exv10w1



 






Exhibit 10.1




Loan And Security Agreement




Dated As Of January 28, 2005




Among




LaSalle Business Credit, LLC,




The Lender,




The Oilgear Company,




Oilgear Towler, S.A.




and




Oilgear Towler GmbH,




The Borrowers




 









 





TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	1.
	 	DEFINITIONS	 	 	1	 
	 
	 	 	 	 	 	 	 	 
	2.
	 	LOANS.	 	 	12	 
	

	 	(a)
	 	Revolving Loans
	 	 	12	 
	

	 	(b)
	 	Term Loan A
	 	 	14	 
	

	 	(c)
	 	Term Loan B
	 	 	15	 
	

	 	(d)
	 	Term Loan C
	 	 	15	 
	

	 	(e)
	 	Term Loan D
	 	 	15	 
	

	 	(f)
	 	Repayments
	 	 	15	 
	

	 	(g)
	 	Notes
	 	 	19	 
	

	 	(h)
	 	Currency
	 	 	19	 
	

	 	(i)
	 	Payments Free and Clear
	 	 	19	 
	 
	 	 	 	 	 	 	 	 
	3.
	 	LETTERS OF CREDIT	 	 	20	 
	

	 	(a)
	 	General Terms
	 	 	20	 
	

	 	(b)
	 	Requests for Letters of Credit
	 	 	20	 
	

	 	(c)
	 	Obligations Absolute
	 	 	21	 
	

	 	(d)
	 	Expiration Dates of Letters of Credit
	 	 	21	 
	 
	 	 	 	 	 	 	 	 
	4.
	 	INTEREST, FEES AND CHARGES	 	 	21	 
	

	 	(a)
	 	Interest Rate
	 	 	21	 
	

	 	(b)
	 	Other LIBOR Provisions
	 	 	22	 
	

	 	(c)
	 	Fees And Charges
	 	 	24	 
	

	 	(d)
	 	Maximum Interest
	 	 	26	 
	 
	 	 	 	 	 	 	 	 
	5.
	 	COLLATERAL	 	 	26	 
	

	 	(a)
	 	Grant of Security Interest to Lender
	 	 	26	 
	

	 	(b)
	 	Other Security
	 	 	27	 
	

	 	(c)
	 	Possessory Collateral
	 	 	27	 
	

	 	(d)
	 	Electronic Chattel Paper
	 	 	28	 
	 
	 	 	 	 	 	 	 	 
	6.
	 	PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN/LENDER’S RIGHT TO REQUIRE ADDITIONAL COLLATERAL	 	 	28	 
	 
	 	 	 	 	 	 	 	 
	7.
	 	POSSESSION OF COLLATERAL AND RELATED MATTERS	 	 	29	 
	 
	 	 	 	 	 	 	 	 
	8.
	 	COLLECTIONS	 	 	29	 






-i-









 






	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	9.
	 	COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES	 	 	31	 
	

	 	(a)
	 	Daily Reports
	 	 	31	 
	

	 	(b)
	 	Monthly Reports
	 	 	32	 
	

	 	(c)
	 	Financial Statements
	 	 	32	 
	

	 	(d)
	 	Annual Projections
	 	 	33	 
	

	 	(e)
	 	Explanation of Budgets and Projections
	 	 	33	 
	

	 	(f)
	 	Public Reporting
	 	 	33	 
	

	 	(g)
	 	Other Information
	 	 	33	 
	 
	 	 	 	 	 	 	 	 
	10.
	 	TERMINATION; AUTOMATIC RENEWAL	 	 	33	 
	 
	 	 	 	 	 	 	 	 
	11.
	 	REPRESENTATIONS AND WARRANTIES	 	 	34	 
	

	 	(a)
	 	Financial Statements and Other Information
	 	 	34	 
	

	 	(b)
	 	Locations
	 	 	35	 
	

	 	(c)
	 	Loans by Companies
	 	 	35	 
	

	 	(d)
	 	Accounts and Inventory
	 	 	35	 
	

	 	(e)
	 	Liens
	 	 	35	 
	

	 	(f)
	 	Organization, Authority and No Conflict
	 	 	35	 
	

	 	(g)
	 	Litigation
	 	 	37	 
	

	 	(h)
	 	Compliance with Laws and Maintenance of Permits
	 	 	37	 
	

	 	(i)
	 	Affiliate Transactions
	 	 	37	 
	

	 	(j)
	 	Names and Trade Names
	 	 	37	 
	

	 	(k)
	 	Equipment
	 	 	37	 
	

	 	(l)
	 	Enforceability
	 	 	38	 
	

	 	(m)
	 	Solvency
	 	 	38	 
	

	 	(n)
	 	Indebtedness
	 	 	38	 
	

	 	(o)
	 	Margin Security and Use of Proceeds
	 	 	38	 
	

	 	(p)
	 	Parent, Subsidiaries and Affiliates
	 	 	38	 
	

	 	(q)
	 	No Defaults
	 	 	38	 
	

	 	(r)
	 	Employee Matters
	 	 	39	 
	

	 	(s)
	 	Intellectual Property
	 	 	39	 
	

	 	(t)
	 	Environmental Matters
	 	 	39	 
	

	 	(u)
	 	ERISA Matters
	 	 	40	 
	

	 	(v)
	 	Related Agreements
	 	 	40	 
	

	 	(w)
	 	Industrial Revenue Bonds
	 	 	40	 
	 
	 	 	 	 	 	 	 	 
	12.
	 	AFFIRMATIVE COVENANTS	 	 	41	 
	

	 	(a)
	 	Maintenance of Records
	 	 	41	 
	

	 	(b)
	 	Notices
	 	 	41	 
	

	 	(c)
	 	Compliance with Laws and Maintenance of Permits
	 	 	42	 
	

	 	(d)
	 	Inspection and Audits
	 	 	43	 
	

	 	(e)
	 	Insurance
	 	 	43	 
	

	 	(f)
	 	Collateral
	 	 	44	 
	

	 	(g)
	 	Use of Proceeds
	 	 	45	 
	

	 	(h)
	 	Taxes/Governmental Charges
	 	 	45	 






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	 	 	 	 	 	 	Page
	

	 	(i)
	 	Intellectual Property
	 	 	45	 
	

	 	(j)
	 	Checking Accounts
	 	 	46	 
	

	 	(k)
	 	Patriot Act, Bank Secrecy Act and Office of Foreign Assets Control
	 	 	46	 
	

	 	(l)
	 	Industrial Revenue Bonds
	 	 	46	 
	

	 	(m)
	 	Oilgear France, Oilgear Italy and Oilgear Spain; Post-Close Documentation
	 	 	46	 
	

	 	(n)
	 	Post- Close Insurance Endorsements
	 	 	47	 
	 
	 	 	 	 	 	 	 	 
	13.
	 	NEGATIVE COVENANTS	 	 	47	 
	

	 	(a)
	 	Guaranties
	 	 	47	 
	

	 	(b)
	 	Indebtedness
	 	 	48	 
	

	 	(c)
	 	Liens
	 	 	48	 
	

	 	(d)
	 	Mergers, Sales, Acquisitions, Subsidiaries and Other Transactions Outside the Ordinary Course of Business
	 	 	48	 
	

	 	(e)
	 	Dividends and Distributions
	 	 	49	 
	

	 	(f)
	 	Investments; Loans
	 	 	49	 
	

	 	(g)
	 	Fundamental Changes, Related Agreements, Line of Business
	 	 	49	 
	

	 	(h)
	 	Equipment
	 	 	49	 
	

	 	(i)
	 	Affiliate Transactions
	 	 	50	 
	

	 	(j)
	 	Settling of Accounts
	 	 	50	 
	

	 	(k)
	 	Management Fees; Compensation
	 	 	50	 
	 
	 	 	 	 	 	 	 	 
	14.
	 	FINANCIAL COVENANTS	 	 	50	 
	

	 	(a)
	 	Tangible Net Worth
	 	 	50	 
	

	 	(b)
	 	Debt Service Coverage
	 	 	51	 
	

	 	(c)
	 	Interest Coverage
	 	 	52	 
	

	 	(d)
	 	Capital Expenditure Limitations
	 	 	52	 
	 
	 	 	 	 	 	 	 	 
	15.
	 	DEFAULT	 	 	53	 
	

	 	(a)
	 	Payment
	 	 	53	 
	

	 	(b)
	 	Breach of this Agreement and the Other Agreements
	 	 	53	 
	

	 	(c)
	 	Breaches of Other Obligations/Demand
	 	 	53	 
	

	 	(d)
	 	Breach of Representations and Warranties
	 	 	53	 
	

	 	(e)
	 	Loss of Collateral
	 	 	53	 
	

	 	(f)
	 	Levy, Seizure or Attachment
	 	 	54	 
	

	 	(g)
	 	Bankruptcy or Similar Proceedings
	 	 	54	 
	

	 	(h)
	 	Appointment of Receiver
	 	 	54	 
	

	 	(i)
	 	Judgment
	 	 	55	 
	

	 	(j)
	 	Death or Dissolution of Obligor
	 	 	55	 
	

	 	(k)
	 	Default or Revocation of Guaranty
	 	 	55	 
	

	 	(l)
	 	Criminal Proceedings
	 	 	55	 
	

	 	(m)
	 	Change of Control
	 	 	55	 
	

	 	(n)
	 	Change of Management
	 	 	55	 
	

	 	(o)
	 	Material Adverse Change
	 	 	55	 
	 
	 	 	 	 	 	 	 	 
	16.
	 	REMEDIES UPON AN EVENT OF DEFAULT	 	 	56	 






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	 	 	 	 	 	 	Page
	17.
	 	CONDITIONS PRECEDENT	 	 	57	 
	

	 	(a)
	 	Initial Loans
	 	 	57	 
	

	 	(b)
	 	All Loans
	 	 	57	 
	 
	 	 	 	 	 	 	 	 
	18.
	 	JOINT AND SEVERAL LIABILITY	 	 	58	 
	 
	 	 	 	 	 	 	 	 
	19.
	 	GENERAL INDEMNIFICATION	 	 	61	 
	 
	 	 	 	 	 	 	 	 
	20.
	 	CURRENCY INDEMNITY	 	 	62	 
	 
	 	 	 	 	 	 	 	 
	21.
	 	NOTICE	 	 	62	 
	 
	 	 	 	 	 	 	 	 
	22.
	 	CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION	 	 	63	 
	 
	 	 	 	 	 	 	 	 
	23.
	 	MODIFICATION AND BENEFIT OF AGREEMENT	 	 	64	 
	 
	 	 	 	 	 	 	 	 
	24.
	 	HEADINGS OF SUBDIVISIONS	 	 	65	 
	 
	 	 	 	 	 	 	 	 
	25.
	 	POWER OF ATTORNEY	 	 	65	 
	 
	 	 	 	 	 	 	 	 
	26.
	 	CONFIDENTIALITY	 	 	65	 
	 
	 	 	 	 	 	 	 	 
	27.
	 	COUNTERPARTS	 	 	65	 
	 
	 	 	 	 	 	 	 	 
	28.
	 	ELECTRONIC SUBMISSIONS	 	 	66	 
	 
	 	 	 	 	 	 	 	 
	29.
	 	WAIVER OF JURY TRIAL; OTHER WAIVERS	 	 	66	 






EXHIBIT A — BUSINESS AND COLLATERAL LOCATIONS



EXHIBIT B — COMPLIANCE CERTIFICATE



EXHIBIT C — COMMERCIAL TORT CLAIMS



EXHIBIT D — OILGEAR VARIABLE COMPENSATION PLAN



SCHEDULE 1 — PERMITTED LIENS



SCHEDULE 11(i) — AFFILIATE TRANSACTIONS



SCHEDULE 11(j) — NAMES & TRADE NAMES



SCHEDULE 11(n) — INDEBTEDNESS



SCHEDULE 11(p) — PARENT, SUBSIDIARIES AND AFFILIATES



SCHEDULE 11(q) — NO DEFAULTS



 -iv- 



 









 





SCHEDULE 11(s) — INTELLECTUAL PROPERTY



SCHEDULE 15(m) — NON-WHOLLY-OWNED SUBSIDIARY



SCHEDULE 17(a) — CLOSING DOCUMENT CHECKLIST



 -v- 



 









 





LOAN AND SECURITY AGREEMENT



       THIS LOAN AND SECURITY AGREEMENT (as amended, modified or supplemented from time to time, this
“Agreement”) made this 28th day of January, 2005 by and among LASALLE BUSINESS CREDIT, LLC, a
Delaware corporation (“Lender”), 135 South LaSalle Street, Chicago, Illinois 60603-4105, and THE
OILGEAR COMPANY, a Wisconsin corporation, having its principal place of business at 2300 South 51st
Street, Milwaukee, Wisconsin 53234 (“US Borrower”), OILGEAR TOWLER GMBH, a German limited
liability company, having its principal place of business at Im Gotthelf 8, D-65795 Hattersheim,
Germany (“German Borrower”) and OILGEAR TOWLER, S.A., a Spanish corporation, having its principal
place of business at Entidad Zicunaga, Apartado 14, Hernani (Guipuzcoa) Spain (“Spanish Borrower”)
(US Borrower, German Borrower and Spanish Borrower are collectively referred to as “Borrowers”).



WITNESSETH:




       WHEREAS, Borrowers may, from time to time, request Loans from Lender, and the parties wish to
provide for the terms and conditions upon which such Loans or other financial accommodations, if
made by Lender, shall be made;



       NOW, THEREFORE, in consideration of any Loan (including any Loan by renewal or extension)
hereafter made to a Borrower by Lender, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by Borrowers, the parties agree as follows:



       1. DEFINITIONS.



       “Account”, “Account Debtor”, “Chattel Paper”, “Commercial Tort Claims”, “Deposit Accounts”,
“Documents”, “Electronic Chattel Paper”, “Equipment”, “Fixtures”, “General Intangibles”, “Goods”,
“Instruments”, “Inventory”, “Investment Property”, “Letter-of-Credit Right”, “Proceeds” and
“Tangible Chattel Paper” shall have the respective meanings assigned to such terms in the Illinois
Uniform Commercial Code, as the same may be in effect from time to time.



       “Additional Collateral” shall have the meaning specified in Section 6 hereof.



       “Adjusted Net Income” shall mean, with respect to any period and any Person, such Person’s
net income after taxes for such period (excluding any after-tax gains or losses on the sale of
assets (other than the sale of Inventory in the ordinary course of business) and excluding other
after-tax extraordinary gains or losses), plus interest expense, depreciation and
amortization deducted in determining net income for such period, minus Capital Expenditures
for such period not financed, minus any cash dividends paid or accrued and cash withdrawals
paid or accrued to shareholders of US Borrower or other Affiliates (other than US Borrower or any
Subsidiary of US Borrower) for such period which were not calculated in determining net income after taxes, and plus
the after-tax increase in LIFO reserves, or minus the after tax decrease in LIFO reserves,
all on a consolidated basis.



 









 






       “Affiliate” shall mean any Person (i) which directly or indirectly through one or more
intermediaries controls, is controlled by, or is under common control with, any Company, (ii) which
beneficially owns or holds five percent (5%) or more of the voting control or equity interests of
any Company, or (iii) five percent (5%) or more of the voting control or equity interests of which
is beneficially owned or held by any Company.



       “Barclays Debt” shall mean the indebtedness of Oilgear UK owing pursuant to the Barclays Debt
Agreement, in an aggregate principal amount not to exceed £3,200,000.



       “Barclays Debt Agreement” shall mean the on demand loan agreement between Oilgear UK and
Barclays Bank PLC, as in effect on February 7, 2005 and as amended or modified from time to time in
accordance with this Agreement.



       “Business Day” shall mean any day other than a Saturday, a Sunday or (i) with respect to all
matters, determinations, fundings and payments in connection with LIBOR Rate Loans, any day on
which banks in London, England or Chicago, Illinois (or solely with respect to provisions set forth
in this Agreement requiring that a payment be made to Lender by German Borrower or Spanish Borrower
on a particular Business Day, or any date that banks in Frankfurt, Germany or Madrid, Spain, as
applicable) are required or permitted to close, and (ii) with respect to all other matters, any day
that banks in Chicago, Illinois (or solely with respect to provisions set forth in this Agreement
requiring that a payment be made to Lender by German Borrower or Spanish Borrower on a particular
Business Day, or any date that banks in Frankfurt, Germany or Madrid, Spain, as applicable) are
required or permitted to close.



       “Capital Expenditures” shall mean with respect to any Person(s) and any period, the aggregate
of all expenditures (whether paid in cash or accrued as liabilities and including expenditures for
capitalized lease obligations) by such Person(s) during such period that are required by generally
accepted accounting principles, consistently applied, to be included in or reflected by the
property, plant and equipment or similar fixed asset accounts (or intangible accounts subject to
amortization) on the balance sheet of such Person(s), all on a consolidated basis.



       “Collateral” shall mean all of the property of each Borrower described in Section 5
hereof, together with all other real or personal property of any Obligor or any other Person now or
hereafter pledged to Lender to secure, either directly or indirectly, repayment of any of the
Liabilities, including without limitation any Additional Collateral.



       “Companies” shall mean, collectively, US Companies and Non-US Companies.



       “Debt Service Coverage” shall mean, with respect to any period and any Person, the ratio of
(i) such Person’s Adjusted Net Income, to (ii) such Person’s current



-2-









 




principal maturities of long term debt and capitalized leases paid or scheduled to be paid during such period (other than
the Barclays Debt), plus interest expense deducted in determining net income for such
period, plus any prepayments on indebtedness owed to any Person (except trade payables,
Revolving Loans and Excess Cash Flow prepayments pursuant to subsection 2(f)(vi)(B)) and
paid during such period, all on a consolidated basis.




       “Dilution” shall mean, with respect to any period, the percentage obtained by dividing (i) the
sum of non-cash credits against Accounts (including, but not limited to returns, adjustments and
rebates) of US Borrower for such period, plus pending or probable, but not yet applied, non-cash
credits against Accounts of US Borrower for such period, as determined by Lender in its sole
discretion by (ii) gross invoiced sales of US Borrower for such period.



       “Dollars” and “$” shall mean lawful money of the United States. To the extent any amount is
owing or is otherwise denominated in a currency other than Dollars, such amount shall be
recalculated for the purposes of this Agreement in the then Dollar equivalent amount thereof as
determined from time to time by Lender.



       “EBITDA” shall mean, with respect to any period and any Person, such Person’s net income after
taxes for such period (excluding any after-tax gains or losses on the sale of assets (other than
the sale of Inventory in the ordinary course of business) and excluding other after-tax
extraordinary gains or losses) plus interest expense, income tax expense, depreciation and
amortization for such period, plus or minus any other non-cash charges or gains which
have been subtracted or added in calculating net income after taxes for such period, all on a
consolidated basis.



       “Eligible Account” shall mean an Account owing to US Borrower which is acceptable to Lender in
its sole discretion for lending purposes. Without limiting Lender’s discretion, Lender shall, in
general, consider an Account to be an Eligible Account if it meets, and so long as it continues to
meet, the following requirements:




       (i) it is genuine and in all respects what it purports to be;




       (ii) it is owned by US Borrower, US Borrower has the right to subject it to a security
interest in favor of Lender or assign it to Lender and it is subject to a first priority
perfected security interest in favor of Lender and to no other claim, lien, security
interest or encumbrance whatsoever, other than Permitted Liens;




       (iii) it arises from (A) the performance of services by US Borrower in the ordinary
course of US Borrower’s business, and such services have been fully performed and
acknowledged and accepted by the Account Debtor thereunder (it being understood that
Accounts based upon percentage of completion billing shall not be Eligible Accounts); or (B)
the sale or lease of Goods by US Borrower in the ordinary course of US Borrower’s business, and (x) such Goods have been completed in
accordance with the Account Debtor’s specifications (if any) and delivered to the Account
Debtor, (y) such Account Debtor has not refused to accept, returned or offered to return, any of the Goods which are the subject of such Account, and (z) US Borrower has possession
of, or US Borrower has delivered to Lender (at Lender’s request) shipping and delivery receipts evidencing delivery of such Goods;


-3-









 






       (iv) it is evidenced by an invoice rendered to the Account Debtor thereunder, is due
and payable within ninety (90) days after the date of the invoice and does not remain unpaid
sixty (60) days past the due date thereof; provided, however, that if more than twenty-five
percent (25%) of the aggregate Dollar amount of invoices owing by a particular Account
Debtor remain unpaid ninety (90) days after the respective invoice dates thereof, then all
Accounts owing by that Account Debtor shall be deemed ineligible;




       (v) (A) it is a valid, legally enforceable and unconditional obligation of the Account
Debtor thereunder, and (B) it is not subject to setoff, counterclaim, credit, allowance or
adjustment by such Account Debtor, or to any claim by such Account Debtor denying liability
thereunder in whole or in part (except that Accounts excluded from Eligible Accounts solely
by reason of this clause (v)(B) shall be Eligible Accounts to the extent of the amount of
the Account that is not subject to setoff, counterclaim, credit, allowance, adjustment or
dispute);




       (vi) it does not arise out of a contract or order which fails in any material respect
to comply with the requirements of applicable law;




       (vii) the Account Debtor thereunder is not a director, officer, employee or agent of a
Borrower, or a Subsidiary, Parent, Company or other Affiliate;




       (viii) it is not an Account with respect to which the Account Debtor is the United
States of America or any state or local government, or any department, agency or
instrumentality thereof, unless US Borrower assigns its right to payment of such Account to
Lender pursuant to, and in full compliance with, the Assignment of Claims Act of 1940, as
amended, or any comparable state or local law, as applicable;




       (ix) it is not an Account with respect to which the Account Debtor is located in a
state which requires US Borrower, as a precondition to commencing or maintaining an action
in the courts of that state, either to (A) receive a certificate of authority to do business
and be in good standing in such state; or (B) file a notice of business activities report or
similar report with such state’s taxing authority, unless (x) US Borrower has taken one of
the actions described in clauses (A) or (B); (y) the failure to take one of the actions
described in either clause (A) or (B) may be cured retroactively by US Borrower at its
election; or (z) US Borrower has proven, to Lender’s satisfaction, that it is exempt from
any such requirements under any such state’s laws;




       (x) the Account Debtor is located within the United States of America or Canada, except
for Volvo, provided that the Volvo’s Account is subject to
credit insurance payable to Lender issued by an insurer and on terms and in an amount acceptable to Lender;



-4-









 






       (xi) the Account is denominated in Dollars;




       (xii) it is not an Account with respect to which the Account Debtor’s obligation to pay
is subject to any repurchase obligation or return right, as with sales made on a
bill-and-hold, guaranteed sale, sale on approval, sale or return or consignment basis;




       (xiii) it is not an Account (A) with respect to which any representation or warranty
contained in this Agreement is untrue; or (B) which violates any of the covenants of any
Borrower contained in this Agreement;




       (xiv) it is not an Account which, when added to a particular Account Debtor’s other
indebtedness to US Borrower, exceeds ten percent (10%) (or with respect to Accounts owing by
(i) Volvo, twenty five percent (25%) and (ii) John Deere & Co., fifteen percent (15%)) of
all Accounts of US Borrower or a credit limit determined by Lender in its sole discretion
for that Account Debtor (except that Accounts excluded from Eligible Accounts solely by
reason of this clause (xiv) shall be Eligible Accounts to the extent of such percentage or
credit limit, as applicable); and




       (xv) it is not an Account with respect to which the prospect of payment or performance
by the Account Debtor is or will be impaired, as determined by Lender in its sole
discretion.



