Exhibit 10.26


 




 





FOURTH AMENDED AND RESTATED CREDIT AGREEMENT


 


Dated as of June 29, 2004


 


among


 


ROLLER BEARING COMPANY OF AMERICA, INC.,


 


as Borrower,


 


THE OTHER CREDIT PARTIES SIGNATORY HERETO,


 


as Credit Parties,


 


THE LENDERS SIGNATORY HERETO


 


FROM TIME TO TIME,


 


as Lenders,


 


GENERAL ELECTRIC CAPITAL CORPORATION,


 


as Agent and Lender,


 


and


 


GECC CAPITAL MARKETS GROUP, INC.,


 


as Lead Arranger


 




 





 





















 


TABLE OF CONTENTS


 


	
  1.

  	
  AMOUNT AND TERMS OF CREDIT

  	
   

  
	
   

  	
  1.1

  	
  Credit Facilities.

  	
   

  
	
   

  	
  1.2

  	
  Letters of Credit

  	
   

  
	
   

  	
  1.3

  	
  Prepayments

  	
   

  
	
   

  	
  1.4

  	
  Use of Proceeds

  	
   

  
	
   

  	
  1.5

  	
  Interest and Applicable Margins

  	
   

  
	
   

  	
  1.6

  	
  Eligible Accounts

  	
   

  
	
   

  	
  1.7

  	
  Eligible Inventory

  	
   

  
	
   

  	
  1.8

  	
  Cash Management Systems

  	
   

  
	
   

  	
  1.9

  	
  Fees

  	
   

  
	
   

  	
  1.10

  	
  Receipt of Payments

  	
   

  
	
   

  	
  1.11

  	
  Application and Allocation of
  Payments

  	
   

  
	
   

  	
  1.12

  	
  Loan Account and Accounting

  	
   

  
	
   

  	
  1.13

  	
  Indemnity

  	
   

  
	
   

  	
  1.14

  	
  Access

  	
   

  
	
   

  	
  1.15

  	
  Taxes

  	
   

  
	
   

  	
  1.16

  	
  Capital Adequacy; Increased
  Costs; Illegality

  	
   

  
	
   

  	
  1.17

  	
  Single Loan

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  CONDITIONS PRECEDENT

  	
   

  
	
   

  	
  2.1

  	
  Conditions to the Initial Loans

  	
   

  
	
   

  	
  2.2

  	
  Further Conditions to Each Loan

  	
   

  
	
   

  	
  2.3

  	
  Conditions to Revolving Credit
  Advances Funding Permitted Loan Funded Acquisitions

  	
   

  
	
   

  	
  2.4

  	
  Commitment Increase Conditions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
  3.1

  	
  Corporate Existence; Compliance
  with Law

  	
   

  
	
   

  	
  3.2

  	
  Executive Offices, Collateral
  Locations, FEIN

  	
   

  
	
   

  	
  3.3

  	
  Corporate Power, Authorization,
  Enforceable Obligations

  	
   

  
	
   

  	
  3.4

  	
  Financial Statements and
  Projections

  	
   

  
	
   

  	
  3.5

  	
  Material Adverse Effect

  	
   

  
	
   

  	
  3.6

  	
  Ownership of Property; Liens

  	
   

  
	
   

  	
  3.7

  	
  Labor Matters

  	
   

  
	
   

  	
  3.8

  	
  Ventures, Subsidiaries and
  Affiliates; Outstanding Stock and Indebtedness

  	
   

  
	
   

  	
  3.9

  	
  Government Regulation

  	
   

  
	
   

  	
  3.10

  	
  Margin Regulations

  	
   

  
	
   

  	
  3.11

  	
  Taxes

  	
   

  
	
   

  	
  3.12

  	
  ERISA

  	
   

  
	
   

  	
  3.13

  	
  No Litigation

  	
   

  
	
   

  	
  3.14

  	
  Brokers

  	
   

  
	
   

  	
  3.15

  	
  Intellectual Property

  	
   

  
	
   

  	
  3.16

  	
  Full Disclosure

  	
   

  



 


i





















 


	
   

  	
  3.17

  	
  [Intentionally Omitted].

  	
   

  
	
   

  	
  3.18

  	
  Insurance

  	
   

  
	
   

  	
  3.19

  	
  Deposit and Disbursement
  Accounts

  	
   

  
	
   

  	
  3.20

  	
  Government Contracts

  	
   

  
	
   

  	
  3.21

  	
  Customer and Trade Relations

  	
   

  
	
   

  	
  3.22

  	
  Agreements and Other
  Documents

  	
   

  
	
   

  	
  3.23

  	
  Solvency

  	
   

  
	
   

  	
  3.24

  	
  Status of Holdings

  	
   

  
	
   

  	
  3.25

  	
  Subordinated Debt; other
  Indebtedness

  	
   

  
	
   

  	
  3.26

  	
  Motor Vehicles

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  FINANCIAL STATEMENTS AND
  INFORMATION

  	
   

  
	
   

  	
  4.1

  	
  Reports and Notices

  	
   

  
	
   

  	
  4.2

  	
  Communication with Accountants

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  AFFIRMATIVE COVENANTS

  	
   

  
	
   

  	
  5.1

  	
  Maintenance of Existence and
  Conduct of Business

  	
   

  
	
   

  	
  5.2

  	
  Payment of Charges

  	
   

  
	
   

  	
  5.3

  	
  Books and Records

  	
   

  
	
   

  	
  5.4

  	
  Insurance; Damage to or
  Destruction of Collateral

  	
   

  
	
   

  	
  5.5

  	
  Compliance with Laws

  	
   

  
	
   

  	
  5.6

  	
  Supplemental Disclosure

  	
   

  
	
   

  	
  5.7

  	
  Intellectual Property

  	
   

  
	
   

  	
  5.8

  	
  Proceeds from Stock Issuances

  	
   

  
	
   

  	
  5.9

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

  	
   

  
	
   

  	
  5.10

  	
  Motor Vehicles

  	
   

  
	
   

  	
  5.11

  	
  Interest Rate

  	
   

  
	
   

  	
  5.12

  	
  Maturity of the Holdco Debenture
  Debt

  	
   

  
	
   

  	
  5.13

  	
  Further Assurances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  NEGATIVE COVENANTS

  	
   

  
	
   

  	
  6.1

  	
  Mergers, Subsidiaries, Etc

  	
   

  
	
   

  	
  6.2

  	
  Investments; Loans and Advances

  	
   

  
	
   

  	
  6.3

  	
  Indebtedness

  	
   

  
	
   

  	
  6.4

  	
  Employee Loans and Affiliate
  Transactions

  	
   

  
	
   

  	
  6.5

  	
  Capital Structure and Business

  	
   

  
	
   

  	
  6.6

  	
  Guaranteed Indebtedness

  	
   

  
	
   

  	
  6.7

  	
  Liens

  	
   

  
	
   

  	
  6.8

  	
  Sale of Stock and Assets

  	
   

  
	
   

  	
  6.9

  	
  ERISA

  	
   

  
	
   

  	
  6.10

  	
  Financial Covenants

  	
   

  
	
   

  	
  6.11

  	
  [RESERVED]

  	
   

  
	
   

  	
  6.12

  	
  Sale-Leasebacks

  	
   

  
	
   

  	
  6.13

  	
  Cancellation of Indebtedness

  	
   

  
	
   

  	
  6.14

  	
  Restricted Payments

  	
   

  
	
   

  	
  6.15

  	
  Change of Corporate Name or
  Location; Change of Fiscal Year

  	
   

  



 


ii





















 


	
   

  	
  6.16

  	
  No Impairment of Intercompany
  Transfers

  	
   

  
	
   

  	
  6.17

  	
  No Speculative Transactions

  	
   

  
	
   

  	
  6.18

  	
  Changes Relating to
  Subordinated Debt; Material Contracts

  	
   

  
	
   

  	
  6.19

  	
  Holdings

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  TERM

  	
   

  
	
   

  	
  7.1

  	
  Termination

  	
   

  
	
   

  	
  7.2

  	
  Survival of Obligations Upon
  Termination of Financing Arrangements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  EVENTS OF DEFAULT; RIGHTS AND
  REMEDIES

  	
   

  
	
   

  	
  8.1

  	
  Events of Default

  	
   

  
	
   

  	
  8.2

  	
  Remedies

  	
   

  
	
   

  	
  8.3

  	
  Waivers by Credit Parties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  ASSIGNMENT AND PARTICIPATIONS;
  APPOINTMENT OF AGENT

  	
   

  
	
   

  	
  9.1

  	
  Assignment and Participations

  	
   

  
	
   

  	
  9.2

  	
  Appointment of Agent

  	
   

  
	
   

  	
  9.3

  	
  Agent’s Reliance, Etc

  	
   

  
	
   

  	
  9.4

  	
  GE Capital and Affiliates

  	
   

  
	
   

  	
  9.5

  	
  Lender Credit Decision

  	
   

  
	
   

  	
  9.6

  	
  Indemnification

  	
   

  
	
   

  	
  9.7

  	
  Successor Agent

  	
   

  
	
   

  	
  9.8

  	
  Setoff and Sharing of Payments

  	
   

  
	
   

  	
  9.9

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

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  SUCCESSORS AND ASSIGNS

  	
   

  
	
   

  	
  10.1

  	
  Successors and Assigns

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
  11.1

  	
  Complete Agreement;
  Modification of Agreement

  	
   

  
	
   

  	
  11.2

  	
  Amendments and Waivers

  	
   

  
	
   

  	
  11.3

  	
  Fees and Expenses

  	
   

  
	
   

  	
  11.4

  	
  No Waiver

  	
   

  
	
   

  	
  11.5

  	
  Remedies

  	
   

  
	
   

  	
  11.6

  	
  Severability

  	
   

  
	
   

  	
  11.7

  	
  Conflict of Terms

  	
   

  
	
   

  	
  11.8

  	
  Confidentiality

  	
   

  
	
   

  	
  11.9

  	
  GOVERNING LAW

  	
   

  
	
   

  	
  11.10

  	
  Notices

  	
   

  
	
   

  	
  11.11

  	
  Section Titles

  	
   

  
	
   

  	
  11.12

  	
  Counterparts

  	
   

  
	
   

  	
  11.13

  	
  WAIVER OF JURY TRIAL

  	
   

  
	
   

  	
  11.14

  	
  Press Releases and Related
  Matters

  	
   

  
	
   

  	
  11.15

  	
  Reinstatement

  	
   

  



 


iii





















 


	
   

  	
  11.16

  	
  Advice of Counsel

  	
   

  
	
   

  	
  11.17

  	
  No Strict Construction

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  RESTATEMENT OF PRIOR CREDIT
  AGREEMENT

  	
   

  



 


iv





















 


INDEX OF APPENDICES


 


	
  Annex A (Recitals)

  	
   

  	
  -

  	
   

  	
  Definitions

  
	
  Annex
  B (Section 1.2)

  	
   

  	
  -

  	
   

  	
  Letters
  of Credit

  
	
  Annex
  C (Section 1.8)

  	
   

  	
  -

  	
   

  	
  Cash
  Management System

  
	
  Annex D (Section 2.1(a))

  	
   

  	
  -

  	
   

  	
  Closing Checklist

  
	
  Annex E (Section 4.1(a))

  	
   

  	
  -

  	
   

  	
  Financial Statements and
  Projections -- Reporting

  
	
  Annex F (Section 4.1(b))

  	
   

  	
  -

  	
   

  	
  Collateral Reports

  
	
  Annex
  G (Section 6.10)

  	
   

  	
  -

  	
   

  	
  Financial
  Covenants

  
	
  Annex H (Section 9.9(a))

  	
   

  	
  -

  	
   

  	
  Lenders’ Wire Transfer
  Information

  
	
  Annex I (Section 11.10)

  	
   

  	
  -

  	
   

  	
  Notice Addresses

  
	
  Annex
  J (from Annex A- Commitments definition)

  	
   

  	
  -

  	
   

  	
  Commitments
  as of Effective Date

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit
  1.1(a)(i)

  	
   

  	
  -

  	
   

  	
  Form
  of Notice of Revolving Credit Advance

  
	
  Exhibit
  1.1(a)(ii)

  	
   

  	
  -

  	
   

  	
  Form
  of Revolving Note

  
	
  Exhibit
  1.1(b)

  	
   

  	
  -

  	
   

  	
  Form
  of Term Note

  
	
  Exhibit
  1.1(c)(ii)

  	
   

  	
  -

  	
   

  	
  Form
  of Swing Line Note

  
	
  Exhibit
  1.5(e)

  	
   

  	
  -

  	
   

  	
  Form
  of Notice of Conversion/Continuation

  
	
  Exhibit
  4.1(b)

  	
   

  	
  -

  	
   

  	
  Form
  of Borrowing Base Certificate

  
	
  Exhibit
  6.1

  	
   

  	
  -

  	
   

  	
  Form
  of Acquisition Compliance Certificate

  
	
  Exhibit
  9.1(a)

  	
   

  	
  -

  	
   

  	
  Form
  of Assignment Agreement

  
	
  Exhibit
  B-1

  	
   

  	
  -

  	
   

  	
  Application
  for Standby Letter of Credit

  
	
  Exhibit
  B-2

  	
   

  	
  -

  	
   

  	
  Application
  for Documentary Letter of Credit

  
	
  Exhibit
  E-1

  	
   

  	
  -

  	
   

  	
  Form
  of Compliance Certificate

  
	
  Exhibit ECF

  	
   

  	
  -

  	
   

  	
  Form of
  Excess Cash Flow Computation

  
	
  Exhibit PA

  	
   

  	
  -

  	
   

  	
  Permitted
  Adjustments

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Schedule
  1.1

  	
   

  	
  -

  	
   

  	
  Agent’s
  Representatives

  
	
  Disclosure
  Schedule 1.4

  	
   

  	
  -

  	
   

  	
  Sources
  and Uses; Funds Flow Memorandum

  
	
  Disclosure
  Schedule 2.1(f)

  	
   

  	
  -

  	
   

  	
  Capital
  Structure

  
	
  Disclosure
  Schedule 3.1

  	
   

  	
  -

  	
   

  	
  Type
  of Entity; State of Organization

  
	
  Disclosure
  Schedule 3.2

  	
   

  	
  -

  	
   

  	
  Executive
  Offices, Collateral Locations, FEIN

  
	
  Disclosure
  Schedule 3.4(a)

  	
   

  	
  -

  	
   

  	
  Financial
  Statements

  
	
  Disclosure
  Schedule 3.4(b)

  	
   

  	
  -

  	
   

  	
  Pro
  Forma

  
	
  Disclosure
  Schedule 3.4(c)

  	
   

  	
  -

  	
   

  	
  Projections

  
	
  Disclosure
  Schedule 3.6

  	
   

  	
  -

  	
   

  	
  Real
  Estate and Leases

  
	
  Disclosure
  Schedule 3.7

  	
   

  	
  -

  	
   

  	
  Labor
  Matters

  
	
  Disclosure
  Schedule 3.8

  	
   

  	
  -

  	
   

  	
  Ventures,
  Subsidiaries and Affiliates; Outstanding Stock

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Disclosure
  Schedule 3.11

  	
   

  	
  -

  	
   

  	
  Tax
  Matters

  
	
  Disclosure
  Schedule 3.12

  	
   

  	
  -

  	
   

  	
  ERISA
  Plans

  
	
  Disclosure
  Schedule 3.13

  	
   

  	
  -

  	
   

  	
  Litigation

  
	
  Disclosure
  Schedule 3.15

  	
   

  	
  -

  	
   

  	
  Intellectual
  Property

  
	
  Disclosure
  Schedule 3.18

  	
   

  	
  -

  	
   

  	
  Insurance

  
	
  Disclosure
  Schedule 3.19

  	
   

  	
  -

  	
   

  	
  Deposit
  and Disbursement Accounts

  



 


v





















 


	
  Disclosure
  Schedule 3.20

  	
   

  	
  -

  	
   

  	
  Government
  Contracts

  
	
  Disclosure
  Schedule 3.22

  	
   

  	
  -

  	
   

  	
  Material
  Agreements

  
	
  Disclosure
  Schedule 5.1

  	
   

  	
  -

  	
   

  	
  Trade
  Names

  
	
  Disclosure
  Schedule 6.3

  	
   

  	
  -

  	
   

  	
  Indebtedness

  
	
  Disclosure
  Schedule 6.4(a)

  	
   

  	
  -

  	
   

  	
  Transactions
  with Affiliates

  
	
  Disclosure
  Schedule 6.4(b)

  	
   

  	
  -

  	
   

  	
  Transactions
  with Employees

  
	
  Disclosure
  Schedule 6.7

  	
   

  	
  -

  	
   

  	
  Existing
  Liens

  
	
  Disclosure Schedule 6.12

  	
   

  	
  -

  	
   

  	
  Permitted Sale–Leasebacks

  



 


vi





















 


This
FOURTH AMENDED AND RESTATED CREDIT AGREEMENT (this “Agreement”), dated
as of June 29, 2004, among ROLLER BEARING COMPANY OF AMERICA, INC., a Delaware
corporation (“Borrower”); the other Credit Parties signatory hereto;
GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation (in its individual
capacity, “GE Capital”), for itself, as Lender, and as Agent for
Lenders, and the other Lenders signatory hereto from time to time.


 


RECITALS


 


WHEREAS,
certain parties hereto are parties to a Third Amended and Restated Credit
Agreement dated as of December 19, 2003 (the “Prior Credit Agreement”),
pursuant to which the Lenders extended revolving and term credit facilities to
Borrower of up to Ninety-Six Million Nine Hundred Thousand Dollars
($96,900,000) in the aggregate for the purpose of refinancing certain
Indebtedness of Borrower and the other Credit Parties and to provide
(a) working capital financing for Borrower and the other Credit Parties,
(b) funds for other general corporate purposes of Borrower and the other
Credit Parties and (c) funds for other purposes not prohibited hereunder,
including financing of Permitted Loan Funded Acquisitions;


 


WHEREAS,
the parties hereto desire to amend and restate the Prior Credit Agreement on
the terms set forth herein (a) to increase the aggregate Commitments of
the Lenders to One Hundred Sixty-Five Million Dollars ($165,000,000) for the
purpose of funding the repayment of the balance of the outstanding amounts
under the Prior Credit Agreement, the redemption of the Borrower’s Prior Senior
Subordinated Notes (as defined below) and the payment of related transaction
costs and expenses and (b) the other purposes provided herein; and


 


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


 


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


 


1.     AMOUNT AND TERMS OF CREDIT


 


1.1           Credit Facilities.


 


(a)           Revolving Credit Facility.


 


(i)            Subject to the terms and conditions
hereof, each Revolving Lender agrees to make available to Borrower from time to
time until the Commitment Termination Date its Pro Rata Share of advances
(each, a “Revolving Credit Advance”). 
The Pro Rata Share of the Revolving Loan of any Revolving Lender shall
not at any time exceed its separate Revolving Loan Commitment.  The obligations of each Revolving Lender
hereunder shall be several and 


 





















 


not joint.  Until the Commitment Termination Date,
Borrower may from time to time borrow, repay (without notice) and reborrow
under this Section 1.1(a); provided,
that the amount of any Revolving Credit Advance to be made at any time shall
not exceed Borrowing Availability at such time. 
Borrowing Availability may be further reduced by Reserves imposed by
Agent in accordance with this Agreement. 
Each Revolving Credit Advance shall be made on notice by Borrower to one
of the representatives of Agent identified in Schedule 1.1 at the
address specified therein.  Any such
notice must be given no later than (1) 11:00 a.m. (Chicago time) on the
Business Day of the proposed Revolving Credit Advance, in the case of an Index
Rate Loan, or (2) 11:00 a.m. (Chicago time) on the date which is three (3)
Business Days prior to the proposed Revolving Credit Advance, in the case of a
LIBOR Loan.  Each such notice (a ”Notice
of Revolving Credit Advance”) must be given in writing (by telecopy or
overnight courier) substantially in the form of Exhibit 1.1(a)(i), and
shall include the information required in such Exhibit.  If Borrower desires to have the Revolving
Credit Advances bear interest by reference to a LIBOR Rate, it must comply with
Section 1.5(e).


 


(ii)           Except as provided in Section 1.12,
Borrower shall execute and deliver to each Revolving Lender a note to evidence
the Revolving Loan Commitment of that Revolving Lender.  Each note shall be in the principal amount of
the Revolving Loan Commitment of the applicable Revolving Lender, dated the
Effective Date and substantially in the form of Exhibit 1.1(a)(ii) (each
a “Revolving Note” and, collectively, the “Revolving Notes”).  Each Revolving Note shall represent the
obligation of Borrower to pay the amount of the relevant Revolving Lender’s
Revolving Loan Commitment or, if less, such Revolving Lender’s Pro Rata Share
of the aggregate unpaid principal amount of all Revolving Credit Advances to
Borrower together with interest thereon as prescribed in Section 1.5.  The entire unpaid balance of the Revolving
Loan and all other non-contingent monetary Obligations shall be immediately due
and payable in full in immediately available funds on the Commitment
Termination Date.


 


(iii)          Any provision of this Agreement to the
contrary notwithstanding, at the request of Borrower, in its discretion Agent
may (but shall have absolutely no obligation to), make Revolving Credit
Advances to Borrower on behalf of Revolving Lenders in amounts that cause
Borrowing Availability to be less than $0 (any such excess Revolving Credit
Advances are herein referred to collectively as “Overadvances”); provided, that (A) no such event or
occurrence shall cause or constitute a waiver of Agent’s, the Swing Line
Lender’s or Revolving Lenders’ right to refuse to make any further
Overadvances, Swing Line Advances or Revolving Credit Advances, or incur any
Letter of Credit Obligations, as the case may be, at any time that an
Overadvance exists, and (B) no Overadvance shall result in a Default or Event
of Default due to Borrower’s failure to comply with Section 1.3(b)(i)
for so long as Agent permits such Overadvance to remain outstanding, but solely
with respect to the amount of such Overadvance. 
In addition, Overadvances may be made even if the conditions to lending
set forth in Section 2 have not been met.  All Overadvances shall constitute Index Rate
Loans, shall bear interest at the Default Rate and shall be payable within
three (3) Business Days after demand. 
Except as otherwise provided in Section 1.11(b), the authority of
Agent to make Overadvances is limited to an aggregate amount not to exceed
$4,000,000 at any time, shall not cause the Revolving Loan to exceed the
Maximum Amount, and the authority of Agent to make Overadvances that exceed
$2,000,000 in the aggregate amount may be revoked prospectively by a written
notice to Agent signed by Requisite Revolving Lenders.  No Overadvance shall be 


 


2





















 


outstanding for more than
sixty (60) consecutive days, and not more than two Overadvances shall be made
in any period of one hundred eighty (180) consecutive days, in each case
without the consent of Requisite Revolving Lenders.


 


(b)           Term Loan.


 


(i)            Subject to the terms and conditions
hereof, each Term Lender agrees to make a term loan (collectively, the “Term
Loan”) on the Effective Date to Borrower in the original principal amount
of its Term Loan Commitment.  The
obligations of each Term Lender hereunder shall be several and not joint.  The Term Loan shall be evidenced by
promissory notes substantially in the form of Exhibit 1.1(b) (each a “Term
Note” and collectively the “Term Notes”), and, except as provided in
Section 1.12, Borrower shall execute and deliver each Term Note to the
applicable Term Lender.  Each Term Note
shall represent the obligation of Borrower to pay the amount of the applicable
Term Lender’s Term Loan Commitment, together with interest thereon as
prescribed in Section 1.5.


 


(ii)           Borrower shall repay the principal
amount of the Term Loan in twenty-five (25) consecutive quarterly installments
on the first day of January, April, July and October of each year, commencing
October 1, 2004, as follows:


 




	
  Payment
  Dates

  	
   

  	
  Installment
  Amounts

  
	
  October 1, 2004 through
  and including October 1, 2010

  	
   

  	
  $

  	
  275,000 each

  






 


and
by making the final payment, which shall be due on December 29, 2010 and shall
be in the amount of $103,125,000 or, if different, the remaining principal
balance of the Term Loan.


 


(iii)          Notwithstanding Section 1.1(b)(ii),
the aggregate outstanding principal balance of the Term Loan shall be due and
payable in full in immediately available funds on the Commitment Termination
Date, if not sooner paid in full.  No
payment with respect to the Term Loan may be reborrowed.


 


(iv)          Each payment of principal with respect
to the Term Loan shall be paid to Agent for the ratable benefit of each Term
Lender, ratably in proportion to each such Term Lender’s respective Term Loan
Commitment.


 


(c)           Swing Line Facility.


 


(i)            Agent shall notify the Swing Line
Lender upon Agent’s receipt of any Notice of Revolving Credit Advance.  Subject to the terms and conditions hereof,
the Swing Line Lender may, in its discretion, make available from time to time
until the Commitment Termination Date advances (each, a “Swing Line Advance”)
in accordance with any such notice.  The
provisions of this Section 1.1(c) shall not relieve Revolving Lenders of
their obligations to make Revolving Credit Advances under Section 1.1(a);
provided, that if the Swing Line
Lender makes a Swing Line Advance pursuant to any such notice, such Swing Line
Advance shall be in lieu of any Revolving Credit Advance that otherwise may be
made by Revolving Credit Lenders pursuant to such notice.  The aggregate amount of Swing Line Advances
outstanding shall not 


 


3





















 


exceed at any time the
lesser of (A) the Swing Line Commitment and (B) the lesser of the Maximum
Amount and (except for Overadvances) the Borrowing Base, in each case, less
the outstanding balance of the Revolving Loan at such time (“Swing Line
Availability”).  Until the Commitment
Termination Date, Borrower may from time to time borrow, repay and reborrow
under this Section 1.1(c).  Each
Swing Line Advance shall be made pursuant to a Notice of Revolving Credit
Advance delivered by Borrower to Agent in accordance with Section 1.1(a).  Any such notice must be given no later than
11:00 a.m. (Chicago time) on the Business Day of the proposed Swing Line
Advance.  Unless the Swing Line Lender
has received at least one (1) Business Day’s prior written notice from
Requisite Revolving Lenders instructing it not to make a Swing Line Advance,
the Swing Line Lender shall, notwithstanding the failure of any condition
precedent set forth in Sections 2.2, be entitled to fund that Swing Line
Advance, and to have such Revolving Lender make Revolving Credit Advances in
accordance with Section 1.1(c)(iii) or purchase participating
interests in accordance with Section 1.1(c)(iv).   Notwithstanding any other provision of this
Agreement or the other Loan Documents, the Swing Line Loan shall constitute an
Index Rate Loan.  Borrower shall repay
the aggregate outstanding principal amount of the Swing Line Loan upon demand
therefor by Agent.


 


(ii)           Borrower shall execute and deliver to
the Swing Line Lender a promissory note to evidence the Swing Line Commitment.  Such note shall be in the principal amount of
the Swing Line Commitment of the Swing Line Lender, dated the Effective Date
and substantially in the form of Exhibit 1.1(c)(ii) (the “Swing Line
Note”). The Swing Line Note shall represent the obligation of Borrower to
pay the amount of the Swing Line Commitment or, if less, the aggregate unpaid
principal amount of all Swing Line Advances made to Borrower together with
interest thereon as prescribed in Section 1.5.  The entire unpaid balance of the Swing Line
Loan and all other non-contingent Obligations shall be immediately due and
payable in full in immediately available funds on the Commitment Termination
Date if not sooner paid in full.


 


(iii)          The Swing Line Lender, at any time and
from time to time in its sole and absolute discretion, but not less frequently
than once each week, shall on behalf of Borrower (and Borrower hereby
irrevocably authorizes the Swing Line Lender to so act on its behalf) request
each Revolving Lender (including the Swing Line Lender) to make a Revolving
Credit Advance to Borrower (which shall be an Index Rate Loan) in an amount
equal to that Revolving Lender’s Pro Rata Share of the principal amount of the
Swing Line Loan (the “Refunded Swing Line Loan”) outstanding on the date
such notice is given.  Unless any of the
events described in Sections 8.1(h) or 8.1(i) has occurred (in which
event the procedures of Section 1.1(c)(iv) shall apply) and regardless
of whether the conditions precedent set forth in this Agreement to the making
of a Revolving Credit Advance are then satisfied, each Revolving Lender shall
disburse directly to Agent, its Pro Rata Share of a Revolving Credit Advance on
behalf of the Swing Line Lender, prior to 2:00 p.m. (Chicago time), in
immediately available funds on the Business Day next succeeding the date that
notice is given.  The proceeds of those
Revolving Credit Advances shall be immediately paid to the Swing Line Lender
and applied to repay the Refunded Swing Line Loan.


 


(iv)          If, prior to refunding a Swing Line
Loan with a Revolving Credit Advance pursuant to Section 1.1(c)(iii),
one of the events described in Sections 8.1(h) or 8.1(i) has occurred,
then, subject to the provisions of Section 1.1(c)(v) below, each
Revolving Lender 


 


4





















 


shall, on the date such
Revolving Credit Advance was to have been made for the benefit of Borrower,
purchase from the Swing Line Lender an undivided participation interest in the
Swing Line Loan in an amount equal to its Pro Rata Share of such Swing Line
Loan.  Upon request, each Revolving
Lender shall promptly transfer to the Swing Line Lender, in immediately
available funds, the amount of its participation interest.


 


(v)           Each Revolving Lender’s obligation to
make Revolving Credit Advances in accordance with Section 1.1(c)(iii)
and to purchase participation interests in accordance with Section
1.1(c)(iv) shall be absolute and unconditional and shall not be affected by
any circumstance, including (A) any setoff, counterclaim, recoupment, defense
or other right that such Revolving Lender may have against the Swing Line
Lender, Borrower or any other Person for any reason whatsoever; (B) the
occurrence or continuance of any Default or Event of Default; (C) any inability
of Borrower to satisfy the conditions precedent to borrowing set forth in this
Agreement at any time or (D) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing.  If any Revolving Lender does not make
available to Agent or the Swing Line Lender, as applicable,  the amount required pursuant to Sections
1.1(c)(iii) or 1.1(c)(iv), as the case may be, the Swing Line Lender shall
be entitled to recover such amount on demand from such Revolving Lender,
together with interest thereon for each day from the date of non-payment until
such amount is paid in full at the Federal Funds Rate for the first two (2)
Business Days and at the Index Rate thereafter.


 


(d)           Reliance on Notices.  Agent shall be entitled to rely upon, and
shall be fully protected in relying upon, any Notice of Revolving Credit
Advance, Notice of Conversion/Continuation or similar notice reasonably
believed by Agent to be genuine.  Agent
may assume that each Person executing and delivering any notice in accordance
herewith was duly authorized, unless the responsible individual acting thereon
for Agent has actual knowledge to the contrary.


 


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


 


1.3           Prepayments.


 


(a)           Voluntary Prepayments; Reductions
in Revolving Loan Commitments. 
Borrower may at any time on at least three (3) days’ prior written
notice to Agent (i) voluntarily prepay all or part of the Term Loan and/or
(ii) permanently reduce (but not terminate) the Revolving Loan Commitment; provided that (A) any such prepayments or
reductions shall be in a minimum amount of $500,000 and integral multiples of
$100,000 in excess of such amount, (B) the Revolving Loan Commitment shall
not be reduced pursuant to this sentence to an amount less than $30,000,000 and
(C) after giving effect to such reductions, Borrower shall comply with Section
1.3(b)(i).  In addition, Borrower may
at any time on at least ten (10) days’ prior written notice to Agent terminate
the Revolving Loan Commitment, provided,
that upon such termination all Loans and other Obligations shall be immediately
due and payable in full and all Letter of Credit Obligations shall be cash
collateralized or otherwise satisfied in accordance with Annex B
hereto.  Any such voluntary prepayment
and any reduction or termination of the 


 


5





















 


Revolving Loan Commitment
must be accompanied by the payment of any applicable LIBOR funding breakage
costs in accordance with Section 1.13(b).  Upon any such reduction or termination of the
Revolving Loan Commitment, Borrower’s right to request Revolving Credit
Advances, or request that Letter of Credit Obligations be incurred on its
behalf, or request Swing Line Advances, shall simultaneously be permanently
reduced or terminated, as the case may be. 
Each notice of partial prepayment shall designate the Loan or other
Obligations to which such prepayment is to be applied; provided, that any partial prepayments of
the Term Loan made by Borrower shall be applied to prepay the scheduled
installments of the Term Loan in inverse order of maturity.


 


(b)           Mandatory Prepayments.


 


(i)            If at any time Borrowing
Availability is less than $0, Borrower shall immediately repay the aggregate
outstanding Revolving Credit Advances to the extent required to eliminate such
deficiency.  If any such deficiency
remains after repayment in full of the aggregate outstanding Revolving Credit
Advances, Borrower shall provide cash collateral for the Letter of Credit
Obligations in the manner set forth in Annex B to the extent required to
eliminate such deficiency. 
Notwithstanding the foregoing, any Overadvance made pursuant to Section
1.1(a)(iii) shall be repaid only on demand in accordance with such Section.


 


(ii)           Immediately upon receipt by Borrower
or any Secured Guarantor of any proceeds of any cash asset disposition
(excluding proceeds of asset dispositions permitted by Section 6.8(a))
to the extent the net cash proceeds of such asset disposition exceed $250,000
in any single transaction or, when added to the net proceeds of all other asset
dispositions (other than asset dispositions permitted by Section 6.8(a))
during a Fiscal Year, exceed $500,000, Borrower shall prepay the Obligations in
an amount equal to all such proceeds, net of (A) commissions and other
reasonable transaction costs (including reasonable relocation costs), fees and
expenses properly attributable to such transaction and payable by Borrower or
any Secured Guarantor in connection therewith (in each case, paid to
non-Affiliates), (B) transfer taxes, (C) amounts payable to holders
of senior Liens (to the extent such Liens constitute Permitted Encumbrances
hereunder), if any, (D) appropriate reserves for income taxes payable in cash
in connection therewith and any adjustment in respect of the sale price of such
assets(s) specified by the definitive documents evidencing such sale (so long
as any such unused sale price reserve is applied at the end of the applicable
adjustment period as a mandatory prepayment hereunder) and (E) any portion of
the purchase price held in escrow (so long as such escrowed funds, upon release
to any Credit Party, are applied as a mandatory prepayment hereunder); provided, that if Borrower or the
applicable Secured Guarantor intends to reinvest all or any portion of the net
proceeds of any asset disposition within 270 days thereafter in fixed assets
and Borrower promptly notifies Agent of that intention in writing, and if
(x) no Event of Default shall have occurred and be continuing at the date
of such written notification, and (y) Borrower or such Secured Guarantor,
as the case may be, grants a first security interest to Agent in such
replacement assets when acquired, then the amount of any such mandatory
prepayment shall be reduced by the amount to be reinvested; provided, further that if and to the
extent that Borrower or such Secured Guarantor, as the case may be, does not
reinvest such net proceeds within that 270-day period, Borrower shall then
repay the Loans with net proceeds that have not been reinvested on the last day
of such 270-day period.  Any prepayment
pursuant to this Section 1.3(b)(ii) shall be applied in accordance with Section
1.3(c).


