the Effective Date, such Credit Party’s name as it appears in
official filings in its jurisdiction of incorporation or organization,
jurisdiction of incorporation or organization, organization type, organization
number, if any, issued by its jurisdiction incorporation or organization, and
the location of such Credit Party’s chief executive office and the warehouses
and premises at which any Collateral is located on the Effective Date are set
forth in Disclosure Schedule (3.2), and such Credit Party has only one
jurisdiction of incorporation or organization.  In addition, Disclosure Schedule
(3.2) lists the federal employer identification number of such Credit Party, if
it is a Domestic Credit Party.

 

3.3                                 Corporate Power, Authorization, Enforceable
Obligations.  The execution, delivery and performance by such Credit Party of
the Loan Documents to which it is a party and the creation of all Liens provided
for therein: (a) are within such Person’s power; (b) have been duly authorized
by all necessary corporate, limited liability company, limited partnership or

 

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similar action; (c) do not contravene any provision of such Person’s charter,
bylaws or partnership or operating agreement as applicable; (d) do not violate
any applicable law or regulation, or any order or decree of any court or
Governmental Authority; (e) do not conflict with or result in the breach or
termination of, constitute a default under or accelerate or permit the
acceleration of any performance required by, any indenture, mortgage, deed of
trust, lease, or other material agreement or instrument to which such Person is
a party or by which such Person or any of its property is bound; (f) do not
result in the creation or imposition of any Lien upon any of the property of
such Person other than those in favor of Agent, on behalf of itself and Lenders,
pursuant to the Loan Documents; and (g) do not require the consent or approval
of any Governmental Authority or any other Person, except those referred to in
Section 2.1(c), all of which will have been duly obtained, made or complied with
prior to or on the Effective Date.  As of the Effective Date, each of the Loan
Documents shall be duly executed and delivered by such Credit Party that is a
party thereto and each such Loan Document shall constitute a legal, valid and
binding obligation of such Credit Party enforceable against it in accordance
with its terms, except as the enforceability thereof may be limited by
applicable bankruptcy laws or similar laws affecting creditors’ rights in
general.

 

3.4                                 Financial Statements and Projections. 
Except for the Projections, all Financial Statements concerning Holdings,
Borrower and its Subsidiaries that are referred to in this Section 3.4 have been
prepared in accordance with GAAP consistently applied throughout the periods
covered (except as disclosed therein and except, with respect to unaudited
Financial Statements, for the absence of footnotes and normal year-end audit
adjustments) and present fairly in all material respects the financial position
of the Persons covered thereby as at the dates thereof and the results of their
operations and cash flows for the periods then ended.

 

(A)                                  FINANCIAL STATEMENTS.  THE FOLLOWING
FINANCIAL STATEMENTS ATTACHED HERETO AS DISCLOSURE SCHEDULE (3.4(A)) HAVE BEEN
DELIVERED TO AGENT ON OR BEFORE THE CLOSING DATE:

 

(I)                                     THE AUDITED CONSOLIDATED AND
CONSOLIDATING BALANCE SHEETS AT MARCH 31, 2001 AND THE RELATED STATEMENTS OF
INCOME AND CASH FLOWS OF HOLDINGS, BORROWER AND ITS SUBSIDIARIES FOR THE FISCAL
YEAR THEN ENDED, CERTIFIED BY ARTHUR ANDERSEN LLP.

 

(II)                                  THE UNAUDITED BALANCE SHEET(S) AT MARCH
30, 2002 AND THE RELATED STATEMENT(S) OF INCOME AND CASH FLOWS OF HOLDINGS,
BORROWER AND ITS SUBSIDIARIES FOR THE FOUR FISCAL QUARTERS THEN ENDED.

 

(B)                                 PRO FORMA.  THE PRO FORMA DELIVERED TO AGENT
ON OR BEFORE THE CLOSING DATE AND ATTACHED HERETO AS DISCLOSURE SCHEDULE
(3.4(B)) WAS BASED ON THE UNAUDITED CONSOLIDATED AND CONSOLIDATING BALANCE
SHEETS OF BORROWER AND ITS SUBSIDIARIES DATED MARCH 30, 2002, AND WAS PREPARED
IN ACCORDANCE WITH GAAP, WITH ONLY SUCH ADJUSTMENTS THERETO AS WOULD BE REQUIRED
IN ACCORDANCE WITH GAAP.

 

(C)                                  PROJECTIONS.  THE PROJECTIONS DELIVERED TO
AGENT ON OR BEFORE THE CLOSING DATE AND ATTACHED HERETO AS DISCLOSURE SCHEDULE
(3.4(C)) HAVE BEEN PREPARED BY BORROWER IN LIGHT OF THE PAST OPERATIONS OF ITS
AND ITS SUBSIDIARIES’ BUSINESSES, BUT INCLUDING FUTURE PAYMENTS OF KNOWN
CONTINGENT LIABILITIES, AND REFLECT PROJECTIONS FOR THE THREE YEAR PERIOD
BEGINNING ON MARCH 31, 2002, ON A MONTH-BY-MONTH BASIS FOR THE FIRST YEAR AND ON
A YEAR-BY-YEAR BASIS

 

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THEREAFTER.  THE PROJECTIONS ARE BASED UPON ESTIMATES AND ASSUMPTIONS STATED
THEREIN, ALL OF WHICH BORROWER BELIEVES TO BE REASONABLE AND FAIR IN LIGHT OF
CURRENT CONDITIONS AND CURRENT FACTS KNOWN TO BORROWER AND, AS OF THE CLOSING
DATE, REFLECT BORROWER’S GOOD FAITH AND REASONABLE ESTIMATES OF THE FUTURE
FINANCIAL PERFORMANCE OF BORROWER AND OF THE OTHER INFORMATION PROJECTED THEREIN
FOR THE PERIOD SET FORTH THEREIN.

 

3.5                                 Material Adverse Effect.  Between March 30,
2002 and the Effective Date, (a) such Credit Party has not incurred any
obligations, contingent or noncontingent liabilities, liabilities for Charges,
long-term leases or unusual forward or long-term commitments that are not
reflected in the Pro Forma and that, alone or in the aggregate, could reasonably
be expected to have a Material Adverse Effect, (b) no contract, lease or other
agreement or instrument has been entered into by such Credit Party or has become
binding upon such Credit Party’s assets and no law or regulation applicable to
such Credit Party has been adopted, in each case, that has had or could
reasonably be expected to have a Material Adverse Effect, and (c) such Credit
Party is not in default and to the best of Borrower’s knowledge no third party
is in default under any material contract, lease or other agreement or
instrument, in any case which default alone or in the aggregate could reasonably
be expected to have a Material Adverse Effect.  Between March 30, 2002 and the
Effective Date no event has occurred, that alone or together with other events,
could reasonably be expected to have a Material Adverse Effect with respect to
such Credit Party.

 

3.6                                 Ownership of Property; Liens.  As of the
Effective Date, the real estate (“Real Estate”) listed in Disclosure Schedule
(3.6) includes all of the real property owned, leased, subleased, or used by
such Credit Party.  As of the Effective Date, such Credit Party owns good and
marketable fee simple title to all of its owned Real Estate, and valid leasehold
interests in all of its leased Real Estate, all as described on Disclosure
Schedule (3.6), and copies of all such leases have been delivered to Agent. 
Disclosure Schedule (3.6) further describes any Real Estate with respect to
which such Credit Party is a lessor, sublessor or assignor as of the Effective
Date.  Such Credit Party also has good and marketable title to, or valid
leasehold interests in, all of its personal property and assets.  As of the
Effective Date, none of the properties and assets of such Credit Party are
subject to any Liens other than Permitted Encumbrances, and such Credit Party
has not received written notice of any facts, circumstances or conditions that
are likely to result in any Liens (including Liens arising under Environmental
Laws) on any Collateral other than Permitted Encumbrances.  As of the Effective
Date, the Liens granted to Agent pursuant to the Loan Documents are first
priority perfected Liens, subject only to Permitted Encumbrances.  As of the
Effective Date, such Credit Party has to its knowledge received all deeds,
assignments, waivers, consents, nondisturbance and attornment or similar
agreements, bills of sale and other documents, and has duly effected all
recordings, filings and other actions reasonably necessary to establish, protect
and perfect such Credit Party’s right, title and interest in and to all such
Real Estate and other properties and assets.  Disclosure Schedule (3.6) also
describes any purchase options, rights of first refusal or other similar
contractual rights pertaining to any Real Estate.  During the period from March
30, 2002 through the Effective Date, no portion of such Credit Party’s Real
Estate has suffered any material damage by fire or other casualty loss that has
not heretofore been repaired and restored in all material respects to its
original condition or otherwise remedied.  As of the Effective Date, all
material permits required to have been issued or appropriate to enable the Real
Estate to be lawfully occupied and used for all of the purposes

 

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for which it is currently occupied and used have been lawfully issued and are in
full force and effect, except as could not reasonably be expected to have a
Material Adverse Effect.

 

3.7                                 Labor Matters.  As of the Effective Date (a)
no strikes or other material labor disputes against such Credit Party are
pending or, to such Credit Party’s knowledge, threatened; (b) hours worked by
and payment made to employees of such Credit Party comply with the Fair Labor
Standards Act (with respect to Domestic Credit Parties) and each other federal,
state, local or foreign law applicable to such matters; (c) all payments due
from such Credit Party for employee health and welfare insurance have been paid
or accrued as a liability on the books of such Credit Party; (d) except as set
forth in Disclosure Schedule (3.7), such Credit Party is not a party to or bound
by any collective bargaining agreement, management agreement, consulting
agreement, employment agreement, bonus, restricted stock, stock option, or stock
appreciation plan or agreement or any similar plan, agreement or arrangement
(and true and complete copies of any agreements described on Disclosure Schedule
(3.7) have been delivered to Agent); (e) to such Credit Party’s knowledge, there
is no organizing activity involving such Credit Party pending or threatened by
any labor union or group of employees; (f) there are no representation
proceedings pending or, to such Credit Party’s knowledge, threatened with the
National Labor Relations Board, and no labor organization or group of employees
of such Credit Party has made a pending demand for recognition; and (g) except
as set forth in Disclosure Schedule (3.7), there are no material complaints or
charges against such Credit Party pending or, to the knowledge of such Credit
Party, threatened to be filed with any Governmental Authority or arbitrator
based on, arising out of, in connection with, or otherwise relating to the
employment or termination of employment by such Credit Party of any individual;
in each case except as could not reasonably be expected to have a Material
Adverse Effect.

 

3.8                                 Ventures, Subsidiaries and Affiliates;
Outstanding Stock and Indebtedness.  Except as set forth in Disclosure Schedule
(3.8), as of the Effective Date, such Credit Party has no Subsidiaries, is not
engaged in any joint venture or partnership with any other Person, or is an
Affiliate of any other Person.  As of the Effective Date, all of the issued and
outstanding Stock of such Credit Party is owned by each of the Stockholders and
in the amounts set forth in Disclosure Schedule (3.8).  Except as set forth in
Disclosure Schedule (3.8), as of the Effective Date there are no outstanding
rights to purchase, options, warrants or similar rights or agreements pursuant
to which such Credit Party may be required to issue, sell, repurchase or redeem
any of its Stock or other equity securities or any Stock or other equity
securities of its Subsidiaries.  All outstanding Indebtedness and Guaranteed
Indebtedness of such Credit Party as of the Effective Date (except for the
Obligations) is described in Section 6.3 (including Disclosure Schedule (6.3)).

 

3.9                                 Government Regulation.  Such Credit Party is
not an “investment company” or an “affiliated person” of, or “promoter” or
“principal underwriter” for, an “investment company,” as such terms are defined
in the Investment Company Act of 1940.  Such Credit Party is not subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, or any other federal or state statute that restricts or limits its
ability to incur Indebtedness or to perform its obligations hereunder. The
making of the Loans by Lenders to Borrower, the incurrence of the Letter of
Credit Obligations on behalf of Borrower, the application of the proceeds
thereof and repayment thereof will not violate any provision of any such statute
or any rule, regulation or order issued by the Securities and Exchange
Commission.

 

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3.10                           Margin Regulations.  Such Credit Party is not
engaged, nor will it engage, principally or as one of its important activities,
in the business of extending credit for the purpose of “purchasing” or
“carrying” any “margin stock” as such terms are defined in Regulation U of the
Federal Reserve Board as now and from time to time hereafter in effect (such
securities being referred to herein as “Margin Stock”).  Such Credit Party does
not own any Margin Stock, and none of the proceeds of the Loans or other
extensions of credit under this Agreement will be used, directly or indirectly,
for the purpose of purchasing or carrying any Margin Stock, for the purpose of
reducing or retiring any Indebtedness that was originally incurred to purchase
or carry any Margin Stock or for any other purpose that might cause any of the
Loans or other extensions of credit under this Agreement to be considered a
“purpose credit” within the meaning of Regulations T, U or X of the Federal
Reserve Board.  Such Credit Party will not take or permit to be taken any action
that might cause any Loan Document to violate any regulation of the Federal
Reserve Board.

 

3.11                           Taxes.  As of the Effective Date, all tax
returns, reports and statements, including information returns, required by any
Governmental Authority to be filed by such Credit Party have been filed with the
appropriate Governmental Authority and all Charges have been paid prior to the
date on which any fine, penalty, interest or late charge may be added thereto
for nonpayment thereof (or any such fine, penalty, interest, late charge or loss
has been paid),  excluding Charges or other amounts being contested in
accordance with the terms described in Section 5.2(b).  As of the Effective
Date, proper and accurate amounts have been withheld by each Credit Party from
its respective employees for all periods in full and complete compliance with
all applicable federal, state, local and foreign laws and such withholdings have
been timely paid to the respective Governmental Authorities.  Disclosure
Schedule (3.11) sets forth as of the Effective Date those taxable years for
which such Credit Party’s tax returns are currently being audited by the IRS or
any other applicable Governmental Authority and any assessments or threatened
assessments in connection with such audit, or that are otherwise currently
outstanding.  Except as described in Disclosure Schedule (3.11), as of the
Effective Date, no Credit Party has executed or filed with the IRS or any other
Governmental Authority any agreement or other document extending, or having the
effect of extending, the period for assessment or collection of any Charges.  As
of the Effective Date, neither such Credit Party nor its predecessors are liable
for any Charges:  (a) under any agreement (including any tax sharing
agreements), except as described in Disclosure Schedule (3.11) or (b) to such
Credit Party’s knowledge, as a transferee.  As of the Effective Date, such
Credit Party has not agreed or been requested to make any adjustment under IRC
Section 481(a), by reason of a change in accounting method or otherwise, which
would have a Material Adverse Effect.

 

3.12                           ERISA.

 

(A)                                  DISCLOSURE SCHEDULE (3.12) LISTS (I) ALL
ERISA AFFILIATES AND (II) ALL PLANS AND SEPARATELY IDENTIFIES ALL PENSION PLANS,
INCLUDING TITLE IV PLANS, MULTIEMPLOYER PLANS, ESOPS AND WELFARE PLANS,
INCLUDING ALL RETIREE WELFARE PLANS.  COPIES OF ALL SUCH LISTED PLANS (OTHER
THAN MULTIEMPLOYER PLANS), TOGETHER WITH A COPY OF THE LATEST FORM IRS/DOL
5500-SERIES FORM FOR EACH SUCH PLAN AND THE MOST RECENT ACTUARIAL REPORT FOR ANY
TITLE IV PLANS AND WELFARE PLANS HAVE BEEN DELIVERED TO AGENT.  EXCEPT WITH
RESPECT TO MULTIEMPLOYER PLANS, EACH QUALIFIED PLAN HAS BEEN DETERMINED BY THE
IRS TO QUALIFY UNDER SECTION 401 OF THE IRC, THE TRUSTS CREATED THEREUNDER HAVE
BEEN DETERMINED TO BE EXEMPT FROM TAX UNDER THE PROVISIONS OF SECTION 501 OF

 

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THE IRC, AND NOTHING HAS OCCURRED THAT WOULD CAUSE THE LOSS OF SUCH
QUALIFICATION OR TAX-EXEMPT STATUS.  EXCEPT AS COULD NOT REASONABLY BE EXPECTED
TO HAVE A MATERIAL ADVERSE EFFECT, EACH PLAN IS IN COMPLIANCE WITH THE
APPLICABLE PROVISIONS OF ERISA AND THE IRC, INCLUDING THE TIMELY FILING OF ALL
REPORTS REQUIRED UNDER THE IRC OR ERISA, INCLUDING THE STATEMENT REQUIRED BY 29
CFR SECTION 2520.104-23.  NEITHER ANY DOMESTIC CREDIT PARTY NOR ERISA AFFILIATE
HAS FAILED TO MAKE ANY CONTRIBUTION OR PAY ANY AMOUNT DUE AS REQUIRED BY EITHER
SECTION 412 OF THE IRC OR SECTION 302 OF ERISA OR THE TERMS OF ANY SUCH PLAN. 
EXCEPT AS COULD NOT BE REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT,
NO “PROHIBITED TRANSACTION,” AS DEFINED IN SECTION 406 OF ERISA AND SECTION 4975
OF THE IRC, IN CONNECTION WITH ANY PLAN HAS OCCURRED THAT WOULD SUBJECT ANY
CREDIT PARTY TO A MATERIAL TAX ON PROHIBITED TRANSACTIONS IMPOSED BY SECTION
502(L) OF ERISA OR SECTION 4975 OF THE IRC, AND NO EVENT HAS OCCURRED WITH
RESPECT TO A PLAN WHICH WOULD SUBJECT ANY DOMESTIC CREDIT PARTY TO ANY MATERIAL
LIABILITY UNDER SECTION 502(L) OF ERISA.

 

(B)                                 EXCEPT AS SET FORTH IN DISCLOSURE SCHEDULE
(3.12): (I) NO TITLE IV PLAN HAS ANY UNFUNDED PENSION LIABILITY; (II) NO ERISA
EVENT OR EVENT DESCRIBED IN SECTION 4062(E) OF ERISA WITH RESPECT TO ANY TITLE
IV PLAN HAS OCCURRED OR IS REASONABLY EXPECTED TO OCCUR; (III) THERE ARE NO
PENDING, OR TO THE KNOWLEDGE OF ANY DOMESTIC CREDIT PARTY, THREATENED CLAIMS
(OTHER THAN CLAIMS FOR BENEFITS IN THE NORMAL COURSE), SANCTIONS, ACTIONS OR
LAWSUITS, ASSERTED OR INSTITUTED AGAINST ANY PLAN OR ANY PERSON AS FIDUCIARY OR
SPONSOR OF ANY PLAN; (IV) NO DOMESTIC CREDIT PARTY OR ERISA AFFILIATE HAS
INCURRED OR REASONABLY EXPECTS TO INCUR ANY LIABILITY AS A RESULT OF A COMPLETE
OR PARTIAL WITHDRAWAL FROM A MULTIEMPLOYER PLAN; (V) WITHIN THE LAST FIVE YEARS
NO TITLE IV PLAN OF ANY DOMESTIC CREDIT PARTY OR ERISA AFFILIATE HAS BEEN
TERMINATED, WHETHER OR NOT IN A “STANDARD TERMINATION” AS THAT TERM IS USED IN
SECTION 4041(B)(1) OF ERISA, NOR HAS ANY TITLE IV PLAN OF ANY DOMESTIC CREDIT
PARTY OR ERISA AFFILIATE (DETERMINED AT ANY TIME WITHIN THE PAST FIVE YEARS)
WITH UNFUNDED PENSION LIABILITIES BEEN TRANSFERRED OUTSIDE OF THE “CONTROLLED
GROUP” (WITHIN THE MEANING OF SECTION 4001(A)(14) OF ERISA) OF ANY DOMESTIC
CREDIT PARTY OR ERISA AFFILIATE (DETERMINED AT SUCH TIME); (VI) EXCEPT IN THE
CASE OF ANY ESOP, STOCK OF ALL CREDIT PARTIES AND THEIR ERISA AFFILIATES MAKES
UP, IN THE AGGREGATE, NO MORE THAN 10% OF FAIR MARKET VALUE OF THE ASSETS OF ANY
PLAN MEASURED ON THE BASIS OF FAIR MARKET VALUE AS OF THE LATEST VALUATION DATE
OF ANY PLAN; AND (VII) NO LIABILITY UNDER ANY TITLE IV PLAN HAS BEEN SATISFIED
WITH THE PURCHASE OF A CONTRACT FROM AN INSURANCE COMPANY THAT IS NOT RATED AAA
BY THE STANDARD & POOR’S CORPORATION OR AN EQUIVALENT RATING BY ANOTHER
NATIONALLY RECOGNIZED RATING AGENCY.

 

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3.13                           No Litigation.  No action, claim, lawsuit,
demand, investigation or proceeding is now pending or, to the knowledge of such
Credit Party, threatened in writing against any Credit Party, before any
Governmental Authority or before any arbitrator or panel of arbitrators
(collectively, “Litigation”), (a) that challenges such Credit Party’s right or
power to enter into or perform any of its obligations under the Loan Documents
to which it is a party, or the validity or enforceability of any Loan Document
or any action taken thereunder, or (b) that is reasonably likely to be
determined adversely to such Credit Party and that, if so determined, would have
a Material Adverse Effect.  Except as set forth on Disclosure Schedule (3.13),
as of the Effective Date there is no Litigation pending or, to such Credit
Party’s knowledge, threatened that seeks damages in excess of the Dollar
Equivalent of $250,000 or injunctive relief against, or alleges criminal
misconduct of, such Credit Party.

 

3.14                           Brokers.  No broker or finder acting on behalf of
such Credit Party or Affiliate thereof brought about the obtaining, making or
closing of the Loans, and neither such Credit Party nor Affiliate thereof has
any obligation to any Person in respect of any finder’s or brokerage fees in
connection therewith.

 

3.15                           Intellectual Property.  As of the Effective Date,
such Credit Party owned or had rights to use all Intellectual Property necessary
to continue to conduct its business as now or heretofore conducted by it or
proposed to be conducted by it, and each Patent, Trademark, Copyright and
License is listed, together with application or registration numbers, as
applicable, in Disclosure Schedule (3.15).  To the knowledge of such Credit
Party, as of the Effective Date, such Credit Party conducts its business and
affairs without infringement of or interference with any Intellectual Property
of any other Person in any material respect.  Except as set forth in Disclosure
Schedule (3.15), as of the Effective Date, such Credit Party is not aware of any
infringement claim by any other Person with respect to any Intellectual
Property.

 

3.16                           Full Disclosure.  No information contained in
this Agreement, any of the other Loan Documents, any Projections, Financial
Statements or Collateral Reports or other written reports from time to time
delivered hereunder or any written statement furnished by or on behalf of such
Credit Party to Agent or any Lender pursuant to the terms of this Agreement
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein not misleading in light of the circumstances under which they
were made.  Projections from time to time delivered hereunder are or will be
based upon the estimates and assumptions stated therein, all of which Borrower
believed at the time of delivery to be reasonable and fair in light of current
conditions and current facts known to Borrower as of such delivery date, and
reflect Borrower’s good faith and reasonable estimates of the future financial
performance of Borrower and of the other information projected therein for the
period set forth therein.  Such Credit Party will use its best efforts to ensure
that the Liens granted to Agent, on behalf of itself and Lenders, pursuant to
the Collateral Documents will at all times be fully perfected first priority
Liens in and to the Collateral described therein, subject, as to priority, only
to Permitted Encumbrances.

 

3.17                           Common Enterprise.  Borrower is the direct and
beneficial owner and holder of all of the issued and outstanding shares of Stock
of each Secured Guarantor and, except for directors’ qualifying shares and
shares owned by managers, Borrower is the direct owner of all of the issued and
outstanding shares of Stock of Schaublin Holding and the indirect owner of all

 

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of the issued and outstanding shares of Stock of Schaublin and each of the
French Operating Companies.  Borrower, Secured Guarantors and Foreign Credit
Parties make up a related organization of various entities constituting a single
economic and business enterprise so that Borrower, Secured Guarantors and
Foreign Credit Parties share a substantial identity of interests such that any
benefit received by any one of them benefits the others.  Borrower and certain
of the Secured Guarantors and Foreign Credit Parties render services to or for
the benefit of Borrower and/or other Secured Guarantors and Foreign Credit
Parties, as the case may be, purchase or sell and supply goods to or from or for
the benefit of the others, make loans, advances and provide other financial
accommodations to or for the benefit of Borrower, Secured Guarantors and Foreign
Credit Parties (including inter alia, the payment by Borrower and Guarantors of
creditors of Borrower or Secured Guarantors and guarantees by Borrower and
Secured Guarantors of indebtedness of Borrower and Secured Guarantors and
provide administrative, marketing, payroll and management services to or for the
benefit of Borrower and other Secured Guarantors).  Borrower and Secured
Guarantors have centralized accounting, common officers and directors and are in
certain circumstances, identified to creditors as a single economic and business
enterprise.

 

3.18                           Insurance.  Disclosure Schedule (3.18) lists all
insurance policies of any nature maintained, as of the Effective Date, for
current occurrences by such Credit Party, as well as a summary of the terms of
each such policy.

 

3.19                           Deposit and Disbursement Accounts.  Disclosure
Schedule (3.19) lists all banks and other financial institutions at which such
Credit Party maintains deposit or other accounts as of the Effective Date,
including any Disbursement Accounts, and such Schedule correctly identifies the
name, address and telephone number of each depository, the name in which the
account is held, a description of the purpose of the account, and the complete
account number therefor.

 

3.20                           Government Contracts.  Except as set forth in
Disclosure Schedule (3.20), as of the Effective Date, such Credit Party is not a
party to any contract or agreement with any Governmental Authority and such
Credit Party’s Accounts are not subject to the Federal Assignment of Claims Act
(31 U.S.C. Section 3727) or any similar state or local law.

 

3.21                           Customer and Trade Relations.  During the twelve
months preceding the Effective Date, there was no termination or cancellation
of:  the business relationship of any Credit Party with any customer or group of
related customers whose purchases during the most recent Fiscal Year caused it
to be ranked among the ten largest customers of such Credit Party; or the
business relationship of any Credit Party with any supplier that cannot be
easily replaced.

 

3.22                           Agreements and Other Documents.  As of the
Effective Date, such Credit Party has, if a Domestic Credit Party or Schaublin,
provided to Agent or its counsel, on behalf of Lenders, complete copies (or
accurate summaries) of all of the following agreements or documents to which it
is subject and each of which is listed in Disclosure Schedule (3.22) without
duplication of the agreements or documents provided as of the Closing Date: 
supply agreements and purchase agreements not terminable by such Credit Party
within sixty (60) days following written notice issued by such Credit Party and
involving transactions in excess of $1,000,000 per annum; leases of Equipment
having a remaining term of one year or longer and

 

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requiring aggregate rental and other payments in excess of $500,000 per annum;
licenses and permits held by such Credit Party, the absence of which could be
reasonably likely to have a Material Adverse Effect; instruments and documents
evidencing any Indebtedness or Guaranteed Indebtedness of such Credit Party in
excess of $500,000 and any Lien granted by such Credit Party with respect
thereto; and instruments and agreements evidencing the issuance of any equity
securities, warrants, rights or options to purchase equity securities of such
Credit Party.

 

3.23                           Solvency.  Both before and after giving effect to
(a) the Loans and Letter of Credit Obligations to be made or incurred on or
prior to the Effective Date, if any, or such other date as Loans and Letter of
Credit Obligations requested hereunder are made or incurred, (b) the
disbursement of the proceeds of such Loans pursuant to the instructions of
Borrower, and payment and accrual of all transaction costs in connection with
the foregoing, such Credit Party is and will be Solvent.

 

3.24                           Status of Holdings.  As of the Effective Date,
Holdings has not engaged in any trade or business and is not obligated to pay
any Indebtedness other than the Zero Coupon Debt.

 

3.25                           Status of Schaublin Holding.  As of the Effective
Date, Schaublin Holding has not engaged in any trade or business and is not
obligated to pay any Indebtedness other than the Existing Schaublin Holding
Intercompany Loan.

 

3.26                           Subordinated Debt; other Indebtedness.  As of the
Effective Date, Borrower has delivered to Agent a complete and correct copy of
the Subordinated Documents, the Discount Debentures Documents and any other debt
instrument of any Credit Party evidencing Indebtedness in excess of $500,000
(including, in each case, all schedules, exhibits, amendments, supplements,
modifications, assignments and all other documents delivered pursuant thereto or
in connection therewith and without duplication of the debt instruments
delivered as of the Closing Date).  As of the relevant dates, Holdings and
Borrower had the corporate power and authority to incur the Indebtedness
evidenced by the Discount Debentures Documents and the Subordinated Debt
Documents, respectively.  All Obligations, including the Letter of Credit
Obligations, constitute senior Indebtedness entitled to the benefits of the
subordination provisions contained in the Senior Subordinated Notes.  Borrower
acknowledges that Agent and each Lender are entering into this Agreement and are
extending the Commitments in reliance upon the subordination provisions of the
Senior Subordinated Notes and this Section 3.25.

 

3.27                           Motor Vehicles.  As of the Effective Date, the
value of all motor vehicles owned by Domestic Credit Parties does not exceed
$100,000 in the aggregate.

 

3.28                           Existing Intercompany Loans.  Disclosure Schedule
3.28 sets forth (a) the aggregate outstanding balance in Dollar Equivalent of
the intercompany loans from Borrower to Schaublin Holding as of close of
business on June 19, 2003 (the “Existing Schaublin Holding Intercompany Loans”),
(b) the outstanding balance in Dollar Equivalents of the intercompany loans from
Schaublin Holding to Schaublin as of the close of business on June 19, 2003 (the
“Existing Schaublin Intercompany Loans”), and (c) the outstanding balance in
Dollar Equivalent of the intercompany loans from Schaublin to RBC France as of
the close of business on June 19, 2003, and (d) the outstanding balance in
Dollar Equivalent of the intercompany loans from Schaublin to Bovagnet as of
close of business on June 19, 2003, which, together with the

 

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outstanding intercompany loans to RBC France in the previous clause (c) are
collectively herein referred to as the “Existing French Intercompany Loans”.

 

4.                                      FINANCIAL STATEMENTS AND INFORMATION

 

4.1                                 REPORTS AND NOTICES.

 

(A)                                  FROM AND AFTER THE EFFECTIVE DATE AND UNTIL
THE TERMINATION DATE, BORROWER SHALL DELIVER TO AGENT OR TO AGENT AND LENDERS,
AS REQUIRED, THE FINANCIAL STATEMENTS, NOTICES, PROJECTIONS AND OTHER
INFORMATION AT THE TIMES, TO THE PERSONS AND IN THE MANNER SET FORTH IN ANNEX E.

 

(B)                                 FROM AND AFTER THE EFFECTIVE DATE AND UNTIL
THE TERMINATION DATE, BORROWER SHALL DELIVER TO AGENT OR TO AGENT AND LENDERS,
AS REQUIRED, THE VARIOUS COLLATERAL REPORTS (INCLUDING U.S. BORROWING BASE
CERTIFICATE IN THE FORM OF EXHIBIT 4.1(B)(I) AND SCHAUBLIN BORROWING BASE
CERTIFICATE IN THE FORM OF EXHIBIT 4.1(B)(II)) AT THE TIMES, TO THE PERSONS AND
IN THE MANNER SET FORTH IN ANNEX F.

 

4.2                                 Communication with Accountants.  Each Credit
Party executing this Agreement authorizes (a) Agent and (b) so long as an Event
of Default has occurred and is continuing, each Lender, to communicate directly
with its independent certified public accountants, including Ernst & Young, and
authorizes and shall instruct those accountants and advisors to disclose and
make available to Agent and each Lender any reasonably requested information in
its possession or under its control relating to any Credit Party with respect to
the business, results of operations and financial condition of any Credit Party.

 

5.                                      AFFIRMATIVE COVENANTS

 

Each (x) Domestic Credit Party executing this Agreement jointly and severally
agrees as to all Credit Parties (regardless of whether the text of any provision
of this Article 5 speaks to one party only) and (y) Foreign Credit Party
executing this Agreement severally agrees as to only itself (regardless of
whether the text of any provision of this Article 5 speaks to more than one
party), that from and after the Effective Date and until the Termination Date:

 

5.1                                 Maintenance of Existence and Conduct of
Business.  Except as otherwise permitted by the Loan Documents, such Credit
Party shall:  (i) do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence and its rights and
franchises; (ii) continue to conduct its business substantially as now conducted
or as otherwise permitted hereunder; and (iii) at all times maintain, preserve
and protect all of its assets and properties used or useful in the conduct of
its business, and keep the same in good repair, working order and condition in
all material respects (taking into consideration ordinary wear and tear) and
from time to time make, or cause to be made, all necessary or appropriate
repairs, replacements and improvements thereto consistent with industry
practices, except in each case where the failure to do so would result in a
Material Adverse Effect.  Such Credit Party shall transact business only in such
corporate and trade names as are set forth in Disclosure Schedule (5.1) or such
other names as such Credit Party may provide to Agent on at least 30 days’ prior
written notice.

 

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5.2                                 PAYMENT OF CHARGES.

 

(A)                                  SUBJECT TO SECTION 5.2(B), SUCH CREDIT
PARTY SHALL PAY AND DISCHARGE OR CAUSE TO BE PAID AND DISCHARGED PROMPTLY ALL
CHARGES PAYABLE BY IT, INCLUDING (I) CHARGES IMPOSED UPON IT, ITS INCOME AND
PROFITS, OR ANY OF ITS PROPERTY (REAL, PERSONAL OR MIXED) AND ALL CHARGES WITH
RESPECT TO TAX, SOCIAL SECURITY AND UNEMPLOYMENT WITHHOLDING WITH RESPECT TO ITS
EMPLOYEES, (II) LAWFUL CLAIMS FOR LABOR, MATERIALS, SUPPLIES AND SERVICES OR
OTHERWISE, AND (III) ALL STORAGE OR RENTAL CHARGES PAYABLE TO WAREHOUSEMEN AND
BAILEES, IN EACH CASE, BEFORE ANY THEREOF SHALL BECOME THIRTY (30) DAYS PAST
DUE.

 

(B)                                 SUCH CREDIT PARTY MAY IN GOOD FAITH CONTEST,
BY APPROPRIATE PROCEEDINGS, THE VALIDITY OR AMOUNT OF ANY CHARGES, TAXES OR
CLAIMS DESCRIBED IN SECTION 5.2(A); PROVIDED, THAT (I) ADEQUATE RESERVES WITH
RESPECT TO SUCH CONTEST ARE MAINTAINED ON THE BOOKS OF SUCH CREDIT PARTY, IN
ACCORDANCE WITH GAAP; (II) NO LIEN SHALL BE IMPOSED TO SECURE PAYMENT OF SUCH
CHARGES (OTHER THAN PAYMENTS TO WAREHOUSEMEN AND/OR BAILEES) THAT IS SUPERIOR TO
ANY OF THE LIENS SECURING THE OBLIGATIONS AND SUCH CONTEST IS MAINTAINED AND
PROSECUTED CONTINUOUSLY AND WITH DILIGENCE AND OPERATES TO SUSPEND COLLECTION OR
ENFORCEMENT OF SUCH CHARGES, (III) NO TANGIBLE ASSET OF SUCH CREDIT PARTY
BECOMES SUBJECT TO FORFEITURE OR LOSS DURING THE PENDENCY OF SUCH CONTEST, AND
(IV) SUCH CREDIT PARTY SHALL PROMPTLY PAY OR DISCHARGE SUCH CONTESTED CHARGES,
TAXES OR CLAIMS AND ALL ADDITIONAL CHARGES, INTEREST, PENALTIES AND EXPENSES, IF
ANY, AND SHALL DELIVER TO AGENT EVIDENCE REASONABLY ACCEPTABLE TO AGENT OF SUCH
COMPLIANCE, PAYMENT OR DISCHARGE, IF SUCH CONTEST IS TERMINATED OR DISCONTINUED
ADVERSELY TO SUCH CREDIT PARTY OR THE CONDITIONS SET FORTH IN THIS SECTION
5.2(B) ARE NO LONGER MET.

 

5.3                                 Books and Records.  The Credit Parties shall
keep adequate books and records with respect to their business activities in
which proper entries, reflecting all material financial transactions, are made
in accordance with GAAP and on a basis consistent with the Financial Statements
attached as Disclosure Schedule (3.4(a)).

 

5.4                                 INSURANCE; DAMAGE TO OR DESTRUCTION OF
COLLATERAL.

 

(A)                                  THE CREDIT PARTIES SHALL, AT THEIR SOLE
COST AND EXPENSE, MAINTAIN THE POLICIES OF INSURANCE DESCRIBED ON DISCLOSURE
SCHEDULE (3.18) AS IN EFFECT ON THE DATE HEREOF OR OTHERWISE IN FORM AND AMOUNTS
DETERMINED BY THE CREDIT PARTIES AND REASONABLY ACCEPTABLE TO AGENT AND WITH
INSURERS SELECTED BY THE CREDIT PARTIES AND REASONABLY ACCEPTABLE TO AGENT. 
SUCH POLICIES OF INSURANCE (OR THE LOSS PAYABLE AND ADDITIONAL INSURED
ENDORSEMENTS DELIVERED TO AGENT) SHALL CONTAIN PROVISIONS PURSUANT TO WHICH THE
INSURER AGREES TO PROVIDE THIRTY (30) DAYS’ PRIOR WRITTEN NOTICE TO AGENT IN THE
EVENT OF ANY NON-RENEWAL, CANCELLATION OR AMENDMENT OF ANY SUCH INSURANCE
POLICY.  IF SUCH CREDIT PARTY AT ANY TIME OR TIMES HEREAFTER SHALL FAIL TO
OBTAIN OR MAINTAIN ANY OF THE POLICIES OF INSURANCE REQUIRED ABOVE OR TO PAY ALL
PREMIUMS RELATING THERETO, AGENT MAY AT ANY TIME OR TIMES THEREAFTER OBTAIN AND
MAINTAIN SUCH POLICIES OF INSURANCE AND PAY SUCH PREMIUMS AND TAKE ANY OTHER
ACTION WITH RESPECT THERETO THAT AGENT DEEMS REASONABLY ADVISABLE.  AGENT SHALL
HAVE NO OBLIGATION TO OBTAIN INSURANCE FOR SUCH CREDIT PARTY OR PAY ANY PREMIUMS
THEREFOR.  BY DOING SO, AGENT SHALL NOT BE DEEMED TO HAVE WAIVED ANY DEFAULT OR
EVENT OF DEFAULT ARISING FROM SUCH CREDIT PARTY’S FAILURE TO MAINTAIN SUCH
INSURANCE OR PAY ANY PREMIUMS THEREFOR.  ALL SUMS SO DISBURSED, INCLUDING
REASONABLE ATTORNEYS’ FEES, COURT COSTS AND

 

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OTHER CHARGES RELATED THERETO, SHALL BE PAYABLE ON DEMAND BY BORROWER TO AGENT
AND SHALL BE ADDITIONAL OBLIGATIONS HEREUNDER SECURED BY THE COLLATERAL.

 

(B)                                 AGENT RESERVES THE RIGHT AT ANY TIME UPON
ANY CHANGE IN SUCH CREDIT PARTY’S RISK PROFILE (INCLUDING ANY MATERIAL CHANGE IN
THE PRODUCT MIX MAINTAINED BY SUCH CREDIT PARTY OR ANY LAWS AFFECTING THE
POTENTIAL LIABILITY OF SUCH CREDIT PARTY) TO REQUIRE ADDITIONAL FORMS AND LIMITS
OF INSURANCE CUSTOMARY IN THE INDUSTRY FOR SUCH CHANGED RISK PROFILE.  IF
REASONABLY REQUESTED BY AGENT, SUCH CREDIT PARTY SHALL DELIVER TO AGENT FROM
TIME TO TIME A REPORT OF A REPUTABLE INSURANCE BROKER, REASONABLY SATISFACTORY
TO AGENT, WITH RESPECT TO ITS INSURANCE POLICIES.

 

(C)                                  SUCH CREDIT PARTY SHALL DELIVER TO AGENT,
IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO AGENT, ENDORSEMENTS TO (I) ALL
“ALL RISK” AND BUSINESS INTERRUPTION INSURANCE NAMING AGENT, ON BEHALF OF ITSELF
AND LENDERS, AS LOSS PAYEE, AND (II) ALL GENERAL LIABILITY AND OTHER LIABILITY
POLICIES MAINTAINED BY SUCH CREDIT PARTY NAMING AGENT, ON BEHALF OF ITSELF AND
LENDERS, AS ADDITIONAL INSURED.  SUCH CREDIT PARTY IRREVOCABLY MAKES,
CONSTITUTES AND APPOINTS AGENT (AND ALL OFFICERS, EMPLOYEES OR AGENTS DESIGNATED
BY AGENT), SO LONG AS ANY EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING, AS
SUCH CREDIT PARTY’S TRUE AND LAWFUL AGENT AND ATTORNEY-IN-FACT FOR THE PURPOSE
OF MAKING, SETTLING AND ADJUSTING CLAIMS UNDER SUCH “ALL RISK” POLICIES OF
INSURANCE, ENDORSING THE NAME OF SUCH CREDIT PARTY ON ANY CHECK OR OTHER ITEM OF
PAYMENT FOR THE PROCEEDS OF SUCH “ALL RISK” POLICIES OF INSURANCE AND FOR MAKING
ALL DETERMINATIONS AND DECISIONS WITH RESPECT TO SUCH “ALL RISK” POLICIES OF
INSURANCE.  AGENT SHALL HAVE NO DUTY TO EXERCISE ANY RIGHTS OR POWERS GRANTED TO
IT PURSUANT TO THE FOREGOING POWER-OF-ATTORNEY.  BORROWER SHALL PROMPTLY NOTIFY
AGENT OF ANY EVENT OF LOSS AND OF ANY LOSS, DAMAGE, OR DESTRUCTION TO THE
COLLATERAL IN THE AMOUNT OF $250,000 OR MORE, WHETHER OR NOT COVERED BY
INSURANCE.  AFTER DEDUCTING FROM THE INSURANCE PROCEEDS RECEIVED IN CONNECTION
WITH SUCH EVENT OF LOSS THE EXPENSES, IF ANY, INCURRED BY AGENT IN THE
COLLECTION OR HANDLING THEREOF, AGENT SHALL EITHER, AT ITS OPTION, APPLY SUCH
PROCEEDS TO THE REDUCTION OF THE OBLIGATIONS IN ACCORDANCE WITH SECTION 1.3(D)
OR PERMIT OR REQUIRE SUCH CREDIT PARTY TO USE SUCH MONEY, OR ANY PART THEREOF,
TO REPLACE, REPAIR, RESTORE OR REBUILD THE COLLATERAL IN A DILIGENT AND
EXPEDITIOUS MANNER WITH MATERIALS AND WORKMANSHIP OF SUBSTANTIALLY THE SAME
QUALITY AS EXISTED BEFORE THE LOSS, DAMAGE OR DESTRUCTION.  NOTWITHSTANDING THE
FOREGOING, IF AN EVENT OF LOSS GIVING RISE TO INSURANCE PROCEEDS COULD NOT
REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT (AFTER GIVING EFFECT TO
THE APPLICATION OF THE INSURANCE PROCEEDS TO REPAIR AND RESTORATION) AND SUCH
INSURANCE PROCEEDS DO NOT EXCEED THE DOLLAR EQUIVALENT OF $2,000,000 IN THE
AGGREGATE, THE APPLICABLE CREDIT PARTY MAY ELECT, IN ITS DISCRETION, TO REPLACE,
RESTORE, REPAIR OR REBUILD THE PROPERTY; PROVIDED, THAT IF SUCH CREDIT PARTY HAS
NOT COMPLETED OR ENTERED INTO BINDING AGREEMENTS TO COMPLETE SUCH REPLACEMENT,
RESTORATION, REPAIR OR REBUILDING WITHIN 270 DAYS OF SUCH CASUALTY, AGENT MAY
APPLY SUCH INSURANCE PROCEEDS TO THE OBLIGATIONS IN ACCORDANCE WITH SECTION
1.3(D).  ALL INSURANCE PROCEEDS THAT ARE TO BE MADE AVAILABLE TO BORROWER OR THE
APPLICABLE RBC SWISS GROUP MEMBER TO REPLACE, REPAIR, RESTORE OR REBUILD THE
COLLATERAL SHALL BE APPLIED BY AGENT TO REDUCE THE OUTSTANDING PRINCIPAL BALANCE
OF THE U.S. REVOLVING LOAN OR THE SCHAUBLIN REVOLVING LOAN, AS THE CASE MAY BE
(WHICH APPLICATION SHALL NOT RESULT IN A PERMANENT REDUCTION OF EITHER REVOLVING
LOAN COMMITMENT) AND UPON SUCH APPLICATION, AGENT SHALL ESTABLISH A RESERVE
AGAINST THE U.S. BORROWING BASE OR THE SCHAUBLIN BORROWING BASE, AS APPLICABLE,
IN AN AMOUNT EQUAL TO THE AMOUNT OF SUCH PROCEEDS SO APPLIED.  THEREAFTER, SUCH
FUNDS SHALL BE MADE AVAILABLE TO SUCH CREDIT PARTY TO PROVIDE FUNDS TO REPLACE,
REPAIR, RESTORE OR REBUILD THE COLLATERAL AS

 

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FOLLOWS: (I) BORROWER SHALL REQUEST A U.S. REVOLVING CREDIT ADVANCE OR A
SCHAUBLIN REVOLVING CREDIT ADVANCE (AS APPLICABLE) BE MADE TO SUCH CREDIT PARTY
IN THE AMOUNT REQUESTED TO BE RELEASED; (II) SO LONG AS THE CONDITIONS SET FORTH
IN SECTION 2.2 HAVE BEEN MET AND SUBJECT TO THE PROVISIONS OF ANY MORTGAGE
ENCUMBERING SUCH COLLATERAL, REVOLVING LENDERS SHALL MAKE SUCH U.S. REVOLVING
CREDIT ADVANCE OR SCHAUBLIN REVOLVING CREDIT ADVANCE (AS APPLICABLE); AND (III)
IN THE CASE OF INSURANCE PROCEEDS APPLIED AGAINST EITHER REVOLVING LOAN, THE
RESERVE ESTABLISHED WITH RESPECT TO SUCH INSURANCE PROCEEDS SHALL BE REDUCED BY
THE AMOUNT OF SUCH REVOLVING CREDIT ADVANCE.  TO THE EXTENT NOT USED TO REPLACE,
REPAIR, RESTORE OR REBUILD THE COLLATERAL, SUCH INSURANCE PROCEEDS SHALL BE
APPLIED IN ACCORDANCE WITH SECTION 1.3(D); PROVIDED, THAT IN THE CASE OF
INSURANCE PROCEEDS PERTAINING TO SUCH CREDIT PARTY OTHER THAN BORROWER OR THE
RBC SWISS GROUP MEMBERS, SUCH INSURANCE PROCEEDS SHALL BE APPLIED TO THE LOANS
OWING BY BORROWER.

 

5.5                                 Compliance with Laws.  Such Credit Party
shall comply with all federal, state, local and foreign laws and regulations
applicable to it, including those relating to FAA, ERISA and labor matters and
Environmental Laws and Environmental Permits, except to the extent that the
failure to comply, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.