       “Eligible Inventory” shall mean Inventory of US Borrower which is acceptable to Lender in its
sole discretion for lending purposes. Without limiting Lender’s discretion, Lender shall, in
general, consider Inventory to be Eligible Inventory if it meets, and so long as it continues to
meet, the following requirements:




       (i) it is owned by US Borrower, US Borrower has the right to subject it to a security
interest in favor of Lender and it is subject to a first priority perfected security
interest in favor of Lender and to no other claim, lien, security interest or encumbrance
whatsoever, other than Permitted Liens;




       (ii) it is located on one of the premises listed on Exhibit A  for US Borrower
in the continental United States (or other locations in the continental United States of
which Lender has been advised in writing pursuant to subsection 12(b)(i) hereof) and
is not in transit;




       (iii) if held for sale or lease or furnishing under contracts of service, it is (except
as Lender may otherwise consent in writing) new and unused and free from defects which
would, in Lender’s sole determination, affect its market value;



-5-









 






       (iv) it is not stored with a bailee, consignee, warehouseman, processor or similar
party unless Lender has given its prior written approval and US Borrower has caused any such
bailee, consignee, warehouseman, processor or similar party to issue and deliver to Lender,
in form and substance acceptable to Lender, such Uniform Commercial Code financing
statements, warehouse receipts, waivers and other documents as Lender shall require;




       (v) it is either (A) raw material Inventory (including purchased component parts), in
each case which have been acquired or sold by US Borrower in the then previous eighteen (18)
months or (B) finished goods Inventory;




       (vi) Lender has determined, in accordance with Lender’s customary business practices,
that it is not unacceptable due to age, type, category or quantity; and




       (vii) it is not Inventory (A) with respect to which any of the representations and
warranties contained in this Agreement are untrue; or (B) which violates any of the
covenants of any Borrower contained in this Agreement.



       “Environmental Laws” shall mean all federal, state, district, local and foreign laws, rules,
regulations, ordinances, and consent decrees relating to health, safety, hazardous substances,
pollution and environmental matters, as now or at any time hereafter in effect, applicable to any
Company’s business or facilities owned or operated by any Company, including laws relating to
emissions, discharges, releases or threatened releases of pollutants, contamination, chemicals, or
hazardous, toxic or dangerous substances, materials or wastes into the environment (including,
without limitation, ambient air, surface water, ground water, land surface or subsurface strata) or
otherwise relating to the generation, manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials.



       “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended, modified
or restated from time to time.



       “Event of Default” shall have the meaning specified in Section 15 hereof.



       “Excess Availability” shall mean, as of any date of determination by Lender, the excess, if
any, of the lesser of (i) the Maximum Revolving Loan Limit less the sum of the outstanding
Revolving Loans and Letter of Credit Obligations and (ii) the Revolving Loan Limit less the sum of
the outstanding Revolving Loans and Letter of Credit Obligations, in each case as of the close of
business on such date and assuming, for purposes of calculation, that all accounts payable of any
Company which remain unpaid more than sixty (60) days after the due dates thereof as the close of
business on such date are treated as additional Revolving Loans outstanding on such date.



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       “EXIM Loan Agreement” shall mean that certain Foreign Accounts Loan Agreement of even date
herewith between US Borrower and Lender, as amended, modified or restated from time to time in
accordance with this Agreement.



       “Fiscal Year” shall mean each twelve (12) month accounting period of Borrowers, which ends on
December 31st of each year.



       “German Borrower Cross Collateralization Cap” shall have the meaning specified in
subsection 18(a) hereof.



       “German Real Property Mortgage” shall mean a first ranking land mortgage without mortgage
certificate (Buchgrundschuld) in favor of Lender over the German Borrower’s real property located
at Im Gotthelf 8, D-65795 Hattersheim, Federal Republic of Germany together with a personal and in
rem submission to immediate forced execution.



       “Hazardous Materials” shall mean any hazardous, toxic or dangerous substance, materials and
wastes, including, without limitation, hydrocarbons (including naturally occurring or man-made
petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation,
radioactive materials, biological substances, polychlorinated biphenyls, pesticides, herbicides and
any other kind and/or type of pollutants or contaminants (including, without limitation, materials
which include hazardous constituents), sewage, sludge, industrial slag, solvents and/or any other
similar substances, materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including, without limitation any that
are or become classified as hazardous or toxic under any Environmental Law).



       “Indemnified Party” shall have the meaning specified in Section 19 hereof.



       “Interest Period” shall have the meaning specified in subsection 4(a)(ii) hereof.



       “IRB Indenture” shall mean that certain Trust Indenture dated October 1, 1997 between County
of Dodge, Nebraska and IRB Trustee, as in effect on the date hereof.



       “IRB Lease Agreement” shall mean that certain Lease Agreement dated October 1, 1997 between
County of Dodge, Nebraska and US Borrower, as in effect on the date hereof.



       “IRB Trustee” shall mean Norwest Bank Wisconsin, National Association.



       “LaSalle Bank” shall mean LaSalle Bank National Association, Chicago, Illinois.



       “Letter of Credit” shall mean any letter of credit, or letter of credit guaranty, in each case
issued on behalf of US Borrower in accordance with Section 3 hereof.



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       “Letter of Credit Obligations” shall mean, as of any date of determination, the sum of (i) the
aggregate undrawn face amount of all Letters of Credit, and (ii) the aggregate unreimbursed amount
of all drawn Letters of Credit not already converted to Revolving Loans hereunder.



       “Liabilities” shall mean any and all obligations, liabilities and indebtedness of Borrowers to
Lender or to any parent, affiliate or subsidiary of Lender of any and every kind and nature,
howsoever created, arising or evidenced and howsoever owned, held or acquired, whether now or
hereafter existing, whether now due or to become due, whether primary, secondary, direct, indirect,
absolute, contingent or otherwise (including, without limitation, obligations of performance),
whether several, joint or joint and several, and whether arising or existing under written or oral
agreement or by operation of law.



       “LIBOR Rate” shall mean, with respect to any LIBOR Rate Loan for any Interest Period, a rate
per annum equal to (a) the offered rate for deposits in Dollars for a period equal to such Interest
Period as displayed in the Bloomberg Financial Markets system (or such other authoritative source
as selected by Lender in its sole discretion) as of 11:00 a.m. (London time) two (2) Business Days
prior to the first day of such Interest Period divided by (b) a number equal to 1.0 minus the
maximum reserve percentages (expressed as a decimal fraction) including, without limitation, basic
supplemental, marginal and emergency reserves under any regulations of the Board of Governors of
the Federal Reserve System 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 such Board) which are required to be maintained by
Lender by the Board of Governors of the Federal Reserve System. The LIBOR Rate shall be adjusted
automatically on and as of the effective date of any change in such reserve percentage.



       “LIBOR Rate Loans” shall mean the Loans bearing interest with reference to the LIBOR Rate.



       “Loans” shall mean all loans and advances made by Lender to or on behalf of any Borrower
hereunder.



       “Lock Box” and “Lock Box Account” shall have the meanings specified in subsection 8(a)
hereof.



       “Material Adverse Effect” shall mean a material adverse effect on (i) the business, property,
assets, prospects, operations or condition, financial or otherwise, of (a) any Borrower or (b) the
Companies, taken as a whole, (ii) the Collateral or Lender’s liens on the Collateral or the
priority of such liens, or (iii) Lender’s rights and remedies under this Agreement and the Other
Agreements.



       “Maximum Loan Limit” shall mean Twenty-One Million Four Hundred Fifty Thousand and No/100
Dollars ($21,450,000).



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       “Maximum Revolving Loan Limit” shall have the meaning specified in subsection 2(a)
hereof.



       “Nebraska IRBs” shall mean the County of Dodge, Nebraska Variable Rate Demand Industrial
Development Revenue Bonds, Series 1997 (The Oilgear Company Project).



       “Non-US Companies” shall mean collectively, (i) German Borrower, (ii) Spanish Borrower, (iii)
any other Subsidiary of US Borrower that has been formed or incorporated under the laws of any
country other than the United States, and each of their predecessors.



       “Obligor” shall mean Borrowers and each other Person who is or shall become primarily or
secondarily liable for any of the Liabilities.



       “Oilgear France” shall mean Oilgear Towler S.A., a French limited liability company.



       “Oilgear India” shall mean Oilgear Towler Polyhydron Pvt. Ltd., a private limited company
organized in India.



       “Oilgear Italy” shall mean Oilgear Towler S.r.l., an Italian limited liability company.



       “Oilgear Taiwan” shall mean Oilgear Towler Taiwan Co. Ltd., a limited liability company
organized in Taiwan.



       “Oilgear UK” shall mean Oilgear Towler Ltd., a limited liability company organized in the
United Kingdom.



       “Original Term” shall have the meaning specified in Section 10 hereof.



       “Other Agreements” shall mean all agreements, instruments and documents, other than this
Agreement, including, without limitation, the EXIM Loan Agreement, guaranties, mortgages, trust
deeds, pledges, powers of attorney, consents, assignments, contracts, notices, security agreements,
leases, financing statements and all other writings heretofore, now or from time to time hereafter
executed by or on behalf of a Borrower, a Company, an Obligor or any other Person and delivered to
Lender or to any parent, affiliate or subsidiary of Lender in connection with the Liabilities or
the transactions contemplated hereby, as each of the same may be amended, modified or supplemented
from time to time.



       “Parent” shall mean any Person now or at any time or times hereafter owning or controlling
(alone or with any other Person) at least a majority of the issued and outstanding equity of a
Company and, if a Company is a partnership, the general partner of such Company.



       “PBGC” shall have the meaning specified in subsection 12(b)(v) hereof.



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       “Permitted Liens” shall mean (i) statutory liens of landlords, carriers, warehousemen,
processors, mechanics, materialmen or suppliers incurred in the ordinary course of business and
securing amounts not yet due or declared to be due by the claimant thereunder; (ii) liens or
security interests in favor of Lender, including without limitation the liens or security interests
pursuant to the EXIM Loan Agreement; (iii) zoning restrictions and easements, licenses, covenants
and other restrictions affecting the use of real property that do not individually or in the
aggregate have a material adverse effect on any Company’s ability to use such real property for its
intended purpose in connection with such Company’s business; (iv) liens in connection with purchase
money indebtedness and capitalized leases otherwise permitted pursuant to this Agreement, provided,
that such liens attach only to the assets the purchase of which was financed by such purchase money
indebtedness or which is the subject of such capitalized leases; (v) liens granted by Oilgear UK on
substantially all of the assets of Oilgear UK to secure the Venture Debt; (vi) liens granted by
Oilgear UK on its assets pursuant to the Barclays Debt Agreement to secure the Barclays Debt; (vii)
liens set forth on Schedule 1 and any lien arising out of the refinancing, extension or renewal of
any indebtedness secured by such liens set forth on Schedule 1; provided, that (A) such
indebtedness is not secured by any additional assets, (B) the amount of such indebtedness is not
increased and (C) such indebtedness is permitted under this Agreement; (viii) liens and prior
claims securing the payment of taxes or other governmental charges not yet delinquent or being
contested in good faith in accordance, so long as in each case Borrowers are in compliance with
subsection 12(n) hereof with respect to such taxes and other governmental charges; (ix)
deposits of money in an aggregate amount not to exceed Seventy-Five Thousand and No/100 Dollars
($75,000) to secure performance of bids, trade contracts, leases and statutory obligations, in each
case provided in the ordinary course of business; (x) liens on the assets of any Non-US Company
(other than on (A) the real property of Spanish Borrower located at Entidad Zicunaga, Apartado 14,
Hernani (Guipuzcoa) Spain, (B) the real property of German Borrower located at Im Gotthelf 8,
D-65795 Hattersheim, Federal Republic of Germany, (C) the real property of Oilgear Italy located at
Via Artigianale, 23 25010, Montirone (Brescia), Italy, (D) the real property of Oilgear France
located at Allee de Freres Montgolfier Parc d’Activities de Paris-Est-Croissy-Beauborg, France and
(E) any other assets on which Lender has a lien), which have been granted in the ordinary course of
such Non-US Company’s business solely to secure the guaranties permitted pursuant to subsection
13(a)(iii) hereof; (xi) 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; (xii) rights of setoff, banker’s lien and other similar rights arising solely by
operation of law (or, with respect to German Borrower, general business conditions customary to
banks in Germany) upon deposits of cash in favor of banks or other depository institutions; (xiii)
subject to subsection 12(l) hereof, rights of the IRB Trustee, the holders of the Nebraska
IRBs, and the issuer of the Nebraska IRBs under the IRB Indenture, the IRB Lease Agreement, that
certain Building Improvement Lease Agreement dated as of October 1, 1997 between the US Borrower as
lessor and the County of Dodge, Nebraska as lessee, and the instruments and agreements relating to the foregoing; and (xiv) liens on the cash collateral pursuant to that
certain Cash Collateral and Security Agreement dated as of February 7, 2005 between the US Borrower
and M&I Marshall & Ilsley Bank.



-10-









 





       “Person” shall mean any individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, limited liability company, institution,
entity, party or foreign or United States government (whether federal, state, county, city,
municipal or otherwise), including, without limitation, any instrumentality, division, agency, body
or department thereof.



       “Plan” shall have the meaning specified in subsection 12(b)(v) hereof.



       “Prime Rate” shall mean LaSalle Bank’s publicly announced prime rate (which is not intended to
be LaSalle Bank’s lowest or most favorable rate in effect at any time) in effect from time to time.



       “Prime Rate Loans” shall mean the Loans bearing interest with reference to the Prime Rate.



       “Related Agreements” shall mean (i) the EXIM Loan Agreement, (ii) the Barclays Debt Agreement,
and (iii) the Venture Debt Agreement.



       “Related Transactions” shall mean the transactions contemplated by the Related Agreements.



       “Relocation Expenses” shall have the meaning specified in subsection 2(f)(vi)(A)(IV).



       “Renewal Term” shall have the meaning specified in Section 10 hereof.



       “Revolving Loan Limit” shall have the meaning specified in subsection 2(a) hereof.



       “Revolving Loans” shall have the meaning specified in subsection 2(a) hereof.



       “Spanish Borrower Cap” shall have the meaning specified in subsection 18(a) hereof.



       “Spanish Real Property Mortgage” shall collectively mean the mortgage deed (Term Loan D), the
mortgage deed (Term Loan C) and the mortgage deed (US Loans).



       “Subsidiary” shall mean any corporation or other entity of which more than fifty percent (50%)
of the outstanding capital stock or other equity interest having ordinary voting power to elect a
majority of the board of directors (or equivalent body) of such corporation or other entity (irrespective of whether at the time stock/equity of any other
class of such corporation or other entity shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned by a Company, or any
partnership, joint venture or limited liability company of which more than fifty percent (50%) of
the outstanding equity interests are at the time, directly or indirectly, owned by a Company or any
partnership of which a Company is a general partner.



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       “Tangible Net Worth” shall have the meaning specified in subsection 14(a) hereof.



       “Tax” shall mean, in relation to any LIBOR Rate Loans and the applicable LIBOR Rate, any tax,
levy, impost, duty, deduction, withholding or charges of whatever nature required to be paid by
Lender and/or to be withheld or deducted from any payment otherwise required hereby to be made by a
Borrower to Lender; provided, that the term “Tax” shall not include any taxes imposed upon the net
income of Lender.



       “Term Loan A” shall have the meaning specified in subsection 2(b) hereof.



       “Term Loan B” shall have the meaning specified in subsection 2(c) hereof.



       “Term Loan C” shall have the meaning specified in subsection 2(d) hereof.



       “Term Loan D” shall have the meaning specified in subsection 2(e) hereof.



       “Term Loans” shall mean, collectively, Term Loan A, Term Loan B, Term Loan C and Term Loan D.



       “US Companies” shall mean collectively, US Borrower and its Subsidiaries that have been formed
or incorporated under the laws of the United States, and each of their predecessors.



       “US Loans” shall mean collectively, the Revolving Loans, Term Loan A, Term Loan B and the
loans made to US Borrower pursuant to the EXIM Loan Agreement.



       “Venture” shall mean Venture Finance PLC, a public limited company organized in the United
Kingdom.



       “Venture Debt” shall mean the indebtedness of Oilgear UK owing pursuant to the Venture Debt
Agreements.



       “Venture Debt Agreements” shall mean, collectively, (i) that certain Agreement for the
Purchase of Debts between Venture and Oilgear UK, (ii) that certain Stock Loan Agreement between
Venture and Oilgear UK and (iii) that certain Plant & Machinery Loan Agreement between Venture and Oilgear UK, each as in effect as of February 7,
2005 and as amended or modified from time to time in accordance with this Agreement.



       “Volvo” shall mean Volvo Construction Equipment Customer Support AB



       2. LOANS.



       (a) Revolving Loans.



       Subject to the terms and conditions of this Agreement and the Other Agreements, including
without limitation Section 17 hereof, during the Original Term and



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any Renewal Term, Lender agrees to make revolving loans and advances to US Borrower (the “Revolving Loans”) in an amount up
to the sum of the following sublimits (the “Revolving Loan Limit”):





       (i) Up to eighty-five percent (85%) of the face amount (less maximum discounts, credits
and allowances which may be taken by or granted to Account Debtors in connection therewith
in the ordinary course of US Borrower’s business) of US Borrower’s Eligible Accounts;
provided that such advance rate shall be reduced by one (1) percentage point for each whole
or partial percentage point by which Dilution (as determined by Lender in good faith based
on the results of the most recent twelve (12) month period for which Lender has conducted a
field audit of US Borrower) exceeds five percent (5%); plus




       (ii) Up to fifty percent (50%) of the lower of cost or market value (as determined
according to generally accepted accounting principles) of US Borrower’s Eligible Inventory
or Four Million and No/100 Dollars ($4,000,000), whichever is less; plus




       (iii) Up to fifty percent (50%) against the face amount of commercial Letters of Credit
issued or guaranteed by Lender on behalf of US Borrower for the purpose of purchasing
Eligible Inventory; provided, that such commercial Letters of Credit are in form and
substance satisfactory to Lender for this purpose; minus




       (iv) such reserves as Lender elects, in its sole discretion to establish from time to
time (including without limitation reserves pertaining to contributions to the Companies’
pension plans and pertaining to the issuance hereunder on the date hereof of a certain Euro
denominated Letter of Credit; it being understood that Lender has no obligation to fund any
Loans, or issue any Letters of Credit, in any currency other than Dollars);


provided, that (x) the sum of the advances to US Borrower with respect to clauses (ii) and (iii)
above shall at no time exceed Four Million and No/100 Dollars ($4,000,000) and (y) the Revolving
Loan Limit shall in no event exceed Twelve Million and No/100 Dollars ($12,000,000) (the “Maximum
Revolving Loan Limit”).




       The aggregate unpaid balance of the Revolving Loans plus Letter of Credit Obligations shall
not at any time exceed the lesser of the (i) Revolving Loan Limit and (ii) the Maximum Revolving
Loan Limit. If at any time the outstanding Revolving Loans plus Letter of Credit Obligations
exceeds either the Revolving Loan Limit or the Maximum Revolving Loan Limit, or any portion of the
Revolving Loans and Letter of Credit Obligations exceeds any applicable sublimit within the
Revolving Loan Limit, US Borrower shall immediately, and without the necessity of demand by Lender,
pay to Lender such amount as may be necessary to eliminate such excess and Lender shall apply such
payment to the Revolving Loans and/or Letter of Credit Obligations in such order as Lender shall
determine in its sole discretion.



-13-









 





       US Borrower hereby authorizes Lender, in its sole discretion, to charge any of US Borrower’s
accounts or advance Revolving Loans to make any payments of principal, interest, fees, costs or
expenses required to be made under this Agreement or the Other Agreements.



       A request for a Revolving Loan shall be made or shall be deemed to be made, each in the
following manner: US Borrower shall give Lender same day notice, no later than 1:00 P.M. (Chicago
time) for such day, of its request for a Revolving Loan as a Prime Rate Loan, and at least three
(3) Business Days prior notice of its request for a Revolving Loan as a LIBOR Rate Loan, in which
notice US Borrower shall specify the amount of the proposed borrowing and the proposed borrowing
date; provided, however, that no such request may be made at a time when there exists an Event of
Default or an event which, with the passage of time or giving of notice, will become an Event of
Default. In the event that US Borrower maintains a controlled disbursement account at LaSalle
Bank, each check presented for payment against such controlled disbursement account and any other
charge or request for payment against such controlled disbursement account shall constitute a
request for a Revolving Loan as a Prime Rate Loan. As an accommodation to US Borrower, Lender may
permit telephone requests for Revolving Loans and electronic transmittal of instructions,
authorizations, agreements or reports to Lender by US Borrower. Unless US Borrower specifically
directs Lender in writing not to accept or act upon telephonic or electronic communications from US
Borrower, Lender shall have no liability to US Borrower for any loss or damage suffered by US
Borrower as a result of Lender’s honoring of any requests, execution of any instructions,
authorizations or agreements or reliance on any reports communicated to it telephonically or
electronically and purporting to have been sent to Lender by US Borrower and Lender shall have no
duty to verify the origin of any such communication or the authority of the Person sending it.



       US Borrower hereby irrevocably authorizes Lender to disburse the proceeds of each Revolving
Loan requested by US Borrower, or deemed to be requested by US Borrower, as follows: the proceeds
of each Revolving Loan requested (or deemed requested) under Section 2(a) shall be disbursed
by Lender in lawful money of the United States of America in immediately available funds, in the
case of the initial borrowing, in accordance with the terms of the written disbursement letter from
US Borrower, and in the case of each subsequent borrowing, by wire transfer or Automated Clearing
House (ACH) transfer to such bank account as may be agreed upon by US Borrower and Lender from time to
time, or elsewhere if pursuant to a written direction from US Borrower.