 


6





















 


(iii)          If Borrower or any Secured Guarantor
shall suffer any Event of Loss, then such Person shall (A) promptly notify
the Agent of such Event of Loss with anticipated net proceeds in excess of
$1,000,000 (including the amount of the estimated net insurance proceeds net of
amounts payable to holders of senior Liens (to the extent such Liens constitute
Permitted Encumbrances hereunder, if any) or other awards payable in connection
with such Event of Loss) and (B) promptly upon receipt of such proceeds by
such Person, Borrower shall prepay the Obligations in an amount equal to such
proceeds net of (x) all money actually applied (or held in reserve pending
such application) to repair or reconstruct the damaged property or property
affected by condemnation or taking but subject to the terms of Section
5.4(c), (y) all out-of-pocket transaction costs and (z) related cash
taxes.  Any prepayment pursuant to this Section
1.3(b)(iii) shall be applied in accordance with Section 1.3(d).


 


(iv)          Proceeds of Keyman Life Insurance
pledged to the Agent shall be immediately used to prepay the Obligations in an
amount equal to such proceeds, which shall be applied in accordance with Section
1.3(c).


 


(v)           If Holdings or Borrower issues Stock,
no later than the Business Day following the date of receipt of any cash
proceeds thereof net of underwriting discounts and commissions and other
reasonable costs, fees and expenses paid to non-Affiliates in connection
therewith, Borrower shall prepay the Obligations in an amount , if any,
required pursuant to Section 5.8. 
Any prepayment pursuant to Section 5.8(a) shall be applied in
accordance with Section 1.3(c) and all prepayments pursuant to Section 5.8(b)
shall be applied in accordance with Section 1.3(f).


 


(vi)          Until the Termination Date, Borrower
shall prepay the Obligations on the date that is ten (10) days after the earlier
of (A) the date on which Borrower’s annual audited Financial Statements
for the immediately preceding Fiscal Year (commencing with the Fiscal Year of
2004 as such immediately preceding Year) are delivered pursuant to Annex E
or (B) the 15th day after the date on which such annual audited Financial
Statements were required to be delivered pursuant to Annex E, in an
amount equal to seventy-five percent (75%) of Excess Cash Flow for the
immediately preceding Fiscal Year.  If
Holdings and its Subsidiaries on a consolidated basis maintain a ratio of (i)
Funded Debt measured as of the last day of any Fiscal Year to (ii) EBITDA for
the four Fiscal Quarters then ended of less than 4.25 to 1.00 but more than
3.75 to 1.0, the Excess Cash Flow
percentage shall be equal to fifty percent (50%) for that Fiscal Year.  If Holdings and its Subsidiaries on a
consolidated basis maintain a ratio of (i) Funded Debt measured as of the
last day of any Fiscal Year to (ii) EBITDA for the four Fiscal Quarters then
ended equal to or less than 3.75 to 1.00, the Excess Cash Flow percentage shall
be equal to twenty-five percent (25%) for that Fiscal Year.  Any prepayments from Excess Cash Flow paid
pursuant to this clause (vi) shall be applied in accordance with Section
1.3(c).  Each such prepayment shall
be accompanied by an Officer Certificate of Borrower’s Chief Financial Officer,
or another responsible officer of Borrower having substantially the same
authority and responsibility or otherwise acceptable to Agent, certifying the manner
in which Excess Cash Flow and the resulting prepayment were calculated, which
certificate shall be in form and substance satisfactory to Agent.


 


(c)           Application of Certain Mandatory
Prepayments.  Any prepayments made by
the Borrower pursuant to Sections 1.3(b)(ii), 1.3(b)(iv),
1.3(b)(v) (by reference to Section 5.8(a)), 


 


7





















 


or 1.3(b)(vi)
shall be applied as follows: first, to Fees and reimbursable expenses of
Agent then due and payable pursuant to any of the Loan Documents; second,
to interest then due and payable on the Term Loan; third, to prepay the
scheduled principal installments of the Term Loan in inverse order of maturity,
until such Term Loan shall have been prepaid in full; fourth, to
interest then due and payable on the Swing Line Loan; fifth, to the
principal balance of the Swing Line Loan until the same has been repaid in
full; sixth, to interest then due and payable on the Revolving Credit
Advances; seventh, to the outstanding principal balance of the Revolving
Credit Advances until the same has been paid in full; and eighth, to any
Letter of Credit Obligations, to provide cash collateral therefor in the manner
set forth in Annex B, until all such Letter of Credit Obligations have
been fully cash collateralized in the manner set forth in Annex B.  Neither the Revolving Loan Commitment nor the
Swing Line Commitment shall be permanently reduced by the amount of any such
prepayments.


 


(d)           Application of Prepayments from
Insurance Proceeds and Condemnation Proceeds.  Prepayments from insurance or condemnation
proceeds in connection with an Event of Loss in accordance with Sections
1.3(b)(iii) and 5.4(c) and the Mortgage(s), respectively, shall be
applied as follows:  insurance proceeds
from casualties or losses to cash or Inventory shall be applied first, to the
Swing Line Loans and, second, to the Revolving Credit Advances; insurance or
condemnation proceeds from casualties or losses to Equipment, Fixtures and Real
Estate shall be applied to scheduled installments of the Term Loan in inverse
order of maturity.  Neither the Revolving
Loan Commitment nor the Swing Line Loan Commitment shall be permanently reduced
by the amount of any such prepayments. 
If the precise amount of insurance or condemnation proceeds allocable to
Inventory as compared to Equipment, Fixtures and Real Estate are not otherwise
determined, the allocation and application of those proceeds shall be jointly
determined by Agent and Borrower.


 


(e)           No Implied Consent.  Nothing in this Section 1.3 shall be
construed to constitute Agent’s or any Lender’s consent to any transaction that
is not permitted by other provisions of this Agreement or the other Loan
Documents.


 


(f)            Application of Mandatory
Prepayments arising from a Qualified Public Offering.  Prepayments made by the Borrower pursuant to Section
1.3(b)(v) (by reference to Section 5.8(b)) shall be applied as
follows:  first, to interest then
due and payable on the Term Loan; second, to prepay the scheduled
principal installments of the Term Loan in inverse order of maturity, until the
Term Loan has been prepaid in full; third, to interest then due and
payable on the Swing Line Loan; fourth, to the principal balance of the
Swing Line Loan until the same has been repaid in full; fifth, to
interest then due and payable on the Revolving Credit Advances; sixth,
to the outstanding principal balance of the Revolving Credit Advances until the
same has been paid in full; and seventh, to any Letter of Credit
Obligations, to provide cash collateral therefor in the manner set forth in Annex
B, until all such Letter of Credit Obligations have been fully cash
collateralized in the manner set forth in Annex B.  Neither the Revolving Loan Commitment nor the
Swing Line Commitment shall be permanently reduced by the amount of any such
prepayments.


 


1.4           Use
of Proceeds.  Borrower shall utilize
the proceeds of the Term Loan, the Revolving Loan and the Swing Line Loan for
the Refinancing and any related transaction costs, fees and expenses, for the
financing of Borrower’s ordinary working capital and general 


 


8





















 


corporate
needs and for any other purpose not prohibited hereunder, and Borrower may use
the proceeds of the Revolving Loan to finance Permitted Loan Funded
Acquisitions, subject to the terms and conditions set forth herein.  Disclosure Schedule (1.4) contains a
description of Borrower’s sources and uses of funds as of the Effective Date,
including Loans and Letter of Credit Obligations to be made or incurred on that
date, and a funds flow memorandum detailing how funds from each source are to
be transferred to particular uses.


 


1.5           Interest and Applicable Margins.


 


(a)           Borrower shall pay interest to Agent,
for the ratable benefit of Lenders in accordance with the various Loans being
made by each Lender, in arrears on each applicable Interest Payment Date, at
the following rates:


 


(i)            with respect to the Revolving Credit
Advances, the Index Rate plus the Applicable Revolver Index Margin per
annum or, at the election of Borrower, the applicable LIBOR Rate plus
the Applicable Revolver LIBOR Margin per annum, based on the aggregate
Revolving Credit Advances outstanding from time to time;


 


(ii)           with respect to the Term Loan, the
Index Rate plus the Applicable Term Loan Index Margin per annum or, at
the election of Borrower, the applicable LIBOR Rate plus the Applicable
Term Loan LIBOR Margin per annum; and


 


(iii)          with respect to the Swing Line Loan,
the Index Rate plus the Applicable Revolver Index Margin per annum.


 


The
Applicable Margins are as follows:


 


	
  Applicable Revolver Index Margin

  	
   

  	
  1.75

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Applicable Revolver LIBOR Margin

  	
   

  	
  3.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Applicable Term Loan Index Margin

  	
   

  	
  2.50

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Applicable Term Loan LIBOR Margin

  	
   

  	
  3.75

  	
  %

  



 


(b)           If any payment on any Loan becomes
due and payable on a day other than a Business Day, the maturity thereof will
be extended to the next succeeding Business Day (except as set forth in the
definition of LIBOR Period) and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension.


 


(c)           All computations of Fees calculated
on a per annum basis and interest shall be made by Agent on the basis of a
360-day year, in each case for the actual number of days occurring in the
period for which such interest and Fees are payable.  The Index Rate is a floating rate determined
for each day.  Each determination by
Agent of an interest rate and Fees hereunder shall be final, binding and
conclusive on Borrower, absent manifest error.


 


9





















 


(d)           So long as an Event of Default has
occurred and is continuing under Section 8.1(a), (h) or (i), or so long
as any other Event of Default has occurred and is continuing and at the
election of Agent (or upon the written request of Requisite Lenders) confirmed
by written notice from Agent to Borrower, the interest rates applicable to the
Loans and the Letter of Credit Fees shall be increased by two percentage points
(2%) per annum above the rates of interest or the rate of such Fees otherwise
applicable hereunder (“Default Rate”). Interest and Letter of Credit
Fees at the Default Rate shall accrue from the initial date of such Event of
Default if such Event of Default arose under Section 8.1(a), (h) or (i)
or from the date of the delivery of the written notice from Agent to Borrower
for all other Events of Default, until that Event of Default is cured or waived
and shall be payable upon demand.


 


(e)           Subject to the conditions precedent
set forth in Section 2.2, Borrower shall have the option to (i) request
that any Revolving Credit Advance be made as a LIBOR Loan, (ii) convert at
any time all or any part of outstanding Loans (other than the Swing Line Loan)
from Index Rate Loans to LIBOR Loans, (iii) convert any LIBOR Loan to an Index
Rate Loan, subject to payment of LIBOR breakage costs in accordance with Section
1.13(b) if such conversion is made prior to the expiration of the LIBOR
Period applicable thereto, or (iv) continue all or any portion of any Loan
(other than the Swing Line Loan) as a LIBOR Loan upon the expiration of the
applicable LIBOR Period and the succeeding LIBOR Period of that continued Loan
shall commence on the first day after the last day of the LIBOR Period of the
Loan to be continued.  Any Loan or group
of Loans having the same proposed LIBOR Period to be made or continued as, or
converted into, a LIBOR Loan must be in a minimum amount of $1,000,000 and
integral multiples of $250,000 in excess of such amount.  Any such election must be made by 11:00 a.m.
(Chicago time) on the 3rd Business Day prior to (1) the date of any
proposed Advance which is to bear interest at the LIBOR Rate, (2) the end of
each LIBOR Period with respect to any LIBOR Loans to be continued as such, or
(3) the date on which Borrower wishes to convert any Index Rate Loan
(other than the Swing Line) to a LIBOR Loan for a LIBOR Period designated by
Borrower in such election.  If no
election is received with respect to a LIBOR Loan by 11:00 a.m. (Chicago time)
on the 3rd Business Day prior to the end of the LIBOR Period with respect
thereto (or if a Default or an Event of Default has occurred and is continuing
or if the additional conditions precedent set forth in Section 2.2 shall
not have been satisfied), that LIBOR Loan shall be converted to an Index Rate
Loan at the end of its LIBOR Period. 
Borrower must make such election by notice to Agent in writing, by
telecopy or overnight courier.  In the
case of any conversion or continuation, such election must be made pursuant to
a written notice (a “Notice of Conversion/Continuation”) in the form of Exhibit
1.5(e).  No Loan may be made as or
converted into a LIBOR Loan until the earlier of (i) 45 days after the
Effective Date and (ii) completion of Primary Syndication as determined by
Agent.  As used in this Section 1.5(e),
“Primary Syndication” shall occur when GE Capital’s aggregate Commitments,
together with the total Loans funded by GE Capital, do not exceed $50,000,000.


 


(f)            Notwithstanding anything to the
contrary set forth in this Section 1.5, if a court of competent
jurisdiction determines in a final order that the rate of interest payable
hereunder exceeds the highest rate of interest permissible under law (the “Maximum
Lawful Rate”), then so long as the Maximum Lawful Rate would be so
exceeded, the rate of interest payable hereunder shall be equal to the Maximum
Lawful Rate; provided, however,
that if at any time thereafter the rate of interest payable hereunder is less
than the Maximum Lawful Rate, Borrower shall continue to pay interest hereunder
at the Maximum Lawful Rate until such time 


 


10





















 


as the total interest
received by Agent, on behalf of Lenders, is equal to the total interest that
would have been received had the interest rate payable hereunder been (but for
the operation of this paragraph) the interest rate payable since the Original
Closing Date as otherwise provided in this Agreement.  Thereafter, interest hereunder shall be paid
at the rate(s) of interest and in the manner provided in Sections 1.5(a)
through (e), unless and until the rate of interest again exceeds the
Maximum Lawful Rate, and at that time this paragraph shall again apply.  In no event shall the total interest received
by any Lender pursuant to the terms hereof exceed the amount that such Lender
could lawfully have received had the interest due hereunder been calculated for
the full term hereof at the Maximum Lawful Rate.  If the Maximum Lawful Rate is calculated
pursuant to this paragraph, such interest shall be calculated at a daily rate
equal to the Maximum Lawful Rate divided by the number of days in the year in
which such calculation is made.  If,
notwithstanding the provisions of this Section 1.5(f), a court of
competent jurisdiction shall finally determine that a Lender has received
interest hereunder in excess of the Maximum Lawful Rate, Agent shall, to the
extent permitted by applicable law, promptly apply such excess in the order
specified in Section 1.11 and thereafter shall refund any excess to
Borrower or as a court of competent jurisdiction may otherwise order.


 


1.6           Eligible
Accounts.  All of the Accounts owned
by Borrower or any Secured Guarantor and reflected in the most recent Borrowing
Base Certificate delivered by Borrower to Agent shall be “Eligible Accounts”
for purposes of this Agreement, except any Account to which any of the
exclusionary criteria set forth below applies. 
Agent shall have the right to establish or modify or eliminate Reserves
against Eligible Accounts from time to time in its reasonable credit judgment
to reflect issues with respect to the collectability of Accounts arising or
discovered by Agent after the Original Closing Date.  In addition, Agent reserves the right, at any
time and from time to time after the Original Closing Date, to adjust any of
the criteria set forth below or to establish new criteria in its reasonable
credit judgment to reflect changes in the Borrower’s or the applicable Secured
Guarantor’s business operations or the collectability of Accounts, subject to
the approval of Requisite Revolving Lenders in the case of adjustments or new
criteria which have the effect of making more credit available.  Eligible Accounts shall not include any
Account of Borrower or a Secured Guarantor:


 


(a)           that does not arise from the sale of
goods or the performance of services by Borrower or a Secured Guarantor in the
ordinary course of its business;


 


(b)           (i) upon which Borrower’s or the
applicable Secured Guarantor’s right to receive payment is not absolute or is
contingent upon the fulfillment of any condition whatsoever or (ii) as to which
Borrower or the applicable Secured Guarantor is not able to bring suit or
otherwise enforce its remedies against the Account Debtor through judicial
process, or (iii) if the Account represents a progress billing consisting of an
invoice for goods sold or used or services rendered pursuant to a contract
under which the Account Debtor’s obligation to pay that invoice is subject to
Borrower’s or the applicable Secured Guarantors’ completion of further
performance under such contract or is subject to the equitable lien of a surety
bond issuer;


 


(c)           to the extent that any defense,
counterclaim, setoff or dispute is asserted as to such Account;


 


11





















 


(d)           that is not a true and correct
statement of bona fide indebtedness incurred in the amount of the Account for
merchandise sold to or services rendered and accepted by the applicable Account
Debtor;


 


(e)           with respect to which an invoice has
not been sent to the applicable Account Debtor;


 


(f)            that (i) is not owned by Borrower or
a Secured Guarantor or (ii) is subject to any right, claim, security interest
or other interest of any other Person, other than Liens described in clauses
(a), (e) and (t) of the definition of Permitted Encumbrances
and Liens in favor of Agent, on behalf of itself and Lenders but only to the
extent of such right, claim, security interest or other interest;


 


(g)           that arises from a sale to any
director, officer, other employee or Affiliate of any Credit Party, or to any
entity that has any common officer with any Credit Party;


 


(h)           that constitutes an Eligible
Government Account or is the obligation of an Account Debtor that is the United
States government or a political subdivision thereof, or any state, county or
municipality or department, agency or instrumentality thereof, unless Borrower
or the applicable Secured Guarantor has complied with respect to such
obligation with the Federal Assignment of Claims Act of 1940, or any applicable
state, county or municipal law restricting assignment thereof;


 


(i)            that is the obligation of an Account
Debtor located in a foreign country other than Canada (excluding the province
of Newfoundland, the Northwest Territories and the Territory of Nunavut),
unless payment thereof is assured by a letter of credit or credit insurance
assigned and delivered to Agent, satisfactory to Agent as to form, amount and
issuer;


 


(j)            to the extent Borrower or any
Secured Guarantor or any Subsidiary thereof is liable for goods sold or
services rendered by the applicable Account Debtor to Borrower or any Secured
Guarantor or any Subsidiary thereof but only to the extent of the potential
offset;


 


(k)           that arises with respect to goods
that are delivered on a bill-and-hold, cash-on-delivery basis or placed on
consignment, guaranteed sale or other terms by reason of which the payment by
the Account Debtor is or may be conditional;


 


(l)            that is in default; provided, that, an Account shall be deemed
in default upon the occurrence of any of the following:


 


(i)            the Account is not paid within the
earlier of: sixty (60) days following its due date or one hundred twenty (120)
days following its original invoice date unless payment thereof is secured by a
letter of credit satisfactory to Agent as to form, substance and issuer;


 


(ii)           the Account Debtor obligated upon
such Account suspends business, makes a general assignment for the benefit of
creditors or fails to pay its debts generally as they come due; or


 


12





















 


(iii)          a petition is filed by or against any
Account Debtor obligated upon such Account under any bankruptcy law or any
other federal, state or foreign (including any provincial) receivership,
insolvency relief or other law or laws for the relief of debtors;


 


(m)          that is the obligation of an Account
Debtor if 50% or more of the Dollar amount of all Accounts owing by that
Account Debtor are ineligible under the criteria set forth in clause (l)
above;


 


(n)           as to which Agent’s Lien thereon, on
behalf of itself and Lenders, is not a first priority perfected Lien;


 


(o)           as to which any of the
representations or warranties in the Loan Documents are untrue in any material
respect;


 


(p)           to the extent such Account is evidenced
by a judgment, Instrument or Chattel Paper;


 


(q)           to the extent that such Account,
together with all other Accounts owing by such Account Debtor and its
Affiliates (excluding the United States government as Account Debtor) as of any
date of determination exceed 15% of all Eligible Accounts; or


 


(r)            that is payable in any currency
other than Dollars, Canadian Dollars, Pounds Sterling or Euros.


 


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


 


1.7           Eligible
Inventory.  All of the Inventory
owned by the Borrower or any Secured Guarantor and reflected in the most recent
Borrowing Base Certificate delivered by Borrower to Agent shall be “Eligible
Inventory” for purposes of this Agreement, except any Inventory to which
any of the exclusionary criteria set forth below applies.  Agent shall have the right to establish,
modify, or eliminate Reserves against Eligible Inventory from time to time in
its reasonable credit judgment to reflect issues with respect to the salability
of Inventory arising or discovered by Agent after the Effective Date.  In addition, Agent reserves the right, at any
time and from time to time after the Effective Date, to adjust any of the
criteria set forth below or to establish new criteria in its reasonable credit
judgment to reflect changes in the Borrower’s or the applicable Secured
Guarantor’s business operations or salability of Inventory, subject to the
approval of Requisite Revolving Lenders in the case of adjustments or new
criteria which have the effect of making more credit available.  Eligible Inventory shall not include any
Inventory of Borrower or any Secured Guarantor that:


 


(a)           is not owned by Borrower or any
Secured Guarantor free and clear of all Liens and rights of any other Person
(including the rights of a purchaser that has made progress payments and the
rights of a surety that has issued a bond to assure Borrower’s or a Secured
Guarantor’s performance with respect to that Inventory), except Liens described
in clauses (a), (d), (e) and (t) of the definition
of Permitted Encumbrances and the Liens in favor of Agent, on behalf of itself
and Lenders;


 


13





















 


(b)           (i) is not located on premises owned,
leased or rented by Borrower or any Secured Guarantor and set forth in Disclosure
Schedule (3.2), (ii) is not located on premises acquired or leased by
Borrower or any Secured Guarantor in connection with any Permitted Loan Funded
Acquisition, or (iii) is stored at a leased location, unless Agent has
given its prior consent thereto and unless either (x) a reasonably satisfactory
landlord waiver has been delivered to Agent, or (y) Reserves reasonably
satisfactory to Agent have been established with respect thereto, or
(iii) is stored with a bailee or warehouseman unless a reasonably
satisfactory, acknowledged bailee letter has been received by Agent and
Reserves reasonably satisfactory to Agent have been established with respect
thereto, or (iv) is located at a location owned by Borrower or any Secured
Guarantor subject to a mortgage in favor of a lender other than Agent, unless a
reasonably satisfactory mortgagee waiver has been delivered to Agent, or (v) is
located at any site if the aggregate book value of Inventory at any such
location is less than $50,000;


 


(c)           is placed on consignment or is in
transit, except for Inventory in transit between domestic locations of Credit
Parties as to which Agent’s Liens have been perfected at origin and
destination;


 


(d)           is covered by a negotiable document
of title, unless such document has been delivered to Agent with all necessary
endorsements, free and clear of all Liens except those in favor of Agent and
Lenders;


 


(e)           is excess, obsolete, slow moving (in
excess of 2-years’ supply), unsalable, shopworn, seconds, damaged or unfit for
sale;


 


(f)            consists of display items or packing
or shipping materials, manufacturing supplies, custom-made Inventory which is
not subject to an outstanding purchase order that is not revocable by its terms
or is not sold in the ordinary course of business, work-in-process Inventory or
replacement parts (excluding Component Parts and Purchased Parts);


 


(g)           is not of a type held for sale in the
ordinary course of Borrower’s or the applicable Secured Guarantor’s business;


 


(h)           is not subject to a first priority
lien in favor of Agent on behalf of itself and Lenders;


 


(i)            breaches in any material respect any
of the representations or warranties pertaining to Inventory set forth in the
Loan Documents;


 


(j)            consists of any costs associated
with “freight-in” charges;


 


(k)           consists of Hazardous Materials or
goods that can be transported or sold only with licenses that are not readily
available; or


 


(l)            is not covered by casualty insurance
in accordance with Section 5.4.


 


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


 


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1.9           Fees.


 


(a)           Borrower has paid and shall pay to GE
Capital, individually, the Fees specified in the GE Capital Fee Letter, at the
times specified for payment therein.


 


(b)           As additional compensation for the
Revolving Lenders, Borrower shall pay to Agent, for the ratable benefit of such
Lenders, in arrears, on the first Business Day of each month prior to the
Commitment Termination Date and on the Commitment Termination Date, a Fee for
Borrower’s non-use of available funds in an amount equal to one-half of one
percent (0.50%) per annum (calculated on the basis of a 360 day year for actual
days elapsed) multiplied by the difference between (x) the Maximum Amount (as
it may be reduced from time to time) and (y) the average for the period of the
daily closing balances of the Revolving Loan and the Swing Line Loan
outstanding during the period for which such Fee is due.


 


(c)           Borrower shall pay to Agent, for the
ratable benefit of Revolving Lenders, the Letter of Credit Fee as provided in Annex B.


 


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


 


1.11         Application and Allocation of
Payments.


 


(a)           So long as no Event of Default has
occurred and is continuing and the Commitment Termination Date has not
occurred, (i) payments received in the ordinary course of business and not
subject to clauses (ii), (iii) and (iv) below shall be applied, first, to the
Swing Line Loan and, second, to the Revolving Loan; (ii) payments matching
specific scheduled payments then due shall be applied to those scheduled
payments; (iii) voluntary prepayments shall be applied as determined by
Borrower, subject to the provisions of Section 1.3(a); and (iv)
mandatory prepayments shall be applied as set forth in Sections 1.3(c),
1.3(d) and 1.3(f).  All payments and
prepayments applied to a particular Loan shall be applied ratably to the
portion thereof held by each Lender as determined by its Pro Rata
Share.  As to any other payment, and as
to all payments made when an Event of Default has occurred and is continuing or
following the Commitment Termination Date, Borrower and each other Credit Party
hereby irrevocably waive the right to direct the application of any and all
payments (including monetary proceeds of collections of or realizations upon
any Collateral) received from or on behalf of Borrower or any other Credit Party,
and Borrower and each other Credit Party hereby irrevocably agree that Agent
and the Requisite Lenders shall have the continuing exclusive right to apply
any and all such payments against the Obligations as Agent and the Requisite
Lenders may deem advisable notwithstanding any previous entry by Agent in the
Loan Account or any other books and records and agree to be bound by all such
payment applications.  In the absence of
a specific determination by Agent and the Requisite Lenders with respect
thereto, payments shall be 


 


15





















 


applied to amounts then
due and payable in the following order: (1) to Fees and Agent’s expenses
reimbursable hereunder; (2) to interest on the Swing Line Loan; (3) to
principal payments on the Swing Line Loan; (4) to interest on the other Loans,
ratably in proportion to the interest accrued as to each Loan; (5) to principal
payments on the other Loans and to provide cash collateral for Letter of Credit
Obligations in the manner described in Annex B, ratably to the
aggregate, combined principal balance of the other Loans and outstanding Letter
of Credit Obligations; and (6) to all other Obligations, including any Hedging
Termination Value owed by Borrower and/or one or more Secured Guarantors with
respect to the Specified Hedging Agreements and expenses of Lenders to the
extent reimbursable under Section 11.3.


 


(b)           Agent is authorized to, and at its
sole election may, charge to the Revolving Loan balance on behalf of Borrower
and cause to be paid all Fees, Charges, reimbursable expenses (including
insurance premiums in accordance with Section 5.4(a)) and interest and
principal, other than principal of the Revolving Loan, owing by Borrower under
this Agreement or any of the other Loan Documents if and to the extent Borrower
fails to pay promptly any such amounts as and when due, even if the amount of
such charges would exceed Borrowing Availability at such time.  At Agent’s option and to the extent permitted
by law, any charges so made shall constitute part of the Revolving Loan
hereunder.


 


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


 


1.13         Indemnity.


 


(a)           Each Credit Party that is a signatory
hereto shall jointly and severally indemnify and hold harmless each of Agent,
Lenders and their respective Affiliates, and each such Person’s respective
officers, directors, employees, attorneys, agents and representatives (each, an
“Indemnified Person”), from and against any and all suits, actions,
proceedings, claims, damages, losses, liabilities and expenses (including
reasonable attorneys’ fees and disbursements and other costs of investigation
or defense, including those incurred upon any appeal) that may be instituted or
asserted against or incurred by any such Indemnified Person as the result of
credit


 


16





















 


having been extended,
suspended or terminated under this Agreement and the other Loan Documents and
the administration of such credit, and in connection with or arising out of the
transactions contemplated hereunder and thereunder and any actions or failures
to act in connection therewith, and legal costs and expenses arising out of or
incurred in connection with disputes between or among any  parties
to any of the Loan Documents (other than disputes between and among Agent/or
the Lenders arising when no Event of Default has occurred and is continuing)
(collectively, “Indemnified Liabilities”); provided, that no such Credit Party shall be liable for any
indemnification to an Indemnified Person to the extent that any such suit,
action, proceeding, claim, damage, loss, liability or expense results from that
Indemnified Person’s gross negligence or willful misconduct; and, provided further, that any obligations of
the Credit Parties to the Indemnified Persons with respect to Environmental
Liabilities and Hazardous Materials shall be governed exclusively by the terms
and provisions of the Environmental Indemnity Agreement and not by the terms
and provisions of this Section 1.13 or any other term and provision of
this Agreement or any other Loan Document other than the Environmental
Indemnity Agreement.  NO INDEMNIFIED
PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY LOAN DOCUMENT,
ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER
PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT,
PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT
OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT
OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.


 


(b)           To induce Lenders to provide the
LIBOR Rate option on the terms provided herein, if (i) any LIBOR Loans are
repaid in whole or in part prior to the last day of any applicable LIBOR Period
(whether that repayment is made pursuant to any provision of this Agreement or
any other Loan Document or occurs as a result of acceleration, by operation of
law or otherwise); (ii) Borrower shall default in payment when due of the
principal amount of or interest on any LIBOR Loan; (iii) Borrower shall refuse
to accept any borrowing of, or shall request a termination of any borrowing,
conversion into or continuation of LIBOR Loans after Borrower has given notice
requesting the same in accordance herewith; or (iv) Borrower shall fail to make
any prepayment of a LIBOR Loan after Borrower has given a notice thereof in
accordance herewith, then Borrower shall indemnify and hold harmless each
Lender from and against all losses, costs and expenses resulting from or
arising from any of the foregoing.  Such
indemnification shall include any loss (including loss of margin) or expense
arising from the reemployment of funds obtained by it or from fees payable to
terminate deposits from which such funds were obtained.  For the purpose of calculating amounts
payable to a Lender under this subsection, each Lender shall be deemed to have
actually funded its relevant LIBOR Loan through the purchase of a deposit
bearing interest at the LIBOR Rate in an amount equal to the amount of that
LIBOR Loan and having a maturity comparable to the relevant LIBOR Period; provided, that each Lender may fund each
of its LIBOR Loans in any manner it sees fit, and the foregoing assumption
shall be utilized only for the calculation of amounts payable under this
subsection.  This covenant shall survive
the termination of this Agreement and the payment of the Notes and all other
amounts payable hereunder.  As promptly
as practicable under the circumstances, each Lender shall provide Borrower with
its written calculation of all amounts payable pursuant to this Section
1.13(b), and such calculation shall be presumed to be correct unless
Borrower shall object in writing within twenty (20) Business Days of receipt
thereof,


 


17





















 


specifying the basis for
such objection in detail.  The payment of
any amounts due under this Section 1.13(b) by Borrower as a result of
any of the events described in clause (i) (other than as a result of
acceleration following an Event of Default),
clause (iii) or clause (iv) above shall constitute a
cure of any Default or Event of Default arising solely from such events.


 


1.14         Access.  Each Credit Party that is a party hereto
shall, during normal business hours, from time to time upon three (3) Business
Days’ prior notice as frequently as Agent determines to be appropriate:
(a) provide Agent and any of its officers, employees and agents access to
its properties, facilities, advisors, officers, employees of each Credit Party
and to the Collateral, (b) permit Agent, and any of its officers,
employees and agents, to inspect, audit and make extracts from any Credit
Party’s books and records, and (c) permit Agent, and its officers, employees
and agents, to inspect, review, evaluate and make test verifications and counts
of the Accounts, Inventory and other Collateral of any Credit Party.  If an Event of Default has occurred and is
continuing or if access is necessary to preserve or protect the Collateral as
determined by the Agent, each such Credit Party shall provide such access to
Agent and to each Lender at all times and without advance notice.  Furthermore, so long as any Event of Default
has occurred and is continuing, Borrower shall provide Agent and each Lender
with access to its suppliers and customers. 
Each Credit Party shall make available to Agent and its counsel, as
quickly as is possible under the circumstances, originals or copies of all
books and records of the Credit Parties that Agent may reasonably request.  Each Credit Party shall deliver any document
or instrument necessary for Agent, as it may from time to time reasonably
request, to obtain records from any service bureau or other Person that maintains
records for such Credit Party.  As long
as a Trigger Event has occurred and is continuing, Agent and Lenders agree that
Agent shall conduct a field Collateral audit of Borrower, the Secured
Guarantors and Schaublin every six months from the date of the last field
Collateral audit.  Agent will give
Lenders at least five (5) days’ prior written notice of regularly scheduled
audits.  Representatives of other Lenders
may accompany Agent’s representatives on regularly scheduled audits at no
charge to Borrower.


 


1.15         Taxes.


 


(a)           Any and all payments by Borrower
hereunder or under the Notes shall be made, in accordance with this Section
1.15, free and clear of and without deduction for any and all present or
future Taxes.  If Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under the Notes, (i) the sum payable shall be increased as much as
shall be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 1.15)
Agent or Lenders, as applicable, receive an amount equal to the sum they would
have received had no such deductions been made, (ii) Borrower shall make such
deductions, and (iii) Borrower shall pay the full amount deducted to the
relevant taxing or other authority in accordance with applicable law.  Within thirty (30) days after the date of any
payment of any such Taxes, Borrower shall furnish to Agent the original or a
certified copy of a receipt evidencing payment thereof.


 


(b)           Each Credit Party that is a signatory
hereto shall indemnify and, within thirty (30) days of demand therefor, pay
Agent and each Lender for the full amount of Taxes (including any Taxes imposed
by any jurisdiction on amounts payable under this Section 1.15) paid by
Agent or such Lender, as appropriate, and any liability (including penalties,
interest and 


 


18





















 


expenses) arising
therefrom or with respect thereto, whether or not such Taxes were correctly or
legally asserted.


 


(c)           Each Lender organized under the laws
of a jurisdiction outside the United States (a “Foreign Lender”) shall
provide to Borrower and Agent a properly completed and executed IRS Form W-8ECI
or Form W-8BEN or other applicable form, certificate or document prescribed by
the IRS or the United States certifying as to such Foreign Lender’s entitlement
to an exemption from United States withholding tax (a “Certificate of
Exemption”).  Any foreign Person that
seeks to become a Lender under this Agreement shall provide a Certificate of
Exemption to Borrower and Agent prior to becoming a Lender hereunder.  No foreign Person may become a Lender
hereunder if such Person fails to deliver a Certificate of Exemption in advance
of becoming a Lender.  Any foreign Person
that has become a Lender hereunder and that has provided a Certificate of
Exemption shall, to the extent legally able to do so, renew its Certificate of
Exemption upon the expiration of the previously delivered Certificate of
Exemption.


 


1.16         Capital Adequacy; Increased Costs;
Illegality.


 


(a)           If any Lender shall have determined
that any law, treaty, governmental (or quasi-governmental) rule, regulation,
guideline or order regarding capital adequacy, reserve requirements or similar
requirements or compliance by any Lender with any request or directive
regarding capital adequacy, reserve requirements or similar requirements
(whether or not having the force of law), in each case, adopted after the
Effective Date, from any central bank or other Governmental Authority increases
or would have the effect of increasing the amount of capital, reserves or other
funds required to be maintained by such Lender and thereby reducing the rate of
return on such Lender’s capital as a consequence of its obligations hereunder,
then Borrower shall from time to time upon demand by such Lender issued within
ninety (90) days after adoption thereof and setting forth a calculation of the
reduction (with a copy of such demand to Agent) pay to Agent, for the account
of such Lender, additional amounts sufficient to compensate such Lender for
such reduction.  A certificate as to the
amount of that reduction and showing the basis of the computation thereof
submitted by such Lender to Borrower and to Agent shall, absent manifest error,
be presumptive evidence of the matters set forth therein.