 

5.6                                 Supplemental Disclosure.  From time to time
as may be reasonably requested by Agent (which request will not be made more
frequently than once each year absent the occurrence and continuance of an Event
of Default), the Credit Parties shall supplement each Disclosure Schedule
hereto, or any representation herein or in any other Loan Document, with respect
to any matter hereafter arising that, if existing or occurring at the date of
this Agreement, would have been required to be set forth or described in such
Disclosure Schedule or as an exception to such representation or that is
necessary to correct any information in such Disclosure Schedule or
representation which has been rendered inaccurate thereby (and, in the case of
any supplements to any Disclosure Schedule, such Disclosure Schedule shall be
appropriately marked to show the changes made therein); provided, that (a) no
such supplement to any such Disclosure Schedule or representation shall amend,
supplement or otherwise modify any Disclosure Schedule or representation, or be
or be deemed a waiver of any Event of Default resulting from the matters
disclosed therein, except as consented to by Agent and Requisite Lenders in
writing and (b) no supplement shall be required or permitted as to
representations and warranties that relate solely to the Closing Date or the
Effective Date, as applicable.

 

5.7                                 Intellectual Property.  Such Credit Party
will conduct its business and affairs without infringement of or interference
with any Intellectual Property of any other Person in any material respect,
except as could not reasonably be expected to have a Material Adverse Effect.

 

5.8                                 [INTENTIONALLY OMITTED]

 

5.9                                 Landlords’ Agreements, Mortgagee Agreements,
Bailee Letters and Real Estate Purchases.  Unless Agent shall otherwise agree in
writing, such Credit Party shall use commercially reasonable efforts to obtain a
landlord’s agreement, mortgagee agreement or bailee letter, as applicable, from
the lessor of each leased property, mortgagee of owned property or bailee with
respect to any warehouse, processor or converter facility or other location
where Collateral is stored or located, which agreement or letter shall contain a
waiver or subordination of all Liens or claims that the landlord, mortgagee or
bailee may assert against the Collateral at

 

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that location, and shall otherwise be satisfactory in form and substance to
Agent. With respect to such locations or warehouse space leased or owned as of
the Effective Date and thereafter, if Agent has not received a landlord or
mortgagee agreement or bailee letter as of the Effective Date (or, if later, as
of the date such location is acquired or leased), Eligible Inventory – U.S. or
Eligible Inventory – Schaublin, as applicable, at that location shall be subject
to such Reserves as may be established by Agent in its reasonable credit
judgment.  After the Effective Date, no real property or warehouse space shall
be leased by such Credit Party, and no material amount of Inventory shall be
shipped to a processor or converter under arrangements established after the
Effective Date without the prior written consent of Agent (which consent, in
Agent’s discretion, may be conditioned upon the exclusion from the U.S.
Borrowing Base or Schaublin Borrowing Base of Eligible Inventory – U.S. or
Eligible Inventory – Schaublin at that location or the establishment of Reserves
reasonably acceptable to Agent) or, unless and until a reasonably satisfactory
landlord agreement or bailee letter, as appropriate, shall first or
simultaneously have been obtained with respect to such location.  Such Credit
Party shall timely and fully pay and perform its obligations in all material
respects under all leases and other agreements with respect to each leased
location or public warehouse where any Collateral is or may be located.  Except
to the extent otherwise permitted hereunder, if such Credit Party proposes to
acquire a fee ownership interest in Real Estate after the Effective Date, it
shall first provide to Agent a mortgage or deed of trust granting Agent a first
priority Lien on such Real Estate, together with environmental audits, mortgage
title insurance commitment, real property survey, local counsel opinion(s), and,
if required by Agent, casualty insurance and flood insurance, and such other
documents, instruments or agreements reasonably requested by Agent, in each
case, in form and substance reasonably satisfactory to Agent.

 

5.10                           MOTOR VEHICLES.  IN THE EVENT THE VALUE OF ALL
MOTOR VEHICLES OWNED BY DOMESTIC CREDIT PARTIES SHALL EXCEED $100,000 IN THE
AGGREGATE, EACH DOMESTIC CREDIT PARTY WILL GRANT TO AGENT PERFECTED LIENS ON ALL
MOTOR VEHICLES OWNED BY SUCH DOMESTIC CREDIT PARTY AND DELIVER ALL TITLE
CERTIFICATE FOR EACH MOTOR VEHICLE OWNED BY SUCH DOMESTIC CREDIT PARTY NOTING
AGENT’S SECURITY INTEREST THEREIN, SIGNED BY THE RELEVANT DOMESTIC CREDIT PARTY,
IN A MANNER SATISFACTORY TO AGENT.

 

5.11                           FURTHER ASSURANCES.  SUCH CREDIT PARTY SHALL, AT
SUCH CREDIT PARTY’S EXPENSE, EXECUTE ANY AND ALL FURTHER DOCUMENTS, FINANCING
STATEMENTS, AGREEMENTS AND INSTRUMENTS, AND TAKE ALL FURTHER ACTION (INCLUDING
FILING CODE AND OTHER FINANCING STATEMENTS, MORTGAGES AND DEEDS OF TRUST) AS MAY
BE REQUIRED UNDER APPLICABLE LAW, OR THAT AGENT MAY REASONABLY REQUEST, IN ORDER
TO EFFECTUATE THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS AND IN ORDER
TO GRANT, PRESERVE, PROTECT AND PERFECT THE VALIDITY AND PRIORITY OF THE
SECURITY INTERESTS CREATED OR INTENDED TO BE CREATED BY THE LOAN DOCUMENTS.

 

6.                                      NEGATIVE COVENANTS

 

Each (x) Domestic Credit Party executing this Agreement jointly and severally
agrees as to all Credit Parties (regardless of whether the text of any provision
of this Article 6 speaks to one party only) and (y) Foreign Credit Party
executing this Agreement severally agrees as to only itself (regardless of
whether the text of any provision of this Article 6 speaks to more than one
party), that from and after the Effective Date until the Termination Date:

 

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6.1                                 MERGERS, SUBSIDIARIES, ETC.

 

(A)                                  SUCH CREDIT PARTY SHALL NOT DIRECTLY OR
INDIRECTLY, BY OPERATION OF LAW OR OTHERWISE, (I) FORM OR ACQUIRE ANY
SUBSIDIARY, OR (II) MERGE WITH, CONSOLIDATE WITH, ACQUIRE ALL OR SUBSTANTIALLY
ALL OF THE ASSETS OR STOCK OF, OR OTHERWISE COMBINE WITH OR ACQUIRE, ANY PERSON,
EXCEPT (A) ANY CREDIT PARTY MAY MERGE WITH ANOTHER CREDIT PARTY, PROVIDED, THAT
BORROWER SHALL BE THE SURVIVOR OF ANY SUCH MERGER TO WHICH IT IS A PARTY AND
(B) BORROWER OR ANY SECURED GUARANTOR MAY CONSUMMATE A PERMITTED ACQUISITION AS
DEFINED IN AND IN ACCORDANCE WITH SECTION 6.1(B) BELOW OR FORM ONE OR MORE
ACQUISITION COMPANIES FOR THE SOLE PURPOSE OF COMPLETING A PERMITTED
ACQUISITION.

 

(B)                                 BORROWER OR ANY SECURED GUARANTOR OR AN
ACQUISITION COMPANY (OR HOLDINGS, SO LONG AS CONTEMPORANEOUSLY THEREWITH, ALL
ASSETS SO ACQUIRED ARE TRANSFERRED TO BORROWER OR ANY SECURED GUARANTOR), MAY
(I) ACQUIRE ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF A QUALIFIED TARGET OR
ASSETS THAT CONSTITUTE ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF A DIVISION OR
OPERATING UNIT OF A QUALIFIED TARGET, (II) PURCHASE 100% OF THE OUTSTANDING
STOCK OF A QUALIFIED TARGET, (III) PURCHASE NOT LESS THAN 80% OF EACH CLASS OF
OUTSTANDING STOCK OF A QUALIFIED TARGET AS LONG AS, WITHOUT LIMITATION TO
CONDITIONS REQUIRED FOR PERMITTED ACQUISITION SET FORTH BELOW, AGENT WILL BE
GRANTED A FIRST PRIORITY PERFECTED LIEN (SUBJECT TO PERMITTED ENCUMBRANCES AND
EXCEPT AS CONTEMPLATED BY CLAUSES (A) AND (C) OF SECTION 6.1(B)(IV)) IN ALL IN
THE ASSETS AND STOCK OF THE QUALIFIED TARGET, AND AGENT SHALL HAVE RECEIVED LIEN
SEARCH RESULTS (AND IN THE CASE OF A QUALIFIED TARGET INCORPORATED IN ENGLAND
FULL SEARCH REPORTS FROM COMPANIES HOUSE), FINANCING STATEMENTS AND SUPPLEMENTAL
SECURITY AGREEMENTS, A GUARANTY, ENVIRONMENTAL INDEMNITY AGREEMENTS, BLOCKED
ACCOUNT AGREEMENTS AND OTHER COLLATERAL DOCUMENTS IN CONNECTION THEREWITH AS
REQUESTED BY AGENT, OR (IV) PARTICIPATE IN A MERGER OF A QUALIFIED TARGET WITH
AND INTO BORROWER OR A SECURED GUARANTOR OR THE MERGER OF AN ACQUISITION COMPANY
INTO A QUALIFIED TARGET (WITH BORROWER AS THE SOLE STOCKHOLDER OF QUALIFIED
TARGET AFTER GIVING EFFECT THERETO) OR THE MERGER OF A QUALIFIED TARGET INTO AN
ACQUISITION COMPANY (EACH SUCH ACQUISITION, PURCHASE OR MERGER BEING AN
“ACQUISITION”), SUBJECT TO SATISFACTION OF EACH OF THE FOLLOWING CONDITIONS (AND
EACH SUCH ACQUISITION SHALL BE A “PERMITTED ACQUISITION” ONLY UPON SATISFACTION
OF EACH OF THE FOLLOWING CONDITIONS):

 

(I)                                     AGENT SHALL RECEIVE AT LEAST 30 DAYS’
PRIOR WRITTEN NOTICE OF SUCH ACQUISITION, WHICH NOTICE SHALL INCLUDE A
REASONABLY DETAILED DESCRIPTION OF SUCH ACQUISITION, WHICH MAY BE SUBJECT TO
FURTHER NEGOTIATION, AND A COPY OF ANY EXECUTED LETTER OF INTENT RELATING
THERETO;

 

(II)                                  SUCH ACQUISITION SHALL ONLY INVOLVE A
QUALIFIED TARGET WHICH BUSINESS WOULD NOT SUBJECT AGENT OR ANY LENDER TO
REGULATORY OR THIRD PARTY APPROVALS IN CONNECTION WITH THE EXERCISE OF ITS
RIGHTS AND REMEDIES UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS OTHER THAN
APPROVALS APPLICABLE TO THE EXERCISE OF SUCH RIGHTS AND REMEDIES WITH RESPECT TO
BORROWER PRIOR TO SUCH ACQUISITION;

 

(III)                               SUCH ACQUISITION SHALL BE CONSENSUAL AND
SHALL HAVE BEEN APPROVED BY THE QUALIFIED TARGET’S BOARD OF DIRECTORS OR, IN THE
CASE OF A QUALIFIED TARGET IN BANKRUPTCY, A COURT OF COMPETENT JURISDICTION;

 

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(IV)                              NO ADDITIONAL INDEBTEDNESS, GUARANTEED
INDEBTEDNESS OR OTHER LIABILITIES SHALL BE INCURRED, ASSUMED OR OTHERWISE BE
REFLECTED ON A CONSOLIDATED BALANCE SHEET OF BORROWER AND QUALIFIED TARGET AFTER
GIVING EFFECT TO SUCH ACQUISITION, EXCEPT (A) U.S. REVOLVING CREDIT ADVANCES
MADE HEREUNDER THAT ARE MADE IN ACCORDANCE WITH THE TERMS OF SECTION 2.3, (B)
TRADE PAYABLES AND ACCRUED EXPENSES, EACH IN EXISTENCE AT THE TIME OF THE
ACQUISITION AND NOT CREATED IN ANTICIPATION THEREOF AND EACH ARISING IN ORDINARY
COURSE, (C) INDUSTRIAL REVENUE BOND FINANCING, CAPITAL LEASES AND PURCHASE MONEY
INDEBTEDNESS, NOT TO EXCEED IN THE AGGREGATE 25% OF TOTAL CONSIDERATION PAID FOR
SUCH PERMITTED ACQUISITION (INCLUDING THE BOOK VALUE OF ASSUMED LIABILITIES),
EACH IN EXISTENCE AT THE TIME OF ACQUISITION AND NOT CREATED IN ANTICIPATION
THEREOF AND EACH ARISING IN THE ORDINARY COURSE OF BUSINESS, AND (D) UNSECURED
ACQUISITION SUBORDINATED DEBT (1) WITH A MATURITY DATE AFTER THE MATURITY OF THE
OBLIGATIONS IN AN AMOUNT NOT TO EXCEED $5,000,000 IN THE AGGREGATE OR (2) WITH
AN EARLIER MATURITY BUT SUBJECT TO RESERVE AGAINST THE U.S. BORROWING BASE IN AN
AMOUNT EQUAL TO THE MAXIMUM AGGREGATE PAYMENTS PAYABLE THEREUNDER;

 

(V)                                 THE ASSETS ACQUIRED IN SUCH ACQUISITION
SHALL BE FREE AND CLEAR OF ALL LIENS (OTHER THAN PERMITTED ENCUMBRANCES AND
EXCEPT AS CONTEMPLATED BY CLAUSES (A) AND (C) OF SECTION 6.1(B)(IV));

 

(VI)                              AT THE CLOSING OF ANY ACQUISITION, AGENT WILL
BE GRANTED A FIRST PRIORITY PERFECTED LIEN (SUBJECT TO PERMITTED ENCUMBRANCES
AND EXCEPT AS CONTEMPLATED BY CLAUSES (A) AND (C) OF SECTION 6.1(B)(IV)) IN ALL
ASSETS ACQUIRED PURSUANT THERETO OR, IN THE CASE OF EQUITY PURCHASE, IN THE
ASSETS AND STOCK OF THE QUALIFIED TARGET, AND BORROWER SHALL HAVE EXECUTED SUCH
DOCUMENTS AND TAKEN SUCH ACTIONS AS MAY BE REASONABLY REQUIRED BY AGENT IN
CONNECTION THEREWITH, AND AGENT SHALL HAVE RECEIVED LIEN SEARCH RESULTS (AND IN
THE CASE OF A QUALIFIED TARGET INCORPORATED IN ENGLAND FULL SEARCH REPORTS FROM
COMPANIES HOUSE), FINANCING STATEMENTS AND SUPPLEMENTAL SECURITY AGREEMENTS, A
GUARANTY, ENVIRONMENTAL INDEMNITY AGREEMENTS, BLOCKED ACCOUNT AGREEMENTS AND
OTHER COLLATERAL DOCUMENTS AND OTHER DOCUMENTS REASONABLY REQUESTED BY AGENT;

 

(VII)                           AT THE TIME OF SUCH ACQUISITION AND IMMEDIATELY
AFTER GIVING EFFECT THERETO (INCLUDING ANY U.S. REVOLVING CREDIT ADVANCE IN
CONNECTION THEREWITH), NO DEFAULT OR EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE
CONTINUING;

 

(VIII)                        AT LEAST FIVE (5) DAYS BEFORE THE CLOSING DATE FOR
THE PERMITTED ACQUISITION, AGENT SHALL HAVE RECEIVED THE FOLLOWING FINANCIAL
STATEMENTS CONSISTING OF BALANCE SHEETS, STATEMENTS OF INCOME AND RETAINED
EARNINGS AND CASH FLOWS WITH RESPECT TO THE QUALIFIED TARGET TO THE EXTENT SUCH
FINANCIAL STATEMENTS EXIST OR ARE OBTAINED BY SUCH DATE: (A) ANNUAL FINANCIAL
STATEMENTS FOR THE MOST RECENT 3-YEAR PERIOD PRECEDING THE ACQUISITION; (B)
MONTHLY FINANCIAL STATEMENTS FOR THE MOST RECENT 4-QUARTER PERIOD PRECEDING THE
ACQUISITION; AND (C) MONTHLY FINANCIAL STATEMENTS FOR YEAR-TO-DATE PRECEDING THE
ACQUISITION, SETTING FORTH IN COMPARATIVE FORM THE FIGURES FOR THE TWO PREVIOUS
YEARS;

 

(IX)                                AT LEAST FIVE (5) DAYS BEFORE THE CLOSING
DATE FOR THE PERMITTED ACQUISITION, AGENT SHALL HAVE RECEIVED ALL PRO FORMA
FINANCIAL STATEMENTS CONSISTING OF BALANCE SHEETS, STATEMENTS OF INCOME AND
RETAINED EARNINGS AND CASH FLOWS WITH RESPECT TO THE QUALIFIED

 

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TARGET PREPARED BY BORROWER OR A SECURED GUARANTOR, AS APPLICABLE, IN CONNECTION
WITH SUCH ACQUISITION;

 

(X)                                   AGENT SHALL HAVE NOT LESS THAN SEVEN (7)
DAYS TO REVIEW (WITHOUT, HOWEVER, THE RIGHT TO APPROVE OR DISAPPROVE),
ENVIRONMENTAL AUDITS WITH RESPECT TO REAL ESTATE ACQUIRED IN CONNECTION WITH A
PERMITTED ACQUISITION AND WITH RESPECT TO QUALIFIED TARGETS ACQUIRED BY MERGER
OR STOCK PURCHASE OR WHERE CONTINGENT LIABILITIES ARE TO BE ASSUMED, LITIGATION,
ACTUARIAL STUDIES AND SIMILAR CONTINGENT LIABILITY ANALYSES WITH RESPECT TO THE
QUALIFIED TARGET;

 

(XI)                                AT LEAST SEVEN (7) DAYS PRIOR TO THE DATE OF
SUCH ACQUISITION, AGENT SHALL HAVE RECEIVED COPIES OF THE DRAFT ACQUISITION
AGREEMENT (WHICH MAY BE SUBJECT TO FURTHER NEGOTIATION) AND RELATED AGREEMENTS,
INSTRUMENTS, AND OTHER DOCUMENTS REASONABLY REQUESTED BY AGENT AND, PROMPTLY
FOLLOWING THE CLOSING DATE FOR SUCH PERMITTED ACQUISITION, FINAL DRAFTS OF THE
FOREGOING;

 

(XII)                             AT LEAST FIVE (5) DAYS PRIOR TO THE CLOSING OF
AN ACQUISITION, BORROWER SHALL HAVE DELIVERED TO AGENT:

 

(A)                              A PRO FORMA CONSOLIDATED BALANCE SHEET, INCOME
STATEMENT AND CASH FLOW STATEMENT OF HOLDINGS AND ITS SUBSIDIARIES (THE
“ACQUISITION PRO FORMA”), BASED ON RECENT FINANCIAL STATEMENTS, WHICH SHALL
FAIRLY PRESENT IN ALL MATERIAL RESPECTS THE ASSETS, LIABILITIES, FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF HOLDINGS AND ITS SUBSIDIARIES IN
ACCORDANCE WITH GAAP CONSISTENTLY APPLIED, BUT TAKING INTO ACCOUNT SUCH
PERMITTED ACQUISITION AND THE FUNDING OF THE U.S. REVOLVING LOAN IN CONNECTION
THEREWITH, INCLUDING DETAILED ACQUISITION ADJUSTMENTS ACCEPTABLE TO AGENT, AND
SUCH ACQUISITION PRO FORMA SHALL REFLECT THAT (X) AVERAGE DAILY U.S. BORROWING
AVAILABILITY FOR THE 90-DAY PERIOD PRECEDING THE CONSUMMATION OF SUCH PERMITTED
ACQUISITION WOULD HAVE EXCEEDED THE APPLICABLE AVAILABILITY BLOCK ON A PRO FORMA
BASIS (AFTER GIVING EFFECT TO SUCH PERMITTED ACQUISITION (INCLUDING ACQUIRED
ELIGIBLE ACCOUNTS AND ELIGIBLE INVENTORY AS TO WHICH AN AUDIT HAS BEEN
COMPLETED) AND THE U.S. REVOLVING LOAN FUNDED IN CONNECTION THEREWITH AS IF MADE
ON THE FIRST DAY OF SUCH PERIOD) AND THE ACQUISITION PROJECTIONS (AS HEREINAFTER
DEFINED) SHALL REFLECT THAT SUCH BORROWING AVAILABILITY EXCEEDING THE APPLICABLE
AVAILABILITY BLOCK SHALL CONTINUE FOR AT LEAST TWO (2) YEARS AFTER THE
CONSUMMATION OF SUCH ACQUISITION, AND (Y) ON A PRO FORMA BASIS, NO EVENT OF
DEFAULT HAS OCCURRED AND IS CONTINUING OR WOULD RESULT AFTER GIVING EFFECT TO
SUCH ACQUISITION AND BORROWER WOULD HAVE BEEN IN COMPLIANCE WITH THE FIXED
CHARGE COVERAGE RATIO FINANCIAL COVENANT SET FORTH IN ANNEX G FOR THE FOUR
QUARTER PERIOD REFLECTED IN THE COMPLIANCE CERTIFICATE MOST RECENTLY DELIVERED
TO AGENT PURSUANT TO ANNEX E PRIOR TO THE CONSUMMATION OF SUCH ACQUISITION
(AFTER GIVING EFFECT TO SUCH PERMITTED ACQUISITION AND THE U.S. REVOLVING LOAN
FUNDED IN CONNECTION THEREWITH AS IF MADE ON THE FIRST DAY OF SUCH PERIOD);

 

(B)                                UPDATED VERSIONS OF THE MOST RECENTLY
DELIVERED PROJECTIONS COVERING THE 1-YEAR PERIOD COMMENCING ON THE DATE OF SUCH
ACQUISITION AND

 

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OTHERWISE PREPARED IN ACCORDANCE WITH THE PROJECTIONS (THE “ACQUISITION
PROJECTIONS”) AND BASED UPON HISTORICAL FINANCIAL DATA OF A RECENT DATE
REASONABLY SATISFACTORY TO AGENT, TAKING INTO ACCOUNT SUCH PERMITTED
ACQUISITION;

 

(C)                                A CERTIFICATE OF THE CHIEF FINANCIAL OFFICER
OF HOLDINGS AND BORROWER TO THE EFFECT THAT: (W) HOLDINGS ON A CONSOLIDATED
BASIS (AFTER TAKING INTO CONSIDERATION ALL RIGHTS OF CONTRIBUTION AND INDEMNITY
BORROWER HAS AGAINST HOLDINGS AND EACH OTHER SUBSIDIARY OF HOLDINGS) WILL BE
SOLVENT UPON THE CONSUMMATION OF THE PERMITTED ACQUISITION; (X) THE ACQUISITION
PRO FORMA FAIRLY PRESENTS THE FINANCIAL CONDITION OF HOLDINGS (ON A CONSOLIDATED
BASIS) AS OF THE DATE THEREOF AFTER GIVING EFFECT TO THE ACQUISITION; (Y) THE
ACQUISITION PROJECTIONS ARE REASONABLE ESTIMATES OF THE FUTURE FINANCIAL
PERFORMANCE OF HOLDINGS (ON A CONSOLIDATED BASIS) SUBSEQUENT TO THE DATE THEREOF
BASED UPON THE HISTORICAL PERFORMANCE OF HOLDINGS, BORROWER AND THE QUALIFIED
TARGET AND SHOW THAT HOLDINGS (ON A CONSOLIDATED BASIS) SHALL CONTINUE TO BE IN
COMPLIANCE WITH THE FIXED CHARGE COVERAGE RATIO SET FORTH IN ANNEX G FOR THE
2-YEAR PERIOD THEREAFTER; AND (Z) HOLDINGS AND BORROWER HAVE COMPLETED THEIR DUE
DILIGENCE INVESTIGATION WITH RESPECT TO THE QUALIFIED TARGET AND SUCH PERMITTED
ACQUISITION; AND

 

(D)                               A CERTIFICATE IN THE FORM OF EXHIBIT 6.1 (THE
“ACQUISITION COMPLIANCE CERTIFICATE”) SHOWING COMPLIANCE WITH THE TERMS AND
PROVISION OF CLAUSES (C) AND (D) OF SECTION 6.1(B)(IV), AND A DESIGNATION OF
ASSETS, IF ANY, IN ACCORDANCE WITH SECTION 6.8(D) WITH RESPECT TO SUCH
ACQUISITION.

 

Notwithstanding the foregoing, the Accounts and Inventory of the Qualified
Target shall not be included in Eligible Accounts and Eligible Inventory until a
field audit of Qualified Target has been satisfactorily completed, including the
establishment of Reserves required in Agent’s reasonable credit judgment to
address the incrementally adverse effect of laws applicable to a Qualified
Target located outside of the United States of America.

 

6.2                                 INVESTMENTS; LOANS AND ADVANCES.  EXCEPT AS
OTHERWISE EXPRESSLY PERMITTED BY THIS SECTION 6, SUCH CREDIT PARTY SHALL NOT
MAKE OR PERMIT TO EXIST ANY INVESTMENT IN, OR MAKE, ACCRUE OR PERMIT TO EXIST
LOANS OR ADVANCES OF MONEY TO, ANY PERSON, THROUGH THE DIRECT OR INDIRECT
LENDING OF MONEY, HOLDING OF SECURITIES OR OTHERWISE, EXCEPT THAT:  (A) BORROWER
AND CREDIT PARTIES MAY HOLD INVESTMENTS COMPRISED OF NOTES PAYABLE, OR STOCK OR
OTHER SECURITIES ISSUED BY ACCOUNT DEBTORS TO BORROWER PURSUANT TO NEGOTIATED
AGREEMENTS WITH RESPECT TO SETTLEMENT OF SUCH ACCOUNT DEBTOR’S ACCOUNTS IN THE
ORDINARY COURSE OF BUSINESS; (B) EACH CREDIT PARTY MAY MAINTAIN (BUT NOT
INCREASE) ITS EXISTING INVESTMENTS IN ITS SUBSIDIARIES AS OF THE EFFECTIVE DATE
WHICH ARE NOT CREDIT PARTIES; (C) SO LONG AS NO DEFAULT OR EVENT OF DEFAULT HAS
OCCURRED AND IS CONTINUING, CREDIT PARTIES MAY MAKE INVESTMENTS, SUBJECT TO A
CONTROL LETTER IN FAVOR OF AGENT FOR THE BENEFIT OF LENDERS OR OTHERWISE SUBJECT
TO A PERFECTED SECURITY INTEREST IN FAVOR OF AGENT FOR THE BENEFIT OF LENDERS,
IN (I) MARKETABLE DIRECT OBLIGATIONS ISSUED OR UNCONDITIONALLY GUARANTEED BY THE
UNITED STATES OF AMERICA OR ANY AGENCY THEREOF MATURING WITHIN ONE YEAR FROM THE
DATE OF ACQUISITION THEREOF, (II) COMMERCIAL PAPER MATURING NO MORE THAN ONE
YEAR FROM THE DATE OF CREATION THEREOF AND CURRENTLY HAVING THE HIGHEST RATING
OBTAINABLE FROM EITHER STANDARD & POOR’S RATINGS GROUP OR MOODY’S INVESTORS
SERVICE, INC., (III)

 

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CERTIFICATES OF DEPOSIT MATURING NO MORE THAN ONE YEAR FROM THE DATE OF CREATION
THEREOF ISSUED BY COMMERCIAL BANKS INCORPORATED UNDER THE LAWS OF THE UNITED
STATES OF AMERICA, EACH HAVING COMBINED CAPITAL, SURPLUS AND UNDIVIDED PROFITS
OF NOT LESS THAN $300,000,000 AND HAVING A SENIOR UNSECURED RATING OF “A” OR
BETTER BY A NATIONALLY RECOGNIZED RATING AGENCY (AN “A RATED BANK”), (IV) TIME
DEPOSITS MATURING NO MORE THAN THIRTY (30) DAYS FROM THE DATE OF CREATION
THEREOF WITH A RATED BANKS AND (V) MUTUAL FUNDS THAT INVEST SOLELY IN ONE OR
MORE OF THE INVESTMENTS DESCRIBED IN CLAUSES (I) THROUGH (IV) ABOVE;
(D) BORROWER MAY MAKE INVESTMENTS IN THE CAPITAL STOCK OF ANY OF THE SECURED
GUARANTORS; (E) BORROWER AND THE SECURED GUARANTORS MAY MAKE INVESTMENTS IN
BORROWER AND SECURED GUARANTORS CONSISTING OF THE INTERCOMPANY LOANS IN
ACCORDANCE WITH SECTION 6.3; (F) BORROWER MAY MAINTAIN (BUT NOT INCREASE) THE
EXISTING SCHAUBLIN HOLDING INTERCOMPANY LOAN; IT BEING UNDERSTOOD AND AGREED
THAT SCHAUBLIN HOLDING MAY REPAY THE EXISTING SCHAUBLIN HOLDING INTERCOMPANY
LOAN, IN WHOLE OR IN PART, AND BORROWER MAY MAKE NEW LOANS TO SCHAUBLIN HOLDING
IN THE AMOUNT NOT TO EXCEED THE AMOUNT OF SUCH REPAYMENTS (AND, IN ANY EVENT, AS
LONG AS THE AGGREGATE OUTSTANDING AMOUNT OF SUCH NEW LOANS, WHEN ADDED TO THE
UNPAID PRINCIPAL BALANCE OF THE EXISTING SCHAUBLIN HOLDING INTERCOMPANY LOAN
REMAINING, IF ANY, AFTER SUCH REPAYMENTS, DOES NOT EXCEED AT ANY DATE OF
DETERMINATION THE DOLLAR EQUIVALENT OF $9,655,624.91), (G) SCHAUBLIN HOLDING MAY
MAINTAIN (BUT NOT INCREASE) THE EXISTING SCHAUBLIN INTERCOMPANY LOAN; IT BEING
UNDERSTOOD AND AGREED THAT SCHAUBLIN MAY REPAY THE EXISTING SCHAUBLIN
INTERCOMPANY LOAN, IN WHOLE OR IN PART, AND SCHAUBLIN HOLDING MAY MAKE NEW LOANS
TO SCHAUBLIN HOLDING IN THE AMOUNT NOT TO EXCEED THE AMOUNT OF SUCH REPAYMENTS,
(AND, IN ANY EVENT, AS LONG AS THE AGGREGATE OUTSTANDING AMOUNT OF SUCH NEW
LOANS, WHEN ADDED TO THE UNPAID PRINCIPAL BALANCE OF THE EXISTING SCHAUBLIN
INTERCOMPANY REMAINING, IF ANY, AFTER SUCH REPAYMENTS, DOES NOT EXCEED AT ANY
DATE OF DETERMINATION THE DOLLAR EQUIVALENT OF $9,655,624.91); (H) SCHAUBLIN MAY
MAINTAIN (BUT NOT INCREASE) THE EXISTING FRENCH INTERCOMPANY LOANS; IT BEING
UNDERSTOOD AND AGREED THAT ONE OR MORE FRENCH OPERATING COMPANIES MAY REPAY THE
RELEVANT EXISTING FRENCH INTERCOMPANY LOAN, IN WHOLE OR IN PART, AND SCHAUBLIN
MAY MAKE NEW LOANS TO THE FRENCH OPERATING COMPANIES IN AN AMOUNT NOT TO EXCEED,
IN THE AGGREGATE, THE AMOUNT OF SUCH REPAYMENTS (AND, IN ANY EVENT, AS LONG AS
THE AGGREGATE OUTSTANDING AMOUNT OF ALL SUCH NEW LOANS TO ONE OR MORE FRENCH
OPERATING COMPANIES, WHEN ADDED TO THE UNPAID PRINCIPAL BALANCE OF THE EXISTING
FRENCH INTERCOMPANY LOANS REMAINING, IF ANY, AFTER SUCH REPAYMENTS, DOES NOT
EXCEED AT ANY DATE OF DETERMINATION THE DOLLAR EQUIVALENT OF $269,616.00);
(I) BORROWER MAY MAKE INTERCOMPANY LOANS TO SCHAUBLIN HOLDING WITH THE PROCEEDS
OF THE SCHAUBLIN REVOLVING LOAN AND IN AN AGGREGATE AMOUNT NOT TO EXCEED THE SUM
OF THE OUTSTANDING PRINCIPAL BALANCE OF THE SCHAUBLIN REVOLVING LOAN;
(J) SCHAUBLIN HOLDING MAY MAKE INTERCOMPANY LOANS TO SCHAUBLIN WITH THE PROCEEDS
OF THE INTERCOMPANY LOANS FROM BORROWER REFERENCED IN THE ABOVE CLAUSE (I) AND
IN AN AGGREGATE AMOUNT NOT TO EXCEED THE OUTSTANDING BALANCE OF THE SCHAUBLIN
REVOLVING LOAN; (K) BORROWER MAY MAKE ADDITIONAL INVESTMENTS, LOANS OR ADVANCES
AFTER THE EFFECTIVE DATE IN OR TO SCHAUBLIN HOLDING AS LONG AS THE AGGREGATE
OUTSTANDING AMOUNT THEREOF AT ANY DATE OF DETERMINATION DOES NOT EXCEED THE
DOLLAR EQUIVALENT OF $2,000,000 (SUCH INTERCOMPANY LOANS BEING THE “ADDITIONAL
SCHAUBLIN HOLDING INTERCOMPANY LOANS”; AND TOGETHER WITH THE INTERCOMPANY LOANS
DESCRIBED IN THE ABOVE CLAUSES (F) AND (I), THE “SCHAUBLIN HOLDING INTERCOMPANY
LOANS”); (L) SCHAUBLIN HOLDING MAY MAKE INTERCOMPANY LOANS TO SCHAUBLIN AFTER
THE EFFECTIVE DATE WITH THE PROCEEDS OF THE INTERCOMPANY LOANS FROM BORROWER
REFERENCED IN THE ABOVE CLAUSE (K) AS LONG AS THE AGGREGATE OUTSTANDING AMOUNT
THEREOF AS OF ANY DATE OF DETERMINATION DOES NOT EXCEED THE DOLLAR EQUIVALENT OF
$2,000,000 (SUCH INTERCOMPANY LOANS BEING THE “ADDITIONAL SCHAUBLIN

 

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INTERCOMPANY LOANS”; AND TOGETHER WITH THE INTERCOMPANY LOANS DESCRIBED IN THE
ABOVE CLAUSES (G) AND (J), THE “SCHAUBLIN INTERCOMPANY LOANS”); (M) SCHAUBLIN
MAY MAKE ADDITIONAL INTERCOMPANY LOANS TO ONE OR MORE FRENCH OPERATING COMPANIES
AFTER THE EFFECTIVE DATE FROM THE PROCEEDS OF THE ADDITIONAL SCHAUBLIN
INTERCOMPANY LOANS OR FROM CASH ON HAND (SUCH ADDITIONAL INTERCOMPANY LOANS
BEING THE “ADDITIONAL FRENCH INTERCOMPANY LOANS”; AND TOGETHER WITH THE NEW
LOANS AND THE EXISTING FRENCH INTERCOMPANY LOANS DESCRIBED IN THE ABOVE CLAUSE
(H), THE “FRENCH INTERCOMPANY LOANS”) AS LONG AS (A) THE AGGREGATE OUTSTANDING
PRINCIPAL AMOUNT OF THE ADDITIONAL FRENCH INTERCOMPANY LOANS, WHEN ADDED TO THE
AGGREGATE OUTSTANDING AMOUNT OF THE NEW INTERCOMPANY LOANS AND THE EXISTING
FRENCH INTERCOMPANY LOANS DESCRIBED IN THE ABOVE CLAUSE (H), DOES NOT TO EXCEED
THE DOLLAR EQUIVALENT OF $1,000,000, (B) NO DEFAULT OR EVENT OF DEFAULT HAS
OCCURRED AND IS CONTINUING OR WOULD RESULT AFTER GIVING EFFECT TO THE PROPOSED
INTERCOMPANY LOAN AND (C) BORROWING AVAILABILITY SHALL BE AT LEAST $5,500,000
AFTER GIVING EFFECT TO EACH OF THE PROPOSED INTERCOMPANY LOANS; (N) CREDIT
PARTIES MAY MAKE LOANS AND ADVANCES TO EMPLOYEES PERMITTED UNDER SECTION 6.4(B);
(O) BORROWER AND THE SECURED GUARANTORS MAY FORM ACQUISITION COMPANIES FOR THE
PURPOSE OF MAKING PERMITTED ACQUISITIONS AND MAKE PERMITTED ACQUISITIONS;
(M) EACH CREDIT PARTY MAY PROVIDE CASH COLLATERAL TO AGENT IN ACCORDANCE WITH
THE LOAN DOCUMENTS; (P) EACH CREDIT PARTY MAY ENTER INTO HEDGING ARRANGEMENTS IN
THE ORDINARY COURSE OF BUSINESS, (Q) BORROWER AND SECURED GUARANTORS MAY MAKE
ADDITIONAL INVESTMENTS AFTER THE CLOSING DATE IN RBC DE MEXICO S DE R.L. DE CV
IN AN AGGREGATE AMOUNT NOT TO EXCEED $1,000,000 IN THE AGGREGATE (WHICH MAY
INCLUDE TRANSFERRED EQUIPMENT WITH AN APPRAISED ORDERLY LIQUIDATION VALUE NOT TO
EXCEED $500,000 IN THE AGGREGATE) DURING THE FIRST TWO YEARS FOLLOWING THE
CLOSING DATE, WHICH LIMITATIONS SHALL BE INCREASED TO $1,500,000 AND $750,000
RESPECTIVELY AS OF THE SECOND ANNIVERSARY OF THE CLOSING DATE; AND (R) CREDIT
PARTIES MAY MAKE OTHER INVESTMENTS NOT TO EXCEED THE DOLLAR EQUIVALENT OF
$1,000,000 IN THE AGGREGATE.

 

6.3                                 INDEBTEDNESS.

 

(A)                                  SUCH CREDIT PARTY SHALL NOT CREATE, INCUR,
ASSUME OR PERMIT TO EXIST ANY INDEBTEDNESS, EXCEPT (WITHOUT DUPLICATION) (I)
INDEBTEDNESS SECURED BY PURCHASE MONEY SECURITY INTERESTS AND CAPITAL LEASES
PERMITTED IN SECTION 6.7(C), (II) THE LOANS AND THE OTHER OBLIGATIONS, (III)
UNFUNDED PENSION FUND AND OTHER EMPLOYEE BENEFIT PLAN OBLIGATIONS AND
LIABILITIES TO THE EXTENT THEY ARE PERMITTED TO REMAIN UNFUNDED UNDER APPLICABLE
LAW, (IV) EXISTING INDEBTEDNESS DESCRIBED IN DISCLOSURE SCHEDULE (6.3)
(INCLUDING EARN-OUTS PAYABLE TO SELLERS OF BUSINESSES, IF ANY, CONSTITUTING
INDEBTEDNESS) AND REFINANCINGS THEREOF OR AMENDMENTS OR MODIFICATIONS THERETO
THAT DO NOT HAVE THE EFFECT OF INCREASING THE PRINCIPAL AMOUNT THEREOF OR
CHANGING THE AMORTIZATION THEREOF (OTHER THAN TO EXTEND THE SAME) AND THAT ARE
OTHERWISE ON TERMS AND CONDITIONS NO LESS FAVORABLE TO ANY CREDIT PARTY, AGENT
OR ANY LENDER, AS REASONABLY DETERMINED BY AGENT, THAN THE TERMS OF THE
INDEBTEDNESS BEING REFINANCED, AMENDED OR MODIFIED, (V) INDEBTEDNESS
SPECIFICALLY PERMITTED UNDER SECTION 6.1, (VI) INDEBTEDNESS CONSISTING OF
INTERCOMPANY LOANS AND ADVANCES MADE BY BORROWER TO ANY SECURED GUARANTOR OR BY
ANY SECURED GUARANTOR TO BORROWER OR ANOTHER SECURED GUARANTOR OR CONSISTING OF
INTERCOMPANY LOANS AND ADVANCES TO THE EXTENT PERMITTED UNDER SECTIONS 6.2(F),
(G), (H), (I) ,(J), (K),(L) AND (M); PROVIDED, THAT:  (A) BORROWER SHALL HAVE
EXECUTED AND DELIVERED TO EACH SUCH SECURED GUARANTOR, AND EACH SUCH SECURED
GUARANTOR SHALL HAVE EXECUTED AND DELIVERED TO BORROWER OR ANOTHER SUCH SECURED
GUARANTOR, AS APPLICABLE, AND SCHAUBLIN HOLDING, SCHAUBLIN AND EACH OF THE
FRENCH OPERATING COMPANIES SHALL HAVE EXECUTED AND DELIVERED TO BORROWER,
SCHAUBLIN HOLDING OR

 

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SCHAUBLIN, AS APPLICABLE, AS OF THE EFFECTIVE DATE, A DEMAND NOTE (COLLECTIVELY,
THE “INTERCOMPANY NOTES”) TO EVIDENCE ANY SUCH INTERCOMPANY INDEBTEDNESS OWING
AT ANY TIME BY BORROWER TO SUCH SECURED GUARANTOR OR BY SUCH SECURED GUARANTOR
TO BORROWER OR SUCH OTHER SECURED GUARANTOR OR BY SCHAUBLIN HOLDING SCHAUBLIN OR
EACH OF THE FRENCH OPERATING COMPANIES TO BORROWER, SCHAUBLIN HOLDING OR
SCHAUBLIN (AS APPLICABLE), WHICH INTERCOMPANY NOTES SHALL BE IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO AGENT AND SHALL BE PLEDGED AND DELIVERED OR
ASSIGNED TO AGENT PURSUANT TO THE APPLICABLE PLEDGE AGREEMENT OR SECURITY
AGREEMENT OR OTHER COLLATERAL DOCUMENT AS ADDITIONAL COLLATERAL SECURITY FOR THE
OBLIGATIONS; (B) BORROWER AND EACH SECURED GUARANTOR, SCHAUBLIN HOLDING,
SCHAUBLIN AND THE FRENCH OPERATING COMPANIES SHALL RECORD ALL INTERCOMPANY
TRANSACTIONS ON ITS BOOKS AND RECORDS IN A MANNER REASONABLY SATISFACTORY TO
AGENT; (C) THE OBLIGATIONS OF BORROWER AND EACH SECURED GUARANTOR UNDER ANY SUCH
INTERCOMPANY NOTES SHALL BE SUBORDINATED TO THE OBLIGATIONS IN A MANNER
REASONABLY SATISFACTORY TO AGENT; (D) NO EVENT OF DEFAULT HAS OCCURRED AND IS
CONTINUING OR WOULD RESULT AFTER GIVING EFFECT TO ANY SUCH PROPOSED INTERCOMPANY
LOAN; AND (E) THE AGGREGATE BALANCE OF ALL SUCH INTERCOMPANY LOANS OWING BY ANY
SECURED GUARANTOR INCURRED DURING THE TIME THAT THE EBITDA OF SUCH SECURED
GUARANTOR HAS BEEN NEGATIVE FOR A TRAILING TWELVE MONTH PERIOD ENDING ON THE
LAST DAY OF ANY FISCAL MONTH SHALL NOT BE INCREASED BY MORE THAN THE DOLLAR
EQUIVALENT OF $2,000,000 OVER THE AMOUNT OF SUCH SECURED GUARANTOR’S OR FRENCH
OPERATING COMPANY’S INTERCOMPANY LOAN OBLIGATIONS AS OF THE LAST DAY OF SUCH
PERIOD; PROVIDED, THAT A SECURED GUARANTOR OR A FRENCH OPERATING COMPANY SHALL
NO LONGER BE SUBJECT TO THE DOLLAR EQUIVALENT OF $2,000,000 LIMITATION IF THAT
SECURED GUARANTOR HAS HAD POSITIVE EBITDA FOR THE TRAILING TWELVE-MONTH PERIODS
ENDING ON THE LAST DAY OF SIX CONSECUTIVE FISCAL MONTHS; PROVIDED, FURTHER, THAT
IF A SECURED GUARANTOR HAS BEEN SUBJECT TO THAT $2,000,000 LIMITATION, THEN
BECAME EXEMPT FROM IT AND AGAIN HAS A NEGATIVE EBITDA FOR A TRAILING
TWELVE-MONTH PERIOD, NOT MORE THAN $2,000,000 OF ADDITIONAL INTERCOMPANY LOANS
MAY BE RECEIVED BY IT AFTER THE DATE WHEN IT AGAIN HAS A NEGATIVE EBITDA; (VII)
UNSECURED INDEBTEDNESS OF BORROWER SO LONG AS SUCH UNSECURED INDEBTEDNESS IS
SUBORDINATED TO THE OBLIGATIONS IN A MANNER AND FORM SATISFACTORY TO AGENT AND
LENDERS IN THEIR SOLE DISCRETION, AS TO RIGHT AND TIME OF PAYMENT AND AS TO ANY
OTHER TERMS, RIGHTS AND REMEDIES THEREUNDER AND SO LONG AS (A) NO EVENT OF
DEFAULT HAS OCCURRED AND IS CONTINUING OR WOULD RESULT AFTER GIVING EFFECT TO
SUCH UNSECURED INDEBTEDNESS; (B) HOLDINGS WAS, ON A PRO FORMA BASIS, IN
COMPLIANCE WITH THE FIXED CHARGE COVERAGE RATIO FINANCIAL COVENANT SET FORTH ON
ANNEX G AS OF THE LAST DAY OF THE FISCAL QUARTER REFLECTED IN THE COMPLIANCE
CERTIFICATE MOST RECENTLY DELIVERED PRIOR TO THE DATE SUCH UNSECURED
INDEBTEDNESS IS INCURRED (AFTER GIVING EFFECT TO SUCH UNSECURED INDEBTEDNESS AND
THE USE THEREOF AS IF INCURRED ON THE FIRST DAY OF SUCH PERIOD); AND (C) THE
PROCEEDS OF SUCH INDEBTEDNESS HAVE BEEN WHOLLY USED, PROMPTLY UPON RECEIPT
THEREOF, TO DIRECTLY PAY (BY WAY OF REFINANCING OR EXCHANGE) THE FOLLOWING
INDEBTEDNESS IN THE FOLLOWING ORDER:  FIRST, THE SENIOR SUBORDINATED DEBT, UNTIL
THE SAME HAS BEEN REPAID IN FULL; SECOND, THE ZERO COUPON DEBT, UNTIL THE SAME
HAS BEEN REPAID IN FULL; THIRD, INTEREST THEN DUE AND PAYABLE ON THE REVOLVING
CREDIT ADVANCES; FOURTH, THE OUTSTANDING PRINCIPAL BALANCE OF THE REVOLVING
CREDIT ADVANCES UNTIL THE SAME HAS BEEN REPAID IN FULL; FIFTH, INTEREST THEN DUE
AND PAYABLE ON THE TERM LOAN; AND SIXTH, THE SCHEDULED PRINCIPAL INSTALLMENTS OF
THE TERM LOAN IN INVERSE ORDER OF MATURITY; (VIII) INDEBTEDNESS OF A QUALIFIED
TARGET ASSUMED OR INCURRED IN A PERMITTED ACQUISITION DESCRIBED IN SECTION
6.1(A)(IV) AS LONG AS SUCH INDEBTEDNESS WAS NOT INCURRED IN CONTEMPLATION OF
SUCH PERMITTED ACQUISITION; (IX) INDEBTEDNESS RESULTING FROM ENDORSEMENT OF
NEGOTIABLE INSTRUMENTS FOR COLLECTION IN THE ORDINARY COURSE OF BUSINESS; (X)
INDEBTEDNESS ARISING WITH RESPECT TO CUSTOMARY INDEMNIFICATION AND PURCHASE
PRICE

 

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ADJUSTMENT OBLIGATIONS INCURRED IN CONNECTION WITH PERMITTED ACQUISITIONS; (XII)
INDEBTEDNESS INCURRED IN THE ORDINARY COURSE OF BUSINESS WITH RESPECT TO SURETY
AND APPEAL BONDS, PERFORMANCE AND RETURN-OF-MONEY BONDS AND OTHER SIMILAR
OBLIGATIONS NOT EXCEEDING AT ANY TIME THE DOLLAR EQUIVALENT OF $250,000 IN
AGGREGATE OUTSTANDING LIABILITY; (XIII) INDEBTEDNESS INCURRED IN CONNECTION WITH
INTEREST SWAP AGREEMENTS OR ARRANGEMENTS DESIGNED TO PROTECT BORROWER OR ANY
SUBSIDIARY AGAINST FLUCTUATION IN INTEREST RATES, AND NOT ENTERED INTO FOR
SPECULATION, ENTERED INTO WITH ANY LENDER (OR ANY AFFILIATE THEREOF) WITH
RESPECT TO THE LOANS, IN EACH CASE WITH THE CONSENT OF AGENT, WHICH SHALL NOT BE
UNREASONABLY WITHHELD; (XIV) CURRENCY HEDGING ARRANGEMENTS; AND (XV)
INDEBTEDNESS NOT PERMITTED BY CLAUSES (I) THROUGH (XIV) ABOVE, SO LONG AS MUCH
INDEBTEDNESS, IN THE AGGREGATE AT ANY TIME OUTSTANDING, DOES NOT EXCEED THE
DOLLAR EQUIVALENT $500,000.