       (b) Term Loan A.



       Subject to the terms and conditions of this Agreement and the Other Agreements, including
without limitation Section 17 hereof, on the date that the conditions to the initial Loans
are satisfied, Lender shall make a term loan to US Borrower in an amount equal to Two Million and
Fifty Thousand and No/100 Dollars ($2,050,000) (the “Term Loan A”). Amounts repaid with respect to
Term Loan A may not be reborrowed.



-14-









 





       (c) Term Loan B.



       Subject to the terms and conditions of this Agreement and the Other Agreements, including
without limitation Section 17 hereof, on the date that the conditions to the initial Loans
are satisfied, Lender shall make a term loan to US Borrower in an amount equal to Four Million
Seven Hundred Thousand and No/100 Dollars ($4,700,000) (the “Term Loan B”). Amounts repaid with
respect to Term Loan B may not be reborrowed.



       (d) Term Loan C.



       Subject to the terms and conditions of this Agreement and the Other Agreements, including
without limitation Section 17 hereof, on the date that the conditions to the initial Loans
are satisfied, Lender shall make a term loan to German Borrower in an amount equal to Eight Hundred
Forty Thousand and No/100 Dollars ($840,000) (the “Term Loan C”). Amounts repaid with respect to
Term Loan C may not be reborrowed.



       (e) Term Loan D.



       Subject to the terms and conditions of this Agreement and the Other Agreements, including
without limitation Section 17 hereof, on the date that the conditions to the initial Loans
are satisfied, Lender shall make a term loan to Spanish Borrower in an amount equal to One Million
Eight Hundred Sixty Thousand and No/100 Dollars ($1,860,000) (the “Term Loan D”). Amounts repaid
with respect to Term Loan D may not be reborrowed.



       (f) Repayments.



       The Liabilities shall be repaid as follows:




       (i) Repayment of Revolving Loans. The Revolving Loans and all other Liabilities
(other than the Term Loans) shall be repaid by US Borrower on the last day of the Original
Term or any Renewal Term if this Agreement is renewed pursuant to Section 10 hereof.




       (ii) Repayment of Term Loan A. The Term Loan A shall be repaid by US Borrower
in sixty (60) equal monthly installments of Thirty-Four Thousand One Hundred Sixty-Six and
66/100 Dollars ($34,166.66) payable on the first day of each month after the date hereof;
provided, that any remaining outstanding principal balance of the Term Loan A shall be
repaid at the end of the Original Term or any Renewal Term if this Agreement is renewed
pursuant to Section 10 hereof. If any such payment due date is not a Business Day,
then such payment may be made on the next succeeding Business Day and such extension of time
shall be included in the computation of the amount of interest and fees due hereunder.




       (iii) Repayment of Term Loan B. Term Loan B shall be repaid by US Borrower in
one hundred and twenty (120) equal monthly installments of Thirty-Nine Thousand One Hundred
Sixty-Six and 66/100 Dollars ($39,166.66) payable on



-15-









 






the first day of each month after the date hereof; provided, that any remaining outstanding principal balance of Term Loan B shall
be repaid at the end of the Original Term or any Renewal Term if this Agreement is renewed
pursuant to Section 10 hereof. If any such payment due date is not a Business Day,
then such payment may be made on the next succeeding Business Day and such extension of time
shall be included in the computation of the amount of interest and fees due hereunder.




       (iv) Repayment of Term Loan C. Term Loan C shall be repaid by German Borrower
in one hundred and twenty (120) equal monthly installments of Seven Thousand and No/100
Dollars ($7,000.00) payable on the first day of each month after the date hereof; provided,
that any remaining outstanding principal balance of Term Loan C shall be repaid at the end
of the Original Term or any Renewal Term if this Agreement is renewed pursuant to Section
10 hereof. If any such payment due date is not a Business Day, then such payment may be
made on the next succeeding Business Day and such extension of time shall be included in the
computation of the amount of interest and fees due hereunder.




       (v) Repayment of Term Loan D. Term Loan D shall be repaid by Spanish Borrower
in one hundred and twenty (120) equal monthly installments of Fifteen Thousand Five Hundred
and No/100 Dollars ($15,500.00) payable on the first day of each month after the date
hereof; provided, that any remaining outstanding principal balance of Term Loan D shall be
repaid at the end of the Original Term or any Renewal Term if this Agreement is renewed
pursuant to Section 10 hereof. If any such payment due date is not a Business Day,
then such payment may be made on the next succeeding Business Day and such extension of time
shall be included in the computation of the amount of interest and fees due hereunder.




       (vi) Mandatory Prepayments of the Term Loans.




       (A) Sales of Assets. Upon receipt of the proceeds of the sale or other
disposition of




     (I) any Equipment (other than sales of Equipment in which the net
proceeds, either individually or in the aggregate, are less than Five
Thousand and No/100 Dollars ($5,000)) of any US Company, or if any Equipment
of any US Company is damaged, destroyed or taken by condemnation in whole or
in part, US Borrower shall cause the proceeds thereof to be paid to Lender
as a mandatory prepayment of the Liabilities, which such prepayment shall be
applied (x) first to Term Loan A against the remaining installments of
principal thereof in the inverse order of their maturities until Term Loan A
is repaid in full, (y) second pro-rata to each of Term Loan B, Term Loan C
and Term Loan D against the remaining installments of principal thereof in
the inverse order of their maturities until each of the Term Loan B, Term
Loan C and Term Loan D is repaid in full, and (z) then against the other
Liabilities, as determined by Lender, in its sole discretion;



-16-









 





     (II) any Equipment of any Non-US Company, or if any Equipment of any
Non-US Company is damaged, destroyed or taken by condemnation in whole or in
part, US Borrower shall cause the proceeds thereof (other than proceeds
pertaining to Equipment of Oilgear UK to the extent such Equipment secures
the Venture Debt and such proceeds are required to repay the Venture Debt in
accordance with the Venture Debt Documents) to be paid to Lender as a
mandatory prepayment of the Liabilities, which such prepayment shall be
applied (x) first pro-rata to each of the Term Loans against the remaining
installments of principal thereof in the inverse order of their maturities
until each of the Term Loans is repaid in full, and (y) then against the
other Liabilities, as determined by Lender, in its sole discretion;




     (III) any real property of any US Company, or if any real property of
any US Company is damaged, destroyed or taken by condemnation in whole or in
part, US Borrower shall cause the proceeds thereof to be paid to Lender as a
mandatory prepayment of the Liabilities, which such prepayment shall be
applied (x) first to Term Loan B against the remaining installments of
principal thereof in the inverse order of their maturities until Term Loan B
is repaid in full, (y) second pro-rata to each of Term Loan A, Term Loan C
and Term Loan D against the remaining installments of principal thereof in
the inverse order of their maturities until each of the Term Loan A, Term
Loan C and Term Loan D is repaid in full, and (z) then against the other
Liabilities, as determined by Lender, in its sole discretion; and




     (IV) any real property of any Non-US Company, or if any real property
of any Non-US Company is damaged, destroyed or taken by condemnation in
whole or in part, US Borrower shall cause the proceeds thereof (other than
(i) proceeds pertaining to real property of Oilgear UK to the extent such
real property secures the Barclays Debt and such proceeds are required to repay the Barclays Debt in accordance
with the Barclays Debt Documents and (ii) up to Seven Hundred Fifty Thousand
and No/100 Dollars ($750,000) to the extent such amount is necessary to pay
relocation costs incurred by Oilgear UK with respect to Oilgear UK’s
relocation from its facility located in Leeds, England (the “Relocation
Expenses”)) to be paid to Lender as a mandatory prepayment of the
Liabilities, which such prepayment shall be applied (x) first pro-rata to
each of Term Loan C and Term Loan D (or just to Term Loan C with respect to
real property of German Borrower, or just to Term Loan D with respect to
real property of Spanish Borrower) against the remaining installments of
principal thereof in the inverse order of their maturities until such Term
Loan(s) is repaid in full, (y) second pro-rata to each of the other Term
Loans against the remaining installments of principal thereof in the inverse order of their maturities until each of the other Term Loans is repaid in
full, and (z) then against the other Liabilities, as determined by Lender,
in its sole discretion.


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       (B) Excess Cash Flow. Ten (10) days after receipt of Borrowers’
financial statements for each fiscal quarter of Borrowers commencing with Borrowers’
fiscal quarter ended March 31, 2005, Borrowers shall make a mandatory prepayment of
the Loans in an amount equal to fifteen percent (15%) of “Excess Cash Flow” (as
described below) for the fiscal quarter just ended. Such payment shall be first
applied (x) first pro-rata to each of the Term Loans against the remaining
installments of principal thereof in the inverse order of their maturities until
each of the Term Loans is repaid in full, and (y) then against the other
Liabilities, as determined by Lender, in its sole discretion. For purposes hereof,
“Excess Cash Flow” shall mean for each of Borrowers’ fiscal quarters, EBITDA of the
Companies for such period, minus the Companies’ taxes during such period, minus
non-PIK interest payable during such period, minus actual principal payments made
with respect to long term debt (resulting in permanent reduction of such debt)
during such period (other than payments with respect to Revolving Loans and payments
of the Barclays Debt from proceeds of the sale of Oilgear UK’s real estate), minus
Relocation Expenses paid in cash during such period that have not been deducted in
determining Net Income for such period, minus all unfinanced Capital Expenditures by
the Companies during such period, all on a consolidated basis; provided, however,
that (i) if the pension expense deducted from net income of the Companies for such
period is less than the amount actually contributed by the Companies in cash to such
Companies’ pensions during such period, the amount of the required prepayment of
Excess Cash Flow pursuant to this clause (B) for such period shall be decreased by
the amount of such deficiency and (ii) if the pension expense deducted from net
income of the Companies in cash to such Companies’ pensions for such period is
greater than the amount actually contributed by the Companies during such
period, the amount of the required prepayment of Excess Cash Flow pursuant to
this clause (B) for such period shall be increased by the amount of such excess.




       (C) German/Spanish Real Estate. If for any reason whatsoever (including
without limitation as a result of currency fluctuations), Lender determines at any
time that the outstanding principal amount of (i) Term Loan C at any time exceeds
sixty percent (60%) of the fair market appraised value of the German Borrower’s
owned real property located at Im Gotthelf 8, D-65795 Hattersheim, Federal Republic
of Germany or (ii) Term Loan D at any time exceeds sixty percent (60%) of the fair
market appraised value of the real property of the Spanish Borrower’s owned real
property located at Entidad Zicunaga, Apartado 14, Hernani (Guipuzcoa) Spain, then
LaSalle may require German Borrower (in the case of clause (i) above) or



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Spanish Borrower (in the case of clause (ii) above) to promptly make a prepayment of Term
Loan C or Term Loan D, as applicable, against the remaining installments of
principal thereof in the inverse order of its maturity until such excess has been
eliminated.



       (g) Notes.



       The Loans shall, in Lender’s sole discretion, be evidenced by one or more promissory notes in
form and substance satisfactory to Lender. However, if such Loans are not so evidenced, such Loans
may be evidenced solely by entries upon the books and records maintained by Lender.



       (h) Currency.



       All Loans shall be made and repaid in Dollars.



       (i) Payments Free and Clear.



       Subject to the terms hereof, any and all payments by any Company under this Agreement or any
Other Agreement shall be made free and clear of and without deduction for any and all present or
future tax, levy, impost, duty, deduction, withholding, any other similar charges and any and all
liabilities (including without limitation, fines, penalties, interest and expenses) in lieu thereof
or for non-collection on or in respect thereof (collectively, “Withholding Taxes”). If either (i)
any Company is required by law (after giving effect to any applicable exemption available pursuant
to applicable law) to deduct any Withholding Taxes from or in respect of any sum payable hereunder
or under any Other Agreement to Lender or (ii) Lender shall be subject to any of the foregoing in
respect of any sum payable hereunder (after giving effect to any applicable exemption available
pursuant to applicable law), such Company shall (x) forthwith pay to Lender a supplemental payment
on an After-Tax Basis, after making any or all required deductions, so that Lender shall receive an
amount equal to the sum it would have received had no such deductions by such Company
been made, and had no such payments been required by Lender, and (y) make such deductions and
pay the full amount deducted to the relevant taxing authority in accordance with applicable law.
In addition, Borrowers agree to pay on an After-Tax Basis any present or future stamp or
documentary taxes, any excise or property taxes, or other charges or similar levies that arise from
any payment made hereunder or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement or any Other Agreement. “After-Tax Basis” means, in the case of any
amount paid or payable to Lender, a basis such that any payment received or deemed to have been
received shall be forthwith supplemented by a further supplemental payment to Lender so that after
taking into account all federal, state, provincial, foreign or local income taxes (other than taxes
imposed upon the net income of Lender), Lender receives an amount equal to the original payment
received or deemed to have been received. In the event that a valid exemption from Withholding
Taxes is available to a Company under applicable law, upon the reasonable request from such Company
to the Lender, the Lender shall cooperate with such Company in executing and



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delivering applicable documents (to the extent such documents are in form and substance acceptable to Lender in its sole
discretion) required to evidence that such exemption is available.




       3. LETTERS OF CREDIT.



       (a) General Terms.



       Subject to the terms and conditions of this Agreement and the Other Agreements, during the
Original Term or any Renewal Term, Lender may, in its sole discretion, from time to time cause to
be issued and co-sign for or otherwise guarantee, upon US Borrower’s request, commercial and/or
standby Letters of Credit; provided, that (i) the aggregate undrawn face amount of all such Letters
of Credit shall at no time exceed Ten Million and No/100 Dollars ($10,000,000) and (ii) the
aggregate unpaid principal balance of the Revolving Loans plus the Letter of Credit Obligations
shall not at any time exceed the lesser of the (x) Revolving Loan Limit and (y) the Maximum
Revolving Loan Limit. Payments made by the issuer of a Letter of Credit to any Person on account
of any Letter of Credit shall be immediately payable by US Borrower without notice, presentment or
demand and US Borrower agrees that each payment made by the issuer of a Letter of Credit in respect
of a Letter of Credit issued on behalf of US Borrower shall constitute a request by US Borrower for
a Revolving Loan to reimburse such issuer. In the event such Revolving Loan is not advanced by
Lender for any reason, such reimbursement obligations (whether owing to the issuer of the Letter of
Credit or Lender if Lender is not the issuer) shall become part of the Liabilities hereunder and
shall bear interest at the rate then applicable to Revolving Loans constituting Prime Rate Loans
until repaid. US Borrower shall remit to Lender a Letter of Credit fee equal to two and one-half
percent (2.50%) per annum on the aggregate undrawn face amount of all Letters of Credit
outstanding, which fee shall be payable monthly in arrears on the first Business Day of each month.
US Borrower shall also pay on demand the normal and customary administrative charges of the issuer
of the Letter of Credit for issuance, amendment, negotiation, renewal or extension of any Letter of
Credit.



       (b) Requests for Letters of Credit.



       US Borrower shall make requests for Letters of Credit in writing at least ten (10) Business
Days prior to the date such Letter of Credit is to be issued. Each such request shall specify the
date such Letter of Credit is to be issued, the amount thereof, the name and address of the
beneficiary thereof and a description of the transaction to be supported thereby. Any such notice
shall be accompanied by the form of Letter of Credit requested and any application or reimbursement
agreement required by the issuer of such Letter of Credit. If any term of such application or
reimbursement agreement is inconsistent with this Agreement, then the provisions of this Agreement
shall control to the extent of such inconsistency.



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       (c) Obligations Absolute.



       US Borrower shall be obligated to reimburse the issuer of any Letter of Credit, or Lender if
Lender has reimbursed such issuer on US Borrower’s behalf, for any payments made in respect of any
Letter of Credit, which obligation shall be unconditional and irrevocable and shall be paid
regardless of: (i) any lack of validity or enforceability of any Letter of Credit, (ii) any
amendment or waiver of or consent or departure from all or any provisions of any Letter of Credit,
this Agreement or any Other Agreement, (iii) the existence of any claim, set off, defense or other
right which US Borrower or any other Person may have against any beneficiary of any Letter of
Credit, Lender or the issuer of the Letter of Credit, (iv) any draft or other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid, or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect, (v) any payment under
any Letter of Credit against presentation of a draft or other document that does not comply with
the terms of such Letter of Credit, and (vi) any other act or omission to act or delay of any kind
of the issuer of such Letter of Credit, the Lender or any other Person or any other event or
circumstance that might otherwise constitute a legal or equitable discharge of US Borrower’s
obligations hereunder. It is understood and agreed by US Borrower that the issuer of any Letter of
Credit may accept documents that appear on their face to be in order without further investigation
or inquiry, regardless of any notice or information to the contrary.



       (d) Expiration Dates of Letters of Credit.



       The expiration date of each Letter of Credit shall be no later than the earlier of (i) one (1)
year from the date of issuance and (ii) the thirtieth (30th) day prior to the end of the Original
Term or any Renewal Term. Notwithstanding the foregoing, a Letter of Credit may provide for
automatic extensions of its expiration date for one or more one (1) year periods, so long as the
issuer thereof has the right to terminate the Letter of Credit at the end of each one (1) year
period and no extension period extends past the thirtieth (30th) day prior to the end of the
Original Term or any Renewal Term.



       4. INTEREST, FEES AND CHARGES.



       (a) Interest Rate.



       Subject to the terms and conditions set forth below, the Loans shall bear interest at the per
annum rate of interest set forth in subsection (i), (ii) or (iii) below:




       (i) One-half of one percent (0.50%) per annum in excess of the Prime Rate in effect
from time to time with respect to Revolving Loans, and one percent (1.00%) per annum in
excess of the Prime Rate in effect from time to time with respect to Term Loans and all
other Liabilities other than Revolving Loans, in each case, payable on the first Business
Day of each month in arrears. Said rate of interest shall increase or decrease by an amount
equal to each increase or decrease in the Prime Rate effective on the effective date of each
such change in the Prime Rate.



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       (ii) Three hundred and fifty (350) basis points in excess of the LIBOR Rate for the
applicable Interest Period with respect to Revolving Loans and four hundred (400) basis
points with respect to the Term Loans, in each case, such rates to remain fixed for such
Interest Period. “Interest Period” shall mean any continuous period of one (1), two (2) or
three (3) months, as selected from time to time by the Borrower requesting such LIBOR Rate
Loan by irrevocable notice (in writing, by telecopy, telex, electronic mail, or cable) given
to Lender not less than three (3) Business Days prior to the first day of each respective
Interest Period; provided, that: (A) each such period occurring after such initial period
shall commence on the day on which the immediately preceding period expires; (B) the final
Interest Period shall be such that its expiration occurs on or before the end of the
Original Term or any Renewal Term; and (C) if for any reason a Borrower shall fail to timely
select a period, then such Loans shall continue as, or revert to, Prime Rate Loans.
Interest shall be payable on the first Business Day of each month in arrears and on the last
Business Day of such Interest Period.




       (iii) Upon the occurrence of an Event of Default, the Loans shall bear interest at the
rate of two percentage points (2.0) per annum in excess of the interest rate otherwise
payable thereon, which interest shall be payable on demand. All interest shall be
calculated on the basis of a 360-day year.



       (b) Other LIBOR Provisions.




       (i) Subject to the provisions of this Agreement, each Borrower shall have the option
(A) as of any date, to convert all or any part of the Prime Rate Loans to, or request that
new Loans be made as, LIBOR Rate Loans of various Interest Periods, (B) as of the last day
of any Interest Period, to continue all or any portion of the relevant LIBOR Rate Loans as
LIBOR Rate Loans; (C) as of the last day of any Interest Period, to convert all or any
portion of the LIBOR Rate Loans to Prime Rate Loans; and (D) at any time, to request new
Loans as Prime Rate Loans; provided, that Loans may not be made as, continued as or converted to LIBOR Rate Loans,
if the making, continuation or conversion thereof would violate the provisions of
subsections 4(b)(ii) or 4(b)(iii) of this Agreement or if an Event of Default
has occurred.




       (ii) Lender’s determination of the LIBOR Rate as provided above shall be conclusive,
absent manifest error. Furthermore, if Lender determines, in good faith (which
determination shall be conclusive, absent manifest error), prior to the commencement of any
Interest Period that (A) U.S. Dollar deposits of sufficient amount and maturity for funding
the Loans are not available to Lender in the London Interbank Eurodollar market in the
ordinary course of business, or (B) by reason of circumstances affecting the London
Interbank Eurodollar market, adequate and fair means do not exist for ascertaining the rate
of interest to be applicable to the Loans requested by a Borrower to be LIBOR Rate Loans or
the Loans bearing interest at the rates set forth in subsection 4(a)(ii) of this
Agreement shall not represent the effective pricing to Lender for U.S. Dollar deposits of a
comparable amount for the relevant



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period (such as for example, but not limited to, official
reserve requirements required by Regulation D to the extent not given effect in determining
the rate), Lender shall promptly notify such Borrower and (1) all existing LIBOR Rate Loans
shall convert to Prime Rate Loans upon the end of the applicable Interest Period, and (2) no
additional LIBOR Rate Loans shall be made until such circumstances are cured.




       (iii) If, after the date hereof, the introduction of, or any change in any applicable
law, treaty, rule, regulation or guideline or in the interpretation or administration
thereof by any governmental authority or any central bank or other fiscal, monetary or other
authority having jurisdiction over Lender or its lending offices (a “Regulatory Change”),
shall, in the opinion of counsel to Lender, make it unlawful for Lender to make or maintain
LIBOR Rate Loans, then Lender shall promptly notify the requesting Borrower and (A) the
LIBOR Rate Loans shall immediately convert to Prime Rate Loans on the last Business Day of
the then existing Interest Period or on such earlier date as required by law and (B) no
additional LIBOR Rate Loans shall be made until such circumstance is cured.




       (iv) If, for any reason, a LIBOR Rate Loan is paid prior to the last Business Day of
any Interest Period or if a LIBOR Rate Loan does not occur on a date specified by the
requesting Borrower in its request (other than as a result of a default by Lender), each
Borrower agrees to indemnify Lender against any loss (including any loss on redeployment of
the deposits or other funds acquired by Lender to fund or maintain such LIBOR Rate Loan)
cost or expense incurred by Lender as a result of such prepayment.