 


(b)           If, due to either (i) the
introduction of or any change in any law or regulation (or any change in the
interpretation thereof) or (ii) the compliance with any guideline or
request from any central bank or other Governmental Authority (whether or not
having the force of law), in each case adopted after the Original Closing Date,
there shall be any increase in the cost to any Lender of agreeing to make or
making, funding or maintaining any Loan, then Borrower shall from time to time,
upon demand by such Lender issued within ninety (90) days after the
introduction thereof or compliance therewith and setting forth a calculation of
such increased costs (with a copy of such demand to Agent), pay to Agent for
the account of such Lender additional amounts sufficient to compensate such
Lender for such increased cost.  A
certificate as to the amount of such increased cost, submitted to Borrower and
to Agent by such Lender, shall be presumptive evidence of the matters set forth
therein, absent manifest error.  Each
Lender agrees that, as promptly as practicable after it becomes aware of any
circumstances referred to above which would result in any such increased cost,
the affected Lender shall, to the extent not inconsistent with such Lender’s
internal policies of general application, use reasonable 


 


19





















 


commercial efforts to
minimize costs and expenses incurred by it and payable to it by Borrower
pursuant to this Section 1.16(b).


 


(c)           Notwithstanding anything to the
contrary contained herein, if the introduction of or any change in any law or
regulation (or any change in the interpretation thereof) shall make it
unlawful, or any central bank or other Governmental Authority shall assert that
it is unlawful, for any Lender to agree to make or to make or to continue to
fund or maintain any LIBOR Loan, then, unless that Lender is able to make or to
continue to fund or to maintain such LIBOR Loan at another branch or office of
that Lender without, in that Lender’s opinion, adversely affecting it or its
Loans or the income obtained therefrom, on notice thereof and demand therefor
by such Lender to Borrower through Agent, (i) the obligation of such
Lender to agree to make or to make or to continue to fund or maintain LIBOR
Loans shall terminate and (ii) Borrower shall forthwith prepay in full all
outstanding LIBOR Loans owing to such Lender, together with interest accrued
thereon, unless Borrower, within five (5) Business Days after the
delivery of such notice and demand, converts all LIBOR Loans into Index Rate
Loans.


 


(d)           Within fifteen (15) days after
receipt by Borrower of written notice and demand from any Lender (an “Affected
Lender”) as provided in Sections 1.15(a), 1.15(b), 1.16(a) or 1.16(b),
Borrower may, at its option, notify Agent and such Affected Lender of its
intention to replace the Affected Lender. 
So long as no Default or Event of Default has occurred and is
continuing, Borrower, with the consent of Agent, may obtain, at Borrower’s
expense, a replacement Lender (“Replacement Lender”) for the Affected
Lender, which Replacement Lender must be reasonably satisfactory to Agent.  If Borrower obtains a Replacement Lender
within one hundred eighty (180) days following notice of its intention to do
so, the Affected Lender must sell and assign its Loans and Commitments to such
Replacement Lender for an amount equal to the principal balance of all Loans
held by the Affected Lender and all accrued interest and Fees with respect
thereto through the date of such sale; provided,
that Borrower shall have reimbursed such Affected Lender for the additional
amounts or increased costs that it is entitled to receive under Sections
1.15(a), 1.15(b), 1.16(a) or 1.16(b) through the date of such sale and assignment.  Notwithstanding the foregoing, Borrower shall
not have the right to obtain a Replacement Lender if the Affected Lender
rescinds its demand for increased costs or additional amounts within fifteen
(15) days following its receipt of Borrower’s notice of intention to replace
such Affected Lender.  Furthermore, if
Borrower gives a notice of intention to replace and does not so replace such
Affected Lender within one hundred eighty (180) days thereafter, Borrower’s
rights under this Section 1.16(d) shall terminate with respect to the
increased costs or additional amounts of such Affected Lender giving rise to
such notice to replace such Affected Lender and Borrower shall promptly pay all
increased costs and or additional amounts demanded by such Affected Lender
pursuant to Sections 1.15(a), 1.15(b), 1.16(a) and 1.16(b).


 


1.17         Single
Loan.  All Loans to Borrower and all
of the other Obligations of Borrower arising under this Agreement, the Prior
Credit Agreement and the other Loan Documents shall constitute one general
obligation of Borrower secured, until the Termination Date, by all of the
Collateral.


 


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2.     CONDITIONS PRECEDENT


 


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


 


(a)           Credit Agreement; Loan Documents.  This Agreement or counterparts hereof shall
have been duly executed by, and delivered to, Borrower, each other Credit
Party, Agent and Lenders; and Agent shall have received such documents,
instruments, agreements and legal opinions as Agent shall reasonably request in
connection with the transactions contemplated by this Agreement and the other
Loan Documents, including all those listed in the Closing Checklist attached
hereto as Annex D, each in form and substance reasonably satisfactory to
Agent.


 


(b)           Prior Debt Obligations.  Agent shall have received evidence
satisfactory to Agent confirming that all required actions have been taken and
required notices have been given under the Prior Senior Subordinated Indenture
to redeem all of the outstanding Prior Senior Subordinated Notes on a date not
later than 30 days from the Effective Date. 
Concurrently with the funding of the Loans and the SCIL Loan and the
deposit of the Refinancing Proceeds with the trustee under the Prior Senior
Subordinated Indenture (the “Trustee”), the Agent shall have received a
copy of the written acknowledgment from the Trustee confirming the satisfaction
and discharge of the Prior Senior Subordinated Indenture in accordance with the
terms of Section 8.01(a) thereof.  In
addition, the Agent shall be satisfied that the SCIL Lenders have agreed to
advance all net proceeds of the SCIL Loan to the Trustee in respect of the
Refinancing on the Effective Date and that Borrower has directed Agent to
disburse a portion of the Term Loan to fund the remaining Refinancing Proceeds
to the Trustee on the Effective Date.


 


(c)           Approvals.  Agent shall have received (i) satisfactory
evidence that the Credit Parties have obtained all required consents and
approvals of all Persons (including all requisite Governmental Authorities) to
the execution, delivery and performance of this Agreement, the other Loan
Documents and the consummation of the Related Transaction or (ii) an Officer
Certificate in form and substance reasonably satisfactory to Agent affirming
that no such consents or approvals are required.


 


(d)           Opening Availability.  The Eligible Accounts and Eligible Inventory
supporting the Revolving Credit Advances to be made on the Effective Date and
the outstanding Letter of Credit Obligations and the amount of the Reserves to
be established on the Effective Date shall be sufficient in value, as
reasonably determined by Agent, to provide Borrower with Borrowing Availability
on the Effective Date, after adding thereto all unrestricted cash on hand of
Borrower and after giving effect to the Revolving Credit Advance to be made on
the Effective Date, the outstanding Letter of Credit Obligations and the
consummation of the Related Transactions (on a pro forma basis, with trade
payables being paid currently, and expenses and liabilities being paid in the
ordinary course of business and without acceleration of sales) of at least
$15,000,000.


 


21





















 


(e)           Effective Date Draw.  After giving effect to the payment of, or the
creation of a Reserve for, all fees and expenses related to the Related
Transactions, no more than $25,000,000 in Revolving Loans (including, without
duplication, all Letter of Credit Obligations) will be drawn as of the
Effective Date.


 


(f)            Consummation of the Related
Transactions.  The Agent shall have
received fully executed copies of final and complete copies of the documents
relating to the SCIL Loan, each of which shall be in full force and effect and
in form and substance reasonably satisfactory to Agent.  The Related Transactions shall, on the
Effective Date, be consummated in accordance with the terms of the Related
Transactions Documents simultaneously with the making of the Loans on the
Effective Date.


 


(g)           Payment of Fees.  Borrower shall have paid the Fees required to
be paid on the Effective Date in the respective amounts specified in Section
1.9 (including the Fees specified in the GE Capital Fee Letter), and shall
have reimbursed Agent for all reimbursable fees, costs and expenses of closing
presented as of the Effective Date.


 


(h)           Term Loan Rating.  The Term Loan shall be rated “B” or better by
S&P and “B2” or better by Moody’s, as evidenced by ratings letters received
from such rating agencies.


 


(i)            Life Insurance.  Agent shall have received evidence that the
Keyman Life Insurance is in effect.


 


(j)            Capital Structure: Other
Indebtedness.  The capital structure
of each Credit Party and the terms and conditions of all Indebtedness of each
Credit Party shall be acceptable to Agent in its sole discretion.  Without limiting the generality of the
foregoing, 


 


(i)            Unaudited Adjusted EBITDA for the
period of 12 consecutive months ended on April 30, 2004 shall be not less than
$39,200,000 (it being understood and agreed that the unaudited Adjusted EBITDA
is subject to normal year end audit adjustments);


 


(ii)           Senior Debt of Holdings and its
Subsidiaries (less Holdings’ and its Subsidiaries’ consolidated
unrestricted cash and Cash Equivalents on hand) shall not exceed 3.54 times
Adjusted EBITDA for the period of 12 consecutive months ended on April 30,
2004;


 


(iii)          Funded Debt of Holdings and its
Subsidiaries (less Holdings’ and its Subsidiaries’ consolidated
unrestricted cash and Cash Equivalents on hand) shall not exceed 5.66 times
Adjusted EBITDA for the period of 12 consecutive months ended on April 30,
2004; and


 


(iv)          Aggregate Indebtedness of Holdings and
its Subsidiaries on a consolidated basis on the Effective Date (including Loans
and the SCIL Loan to be made on the Effective Date and after taking into
account the repayment of existing Indebtedness on the Effective Date) shall not
exceed $223,500,000.


 


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(k)           Field Exams.  Agent shall have completed its field
examination of Borrower’s and its Subsidiaries respective businesses,
operations, financial conditions, and assets, including a roll forward of its
previous Collateral audit, with results reasonably satisfactory to Agent.


 


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


 


(a)           any representation or warranty by any
Credit Party contained herein or in any other Loan Document is untrue or
incorrect as of such date in any material respect, except to the extent that
such representation or warranty expressly relates to an earlier date and except
for changes therein expressly permitted or expressly contemplated by this
Agreement, and Agent or Requisite Revolving Lenders have determined not to make
such Advance or incur such Letter of Credit Obligation as a result of the fact
that such warranty or representation is untrue or incorrect;


 


(b)           any event or circumstance (i) having
a Material Adverse Effect as set forth in clauses (c) or (d) of the
definition thereof or (ii) which could reasonably be expected to result in
costs, liabilities or damages, individually or in the aggregate, to any Credit
Party or Credit Parties in an amount that would have caused any of the
Financial Covenants to have been breached if such event or occurrence had
occurred and such costs, liabilities or damages had been paid on the first day
of the Fiscal Quarter most recently ended or (iii) which results in an
uninsured loss of tangible assets with a value in excess of $4,000,000 has
occurred since the date hereof as determined by the Requisite Revolving
Lenders, and Agent or Requisite Revolving Lenders have determined not to make
such Advance or incur such Letter of Credit Obligation as a result of the fact
that such event or circumstance has occurred; or


 


(c)           any Event of Default has occurred and
is continuing or would result after giving effect to any Advance (or the
incurrence of any Letter of Credit Obligation), and Agent or Requisite
Revolving Lenders shall have determined not to make any Advance or incur any
Letter of Credit Obligation as a result of that Event of Default.


 


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


 


2.3           Conditions
to Revolving Credit Advances Funding Permitted Loan Funded Acquisitions.  In addition to the conditions set forth in Section
2.2 with respect to all Advances, no Lender shall be obligated to advance
its Pro Rata Share of any Revolving Credit Advance used for the purpose of funding
all or part of the purchase price of any acquisition of Stock, any purchase of
all or substantially all of the assets of any Person, or any business or
division of any Person or any acquisition of a Person by a merger,
consolidation or any other combination unless the conditions set forth in the
definition of the term “Permitted Loan Funded


 


23





















 


Acquisition”
have been satisfied (or provided for in a manner satisfactory to Agent) or
waived in writing by Agent and Lenders (including, without limitation, the
condition in clause(vi) of the definition of the term “Permitted Loan
Funded Acquisition” applicable to any Foreign Qualified Target).


 


2.4           Commitment Increase Conditions.  


 


(a)           From time to time after the Effective
Date, the Commitments may be increased at the option of the Borrower pursuant
to a proposed Commitment Increase if each of the following conditions have been
met:


 


(i)            The conditions set forth in Section
2.2 have been satisfied;


 


(ii)           Agent has received evidence
satisfactory to it that Borrower (i) would have been in compliance with
the Financial Covenants set forth in Annex G for the quarterly period
reflected in the Compliance Certificate most recently delivered to Agent
pursuant to Annex E on or prior to the proposed Commitment Increase
(after giving effect to the Indebtedness to be incurred as a result of the
proposed Commitment Increase as if such Indebtedness was incurred on the first
day of such period) and (ii) will remain in compliance with the Financial
Covenants set forth in Annex G for the four consecutive quarterly
periods beginning on the Business Day after the Fiscal Quarter following the
proposed Commitment Increase (after giving effect to the Indebtedness to be
incurred as a result of the proposed Commitment Increase as if such
Indebtedness was incurred on the first day of such period);


 


(iii)          The second anniversary of the
Effective Date has not occurred;


 


(iv)          The Borrower has not previously caused
the Commitments and this Agreement or the commitments under the SCIL Credit
Agreement to have been increased more than once;


 


(v)           Borrower has forwarded to GE Capital
and Agent a written offer to GE Capital to provide on the proposed Commitment
Increase whereupon GE Capital shall have the right, but no obligation, to
commit to all or any portion of the proposed Commitment Increase, provided that, no later than fourteen (14)
days after receipt of such written request, GE Capital shall advise Agent and
the Borrower whether GE Capital will commit to provide all or any portion of
the proposed Commitment Increase and, if so, the amount of its proposed
Commitment (the “First Offer Requirement”).  After satisfying the First Offer Requirement,
Borrower shall be entitled to offer participation in the portion of the
proposed Commitment Increase not committed to by GE Capital, if any, to other
Lenders and/or New Lenders.  Borrower
acknowledges and agrees that GE Capital and/or its Affiliates may elect to syndicate
all or any portion of any Commitment Increase to which GE Capital may hereafter
commit; provided, that Borrower
shall not be obligated to pay any additional fees or provide any increase in
pricing to ensure a successful syndication of such commitments by GE Capital or
its Affiliates;


 


(vi)          The proposed Commitment Increase has
been consented to in writing by the Lenders or New Lenders whose increase in
Commitments or New Commitments in the aggregate equals such proposed Commitment
Increase (it being understood and agreed that 


 


24





















 


no Commitment of a Lender
may be increased hereunder without such Lender’s written consent);


 


(vii)         Any increase in the Term Loan
Commitment shall be in the minimum amount of $5,000,000;


 


(viii)        Any increase in the Revolving Loan
Commitment shall be in the minimum amount of $5,000,000;


 


(ix)           the proposed Commitment Increase
together with any prior Commitment Increase shall not exceed the Commitment
Increase Cap;


 


(x)            The Applicable Margins pertaining to
the type of Loan or Loans which are the subject of any Commitment Increase
shall be equal to the Applicable Margins pertaining to same type of Loan or
Loans under this Agreement.  If, in
connection with any Commitment Increase, any Applicable Margin for a particular
type of Loan is increased, a reciprocal increase in the relevant Applicable
Margin(s) for such type of Loan under this Agreement shall be required to occur
from and after the effective date of such Commitment Increase.   By way of example, if a proposed Commitment
Increase consists of $20,000,000 of additional Term Loan Commitments and
Borrower agrees to increase the Applicable Term Loan LIBOR Margin by 0.20% over
the levels then in effect under this Agreement to attract such additional Term
Loan Commitments, the Applicable Term Loan LIBOR Margin for all Term Loans from
and after the effective date of such Commitment Increase would be increased by
such amount; and


 


(xi)           Agent shall have received amendments
to this Agreement and the Loan Documents, joinders and other agreements,
documents and instruments reasonably satisfactory to Agent in its sole
discretion evidencing and setting forth the terms of the Commitment Increase.


 


(b)           Borrower, Credit Parties, Lenders and
Agent acknowledge and agree that each Commitment Increase meeting the
conditions set forth in Section 2.4(a) (each, a “Qualifying
Commitment Increase”) shall not require the consent of any Lender other
than those Lenders, if any, which have agreed to increase their Commitments in
connection with such proposed Qualifying Commitment Increase.  Each Lender hereby authorizes the Agent,
without any further consent from or agreement of such Lender, to execute on
behalf of such Lender such amendments to this Agreement and/or the other Loan
Documents as may be necessary to implement each such Qualifying Commitment
Increase.


 


3.     REPRESENTATIONS AND WARRANTIES


 


To
induce Lenders to make the Loans and to incur Letter of Credit Obligations, the
Credit Parties executing this Agreement, jointly and severally, make the
following representations and warranties to Agent and each Lender with respect
to all Credit Parties, each and all of which shall survive the execution and
delivery of this Agreement.


 


3.1           Corporate
Existence; Compliance with Law.  Each
Credit Party (a) is a corporation, limited liability company or limited
partnership duly organized, validly existing and 


 


25





















 


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


 


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


 


3.3           Corporate
Power, Authorization, Enforceable Obligations.  The execution, delivery and performance by
each Credit Party of the Loan Documents to which it is a party and the creation
of all Liens provided for therein: (a) are within such Person’s power; (b) have
been duly authorized by all necessary corporate, limited liability company or
limited partnership action; (c) do not contravene any provision of such
Person’s charter, bylaws or partnership or operating agreement as applicable;
(d) do not violate any applicable law or regulation, or any order or decree of
any court or Governmental Authority; (e) do not conflict with or result in the
breach or termination of, constitute a default under or accelerate or permit
the acceleration of any performance required by, any indenture, mortgage, deed
of trust, lease, or other material agreement or instrument to which such Person
is a party or by which such Person or any of its property is bound; (f) do not
result in the creation or imposition of any Lien upon any of the property of
such Person other than those in favor of Agent, on behalf of itself and
Lenders, or the counterparty to any Specified Hedging Agreement pursuant to the
Loan Documents; and (g) do not require the consent or approval of any
Governmental Authority or any other Person, except those referred to in Section
2.1(c), all of which will have been duly obtained, made or complied with
prior to or on the Effective Date unless otherwise agreed to by Agent in
writing.  As of the Effective Date, each
of the Loan Documents shall be duly executed and delivered by each Credit Party
that is a party thereto and each such Loan Document shall constitute a legal,
valid and binding obligation of such Credit Party enforceable against it in
accordance with its terms, 


 


26





















 


except
as the enforceability thereof may be limited by applicable bankruptcy laws or
similar laws affecting creditors’ rights in general.


 


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


 


(a)           Financial Statements.  The following Financial Statements attached
hereto as Disclosure Schedule (3.4(a)) have been delivered to Agent on
or before the Effective Date:


 


(i)            The audited consolidated and
consolidating balance sheets at March 31, 2003 and the related statements of
income and cash flows of Holdings, Borrower and its Subsidiaries for the Fiscal
Year then ended, certified by Ernst & Young LLP.


 


(ii)           The unaudited balance sheet(s) at
April 30, 2004 and the related statement(s) of income and cash flows of
Holdings, Borrower and its Subsidiaries for the four Fiscal Quarters then
ended.


 


(b)           Pro Forma.  The Pro Forma delivered to Agent on or before
the Effective Date and attached hereto as Disclosure Schedule (3.4(b))
was prepared by Borrower giving pro forma effect to the Related
Transactions, was based on the unaudited consolidated and consolidating balance
sheets of Borrower and its Subsidiaries dated December 27, 2003, and was
prepared in accordance with GAAP, with only such adjustments thereto as would
be required in accordance with GAAP.


 


(c)           Projections.  The Projections delivered to Agent on or
before the Effective Date and attached hereto as Disclosure Schedule
(3.4(c)) have been prepared by Borrower in light of the past operations of
its and its Subsidiaries’ businesses, but including future payments of known
contingent liabilities, and
reflect projections for the three year period beginning on April 4, 2004, on a
month-by-month basis solely in respect of the income statement and on a
quarterly basis for all other financial statements for the first year and on a
year-by-year basis thereafter.  The
Projections are based upon material and relevant estimates and assumptions
stated therein, all of which Borrower believes to be reasonable and fair in light
of current conditions and current facts known to Borrower and, as of the
Effective Date, reflect Borrower’s good faith and reasonable estimates of the
future financial performance of Borrower and of the other information projected
therein for the period set forth therein.


 


3.5           Material
Adverse Effect.  Between March 31,
2003 and the Effective Date, (a) no Credit Party has incurred any obligations,
contingent or noncontingent liabilities, liabilities for Charges, long-term
leases or unusual forward or long-term commitments that are not reflected in
the Pro Forma and that, alone or in the aggregate, could reasonably be expected
to have a Material Adverse Effect, (b) no contract, lease or other agreement or
instrument has been entered into by any Credit Party or has become binding upon
any Credit Party’s assets and no 


 


27





















 


law
or regulation applicable to any Credit Party has been adopted, in each case,
that has had or could reasonably be expected to have a Material Adverse Effect,
and (c) no Credit Party is in default and to the best of Borrower’s knowledge
no third party is in default under any material contract, lease or other
agreement or instrument, in any case which default alone or in the aggregate
could reasonably be expected to have a Material Adverse Effect.  Between March 31, 2003 and the Effective Date
no event has occurred, that alone or together with other events, could
reasonably be expected to have a Material Adverse Effect.


 


3.6           Ownership
of Property; Liens.  As of the
Effective Date, the real estate (“Real Estate”) listed in Disclosure
Schedule (3.6) includes all of the real property owned, leased, subleased,
or used by any Credit Party.  As of the
Effective Date, each Credit Party owns good and marketable fee simple title to
all of its owned Real Estate, and valid leasehold interests in all of its
leased Real Estate, all as described on Disclosure Schedule (3.6), and
copies of all such leases have been delivered to Agent.  Disclosure Schedule (3.6) further
describes any Real Estate with respect to which any Credit Party is a lessor,
sublessor or assignor as of the Effective Date. 
Each Credit Party also has good and marketable title to, or valid
leasehold interests in, all of its personal property and assets.  As of the Effective Date, none of the
properties and assets of any Credit Party are subject to any Liens other than
Permitted Encumbrances, and no Credit Party has received written notice of any
facts, circumstances or conditions that are likely to result in any Liens
(including Liens arising under Environmental Laws) on any Collateral other than
Permitted Encumbrances.  As of the
Effective Date, the Liens granted to Agent pursuant to the Loan Documents are
first priority perfected Liens, subject only to Permitted Encumbrances.  As of the Effective Date, each Credit Party
has to its knowledge received all deeds, assignments, waivers, consents,
nondisturbance and attornment or similar agreements, bills of sale and other
documents, and has duly effected all recordings, filings and other actions
reasonably necessary to establish, protect and perfect such Credit Party’s
right, title and interest in and to all such Real Estate and other properties
and assets.  Disclosure Schedule (3.6)
also describes any purchase options, rights of first refusal or other similar
contractual rights pertaining to any Real Estate.  During the period from March 31, 2003 through
the Effective Date, no portion of any Credit Party’s Real Estate has suffered
any material damage by fire or other casualty loss that has not heretofore been
repaired and restored in all material respects to its original condition or
otherwise remedied.  As of the Effective
Date, all material permits required to have been issued or appropriate to enable
the Real Estate to be lawfully occupied and used for all of the purposes for
which it is currently occupied and used have been lawfully issued and are in
full force and effect, except as could not reasonably be expected to have a
Material Adverse Effect.


 


3.7           Labor
Matters.  As of the Effective Date
(a) no strikes or other material labor disputes against any Credit Party are
pending or, to any Credit Party’s knowledge, threatened; (b) hours worked by
and payment made to employees of each Credit Party comply with the Fair Labor
Standards Act and each other federal, state, local or foreign law applicable to
such matters; (c) all payments due from any Credit Party for employee health
and welfare insurance have been paid or accrued as a liability on the books of
such Credit Party; (d) except as set forth in Disclosure Schedule (3.7),
no Credit Party is a party to or bound by any collective bargaining agreement,
management agreement, consulting agreement, employment agreement, bonus,
restricted stock, stock option, or stock appreciation plan or agreement or any
similar plan, agreement or arrangement (and true and complete copies of any
agreements described on Disclosure Schedule (3.7) have been delivered to
Agent); (e) to any Credit Party’s knowledge, 


 


28





















 


there
is no organizing activity involving any Credit Party pending or threatened by
any labor union or group of employees; (f) there are no representation
proceedings pending or, to any Credit Party’s knowledge, threatened with the
National Labor Relations Board, and no labor organization or group of employees
of any Credit Party has made a pending demand for recognition; and (g) except
as set forth in Disclosure Schedule (3.7), there are no material
complaints or charges against any Credit Party pending or, to the knowledge of
any Credit Party, threatened to be filed with any Governmental Authority or
arbitrator based on, arising out of, in connection with, or otherwise relating
to the employment or termination of employment by any Credit Party of any
individual; in each case except as could not reasonably be expected to have a
Material Adverse Effect.


 


3.8           Ventures,
Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.  Except as set forth in Disclosure Schedule
(3.8), as of the Effective Date, no Credit Party has any Subsidiaries, is
engaged in any joint venture or partnership with any other Person, or is an
Affiliate of any other Person.  As of the
Effective Date, all of the issued and outstanding Stock of each Credit Party is
owned by each of the Stockholders and in the amounts set forth in Disclosure
Schedule (3.8).  Except as set forth
in Disclosure Schedule (3.8), as of the Effective Date there are no
outstanding rights to purchase, options, warrants or similar rights or
agreements pursuant to which any Credit Party may be required to issue, sell,
repurchase or redeem any of its Stock or other equity securities or any Stock
or other equity securities of its Subsidiaries. 
All outstanding Indebtedness and Guaranteed Indebtedness of each Credit
Party as of the Effective Date (except for the Obligations) is described in Section
6.3 (including Disclosure Schedule (6.3)).


 


3.9           Government
Regulation.  No Credit Party is an
“investment company” or an “affiliated person” of, or “promoter” or “principal
underwriter” for, an “investment company” that is required to register as such
under the Investment Company Act of 1940, in each case as such terms are
defined in such act.  No Credit Party is
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, or any other federal or state statute that restricts or
limits its ability to incur Indebtedness or to perform its obligations
hereunder.  The making of the Loans by
Lenders to Borrower, the incurrence of the Letter of Credit Obligations on
behalf of Borrower, the application of the proceeds thereof and repayment
thereof and the consummation of the Related Transactions will not violate any
provision of any such statute or any rule, regulation or order issued by the
Securities and Exchange Commission.


 


3.10         Margin
Regulations.  No Credit Party is
engaged, nor will it engage, principally or as one of its important activities,
in the business of extending credit for the purpose of “purchasing” or
“carrying” any “margin stock” as such terms are defined in Regulation U of the
Federal Reserve Board as now and from time to time hereafter in effect (such
securities being referred to herein as “Margin Stock”).  No Credit Party owns any Margin Stock, and
none of the proceeds of the Loans or other extensions of credit under this
Agreement will be used, directly or indirectly, for the purpose of purchasing
or carrying any Margin Stock, for the purpose of reducing or retiring any
Indebtedness that was originally incurred to purchase or carry any Margin Stock
or for any other purpose that might cause any of the Loans or other extensions
of credit under this Agreement to be considered a “purpose credit” within the
meaning of Regulations T, U or X of the Federal Reserve Board.  No Credit Party will take or permit to be 


 


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taken
any action that might cause any Loan Document to violate any regulation of the
Federal Reserve Board.


 


3.11         Taxes.  As of the Effective Date, all tax returns,
reports and statements, including information returns, required by any
Governmental Authority to be filed by any Credit Party have been filed with the
appropriate Governmental Authority and all Charges have been paid prior to the
date on which any fine, penalty, interest or late charge may be added thereto
for nonpayment thereof (or any such fine, penalty, interest, late charge or
loss has been paid),  excluding Charges
or other amounts being contested in accordance with the terms described in Section
5.2(b).  As of the Effective Date,
proper and accurate amounts have been withheld by each Credit Party from its
respective employees for all periods in compliance in all material respects
with all applicable federal, state, local and foreign laws and such
withholdings have been timely paid to the respective Governmental
Authorities.  Disclosure Schedule
(3.11) sets forth as of the Effective Date those taxable years for which
any Credit Party’s tax returns are currently being audited by the IRS or any
other applicable Governmental Authority and any assessments or threatened
assessments in connection with such audit, or that are otherwise currently
outstanding.  Except as described in Disclosure
Schedule (3.11), as of the Effective Date, no Credit Party has executed or
filed with the IRS or any other Governmental Authority any agreement or other
document extending, or having the effect of extending, the period for
assessment or collection of any Charges. 
As of the Effective Date, none of the Credit Parties and their
respective predecessors are liable for any Charges: (a) under any agreement
(including any tax sharing agreements), except as described in Disclosure
Schedule (3.11) or (b) to each Credit Party’s knowledge, as a transferee.  As of the Effective Date, no Credit Party has
agreed or been requested to make any adjustment under IRC Section 481(a), by
reason of a change in accounting method or otherwise, which would have a
Material Adverse Effect.


 


3.12         ERISA.


 


(a)           Disclosure Schedule (3.12)
lists (i) all ERISA Affiliates and (ii) all Plans and separately identifies all
Pension Plans, including Title IV Plans, Multiemployer Plans, ESOPs and Welfare
Plans, including all Retiree Welfare Plans. 
Copies of all such listed Plans (other than Multiemployer Plans),
together with a copy of the latest form IRS/DOL 5500-series form for each such
Plan and the most recent actuarial report for any Title IV Plans and Welfare
Plans have been delivered to Agent. 
Except with respect to Multiemployer Plans, each Qualified Plan has been
determined by the IRS to qualify under Section 401 of the IRC, the trusts
created thereunder have been determined to be exempt from tax under the
provisions of Section 501 of the IRC, and nothing has occurred that would cause
the loss of such qualification or tax-exempt status.  Except as could not reasonably be expected to
have a Material Adverse Effect, each Plan is in compliance with the applicable
provisions of ERISA and the IRC, including the timely filing of all reports
required under the IRC or ERISA, including the statement required by 29 CFR
Section 2520.104-23.  Neither any Credit
Party nor ERISA Affiliate has failed to make any contribution or pay any amount
due as required by either Section 412 of the IRC or Section 302 of ERISA or the
terms of any such Plan.  Except as could
not be reasonably be expected to have a Material Adverse Effect, no “prohibited
transaction,” as defined in Section 406 of ERISA and Section 4975 of the IRC,
in connection with any Plan has occurred that would subject any Credit Party to
a material tax on prohibited transactions imposed by Section 502(l) of ERISA or
Section


 


30





















 


4975 of the IRC, and no
event has occurred with respect to a Plan which would subject any Credit Party
to any material liability under Section 502(l) of ERISA.


 


(b)           Except as set forth in Disclosure
Schedule (3.12): (i) no Title IV Plan has any Unfunded Pension Liability;
(ii) no ERISA Event or event described in Section 4062(e) of ERISA with respect
to any Title IV Plan has occurred or is reasonably expected to occur; (iii)
there are no pending, or to the knowledge of any Credit Party, threatened
claims (other than claims for benefits in the normal course), sanctions,
actions or lawsuits, asserted or instituted against any Plan or any Person as
fiduciary or sponsor of any Plan; (iv) no Credit Party or ERISA Affiliate has
incurred or reasonably expects to incur any liability as a result of a complete
or partial withdrawal from a Multiemployer Plan; (v) within the last five years
no Title IV Plan of any Credit Party or ERISA Affiliate has been terminated,
whether or not in a “standard termination” as that term is used in Section
4041(b)(1) of ERISA, nor has any Title IV Plan of any Credit Party or ERISA
Affiliate (determined at any time within the past five years) with Unfunded
Pension Liabilities been transferred outside of the “controlled group” (within
the meaning of Section 4001(a)(14) of ERISA) of any Credit Party or ERISA
Affiliate (determined at such time); (vi) except in the case of any ESOP,
Stock of all Credit Parties and their ERISA Affiliates makes up, in the
aggregate, no more than 10% of fair market value of the assets of any Plan
measured on the basis of fair market value as of the latest valuation date of
any Plan; and (vii) no liability under any Title IV Plan has been
satisfied with the purchase of a contract from an insurance company that is not
rated AAA by the Standard & Poor’s Corporation or an equivalent rating by
another nationally recognized rating agency.


 


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


 


3.14         Brokers.  No broker or finder acting on behalf of any
Credit Party or Affiliate thereof brought about the obtaining, making or
closing of the Loans or the Related Transactions, and no Credit Party or
Affiliate thereof has any obligation to any Person in respect of any finder’s
or brokerage fees in connection therewith.


 


3.15         Intellectual
Property.  As of the Effective Date,
each Credit Party owns or has rights to use all Intellectual Property necessary
to continue to conduct its business as now or heretofore conducted by it or
proposed to be conducted by it, and each Patent, registered Trademark,
registered Copyright and License is listed, together with application or
registration numbers, as applicable, in Disclosure Schedule (3.15).  To the knowledge of each Credit Party, as of
the Effective Date, each Credit Party conducts its business and affairs without
infringement of or interference with any Intellectual Property of any other
Person in any material respect.  


 


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Except
as set forth in Disclosure Schedule (3.15), as of the Effective Date, no
Credit Party is aware of any infringement claim by any other Person with
respect to any Intellectual Property.


 


3.16         Full
Disclosure.  No information contained
in this Agreement, any of the other Loan Documents, any Projections, Financial
Statements or Collateral Reports or other written reports from time to time
delivered hereunder or any written statement furnished by or on behalf of any
Credit Party to Agent or any Lender pursuant to the terms of this Agreement
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein not misleading in light of the circumstances under which they
were made; provided that, with
respect to Projections from time to time delivered hereunder, Borrower
represents only that (A) such Projections are based on good faith estimates and
assumptions believed by Borrower to be reasonable and attainable at the time
made and (B) such Projections are or will be based upon the material and
relevant estimates and assumptions stated therein, all of which Borrower
believed at the time of delivery to be reasonable and fair in light of current
conditions and current facts known to Borrower as of such delivery date, and
reflect Borrower’s good faith and reasonable estimates of the future financial
performance of Borrower and of the other information projected therein for the
period set forth therein.  Each Credit
Party will use its best efforts to ensure that the Liens granted to Agent, on
behalf of itself and Lenders, pursuant to the Collateral Documents will at all
times be fully perfected first priority Liens in and to the Collateral
described therein, subject, as to priority, only to Permitted Encumbrances
(other than clause (t) of the definition of the term “Permitted
Encumbrances”).  On the Effective Date,
after giving effect to the consummation of the Related Transactions, no default
or event of default under or with respect to any of the Related Transactions
Documents has occurred and is continuing


 


3.17         [Intentionally
Omitted].