 

(B)                                 DURING THE FIRST TWO YEARS FOLLOWING THE
CLOSING DATE, SUCH CREDIT PARTY SHALL NOT, DIRECTLY OR INDIRECTLY, VOLUNTARILY
PURCHASE, REDEEM, DEFEASE OR PREPAY: ANY PRINCIPAL OF, PREMIUM, IF ANY, INTEREST
OR OTHER AMOUNT PAYABLE IN RESPECT OF ANY INDEBTEDNESS, OTHER THAN (I) THE
OBLIGATIONS; (II) INDEBTEDNESS SECURED BY A PERMITTED ENCUMBRANCE IF THE ASSET
SECURING SUCH INDEBTEDNESS HAS BEEN SOLD OR OTHERWISE DISPOSED OF IN ACCORDANCE
WITH SECTIONS 6.8(B) OR (C); (III) INDEBTEDNESS PERMITTED BY SECTION 6.3(A)(IV)
UPON ANY REFINANCING THEREOF IN ACCORDANCE WITH SECTION 6.3(A)(IV) OR SECTION
6.3(A)(VII); (IV) INTERCOMPANY INDEBTEDNESS; AND (V) AS OTHERWISE PERMITTED BY
SECTION 6.14; PROVIDED, THAT AFTER THE FIRST TWO YEARS FOLLOWING THE CLOSING
DATE, IF BORROWER PURCHASES, PREPAYS OR REDEEMS OTHER INDEBTEDNESS, BORROWER
SHALL MEET THE MINIMUM U.S. BORROWING AVAILABILITY SET FORTH IN SECTION 6.14(B)
AFTER GIVING EFFECT THERETO.

 

6.4                                 EMPLOYEE LOANS AND AFFILIATE TRANSACTIONS.

 

(A)                                  SUCH CREDIT PARTY SHALL NOT ENTER INTO OR
BE A PARTY TO ANY TRANSACTION WITH ANY OTHER CREDIT PARTY OR ANY AFFILIATE
THEREOF EXCEPT (I) IN THE ORDINARY COURSE OF AND PURSUANT TO THE REASONABLE
REQUIREMENTS OF SUCH CREDIT PARTY’S BUSINESS AND UPON FAIR AND REASONABLE TERMS
THAT ARE NO LESS FAVORABLE TO SUCH CREDIT PARTY THAN WOULD BE OBTAINED IN A
COMPARABLE ARM’S LENGTH TRANSACTION WITH A PERSON NOT AN AFFILIATE OF SUCH
CREDIT PARTY (II) AS AND TO THE EXTENT PERMITTED IN SECTION 6.13(E) AND (III) AS
AND TO THE EXTENT PERMITTED BY SECTION 6.3(A)(VI).  ALL SUCH TRANSACTIONS
EXISTING AS OF THE DATE HEREOF ARE DESCRIBED IN DISCLOSURE SCHEDULE (6.4(A)).

 

(B)                                 EXCLUDING LOANS SET FORTH IN DISCLOSURE
SCHEDULE (6.4(B)), SUCH CREDIT PARTY SHALL NOT ENTER INTO ANY LENDING OR
BORROWING TRANSACTION WITH ANY EMPLOYEES OF ANY CREDIT PARTY, EXCEPT LOANS TO
ITS RESPECTIVE EMPLOYEES ON AN ARM’S-LENGTH BASIS IN THE ORDINARY COURSE OF
BUSINESS CONSISTENT WITH PAST PRACTICES FOR TRAVEL AND ENTERTAINMENT EXPENSES,
RELOCATION COSTS AND SIMILAR PURPOSES UP TO A MAXIMUM OF THE DOLLAR EQUIVALENT
OF $250,000 TO ANY EMPLOYEE AND UP TO A MAXIMUM OF THE DOLLAR EQUIVALENT OF
$1,000,000 IN THE AGGREGATE AT ANY ONE TIME OUTSTANDING AND EXCEPT FOR LOANS OR
ADVANCES MADE IN CONNECTION WITH A MANAGEMENT OR EMPLOYEE STOCK OWNERSHIP
PROGRAM, THE PROCEEDS OF WHICH ARE IMMEDIATELY INVESTED IN HOLDINGS’ STOCK AND
CONTRIBUTED TO THE CAPITAL OF BORROWER.

 

6.5                                 CAPITAL STRUCTURE AND BUSINESS.  SUCH CREDIT
PARTY SHALL NOT AMEND ITS CHARTER OR BYLAWS IN A MANNER THAT COULD REASONABLY BE
EXPECTED TO ADVERSELY AFFECT AGENT OR LENDERS OR SUCH CREDIT PARTY’S DUTY OR
ABILITY TO REPAY THE OBLIGATIONS.  SUCH CREDIT PARTY SHALL NOT ENGAGE

 

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IN ANY BUSINESS OTHER THAN THE BUSINESSES CURRENTLY ENGAGED IN BY THE CREDIT
PARTIES OR ANY BUSINESS REASONABLY RELATED THERETO.  SUCH CREDIT PARTY (IF NOT
HOLDINGS OR BORROWER) SHALL NOT ISSUE ANY ADDITIONAL SHARES OF STOCK.

 

6.6                                 GUARANTEED INDEBTEDNESS.  SUCH CREDIT PARTY
SHALL NOT CREATE, INCUR, ASSUME OR PERMIT TO EXIST ANY GUARANTEED INDEBTEDNESS
EXCEPT (A) BY ENDORSEMENT OF INSTRUMENTS OR ITEMS OF PAYMENT FOR DEPOSIT TO THE
GENERAL ACCOUNT OF ANY CREDIT PARTY, AND (B) FOR GUARANTEED INDEBTEDNESS
INCURRED FOR THE BENEFIT OF ANY OTHER CREDIT PARTY IF THE PRIMARY OBLIGATION IS
EXPRESSLY PERMITTED BY THIS AGREEMENT; PROVIDED, THAT NEITHER BORROWER NOR ANY
OF ITS DOMESTIC SUBSIDIARIES SHALL CREATE, INCUR, ASSUME OR PERMIT TO EXIST ANY
GUARANTEED INDEBTEDNESS FOR THE BENEFIT OF HOLDINGS OR ANY FOREIGN SUBSIDIARY.

 

6.7                                 LIENS.  SUCH CREDIT PARTY SHALL NOT CREATE,
INCUR, ASSUME OR PERMIT TO EXIST ANY LIEN ON OR WITH RESPECT TO ITS ACCOUNTS. 
SUCH CREDIT PARTY SHALL NOT CREATE, INCUR, ASSUME OR PERMIT TO EXIST ANY LIEN ON
OR WITH RESPECT TO ANY OF ITS OTHER PROPERTIES OR ASSETS (WHETHER NOW OWNED OR
HEREAFTER ACQUIRED) EXCEPT FOR (A) PERMITTED ENCUMBRANCES; (B) LIENS IN
EXISTENCE ON THE DATE HEREOF (EXCLUSIVE OF LIENS OF THE PRIOR LENDERS,
DISCHARGED ON THE CLOSING DATE OR THE EFFECTIVE DATE) AND SUMMARIZED ON
DISCLOSURE SCHEDULE (6.7) SECURING THE INDEBTEDNESS DESCRIBED ON DISCLOSURE
SCHEDULE (6.3) AND PERMITTED REFINANCINGS, EXTENSIONS AND RENEWALS THEREOF,
INCLUDING EXTENSIONS OR RENEWALS OF ANY SUCH LIENS; PROVIDED, THAT THE PRINCIPAL
AMOUNT OF THE INDEBTEDNESS SO SECURED IS NOT INCREASED AND THE LIEN DOES NOT
ATTACH TO ANY OTHER PROPERTY; AND (C) LIENS CREATED AFTER THE DATE HEREOF BY
CONDITIONAL SALE OR OTHER TITLE RETENTION AGREEMENTS (INCLUDING CAPITAL LEASES)
OR IN CONNECTION WITH PURCHASE MONEY INDEBTEDNESS WITH RESPECT TO REAL ESTATE,
IMPROVEMENTS THERETO, OR EQUIPMENT AND FIXTURES ACQUIRED BY ANY CREDIT PARTY IN
THE ORDINARY COURSE OF BUSINESS, INVOLVING THE INCURRENCE OF AN AGGREGATE AMOUNT
OF PURCHASE MONEY INDEBTEDNESS AND CAPITAL LEASE OBLIGATIONS OF NOT MORE THAN
THE DOLLAR EQUIVALENT OF $5,000,000 OUTSTANDING AT ANY ONE TIME FOR ALL SUCH
LIENS (PROVIDED, THAT SUCH LIENS ATTACH ONLY TO THE ASSETS SUBJECT TO SUCH
PURCHASE MONEY DEBT AND SUCH INDEBTEDNESS IS INCURRED WITHIN 30 DAYS FOLLOWING
SUCH PURCHASE AND DOES NOT EXCEED 100% OF THE PURCHASE PRICE OF THE SUBJECT
ASSETS), (D) LIENS PERMITTED IN ACCORDANCE WITH SECTION 6.1 AND (E) LIENS
SECURING OTHER OBLIGATIONS NOT TO EXCEED THE DOLLAR EQUIVALENT OF $500,000 IN
THE AGGREGATE.  IN ADDITION, SUCH CREDIT PARTY SHALL NOT BECOME A PARTY TO ANY
AGREEMENT, NOTE, INDENTURE OR INSTRUMENT, OR TAKE ANY OTHER ACTION, THAT WOULD
PROHIBIT THE CREATION OF A LIEN ON ANY OF ITS PROPERTIES OR OTHER ASSETS IN
FAVOR OF AGENT, ON BEHALF OF ITSELF AND LENDERS, AS ADDITIONAL COLLATERAL FOR
THE OBLIGATIONS, EXCEPT OPERATING LEASES, CAPITAL LEASES OR LICENSES WHICH
PROHIBIT LIENS UPON THE ASSETS THAT ARE SUBJECT THERETO.

 

6.8                                 SALE OF STOCK AND ASSETS.  SUCH CREDIT PARTY
SHALL NOT SELL, TRANSFER, CONVEY, ASSIGN OR OTHERWISE DISPOSE OF ANY OF ITS
PROPERTIES OR OTHER ASSETS, INCLUDING THE STOCK OF ANY OF ITS SUBSIDIARIES
(WHETHER IN A PUBLIC OR A PRIVATE OFFERING OR OTHERWISE) OR ANY OF ITS ACCOUNTS,
OTHER THAN (A) THE SALE OF INVENTORY IN THE ORDINARY COURSE OF BUSINESS, (B) THE
SALE, TRANSFER, CONVEYANCE OR OTHER DISPOSITION BY A CREDIT PARTY OF EQUIPMENT,
FIXTURES AND REAL ESTATE THAT ARE OBSOLETE OR NO LONGER USED OR USEFUL IN SUCH
CREDIT PARTY’S BUSINESS AND HAVING A BOOK VALUE NOT EXCEEDING THE DOLLAR
EQUIVALENT OF $500,000 IN THE AGGREGATE IN ANY FISCAL YEAR, (C) THE SALE,
TRANSFER, CONVEYANCE OR OTHER DISPOSITION OF OTHER EQUIPMENT AND FIXTURES HAVING
A VALUE NOT EXCEEDING THE DOLLAR EQUIVALENT OF $500,000 IN THE AGGREGATE IN ANY
FISCAL YEAR, AND (D) ASSETS ACQUIRED AS PART OF A PERMITTED ACQUISITION AND
DESIGNATED FOR DISPOSITION IN A WRITTEN NOTICE TO

 

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AGENT WHEN ACQUIRED.  WITH RESPECT TO ANY DISPOSITION OF ASSETS OR OTHER
PROPERTIES PERMITTED PURSUANT TO CLAUSES (B) AND (C) ABOVE, SUBJECT TO
COMPLIANCE WITH SECTION 1.3(B), AGENT AGREES ON REASONABLE PRIOR WRITTEN NOTICE
TO RELEASE ITS LIEN ON SUCH ASSETS OR OTHER PROPERTIES IN ORDER TO PERMIT THE
APPLICABLE CREDIT PARTY TO EFFECT SUCH DISPOSITION AND SHALL EXECUTE AND
PROMPTLY DELIVER TO BORROWER, AT BORROWER’S EXPENSE, APPROPRIATE UCC-3
TERMINATION STATEMENTS AND OTHER RELEASES AS REASONABLY REQUESTED BY BORROWER.

 

6.9                                 ERISA.  SUCH CREDIT PARTY SHALL NOT, OR
SHALL CAUSE OR PERMIT ANY ERISA AFFILIATE TO, CAUSE OR PERMIT TO OCCUR AN EVENT
THAT COULD RESULT IN THE IMPOSITION OF A LIEN UNDER SECTION 412 OF THE IRC OR
SECTION 302 OR 4068 OF ERISA OR CAUSE OR PERMIT TO OCCUR AN ERISA EVENT TO THE
EXTENT SUCH ERISA EVENT COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE
EFFECT.

 

6.10                           FINANCIAL COVENANTS.  BORROWER SHALL NOT BREACH
OR FAIL TO COMPLY WITH ANY OF THE FINANCIAL COVENANTS.

 

6.11                           [RESERVED]

 

6.12                           SALE-LEASEBACKS.  SUCH CREDIT PARTY SHALL NOT
ENGAGE IN ANY SALE-LEASEBACK, SYNTHETIC LEASE OR SIMILAR TRANSACTION INVOLVING
ANY OF ITS ASSETS.

 

6.13                           CANCELLATION OF INDEBTEDNESS.  SUCH CREDIT PARTY
SHALL NOT CANCEL ANY CLAIM OR DEBT OWING TO IT, EXCEPT FOR REASONABLE
CONSIDERATION NEGOTIATED ON AN ARM’S–LENGTH BASIS AND IN THE ORDINARY COURSE OF
ITS BUSINESS CONSISTENT WITH PAST PRACTICES.

 

6.14                           RESTRICTED PAYMENTS.

 

(A)                                  SUCH CREDIT PARTY SHALL NOT MAKE ANY
RESTRICTED PAYMENT, EXCEPT (I) PAYMENTS OF INTEREST AND PRINCIPAL OF
INTERCOMPANY LOANS AND ADVANCES BETWEEN BORROWER AND SECURED GUARANTORS AND
BETWEEN THE FRENCH OPERATING COMPANIES, SCHAUBLIN AND SCHAUBLIN HOLDING, AND
SCHAUBLIN, SCHAUBLIN HOLDING AND BORROWER, RESPECTIVELY, TO THE EXTENT SUCH
INTERCOMPANY LOANS AND ADVANCES ARE PERMITTED BY SECTION 6.2 AND SECTION 6.3,
(II) DIVIDENDS AND DISTRIBUTIONS BY SUBSIDIARIES OF BORROWER PAID TO BORROWER OR
TO AN INTERMEDIATE SUBSIDIARY OF BORROWER WHICH IS THE DIRECT HOLDER OF STOCK IN
THE SUBSIDIARY MAKING A DIVIDEND ON OTHER DISTRIBUTION, AS APPLICABLE,
(III) TRANSACTIONS PERMITTED UNDER SECTION 6.4(B), (IV) PAYMENTS OF MANAGEMENT
FEES TO WHITNEY & CO. IN EQUAL QUARTERLY INSTALLMENTS, AS LONG AS SUCH PAYMENTS
OF MANAGEMENT FEES DO NOT EXCEED $450,000 IN THE AGGREGATE DURING ANY FISCAL
YEAR, (V) SCHEDULED PAYMENTS OF INTEREST WITH RESPECT TO THE SENIOR SUBORDINATED
DEBT OR ANY REFINANCING THEREOF PERMITTED UNDER SECTION 6.3(A)(VII) SUBJECT TO
THE SUBORDINATION PROVISIONS SET FORTH IN THE APPLICABLE NOTE PURCHASE AGREEMENT
OR INDENTURE, (VI) DIVIDENDS OR DISTRIBUTIONS PAYABLE TO HOLDINGS SOLELY IN
COMMON STOCK OF HOLDINGS, (VII) PAYMENTS TO DR. MICHAEL J. HARTNETT NOT TO
EXCEED THOSE SET FORTH IN THAT CERTAIN EMPLOYMENT AGREEMENT, DATED DECEMBER 18,
2000, BY AND BETWEEN BORROWER AND DR. MICHAEL J. HARTNETT, AS IN EFFECT ON THE
CLOSING DATE AND (VIII) PAYMENTS AND DISTRIBUTIONS WITH RESPECT TO ZERO COUPON
DEBT AND SENIOR SUBORDINATED NOTES PERMITTED IN ACCORDANCE WITH SECTION
6.3(A)(VII); AND PROVIDED, THAT NO EVENT OF DEFAULT HAS OCCURRED AND IS
CONTINUING OR WOULD RESULT AFTER GIVING EFFECT TO ANY RESTRICTED PAYMENT
PURSUANT TO CLAUSE (IV) ABOVE.

 

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(B)                                 NOTWITHSTANDING THE FOREGOING SECTION
6.14(A), BORROWER MAY PAY CASH DIVIDENDS TO HOLDINGS (“DIVIDENDS”) AS LONG AS
(A) PROMPTLY UPON RECEIPT THEREOF, HOLDINGS IMMEDIATELY USES ALL OF THE PROCEEDS
OF SUCH DIVIDENDS SOLELY FOR ONE OR MORE OF THE FOLLOWING PURPOSES:  (I) PAYMENT
OF SCHEDULED INTEREST AS OF THE CLOSING DATE ON, AND THE REDEMPTION REQUIRED AS
OF THE CLOSING DATE OF, THE ZERO COUPON DEBT, (II) PAYMENT OF DIVIDENDS ON THE
PREFERRED STOCK OF HOLDINGS, (III) PAYMENTS AT SUCH TIMES AND IN SUCH AMOUNTS AS
ARE SUFFICIENT TO ENABLE HOLDINGS TO PAY THE FEDERAL AND STATE INCOME TAXES
ATTRIBUTABLE TO THE TAXABLE INCOME OF BORROWER AND SUBSIDIARIES PURSUANT TO THE
TAX SHARING AGREEMENT, (IV) REPURCHASE OF HOLDINGS’ STOCK FROM EMPLOYEES OR
FORMER EMPLOYEES AN AGGREGATE AMOUNT NOT TO EXCEED $500,000 PER YEAR, IT BEING
AGREED THAT NO MORE THAN $100,000 OF SUCH AGGREGATE AMOUNT MAY CONSIST OF SUCH
REPURCHASES FROM EMPLOYEES WHOSE EMPLOYMENT CONTINUES, (V) DIVIDENDS FROM
BORROWER TO HOLDINGS NOT TO EXCEED $100,000 IN THE AGGREGATE IN ANY FISCAL YEAR
TO PAY THE OPERATING EXPENSES OF HOLDINGS, AND (VI) FUNDING REDEMPTIONS AS LONG
AS SUCH DIVIDENDS PAID FOR REDEMPTIONS DO NOT EXCEED $30,000,000 IN THE
AGGREGATE AFTER THE CLOSING DATE; (B) NO DEFAULT OR EVENT OF DEFAULT AND NO
DEFAULT OR AN EVENT OF DEFAULT UNDER ANY SUBORDINATED DEBT DOCUMENT, DISCOUNT
DEBENTURES DOCUMENTS OR ANY OTHER DEBT INSTRUMENT OF HOLDINGS, BORROWER OR ANY
OTHER CREDIT PARTY OR IN RESPECT OF THE CHARTER OF HOLDINGS, BORROWER OR ANY
OTHER CREDIT PARTY HAS OCCURRED AND IS CONTINUING OR WOULD RESULT AFTER GIVING
EFFECT TO ANY SUCH DIVIDEND OR REDEMPTION AND ANY U.S. REVOLVING CREDIT ADVANCES
USED TO FUND SUCH DIVIDEND; (C) BORROWER AND HOLDINGS ARE IN COMPLIANCE WITH THE
FIXED CHARGE COVERAGE RATIO SET FORTH IN ANNEX G FOR THE FOUR QUARTER PERIOD
REFLECTED IN THE COMPLIANCE CERTIFICATE MOST RECENTLY DELIVERED PURSUANT TO
ANNEX E PRIOR TO SUCH PROPOSED DIVIDEND AND ALL U.S. REVOLVING CREDIT ADVANCES
USED TO FUND SUCH DIVIDEND (AFTER GIVING EFFECT TO SUCH PROPOSED REDEMPTION,
DIVIDEND AND REVOLVING CREDIT ADVANCES AS IF MADE ON THE FIRST DAY OF SUCH
PERIOD); (D) BORROWER HAS U.S. BORROWING AVAILABILITY OF AT LEAST $10,000,000,
AFTER GIVING EFFECT TO THE PROPOSED DIVIDEND AND U.S. REVOLVING CREDIT ADVANCES
USED TO FUND SUCH DIVIDEND AND WITHOUT ANY MANIPULATION OF WORKING CAPITAL OF
BORROWER, AND (E) IF THE PROCEEDS OF THE U.S. REVOLVING CREDIT ADVANCES USED TO
FUND REDEMPTIONS EXCEED $9,000,000 IN THE AGGREGATE, THEN, IN ADDITION TO
SATISFYING THE CONDITIONS OF THE FOREGOING CLAUSES (A) THROUGH (D) OF THIS
SECTION 6.14(B), THE LEVERAGE RATIO AT THE END OF THE FOLLOWING FISCAL QUARTERS
AND FOR THE 12-MONTH PERIOD THEN ENDED (CALCULATED AS IF ANY PROPOSED
REDEMPTION, DIVIDENDS AND ALL REVOLVING CREDIT ADVANCES USED TO FUND SUCH
DIVIDENDS HAD BEEN MADE ON THE FIRST DAY OF SUCH PERIOD) SHALL NOT BE GREATER
THAN THE RATIO SET FORTH BELOW FOR SUCH FISCAL QUARTER:

 

6.100 to 1.0 at the end of each Fiscal Quarter ending on or before December 31,
2002

 

5.975 to 1.0 at the end of Fiscal Quarter ending March 31, 2003

 

5.850 to 1.0 at the end of Fiscal Quarter ending June 30, 2003

 

5.725 to 1.0 at the end of Fiscal Quarter ending September 30, 2003

 

5.600 to 1.0 at the end of Fiscal Quarter ending December 31, 2003

 

5.475 to 1.0 at the end of Fiscal Quarter ending March 31, 2004

 

5.350 to 1.0 at the end of Fiscal Quarter ending June 30, 2004

 

5.225 to 1.0 at the end of Fiscal Quarter ending September 30, 2004

 

5.100 to 1.0 at the end of Fiscal Quarter ending December 31, 2004

 

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4.975 to 1.0 at the end of Fiscal Quarter ending March 31, 2005

 

4.850 to 1.0 at the end of Fiscal Quarter ending June 30, 2005

 

4.725 to 1.0 at the end of Fiscal Quarter ending September 30, 2005

 

4.600 to 1.0 at the end of Fiscal Quarter ending December 31, 2005;

 

4.475 to 1.0 at the end of Fiscal Quarter ending March 31, 2006;

 

4.350 to 1.0 at the end of Fiscal Quarter ending June 30, 2006;

 

4.225 to 1.0 at the end of Fiscal Quarter ending September 30, 2006;

 

4.100 to 1.0 at the end of Fiscal Quarter ending December 31, 2006.

 

3.975 to 1.0 at the end of Fiscal Quarter ending March 31, 2007;

 

3.850 to 1.0 thereafter.

 

(C)                                  IN ADDITION, BORROWER MAY PAY DIVIDENDS TO
HOLDINGS FOR REDEMPTIONS THAT OCCUR AFTER THE TOTAL DIVIDENDS PAID FOR
REDEMPTIONS EXCEED OR WILL EXCEED, AFTER GIVING EFFECT TO SUCH DIVIDEND,
$30,000,000 IN THE AGGREGATE, SO LONG AS (X) THE LEVERAGE RATIO SET FORTH IN
SECTION 6.14(B) ABOVE SHALL BE COMPLIED WITH; (Y) NO DEFAULT OR EVENT OF DEFAULT
OR A DEFAULT OR AN EVENT OF DEFAULT UNDER ANY SUBORDINATED DEBT DOCUMENTS,
DISCOUNT DEBENTURES DOCUMENTS OR ANY OTHER DEBT INSTRUMENT OF HOLDINGS, BORROWER
OR ANY OTHER CREDIT PARTY OR IN RESPECT OF CHARTER OF HOLDINGS, BORROWER OR ANY
OTHER CREDIT PARTY HAS OCCURRED AND IS CONTINUING OR WOULD RESULT AFTER GIVING
EFFECT TO ANY SUCH DIVIDEND, REDEMPTION OR THE U.S. REVOLVING CREDIT ADVANCE
USED TO FUND SUCH DIVIDEND; AND (Z) BORROWER AND HOLDINGS ARE IN COMPLIANCE WITH
THE FIXED CHARGE COVERAGE RATIO SET FORTH IN ANNEX G FOR THE FOUR QUARTER PERIOD
REFLECTED IN THE COMPLIANCE CERTIFICATE MOST RECENTLY DELIVERED PURSUANT TO
ANNEX E PRIOR TO SUCH PROPOSED DIVIDENDS AND ALL U.S. REVOLVING CREDIT ADVANCES
TO BE USED TO FUND SUCH PROPOSED DIVIDEND (AFTER GIVING EFFECT TO SUCH PROPOSED
DIVIDEND AND AS IF MADE ON THE FIRST DAY OF SUCH PERIOD).

 

6.15                           CHANGE OF CORPORATE NAME OR LOCATION; CHANGE OF
FISCAL YEAR.  SUCH CREDIT PARTY SHALL NOT (A) CHANGE ITS NAME AS IT APPEARS IN
OFFICIAL FILINGS IN THE STATE OF ITS INCORPORATION OR OTHER ORGANIZATION, (B)
CHANGE ITS CHIEF EXECUTIVE OFFICE, PRINCIPAL PLACE OF BUSINESS, CORPORATE
OFFICES OR WAREHOUSES OR LOCATIONS AT WHICH COLLATERAL IS HELD OR STORED, OR THE
LOCATION OF ITS RECORDS CONCERNING THE COLLATERAL, (C) CHANGE THE TYPE OF ENTITY
THAT IT IS, (D) CAUSE TO BE CHANGED ITS ORGANIZATION IDENTIFICATION NUMBER, IF
ANY, ISSUED BY ITS STATE OF INCORPORATION OR OTHER ORGANIZATION, OR (E) CHANGE
ITS STATE OF INCORPORATION OR ORGANIZATION OR INCORPORATE OR ORGANIZE IN ANY
ADDITIONAL JURISDICTIONS, IN EACH CASE WITHOUT AT LEAST THIRTY (30) DAYS PRIOR
WRITTEN NOTICE TO AGENT AND AFTER AGENT’S WRITTEN ACKNOWLEDGMENT THAT ANY
REASONABLE ACTION REQUESTED BY AGENT IN CONNECTION THEREWITH, INCLUDING TO
CONTINUE THE PERFECTION OF ANY LIENS IN FAVOR OF AGENT, ON BEHALF OF LENDERS, IN
ANY COLLATERAL, HAS BEEN COMPLETED OR TAKEN, AND PROVIDED, THAT ANY SUCH NEW
LOCATION SHALL BE IN THE CONTINENTAL UNITED STATES, EXCEPT FOR NEW LOCATIONS
ESTABLISHED BY SCHAUBLIN OR FRENCH OPERATING COMPANIES WHICH MAY BE IN
SWITZERLAND OR FRANCE, AS APPLICABLE. WITHOUT LIMITING THE FOREGOING, NO CREDIT
PARTY SHALL CAUSE TO BE CHANGED ITS NAME, IDENTITY OR CORPORATE STRUCTURE IN ANY
MANNER THAT MIGHT MAKE ANY FINANCING OR CONTINUATION STATEMENT FILED IN
CONNECTION HEREWITH SERIOUSLY MISLEADING AS SUCH TERM IS DEFINED IN AND/OR USED
IN THE CODE OR ANY OTHER THEN APPLICABLE PROVISION OF THE CODE EXCEPT UPON PRIOR
WRITTEN

 

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NOTICE TO AGENT AND LENDERS AND AFTER AGENT’S WRITTEN ACKNOWLEDGMENT THAT ANY
REASONABLE ACTION REQUESTED BY AGENT IN CONNECTION THEREWITH, INCLUDING TO
CONTINUE THE PERFECTION OF ANY LIENS IN FAVOR OF AGENT, ON BEHALF OF LENDERS, IN
ANY COLLATERAL, HAS BEEN COMPLETED OR TAKEN.  NO CREDIT PARTY SHALL CHANGE ITS
FISCAL YEAR.

 

6.16                           NO IMPAIRMENT OF INTERCOMPANY TRANSFERS.  SUCH
CREDIT PARTY SHALL NOT DIRECTLY OR INDIRECTLY ENTER INTO OR BECOME BOUND BY ANY
AGREEMENT, INSTRUMENT, INDENTURE OR OTHER OBLIGATION (OTHER THAN THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS) THAT COULD DIRECTLY OR INDIRECTLY RESTRICT,
PROHIBIT OR REQUIRE THE CONSENT OF ANY PERSON WITH RESPECT TO THE PAYMENT OF
DIVIDENDS OR DISTRIBUTIONS OR THE MAKING OR REPAYMENT OF INTERCOMPANY LOANS BY A
SECURED GUARANTOR TO BORROWER.

 

6.17                           NO SPECULATIVE TRANSACTIONS.  SUCH CREDIT PARTY
SHALL NOT ENGAGE IN ANY TRANSACTION INVOLVING COMMODITY OPTIONS, FUTURES
CONTRACTS OR SIMILAR TRANSACTIONS, EXCEPT SOLELY TO HEDGE AGAINST FLUCTUATIONS
IN THE PRICES OF COMMODITIES OWNED OR PURCHASED BY IT AND THE VALUES OF FOREIGN
CURRENCIES RECEIVABLE OR PAYABLE BY IT AND INTEREST SWAPS, CAPS OR COLLARS.

 

6.18                           CHANGES RELATING TO SUBORDINATED DEBT; MATERIAL
CONTRACTS.  SUCH CREDIT PARTY SHALL NOT CHANGE OR AMEND THE TERMS OF ANY
SUBORDINATED DEBT (OR ANY INDENTURE OR AGREEMENT IN CONNECTION THEREWITH) IF THE
EFFECT OF SUCH AMENDMENT IS TO:  (A) INCREASE THE INTEREST RATE ON SUCH
SUBORDINATED DEBT; (B) CHANGE THE DATES UPON WHICH PAYMENTS OF PRINCIPAL OR
INTEREST ARE DUE ON SUCH SUBORDINATED DEBT OTHER THAN TO EXTEND SUCH DATES; (C)
CHANGE ANY DEFAULT OR EVENT OF DEFAULT OTHER THAN TO DELETE OR MAKE LESS
RESTRICTIVE ANY DEFAULT PROVISION THEREIN, OR ADD ANY COVENANT WITH RESPECT TO
SUCH SUBORDINATED DEBT; (D) CHANGE THE REDEMPTION OR PREPAYMENT PROVISIONS OF
SUCH SUBORDINATED DEBT OTHER THAN TO EXTEND THE DATES THEREFOR OR TO REDUCE THE
PREMIUMS PAYABLE IN CONNECTION THEREWITH; (E) GRANT ANY SECURITY OR COLLATERAL
TO SECURE PAYMENT OF SUCH SUBORDINATED DEBT; OR (F) CHANGE OR AMEND ANY OTHER
TERM IF SUCH CHANGE OR AMENDMENT WOULD MATERIALLY INCREASE THE OBLIGATIONS OF
THE CREDIT PARTY THEREUNDER OR CONFER ADDITIONAL MATERIAL RIGHTS ON THE HOLDER
OF SUCH SUBORDINATED DEBT IN A MANNER ADVERSE TO ANY CREDIT PARTY, AGENT OR ANY
LENDER.

 

6.19                           REDEMPTIONS.

 

(A)                                  PROCEEDS OF LOANS USED BY BORROWER TO FUND
THE RECAPITALIZATION ON THE CLOSING DATE OR AT ANY TIME PRIOR TO DECEMBER 16,
2002 SHALL NOT EXCEED $30,000,000 IN THE AGGREGATE.

 

(B)                                 PRIOR TO ANY RECAPITALIZATION PAYMENT,
BORROWER SHALL DELIVER TO AGENT EVIDENCE DEMONSTRATING BORROWER’S CONTINUED
COMPLIANCE WITH THE FINANCIAL COVENANTS AFTER GIVING EFFECT TO SUCH PAYMENT.

 

6.20                           HOLDINGS AND SCHAUBLIN HOLDING.

 

(A)                                  HOLDINGS SHALL NOT ENGAGE IN ANY TRADE OR
BUSINESS OR INCUR ANY INDEBTEDNESS OTHER THAN THE ZERO COUPON DEBT OR ANY
REFINANCING THEREOF.

 

(B)                                 SCHAUBLIN HOLDING SHALL NOT ENGAGE IN ANY
TRADE OR BUSINESS OR INCUR ANY INDEBTEDNESS OTHER THAN THE SCHAUBLIN HOLDING
INTERCOMPANY LOANS.

 

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7.                                      TERM

 

7.1                                 TERMINATION.  THE FINANCING ARRANGEMENTS
CONTEMPLATED HEREBY SHALL BE IN EFFECT UNTIL THE COMMITMENT TERMINATION DATE,
AND THE LOANS AND ALL OTHER OBLIGATIONS SHALL BE AUTOMATICALLY DUE AND PAYABLE
IN FULL ON SUCH DATE.

 

7.2                                 SURVIVAL OF OBLIGATIONS UPON TERMINATION OF
FINANCING ARRANGEMENTS.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED FOR IN THE LOAN
DOCUMENTS, NO TERMINATION OR CANCELLATION (REGARDLESS OF CAUSE OR PROCEDURE) OF
ANY FINANCING ARRANGEMENT UNDER THIS AGREEMENT SHALL IN ANY WAY AFFECT OR IMPAIR
THE OBLIGATIONS, DUTIES AND LIABILITIES OF THE CREDIT PARTIES OR THE RIGHTS OF
AGENT AND LENDERS RELATING TO ANY UNPAID PORTION OF THE LOANS OR ANY OTHER
OBLIGATIONS, DUE OR NOT DUE, LIQUIDATED, CONTINGENT OR UNLIQUIDATED OR ANY
TRANSACTION OR EVENT OCCURRING PRIOR TO SUCH TERMINATION, OR ANY TRANSACTION OR
EVENT, THE PERFORMANCE OF WHICH IS REQUIRED AFTER THE COMMITMENT TERMINATION
DATE.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN OR IN ANY OTHER LOAN
DOCUMENT, ALL UNDERTAKINGS, AGREEMENTS, COVENANTS, WARRANTIES AND
REPRESENTATIONS OF OR BINDING UPON THE CREDIT PARTIES, AND ALL RIGHTS OF AGENT
AND EACH LENDER, ALL AS CONTAINED IN THE LOAN DOCUMENTS SHALL CONTINUE IN FULL
FORCE AND EFFECT UNTIL THE TERMINATION DATE; PROVIDED, THAT THE PROVISIONS OF
SECTION 11, THE PAYMENT OBLIGATIONS UNDER SECTIONS 1.15 AND 1.16, AND THE
INDEMNITIES CONTAINED IN THE LOAN DOCUMENTS SHALL SURVIVE THE TERMINATION DATE.

 

8.                                      EVENTS OF DEFAULT; RIGHTS AND REMEDIES

 

8.1                                 EVENTS OF DEFAULT.  THE OCCURRENCE OF ANY
ONE OR MORE OF THE FOLLOWING EVENTS (REGARDLESS OF THE REASON THEREFOR) SHALL
CONSTITUTE AN “EVENT OF DEFAULT” HEREUNDER:

 

(A)                                  BORROWER (I) FAILS TO MAKE ANY PAYMENT OF
PRINCIPAL HEREUNDER WHEN DUE; (II) FAILS TO MAKE ANY PAYMENT OF INTEREST ON, OR
FEES OWING IN RESPECT OF, THE LOANS OR ANY OF THE OTHER OBLIGATIONS WITHIN THREE
(3) DAYS AFTER SUCH PAYMENT IS DUE; OR (III) FAILS TO PAY OR REIMBURSE AGENT OR
LENDERS FOR ANY EXPENSE REIMBURSABLE HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT
WITHIN TEN (10) DAYS FOLLOWING AGENT’S DEMAND FOR SUCH REIMBURSEMENT OR PAYMENT
OF EXPENSES.

 

(B)                                 ANY CREDIT PARTY FAILS OR NEGLECTS TO
PERFORM, KEEP OR OBSERVE ANY OF THE PROVISIONS OF SECTIONS 1.4, 1.8, 5.4(A) OR
6, ANY OF THE PROVISIONS SET FORTH IN ANNEXES C OR G, RESPECTIVELY, OR ANY OF
THE PROVISIONS OF SECTION 3.2 OF THE ENVIRONMENTAL INDEMNITY AGREEMENT.

 

(C)                                  BORROWER FAILS OR NEGLECTS TO PERFORM, KEEP
OR OBSERVE ANY OF THE PROVISIONS OF SECTION 4 OR ANY PROVISIONS SET FORTH IN
ANNEXES E OR F, RESPECTIVELY, AND THE SAME SHALL REMAIN UNREMEDIED FOR FIVE (5)
DAYS OR MORE.

 

(D)                                 ANY CREDIT PARTY FAILS OR NEGLECTS TO
PERFORM, KEEP OR OBSERVE ANY OTHER PROVISION OF THIS AGREEMENT OR OF ANY OF THE
OTHER LOAN DOCUMENTS (OTHER THAN ANY PROVISION EMBODIED IN OR COVERED BY ANY
OTHER CLAUSE OF THIS SECTION 8.1) AND THE SAME SHALL REMAIN UNREMEDIED FOR 15
DAYS OR MORE AFTER AGENT’S NOTICE THEREOF TO BORROWER.

 

(E)                                  A DEFAULT OR BREACH OCCURS (A) UNDER ANY
AGREEMENT, DOCUMENT OR INSTRUMENT TO WHICH ANY CREDIT PARTY IS A PARTY THAT
EVIDENCES ANY OF THE SCHAUBLIN HOLDING INTERCOMPANY LOANS, SCHAUBLIN
INTERCOMPANY LOANS OR FRENCH INTERCOMPANY LOANS OR UNDER

 

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ANY FOREIGN COLLATERAL DOCUMENT OR (B) UNDER ANY OTHER AGREEMENT, DOCUMENT OR
INSTRUMENT TO WHICH ANY CREDIT PARTY IS A PARTY THAT IS NOT CURED WITHIN ANY
APPLICABLE GRACE PERIOD THEREFOR, AND SUCH DEFAULT OR BREACH (I) INVOLVES THE
FAILURE TO MAKE ANY PAYMENT WHEN DUE IN RESPECT OF ANY INDEBTEDNESS OR
GUARANTEED INDEBTEDNESS (OTHER THAN THE OBLIGATIONS) OF ANY CREDIT PARTY IN
EXCESS OF THE DOLLAR EQUIVALENT OF $3,000,000 IN THE AGGREGATE (INCLUDING (X)
UNDRAWN COMMITTED OR AVAILABLE AMOUNTS AND (Y) AMOUNTS OWING TO ALL CREDITORS
UNDER ANY COMBINED OR SYNDICATED CREDIT ARRANGEMENTS), OR (II) CAUSES, OR
PERMITS ANY HOLDER OF SUCH INDEBTEDNESS OR GUARANTEED INDEBTEDNESS OR A TRUSTEE
TO CAUSE, INDEBTEDNESS OR GUARANTEED INDEBTEDNESS OR A PORTION THEREOF IN EXCESS
OF THE DOLLAR EQUIVALENT OF $3,000,000 IN THE AGGREGATE TO BECOME DUE PRIOR TO
ITS STATED MATURITY OR PRIOR TO ITS REGULARLY SCHEDULED DATES OF PAYMENT, OR
CASH COLLATERAL TO BE DEMANDED IN RESPECT THEREOF, IN EACH CASE, REGARDLESS OF
WHETHER SUCH DEFAULT IS WAIVED, OR SUCH RIGHT IS EXERCISED, BY SUCH HOLDER OR
TRUSTEE.

 

(F)                                    ANY INFORMATION CONTAINED IN ANY
BORROWING BASE CERTIFICATE IS UNTRUE OR INCORRECT IN ANY RESPECT RESULTING IN
THE MAKING OF A REVOLVING CREDIT ADVANCE IN EXCESS OF THE ACTUAL APPLICABLE
BORROWING AVAILABILITY LESS THE APPLICABLE AVAILABILITY BLOCK (OTHER THAN
INADVERTENT, IMMATERIAL ERRORS NOT EXCEEDING THE DOLLAR EQUIVALENT $150,000 IN
ANY BORROWING BASE CERTIFICATE), OR ANY REPRESENTATION OR WARRANTY HEREIN OR IN
ANY LOAN DOCUMENT OR IN ANY WRITTEN STATEMENT, REPORT, FINANCIAL STATEMENT OR
CERTIFICATE (OTHER THAN A BORROWING BASE CERTIFICATE) MADE OR DELIVERED TO AGENT
OR ANY LENDER BY ANY CREDIT PARTY IS UNTRUE OR INCORRECT IN ANY MATERIAL RESPECT
AS OF THE DATE WHEN MADE OR DEEMED MADE.

 

(G)                                 ASSETS OF ANY CREDIT PARTY WITH A FAIR
MARKET VALUE OF THE DOLLAR EQUIVALENT OF $500,000 OR MORE ARE ATTACHED, SEIZED,
LEVIED UPON OR SUBJECTED TO A WRIT OR DISTRESS WARRANT, OR COME WITHIN THE
POSSESSION OF ANY CREDITOR OR RECEIVER, TRUSTEE, CUSTODIAN, ASSIGNEE OR SIMILAR
PERSON FOR THE BENEFIT OF ANY CREDITOR OF ANY CREDIT PARTY AND SUCH CONDITION
CONTINUES FOR 30 DAYS OR MORE.

 

(H)                                 A CASE, PETITION OR PROCEEDING IS COMMENCED
AGAINST, ANY APPLICATION IS MADE OR ANY OTHER STEP IS TAKEN IN RESPECT OF ANY
CREDIT PARTY OR HOLDINGS FOR THE PURPOSES OF SEEKING A DECREE OR ORDER IN
RESPECT OF SUCH CREDIT PARTY OR HOLDINGS (I) UNDER THE BANKRUPTCY CODE OR ANY
OTHER APPLICABLE FEDERAL, STATE OR FOREIGN BANKRUPTCY OR OTHER SIMILAR LAW, (II)
APPOINTING A CUSTODIAN, ADMINISTRATOR, RECEIVER, LIQUIDATOR, ASSIGNEE, TRUSTEE
OR SEQUESTRATOR (OR SIMILAR OFFICIAL) FOR SUCH CREDIT PARTY OR HOLDINGS OR FOR
ANY SUBSTANTIAL PART OF ANY SUCH CREDIT PARTY’S ASSETS OR OF ASSETS OF HOLDINGS,
OR (III) ORDERING THE WINDING-UP OR LIQUIDATION OF THE AFFAIRS OF SUCH CREDIT
PARTY OR HOLDINGS, AND, IF SUCH CREDIT PARTY IS A DOMESTIC CREDIT PARTY, SUCH
CASE OR PROCEEDING AGAINST SUCH DOMESTIC CREDIT PARTY SHALL REMAIN UNDISMISSED
OR UNSTAYED FOR SIXTY (60) DAYS OR MORE OR A DECREE OR ORDER GRANTING THE RELIEF
SOUGHT IN SUCH CASE OR PROCEEDING BY A COURT OF COMPETENT JURISDICTION.

 

(I)                                     ANY CREDIT PARTY OR HOLDINGS (AND, IN
THE CASE OF ANY FOREIGN CREDIT PARTY, ITS SHAREHOLDERS OR DIRECTORS ACTING WITH
RESPECT TO SUCH CREDIT PARTY) (I) FILES A PETITION OR CONVENES ANY MEETING
SEEKING RELIEF UNDER THE BANKRUPTCY CODE OR ANY OTHER APPLICABLE FEDERAL, STATE
OR FOREIGN BANKRUPTCY OR OTHER SIMILAR LAW, (II) CONVENES ANY MEETING, PRESENTS
ANY PETITION, CONSENTS TO OR FAILS TO CONTEST IN A TIMELY AND APPROPRIATE MANNER
OR TAKES ANY OTHER STEP FOR THE PURPOSES OF THE INSTITUTION OF PROCEEDINGS
THEREUNDER OR TO THE FILING OF ANY SUCH PETITION OR TO THE APPOINTMENT OF OR
TAKING POSSESSION BY A CUSTODIAN, ADMINISTRATOR, RECEIVER, LIQUIDATOR, ASSIGNEE,

 

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TRUSTEE OR SEQUESTRATOR (OR SIMILAR OFFICIAL) FOR SUCH CREDIT PARTY OR HOLDINGS
OR FOR ANY SUBSTANTIAL PART OF ANY SUCH CREDIT PARTY’S ASSETS OR OF ASSETS OF
HOLDINGS, (III) ANY FOREIGN CREDIT PARTY CEASES TO PAY OR SUSPENDS PAYMENT OF
ALL OR ANY CLASS OF ITS DEBTS OR ANY CREDIT PARTY MAKES AN ASSIGNMENT FOR THE
BENEFIT OF CREDITORS, (IV) TAKES ANY ACTION IN FURTHERANCE OF ANY OF THE
FOREGOING, (V) ADMITS IN WRITING ITS INABILITY TO, OR IS GENERALLY UNABLE TO,
PAY ITS DEBTS AS SUCH DEBTS BECOME DUE OR BECOMES INSOLVENT (ON A GOING CONCERN
OR, IN THE CASE OF A FOREIGN CREDIT PARTY ONLY, ON A BALANCE SHEET BASIS), OR
(VI) ENTERS INTO ANY AGREEMENT FOR THE RESCHEDULING, RESTRUCTURING OR
READJUSTMENT OF ITS DEBTS OR ANY CLASS THEREOF.