       (v) If any Regulatory Change (whether or not having the force of law) shall (A) impose,
modify or deem applicable any assessment, reserve, special deposit or similar requirement
against assets held by, or deposits in or for the account of or loans by, or any other
acquisition of funds or disbursements by, Lender; (B) subject Lender or the LIBOR Rate Loans to any Tax or change the basis of taxation of
payments to Lender of principal or interest due from a Borrower to Lender hereunder (other
than a change in the taxation of the overall net income of Lender); or (C) impose on Lender
any other condition regarding the LIBOR Rate Loans or Lender’s funding thereof, and Lender
shall determine (which determination shall be conclusive, absent any manifest error) that
the result of the foregoing is to increase the cost to Lender of making or maintaining the
LIBOR Rate Loans or to reduce the amount of principal or interest received by Lender
hereunder, then Borrowers shall pay to Lender, on demand, such additional amounts as Lender
shall, from time to time, determine are sufficient to compensate and indemnify Lender from
such increased cost or reduced amount.




       (vi) Lender shall receive payments of amounts of principal of and interest with respect
to the LIBOR Rate Loans free and clear of, and without deduction for, any Taxes. If (A)
Lender shall be subject to any Tax in respect of any LIBOR Rate Loans or any part thereof
or, (B) Borrowers shall be required to withhold or deduct any Tax from any such amount, the
LIBOR Rate applicable to



-23-









 






such LIBOR Rate Loans shall be adjusted by Lender to reflect all
additional costs incurred by Lender in connection with the payment by Lender or the
withholding by a Borrower of such Tax and Borrowers shall provide Lender with a statement
detailing the amount of any such Tax actually paid by Borrowers. Determination by Lender of
the amount of such costs shall be conclusive, absent manifest error. If after any such
adjustment any part of any Tax paid by Lender is subsequently recovered by Lender, Lender
shall reimburse Borrowers to the extent of the amount so recovered. A certificate of an
officer of Lender setting forth the amount of such recovery and the basis therefor in
reasonable detail shall be conclusive, absent manifest error.




       (vii) Each request for LIBOR Rate Loans shall be in an amount not less than Five
Hundred Thousand and No/100 Dollars ($500,000), and in integral multiples of, One Hundred
Thousand and No/100 Dollars ($100,000).




       (viii) Unless otherwise specified by a Borrower, all Loans shall be Prime Rate Loans.




       (ix) No more than three (3) Interest Periods may be in effect with respect to
outstanding LIBOR Rate Loans at any one time.



       (c) Fees And Charges.




       (i) Closing Fees: US Borrower shall pay to Lender a closing fee of (a) One
Hundred Nine Thousand Two Hundred Sixty-Five and No/100 Dollars ($109,265) in the event that
(x) US Borrower has Excess Availability (inclusive of the “Excess Availability” under the
EXIM Loan Agreement) of not less than Two Million and No/100 Dollars ($2,000,000) and (y)
the Companies collectively have Excess Availability (inclusive of the “Excess Availability”
under the EXIM Loan Agreement) plus access to immediately available funds from sources
other the Lender of not less than Four Million and No/100 Dollars ($4,000,000) (the
Excess Availability thresholds described in clauses (x) and (y) are collectively referred to
herein as “Target Excess Availability”) or (b) One Hundred Twenty-Two Thousand Three Hundred
Seventy-Six and 80/100 Dollars ($122,376.80) in the event US Borrower and the Companies do
not attain Target Excess Availability; German Borrower shall pay to Lender a closing fee
of (c) Four Thousand Eight Hundred Ninety-Five and No/100 Dollars ($4,895) in the event that
US Borrower and the Companies attain Target Excess Availability or (d) Five Thousand Four
Hundred Eighty-Two and 40/100 Dollars ($5,482.40) in the event that US Borrower and the
Companies do not attain Target Excess Availability; and Spanish Borrower shall pay to Lender
a closing fee of (e) Ten Thousand Eight Hundred Forty and No/100 Dollars ($10,840) in the
event that US Borrower and the Companies attain Target Excess Availability or (f) Twelve
Thousand One Hundred Forty and 80/100 Dollars ($12,140.80) in the event that US Borrower and
the Companies do not attain Target Excess Availability, which fees shall be fully earned and
payable on the date of disbursement of the initial Loans hereunder.



-24-









 






       (ii) Unused Line Fee: US Borrower shall pay to Lender an unused line fee of
three-eighths of one percent (.375%) of the difference between the Maximum Revolving Loan
Limit and the average daily balance of the Revolving Loans plus the Letter of Credit
Obligations for each month, which fee shall be fully earned by Lender and payable monthly in
arrears on the first Business Day of each month during the Original Term and any Renewal
Term. Said fee shall be calculated on the basis of a 360 day year.




       (iii) Administrative Fees: US Borrower shall pay to Lender an administrative
fee of Six Thousand Five Hundred Fifty-Six and No/100 Dollars ($6,556) per quarter, German
Borrower shall pay to Lender an administrative fee of Two Hundred Ninety-Four and No/100
Dollars ($294) per quarter and Spanish Borrower shall pay to Lender an administrative fee of
Six Hundred Fifty and No/100 Dollars ($650) per quarter, which fees shall be fully earned
and payable in arrears on the first Business Day of each quarter (commencing with March 31,
2005) during the Original Term and any Renewal Term.




       (iv) Costs and Expenses: Borrowers shall reimburse Lender for all costs and
expenses, including, without limitation, legal expenses and reasonable attorneys’ fees
(whether for internal or outside counsel), incurred by Lender in connection with the (A)
documentation and consummation of this transaction and any other transactions between
Borrowers and Lender, including, without limitation, Uniform Commercial Code and other
public record searches and filings, overnight courier or other express or messenger
delivery, appraisal costs, surveys, title insurance and environmental audit or review costs;
(B) collection, protection or enforcement of any rights in or to the Collateral; (C)
collection of any Liabilities; and (D) administration and enforcement of any of Lender’s
rights under this Agreement or any Other Agreement. Borrowers shall also pay all normal
service charges with respect to all accounts maintained by each Company with Lender and
LaSalle Bank and any additional services requested by a Company from Lender and LaSalle
Bank. All such costs, expenses and charges shall, if owed to LaSalle Bank, be reimbursed by
Lender and in such event or in the event such costs and expenses are owed to Lender, shall
constitute Liabilities hereunder, shall be payable by Borrowers to Lender on demand, and,
until paid, shall bear interest at the highest rate then applicable to Loans hereunder.




       (v) Capital Adequacy Charge. If Lender shall have determined that the adoption
of any law, rule or regulation regarding capital adequacy, or any change therein or in the
interpretation or application thereof, or compliance by Lender with any request or directive
regarding capital adequacy (whether or not having the force of law) from any central bank or
governmental authority enacted after the date hereof, does or shall have the effect of
reducing the rate of return on such party’s capital as a consequence of its obligations
hereunder to a level below that which Lender could have achieved but for such adoption,
change or compliance (taking into consideration Lender’s policies with respect to capital
adequacy) by a material amount, then from time to time, after submission by Lender to
Borrowers of a written demand therefor



-25-









 






(“Capital Adequacy Demand”) together with the certificate described below, Borrowers shall pay to Lender such additional amount or amounts
(“Capital Adequacy Charge”) as will compensate Lender for such reduction, such Capital
Adequacy Demand to be made with reasonable promptness following such determination. A
certificate of Lender claiming entitlement to payment as set forth herein shall be
conclusive in the absence of manifest error. Such certificate shall set forth the nature of
the occurrence giving rise to such reduction, the amount of the Capital Adequacy Charge to
be paid to Lender, and the method by which such amount was determined. In determining such
amount, Lender may use any reasonable averaging and attribution method, applied on a
non-discriminatory basis.



       (d) Maximum Interest.




       It is the intent of the parties that the rate of interest and other charges to each Borrower
under this Agreement and the Other Agreements shall be lawful; therefore, if for any reason the
interest or other charges payable under this Agreement are found by a court of competent
jurisdiction, in a final determination, to exceed the limit which Lender may lawfully charge such
Borrower, then the obligation to pay interest and other charges shall automatically be reduced to
such limit and, if any amount in excess of such limit shall have been paid, then such amount shall
be refunded to such Borrower.



       5. COLLATERAL.



       (a) Grant of Security Interest to Lender.




       (i) US Borrower Collateral. As security for the payment of all Loans (including
without limitation the Revolving Loans and the Term Loans) now or in the future made by
Lender to any Borrower hereunder and for the payment or other satisfaction of all other Liabilities, US Borrower hereby assigns to Lender
and grants to Lender a continuing security interest in the following property of US
Borrower, whether now or hereafter owned, existing, acquired or arising and wherever now or
hereafter located: (A) all Accounts (whether or not Eligible Accounts) and all Goods whose
sale, lease or other disposition by US Borrower has given rise to Accounts and have been
returned to, or repossessed or stopped in transit by, US Borrower; (B) all Chattel Paper,
Instruments, Documents and General Intangibles (including, without limitation, all patents,
patent applications, trademarks, trademark applications, trade names, trade secrets,
goodwill, copyrights, copyright applications, registrations, licenses, owned software,
franchises, customer lists, tax refund claims, claims against carriers and shippers,
guarantee claims, contract rights, payment intangibles, security interests, security
deposits and rights to indemnification); (C) all Inventory (whether or not Eligible
Inventory); (D) all Goods (other than Inventory), including, without limitation, Equipment,
vehicles and Fixtures; (E) all Investment Property; (F) all Deposit Accounts, bank accounts,
deposits and cash; (G) all Letter-of-Credit Rights; (H) Commercial Tort Claims listed on
Exhibit C hereto; (I) any other property of US Borrower now or hereafter in the possession,
custody or control of Lender or any agent or any parent, affiliate or subsidiary of Lender
or any participant with Lender in



-26-









 






the Loans, for any purpose (whether for safekeeping,
deposit, collection, custody, pledge, transmission or otherwise) and (J) all additions and
accessions to, substitutions for, and replacements, products and Proceeds of the foregoing
property, including, without limitation, proceeds of all insurance policies insuring the
foregoing property, and all of US Borrower’s books and records relating to any of the
foregoing and to US Borrower’s business.




       (ii) German Borrower Collateral. As security for the payment of all Loans
(including without limitation the Revolving Loans and the Term Loans; but subject to the
German Borrower Cross Collateralization Cap with respect to the US Loans) now or in the
future made by Lender to any Borrower hereunder and for the payment or other satisfaction of
all other Liabilities, German Borrower assigns to Lender and grants to Lender a continuing
security interest in all collateral described in the German Real Property Mortgage.




       (iii) Spanish Borrower Collateral. As security for the payment of all Loans
(including without limitation the Revolving Loans and the Term Loans; but subject to the
Spanish Borrower Cap) now or in the future made by Lender to any Borrower hereunder and for
the payment or other satisfaction of all other Liabilities, Spanish Borrower assigns to
Lender and grants to Lender a continuing security interest in all collateral described in
the Spanish Real Property Mortgage.



       (b) Other Security.



       Lender, in its sole discretion, without waiving or releasing any obligation, liability or duty
of any Company under this Agreement or the Other Agreements or any Event of Default, may at any
time or times hereafter, but shall not be obligated to, pay,
acquire or accept an assignment of any security interest, lien, encumbrance or claim asserted
by any Person in, upon or against the Collateral. All sums paid by Lender in respect thereof and
all costs, fees and expenses including, without limitation, reasonable attorney fees, all court
costs and all other charges relating thereto incurred by Lender shall constitute Liabilities,
payable by Borrowers to Lender on demand and, until paid, shall bear interest at the highest rate
then applicable to Loans hereunder.



       (c) Possessory Collateral.



       Immediately upon receipt by any Borrower or any other Company of any portion of the Collateral
evidenced by an Instrument or Document, including, without limitation, any Tangible Chattel Paper
and any Investment Property consisting of certificated securities, Borrowers shall, or shall cause
the applicable Company to, deliver the original thereof to Lender together with an appropriate
endorsement or other specific evidence of assignment thereof to Lender (in form and substance
acceptable to Lender). If an endorsement or assignment of any such items shall not be made for any
reason, Lender is hereby irrevocably authorized, as such Borrower’s or other Company’s, as
applicable, attorney and agent-in-fact, to endorse or assign the same on such Person’s behalf.



-27-









 





       (d) Electronic Chattel Paper.



       To the extent that any US Borrower or any other Company that has granted a lien in favor of
Lender on its Accounts or Chattel Paper obtains or maintains any Electronic Chattel Paper, US
Borrower shall, and shall cause such other Company to, create, store and assign the record or
records comprising the Electronic Chattel Paper in such a manner that (i) a single authoritative
copy of the record or records exists which is unique, identifiable and except as otherwise provided
in clauses (iv), (v) and (vi) below, unalterable, (ii) the authoritative copy identifies Lender as
the assignee of the record or records, (iii) the authoritative copy is communicated to and
maintained by the Lender or its designated custodian, (iv) copies or revisions that add or change
an identified assignee of the authoritative copy can only be made with the participation of Lender,
(v) each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy
that is not the authoritative copy and (vi) any revision of the authoritative copy is readily
identifiable as an authorized or unauthorized revision.



       6. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN/LENDER’S RIGHT
TO REQUIRE ADDITIONAL COLLATERAL.



       Each Borrower shall, and US Borrower shall cause each other Company to, at Lender’s request,
at any time and from time to time, promptly authenticate, execute and deliver to Lender such
financing statements, documents and other agreements and instruments (and pay the cost of filing or
recording the same in all public offices deemed necessary or desirable by Lender) and do such other
acts and things or cause third parties to do such other acts and things as Lender may deem
necessary or desirable in its sole discretion in order to establish and maintain a valid, attached
and perfected security interest in the Collateral (including the Additional Collateral) in favor of Lender (free and clear of
all other liens, claims, encumbrances and rights of third parties whatsoever, whether voluntarily
or involuntarily created, except Permitted Liens) to secure payment of the Liabilities (subject to
the German Borrower Cross Collateralization Cap with respect to Collateral granted by German
Borrower, the Spanish Borrower Cap with respect to Collateral granted by Spanish Borrower and
similar caps with respect to Collateral granted by other Non-US Companies), and in order to
facilitate the collection of the Collateral. Each Borrower irrevocably hereby makes, constitutes
and appoints Lender (and all Persons designated by Lender for that purpose) as such Borrower’s true
and lawful attorney and agent-in-fact to execute and file such financing statements, documents and
other agreements and instruments and do such other acts and things as may be necessary to preserve
and perfect Lender’s security interest in the Collateral. Each Borrower further agrees that a
carbon, photographic, photostatic or other reproduction of this Agreement or of a financing
statement shall be sufficient as a financing statement, each Borrower further ratifies and confirms
the prior filing by Lender of any and all financing statements which identify such Borrower as
debtor, Lender as secured party and any or all Collateral as collateral. In the event that Lender
reasonably (provided such “reasonable” qualification shall not apply during the existence of an
Event of Default) requests, each of German Borrower and Spanish Borrower will, and Borrowers will
cause each other Non-US Company to, promptly guaranty the Liabilities and grant to Lender a



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valid, attached and perfected security interest, in form and substance satisfactory to Lender, in all of
their respective real and personal property, whether now or hereafter existing and wherever
located, to secure the Liabilities, in each case to the extent German Borrower, Spanish Borrower
or such other Non-US Company has not already done so (the “Additional Collateral”); provided, so
long as no Event of Default is in existence, such additional guaranties or the pledging of such
Additional Collateral shall only be required under this Section 6 to the extent they do not result
in material tax liabilities to the US Borrower under Section 956 of the Internal Revenue Code.




       7. POSSESSION OF COLLATERAL AND RELATED MATTERS.



       While no Event of Default is in existence, each Company shall have the right, except as
otherwise provided in this Agreement, in the ordinary course of such Company’s business, to (a)
sell, lease or furnish under contracts of service any of such Company’s Inventory normally held by
such Company for any such purpose; and (b) use and consume any raw materials, work in process or
other materials normally held by such Company for such purpose; provided, however, that a sale in
the ordinary course of business shall not include any transfer or sale in satisfaction, partial or
complete, of a debt owed by such Company.



       8. COLLECTIONS.



       (a) US Borrower shall, and shall cause each other US Company to, direct all of its Account
Debtors to make all payments on the Accounts directly to a post office box (the “Lock Box”)
designated by, and under the exclusive control of, Lender, at a financial institution acceptable to
Lender. US Borrower shall establish an account (the “Lock Box Account”) in Lender’s name with a financial institution acceptable to Lender, into which all
payments received in the Lock Box shall be deposited, and into which US Borrower will, and shall
cause each other US Company to, immediately deposit all payments received by US Borrower or such
other US Company on Accounts in the identical form in which such payments were received, whether by
cash or check. If a Borrower, any Affiliate or Subsidiary, any shareholder, officer, director,
employee or agent of a Borrower or any Affiliate or Subsidiary, or any other Person acting for or
in concert with a Borrower shall receive any monies, checks, notes, drafts or other payments
relating to or as Proceeds of Accounts of US Borrower or any other US Company or other Collateral,
such Borrower and each such Person shall receive all such items in trust for, and as the sole and
exclusive property of, Lender and, immediately upon receipt thereof, shall remit the same (or cause
the same to be remitted) in kind to the Lock Box Account. The financial institution with which the
Lock Box Account is established shall acknowledge and agree, in a manner satisfactory to Lender,
that the amounts on deposit in such Lock Box and Lock Box Account are the sole and exclusive
property of Lender, that such financial institution will follow the instructions of Lender with
respect to disposition of funds in the Lock Box and Lock Box Account without further consent from
US Borrower, that such financial institution has no right to setoff against the Lock Box or Lock
Box Account or against any other account maintained by such financial institution into which the
contents of the Lock Box or Lock Box Account are transferred, and that such financial institution
shall wire, or otherwise transfer in



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immediately available funds to Lender in a manner satisfactory
to Lender, funds deposited in the Lock Box Account on a daily basis as such funds are collected.
US Borrower, on behalf of itself and the other US Companies, agrees that all payments made to such
Lock Box Account or otherwise received by Lender, whether in respect of the Accounts of the US
Borrower or such other US Company or as Proceeds of other Collateral or otherwise, will be applied
on account of the Liabilities in accordance with the terms of this Agreement; provided, that so
long as no Event of Default has occurred and is continuing, payments received by Lender shall not
be applied to the unmatured portion of the LIBOR Rate Loans, but shall be held in a cash collateral
account maintained by Lender, until the earlier of (i) the last Business Day of the Interest Period
applicable to such LIBOR Rate Loan and (ii) the occurrence of an Event of Default; provided,
further, that if all of the conditions set forth in this Agreement with respect to the making of
Revolving Loans have been satisfied, the immediately available funds in such cash collateral
account may be disbursed, at US Borrower’s request, to US Borrower as a Revolving Loan. US
Borrower agrees to pay all fees, costs and expenses in connection with opening and maintaining the
Lock Box and Lock Box Account. All of such fees, costs and expenses if not paid by US Borrower,
may be paid by Lender and in such event all amounts paid by Lender shall constitute Liabilities
hereunder, shall be payable to Lender by US Borrower upon demand, and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder. All checks, drafts, instruments
and other items of payment or Proceeds of Collateral shall be endorsed by US Borrower or such other
US Company to Lender, and, if that endorsement of any such item shall not be made for any reason,
Lender is hereby irrevocably authorized to endorse the same on US Borrower’s or such other US
Company’s behalf. For the purpose of this section, US Borrower, on behalf of itself and the other
US Companies, irrevocably hereby makes, constitutes and appoints Lender (and all Persons designated
by Lender for that purpose) as US Borrower’s, and such other US Company’s, true and lawful attorney and agent-in-fact (i) to
endorse US Borrower’s or such other US Company’s name upon said items of payment and/or Proceeds of
Collateral and upon any Chattel Paper, Document, Instrument, invoice or similar document or
agreement relating to any Account of US Borrower or Goods pertaining thereto; (ii) to take control
in any manner of any item of payment or Proceeds thereof and (iii) to have access to any lock box
or postal box into which any of US Borrower’s mail is deposited, and open and process all mail
addressed to US Borrower or such other US Company and deposited therein.




       (b) During the existence of an Event of Default, Lender may, at any time and from time to
time, whether before or after notification to any Account Debtor and whether before or after the
maturity of any of the Liabilities, (i) enforce collection of any of US Borrower’s Accounts or
other amounts owed to US Borrower or each other US Company by suit or otherwise; (ii) exercise all
of US Borrower’s and each other US Company’s rights and remedies with respect to proceedings
brought to collect any Accounts or other amounts owed to US Borrower or such other US Company;
(iii) surrender, release or exchange all or any part of any Accounts or other amounts owed to US
Borrower or any other US Company, or compromise or extend or renew for any period (whether or not
longer than the original period) any indebtedness thereunder; (iv) sell or assign any Account of US
Borrower or other amount owed to US Borrower or any other US Company upon such terms, for such
amount



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and at such time or times as Lender deems advisable; (v) prepare, file and sign US
Borrower’s and each other US Company’s name on any proof of claim in bankruptcy or other similar
document against any Account Debtor or other Person obligated to US Borrower or such other US
Company; and (vi) do all other acts and things which are necessary, in Lender’s sole discretion, to
fulfill US Borrower’s and each other US Company’s obligations under this Agreement and the Other
Agreements and to allow Lender to collect the Accounts or other amounts owed to US Borrower or such
other US Company. In addition to any other provision hereof, Lender may at any time, after the
occurrence and during the continuance of an Event of Default, at US Borrower’s expense, notify any
parties obligated on any of the Accounts to make payment directly to Lender of any amounts due or
to become due thereunder.




       (c) For purposes of calculating interest and fees, Lender shall, within one and a half (1.5)
Business Days after receipt by Lender at its office in Chicago, Illinois of (i) fully-cleared
checks and (ii) cash or other immediately available funds from collections of items of payment and
Proceeds of any Collateral, apply the whole or any part of such collections or Proceeds against the
Liabilities and the “Liabilities” as defined the EXIM Loan Agreement in such order as Lender shall
determine in its sole discretion. For purposes of determining the amount of Loans available for
borrowing purposes, fully-cleared checks and cash or other immediately available funds from
collections of items of payment and Proceeds of any Collateral shall be applied in whole or in part
against the Liabilities and the “Liabilities” as defined the EXIM Loan Agreement in such order as
Lender shall determine in its sole discretion, on the day of receipt, subject to actual collection.
Notwithstanding anything contained herein to the contrary, the Proceeds of Eligible Export-Related
Accounts and Eligible Export-Related Inventory (each as defined in the EXIM Loan Agreement) shall
be applied first to the “Liabilities” owing under the EXIM Loan Agreement and the Proceeds of
all other Collateral shall be applied first to the Liabilities owing hereunder.