 


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


 


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


 


3.20         Government
Contracts.  Except as set forth in Disclosure
Schedule (3.20), as of the Effective Date, no Credit Party is a party to
any contract or agreement with any Governmental Authority and no Credit Party’s
Accounts are subject to the Federal Assignment of Claims Act (31 U.S.C. Section
3727) or any similar state or local law.


 


3.21         Customer
and Trade Relations.  During the
twelve months preceding the Effective Date, there was no termination or
cancellation of:  the business
relationship of any Credit Party with any customer or group of related
customers whose purchases during the most 


 


32





















 


recent
Fiscal Year caused it to be ranked among the ten largest customers of such
Credit Party; or the business relationship of any Credit Party with any
supplier that cannot be easily replaced.


 


3.22         Agreements
and Other Documents.  As of the
Effective Date, each Credit Party has provided to Agent or its counsel, on
behalf of Lenders, complete copies (or accurate summaries) of all of the
following agreements or documents to which it is subject and each of which is
listed in Disclosure Schedule (3.22) without duplication of the
agreements or documents provided as of the Original Closing Date or as of the
date of the Prior Credit Agreement: 
supply agreements and purchase agreements not terminable by such Credit
Party within sixty (60) days following written notice issued by such Credit
Party and involving transactions in excess of $1,000,000 per annum; leases of
Equipment having a remaining term of one year or longer and requiring aggregate
rental and other payments in excess of $500,000 per annum; licenses and permits
held by the Credit Parties, the absence of which could be reasonably likely to
have a Material Adverse Effect; instruments and documents evidencing any
Indebtedness or Guaranteed Indebtedness of such Credit Party in excess of
$500,000 and any Lien granted by such Credit Party with respect thereto; and
instruments and agreements evidencing the issuance of any equity securities,
warrants, rights or options to purchase equity securities of such Credit Party.


 


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


 


3.24         Status
of Holdings.  As of the Effective
Date, Holdings has not engaged in any trade or business and has not incurred
any Indebtedness other than holding, managing and directing its equity and debt
positions in Borrower and performing its obligations under existing arrangements
with its stockholders and taking actions incident thereto.


 


3.25         Subordinated
Debt; other Indebtedness.  As of the
Effective Date, Borrower has delivered to Agent a complete and correct copy of
the Discount Debentures Documents and any other debt instrument of any Credit
Party evidencing Indebtedness in excess of $500,000 (including, in each case,
all schedules, exhibits, amendments, supplements, modifications, assignments
and all other documents delivered pursuant thereto or in connection therewith).  As of the relevant dates, Holdings had the
corporate power and authority to incur the Indebtedness evidenced by the
Discount Debentures Documents.  The
execution, delivery and performance of this Agreement and the other Loan
Documents and the funding of the Loans do not violate any term or provision of
any of Discount Debentures Documents.


 


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


 


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4.     FINANCIAL STATEMENTS AND INFORMATION


 


4.1           Reports and Notices.


 


(a)           From and after the Effective Date and
until the Termination Date, Borrower shall deliver to Agent for distribution to
the Lenders, the Financial Statements, notices, Projections and other
information at the times, to the Persons and in the manner set forth in Annex
E.


 


(b)           From and after the Effective Date and
until the Termination Date, Borrower shall deliver to Agent or to Agent for
distribution to the Lenders, the various Collateral Reports (including
Borrowing Base Certificates in the form of Exhibit 4.1(b)) at the times,
to the Persons and in the manner set forth in Annex F.


 


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


 


5.     AFFIRMATIVE COVENANTS


 


Each
Credit Party executing this Agreement jointly and severally agrees as to all
Credit Parties that from and after the date hereof and until the Termination
Date:


 


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


 


5.2           Payment of Charges.


 


(a)           Subject to Section 5.2(b),
each Credit Party shall pay and discharge or cause to be paid and discharged
promptly all Charges payable by it, including (i) Charges imposed upon it,
its income and profits, or any of its property (real, personal or mixed) and
all Charges with respect to tax, social security and unemployment withholding
with respect to its employees, (ii) lawful claims for labor, materials,
supplies and services or otherwise, and (iii) all 


 


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storage or rental charges
payable to warehousemen and bailees, in each case, before any thereof shall
become thirty (30) days past due.


 


(b)           Each Credit Party may in good faith
contest, by appropriate proceedings, the validity or amount of any Charges,
Taxes or claims described in Section 5.2(a); provided, that (i) adequate reserves with respect to such
contest are maintained on the books of such Credit Party, in accordance with
GAAP; (ii) no Lien shall be imposed to secure payment of such Charges (other
than payments to warehousemen and/or bailees) that is superior to any of the
Liens securing the Obligations and such contest is maintained and prosecuted
continuously and with diligence and operates to suspend collection or
enforcement of such Charges, (iii) no tangible asset of any Credit Party
becomes subject to forfeiture or loss during the pendency of such contest, and
(iv) such Credit Party shall promptly pay or discharge such contested Charges,
Taxes or claims and all additional charges, interest, penalties and expenses,
if any, and shall deliver to Agent evidence reasonably acceptable to Agent of
such compliance, payment or discharge, if such contest is terminated or
discontinued adversely to such Credit Party or the conditions set forth in this
Section 5.2(b) are no longer met.


 


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


 


5.4           Insurance; Damage to or Destruction
of Collateral.


 


(a)           The Credit Parties shall, at their
sole cost and expense, maintain the policies of insurance described on Disclosure
Schedule (3.18) as in effect on the date hereof or otherwise in form and
amounts determined by the Credit Parties and reasonably acceptable to Agent and
with insurers selected by the Credit Parties and reasonably acceptable to
Agent.  Such policies of insurance (or
the loss payable and additional insured endorsements delivered to Agent) shall
contain provisions pursuant to which the insurer agrees to provide thirty (30)
days’ prior written notice to Agent in the event of any non-renewal,
cancellation or amendment of any such insurance policy.  If any Credit Party at any time or times
hereafter shall fail to obtain or maintain any of the policies of insurance
required above or to pay all premiums relating thereto, Agent may at any time
or times thereafter obtain and maintain such policies of insurance and pay such
premiums and take any other action with respect thereto that Agent deems
reasonably advisable.  Agent shall have
no obligation to obtain insurance for any Credit Party or pay any premiums
therefor.  By doing so, Agent shall not
be deemed to have waived any Default or Event of Default arising from any
Credit Party’s failure to maintain such insurance or pay any premiums
therefor.  All sums so disbursed,
including reasonable attorneys’ fees, court costs and other charges related
thereto, shall be payable on demand by Borrower to Agent and shall be
additional Obligations hereunder secured by the Collateral.


 


(b)           Agent reserves the right at any time
upon any change in any Credit Party’s risk profile (including any material
change in the product mix maintained by any Credit Party or any laws affecting
the potential liability of such Credit Party) to require additional forms and
limits of insurance customary in the industry for such changed risk
profile.  If reasonably requested by
Agent, each Credit Party shall deliver to Agent from time to time a report of a



 


35





















 


reputable insurance
broker, reasonably satisfactory to Agent, with respect to its insurance
policies.


 


(c)           Each Credit Party shall deliver to
Agent, in form and substance reasonably satisfactory to Agent, endorsements to
(i) all “All Risk” and business interruption insurance naming Agent, on behalf
of itself and Lenders, as loss payee, and (ii) all general liability and other
liability policies maintained by such Credit Party naming Agent, on behalf of
itself and Lenders, as additional insured. 
Each Credit Party irrevocably makes, constitutes and appoints Agent (and
all officers, employees or agents designated by Agent), so long as any Event of
Default has occurred and is continuing, as each Credit Party’s true and lawful
agent and attorney-in-fact for the purpose of making, settling and adjusting
claims under such “All Risk” policies of insurance, endorsing the name of each
Credit Party on any check or other item of payment for the proceeds of such
“All Risk” policies of insurance and for making all determinations and
decisions with respect to such “All Risk” policies of insurance.  Agent shall have no duty to exercise any
rights or powers granted to it pursuant to the foregoing
power-of-attorney.  Borrower shall
promptly notify Agent of any Event of Loss and of any loss, damage, or
destruction to the Collateral in the amount of $250,000 or more, whether or not
covered by insurance.  After deducting
from the insurance proceeds received in connection with such Event of Loss the
costs, fees and expenses, if any, incurred by Agent in the collection or
handling thereof, Agent shall either, at its option, apply such proceeds to the
reduction of the Obligations in accordance with Section 1.3(d) or
permit or require each Credit Party to use such money, or any part thereof, to
replace, repair, restore or rebuild the Collateral in a diligent and
expeditious manner with materials and workmanship of substantially the same
quality as existed before the loss, damage or destruction.  Notwithstanding the foregoing, if an Event of
Loss giving rise to insurance proceeds could not reasonably be expected to have
a Material Adverse Effect (after giving effect to the application of the
insurance proceeds to repair and restoration) and such insurance proceeds do
not exceed $2,000,000 in
the aggregate, the applicable Credit Party may elect, in its discretion, to
replace, restore, repair or rebuild the property; provided that if such Credit Party has not completed or
entered into binding agreements to complete such replacement, restoration,
repair or rebuilding within 270 days of such casualty, Agent may apply such
insurance proceeds to the Obligations in accordance with Section 1.3(d).  All insurance proceeds that are to be made
available to Borrower to replace, repair, restore or rebuild the Collateral
shall be applied by Agent to reduce the outstanding principal balance of the
Revolving Loan (which application shall not result in a permanent reduction of
the Revolving Loan Commitment) and upon such application, Agent shall establish
a Reserve against the Borrowing Base in an amount equal to the amount of such
proceeds so applied.  Thereafter, such
funds shall be made available to such Credit Party to provide funds to replace,
repair, restore or rebuild the Collateral as follows: (i) Borrower shall
request a Revolving Credit Advance be made to such Credit Party in the amount
requested to be released; (ii) so long as the conditions set forth in Section
2.2 have been met and subject to the provisions of any Mortgage encumbering
such Collateral, Revolving Lenders shall make such Revolving Credit Advance;
and (iii) in the case of insurance proceeds applied against the Revolving Loan,
the Reserve established with respect to such insurance proceeds shall be
reduced by the amount of such Revolving Credit Advance.  To the extent not used to replace, repair,
restore or rebuild the Collateral, such insurance proceeds shall be applied in
accordance with Section 1.3(d); provided,
that in the case of insurance proceeds pertaining to any Credit Party other
than Borrower, such insurance proceeds shall be applied to the Loans owing by
Borrower in accordance with Section 1.3(d).


 


36





















 


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


 


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


 


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


 


5.8           Proceeds
from Stock Issuances.  If Holdings or
Borrower issues Stock, the cash proceeds thereof (net of underwriting discounts
and commissions and other reasonable costs, fees and expenses paid to
non-Affiliates of Holdings or Borrower in connection therewith) shall be used
as follows:


 


(a)           in the case of an issuance of such
Stock other than pursuant to a Qualified Public Offering, after repayment of
outstanding Holdco Debenture Debt elected to be repaid by Holdings from the
proceeds of issuance of Stock (other than Disqualified Stock) to the extent
permitted by Section 6.14(a)(J), 50% of any remaining net proceeds shall
be used to prepay Obligations in accordance with Section 1.3(b)(v) and
the other 50% of such remaining net proceeds shall be used by Borrower or Holdings
for general corporate purposes subject to the terms and conditions of this
Agreement.


 


(b)           in the case of an issuance of Stock
pursuant to a Qualified Public Offering, such proceeds shall be used as
follows:


 


(i)            first,
up to 100% of such proceeds shall be used to repay outstanding Holdco Debenture
Debt, if any, until paid in full;


 


37





















 


(ii)           second,
50% of any proceeds remaining after application of clause (b)(i)
above (such remaining proceeds being the “Post-Holdco Debenture Debt
Proceeds”) shall be used to repay obligations owing in respect of the SCIL
Loan and/or to prepay Obligations in accordance with Section 1.3(b)(v)
(the application of such proceeds being allocated between the prepayment of the
Obligations and the SCIL Loan by Borrower); and


 


(iii)          third,
the remaining 50% of any Post-Holdco Debenture Proceeds (such amount, (the “Credit
Party Post-Holdco Debenture Debt Proceeds”) shall be used by Borrower or
Holdings for one or more of the following purposes: (A) general corporate
purposes, (B) to prepay obligations in respect of the SCIL Loan in
accordance with the SCIL Credit Agreement or (C) to make Restricted
Payments in respect of the Holdings’ preferred Stock to the extent permitted by
Section 6.14(a)(I), subject in each case to terms and conditions of this
Agreement; provided that Holdings
and Borrower may use no more than 50% of the Credit Party Post-Holdco Debenture
Debt Proceeds to (x) make Restricted Payments in respect of Holding’s preferred
Stock promptly upon receipt thereof to the extent permitted by Section
6.14(a)(I) or (y) prepay obligations owing in respect of the SCIL Loan in
accordance with the SCIL Credit Agreement promptly upon receipt thereof to the
extent permitted by Section 6.14(a)(I).


 


(c)           Notwithstanding the foregoing, Section
5.8(a) and (b) shall not apply to:


 


(i)            issuances of Stock (other than
Disqualified Stock) of Holdings to the existing Stockholders of Holdings (and
in the case such Stockholders are Michael J. Hartnett or Whitney & Co.,
issuance of Stock of Holdings to any Person controlled by or under common
control with Michael J. Hartnett or Whitney & Co. (any such Person being a
“Related Stockholder Party”) in the aggregate amount not to exceed
$10,000,000;


 


(ii)           issuances of Stock (other than
Disqualified Stock) of Holdings to the existing Stockholders of Holdings
(and/or any Related Stockholder Party) or to seller(s) involved in a Permitted
Acquisition, in each case to the extent (but only to the extent) that such Stock
or the proceeds thereof are immediately used as a consideration for all or a
portion of the purchase price of a Permitted Acquisition, so long as no Change
of Control results after giving effect to such issuance or series of related
issuances (proceeds from Stock issuances to the existing Stockholders (and/or
any Related Stockholder Party) used as a consideration for Permitted
Acquisitions described in this clause (ii) being the “Stockholder
Proceeds”);


 


(iii)          issuance of directors’ qualifying
shares;


 


(iv)          issuances of Stock of Holdings issued
to any holder of Indebtedness of Holdings or Borrower to the extent (but only
to the extent) issued in connection with an issuance, refinancing or
restructuring of Indebtedness permitted hereunder, so long as no Change of
Control results after giving effect to such issuance or a series of related
issuances; or


 


(v)           sales or issuances of common Stock to
officers, directors or employees of Holdings, Borrower or any Subsidiary, as
the case may be, pursuant to a director, management or employee compensation
benefit plan, to the extent the aggregate cash proceeds received from the
issuance of such common Stock in excess of the aggregate redemption 


 


38





















 


proceeds paid in connection
with redemptions of common Stock of employees does not exceed $2,000,000 in any
Fiscal Year.


 


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


 


5.10         Motor
Vehicles.  In the event the value of
all motor vehicles owned by Credit Parties shall exceed $100,000 in the
aggregate, each Credit Party will grant to Agent perfected Liens on all motor
vehicles owned by such Credit Party and deliver all title certificate for each
motor vehicle owned by such Credit Party noting Agent’s security interest
therein, signed by the relevant Credit Party, in a manner satisfactory to
Agent.


 


5.11         Interest
Rate. Within one hundred and eighty (180) days after the Effective Date and
at all times thereafter prior to the Termination Date, Borrower shall enter
into and maintain one or more Specified Hedging Agreements designed to provide
protection against fluctuations in interest rates, and pursuant to which
Borrower is protected against increases in interest rates as currently in
effect from and after the date of such contracts such that aggregate principal
amount equal to at least 50% of the aggregate outstanding principal amount of
the Term Loan and the SCIL Loan is either (i) fixed rate Indebtedness or (ii)
subject to Specified Hedging Agreements.


 


39





















 


5.12         Maturity
of the Holdco Debenture Debt No later than the 180th day prior
to June 15, 2009, the Holdco Debenture Debt shall be refinanced or the terms
and provisions of the Discount Debentures Documents shall be amended, in each
case on terms and conditions satisfactory to Agent in its sole discretion, so
that the Indebtedness refinancing the Holdco Debenture Debt or the Indebtedness
evidenced by the amended the Discount Debentures Documents, as the case may be,
matures no earlier than December 29, 2011.


 


5.13         Further
Assurances.  Each Credit Party shall,
at such Credit Party’s expense, execute any and all further documents,
financing statements, agreements and instruments, and take all further action
(including filing Code and other financing statements, mortgages and deeds of
trust) as may be required under applicable law, or that the Agent may
reasonably request, in order to effectuate the transactions contemplated by the
Loan Documents and in order to grant, preserve, protect and perfect the
validity and priority of the security interests created or intended to be
created by the Loan Documents.


 


6.     NEGATIVE COVENANTS


 


Each
Credit Party executing this Agreement jointly and severally agrees as to all
Credit Parties that from and after the Effective Date hereof until the
Termination Date:


 


6.1           Mergers, Subsidiaries, Etc.  No Credit Party shall, nor
shall it cause or permit any Subsidiaries to, directly or indirectly, by
operation of law or otherwise, (i) form or acquire any Subsidiary, or
(ii) merge with, consolidate with, acquire all or substantially all of the
assets or Stock of, or otherwise combine with or acquire, any Person, except
(A) any Credit Party may merge with another Credit Party, provided that Borrower shall be the
survivor of any such merger to which it is a party; (B) any Credit Party may
form one or more wholly owned Domestic Subsidiaries so long as (i) no Event of
Default shall have occurred and be continuing or result therefrom, (ii) Agent
receives an Officer Certificate of Borrower executed by the Chief Financial
Officer of Borrower, or another responsible officer of Borrower having
substantially the same authority and responsibility or otherwise acceptable to
Agent, certifying as to the purpose of such New Subsidiary, the amount of cash
and fair market value of any other assets being contributed to such New
Subsidiary and Borrower’s compliance with the terms of the restrictions on such
investments in Section 6.2 hereof, and (iii) such Subsidiary shall have
become a Secured Guarantor and Borrower and/or its Subsidiaries shall have
caused to be executed and delivered such documents and taken such actions as
may be reasonably required by Agent in connection therewith, including, without
limitation, delivery of financing statements, supplemental security agreements,
mortgages, joinder agreements, a Guaranty, environmental indemnity agreements,
blocked account agreements, and other documents, certificates and opinions, in
each case in form and substance acceptable reasonably to Agent;
(C) Borrower or any Secured Guarantor may consummate a Permitted Loan
Funded Acquisition; and (D) any Foreign Subsidiary may consummate a
Permitted Non-Loan Funded Acquisition.


 


6.2           Investments;
Loans and Advances.  Except as
otherwise expressly permitted by this Section 6, no Credit Party shall,
nor shall it cause or permit any Subsidiaries to, make or permit to exist any
investment in, or make, accrue or permit to exist loans or advances of money
to, any Person, through the direct or indirect lending of money, holding of
securities or otherwise, except that: 
(a) Borrower and Credit Parties may hold investments comprised of 


 


40





















 


notes
payable, or stock or other securities issued by Account Debtors to Borrower
pursuant to negotiated agreements with respect to settlement of such Account
Debtor’s Accounts in the ordinary course of business or pursuant to a plan of
reorganization approved by a court of competent jurisdiction; (b) each Credit
Party may maintain (but not increase) its existing investments in its
Subsidiaries as of the Effective Date which are not Credit Parties; (c) so long
as no Default or Event of Default has occurred and is continuing, Credit
Parties may make investments, subject to a Control Letter in favor of Agent for
the benefit of Lenders or otherwise subject to a perfected security interest in
favor of Agent for the benefit of Lenders, in (i) marketable direct
obligations issued or unconditionally guaranteed by the United States of
America or any agency thereof maturing within one year from the date of
acquisition thereof, (ii) commercial paper maturing no more than one year
from the date of creation thereof and currently having the highest rating
obtainable from either Standard & Poor’s Ratings Group or Moody’s Investors
Service, Inc., (iii) certificates of deposit maturing no more than one year
from the date of creation thereof issued by commercial banks incorporated under
the laws of the United States of America, each having combined capital, surplus
and undivided profits of not less than $300,000,000 and having a senior
unsecured rating of “A” or better by a nationally recognized rating agency (an
“A Rated Bank”), (iv) time deposits maturing no more than thirty (30)
days from the date of creation thereof with A Rated Banks and (v) mutual funds
that invest solely in one or more of the investments described in clauses
(i) through (iv) above; (d) Borrower may make investments in the capital
Stock of any of the Secured Guarantors; (e) Borrower and the Secured Guarantors
may make investments in Borrower and Secured Guarantors consisting of the
intercompany loans in accordance with Section 6.3; (f) Credit Parties may
make loans and advances to employees permitted under Section 6.4(b); (g)
each Credit Party may make Permitted Acquisitions, form Acquisition Companies
for the purpose of making Permitted Acquisitions and form new wholly owned
Subsidiaries in accordance with the terms of Section 6.1 so long as the
value of any cash or other assets contributed by any Credit Party to (1) any
one Acquisition Company or new Subsidiary does not exceed five (5%) percent of
the consolidated total assets of Holdings and its Subsidiaries on the date of
contribution plus any Stockholder Proceeds or (2) all such Acquisition
Companies and/or new Subsidiaries do not exceed ten (10%) percent of the
consolidated total assets of Holdings and its Subsidiaries on the date of
contribution plus any Stockholder Proceeds; (h) each Credit Party
may provide cash collateral to Agent in accordance with the Loan Documents;
(i) each Credit Party may enter into currency hedging arrangements to the
extent permitted by Section 6.3(a)(xiv), (j) Borrower may make
additional investments after the Effective Date in RBC de Mexico S De R.L. de
CV in an amount not to exceed $500,000 in the aggregate during any Fiscal Year;
(k) Borrower may enter into Specified Hedging Agreements to the extent
permitted by Section 6.3(a)(xiii); and (l) Credit Parties may make
other investments not to exceed $2,000,000 in the aggregate.  For purposes of this Section 6.2, the
value of any non-cash investment shall be, in the case of Equipment, its
appraised orderly liquidation value at the time of investment and, in the case
of any other non-cash investment, its fair market value at the time of
investment.


 


6.3           Indebtedness.


 


(a)           No Credit Party shall create, incur,
assume or permit to exist any Indebtedness, except (without duplication) (i)
Indebtedness secured by purchase money security interests and Capital Leases
permitted in Section 6.7(c), (ii) the Loans and the other Obligations,
(iii) unfunded pension fund and other employee benefit plan obligations and
liabilities to the 


 


41





















 


extent they are permitted
to remain unfunded under applicable law, (iv) existing Indebtedness described
in Disclosure Schedule (6.3) (including earn-outs payable to sellers of
businesses, if any, constituting Indebtedness) and refinancings thereof or
amendments or modifications thereto that do not have the effect of increasing
the principal amount thereof or changing the amortization thereof (other than
to extend the same) and that are otherwise on terms and conditions no less
favorable to any Credit Party, Agent or any Lender, as reasonably determined by
Agent, than the terms of the Indebtedness being refinanced, amended or
modified, (v) Indebtedness specifically permitted under Section 6.1,
(vi) Indebtedness consisting of intercompany loans and advances made by
Borrower to any Secured Guarantor or by any Secured Guarantor to Borrower or
another Secured Guarantor; provided, that:  (A) Borrower shall have executed and
delivered to each such Secured Guarantor, and each such Secured Guarantor shall
have executed and delivered to Borrower or another such Secured Guarantor, as
applicable, a demand note (collectively, the “Intercompany Notes”) to
evidence any such intercompany Indebtedness owing at any time by Borrower to
such Secured Guarantor or by such Secured Guarantor to Borrower or such other
Guarantor, which Intercompany Notes shall be in form and substance reasonably
satisfactory to Agent and shall be pledged and delivered to Agent pursuant to
the applicable Pledge Agreement or Security Agreement as additional collateral
security for the Obligations; (B) Borrower and each Secured Guarantor
shall record all intercompany transactions on its books and records in a manner
reasonably satisfactory to Agent; (C) the obligations of Borrower and each
Secured Guarantor under any such Intercompany Notes shall be subordinated to
the Obligations of Borrower and each Secured Guarantor hereunder in a manner
reasonably satisfactory to Agent; (D) no Event of Default shall be continuing
after giving effect to any such proposed intercompany loan; and (E) the
aggregate balance of all such intercompany loans owing by any Secured Guarantor
incurred during the time that the EBITDA of such Secured Guarantor has been
negative for a trailing twelve month period ending on the last day of any
Fiscal Month shall not be increased by more than $2,000,000 over the amount of
such Secured Guarantor’s intercompany loan obligations as of the last day of
such period; provided that a
Secured Guarantor shall no longer be subject to that $2,000,000 limitation if
that Secured Guarantor has had positive EBITDA for the trailing twelve-month
periods ending on the last day of six consecutive Fiscal Months; provided, further,
that if a Secured Guarantor has been subject to that $2,000,000 limitation,
then became exempt from it and again has a negative EBITDA for a trailing
twelve-month period, not more than $2,000,000 of additional intercompany loans
may be received by it after the date when it again has a negative EBITDA;
(vii) unsecured Indebtedness of Borrower so long as such unsecured
Indebtedness is subordinated to the Obligations in a manner and form
satisfactory to Agent in its sole discretion, as to right and time of payment
and as to any other terms, rights and remedies thereunder and so long as:  (A) no Event of Default has occurred and
is continuing or would result after giving effect to such unsecured
Indebtedness, (B) Holdings was, on a pro forma basis, in compliance with
the Fixed Charge Coverage Ratio Financial Covenant set forth on Annex G
as of the last day of the Fiscal Quarter reflected in the Compliance
Certificate most recently delivered prior to the date such unsecured
Indebtedness is incurred (after giving effect to such unsecured Indebtedness
and the use thereof as if incurred on the first day of such period); and
(C) the proceeds of such Indebtedness have been wholly used, promptly upon
receipt thereof, to directly pay (by way of refinancing or exchange) the
following Indebtedness in the following order: 
first, Holdco Debenture Debt, until the same has been repaid in
full; second, interest then due and payable on the Term Loan; third,
the scheduled principal installments of the Term Loan in 


 


42





















 


inverse order of
maturity; fourth, the SCIL Loan, until the same has been repaid in full;
fifth, interest then due and payable on the Revolving Credit Advances;
and sixth, the outstanding principal balance of the Revolving Credit
Advances until the same has been repaid in full; (viii) Indebtedness of a
Qualified Target assumed or incurred in a Permitted Acquisition described in Section
6.1(a)(iv) as long as such Indebtedness was not incurred in contemplation
of such Permitted Acquisition; (ix) Indebtedness resulting from
endorsement of negotiable instruments for collection in the ordinary course of
business; (x) Indebtedness arising with respect to customary indemnification
and purchase price adjustment obligations incurred in connection with Permitted
Acquisitions; (xii) Indebtedness incurred in the ordinary course of
business with respect to surety and appeal bonds, performance and
return-of-money bonds and other similar obligations not exceeding at any time
$250,000 in aggregate outstanding liability; (xiii) Indebtedness of Borrower
under any Specified Hedging Agreement constituting Interest Rate Protection
Agreements and providing for hedging obligations specifically permitted under Section
6.17; (xiv) currency hedging arrangements providing for hedging obligations
specifically permitted under Section 6.17; (xv) Indebtedness
incurred pursuant to the SCIL Loan Documents as in effect on the Effective Date
and as amended or otherwise modified in a manner and to the extent permitted by
and in accordance with the Intercreditor Agreement; and (xvi) Indebtedness not
permitted by clauses (i) through (xv) above, so long as much
Indebtedness, in the aggregate at any time outstanding, does not exceed
$500,000.


 


(b)           No Credit Party shall, directly or
indirectly, voluntarily purchase, redeem, defease or prepay: any principal of,
premium, if any, interest or other amount payable in respect of any
Indebtedness, other than (i) the Obligations; (ii) Indebtedness
secured by a Permitted Encumbrance if the asset securing such Indebtedness has
been sold or otherwise disposed of in accordance with Sections 6.8(b) or (c);
(iii) Indebtedness permitted by Section 6.3(a)(iv) upon any
refinancing thereof in accordance with Section 6.3(a)(iv); (iv) the SCIL
Loan, to the extent permitted by Section 1.3(b)(v) or Section
6.3(a)(vii); (v) intercompany Indebtedness; and (vi) as otherwise
permitted by Section 6.14.


 


6.4           Employee Loans and Affiliate
Transactions. 


 


(a)           No Credit Party shall enter into or
be a party to any transaction with any other Credit Party or any Affiliate
thereof except (i) in the ordinary course of and pursuant to the
reasonable requirements of such Credit Party’s business and upon fair and
reasonable terms that are no less favorable to such Credit Party than would be
obtained in a comparable arm’s length transaction with a Person not an
Affiliate of such Credit Party; (ii) the intercompany sale in the ordinary
course of the Credit Parties’ business on fair and reasonable terms consistent
with past practices of work in process Inventory by any Credit Party to RBC de
Mexico S. De R.L. de CV (“RBC Mexico”) for finishing and resale and
shipment back to a Credit Party (“Intercompany WIP”); provided,
that the aggregate book value of such Intercompany WIP (valued at the lower of
cost or market) at any time owned or possessed by RBC Mexico shall not exceed
$5,000,000; (iii) as and to the extent permitted in Section 6.14(a)(E)
and Section 6.14(a)(G); and (iv) as and to the extent permitted by Section
6.3(a)(vi), Section 6.4(b) or Sections 6.2(d)-(g).  All such transactions existing as of the date
hereof are described in Disclosure Schedule (6.4(a)).


 


(b)           Excluding loans set forth in Disclosure
Schedule (6.4(b)), no Credit Party shall enter into any lending or
borrowing transaction with any employees of any Credit Party, 


 


43





















 


except loans to its
respective employees on an arm’s-length basis in the ordinary course of
business consistent with past practices for travel and entertainment expenses,
relocation costs and similar purposes up to a maximum of $250,000 to any
employee and up to a maximum of $1,000,000 in the aggregate at any one time outstanding
and except for loans or advances made in connection with a management or
employee stock ownership program, the proceeds of which are immediately
invested in Holdings’ Stock and contributed to the capital of Borrower.


 


6.5           Capital
Structure and Business.  No Credit
Party shall amend its charter or bylaws (or similar governing documents)in a
manner that could reasonably be expected to adversely affect Agent or Lenders
or such Credit Party’s duty or ability to repay the Obligations.  No Credit Party shall engage in any business
other than the businesses currently engaged in by the Credit Parties or any
business reasonably related thereto.  No
Credit Party other than Borrower shall issue any additional shares of Stock.


 


6.6           Guaranteed
Indebtedness.  No Credit Party shall
create, incur, assume or permit to exist any Guaranteed Indebtedness except (a)
by endorsement of instruments or items of payment for deposit to the general
account of any Credit Party, and (b) for Guaranteed Indebtedness incurred for
the benefit of any other Credit Party if the primary obligation is expressly
permitted by this Agreement (including Guaranteed Indebtedness incurred with
respect to the SCIL Obligations); provided, that
neither Borrower nor any of its Domestic Subsidiaries shall create, incur,
assume or permit to exist any Guaranteed Indebtedness for the benefit of Holdings
or any Foreign Subsidiary; provided, further, that any such Guaranteed
Indebtedness is subordinated to the Obligations to the same extent as the
Indebtedness to which it relates is subordinated to the Obligations (and in the
case of the Guaranteed Indebtedness incurred with respect to the SCIL
Obligations, the Liens securing such Guaranteed Indebtedness are subordinated
to the Liens securing Obligations pursuant to and in accordance with the terms
of the Intercreditor Agreement).


 


6.7           Liens.  No Credit Party shall create, incur, assume
or permit to exist any Lien on or with respect to its Accounts (whether now
owned or hereafter acquired) other than Lien in favor of the Agent, on behalf
of itself and Lenders.  No Credit Party
shall create, incur, assume or permit to exist any Lien on or with respect to
any of its other properties or assets (whether now owned or hereafter acquired)
except for (a) Permitted Encumbrances; (b) Liens in existence on the date
hereof and summarized on Disclosure Schedule (6.7) securing the
Indebtedness described on Disclosure Schedule (6.3) and permitted
refinancings, extensions and renewals thereof, including extensions or renewals
of any such Liens; provided that
the principal amount of the Indebtedness so secured is not increased and the
Lien does not attach to any other property; (c) Liens created after the date
hereof by conditional sale or other title retention agreements (including
Capital Leases) or in connection with purchase money Indebtedness with respect
to real estate, improvements thereto, or Equipment and Fixtures acquired by any
Credit Party in the ordinary course of business, involving the incurrence of an
aggregate amount of purchase money Indebtedness and Capital Lease Obligations
of not more than $5,000,000 outstanding at any one time for all such Liens (provided that such Liens attach only to
the assets subject to such purchase money debt and such Indebtedness is
incurred within thirty (30) days following such purchase and does not exceed
100% of the purchase price of the subject assets); (d) Liens permitted in
accordance with Section 6.1; (e) Liens securing the SCIL Obligations,
subject to the Intercreditor Agreement and (f) Liens securing other obligations
not to exceed 


 


44





















 


$500,000
in the aggregate.  In addition, no Credit
Party shall become a party to any agreement, note, indenture or instrument, or
take any other action, that would prohibit the creation of a Lien on any of its
properties or other assets in favor of Agent, on behalf of itself and Lenders,
as additional collateral for the Obligations, except operating leases, Capital
Leases or Licenses which prohibit Liens upon the assets that are subject
thereto.


 


6.8           Sale
of Stock and Assets.  No Credit Party
shall sell, transfer, convey, assign or otherwise dispose of any of its
properties or other assets, including the Stock of any of its Subsidiaries
(whether in a public or a private offering or otherwise) or any of its
Accounts, other than (a) the sale of Inventory in the ordinary course of
business, (b) the sale, transfer, conveyance or other disposition by a Credit
Party of Equipment, Fixtures and Real Estate that are obsolete or no longer
used or useful in such Credit Party’s business and having a book value not
exceeding $500,000 in the aggregate in any Fiscal Year, (c) the sale, transfer,
conveyance or other disposition of other Equipment and Fixtures having a value
not exceeding $500,000 in the aggregate in any Fiscal Year, (d) assets
acquired as part of a Permitted Acquisition and designated for disposition in a
written notice to Agent when acquired as long as such assets are disposed of
within one year after being acquired in such Permitted Acquisition,
(e) Permitted Asset Sales as long as the Fair Market Value of all
Permitted Asset Sales does not exceed $15,000,000 in the aggregate and (f) as
permitted under Section 6.1 and/or Section 6.2.  With respect to any disposition of assets or
other properties permitted pursuant to clauses (b) and (c) above,
subject to compliance with Section 1.3(b), Agent agrees on
reasonable prior written notice to release its Lien on such assets or other
properties in order to permit the applicable Credit Party to effect such
disposition and shall execute and promptly deliver to Borrower, at Borrower’s
expense, appropriate UCC-3 termination statements and other releases as
reasonably requested by Borrower.