 

(J)                                     AN UNINSURED FINAL JUDGMENT OR JUDGMENTS
FOR THE PAYMENT OF MONEY IN EXCESS OF THE DOLLAR EQUIVALENT OF $500,000 IN THE
AGGREGATE AT ANY TIME ARE OUTSTANDING AGAINST ONE OR MORE OF THE CREDIT PARTIES
AND THE SAME ARE NOT, WITHIN THIRTY (30) DAYS AFTER THE ENTRY THEREOF,
DISCHARGED OR EXECUTION THEREOF STAYED OR BONDED PENDING APPEAL, OR SUCH
JUDGMENTS ARE NOT DISCHARGED PRIOR TO THE EXPIRATION OF ANY SUCH STAY.

 

(K)                                  ANY MATERIAL PROVISION OF ANY LOAN DOCUMENT
FOR ANY REASON CEASES TO BE VALID, BINDING AND ENFORCEABLE IN ACCORDANCE WITH
ITS TERMS (OR ANY CREDIT PARTY SHALL CHALLENGE THE ENFORCEABILITY OF ANY LOAN
DOCUMENT OR SHALL ASSERT IN WRITING, OR ENGAGE IN ANY ACTION OR INACTION BASED
ON ANY SUCH ASSERTION, THAT ANY PROVISION OF ANY OF THE LOAN DOCUMENTS HAS
CEASED TO BE OR OTHERWISE IS NOT VALID, BINDING AND ENFORCEABLE IN ACCORDANCE
WITH ITS TERMS), OR ANY LIEN CREATED UNDER ANY LOAN DOCUMENT CEASES TO BE A
VALID AND PERFECTED FIRST PRIORITY LIEN (EXCEPT AS OTHERWISE PERMITTED HEREIN OR
THEREIN) IN ANY OF THE COLLATERAL PURPORTED TO BE COVERED THEREBY, AND REMAINS
UNREMEDIED FOR A PERIOD OF TEN (10) DAYS AFTER BORROWER OBTAINS KNOWLEDGE
THEREOF.

 

(L)                                     ANY CHANGE OF CONTROL OCCURS.

 

(M)                               ANY EVENT OCCURS, WHETHER OR NOT INSURED OR
INSURABLE, AS A RESULT OF WHICH REVENUE-PRODUCING ACTIVITIES CEASE OR ARE
SUBSTANTIALLY CURTAILED AT ANY FACILITY OF BORROWER OR ANY SECURED GUARANTOR
GENERATING MORE THAN 5% OF BORROWER’S CONSOLIDATED REVENUES FOR THE FISCAL YEAR
PRECEDING SUCH EVENT AND SUCH CESSATION OR CURTAILMENT CONTINUES FOR MORE THAN
180 DAYS.

 

(N)                                 HOLDINGS SHALL FAIL TO PLEDGE ALL OF THE
STOCK OF BORROWER AS COLLATERAL WITHIN TEN (10) DAYS AFTER PAYMENT IN FULL OF
THE ZERO COUPON DEBT.

 

8.2                                 REMEDIES.

 

(A)                                  IF ANY DEFAULT OR EVENT OF DEFAULT HAS
OCCURRED AND IS CONTINUING, AGENT MAY (AND AT THE WRITTEN REQUEST OF THE
REQUISITE REVOLVING LENDERS SHALL), WITHOUT NOTICE, SUSPEND THE REVOLVING LOAN
FACILITIES WITH RESPECT TO ADDITIONAL ADVANCES AND/OR THE INCURRENCE OF
ADDITIONAL LETTER OF CREDIT OBLIGATIONS, WHEREUPON ANY ADDITIONAL ADVANCES AND
ADDITIONAL LETTER OF CREDIT OBLIGATIONS SHALL BE MADE OR INCURRED IN AGENT’S
SOLE DISCRETION (OR IN THE SOLE DISCRETION OF THE REQUISITE REVOLVING LENDERS,
IF SUCH SUSPENSION OCCURRED AT THEIR DIRECTION) SO LONG AS SUCH DEFAULT OR EVENT
OF DEFAULT IS CONTINUING.  IF ANY DEFAULT OR EVENT OF DEFAULT HAS OCCURRED AND
IS CONTINUING, AGENT MAY (AND AT THE WRITTEN REQUEST OF REQUISITE LENDERS
SHALL),

 

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WITHOUT NOTICE EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, INCREASE THE RATE
OF INTEREST APPLICABLE TO THE LOANS AND THE LETTER OF CREDIT FEES TO THE DEFAULT
RATE.

 

(B)                                 IF ANY EVENT OF DEFAULT HAS OCCURRED AND IS
CONTINUING, AGENT MAY (AND AT THE WRITTEN REQUEST OF THE REQUISITE LENDERS
SHALL), WITHOUT NOTICE: (I) TERMINATE THE REVOLVING LOAN FACILITIES WITH RESPECT
TO FURTHER ADVANCES OR THE INCURRENCE OF FURTHER LETTER OF CREDIT OBLIGATIONS;
(II) REDUCE THE REVOLVING LOAN COMMITMENTS FROM TIME TO TIME UPON WRITTEN NOTICE
TO BORROWER; (III) DECLARE ALL OR ANY PORTION OF THE OBLIGATIONS, INCLUDING ALL
OR ANY PORTION OF ANY LOAN TO BE FORTHWITH DUE AND PAYABLE, AND REQUIRE THAT THE
LETTER OF CREDIT OBLIGATIONS BE CASH COLLATERALIZED AS PROVIDED IN ANNEX B, ALL
WITHOUT PRESENTMENT, DEMAND, PROTEST OR FURTHER NOTICE OF ANY KIND, ALL OF WHICH
ARE EXPRESSLY WAIVED BY BORROWER AND EACH OTHER CREDIT PARTY; AND (IV) EXERCISE
ANY RIGHTS AND REMEDIES PROVIDED TO AGENT UNDER THE LOAN DOCUMENTS OR AT LAW OR
EQUITY, INCLUDING ALL REMEDIES PROVIDED UNDER THE CODE; PROVIDED, THAT UPON THE
OCCURRENCE OF AN EVENT OF DEFAULT SPECIFIED IN SECTIONS 8.1(H) OR (I), THE
COMMITMENTS SHALL BE IMMEDIATELY TERMINATED AND ALL OF THE OBLIGATIONS,
INCLUDING THE REVOLVING LOANS (BUT EXCLUSIVE OF OBLIGATIONS OF ANY OF THE
FOREIGN CREDIT PARTIES UNDER THE INTERCOMPANY NOTES), SHALL BECOME IMMEDIATELY
DUE AND PAYABLE WITHOUT DECLARATION, NOTICE OR DEMAND BY ANY PERSON.

 

8.3                                 WAIVERS BY CREDIT PARTIES.  EXCEPT AS
OTHERWISE PROVIDED FOR IN THIS AGREEMENT OR BY APPLICABLE LAW, EACH CREDIT PARTY
WAIVES: (A) PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF PRESENTMENT, DISHONOR,
NOTICE OF INTENT TO ACCELERATE, NOTICE OF ACCELERATION, PROTEST, DEFAULT,
NONPAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF
ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS,
CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY AGENT ON WHICH ANY CREDIT PARTY
MAY IN ANY WAY BE LIABLE, AND HEREBY RATIFIES AND CONFIRMS WHATEVER AGENT MAY DO
IN THIS REGARD, (B) ALL RIGHTS TO NOTICE AND A HEARING PRIOR TO AGENT’S TAKING
POSSESSION OR CONTROL OF, OR TO AGENT’S REPLEVY, ATTACHMENT OR LEVY UPON, THE
COLLATERAL OR ANY BOND OR SECURITY THAT MIGHT BE REQUIRED BY ANY COURT PRIOR TO
ALLOWING AGENT TO EXERCISE ANY OF ITS REMEDIES, AND (C) THE BENEFIT OF ALL
VALUATION, APPRAISAL, MARSHALING AND EXEMPTION LAWS.

 

9.                                      ASSIGNMENT AND PARTICIPATIONS;
APPOINTMENT OF AGENT

 

9.1                                 ASSIGNMENT AND PARTICIPATIONS.

 

(A)                                  SUBJECT TO THE TERMS OF THIS SECTION 9.1,
ANY LENDER MAY MAKE AN ASSIGNMENT TO A QUALIFIED ASSIGNEE OF, OR SELL
PARTICIPATIONS IN, AT ANY TIME OR TIMES, THE LOAN DOCUMENTS, LOANS, LETTER OF
CREDIT OBLIGATIONS AND ANY COMMITMENT OR ANY PORTION THEREOF OR INTEREST
THEREIN, INCLUDING ANY LENDER’S RIGHTS, TITLE, INTERESTS, REMEDIES, POWERS OR
DUTIES THEREUNDER; PROVIDED, HOWEVER, THAT EACH SUCH ASSIGNMENT MUST BE OF A
FIXED PERCENTAGE OF ALL OF SUCH LENDER’S RIGHTS AND OBLIGATIONS HEREUNDER.  ANY
ASSIGNMENT BY A LENDER SHALL:  (I) REQUIRE THE CONSENT OF AGENT (WHICH CONSENT
SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED WITH RESPECT TO A QUALIFIED
ASSIGNEE) AND THE EXECUTION OF AN ASSIGNMENT AGREEMENT (AN “ASSIGNMENT
AGREEMENT” SUBSTANTIALLY IN THE FORM ATTACHED HERETO AS EXHIBIT 9.1(A) AND
OTHERWISE IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO, AND ACKNOWLEDGED BY,
AGENT; (II) BE CONDITIONED ON SUCH ASSIGNEE LENDER REPRESENTING TO THE ASSIGNING
LENDER AND AGENT THAT IT IS PURCHASING THE APPLICABLE LOANS TO BE ASSIGNED TO IT
FOR ITS OWN ACCOUNT, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO THE
DISTRIBUTION THEREOF; (III) AFTER GIVING EFFECT TO ANY SUCH PARTIAL ASSIGNMENT,
THE

 

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ASSIGNEE LENDER SHALL HAVE COMMITMENTS IN AN AMOUNT AT LEAST EQUAL TO $5,000,000
AND THE ASSIGNING LENDER SHALL HAVE RETAINED COMMITMENTS IN AN AMOUNT AT LEAST
EQUAL TO $5,000,000; (IV) INCLUDE A PAYMENT TO AGENT OF AN ASSIGNMENT FEE OF
$3,500; AND (V) SO LONG AS NO EVENT OF DEFAULT SHALL HAVE OCCURRED OR BE
CONTINUING, REQUIRE THE CONSENT OF BORROWER (WHICH CONSENT SHALL NOT BE
UNREASONABLY WITHHELD OR DELAYED WITH RESPECT TO A QUALIFIED ASSIGNEE).  IN THE
CASE OF AN ASSIGNMENT BY A LENDER UNDER THIS SECTION 9.1, THE ASSIGNEE SHALL
HAVE, TO THE EXTENT OF SUCH ASSIGNMENT, THE SAME RIGHTS, BENEFITS AND
OBLIGATIONS AS ALL OTHER LENDERS HEREUNDER.  THE ASSIGNING LENDER SHALL BE
RELIEVED OF ITS OBLIGATIONS HEREUNDER WITH RESPECT TO ITS COMMITMENTS OR
ASSIGNED PORTION THEREOF FROM AND AFTER THE DATE OF SUCH ASSIGNMENT.  BORROWER
HEREBY ACKNOWLEDGES AND AGREES THAT ANY ASSIGNMENT SHALL GIVE RISE TO A DIRECT
OBLIGATION OF BORROWER TO THE ASSIGNEE AND THAT THE ASSIGNEE SHALL BE CONSIDERED
TO BE A “LENDER”.  IN ALL INSTANCES, EACH LENDER’S LIABILITY TO MAKE LOANS
HEREUNDER SHALL BE SEVERAL AND NOT JOINT AND SHALL BE LIMITED TO SUCH LENDER’S
PRO RATA SHARE OF THE APPLICABLE COMMITMENT.  IN THE EVENT AGENT OR ANY LENDER
ASSIGNS OR OTHERWISE TRANSFERS ALL OR ANY PART OF THE OBLIGATIONS, AGENT OR ANY
SUCH LENDER SHALL SO NOTIFY BORROWER AND BORROWER SHALL, UPON THE REQUEST OF
AGENT OR SUCH LENDER, EXECUTE NEW NOTES IN EXCHANGE FOR THE NOTES, IF ANY, BEING
ASSIGNED.  NOTWITHSTANDING THE FOREGOING PROVISIONS OF THIS SECTION 9.1(A), ANY
LENDER MAY AT ANY TIME PLEDGE THE OBLIGATIONS HELD BY IT AND SUCH LENDER’S
RIGHTS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO A FEDERAL RESERVE
BANK; PROVIDED, THAT NO SUCH PLEDGE TO A FEDERAL RESERVE BANK SHALL RELEASE SUCH
LENDER FROM SUCH LENDER’S OBLIGATIONS HEREUNDER OR UNDER ANY OTHER LOAN
DOCUMENT.

 

(B)                                 ANY PARTICIPATION BY A LENDER OF ALL OR ANY
PART OF ITS COMMITMENTS SHALL BE MADE WITH THE UNDERSTANDING THAT ALL AMOUNTS
PAYABLE BY BORROWER HEREUNDER SHALL BE DETERMINED AS IF THAT LENDER HAD NOT SOLD
SUCH PARTICIPATION, AND THAT THE HOLDER OF ANY SUCH PARTICIPATION SHALL NOT BE
ENTITLED TO REQUIRE SUCH LENDER TO TAKE OR OMIT TO TAKE ANY ACTION HEREUNDER
EXCEPT ACTIONS DIRECTLY AFFECTING (I) ANY REDUCTION IN THE PRINCIPAL AMOUNT OF,
OR INTEREST RATE OR FEES PAYABLE WITH RESPECT TO, ANY LOAN IN WHICH SUCH HOLDER
PARTICIPATES, (II) ANY EXTENSION OF THE SCHEDULED AMORTIZATION OF THE PRINCIPAL
AMOUNT OF ANY LOAN IN WHICH SUCH HOLDER PARTICIPATES OR THE FINAL MATURITY DATE
THEREOF, AND (III) ANY RELEASE OF ALL OR SUBSTANTIALLY ALL OF THE COLLATERAL
(OTHER THAN IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT, THE COLLATERAL
DOCUMENTS OR THE OTHER LOAN DOCUMENTS).  NEITHER BORROWER NOR ANY OTHER CREDIT
PARTY SHALL HAVE ANY OBLIGATION OR DUTY TO ANY PARTICIPANT.  NEITHER AGENT NOR
ANY LENDER (OTHER THAN THE LENDER SELLING A PARTICIPATION) SHALL HAVE ANY DUTY
TO ANY PARTICIPANT AND MAY CONTINUE TO DEAL SOLELY WITH THE LENDER SELLING A
PARTICIPATION AS IF NO SUCH SALE HAD OCCURRED.

 

(C)                                  EXCEPT AS EXPRESSLY PROVIDED IN THIS
SECTION 9.1, NO LENDER SHALL, AS BETWEEN BORROWER AND THAT LENDER, OR AGENT AND
THAT LENDER, BE RELIEVED OF ANY OF ITS OBLIGATIONS HEREUNDER AS A RESULT OF ANY
SALE, ASSIGNMENT, TRANSFER OR NEGOTIATION OF, OR GRANTING OF PARTICIPATION IN,
ALL OR ANY PART OF THE LOANS, THE NOTES OR OTHER OBLIGATIONS OWED TO SUCH
LENDER.

 

(D)                                 EACH CREDIT PARTY EXECUTING THIS AGREEMENT
SHALL ASSIST ANY LENDER PERMITTED TO SELL ASSIGNMENTS OR PARTICIPATIONS UNDER
THIS SECTION 9.1 AS REASONABLY REQUIRED TO ENABLE THE ASSIGNING OR SELLING
LENDER TO EFFECT ANY SUCH ASSIGNMENT OR PARTICIPATION, INCLUDING THE PREPARATION
OF INFORMATIONAL MATERIALS FOR, AND THE PARTICIPATION OF MANAGEMENT IN MEETINGS
WITH, POTENTIAL ASSIGNEES OR PARTICIPANTS.  EACH CREDIT PARTY EXECUTING THIS
AGREEMENT SHALL CERTIFY THE CORRECTNESS, COMPLETENESS AND ACCURACY OF ALL
DESCRIPTIONS OF SUCH CREDIT PARTY AND ITS AFFAIRS CONTAINED IN ANY SELLING
MATERIALS PROVIDED BY IT AND ALL OTHER INFORMATION PROVIDED BY IT

 

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AND INCLUDED IN SUCH MATERIALS, EXCEPT THAT ANY PROJECTIONS DELIVERED BY
BORROWER SHALL ONLY BE CERTIFIED BY BORROWER AS HAVING BEEN PREPARED BY BORROWER
IN COMPLIANCE WITH THE REPRESENTATIONS CONTAINED IN SECTION 3.4(C).

 

(E)                                  A LENDER MAY FURNISH ANY INFORMATION
CONCERNING CREDIT PARTIES IN THE POSSESSION OF SUCH LENDER FROM TIME TO TIME TO
ASSIGNEES AND PARTICIPANTS (INCLUDING PROSPECTIVE ASSIGNEES AND PARTICIPANTS);
PROVIDED, THAT SUCH LENDER SHALL OBTAIN FROM ASSIGNEES OR PARTICIPANTS
CONFIDENTIALITY COVENANTS SUBSTANTIALLY EQUIVALENT TO THOSE CONTAINED IN SECTION
11.8.

 

(F)                                    NO LENDER SHALL ASSIGN OR SELL
PARTICIPATIONS IN ANY PORTION OF ITS LOAN OR COMMITMENTS TO A POTENTIAL LENDER
OR PARTICIPANT, IF, AS OF THE DATE OF THE PROPOSED ASSIGNMENT OR SALE, THE
ASSIGNEE LENDER OR PARTICIPANT WOULD BE SUBJECT TO CAPITAL ADEQUACY OR SIMILAR
REQUIREMENTS UNDER SECTION 1.16(A), INCREASED COSTS UNDER SECTION 1.16(B), AN
INABILITY TO FUND LIBOR LOANS UNDER SECTION 1.16(C), OR TAXES IN ACCORDANCE WITH
SECTION 1.15(A) OR SECTION 1.15(B).

 

(G)                                 NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED HEREIN, ANY LENDER (A “GRANTING LENDER”), MAY GRANT TO A SPECIAL
PURPOSE FUNDING VEHICLE (AN “SPC”), IDENTIFIED AS SUCH IN WRITING BY THE
GRANTING LENDER TO AGENT AND BORROWER, THE OPTION TO PROVIDE TO BORROWER ALL OR
ANY PART OF ANY LOANS THAT SUCH GRANTING LENDER WOULD OTHERWISE BE OBLIGATED TO
MAKE TO BORROWER PURSUANT TO THIS AGREEMENT; PROVIDED, THAT (I) NOTHING HEREIN
SHALL CONSTITUTE A COMMITMENT BY ANY SPC TO MAKE ANY LOAN; AND (II) IF AN SPC
ELECTS NOT TO EXERCISE SUCH OPTION OR OTHERWISE FAILS TO PROVIDE ALL OR ANY PART
OF SUCH LOAN, THE GRANTING LENDER SHALL BE OBLIGATED TO MAKE SUCH LOAN PURSUANT
TO THE TERMS HEREOF.  THE MAKING OF A LOAN BY AN SPC HEREUNDER SHALL UTILIZE THE
COMMITMENT OF THE GRANTING LENDER TO THE SAME EXTENT, AND AS IF SUCH LOAN WERE
MADE BY SUCH GRANTING LENDER.  NO SPC SHALL BE LIABLE FOR ANY INDEMNITY OR
SIMILAR PAYMENT OBLIGATION UNDER THIS AGREEMENT (ALL LIABILITY FOR WHICH SHALL
REMAIN WITH THE GRANTING LENDER).  ANY SPC MAY (I) WITH NOTICE TO, BUT WITHOUT
THE PRIOR WRITTEN CONSENT OF, BORROWER AND AGENT AND ASSIGN ALL OR A PORTION OF
ITS INTERESTS IN ANY LOANS TO THE GRANTING LENDER OR TO ANY FINANCIAL
INSTITUTIONS (CONSENTED TO BY BORROWER AND AGENT) PROVIDING LIQUIDITY AND/OR
CREDIT SUPPORT TO OR FOR THE ACCOUNT OF SUCH SPC TO SUPPORT THE FUNDING OR
MAINTENANCE OF LOANS AND (II) DISCLOSE ON A CONFIDENTIAL BASIS ANY NON-PUBLIC
INFORMATION RELATING TO ITS LOANS TO ANY RATING AGENCY, COMMERCIAL PAPER DEALER
OR PROVIDER OF ANY SURETY, GUARANTY OR CREDIT OR LIQUIDITY ENHANCEMENT TO SUCH
SPC.  THIS SECTION 9.1(G) MAY NOT BE AMENDED WITHOUT THE PRIOR WRITTEN CONSENT
OF EACH GRANTING LENDER, ALL OR ANY OF WHOSE LOANS ARE BEING FUNDED BY AN SPC AT
THE TIME OF SUCH AMENDMENT.  FOR THE AVOIDANCE OF DOUBT, THE GRANTING LENDER
SHALL FOR ALL PURPOSES, INCLUDING WITHOUT LIMITATION, THE APPROVAL OF ANY
AMENDMENT OR WAIVER OF ANY PROVISION OF ANY LOAN DOCUMENT OR THE OBLIGATION TO
PAY ANY AMOUNT OTHERWISE PAYABLE BY THE GRANTING LENDER UNDER THE LOAN
DOCUMENTS, CONTINUE TO BE THE LENDER OF RECORD HEREUNDER.

 

9.2                                 APPOINTMENT OF AGENT.  GE CAPITAL IS HEREBY
APPOINTED TO ACT ON BEHALF OF ALL LENDERS AS AGENT UNDER THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS.  THE PROVISIONS OF THIS SECTION 9.2 ARE SOLELY FOR THE
BENEFIT OF AGENT AND LENDERS AND NO CREDIT PARTY NOR ANY OTHER PERSON SHALL HAVE
ANY RIGHTS AS A THIRD PARTY BENEFICIARY OF ANY OF THE PROVISIONS HEREOF.  IN
PERFORMING ITS FUNCTIONS AND DUTIES UNDER THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS, AGENT SHALL ACT SOLELY AS AN AGENT OF LENDERS AND DOES NOT ASSUME AND
SHALL NOT BE DEEMED TO HAVE ASSUMED ANY OBLIGATION TOWARD OR RELATIONSHIP OF
AGENCY OR TRUST WITH OR FOR ANY CREDIT PARTY OR

 

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ANY OTHER PERSON.  AGENT SHALL HAVE NO DUTIES OR RESPONSIBILITIES EXCEPT FOR
THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.  THE
DUTIES OF AGENT SHALL BE MECHANICAL AND ADMINISTRATIVE IN NATURE AND AGENT SHALL
NOT HAVE, OR BE DEEMED TO HAVE, BY REASON OF THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT OR OTHERWISE A FIDUCIARY RELATIONSHIP IN RESPECT OF ANY LENDER.  EXCEPT
AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AGENT
SHALL NOT HAVE ANY DUTY TO DISCLOSE, AND SHALL NOT BE LIABLE FOR FAILURE TO
DISCLOSE, ANY INFORMATION RELATING TO ANY CREDIT PARTY OR ANY OF THEIR
RESPECTIVE SUBSIDIARIES OR ANY ACCOUNT DEBTOR THAT IS COMMUNICATED TO OR
OBTAINED BY GE CAPITAL OR ANY OF ITS AFFILIATES IN ANY CAPACITY.  NEITHER AGENT
NOR ANY OF ITS AFFILIATES NOR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE LIABLE TO ANY LENDER FOR ANY
ACTION TAKEN OR OMITTED TO BE TAKEN BY IT HEREUNDER OR UNDER ANY OTHER LOAN
DOCUMENT, OR IN CONNECTION HEREWITH OR THEREWITH, EXCEPT FOR DAMAGES CAUSED BY
ITS OR THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

 

If Agent shall request instructions from Requisite Lenders, Requisite Revolving
Lenders or all affected Lenders with respect to any act or action (including
failure to act) in connection with this Agreement or any other Loan Document,
then Agent shall be entitled to refrain from such act or taking such action
unless and until Agent shall have received instructions from Requisite Lenders,
Requisite Revolving Lenders or all affected Lenders, as the case may be, and
Agent shall not incur liability to any Person by reason of so refraining.  Agent
shall be fully justified in failing or refusing to take any action hereunder or
under any other Loan Document (a) if such action would, in the opinion of Agent,
be contrary to law or the terms of this Agreement or any other Loan Document,
(b) if such action would, in the opinion of Agent, expose Agent to Environmental
Liabilities or (c) if Agent shall not first be indemnified to its satisfaction
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action.  Without limiting the
foregoing, no Lender shall have any right of action whatsoever against Agent as
a result of Agent acting or refraining from acting hereunder or under any other
Loan Document in accordance with the instructions of Requisite Lenders,
Requisite Revolving Lenders or all affected Lenders, as applicable.

 

9.3                                 AGENT’S RELIANCE, ETC.  NEITHER AGENT NOR
ANY OF ITS AFFILIATES NOR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, AGENTS OR
EMPLOYEES SHALL BE LIABLE FOR ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY IT OR
THEM UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS,
EXCEPT FOR DAMAGES CAUSED BY ITS OR THEIR OWN GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, AGENT:  (A) MAY
TREAT THE PAYEE OF ANY NOTE AS THE HOLDER THEREOF UNTIL AGENT RECEIVES WRITTEN
NOTICE OF THE ASSIGNMENT OR TRANSFER THEREOF SIGNED BY SUCH PAYEE AND IN FORM
REASONABLY SATISFACTORY TO AGENT; (B) MAY CONSULT WITH LEGAL COUNSEL,
INDEPENDENT PUBLIC ACCOUNTANTS AND OTHER EXPERTS SELECTED BY IT AND SHALL NOT BE
LIABLE FOR ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY IT IN GOOD FAITH IN
ACCORDANCE WITH THE ADVICE OF SUCH COUNSEL, ACCOUNTANTS OR EXPERTS; (C) MAKES NO
WARRANTY OR REPRESENTATION TO ANY LENDER AND SHALL NOT BE RESPONSIBLE TO ANY
LENDER FOR ANY STATEMENTS, WARRANTIES OR REPRESENTATIONS MADE IN OR IN
CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS; (D) SHALL NOT HAVE
ANY DUTY TO ASCERTAIN OR TO INQUIRE AS TO THE PERFORMANCE OR OBSERVANCE OF ANY
OF THE TERMS, COVENANTS OR CONDITIONS OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS ON THE PART OF ANY CREDIT PARTY OR TO INSPECT THE COLLATERAL
(INCLUDING THE BOOKS AND RECORDS) OF ANY CREDIT PARTY; (E) SHALL NOT BE
RESPONSIBLE TO ANY LENDER FOR THE DUE EXECUTION, LEGALITY, VALIDITY,
ENFORCEABILITY, GENUINENESS, SUFFICIENCY OR VALUE OF THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS OR ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO OR
THERETO; AND (F) SHALL INCUR NO

 

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LIABILITY UNDER OR IN RESPECT OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS BY
ACTING UPON ANY NOTICE, CONSENT, CERTIFICATE OR OTHER INSTRUMENT OR WRITING
(WHICH MAY BE BY TELECOPY, TELEGRAM, CABLE OR TELEX) BELIEVED BY IT TO BE
GENUINE AND SIGNED OR SENT BY THE PROPER PARTY OR PARTIES.

 

9.4                                 GE CAPITAL AND AFFILIATES.  WITH RESPECT TO
ITS COMMITMENTS HEREUNDER, GE CAPITAL SHALL HAVE THE SAME RIGHTS AND POWERS
UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AS ANY OTHER LENDER AND MAY
EXERCISE THE SAME AS THOUGH IT WERE NOT AGENT; AND THE TERM “LENDER” OR
“LENDERS” SHALL, UNLESS OTHERWISE EXPRESSLY INDICATED, INCLUDE GE CAPITAL IN ITS
INDIVIDUAL CAPACITY.  GE CAPITAL AND ITS AFFILIATES MAY LEND MONEY TO, INVEST
IN, AND GENERALLY ENGAGE IN ANY KIND OF BUSINESS WITH, ANY CREDIT PARTY, ANY OF
THEIR AFFILIATES AND ANY PERSON WHO MAY DO BUSINESS WITH OR OWN SECURITIES OF
ANY CREDIT PARTY OR ANY SUCH AFFILIATE, ALL AS IF GE CAPITAL WERE NOT AGENT AND
WITHOUT ANY DUTY TO ACCOUNT THEREFOR TO LENDERS.  GE CAPITAL OR ONE OR MORE OF
AFFILIATES MAY ALSO PURCHASE CERTAIN EQUITY INTERESTS IN HOLDINGS, WHICH IS A
CORPORATION THAT CURRENTLY OWNS 100% OF THE OUTSTANDING STOCK OF BORROWER.  GE
CAPITAL AND ITS AFFILIATES MAY ACCEPT FEES AND OTHER CONSIDERATION FROM ANY
CREDIT PARTY FOR SERVICES IN CONNECTION WITH THIS AGREEMENT OR OTHERWISE WITHOUT
HAVING TO ACCOUNT FOR THE SAME TO LENDERS.  EACH LENDER ACKNOWLEDGES THE
POTENTIAL CONFLICT OF INTEREST BETWEEN GE CAPITAL AS A LENDER HOLDING
DISPROPORTIONATE INTERESTS IN THE LOANS, GE CAPITAL OR ITS AFFILIATES AS A
STOCKHOLDER AND GE CAPITAL AS AGENT; PROVIDED, THAT ANY EQUITY INVESTMENT BY GE
CAPITAL SHALL NOT EXCEED 7.5% IN THE AGGREGATE OF THE STOCK OF HOLDINGS
OUTSTANDING ON A FULLY DILUTED BASIS, AND SHALL NOT EXCEED $7,500,000 OF
INVESTMENTS IN THE AGGREGATE.

 

9.5                                 LENDER CREDIT DECISION.  EACH LENDER
ACKNOWLEDGES THAT IT HAS, INDEPENDENTLY AND WITHOUT RELIANCE UPON AGENT OR ANY
OTHER LENDER AND BASED ON THE FINANCIAL STATEMENTS REFERRED TO IN SECTION 3.4(A)
AND SUCH OTHER DOCUMENTS AND INFORMATION AS IT HAS DEEMED APPROPRIATE, MADE ITS
OWN CREDIT AND FINANCIAL ANALYSIS OF THE CREDIT PARTIES AND ITS OWN DECISION TO
ENTER INTO THIS AGREEMENT.  EACH LENDER ALSO ACKNOWLEDGES THAT IT WILL,
INDEPENDENTLY AND WITHOUT RELIANCE UPON AGENT OR ANY OTHER LENDER AND BASED ON
SUCH DOCUMENTS AND INFORMATION AS IT SHALL DEEM APPROPRIATE AT THE TIME,
CONTINUE TO MAKE ITS OWN CREDIT DECISIONS IN TAKING OR NOT TAKING ACTION UNDER
THIS AGREEMENT.  EACH LENDER ACKNOWLEDGES THE POTENTIAL CONFLICT OF INTEREST OF
EACH OTHER LENDER AS A RESULT OF LENDERS HOLDING DISPROPORTIONATE INTERESTS IN
THE LOANS, AND EXPRESSLY CONSENTS TO, AND WAIVES ANY CLAIM BASED UPON, SUCH
CONFLICT OF INTEREST.

 

9.6                                 INDEMNIFICATION.  LENDERS AGREE TO INDEMNIFY
AGENT (TO THE EXTENT NOT REIMBURSED BY CREDIT PARTIES AND WITHOUT LIMITING THE
OBLIGATIONS OF BORROWER HEREUNDER), RATABLY ACCORDING TO THEIR RESPECTIVE PRO
RATA SHARES, FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS
OF ANY KIND OR NATURE WHATSOEVER THAT MAY BE IMPOSED ON, INCURRED BY, OR
ASSERTED AGAINST AGENT IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT OR ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY AGENT
IN CONNECTION THEREWITH; PROVIDED, THAT NO LENDER SHALL BE LIABLE FOR ANY
PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING FROM AGENT’S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.  IF WITHOUT LIMITING THE FOREGOING, EACH
LENDER AGREES TO REIMBURSE AGENT PROMPTLY UPON DEMAND FOR ITS RATABLE SHARE OF
ANY OUT-OF-POCKET EXPENSES (INCLUDING REASONABLE COUNSEL FEES) INCURRED BY AGENT
IN CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION,
MODIFICATION, AMENDMENT OR ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL
PROCEEDINGS OR OTHERWISE) OF, OR LEGAL ADVICE IN RESPECT OF RIGHTS OR
RESPONSIBILITIES UNDER, THIS AGREEMENT AND

 

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EACH OTHER LOAN DOCUMENT, TO THE EXTENT THAT AGENT IS NOT REIMBURSED FOR SUCH
EXPENSES BY CREDIT PARTIES.

 

9.7                                 SUCCESSOR AGENT.  AGENT MAY RESIGN AT ANY
TIME BY GIVING NOT LESS THAN 30 DAYS’ PRIOR WRITTEN NOTICE THEREOF TO LENDERS
AND BORROWER.  UPON ANY SUCH RESIGNATION, THE REQUISITE LENDERS SHALL HAVE THE
RIGHT TO APPOINT A SUCCESSOR AGENT.  IF NO SUCCESSOR AGENT SHALL HAVE BEEN SO
APPOINTED BY THE REQUISITE LENDERS AND SHALL HAVE ACCEPTED SUCH APPOINTMENT
WITHIN 30 DAYS AFTER THE RESIGNING AGENT’S GIVING NOTICE OF RESIGNATION, THEN
THE RESIGNING AGENT MAY, ON BEHALF OF LENDERS, APPOINT A SUCCESSOR AGENT, WHICH
SHALL BE A LENDER, IF A LENDER IS WILLING TO ACCEPT SUCH APPOINTMENT, OR
OTHERWISE SHALL BE A COMMERCIAL BANK OR FINANCIAL INSTITUTION OR A SUBSIDIARY OF
A COMMERCIAL BANK OR FINANCIAL INSTITUTION IF SUCH COMMERCIAL BANK OR FINANCIAL
INSTITUTION IS ORGANIZED UNDER THE LAWS OF THE UNITED STATES OF AMERICA OR OF
ANY STATE THEREOF AND HAS A COMBINED CAPITAL AND SURPLUS OF AT LEAST
$300,000,000.  IF NO SUCCESSOR AGENT HAS BEEN APPOINTED PURSUANT TO THE
FOREGOING, WITHIN THIRTY (30) DAYS AFTER THE DATE SUCH NOTICE OF RESIGNATION WAS
GIVEN BY THE RESIGNING AGENT, SUCH RESIGNATION SHALL BECOME EFFECTIVE AND THE
REQUISITE LENDERS SHALL THEREAFTER PERFORM ALL THE DUTIES OF AGENT HEREUNDER
UNTIL SUCH TIME, IF ANY, AS THE REQUISITE LENDERS APPOINT A SUCCESSOR AGENT AS
PROVIDED ABOVE. ANY SUCCESSOR AGENT APPOINTED BY AGENT OR REQUISITE LENDERS
HEREUNDER SHALL BE SUBJECT TO THE APPROVAL OF BORROWER, SUCH APPROVAL NOT TO BE
UNREASONABLY WITHHELD OR DELAYED; PROVIDED, THAT SUCH APPROVAL SHALL NOT BE
REQUIRED IF A DEFAULT OR AN EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING. 
UPON THE ACCEPTANCE OF ANY APPOINTMENT AS AGENT HEREUNDER BY A SUCCESSOR AGENT,
SUCH SUCCESSOR AGENT SHALL SUCCEED TO AND BECOME VESTED WITH ALL THE RIGHTS,
POWERS, PRIVILEGES AND DUTIES OF THE RESIGNING AGENT.  UPON THE EARLIER OF THE
ACCEPTANCE OF ANY APPOINTMENT AS AGENT HEREUNDER BY A SUCCESSOR AGENT OR THE
EFFECTIVE DATE OF THE RESIGNING AGENT’S RESIGNATION, THE RESIGNING AGENT SHALL
BE DISCHARGED FROM ITS DUTIES AND OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS, EXCEPT THAT ANY INDEMNITY RIGHTS OR OTHER RIGHTS IN FAVOR OF
SUCH RESIGNING AGENT SHALL CONTINUE.  AFTER ANY RESIGNING AGENT’S RESIGNATION
HEREUNDER, THE PROVISIONS OF THIS SECTION 9 SHALL INURE TO ITS BENEFIT AS TO ANY
ACTIONS TAKEN OR OMITTED TO BE TAKEN BY IT WHILE IT WAS ACTING AS AGENT UNDER
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

 

9.8                                 SETOFF AND SHARING OF PAYMENTS.  IN ADDITION
TO ANY RIGHTS NOW OR HEREAFTER GRANTED UNDER APPLICABLE LAW AND NOT BY WAY OF
LIMITATION OF ANY SUCH RIGHTS, UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF
ANY EVENT OF DEFAULT AND SUBJECT TO SECTION 9.9(F), EACH LENDER IS HEREBY
AUTHORIZED AT ANY TIME OR FROM TIME TO TIME, WITHOUT NOTICE TO ANY CREDIT PARTY
OR TO ANY OTHER PERSON, ANY SUCH NOTICE BEING HEREBY EXPRESSLY WAIVED, TO OFFSET
AND TO APPROPRIATE AND TO APPLY ANY AND ALL BALANCES HELD BY IT AT ANY OF ITS
OFFICES FOR THE ACCOUNT OF BORROWER OR ANY GUARANTOR (REGARDLESS OF WHETHER SUCH
BALANCES ARE THEN DUE TO BORROWER OR ANY GUARANTOR) AND ANY OTHER PROPERTIES OR
ASSETS AT ANY TIME HELD OR OWING BY THAT LENDER OR THAT HOLDER TO OR FOR THE
CREDIT OR FOR THE ACCOUNT OF BORROWER OR ANY GUARANTOR AGAINST AND ON ACCOUNT OF
ANY OF THE OBLIGATIONS THAT ARE IF NOT PAID WHEN DUE.  ANY LENDER EXERCISING THE
FOREGOING RIGHT OF SETOFF OR OTHERWISE RECEIVING ANY PAYMENT ON ACCOUNT OF THE
OBLIGATIONS IN EXCESS OF ITS PRO RATA SHARE THEREOF SHALL PURCHASE FOR CASH (AND
THE OTHER LENDERS OR HOLDERS SHALL SELL) SUCH PARTICIPATIONS IN EACH SUCH OTHER
LENDER’S OR HOLDER’S PRO RATA SHARE OF THE OBLIGATIONS AS WOULD BE NECESSARY TO
CAUSE SUCH LENDER TO SHARE THE AMOUNT SO OFFSET OR OTHERWISE RECEIVED WITH EACH
OTHER LENDER OR HOLDER IN ACCORDANCE WITH THEIR RESPECTIVE PRO RATA SHARES,
(OTHER THAN OFFSET RIGHTS EXERCISED BY ANY LENDER WITH RESPECT TO SECTIONS 1.13,
1.15 OR 1.16).  EACH CREDIT PARTY AGREES, TO THE FULLEST EXTENT PERMITTED BY
LAW, THAT (A) ANY LENDER MAY

 

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EXERCISE THE FOREGOING RIGHT TO OFFSET WITH RESPECT TO AMOUNTS IN EXCESS OF ITS
PRO RATA SHARE OF THE OBLIGATIONS AND MAY SELL PARTICIPATIONS IN SUCH AMOUNTS SO
OFFSET TO OTHER LENDERS AND HOLDERS AND (B) ANY LENDER SO PURCHASING A
PARTICIPATION IN THE LOANS MADE OR OTHER OBLIGATIONS HELD BY OTHER LENDERS OR
HOLDERS MAY EXERCISE ALL RIGHTS OF OFFSET, BANKERS’ LIEN, COUNTERCLAIM OR
SIMILAR RIGHTS WITH RESPECT TO SUCH PARTICIPATION AS FULLY AS IF SUCH LENDER OR
HOLDER WERE A DIRECT HOLDER OF THE LOANS AND THE OTHER OBLIGATIONS IN THE AMOUNT
OF SUCH PARTICIPATION.  NOTWITHSTANDING THE FOREGOING, IF ALL OR ANY PORTION OF
THE OFFSET AMOUNT OR PAYMENT OTHERWISE RECEIVED IS THEREAFTER RECOVERED FROM THE
LENDER THAT HAS EXERCISED THE RIGHT OF OFFSET, THE PURCHASE OF PARTICIPATIONS BY
THAT LENDER SHALL BE RESCINDED AND THE PURCHASE PRICE RESTORED WITHOUT INTEREST.

 

9.9                                 ADVANCES; PAYMENTS; NON-FUNDING LENDERS;
INFORMATION; ACTIONS IN CONCERT.

 

(A)                                  ADVANCES; PAYMENTS.

 

(I)                                     REVOLVING LENDERS SHALL REFUND OR
PARTICIPATE IN THE SWING LINE LOAN IN ACCORDANCE WITH CLAUSES (III) AND (IV) OF
SECTION 1.1(C).  IF THE SWING LINE LENDER DECLINES TO MAKE A SWING LINE LOAN OR
IF SWING LINE AVAILABILITY IS ZERO, AGENT SHALL NOTIFY REVOLVING LENDERS,
PROMPTLY AFTER RECEIPT OF A NOTICE OF U.S. REVOLVING CREDIT ADVANCE AND IN ANY
EVENT PRIOR TO 1:00 P.M. (CHICAGO TIME) ON THE DATE SUCH NOTICE OF REVOLVING
ADVANCE IS RECEIVED, BY TELECOPY, TELEPHONE OR OTHER SIMILAR FORM OF
TRANSMISSION.  EACH REVOLVING LENDER SHALL MAKE THE AMOUNT OF SUCH LENDER’S PRO
RATA SHARE OF SUCH REVOLVING CREDIT ADVANCE AVAILABLE TO AGENT IN SAME DAY FUNDS
BY WIRE TRANSFER TO AGENT’S ACCOUNT AS SET FORTH IN ANNEX H NOT LATER THAN 3:00
P.M. (CHICAGO TIME) ON THE REQUESTED FUNDING DATE, IN THE CASE OF AN INDEX RATE
LOAN AND NOT LATER THAN 11:00 A.M. (CHICAGO TIME) ON THE REQUESTED FUNDING DATE
IN THE CASE OF A LIBOR LOAN.  AFTER RECEIPT OF SUCH WIRE TRANSFERS (OR, IN
AGENT’S SOLE DISCRETION, BEFORE RECEIPT OF SUCH WIRE TRANSFERS), SUBJECT TO THE
TERMS HEREOF, AGENT SHALL MAKE THE REQUESTED U.S. REVOLVING CREDIT ADVANCE TO
BORROWER.  ALL PAYMENTS BY EACH REVOLVING LENDER SHALL BE MADE WITHOUT SETOFF,
COUNTERCLAIM OR DEDUCTION OF ANY KIND.

 

(II)                                  ON THE 2ND BUSINESS DAY OF EACH CALENDAR
WEEK OR MORE FREQUENTLY AT AGENT’S ELECTION (EACH, A “SETTLEMENT DATE”), AGENT
SHALL ADVISE EACH LENDER BY TELEPHONE, OR TELECOPY OF THE AMOUNT OF SUCH
LENDER’S PRO RATA SHARE OF PRINCIPAL, INTEREST AND FEES PAID FOR THE BENEFIT OF
LENDERS WITH RESPECT TO EACH APPLICABLE LOAN.  PROVIDED THAT EACH LENDER HAS
FUNDED ALL PAYMENTS AND ADVANCES REQUIRED TO BE MADE BY IT AND PURCHASED ALL
PARTICIPATIONS REQUIRED TO BE PURCHASED BY IT UNDER THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS AS OF SUCH SETTLEMENT DATE, AGENT SHALL PAY TO EACH LENDER SUCH
LENDER’S PRO RATA SHARE OF PRINCIPAL, INTEREST AND FEES PAID BY BORROWER SINCE
THE PREVIOUS SETTLEMENT DATE FOR THE BENEFIT OF SUCH LENDER ON THE LOANS HELD BY
IT.  TO THE EXTENT THAT ANY LENDER (A “NON-FUNDING LENDER”) HAS FAILED TO FUND
ALL SUCH PAYMENTS AND ADVANCES OR FAILED TO FUND THE PURCHASE OF ALL SUCH
PARTICIPATIONS, AGENT SHALL BE ENTITLED TO SET OFF THE FUNDING SHORT-FALL
AGAINST THAT NON-FUNDING LENDER’S PRO RATA SHARE OF ALL PAYMENTS RECEIVED FROM
BORROWER.  SUCH PAYMENTS SHALL BE MADE BY WIRE TRANSFER TO SUCH LENDER’S ACCOUNT
(AS SPECIFIED BY SUCH LENDER IN ANNEX H OR THE APPLICABLE ASSIGNMENT AGREEMENT)
NOT LATER THAN 1:00 P.M. (CHICAGO TIME) ON THE NEXT BUSINESS DAY FOLLOWING EACH
SETTLEMENT DATE.