       (d) On a monthly basis, Lender shall deliver to US Borrower an account statement showing all
Loans, charges and payments, which shall be deemed final, binding and conclusive upon Borrowers
unless a Borrower notifies Lender in writing, specifying any error therein, within thirty (30) days
of the date such account statement is sent to US Borrower and any such notice shall only constitute
an objection to the items specifically identified.



       9. COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES.



       (a) Daily Reports.



       US Borrower shall deliver to Lender an executed daily loan report and certificate in Lender’s
then current form on each day on which US Borrower requests a Revolving Loan, and in any event at
least once each week, which shall be accompanied by copies of US Borrower’s sales journal, cash
receipts journal and credit memo journal for the relevant period. Such report shall reflect the
activity of US Borrower with respect to Accounts for the immediately preceding week, and shall be
in a form and with such



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specificity as is satisfactory to Lender and shall contain such additional
information concerning Accounts and Inventory as may be requested by Lender including, without
limitation, but only if specifically requested by Lender, copies of all invoices prepared in
connection with such Accounts.




       (b) Monthly Reports.



       US Borrower shall deliver to Lender, in addition to any other reports, as soon as practicable
and in any event: (i) within twenty (20) days after the end of each month, (A) a detailed trial
balance of US Borrower’s Accounts aged per invoice date, in form and substance reasonably
satisfactory to Lender including, without limitation, the names and addresses of all Account
Debtors of US Borrower, and (B) a summary and detail of accounts payable (such Accounts and
accounts payable divided into such time intervals as Lender may require in its sole discretion),
including a listing of any held checks; and (ii) within twenty (20) days after the end of each
month, the general ledger inventory account balance, a perpetual inventory report and Lender’s
standard form of Inventory report then in effect or the form most recently requested from US
Borrower by Lender, for US Borrower by each category of Inventory, together with a description of
the monthly change in each category of Inventory and a breakdown of the dates of purchase and sale
of raw material Inventory (including purchased component parts).



       (c) Financial Statements.



       Borrowers shall deliver to Lender the following financial information, all of which shall be
prepared in accordance with generally accepted accounting principles consistently applied, and shall be accompanied by a compliance certificate in the form of
Exhibit B hereto, which compliance certificate shall include a calculation of all financial
covenants contained in this Agreement: (i) no later than thirty (30) days after each month, copies
of internally prepared financial statements, including, without limitation, balance sheets and
statements of income, retained earnings and cash flow of all of the Companies on a consolidated and
consolidating basis, certified by the Chief Financial Officer of US Borrower; (ii) no later than
forty-five (45) days after the end of each of the first three quarters of each Fiscal Year, copies
of internally prepared financial statements including, without limitation, balance sheets,
statements of income, retained earnings, cash flows and reconciliation of surplus of all of the
Companies on a consolidated and consolidating basis, certified by the Chief Financial Officer of US
Borrower and (iii) no later than ninety (90) days after the end of each Fiscal Year, audited annual
financial statements of the Companies on a consolidated and consolidating basis with an unqualified
opinion (it being understood that without limiting the foregoing, such opinion shall not include
any going concern qualification) by independent certified public accountants selected by Borrowers
and reasonably satisfactory to Lender, which financial statements shall be accompanied by copies of
any management letters sent to any Company by such accountants. Without limiting the foregoing, no
obligation of Spanish Borrower under this subsection 9(c) shall be limited as a result of
any waiver to which Spanish Borrower could be entitled and which could result from the application
of national legislation.



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       (d) Annual Projections.



       As soon as practicable and in any event prior to the beginning of each Fiscal Year, Borrowers
shall deliver to Lender projected balance sheets, statements of income and cash flow for each
Company in the Domestic segment (as referenced in US Borrower’s 10-K report filed March 30, 2004)
on a consolidated basis, each Company in the European segment (as referenced in US Borrower’s 10-K
report filed March 30, 2004) on a consolidated basis and each Company in the International segment
(as referenced in US Borrower’s 10-K report filed March 30, 2004) on a consolidated basis, and also
on a standalone basis for US Borrower, for each of the twelve (12) months during such Fiscal Year,
which shall include the assumptions used therein, together with appropriate supporting details as
reasonably requested by Lender.



       (e) Explanation of Budgets and Projections.



       In conjunction with the delivery of the annual presentation of projections referred to in
subsection 9(d) above, Borrowers shall deliver a letter signed on behalf of Borrowers by the
President or a Vice President of US Borrower and by the Treasurer or Chief Financial Officer of US
Borrower, describing, comparing and analyzing, in detail, all changes and developments between the
anticipated financial results included in such projections and the historical financial statements
of each Company.



       (f) Public Reporting.



       Promptly upon the filing thereof, Borrowers shall deliver to Lender copies of all registration
statements and annual, quarterly, monthly or other regular reports which any Company files with the
Securities and Exchange Commission or any similar organization, as well as promptly providing to
Lender copies of any reports and proxy statements delivered to shareholders of any Company.



       (g) Other Information.



       Promptly following request therefor by Lender, such other business or financial data, reports,
appraisals and projections as Lender may reasonably request.



       10. TERMINATION; AUTOMATIC RENEWAL.



       THIS AGREEMENT SHALL BE IN EFFECT FROM THE DATE HEREOF UNTIL JANUARY 28, 2008 (THE “ORIGINAL
TERM”) AND SHALL AUTOMATICALLY RENEW ITSELF FROM YEAR TO YEAR THEREAFTER (EACH SUCH ONE-YEAR
RENEWAL BEING REFERRED TO HEREIN AS A “RENEWAL TERM”) UNLESS (A) LENDER ELECTS NOT TO RENEW THIS
AGREEMENT AT THE END OF THE ORIGINAL TERM OR ANY RENEWAL TERM; (B) THE DUE DATE OF THE LIABILITIES
IS ACCELERATED PURSUANT TO SECTION 16 HEREOF; OR (C) A BORROWER ELECTS NOT TO RENEW THIS
AGREEMENT AT THE END OF THE ORIGINAL TERM OR AT THE END OF ANY RENEWAL TERM BY GIVING LENDER
WRITTEN NOTICE



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OF SUCH ELECTION AT LEAST NINETY (90) DAYS PRIOR TO THE END OF THE ORIGINAL TERM OR
THE THEN CURRENT RENEWAL TERM AND BY PAYING ALL OF THE LIABILITIES IN FULL ON THE LAST DAY OF SUCH
TERM. If one or more of the events specified in clauses (A), (B) and (C) occurs or this Agreement
otherwise expires, then (i) Lender shall not make any additional Loans on or after the date
identified as the date on which the Liabilities are to be repaid; and (ii) this Agreement shall
terminate on the date thereafter that the Liabilities are paid in full. At such time as Borrowers
have repaid all of the Liabilities and this Agreement has terminated, each Borrower shall, and US
Borrower shall cause each other Company to, deliver to Lender a release, in form and substance
satisfactory to Lender, of all obligations and liabilities of Lender and its officers, directors,
employees, agents, parents, subsidiaries and affiliates to such Borrower and such Company, and if
such Borrower or such Company is obtaining new financing from another lender, Borrowers shall
deliver such lender’s indemnification of Lender, in form and substance satisfactory to Lender, for
checks which Lender has credited to such Borrower’s or such Company’s account, but which
subsequently are dishonored for any reason or for automatic clearinghouse or wire transfers not yet
posted to such Borrower’s or such Company’s account. If, during the term of this Agreement,
Borrowers prepay all of the Liabilities from any source other than income from the ordinary course
operations of Borrowers’ business and this Agreement is terminated, Borrowers agree to pay to
Lender as a prepayment fee, in addition to the payment of all other Liabilities, an amount equal to
(i) two percent (2%) of the Maximum Loan Limit if such prepayment occurs two (2) years or more
prior to the end of the Original Term, (ii) one percent (1%) of the Maximum Loan Limit if such
prepayment occurs less than two (2) years, but at least one (1) year prior to the end of the
Original Term, or (iii) one-half of one percent (0.50%) of the Maximum Loan Limit if such
prepayment occurs less than one (1) year prior to the end of the Original Term or any then current
Renewal Term.




       11. REPRESENTATIONS AND WARRANTIES.



       Each Borrower hereby represents and warrants to Lender, which representations and warranties
(whether appearing in this Section 11 or elsewhere) shall be true at the time of Borrowers’
execution hereof and the closing of the transactions described herein or related hereto, shall
remain true until the repayment in full and satisfaction of all the Liabilities and termination of
this Agreement, and shall be remade by each Borrower at the time each Loan is made pursuant to this
Agreement.



       (a) Financial Statements and Other Information.



       The financial statements and other information delivered or to be delivered by any Company to
Lender at or prior to the date of this Agreement accurately reflect the financial condition of the
Companies in all material respects (or in all respects with respect to any report delivered
pursuant to subsection 9(a) hereof, other than inadvertent, immaterial errors not exceeding
Five Thousand and No/100 Dollars ($5,000) in the aggregate), and there has been no material adverse
change in the financial condition, the operations or any other status of any such Company since the
date of the financial statements delivered to Lender most recently prior to the date of this
Agreement. All written information now or heretofore



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furnished by any Company to Lender is true
and correct in all material respects (or in all respects with respect to any report delivered
pursuant to subsection 9(a) hereof, other than inadvertent, immaterial errors not exceeding Five
Thousand and No/100 Dollars ($5,000) in the aggregate) as of the date with respect to which such
information was furnished.




       (b) Locations.



       The office where each US Company keeps its books, records and accounts (or copies thereof)
concerning the Collateral, each US Company’s principal place of business and all of each US
Company’s other places of business, locations of Collateral and post office boxes and locations of
bank accounts are as set forth in Exhibit A and at other locations within the continental
United States of which Lender has been advised by US Borrower in accordance with subsection
12(b)(i). The Collateral granted by the US Companies, including, without limitation, the
Equipment (except any part thereof which a Borrower shall have advised Lender in writing consists
of Collateral normally used in more than one state) is kept, or, in the case of vehicles, based,
only at the addresses set forth on Exhibit A with respect to such US Company, and at other
locations within the continental United States of which Lender has been advised by US Borrower in
writing in accordance with subsection 12(b)(i) hereof.



       (c) Loans by Companies.



       No Company has made any loans or advances to any Affiliate or other Person except as permitted
pursuant to subsection 13(f) hereof.



       (d) Accounts and Inventory.



       Each Account or item of Inventory which any Company shall, expressly or by implication,
request Lender to classify as an Eligible Account or as Eligible Inventory, respectively, shall, as
of the time when such request is made, conform in all respects to the requirements of such
classification as set forth in the respective definitions of “Eligible Account” and “Eligible
Inventory” as set forth herein and as otherwise established by Lender from time to time.



       (e) Liens.



       Each Company pledging Collateral hereunder is the lawful owner of all Collateral now
purportedly owned or hereafter purportedly acquired by such Company, free from all liens, claims,
security interests and encumbrances whatsoever, whether voluntarily or involuntarily created and
whether or not perfected, other than the Permitted Liens.



       (f) Organization, Authority and No Conflict.




       (i) US Borrower is a corporation, duly organized, validly existing and in active status
in the State of Wisconsin, its state organizational identification number is 1000801 and US
Borrower is duly qualified and in good standing in all jurisdictions where the nature and
extent of the business transacted by it or the



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ownership of its assets makes such qualification necessary, except where the failure to be so qualified outside of Wisconsin
could not reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.




       (ii) German Borrower is a German limited liability company, duly organized, validly
existing in Germany and German Borrower is duly qualified and in good standing in all
jurisdictions where the nature and extent of the business transacted by it or the ownership
of its assets makes such qualification necessary, except where the failure to be so
qualified outside of Germany could not reasonably be expected to have, either individually
or in the aggregate, a Material Adverse Effect.




       (iii) Spanish Borrower is a Spanish corporation, duly organized, validly existing and
in good standing in Spain and Spanish Borrower is duly qualified and in good standing in all
jurisdictions where the nature and extent of the business transacted by it or the ownership
of its assets makes such qualification necessary, except where the failure to be so
qualified outside of Spain could not reasonably be expected to have, either individually or
in the aggregate, a Material Adverse Effect.




       (iv) Each other Company is of the type of entity set forth next to such Company’s name
on Schedule 11(p) hereto, duly organized, validly existing and in good standing in
its jurisdiction of organization, duly qualified and in good standing in all jurisdictions
where the nature and extent of the business transacted by it or the ownership of its assets
makes such qualification necessary, except where the failure to be so qualified outside its
jurisdiction of organization could not reasonably be expected to have, either individually
or in the aggregate, a Material Adverse Effect.




       (v) Each Company has the right and power and is duly authorized and empowered to enter
into, execute and deliver this Agreement and the Other Agreements that it is a party to, if
any, and perform its obligations hereunder and thereunder. Each Company’s execution,
delivery and performance of this Agreement and the Other Agreements that it is party to, if
any, does not conflict with the provisions of the organizational documents of such Company,
any statute, regulation, ordinance or rule of law, or any agreement, contract or other
document which may now or hereafter be binding on such Company (other than for such
conflicts with any statute, regulation, ordinance or rule of law, or any agreement, contract
or other document (other than any organizational document) which could not reasonably be
expected to have, either individually or in the aggregate, a Material Adverse Effect), and
each Company’s execution, delivery and performance of this Agreement and the Other
Agreements that it is party to, if any, shall not result in the imposition of any lien or
other encumbrance upon any of such Company’s property under any existing indenture,
mortgage, deed of trust, loan or credit agreement or other agreement or instrument by which
such Company or any of its property may be bound or affected.



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       (g) Litigation.



       There are no actions or proceedings which are pending or threatened against any Company which
could reasonably be expected to have, either individually or in the aggregate, a Material Adverse
Effect, and US Borrower shall, promptly upon any Company becoming aware of any such pending or
threatened action or proceeding, give written notice thereof to Lender. No Company has any
Commercial Tort Claims pending other than those set forth on Exhibit C hereto as Exhibit
C may be amended from time to time by written notice by Borrowers to Lender.



       (h) Compliance with Laws and Maintenance of Permits.



       Each Company has obtained all governmental consents, franchises, certificates, licenses,
authorizations, approvals and permits, the lack of which could reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect. Each Company is in compliance
in all material respects with all applicable federal, state, local and foreign statutes, orders,
regulations, rules and ordinances (including, without limitation, Environmental Laws and statutes,
orders, regulations, rules and ordinances relating to taxes, employer and employee contributions
and similar items, securities, ERISA, employee retirement or welfare plans or employee health and
safety) the failure to comply with which could reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.



       (i) Affiliate Transactions.



       Except as set forth on Schedule 11(i) hereto or as permitted pursuant to subsection
11(c) hereof and subsection 13(i) hereof, no Company is conducting, permitting or
suffering to be conducted, transactions with any Affiliate other than transactions with Affiliates
for the purchase or sale of Inventory or services in the ordinary course of business pursuant to
terms that are no less favorable to such Company than the terms upon which such transactions would
have been made had they been made to or with a Person that is not an Affiliate.



       (j) Names and Trade Names.



       Each name of any Company has always been as set forth on Schedule 11(j) hereto (and
such other names of which Lender has been advised by any Borrower in accordance with subsection
12(b)(iv) hereof) and no Company uses or has used trade names, assumed names, fictitious names or
division names in the operation of its business, except as set forth on Schedule 11(j)
hereto (and such other names of which Lender has been advised by any Borrower in accordance with
subsection 12(b)(iv) hereof).



       (k) Equipment.



       Each Company that has granted a lien to Lender on any of its Equipment has good and
indefeasible and merchantable title to and ownership of all of its respective Equipment. No
Equipment of any Company that has granted a lien to Lender on any of its



-37-









 







Equipment is a Fixture to real estate unless such real estate is owned by such Company and such real estate is subject to a
mortgage in favor of Lender, or if such real estate is leased, such real estate is subject to a
landlord’s agreement in favor of Lender on terms acceptable to Lender, or an accession to other
personal property unless such personal property is subject to a first priority lien in favor of
Lender.




       (l) Enforceability.



       This Agreement and the Other Agreements to which a Company is a party, if any, are the legal,
valid and binding obligations of such Company and are enforceable against such Company in
accordance with their respective terms.



       (m) Solvency.



       Each Company is, after giving effect to the transactions contemplated hereby, solvent, able to
pay its debts as they become due, has capital sufficient to carry on its business, now owns
property having a value both at fair valuation and at present fair saleable value greater than the
amount required to pay its debts, and will not be rendered insolvent by the execution and delivery
of this Agreement or any of the Other Agreements or by completion of the transactions contemplated
hereunder or thereunder.



       (n) Indebtedness.



       Except as permitted by subsections 13(a) and (b) hereof, no Company is obligated
(directly or indirectly), for any loans or other indebtedness for borrowed money.



       (o) Margin Security and Use of Proceeds.



       No Company owns any margin securities, and none of the proceeds of the Loans hereunder shall
be used for the purpose of purchasing or carrying any margin securities or for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase any margin
securities or for any other purpose not permitted by Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time.



       (p) Parent, Subsidiaries and Affiliates.



       Except as set forth on Schedule 11(p) hereto, no Company has any Parents, Subsidiaries
or other Affiliates or divisions, nor is any Company engaged in any joint venture or partnership
with any other Person.



       (q) No Defaults.



       Except as set forth on Schedule 11(q), no Company is in default under any material contract,
lease or commitment to which it is a party or by which it is bound where such default could
reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect,
nor does any Company know of any dispute regarding any contract, lease or commitment which could
reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.



-38-









 





       (r) Employee Matters.



       There are no controversies pending or threatened between a Company and any of its employees,
agents or independent contractors other than employee grievances arising in the ordinary course of
business which could not reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect, and each Company is in compliance with all federal, state, foreign and
other laws respecting employment and employment terms, conditions and practices except for such
non-compliance which could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.



       (s) Intellectual Property.



       Each Company possesses adequate licenses, patents, patent applications, copyrights, service
marks, trademarks, trademark applications, trade styles and trade names to continue to conduct its
business as heretofore conducted by it (collectively, the “Intellectual Property”) and all of such
Intellectual Property which is registered and owned by any Company that has granted a lien to Lender on any of its Intellectual Property is
identified on Schedule 11(s) hereto (such Schedule 11(s) may be amended or modified
from time to time by a written notice from any Borrower to Lender any time new Intellectual
Property is acquired by any such Company).



       (t) Environmental Matters.



       No Company has generated, used, stored, treated, transported, manufactured, handled, produced
or disposed of any Hazardous Materials, on or off its premises (whether or not owned by it) in any
manner which at any time violates any Environmental Law or any license, permit, certificate,
approval or similar authorization thereunder (except for violations which could not reasonably be
expected to have, either individually or in the aggregate, a Material Adverse Effect or which could
not reasonably be expected to result, either individually or in the aggregate, in liability of any
Company in an amount in excess of Fifty Thousand and No/100 Dollars ($50,000)) and the operations
of each Company comply in all material respects with all Environmental Laws and all licenses,
permits, certificates, approvals and similar authorizations thereunder. In the past five (5) years
there has been no investigation, proceeding, complaint, order, directive, claim, citation or notice
by any governmental authority or any other Person, nor is any pending or to the best of each
Company’s knowledge threatened with respect to any non-compliance with or violation of the
requirements of any Environmental Law by any Company or the release, spill or discharge, threatened
or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or any other
environmental, health or safety matter, which affects any Company or its business, operations or
assets or any properties at which any Company has transported, stored or disposed of any Hazardous
Materials. No Company has any material liability



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(contingent or otherwise) in connection with a
release, spill or discharge, threatened or actual, of any Hazardous Materials or the generation,
use, storage, treatment, transportation, manufacture, handling, production or disposal of any
Hazardous Materials.




       (u) ERISA Matters.



       Except as set forth on Schedule 11(q), each Company has paid and discharged all obligations
and liabilities arising under ERISA and other applicable employee retirement and welfare benefit
statutes, orders, regulations, rules and ordinances of a character which, if unpaid or unperformed,
might result in the imposition of a lien against any of such Company’s properties or assets.



       (v) Related Agreements.



       All of the Related Transactions have been consummated in accordance with the terms of the
Related Agreements, none of the Related Agreements have been amended or modified other than in
accordance with this Agreement and as of the date hereof all the representations and warranties in
the Related Agreements of each Company are true, correct and complete in all material respects.



       (w) Industrial Revenue Bonds.



       As of the date of the initial Loans hereunder, (i) US Borrower has delivered to the IRB
Trustee a notice of prepayment pursuant to Section 5.3 of the IRB Lease Agreement and will promptly
cause the IRB Trustee to deliver the redemption notice required by Section 302 of the IRB Indenture
to each holder of the Nebraska IRBs in order to effectuate the redemption of all outstanding
Nebraska IRBs in accordance with Section 403 of the IRB Indenture, (ii) the outstanding principal
amount of the Nebraska IRBs is $1,200,000 and all interest and other amounts owed by US Borrower
and its Affiliates in connection with the Nebraska IRBs (including without limitation in connection
with the IRB Indenture, the IRB Lease Agreement and all other related agreements) are estimated not
to exceed $50,000, and (iii) no “Event of Default” (as defined in the IRB Lease Agreement and the
IRB Indenture) has occurred under the IRB Lease Agreement or the IRB Indenture. Each Borrower
further represents and warrants that the actions described in subsection 12(l) hereof shall
be effectuated solely by delivering the redemption notice described in clause (i) above and paying
the obligations described in clause (ii) above and that no prepayment fee, premium, penalty or
similar costs (other than a nominal amount payable in connection with the purchase option under
Section 10.1 of the IRB Lease Agreement and customary transaction expenses, including legal fees,
of the parties that are reimbursable by the US Borrower) shall be incurred in connection therewith.



       12. AFFIRMATIVE COVENANTS.



       Until payment and satisfaction in full of all Liabilities and termination of this Agreement,
unless Borrowers obtain Lender’s prior written consent to waiving or modifying
any of Borrowers’ covenants hereunder in any specific instance, each Borrower covenants and agrees as follows:



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       (a) Maintenance of Records.



       Each Borrower shall, and shall cause all other Companies to, at all times keep accurate and
complete books, records and accounts with respect to all of such Borrower’s and such other
Company’s business activities, in accordance with sound accounting practices and generally accepted
accounting principles consistently applied, and shall keep such books, records and accounts, and
any copies thereof, only at the addresses indicated for such purpose on Exhibit A.