 


6.9           ERISA.  No Credit Party shall, or shall cause or
permit any ERISA Affiliate to, cause or permit to occur an event that could
result in the imposition of a Lien under Section 412 of the IRC or Section 302
or 4068 of ERISA or cause or permit to occur an ERISA Event to the extent such
ERISA Event could reasonably be expected to have a Material Adverse Effect.


 


6.10         Financial
Covenants.  Borrower shall not breach
or fail to comply with any of the Financial Covenants.


 


6.11         [RESERVED]  


 


6.12         Sale-Leasebacks.  No Credit Party shall engage in any
sale-leaseback, synthetic lease or similar transaction involving any of its assets
except in respect of the Real Estate of the Credit Parties described on Disclosure
Schedule 6.12 hereto; provided, that (i) the Credit Parties receive
net proceeds in connection with any such proposed transaction in excess of the
amounts set forth opposite such Real Estate on Disclosure Schedule 6.12
and (ii) the net proceeds of any such transaction are applied as an asset sale
in accordance with Section 1.3(c).


 


6.13         Cancellation
of Indebtedness.  No Credit Party
shall cancel any claim or debt owing to it, except for reasonable consideration
negotiated on an arm’s-length basis and in the ordinary course of its business
consistent with past practices.


 


45





















 


6.14         Restricted Payments.


 


(a)           No Credit Party shall make any
Restricted Payment, except (A) payments of interest and principal of
intercompany loans and advances between Borrower and Secured Guarantors to the
extent permitted by Section 6.3, (B) dividends and distributions by
Subsidiaries of Borrower paid to Borrower or to an intermediate Subsidiary of
Borrower, as applicable, (C) transactions permitted under Section
6.4(a) or (b), (D) payments of interest and principal of Intercompany
Notes as permitted and issued in accordance with Section 6.3,
(E) payments of management fees to Whitney & Co. in equal quarterly
installments, as long as such payments of management fees do not exceed
$450,000 in the aggregate during any Fiscal Year and no Event of Default shall
have occurred and be continuing or result after giving effect to such
Restricted Payment, (F) dividends or distributions payable to Holdings
solely in common Stock of Holdings, (G) payments to Dr. Michael J.
Hartnett not to exceed those set forth in that certain Employment Agreement,
dated December 18, 2000, by and between Borrower and Dr. Michael J. Hartnett,
as in effect on the Original Closing Date, (H) payments and distributions with
respect to Holdco Debenture Debt permitted in accordance with Section
6.3(a)(vii), (I) (i) payments and distributions in respect of
redemptions, defeasance, sinking fund or other retirement or acquisition for
value (or similar payments and distributions having substantially the same
effect of any of the foregoing) of the preferred Stock of Holdings or
(ii) prepayments of obligations owing in respect of the SCIL Loan in
accordance with the SCIL Credit Agreement, in each case from the portion of the
Credit Party Post-Holdco Debenture Debt Proceeds permitted to be retained by
the Borrower and/or Holdings and used to make such payments and distributions
pursuant to Section 5.8(b)(iii) as long as, as of the date of such
payment, distribution or prepayment, no Default or Event of Default shall have
occurred or is continuing, (J) repayments of Holdco Debenture Debt with
proceeds from the issuances of Stock pursuant to Section 5.8(a) as long
as, as of the date of such repayment, no Default or Event of Default shall have
occurred or is continuing, (K) dividends or distributions payable to
Holdings solely with (x) proceeds of a Qualified Public Offering
contributed to the capital of Borrower that are not otherwise required to be
applied to prepay the Obligations pursuant to Section 1.3(b)(v) and/or
(y) commencing on and after the fiscal year ending December 31, 2006,
proceeds of Excess Cash Flow in respect of the immediately preceding fiscal
year that are not otherwise required to be applied to prepay the Obligations
pursuant to Section 1.3(b)(vi), provided,
that, as to each payment of such dividends or distributions, each of the following
conditions is satisfied:  (1) the
Holdco Debenture Debt and the SCIL Loan have been repaid in full in cash,
(2) Agent shall have received not less than ten (10) Business Days prior
written notice of the intention of Borrower to pay such dividend or distribution,
(3) as of the date of such payment and after giving effect thereto, no
Default or Event of Default, shall have occurred or is continuing, and
(4) as of the date of payment of such dividend or distribution, on a pro
forma basis, Holdings and its Subsidiaries would have had a Senior Leverage
Ratio of not more than 2.5 to 1.0 for the twelve month period most recently
ended for which financial statements have been delivered to Agent pursuant to Annex
E of this Agreement (giving effect to payment of such dividend or
distribution as if made on the first day of such period) as certified by an
Officer Certificate of the Chief Financial Officer of Borrower or another
responsible officer of Borrower having substantially the same authority and
responsibility or otherwise acceptable to Agent delivered to Agent, and
(L) subject to the terms and conditions of the Intercreditor Agreement,
Permitted SCIL Obligation Payments;


 


46





















 


(b)           Notwithstanding the foregoing Section
6.14(a), Borrower may pay cash dividends to Holdings (“Dividends”)
as long as (A) reasonably promptly upon receipt thereof, Holdings uses all of
the proceeds of such Dividends solely for one or more of the following
purposes: (i) payments of scheduled interest as of the Original Closing
Date on, and the redemption required as of the Original Closing Date of, the
Holdco Debenture Debt, (ii) payment of dividends on the preferred Stock of
Holdings, (iii) payments at such times and in such amounts as are sufficient to
enable Holdings to pay the federal and state income taxes attributable to the
taxable income of Borrower and Subsidiaries pursuant to the Tax Sharing
Agreement, (iv) repurchase of Holdings’ Stock from employees or former
employees an aggregate amount not to exceed $500,000 per year, it being agreed
that no more than $100,000 of such aggregate amount may consist of such
repurchases from employees whose employment continues, and (v) payment of
operating expenses of Holdings in an amount not to exceed (1) at all times
prior to the occurrence of a Qualified Public Offering, $500,000 in the
aggregate in any Fiscal Year and (2) from and after the occurrence of a
Qualified Public Offering, $1,000,000 in the aggregate in any Fiscal Year; (B)
no Default or Event of Default and no default or an event of default under any
Discount Debentures Documents or any other debt instrument of Holdings,
Borrower or any other Credit Party or in respect of charter of Holdings,
Borrower or any other Credit Party has occurred and is continuing or would
result after giving effect to any such Dividend and Revolving Credit Advances,
if any, used to fund such Dividend; (C) Borrower and Holdings are in compliance
with the Fixed Charge Coverage Ratio set forth in Annex G for the four
quarter period reflected in the Compliance Certificate most recently delivered
pursuant to Annex E prior to such proposed Dividend and all Revolving
Credit Advances, if any, used to fund such Dividend (after giving effect to
such proposed Dividend and Revolving Credit Advances, if any, as if made on the
first day of such period); and (D) Borrower has Borrowing Availability of at
least $10,000,000, after giving effect to the proposed Dividend and Revolving
Credit Advances, if any, used to fund such Dividend and without any
manipulation of working capital of Borrower.


 


6.15         Change
of Corporate Name or Location; Change of Fiscal Year.  No Credit Party shall (a) change its name as
it appears in official filings in the state of its incorporation or other
organization, (b) change its chief executive office, principal place of
business, corporate offices or warehouses or locations at which Collateral is
held or stored, or the location of its records concerning the Collateral, (c)
change the type of entity that it is, (d) cause to be changed its organization
identification number, if any, issued by its state of incorporation or other
organization, or (e) change its state of incorporation or organization or
incorporate or organize in any additional jurisdictions, in each case without
at least thirty (30) days prior written notice to Agent and after Agent’s
written acknowledgment that any reasonable action requested by Agent in
connection therewith, including to continue the perfection of any Liens in
favor of Agent, on behalf of Lenders, in any Collateral, has been completed or
taken, and provided that any such
new location shall be in the continental United States. Without limiting the
foregoing, no Credit Party shall cause to be changed its name, identity or corporate
structure in any manner that might make any financing or continuation statement
filed in connection herewith seriously misleading as such term is defined in
and/or used in the Code or any other then applicable provision of the Code
except upon prior written notice to Agent and Lenders and after Agent’s written
acknowledgment that any reasonable action requested by Agent in connection
therewith, including to continue the perfection of any Liens in favor of Agent,
on behalf of Lenders, in any Collateral, has been completed or taken.  No Credit Party shall change its Fiscal Year.


 


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6.16         No
Impairment of Intercompany Transfers. 
No Credit Party shall directly or indirectly enter into or become bound
by any agreement, instrument, indenture or other obligation (other than this
Agreement and the other Loan Documents) that could directly or indirectly
restrict, prohibit or require the consent of any Person with respect to the
payment of dividends or distributions or the making or repayment of
intercompany loans by a Secured Guarantor to Borrower.


 


6.17         No
Speculative Transactions.  No Credit
Party shall engage in any transaction involving commodity options, futures
contracts or similar transactions, except solely to hedge against fluctuations
in the prices of commodities owned or purchased by it and the values of foreign
currencies receivable or payable by it and interest swaps, caps or collars.


 


6.18         Changes
Relating to Subordinated Debt; Material Contracts.  No Credit Party shall change or amend the
terms of any Subordinated Debt (or any indenture or agreement in connection
therewith) if the effect of such amendment is to:  (a) increase the interest rate on such
Subordinated Debt; (b) change the dates upon which payments of principal or
interest are due on such Subordinated Debt other than to extend such dates; (c)
change any default or event of default other than to delete or make less
restrictive any default provision therein, or add any covenant with respect to
such Subordinated Debt; (d) change the redemption or prepayment provisions of
such Subordinated Debt other than to extend the dates therefor or to reduce the
premiums payable in connection therewith; (e) grant any security or collateral
to secure payment of such Subordinated Debt; or (f) change or amend any other
term if such change or amendment would materially increase the obligations of
the Credit Party thereunder or confer additional material rights on the holder
of such Subordinated Debt in a manner adverse to any Credit Party, Agent or any
Lender.


 


6.19         Holdings.  Holdings shall not engage in any trade or
business or incur any Indebtedness other than to hold, manage and direct its
equity and debt positions in Borrower and to perform its obligations under
existing arrangements with its stockholders and take actions incident thereto.


 


6.20         Modifications
of SCIL Loan Documents. 
Notwithstanding any provision contained in this Agreement or in the
Intercreditor Agreement, Borrower shall not, nor shall it cause or permit any
of its Subsidiaries to:


 


(a)           modify Sections 6.1, 6.2,
6.7(c), 6.8 or 6.10 of the SCIL Loan Agreement or any
included capitalized term as defined in Annex A of the SCIL Loan
Agreement included in any of the foregoing sections (provided that such
limitation shall only apply to such defined term to the extent such term is
used in one or more of the foregoing sections and for no other purpose) (the
covenants and definitions described in this clause (a) are herein
sometimes referred to as the “Non-Change Covenants”); or


 


(b)           add materially more restrictive
covenants, representations, warranties or events of default or make materially
more restrictive the covenants, representations, warranties or events of
default under the SCIL Loan Documents (but the foregoing shall not prevent the
charging of fees or the making of changes to conform the SCIL Loan Documents to
changes made to the First Lien Loan Documents); provided, however, that the
terms of this clause (b) do 


 


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not relate to the
Non-Change Covenants all of which are governed by the terms of the preceding clause
(a); and provided further, that there shall be no modification of or
addition to or of any covenant, representation, warranty or event of default
(or any included capitalized term to the extent such term is used in any one or
more of the covenants, representations, warranties or events of default) (all
of the foregoing covenants, representations, warranties, events of default and
related definitions are referred to herein as “Subject Clauses”)
contained or proposed to be contained in any of the SCIL Loan Documents except
following satisfaction of the following terms and conditions including the
absence of a notice of objection by the Agent as of 5:00 p.m., (Chicago time),
on the last day of the five Business Day period referred to in the following paragraph
(2) of this clause (b):


 


(1)           the Borrower shall deliver to the Agent and each Lender
ten (10) Business Days’ prior written notice (the “Borrower Change Notice”)
containing the full text of any proposed amendment to or addition of a Subject
Clause in the SCIL Loan Documents (a “Proposed Second Lien Change”);


 


(2)           within ten (10) Business Days following the Agent’s
receipt of the Borrower Change Notice, the Agent, which shall act or not act
based on a determination to be made by the Requisite Lenders, shall deliver to
the Borrower (with a copy to the SCIL Agent) written notice of objection if,
and so stating that, the Agent or Requisite Lenders consider the Proposed
Second Lien Change to be inconsistent with or to cause a breach under the terms
of clause (b) above (it being understood that the Agent’s failure timely
to deliver such a notice shall constitute the Agent’s and Lenders’ non-objection
to the Proposed Second Lien Change);


 


(3)           the Borrower shall not agree to, permit or suffer to
occur, any modification to the SCIL Loan Documents to the extent that such
modification has been objected to by the Agent pursuant to and in accordance
with the terms of the preceding paragraph (2);


 


(4)           the preceding paragraphs (1), (2) and (3)
shall not apply to any amendments or modifications to the Non-Change Covenants.


 


7.     TERM


 


7.1           Termination.  The financing arrangements contemplated
hereby shall be in effect until the Commitment Termination Date, and the Loans
and all other Obligations shall be automatically due and payable in full on
such date.


 


7.2           Survival
of Obligations Upon Termination of Financing Arrangements.  Except as otherwise expressly provided for in
the Loan Documents, no termination or cancellation (regardless of cause or
procedure) of any financing arrangement under this Agreement shall in any way
affect or impair the obligations, duties and liabilities of the Credit Parties
or the rights of Agent and Lenders relating to any unpaid portion of the Loans
or any other Obligations, due or not due, liquidated, contingent or
unliquidated or any transaction or event occurring prior to such termination,
or any transaction or event, the performance of which is required after the
Commitment Termination Date.  Except as
otherwise expressly provided herein or in any other Loan Document, all
undertakings, agreements, covenants, warranties and 


 


49





















 


representations
of or binding upon the Credit Parties, and all rights of Agent and each Lender,
all as contained in the Loan Documents shall continue in full force and effect
until the Termination Date; provided,
that the provisions of Section 11, the payment obligations under Sections
1.15 and 1.16,  and the indemnities
contained in the Loan Documents shall survive the Termination Date.


 


8.     EVENTS OF DEFAULT; RIGHTS AND REMEDIES


 


8.1           Events
of Default.  The occurrence of any
one or more of the following events (regardless of the reason therefor) shall
constitute an “Event of Default” hereunder:


 


(a)           Borrower (i) fails to make any
payment of principal hereunder when due; (ii) fails to make any payment of
interest on, or Fees owing in respect of, the Loans or any of the other
Obligations within three (3) days after such payment is due; or (iii) fails to
pay or reimburse Agent or Lenders for any expense reimbursable hereunder or
under any other Loan Document within ten (10) days following Agent’s demand for
such reimbursement or payment of expenses.


 


(b)           Any Credit Party fails or neglects to
perform, keep or observe any of the provisions of Sections 1.4, 1.8, 5.4(a),
5.8, 5.11, 5.12 or 6, any of the provisions set forth in Annexes C or G,
respectively, or any of the provisions of Section 3.2 of the
Environmental Indemnity Agreement.


 


(c)           Borrower fails or neglects to
perform, keep or observe (i) any of the provisions of Section 4 or
any provisions set forth in Annexes E or F (other than paragraph (d)
of Annex E), respectively, and the same shall remain unremedied for five
(5) days or more or (ii) any of the provisions set forth in paragraph (d)
of Annex E, and the same shall remain unremedied for fifteen (15) days
or more.


 


(d)           Any Credit Party fails or neglects to
perform, keep or observe any other provision of this Agreement or of any of the
other Loan Documents (other than any provision embodied in or covered by any
other clause of this Section 8.1) and the same shall remain unremedied
for fifteen (15) days or more after Agent’s notice thereof to Borrower.


 


(e)           A default or breach occurs under any
other agreement, document or instrument to which any Credit Party is a party
that is not cured within any applicable grace period therefor, and such default
or breach (i) involves the failure to make any payment when due in respect of
any Indebtedness or Guaranteed Indebtedness (other than the Obligations) of any
Credit Party in excess of $3,000,000 in the aggregate (including (x) undrawn
committed or available amounts and (y) amounts owing to all creditors under any
combined or syndicated credit arrangements), or (ii) causes, or permits any
holder of such Indebtedness or Guaranteed Indebtedness or a trustee to cause,
Indebtedness or Guaranteed Indebtedness or a portion thereof in excess of
$3,000,000 in the aggregate to become due prior to its stated maturity or prior
to its regularly scheduled dates of payment, or cash collateral to be demanded
in respect thereof, in each case, regardless of whether such default is waived,
or such right is exercised, by such holder or trustee.


 


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(f)            Any information contained in any
Borrowing Base Certificate is untrue or incorrect in any respect resulting in
the making of a Revolving Credit Advance in excess of the actual Borrowing
Availability (other than inadvertent, immaterial errors not exceeding $150,000
in any Borrowing Base Certificate), or any representation or warranty herein or
in any Loan Document or in any written statement, report, financial statement
or certificate (other than a Borrowing Base Certificate) made or delivered to
Agent or any Lender by any Credit Party is untrue or incorrect in any material
respect as of the date when made or deemed made.


 


(g)           Assets of any Credit Party with a
fair market value of $1,500,000 or more are attached, seized, levied upon or
subjected to a writ or distress warrant, or come within the possession of any
receiver, trustee, custodian or assignee for the benefit of creditors of any
Credit Party and such condition continues for thirty (30) days or more.


 


(h)           A case or proceeding is commenced
against any Credit Party or Holdings seeking a decree or order in respect of
such Credit Party or Holdings (i) under the Bankruptcy Code or any other applicable
federal, state or foreign bankruptcy or other similar law, (ii) appointing a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar
official) for such Credit Party or Holdings or for any substantial part of any
such Credit Party’s assets or of assets of Holdings, or (iii) ordering the
winding-up or liquidation of the affairs of such Credit Party or Holdings, and
such case or proceeding shall remain undismissed or unstayed for sixty (60)
days or more or a decree or order granting the relief sought in such case or
proceeding by a court of competent jurisdiction.


 


(i)            Any Credit Party or Holdings (i)
files a petition seeking relief under the Bankruptcy Code or any other
applicable federal, state or foreign bankruptcy or other similar law, (ii)
consents to or fails to contest in a timely and appropriate manner to the
institution of proceedings thereunder or to the filing of any such petition or
to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) for such
Credit Party or Holdings or for any substantial part of any such Credit Party’s
assets or of assets of Holdings, (iii) makes an assignment for the benefit of
creditors, or (iv) takes any action in furtherance of any of the foregoing, or
(v) admits in writing its inability to, or is generally unable to, pay its
debts as such debts become due.


 


(j)            An uninsured final judgment or
judgments for the payment of money in excess of $1,500,000 in the aggregate at
any time are outstanding against one or more of the Credit Parties and the same
are not, within thirty (30) days after the entry thereof, discharged or
execution thereof stayed or bonded pending appeal, or such judgments are not
discharged prior to the expiration of any such stay.


 


(k)           Any material provision of any Loan
Document for any reason ceases to be valid, binding and enforceable in
accordance with its terms (or any Credit Party shall challenge the
enforceability of any Loan Document or shall assert in writing, or engage in
any action or inaction based on any such assertion, that any provision of any
of the Loan Documents has ceased to be or otherwise is not valid, binding and
enforceable in accordance with its terms), or any Lien created under any Loan
Document ceases to be a valid and perfected first priority Lien (except as
otherwise permitted herein or therein) in any of the Collateral purported to be
covered 


 


51





















 


thereby, and remains
unremedied for a period of ten (10) days after Borrower obtains knowledge
thereof.


 


(l)            Any Change of Control occurs.


 


(m)          Any event occurs, whether or not
insured or insurable, as a result of which revenue-producing activities cease
or are substantially curtailed at any facility of Borrower or any Secured
Guarantor generating more than 5% of Borrower’s consolidated revenues for the
Fiscal Year preceding such event and such cessation or curtailment continues
for more than one hundred eighty (180) days.


 


(n)           Holdings shall fail (i) to become a
Guarantor and pledge all of the Stock of Borrower as Collateral within ten (10)
days after payment in full of the Holdco Debenture Debt; (ii) to contribute to
the capital of Borrower all net cash proceeds of any Qualified Public Offering
within ten (10) days of the receipt thereof except for those amounts used with
such 10-day period (x) to purchase, retire, redeem or otherwise acquire
for value all or any portion of the Holdco Debenture Debt and (y) to
redeem, defease or otherwise retire or acquire for value (or make similar
payments or distributions having substantially the same effect of any of the
foregoing) the preferred Stock of Holdings to the extent permitted by this
Agreement; or (iii) to contribute to the capital of Borrower all net cash
proceeds of any issuance of Stock (other than net cash proceeds received
pursuant to a Qualified Public Offering), other than any portion of such net
proceeds that Holdings uses to purchase, retire, redeem or otherwise acquire
for value all or any portion of the Holdco Debenture Debt within ten (10) days
of the receipt of such net cash proceeds to the extent permitted by this
Agreement.


 


(o)           A default or breach under any
agreement document or instrument to which Schaublin Holding or any of its
Subsidiaries is a party that evidences the Schaublin Financing that is not
cured within any applicable grace period thereto and such default or breach
(involves the failure to make any payment when due in respect of any
Indebtedness or Guaranteed indebtedness, or (ii) causes, or permits any holder
of such Indebtedness or Guaranteed Indebtedness or a trustee to cause,
Indebtedness or Guaranteed Indebtedness or a portion thereof in the aggregate
to become due prior to its stated maturity or prior to its regularly scheduled
dates of payment, or cash collateral to be demanded in respect thereof, in each
case, regardless of whether such default is waived, or such right is exercised,
by such holder or trustee.


 


8.2           Remedies.


 


(a)           If any Default or Event of Default
has occurred and is continuing, Agent may (and at the written request of the
Requisite Revolving Lenders shall), without notice, suspend the Revolving Loan
facility with respect to additional Advances and/or the incurrence of
additional Letter of Credit Obligations, whereupon any additional Advances and
additional Letter of Credit Obligations shall be made or incurred in Agent’s
sole discretion (or in the sole discretion of the Requisite Revolving Lenders,
if such suspension occurred at their direction) so long as such Default or
Event of Default is continuing.  If any
Default or Event of Default has occurred and is continuing, Agent may (and at
the written request of Requisite Lenders shall), without notice except as
otherwise expressly provided herein, increase the rate of interest applicable
to the Loans and the Letter of Credit Fees to the Default Rate.


 


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(b)           If any Event of Default has occurred
and is continuing, Agent may (and at the written request of the Requisite
Lenders shall), without notice: (i) terminate the Revolving Loan facility
with respect to further Advances or the incurrence of further Letter of Credit
Obligations; (ii) reduce the Revolving Loan Commitments from time to time upon
written notice to Borrower; (iii) declare all or any portion of the
Obligations, including all or any portion of any Loan to be forthwith due and
payable, and require that the Letter of Credit Obligations be cash
collateralized as provided in Annex B, all without presentment, demand,
protest or further notice of any kind, all of which are expressly waived by
Borrower and each other Credit Party; and (iv) exercise any rights and
remedies provided to Agent under the Loan Documents or at law or equity, including
all remedies provided under the Code; provided,
that upon the occurrence of an Event of Default specified in Sections 8.1(h)
or (i), the Commitments shall be immediately terminated and all of the
Obligations, including the Revolving Loan, shall become immediately due and
payable without declaration, notice or demand by any Person.


 


8.3           Waivers
by Credit Parties.  Except as
otherwise provided for in this Agreement or by applicable law, each Credit
Party waives: (a) presentment, demand and protest and notice of presentment,
dishonor, notice of intent to accelerate, notice of acceleration, protest,
default, nonpayment, maturity, release, compromise, settlement, setoff rights,
extension or renewal of any or all commercial paper, accounts, contract rights,
documents, instruments, chattel paper and guaranties at any time held by Agent
on which any Credit Party may in any way be liable, and hereby ratifies and
confirms whatever Agent may do in this regard, (b) all rights to notice and a
hearing prior to Agent’s taking possession or control of, or to Agent’s
replevy, attachment or levy upon, the Collateral or any bond or security that
might be required by any court prior to allowing Agent to exercise any of its
remedies, and (c) the benefit of all valuation, appraisal, marshaling and
exemption laws.


 


9.     ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT


 


9.1           Assignment and Participations.


 


(a)           Subject to the terms of this Section
9.1, any Lender may make an assignment to a Qualified Assignee or a Related
Fund of, or sell participations in, at any time or times, the Loan Documents,
Loans, Letter of Credit Obligations and any Commitment or any portion thereof
or interest therein, including any Lender’s rights, title, interests, remedies,
powers or duties thereunder.  Any assignment
by a Lender shall:  (i) require the
consent of Agent (which consent shall not be unreasonably withheld or delayed
with respect to a Qualified Assignee) and the execution of an assignment
agreement (an “Assignment Agreement” substantially in the form attached
hereto as Exhibit 9.1(a) and otherwise in form and substance reasonably
satisfactory to, and acknowledged by, Agent; (ii) be conditioned on such
assignee Lender representing to the assigning Lender and Agent that it is
purchasing the applicable Loans to be assigned to it for its own account, for
investment purposes and not with a view to the distribution thereof;
(iii) after giving effect to any such partial assignment, (x) in the
case of Revolving Loan, the assignee Lender shall have Revolving Commitments in
an amount at least equal to $5,000,000 and the assigning Lender shall have
retained Revolving Commitments in an amount at least equal to $5,000,000, and
(y) in the case of Term Loan, the assignee Lender and its Affiliates and
Related Funds shall have Term Loan Commitments of at least $1,000,000 in the
aggregate and the assigning Lender and its Affiliates and Related Funds shall
have retained Term Loan 


 


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Commitments of at least
$1,000,000 in the aggregate; (iv) include a payment to Agent of an
assignment fee of $3,500; and (vi) so long as no Event of Default shall have
occurred or be continuing, require the consent of Borrower (which consent shall
not be unreasonably withheld or delayed with respect to a Qualified Assignee
and shall not be required (x) for an assignment by a Lender to another Lender
or to an Affiliate of a Lender or to a Related Fund or (y) for an assignment of
the Term Loan and the related Loan Documents). 
In the case of an assignment by a Lender under this Section 9.1,
the assignee shall have, to the extent of such assignment, the same rights,
benefits and obligations as all other Lenders hereunder.  The assigning Lender shall be relieved of its
obligations hereunder with respect to its Commitments or assigned portion
thereof from and after the date of such assignment.  Borrower hereby acknowledges and agrees that
any assignment shall give rise to a direct obligation of Borrower to the assignee
and that the assignee shall be considered to be a “Lender”.  In all instances, each Lender’s liability to
make Loans hereunder shall be several and not joint and shall be limited to
such Lender’s Pro Rata Share of the applicable Commitment.  In the event Agent or any Lender assigns or otherwise
transfers all or any part of the Obligations, Agent or any such Lender shall so
notify Borrower and Borrower shall, upon the request of Agent or such Lender,
execute new Notes in exchange for the Notes, if any, being assigned.  Notwithstanding the foregoing provisions of
this Section 9.1(a), any Lender may at any time pledge all or any
portion of the Obligations held by it and all or any portion of such Lender’s
rights under this Agreement and the other Loan Documents to a Federal Reserve
Bank or a Qualified Assignee as collateral security to secure obligations of
such Lender, Affiliates of such Lender or funds or accounts managed by such
Lender or an Affiliate of such Lender to such Federal Reserve Bank or such
Qualified Assignee (without requesting the consent of the Borrower or the Agent
but in each case by providing to the Agent an advance written notice thereof
which shall identify the Person obligated under the obligations secured by such
pledge and the Person in whose favor such pledge is made); provided, that no such pledge shall
release such Lender from such Lender’s obligations hereunder or under any other
Loan Document; provided, further, any such pledgee or grantee
(other than any Federal Reserve Bank) shall be entitled to further transfer all
of any portion of the rights pledged or granted to it, whether by means of
foreclosure or otherwise, as long as (x) such pledgee or grantee transfers
such rights to a Qualified Assignee, (y) such right to transfer is at all
times subject to the terms of this Agreement and (z) each such pledgee or
grantee shall have provided in each case a written notice of such transfer to
the Agent which identifies the transferee of such rights.  Agent shall maintain in its offices located
at 100 California Street, 10th Floor, San Francisco, California
94111 (or such other offices as Agent may elect from time to time) a “register”
for recording the name, address, commitment and Loans owing to each
Lender.  The entries in such register
shall be presumptive evidence of the amounts due and owing to each Lender in
the absence of manifest error.  Borrower,
Agent and each Lender may treat each Person whose name is recorded in such
register pursuant to the terms hereof as a Lender for all purposes of this
Agreement.  The register described herein
shall be available for inspection by Borrower and any Lender, at any reasonable
time upon reasonable prior notice.


 


(b)           Any participation by a Lender of all
or any part of its Commitments shall be made with the understanding that all amounts
payable by Borrower hereunder shall be determined as if that Lender had not
sold such participation, and that the holder of any such participation shall
not be entitled to require such Lender to take or omit to take any action
hereunder except actions directly affecting (i) any reduction in the principal
amount of, or interest rate or Fees payable with respect to, any Loan in which
such holder participates, (ii) any 


 


54





















 


extension of the
scheduled amortization of the principal amount of any Loan in which such holder
participates or the final maturity date thereof, and (iii) any release of all
or substantially all of the Collateral (other than in accordance with the terms
of this Agreement, the Collateral Documents or the other Loan Documents).  Neither Borrower nor any other Credit Party
shall have any obligation or duty to any participant.  Neither Agent nor any Lender (other than the
Lender selling a participation) shall have any duty to any participant and may
continue to deal solely with the Lender selling a participation as if no such
sale had occurred.


 


(c)           Except as expressly provided in this Section
9.1, no Lender shall, as between Borrower and that Lender, or Agent and
that Lender, be relieved of any of its obligations hereunder as a result of any
sale, assignment, transfer or negotiation of, or granting of participation in,
all or any part of the Loans, the Notes or other Obligations owed to such
Lender.


 


(d)           Each Credit Party executing this Agreement
shall assist any Lender permitted to sell assignments or participations under
this Section 9.1 as reasonably required to enable the assigning or
selling Lender to effect any such assignment or participation, including the
preparation of informational materials for, and the participation of management
in meetings with, potential assignees or participants.  Each Credit Party executing this Agreement
shall certify the correctness, completeness and accuracy of all descriptions of
the Credit Parties and their respective affairs contained in any selling
materials provided by it and all other information provided by it and included
in such materials, except that any Projections delivered by Borrower shall only
be certified by Borrower as having been prepared by Borrower in compliance with
the representations contained in Section 3.4(c).


 


(e)           A Lender may furnish any information
concerning Credit Parties in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants); provided that such Lender shall obtain
from assignees or participants confidentiality covenants substantially
equivalent to those contained in Section 11.8.


 


(f)            No Lender shall assign or sell
participations in any portion of its Loan or Commitments to a potential Lender
or participant, if, as of the date of the proposed assignment or sale, the
assignee Lender or participant would be subject to capital adequacy or similar
requirements under Section 1.16(a), increased costs under Section
1.16(b), an inability to fund LIBOR Loans under Section 1.16(c), or
taxes in accordance with Section 1.15(a) or Section 1.15(b).


 


(g)           Notwithstanding anything to the
contrary contained herein, any Lender (a “Granting Lender”), may grant
to a special purpose funding vehicle (an “SPC”), identified as such in
writing by the Granting Lender to Agent and Borrower, the option to provide to
Borrower all or any part of any Loans that such Granting Lender would otherwise
be obligated to make to Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC
to make any Loan; and (ii) if an SPC elects not to exercise such option or
otherwise fails to provide all or any part of such Loan, the Granting Lender
shall be obligated to make such Loan pursuant to the terms hereof.  The making of a Loan by an SPC hereunder
shall utilize the Commitment of the Granting Lender to the same extent, and as
if such Loan were made by such Granting Lender. 
No SPC shall be liable for any indemnity or similar payment obligation
under this Agreement (all liability for which shall remain with the Granting 


 


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Lender).  Any SPC may (i) with notice to, but without
the prior written consent of, Borrower and Agent and assign all or a portion of
its interests in any Loans to the Granting Lender or to any financial
institutions (consented to by Borrower and Agent) providing liquidity and/or
credit support to or for the account of such SPC to support the funding or
maintenance of Loans and (ii) disclose on a confidential basis any non-public
information relating to its Loans to any rating agency, commercial paper dealer
or provider of any surety, guaranty or credit or liquidity enhancement to such
SPC.  This Section 9.1(g) may not
be amended without the prior written consent of each Granting Lender, all or
any of whose Loans are being funded by an SPC at the time of such
amendment.  For the avoidance of doubt,
the Granting Lender shall for all purposes, including without limitation, the
approval of any amendment or waiver of any provision of any Loan Document or
the obligation to pay any amount otherwise payable by the Granting Lender under
the Loan Documents, continue to be the Lender of record hereunder.


 


9.2           Appointment
of Agent.  GE Capital is hereby
appointed to act on behalf of all Lenders as Agent under this Agreement and the
other Loan Documents.  The provisions of
this Section 9.2 are solely for the benefit of Agent and Lenders and no
Credit Party nor any other Person shall have any rights as a third party
beneficiary of any of the provisions hereof. 
In performing its functions and duties under this Agreement and the
other Loan Documents, Agent shall act solely as an agent of Lenders and does not
assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for any Credit Party or any other
Person.  Agent shall have no duties or
responsibilities except for those expressly set forth in this Agreement and the
other Loan Documents.  The duties of
Agent shall be mechanical and administrative in nature and Agent shall not
have, or be deemed to have, by reason of this Agreement, any other Loan
Document or otherwise a fiduciary relationship in respect of any Lender.  Except as expressly set forth in this
Agreement and the other Loan Documents, Agent shall not have any duty to
disclose, and shall not be liable for failure to disclose, any information
relating to any Credit Party or any of their respective Subsidiaries or any
Account Debtor that is communicated to or obtained by GE Capital or any of its
Affiliates in any capacity.  Neither
Agent nor any of its Affiliates nor any of their respective officers, directors,
employees, agents or representatives shall be liable to any Lender for any
action taken or omitted to be taken by it hereunder or under any other Loan
Document, or in connection herewith or therewith, except for damages caused by
its or their own gross negligence or willful misconduct.


 


Each
Lender hereby irrevocably authorizes Agent to execute and deliver the
Intercreditor Agreement and to observe and perform each and all of the
obligations of Agent under the Intercreditor Agreement and to take such action
or to refrain from taking such action on behalf of itself and the Lenders under
the Intercreditor Agreement and to exercise such powers as are set forth herein
or therein, together with such other powers as are reasonably incidental
thereto.  Each Lender agrees to be, and
is, bound by the provisions of the Intercreditor Agreement, and each future
Lender, by taking an assignment of, or purchasing participations in, the Loan
Documents and one or more Loans or any portion thereof or interest therein,
shall be deemed to have agreed to be bound by the terms and provisions of the
Intercreditor Agreement.