 

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(B)                                 AVAILABILITY OF LENDER’S PRO RATA SHARE. 
AGENT MAY ASSUME THAT EACH REVOLVING LENDER WILL MAKE ITS PRO RATA SHARE OF EACH
REVOLVING CREDIT ADVANCE AVAILABLE TO AGENT ON EACH FUNDING DATE.  IF SUCH PRO
RATA SHARE IS NOT, IN FACT, PAID TO AGENT BY SUCH REVOLVING LENDER WHEN DUE,
AGENT WILL BE ENTITLED TO RECOVER SUCH AMOUNT ON DEMAND FROM SUCH REVOLVING
LENDER WITHOUT SETOFF, COUNTERCLAIM OR DEDUCTION OF ANY KIND.  IF ANY REVOLVING
LENDER FAILS TO PAY THE AMOUNT OF ITS PRO RATA SHARE FORTHWITH UPON AGENT’S
DEMAND, AGENT SHALL PROMPTLY NOTIFY BORROWER AND BORROWER SHALL IMMEDIATELY
REPAY SUCH AMOUNT TO AGENT.  NOTHING IN THIS SECTION 9.9(B) OR ELSEWHERE IN THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE DEEMED TO REQUIRE AGENT TO
ADVANCE FUNDS ON BEHALF OF ANY REVOLVING LENDER OR TO RELIEVE ANY REVOLVING
LENDER FROM ITS OBLIGATION TO FULFILL ITS COMMITMENTS HEREUNDER OR TO PREJUDICE
ANY RIGHTS THAT BORROWER MAY HAVE AGAINST ANY REVOLVING LENDER AS A RESULT OF
ANY DEFAULT BY SUCH REVOLVING LENDER HEREUNDER.  TO THE EXTENT THAT AGENT
ADVANCES FUNDS TO BORROWER ON BEHALF OF ANY REVOLVING LENDER AND IS NOT
REIMBURSED THEREFOR ON THE SAME BUSINESS DAY AS SUCH ADVANCE IS MADE, AGENT
SHALL BE ENTITLED TO RETAIN FOR ITS ACCOUNT ALL INTEREST ACCRUED ON SUCH ADVANCE
UNTIL REIMBURSED BY THE APPLICABLE REVOLVING LENDER.

 

(C)                                  RETURN OF PAYMENTS.

 

(I)                                     IF AGENT PAYS AN AMOUNT TO A LENDER
UNDER THIS AGREEMENT IN THE BELIEF OR EXPECTATION THAT A RELATED PAYMENT HAS
BEEN OR WILL BE RECEIVED BY AGENT FROM BORROWER AND SUCH RELATED PAYMENT IS NOT
RECEIVED BY AGENT, THEN AGENT WILL BE ENTITLED TO RECOVER SUCH AMOUNT FROM SUCH
LENDER ON DEMAND WITHOUT SETOFF, COUNTERCLAIM OR DEDUCTION OF ANY KIND.

 

(II)                                  IF AGENT DETERMINES AT ANY TIME THAT ANY
AMOUNT RECEIVED BY AGENT UNDER THIS AGREEMENT MUST BE RETURNED TO BORROWER OR
PAID TO ANY OTHER PERSON PURSUANT TO ANY INSOLVENCY LAW OR OTHERWISE, THEN,
NOTWITHSTANDING ANY OTHER TERM OR CONDITION OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, AGENT WILL NOT BE REQUIRED TO DISTRIBUTE ANY PORTION THEREOF TO ANY
LENDER.  IN ADDITION, EACH LENDER WILL REPAY TO AGENT ON DEMAND ANY PORTION OF
SUCH AMOUNT THAT AGENT HAS DISTRIBUTED TO SUCH LENDER, TOGETHER WITH INTEREST AT
SUCH RATE, IF ANY, AS AGENT IS REQUIRED TO PAY TO BORROWER OR SUCH OTHER PERSON,
WITHOUT SETOFF, COUNTERCLAIM OR DEDUCTION OF ANY KIND.

 

(D)                                 NON-FUNDING LENDERS.  THE FAILURE OF ANY
NON-FUNDING LENDER TO MAKE ANY REVOLVING CREDIT ADVANCE OR ANY PAYMENT REQUIRED
BY IT HEREUNDER, OR TO PURCHASE ANY PARTICIPATION IN ANY SWING LINE LOAN TO BE
MADE OR PURCHASED BY IT ON THE DATE SPECIFIED THEREFOR SHALL NOT RELIEVE ANY
OTHER LENDER (EACH SUCH OTHER REVOLVING LENDER, AN “OTHER LENDER”) OF ITS
OBLIGATIONS TO MAKE SUCH ADVANCE OR PURCHASE SUCH PARTICIPATION ON SUCH DATE,
BUT NEITHER ANY OTHER LENDER NOR AGENT SHALL BE RESPONSIBLE FOR THE FAILURE OF
ANY NON-FUNDING LENDER TO MAKE AN ADVANCE, PURCHASE A PARTICIPATION OR MAKE ANY
OTHER PAYMENT REQUIRED HEREUNDER.  NOTWITHSTANDING ANYTHING SET FORTH HEREIN TO
THE CONTRARY, A NON-FUNDING LENDER SHALL NOT HAVE ANY VOTING OR CONSENT RIGHTS
UNDER OR WITH RESPECT TO ANY LOAN DOCUMENT OR CONSTITUTE A “LENDER” OR A
“REVOLVING LENDER” (OR BE INCLUDED IN THE CALCULATION OF “REQUISITE LENDERS” OR
“REQUISITE REVOLVING LENDERS” HEREUNDER) FOR ANY VOTING OR CONSENT RIGHTS UNDER
OR WITH RESPECT TO ANY LOAN DOCUMENT.  AT BORROWER’S REQUEST, AGENT OR A PERSON
ACCEPTABLE TO AGENT SHALL HAVE THE RIGHT WITH AGENT’S CONSENT AND IN AGENT’S
SOLE DISCRETION (BUT SHALL HAVE NO OBLIGATION) TO PURCHASE FROM ANY NON-FUNDING
LENDER, AND EACH NON-FUNDING LENDER AGREES THAT IT SHALL, AT AGENT’S REQUEST,
SELL AND ASSIGN TO AGENT OR SUCH PERSON, ALL OF THE COMMITMENTS OF THAT
NON-FUNDING

 

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LENDER FOR AN AMOUNT EQUAL TO THE PRINCIPAL BALANCE OF ALL LOANS HELD BY SUCH
NON-FUNDING LENDER AND ALL ACCRUED INTEREST AND FEES WITH RESPECT THERETO
THROUGH THE DATE OF SALE, SUCH PURCHASE AND SALE TO BE CONSUMMATED PURSUANT TO
AN EXECUTED ASSIGNMENT AGREEMENT.

 

(E)                                  DISSEMINATION OF INFORMATION.  AGENT SHALL
USE REASONABLE EFFORTS TO PROVIDE LENDERS WITH ANY NOTICE OF DEFAULT OR EVENT OF
DEFAULT RECEIVED BY AGENT FROM, OR DELIVERED BY AGENT TO, ANY CREDIT PARTY, WITH
NOTICE OF ANY EVENT OF DEFAULT OF WHICH AGENT HAS ACTUALLY BECOME AWARE AND WITH
NOTICE OF ANY ACTION TAKEN BY AGENT FOLLOWING ANY EVENT OF DEFAULT; PROVIDED,
THAT AGENT SHALL NOT BE LIABLE TO ANY LENDER FOR ANY FAILURE TO DO SO, EXCEPT TO
THE EXTENT THAT SUCH FAILURE IS ATTRIBUTABLE TO AGENT’S GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT.  LENDERS ACKNOWLEDGE THAT BORROWER IS REQUIRED TO PROVIDE
FINANCIAL STATEMENTS AND COLLATERAL REPORTS TO LENDERS IN ACCORDANCE WITH
ANNEXES E AND F HERETO AND AGREE THAT AGENT SHALL HAVE NO DUTY TO PROVIDE THE
SAME TO LENDERS.

 

(F)                                    ACTIONS IN CONCERT.  ANYTHING IN THIS
AGREEMENT TO THE CONTRARY NOTWITHSTANDING, EACH LENDER HEREBY AGREES WITH EACH
OTHER LENDER THAT NO LENDER SHALL TAKE ANY ACTION TO PROTECT OR ENFORCE ITS
RIGHTS ARISING OUT OF THIS AGREEMENT OR THE NOTES (INCLUDING EXERCISING ANY
RIGHTS OF SETOFF) WITHOUT FIRST OBTAINING THE PRIOR WRITTEN CONSENT OF AGENT AND
REQUISITE LENDERS, IT BEING THE INTENT OF LENDERS THAT ANY SUCH ACTION TO
PROTECT OR ENFORCE RIGHTS UNDER THIS AGREEMENT AND THE NOTES SHALL BE TAKEN IN
CONCERT AND AT THE DIRECTION OR WITH THE CONSENT OF AGENT OR REQUISITE LENDERS. 
WITH RESPECT TO ANY ACTION BY AGENT TO ENFORCE THE RIGHTS AND REMEDIES OF AGENT
AND THE LENDERS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, EACH LENDER
HEREBY CONSENTS TO THE JURISDICTION OF THE COURT IN WHICH SUCH ACTION IS
MAINTAINED, AND AGREES TO DELIVER ITS NOTES TO AGENT TO THE EXTENT NECESSARY TO
ENFORCE THE RIGHTS AND REMEDIES OF AGENT FOR THE BENEFIT OF THE LENDERS UNDER
THE MORTGAGES IN ACCORDANCE WITH THE PROVISIONS HEREOF.

 

10.                               SUCCESSORS AND ASSIGNS

 

10.1                           SUCCESSORS AND ASSIGNS.  THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS SHALL BE BINDING ON AND SHALL INURE TO THE BENEFIT OF EACH
CREDIT PARTY, AGENT, LENDERS AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS
(INCLUDING, IN THE CASE OF ANY CREDIT PARTY, A DEBTOR-IN-POSSESSION ON BEHALF OF
SUCH CREDIT PARTY), EXCEPT AS OTHERWISE PROVIDED HEREIN OR THEREIN.  NO CREDIT
PARTY MAY ASSIGN, TRANSFER, HYPOTHECATE OR OTHERWISE CONVEY ITS RIGHTS,
BENEFITS, OBLIGATIONS OR DUTIES HEREUNDER OR UNDER ANY OF THE OTHER LOAN
DOCUMENTS WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT OF AGENT AND LENDERS.  ANY
SUCH PURPORTED ASSIGNMENT, TRANSFER, HYPOTHECATION OR OTHER CONVEYANCE BY ANY
CREDIT PARTY WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT OF AGENT AND LENDERS
SHALL BE VOID.  THE TERMS AND PROVISIONS OF THIS AGREEMENT ARE FOR THE PURPOSE
OF DEFINING THE RELATIVE RIGHTS AND OBLIGATIONS OF EACH CREDIT PARTY, AGENT AND
LENDERS WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY AND NO PERSON SHALL
BE A THIRD PARTY BENEFICIARY OF ANY OF THE TERMS AND PROVISIONS OF THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.

 

11.                               MISCELLANEOUS

 

11.1                           COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT. 
THE LOAN DOCUMENTS CONSTITUTE THE COMPLETE AGREEMENT BETWEEN THE PARTIES WITH
RESPECT TO THE SUBJECT MATTER THEREOF AND MAY NOT BE MODIFIED, ALTERED OR
AMENDED EXCEPT AS SET FORTH IN SECTION 11.2.  ANY LETTER OF

 

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INTEREST, COMMITMENT LETTER, OR FEE LETTER (OTHER THAN THE GE CAPITAL FEE LETTER
OR ANY CONFIDENTIALITY AGREEMENT), IF ANY, BETWEEN ANY CREDIT PARTY AND AGENT OR
ANY LENDER OR ANY OF THEIR RESPECTIVE AFFILIATES, PREDATING THIS AGREEMENT AND
RELATING TO A FINANCING OF SUBSTANTIALLY SIMILAR FORM, PURPOSE OR EFFECT SHALL
BE SUPERSEDED BY THIS AGREEMENT.

 

11.2                           AMENDMENTS AND WAIVERS.

 

(A)                                  EXCEPT FOR ACTIONS EXPRESSLY PERMITTED TO
BE TAKEN BY AGENT, NO AMENDMENT, MODIFICATION, TERMINATION OR WAIVER OF ANY
PROVISION OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY CONSENT TO ANY
DEPARTURE BY ANY CREDIT PARTY THEREFROM, SHALL IN ANY EVENT BE EFFECTIVE UNLESS
THE SAME SHALL BE IN WRITING AND SIGNED BY AGENT AND BORROWER, AND BY REQUISITE
LENDERS, REQUISITE REVOLVING LENDERS OR ALL AFFECTED LENDERS, AS APPLICABLE. 
EXCEPT AS SET FORTH IN CLAUSES (B) AND (C) BELOW, ALL SUCH AMENDMENTS,
MODIFICATIONS, TERMINATIONS OR WAIVERS SHALL REQUIRE THE WRITTEN CONSENT OF
REQUISITE LENDERS.

 

(B)                                 NO AMENDMENT, MODIFICATION, TERMINATION OR
WAIVER OF OR CONSENT WITH RESPECT TO ANY PROVISION OF THIS AGREEMENT THAT
INCREASES THE PERCENTAGE ADVANCE RATES SET FORTH IN THE DEFINITION OF THE U.S.
BORROWING BASE OR THE SCHAUBLIN BORROWING BASE, OR THAT MAKES LESS RESTRICTIVE
THE NONDISCRETIONARY CRITERIA FOR EXCLUSION FROM ELIGIBLE ACCOUNTS-U.S. ELIGIBLE
ACCOUNTS-SCHAUBLIN ELIGIBLE INVENTORY-U.S. AND ELIGIBLE INVENTORY-SCHAUBLIN SET
FORTH IN SECTIONS 1.6(A), 1.6(B), 1.7(A) AND 1.7(B) SHALL BE EFFECTIVE UNLESS
THE SAME SHALL BE IN WRITING AND SIGNED BY AGENT, REQUISITE REVOLVING LENDERS
AND BORROWER.  NO AMENDMENT, MODIFICATION, TERMINATION OR WAIVER OF OR CONSENT
WITH RESPECT TO ANY PROVISION OF THIS AGREEMENT THAT WAIVES COMPLIANCE WITH THE
CONDITIONS PRECEDENT SET FORTH IN SECTION 2.2 TO THE MAKING OF ANY LOAN OR THE
INCURRENCE OF ANY LETTER OF CREDIT OBLIGATIONS SHALL BE EFFECTIVE UNLESS THE
SAME SHALL BE IN WRITING AND SIGNED BY AGENT, REQUISITE REVOLVING LENDERS AND
BORROWER.  NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT TO THE CONTRARY,
NO WAIVER OR CONSENT WITH RESPECT TO ANY DEFAULT OR ANY EVENT OF DEFAULT SHALL
BE EFFECTIVE FOR PURPOSES OF THE CONDITIONS PRECEDENT TO THE MAKING OF LOANS OR
THE INCURRENCE OF LETTER OF CREDIT OBLIGATIONS SET FORTH IN SECTION 2.2 AND
SECTION 2.3 UNLESS THE SAME SHALL BE IN WRITING AND SIGNED BY AGENT, REQUISITE
REVOLVING LENDERS AND BORROWER.

 

(C)                                  NO AMENDMENT, MODIFICATION, TERMINATION OR
WAIVER SHALL, UNLESS IN WRITING AND SIGNED BY AGENT AND EACH LENDER DIRECTLY
AFFECTED THEREBY:  (I) INCREASE THE PRINCIPAL AMOUNT OF ANY LENDER’S COMMITMENT
(WHICH ACTION SHALL BE DEEMED ONLY TO AFFECT THOSE LENDERS WHOSE COMMITMENTS ARE
INCREASED AND MUST BE APPROVED BY REQUISITE LENDERS, INCLUDING THOSE LENDERS
WHOSE COMMITMENTS ARE INCREASED); (II) REDUCE THE PRINCIPAL OF, RATE OF INTEREST
ON OR FEES PAYABLE WITH RESPECT TO ANY LOAN OR LETTER OF CREDIT OBLIGATIONS OF
ANY AFFECTED LENDER; (III) WAIVE OR EXTEND ANY SCHEDULED PAYMENT DATE (OTHER
THAN PAYMENT DATES OF MANDATORY PREPAYMENTS UNDER SECTION 1.3(B)(II)-(IV)) OR
FINAL MATURITY DATE OF THE PRINCIPAL AMOUNT OF ANY LOAN OF ANY AFFECTED LENDER;
(IV) WAIVE, FORGIVE, DEFER, EXTEND OR POSTPONE ANY PAYMENT OF INTEREST OR FEES
AS TO ANY AFFECTED LENDER; (V) RELEASE ANY GUARANTY OR EXCEPT AS OTHERWISE
PERMITTED HEREIN OR IN THE OTHER LOAN DOCUMENTS, RELEASE, OR PERMIT ANY CREDIT
PARTY TO SELL OR OTHERWISE DISPOSE OF, ANY COLLATERAL WITH A VALUE EXCEEDING
$3,000,000 IN THE AGGREGATE (WHICH ACTION SHALL BE DEEMED TO DIRECTLY AFFECT ALL
LENDERS); (VI) CHANGE THE PERCENTAGE OF THE COMMITMENTS OR OF THE AGGREGATE
UNPAID PRINCIPAL AMOUNT OF THE LOANS THAT SHALL BE REQUIRED FOR LENDERS OR ANY
OF THEM TO TAKE ANY ACTION HEREUNDER (WHICH ACTION SHALL BE DEEMED TO DIRECTLY

 

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AFFECT ALL LENDERS); AND (VII) AMEND OR WAIVE THIS SECTION 11.2 OR THE
DEFINITIONS OF THE TERMS “REQUISITE LENDERS” OR “REQUISITE REVOLVING LENDERS”
INSOFAR AS SUCH DEFINITIONS AFFECT THE SUBSTANCE OF THIS SECTION 11.2 (WHICH
ACTION SHALL BE DEEMED TO DIRECTLY AFFECT ALL LENDERS).  FURTHERMORE, NO
AMENDMENT, MODIFICATION, TERMINATION OR WAIVER AFFECTING THE RIGHTS OR DUTIES OF
AGENT OR L/C ISSUER UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE
EFFECTIVE UNLESS IN WRITING AND SIGNED BY AGENT OR L/C ISSUER, AS THE CASE MAY
BE, IN ADDITION TO LENDERS REQUIRED HEREINABOVE TO TAKE SUCH ACTION.  EACH
AMENDMENT, MODIFICATION, TERMINATION OR WAIVER SHALL BE EFFECTIVE ONLY IN THE
SPECIFIC INSTANCE AND FOR THE SPECIFIC PURPOSE FOR WHICH IT WAS GIVEN.  NO
AMENDMENT, MODIFICATION, TERMINATION OR WAIVER SHALL BE REQUIRED FOR AGENT TO
TAKE ADDITIONAL COLLATERAL PURSUANT TO ANY LOAN DOCUMENT. NO AMENDMENT,
MODIFICATION, TERMINATION OR WAIVER OF ANY PROVISION OF ANY NOTE SHALL BE
EFFECTIVE WITHOUT THE WRITTEN CONCURRENCE OF THE HOLDER OF THAT NOTE.  NO NOTICE
TO OR DEMAND ON ANY CREDIT PARTY IN ANY CASE SHALL ENTITLE SUCH CREDIT PARTY OR
ANY OTHER CREDIT PARTY TO ANY OTHER OR FURTHER NOTICE OR DEMAND IN SIMILAR OR
OTHER CIRCUMSTANCES.  ANY AMENDMENT, MODIFICATION, TERMINATION, WAIVER OR
CONSENT EFFECTED IN ACCORDANCE WITH THIS SECTION 11.2 SHALL BE BINDING UPON EACH
HOLDER OF THE NOTES AT THE TIME OUTSTANDING AND EACH FUTURE HOLDER OF THE NOTES.

 

(D)                                 IF, IN CONNECTION WITH ANY PROPOSED
AMENDMENT, MODIFICATION, WAIVER OR TERMINATION (A “PROPOSED CHANGE”):

 

(I)                                     REQUIRING THE CONSENT OF ALL AFFECTED
LENDERS, THE CONSENT OF REQUISITE LENDERS IS OBTAINED, BUT THE CONSENT OF OTHER
LENDERS WHOSE CONSENT IS REQUIRED IS NOT OBTAINED (ANY SUCH LENDER WHOSE CONSENT
IS NOT OBTAINED AS DESCRIBED IN THIS CLAUSE (I) AND IN CLAUSES (II) AND (III)
BELOW BEING REFERRED TO AS A “NON-CONSENTING LENDER”),

 

(II)                                  REQUIRING THE CONSENT OF REQUISITE
REVOLVING LENDERS, THE CONSENT OF REVOLVING LENDERS HOLDING 51% OR MORE OF THE
AGGREGATE REVOLVING LOAN COMMITMENTS IS OBTAINED, BUT THE CONSENT OF REQUISITE
REVOLVING LENDERS IS NOT OBTAINED, OR

 

(III)                               REQUIRING THE CONSENT OF REQUISITE LENDERS,
THE CONSENT OF LENDERS HOLDING 51% OR MORE OF THE AGGREGATE COMMITMENTS IS
OBTAINED, BUT THE CONSENT OF REQUISITE LENDERS IS NOT OBTAINED,

 

then, so long as Agent is not a Non-Consenting Lender, at Borrower’s request
Agent, or a Person reasonably acceptable to Agent, shall have the right with
Agent’s consent and in Agent’s sole discretion (but shall have no obligation) to
purchase from such Non-Consenting Lenders, and such Non-Consenting Lenders agree
that they shall, upon Agent’s request, sell and assign to Agent or such Person,
all of the Commitments of such Non-Consenting Lenders for an amount equal to the
principal balance of all Loans held by the Non-Consenting Lenders and all
accrued interest and Fees with respect thereto through the date of sale, such
purchase and sale to be consummated pursuant to an executed Assignment
Agreement.

 

(E)                                  UPON PAYMENT IN FULL IN CASH AND
PERFORMANCE OF ALL OF THE OBLIGATIONS (OTHER THAN INDEMNIFICATION OBLIGATIONS),
TERMINATION OF THE COMMITMENTS AND A RELEASE OF ALL CLAIMS AGAINST AGENT AND
LENDERS, AND SO LONG AS NO SUITS, ACTIONS PROCEEDINGS, OR CLAIMS ARE PENDING OR
THREATENED AGAINST ANY INDEMNIFIED PERSON ASSERTING ANY DAMAGES, LOSSES OR
LIABILITIES THAT ARE INDEMNIFIED LIABILITIES, AGENT SHALL DELIVER TO BORROWER
TERMINATION STATEMENTS,

 

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MORTGAGE RELEASES AND OTHER DOCUMENTS NECESSARY OR APPROPRIATE TO EVIDENCE THE
TERMINATION OF THE LIENS SECURING PAYMENT OF THE OBLIGATIONS.

 

11.3                           FEES AND EXPENSES.  BORROWER SHALL REIMBURSE
(I) AGENT FOR ALL REASONABLE OUT-OF-POCKET FEES, COSTS AND EXPENSES (INCLUDING
THE REASONABLE FEES AND EXPENSES OF ALL OF ITS COUNSEL, ADVISORS, CONSULTANTS
AND AUDITORS) AND (II) AGENT (AND, WITH RESPECT TO CLAUSES (C) AND (D) BELOW,
ALL LENDERS) FOR ALL REASONABLE OUT-OF-POCKET FEES, COSTS AND EXPENSES,
INCLUDING THE REASONABLE FEES, COSTS AND EXPENSES OF COUNSEL OR OTHER ADVISORS
(INCLUDING ENVIRONMENTAL AND MANAGEMENT CONSULTANTS AND APPRAISERS) INCURRED IN
CONNECTION WITH THE NEGOTIATION, PREPARATION AND FILING AND/OR RECORDATION OF
THE LOAN DOCUMENTS AND INCURRED IN CONNECTION WITH:

 

(A)                                  THE FORWARDING TO BORROWER OR ANY OTHER
PERSON ON BEHALF OF BORROWER BY AGENT OF THE PROCEEDS OF ANY LOAN (INCLUDING A
WIRE TRANSFER FEE OF $25 PER WIRE TRANSFER);

 

(B)                                 ANY AMENDMENT, MODIFICATION OR WAIVER OF, OR
CONSENT WITH RESPECT TO, OR TERMINATION OF, ANY OF THE LOAN DOCUMENTS OR ADVICE
IN CONNECTION WITH THE SYNDICATION AND ADMINISTRATION OF THE LOANS MADE PURSUANT
HERETO OR ITS RIGHTS HEREUNDER OR THEREUNDER;

 

(C)                                  ANY LITIGATION, CONTEST, DISPUTE, SUIT,
PROCEEDING OR ACTION (WHETHER INSTITUTED BY AGENT, ANY LENDER, ANY CREDIT PARTY
OR ANY OTHER PERSON AND WHETHER AS A PARTY, WITNESS OR OTHERWISE) IN ANY WAY
RELATING TO THE COLLATERAL, ANY OF THE LOAN DOCUMENTS OR ANY OTHER AGREEMENT TO
BE EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH, INCLUDING ANY
LITIGATION, CONTEST, DISPUTE, SUIT, CASE, PROCEEDING OR ACTION, AND ANY APPEAL
OR REVIEW THEREOF, IN CONNECTION WITH A CASE COMMENCED BY OR AGAINST ANY OR ALL
OF THE CREDIT PARTIES OR ANY OTHER PERSON THAT MAY BE OBLIGATED TO AGENT BY
VIRTUE OF THE LOAN DOCUMENTS, INCLUDING ANY SUCH LITIGATION, CONTEST, DISPUTE,
SUIT, PROCEEDING OR ACTION ARISING IN CONNECTION WITH ANY WORK-OUT OR
RESTRUCTURING OF THE LOANS DURING THE PENDENCY OF ONE OR MORE EVENTS OF DEFAULT;
PROVIDED, THAT IN THE CASE OF REIMBURSEMENT OF COUNSEL FOR LENDERS OTHER THAN
AGENT, SUCH REIMBURSEMENT SHALL BE LIMITED TO ONE COUNSEL FOR ALL SUCH LENDERS;
PROVIDED, FURTHER, THAT NO PERSON SHALL BE ENTITLED TO REIMBURSEMENT UNDER THIS
CLAUSE (C) IN RESPECT OF ANY LITIGATION, CONTEST, DISPUTE, SUIT, PROCEEDING OR
ACTION TO THE EXTENT ANY OF THE FOREGOING RESULTS FROM SUCH PERSON’S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT;

 

(D)                                 ANY ATTEMPT TO ENFORCE ANY REMEDIES OF AGENT
OR ANY LENDER AGAINST ANY OR ALL OF THE CREDIT PARTIES OR ANY OTHER PERSON THAT
MAY BE OBLIGATED TO AGENT OR ANY LENDER BY VIRTUE OF ANY OF THE LOAN DOCUMENTS,
INCLUDING ANY SUCH ATTEMPT TO ENFORCE ANY SUCH REMEDIES IN THE COURSE OF ANY
WORK-OUT OR RESTRUCTURING OF THE LOANS DURING THE PENDENCY OF ONE OR MORE EVENTS
OF DEFAULT; PROVIDED, THAT IN THE CASE OF REIMBURSEMENT OF COUNSEL FOR LENDERS
OTHER THAN AGENT, SUCH REIMBURSEMENT SHALL BE LIMITED TO ONE COUNSEL FOR ALL
SUCH LENDERS;

 

(E)                                  ANY WORKOUT OR RESTRUCTURING OF THE LOANS
DURING THE PENDENCY OF ONE OR MORE EVENTS OF DEFAULT; AND

 

(F)                                    EFFORTS TO (I) MONITOR THE LOANS OR ANY
OF THE OTHER OBLIGATIONS, AND (II) VERIFY, PROTECT, EVALUATE, ASSESS, APPRAISE,
COLLECT, SELL, LIQUIDATE OR OTHERWISE DISPOSE OF ANY OF THE COLLATERAL;

 

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including, as to each of clauses (a) through (f) above, all reasonable
attorneys’ and other professional and service providers’ fees arising from such
services and other advice, assistance or other representation, including those
in connection with any appellate proceedings, and all expenses, costs, charges
and other fees incurred by such counsel and others in connection with or
relating to any of the events or actions described in this Section 11.3, all of
which shall be payable, on demand, by Borrower to Agent.  Without limiting the
generality of the foregoing, such expenses, costs, charges and fees may include:
fees, costs and expenses of accountants, environmental advisors, appraisers,
investment bankers, management and other consultants and paralegals; court costs
and expenses; photocopying and duplication expenses; court reporter fees, costs
and expenses; long distance telephone charges; air express charges; telegram or
telecopy charges; secretarial overtime charges; and expenses for travel, lodging
and food paid or incurred in connection with the performance of such legal or
other advisory services.

 

11.4                           NO WAIVER.  AGENT’S OR ANY LENDER’S FAILURE, AT
ANY TIME OR TIMES, TO REQUIRE STRICT PERFORMANCE BY THE CREDIT PARTIES OF ANY
PROVISION OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL NOT WAIVE, AFFECT
OR DIMINISH ANY RIGHT OF AGENT OR SUCH LENDER THEREAFTER TO DEMAND STRICT
COMPLIANCE AND PERFORMANCE HEREWITH OR THEREWITH.  ANY SUSPENSION OR WAIVER OF
AN EVENT OF DEFAULT SHALL NOT SUSPEND, WAIVE OR AFFECT ANY OTHER EVENT OF
DEFAULT WHETHER THE SAME IS PRIOR OR SUBSEQUENT THERETO AND WHETHER THE SAME OR
OF A DIFFERENT TYPE.  SUBJECT TO THE PROVISIONS OF SECTION 11.2, NONE OF THE
UNDERTAKINGS, AGREEMENTS, WARRANTIES, COVENANTS AND REPRESENTATIONS OF ANY
CREDIT PARTY CONTAINED IN THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS AND
NO DEFAULT OR EVENT OF DEFAULT BY ANY CREDIT PARTY SHALL BE DEEMED TO HAVE BEEN
SUSPENDED OR WAIVED BY AGENT OR ANY LENDER, UNLESS SUCH WAIVER OR SUSPENSION IS
BY AN INSTRUMENT IN WRITING SIGNED BY AN OFFICER OF OR OTHER AUTHORIZED EMPLOYEE
OF AGENT AND THE APPLICABLE REQUIRED LENDERS AND DIRECTED TO BORROWER SPECIFYING
SUCH SUSPENSION OR WAIVER.

 

11.5                           REMEDIES.  AGENT’S AND LENDERS’ RIGHTS AND
REMEDIES UNDER THIS AGREEMENT SHALL BE CUMULATIVE AND NONEXCLUSIVE OF ANY OTHER
RIGHTS AND REMEDIES THAT AGENT OR ANY LENDER MAY HAVE UNDER ANY OTHER AGREEMENT,
INCLUDING THE OTHER LOAN DOCUMENTS, BY OPERATION OF LAW OR OTHERWISE.  RECOURSE
TO THE COLLATERAL SHALL NOT BE REQUIRED.

 

11.6                           SEVERABILITY.  WHEREVER POSSIBLE, EACH PROVISION
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE INTERPRETED IN SUCH A
MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION
OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE PROHIBITED BY OR INVALID
UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE INEFFECTIVE ONLY TO THE EXTENT OF
SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH
PROVISION OR THE REMAINING PROVISIONS OF THIS AGREEMENT OR SUCH OTHER LOAN
DOCUMENT.

 

11.7                           CONFLICT OF TERMS.  EXCEPT AS OTHERWISE PROVIDED
IN THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS BY SPECIFIC REFERENCE TO
THE APPLICABLE PROVISIONS OF THIS AGREEMENT, IF ANY PROVISION CONTAINED IN THIS
AGREEMENT CONFLICTS WITH ANY PROVISION IN ANY OF THE OTHER LOAN DOCUMENTS, THE
PROVISION CONTAINED IN THIS AGREEMENT SHALL GOVERN AND CONTROL.

 

11.8                           CONFIDENTIALITY.  AGENT AND EACH LENDER AGREE TO
USE COMMERCIALLY REASONABLE EFFORTS (EQUIVALENT TO THE EFFORTS AGENT OR SUCH
LENDER APPLIES TO MAINTAIN THE CONFIDENTIALITY OF ITS OWN CONFIDENTIAL
INFORMATION) TO MAINTAIN AS CONFIDENTIAL ALL CONFIDENTIAL INFORMATION PROVIDED
TO THEM BY THE CREDIT PARTIES AND DESIGNATED AS CONFIDENTIAL FOR A PERIOD OF 2
YEARS

 

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FOLLOWING RECEIPT THEREOF, EXCEPT THAT AGENT AND ANY LENDER MAY DISCLOSE SUCH
INFORMATION (A) TO PERSONS EMPLOYED OR ENGAGED BY AGENT OR SUCH LENDER,
INCLUDING ANY AGENTS THAT HAVE BEEN GRANTED ACCESS PURSUANT TO SECTION 1.14; (B)
TO ANY BONA FIDE ASSIGNEE OR PARTICIPANT OR POTENTIAL ASSIGNEE OR PARTICIPANT
THAT HAS AGREED TO COMPLY WITH THE COVENANT CONTAINED IN THIS SECTION 11.8 (AND
ANY SUCH BONA FIDE ASSIGNEE OR PARTICIPANT OR POTENTIAL ASSIGNEE OR PARTICIPANT
MAY DISCLOSE SUCH INFORMATION TO PERSONS EMPLOYED OR ENGAGED BY THEM AS
DESCRIBED IN CLAUSE (A) ABOVE); (C) AS REQUIRED OR REQUESTED BY ANY GOVERNMENTAL
AUTHORITY OR REASONABLY BELIEVED BY AGENT OR SUCH LENDER TO BE COMPELLED BY ANY
COURT DECREE, SUBPOENA OR LEGAL OR ADMINISTRATIVE ORDER OR PROCESS; (D) AS, ON
THE ADVICE OF AGENT’S OR SUCH LENDER’S COUNSEL, IS REQUIRED BY LAW; (E) IN
CONNECTION WITH THE EXERCISE OF ANY RIGHT OR REMEDY UNDER THE LOAN DOCUMENTS OR
IN CONNECTION WITH ANY LITIGATION TO WHICH AGENT OR SUCH LENDER IS A PARTY; OR
(F) THAT CEASES TO BE CONFIDENTIAL THROUGH NO FAULT OF AGENT OR ANY LENDER.

 

11.9                           GOVERNING LAW.  EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA.  EACH CREDIT PARTY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL
COURTS LOCATED IN NEW YORK COUNTY, CITY OF NEW YORK, NEW YORK SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE
CREDIT PARTIES, AGENT AND LENDERS PERTAINING TO THIS AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT AGENT, LENDERS AND
THE CREDIT PARTIES ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK COUNTY AND; PROVIDED, FURTHER THAT
NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE
ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT.  EACH CREDIT PARTY EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND EACH CREDIT PARTY HEREBY WAIVES ANY OBJECTION
THAT SUCH CREDIT PARTY MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF
SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.  EACH
CREDIT PARTY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO SUCH CREDIT PARTY AT THE ADDRESS SET FORTH IN ANNEX I OF THIS
AGREEMENT AND

 

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THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH CREDIT
PARTY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE UNITED
STATES MAILS, PROPER POSTAGE PREPAID.

 

11.10                     NOTICES.  EXCEPT AS OTHERWISE PROVIDED HEREIN,
WHENEVER IT IS PROVIDED HEREIN THAT ANY NOTICE, DEMAND, REQUEST, CONSENT,
APPROVAL, DECLARATION OR OTHER COMMUNICATION SHALL OR MAY BE GIVEN TO OR SERVED
UPON ANY OF THE PARTIES BY ANY OTHER PARTIES, OR WHENEVER ANY OF THE PARTIES
DESIRES TO GIVE OR SERVE UPON ANY OTHER PARTIES ANY COMMUNICATION WITH RESPECT
TO THIS AGREEMENT, EACH SUCH NOTICE, DEMAND, REQUEST, CONSENT, APPROVAL,
DECLARATION OR OTHER COMMUNICATION SHALL BE IN WRITING AND SHALL BE DEEMED TO
HAVE BEEN VALIDLY SERVED, GIVEN OR DELIVERED (A) UPON THE EARLIER OF ACTUAL
RECEIPT AND THREE (3) BUSINESS DAYS AFTER DEPOSIT IN THE UNITED STATES MAIL,
REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, WITH PROPER POSTAGE
PREPAID, (B) UPON TRANSMISSION, WHEN SENT BY TELECOPY OR OTHER SIMILAR FACSIMILE
TRANSMISSION (WITH SUCH TELECOPY OR FACSIMILE PROMPTLY CONFIRMED BY DELIVERY OF
A COPY BY PERSONAL DELIVERY OR UNITED STATES MAIL AS OTHERWISE PROVIDED IN THIS
SECTION 11.10); (C) ONE (1) BUSINESS DAY AFTER DEPOSIT WITH A REPUTABLE
OVERNIGHT COURIER WITH ALL CHARGES PREPAID OR (D) WHEN DELIVERED, IF
HAND-DELIVERED BY MESSENGER, ALL OF WHICH SHALL BE ADDRESSED TO THE PARTY TO BE
NOTIFIED AND SENT TO THE ADDRESS OR FACSIMILE NUMBER INDICATED IN ANNEX I OR TO
SUCH OTHER ADDRESS (OR FACSIMILE NUMBER) AS MAY BE SUBSTITUTED BY NOTICE GIVEN
AS HEREIN PROVIDED.  THE GIVING OF ANY NOTICE REQUIRED HEREUNDER MAY BE WAIVED
IN WRITING BY THE PARTY ENTITLED TO RECEIVE SUCH NOTICE.  FAILURE OR DELAY IN
DELIVERING COPIES OF ANY NOTICE, DEMAND, REQUEST, CONSENT, APPROVAL, DECLARATION
OR OTHER COMMUNICATION TO ANY PERSON (OTHER THAN BORROWER OR AGENT) DESIGNATED
IN ANNEX I TO RECEIVE COPIES SHALL IN NO WAY ADVERSELY AFFECT THE EFFECTIVENESS
OF SUCH NOTICE, DEMAND, REQUEST, CONSENT, APPROVAL, DECLARATION OR OTHER
COMMUNICATION.

 

11.11                     SECTION TITLES.  THE SECTION TITLES AND TABLE OF
CONTENTS CONTAINED IN THIS AGREEMENT ARE AND SHALL BE WITHOUT SUBSTANTIVE
MEANING OR CONTENT OF ANY KIND WHATSOEVER AND ARE NOT A PART OF THE AGREEMENT
BETWEEN THE PARTIES HERETO.

 

11.12                     COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN ANY
NUMBER OF SEPARATE COUNTERPARTS, EACH OF WHICH SHALL COLLECTIVELY AND SEPARATELY
CONSTITUTE ONE AGREEMENT.

 

11.13                     WAIVER OF JURY TRIAL.  BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES
DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE
LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE
JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE TO THE FULLEST
EXTENT PERMITTED BY LAW ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, AMONG AGENT, LENDERS AND ANY CREDIT PARTY ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH, THIS

 

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AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED
THERETO.

 

11.14                     PRESS RELEASES AND RELATED MATTERS.  EACH CREDIT PARTY
EXECUTING THIS AGREEMENT AGREES THAT NEITHER IT NOR ITS AFFILIATES WILL IN THE
FUTURE ISSUE ANY PRESS RELEASES OR OTHER PUBLIC DISCLOSURE USING THE NAME OF GE
CAPITAL OR ITS AFFILIATES OR REFERRING TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS WITHOUT AT LEAST TWO (2) BUSINESS DAYS’ PRIOR NOTICE TO GE CAPITAL AND
WITHOUT THE PRIOR WRITTEN CONSENT OF GE CAPITAL UNLESS (AND ONLY TO THE EXTENT
THAT) SUCH CREDIT PARTY OR AFFILIATE IS REQUIRED TO DO SO UNDER LAW AND THEN, IN
ANY EVENT, SUCH CREDIT PARTY OR AFFILIATE WILL CONSULT WITH GE CAPITAL BEFORE
ISSUING ANY PRESS RELEASE.  EACH CREDIT PARTY CONSENTS TO THE PUBLICATION BY
AGENT OR ANY LENDER OF A TOMBSTONE OR SIMILAR ADVERTISING MATERIAL RELATING TO
THE FINANCING TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.  AGENT OR SUCH LENDER
SHALL PROVIDE A DRAFT OF ANY SUCH TOMBSTONE OR SIMILAR ADVERTISING MATERIAL TO
EACH CREDIT PARTY FOR REVIEW AND COMMENT PRIOR TO THE PUBLICATION THEREOF. 
AGENT RESERVES THE RIGHT TO PROVIDE TO INDUSTRY TRADE ORGANIZATIONS INFORMATION
NECESSARY AND CUSTOMARY FOR INCLUSION IN LEAGUE TABLE MEASUREMENTS.

 

11.15                     REINSTATEMENT.  THIS AGREEMENT SHALL REMAIN IN FULL
FORCE AND EFFECT AND CONTINUE TO BE EFFECTIVE SHOULD ANY PETITION BE FILED BY OR
AGAINST ANY CREDIT PARTY FOR LIQUIDATION OR REORGANIZATION, SHOULD ANY CREDIT
PARTY BECOME INSOLVENT OR MAKE AN ASSIGNMENT FOR THE BENEFIT OF ANY CREDITOR OR
CREDITORS OR SHOULD A RECEIVER OR TRUSTEE BE APPOINTED FOR ALL OR ANY
SIGNIFICANT PART OF ANY CREDIT PARTY’S ASSETS, AND SHALL CONTINUE TO BE
EFFECTIVE OR TO BE REINSTATED, AS THE CASE MAY BE, IF AT ANY TIME PAYMENT AND
PERFORMANCE OF THE OBLIGATIONS, OR ANY PART THEREOF, IS, PURSUANT TO APPLICABLE
LAW, RESCINDED OR REDUCED IN AMOUNT, OR MUST OTHERWISE BE RESTORED OR RETURNED
BY ANY OBLIGEE OF THE OBLIGATIONS, WHETHER AS A “VOIDABLE PREFERENCE,”
“FRAUDULENT CONVEYANCE,” OR OTHERWISE, ALL AS THOUGH SUCH PAYMENT OR PERFORMANCE
HAD NOT BEEN MADE.  IN THE EVENT THAT ANY PAYMENT, OR ANY PART THEREOF, IS
RESCINDED, REDUCED, RESTORED OR RETURNED, THE OBLIGATIONS SHALL BE REINSTATED
AND DEEMED REDUCED ONLY BY SUCH AMOUNT PAID AND NOT SO RESCINDED, REDUCED,
RESTORED OR RETURNED.

 

11.16                     ADVICE OF COUNSEL.  EACH OF THE PARTIES REPRESENTS TO
EACH OTHER PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY,
THE PROVISIONS OF SECTIONS 11.9 AND 11.13, WITH ITS COUNSEL.

 

11.17                     NO STRICT CONSTRUCTION.  THE PARTIES HERETO HAVE
PARTICIPATED JOINTLY IN THE NEGOTIATION AND DRAFTING OF THIS AGREEMENT.  IN THE
EVENT AN AMBIGUITY OR QUESTION OF INTENT OR INTERPRETATION ARISES, THIS
AGREEMENT SHALL BE CONSTRUED AS IF DRAFTED JOINTLY BY THE PARTIES HERETO AND NO
PRESUMPTION OR BURDEN OF PROOF SHALL ARISE FAVORING OR DISFAVORING ANY PARTY BY
VIRTUE OF THE AUTHORSHIP OF ANY PROVISIONS OF THIS AGREEMENT.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first
written above.

 

 

BORROWER:

 

 

 

 

ROLLER BEARING COMPANY OF AMERICA,
INC., a Delaware corporation

 

 

 

 

 

 

 

By:

/s/Michael Gostomski

 

 

Name:

Michael Gostomski

 

 

Title:

 

Executive Vice President

 

 

 

 

 

GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and Lender

 

 

 

 

 

 

 

By:

/s/

Duly Authorized Signatory

 

 

 

Duly Authorized Signatory

 

 

 

 

 

CONGRESS FINANCIAL CORPORATION
(CENTRAL), as Lender

 

 

 

 

 

 

 

By:

/s/

Duly Authorized Signatory

 

 

 

Duly Authorized Signatory

 

[Signature Page to the Amended and Restated Credit Agreement]

 

--------------------------------------------------------------------------------

 

The following Persons are signatories to this Agreement in their capacity as
Credit Parties and not as Borrowers.

 

 

CREDIT PARTIES:

 

 

 

 

INDUSTRIAL TECTONICS BEARINGS
CORPORATION, a Delaware corporation

 

 

 

 

 

 

 

By:

/s/Michael Gostomski

 

 

Name:

Michael Gostomski

 

 

Title:

 

Executive Vice President

 

 

 

 

 

RBC NICE BEARINGS INC., a Delaware corporation

 

 

 

 

 

 

 

By:

/s/Michael Gostomski

 

 

Name:

Michael Gostomski

 

 

Title:

 

Executive Vice President

 

 

 

 

 

 

BREMEN BEARINGS, INC., a Delaware corporation

 

 

 

 

 

 

 

By:

/s/Michael Gostomski

 

 

Name:

Michael Gostomski

 

 

Title:

 

Executive Vice President

 

 

 

 

 

TYSON BEARING COMPANY, INC., a Delaware
corporation

 

 

 

 

 

 

 

By:

/s/Michael Gostomski

 

 

Name:

Michael Gostomski

 

 

Title:

 

Executive Vice President

 

 

 

 

 

RBC LINEAR PRECISION PRODUCTS, INC., a
Delaware corporation

 

 

 

 

 

 

 

By:

/s/Michael Gostomski

 

 

Name:

Michael Gostomski

 

 

Title:

 

Executive Vice President

 

 

 

 

 

MILLER BEARING COMPANY, INC., a Delaware
corporation

 

 

 

 

 

 

 

By:

/s/Michael Gostomski

 

 

Name:

Michael Gostomski

 

 

Title:

 

Executive Vice President

 

 

--------------------------------------------------------------------------------

 

 

RBC OKLAHOMA, INC., a Delaware
corporation

 

 

 

 

 

 

 

By:

/s/Michael Gostomski

 

 

Name:

Michael Gostomski

 

 

Title:

 

Executive Vice President

 

 

 

 

 

SCHAUBLIN HOLDING S.A., a corporation
incorporated under the laws of Switzerland

 

 

 

 

 

 

 

By:

/s/Michael Gostomski

 

 

Name:

Michael Gostomski

 

 

Title:

President

 

 

 

 

 

SCHAUBLIN S.A., a corporation incorporated under the
laws of Switzerland

 

 

 

 

 

 

 

By:

/s/Michael Gostomski

 

 

Name:

Michael Gostomski

 

 

Title:

President

 

 

 

 

 

ETABLISSEMENTS J. BOVAGNET S.A., a French
société anomyme

 

 

 

 

 

 

 

By:

/s/Michael Gostomski

 

 

Name:

Michael Gostomski

 

 

Title:

 

Authorized Person

 

 

 

 

 

RBC FRANCE SAS, a French société par actions
simplifiée

 

 

 

 

 

 

 

By:

/s/Michael Gostomski

 

 

Name:

Michael Gostomski

 

 

Title:

 

Authorized Person

 

 

--------------------------------------------------------------------------------

 

ANNEX A (Recitals)

to

CREDIT AGREEMENT

 

DEFINITIONS

 

Capitalized terms used in the Loan Documents shall have (unless otherwise
provided elsewhere in the Loan Documents) the following respective meanings and
all references to Sections, Exhibits, Schedules or Annexes in the following
definitions shall refer to Sections, Exhibits, Schedules or Annexes of or to the
Agreement:

 

“A Rated Bank” has the meaning ascribed to it in Section 6.2.

 

“Acceptable Foreign Currency” means Australian Dollars, Canadian Dollars,
Sterling, Euros or Swiss Francs.

 

“Account Debtor” means any Person who may become obligated to any Domestic
Credit Party or Schaublin under, with respect to, or on account of, an Account,
Chattel Paper or General Intangibles (including a payment intangible).