       (b) Notices.



       Each Borrower shall:




       (i) Locations. Promptly (but in no event less than thirty (30) days prior to
the occurrence thereof) notify Lender of the proposed opening of any new place of business
by any Company or new location of Collateral, the closing of any existing place of business
or location of Collateral, any change of in the location of any US Company’s books, records and accounts (or copies thereof), the
opening or closing of any post office box, the opening or closing of any bank account or, if
any of the Collateral consists of Goods of any US Company of a type normally used in more
than one state, the use of any such Goods in any state other than a state in which Borrowers
have previously advised Lender that such Goods will be used.




       (ii) Eligible Accounts and Inventory. Promptly upon any Company becoming aware
thereof, notify Lender if any Accounts or Inventory identified by any Company to Lender as
an Eligible Account or Eligible Inventory becomes ineligible for any reason.




       (iii) Litigation and Proceedings. Promptly upon any Company becoming aware
thereof, notify Lender of any actions or proceedings which are pending or threatened against
any Company which could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect and of any Commercial Tort Claims of any Company which
may arise, which notice shall constitute each Company’s authorization to amend Exhibit
C to add such Commercial Tort Claim.




       (iv) Names and Trade Names. Notify Lender within ten (10) days of the change of
any Company’s name or the use of any trade name, assumed name, fictitious name or division
name by any Company not previously disclosed to Lender in writing.




       (v) ERISA Matters. Promptly notify Lender of (x) the occurrence of any
“reportable event” (as defined in ERISA) which might result in the termination by the
Pension Benefit Guaranty Corporation (the “PBGC”) of any employee benefit



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plan (“Plan”) covering any officers or employees of any US Company, any benefits of which are, or are
required to be, guaranteed by the PBGC, (y) receipt by any US Company of any notice from the
PBGC of its intention to seek termination of any Plan or appointment of a trustee therefor
or (z) its intention to terminate or withdraw from any Plan.




       (vi) Environmental Matters. Immediately notify Lender upon any Company becoming
aware of any investigation, proceeding, complaint, order, directive, claim, citation or
notice with respect to any non-compliance with or violation of the requirements of any
Environmental Law by any Company or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or any other
environmental, health or safety matter, in each case, in violation of the requirements of
any Environmental Law, which affects any Company or any Company’s business operations or
assets or any properties at which any Company has transported, stored or disposed of any
Hazardous Materials.




       (vii) Default; Material Adverse Change; Demands. Promptly advise Lender of (x)
any change in the business, property, assets, prospects,
operations or condition, financial or otherwise, of any Company which could reasonably
be expected to have, either individually or in the aggregate, a Material Adverse Effect, (y)
the occurrence of any Event of Default hereunder or the occurrence of any event which, if
uncured, could reasonably be expected to become an Event of Default after notice or lapse of
time (or both) or (z) any demand for payment under the Barclays Debt Agreement.



       (c) Compliance with Laws and Maintenance of Permits.



       Each Borrower shall, and US Borrower shall cause each other Company to, maintain all
governmental consents, franchises, certificates, licenses, authorizations, approvals and permits,
the lack of which could reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect and each Borrower shall, and US Borrower shall cause each other Company to,
remain in compliance with all applicable federal, state, local and foreign statutes, orders,
regulations, rules and ordinances (including, without limitation, Environmental Laws and statutes,
orders, regulations, rules and ordinances relating to taxes, employer and employee contributions
and similar items, securities, ERISA, employee retirement and welfare benefits or employee health
and safety) the failure with which to comply could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. Following any determination by Lender
that there is non-compliance, or any condition which requires any action by or on behalf of any
Company in order to avoid non-compliance, with any Environmental Law, at Borrowers’ expense cause
an independent environmental engineer acceptable to Lender to conduct such tests of the relevant
site(s) as are appropriate and prepare and deliver a report setting forth the results of such
tests, a proposed plan for remediation and an estimate of the costs thereof.



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       (d) Inspection and Audits.



       Each Borrower shall, and US Borrower shall cause each other Company to, permit Lender, or any
Persons designated by it, to call at each Company’s places of business at any reasonable times,
and, without hindrance or delay, to inspect the Collateral and to inspect, audit, check and make
extracts from each Company’s books, records, journals, orders, receipts and any correspondence and
other data relating to such Company’s business, the Collateral or any transactions between the
parties hereto, and shall have the right to make such verification concerning such Company’s
business as Lender may consider reasonable under the circumstances. Each Borrower shall, and US
Borrower shall cause each other Company to, furnish to Lender such information relevant to Lender’s
rights under this Agreement and the Other Agreements as Lender shall at any time and from time to
time request. Lender, through its officers, employees or agents shall have the right, at any time
and from time to time, in Lender’s name, to verify the validity, amount or any other matter
relating to any of US Borrower’s Accounts, by mail, telephone, telecopy, electronic mail, or
otherwise. Each Borrower authorizes Lender to discuss the affairs, finances and business of each
Company with any officers, employees or directors of any Company or with its Parent or any
Affiliate or the officers, employees or directors of its Parent or any Affiliate, and to discuss
the financial condition of each Company with such Company’s independent public accountants. Any
such discussions shall be without liability to Lender or to any Company’s
independent public accountants. Borrowers shall pay to Lender all customary fees (currently
$750 per person per day) and all reasonable costs and out-of-pocket expenses incurred by Lender in
the exercise of its rights hereunder, and all of such fees, costs and expenses shall constitute
Liabilities hereunder, shall be payable on demand and, until paid, shall bear interest at the
highest rate then applicable to Loans hereunder.



       (e) Insurance.



       Each Borrower shall, and US Borrower shall cause each other Company to:




       (i) Keep the Collateral and all other assets owned by any Company properly housed and
insured for the full insurable value thereof against loss or damage by fire, theft,
explosion, sprinklers, collision (in the case of motor vehicles) and such other risks as are
customarily insured against by Persons engaged in businesses similar to that of such
Company, with such companies, in such amounts, with such deductibles, and under policies in
such form, as shall be satisfactory to Lender. Original (or certified) copies of such
policies of insurance have been or shall be, within ninety (90) days of the date of the
initial funding of the Loans hereunder, delivered to Lender, together with evidence of
payment of all premiums therefor, and shall contain an endorsement, in form and substance
acceptable to Lender with respect to insurance of any Company, showing loss under such
insurance policies payable to Lender. Such endorsement, or an independent instrument
furnished to Lender, shall provide that the insurance company shall give Lender at least
thirty (30) days written notice before any such policy of insurance is altered or canceled
and that no act, whether willful or negligent, or default of any Company or any other Person
shall affect the right of Lender to recover under such policy of insurance in case of



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loss or damage. In addition, each Borrower shall cause to be executed and delivered to Lender an
assignment of proceeds of such Borrower’s business interruption insurance policies. Each
Borrower hereby directs all insurers under all policies of insurance of each Company to pay
all proceeds payable thereunder directly to Lender. Each Borrower irrevocably makes,
constitutes and appoints Lender (and all officers, employees or agents designated by Lender)
as such Borrower’s true and lawful attorney (and agent-in-fact) for the purpose of making,
settling and adjusting claims under such policies of insurance, endorsing the name of such
Borrower on any check, draft, instrument or other item of payment for the proceeds of such
policies of insurance and making all determinations and decisions with respect to such
policies of insurance.




       (ii) Maintain, at its expense, such public liability and third party property damage
insurance as is customary for Persons engaged in businesses similar to that of such Company
with such companies and in such amounts, with such deductibles and under policies in such
form as shall be satisfactory to Lender and original (or certified) copies of such policies
have been or shall be, within ninety (90) days after the date hereof, delivered to Lender,
together with evidence of payment of all premiums therefor; subject to subsection
12(n) hereof, each such policy shall contain an endorsement showing Lender as additional
insured thereunder with respect to insurance of any Company and providing that the insurance company shall give
Lender at least thirty (30) days written notice before any such policy shall be altered or
canceled.


If any Company at any time or times hereafter shall fail to obtain or maintain any of the policies
of insurance required above or to pay any premium relating thereto, then Lender, without waiving or
releasing any obligation or default by Borrowers hereunder, may (but shall be under no obligation
to) obtain and maintain such policies of insurance and pay such premiums and take such other
actions with respect thereto as Lender deems advisable. Such insurance, if obtained by Lender,
may, but need not, protect such Company’s interests or pay any claim made by or against such
Company with respect to the Collateral. Such insurance may be more expensive than the cost of
insurance such Company may be able to obtain on its own and may be cancelled only upon Borrowers
providing evidence that Borrowers have obtained the insurance as required above. All sums
disbursed by Lender in connection with any such actions, including, without limitation, court
costs, expenses, other charges relating thereto and reasonable attorneys’ fees, shall constitute
Loans hereunder, shall be payable on demand by Borrowers to Lender and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder. Notwithstanding anything contained
in this subsection 12(e) to the contrary, any Non-US Company which is not a Borrower or an
Obligor shall not be required to deliver to Lender any insurance certificates or endorsements
naming Lender as a loss payee or additional insured.




       (f) Collateral.



       Each Borrower shall, and US Borrower shall cause each other Company to, keep the Collateral
and all other assets of such Company in good condition, repair and order,



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ordinary wear and tear excluded, and shall make all necessary repairs to the Equipment and replacements thereof so that
the operating efficiency and the value thereof shall at all times be preserved and maintained.
Each Borrower shall, and US Borrower shall cause each other Company to, permit Lender to examine
any of the Collateral or other assets on which Lender has a lien at any time and wherever such
Collateral or other assets may be located and, each Borrower shall, and US Borrower shall cause
each other Company to, immediately upon request therefor by Lender, deliver to Lender any and all
evidence of ownership of any of the Equipment including, without limitation, certificates of title
and applications of title. Each Borrower shall, and US Borrower shall cause each other Company to,
at the request of Lender, indicate on its records concerning the Collateral a notation, in form
satisfactory to Lender, of the security interest of Lender hereunder.




       (g) Use of Proceeds.



       All monies and other property obtained by a Borrower from Lender pursuant to this Agreement
shall be used solely for business purposes of such Borrower.



       (h) Taxes/Governmental Charges.



       Each Borrower shall, and US Borrower shall cause each other Company to, file all required tax
returns and pay all of its taxes and other governmental charges when due, including, without
limitation, taxes and other governmental charges imposed by federal, state or municipal agencies,
and shall cause any liens for taxes and other governmental charges to be promptly released;
provided, that such Company shall have the right to contest the payment of such taxes and other
governmental charges in good faith by appropriate proceedings so long as (i) the amount so
contested is shown on such Company’s financial statements; (ii) such Company keeps on deposit with
Lender (such deposit to be held without interest) an amount of money which, in the sole judgment of
Lender, is sufficient to pay such taxes and other governmental charges and any interest or
penalties that may accrue thereon; and (iii) if such Company fails to prosecute such contest with
reasonable diligence, Lender may apply the money so deposited in payment of such taxes and other
governmental charges. If a Company fails to pay any such taxes or other governmental charges and
in the absence of any such contest by such Company, Lender may (but shall be under no obligation
to) advance and pay any sums required to pay any such taxes and/or to secure the release of any
lien therefor, and any sums so advanced by Lender shall constitute Liabilities hereunder, shall be
payable by Borrowers to Lender on demand, and, until paid, shall bear interest at the highest rate
then applicable to Loans hereunder.



       (i) Intellectual Property.



       Each Borrower shall, and US Borrower shall cause each other Company to, maintain adequate
licenses, patents, patent applications, copyrights, service marks, trademarks, trademark
applications, tradestyles and trade names to continue its business as heretofore conducted by it or
as hereafter conducted by it.



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       (j) Checking Accounts.



       Each US Company shall maintain its general checking/controlled disbursement account with
LaSalle Bank. Normal charges shall be assessed thereon. Although no compensating balance is
required, each US Company must keep monthly balances in order to merit earnings credits which will
cover LaSalle Bank’s service charge for demand deposit account activities. In addition, each US
Company shall enter into agreements with LaSalle Bank for cash management services. Each US
Company shall be responsible for all normal charges assessed thereon.



       (k) Patriot Act, Bank Secrecy Act and Office of Foreign Assets Control.



       As required by federal law and LaSalle Bank’s and Lender’s policies and practices, LaSalle
Bank and Lender may need to obtain, verify and record certain customer identification information
and documentation in connection with opening or maintaining accounts, or establishing or continuing
to provide services and each Borrower agrees to provide such information. In addition, and without
limiting the foregoing sentence, each Borrower shall (a) ensure, and cause each other Company to ensure, that no Person who owns a
controlling interest in or otherwise controls any Company is or shall be listed on the Specially
Designated Nationals and Blocked Person List or other similar lists maintained by the Office of
Foreign Assets Control (“OFAC”), the Department of the Treasury or included in any Executive
Orders, (b) not use or permit the use of the proceeds of the Loans to violate any of the foreign
asset control regulations of OFAC or any enabling statute or Executive Order relating thereto, and
(c) comply, and cause each other Company to comply, with all applicable Bank Secrecy Act laws and
regulations, as amended.



       (l) Industrial Revenue Bonds.



       (A) US Borrower shall, on or prior to March 24, 2005, cause the redemption of all of the
Nebraska IRBs, and (B) US Borrower shall promptly after such redemption (but in no event later than
April 3, 2005) repay all amounts owing in connection therewith and cause all agreements pertaining
thereto (including without limitation the IRB Indenture, the IRB Lease Agreement, and that certain
Irrevocable Letter of Credit Number SB/IRB 169 dated as of October 30, 1997 issued by M&I Marshall
& Ilsley Bank in favor of Norwest Bank Wisconsin, National Association as Trustee) to be terminated
and exercise US Borrower’s purchase option set forth in Section 10.1 of the IRB Lease Agreement.



       (m) Oilgear France, Oilgear Italy and Oilgear Spain; Post-Close Documentation.



       Within forty-five (45) days of the date of the initial funding of the Loans hereunder,
Borrowers shall cause to be delivered to Lender (i) documents granting to Lender a first priority
security interest in the owned real property of Oilgear France located at Allee de Freres
Montgolfier Parc d’Activities de Paris-Est-Croissy-Beauborg, France and of Oilgear Italy located at
Via Artigianale, 23 25010, Montirone (Brescia), Italy, (ii) documents



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granting the pledge to Lender of a first priority security interest in all of the outstanding shares of Oilgear France and
Oilgear Italy (other than directors’ qualifying shares), (iii) documents evidencing the guarantee
by Oilgear France of Two Million and No/100 Dollars ($2,000,000) of the Liabilities, (iv) documents
evidencing the guarantee by Oilgear Italy of Seven Hundred Thousand and No/100 Dollars ($700,000)
of the Liabilities, (v) the corporate authority documents for each of Oilgear France and Oilgear
Italy with respect to the documents referenced in clauses (i) through (iv) above and (vi) legal
opinions with respect to the documents referenced in clauses (i) through (iv) above and the
transactions contemplated thereby, each in form and substance satisfactory to Lender in its sole
discretion. Within ninety (90) days of the date of the initial funding of the Loans hereunder, (x)
US Borrower shall appear before the applicable Spanish notary and grant a first priority security
interest in all of the outstanding shares of Spanish Borrower pursuant to a Deed of Pledge in form
and substance satisfactory to Lender, as required by that certain Deed of Promise to Pledge dated
as of the date hereof executed by US Borrower in favor of Lender and (y) Spanish Borrower shall
cause to be delivered to Lender, in form and substance satisfactory to Lender, an updated appraisal
certification with respect to the real property of Spanish Borrower located at Entidad Zicunaga,
Apartado 14, Hernani (Guipuzcoa) Spain.




       (n) Post- Close Insurance Endorsements.



       Within thirty (30) days of the date of the initial funding of the Loans hereunder, Borrowers
shall cause to be delivered to Lender the endorsements to the insurance policies of the US
Companies which have not previously been delivered to Lender, each in form and substance
satisfactory to Lender.



       13. NEGATIVE COVENANTS.



       Until payment and satisfaction in full of all Liabilities and termination of this Agreement,
unless Borrowers obtain Lender’s prior written consent waiving or modifying any of Borrowers’
covenants hereunder in any specific instance, each Borrower agrees as follows:



       (a) Guaranties.



       No Borrower shall, nor shall US Borrower permit any Company to, assume, guarantee or endorse,
or otherwise become liable in connection with, the obligations of any Person (i) other than the
Liabilities, (ii) except by endorsement of instruments for deposit or collection or similar
transactions in the ordinary course of business, (iii) in the case of Non-US Companies, except for
reimbursement obligations of the Non-US Companies with respect to guaranties issued by third-party
financial institutions in favor of certain customers of such Non-US Companies to guarantee the
repayment of such customers’ downpayments deposited with such Non-US Companies for work to be
performed by such Non-US Companies, in each case entered into in the ordinary course of business of
such Non-US Companies and (iv) other guaranties assumed by any Company not to exceed Four Hundred
Thousand and No/100 Dollars ($400,000) in the aggregate.



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       (b) Indebtedness.



       No Borrower shall, nor shall US Borrower permit any Company to, create, incur, assume or
become obligated (directly or indirectly), for any loans or other indebtedness for borrowed money
other than the Loans (and the “Loans” as defined in the EXIM Loan Agreement), except (i) the
applicable Companies may maintain their present indebtedness listed on Schedule 11(n)
hereto; (ii) in the case of Oilgear UK, the Venture Debt; (iii) in the case of Oilgear UK, the
Barclays Debt; (iv) subject to subsection 12(l) hereof, in the case of US Borrower, the
indebtedness owing to the holders of the Nebraska IRBs pursuant to the IRB Lease Agreement and the
IRB Indenture; (v) the intercompany indebtedness permitted by subsection 13(f)(ii) hereof;
(vi) unsecured indebtedness owing by the Companies to trade creditors in the ordinary course of
business; (vii) purchase money indebtedness or capitalized lease obligations in connection with
Capital Expenditures permitted pursuant to subsection 14(d) hereof; and (viii) operating
lease obligations requiring payments not to exceed Three Million Five Hundred Thousand and No/100
Dollars ($3,500,000) in the aggregate during any Fiscal Year.



       (c) Liens.



       No Borrower shall, nor shall US Borrower permit any other Company to, grant or permit to exist
(voluntarily or involuntarily) any lien, claim, security interest or other encumbrance whatsoever
on any of its assets, other than Permitted Liens.



       (d) Mergers, Sales, Acquisitions, Subsidiaries and Other Transactions Outside the Ordinary
Course of Business.



       No Borrower shall, nor shall US Borrower permit any other Company to, (i) enter into any
merger or consolidation; (ii) without providing Lender thirty (30) days prior notice (provided that
such Borrower or Company shall take all steps necessary or otherwise requested by Lender to
preserve and perfect Lender’s liens in the Collateral), change its jurisdiction of organization or
enter into any transaction which has the effect of changing its jurisdiction of organization,
provided that in no event shall any Company change its country of organization; (iii) sell, lease
or otherwise dispose of any of its assets other than sales of Inventory in the ordinary course of
business other than the sale of the US Borrower’s real estate located at 211 Industrial Drive,
Longview, Texas in accordance with Section 30 of that certain “Net” Lease Agreement dated as of
September 26, 2003, and as in effect on the date hereof, between US Borrower and West Machine and
Tool, Inc.; (iv) purchase the stock, other equity interests or all or a material portion of the
assets of any Person or division of such Person; or (v) enter into any other transaction outside
the ordinary course of such Company’s business, including, without limitation, any purchase,
redemption or retirement of any shares of any class of its stock or any other equity interest, and
any issuance of any shares of, or warrants or other rights to receive or purchase any shares of,
any class of its stock or any other equity interest. No Company shall form any Subsidiaries or
enter into any joint ventures or partnerships with any other Person without the prior written
consent of Lender, which such consent shall not be unreasonably withheld.



-48-









 





       (e) Dividends and Distributions.



       No Borrower shall, nor shall US Borrower permit any other Company to, declare or pay any
dividend or other distribution (whether in cash or in kind) on any class of its stock (if such
Company is a corporation) or on account of any equity interest in such Company (if such Company is
a partnership, limited liability company or other type of entity), except that (i) any Company may
declare or pay any dividend or other distribution to US Borrower, (ii) any wholly-owned Subsidiary
of a US Company may declare or pay any dividend or other distribution to such US Company, (iii) any
wholly-owned Non-US Subsidiary of a Non-US Company may declare or pay any dividend or other
distribution to such Non-US Company and (iv) each of Oilgear India and Oilgear Taiwan may declare
or pay dividends to its shareholders provided that such dividends are made solely from the
internally generated cash of Oilgear India or Oilgear Taiwan, as applicable.



       (f) Investments; Loans.



       No Borrower shall, nor shall US Borrower permit any other Company to, (i) purchase or
otherwise acquire, or contract to purchase or otherwise acquire, the obligations or stock of any
Person, other than direct obligations of the United States, or (ii) lend or otherwise advance funds
to any Person except for (x) advances made to employees, officers and directors for travel and
other expenses arising in the ordinary course of business, (y) indebtedness consisting of
intercompany loans and advances made by (A) any US Company (other than US Borrower) to any other US
Company, (B) any Non-US Company to any other Company and (C) US Borrower to German Borrower and/or
Spanish Borrower, the proceeds of which are immediately used in full by German Borrower or Spanish
Borrower (as applicable) to make payments then owing with respect to Term Loan C or Term Loan D (as
applicable) and solely to the extent that German Borrower and/or Spanish Borrower do not then have
sufficient funds to make such payments and (z) loans to employees pursuant to that certain Oilgear
Key Employee Stock Purchase Plan (as Amended and Restated September 6, 1990) solely to the extent
the proceeds of such loans are immediately reinvested into US Borrower to purchase capital stock of
US Borrower.



       (g) Fundamental Changes, Related Agreements, Line of Business.



       No Borrower shall, nor shall US Borrower permit any other Company to, (i) amend or modify its
organizational documents or any Related Agreement, (ii) change its Fiscal Year or (iii) enter into
a new line of business materially different from such Company’s current business.



       (h) Equipment.



       No Borrower shall, nor shall any Borrower permit any other Company that has granted a lien on
its Equipment to Lender to, (i) permit any Equipment to become a Fixture to real property unless
such real property is owned by such Company and is subject to a mortgage in favor of Lender, or if
such real estate is leased, is subject to a landlord’s agreement in favor of Lender on terms
acceptable to Lender, or (ii) permit any Equipment to become an accession to any other personal
property unless such personal property is subject to a first priority lien in favor of Lender.