 


If
Agent shall request instructions from Requisite Lenders, Requisite Revolving
Lenders, or all affected Lenders with respect to any act or action (including
failure to act) in connection with this Agreement or any other Loan Document,
then Agent shall be entitled to refrain from such act or taking such action
unless and until Agent shall have received 


 


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instructions
from Requisite Lenders, Requisite Revolving Lenders, or all affected Lenders,
as the case may be, and Agent shall not incur liability to any Person by reason
of so refraining.  Agent shall be fully
justified in failing or refusing to take any action hereunder or under any
other Loan Document (a) if such action would, in the opinion of Agent, be
contrary to law or the terms of this Agreement or any other Loan Document, (b)
if such action would, in the opinion of Agent, expose Agent to Environmental
Liabilities or (c) if Agent shall not first be indemnified to its satisfaction
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action or if Agent has not received
sufficient cash deposits to satisfy expected liabilities and expenses related
to such action.  Without limiting the
foregoing, no Lender shall have any right of action whatsoever against Agent as
a result of Agent acting or refraining from acting hereunder or under any other
Loan Document in accordance with the instructions of Requisite Lenders,
Requisite Revolving Lenders, or all affected Lenders, as applicable.


 


9.3           Agent’s Reliance, Etc.  Neither Agent nor any of its Affiliates nor
any of their respective directors, officers, agents or employees shall be
liable for any action taken or omitted to be taken by it or them under or in
connection with this Agreement or the other Loan Documents, except for damages
caused by its or their own gross negligence or willful misconduct.  Without limiting the generality of the foregoing,
Agent:  (a) may treat the payee of any
Note as the holder thereof until Agent receives written notice of the
assignment or transfer thereof signed by such payee and in form reasonably
satisfactory to Agent; (b) may consult with legal counsel, independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts; (c) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations made in or in connection with this
Agreement or the other Loan Documents; (d) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement or the other Loan Documents on the
part of any Credit Party or to inspect the Collateral (including the books and
records) of any Credit Party; (e) shall not be responsible to any Lender for
the due execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement or the other Loan Documents or any other instrument
or document furnished pursuant hereto or thereto; and (f) shall incur no liability
under or in respect of this Agreement or the other Loan Documents by acting
upon any notice, consent, certificate or other instrument or writing (which may
be by telecopy, telegram, cable or telex) believed by it to be genuine and
signed or sent by the proper party or parties.


 


9.4           GE
Capital and Affiliates.  With respect
to its Commitments hereunder, GE Capital shall have the same rights and powers
under this Agreement and the other Loan Documents as any other Lender and may
exercise the same as though it were not Agent; and the term “Lender” or
“Lenders” shall, unless otherwise expressly indicated, include GE Capital in
its individual capacity.  GE Capital and
its Affiliates may lend money to, invest in, and generally engage in any kind
of business with, any Credit Party, any of their Affiliates and any Person who
may do business with or own securities of any Credit Party or any such
Affiliate, all as if GE Capital were not Agent and without any duty to account
therefor to Lenders.  GE Capital or one
or more of Affiliates may also purchase certain equity interests in Holdings,
which is a corporation that currently owns 100% of the outstanding Stock of
Borrower.  GE Capital and its Affiliates
may accept fees and other consideration from any Credit Party for services in 


 


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connection
with this Agreement or otherwise without having to account for the same to
Lenders.  GE Capital also acts as agent
for the holders of the SCIL Loan.  Each
Lender acknowledges the potential conflict of interest between GE Capital as a
Lender holding disproportionate interests in the Loans, GE Capital or its
Affiliates as a Stockholder and GE Capital as Agent or that may arise from GE
Capital acting as agent for the holders of the SCIL Loan; provided that any equity investment by GE
Capital shall not exceed 7.5% in the aggregate of the Stock of Holdings
outstanding on a fully diluted basis, and shall not exceed $7,500,000 of
investments in the aggregate.


 


9.5           Lender
Credit Decision.  Each Lender
acknowledges that it has, independently and without reliance upon Agent or any
other Lender and based on the Financial Statements referred to in Section
3.4(a) and such other documents and information as it has deemed
appropriate, made its own credit and financial analysis of the Credit Parties
and its own decision to enter into this Agreement.  Each Lender also acknowledges that it will,
independently and without reliance upon Agent or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement.  Each Lender acknowledges
the potential conflict of interest of each other Lender as a result of Lenders
holding disproportionate interests in the Loans, and expressly consents to, and
waives any claim based upon, such conflict of interest.


 


9.6           Indemnification.  Lenders agree to indemnify Agent (to the
extent not reimbursed by Credit Parties on demand and without limiting the
obligations of Credit Parties hereunder), ratably according to their respective
Pro Rata Shares, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever (including reasonable attorneys’,
accountants’, experts’ and advisors’ fees and disbursements and all costs of
investigation, testing or defense, including those incurred on any appeal) that
may be instituted or asserted against, imposed on or incurred by Agent in any
way relating to or arising out of this Agreement or any other Loan Document or
any action taken or omitted to be taken by Agent in connection therewith (all
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits costs, expenses or disbursements, collectively, the “Agent Indemnified
Items”); provided, that no
Lender shall be liable to Agent for that portion, if any, of such Agent
Indemnified Items which resulted from Agent’s gross negligence or willful
misconduct. Without limiting the foregoing, each Lender agrees to reimburse
Agent promptly upon demand for its ratable share of any out-of-pocket expenses
(including reasonable counsel, accountant, expert and advisor fees and
disbursements) incurred by Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement and each other Loan
Document to the extent that Agent is not reimbursed for such expenses by the
Credit Parties upon demand.


 


9.7           Successor
Agent.  Agent may resign at any time
by giving not less than thirty (30) days’ prior written notice thereof to
Lenders and Borrower.  Upon any such
resignation, the Requisite Lenders shall have the right to appoint a successor
Agent.  If no successor Agent shall have
been so appointed by the Requisite Lenders and shall have accepted such
appointment within thirty (30) days after the resigning Agent’s giving notice
of resignation, 


 


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then
the resigning Agent may, on behalf of Lenders, appoint a successor Agent, which
shall be a Lender, if a Lender is willing to accept such appointment, or
otherwise shall be a commercial bank or financial institution or a subsidiary
of a commercial bank or financial institution if such commercial bank or
financial institution is organized under the laws of the United States of
America or of any State thereof and has a combined capital and surplus
of at least $300,000,000.  If no
successor Agent has been appointed pursuant to the foregoing, within thirty
(30) days after the date such notice of resignation was given by the resigning
Agent, such resignation shall become effective and the Requisite Lenders shall
thereafter perform all the duties of Agent hereunder until such time, if any,
as the Requisite Lenders appoint a successor Agent as provided above. Any
successor Agent appointed by Agent or Requisite Lenders hereunder shall be
subject to the approval of Borrower, such approval not to be unreasonably
withheld or delayed; provided
that such approval shall not be required if a Default or an Event of Default
has occurred and is continuing.  Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall succeed to and become vested with all the rights, powers,
privileges and duties of the resigning Agent. 
Upon the earlier of the acceptance of any appointment as Agent hereunder
by a successor Agent or the effective date of the resigning Agent’s
resignation, the resigning Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents, except that any
indemnity rights or other rights in favor of such resigning Agent shall
continue.  After any resigning Agent’s
resignation hereunder, the provisions of this Section 9 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
acting as Agent under this Agreement and the other Loan Documents.


 


9.8           Setoff
and Sharing of Payments.  In addition
to any rights now or hereafter granted under applicable law and not by way of
limitation of any such rights, upon the occurrence and during the continuance
of any Event of Default and subject to Section 9.9(f), each Lender is
hereby authorized at any time or from time to time, without notice to any
Credit Party or to any other Person, any such notice being hereby expressly
waived, to offset and to appropriate and to apply any and all balances held by
it at any of its offices for the account of Borrower or any Guarantor
(regardless of whether such balances are then due to Borrower or any Guarantor)
and any other properties or assets at any time held or owing by that Lender or
that holder to or for the credit or for the account of Borrower or any
Guarantor against and on account of any of the Obligations that are not paid
when due.  Any Lender exercising the
foregoing right of setoff or otherwise receiving any payment on account of the
Obligations in excess of its Pro Rata Share thereof determined in accordance
with Section 1.11 shall purchase for cash (and the other Lenders or
holders shall sell) such participations in each such other Lender’s or holder’s
Pro Rata Share of the Obligations as would be necessary to cause such Lender to
share the amount so offset or otherwise received with each other Lender or
holder in accordance with their respective Pro Rata Shares determined in accordance
with Section 1.11, (other than offset rights exercised by any
Lender with respect to Sections 1.13, 1.15 or 1.16).  Each Credit Party agrees, to the fullest
extent permitted by law, that (a) any Lender may exercise the foregoing right
to offset with respect to amounts in excess of its Pro Rata Share of the
Obligations and may sell participations in such amounts so offset to other
Lenders and holders and (b) any Lender so purchasing a participation in the
Loans made or other Obligations held by other Lenders or holders may exercise
all rights of offset, bankers’ lien, counterclaim or similar rights with
respect to such participation as fully as if such Lender or holder were a
direct holder of the Loans and the other Obligations in the amount of such participation.  Notwithstanding the foregoing, if all or any
portion of the offset amount or payment otherwise received is thereafter


 


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recovered
from the Lender that has exercised the right of offset, the purchase of
participations by that Lender shall be rescinded and the purchase price
restored without interest.


 


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


 


(a)           Advances; Payments.


 


(i)            Revolving Lenders shall refund or
participate in the Swing Line Loan in accordance with clauses (iii) and (iv)
of Section 1.1(c).  If the Swing
Line Lender declines to make a Swing Line Loan or if Swing Line Availability is
zero, Agent shall notify Revolving Lenders, promptly after receipt of a Notice
of Revolving Credit Advance and in any event prior to 1:00 p.m. (Chicago time)
on the date such Notice of Revolving Advance is received, by telecopy,
telephone or other similar form of transmission.  Each Revolving Lender shall make the amount
of such Lender’s Pro Rata Share of such Revolving Credit Advance available to
Agent in same day funds by wire transfer to Agent’s account as set forth in Annex
H not later than 3:00 p.m. (Chicago time) on the requested funding date, in
the case of an Index Rate Loan and not later than 11:00 a.m. (Chicago time) on
the requested funding date in the case of a LIBOR Loan.  After receipt of such wire transfers (or, in
the Agent’s sole discretion, before receipt of such wire transfers), subject to
the terms hereof, Agent shall make the requested Revolving Credit Advance to
Borrower.  All payments by each Revolving
Lender shall be made without setoff, counterclaim or deduction of any kind.


 


(ii)           On the 2nd Business Day of each
calendar week or more frequently at Agent’s election (each, a “Settlement
Date”), Agent shall advise each Lender by telephone, or telecopy of the
amount of such Lender’s Pro Rata Share of principal, interest and Fees paid for
the benefit of Lenders with respect to each applicable Loan.  Provided that each Lender has funded all
payments and Advances required to be made by it and purchased all
participations required to be purchased by it under this Agreement and the
other Loan Documents as of such Settlement Date, Agent shall pay to each Lender
such Lender’s Pro Rata Share of principal, interest and Fees paid by Borrower
since the previous Settlement Date for the benefit of such Lender on the Loans
held by it.  To the extent that any
Lender (a “Non-Funding Lender”) has failed to fund all such payments and
Advances or failed to fund the purchase of all such participations, Agent shall
be entitled to set off the funding short-fall against that Non-Funding Lender’s
Pro Rata Share of all payments received from Borrower.  Such payments shall be made by wire transfer
to such Lender’s account (as specified by such Lender in Annex H or the
applicable Assignment Agreement) not later than 1:00 p.m. (Chicago time) on the
next Business Day following each Settlement Date.


 


(b)           Availability of Lender’s
Pro Rata Share.  Agent may assume
that each Revolving Lender will make its Pro Rata Share of each Revolving
Credit Advance available to Agent on each funding date.  If such Pro Rata Share is not, in fact, paid
to Agent by such Revolving Lender when due, Agent will be entitled to recover
such amount on demand from such Revolving Lender without setoff, counterclaim
or deduction of any kind.  If any
Revolving Lender fails to pay the amount of its Pro Rata Share forthwith upon
Agent’s demand, Agent shall promptly notify Borrower and Borrower shall
immediately repay such amount to Agent. 
Nothing in this Section 9.9(b) or elsewhere in this Agreement or
the other Loan Documents shall 


 


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be deemed to require
Agent to advance funds on behalf of any Revolving Lender or to relieve any
Revolving Lender from its obligation to fulfill its Commitments hereunder or to
prejudice any rights that Borrower may have against any Revolving Lender as a
result of any default by such Revolving Lender hereunder.  To the extent that Agent advances funds to
Borrower on behalf of any Revolving Lender and is not reimbursed therefor on
the same Business Day as such Advance is made, Agent shall be entitled to retain
for its account all interest accrued on such Advance until reimbursed by the
applicable Revolving Lender.


 


(c)           Return of Payments.


 


(i)            If Agent pays an amount to a Lender
under this Agreement in the belief or expectation that a related payment has
been or will be received by Agent from Borrower and such related payment is not
received by Agent, then Agent will be entitled to recover such amount from such
Lender on demand without setoff, counterclaim or deduction of any kind.


 


(ii)           If Agent determines at any time that
any amount received by Agent under this Agreement must be returned to Borrower
or paid to any other Person pursuant to any insolvency law or otherwise, then,
notwithstanding any other term or condition of this Agreement or any other Loan
Document, Agent will not be required to distribute any portion thereof to any
Lender.  In addition, each Lender will
repay to Agent on demand any portion of such amount that Agent has distributed
to such Lender, together with interest at such rate, if any, as Agent is
required to pay to Borrower or such other Person, without setoff, counterclaim
or deduction of any kind.


 


(d)           Non-Funding Lenders.  The failure of any Non-Funding Lender to make
any Revolving Credit Advance or any payment required by it hereunder, or to
purchase any participation in any Swing Line Loan to be made or purchased by it
on the date specified therefor shall not relieve any other Lender (each such
other Revolving Lender, an “Other Lender”) of its obligations to make
such Advance or purchase such participation on such date, but neither any Other
Lender nor Agent shall be responsible for the failure of any Non-Funding Lender
to make an Advance, purchase a participation or make any other payment required
hereunder.  Notwithstanding anything set
forth herein to the contrary, a Non-Funding Lender shall not have any voting or
consent rights under or with respect to any Loan Document or constitute a
“Lender” or a “Revolving Lender” (or be included in the calculation of
“Requisite Lenders” or “Requisite Revolving Lenders” hereunder) for any voting
or consent rights under or with respect to any Loan Document (except that a
Lender that becomes a Non-Funding Lender solely by reason of Section 2.2(c)
shall retain its voting or consent rights under or with respect to any Loan
Document).  At Borrower’s request, Agent
or a Person acceptable to Agent shall have the right with Agent’s consent and
in Agent’s sole discretion (but shall have no obligation) to purchase from any
Non-Funding Lender, and each Non-Funding Lender agrees that it shall, at Agent’s
request, sell and assign to Agent or such Person, all of the Commitments of
that Non-Funding Lender for an amount equal to the principal balance of all
Loans held by such Non-Funding Lender and all accrued interest and fees with
respect thereto through the date of sale, such purchase and sale to be
consummated pursuant to an executed Assignment Agreement.


 


(e)           Dissemination of Information.  Agent shall use reasonable efforts to provide
Lenders with any notice of Default or Event of Default received by Agent from,
or 


 


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delivered by Agent to,
any Credit Party, with notice of any Event of Default of which Agent has
actually become aware and with notice of any action taken by Agent following
any Event of Default; provided
that Agent shall not be liable to any Lender for any failure to do so, except
to the extent that such failure is attributable to Agent’s gross negligence or
willful misconduct.  Lenders acknowledge
that Borrower is required to provide Financial Statements and Collateral
Reports to Lenders in accordance with Annexes E and F hereto and
agree that Agent shall have no duty to provide the same to Lenders.


 


(f)            Actions in Concert.  Anything in this Agreement to the contrary
notwithstanding, each Lender hereby agrees with each other Lender that no
Lender shall take any action to protect or enforce its rights arising out of
this Agreement or the Notes (including exercising any rights of setoff) without
first obtaining the prior written consent of Agent and Requisite Lenders, it
being the intent of Lenders that any such action to protect or enforce rights
under this Agreement and the Notes shall be taken in concert and at the
direction or with the consent of Agent or Requisite Lenders.  With respect to any action by Agent to
enforce the rights and remedies of Agent and the Lenders under this Agreement
and the other Loan Documents, each Lender hereby consents to the jurisdiction
of the court in which such action is maintained, and agrees to deliver its
Notes to Agent to the extent necessary to enforce the rights and remedies of
Agent for the benefit of the Lenders under the Mortgages in accordance with the
provisions hereof.


 


10.  SUCCESSORS AND ASSIGNS


 


10.1         Successors
and Assigns.  This Agreement and the
other Loan Documents shall be binding on and shall inure to the benefit of each
Credit Party, Agent, Lenders and their respective successors and assigns
(including, in the case of any Credit Party, a debtor-in-possession on behalf
of such Credit Party), except as otherwise provided herein or therein.  No Credit Party may assign, transfer,
hypothecate or otherwise convey its rights, benefits, obligations or duties
hereunder or under any of the other Loan Documents without the prior express
written consent of Agent and all Lenders. 
Any such purported assignment, transfer, hypothecation or other
conveyance by any Credit Party without the prior express written consent of
Agent and all Lenders shall be void.  The
terms and provisions of this Agreement are for the purpose of defining the
relative rights and obligations of each Credit Party, Agent and Lenders with
respect to the transactions contemplated hereby and no Person shall be a third
party beneficiary of any of the terms and provisions of this Agreement or any
of the other Loan Documents.


 


11.  MISCELLANEOUS


 


11.1         Complete
Agreement; Modification of Agreement. 
The Loan Documents constitute the complete agreement between the parties
with respect to the subject matter thereof and may not be modified, altered or
amended except as set forth in Section 11.2.  Any letter of interest, commitment letter, or
fee letter (other than the GE Capital Fee Letter or any confidentiality
agreement), if any, between any Credit Party and Agent or any Lender or any of
their respective Affiliates, predating this Agreement and relating to a
financing of substantially similar form, purpose or effect shall be superseded
by this Agreement.


 


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11.2         Amendments and Waivers.


 


(a)           Except for actions expressly
permitted to be taken by Agent, no amendment, modification, termination or
waiver of any provision of this Agreement or any other Loan Document, or any
consent to any departure by any Credit Party therefrom, shall in any event be effective
unless the same shall be in writing and signed by Agent and Borrower, and by
Requisite Lenders, Requisite Revolving Lenders, Term Lenders or all affected
Lenders, as applicable.  Except as set
forth in clauses (b) and (c) below, all such amendments, modifications,
terminations or waivers shall require the written consent of Requisite Lenders.


 


(b)           No amendment, modification,
termination or waiver of or consent with respect to any provision of this
Agreement that increases the percentage advance rates set forth in the
definition of the Borrowing Base, or that makes less restrictive the
nondiscretionary criteria for exclusion from Eligible Accounts and Eligible
Inventory set forth in Sections 1.6 and 1.7, shall be effective unless
the same shall be in writing and signed by Agent, Requisite Revolving Lenders
and Borrower.  No amendment,
modification, termination or waiver of or consent with respect to any provision
of this Agreement that waives compliance with the conditions precedent set
forth in Section 2.2 to the making of any Loan or the incurrence of any
Letter of Credit Obligations shall be effective unless the same shall be in
writing and signed by Agent, Requisite Revolving Lenders and Borrower.  Notwithstanding anything contained in this
Agreement to the contrary, no waiver or consent with respect to any Default or
any Event of Default shall be effective for purposes of the conditions
precedent to the making of Loans or the incurrence of Letter of Credit
Obligations set forth in Section 2.2 and Section 2.3 unless the
same shall be in writing and signed by Agent, Requisite Revolving Lenders and
Borrower.


 


(c)           No amendment, modification,
termination or waiver shall, unless in writing and signed by Agent and each
Lender directly affected thereby:  (i)
increase the principal amount of any Lender’s Commitment (which action shall be
deemed only to affect those Lenders whose Commitments are increased and must be
approved by Requisite Lenders, including those Lenders whose Commitments are
increased); (ii) reduce the principal of, rate of interest on or Fees payable
with respect to any Loan or Letter of Credit Obligations of any affected
Lender; (iii) waive or extend any scheduled payment date (other than payment
dates of mandatory prepayments under Section 1.3(b)(ii)-(vi)) or final
maturity date of the principal amount of any Loan of any affected Lender; (iv)
waive, forgive, defer, extend or postpone any payment of interest or Fees as to
any affected Lender; (v) amend the second sentence of Section 10.1 or release
any Guaranty or except as otherwise permitted herein or in the other Loan
Documents, release, or permit any Credit Party to sell or otherwise dispose of,
any Collateral with a value exceeding $4,000,000 in the aggregate (which action
shall be deemed to directly affect all Lenders); (vi) change the percentage of
the Commitments or of the aggregate unpaid principal amount of the Loans that
shall be required for Lenders or any of them to take any action hereunder
(which action shall be deemed to directly affect all Lenders); and (vii) amend
or waive this Section 11.2 or the definitions of the terms “Requisite
Lenders” or “Requisite Revolving Lenders” insofar as such definitions affect
the substance of this Section 11.2 (which action shall be deemed to directly
affect all Lenders).  Furthermore, no
amendment, modification, termination or waiver affecting the rights or duties
of Agent or L/C Issuer under this Agreement or any other Loan Document shall be
effective unless in writing and signed by Agent or L/C Issuer, as the case may
be, in addition to Lenders required hereinabove to take such action.  Each


 


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amendment, modification,
termination or waiver shall be effective only in the specific instance and for
the specific purpose for which it was given. 
No amendment, modification, termination or waiver shall be required for
Agent to take additional Collateral pursuant to any Loan Document. No
amendment, modification, termination or waiver of any provision of any Note
shall be effective without the written concurrence of the holder of that
Note.  No notice to or demand on any
Credit Party in any case shall entitle such Credit Party or any other Credit
Party to any other or further notice or demand in similar or other
circumstances.  Any amendment,
modification, termination, waiver or consent effected in accordance with this Section
11.2 shall be binding upon each holder of the Notes at the time outstanding
and each future holder of the Notes.


 


(d)           If, in connection with any proposed
amendment, modification, waiver or termination (a “Proposed Change”):


 


(i)            requiring the consent of all
affected Lenders, the consent of Requisite Lenders is obtained, but the consent
of other Lenders whose consent is required is not obtained (any such Lender
whose consent is not obtained as described in this clause (i) and in clause
(ii) below being referred to as a “Non-Consenting Lender”), or


 


(ii)           requiring the consent of all affected
Revolving Lenders, the consent of Requisite Revolving Lenders is obtained, but
the consent of other Revolving Lenders whose consent is required is not
obtained,


 


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


 


(e)           Upon payment in full in cash and
performance of all of the Obligations (other than indemnification Obligations),
termination of the Commitments and a release of all claims against Agent and
Lenders, and so long as no suits, actions proceedings, or claims are pending or
threatened against any Indemnified Person asserting any damages, losses or
liabilities that are Indemnified Liabilities, Agent shall deliver to Borrower
termination statements, mortgage releases and other documents necessary or
appropriate to evidence the termination of the Liens securing payment of the
Obligations.


 


11.3         Fees
and Expenses.  Borrower shall
reimburse (i) Agent for all reasonable out-of-pocket fees, costs and
expenses (including the reasonable fees and expenses of all of its counsel,
advisors, consultants and auditors) and (ii) Agent (and, with respect to clauses
(c) and (d) below, all Lenders) for all reasonable out-of-pocket fees,
costs and expenses, including the reasonable fees, costs and expenses of
counsel or other advisors (including environmental and management consultants
and appraisers) incurred in connection with the negotiation, preparation and
filing and/or recordation of the Loan Documents and incurred in connection
with:


 


64





















 


(a)           the forwarding to Borrower or any
other Person on behalf of Borrower by Agent of the proceeds of any Loan
(including a wire transfer fee of $25 per wire transfer);


 


(b)           any amendment, modification or waiver
of, or consent with respect to, or termination of, any of the Loan Documents or
Related Transactions Documents or advice in connection with the syndication and
administration of the Loans made pursuant hereto or its rights hereunder or
thereunder;


 


(c)           any litigation, contest, dispute,
suit, proceeding or action (whether instituted by Agent, any Lender, any Credit
Party or any other Person and whether as a party, witness or otherwise) in any
way relating to the Collateral, any of the Loan Documents or any other
agreement to be executed or delivered in connection herewith or therewith,
including any litigation, contest, dispute, suit, case, proceeding or action,
and any appeal or review thereof, in connection with a case commenced by or
against any or all of the Credit Parties or any other Person that may be
obligated to Agent by virtue of the Loan Documents, including any such
litigation, contest, dispute, suit, proceeding or action arising in connection
with any work-out or restructuring of the Loans during the pendency of one or
more Events of Default; provided
that in the case of reimbursement of counsel for Lenders other than Agent, such
reimbursement shall be limited to one counsel for all such Lenders; provided, further, that no Person shall be
entitled to reimbursement under this clause (c) in respect of any litigation,
contest, dispute, suit, proceeding or action to the extent any of the foregoing
results from such Person’s gross negligence or willful misconduct;


 


(d)           any attempt to enforce any remedies
of Agent or any Lender against any or all of the Credit Parties or any other
Person that may be obligated to Agent or any Lender by virtue of any of the
Loan Documents, including any such attempt to enforce any such remedies in the
course of any work-out or restructuring of the Loans during the pendency of one
or more Events of Default; provided
that in the case of reimbursement of counsel for Lenders other than Agent, such
reimbursement shall be limited to one counsel for all such Lenders;


 


(e)           any workout or restructuring of the
Loans during the pendency of one or more Events of Default; and


 


(f)            efforts to (i) monitor the Loans or
any of the other Obligations, and (ii) verify, protect, evaluate, assess,
appraise, collect, sell, liquidate or otherwise dispose of any of the
Collateral;


 


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


 


65





















 


charges;
secretarial overtime charges; expenses for travel, lodging and food paid or
incurred in connection with the performance of such legal or other advisory
services and, in the case of auditors, a per diem charge at the Agents’ then
applicable rate per person per day for each such auditor in the field and
office plus all reasonable out-of-pocket costs and expenses (including, without
limitation, air fare, lodging and meals) incurred in connection with or
relating to audits to be conducted pursuant hereunder.  As of the Effective Date, the Agent’s
applicable rate for auditors is $750 per person per day.


 


11.4         No
Waiver.  Agent’s or any Lender’s
failure, at any time or times, to require strict performance by the Credit Parties
of any provision of this Agreement or any other Loan Document shall not waive,
affect or diminish any right of Agent or such Lender thereafter to demand
strict compliance and performance herewith or therewith.  Any suspension or waiver of an Event of
Default shall not suspend, waive or affect any other Event of Default whether
the same is prior or subsequent thereto and whether the same or of a different
type.  Subject to the provisions of Section
11.2, none of the undertakings, agreements, warranties, covenants and
representations of any Credit Party contained in this Agreement or any of the
other Loan Documents and no Default or Event of Default by any Credit Party
shall be deemed to have been suspended or waived by Agent or any Lender, unless
such waiver or suspension is by an instrument in writing signed by an officer
of or other authorized employee of Agent and the applicable required Lenders
and directed to Borrower specifying such suspension or waiver.


 


11.5         Remedies.  Agent’s and Lenders’ rights and remedies
under this Agreement shall be cumulative and nonexclusive of any other rights
and remedies that Agent or any Lender may have under any other agreement,
including the other Loan Documents, by operation of law or otherwise.  Recourse to the Collateral shall not be
required.


 


11.6         Severability.  Wherever possible, each provision of this
Agreement and the other Loan Documents shall be interpreted in such a manner as
to be effective and valid under applicable law, but if any provision of this
Agreement or any other Loan Document shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement or such other Loan Document.


 


11.7         Conflict
of Terms.  Except as otherwise
provided in this Agreement or any of the other Loan Documents by specific
reference to the applicable provisions of this Agreement, if any provision
contained in this Agreement conflicts with any provision in any of the other
Loan Documents, the provision contained in this Agreement shall govern and
control.


 


11.8         Confidentiality.  Agent and each Lender agree to use
commercially reasonable efforts (equivalent to the efforts Agent or such Lender
applies to maintain the confidentiality of its own confidential information) to
maintain as confidential all confidential information provided to them by the
Credit Parties and designated as confidential for a period of two (2) years
following receipt thereof, except that Agent and any Lender may disclose such
information (a) to Persons employed or engaged by Agent or such Lender,
including any agents that have been granted access pursuant to Section 1.14;
(b) to any bona fide assignee or participant or potential assignee or
participant that has agreed to comply with the covenant contained in this Section
11.8 (and any such bona fide assignee or participant or potential


 


66





















 


assignee
or participant may disclose such information to Persons employed or engaged by
them as described in clause (a) above); (c) as required or requested by
any Governmental Authority or reasonably believed by Agent or such Lender to be
compelled by any court decree, subpoena or legal or administrative order or
process; (d) as, on the advice of Agent’s or such Lender’s counsel, is required
by law; (e) in connection with the exercise of any right or remedy under the
Loan Documents or in connection with any Litigation to which Agent or such
Lender is a party; (f) to a Person that is an investor or prospective
investor in a Securitization (as defined below) that agrees that its access to
information regarding the Borrower and the Loans is solely for purposes of
evaluating an investment in such Securitization, (g) to a Person that is a
trustee, collateral manager, servicer, investor, potential investor or secured
party in a Securitization in connection with the administration, servicing and
reporting on the assets serving as collateral for such Securitization.  For purposes of this Section “Securitization”
shall mean a public or private offering by a Lender or any of its Affiliates or
their respective successors and assigns, of securities which represent an interest
in, or which are collateralized in whole or in part by, the Loans; or (h) that
ceases to be confidential through no fault of Agent or any Lender.


 


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


 


67





















 


SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE
MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT PARTY AT THE
ADDRESS SET FORTH IN ANNEX I OF THIS AGREEMENT AND THAT SERVICE SO MADE
SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH CREDIT PARTY’S ACTUAL
RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS,
PROPER POSTAGE PREPAID.


 


11.10       Notices.  Except as otherwise provided herein, whenever
it is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by any other parties, or whenever any of the parties desires to
give or serve upon any other parties any communication with respect to this
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be deemed to have been
validly served, given or delivered (a) upon the earlier of actual receipt and
three (3) Business Days after deposit in the United States Mail, registered or
certified mail, return receipt requested, with proper postage prepaid, (b) upon
transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States Mail as otherwise provided in this Section
11.10); (c) one (1) Business Day after deposit with a reputable overnight
courier with all charges prepaid or (d) when delivered, if hand-delivered by
messenger, all of which shall be addressed to the party to be notified and sent
to the address or facsimile number indicated in Annex I or to such other
address (or facsimile number) as may be substituted by notice given as herein
provided.  The giving of any notice
required hereunder may be waived in writing by the party entitled to receive
such notice.  Failure or delay in
delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to any Person (other than Borrower or Agent)
designated in Annex I to receive copies shall in no way adversely affect
the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication.


 


11.11       Section
Titles.  The Section titles and Table
of Contents contained in this Agreement are and shall be without substantive
meaning or content of any kind whatsoever and are not a part of the agreement
between the parties hereto.


 


11.12       Counterparts.  This Agreement may be executed in any number
of separate counterparts, each of which shall collectively and separately
constitute one agreement.


 


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


 


68





















 


OTHERWISE, AMONG AGENT, LENDERS AND ANY CREDIT PARTY ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.


 


11.14       Press
Releases and Related Matters.  Each
Credit Party executing this Agreement agrees that neither it nor its Affiliates
will in the future issue any press releases or other public disclosure using
the name of GE Capital or its affiliates or referring to this Agreement, the
other Loan Documents or the Related Transactions Documents without at least two
(2) Business Days’ prior notice to GE Capital and without the prior written
consent of GE Capital unless (and only to the extent that) such Credit Party or
Affiliate is required to do so under law and then, in any event, such Credit
Party or Affiliate will consult with GE Capital before issuing any press
release.  Each Credit Party consents to
the publication by Agent or any Lender of a tombstone or similar advertising
material relating to the financing transactions contemplated by this
Agreement.  Agent or such Lender shall
provide a draft of any such tombstone or similar advertising material to each
Credit Party for review and comment prior to the publication thereof.  Agent reserves the right to provide to
industry trade organizations information necessary and customary for inclusion
in league table measurements.


 


11.15       Reinstatement.  This Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
any Credit Party for liquidation or reorganization, should any Credit Party
become insolvent or make an assignment for the benefit of any creditor or
creditors or should a receiver or trustee be appointed for all or any
significant part of any Credit Party’s assets, and shall continue to be
effective or to be reinstated, as the case may be, if at any time payment and performance
of the Obligations, or any part thereof, is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or returned by
any obligee of the Obligations, whether as a “voidable preference,” “fraudulent
conveyance,” or otherwise, all as though such payment or performance had not
been made.  In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.


 


11.16       Advice
of Counsel.  Each of the parties
represents to each other party hereto that it has discussed this Agreement and,
specifically, the provisions of Sections 11.9 and 11.13, with its
counsel.


 


11.17       No
Strict Construction.  The parties
hereto have participated jointly in the negotiation and drafting of this
Agreement.  In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement.


 


12.  RESTATEMENT OF PRIOR CREDIT AGREEMENT.


 


The
parties hereto agree that, on the Effective Date, the following transactions
shall be deemed to occur automatically, without further action by any party
hereto:


 


69





















 


(a)           the Prior Credit Agreement shall be
deemed to be amended and restated in its entirety in the form of this
Agreement;


 


(b)           all Existing Obligations outstanding
on the Effective Date shall, to the extent not paid on the Effective Date, be
deemed to be Obligations outstanding hereunder;


 


(c)           the guaranties and Collateral
Documents, including the Liens created thereunder in favor of Agent for the
benefit of Agent and Lenders or in favor of Agent and Lenders, as applicable,
and securing payment of the Existing Obligations, as amended and restated on
the Effective Date, shall remain in full force and effect with respect to the
Obligations and are hereby reaffirmed; and


 


(d)           all references in the other Loan
Documents to the Prior Credit Agreement shall be deemed to refer without
further amendment to this Agreement.


 


The
parties acknowledge and agree that this Agreement and the other Loan Documents
do not constitute a novation, payment and reborrowing or termination of the
Existing Obligations and that all such Existing Obligations are in all respects
continued and outstanding as Obligations under this Agreement and the Notes
with only the terms being modified from and after the Effective Date of this
Agreement as provided in this Agreement, the Notes and the other Loan
Documents.