 

“Accounting Changes” has the meaning ascribed to it in Annex G.

 

“Accounts” means all “accounts,” as such term is defined in the Code, now owned
or hereafter acquired by any Credit Party, including (a) all accounts
receivable, other receivables, book debts and other forms of obligations (other
than forms of obligations evidenced by Chattel Paper or Instruments), (including
any such obligations that may be characterized as an account or contract right
under the Code), (b) all of each Credit Party’s rights in, to and under all
purchase orders or receipts for goods or services, (c) all of each Credit
Party’s rights to any goods represented by any of the foregoing (including
unpaid sellers’ rights of rescission, replevin, reclamation and stoppage in
transit and rights to returned, reclaimed or repossessed goods), (d) all rights
to payment due to any Credit Party for property sold, leased, licensed, assigned
or otherwise disposed of, for a policy of insurance issued or to be issued, for
a secondary obligation incurred or to be incurred, for energy provided or to be
provided, for the use or hire of a vessel under a charter or other contract,
arising out of the use of a credit card or charge card, or for services rendered
or to be rendered by such Credit Party or in connection with any other
transaction (whether or not yet earned by performance on the part of such Credit
Party), (e) all healthcare insurance receivables, and (f) all collateral
security of any kind, now or hereafter in existence, given by any Account Debtor
or other Person with respect to any of the foregoing.

 

“Acquisition” has the meaning ascribed to it in Section 6.1.

 

“Acquisition Company” means a Delaware corporation, limited liability company or
limited partnership that is a direct or indirect wholly-owned Subsidiary of
Borrower formed for the sole purpose of completing a Permitted Acquisition of a
Qualified Target.

 

A-1

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“Acquisition Compliance Certificate” has the meaning ascribed to it in Section
6.1(b)(xii).

 

“Acquisition Pro Forma” has the meaning ascribed to it in Section
6.1(b)(xiv)(A).

 

“Acquisition Projections” has the meaning ascribed to it in Section
6.1(b)(xiv)(B).

 

“Acquisition Subordinated Debt” means Indebtedness issued to seller(s) as
consideration for a Permitted Acquisition in an amount, on such terms, and
subordinated to the Obligations in a manner and form satisfactory to Agent and
Lenders in their reasonable discretion as to right and time of payment and as to
any other terms, rights and remedies thereunder, provided, that Borrower may
determine the maturity date thereof and Agent’s and Lenders’ discretion with
respect to subordination provisions shall not preclude a maturity date otherwise
permitted under Section 6.1 of the Agreement.

 

“Activation Event” and “Activation Notice” have the meanings ascribed thereto in
Annex C.

 

“Advance” means any Revolving Credit Advance or Swing Line Advance, as the
context may require.

 

“Adjusted EBITDA” means for any period with respect to Holdings, on a
consolidated basis, an amount equal to (i) EBITDA of Holdings, on a consolidated
basis, for such period, plus (ii) to the extent that the calculation thereof has
been approved by Agent (in consultation with Requisite Lenders) and to the
extent not included in such EBITDA, the aggregate EBITDA for such period on pro
forma basis of any Qualified Target of a Permitted Acquisition which closed
within such period (it being understood that any EBITDA of such Qualified Target
shall be included in the EBITDA of Holdings, on a consolidated basis, only for
those Fiscal Quarters in such period occurring prior to the closing of such
Permitted Acquisition, (iii) less the aggregate EBITDA of any Person or assets,
as the case may be, sold by the Holdings or any Subsidiary thereof (if such
EBITDA is positive), the sale of which closed during such period.

 

“Adjusted Funded Debt” means with respect to Holdings, without duplication, all
Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness that by its terms matures more than one year
from the date of creation thereof, or is directly or indirectly renewable or
extendible at Holdings’ option under a revolving credit or similar agreement
obligating the lender or lenders to extend credit over a period of more than one
year from the date of creation thereof, and specifically including Capital Lease
Obligations, current maturities of long-term debt, and also including Guaranteed
Indebtedness consisting of guaranties of Adjusted Funded Debt of other Person
and Letter of Credit Obligations plus outstanding preferred Stock of Holdings
which by its terms (or by the terms of any security which is convertible into it
or exchangeable for it) or upon the happening of an event:  (i) entitled its
holder to a dividend payable in cash or (ii) matures or is mandatorily
redeemable in whole or in part pursuant to a sinking funds obligation or
otherwise or is redeemable at the option of its holder, in whole or in part, on
or prior to the Termination Date less any unrestricted cash on hand of Holdings
and its Subsidiaries.  For purposes of this definition, the following
Indebtedness

 

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shall be excluded: (1) the Indebtedness of any other Person prior to the date it
became a Subsidiary of, or was merged into, Holdings or any Subsidiary of
Holdings; and (2) the Indebtedness of any other Person (other than a Subsidiary)
in which Holdings has an ownership interest.

 

“Affected Lender” has the meaning ascribed to it in Section 1.16(d).

 

“Affiliate” means, with respect to any Person, (a) each Person that, directly or
indirectly, owns or controls, whether beneficially, or as a trustee, guardian or
other fiduciary, 10% or more of the Stock having ordinary voting power in the
election of directors of such Person, (b) each Person that controls, is
controlled by or is under common control with such Person, (c) each of such
Person’s officers, directors, joint venturers and partners and (d) in the case
of Borrower, the immediate family members, spouses and lineal descendants of
individuals who are Affiliates of Borrower.  For the purposes of this
definition, “control” of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise; provided, however, that with respect to each Credit Party and its
Affiliates, the term “Affiliate” shall specifically exclude (i) Agent and each
Lender and their respective Affiliates and (ii) operating companies in which an
investment fund managed by Whitney & Co. or its Affiliates has an equity or debt
interest.

 

“Agent” means GE Capital in its capacity as Agent for Lenders or its successor
appointed pursuant to Section 9.7.

 

“Aggregate Borrowing Base” means as of any date of determination, an amount
equal to (i) the sum of the U.S. Borrowing Base and the Schaublin Borrowing
Base; less (ii) any Reserves except to the extent already deducted therefrom.

 

“Agreement” means the Credit Agreement by and among Borrower, the other Credit
Parties party thereto, GE Capital, as Agent and Lender and the other Lenders
from time to time party thereto, as the same may be amended, supplemented,
restated or otherwise modified from time to time.

 

“Appendices” has the meaning ascribed to it in the recitals to the Agreement.

 

“Applicable Availability Block” means the Dollar amount equal to the product of
$5,000,000 multiplied by (a) with respect to U.S. Borrowing Availability, a
fraction, the numerator of which is the U.S. Borrowing Base as of any date of
determination and the denominator of which is the sum of the U.S. Borrowing Base
and the Schaublin Borrowing Base, each as of such date of determination and
(b) with respect to Schaublin Borrowing Availability, a fraction, the numerator
of which is the Schaublin Borrowing Base as of any date of determination and the
denominator of which is the sum of the U.S. Borrowing Base and the Schaublin
Borrowing Base, each as of such date of determination.

 

“Applicable Margins” means collectively the Applicable Revolver Index Margin,
the Applicable Term Loan Index Margin, the Applicable Revolver LIBOR Margin and
the Applicable Term Loan LIBOR Margin.

 

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“Applicable Revolver Index Margin” means the per annum interest rate margin from
time to time in effect and payable in addition to the Index Rate applicable to
the Revolving Loans, as determined by reference to Section 1.5(a).

 

“Applicable Revolver LIBOR Margin” means the per annum interest rate from time
to time in effect and payable in addition to the LIBOR Rate applicable to the
Revolving Loans, as determined by reference to Section 1.5(a).

 

“Applicable Term Loan Index Margin” means the per annum interest rate from time
to time in effect and payable in addition to the Index Rate applicable to the
Term Loan, as determined by reference to Section 1.5(a).

 

“Applicable Term Loan LIBOR Margin” means the per annum interest rate from time
to time in effect and payable in addition to the LIBOR Rate applicable to the
Term Loan, as determined by reference to Section 1.5(a).

 

“Assignment Agreement” has the meaning ascribed to it in Section 9.1(a).

 

“Australian Dollar” means the lawful currency of Australia.

 

“Bankruptcy Code” means the provisions of Title 11 of the United States Code, 11
U.S.C. §§ 101 et seq.

 

“Blocked Accounts” has the meaning ascribed to it in Annex C.

 

“Borrower” has the meaning ascribed to it in the preamble to the Agreement.

 

“Borrower Assignment” has the meaning ascribed to it in Section 1.17(d).

 

“Borrower Pledge Agreement” means the Pledge Agreement dated as of the Closing
Date executed by Borrower in favor of Agent, on behalf of itself and Lenders,
pledging (i) all Stock of its Domestic Subsidiaries and 66% of the outstanding
Stock of RBC Schaublin Holdings S.A. and RBC de Mexico S de R.L. de CV, and (ii)
all Intercompany Notes owing to or held by it.

 

“Borrower Swiss Pledge Agreement” means the Pledge Agreement executed by
Borrower in favor of Agent, on behalf of itself and Lenders, dated as of the
Effective Date, pledging (i) all Stock of Schaublin Holding and (ii) all
Intercompany Notes owing to or held by it, governed by Swiss law.

 

“Borrowing Availability” means, as of any date of determination, the lesser of
(i) the Maximum Amount and (ii) the Aggregate Borrowing Base, in each case, less
the sum of the aggregate Revolving Loans and Swing Line Loan then outstanding.

 

“Borrowing Base” means U.S. Borrowing Base and Schaublin Borrowing Base or
either of them.

 

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“Borrowing Base Certificate” means a U.S. Borrowing Base Certificate and a
Schaublin Borrowing Base Certificate or either of them.

 

“Bovagnet” means Etablissements J. Bovagnet S.A., a French société anomyme and a
Subsidiary of Schaublin.

 

“Business Day” means any day that is not a Saturday, a Sunday or a day on which
banks are required or permitted to be closed in the States of Illinois and/or
New York and in reference to LIBOR Loans shall mean any such day that is also a
LIBOR Business Day.

 

“Canadian Dollar” means the lawful currency of Canada.

 

“Capital Expenditures” means, with respect to any Person, all expenditures (by
the expenditure of cash or the incurrence of Indebtedness) by such Person during
any measuring period for any fixed assets or improvements or for replacements,
substitutions or additions thereto, that have a useful life of more than one
year and that are required to be capitalized under GAAP, provided, that
expenditures for Permitted Acquisitions and reinvestment in assets in accordance
with the proviso of Section 1.3(b)(ii) shall not constitute Capital
Expenditures.

 

“Capital Lease” means, with respect to any Person, any lease of any property
(whether real, personal or mixed) by such Person as lessee that, in accordance
with GAAP, would be required to be classified and accounted for as a capital
lease on a balance sheet of such Person.

 

“Capital Lease Obligation” means, with respect to any Capital Lease of any
Person, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in respect
of such Capital Lease.

 

“Cash Collateral Account” has the meaning ascribed to it Annex B.

 

“Cash Equivalents” has the meaning ascribed to it in Annex B.

 

“Cash Management Systems” has the meaning ascribed to it in Section 1.8.

 

“Certificate of Exemption” has the meaning ascribed to it in Section 1.15.

 

“Change of Control” shall be deemed to have occurred if (a) (i) Michael J.
Hartnett and his Permitted Transferees shall cease to own directly or
indirectly, beneficially or of record (including indirectly through Hartnett
Family Investments, L.P.), those shares or rights to acquire those shares of
capital Stock of Holdings which entitle their holder to majority number of votes
(i.e., to that number of votes per share on all matters to be voted upon by
Holdings which entitle such holder, in the aggregate, to 51% of the voting power
of the issued and outstanding common Stock of Holdings), other than as a result
of the death or permanent disability of Michael J. Hartnett or the completion of
a Qualified Public Offering or (ii) such shares of Capital Stock cease to
entitle the holder thereof to such majority number of votes (either because a
Voting Event as defined in the charter of Holdings has occurred or otherwise);
(b) following the completion of a Qualified Public Offering, any person or group
(within the meaning of Rule 13d-5 of the Securities Exchange Act of 1934) other
than Michael J. Hartnett and/or his Permitted

 

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Transferees, funds managed by Affiliates of Whitney & Co. or one or more equity
sponsors with funds under management of at least $500,000,000, shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by
the Securities and Exchange Commission under the Securities Exchange Act of
1934) of 30% or more of the issued and outstanding shares of capital Stock of
Holdings under ordinary circumstances; (c) during any period of twelve
consecutive calendar months, individuals who at the beginning of such period
constituted the board of directors of Holdings (together with any new directors
whose election by the board of directors of Holdings or whose nomination for
election by the Stockholders of Holdings was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason other than death or disability to
constitute a majority of the directors then in office; (d) funds managed by
Affiliates of Whitney & Co. and/or one or more equity sponsors with funds under
management of at least $500,000,000 ceases to own directly or indirectly,
beneficially or of record shares representing at least 50.1% of the Stock (on a
fully diluted basis) of Holdings other than as a result of Qualified Public
Offering; (e) Holdings ceases to own and control all of the economic and voting
rights associated with all of the outstanding capital Stock of Borrower; (f)
Borrower ceases to own, directly or indirectly, and control all of the economic
and voting rights associated with all of the outstanding capital Stock of any of
its Subsidiaries other than as a result of a dissolution of a Subsidiary
resulting in the distribution of its assets to Borrower or the merger of any
Subsidiary with Borrower or another Subsidiary of Borrower and other than
directors’ qualifying shares and up to 10% of the shares of Bovagnet or RBC
France owned by its management, or (g) any change in control (or similar event,
however denominated) with respect to Holdings, Borrower or any Subsidiary shall
occur under and as defined in any indenture or agreement to which Holdings,
Borrower or any Subsidiary is a party in respect of Indebtedness in an aggregate
original principal amount in excess of $3,000,000 which results in a default or
an event of default thereunder or an obligation to prepay or redeem all or any
material portion of such Indebtedness unless irrevocably waived by the holders
thereof.

 

“Charges” means all federal, state, county, city, municipal, local, foreign or
other governmental taxes (including taxes owed to the PBGC at the time due and
payable), levies, assessments, charges, liens, claims or encumbrances upon or
relating to (a) the Collateral, (b) the Obligations, (c) the employees, payroll,
income or gross receipts of any Credit Party, (d) any Credit Party’s ownership
or use of any properties or other assets, or (e) any other aspect of any Credit
Party’s business.

 

“Chattel Paper” means any “chattel paper,” as such term is defined in the Code,
including electronic chattel paper, now owned or hereafter acquired by any
Credit Party, wherever located.

 

“Closing Checklist” means the schedule, including all appendices, exhibits or
schedules thereto, listing certain documents and information to be delivered in
connection with the Agreement, the other Loan Documents and the transactions
contemplated thereunder, substantially in the form attached hereto as Annex D.

 

“Closing Date” means May 30, 2002.

 

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“Code” means the Uniform Commercial Code as the same may, from time to time, be
enacted and in effect in the State of New York; provided, that to the extent
that the Code is used to define any term herein or in any Loan Document and such
term is defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Article or Division 9 shall govern;
provided, further, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection or priority of, or remedies with
respect to, Agent’s or any Lender’s Lien on any Collateral is governed by the
Uniform Commercial Code as enacted and in effect in a jurisdiction other than
the State of New York, the term “Code” shall mean the Uniform Commercial Code as
enacted and in effect in such other jurisdiction solely for purposes of the
provisions thereof relating to such attachment, perfection, priority or remedies
and for purposes of definitions related to such provisions.

 

“Collateral” means the U.S. Collateral and the Foreign Collateral or either of
them.

 

“Collateral Documents” means the U.S. Collateral Documents and the Foreign
Collateral Documents or any of them.

 

“Collateral Reports” means the reports with respect to the Collateral referred
to in Annex F.

 

“Collection Account” means that certain account of Agent, account number
502-328-54 in the name of Agent at DeutscheBank Trust Company Americas in New
York, New York ABA No. 021 001 033, or such other account as may be specified in
writing by Agent as the “Collection Account.”

 

“Collection Account (Government Receivables)” means that certain account of
Agent, account number 50-272-522 in the name of Agent at DeutscheBank Trust
Company Americas, ABA No. 021 001 033 or such other account as may be, specified
by Agent as the “Collection Account (Government Receivables)”.

 

“Commitment Termination Date” means the earliest of (a) May 30, 2007, (b) the
date of termination of Lenders’ obligations to make Advances and to incur Letter
of Credit Obligations or permit existing Loans to remain outstanding pursuant to
Section 8.2(b), and (c) the date of indefeasible prepayment in full by Borrower
of the Loans and the cancellation and return (or stand-by guaranty) of all
Letters of Credit or the cash collateralization of all Letter of Credit
Obligations pursuant to Annex B, and the permanent reduction of the Commitments
to zero dollars ($0).

 

“Commitments” means (a) as to any Lender, the aggregate of such Lender’s
Revolving Loan Commitments (including without duplication the Swing Line
Lender’s Swing Line Commitment as a subset of its U.S. Revolving Loan
Commitment) and Term Loan Commitment as set forth on Annex J to the Agreement or
in the most recent Assignment Agreement executed by such Lender and (b) as to
all Lenders, the aggregate of all Lenders’ Revolving Loan Commitments (including
without duplication the Swing Line Lender’s Swing Line Commitment as a subset of
its U.S. Revolving Loan Commitment) and Term Loan Commitments, which aggregate
commitment shall be Ninety-Four Million Dollars ($94,000,000)

 

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on the Effective Date, as to each of clauses (a) and (b), as such Commitments
may be reduced, amortized or adjusted from time to time in accordance with the
Agreement.

 

“Compliance Certificate” has the meaning ascribed to it in Annex E.

 

“Component Parts” means parts machined at Borrower’s or a Secured Guarantor’s
facility which are placed in storage for later assembly.

 

“Concentration Account” has the meaning ascribed to it in Annex C.

 

“Contracts” means all “contracts,” as such term is defined in the Code, now
owned or hereafter acquired by any Credit Party, in any event, including all
contracts, undertakings, or agreements (other than rights evidenced by Chattel
Paper, Documents or Instruments) in or under which any Credit Party may now or
hereafter have any right, title or interest, including any agreement relating to
the terms of payment or the terms of performance of any Account.

 

“Control Letter” means a letter agreement between Agent and (i) the issuer of
uncertificated securities with respect to uncertificated securities in the name
of any Credit Party, (ii) a securities intermediary with respect to securities,
whether certificated or uncertificated, securities entitlements and other
financial assets held in a securities account in the name of any Credit Party,
(iii) a futures commission merchant or clearing house, as applicable, with
respect to commodity accounts and commodity contracts held by any Credit Party,
whereby, among other things, the issuer, securities intermediary or futures
commission merchant disclaims any security interest in the applicable financial
assets, acknowledges the Lien of Agent, on behalf of itself and Lenders, on such
financial assets, and agrees to follow the instructions or entitlement orders of
Agent without further consent by the affected Credit Party.

 

“Copyright License” means any and all rights now owned or hereafter acquired by
any Credit Party under any written agreement granting any right to use any
Copyright or Copyright registration.

 

“Copyright Security Agreements” means the Copyright Security Agreements made in
favor of Agent, on behalf of itself and Lenders, by each applicable Credit
Party.

 

“Copyrights” means all of the following now owned or hereafter adopted or
acquired by any Credit Party: (a) all copyrights and General Intangibles of like
nature (whether registered or unregistered), all registrations and recordings
thereof, and all applications in connection therewith, including all
registrations, recordings and applications in the United States Copyright Office
or in any similar office or agency of the United States, any state or territory
thereof, or any other country or any political subdivision thereof, and (b) all
reissues, extensions or renewals thereof.

 

“Costing Reserve” means a reserve with respect to the variance between the
perpetual cost of Inventory and the invoice cost of Inventory.

 

“Credit Parties” means the Domestic Credit Parties and the Foreign Credit
Parties.

 

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“Default” means any event that, with the passage of time or notice or both,
would, unless cured or waived, become an Event of Default.

 

“Default Rate” has the meaning ascribed to it in Section 1.5(d).

 

“Deposit Accounts” means all “deposit accounts” as such term in defined in the
Code, now or hereafter held in the name of any Credit Party.

 

“Disbursement Accounts” has the meaning ascribed to it in Annex C.

 

“Disclosure Schedules” means the Schedules prepared by Borrower and denominated
as Disclosure Schedules (1.4) through (6.7) in the Index to the Agreement.

 

“Discount Debentures” means those certain 13% Senior Discount Debentures Due
2009 issued by Holdings in an aggregate original principal amount of $74,882,000
pursuant to that certain Indenture dated as of June 15, 1997 between Holdings,
as issuer, and United States Trust Company of New York, as trustee (the
“Discount Debentures Indenture”).

 

“Discount Debentures Documents” means the Discount Debentures, the Discount
Debentures Indenture and any other instrument, document or agreement delivered
pursuant thereto or in connection therewith.

 

“Discount Debentures Indenture” has the meaning ascribed to it in the definition
of the Discount Debentures.

 

“Dividends” has the meaning ascribed to it in Section 6.14.

 

“Documents” means any “documents,” as such term is defined in the Code, now
owned or hereafter acquired by any Credit Party, wherever located.

 

“Dollar Equivalent” means the amount of Dollars, as of any date of
determination, into which any Acceptable Foreign Currency can be converted in
accordance with Section 1.18.

 

“Dollars” or “$” means lawful currency of the United States of America.

 

“Domestic” means, as to any Person, a Person which is created or organized under
the laws of the United States of America, any of its states or the District of
Columbia.

 

“Domestic Credit Parties” means Borrower and its Domestic Subsidiaries.

 

“EBITDA” means, with respect to any Person for any fiscal period, without
duplication, an amount equal to (a) consolidated net income of such Person for
such period, determined in accordance with GAAP, minus (b) the sum of (i) income
tax credits, (ii) interest income, (iii) gain from extraordinary items for such
period, (iv) any aggregate net gain during such period arising from the sale,
exchange or other disposition of capital assets of such Person, and (v) any
other non-cash gains that have been added in determining consolidated net
income, in each case to the extent included in the calculation of consolidated
net income of such Person for such period in accordance with GAAP, but without
duplication, plus (c) the sum of (i) any

 

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provision for income taxes, (ii) Interest Expense, (iii) loss from extraordinary
items for such period, (iv) depreciation and amortization for such period, (v)
amortized debt discount for such period, (vi) the amount of any deduction to
consolidated net income as the result of any grant of any Stock or equity rights
to any employee of such Person, in each case to the extent included in the
calculation of consolidated net income of such Person for such period in
accordance with GAAP, but without duplication, (vii) any aggregate net loss
during such period arising from the sale, exchange or other disposition of
capital assets of such Person, (viii) with the consent of Agent, which shall not
be unreasonably withheld, any non-recurring losses or charges that have been
deducted from the consolidated net income of such Person in accordance with
GAAP, and (ix) the amount of any reduction to the consolidated net income of
Holdings as the result of the Restricted Payment described and permitted
pursuant to Section 6.14(a)(iv).  For purposes of this definition, the following
items shall be excluded in determining consolidated net income of a Person:  (1)
the income (or deficit) of any other Person accrued prior to the date it became
a Subsidiary of, or was merged or consolidated into, such Person or any of such
Person’s Subsidiaries; (2) the income (or deficit) of any other Person (other
than a Subsidiary) in which such Person has an ownership interest, except to the
extent any such income has actually been received by such Person in the form of
cash dividends or distributions; (3) the undistributed earnings of any
Subsidiary of such Person to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any contractual obligation or requirement of law
applicable to such Subsidiary; (4) any restoration to income of any contingency
reserve, except to the extent that provision for such reserve was made out of
income accrued during such period; (5) any write-down of assets (other than
Accounts or Inventory) and any write-down of goodwill (to the extent it is a
write-down of goodwill only), or write-up of any asset; (6) any net gain from
the collection of the proceeds of life insurance policies; (7) any net gain
arising from the acquisition of any securities, or the extinguishment, under
GAAP, of any Indebtedness, of such Person, (8) in the case of a successor to
such Person by consolidation or merger or as a transferee of its assets, any
earnings of such successor prior to such consolidation, merger or transfer of
assets, (9) any deferred credit representing the excess of equity in any
Subsidiary of such Person at the date of acquisition of such Subsidiary over the
cost to such Person of the investment in such Subsidiary, and (10) any other
non-cash expenses or deductions in connection with the issuances or
modifications of stock options or rights issued to employees or directors.

 

“Effective Date” means June 19, 2003.

 

“Effective Date Transactions” means the following transactions, all of which
shall be deemed to have occurred concurrently on the Effective Date:  (i) the
principal balance of the Revolving Loan outstanding immediately prior to the
Effective Date shall be deemed to have been repaid in the amount of $4,138,244,
(ii)  the initial borrowing under the Schaublin Revolving Loan in the amount of
$4,138,244 shall be deemed to have been funded, (iii) the proceeds of such
borrowing shall be deemed to have been applied to repay the outstanding
principal balance of the Existing Schaublin Holding Intercompany Loans and the
Existing Schaublin Intercompany Loans in the amount of $4,138,244, and new
intercompany loans in the amount of such repayment shall be deemed to be have
been made by Borrower to Schaublin Holding as permitted under Sections 6.2(f)
and by Schaublin Holding to Schaublin as permitted under Section 6.2(g) and (iv)
the portion of the Revolving Loan outstanding immediately prior

 

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on the Effective Date which remains after the prepayment in the above clause (i)
shall be deemed to have been converted to the U.S. Revolving Loan.

 

 “Eligible Accounts – Schaublin” has the meaning ascribed to it in Section
1.6(b) of the Agreement.

 

“Eligible Accounts-U.S.” has the meaning ascribed to it in Section 1.6(a) of the
Agreement.

 

“Eligible Inventory – Schaublin” has the meaning ascribed to it in Section
1.7(b) of the Agreement.

 

“Eligible Inventory – U.S.” has the meaning ascribed to it in Section 1.7(a) of
the Agreement.

 

“Environmental Indemnity Agreement” means that certain Environmental Indemnity
Agreement, dated the date hereof, by the Credit Parties in favor of Agent on
behalf of the Lenders.

 

“Environmental Laws” means all applicable federal, state, local and foreign
laws, statutes, ordinances, codes, rules, standards and regulations, now or
hereafter in effect, and any applicable judicial or administrative
interpretation thereof, including any applicable judicial or administrative
order, consent decree, order or judgment, imposing liability or standards of
conduct for or relating to the regulation and protection of human health,
safety, the environment and natural resources (including ambient air, surface
water, groundwater, wetlands, land surface or subsurface strata, wildlife,
aquatic species and vegetation).  Environmental Laws include the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. §§
9601 et seq.) (“CERCLA”); the Hazardous Materials Transportation Authorization
Act of 1994 (49 U.S.C. §§ 5101 et seq.); the Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C. §§ 136 et seq.); the Solid Waste Disposal Act (42
U.S.C. §§ 6901 et seq.); the Toxic Substance Control Act (15 U.S.C. §§ 2601 et
seq.); the Clean Air Act (42 U.S.C. §§ 7401 et seq.); the Federal Water
Pollution Control Act (33 U.S.C. §§ 1251 et seq.); the Occupational Safety and
Health Act (29 U.S.C. §§ 651 et seq.); and the Safe Drinking Water Act (42
U.S.C. §§ 300(f) et seq.), and any and all regulations promulgated thereunder,
and all analogous state, local and foreign counterparts or equivalents and any
transfer of ownership notification or approval statutes relating to or stemming
from environmental matters.

 

“Environmental Liabilities” means, with respect to any Person, all liabilities,
obligations, responsibilities, response, remedial and removal costs,
investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts
and consultants), fines, penalties, sanctions and interest incurred as a result
of or related to any claim, suit, action, investigation, proceeding or demand by
any Person, whether based in contract, tort, implied or express warranty, strict
liability, criminal or civil statute or common law arising under or related to
any Environmental Laws, Environmental Permits, or in connection with any Release

 

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or threatened Release or presence of a Hazardous Material whether on, at, in,
under, from or about or in the vicinity of any real or personal property.

 

“Environmental Permits” means all permits, licenses, authorizations,
certificates, approvals or registrations required by any Governmental Authority
under any Environmental Laws.

 

“Equipment” means all “equipment,” as such term is defined in the Code, now
owned or hereafter acquired by any Credit Party, wherever located and, in any
event, including all such Credit Party’s machinery and equipment, including
processing equipment, conveyors, machine tools, data processing and computer
equipment, including embedded software and peripheral equipment and all
engineering, processing and manufacturing equipment, office machinery,
furniture, materials handling equipment, tools, attachments, accessories,
automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor
vehicles, rolling stock and other equipment of every kind and nature, trade
fixtures and fixtures not forming a part of real property, together with all
additions and accessions thereto, replacements therefor, all parts therefor, all
substitutes for any of the foregoing, fuel therefor, and all manuals, drawings,
instructions, warranties and rights with respect thereto, and all products and
proceeds thereof and condemnation awards and insurance proceeds with respect
thereto.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and any regulations promulgated thereunder.

 

“ERISA Affiliate” means, with respect to any Domestic Credit Party, any trade or
business (whether or not incorporated) that, together with such Credit Party,
are treated as a single employer within the meaning of Sections 414(b), (c), (m)
or (o) of the IRC.

 

“ERISA Event” means, with respect to any Domestic Credit Party or any ERISA
Affiliate, (a) any event described in Section 4043(c) of ERISA with respect to a
Title IV Plan; (b) the withdrawal of any Credit Party or ERISA Affiliate from a
Title IV Plan subject to Section 4063 of ERISA during a plan year in which it
was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (c) the
complete or partial withdrawal of any Domestic Credit Party or any ERISA
Affiliate from any Multiemployer Plan; (d) the filing of a notice of intent to
terminate a Title IV Plan or the treatment of a plan amendment as a termination
under Section 4041 of ERISA; (e) the institution of proceedings to terminate a
Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure by any Domestic
Credit Party or ERISA Affiliate to make when due required contributions to a
Multiemployer Plan or Title IV Plan unless such failure is cured within 30 days;
(g) any other event or condition that might reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Title IV Plan or Multiemployer Plan or for the
imposition of liability under Section 4069 or 4212(c) of ERISA; (h) the
termination of a Multiemployer Plan under Section 4041A of ERISA or the
reorganization or insolvency of a Multiemployer Plan under Section 4241 or 4245
of ERISA; or (i) the loss of a Qualified Plan’s qualification or tax exempt
status; or (j) the termination of a Plan described in Section 4064 of ERISA.

 

“ESOP” means a Plan that is intended to satisfy the requirements of Section
4975(e)(7) of the IRC.

 

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“Euro”, “euro” or “euros” means the single currency of Participating Member
States.

 

“Event of Default” has the meaning ascribed to it in Section 8.1.

 

“Event of Loss” means, with respect to any property, any of the following: 
(a) any loss, destruction or damage of such property; (b) any condemnation or
seizure of such property or for the exercise of any right of eminent domain; or
(c) any actual condemnation, seizure or taking, by exercise of the power of
eminent domain or otherwise, of such property, or confiscation of such property
or the requisition of the use of such property.

 

“Existing Credit Agreement” means the Credit Agreement dated as of June 23, 1997
among Borrower, Prior Lenders and Credit Suisse First Boston, as administrative
agent for Prior Lenders, as amended.

 

“Existing French Intercompany Loans” has the meaning ascribed to it in Section
3.28.

 

“Existing Schaublin Holding Intercompany Loans” has the meaning ascribed to it
in Section 3.28.

 

“Existing Schaublin Intercompany Loans” has the meaning ascribed to it in
Section 3.28.

 

“Fair Labor Standards Act” means the Fair Labor Standards Act, 29 U.S.C. §201 et
seq.

 

“Federal Funds Rate” means, for any day, a floating rate equal to the weighted
average of the rates on overnight federal funds transactions among members of
the Federal Reserve System, as determined by Agent in its sole discretion, which
determination shall be final, binding and conclusive (absent manifest error).

 

“Federal Reserve Board” means the Board of Governors of the Federal Reserve
System.

 

“Fees” means any and all fees payable to Agent or any Lender pursuant to the
Agreement or any of the other Loan Documents.

 

“Financial Covenants” means the financial covenants set forth in Annex G.

 

“Financial Statements” means the consolidated and consolidating income
statements, statements of cash flows and balance sheets of Borrower delivered in
accordance with Section 3.4 and Annex E.

 

“Fiscal Month” means any of the monthly accounting periods of Borrower.

 

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“Fiscal Quarter” means any of the quarterly accounting periods of Borrower,
ending on the last Saturday of June, September, and December and on the Saturday
closest to March 31 of each year.

 

“Fiscal Year” means any of the annual accounting periods of Borrower ending on
the Saturday closest to March 31 of each year.

 

“Fixed Charges” means, with respect to Holdings, on a consolidated basis, for
any fiscal period, an amount equal to the sum of (a) the aggregate of all cash
Interest Expense paid or accrued during such period (excluding original issue
discount and interest paid by the issuance of any payment-in-kind notes) plus
(b) scheduled payments of principal with respect to Indebtedness during such
period other than Acquisition Subordinated Debt as to which a Reserve has been
established, plus (c) payments on earn-outs to sellers in connection with a
Permitted Acquisition, unless such earn-outs are deducted in the calculation of
EBITDA during the relevant period or a Reserve with respect thereto has been
established, including a Reserve with respect to Acquisition Subordinated Debt,
plus (d) the aggregate of all redemptions, purchases, retirements, defeasances,
sinking fund or similar payments or acquisitions for value with respect to
Indebtedness (other than payments made for Redemptions to the extent such
payments for Redemptions after the Closing Date are less than $30,000,000 in the
aggregate) plus (d) dividends paid in cash.  For purposes of this definition,
the following Fixed Charges shall be excluded: (1) the Fixed Charges of any
other Person prior to the date it became a Subsidiary of, or was merged or
consolidated into, such Person or any of such Person’s Subsidiaries, and (2) the
Fixed Charges of any other Person (other than a Subsidiary) in which such Person
has an ownership interest.  For purposes of calculating Fixed Charges for
measuring periods ending within 1 year after the Closing Date, scheduled
payments of principal shall be deemed to have been $1,428,570 per Fiscal Quarter
prior to September 30, 2002.

 

“Fixed Charge Coverage Ratio” means, with respect to any Person for any fiscal
period, the ratio of (a) EBITDA less Capital Expenditures (other than that
portion of Capital Expenditures financed by third party loans) and income taxes
paid in cash to (b) Fixed Charges.

 

“Fixtures” means all “fixtures” as such term is defined in the Code, now owned
or hereafter acquired by any Credit Party.

 

“Foreign” means, as to any Person, a Person which is not created or organized
under the laws of the United States of America, or any of its states or the
District of Columbia.

 

“Foreign Collateral” means the property of the RBC Swiss Group Members covered
by Foreign Collateral Documents and any other property of RBC Swiss Group
Members, real or personal, tangible or intangible, now existing or hereafter
acquired, that may at any time be or become subject to a security interest or
Lien securing repayment of the Schaublin Intercompany Loans and French
Intercompany Loans (and, by assignment, securing Obligations under the Loan
Documents).

 

“Foreign Collateral Documents” means the Schaublin Swiss Pledge Agreement, the
Schaublin French Pledge Agreement (RBC France), the Schaublin French Pledge
Agreement (Bovagnet), the Schaublin Holding Pledge Agreement, the Swiss
Warehouse Control Agreement

 

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and all similar agreements entered into granting a Lien upon property as
security for repayment of the Schaublin Intercompany Loans and French
Intercompany Loans (and, by assignment, securing Obligations under the Loan
Documents).

 

“Foreign Credit Parties” means, collectively, Schaublin Holding, Schaublin, RBC
France and Bovagnet and “Foreign Credit Party” means any of the foregoing.

 

“Foreign Lender” has the meaning ascribed to it in Section 1.15.

 

“French Intercompany Loans” has the meaning ascribed to it in Section 6.2(h).

 

“French Operating Companies” means, collectively, Bovagnet and RBC France and
“French Operating Company” means either of the foregoing.

 

“Funded Debt” means, with respect to any Person, without duplication, all
Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness that by its terms matures more than one year
from, or is directly or indirectly renewable or extendible at such Person’s
option under a revolving credit or similar agreement obligating the lender or
lenders to extend credit over a period of more than one year from the date of
creation thereof, and specifically including Capital Lease Obligations, current
maturities of long-term debt, revolving credit and short-term debt extendible
beyond one year at the option of the debtor, and also including, in the case of
Borrower, the Obligations and, without duplication, Guaranteed Indebtedness
consisting of guaranties of Funded Debt of other Persons.

 

“GAAP” means generally accepted accounting principles in the United States of
America, consistently applied, as such term is further defined in Annex G to the
Agreement provided, that with respect to the financial computations in the
internal books and records of the Foreign Credit Parties, any reference to GAAP
shall mean legally required accounting principles in Switzerland or France, as
applicable.

 

“GE Capital” means General Electric Capital Corporation, a Delaware corporation.

 

“GE Capital Fee Letter” means that certain letter, dated as of February 26,
2002, between GE Capital and Borrower with respect to certain Fees to be paid
from time to time by Borrower to GE Capital.

 

“General Intangibles” means all “general intangibles,” as such term is defined
in the Code, now owned or hereafter acquired by any Credit Party, including all
right, title and interest that such Credit Party may now or hereafter have in or
under any Contract, all payment intangibles, customer lists, Licenses,
Copyrights, Trademarks, Patents, and all applications therefor and reissues,
extensions or renewals thereof, rights in Intellectual Property, interests in
partnerships, joint ventures and other business associations, licenses, permits,
copyrights, trade secrets, proprietary or confidential information, inventions
(whether or not patented or patentable), technical information, procedures,
designs, knowledge, know-how, software, data bases, data, skill, expertise,
experience, processes, models, drawings, materials and records, goodwill
(including the goodwill associated with any Trademark or Trademark License), all
rights and claims in or under insurance policies (including insurance for fire,
damage, loss and

 

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casualty, whether covering personal property, real property, tangible rights or
intangible rights, all liability, life, key man and business interruption
insurance, and all unearned premiums), uncertificated securities, choses in
action, deposit, checking and other bank accounts, rights to receive tax refunds
and other payments, rights to receive dividends, distributions, cash,
Instruments and other property in respect of or in exchange for pledged Stock
and Investment Property, rights of indemnification, all books and records,
correspondence, credit files, invoices and other papers, including without
limitation all tapes, cards, computer runs and other papers and documents in the
possession or under the control of such Credit Party or any computer bureau or
service company from time to time acting for such Credit Party.

 

“Goods” means all “goods” as defined in the Code, now owned or hereafter
acquired by any Credit Party, wherever located, including embedded software to
the extent included in “goods” as defined in the Code, manufactured homes,
standing timber that is cut and removed for sale and unborn young of animals.

 

“Governmental Authority” means any nation or government, any state or other
political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

 

“Granting Lender” has the meaning ascribed to it in Section 9.1(g).

 

“Guaranteed Indebtedness” means, as to any Person, any obligation of such Person
guaranteeing, providing comfort or otherwise supporting any Indebtedness, lease,
dividend, or other obligation (“primary obligation”) of any other Person (the
“primary obligor”) in any manner, including any obligation or arrangement of
such Person to (a) purchase or repurchase any such primary obligation,
(b) advance or supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
condition of the primary obligor, (c) purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, (d) protect the beneficiary of such arrangement from loss (other
than product warranties given in the ordinary course of business) or
(e) indemnify the owner of such primary obligation against loss in respect
thereof.  The amount of any Guaranteed Indebtedness at any time shall be deemed
to be an amount equal to the lesser at such time of (x) the stated or
determinable amount of the primary obligation in respect of which such
Guaranteed Indebtedness is incurred and (y) the maximum amount for which such
Person may be liable pursuant to the terms of the instrument embodying such
Guaranteed Indebtedness, or, if not stated or determinable, the maximum
reasonably anticipated liability (assuming full performance) in respect thereof.

 

“Guaranties” means, collectively, each Subsidiary Guaranty and any other
guaranty executed by any Guarantor in favor of Agent and Lenders in respect of
the Obligations.

 

“Guarantors” means each Secured Guarantor and each other Person, if any, that
executes a guaranty or other similar agreement in favor of Agent, for itself and
the ratable benefit of Lenders, in connection with the transactions contemplated
by the Agreement and the other Loan Documents.

 

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“Hazardous Material” means any substance, material or waste that is regulated
by, or forms the basis of liability now or hereafter under, any Environmental
Laws, including any material or substance that is (a) defined as a “solid
waste,” “hazardous waste,” “hazardous material,” “hazardous substance,”
“extremely hazardous waste,”  “restricted hazardous waste,” “pollutant,”
“contaminant,” “hazardous constituent,” “special waste,” “toxic substance” or
other similar term or phrase under any Environmental Laws, or (b) petroleum or
any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB’s),
or any radioactive substance.

 

“Holdings” means Roller Bearing Holding Company, Inc., a Delaware corporation.

 

“Immediate Family” with respect to any individual, shall mean his brothers,
sisters, spouse, children (including adopted children), parents, parents-in-law,
grandchildren, great grandchildren and other lineal descendants and spouses of
any of the foregoing.

 

“Indebtedness” means, with respect to any Person, without duplication (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property payment for which is deferred 12 months or more, but excluding
obligations to trade creditors incurred in the ordinary course of business that
are unsecured and not overdue by more than 6 months unless being contested in
good faith, (b) all reimbursement and other obligations with respect to letters
of credit, bankers’ acceptances and surety bonds, whether or not matured, (c)
all obligations evidenced by notes, bonds, debentures or similar instruments,
(d) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (e)
all Capital Lease Obligations and the present value (discounted at the Index
Rate as in effect on the Closing Date) of future rental payments under all
synthetic leases, (f) all obligations of such Person under commodity purchase or
option agreements or other commodity price hedging arrangements, in each case
whether contingent or matured, (g) all obligations of such Person under any
foreign exchange contract, currency swap agreement, interest rate swap, cap or
collar agreement or other similar agreement or arrangement designed to alter the
risks of that Person arising from fluctuations in currency values or interest
rates, in each case whether contingent or matured, (h) all Indebtedness referred
to above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon or in
property or other assets (including accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness, and (i) the Obligations.

 

“Indemnified Liabilities” has the meaning ascribed to it in Section 1.13.

 

“Indemnified Person” has the meaning ascribed to it in Section 1.13.

 

“Index Rate” means, for any day, a floating rate equal to the higher of (i) the
rate publicly quoted from time to time by The Wall Street Journal as the “base
rate on corporate loans posted by at least 75% of the nation’s 30 largest banks”
(or, if The Wall Street Journal ceases quoting a base rate of the type
described, the highest per annum rate of interest published by the Federal
Reserve Board in Federal Reserve statistical release H.15 (519) entitled
“Selected

 

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Interest Rates” as the Bank prime loan rate or its equivalent), and (ii) the
Federal Funds Rate plus 50 basis points per annum.  Each change in any interest
rate provided for in the Agreement based upon the Index Rate shall take effect
at the time of such change in the Index Rate.

 

“Index Rate Loan” means a Loan or portion thereof bearing interest by reference
to the Index Rate.

 

“Industrial Revenue Bond Financing” means financing of acquisition of real
estate and improvements thereto, Fixtures and Equipment involved in industrial
or commercial projects from proceeds of tax-exempt or taxable bonds issues by
state or local government agency.

 

“Instruments” means all “instruments,” as such term is defined in the Code, now
owned or hereafter acquired by any Credit Party, wherever located, and, in any
event, including all certificated securities, all certificates of deposit, and
all promissory notes and other evidences of indebtedness, other than instruments
that constitute, or are a part of a group of writings that constitute, Chattel
Paper.

 

“Intellectual Property” means any and all Licenses, Patents, Copyrights,
Trademarks, and the goodwill associated with such Trademarks.

 

“Intercompany Notes” has the meaning ascribed to it in Section 6.3.

 

“Interest Expense” means, with respect to any Person for any fiscal period,
interest expense (whether cash or non-cash) of such Person less any interest
income of such Person determined in accordance with GAAP for the relevant period
ended on such date, including interest expense with respect to any Funded Debt
of such Person and interest expense for the relevant period that has been
capitalized on the balance sheet of such Person.

 

“Interest Payment Date” means (a) as to any Index Rate Loan, the first Business
Day of each month to occur while such Loan is outstanding, and (b) as to any
LIBOR Loan, the last day of the applicable LIBOR Period and, in addition, in the
case of a LIBOR Period in excess of three months, the last day of the third
month of such LIBOR Period, provided, that, in addition to the foregoing, each
of (x) the date upon which all of the Commitments have been terminated and the
Loans have been paid in full and (y) the Commitment Termination Date shall be
deemed to be an “Interest Payment Date” with respect to any interest that has
then accrued under the Agreement.

 

“Inventory” means all “inventory,” as such term is defined in the Code, now
owned or hereafter acquired by any Credit Party, wherever located, and in any
event including inventory, merchandise, goods and other personal property that
are held by or on behalf of any Credit Party for sale or lease or are furnished
or are to be furnished under a contract of service, or that constitute raw
materials, work in process, finished goods, returned goods, supplies or
materials of any kind, nature or description used or consumed or to be used or
consumed in such Credit Party’s business or in the processing, production,
packaging, promotion, delivery or shipping of the same, including other supplies
and embedded software.

 

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“Investment Property” means all “investment property” as such term is defined in
the Code now owned or hereafter acquired by any Credit Party, wherever located,
including (a) all securities, whether certificated or uncertificated, including
stocks, bonds, interests in limited liability companies, partnership interests,
treasuries, certificates of deposit, and mutual fund shares; (b) all securities
entitlements of any Credit Party, including the rights of such Credit Party to
any securities account and the financial assets held by a securities
intermediary in such securities account and any free credit balance or other
money owing by any securities intermediary with respect to that account; (c) all
securities accounts of any Credit Party; (d) all commodity contracts of any
Credit Party; and (e) all commodity accounts held by any Credit Party.

 

“IRB Loan” shall mean Indebtedness evidenced by any of the following: (a) the
Loan Agreement dated as of September 1, 1994, between South Carolina
Jobs-Economic Development Authority (the “Authority”) and Borrower relating to
$7,700,000 Variable Rate Demand Industrial Development Revenue Bonds (Roller
Bearing Company of America, Inc. Project) Series 1994A, (b) the Trust Indenture
dated as of September 1, 1994, by and between the Authority and Mark Twain Bank,
as trustee, with respect to the bonds described in clause (a) of this
definition, (c) the Loan Agreement dated as of September 1, 1994, between the
Authority and Borrower relating to $3,000,000 Variable Rate Demand Industrial
Development Revenue Bonds (Roller Bearing Company of America, Inc. Project)
Series 1994B, (d) the Trust Indenture dated as of September 1, 1994, by and
between the Authority and Mark Twain Bank, as trustee, with respect to the bonds
described in clause (c) of this definition, (e) the Loan Agreement dated as of
September 1, 1998 between the Authority and RBC Linear Precision Products, Inc.
relating to $3,000,000 Tax Exempt Demand/Fixed Rate Industrial Development
Revenue Bonds (RBC Linear Precision Products, Inc. Project) Series 1998, (f) the
Trust Indenture dated as of September 1, 1998 with respect to the bonds
described in clause (e) of this definition, (g) the Loan Agreement dated as of
April 1, 1999 between California Infrastructure and Economic Development Bank
and Borrower relating to $4,800,000 Variable Rate Demand Industrial Revenue
Bonds Series 1999 (Roller Bearing Company of America, Inc. – Santa Ana Project)
and (h) the Indenture of Trust dated as of April 1, 1999 with respect to the
bonds described in clause (g) of this definition and, in each case, the other
documents executed in connection therewith.