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       (i) Affiliate Transactions.



       Except as set forth on Schedule 11(i) hereto or as permitted pursuant to subsection
11(c) hereof, no Borrower shall, nor shall US Borrower permit any other Company to, conduct,
permit or suffer to be conducted, transactions with Affiliates other than transactions for the
purchase or sale of Inventory or services in the ordinary course of business pursuant to terms that
are no less favorable to such Company than the terms upon which such transactions would have been
made had they been made to or with a Person that is not an Affiliate.



       (j) Settling of Accounts.



       No Borrower shall, nor shall US Borrower permit any other Company to, settle or adjust any
Accounts identified by any Company as Eligible Accounts and no Company shall settle or adjust any
Accounts with respect to which the Account Debtor is an Affiliate without the consent of Lender,
provided, that during the existence of an Event of Default, no such Company shall settle or adjust
any Account without the consent of Lender.



       (k) Management Fees; Compensation.



       No Borrower shall, nor shall US Borrower permit any other Company to, pay any management or
consulting fees to any Persons, or pay annual aggregate salary to all directors or officers of such
Borrower or other Company in excess of one hundred ten percent (110%) of the aggregate salary to
all directors, and officers of such Borrower or other Company in effect on the date of this
Agreement for the first year and one hundred ten percent (110%) of the prior year’s aggregate
salary amount for each subsequent year. The aggregate annual salary amount(s) shall be adjusted
each year for the net addition or loss of directors or officers. Notwithstanding the foregoing,
this paragraph (k) shall not apply to bonuses to be paid in accordance with the Oilgear Variable
Compensation Plan as in effect on the date hereof attached as Exhibit D hereto.



       14. FINANCIAL COVENANTS.



       Each Borrower shall maintain and keep in full force and effect each of the financial covenants
set forth below:



       (a) Tangible Net Worth.



       Borrowers shall not permit the Tangible Net Worth of the Companies at any time to be less than
the Minimum Tangible Net Worth Amount set forth below during any corresponding period set forth
below:



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	Period	 	Minimum Tangible Net Worth Amount
	Date hereof through March 30, 2005
	 	Negative $2,700,000
	March 31, 2005 through
June 29, 2005
	 	Negative $1,900,000
	June 30, 2005 through September 29, 2005
	 	Negative $1,500,000
	September 30, 2005 through December 30, 2005
	 	Negative $1,100,000
	December 31, 2005
	 	$4,400,000







At all times (i) from January 1st through December 30th of each Fiscal Year
commencing with the Fiscal Year ending December 31, 2006, an amount equal to
ninety percent (90%) of the actual Tangible Net Worth of the Companies as of
the last day of the immediately preceding Fiscal Year, and (ii) as of the last
day of each Fiscal Year commencing with the Fiscal Year ending December 31,
2006, an amount equal to the actual Tangible Net Worth of the Companies as of
the last day of the immediately preceding Fiscal Year plus Three Hundred
Thousand and No/100 Dollars ($300,000).



       ”Tangible Net Worth” being defined for purposes of this subsection, as of any date, as such
Person’s shareholders’ equity (including retained earnings), plus LIFO reserves, plus
or less any non-cash foreign currency translation adjustments from the September 30, 2004
balance reported in US Borrower’s 10-Q report filed on November 15, 2004 of $15,203, plus or
less any non-cash minimum pension liability adjustments from the September 30, 2004 balance
reported in US Borrower’s 10-Q report filed on November 15, 2004 of ($22,091,419) less the
book value of all fixed asset drawings, patterns, patents and other intangible assets as determined
solely by Lender, in good faith, on a consistent basis, less prepaid expenses, deposits and
amounts due from officers, employees and other Affiliates, plus the amount of any debt
subordinated to Lender, all as determined under generally accepted accounting principles applied on
a consistent basis.



       (b) Debt Service Coverage.



       Borrowers shall not permit Debt Service Coverage of the Companies to be less than the ratio
set forth below for the corresponding period set forth below:



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	Period	 	Ratio	 
	Date hereof through December 31, 2004
	 	 	1.10:1.00	 
	January 1, 2005 through March 31, 2005
	 	 	1.20:1.00	 
	January 1, 2005 through June 30, 2005
	 	 	1.20:1.00	 
	January 1, 2005 through September 30, 2005
	 	 	1.20:1.00	 
	Twelve month period ending December 31, 2005 and each twelve
month period thereafter ending on the last day of each fiscal
quarter thereafter
	 	 	1.20:1.00	 






       (c) Interest Coverage.



       Borrowers shall not permit the ratio of (x) Adjusted Net Income of the Companies to (y)
scheduled payments of interest and fees of Companies, on a consolidated basis, to the extent
carried as interest expense on Companies’ consolidated financial statements, with respect to
indebtedness for borrowed money (including the interest component payments with respect to
capitalized leases), to be less than the ratio set forth below for the corresponding period set
forth below:



	 	 	 	 	 
	Period	 	Ratio	 
	Date hereof through December 31, 2004
	 	 	1.50:1.00	 
	January 1, 2005 through March 31, 2005
	 	 	1.50:1.00	 
	January 1, 2005 through June 30, 2005
	 	 	1.50:1.00	 
	January 1, 2005 through September 30, 2005
	 	 	1.50:1.00	 
	Twelve month period ending December 31, 2005 and each twelve
month period thereafter ending on the last day of each fiscal
quarter thereafter
	 	 	1.50:1.00	 






       (d) Capital Expenditure Limitations.



       Companies shall not make any Capital Expenditures if, after giving effect to such Capital
Expenditure, the aggregate cost of all such fixed assets purchased or otherwise acquired by the
Companies would exceed One Million Two Hundred Fifty Thousand and No/100 Dollars ($1,250,000)
during any Fiscal Year.



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            15. DEFAULT.




            The occurrence of any one or more of the following events shall constitute an “Event of
Default” by Borrowers hereunder:




            (a) Payment.




            The failure of any Obligor to pay when due any of the Liabilities.




            (b) Breach of this Agreement and the Other Agreements.




            The failure of any Obligor to perform, keep or observe any of the covenants, conditions,
promises, agreements or obligations of such Obligor under this Agreement or any of the Other
Agreements and such failure shall continue unremedied for ten (10) days;
provided that such ten (10) day cure period shall not apply in the case of any failure to
perform, keep or observe any of the covenants, conditions, promises, agreements of such Obligor (i)
under Section 8, any of subsections 12(d), 12(e), 12(f), Section 13 or Section 14, or (ii)
which are not capable of being cured during such period of ten (10) days.




            (c) Breaches of Other Obligations/Demand.




            (i) Any Company fails to pay when due or within any applicable grace period any principal or
interest on indebtedness for borrowed money or (ii) the breach or default of any Company, or the
occurrence of any condition or event, with respect to any indebtedness for borrowed money, if the
effect of such failure, breach or default or occurrence is to cause or to permit the holder or
holders then to cause, indebtedness having an aggregate principal amount in excess of Two Hundred
Thousand and No/100 Dollars ($200,000) to become or be declared due prior to their stated maturity
or to otherwise permit the holder or holders to enforce their remedies against such Company or
(iii) any Company is in breach of, or there is a default under, any Related Agreement or (iv) any
payment of principal becomes due (whether as a result of demand or otherwise) on the Barclays Debt.




            (d) Breach of Representations and Warranties.




            The making or furnishing by any Company to Lender of any representation, warranty,
certificate, schedule, report or other communication within or in connection with this Agreement or
the Other Agreements or in connection with any other agreement between such Company and Lender,
which is untrue or misleading in any material respect (or in all respects with respect to any
report delivered pursuant to subsection 9(a) hereof, other than inadvertent, immaterial
errors not exceeding Five Thousand and No/100 Dollars ($5,000) in the aggregate).




            (e) Loss of Collateral.




            The loss, theft, damage or destruction (to the extent such loss, theft, damage or destruction
is not covered by insurance in a manner satisfactory to Lender) of any of the Collateral with an aggregate value in excess of One Hundred Fifty Thousand and No/100 Dollars ($150,000).



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       (f) Levy, Seizure or Attachment.



       The making or any attempt by any Person to make any levy, seizure or attachment upon any of
the Collateral with an aggregate value in excess of One Hundred Thousand and No/100 Dollars
($100,000); provided, that the Companies shall have the right to contest such levy, seizure or
attachment in good faith by appropriate proceedings so long as (i) the value of the Collateral
subject to such contested levy, seizure or attachment is shown on such Company’s financial
statements, (ii) such Company keeps on deposit with Lender (such deposit to be held without
interest) an amount of money which, in the sole judgment of Lender, is sufficient to satisfy the
claim of such Person with respect to such levy, seizure or attachment and (iii) if such Company fails to prosecute such contest with
reasonable diligence, Lender may apply the money so deposited to satisfy such claim.



       (g) Bankruptcy or Similar Proceedings.



       The commencement of any proceedings in bankruptcy by or against any Company or for the
liquidation or reorganization of any Company, or alleging that such Company is insolvent or unable
to pay its debts as they mature, or for the readjustment or arrangement of any Company’s debts,
whether under the United States Bankruptcy Code or under any other law, whether state, federal or
foreign, now or hereafter existing, for the relief of debtors, or the commencement of any analogous
statutory or non-statutory proceedings involving any Company; provided, however, that if such
commencement of proceedings against such Company is involuntary, such action shall not constitute
an Event of Default unless such proceedings are not dismissed within thirty (30) days after the
commencement of such proceedings, though Lender shall have no obligation to make Loans to or issue,
or cause to be issued, Letters of Credit on behalf of any Borrower during such thirty (30) day
period or, if earlier, until such proceedings are dismissed.



       (h) Appointment of Receiver.



       The appointment of a receiver or trustee for any Company, for any of the Collateral or for any
substantial part of any Company’s assets or the institution of any proceedings for the dissolution,
or the full or partial liquidation, or the merger or consolidation, of any Company which is a
corporation, limited liability company or a partnership; provided, however, that if such
appointment or commencement of proceedings against such Company is involuntary, such action shall
not constitute an Event of Default unless such appointment is not revoked or such proceedings are
not dismissed within thirty (30) days after the commencement of such proceedings, though Lender
shall have no obligation to make Loans to or issue, or cause to be issued, Letters of Credit on
behalf of any Borrower during such thirty (30) day period or, if earlier, until such appointment is
revoked or such proceedings are dismissed.



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       (i) Judgment.



       The entry of any judgment or order against any Company in an aggregate amount in excess of One
Hundred Thousand and No/100 Dollars ($100,000) (or for a non-monetary judgment which could
reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect)
which remains unsatisfied or undischarged and in effect for thirty (30) days after such entry
without a stay of enforcement or execution.



       (j) Death or Dissolution of Obligor.



       The death of any Obligor who is a natural Person, or of any general partner who is a natural
Person of any Obligor which is a partnership, or any member who is a natural Person of any Obligor
which is a limited liability company or the dissolution of any Obligor which is a partnership,
limited liability company, corporation or other entity.



       (k) Default or Revocation of Guaranty.



       The occurrence of an event of default under, or the revocation or termination of, any
agreement, instrument or document executed and delivered by any Person to Lender pursuant to which
such Person has guaranteed to Lender the payment of all or any of the Liabilities or has granted
Lender a security interest in or lien upon some or all of such Person’s real and/or personal
property to secure the payment of all or any of the Liabilities.



       (l) Criminal Proceedings.



       The institution in any court of a criminal proceeding (other than for a misdemeanor) against
any Company, or the indictment of any Company for any crime.



       (m) Change of Control.



       The failure of (i) David A. Zuege, Thomas J. Price, the current officers and directors of the
US Borrower, Oilgear Ferris Foundation, Oilgear Savings Plus Plan, Oilgear Stock Retirement Plan
and Oilgear Salaried Retirement Plan to collectively own and have voting control of at least fifty
one percent (51%) of the issued and outstanding voting equity interests of US Borrower, or (ii)
other than as set forth on Schedule 15(m), US Borrower to own and have voting control of at
least 100 percent (100%) of the issued and outstanding voting equity interest of each other
Company.



       (n) Change of Management.



       If David A. Zuege shall cease to be the President and CEO of US Borrower at any time.



       (o) Material Adverse Change.



       Any material adverse change in the Collateral, business, property, assets, prospects,
operations or condition, financial or otherwise of any Company, as determined by



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Lender in its sole judgment, or the occurrence of any event which, in Lender’s sole judgment, could reasonably be
expected to have, either individually or in the aggregate, a Material Adverse Effect.




       16. REMEDIES UPON AN EVENT OF DEFAULT.



       (a) Upon the occurrence of an Event of Default described in subsection 15(g) hereof,
all of the Liabilities shall immediately and automatically become due and payable, without notice
of any kind. Upon the occurrence of any other Event of Default, all Liabilities may, at the option
of Lender, and without demand, notice or legal process of any kind, be declared, and immediately
shall become, due and payable.



       (b) Upon the occurrence and during the continuance of an Event of Default, Lender may exercise
from time to time any rights and remedies available to it under the Uniform Commercial Code and any
other applicable law in addition to, and not in lieu of, any rights and remedies expressly granted in this Agreement or in any of the Other Agreements
and all of Lender’s rights and remedies shall be cumulative and non-exclusive to the extent
permitted by law. In particular, but not by way of limitation of the foregoing, Lender may,
without notice, demand or legal process of any kind, take possession of any or all of the
Collateral (in addition to Collateral of which it already has possession), wherever it may be
found, and for that purpose may pursue the same wherever it may be found, and may enter onto any
Company’s premises where any of the Collateral may be, and search for, take possession of, remove,
keep and store any of the Collateral until the same shall be sold or otherwise disposed of, and
Lender shall have the right to store the same at any Company’s premises without cost to Lender. At
Lender’s request, each Borrower shall, at Borrowers’ joint and several expense, assemble the
Collateral and make it available to Lender at one or more places to be designated by Lender and
reasonably convenient to Lender and such Borrower. Each Borrower recognizes that if a Borrower
fails to perform, observe or discharge any of its Liabilities under this Agreement or the Other
Agreements, no remedy at law will provide adequate relief to Lender, and agrees that Lender shall
be entitled to temporary and permanent injunctive relief in any such case without the necessity of
proving actual damages. Any notification of intended disposition of any of the Collateral required
by law will be deemed to be a reasonable authenticated notification of disposition if given at
least ten (10) days prior to such disposition and such notice shall (i) describe Lender and the
applicable Borrower(s), (ii) describe the Collateral that is the subject to the intended
disposition, (iii) state the method of the intended disposition, (iv) state that the applicable
Borrower(s) is entitled to an accounting of the Liabilities and state the charge, if any, for an
accounting and (v) state the time and place of any public disposition or the time after which any
private sale is to be made. Lender may disclaim any warranties that might arise in connection with
the sale, lease or other disposition of the Collateral and has no obligation to provide any
warranties at such time. Any Proceeds of any disposition by Lender of any of the Collateral may be
applied by Lender to the payment of expenses in connection with the Collateral, including, without
limitation, legal expenses and reasonable attorneys’ fees, and any balance of such Proceeds may be
applied by Lender toward the payment of such of the Liabilities, and in such order of application,
as Lender may from time to time elect.



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       17. CONDITIONS PRECEDENT.



       (a) Initial Loans.



       The obligation of Lender to fund the Term Loans, to fund the initial Revolving Loan, and to
issue or cause to be issued the initial Letter of Credit, is subject to the satisfaction or waiver
on or before the date hereof of the following conditions precedent:




       (i) Lender shall have received each of the agreements, opinions, reports, approvals,
consents, certificates and other documents set forth on the closing document list attached
hereto as Schedule 17(a) (the “Closing Document List”) in each case in form and
substance satisfactory to Lender;




       (ii) Since September 30, 2004, no event shall have occurred which has had or could
reasonably be expected to have, either individually or in the aggregate, a Material Adverse
Effect, as determined by Lender in its sole discretion;




       (iii) Lender shall have received payment in full of all fees and expenses payable to it
by Borrowers or any other Person in connection herewith, on or before disbursement of the
initial Loans or the issuance of the initial Letters of Credit hereunder;




       (iv) Lender shall have determined that immediately after giving effect to (A) the
making of the initial Loans, including without limitation the Term Loans and the Revolving
Loans, if any, requested to be made on the date hereof, (B) the issuance of the initial
Letter of Credit, if any, requested to be made on such date, (C) the making of the advances
on the date hereof under the Venture Debt Agreements and the Barclays Debt Agreement, (D)
the payment of all fees due upon such date and (E) the payment or reimbursement by Borrowers
of Lender for all closing costs and expenses incurred in connection with the transactions
contemplated hereby, (x) US Borrower has Excess Availability (inclusive of the “Excess
Availability” under the EXIM Loan Agreement) of not less than One Million and No/100 Dollars
($1,000,000) and (y) the Companies collectively have Excess Availability (inclusive of the
“Excess Availability” under the EXIM Loan Agreement) plus access to immediately available
funds from sources other the Lender of not less than Two Million Five Hundred Thousand and
No/100 Dollars ($2,500,000); and




       (v) The Obligors shall have executed and delivered to Lender all such other documents,
instruments and agreements which Lender determines are reasonably necessary to consummate
the transactions contemplated hereby.



       (b) All Loans.



       The obligation of Lender to fund any Loan, and to issue or cause to be issued any Letter of
Credit, is subject to the satisfaction or waiver on or before the date thereof of the following
additional conditions precedent as of the date of each such funding or issuance:



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       (i) The representations and warranties made by the Companies contained in this
Agreement and other Loan Documents shall be true and correct on and as of such funding or
issuance date (except to the extent such representations and warranties expressly refer to
an earlier date, in which case they shall be true and correct as of such earlier date); and




       (ii) There exists no Event of Default nor any event which, with the passage of time or
giving of notice, will become an Event of Default.


Each request for a Loan or a Letter of Credit submitted by any Borrower hereunder shall constitute
a representation and warranty by the Borrowers, as of the date of each such request
and as of the date of the related funding of the Loan or issuance of the Letter of Credit, as
applicable, that the conditions in this Section 17 have been satisfied.




       18. JOINT AND SEVERAL LIABILITY.



       (a) Notwithstanding anything to the contrary contained herein, all Liabilities of each
Borrower (including without limitation Liabilities hereunder, under all Other Agreements and under
the EXIM Loan Agreement) shall be joint and several obligations of Borrowers; provided however that
(i) German Borrower’s obligations under this Section 18 with respect to the US Loans shall
not exceed Two Million One Hundred Thousand and No/100 Dollars ($2,100,000) (the “German Borrower
Cross Collateralization Cap”; it being understood that the German Borrower Cross Collateralization
Cap shall not apply with respect to Term Loan C or Term Loan D) and (ii) Spanish Borrower’s
obligations with respect to the Loans shall not exceed Two Million Eight Hundred Thousand and
No/100 Dollars ($2,800,000) (the “Spanish Borrower Cap”).



       (b) Notwithstanding any provisions of this Agreement to the contrary, it is intended that the
joint and several nature of the Liabilities of US Borrower and the liens and security interests
granted by US Borrower to secure the Liabilities, not constitute a “Fraudulent Conveyance” (as
defined below). Consequently, Lender and US Borrower agree that if the Liabilities of US Borrower,
or any liens or security interests granted by US Borrower securing the Liabilities would, but for
the application of this sentence, constitute a Fraudulent Conveyance, the Liabilities of US
Borrower and the liens and security interests securing such Liabilities shall be valid and
enforceable only to the maximum extent that would not cause such Liabilities or such lien or
security interest to constitute a Fraudulent Conveyance, and the Liabilities of US Borrower and
this Agreement shall automatically be deemed to have been amended accordingly. For purposes
hereof, “Fraudulent Conveyance” means a fraudulent conveyance under Section 548 of Chapter 11 of
Title II of the United States Code (11 U.S.C. § 101, et seq.), as amended (the “Bankruptcy Code”).



       (c) (i) Notwithstanding any provision to the contrary contained in this Agreement the Lender
shall not, subject to clause (iv) below, demand payments to be made by the German Borrower with
respect to Liabilities (other than with respect to Liabilities pertaining to Term Loan C) under any
joint and several liability created by this Agreement (the “German Borrower Indirect Liabilities”)
as far as, and to the extent that, such



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payments cause the German Borrower’s net assets
(Reinvermögen) to be reduced below the amount of its registered share capital which is protected by
sections 30 and 31 of the German Act on Limited Liability Companies (GmbHG), or, if the German
Borrower’s net assets are below the amount of registered share capital, cause such amount to be
further reduced (the amount by which the net assets fall short of the registered share capital
hereinafter referred to as the “Protected Assets”).





       (ii) For the purpose of the calculation of the Protected Assets, the following amounts
shall be corrected in the respective balance sheet of the German Borrower: loans taken,
obligations assumed and indebtedness incurred by the German Borrower in violation of the provisions of this Agreement shall not be taken
into account.




       (iii) While an Event of Default is continuing, if the joint and several liability
pursuant to subsection 18(a) causes the German Borrower’s Protected Assets to be greater
than zero, the German Borrower is obliged to take such action which can reasonably be
expected to avoid the application of sections 30 and 31 GmbHG, including without limitation
to sell such assets (other than the German Borrower’s real property located at Im Gotthelf
8, D-65795 Hattersheim, Federal Republic of Germany) which are shown in the balance sheet
with a book value below market value if they are not necessary for the German Borrower’s
business (betriebsnotwendig).




       (iv) The limitation pursuant to paragraph (c)(i) above does not apply if and to the
extent that (A) the proceeds of a German Borrower Indirect Liability have been further
advanced to the German Borrower and/or (B) any loan is granted by another Borrower in favor
of the German Borrower and such loan is still outstanding at the time of the payment of the
German Borrower under the joint and several liability pursuant to subsection 18(a) and
provided that the German Borrower is entitled to set off its recourse claim against the
other Borrower against its payment obligations with respect to the loans.




       (v) For purposes of the calculation of the Protected Assets and thus the enforceable
amount, the German Borrower shall deliver (A) within ten (10) Business Days following the
occurrence of an Event of Default and a request by the Lender, to the Lender an up-to-date,
unaudited balance sheet and determination of the Protected Assets prepared by the German
Borrower’s management and prepared in accordance with the applicable accounting principles
for the German Borrower continuously applied and (B) upon request of the Lender within a
further forty (40) day period following provision of the unaudited balance sheet, to the
Lender an up-to- date balance sheet prepared by a firm of auditors of international standard
and repute together with a determination of the Protected Assets. Such audited balance sheet
and determination of the Protected Assets shall be prepared in accordance with the
applicable accounting principles for the German Borrower continuously applied.