 


[Signature Page Follows]


 


70





















 


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


 


	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  ROLLER BEARING COMPANY OF AMERICA,

  INC., a Delaware corporation

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


[Signature Page to 4th Amended and
Restated Credit Agreement]


 





















 


	
   

  	
  AGENT AND LENDERS:

  
	
   

  	
   

  	
   

  
	
   

  	
  GENERAL ELECTRIC CAPITAL

  CORPORATION, as
  Agent and Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Duly Authorized Signatory

  



 


[Signature Page to 4th Amended and
Restated Credit Agreement]


 





















 


	
   

  	
  LASALLE BANK NATIONAL ASSOCIATION, as a

  Lender

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
							



 


[Signature Page to 4th Amended and
Restated Credit Agreement]


 





















 


	
   

  	
  OPPENHEIMER SENIOR FLOATING RATE FUND, 

  as a Lender

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
							



 


[Signature Page to 4th Amended and
Restated Credit Agreement]


 





















 


	
   

  	
  AMALGAMATED BANK, as a Lender

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
							



 





















 


	
   

  	
  WACHOVIA BANK, NATIONAL ASSOCIATION, as

  a Lender

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
							



 


[Signature Page to 4th Amended and
Restated Credit Agreement]


 





















 


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


 


	
   

  	
  CREDIT PARTIES:

  
	
   

  	
   

  
	
   

  	
  INDUSTRIAL TECTONICS BEARINGS 

  CORPORATION, a
  Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  RBC NICE BEARINGS INC., a Delaware corporation

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BREMEN BEARINGS, INC., a Delaware corporation

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TYSON BEARING COMPANY, INC., a
  Delaware 

  corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  RBC AIRCRAFT PRODUCTS, INC., a Delaware 

  corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
												



 


[Signature Page to 4th Amended and
Restated Credit Agreement]


 





















 


	
   

  	
  RBC LINEAR PRECISION PRODUCTS, INC., a 

  Delaware corporation

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MILLER BEARING COMPANY, INC., a Delaware

  corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  RBC OKLAHOMA, INC., a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
									



 


[Signature Page to 4th Amended and
Restated Credit Agreement]


 





















 


ANNEX A (Recitals)


to


CREDIT AGREEMENT


 


DEFINITIONS


 


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


 


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


 


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


 


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


 


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


 


“Acquisition”
means a Domestic Acquisition or a Foreign Acquisition, or either of them.


 


“Acquisition
Company” means (a) in the case of any Domestic Acquisition, a Delaware
corporation, limited liability company or limited partnership and (b) in
the case of any Acquisition outside the United States, a corporation, limited
liability company or limited partnership or any equivalent legal entity under
the laws of any jurisdiction in which a Permitted Acquisition outside the
United State is consummated, which, in the case of clause (a) or clause
(b), is a direct or indirect wholly-owned Subsidiary of Borrower formed for
the sole purpose of completing a Permitted Acquisition of a Qualified Target.


 


A - 1





















 


“Acquisition
Compliance Certificate” means a certificate in the form of Exhibit 6.1
showing compliance with the terms and provision of clauses (iv)(C) and
(iv)(D) of the definition of the term “Permitted Loan Funded
Acquisition” and clauses (iv)(C) and (iv)(D) of the definition of
the term “Permitted Non-Loan Funded Acquisition”, as the case may be, and a
designation of assets, if any, in accordance with Section 6.8(d) with
respect to such Acquisition.


 


“Acquisition
Pro Forma” has the meaning ascribed to it in clause(xiv)(A) of the
definition of the term “Permitted Loan Funded Acquisition”.


 


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


 


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


 


“Activation
Trigger Event” has the meanings ascribed to it in Annex C.


 


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


 


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


 


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


 


“Affiliate”
means, with respect to any Person, (a) each Person that, directly or
indirectly, owns or controls, whether beneficially, or as a trustee, guardian
or other fiduciary, 10% or more of the Stock having ordinary voting power in
the election of directors of such Person, (b) each Person that controls, is controlled
by or is under common control with such Person, (c) each of such Person’s
officers, directors, joint venturers and partners and (d) in the case of
Borrower, the immediate family members, spouses and lineal descendants of
individuals 


 


A - 2





















 


who
are Affiliates of Borrower.  For the
purposes of this definition, “control” of a Person shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of
voting securities, by contract or otherwise; provided,
however, that with respect to each Credit Party and its Affiliates,
the term “Affiliate” shall specifically exclude (i) Agent and each
Lender and their respective Affiliates and (ii) any Person in which an
investment fund managed by Whitney & Co. or its Affiliates has a direct or
indirect equity or debt interest.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Average
Borrowing Availability” has the meaning ascribed to it in Annex C.


 


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


 


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


 


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


 


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


 


A - 3





















 


“Borrower
Mexican Pledge Agreement” means the Pledge Agreement of even date herewith
executed by Borrower in favor of Agent, on behalf of itself and Lenders,
pledging sixty-six (66%) percent of the outstanding Stock of RBC de Mexico S De
R.L. de CV governed by Mexican law, as the same may be amended, restated,
modified and/or supplemented from time to time.


 


“Borrower
Pledge Agreement” means the Pledge Agreement as of the Original Closing
Date executed by Borrower in favor of Agent, on behalf of itself and Lenders,
pledging (i) all Stock of its Domestic Subsidiaries, and (ii) all Intercompany
Notes owing to or held by it, as the same may be amended, restated, modified
and/or supplemented from time to time including, without limitation, by any
joinder thereto.


 


“Borrower
Swiss Pledge Agreement” means the Pledge Agreement executed by Borrower in
favor of Agent, on behalf of itself and Lenders, dated as of June 19, 2003, as
amended, restated or otherwise modified from time to time including, without
limitation, by any joinder thereto, pledging sixty-six (66%) percent of the
outstanding Stock of Schaublin Holding governed by Swiss law.


 


“Borrowing
Availability” means as of any date of determination the lesser of (i) the
Maximum Amount and (ii) the Borrowing Base, in each case, less the sum
of the Revolving Loan and Swing Line Loan then outstanding; provided that an Overadvance in accordance
with Section 1.1(a)(iii) may cause the Revolving Loan and Swing Line
Loan to exceed the Borrowing Base by the amount of such permitted Overadvance.


 


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


 


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


 


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


 


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


 


(d)           50%
of the book value of Eligible Government Accounts at such time; provided, however,
that notwithstanding the foregoing calculation, the amount of Borrowing
Availability attributable to Eligible Government Accounts shall not exceed
$5,000,000;


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Change
of Control” shall be deemed to have occurred if (a) prior to a Qualified
Public Offering, Michael J. Hartnett, his Permitted Transferees, Whitney &
Co., its Affiliates and the Related Stockholder Parties shall cease, taken as a
whole, to own directly or indirectly, beneficially or of record, those shares
or rights to acquire those shares of capital Stock of Holdings which entitle
their holder to majority number of votes (i.e.,
to that number of votes per share on all matters to be voted upon by Holdings
which entitle such holder, in the aggregate, to 51% of the voting power of the
issued and outstanding common Stock of Holdings); (b) following the
completion of a Qualified Public Offering, (i) any person or group (within
the meaning of Rule 13d-5 of the Securities Exchange Act of 1934) (other than
Michael J. Hartnett, his Permitted Transferees, Whitney & Co., its
Affiliates, the Related Stockholder Parties or one or more equity sponsors with
funds under management of at least $500,000,000) shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934) of 30% or more
of the issued and outstanding shares of capital Stock of Holdings or
(ii) Whitney & Co., its Affiliates and Related Stockholder Parties
shall cease, taken as a whole, to own directly or indirectly, beneficially or
of record, at least 30% of the issued and outstanding shares of capital Stock
of Holdings; (c) during any period of twelve consecutive calendar months,
individuals who at the 


 


A - 5





















 


beginning
of such period constituted the board of directors of Holdings (together with
any new directors whose election by the board of directors of Holdings or whose
nomination for election by the Stockholders of Holdings was approved by a vote
of at least two-thirds of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason other than death or
disability to constitute a majority of the directors then in office;
(d) Holdings ceases to own and control all of the economic and voting
rights associated with all of the outstanding capital Stock of Borrower;
(e) Borrower ceases to own, directly or indirectly, and control all of the
economic and voting rights associated with all of the outstanding capital Stock
of any of its Subsidiaries other than (i) as a result of a dissolution of
a Subsidiary resulting in the distribution of its assets to Borrower or the
merger of any Subsidiary with Borrower or another Subsidiary of Borrower or
(ii) as a result of a Permitted Asset Sale to the extent permitted by Section
6.8(f), or (f) any change of control (or similar event, however
denominated) shall occur under one or more of the Discount Debentures Documents.


 


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


 


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


 


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


 


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


 


“Collateral”
means the property covered by the Security Agreement, the Mortgages and the
other Collateral Documents and any other property, real or personal, tangible
or intangible, now existing or hereafter acquired, that may at any time be or
become subject to a 


 


A - 6





















 


security
interest or Lien in favor of Agent, on behalf of itself and Lenders, to secure
the Obligations.


 


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


 


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


 


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


 


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


 


“Commitment
Increase” has the meaning ascribed to it in the definition of the term
“Commitments”.


 


“Commitment
Increase Cap” has the meaning ascribed to it in the definition of the term
“Commitments”.


 


“Commitment
Termination Date” means the earliest of (a) December 29, 2010,
(b) the date of termination of Lenders’ obligations to make Advances and
to incur Letter of Credit Obligations or permit existing Loans to remain
outstanding pursuant to Section 8.2(b), and (c) the date of
indefeasible prepayment in full by Borrower of the Loans and the cancellation
and return (or stand-by guaranty) of all Letters of Credit or the cash
collateralization of all Letter of Credit Obligations pursuant to Annex B,
and the permanent reduction of the Commitments to zero dollars ($0).


 


“Commitments”
means (a) as to any Lender, the aggregate of such Lender’s Revolving Loan
Commitment (including without duplication the Swing Line Lender’s Swing Line
Commitment as a subset of its Revolving Loan Commitment) and Term Loan Commitment
as set forth on Annex J to the Agreement or in the most recent
Assignment Agreement executed by such Lender and (b) as to all Lenders,
the aggregate of all Lenders’ Revolving Loan Commitments (including without
duplication the Swing Line Lender’s Swing Line Commitment as a subset of its
Revolving Loan Commitment) and Term Loan Commitments, which aggregate
commitment shall be One Hundred Sixty-Five Million Dollars ($165,000,000) on
the Effective Date, as to each of clauses (a) and (b); provided that, upon satisfaction of the
conditions to the increase in Commitments specified in Section 2.4,
Commitments may be increased in the aggregate amount not to exceed the lesser
of: (i)  $40,000,000 less any increase in the aggregate principal
amount of the SCIL Loan effectuated after the Effective Date, (ii) an
amount that, after 


 


A - 7





















 


giving
effect to such increase, would not cause the Senior Leverage Ratio of Holdings, Borrower and its Subsidiaries on a
consolidated basis to exceed 2.50:1.00 for the period of twelve consecutive
completed fiscal months most recently ended on or prior to the date of the
increase (assuming that such increase in Senior Debt had occurred on the last
days of such period), and (iii) the amount requested in writing by the Borrower
(each such increase being the “Commitment Increase” and the aggregate
amount of all such increases permitted hereunder being the “Commitment
Increase Cap”) and as Commitments may be increased, reduced, amortized or
adjusted from time to time in accordance with the Agreement.


 


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


 


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


 


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


 


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


 


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


 


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


 


“Copyright
Security Agreements” means the Copyright Security Agreements made in favor
of Agent, on behalf of itself and Lenders, by each applicable Credit Party, as
the same may be amended, restated, modified and/or supplemented from time to
time including, without limitation, by any joinder thereto.


 


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


 


A - 8





















 


thereof,
or any other country or any political subdivision thereof, and (b) all reissues,
extensions or renewals thereof.


 


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


 


“Credit
Parties” means Borrower, its Domestic Subsidiaries and any other Guarantor.


 


“Credit
Party Post-Holdco Debenture Debt Proceeds” has the meaning ascribed to it
in Section 5.8(b)(iii).


 


“Current
Assets” means, with respect to any Person, all current assets of such
Person as of any date of determination calculated in accordance with GAAP, but
excluding cash, cash equivalents and debts due from Affiliates.”


 


“Current
Liabilities” means, with respect to any Person, all liabilities that
should, in accordance with GAAP, be classified as current liabilities, and in
any event shall include all Indebtedness payable on demand or within one year
from any date of determination without any option on the part of the obligor to
extend or renew beyond such year, all accruals for federal or other taxes based
on or measured by income and payable within such year, but excluding the
current portion of long-term debt required to be paid within one year and the
aggregate outstanding principal balances of the Revolving Loan and the Swing
Line Loan.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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“Disqualified
Stock” mean any Stock which, by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable), or upon the
happening of any event, (a) matures (excluding any maturity as the result
of an optional redemption by the issuer thereof) or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or is redeemable at the
option of the holder thereof, in whole or in part, on or prior to the eighth
anniversary of the Closing Date, (b) is convertible into or exchangeable
(unless at the sole option of the issuer thereof) for (i)  debt securities
or (ii)  any Stock referred to in clause (a) above, in each case at
any time prior to the eighth anniversary of the Closing Date, or
(c) contains any repurchase obligation which may come into effect prior to
payment in full of all Obligations.


 


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


 


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


 


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


 


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


 


“Domestic
Acquisition” has the meaning ascribed to in the definition of the term
“Permitted Loan Funded Acquisition.”


 


“Domestic
Acquisition Projections” has the meaning ascribed to it in clause(xii)(B) 
of the definition of the term “Permitted Loan Funded Acquisition”.


 


“EBITDA”
means, with respect to any Person for any fiscal period, without duplication,
an amount equal to (a) consolidated net income of such Person for such period,
determined in accordance with GAAP, minus (b) the sum of (i) income tax
credits, (ii) interest income, (iii) gain from extraordinary items for such
period, (iv) any aggregate net gain during such period arising from the sale,
exchange or other disposition of capital assets of such Person, and (v) any
other non-cash gains (including non-cash gains in respect of Hedging
Agreements, including those resulting from the application of FAS 133) that
have been added in determining consolidated net income, in each case to the
extent included in the calculation of consolidated net income of such Person
for such period in accordance with GAAP, but without duplication, plus
(c) the sum of (i) any provision for income taxes, (ii) Interest Expense, (iii)
loss from extraordinary items for such period, (iv) depreciation and
amortization for such period, (v) amortized debt discount for such period, (vi)
the amount of any deduction to consolidated net income as the result of any
grant of any Stock or equity rights to any employee of such Person, in each
case to the extent included in the calculation of consolidated net income of
such Person for such period in accordance with GAAP, but without duplication,
(vii) any aggregate net loss during such period arising from the sale, exchange
or other disposition of capital assets of such Person, (viii) with the consent
of Agent, which shall not be unreasonably withheld, any non-recurring losses or
charges that have been deducted from the consolidated net income of such Person
in accordance with GAAP, (ix) any other non-cash losses or charges in respect
of Hedging Agreements (including those resulting from the application of FAS
133) that have been deducted in the calculation of consolidated net income of
such Person for such period in


 


A - 10





















 


accordance
with GAAP, but without duplication, and (x) the amount of any reduction to the
consolidated net income of Holdings as the result of the Restricted Payment
described and permitted pursuant to Section 6.14(a)(E){Whitney & Co.
Management Fees} or Section 6.14(b)(v){Holdco Operating Expenses}.  For purposes of this definition, the
following items shall be excluded in determining consolidated net income of a
Person: (1) the income (or deficit) of any other Person accrued prior to the
date it became a Subsidiary of, or was merged or consolidated into, such Person
or any of such Person’s Subsidiaries; (2) the income (or deficit) of any other
Person (other than a Subsidiary) in which such Person has an ownership
interest, except to the extent any such income has actually been received by
such Person in the form of cash dividends or distributions; (3) the
undistributed earnings of any Subsidiary of such Person to the extent that the
declaration or payment of dividends or similar distributions by such Subsidiary
is not at the time permitted by the terms of any contractual obligation or
requirement of law applicable to such Subsidiary; (4) any restoration to income
of any contingency reserve, except to the extent that provision for such
reserve was made out of income accrued during such period; (5) any write-down
of assets (other than Accounts or Inventory) and any write-down of goodwill (to
the extent it is a write-down of goodwill only), or write-up of any asset; (6)
any net gain from the collection of the proceeds of life insurance policies;
(7) any net gain arising from the acquisition of any securities, or the
extinguishment, under GAAP, of any Indebtedness, of such Person, (8) in the
case of a successor to such Person by consolidation or merger or as a
transferee of its assets, any earnings of such successor prior to such
consolidation, merger or transfer of assets, (9) any deferred credit
representing the excess of equity in any Subsidiary of such Person at the date
of acquisition of such Subsidiary over the cost to such Person of the investment
in such Subsidiary, and (10) any other non-cash expenses or deductions in
connection with the issuances or modifications of stock options or rights
issued to employees or directors.


 


“Effective
Date” means the date on which each of the conditions set forth in Section
2.1 shall have been satisfied except for such conditions, if any that have been
waived in writing by the Agent and the Requisite Lenders.


 


“Eligible
Government Accounts” means all Accounts that are owned by Borrower or any
Secured Guarantor and reflected in the most recent Borrowing Base Certificate
delivered by Borrower to Agent and which Accounts are excluded from the
definition of “Eligible Accounts” solely because such Accounts are owing from
the United States government or a political subdivision thereof and are subject
to the exclusionary criteria set forth in Section 1.6(h); provided, that Eligible Government
Accounts shall exclude any such Accounts that are more than forty-five (45)
days past due.


 


“Eligible
Accounts” has the meaning ascribed to it in Section 1.6 of the
Agreement.


 


“Eligible
Inventory” has the meaning ascribed to it in Section 1.7 of the
Agreement.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Excess
Cash Flow” has the meaning and shall be computed in accordance with Exhibit
ECF attached hereto.


 


“Existing
Obligations” shall mean the “Obligations”, as defined in the Prior Credit
Agreement.


 


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


 


“Fair
Market Value” means, with respect any asset, the price (after taking into
account any liabilities relating to such assets) which could be negotiated in
an arm’s length 


 


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transaction,
for cash, between a willing seller and a willing and able buyer neither of
which is under any compulsion to complete the transaction.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Foreign
Acquisition” has the meaning ascribed to it in the definition of the
term “Permitted Non-Loan Funded Acquisition”.


 


“Foreign
Acquisition Pro Forma” has the meaning ascribed to it in clause(vi)(A)
of the definition of the term “Permitted Non-Loan Funded Acquisition”.


 


“Foreign
Acquisition Projections” has the meaning ascribed to it in clause(vi)(B) 
of the definition of the term “Permitted Non-Loan Funded Acquisition”.


 


“Funded
Debt” means, with respect to any Person, without duplication, all
Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness that by its terms matures more than one year
from, or is directly or indirectly renewable or extendible at such Person’s
option under a revolving credit or similar agreement obligating the lender or
lenders to extend credit over a period of more than one year from the date of
creation thereof, and specifically including Capital Lease Obligations, current
maturities of long-term debt, revolving credit and short-term debt extendible
beyond one year at the option of the debtor, and also including, in the case of
Borrower, the Obligations, the SCIL Obligations and, without duplication,
Guaranteed Indebtedness consisting of guaranties of Funded Debt of other
Persons.  For purposes of this definition
when computing the Funded Debt of Holdings and its Subsidiaries, the following
Indebtedness shall be excluded: (1) the Indebtedness of any other Person prior
to the date it became a Subsidiary of, or was merged into, Holdings or any
Subsidiary of Holdings; and (2) the Indebtedness of any other Person (other
than a Subsidiary) in which Holdings has an ownership interest.  For the avoidance of doubt, Funded Debt shall
not include any obligations under or amounts due in respect of the Prior Senior
Subordinated Notes.


 


“GAAP”
means generally accepted accounting principles in the United States of America,
consistently applied, as such term is further defined in Annex G to the
Agreement.


 


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


 


“GE
Capital Fee Letter” means that certain letter, dated as of April 8, 2004,
between GE Capital and Borrower with respect to certain Fees to be paid from
time to time by Borrower to GE Capital as modified by that certain side letter
between Borrower and GE Capital dated as of April 8, 2004.


 


“General
Intangibles” means all “general intangibles,” as such term is defined in
the Code, now owned or hereafter acquired by any Credit Party, including all
right, title and interest that such Credit Party may now or hereafter have in
or under any Contract, all payment intangibles, customer lists, Licenses,
Copyrights, Trademarks, Patents, and all applications therefor and reissues,
extensions or renewals thereof, rights in Intellectual Property, interests in
partnerships, joint ventures and other business associations, licenses, permits,
copyrights, trade 


 


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secrets,
proprietary or confidential information, inventions (whether or not patented or
patentable), technical information, procedures, designs, knowledge, know-how,
software, data bases, data, skill, expertise, experience, processes, models,
drawings, materials and records, goodwill (including the goodwill associated
with any Trademark or Trademark License), all rights and claims in or under
insurance policies (including insurance for fire, damage, loss and casualty,
whether covering personal property, real property, tangible rights or
intangible rights, all liability, life, key man and business interruption
insurance, and all unearned premiums), uncertificated securities, choses in
action, deposit, checking and other bank accounts, rights to receive tax
refunds and other payments, rights to receive dividends, distributions, cash,
Instruments and other property in respect of or in exchange for pledged Stock
and Investment Property, rights of indemnification, all books and records,
correspondence, credit files, invoices and other papers, including without
limitation all tapes, cards, computer runs and other papers and documents in
the possession or under the control of such Credit Party or any computer bureau
or service company from time to time acting for such Credit Party.


 


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


 


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


 


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


 


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


 


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


 


A - 16





















 


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


 


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


 


“Hedging
Agreement” means any Interest Rate Protection Agreement, foreign currency
exchange agreement, commodity price protection agreement or other interest or
currency exchange rate or commodity price hedging arrangement.


 


“Hedging
Reserve” means a Reserve determined with respect to each Specified Hedging
Agreement by the Agent in its reasonable credit judgment and giving effect to
the aggregate amount owing to Borrower by a counterparty to a Specified Hedging
Agreement, less the amount Borrower owes such counterparty thereunder, less
the aggregate amount of property pledged to cash collateralize such obligation
(other than the Collateral granted under the Loan Documents), in each case
based on a mark-to-market analysis and with due regard to recent market
volatility (i) as of the last Business Day of the quarter and (ii) if
an Activation Trigger Event has occurred and remains in effect, as of the last
Business Day of the month; (or, in each case, if not available, the nearest
prior Business Day for which such evaluation is available).


 


“Hedging
Termination Value” means, in respect of any one or more Hedging Agreements,
after taking into account the effect of any legally enforceable netting
agreement relating to such Hedging Agreements, (a) for any date on or after the
date such Hedging Agreements have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a) the amount(s) determined as the
mark-to-market value(s) for such Hedging Agreements, as determined based upon
one or more mid-market or other readily available quotations provided by any
recognized dealer in such Hedging Agreements.


 


“Holdco
Debenture Debt” means Indebtedness evidenced by Discount Debentures.


 


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


 


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


 


“Indebtedness”
means, with respect to any Person, without duplication (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property 


 


A - 17





















 


payment
for which is deferred 12 months or more, but excluding obligations to trade
creditors incurred in the ordinary course of business that are unsecured and
not overdue by more than 6 months unless being contested in good faith, (b) all
reimbursement and other obligations with respect to letters of credit, bankers’
acceptances and surety bonds, whether or not matured, (c) all obligations
evidenced by notes, bonds, debentures or similar instruments, (d) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (e)
all Capital Lease Obligations and the present value (discounted at the Index
Rate as in effect on the Effective Date) of future rental payments under all
synthetic leases, (f) all obligations of such Person under commodity purchase
or option agreements or other commodity price hedging arrangements, in each
case whether contingent or matured, (g) all obligations of such Person under
any Hedging Agreement, in each case whether contingent or matured, (h) all
Indebtedness referred to above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property or other assets (including accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness, and (i) the Obligations.  Notwithstanding the foregoing, in no event
shall Indebtedness include any obligations under or amounts due in respect of
the Prior Senior Subordinated Notes or Stock of Holdings other than
Disqualified Stock.


 


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


 


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


 


“Index
Rate” means, for any day, a floating rate equal to the higher of (i) the
rate publicly quoted from time to time by The Wall Street Journal
as the “base rate on corporate loans posted by at least 75% of the nation’s 30
largest banks” (or, if The Wall Street Journal ceases quoting
a base rate of the type described, the highest per annum rate of interest
published by the Federal Reserve Board in Federal Reserve statistical release
H.15 (519) entitled “Selected Interest Rates” as the Bank prime loan rate
or its equivalent), and (ii) the Federal Funds Rate plus 50 basis points
per annum.   Each change in any interest
rate provided for in the Agreement based upon the Index Rate shall take effect
at the time of such change in the Index Rate.


 


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


 


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


 


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


 


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


 


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


 


“Intercompany
WIP” has the meaning ascribed to it in Section 6.4(a).


 


“Intercreditor
Agreement” means that certain Intercreditor Agreement, dated as of even
date herewith, between the Agent and GE Capital as agent for the holders of the
SCIL Loan, as amended, restated, supplemented and otherwise modified from time
to time.


 


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


 


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


 


“Interest
Rate Protection Agreement” shall mean any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or similar
agreement or arrangement designed to protect Borrower or any Secured Guarantor
against fluctuations in interest rates and not entered into for speculation.


 


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


 


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


 


A - 19





















 


commodity
contracts of any Credit Party; and (e) all commodity accounts held by any
Credit Party.


 


“IRB
Loan” shall mean Indebtedness evidenced by any of the following: (a) the
Loan Agreement dated as of September 1, 1994, between South Carolina
Jobs-Economic Development Authority (the “Authority”) and Borrower
relating to $7,700,000 Variable Rate Demand Industrial Development Revenue
Bonds (Roller Bearing Company of America, Inc. Project) Series 1994A, (b) the
Trust Indenture dated as of September 1, 1994, by and between the Authority and
Mark Twain Bank, as trustee, with respect to the bonds described in clause
(a) of this definition, (c) the Loan Agreement dated as of September 1,
1994, between the Authority and Borrower relating to $1,155,000 Variable Rate
Demand Industrial Development Revenue Bonds (Roller Bearing Company of America,
Inc. Project) Series 1994B, (d) the Trust Indenture dated as of September 1,
1994, by and between the Authority and Mark Twain Bank, as trustee, with
respect to the bonds described in clause (c) of this definition, (e) the
Loan Agreement dated as of September 1, 1998 between the Authority and RBC
Linear Precision Products, Inc. relating to $3,000,000 Tax Exempt Demand/Fixed
Rate Industrial Development Revenue Bonds (RBC Linear Precision Products, Inc.
Project) Series 1998, (f) the Trust Indenture dated as of September 1, 1998
with respect to the bonds described in clause (e) of this definition,
(g) the Loan Agreement dated as of April 1, 1999 between California
Infrastructure and Economic Development Bank and Borrower relating to
$4,800,000 Variable Rate Demand Industrial Revenue Bonds Series 1999 (Roller
Bearing Company of America, Inc. — Santa Ana Project) and (h) the Indenture of
Trust dated as of April 1, 1999 with respect to the bonds described in clause
(g) of this definition and, in each case, the other documents executed in
connection therewith.


 


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


 


“IRS”
means the Internal Revenue Service.


 


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


 


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


 


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


 


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


 


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


 


“Letter
of Credit Obligations” means all outstanding obligations incurred by Agent
and Lenders at the request of Borrower, whether direct or indirect, contingent
or otherwise, due or not due, in connection with the issuance of Letters of
Credit by Agent or another L/C Issuer or the purchase of a participation as set
forth in Annex B with respect to any 


 


A - 20





















 


Letter
of Credit.  The amount of such Letter of
Credit Obligations shall equal the maximum amount that may be payable by Agent
or Lenders thereupon or pursuant thereto.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(d)           Borrower
shall select LIBOR Periods so that there shall be no more than 10 separate
LIBOR Loans in existence at any one time.


 


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


 


(a)           the
offered rate for deposits in United States Dollars for the applicable LIBOR
Period that appears on Telerate Page 3750 as of 11:00 a.m. (London time),
on the second full LIBOR Business Day next preceding the first day of such
LIBOR Period 


 


A - 21





















 


(unless
such date is not a Business Day, in which event the next succeeding Business
Day will be used); divided by


 


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


 


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


 


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


 


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


 


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


 


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


 


“Loan
Documents” means the Agreement, the Notes, the Collateral Documents, the
Master Standby Agreement, the Master Documentary Agreement, the Intercreditor
Agreement, the Environmental Indemnity Agreement, the GE Capital Fee Letter,
Specified Hedging Agreements and all other agreements, instruments, documents
and certificates identified in the Closing Checklist executed and delivered to,
or in favor of, Agent or any Lenders and including all other pledges, powers of
attorney, consents, assignments, contracts, notices, and all other written
matter whether heretofore, now or hereafter executed by or on behalf of any
Credit Party, or any employee of any Credit Party, and delivered to Agent or
any Lender in connection with the Agreement or the transactions contemplated
thereby.  Any reference in the Agreement
or any other Loan Document to a Loan Document shall include all appendices,
exhibits or schedules thereto, and all amendments, restatements, supplements or
other modifications thereto, and shall refer to the Agreement or such Loan
Document as the same may be in effect at any and all times such reference
becomes operative.  Loan Documents shall
in no event include the SCIL Credit Agreement or the SCIL Loan Documents or any
agreement, document or instrument delivered by the Credit Parties to the
Trustee relating to the Refinancing.


 


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


 


A - 22





















 


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


 


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


 


“Master
Documentary Agreement” means the Master Agreement for Documentary Letters
of Credit dated as of the Original Closing Date between Borrower, as Applicant,
and GE Capital, as Issuer, as the same may be amended, restated, modified
and/or supplemented from time to time including, without limitation, by any
joinder thereto.


 


“Master
Standby Agreement” means the Master Agreement for Standby Letters of Credit
dated as of the Original Closing Date between Borrower, as Applicant, and GE
Capital, as Issuer, as the same may be amended, restated, modified and/or
supplemented from time to time including, without limitation, by any joinder
thereto.


 


“Material
Adverse Effect” means a material adverse effect on (a) the business,
assets, operations, prospects or financial or other condition of the Credit
Parties considered as a whole, (b) Borrower’s ability to pay any of the Loans
or any of the other Obligations in accordance with the terms of the Agreement,
(c) the Collateral or Agent’s Liens, on behalf of itself and Lenders, on the
Collateral or the priority of such Liens, or (d) Agent’s or any Lender’s rights
and remedies under the Agreement and the other Loan Documents.  Without limiting the generality of the
foregoing, any event or occurrence adverse to one or more Credit Parties which
results or could reasonably be expected to result in losses, costs, damages, liabilities
or expenditures in excess of $2,500,000 shall constitute a Material Adverse
Effect.


 


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


 


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


 


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


 


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


 


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


 


“New
Lender” means a Qualified Assignee or other similar investment fund, bank,
savings and loan, savings bank or “accredited investor” (as defined in
Regulation D of the Securities Act of 1933) that is deemed to be acceptable by
the Agent to become a Lender under this Agreement in connection with a
Commitment Increase.


 


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


 


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


 


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


 


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


 


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


 


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


 


“Officer
Certificate” means a certificate of Chief Executive Officer, Chief
Financial Officer, any other responsible officer having substantially the same
authority and responsibility or any other responsible officer deemed acceptable
to Agent, executed on behalf of Holdings, Borrower or any other Credit Party,
in each case in accordance with the Agreement.


 


“Original
Closing Date” means May 30, 2002.


 


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


 


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


 


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


 


“Patent
Security Agreements” means the Patent Security Agreements made in favor of
Agent, on behalf of itself and Lenders, by each applicable Credit Party, as the
same may be amended, restated, modified and/or supplemented from time to time
including, without limitation, by any joinder thereto.


 


“Patents”
means all of the following in which any Credit Party now holds or hereafter
acquires any interest: (a) all letters patent of the United States or any other
country, all registrations and recordings thereof, and all applications for
letters patent of the United States or 


 


A - 24





















 


of
any other country, including registrations, recordings and applications in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any State or any other country, and (b) all reissues,
continuations, continuations-in-part or extensions thereof.


 


“PBGC”
means the Pension Benefit Guaranty Corporation.


 


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


 


“Permitted
Acquisition” means Permitted Loan Funded Acquisition, Permitted Non-Loan
Funded Acquisition, or either of them.


 


“Permitted
Adjustments” means each of the dollar amount of adjustments to Adjusted
EBITDA of Holdings and its Subsidiaries described on Exhibit PA hereto
which shall be deemed to be applicable in computing Adjusted EBITDA only for a
period of 12 months after the date described on Exhibit PA pertaining to
such adjustments.


 


“Permitted
Asset Sale” means any sale, transfer, conveyance, assignment or other
disposition of any of the properties or other assets made, directly or
indirectly, by Borrower or any other Credit Party which meets each of the
following conditions:


 


(a)           no Default or Event of Default then
exists or would result therefrom;


 


(b)           Borrower or such other Credit Party,
as the case may be, receives consideration at the time of such sale, transfer,
conveyance, assignment or other disposition at least equal to the Fair Market
Value of the property or other assets being sold, transferred, conveyed,
assigned or otherwise disposed of, provided,
however, that the Fair Market
Value of any property or other assets being sold, transferred, conveyed,
assigned or otherwise disposed of (A) in excess of $1,000,000 but less than $5,000,000 shall be
determined conclusively by the board of directors of Borrower (or a duly
authorized committee thereof) acting in good faith and shall be evidenced by a
resolution of such board of directors delivered to the Agent and (B) in
excess of $5,000,000 shall be determined by the board of directors of the
Borrower as provided in the immediately preceding clause (A), whose
determination, however, shall not be conclusive but which shall be supported by
an appraisal as may be requested the Agent, at the expense of the Borrower, by
an independent, third-party appraiser designated by the Agent and reasonably
acceptable to the Borrower.; and


 


(c)           at least 85% of such consideration
received by Borrower or such other Credit Party consists of cash.