 

“IRC” means the Internal Revenue Code of 1986, as amended, and all regulations
promulgated thereunder.

 

“IRS” means the Internal Revenue Service.

 

“Judgment Conversion Date” has the meaning ascribed to it in Section 1.19.

 

“Judgment Currency” has the meaning ascribed to it in Section 1.19.

 

“Keyman Life Insurance” means a keyman life insurance policy on Michael J.
Hartnett from an insurance company and on terms and conditions acceptable to
Agent, in an amount of at least $10,000,000.

 

“L/C Issuer” has the meaning ascribed to it in Annex B.

 

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“L/C Sublimit” has the meaning ascribed to in it Annex B.

 

“Lenders” means GE Capital and the other Lenders named on the signature pages of
the Agreement, and, if any such Lender shall decide to assign all or any portion
of the Obligations, such term shall include any assignee of such Lender.

 

“Letter of Credit Fee” has the meaning ascribed to it in Annex B.

 

“Letter of Credit Obligations” means all outstanding obligations incurred by
Agent and Lenders at the request of Borrower, whether direct or indirect,
contingent or otherwise, due or not due, in connection with the issuance of
Letters of Credit by Agent or another L/C Issuer or the purchase of a
participation as set forth in Annex B with respect to any Letter of Credit.  The
amount of such Letter of Credit Obligations shall equal the maximum amount that
may be payable by Agent or Lenders thereupon or pursuant thereto.

 

“Letters of Credit” means documentary or standby letters of credit issued for
the account of Borrower by any L/C Issuer, and bankers’ acceptances issued by
Borrower, for which Agent and Lenders have incurred Letter of Credit
Obligations.

 

“Letter-of-Credit Rights” means “letter-of-credit rights” as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party,
including rights to payment or performance under a letter of credit, whether or
not such Credit Party, as beneficiary, has demanded or is entitled to demand
payment or performance.

 

“Leverage Ratio” means, with respect to Holdings, on a consolidated basis after
giving effect to any and all Redemption(s), the ratio of (i) the Adjusted Funded
Debt as of any date of determination, to (ii) the Adjusted EBITDA for the twelve
months most recently ended on or prior to the date of determination.

 

“LIBOR Business Day” means a Business Day on which banks in the City of London
are generally open for interbank or foreign exchange transactions.

 

“LIBOR Loan” means a Loan or any portion thereof bearing interest by reference
to the LIBOR Rate.

 

“LIBOR Period” means, with respect to any LIBOR Loan, each period commencing on
a LIBOR Business Day selected by Borrower pursuant to the Agreement and ending
one, two, three or six months thereafter, as selected by Borrower’s irrevocable
notice to Agent as set forth in Section 1.5(e); provided, that the foregoing
provision relating to LIBOR Periods is subject to the following:

 

(a)                                  if any LIBOR Period would otherwise end on
a day that is not a LIBOR Business Day, such LIBOR Period shall be extended to
the next succeeding LIBOR Business Day unless the result of such extension would
be to carry such LIBOR Period into another calendar month in which event such
LIBOR Period shall end on the immediately preceding LIBOR Business Day;

 

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(b)                                 any LIBOR Period that would otherwise extend
beyond the Commitment Termination Date shall end two (2) LIBOR Business Days
prior to such date;

 

(c)                                  any LIBOR Period that begins on the last
LIBOR Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such LIBOR
Period) shall end on the last LIBOR Business Day of a calendar month; and

 

(d)                                 Borrower shall select LIBOR Periods so that
there shall be no more than 5 separate LIBOR Loans in existence at any one time.

 

“LIBOR Rate” means for each LIBOR Period, a rate of interest determined by Agent
equal to:

 

(a)                                  the offered rate for deposits in United
States Dollars for the applicable LIBOR Period that appears on Telerate Page
3750 as of 11:00 a.m. (London time), on the second full LIBOR Business Day next
preceding the first day of such LIBOR Period (unless such date is not a Business
Day, in which event the next succeeding Business Day will be used); divided by

 

(b)                                 a number equal to 1.0 minus the aggregate
(but without duplication) of the rates (expressed as a decimal fraction) of
reserve requirements in effect on the day that is two (2) LIBOR Business Days
prior to the beginning of such LIBOR Period (including basic, supplemental,
marginal and emergency reserves under any regulations of the Federal Reserve
Board or other Governmental Authority having jurisdiction with respect thereto,
as now and from time to time in effect) for Eurocurrency funding (currently
referred to as “Eurocurrency Liabilities” in Regulation D of the Federal Reserve
Board that are required to be maintained by a member bank of the Federal Reserve
System.

 

If such interest rates shall cease to be available from Telerate News Service,
the LIBOR Rate shall be determined from such financial reporting service or
other information as shall be mutually acceptable to Agent and Borrower.

 

“License” means any Copyright License, Patent License, Trademark License or
other license of rights or interests now held or hereafter acquired by any
Credit Party.

 

“Lien” means any mortgage or deed of trust, pledge, hypothecation, assignment,
deposit arrangement, lien, charge, claim, security interest, easement or
encumbrance, or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any lease or title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to give, any
financing statement perfecting a security interest under the Code or comparable
law of any jurisdiction).

 

“Litigation” has the meaning ascribed to it in Section 3.13.

 

“Loan Account” has the meaning ascribed to it in Section 1.12.

 

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“Loan Documents” means the Agreement, the Notes, the Intercompany Notes and all
agreements, instruments and documents related thereto, the Collateral Documents,
the Master Standby Agreement, the Master Documentary Agreement, the Post Closing
Matters Agreement, the Environmental Indemnity Agreement, the GE Capital Fee
Letter and all other agreements, instruments, documents and certificates
identified in the Closing Checklist executed and delivered to, or in favor of,
Agent or any Lenders and including all other pledges, powers of attorney,
consents, assignments, contracts, notices, and all other written matter whether
heretofore, now or hereafter executed by or on behalf of any Credit Party, or
any employee of any Credit Party, and delivered to Agent or any Lender in
connection with the Agreement or the transactions contemplated thereby.  Any
reference in the Agreement or any other Loan Document to a Loan Document shall
include all appendices, exhibits or schedules thereto, and all amendments,
restatements, supplements or other modifications thereto, and shall refer to the
Agreement or such Loan Document as the same may be in effect at any and all
times such reference becomes operative.

 

“Loans” means the Revolving Loans, the Swing Line Loan and the Term Loan.

 

“Lock Boxes” has the meaning ascribed to it in Annex C.

 

“Margin Stock” has the meaning ascribed to it in Section 3.10.

 

“Master Documentary Agreement” means the Master Agreement for Documentary
Letters of Credit dated as of the Closing Date between Borrower, as Applicant,
and GE Capital, as Issuer.

 

“Master Standby Agreement” means the Master Agreement for Standby Letters of
Credit dated as of the Closing Date between Borrower, as Applicant, and GE
Capital, as Issuer.

 

“Material Adverse Effect” means a material adverse effect on (a) the business,
assets, operations, prospects or financial or other condition of the Credit
Parties considered as a whole, (b) Borrower’s ability to pay any of the Loans or
any of the other Obligations in accordance with the terms of the Agreement, (c)
the Collateral or Agent’s Liens, on behalf of itself and Lenders, on the
Collateral or the priority of such Liens, or (d) Agent’s or any Lender’s rights
and remedies under the Agreement and the other Loan Documents.  Without limiting
the generality of the foregoing, any event or occurrence adverse to one or more
Credit Parties which results or could reasonably be expected to result in costs,
liabilities or damages, individually, or in the aggregate, to any Credit Party
or Credit Parties in an amount that would have caused the Fixed Charge Covenant
Ratio Financial Covenant to have been breached if such event or occurrence had
occurred and such costs, liabilities or damages had been paid on the first day
of the Fiscal Quarter most recently ended.

 

“Maximum Amount” means, as of any date of determination, an amount equal to the
U.S. Revolving Loan Commitments of all Lenders as of that date.

 

“Maximum Lawful Rate” has the meaning ascribed to it in Section 1.5(f).

 

“Mortgaged Properties” has the meaning assigned to it in Annex D.

 

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“Mortgages” means each of the mortgages, deeds of trust, leasehold mortgages,
leasehold deeds of trust, collateral assignments of leases or other real estate
security documents delivered by any Credit Party to Agent on behalf of itself
and Lenders with respect to the Mortgaged Properties, all in form and substance
reasonably satisfactory to Agent.

 

“Multiemployer Plan” means a “multiemployer plan” as defined in Section 3(37) of
ERISA, and to which any Domestic Credit Party or ERISA Affiliate is making, is
obligated to make or has made or been obligated to make, contributions on behalf
of participants who are or were employed by any of them with the last six years.

 

“Non-Consenting Lender” has the meaning ascribed to it in Section 11.2(d)(i).

 

“Non-Funding Lender” has the meaning ascribed to it in Section 9.9(a)(ii).

 

“Notes” means, collectively, the Revolving Notes, the Swing Line Note and the
Term Notes.

 

“Notice of Conversion/Continuation” has the meaning ascribed to it in Section
1.5(e).

 

“Notice of Schaublin Revolving Credit Advance” has the meaning ascribed to it in
Section 1.1(d)(i).

 

“Notice of U.S. Revolving Credit Advance” has the meaning ascribed to it in
Section 1.1(a).

 

“Obligations” means all loans, advances, debts, liabilities and obligations,
including letter of credit obligations, for the performance of covenants, tasks
or duties or for payment of monetary amounts (whether or not such performance is
then required or contingent, or such amounts are liquidated or determinable)
owing by any Credit Party to Agent or any Lender, and all covenants and duties
regarding such amounts, of any kind or nature, present or future, whether or not
evidenced by any note, agreement or other instrument, arising under the
Agreement or any of the other Loan Documents.  This term includes all principal,
interest (including all interest that accrues after the commencement of any case
or proceeding by or against any Credit Party in bankruptcy, whether or not
allowed in such case or proceeding), Fees, Charges, expenses, attorneys’ fees
and any other sum chargeable to any Credit Party under the Agreement or any of
the other Loan Documents.

 

“Obligation Currency” has the meaning ascribed to it in Section 1.19.

 

“Other Lender” has the meaning ascribed to it in Section 9.9(d).

 

“Overadvance” has the meaning ascribed to it in Section 1.1(a)(iii).

 

“Participating Member State” means any member state which adopts the euro unit
of the single currency pursuant to the Treaty.

 

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“Patent License” means rights under any written agreement now owned or hereafter
acquired by any Credit Party granting any right with respect to any invention on
which a Patent is in existence.

 

“Patent Security Agreements” means the Patent Security Agreements made in favor
of Agent, on behalf of itself and Lenders, by each applicable Credit Party.

 

“Patents” means all of the following in which any Credit Party now holds or
hereafter acquires any interest: (a) all letters patent of the United States or
any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or of any other country,
including registrations, recordings and applications in the United States Patent
and Trademark Office or in any similar office or agency of the United States,
any State or any other country, and (b) all reissues, continuations,
continuations-in-part or extensions thereof.

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“Pension Plan” means a Plan described in Section 3(2) of ERISA.

 

“Permitted Acquisition” has the meaning ascribed to it in Section 6.1.

 

“Permitted Encumbrances” means the following encumbrances: (a) Liens for taxes
or assessments or other governmental Charges not yet due and payable or which
are being contested in accordance with Section 5.2(b); (b) pledges or deposits
of money securing statutory obligations under workmen’s compensation,
unemployment insurance, social security or public liability laws or similar
legislation (excluding Liens under ERISA); (c) pledges or deposits of money
securing bids, tenders, contracts (other than contracts for the payment of
money) or leases to which any Credit Party is a party as lessee made in the
ordinary course of business; (d) inchoate and unperfected workers’, mechanics’ 
or similar liens arising in the ordinary course of business, so long as such
Liens attach only to Equipment, Fixtures and/or Real Estate; (e) carriers’,
warehousemen’s, suppliers’ or other similar possessory liens arising in the
ordinary course of business and securing liabilities not yet due and payable or
which are being contested in accordance with Section 5.2(b), so long as such
Liens attach only to Inventory; (f) deposits securing, or in lieu of, surety,
appeal or customs bonds in proceedings to which any Credit Party is a party; (g)
any attachment or judgment lien not constituting an Event of Default under
Section 8.1(j); (h) zoning restrictions, easements, licenses, or other
restrictions on the use of any Real Estate or other minor irregularities in
title (including leasehold title) thereto, so long as the same do not materially
impair the use, value, or marketability of such Real Estate; (i) presently
existing or hereafter created Liens in favor of Agent, on behalf of Lenders; (j)
Liens expressly permitted under clauses (b) and (c) of Section 6.7 of the
Agreement, (k) Liens securing the IRB Loans, (l) Liens securing Industrial
Revenue Bond Financing incurred or assumed after the date hereof permitted under
the terms of the Agreement, (m) deposits made in the ordinary course of business
to secure liability to insurance carriers, (n) leases or subleases granted to
others not materially interfering with the business of the Credit Parties, (o)
any interest or title of a landlord or a sublandlord under any lease, (o) Liens
consisting of owner’s rights to raw materials held on consignment at 999 Happy
Valley Road, Glasgow, Kentucky 42141 that are segregated and clearly labeled,
(p) Liens arising from precautionary Code financing statements with respect to

 

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assets leased by Borrower or its Subsidiaries pursuant to operating leases and
(q) Liens created pursuant to the Foreign Collateral Documents.

 

“Permitted Transferee” means, with respect to any Person, if such Person is an
individual, (i) a member of the Immediate Family of such Person, (ii) a trust or
other similar legal entity for the primary benefit of such Person and/or one or
more members of his Immediate Family, or (iii) a partnership, limited
partnership, limited liability company, corporation or other entity in which
such Person alone or together with members of his Immediate Family possess 100%
of the outstanding voting securities.

 

“Person” means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, limited liability
company, institution, public benefit corporation, other entity or government
(whether federal, state, county, city, municipal, local, foreign, or otherwise,
including any instrumentality, division, agency, body or department thereof).

 

“Plan” means, at any time, an “employee benefit plan,” as defined in Section
3(3) of ERISA, that any Domestic Credit Party or ERISA Affiliate maintains,
contributes to or has an obligation to contribute to on behalf of participants
who are or were employed by any Credit Party.

 

“Post Closing Matters Agreement” means the Post Closing Matters Agreement dated
as of June 19, 2003 between Borrower and Agent.

 

“Prior Credit Agreement” has the meaning ascribed to it in the recitals to the
Agreement.

 

“Prior Lender Obligations” means liabilities, obligations and indebtedness of
Borrower under and pursuant to the Existing Credit Agreement.

 

“Prior Lenders” means Credit Suisse First Boston and various other financial
institutions from time to time party to the Existing Credit Agreement.

 

“Pro Forma” means the unaudited consolidated and consolidating balance sheet of
Borrower and its Subsidiaries as of March 31, 2002.

 

“Pro Rata Share” means with respect to all matters relating to any Lender (a)
with respect to the Revolving Loans, the percentage obtained by dividing (i) the
Revolving Loan Commitments of that Lender by (ii) the aggregate Revolving Loan
Commitments of all Lenders, (b) with respect to the Term Loan, the percentage
obtained by dividing (i) the Term Loan Commitment of that Lender by (ii) the
aggregate Term Loan Commitments of all Lenders, as any such percentages may be
adjusted by assignments permitted pursuant to Section 9.1, (c) with respect to
all Loans, the percentage obtained by dividing (i) the aggregate Commitments of
that Lender by (ii) the aggregate Commitments of all Lenders, and (d) with
respect to all Loans on and after the Commitment Termination Date, the
percentage obtained by dividing (i) the aggregate outstanding principal balance
of the Loans held by that Lender, by (ii) the outstanding principal balance of
the Loans held by all Lenders.

 

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“Proceeds” means “proceeds,” as such term is defined in the Code, including
(a) any and all proceeds of any insurance, indemnity, warranty or guaranty
payable to any Credit Party from time to time with respect to any of the
Collateral, (b) any and all payments (in any form whatsoever) made or due and
payable to any Credit Party from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any Governmental Authority (or any Person acting under
color of governmental authority), (c) any claim of any Credit Party against
third parties (i) for past, present or future infringement of any Patent or
Patent License, or (ii) for past, present or future infringement or dilution of
any Copyright, Copyright License, Trademark or Trademark License, or for injury
to the goodwill associated with any Trademark or Trademark License, (d) any
recoveries by any Credit Party against third parties with respect to any
litigation or dispute concerning any of the Collateral including claims arising
out of the loss or nonconformity of, interference with the use of, defects in,
or infringement of rights in, or damage to, Collateral, (e) all amounts
collected on, or distributed on account of, other Collateral, including
dividends, interest, distributions and Instruments with respect to Investment
Property and pledged Stock, and (f) any and all other amounts, rights to payment
or other property acquired upon the sale, lease, license, exchange or other
disposition of Collateral and all rights arising out of Collateral.

 

“Projections” means Borrower’s forecasted consolidated:  (a) balance sheets; (b)
profit and loss statements; (c) cash flow statements; and (d) capitalization
statements, which, in the case of profit and loss statements, shall be prepared
on a Subsidiary by Subsidiary or division-by-division basis, if applicable, and
all consistent with the historical Financial Statements of Borrower, together
with appropriate supporting details and a statement of underlying assumptions.

 

“Proposed Change” has the meaning ascribed to it in Section 11.2(d).

 

“Purchased Parts” means parts purchased by Borrower or a Secured Guarantor from
a third-party supplier or a Foreign Subsidiary which are used for assembly.

 

“Qualified Assignee” means (a) any Lender, any Affiliate of any Lender and, with
respect to any Lender that is an investment fund that invests in commercial
loans, any other investment fund that invests in commercial loans and that is
managed or advised by the same investment advisor as such Lender or by an
Affiliate of such investment advisor, and (b) any commercial bank, savings and
loan association or savings bank or any other entity which is an “accredited
investor” (as defined in Regulation D under the Securities Act or 1933) which
extends credit or buys loans as one of its businesses, including insurance
companies, mutual funds, lease financing companies and commercial finance
companies, in each case, which has a rating of BBB or higher from S&P and a
rating of Baa2 or higher from Moody’s at the date that it becomes a Lender and
which, through its applicable lending office, is capable of lending to Borrower
without the imposition of any withholding or similar taxes; provided, that no
Person determined by Agent to be acting in the capacity of a vulture fund or
distressed debt purchaser shall be a Qualified Assignee and no Person or
Affiliate of such Person (other than a Person that is already a Lender) holding
Subordinated Debt or Stock issued by any Credit Party shall be a Qualified
Assignee.

 

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“Qualified Plan” means a Pension Plan that is intended to be tax-qualified under
Section 401(a) of the IRC.

 

“Qualified Public Offering” means an initial public offering of Stock of
Holdings resulting in proceeds to Holdings of at least $20,000,000 and which
qualifies Holdings for listing on NASDAQ National Markets.

 

“Qualified Target” means a corporation, limited partnership, limited liability
company or partnership or a similar Person that is incorporated, formed or
organized under the laws of one of the United States of America, Canada or
England, with substantially all of its assets located in the United States of
America, Canada or England and that is engaged in a business engaged in by
Borrower or any Credit Party or a business substantially similar or related
thereto.

 

“Ratable Share” has the meaning ascribed to it in Section 1.1(b).

 

“RBC France” means RBC France SAS (formerly named myonic SAS), a French société
par actions simplifiée and wholly-owned subsidiary of Schaublin.

 

“RBC Swiss Group Members” means, collectively, Schaublin Holding and Schaublin
and “RBC Swiss Group Member” means any of the foregoing.

 

“Real Estate” has the meaning ascribed to it in Section 3.6.

 

“Recapitalization” means the Redemptions that take place prior to December 16,
2002.

 

“Redemption” means any redemption, purchase, retirement, defeasance, sinking
fund or similar payment or acquisition for value with respect to the Discount
Debentures.

 

“Refinancing” means the repayment in full by Borrower of the Prior Lender
Obligations on the Closing Date.

 

“Refunded Swing Line Loan” has the meaning ascribed to it in Section
1.1(c)(iii).

 

“Release” means any release, threatened release, spill, emission, leaking,
pumping, pouring, emitting, emptying, escape, injection, deposit, disposal,
discharge, dispersal, dumping, leaching or migration of Hazardous Material in
the indoor or outdoor environment, including the movement of Hazardous Material
through or in the air, soil, surface water, ground water or property.

 

“Replacement Lender” has the meaning ascribed to it in Section 1.16(d).

 

“Requisite Lenders” means Lenders having (a) more than 66 2/3% of the
Commitments of all Lenders, or (b) if the Commitments have been terminated, more
than 66 2/3% of the aggregate outstanding amount of the Loans, provided, that in
the case of two Lenders, “Requisite Lenders” shall mean both such Lenders.

 

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“Requisite Revolving Lenders” means Lenders having (a) more than 66 2/3% of the
Revolving Loan Commitments of all Lenders, or (b) if the Revolving Loan
Commitments have been terminated, more than 66 2/3% of the aggregate outstanding
amount of the Revolving Loans, provided, that if there are only two Lenders,
“Requisite Revolving Lenders” shall mean both such Lenders.

 

“Reserves” means, with respect to the U.S. Borrowing Base or Schaublin Borrowing
Base (a) reserves established by Agent from time to time against Eligible
Inventory – U.S. or Eligible Inventory – Schaublin pursuant to Section 5.9, (b)
reserves established pursuant to Section 5.4(c), and (c) such other reserves
against Eligible Accounts – U.S., Eligible Accounts – Schaublin, Eligible
Inventory – U.S. and Eligible Inventory – Schaublin that Agent may, in its
reasonable credit judgment, establish from time to time in accordance with
Sections 1.6 and 1.7.  Without limiting the generality of the foregoing, a
Timing Reserve, an Unapplied Cash Reserve, a Costing Reserve, a reserve for
dilution with respect to Accounts to the extent dilution exceeds five percent
(5%) of Accounts, a reserve established in accordance with Section 6.1(b)(iv)
and any other reserve expressly provided for under the Agreement shall be deemed
to be a reasonable exercise of Agent’s credit judgment.

 

“Restricted Payment” means, with respect to any Credit Party (a) the declaration
or payment of any dividend or the incurrence of any liability to make any other
payment or distribution of cash or other property or assets in respect of Stock;
(b) any payment on account of the purchase, redemption, defeasance, sinking fund
or other retirement or acquisition for value of such Credit Party’s Stock or any
other payment or distribution made in respect thereof, either directly or
indirectly; (c) any payment or prepayment of principal of, premium, if any, or
interest, fees or other charges on or with respect to, and any redemption,
purchase, retirement, defeasance, sinking fund or similar payment or acquisition
for value with respect to, any Subordinated Debt; (d) any payment made to
redeem, purchase, repurchase or retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire Stock of such Credit
Party now or hereafter outstanding; (e) any payment of a claim for the
rescission of the purchase or sale of, or for material damages arising from the
purchase or sale of, any shares of such Credit Party’s Stock or of a claim for
reimbursement, indemnification or contribution arising out of or related to any
such claim for damages or rescission; (f) any payment, loan, contribution, or
other transfer of funds or other property to any Stockholder of such Credit
Party other than payment of compensation in the ordinary course of business to
Stockholders who are employees of such Credit Party; and (g) any payment of
management fees (or other fees of a similar nature) by such Credit Party to any
Stockholder of such Credit Party or its Affiliates.

 

“Retiree Welfare Plan” means, at any time, a Welfare Plan that provides for
continuing coverage or benefits for any participant or any beneficiary of a
participant after such participant’s termination of employment, other than
continuation coverage provided pursuant to Section 4980B of the IRC and at the
sole expense of the participant or the beneficiary of the participant.

 

“Revolving Credit Advances” means, collectively, the Schaublin Revolving Credit
Advances and the U.S. Revolving Credit Advances and a “Revolving Credit Advance”
means either of the foregoing.

 

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“Revolving Lenders” means, as of any date of determination, Lenders having a
Revolving Loan Commitment.

 

“Revolving Loan Commitments” means, collectively, the Schaublin Revolving Loan
Commitment and the U.S. Revolving Loan Commitment and “Revolving Loan
Commitment” means either of the foregoing.

 

“Revolving Loans” means, collectively, the Schaublin Revolving Loan and the U.S.
Revolving Loan and “Revolving Loan” means either of the foregoing.

 

“Revolving Note” has the meaning ascribed to it in Section 1.1(a)(ii) and
Section 1.1(d)(ii).

 

“Schaublin” means Schaublin S.A, a Swiss corporation and wholly-owned Subsidiary
of Schaublin Holding (excluding directors’ qualifying shares).

 

“Schaublin Borrowing Base Certificate” means a certificate to be executed and
delivered from time to time by Borrower in the form attached to the Agreement as
Exhibit 4.1(b)(ii).

 

“Schaublin Borrowing Availability” means as of any date of determination the
lesser of (i) the Schaublin Revolving Loan Sublimit and (ii) the Dollar
Equivalent of the Schaublin Borrowing Base, in each case, less the sum of
(A) the principal balance of Schaublin Revolving Loan at that date outstanding,
plus (B) the excess, if any, of the principal balance of the U.S. Revolving Loan
(including the Swing Line Loan) at that date outstanding over the amount
obtained by subtracting the Schaublin Revolving Loan Sublimit from the Maximum
Amount.

 

“Schaublin Borrowing Base” means, as of any date of determination by Agent, from
time to time, an amount equal to the sum at such time of:

 

(a)                                  85% of the book value of Eligible Accounts
–Schaublin at such time; and

 

(b)                                 65% of the book value of Eligible Inventory
–Schaublin (other than Component Parts and Purchased Parts) valued at the lower
of cost (determined on a first-in, first-out basis) or market;

 

(c)                                  30% of the book value of Eligible Inventory
–Schaublin consisting of Component Parts and Purchased Parts valued at the lower
of cost (determined on a first-in, first-out basis) or market, provided, that
the value of Component Parts and Purchased Parts included in the Schaublin
Borrowing Base shall not exceed 25% of the total value of all Eligible Inventory
– Schaublin (including the Eligible Inventory –Schaublin consisting of Component
Parts and Purchased Parts);

 

“Schaublin French Pledge Agreement (Bovagnet)” means the Declaration of Pledge
of a Securities Account executed by Schaublin in favor of Schaublin Holding (the
rights and remedies of Schaublin Holding thereunder being assigned to Agent, on
behalf of itself and

 

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Lenders) dated as of the Effective Date, pledging all Stock of RBC France,
governed by French law.

 

“Schaublin French Pledge Agreement (RBC France)” means the Declaration of Pledge
of a Securities Account executed by Schaublin in favor of Schaublin Holding (the
rights and remedies of Schaublin Holding thereunder being assigned to Agent, on
behalf of itself and Lenders) dated as of the Effective Date, pledging all Stock
of RBC France, governed by French law.

 

“Schaublin Holding” means Schaublin Holding S.A., a Swiss corporation and
wholly-owned Subsidiary of Borrower (excluding directors’ qualifying shares).

 

“Schaublin Holding Assignment” has the meaning ascribed to it in Section
1.17(c).

 

“Schaublin Holding Pledge Agreement” means the Pledge Agreement executed by
Schaublin Holding in favor of Borrower (the rights and remedies of Borrower
thereunder being assigned to Agent, on behalf of itself and Lenders), dated as
of the Effective Date, granting a Lien on (i) all bank accounts of Schaublin
Holding and (ii) all Stock of Schaublin to secure the payment and performance of
the Schaublin Intercompany Loans, French Intercompany Loans and other
obligations under the Foreign Collateral Documents of Schaublin Holding,
governed by Swiss law.

 

“Schaublin Intercompany Loans” has the meaning ascribed to it in Section 6.2(g).

 

“Schaublin Loans” has the meaning assigned to it in Section 6.2(k).

 

“Schaublin Operating Companies” means Schaublin, Bovagnet and RBC France.

 

“Schaublin Revolving Credit Advance” has the meaning ascribed to it in
Section 1.1(d)(i).

 

“Schaublin Revolving Loan” means, at any time, the sum of the aggregate amount
of Schaublin Revolving Credit Advances outstanding to Borrower.

 

“Schaublin Revolving Loan Sublimit” mean, as of any date of determination, an
amount equal to the Schaublin Revolving Loan Commitments of all Lenders as of
that date.

 

“Schaublin Revolving Loan Commitment” means (a) as to any Revolving Lender, the
aggregate commitment of such Revolving Lender to make Schaublin Revolving Credit
Advances as set forth on Annex J to the Agreement or in the most recent
Assignment Agreement executed by such Revolving Lender and (b) as to all
Revolving Lenders, the aggregate commitment of all Revolving Lenders to make
Schaublin Revolving Credit Advances, which aggregate commitment shall be Seven
Million Dollars ($7,000,000), as such aggregate commitment may be further
adjusted, if at all, from time to time in accordance with the Agreement.

 

“Schaublin Revolving Note” has the meaning ascribed to it in Section 1.1(d)(ii).

 

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“Schaublin Swiss Pledge Agreement” means the Pledge Agreement executed by
Schaublin in favor of Schaublin Holding (the rights and remedies of Schaublin
Holding thereunder being assigned to Agent, on behalf of itself and Lenders),
dated as of the Effective Date, granting a Lien on (i) all bank accounts of
Schaublin, (ii) all Accounts of Schaublin and (iii) all Inventory of Schaublin,
and securing the payment and performance of the Schaublin Intercompany Loans,
the French Intercompany Loans and other obligations under the Foreign Collateral
Documents of Schaublin, governed by Swiss law.

 

“Secured Guarantor” means a Guarantor (i) that has executed a full recourse
Guaranty of all of the Obligations, (ii) that is a Domestic Subsidiary of
Borrower (other than Bunting Acquisition Corp., a Delaware corporation),
(iii) that has granted Agent a first priority perfected Lien on all or
substantially all of its assets to secure payments and performance of the
Obligations, (iv) with respect to which Agent has received all opinions,
certificates and other documents requested by Agent, and (v) whose outstanding
equity interests have been pledged to Agent to secure payment and performance of
the Obligations.

 

“Senior Debt” means all Funded Debt of Borrower other than Senior Subordinated
Debt.

 

“Senior Subordinated Debt” means the Indebtedness of Borrower evidenced by the
Senior Subordinated Notes.

 

“Senior Subordinated Indenture” means to that certain Indenture dated as of June
15, 1997 among Borrower, its Subsidiaries party thereto and United States Trust
Company of New York, as trustee.

 

“Senior Subordinated Notes” means those certain 9-5/8% Senior Subordinated Notes
due 2007 issued by Borrower in an aggregate original principal amount of
$110,000,000 pursuant the Senior Subordinated Indenture.

 

“Settlement Date” has the meaning ascribed to it in Section 9.9(a)(ii).

 

“Software” means all “software” as such term is defined in the Code, now owned
or hereafter acquired by any Credit Party, other than software embedded in any
category of Goods, including all computer programs and all supporting
information provided in connection with a transaction related to any program.

 

“Solvent” means, with respect to any Person on a particular date, that on such
date (a) the fair value of the property of such Person is greater than the total
amount of liabilities, including contingent liabilities, of such Person; (b) 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; (c) such Person does not intend to,
and does not believe that it will, incur debts or liabilities beyond such
Person’s ability to pay as such debts and liabilities mature; and (d) such
Person is not engaged in a business or transaction, and is not about to engage
in a business or transaction, for which such Person’s property would constitute
an unreasonably small capital.  The amount of contingent liabilities (such as
litigation, guaranties and pension plan liabilities) at any time shall be
computed as the amount that, in light

 

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of all the facts and circumstances existing at the time, represents the amount
that can be reasonably be expected to become an actual or matured liability.

 

“SPC” has the meaning ascribed to it in Section 9.1(g).

 

“Sterling” means the lawful currency of Great Britain.

 

“Stock” means all shares, options, warrants, general or limited partnership
interests, membership interests or other equivalents (regardless of how
designated) of or in a corporation, partnership, limited liability company or
equivalent entity whether voting or nonvoting, including common stock, preferred
stock or any other “equity security” (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934).

 

“Stockholder” means, with respect to any Person, each holder of Stock of such
Person.

 

“Subordinated Debt” means the Senior Subordinated Debt and any other
Indebtedness of any Credit Party in an amount, on such terms, and subordinated
to the Obligations in a manner and form satisfactory to Agent and Lenders in
their sole discretion as to right and time of payment and as to any other terms,
rights and remedies thereunder.

 

“Subordinated Debt Documents” means the Senior Subordinated Notes, the Senior
Subordinated Indenture, and any other instrument, document or agreement
(including Subsidiary Guaranties delivered by applicable Subsidiaries of
Borrower) evidencing the Subordinated Debt, in each including all schedules,
exhibits, amendments, supplements, modifications, assignments and all other
documents delivered pursuant thereto or in connection therewith.

 

“Subsidiary” means, with respect to any Person, (a) any corporation of which an
aggregate of more than 50% of the outstanding Stock having ordinary voting power
to elect a majority of the board of directors of such corporation (irrespective
of whether, at the time, Stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, owned legally or
beneficially by such Person or one or more Subsidiaries of such Person, or with
respect to which any such Person has the right to vote or designate the vote of
50% or more of such Stock whether by proxy, agreement, operation of law or
otherwise, and (b) any partnership or limited liability company in which such
Person and/or one or more Subsidiaries of such Person shall have an interest
(whether in the form of voting or participation in profits or capital
contribution) of more than 50% or of which any such Person is a general partner
or may exercise the powers of a general partner.  Unless the context otherwise
requires, each reference to a Subsidiary shall be a reference to a Subsidiary of
Borrower.

 

“Subsidiary Guaranty” means the Subsidiary Guaranty dated as of the Closing Date
executed by each Secured Guarantor in favor of Agent, on behalf of itself and
Lenders.

 

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“Supporting Obligations” means all “supporting obligations” as such term is
defined in the Code, including letters of credit and guaranties issued in
support of Accounts, Chattel Paper, Documents, General Intangibles, Instruments,
or Investment Property.

 

“Swing Line Advance” has the meaning ascribed to it in Section 1.1(c)(i).

 

“Swing Line Availability” has the meaning ascribed to it in Section 1.1(c)(i).

 

“Swing Line Commitment” means, as to the Swing Line Lender, the commitment of
the Swing Line Lender to make Swing Line Advances as set forth on Annex J to the
Agreement, which commitment constitutes a subfacility of the U.S. Revolving Loan
Commitment of the Swing Line Lender.

 

“Swing Line Lender” means GE Capital.

 

“Swing Line Loan” means at any time, the aggregate amount of Swing Line Advances
outstanding to Borrower.

 

“Swing Line Note” has the meaning ascribed to it in Section 1.1(c)(ii).

 

“Swiss Francs” means the lawful currency of Switzerland.

 

“Swiss Warehouse Control Agreement” means the agreement among Agent, Borrower,
Schaublin, Schaublin Holding and an inventory controller, dated as of the
Effective Date, pursuant to which Schaublin is pledging its inventory by
conveying the right of possession over the inventory to Agent and which is
providing for effective control over Schaublin’s inventory by Agent or its
authorized representative.

 

“Tax Sharing Agreement” means the Tax Sharing Agreement dated June 16, 1997, by
and among Holdings, Borrower and Subsidiaries.

 

“Taxes” means taxes, levies, imposts, deductions, Charges or withholdings, and
all liabilities with respect thereto, excluding taxes imposed on or measured by
the net income of Agent or a Lender by the jurisdictions under the laws of which
Agent and Lenders are organized or conduct business or any political subdivision
thereof.

 

“Term Lenders” means those Lenders having Term Loan Commitments.

 

“Term Loan” has the meaning assigned to it in Section 1.1(b)(i).

 

“Term Loan Commitment” means (a) as to any Lender with a Term Loan Commitment,
the commitment of such Lender to make its Pro Rata Share of the Term Loan as set
forth on Annex J to the Agreement or in the most recent Assignment Agreement
executed by such Lender, and (b) as to all Lenders with a Term Loan Commitment,
the aggregate commitment of all Lenders to make the Term Loan, which aggregate
commitment shall be Forty Million Dollars ($40,000,000) on the Closing Date. 
After advancing the Term Loan, each reference to a Lender’s Term Loan Commitment
shall refer to that Lender’s Pro Rata Share of the outstanding Term Loan.

 

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“Term Note” has the meaning assigned to it in Section 1.1(b)(i).

 

“Termination Date” means the date on which (a) the Loans have been indefeasibly
repaid in full, (b) all other Obligations under the Agreement and the other Loan
Documents have been completely discharged, (c) all Letter of Credit Obligations
have been cash collateralized, cancelled or backed by standby letters of credit
in accordance with Annex B, and (d) Borrower shall not have any further right to
borrow any monies under the Agreement.

 

“Timing Reserve” means a reserve equal to unreconciled differences between the
perpetual Inventory balance and general ledger Inventory balance.

 

“Title IV Plan” means a Pension Plan (other than a Multiemployer Plan), that is
covered by Title IV of ERISA or subject to Section 412 of IRC, and that any
Domestic Credit Party or ERISA Affiliate maintains, contributes to or has an
obligation to contribute to on behalf of participants who are or were employed
by any of them.

 

“Trademark Security Agreements” means the Trademark Security Agreements made in
favor of Agent, on behalf of Lenders, by each applicable Credit Party.

 

“Trademark License” means rights under any written agreement now owned or
hereafter acquired by any Credit Party granting any right to use any Trademark.

 

“Trademarks” means all of the following now owned or hereafter adopted or
acquired by any Credit Party: (a) all trademarks, trade names, corporate names,
business names, trade styles, service marks, logos, other source or business
identifiers, prints and labels on which any of the foregoing have appeared or
appear, designs and general intangibles of like nature (whether registered or
unregistered), all registrations and recordings thereof, and all applications in
connection therewith, including registrations, recordings and applications in
the United States Patent and Trademark Office or in any similar office or agency
of the United States, any state or territory thereof, or any other country or
any political subdivision thereof; (b) all reissues, extensions or renewals
thereof; and (c) all goodwill associated with or symbolized by any of the
foregoing.

 

“Treaty” means the treaty establishing the European Community being the Treaty
of Rome as amended from time to time.

 

“Trigger Event” means any time that the Borrowing Availability for a period of
two (2) consecutive months is less than $10,000,000.  Once a Trigger Event has
occurred, it shall remain in effect until Agent has determined that
(i) Borrowing Availability has exceeded $10,000,000 for a period of one (1)
calendar month and (ii) no Event of Default has occurred and continues to exist
during such calendar month.

 

“Unapplied Cash Reserve” means a reserve equal to cash received in payment of
Accounts that has not been applied to payment thereof in the general ledger.

 

“Unfunded Pension Liability” means, at any time, the aggregate amount, if any,
of the sum of (a) the amount by which the present value of all accrued benefits
under each Title IV Plan exceeds the fair market value of all assets of such
Title IV Plan allocable to such benefits in

 

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accordance with Title IV of ERISA, all determined as of the most recent
valuation date for each such Title IV Plan using the actuarial assumptions for
funding purposes in effect under such Title IV Plan, and (b) for a period of 5
years following a transaction which might reasonably be expected to be covered
by Section 4069 of ERISA, the liabilities (whether or not accrued) that could be
avoided by any Credit Party or any ERISA Affiliate as a result of such
transaction.

 

“U.S. Borrowing Availability” means as of any date of determination the lesser
of (i) the Maximum Amount less the outstanding principal balance of the
Schaublin Revolving Loan and (ii) the U.S. Borrowing Base, in each case, less
the sum of the U.S. Revolving Loan and Swing Line Loan at that date outstanding,
and, in addition, if the U.S. Borrowing Base is equal to or greater than
$47,000,000, less the principal balance of the Schaublin Revolving Loan at that
date outstanding; provided, that an Overadvance in accordance with Section
1.1(a)(iii) may cause the U.S. Revolving Loan and Swing Line Loan to exceed the
U.S. Borrowing Base by the amount of such permitted Overadvance.

 

“U.S. Borrowing Base” means, as of any date of determination by Agent, from time
to time, an amount equal to the sum at such time of:

 

(a)                                  85% of the book value of Eligible
Accounts-U.S. at such time;

 

(b)                                 65% of the book value of Eligible
Inventory-U.S. (other than Component Parts and Purchased Parts) valued at the
lower of cost (determined on a first-in, first-out basis) or market; and

 

(c)                                  30% of the book value of Eligible
Inventory-U.S. consisting of Component Parts and Purchased Parts valued at the
lower of cost (determined on a first-in, first-out basis) or market; provided,
that the value of Component Parts and Purchased Parts included in the Borrowing
Base shall not exceed 25% of the total value of all Eligible Inventory-U.S.
(including the Eligible Inventory-U.S. consisting of Component Parts and
Purchased Parts);

 

in each case, less any Reserves established by Agent at such time.

 

“U.S. Borrowing Base Certificate” means a certificate to be executed and
delivered from time to time by Borrower in the form attached to the Agreement as
Exhibit 4.1(b)(i).

 

“U.S. Collateral” means the property of Borrower and Secured Guarantors covered
by the U.S. Security Agreement, the Mortgages and the other U.S. Collateral
Documents and any other property of Borrower or a Secured Guarantor, real or
personal, tangible or intangible, now existing or hereafter acquired, that may
at any time be or become subject to a security interest or Lien in favor of
Agent to secure any or all of the Obligations.

 

“U.S. Collateral Documents” means the U.S. Security Agreement, the U.S. Pledge
Agreements, the Guaranties, the Mortgages, the Patent Securities Agreements, the
Trademark Security Agreements, the Copyright Security Agreements, and all other
similar agreements entered into guaranteeing payment of, or granting a Lien upon
property as security for payment of, the Obligations.

 

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“U.S. Pledge Agreements” means the Borrower Pledge Agreement, the Borrower Swiss
Pledge Agreement, and any other pledge agreement entered into after the Closing
Date by any Domestic Credit Party (as required by the Agreement or any other
Loan Document).

 

“U.S. Revolving Credit Advance” has the meaning ascribed to it in
Section 1.1(a)(i).

 

“U.S. Revolving Loan” means, at any time, the sum of (i) the aggregate amount of
U.S. Revolving Credit Advances outstanding to Borrower plus (ii) the aggregate
Letter of Credit Obligations incurred on behalf of Borrower.  Unless the context
otherwise requires, references to the outstanding principal balance of the U.S.
Revolving Loan shall include the outstanding balance of Letter of Credit
Obligations.

 

“U.S. Revolving Loan Commitment” means (a) as to any Revolving Lender, the
aggregate commitment of such Revolving Lender to make U.S. Revolving Credit
Advances or incur Letter of Credit Obligations as set forth on Annex J to the
Agreement or in the most recent Assignment Agreement executed by such Revolving
Lender and (b) as to all Revolving Lenders, the aggregate commitment of all
Revolving Lenders to make U.S. Revolving Credit Advances or incur Letter of
Credit Obligations, which aggregate commitment shall be Fifty-Four Million
Dollars ($54,000,000), as such aggregate commitment may be further adjusted, if
at all, from time to time in accordance with the Agreement.

 

“U.S. Revolving Note” has the meaning ascribed to it in Section 1.1(a)(ii).

 

“U.S. Security Agreement” means the Security Agreement dated as of the Closing
Date herewith entered into by and among Agent, on behalf of itself and Lenders,
and each Domestic Credit Party that is a signatory thereto.

 

“Welfare Plan” means a Plan described in Section 3(1) of ERISA.

 

“Zero Coupon Debt” means Indebtedness evidenced by Discount Debentures.

 

Rules of construction with respect to accounting terms used in the Agreement or
the other Loan Documents shall be as set forth in Annex G.  All other undefined
terms contained in any of the Loan Documents shall, unless the context indicates
otherwise, have the meanings provided for by the Code to the extent the same are
used or defined therein; in the event that any term is defined differently in
different Articles or Divisions of the Code, the definition contained in Article
or Division 9 shall control.  Unless otherwise specified, references in the
Agreement or any of the Appendices to a Section, subsection or clause refer to
such Section, subsection or clause as contained in the Agreement.  The words
“herein,” “hereof” and “hereunder” and other words of similar import refer to
the Agreement as a whole, including all Annexes, Exhibits and Schedules, as the
same may from time to time be amended, restated, modified or supplemented, and
not to any particular section, subsection or clause contained in the Agreement
or any such Annex, Exhibit or Schedule.

 

Wherever from the context it appears appropriate, each term stated in either the
singular or plural shall include the singular and the plural, and pronouns
stated in the masculine, feminine or neuter gender shall include the masculine,
feminine and neuter genders.  The words

 

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“including”, “includes” and “include” shall be deemed to be followed by the
words “without limitation”; the word “or” is not exclusive; references to
Persons include their respective successors and assigns (to the extent and only
to the extent permitted by the Loan Documents) or, in the case of governmental
Persons, Persons succeeding to the relevant functions of such Persons; and all
references to statutes and related regulations shall include any amendments of
the same and any successor statutes and regulations.  Whenever any provision in
any Loan Document refers to the knowledge (or an analogous phrase) of any Credit
Party, such words are intended to signify that such Credit Party has actual
knowledge or awareness of a particular fact or circumstance.

 

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ANNEX B (Section 1.2)

to

CREDIT AGREEMENT

 

LETTERS OF CREDIT

 

(a)                                  Issuance. Subject to the terms and
conditions of the Agreement, Agent and Revolving Lenders agree to incur, from
time to time prior to the Commitment Termination Date, upon the request of
Borrower and for Borrower’s account, Letter of Credit Obligations by causing
Letters of Credit to be issued by GE Capital or a Subsidiary thereof or a bank
or other legally authorized Person selected by or acceptable to Agent in its
sole discretion (each, an “L/C Issuer”) for Borrower’s account and guaranteed by
Agent; provided, that if the L/C Issuer is a Revolving Lender, then such Letters
of Credit shall not be guaranteed by Agent but rather each Revolving Lender
shall, subject to the terms and conditions hereinafter set forth, purchase (or
be deemed to have purchased) risk participations in all such Letters of Credit
issued with the written consent of Agent, as more fully described in paragraph
(b)(ii) below. The aggregate amount of all such Letter of Credit Obligations
shall not at any time exceed the least of (i) Twenty-Five Million Dollars
($25,000,000) (the “L/C Sublimit”), and (ii) the Maximum Amount less the
aggregate outstanding principal balance of the U.S. Revolving Credit Advances
and the Swing Line Loan, and (iii) the U.S. Borrowing Base less the aggregate
outstanding principal balance of the U.S. Revolving Credit Advances and the
Swing Line Loan.  No such Letter of Credit shall have an expiry date that is
more than one year following the date of issuance thereof, unless otherwise
determined by Agent in its sole discretion, and neither Agent nor Revolving
Lenders shall be under any obligation to incur Letter of Credit Obligations in
respect of, or purchase risk participations in, any Letter of Credit having an
expiry date that is later than the Commitment Termination Date.