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       (vi) The determination by the auditors (as set forth above, the “Auditors’
Determination”) pertaining to the German Borrower shall be up to date and in any event such
Auditors’ Determination shall have been prepared as of a date no earlier than fifteen (15)
Business Days prior to the date of the demand by the Lender.




       (vii) In the event that the German Borrower fails to deliver an unaudited or audited
(as applicable) balance sheet and/or determination of the Protected Assets within the
periods, stated in clause (v) above, the Lender shall be entitled to demand payment under
this Agreement without limitation, but agrees to release proceeds from such enforcement to
the extent required to ensure that the Protected Assets shall not be less than zero, if and when the German Borrower has
submitted to the Lender the Auditor’s Determination. In the event that the German Borrower’s
management provides the Lender with an unaudited balance sheet and/or determination of the
Protected Assets within the period stated in clause (v) (A) above, the Lender shall only be
entitled to enforce amounts up to the Protected Assets determined by the German Borrower’s
management until the auditors have prepared the audited balance sheet, in which case the
audited balance sheet and the Auditor’s Determination shall prevail.



       (d) Each Borrower assumes responsibility for keeping itself informed of the financial
condition of the each other Borrower, and any and all endorsers and/or guarantors of any instrument
or document evidencing all or any part of such other Borrower’s Liabilities and of all other
circumstances bearing upon the risk of nonpayment by such other Borrower of its Liabilities and
each Borrower agrees that Lender shall not have any duty to advise any Borrower of information
known to Lender regarding such condition or any such circumstances or to undertake any
investigation not a part of its regular business routine. If Lender, in its sole discretion,
undertakes at any time or from time to time to provide any such information to a Borrower, Lender
shall not be under any obligation to update any such information or to provide any such information
to any Borrower on any subsequent occasion.



       (e) Lender is hereby authorized, without notice or demand and without affecting the liability
of a Borrower hereunder, to, at any time and from time to time, (i) renew, extend, accelerate or
otherwise change the time for payment of, or other terms relating to a Borrower’s Liabilities or
otherwise modify, amend or change the terms of any promissory note or other agreement, document or
instrument now or hereafter executed by a Borrower and delivered to Lender; (ii) accept partial
payments on a Borrower’s Liabilities; (iii) take and hold security or collateral for the payment of
a Borrower’s Liabilities hereunder or for the payment of any guaranties of a Borrower’s Liabilities
or other liabilities of a Borrower and exchange, enforce, waive and release any such security or
collateral; (iv) apply such security or collateral and direct the order or manner of sale thereof
as Lender, in its sole discretion, may determine; and (v) settle, release, compromise, collect or
otherwise liquidate a Borrower’s Liabilities and any security or collateral therefor in any manner,
without affecting or impairing the obligations of the other Borrowers. Lender shall have the
exclusive right to determine the time and manner of application of any payments or credits, whether
received from a Borrower or any other source, and such determination shall be



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binding on such Borrower. All such payments and credits may be applied, reversed and reapplied, in whole or in
part, to any of a Borrower’s Liabilities as Lender shall determine in its sole discretion without
affecting the validity or enforceability of the Liabilities of the other Borrowers.




       (f) Each Borrower hereby agrees that, except as hereinafter provided, its obligations
hereunder shall be unconditional, irrespective of (i) the absence of any attempt to collect a
Borrower’s Liabilities from any Borrower or any guarantor or other action to enforce the same; (ii)
the waiver or consent by Lender with respect to any provision of any instrument evidencing
Borrowers’ Liabilities, or any part thereof, or any other agreement heretofore, now or hereafter
executed by a Borrower and delivered to Lender; (iii) failure by
Lender to take any steps to perfect and maintain its security interest in, or to preserve its
rights to, any security or collateral for Borrowers’ Liabilities; (iv) the institution of any
proceeding under the Bankruptcy Code, or any similar proceeding, by or against a Borrower or
Lender’s election in any such proceeding of the application of Section 1111(b)(2) of the Bankruptcy
Code; (v) any borrowing or grant of a security interest by any Borrower as debtor-in-possession,
under Section 364 of the Bankruptcy Code; (vi) the disallowance, under Section 502 of the
Bankruptcy Code, of all or any portion of Lender’s claim(s) for repayment of any of Borrowers’
Liabilities; or (vii) any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor.



       (g) No payment made by or for the account of a Borrower including, without limitation, (i) a
payment made by such Borrower on behalf of another Borrower’s Liabilities or (ii) a payment made by
any other Person under any guaranty, shall entitle such Borrower, by subrogation or otherwise, to
any payment from such other Borrower or from or out of such other Borrower’s property and such
Borrower shall not exercise any right or remedy against such other Borrower or any property of such
other Borrower by reason of any performance of such Borrower of its joint and several obligations
hereunder.



       19. GENERAL INDEMNIFICATION.



       Each Borrower agrees to defend (with counsel satisfactory to Lender), protect, indemnify and
hold harmless Lender, each affiliate or subsidiary of Lender, and each of their respective
shareholders, members, officers, directors, managers, employees, attorneys and agents (each an
“Indemnified Party”) from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or
nature (including, without limitation, the disbursements and the reasonable fees of counsel for
each Indemnified Party in connection with any investigative, administrative or judicial proceeding,
whether or not the Indemnified Party shall be designated a party thereto), which may be imposed on,
incurred by, or asserted against, any Indemnified Party (whether direct, indirect or consequential
and whether based on any federal, state or local laws or regulations, including, without
limitation, securities laws and regulations, Environmental Laws and commercial laws and
regulations, under common law or in equity, or based on contract or otherwise) in any manner
relating to or arising out of this Agreement or any Other Agreement, or any act, event or
transaction related or attendant thereto, the making or issuance and the management of the Loans or
any Letters of Credit or



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the use or intended use of the proceeds of the Loans or any Letters of
Credit; provided, however, that no Borrower shall have any obligation hereunder to any Indemnified
Party with respect to matters caused by or resulting from the willful misconduct or gross
negligence of such Indemnified Party. To the extent that the undertaking to indemnify set forth in
the preceding sentence may be unenforceable because it is violative of any law or public policy,
each Borrower shall satisfy such undertaking to the maximum extent permitted by applicable law.
Any liability, obligation, loss, damage, penalty, cost or expense covered by this indemnity shall
be paid to each Indemnified Party on demand, and, failing prompt payment, shall, together with
interest thereon at the highest rate then applicable to Loans hereunder from the date incurred by
each Indemnified Party until paid by Borrowers, be added to the Liabilities of Borrowers and be
secured by the Collateral. The provisions of this Section 19 shall survive the satisfaction and payment of the other Liabilities and the
termination of this Agreement.




       20. CURRENCY INDEMNITY.



       Any amount received or recovered by the Lender, in respect of any Liabilities, in a currency
other than Dollars (whether as a result of, or of the enforcement of, any judgment or order of a
court or tribunal of any jurisdiction, the winding-up of any Company or otherwise) shall only
constitute a discharge to the applicable Company to the extent of the amount of Dollars that Lender
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 of recovery (or, if later, the first date on which
such purchase is practicable). If the amount of the Dollars so purchased is less than the amount
of the Dollars so expressed to be due, the Borrowers shall indemnify the Lender against any loss
sustained by Lender as a result, including the cost of making any such purchase. The provisions of
this Section 20 shall survive the satisfaction and payment of the other Liabilities and the
termination of this Agreement.



       21. NOTICE.



       Except as otherwise expressly provided in this Agreement, any notice or other communication
required shall be in writing addressed to the respective party as set forth below and may be
personally served, telecopied, sent by overnight courier service or U.S. mail and shall be deemed
to have been given: (a) if delivered in person, when delivered; (b) if delivered by fax, on the
date of transmission if transmitted on a Business Day before 4:00 p.m. Chicago time (or on the next
Business Day after the date of transmission, if transmitted on a Business Day on or after 4:00 p.m.
Chicago time); (c) if delivered by overnight courier, one (1) Business Day after delivery to the
courier properly addressed; or (d) if delivered by U.S. mail, four (4) Business Days after deposit
with postage prepaid and properly addressed.



       Notices shall be addressed as follows (or as otherwise directed by the applicable party hereto
to the other parties hereto):



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	If to US Borrower or

	 	The Oilgear Company

2300 South 51st Street
	 
	 	 
	German Borrower:
	 	 
	

	 	Milwaukee, WI 53234

Attention: Thomas J. Price, Vice President,

Chief Financial Officer & Secretary

Facsimile Number: (414) 328-4750
	 
	 	 
	If to Spanish Borrower:

	 	Oilgear Towler, S.A.

Entidad Zicunaga

Apartado 14

Hernani (Guipuzcoa) Spain

Attention: Mikel Basarte

Facsimile Number: 011 34 943 552716
	 
	 	 
	If to Lender:

	 	LaSalle Business Credit, LLC

Two Honey Creek Corporate Center, Suite 220

115 South 84th Street

Milwaukee, Wisconsin 53214

Attention: Timothy Woldt, First Vice President

Facsimile Number: (414) 256-5099
	 
	 	 
	With a copy to:

	 	LaSalle Business Credit, LLC

135 South LaSalle Street, Suite 400

Chicago, IL 60603

Attention: Steven Fenton

Facsimile Number: (312) 904-6109






       22. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION.



       This Agreement and the Other Agreements are submitted by Borrowers to Lender for Lender’s
acceptance or rejection at Lender’s principal place of business as an offer by Borrowers to borrow
monies from Lender now and from time to time hereafter, and shall not be binding upon Lender or
become effective until accepted by Lender, in writing, at said place of business. If so accepted
by Lender, this Agreement and the Other Agreements shall be deemed to have been made at said place
of business. THIS AGREEMENT AND THE OTHER AGREEMENTS (OTHER THAN THOSE OTHER AGREEMENTS WHICH ARE
EXPLICITLY STATED TO BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION) SHALL BE GOVERNED AND
CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS AS TO INTERPRETATION, ENFORCEMENT,
VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS, INCLUDING, WITHOUT LIMITATION, THE
LEGALITY OF THE INTEREST RATE AND OTHER CHARGES, BUT EXCLUDING PERFECTION OF THE SECURITY INTERESTS
IN COLLATERAL LOCATED OUTSIDE OF THE



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STATE OF ILLINOIS, WHICH SHALL BE GOVERNED AND CONTROLLED BY
THE LAWS OF THE RELEVANT JURISDICTION IN WHICH SUCH COLLATERAL IS LOCATED. If any provision of
this Agreement shall be held to 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 remaining provisions of this Agreement.




       To induce Lender to accept this Agreement, each Borrower irrevocably agrees that, subject to
Lender’s sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT,
ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE OTHER AGREEMENTS (OTHER THAN
THOSE OTHER AGREEMENTS WHICH ARE EXPLICITLY STATED TO BE GOVERNED BY THE LAWS OF ANOTHER
JURISDICTION) OR THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF
CHICAGO, STATE OF ILLINOIS. EACH BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY
LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN SAID CITY AND STATE. EACH BORROWER HEREBY WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE
UPON SUCH BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SUCH
BORROWER, AT THE ADDRESS SET FORTH FOR NOTICE IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE
COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED. EACH BORROWER HEREBY WAIVES ANY RIGHT IT
MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST SUCH BORROWER BY LENDER
IN ACCORDANCE WITH THIS SECTION.



       23. MODIFICATION AND BENEFIT OF AGREEMENT.



       This Agreement and the Other Agreements may not be modified, altered or amended except by an
agreement in writing signed by each Borrower or such other Person who is a party to such Other
Agreement and Lender. No Borrower may sell, assign or transfer this Agreement, or the Other
Agreements or any portion thereof, including, without limitation, such Borrower’s rights, titles,
interest, remedies, powers or duties hereunder and thereunder. Each Borrower hereby consents to
Lender’s sale, assignment, transfer or other disposition, at any time and from time to time
hereafter, of this Agreement, or the Other Agreements, or of any portion thereof, or participations
therein, including, without limitation, Lender’s rights, titles, interest, remedies, powers and/or
duties and agrees that it shall execute and deliver such documents as Lender may request in
connection with any such sale, assignment, transfer or other disposition.



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       24. HEADINGS OF SUBDIVISIONS.



       The headings of subdivisions in this Agreement are for convenience of reference only, and
shall not govern the interpretation of any of the provisions of this Agreement.



       25. POWER OF ATTORNEY.



       Each Borrower acknowledges and agrees that its appointment of Lender as its attorney and
agent-in-fact for the purposes specified in this Agreement is an appointment coupled with an
interest and shall be irrevocable until all of the Liabilities are satisfied and paid in full and
this Agreement is terminated.



       26. CONFIDENTIALITY.



       Lender hereby agrees to use commercially reasonable efforts to assure that any and all
information relating to a Borrower which is (i) furnished by such Borrower to Lender (or to any
affiliate of Lender); and (ii) non-public, confidential or proprietary in nature, shall be kept
confidential by Lender or such affiliate in accordance with applicable law; provided,
however, that such information and other credit information relating to such Borrower may be
distributed by Lender or such affiliate to Lender’s or such affiliate’s directors, managers,
officers, employees, attorneys, affiliates, assignees, participants, auditors, agents and
regulators, and upon the order of a court or other governmental agency having jurisdiction over
Lender or such affiliate, to any other party. In addition, such information and other credit
information may be distributed by Lender to potential participants or assignees of any portion of
the Liabilities, provided, that such potential participant or assignee agrees to follow the
confidentiality requirements as set forth herein. Each Borrower and Lender further agree that this
provision shall survive the termination of this Agreement. Notwithstanding the foregoing, each
Borrower hereby consents to Lender publishing a tombstone or similar advertising material relating
to the financing transaction contemplated by this Agreement. Notwithstanding anything to the
contrary set forth herein or in any Other Agreement to which the parties hereto are parties or by
which they are bound, the obligations of confidentiality contained herein and therein, as they
relate the transactions contemplated by this Agreement and the Other Agreements (the
“Transaction”), shall not apply to the federal tax structure or federal tax treatment of the
Transaction, and each party hereto (and any employee, representative, agent of any party hereto)
may disclose to any and all persons, without limitation of any kind, the federal tax structure and
federal tax treatment of the Transaction. In addition, each party hereto acknowledges that it has
no proprietary or exclusive rights to the federal tax structure of the Transaction or any federal
tax matter or federal tax idea related to the Transaction.



       27. COUNTERPARTS.



       This Agreement, any of the Other Agreements and any amendments, waivers, consents or
supplements may be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which, when so executed and delivered, shall
be deemed an original, but all of which counterparts together shall constitute but one agreement.



-65-









 





       28. ELECTRONIC SUBMISSIONS.



       Upon not less than sixty (60) days’ prior written notice (the “Approved Electronic Form
Notice”), Lender may permit or require that any of the documents, certificates, forms, deliveries
or other communications, authorized, required or contemplated by this Agreement or the Other
Agreements, be submitted to Lender in “Approved Electronic Form” (as hereafter defined), subject to
any reasonable terms, conditions and requirements in the applicable Approved Electronic Forms
Notice. For purposes hereof “Electronic Form” means e-mail, e-mail attachments, data submitted on
web-based forms or any other communication method that delivers machine readable data or
information to Lender, and “Approved Electronic Form” means an Electronic Form that has been approved in
writing by Lender (which approval has not been revoked or modified by Lender) and sent to Borrowers
in an Approved Electronic Form Notice. Except as otherwise specifically provided in the applicable
Approved Electronic Form Notice, any submissions made in an applicable Approved Electronic Form
shall have the same force and effect that the same submissions would have had if they had been
submitted in any other applicable form authorized, required or contemplated by this Agreement or
the Other Agreements.



       29. WAIVER OF JURY TRIAL; OTHER WAIVERS.



       (a) EACH BORROWER AND LENDER EACH HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, ANY OF THE OTHER AGREEMENTS,
THE LIABILITIES, THE COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT BY A BORROWER OR LENDER OR WHICH, IN
ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN A BORROWER
AND LENDER. IN NO EVENT SHALL LENDER BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES.



       (b) Each Borrower hereby waives demand, presentment, protest and notice of nonpayment, and
further waives the benefit of all valuation, appraisal and exemption laws.



       (c) Each Borrower hereby waives the benefit of any law that would otherwise restrict or limit
Lender or any affiliate of Lender in the exercise of its right, which is hereby acknowledged and
agreed to, to set-off against the Liabilities, without notice at any time hereafter, any
indebtedness, matured or unmatured, owing by Lender or such affiliate of Lender to such Borrower,
including, without limitation any Deposit Account at Lender or such affiliate.



       (d) EACH BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO THE
EXERCISE BY LENDER OF ITS RIGHTS TO REPOSSESS THE COLLATERAL OF SUCH BORROWER
WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH COLLATERAL.



-66-









 





       (e) Lender’s failure, at any time or times hereafter, to require strict performance by a
Borrower of any provision of this Agreement or any of the Other Agreements shall not waive, affect
or diminish any right of Lender thereafter to demand strict compliance and performance therewith.
Any suspension or waiver by Lender of an Event of Default under this Agreement or any default under
any of the Other Agreements shall not suspend, waive or affect any other Event of Default under
this Agreement or any other default under any of the Other Agreements, whether the same is prior or
subsequent thereto and whether of the same or of a different kind or character. No delay on the
part of Lender in the exercise of any right or remedy under this Agreement or any Other Agreement
shall preclude other or further exercise thereof or the exercise of any right or remedy. None
of the undertakings, agreements, warranties, covenants and representations of Borrowers
contained in this Agreement or any of the Other Agreements and no Event of Default under this
Agreement or default under any of the Other Agreements shall be deemed to have been suspended or
waived by Lender unless such suspension or waiver is in writing, signed by a duly authorized
officer of Lender and directed to Borrowers specifying such suspension or waiver.



-67-









 





       IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first
written above.



	 	 	 	 	 	 	 
	THE OILGEAR COMPANY
	 	LASALLE BUSINESS CREDIT, LLC
	 
	 	 	 	 	 	 
	By

	 	/s/ Thomas J. Price
	 	By
	 	/s/ Timothy Woldt
	

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Title

	 	/s/ Chief Financial Officer
	 	Title
	 	/s/ First Vice President
	

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	OILGEAR TOWLER GMBH

	 
	 	 	 	 	 	 
	By

	 	/s/ Thomas J. Price	 	 	 	 
	

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Title

	 	/s/ Chief Financial Officer	 	 	 	 
	

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	OILGEAR TOWLER, S.A.

	 
	 	 	 	 	 	 
	By

	 	/s/ Thomas J. Price	 	 	 	 
	

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Title

	 	/s/ Chief Financial Officer	 	 	 	 
	

	 	 	 	 	 	 






[Signature Page to Loan and Security Agreement]




 









 





EXHIBIT A — BUSINESS AND COLLATERAL LOCATIONS



       Attached to and made a part of that certain Loan and Security Agreement of even date herewith
among The Oilgear Company (“US Borrower”), Oilgear Towler GmbH (“German Borrower”) and Oilgear
Towler, S.A. (“Spanish Borrower”) (US Borrower, German Borrower and Spanish Borrower are
collectively referred to as “Borrowers”) and LASALLE BUSINESS CREDIT, LLC (“Lender”).



US Borrower




	 	 	 
	A.

	 	US Borrower’s business locations (please indicate which location is the principal place of
business and at which locations originals and all copies of US Borrower’s books, records and
accounts are kept).
	 
	 	 
	

	 	a.
	 
	 	 
	

	 	b.
	 
	 	 
	

	 	c.
	 
	 	 
	B.

	 	Other locations of Collateral (including, without limitation, warehouse locations, processing
locations, consignment locations) and all post office boxes of US Borrower. Please indicate
the relationship of such location to US Borrower (i.e., public warehouse, processor, etc.).
	 
	 	 
	

	 	a.
	 
	 	 
	

	 	b.
	 
	 	 
	

	 	c.
	 
	 	 
	C.

	 	Bank Accounts of US Borrower (other than those at LaSalle Bank National Association):
	 
	 	 
	

	 	          Bank (with address)          Account Number          Type of Account
	 
	 	 
	

	 	a.
	 
	 	 
	

	 	b.
	 
	 	 
	

	 	c.






[Complete for other applicable Companies]




 









 





EXHIBIT B — COMPLIANCE CERTIFICATE



       Attached to and made a part of that certain Loan and Security Agreement, as it may be amended
in accordance with its terms from time to time, including all exhibits attached thereto (the
“Agreement”) of even date herewith among The Oilgear Company (“US Borrower”), Oilgear Towler GmbH
(“German Borrower”) and Oilgear Towler, S.A. (“Spanish Borrower”) (US Borrower, German Borrower and
Spanish Borrower are collectively referred to as “Borrowers”) and LASALLE BUSINESS CREDIT, LLC
(“Lender”).



       This Certificate is submitted pursuant to subsection 9(c) of the Agreement.



       The undersigned hereby certifies to Lender that as of the date of this Certificate:



     1. The undersigned is the                                          of US Borrower.



     2. There exists no event or circumstance which is or which with the passage of time, the
giving of notice, or both would constitute an Event of Default, as that term is defined in the
Agreement, or, if such an event of circumstance exists, a writing attached hereto specifies the
nature thereof, the period of existence thereof and the action that Borrower has taken or proposes
to take with respect thereto.



     3. No material adverse change in the condition, financial or otherwise, business, property, or
results of operations of any Company has occurred since [date of last Compliance Certificate/last
financial statements delivered prior to closing], or, if such a change has occurred, a writing
attached hereto specifies the nature thereof and the action that Borrowers have taken or proposes
to take with respect thereto.



     4. Borrowers are in compliance with the representations, warranties and covenants in the
Agreement, or, if Borrowers are not in compliance with any representations, warranties or covenants
in the Agreement, a writing attached hereto specifies the nature thereof, the period of existence
thereof and the action that Borrowers have taken or proposes to take with respect thereto.



     5. The financial statements of each Company being concurrently delivered herewith have been
prepared in accordance with generally accepted accounting principles consistently applied and there
have been no material changes in accounting policies or financial reporting practices of such
Company since [date of the last Compliance Certificate/date of last financial statements delivered
prior to closing] or, if any such change has occurred, such changes are set forth in a writing
attached hereto.



 









 





     6. Attached hereto is a true and correct calculation of the financial covenants contained in
the Agreement.


	 	 	 	 	 
	 	THE OILGEAR COMPANY

 	 
	 	By  	 	 
	 	 	 	 
	 	Title