 

(b)(i)  Advances Automatic; Participations.  In the event that Agent or any
Revolving Lender shall make any payment on or pursuant to any Letter of Credit
Obligation, such payment shall then be deemed automatically to constitute a U.S.
Revolving Credit Advance under Section 1.1(a) of the Agreement regardless of
whether a Default or Event of Default has occurred and is continuing and
notwithstanding Borrower’s failure to satisfy the conditions precedent set forth
in Section 2, and each Revolving Lender shall be obligated to pay its Pro Rata
Share thereof in accordance with the Agreement.  The failure of any Revolving
Lender to make available to Agent for Agent’s own account its Pro Rata Share of
any such U.S. Revolving Credit Advance or payment by Agent under or in respect
of a Letter of Credit shall not relieve any other Revolving Lender of its
obligation hereunder to make available to Agent its Pro Rata Share thereof, but
no Revolving Lender shall be responsible for the failure of any other Revolving
Lender to make available such other Revolving Lender’s Pro Rata Share of any
such payment.

 

(ii)  If it shall be illegal or unlawful for Borrower to incur U.S. Revolving
Credit Advances as contemplated by paragraph (b)(i) above because of an Event of
Default described in Sections 8.1(h) or (i) or otherwise or if it shall be
illegal or unlawful for any Revolving Lender to be deemed to have assumed a
ratable share of the reimbursement obligations owed to an L/C Issuer, or if the
L/C Issuer is a Revolving Lender, then (A) immediately and without further
action whatsoever, each Revolving Lender shall be deemed to

 

B-1

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have irrevocably and unconditionally purchased from Agent (or such L/C Issuer,
as the case may be) an undivided interest and participation equal to such
Revolving Lender’s Pro Rata Share (based on the U.S. Revolving Loan Commitments)
of the Letter of Credit Obligations in respect of all Letters of Credit then
outstanding and (B) thereafter, immediately upon issuance of any Letter of
Credit, each Revolving Lender shall be deemed to have irrevocably and
unconditionally purchased from Agent (or such L/C Issuer, as the case may be) an
undivided interest and participation in such Revolving Lender’s Pro Rata Share
(based on the U.S. Revolving Loan Commitments) of the Letter of Credit
Obligations with respect to such Letter of Credit on the date of such issuance. 
Each Revolving Lender shall fund its participation in all payments or
disbursements made under the Letters of Credit in the same manner as provided in
the Agreement with respect to U.S. Revolving Credit Advances.

 

(c)                                  Cash Collateral.  (i) If Borrower is
required to provide cash collateral for any Letter of Credit Obligations
pursuant to the Agreement prior to the Commitment Termination Date, Borrower
will pay to Agent for the ratable benefit of itself and Revolving Lenders cash
or cash equivalents acceptable to Agent (“Cash Equivalents”) in an amount equal
to 103% of the maximum amount then available to be drawn under each applicable
Letter of Credit outstanding, plus fees and expenses reasonably expected to be
incurred in connection with draws thereunder.  Such funds or Cash Equivalents
shall be held by Agent in a cash collateral account (the “Cash Collateral
Account”) maintained at a bank or financial institution acceptable to Agent. 
The Cash Collateral Account shall be in the name of Borrower and shall be
pledged to, and subject to the control of, Agent, for the benefit of Agent and
Lenders, in a manner satisfactory to Agent.  Borrower hereby pledges and grants
to Agent, on behalf of itself and Lenders, a security interest in all such funds
and Cash Equivalents held in the Cash Collateral Account from time to time and
all proceeds thereof, as security for the payment of all amounts due in respect
of the Letter of Credit Obligations and other Obligations, whether or not then
due.  The Agreement, including this Annex B, shall constitute a security
agreement under applicable law.

 

(ii)                                  If any Letter of Credit Obligations,
whether or not then due and payable, shall for any reason be outstanding on the
Commitment Termination Date, Borrower shall either (A) provide cash collateral
therefor in the manner described above, or (B) cause all such Letters of Credit
and guaranties thereof, if any, to be canceled and returned, or (C) deliver a
stand-by letter (or letters) of credit in guarantee of such Letter of Credit
Obligations, which stand-by letter (or letters) of credit shall be of like tenor
and duration (plus thirty (30) additional days) as, and in an amount equal to
103% of the aggregate maximum amount then available to be drawn under, the
Letters of Credit to which such outstanding Letter of Credit Obligations relate,
plus fees and expenses reasonably expected to be incurred in connection with
draws thereunder and shall be issued by a Person, and shall be subject to such
terms and conditions, as are be satisfactory to Agent in its sole discretion.

 

(iii)                               From time to time after funds are deposited
in the Cash Collateral Account by Borrower, whether before or after the
Commitment Termination Date, Agent may apply such funds or Cash Equivalents then
held in the Cash Collateral Account to the payment of any amounts, and in such
order as Agent may elect, as shall be or shall become due and payable by
Borrower to Agent and Lenders with respect to such Letter of Credit Obligations
of Borrower

 

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if and, upon the satisfaction in full of all Letter of Credit Obligations of
Borrower, to any other Obligations then due and payable.

 

(iv)                              Neither Borrower nor any Person claiming on
behalf of or through Borrower shall have any right to withdraw any of the funds
or Cash Equivalents held in the Cash Collateral Account, except that upon the
termination of all Letter of Credit Obligations and the payment of all amounts
payable by Borrower to Agent and Lenders in respect thereof, any funds remaining
in the Cash Collateral Account shall be applied to other Obligations then due
and owing and upon payment in full of such Obligations, any remaining amount
shall be paid to Borrower or as otherwise required by law.  Interest earned on
deposits in the Cash Collateral Account shall be for the account of Agent.

 

(d)                                 Fees and Expenses.  Borrower agrees to pay
to Agent for the benefit of Revolving Lenders, as compensation to such Lenders
for Letter of Credit Obligations incurred hereunder, (i) all costs and expenses
incurred by Agent or any Lender on account of such Letter of Credit Obligations,
and (ii) for each month during which any Letter of Credit Obligation shall
remain outstanding, a fee (the “Letter of Credit Fee”) in an amount equal to two
and one-quarter percent (2.25%) per annum multiplied by the maximum amount
available from time to time to be drawn under the applicable Letter of Credit. 
Such fee shall be paid to Agent for the benefit of the Revolving Lenders in
arrears, on the first day of each month and on the Commitment Termination Date. 
In addition, Borrower shall pay to any L/C Issuer, on demand, such fees
(including all per annum fees), charges and expenses of such L/C Issuer in
respect of the issuance, negotiation, acceptance, amendment, transfer and
payment of such Letter of Credit or otherwise payable pursuant to the
application and related documentation under which such Letter of Credit is
issued.

 

(e)                                  Request for Incurrence of Letter of Credit
Obligations.  Borrower shall give Agent at least two (2) Business Days’ prior
written notice requesting the incurrence of any Letter of Credit Obligation. 
The notice shall be accompanied by the form of the Letter of Credit (which shall
be acceptable to the L/C Issuer) and a completed Application for Standby Letter
of Credit or Application for Documentary Letter of Credit as applicable in the
form Exhibit B-1 or B-2 attached hereto.  Notwithstanding anything contained
herein to the contrary, Letter of Credit applications by Borrower and approvals
by Agent and the L/C Issuer may be made and transmitted pursuant to electronic
codes and security measures mutually agreed upon and established by and among
Borrower, Agent and the L/C Issuer.

 

(f)                                    Obligation Absolute.  The obligation of
Borrower to reimburse Agent and Revolving Lenders for payments made with respect
to any Letter of Credit Obligation shall be absolute, unconditional and
irrevocable, without necessity of presentment, demand, protest or other
formalities, and the obligations of each Revolving Lender to make payments to
Agent with respect to Letters of Credit shall be unconditional and irrevocable. 
Such obligations of Borrower and Revolving Lenders shall be paid strictly in
accordance with the terms hereof under all circumstances including the
following:

 

(i)                                     any lack of validity or enforceability
of any Letter of Credit or the Agreement or the other Loan Documents or any
other agreement;

 

B-3

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(ii)                                  the existence of any claim, setoff,
defense or other right that Borrower or any of its Affiliates or any Lender may
at any time have against a beneficiary or any transferee of any Letter of Credit
(or any Persons or entities for whom any such transferee may be acting), Agent,
any Lender, or any other Person, whether in connection with the Agreement, the
Letter of Credit, the transactions contemplated herein or therein or any
unrelated transaction (including any underlying transaction between Borrower or
any of its Affiliates and the beneficiary for which the Letter of Credit was
procured);

 

(iii)                               any draft, demand, certificate or any 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;

 

(iv)                              payment by Agent (except as otherwise
expressly provided in paragraph (g)(ii)(C) below) or any L/C Issuer under any
Letter of Credit or guaranty thereof against presentation of a demand, draft or
certificate or other document that does not comply with the terms of such Letter
of Credit or such guaranty;

 

(v)                                 any other circumstance or event whatsoever,
that is similar to any of the foregoing; or

 

(vi)                              the fact that a Default or an Event of Default
has occurred and is continuing.

 

(g)                                 Indemnification; Nature of Lenders’ Duties. 
(i) In addition to amounts payable as elsewhere provided in the Agreement,
Borrower hereby agrees to pay and to protect, indemnify, and save harmless Agent
and each Lender from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable attorneys’
fees and allocated costs of internal counsel) that Agent or any Lender may incur
or be subject to as a consequence, direct or indirect, of (A) the issuance of
any Letter of Credit or guaranty thereof, or (B) the failure of Agent or any
Lender seeking indemnification or of any L/C Issuer to honor a demand for
payment under any Letter of Credit or guaranty thereof as a result of any act or
omission, whether rightful or wrongful, of any present or future de jure or de
facto government or Governmental Authority, in each case other than to the
extent solely as a result of the gross negligence or willful misconduct of Agent
or such Lender (as finally determined by a court of competent jurisdiction).

 

(ii)                                  As between Agent and any Lender and
Borrower, Borrower assumes all risks of the acts and omissions of, or misuse of
any Letter of Credit by beneficiaries of any Letter of Credit.  In furtherance
and not in limitation of the foregoing, to the fullest extent permitted by law
neither Agent nor any Lender shall be responsible for:  (A) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document issued by any
party in connection with the application for and issuance of any Letter of
Credit, even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (B) the validity or sufficiency
of any instrument transferring or assigning or purporting to transfer or assign
any Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, that may prove to be invalid or ineffective for any reason;
(C) failure of the beneficiary of any Letter of Credit to comply fully with
conditions required in order to demand payment under such Letter of Credit;

 

B-4

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provided, that in the case of any payment by Agent under any Letter of Credit or
guaranty thereof, Agent shall be liable to the extent such payment was made
solely as a result of its gross negligence or willful misconduct (as finally
determined by a court of competent jurisdiction) in determining that the demand
for payment under such Letter of Credit or guaranty thereof complies on its face
with any applicable requirements for a demand for payment under such Letter of
Credit or guaranty thereof; (D) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they may be in cipher; (E) errors in interpretation of
technical terms; (F) any loss or delay in the transmission or otherwise of any
document required in order to make a payment under any Letter of Credit or
guaranty thereof or of the proceeds thereof; (G) the credit of the proceeds of
any drawing under any Letter of Credit or guaranty thereof; and (H) any
consequences arising from causes beyond the control of Agent or any Lender. None
of the above shall affect, impair, or prevent the vesting of any of Agent’s or
any Lender’s rights or powers hereunder or under the Agreement.

 

(iii)                               Nothing contained herein shall be deemed to
limit or to expand any waivers, covenants or indemnities made by Borrower in
favor of any L/C Issuer in any letter of credit application, reimbursement
agreement or similar document, instrument or agreement between Borrower and such
L/C Issuer, including an Application and Agreement for Documentary Letter of
Credit or a Master Documentary Agreement and a Master Standby Agreement entered
into with Agent.

 

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ANNEX C (Section 1.8)

to

CREDIT AGREEMENT

 

CASH MANAGEMENT SYSTEM

 

Borrower shall, and shall cause the Secured Guarantors to, establish and
maintain the Cash Management Systems described below:

 

(a)                                  Before the Effective Date and until the
Termination Date, Borrower shall (i) establish lock boxes (“Lock Boxes”) or, at
Agent’s discretion, blocked accounts (“Blocked Accounts”) at one or more of the
banks set forth in Disclosure Schedule (3.18), and shall request in writing and
otherwise take such reasonable steps to ensure that all Account Debtors forward
payment directly to such Lock Boxes, and (ii) deposit and cause the Secured
Guarantors and Schaublin to deposit or cause to be deposited promptly, and in
any event no later than the first Business Day after the date of receipt
thereof, all cash, checks, drafts or other similar items of payment relating to
or constituting payments made in respect of any and all Collateral (whether or
not otherwise delivered to a Lock Box) into one or more Blocked Accounts in
Borrower’s name or any such Secured Guarantor’s or Schaublin’s name and at a
bank identified in Disclosure Schedule (3.18) (each, a “Relationship Bank”).  On
or before the Closing Date, Borrower shall have established a concentration
account in its name (the “Concentration Account”) at the bank that shall be
designated as the Concentration Account bank for Borrower in Disclosure Schedule
(3.18) (the “Concentration Account Bank”) which bank shall be reasonably
satisfactory to Agent.

 

(b)                                 Borrower may maintain, in its name, an
account (each a “Disbursement Account” and collectively, the “Disbursement
Accounts”) at a bank acceptable to Agent into which Agent shall, from time to
time, deposit proceeds of Revolving Credit Advances and Swing Line Advances made
to Borrower pursuant to Section 1.1 for use by Borrower in accordance with the
provisions of Section 1.4.

 

(c)                                  On or before the Effective Date (or such
later date as Agent shall consent to in writing), the Concentration Account
Bank, each bank where a Disbursement Account is maintained and all other
Relationship Banks, shall have entered into tri-party blocked account agreements
with Agent, for the benefit of itself and Lenders, and Borrower and the Secured
Guarantors or Schaublin, as applicable, in form and substance reasonably
acceptable to Agent, which shall become operative on or prior to the Effective
Date.  Each such blocked account agreement shall provide, among other things,
that (i) all items of payment deposited in such account and proceeds thereof
deposited in the Concentration Account are held by such bank as agent or
bailee-in-possession for Agent, on behalf of itself and Lenders, (ii) the bank
executing such agreement has no rights of setoff or recoupment or any other
claim against such account, as the case may be, other than for payment of its
service fees and other charges directly related to the administration of such
account and for returned checks or other items of payment, and (iii) from and
after the Effective Date (A) with respect to banks at which a Blocked Account is
maintained, such bank agrees, from and after the receipt of a notice (an
“Activation Notice”) from Agent (which Activation Notice may be given by Agent
at any time at which an Event of

 

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Default described in Sections 8.1(a), 8.1(b) (as a result of a breach of any of
Sections 1.4, 1.8, 5.4(a), 6.1, 6.2, 6.5, 6.6, 6.7, 6.8, 6.10, 6.12, 6.14, and
6.19), 8.1(f), 8.1(h) or 8.1(i) has occurred and is continuing (any of the
foregoing being referred to herein as an “Activation Event”), to forward
immediately all amounts in each Blocked Account to the Concentration Account
Bank and to commence the process of daily sweeps from such Blocked Account into
the Concentration Account and (B) with respect to the Concentration Account
Bank, such bank agrees from and after the receipt of an Activation Notice from
Agent upon the occurrence of an Activation Event, to immediately forward all
amounts received in the Concentration Account to the Collection Account through
daily sweeps from such Concentration Account into the Collection Account. From
and after the date Agent has delivered an Activation Notice to any bank with
respect to any Blocked Account(s), Borrower shall not, and shall not cause or
permit any Secured Guarantor or Schaublin to, accumulate or maintain cash in
Disbursement Accounts or payroll accounts as of any date of determination in
excess of checks outstanding against such accounts as of that date and amounts
necessary to meet minimum balance requirements.

 

(d)                                 So long as no Default or Event of Default
has occurred and is continuing, Borrower may amend Disclosure Schedule (3.19) to
add or replace a Relationship Bank, Lock Box or Blocked Account or to replace
any Concentration Account or any Disbursement Account; provided, that prior to
the time of the opening of such account or Lock Box, Borrower or the Secured
Guarantors or Schaublin, as applicable, and such bank shall have executed and
delivered to Agent a tri-party blocked account agreement, in form and substance
reasonably satisfactory to Agent. Borrower shall close any of its depository,
lock box or concentration accounts (and establish replacement accounts in
accordance with the foregoing sentence) promptly and in any event within 30 days
following notice from Agent that the creditworthiness of any bank holding an
account is no longer acceptable in Agent’s reasonable judgment, or as promptly
as practicable and in any event within 60 days following notice from Agent that
the operating performance, funds transfer or availability procedures or
performance with respect to accounts or Lock Boxes of the bank holding such
accounts or Agent’s liability under any tri-party blocked account agreement with
such bank is no longer acceptable in Agent’s reasonable judgment.

 

(e)                                  The Lock Boxes, Blocked Accounts,
Disbursement Accounts and the Concentration Account shall be cash collateral
accounts, with all cash, checks and other similar items of payment in such
accounts securing payment of the Loans and all other Obligations, and in which
Borrower and each Secured Guarantor shall have granted a Lien to Agent, on
behalf of itself and Lenders, pursuant to the Security Agreement.

 

(f)                                    All amounts deposited in the Collection
Account shall be deemed received by Agent in accordance with Section 1.10 and
shall be applied (and allocated) by Agent in accordance with Section 1.11.  In
no event shall any amount be so applied unless and until such amount shall have
been credited in immediately available funds to the Collection Account.

 

(g)                                 Borrower shall and shall cause its
Affiliates, officers, employees, agents, directors or other Persons acting for
or in concert with Borrower (each a “Related Person”) to (i) hold in trust for
Agent, for the benefit of itself and Lenders, all checks, cash and other items
of payment received by Borrower or any such Related Person, and (ii) promptly
after receipt by Borrower or any such Related Person of any checks, cash or
other items of payment, deposit the same into a Blocked Account.  Borrower and
each Related Person thereof acknowledges and

 

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agrees that all cash, checks or other items of payment constituting proceeds of
Collateral are part of the Collateral.  All proceeds of the sale or other
disposition of any Collateral, shall be deposited directly into Blocked
Accounts.

 

(h)                                 Until the occurrence of an Activation Event,
Agent shall forward to Borrower at the end of each Business Day all amounts
received by Agent on such Business Day in the Collection Account (Government
Receivables) in good faith so long as no Revolving Credit Advances are
outstanding and no sums are then due and payable to Agent or Lenders under the
Credit Agreement.  All such funds shall be sent by wire transfer to the
following Borrower’s depositors account:

 

Bank:

 

Wachovia/First Union National Bank
Charlotte, NC

 

 

 

ABA/Swift number:

 

031201467

 

 

 

Bank Account #:

 

2014146817950

 

 

 

Account Name:

 

Roller Bearing Company of America, Inc.

 

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ANNEX D (Section 2.1(a))

to

CREDIT AGREEMENT

 

CLOSING CHECKLIST

 

In addition to, and not in limitation of, the conditions described in Section
2.1 of the Agreement, pursuant to Section 2.1(a), the following items must be
received by Agent in form and substance satisfactory to Agent on or prior to the
Effective Date (each capitalized term used but not otherwise defined herein
shall have the meaning ascribed thereto in Annex A to the Agreement):

 

A.                                   Appendices.  All Appendices to the
Agreement, in form and substance satisfactory to Agent.

 

B.                                     Revolving Notes.  Duly executed originals
of the Revolving Notes for each applicable Lender, dated the Closing Date or the
Effective Date, as applicable.

 

C.                                     Security Interests.  (a) Evidence
satisfactory to Agent that Agent (for the benefit of itself and Lenders) has a
valid and perfected first priority security interest in the Collateral,
including (i) such documents duly executed by each of the RBC Swiss Group
Members and French Operating Companies and as Agent may request in order to
perfect its security interests in the Collateral and (ii) copies of Lien search
reports listing all effective Liens with respect to RBC Swiss Group Members.

 

E.                                      Initial Schaublin Borrowing Base
Certificate.  Duly executed originals of Schaublin Borrowing Base Certificates
from Borrower, dated the Effective Date, reflecting information concerning
Eligible Accounts – Schaublin and Eligible Inventory – Schaublin as of April 30,
2003.

 

F.                                      Foreign Credit Parties Insurance. 
Satisfactory evidence the insurance policies required by Section 5.4 with
respect to Foreign Credit Parties are in full force and effect, together with
appropriate evidence showing loss payable and/or additional insured clauses or
endorsements, as requested by Agent, in favor of Agent, on behalf of Lenders.

 

G.                                     Cash Management System; Blocked Account
Agreements.  Evidence satisfactory to Agent that, as of the Effective Date, Cash
Management Systems complying with Annex C to the Agreement have been established
and are currently being maintained in the manner set forth in such Annex C with
respect to Schaublin, together with copies of duly executed tri-party blocked
account and lock box agreements, reasonably satisfactory to Agent, with the
banks as required by Annex C.

 

H.                                    Charter and Good Standing.  For each RBC
Swiss Group Member and each French Operating Company, such Person’s (a) charter
and all amendments thereto, (b) good standing certificates (including
verification of tax status) in its jurisdiction of incorporation and (c) good
standing certificates (including verification of tax status) and certificates of
qualification to conduct business in each jurisdiction where its ownership or
lease of property or the conduct

 

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of its business requires such qualification, each dated a recent date prior to
the Effective Date and certified by the applicable Secretary of State or other
authorized Governmental Authority.

 

I.                                         Bylaws and Resolutions.  For each RBC
Swiss Group Member and each French Operating Company, (a) such Person’s bylaws,
together with all amendments thereto and (b) resolutions of such Person’s Board
of Directors, approving and authorizing the execution, delivery and performance
of the Loan Documents to which such Person is a party and the transactions to be
consummated in connection therewith, each certified as of the Effective Date by
such Person’s corporate secretary or an assistant secretary as being in full
force and effect without any modification or amendment.

 

J.                                        Incumbency Certificates.  For each
Credit Party, signature and incumbency certificates of the officers of each such
Person executing any of the Loan Documents, certified as of the Effective Date
by such Person’s corporate secretary or an assistant secretary as being true,
accurate, correct and complete.

 

K.                                    Opinions of Counsel.  Duly executed
originals of opinions of McDermott, Will & Emery, Orrick, Herrington & Sutcliffe
and Raaflaub Law Offices, each counsel for the Credit Parties, in form and
substance reasonably satisfactory to Agent and its counsel, dated the Effective
Date.

 

L.                                      Foreign Collateral Documents and
Borrower Swiss Pledge Agreement.  Duly executed originals of the Schaublin
Holding Pledge Agreement, the Schaublin Swiss Pledge Agreement, the Schaublin
French Pledge Agreement (RBC France), the Schaublin French Pledge Agreement
(Bovagnet), the Swiss Warehouse Control Agreement, and the Borrower Swiss Pledge
Agreement, accompanied by (as applicable and to the extent required under
applicable law) (a) share certificates representing all of the outstanding Stock
being pledged pursuant to such pledge agreements and stock powers for such share
certificates executed in blank and (b) the original Intercompany Notes and other
instruments evidencing Indebtedness being pledged pursuant to such pledge
agreements, duly endorsed in blank.

 

M.                                 Officer’s Certificate.  Agent shall have
received duly executed originals of a certificate of the Chief Executive Officer
and Chief Financial Officer of Borrower, dated the Effective Date, stating that,
since March 30, 2002, except as set forth in such certificate:  (a) no event or
condition has occurred or is existing which could reasonably be expected to have
a Material Adverse Effect; (b) there has been no material adverse change in the
industry in which Borrower operates; (c) no Litigation has been commenced which,
if successful, would have a Material Adverse Effect or could challenge any of
the transactions contemplated by the Agreement and the other Loan Documents; (d)
there have been no Restricted Payments made by any Credit Party; and (e) there
has been no material increase in liabilities, liquidated or contingent, and no
material decrease in assets of Borrower or any of its Subsidiaries.

 

N.                                    Waivers.  Agent, on behalf of Lenders,
shall have received landlord waivers and consents, bailee letters and mortgagee
agreements in form and substance satisfactory to Agent, in each case as required
pursuant to Section 5.9.

 

D-2

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O.                                    Appraisals.  Agent shall have received
appraisals as to all Inventory of Schaublin.

 

P.                                      Additional Swiss Security Documents. 
[To be determined]

 

Q.                                    Additional French Security Documents.  [To
be determined]

 

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ANNEX E (Section 4.1(a))

to

CREDIT AGREEMENT

 

FINANCIAL STATEMENTS AND PROJECTIONS – REPORTING

 

Borrower shall deliver or cause to be delivered to Agent or to Agent and
Lenders, as indicated, the following:

 

(a)                                  Monthly Financials.  To Agent and Lenders,
within 45 days after the end of each Fiscal Month (other than a Fiscal Month
that is the last month of a Fiscal Quarter), financial information regarding
Holdings, Borrower and its Subsidiaries, certified by the Chief Financial
Officer of Borrower, consisting of consolidated and consolidating (i) unaudited
balance sheets as of the close of such Fiscal Month and the related statements
of income and cash flows for that portion of the Fiscal Year ending as of the
close of such Fiscal Month; (ii) unaudited statements of income and cash flows
for such Fiscal Month, setting forth in comparative form the figures for the
corresponding period in the prior year and the figures contained in the
Projections for such Fiscal Year, all prepared in accordance with GAAP (subject
to normal year-end adjustments); and (iii) a summary of the outstanding balance
of all Intercompany Notes as of the last day of that Fiscal Month.  Such
financial information shall be accompanied by the certification of the Chief
Financial Officer of Borrower that (i) such financial information presents
fairly in accordance with GAAP (subject to normal year-end adjustments) the
financial position and results of operations of Holdings, Borrower and its
Subsidiaries, on a consolidated and consolidating basis, in each case as at the
end of such Fiscal Month and for that portion of the Fiscal Year then ended and
(ii) any other information presented is true, correct and complete in all
material respects and that there was no Default or Event of Default in existence
as of such time or, if a Default or Event of Default shall have occurred and be
continuing, describing the nature thereof and all efforts undertaken to cure
such Default or Event of Default.  In addition, Borrower shall deliver to Agent
and Lenders, within 45 days after the end of each Fiscal Month, a management
discussion and analysis of the financial performance of Holdings, Borrower and
its Subsidiaries prepared in accordance with Borrower’s past practices.

 

(b)                                 Quarterly Financials.  To Agent and Lenders,
within 45 days after the end of each Fiscal Quarter, consolidated and
consolidating financial information regarding Holdings, Borrower and its
Subsidiaries, certified by the Chief Financial Officer of Borrower, including
(i) unaudited balance sheets as of the close of such Fiscal Quarter and the
related statements of income and cash flow for that portion of the Fiscal Year
ending as of the close of such Fiscal Quarter and (ii) unaudited statements of
income and cash flows for such Fiscal Quarter, in each case setting forth in
comparative form the figures for the corresponding period in the prior year and
the figures contained in the Projections for such Fiscal Year, all prepared in
accordance with GAAP (subject to normal year-end adjustments).  Such financial
information shall be accompanied by (A) a statement in reasonable detail in the
form of Exhibit E-1 (each, a “Compliance Certificate”) in respect of the Fixed
Charge Coverage Ratio Financial Covenant that is tested on a quarterly basis and
(B) the certification of the Chief Financial Officer of Borrower that (i) such
financial information presents fairly in accordance with GAAP (subject to normal
year-end adjustments) the financial position, results of operations and
statements of cash

 

E-1

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if flows of Holdings, Borrower and its Subsidiaries, on both a consolidated and
consolidating basis, as at the end of such Fiscal Quarter and for that portion
of the Fiscal Year then ended, (ii) any other information presented is true,
correct and complete in all material respects and that there was no Default or
Event of Default in existence as of such time or, if a Default or Event of
Default has occurred and is continuing, describing the nature thereof and all
efforts undertaken to cure such Default or Event of Default.

 

(c)                                  Operating Plan.  To Agent and Lenders, as
soon as available, but not later than 30 days after the end of each Fiscal Year,
an annual operating plan for Holdings and Borrower, approved by the Board of
Directors of Borrower, for the following Fiscal Year, which (i) includes a
statement of all of the material assumptions on which such plan is based, (ii)
includes monthly balance sheets and a quarterly budget for the following year
and (iii) integrates sales, gross profits, operating expenses, operating profit,
cash flow projections (and shows such projections separately with respect to the
French Operating Companies), U.S. Borrowing Availability and Schaublin Borrowing
Availability projections, all prepared on the same basis and in similar detail
as that on which operating results are reported (and in the case of cash flow
projections, representing management’s good faith estimates of future financial
performance based on historical performance), and including plans for personnel,
Capital Expenditures and facilities.

 

(d)                                 Annual Audited Financials. To Agent and
Lenders, within ninety (90) days after the end of each Fiscal Year, or on a
later date on which filing thereof is required with the Securities and Exchange
Commission, audited Financial Statements for Holdings, Borrower and its
Subsidiaries on a consolidated and (unaudited) consolidating basis, consisting
of balance sheets and statements of income and retained earnings and cash flows,
setting forth in comparative form in each case the figures for the previous
Fiscal Year, which Financial Statements shall be prepared in accordance with
GAAP and certified without qualification, by an independent certified public
accounting firm of national standing or otherwise acceptable to Agent.  Such
Financial Statements shall be accompanied by (i) the Compliance Certificate
showing the calculations used in determining compliance with the Fixed Charge
Coverage Ratio Financial Covenant, (ii) a report from such accounting firm to
the effect that, in connection with their audit examination, nothing has come to
their attention to cause them to believe that a Default or Event of Default has
occurred with respect to the Fixed Charge Coverage Ratio Financial Covenant (or
specifying those Defaults and Events of Default that they became aware of), it
being understood that such audit examination extended only to accounting matters
and that no special investigation was made with respect to the existence of
Defaults or Events of Default, (iii) the annual letters to such accountants in
connection with their audit examination detailing contingent liabilities and
material litigation matters, and (iv) the certification of the Chief Executive
Officer or Chief Financial Officer of Borrower that all such Financial
Statements present fairly in accordance with GAAP the financial position,
results of operations and statements of cash flows of Holdings, Borrower and its
Subsidiaries on a consolidated and consolidating basis, as at the end of such
Fiscal Year and for the period then ended, and that there was no Default or
Event of Default in existence as of such time or, if a Default or Event of
Default has occurred and is continuing, describing the nature thereof and all
efforts undertaken to cure such Default or Event of Default.

 

E-2

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(e)                                  Management Letters.  To Agent and Lenders,
within five (5) Business Days after receipt thereof by any Credit Party, copies
of all management letters, exception reports or similar letters or reports
received by such Credit Party from its independent certified public accountants.

 

(f)                                  Default Notices.  To Agent and Lenders, as
soon as practicable, and in any event within five (5) Business Days after an
executive officer of Borrower has actual knowledge of the existence of any
Default, Event of Default or other event that has had a Material Adverse Effect,
telephonic or telecopied notice specifying the nature of such Default or Event
of Default or other event, including the anticipated effect thereof, which
notice, if given telephonically, shall be promptly confirmed in writing on the
next Business Day.

 

(g)                               SEC Filings and Press Releases.  To Agent and
Lenders, promptly upon their becoming available, copies of:  (i) all Financial
Statements, reports, notices and proxy statements made publicly available by any
Credit Party to its security holders; (ii) all regular and periodic reports and
all registration statements and prospectuses, if any, filed by any Credit Party
with any securities exchange or with the Securities and Exchange Commission or
any governmental or private regulatory authority; and (iii) all press releases
and other statements made available by any Credit Party to the public concerning
material changes or developments in the business of any such Person.

 

(h)                               Subordinated Debt and Equity Notices.  To
Agent and Lenders, as soon as practicable, copies of all material written
notices given or received by any Credit Party with respect to any Subordinated
Debt or Stock of such Person, and, within three (3) Business Days after any
Credit Party obtains knowledge of any matured or unmatured event of default with
respect to any Subordinated Debt, notice of such event of default.

 

(i)                                     Supplemental Schedules.  To Agent,
supplemental disclosures, if any, required by Section 5.6.

 

(j)                                     Litigation.  To Agent and Lenders in
writing, promptly upon learning thereof, notice of any Litigation commenced or
threatened against any Credit Party that (i) seeks damages in excess of the
Dollar Equivalent of $250,000, (ii) seeks injunctive relief, (iii) is asserted
or instituted against any Plan, its fiduciaries or its assets or against any
Credit Party or ERISA Affiliate in connection with any Plan, (iv) alleges
criminal misconduct by any Credit Party, (v) alleges the violation of any law
regarding, or seeks remedies in connection with, any Environmental Liabilities;
or (vi) involves any product recall.

 

(k)                                  Insurance Notices.  To Agent, disclosure of
losses or casualties required by Section 5.4.

 

(l)                                     Lease Default Notices.  To Agent, within
five (5) Business Days after receipt thereof, copies of (i) any and all default
notices received under or with respect to any leased location or public
warehouse where Collateral is located, and (ii) such other notices or documents
as Agent may reasonably request.

 

E-3

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(m)                               Lease Amendments.  To Agent, promptly after
receipt thereof, copies of all material amendments to real estate leases.

 

(n)                                 French Intercompany Loans and Schaublin
Intercompany Loans Certificate.  Together with each Borrowing Base Certificate
submitted to Agent, and in any event within ten (10) Business Days after the end
of each Fiscal Month, to Agent a certificate with respect to the balances and
advances of the Schaublin Intercompany Loans and French Intercompany Loans in
the form of Exhibit E-2 executed by each Credit Party signatory thereto.

 

(n)                                 Other Documents.  To Agent and Lenders, such
other financial and other information respecting any Credit Party’s business or
financial condition as Agent or any Lender shall, from time to time, reasonably
request.

 

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ANNEX F (Section 4.1(b))

to

CREDIT AGREEMENT

 

COLLATERAL REPORTS

 

Borrower shall deliver or cause to be delivered the following:

 

(a)                                  To Agent, within ten (10) Business Days
after the end of each Fiscal Month (together with a copy of all or any part of
the following reports requested by any Lender in writing after the Closing
Date), each of the following reports, each of which shall be prepared by
Borrower as of the last day of the immediately preceding Fiscal Month:

 

(i)                                     a U.S. Borrowing Base Certificate with
respect to Borrower and Secured Guarantors and a Schaublin Borrowing Base
Certificate with respect to Schaublin, accompanied by such supporting detail and
documentation as shall be requested by Agent in its reasonable discretion;

 

(ii)                                  with respect to Borrower, Secured
Guarantors and Schaublin, a summary of Inventory by location and type with a
supporting perpetual Inventory report, in each case accompanied by such
supporting detail and documentation as shall be requested by Agent in its
reasonable discretion; and

 

(iii)                               with respect to Borrower, Secured Guarantors
and Schaublin, a monthly trial balance showing Accounts outstanding aged from
invoice date as follows:  1 to 30 days, 31 to 60 days, 61 to 90 days and 91 days
or more, accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion.

 

(b)                                 As long as Borrowing Availability is less
than $10,000,000 at the time of the delivery of the Borrowing Base Certificates
in accordance with clause (a) above, to Agent and each Lender, at the time of
such delivery, each of the following reports, each of which shall be prepared by
Borrower as of the last day of the immediately preceding Fiscal Month:

 

(i)                                     with respect to Borrower, Secured
Guarantors and Schaublin, a summary of Inventory by type with a supporting
perpetual Inventory report;

 

(ii)                                  with respect to Borrower, Secured
Guarantors and Schaublin, a monthly trial balance showing Accounts outstanding
aged from invoice date as follows:  1 to 30 days, 31 to 60 days, 61 to 90 days
and 91 days or more;

 

(ii)                                with respect to Borrower, Secured Guarantors
and Schaublin, agings of accounts payable (and including information indicating
the amounts then owing to owners and lessors of leased premises, warehouses,
processors and other third parties from time to time in possession of any
Collateral);

 

F-1

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(iii)                               schedules in a form satisfactory to Agent
reflecting sales made, credits issued, cash or other items of payment received
and other data relating to the collection of Accounts; and

 

(iv)                              the percentages of all Eligible Accounts owing
to each of the five (5) largest Account Debtors and their Affiliates (excluding
the United States government as Account Debtor).

 

(b)                                 To Agent, at the time of delivery of each of
the monthly Financial Statements delivered pursuant to Annex E:

 

(i)                                     a reconciliation of the most recent U.S.
Borrowing Base and Schaublin Borrowing Base, general ledger and month-end
Inventory reports of Borrower to Borrower’s general ledger and monthly Financial
Statements delivered pursuant to such Annex E, in each case accompanied by such
supporting detail and documentation as shall be requested by Agent in its
reasonable discretion;

 

(ii)                                  a reconciliation of the perpetual
inventory by location to Borrower’s most recent U.S. Borrowing Base and
Schaublin Borrowing Base, general ledger and monthly Financial Statements
delivered pursuant to Annex E, in each case accompanied by such supporting
detail and documentation as shall be requested by Agent in its reasonable
discretion;

 

(iii)                               an aging of accounts payable and a
reconciliation of that accounts payable aging to Borrower’s general ledger and
monthly Financial Statements delivered pursuant to Annex E, in each case
accompanied by such supporting detail and documentation as shall be requested by
Agent in its reasonable discretion;

 

(iv)                              a reconciliation of the outstanding Loans as
set forth in the monthly Loan Account statement provided by Agent to Borrower’s
general ledger and monthly Financial Statements delivered pursuant to Annex E,
in each case accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion;

 

(d)                                 To Agent, at the time of delivery of each of
the quarterly or annual Financial Statements delivered pursuant to Annex E, (i)
a listing of government contracts of Borrower subject to the Federal Assignment
of Claims Act of 1940; and (ii) a list of any applications for the registration
of any Patent, Trademark or Copyright filed by any Credit Party with the United
States Patent and Trademark Office, the United States Copyright Office or any
similar office or agency in the prior Fiscal Quarter;

 

(e)                                  Borrower, at its own expense, shall deliver
to Agent and Lenders the results of each physical verification, if any, that
Borrower or any of its Subsidiaries may in their discretion have made, or caused
any other Person to have made on their behalf, of all or any portion of their
Inventory (and, if a Default or an Event of Default has occurred and be
continuing, Borrower shall, upon the request of Agent, conduct, and deliver the
results of, such physical verifications as Agent may require);

 

F-2

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(f)                                    Borrower, at its own expense, shall
deliver to Agent and Lenders a desk top appraisal of Inventory of Borrower, the
Secured Guarantors and Schaublin on the second anniversary of the Closing Date
to be conducted by an appraiser, and in form and substance reasonably
satisfactory to Agent, and Borrower, at its own expense, shall deliver to Agent
and Lenders such appraisals of its assets and the assets of Secured Guarantors
and Schaublin as Agent may request at any time after the occurrence and during
the continuance of a Default or an Event of Default, such appraisals to be
conducted by an appraiser, and in form and substance reasonably satisfactory to
Agent; and

 

(g)                                 Such other reports, statements and
reconciliations with respect to the U.S. Borrowing Base, Schaublin Borrowing
Base or Collateral or Obligations of any or all Credit Parties as Agent shall
from time to time request in its reasonable discretion, including additions and
reductions of Accounts on an intra-month basis.

 

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ANNEX G (Section 6.10)

to

CREDIT AGREEMENT

 

FINANCIAL COVENANTS

 

Borrower shall not breach or fail to comply with, and shall not permit Holdings
to breach or fail to comply with, any of the following financial covenants, each
of which shall be calculated in accordance with GAAP consistently applied:

 

(A)                                  FIXED CHARGE COVERAGE RATIO.  HOLDINGS, ON
A CONSOLIDATED BASIS SHALL HAVE AT THE END OF EACH FISCAL QUARTER A FIXED CHARGE
COVERAGE RATIO FOR THE 12-MONTH PERIOD THEN ENDED OF NOT LESS THAN 1.10 TO 1.00.

 

(B)                                 MINIMUM BORROWING AVAILABILITY.  EXCEPT FOR
OVERADVANCES OUTSTANDING UNDER SECTION 1.1(A)(III) AND THE GREATER MINIMUM
BORROWING AVAILABILITY REQUIRED AT TIMES AND AMOUNTS SET FORTH IN SECTIONS
6.3(B) AND 6.14, BORROWER SHALL, AT ALL TIMES, CAUSE THE BORROWING AVAILABILITY
TO EXCEED $5,000,000.

 

Unless otherwise specifically provided herein, any accounting term used in the
Agreement shall have the meaning customarily given such term in accordance with
GAAP, and all financial computations hereunder shall be computed in accordance
with GAAP consistently applied.  That certain items or computations are
explicitly modified by the phrase “in accordance with GAAP” shall in no way be
construed to limit the foregoing.  If any “Accounting Changes” (as defined
below) occur and such changes result in a change in the calculation of the
financial covenants, standards or terms used in the Agreement or any other Loan
Document, then Borrower, Agent and Lenders agree to enter into negotiations in
order to amend such provisions of the Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating the
financial condition of Holdings, Borrower and its Subsidiaries shall be the same
after such Accounting Changes as if such Accounting Changes had not been made;
provided, however, that the agreement of Requisite Lenders to any required
amendments of such provisions shall be sufficient to bind all Lenders. 
“Accounting Changes” means (i) changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants (or successor thereto or any agency with similar functions), (ii)
changes in accounting principles concurred in by Borrower’s certified public
accountants; (iii) purchase accounting adjustments under A.P.B. 16 or 17 and
EITF 88-16, and the application of the accounting principles set forth in FASB
109, including the establishment of reserves pursuant thereto and any subsequent
reversal (in whole or in part) of such reserves; and (iv) the reversal of any
reserves established as a result of purchase accounting adjustments.  All such
adjustments resulting from expenditures made subsequent to the Closing Date
(including capitalization of costs and expenses or payment of pre-Closing Date
liabilities) shall be treated as expenses in the period the expenditures are
made and deducted as part of the calculation of EBITDA in such period.  If
Agent, Borrower and Requisite Lenders agree upon the required amendments, then
after appropriate amendments have been executed and the underlying Accounting
Change with respect thereto has been implemented, any reference to GAAP
contained in the Agreement or in any other Loan Document shall, only to the
extent of such Accounting Change, refer to GAAP,

 

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if consistently applied after giving effect to the implementation of such
Accounting Change.  If Agent, Borrower and Requisite Lenders cannot agree upon
the required amendments within 30 days following the date of implementation of
any Accounting Change, then all Financial Statements delivered and all
calculations of financial covenants and other standards and terms in accordance
with the Agreement and the other Loan Documents shall be prepared, delivered and
made without regard to the underlying Accounting Change.  For purposes of
Section 8.1, a breach of a Financial Covenant contained in this Annex G shall be
deemed to have occurred as of any date of determination by Agent or as of the
last day of any specified measurement period, regardless of when the Financial
Statements reflecting such breach are delivered to Agent.

 

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ANNEX H (Section 9.9(a))

to

CREDIT AGREEMENT

 

LENDERS’ WIRE TRANSFER INFORMATION

 

Name:

 

General Electric Capital Corporation

Bank:

 

Bankers Trust Company

 

 

New York, New York

ABA #:

 

021001033

Account #:

 

50232854

Account Name:

 

GECC/CAF Depository

Reference:

 

CFN 4731

 

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ANNEX I (Section 11.10)

to

CREDIT AGREEMENT

 

NOTICE ADDRESSES

 

(A)

 

If to Agent or GE Capital, at

 

 

 

 

 

General Electric Capital Corporation

 

 

100 California Street, 10th Floor

 

 

San Francisco, California 94111

 

 

Attention:  John Goodwin and Neel Morey

 

 

Telecopier No.:  (415) 277-7443

 

 

Telephone No.:  (415) 277-7400

 

 

 

 

 

with copies to:

 

 

 

 

 

General Electric Capital Corporation

 

 

500 W. Monroe Street, 16th Floor

 

 

Chicago, Illinois 60661

 

 

Attention:  Andrew Packer

 

 

Telecopier No.:  (312) 441-6876

 

 

Telephone No.:  (312) 441-7244

 

 

 

 

 

and

 

 

 

 

 

Latham & Watkins

 

 

233 S. Wacker Drive, Suite 5800

 

 

Chicago, Illinois 60606

 

 

Attention:  David G. Crumbaugh

 

 

Telecopier No.:  (312) 993-9767

 

 

Telephone No.:  (312) 876-7700

 

 

 

 

 

and

 

 

 

 

 

General Electric Capital Corporation

 

 

201 High Ridge Road

 

 

Stamford, Connecticut 06927-5100

 

 

Attention:  Corporate Counsel-Commercial Finance

 

 

Telecopier No.:  (203) 316-7889

 

 

Telephone No.:  (203) 316-7552

 

I-1

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(B)

 

If to Borrower, at

 

 

 

 

 

Roller Bearing Company of America, Inc.

 

 

60 Round Hill Road

 

 

P. O. Box 430

 

 

Fairfield, Connecticut 06430-0430

 

 

Attention:  Chief Financial Officer

 

 

Telecopier No.:  (203) 256-0775

 

 

Telephone No.:  (203) 255-1511

 

 

 

 

 

With copies to:

 

 

 

 

 

McDermott, Will & Emery

 

 

50 Rockefeller Plaza

 

 

New York, New York 10020-1605

 

 

Attention:  C. David Goldman

 

 

Telecopier No.:  (212) 547-5444

 

 

Telephone No.:  (212) 547-5512

 

 

 

(C)

 

If to Lenders, at

 

 

 

 

 

Congress Financial Corporation (Central)

 

 

150 South Wacker Drive, Suite 2200

 

 

Chicago, Illinois 60606

 

 

Attention:  Vicky Geist

 

 

Telecopier No.:  (312) 332-0424

 

 

Telephone No.:  (312) 332-0420

 

 

 

 

 

With copies to:

 

 

 

 

 

Otterbourg, Steindler, Houston & Rosen, P.C.

 

 

230 Park Avenue

 

 

New York, New York 10169

 

 

Attention:  David W. Morse, Esq.

 

 

Telecopier No.:  (212) 682-6104

 

 

Telephone No.:  (212) 661-9100

 

I-2

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ANNEX J (from Annex A - Commitments definition)

to

CREDIT AGREEMENT

 

PRO RATA SHARE

 

Commitments

 

Lender(s)

 

Pro Rata Share (of the
applicable Loan)

 

 

 

 

 

Revolving Loan Commitment (including a Swing Line Commitment of $5,000,0000):
$34,468,085.11

 

General Electric Capital Corporation

 

63.8297%

 

 

 

 

 

Term Loan Commitment: $25,531,914.89

 

General Electric Capital Corporation

 

63.8297%

 

 

 

 

 

Revolving Loan Commitment:  $19,531,914.89

 

Congress Financial Corporation (Central)

 

36.1702%

 

 

 

 

 

Term Loan Commitment: $14,468,085.11

 

Congress Financial Corporation (Central)

 

36.1702%

 

 

 

 

 

Schaublin Revolving Loan Commitment $4,468,085.11 (sublimit of GE Capital’s
Revolving Loan Commitment)

 

General Electric Capital Corporation

 

63.8297%

 

 

 

 

 

Schaublin Revolving Loan Commitment $2,531,914.89 (sublimit of Congress
Financial Corporation (Central)’s Revolving Loan Commitment)

 

Congress Financial Corporation (Central)

 

36.1702%

 

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