 


“Permitted
Encumbrances” means the following encumbrances: (a) Liens for taxes or
assessments or other governmental Charges not yet due and payable or which are
being contested in accordance with Section 5.2(b); (b) pledges or
deposits of money securing statutory obligations under workmen’s compensation,
unemployment insurance, social security or public liability laws or similar
legislation (excluding Liens under ERISA); (c) pledges or deposits of money
securing bids, tenders, contracts (other than contracts for the payment of
money) or leases to which any Credit Party is a party as lessee made in the
ordinary course of business; (d) inchoate and unperfected workers’,
mechanics’  or similar liens arising in
the ordinary course of business, so long as such Liens attach only to
Equipment, Fixtures and/or Real Estate; (e) 


 


A - 25





















 


carriers’,
warehousemen’s, suppliers’ or other similar possessory liens arising in the
ordinary course of business and securing liabilities not yet due and payable or
which are being contested in accordance with Section 5.2(b), so long as
such Liens attach only to Inventory; (f) deposits securing, or in lieu of,
surety, appeal or customs bonds in proceedings to which any Credit Party is a
party; (g) any attachment or judgment lien not constituting an Event of Default
under Section 8.1(j); (h) zoning restrictions, easements, licenses, or
other restrictions on the use of any Real Estate or other minor irregularities
in title (including leasehold title) thereto, so long as the same do not
materially impair the use, value, or marketability of such Real Estate; (i)
presently existing or hereafter created Liens in favor of Agent, on behalf of
Lenders; (j) Liens expressly permitted under clauses (b) and (c) of Section
6.7 of the Agreement, (k) Liens securing the IRB Loans and the Swiss Loans,
(l) Liens securing Industrial Revenue Bond Financing incurred or assumed after
the date hereof permitted under the terms of the Agreement, (m) deposits made
in the ordinary course of business to secure liability to insurance carriers,
(n) leases or subleases granted to others not materially interfering with the
business of the Credit Parties, (o) any interest or title of a landlord or a
sublandlord under any lease, (o) Liens consisting of owner’s rights to raw
materials held on consignment at 999 Happy Valley Road, Glasgow, Kentucky 42141
that are segregated and clearly labeled, (p) Liens arising from precautionary
Code financing statements with respect to assets leased by Borrower or its
Subsidiaries pursuant to operating leases, (q) non-exclusive licenses of
Borrower’s or its Subsidiaries’ Intellectual Property entered into in the
ordinary course, (r) Liens on, or rights of setoff against, cash of any
Credit Party constituting deposits of cash made by such Credit Party in the
ordinary course of business and within the general parameters customary in the
industry, to secure Indebtedness under Specified Hedging Agreements that is
permitted under Section 6.3(a) hereof, (s) Liens on the Refinancing
Proceeds in favor of the Trustee solely to the extent granted or otherwise
arising in connection with the Refinancing, and (t) Liens expressly permitted
under clause (e) of Section 6.7 of the Agreement.


 


“Permitted
Loan Funded Acquisition” means (a) acquisition by any Credit Party or
an Acquisition Company (or Holdings, so long as contemporaneously therewith,
all assets so acquired are transferred to Borrower or any other Credit Party)
of all or substantially all of the assets of a Qualified Target or assets that
constitute all or substantially all of the assets of a division or operating
unit of a Qualified Target, (b) purchase by any Credit Party or an
Acquisition Company which shall become a Credit Party upon consummation of such
Permitted Acquisition (or Holdings, so long as contemporaneously therewith, all
assets so acquired are transferred to Borrower or any other Credit Party) of
100% of the outstanding Stock of a Qualified Target, (c) purchase by any
Credit Party or an Acquisition Company which shall become a Credit Party upon
consummation of such Permitted Acquisition (or Holdings, so long as
contemporaneously therewith, all assets so acquired are transferred to Borrower
or any other Credit Party) of not less than 80% of each class of outstanding
Stock of a Qualified Target as long as, without limitation to conditions
required for Permitted Loan Funded Acquisition set forth below, Agent will be
granted a first priority perfected Lien (subject to Permitted Encumbrances
(other than those described in clause (t) of the definition of Permitted
Encumbrances)) and except as contemplated by clauses (A) and (C)
of this definition of the term “Permitted Loan Funded Acquisition” in all in
the assets and Stock of the Qualified Target, and Agent shall have received lien
search results, financing statements and supplemental security agreements, a
Guaranty, environmental indemnity agreements, blocked account agreements and
other collateral documents in connection therewith as reasonably requested by
Agent, or


 


A - 26





















 


(d) participation
by any Credit Party or an Acquisition Company (or Holdings, so long as
contemporaneously therewith, all assets so acquired are transferred to Borrower
or any other Credit Party) in a merger of a Qualified Target with and into
Borrower or a Secured Guarantor or the merger of an Acquisition Company into a
Qualified Target (with Borrower as the sole Stockholder of Qualified Target
after giving effect thereto) or the merger of a Qualified Target into an
Acquisition Company (each such acquisition, purchase or merger being an “Domestic
Acquisition”), subject to satisfaction of each of the following conditions
(and each such Domestic Acquisition shall be a “Permitted Loan Funded
Acquisition” only upon satisfaction of each of the following conditions):


 


(i)            Agent shall receive at least thirty
(30) days’ (or any shorter period if requested by such Credit Party and
consented to by Agent in writing) prior written notice of such Domestic
Acquisition, which notice shall include a reasonably detailed description of
such Domestic Acquisition, which may be subject to further negotiation, and a
copy of any executed letter of intent relating thereto;


 


(ii)           such Domestic Acquisition shall only
involve a Qualified Target which business would not subject Agent or any Lender
to regulatory or third party approvals in connection with the exercise of its
rights and remedies under this Agreement or any other Loan Documents other than
approvals applicable to the exercise of such rights and remedies with respect
to Borrower prior to such Domestic Acquisition;


 


(iii)          such Domestic Acquisition shall be
consensual and shall have been approved by the Qualified Target’s board of
directors or, in the case of a Qualified Target in bankruptcy, a court of
competent jurisdiction;


 


(iv)          no additional Indebtedness, Guaranteed
Indebtedness or other liabilities shall be incurred, assumed or otherwise be
reflected on a consolidated balance sheet of Borrower and Qualified Target
after giving effect to such Domestic Acquisition, except (A) Revolving
Credit Advances made under the Agreement that are made in accordance with the
terms of Section 2.3 or Loans made in respect of an Increased Commitment
under the Agreement or an increase in the SCIL Loan, (B) trade payables and
accrued expenses, each in existence at the time of the Domestic Acquisition and
not created in anticipation thereof and each arising in ordinary course,
(C) Industrial Revenue Bond Financing, Capital Leases and purchase money Indebtedness,
not to exceed in the aggregate 25% of total consideration paid for such
Permitted Loan Funded Acquisition (including the book value of assumed
liabilities), each in existence at the time of Domestic Acquisition and not
created in anticipation thereof and each arising in the ordinary course of
business, and (D) Subordinated Debt in the form of an “earn-out” and unsecured
Domestic Acquisition Subordinated Debt (1) with a maturity date after the
maturity of the Obligations in an amount not to exceed twenty five percent
(25%) of the purchase price of any given Permitted Loan Funded Acquisition or
(2) with an earlier maturity but subject to Reserve against the Borrowing Base
in an amount equal to the maximum aggregate payments payable thereunder;


 


(v)           the assets acquired in such Domestic
Acquisition shall be free and clear of all Liens (other than Permitted
Encumbrances and except as contemplated by clauses (iv)(A) and (iv)(C)
of this definition of the term “Permitted Loan Funded Acquisitions”);


 


A - 27





















 


(vi)          such Qualified Target is a
Domestic Person and at the closing of the Domestic Acquisition of such
Qualified Target, Agent will be granted a first priority perfected Lien
(subject to Permitted Encumbrances and except as contemplated by clauses
(iv)(A) and (iv)(C) of this definition of the term “Permitted Loan
Funded Acquisitions”) in all assets acquired pursuant thereto or, in the case
of equity purchase, in the assets and Stock of the Qualified Target, and
Borrower shall have executed such documents and taken such actions as may be
reasonably required by Agent in connection therewith, and Agent shall have
received lien search results, financing statements and supplemental security
agreements, a Guaranty, environmental indemnity agreements, blocked account
agreements and other collateral documents and other documents reasonably
requested by Agent;


 


(vii)         at the time of such Domestic
Acquisition and immediately after giving effect thereto (including any Revolving
Credit Advance, Loans made in respect of an Increased Commitment under the
Agreement or an increase in the SCIL Loan in connection therewith), no Default
or Event of Default shall have occurred and be continuing;


 


(viii)        at least five (5) days before the
closing date for the Permitted Loan Funded Acquisition, Agent shall have
received the following financial statements consisting of balance sheets,
statements of income and retained earnings and cash flows with respect to the
Qualified Target to the extent such financial statements exist or are obtained
by such date: (A) annual financial statements for the most recent 3-year period
preceding the Domestic Acquisition; (B) monthly financial statements for the
most recent 4-quarter period preceding the Domestic Acquisition; and (C)
monthly financial statements for year-to-date preceding the Domestic
Acquisition, setting forth in comparative form the figures for the two previous
years;


 


(ix)           at least five (5) days before the
closing date for the Permitted Loan Funded Acquisition, Agent shall have
received all pro forma financial statements consisting of balance sheets,
statements of income and retained earnings and cash flows with respect to the
Qualified Target prepared by Borrower or a Secured Guarantor, as applicable, in
connection with such Domestic Acquisition;


 


(x)            Agent shall have not less than seven
(7) days to review (without, however, the right to approve or disapprove),
environmental audits with respect to real estate acquired in connection with a
Permitted Loan Funded Acquisition and with respect to Qualified Targets
acquired by merger or Stock purchase or where contingent liabilities are to be
assumed, litigation, actuarial studies and similar contingent liability
analyses with respect to the Qualified Target;


 


(xi)           at least seven (7) days (or any
shorter period if requested by such Credit Party and consented to by Agent in
writing) prior to the date of such Domestic Acquisition, Agent shall have
received copies of the draft acquisition agreement and related agreements,
instruments, and other documents reasonably requested by Agent and, promptly
following the closing date for such Permitted Loan Funded Acquisition, final
drafts of the foregoing;


 


(xii)          at least five (5) days prior to the
closing of an Domestic Acquisition, Borrower shall have delivered to Agent:


 


A - 28





















 


(A)                          a
pro forma consolidated balance sheet, income statement and cash flow statement
of Holdings and its Subsidiaries (the “Acquisition Pro Forma”), based on
recent financial statements, which shall fairly present in all material
respects the assets, liabilities, financial condition and results of operations
of Holdings and its Subsidiaries in accordance with GAAP consistently applied,
but taking into account such Permitted Loan Funded Acquisition and the funding
of the Revolving Loan and/or SCIL Loan in connection therewith, including
detailed acquisition adjustments acceptable to Agent, and such Domestic
Acquisition Pro Forma shall reflect that (x) average daily Borrowing
Availability for the 90-day period preceding the consummation of such Permitted
Loan Funded Acquisition would have exceeded $5,000,000 on a pro forma basis
(after giving effect to such Permitted Loan Funded Acquisition (including
acquired Eligible Accounts and Eligible Inventory as to which an audit has been
completed) and the Revolving Loan and/or SCIL Loan funded in connection
therewith as if made on the first day of such period) and the Domestic
Acquisition Projections (as hereinafter defined) shall reflect that such
Borrowing Availability of $5,000,000 shall continue for at least two (2) years
after the consummation of such Domestic Acquisition, and (y) on a pro forma
basis, no Event of Default has occurred and is continuing or would result after
giving effect to such Domestic Acquisition and Borrower would have been in
compliance with the Financial Covenants set forth in Annex G for the
four quarter period reflected in the Compliance Certificate most recently delivered
to Agent pursuant to Annex E prior to the consummation of such Domestic
Acquisition (after giving effect to such Permitted Loan Funded Acquisition and
the Revolving Loan funded in connection therewith as if made on the first day
of such period);


 


(B)                           updated
versions of the most recently delivered Projections covering the 1-year period
commencing on the date of such Domestic Acquisition and otherwise prepared in
accordance with the Projections (the “Domestic Acquisition Projections”)
and based upon historical financial data of a recent date reasonably
satisfactory to Agent, taking into account such Permitted Loan Funded
Acquisition;


 


(C)                           an
Officer Certificate of the Chief Financial Officer of Holdings and Borrower,
other responsible officer of Borrower and Holdings having substantially the
same authority and responsibility or other responsible officer acceptable to
Agent to the effect that: (w) Holdings on a consolidated basis (after taking
into consideration all rights of contribution and indemnity Borrower has
against Holdings and each other Subsidiary of Holdings) will be Solvent upon
the consummation of the Permitted Loan Funded Acquisition; (x) the Acquisition
Pro Forma fairly presents the financial condition of Holdings (on a
consolidated basis) as of the date thereof after giving effect to the Domestic
Acquisition; (y) the Domestic Acquisition Projections are reasonable estimates
of the future financial performance of Holdings (on a consolidated basis)
subsequent to the date thereof based upon the historical performance of
Holdings, Borrower and the Qualified Target and show that Holdings (on a
consolidated basis) shall continue to be in compliance with the Financial
Covenants set forth in Annex G for the 2-year period thereafter; and (z)
Holdings and Borrower have completed in all material respects their due
diligence investigation with respect to the Qualified Target and such Permitted
Loan Funded Acquisition; and


 


A - 29





















 


(D)                          an
Acquisition Compliance Certificate showing compliance with the terms and
provision of clauses (iv)(C) and (iv)(D) of this definition of
the term “Permitted Loan Funded Acquisition”, and a designation of assets, if
any, in accordance with Section 6.8(d) with respect to such Acquisition.


 


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


 


“Permitted
Non-Loan Funded Acquisition” means (a) acquisition by any Foreign
Subsidiary of Borrower of all or substantially all of the assets of a Foreign
Qualified Target or assets that constitute all or substantially all of the
assets of a division or operating unit of a Foreign Qualified Target,
(b) purchase by any Foreign Subsidiary of Borrower or by a Domestic Credit
Party of more than 50% of the outstanding Stock of a Foreign Qualified Target
or (c) participation by any Foreign Subsidiary of Borrower in a merger of
a Foreign Qualified Target with and into such Foreign Subsidiary of Borrower
(each such acquisition, purchase or merger being an “Foreign  Acquisition”),
subject to satisfaction of each of the following conditions (and each such
Foreign Acquisition shall be a “Permitted Non-Loan Funded Acquisition”
only upon satisfaction of each of the following conditions):


 


(xiii)         Agent shall receive a written notice of
such Foreign Acquisition reasonably in advance of such Foreign Acquisition,
which notice shall include a reasonably detailed description of such Foreign
Acquisition and any financing thereof, and promptly following the closing date
for such Permitted Non-Loan Funded Acquisition, copies of all acquisition
agreements and related agreements, instruments, and other documents executed in
connection therewith or related thereto;


 


(xiv)        such Foreign Acquisition shall be
consensual and shall have been approved by the Foreign Qualified Target’s board
of directors or, in the case of a Foreign Qualified Target in bankruptcy, a
court of competent jurisdiction;


 


(xv)         consideration for the Foreign Acquisition
is funded entirely from (A) proceeds of a financing provided to the
Foreign Subsidiary of Borrower with recourse solely to the assets of the
Foreign Subsidiary upon which Agent has no Liens, (B) unsecured
Indebtedness issued to seller(s) in such Foreign Acquisition; (C) cash
which is provided by Foreign Subsidiaries, (D) Stockholder Proceeds or
(E) combination of any of the foregoing clauses (A), (B), (C) or (D);


 


(xvi)        no Credit Party incurs any Indebtedness,
Guaranteed Indebtedness or any other liability or obligation in connection with
or relating to such Foreign Acquisition;


 


(xvii)       at the time of such Foreign Acquisition
and immediately after giving effect thereto, no Default or Event of Default
shall have occurred and be continuing;


 


(xviii)      at least five (5) days prior to the
closing of an Foreign Acquisition, Borrower shall have delivered to Agent:


 


A - 30





















 


(A)                          a
pro forma consolidated balance sheet, income statement and cash flow statement
of Holdings and its Subsidiaries (the “Foreign Acquisition Pro Forma”),
based on recent financial statements, which shall fairly present in all
material respects the assets, liabilities, financial condition and results of
operations of Holdings and its Subsidiaries in accordance with GAAP
consistently applied, but taking into account such Permitted Non-Loan Funded
Acquisition, including detailed acquisition adjustments acceptable to Agent,
and such Foreign Acquisition Pro Forma shall reflect that (x) average daily
Borrowing Availability for the 90-day period preceding the consummation of such
Permitted Non-Loan Funded Acquisition would have exceeded $5,000,000 on a pro
forma basis (after giving effect to such Permitted Non-Loan Funded Acquisition
and the Foreign Acquisition Projections (as hereinafter defined) shall reflect
that such Borrowing Availability of $5,000,000 shall continue for at least two
(2) years after the consummation of such Foreign Acquisition, and (y) on a
pro forma basis, no Event of Default has occurred and is continuing or would
result after giving effect to such Foreign Acquisition and Borrower would have
been in compliance with the Financial Covenants set forth in Annex G for
the four quarter period reflected in the Compliance Certificate most recently
delivered to Agent pursuant to Annex E prior to the consummation of such
Foreign Acquisition (after giving effect to such Permitted Non-Loan Funded
Acquisition);


 


(B)                           updated
versions of the most recently delivered Projections covering the 1-year period
commencing on the date of such Foreign Acquisition and otherwise prepared in
accordance with the Projections (the “Foreign Acquisition Projections”)
and based upon historical financial data of a recent date reasonably
satisfactory to Agent, taking into account such Permitted Non-Loan Funded
Acquisition;


 


(C)                           an
Officer Certificate of the Chief Financial Officer of Holdings and Borrower, or
another responsible officer of Borrower and Holdings having substantially the
same authority and responsibility or otherwise acceptable to Agent, to the
effect that: (w) Holdings on a consolidated basis (after taking into
consideration all rights of contribution and indemnity Borrower has against
Holdings and each other Subsidiary of Holdings) will be Solvent upon the
consummation of the Permitted Non-Loan Funded Acquisition; (x) the Foreign
Acquisition Pro Forma fairly presents the financial condition of Holdings (on a
consolidated basis) as of the date thereof after giving effect to the Foreign
Acquisition; (y) the Foreign Acquisition Projections are reasonable estimates
of the future financial performance of Holdings (on a consolidated basis)
subsequent to the date thereof based upon the historical performance of
Holdings, Borrower, Foreign Subsidiaries and the Foreign Qualified Target and
show that Holdings (on a consolidated basis) shall continue to be in compliance
with the Financial Covenants set forth in Annex G for the 2-year period
thereafter; and (z) applicable Foreign Subsidiary has completed in all material
respects its due diligence investigation with respect to the Foreign Qualified
Target and such Permitted Non-Loan Funded Acquisition; and


 


(D)                          an
Acquisition Compliance Certificate showing compliance with the terms and
provision of clauses (iv)(C) and (iv)(D) of this definition of
the term 


 


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“Permitted
Loan Funded Acquisition”, and a designation of assets, if any, in accordance
with Section 6.8(d) with respect to such Acquisition;


 


(xix)         the aggregate consideration for all
Permitted Non-Loan Funded Acquisitions since the Closing Date does not exceed
the dollar equivalent of $30,000,000 (the dollar equivalent being the amount of
Dollars, as of any date of determination, into which currency other than
Dollars may be converted in accordance with prevailing exchange rates, as
determined by Agent in its reasonable discretion, on the date of
determination); and


 


(xx)          in the case Foreign Qualified Target
is a Foreign Person which will become a first-tier Foreign Subsidiary of a
Domestic Credit Party or of a Domestic Acquisition Company after giving effect
to the proposed Foreign Acquisition (x) at the closing of the Foreign
Acquisition of such Foreign Qualified Target, if any Domestic Acquisition Company
is formed for the purpose of completing such Foreign Acquisition, such Domestic
Acquisition Company satisfies all requirements to become a Secured Guarantor
under the Agreement, (y) at the closing of the Foreign Acquisition of such
Foreign Qualified Target, such Foreign Qualified Target satisfies all
requirements to become a Secured Guarantor under the Agreement (other than the
requirement that the Qualified Target be a Domestic Subsidiary) or, if becoming
a Secured Guarantor would result in adverse tax liabilities under Section 956
of the IRC (or any similar statute) for Holdings, Borrower or the other Credit
Parties (as demonstrated by Borrower in a manner reasonably satisfactory to
Agent), such Foreign Qualified Target shall not be required to become a Secured
Guarantor provided that Agent shall have been granted a first priority
perfected Lien on 66% of Stock of such Foreign Qualified Target and (z) to
the extent any assets of such Foreign Qualified Target are located in the
United States, the fair market value of such assets does not exceed 5% of the
purchase price for the proposed Foreign Acquisition (unless a greater
percentage is approved by Requisite Lenders in writing).


 


“Permitted
SCIL Obligation Payments” means (i) payments of fees, reimbursable
costs and expenses and regularly scheduled payments of interest on the SCIL
Loan due and payable on a non-accelerated basis and (ii) prepayments of
the SCIL Loan to the extent permitted by Section 6.14(a)(I)(ii), in each
case in accordance with the terms of the SCIL Loan Documents as in effect on
the date hereof or as modified in accordance with the terms of the
Intercreditor Agreement.


 


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


 


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


 


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


 


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


 


“Post-Holdco
Debenture Debt Proceeds” has the meaning ascribed to it in Section 5.8(b)(ii).


 


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


 


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


 


“Prior
Senior Subordinated Note Documents” means the Prior Senior Subordinated
Indenture, Prior Senior Subordinated Notes, and any other instrument, document
or agreement delivered pursuant thereto or in connection therewith.


 


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


 


“Pro
Forma” means the unaudited consolidated and consolidating balance sheet of
Borrower and its Subsidiaries as of March 31, 2004 after giving pro  forma
effect to the Related Transactions and the acquisition of RBC Aircraft.


 


“Projections”
means Borrower’s forecasted consolidated: 
(a) balance sheets; (b) profit and loss statements; (c) cash flow
statements; and (d) capitalization statements, which, in 


 


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the
case of profit and loss statements, shall be prepared on a Subsidiary by
Subsidiary or division-by-division basis, if applicable, and all consistent
with the historical Financial Statements of Borrower, together with appropriate
supporting details and a statement of underlying assumptions.


 


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


 


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


 


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


 


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


 


“Qualified
Public Offering” means an initial public offering of Stock of Holdings
resulting in net cash proceeds to Holdings of at least $30,000,000 and which
qualifies Holdings for listing on NASDAQ National Markets or the New York Stock
Exchange.


 


“Qualified
Target” means a corporation, limited partnership, limited liability company
or partnership or a similar Person that is incorporated, formed or organized
under the laws of one of the United States of America, Canada, Europe or Asia,
with substantially all of its assets located in the United States of America,
Canada, Europe or Asia and that is engaged in a 


 


A - 34





















 


business
engaged in by Borrower or any Credit Party or a business substantially similar
or related thereto.


 


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


 


“RBC
Aircraft” means RBC Aircraft Products, Inc., a Delaware corporation.


 


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


 


“Refinancing”
means the payment of the Refinancing Proceeds to the Trustee for redemption of
the Prior Senior Subordinated Notes and payment of all amounts (including any
call premium, accrued and unpaid interest, and fees and expenses) owing in
respect thereof under the Prior Senior Subordinated Documents and the
satisfaction of the conditions set forth in Section 2.1(b) hereto.


 


“Refinancing
Proceeds” means that portion of the net cash proceeds of the Loans and the
SCIL Loan that Borrower causes to be paid to the Trustee on the Effective Date
to be used solely for redeeming the Prior Senior Subordinated Notes and paying
all amounts (including any call premium, accrued and unpaid interest, and fees
and expenses) owing in respect thereof under the Prior Senior Subordinated
Documents, as reflected in Disclosure Schedule 1.4.


 


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


 


“Related
Fund” with respect to any Lender, means any fund that (a) invests in
commercial loans and (b) is managed or advised by the same investment advisor
as such Lender, by such Lender or an Affiliate of such Lender.


 


“Related
Stockholder Party” has the meaning ascribed to it in Section
1.3(b)(v)(A).


 


“Related
Transactions” means the borrowing under the Revolving Loan and the Term
Loan on the Effective Date, the Refinancing, the borrowing of the SCIL Loan,
the payment of all fees, costs and expenses associated with all of the
foregoing and the execution and delivery of all of the Related Transactions
Documents.


 


“Related
Transactions Documents” means the Loan Documents, the agreements and
instruments governing the SCIL Loan and all other agreements or instruments
executed in connection with the Related Transactions.


 


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


 


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


 


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“Requisite
Lenders” means Lenders having (a) more than 51% of the Commitments of
all Lenders, or (b) if the Commitments have been terminated, more than 51% of
the aggregate outstanding amount of the Loans; provided
that if only two Lenders shall exist, “Requisite Lenders” shall mean both such
Lenders.


 


“Requisite
Revolving Lenders” means Lenders having (a) more than 51% of the
Revolving Loan Commitments of all Lenders, or (b) if the Revolving Loan
Commitments have been terminated, more than 51% of the aggregate outstanding
amount of the Revolving Loan, provided
that if there are only two Lenders, “Requisite Revolving Lenders” shall mean
both such Lenders.


 


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


 


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


 


“Retiree
Welfare Plan” means, at any time, a Welfare Plan that provides for
continuing coverage or benefits for any participant or any beneficiary of a
participant after such participant’s termination of employment, other than
continuation coverage provided pursuant to 


 


A - 36





















 


Section
4980B of the IRC and at the sole expense of the participant or the beneficiary
of the participant.


 


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


 


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


 


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


 


“Revolving
Loan Commitment” means (a) as to any Revolving Lender, the aggregate
commitment of such Revolving Lender to make Revolving Credit Advances or incur
Letter of Credit Obligations as set forth on Annex J to the Agreement or
in the most recent Assignment Agreement executed by such Revolving Lender and
(b) as to all Revolving Lenders, the aggregate commitment of all Revolving
Lenders to make Revolving Credit Advances or incur Letter of Credit
Obligations, which aggregate commitment shall be Fifty-Five Million Dollars
($55,000,000) on the Effective Date, as such amount may be adjusted, if at all,
from time to time in accordance with the Agreement (including, without
limitation, pursuant to a Commitment Increase).


 


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


 


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


 


“Schaublin
Financing” shall mean the credit facility provided to Schaublin pursuant to
that certain Credit Agreement dated on or about December 8, 2003 between
Schaublin and Credit Suisse and all documents and agreements executed and/or
delivered in connection therewith, as the same may be amended, restated,
modified or supplemented from time to time.


 


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


 


“SCIL
Credit Agreement” means the SCIL Credit Agreement dated as of the date hereof among the Credit Parties, GE
Capital, as SCIL Agent and lender, and the other lenders from time to time
party thereto, as the same may be amended, supplemented, restated, replaced or
otherwise modified from time to time to the extent permitted by and in
accordance with the Intercreditor Agreement.


 


“SCIL
Leverage Ratio” means, with respect to Holdings, Borrower and their
Subsidiaries, on a consolidated basis, as of any date of determination, the
ratio of (a) the difference of (i) the sum of (x) Senior Debt plus
(y) Indebtedness incurred pursuant to the SCIL Loan Documents minus
(ii) the sum of (x) the Credit Parties’ consolidated unrestricted cash and 


 


A - 37





















 


Cash
Equivalents on hand in excess of $1,000,000 but not in excess of $4,000,000
(other than any cash or Cash Equivalents constituting proceeds of an asset
disposition by any Credit Party for which Agent has received notice from
Borrower pursuant to Section 1.3(b)(ii) that such proceeds will be
reinvested in fixed assets) and (y) the Credit Parties’ consolidated
unrestricted cash and Cash Equivalents on hand in excess of $4,000,000 to the
extent the same constitute proceeds of an asset disposition by any Credit Party
as to which Borrower has provided irrevocable written notice to the Agent (in
lieu of its right retain such proceeds for reinvestment in fixed assets
pursuant to Section 1.3(b)(ii) hereof) that such proceeds will be used
to prepay the Loans (provided,
that with respect to the Revolving Loan, Funded Debt shall include the average
monthly balance outstanding during any applicable measuring period) to (b) the
sum of Adjusted EBITDA for the 12-month period ending on the date of determination.


 


“SCIL
Loan” means a subordinated collateralized institutional loan, secured by a
second lien on all or substantially all of the Collateral in the principal
amount of $45,000,000, payable in a single installment on its maturity date,
and having a maturity date of not earlier than June 29, 2011.


 


“SCIL
Loan Documents” shall mean the “Loan Documents” as defined in Annex A to
the SCIL Credit Agreement.


 


“SCIL
Obligations” shall mean the “Obligations” as defined in Annex A to the SCIL
Credit Agreement.


 


“Security
Agreement” means the Security Agreement dated as of the Original Closing
Date entered into by and among Agent, on behalf of itself and Lenders, and each
Credit Party that is a signatory thereto, as the same may be amended, restated,
modified and/or supplemented from time to time including, without limitation,
by any joinder thereto.


 


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


 


“Senior
Debt” means all Funded Debt of Holdings, Borrower and their Subsidiaries,
on a consolidated basis, excluding (i) Subordinated Debt, (ii) all
Indebtedness incurred pursuant to the SCIL Loan Documents, and (iii) all
Indebtedness in respect of the Holdco Discount Debentures.


 


“Senior
Leverage Ratio” means, with respect to Holdings, Borrower and their
Subsidiaries, on a consolidated basis, as of any date of determination, the
ratio of (a) the difference of (i) Senior Debt minus (ii) the sum of (x)
the Credit Parties’ consolidated unrestricted cash and Cash Equivalents on hand
in excess of $1,000,000 but not in excess of $4,000,000 (other than any cash or
Cash Equivalents constituting proceeds of an asset disposition by any Credit
Party for which Agent has received notice from Borrower pursuant to 


 


A - 38





















 


Section
1.3(b)(ii) that such
proceeds will be reinvested in fixed assets) and (y) the Credit Parties’
consolidated unrestricted cash and Cash Equivalents on hand in excess of
$4,000,000 to the extent the same constitute proceeds of an asset disposition
by any Credit Party as to which Borrower has provided irrevocable written
notice to the Agent (in lieu of its right retain such proceeds for reinvestment
in fixed assets pursuant to Section 1.3(b)(ii) hereof) that such proceeds
will be used to prepay the Loans (provided,
that with respect to the Revolving Loan, Senior Debt shall include the average
monthly balance outstanding during any applicable measuring period) to (b) the
sum of Adjusted EBITDA for the 12-month period ending on the date of
determination.


 


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


 


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


 


“Solvent”
means, with respect to any Person on a particular date, that on such date (a)
the fair value of the property of such Person is greater than the total amount
of liabilities, including contingent liabilities, of such Person; (b) the
present fair salable value of the assets of such Person is not less than the
amount that will be required to pay the probable liability of such Person on
its debts as they become absolute and matured; (c) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond such
Person’s ability to pay as such debts and liabilities mature; and (d) such
Person is not engaged in a business or transaction, and is not about to engage
in a business or transaction, for which such Person’s property would constitute
an unreasonably small capital.  The
amount of contingent liabilities (such as litigation, guaranties and pension
plan liabilities) at any time shall be computed as the amount that, in light of
all the facts and circumstances existing at the time, represents the amount
that can be reasonably be expected to become an actual or matured liability.


 


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


 


“Specified
Hedging Agreements” means any Hedging Agreements made or entered into at
any time, or in effect at any time between any Borrower and a counterparty to a
Hedging Agreement reasonably satisfactory to the Agent (which may include any
Lender hereunder) and on terms and for periods reasonably satisfactory to the
Agent.


 


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


 


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


 


“Stockholder
Proceeds” has the meaning ascribed to it in Section 5.8(c)(ii).


 


A - 39





















 


 


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


 


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


 


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


 


“Subsidiary Guaranty” means Subsidiary
Guaranty dated as of the Original Closing Date executed by each Secured
Guarantor in favor of Agent, on behalf of itself and Lenders as the same may be
amended, restated, modified and/or supplemented from time to time including,
without limitation, by any joinder thereto.


 


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


 


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


 


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


 


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


 


“Swing Line Lender” means GE Capital.


 


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


 


A - 40





















 


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


 


“Swiss Loan” means the Indebtedness of RBC
Schaublin S.A. Delémont to Credit Suisse pursuant to the terms of the Credit
Agreement dated as of December 27, 1999 not to exceed Swiss Francs
12,000,000 in the aggregate.


 


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


 


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


 


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


 


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


 


“Term Loan Commitment” means (a) as to any
Lender with a Term Loan Commitment, the commitment of such Lender to make its
Pro Rata Share of the Term Loan on the Effective Date as set forth on Annex J
to the Agreement or in the most recent Assignment Agreement executed by such
Lender, and (b) as to all Lenders with a Term Loan Commitment, the aggregate
commitment of all Lenders to make the Term Loan, which aggregate commitment
shall be One Hundred Ten Million Dollars ($110,000,000) on the Effective Date,
as such amount may be adjusted, if at all, from time to time in accordance with
this Agreement (including, without limitation, pursuant to a Commitment
Increase).  After advancing the Term
Loan, each reference to a Lender’s Term Loan Commitment shall refer to that
Lender’s Pro Rata Share of the outstanding Term Loan.


 


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


 


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


 


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


 


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


 


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


 


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be
amended, restated, modified and/or supplemented from time to time including,
without limitation, by any joinder thereto.


 


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


 


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


 


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


 


“Trustee” has the meaning ascribed to it in Section 2.1(b).


 


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


 


“Unfunded Pension Liability” means, at any
time, the aggregate amount, if any, of the sum of (a) the amount by which the
present value of all accrued benefits under each Title IV Plan exceeds the fair
market value of all assets of such Title IV Plan allocable to such benefits in
accordance with Title IV of ERISA, all determined as of the most recent
valuation date for each such Title IV Plan using the actuarial assumptions for
funding purposes in effect under such Title IV Plan, and (b) for a period of 5
years following a transaction which might reasonably be expected to be covered
by Section 4069 of ERISA, the liabilities (whether or not accrued) that
could be avoided by any Credit Party or any ERISA Affiliate as a result of such
transaction.


 


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


 


“Working Capital” means, with respect to any
Fiscal Year, the average Current Assets of Holdings and its Subsidiaries on a
consolidated basis less the average Current Liabilities of Holdings and
its Subsidiaries on a consolidated basis for the first month of each Fiscal
Year compared to the average Current Assets of Holdings and its Subsidiaries on
a consolidated basis less the average Current Liabilities of Holdings and its
Subsidiaries on a consolidated basis for the last month of such Fiscal Year
determined from the financial statements delivered with respect thereto under paragraphs
(a) and/or (d) of Annex E.


 


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Rules of construction with respect to accounting
terms used in the Agreement or the other Loan Documents shall be as set forth
in Annex G.  All other undefined
terms contained in any of the Loan Documents shall, unless the context
indicates otherwise, have the meanings provided for by the Code to the extent
the same are used or defined therein; in the event that any term is defined
differently in different Articles or Divisions of the Code, the definition
contained in Article or Division 9 shall control.  Unless otherwise specified, references in the
Agreement or any of the Appendices to a Section, subsection or clause
refer to such Section, subsection or clause as contained in the Agreement.  The words “herein,” “hereof” and “hereunder”
and other words of similar import refer to the Agreement as a whole, including
all Annexes, Exhibits and Schedules, as the same may from time to time be
amended, restated, modified or supplemented, and not to any particular section,
subsection or clause contained in the Agreement or any such Annex, Exhibit
or Schedule.  The word “including” means
“including, without limitation”.


 


Wherever from the context it appears appropriate,
each term stated in either the singular or plural shall include the singular
and the plural, and pronouns stated in the masculine, feminine or neuter gender
shall include the masculine, feminine and neuter genders.  The words “including”, “includes” and
“include” shall be deemed to be followed by the words “without limitation”; the
word “or” is not exclusive; references to Persons include their respective
successors and assigns (to the extent and only to the extent permitted by the
Loan Documents) or, in the case of governmental Persons, Persons succeeding to
the relevant functions of such Persons; and all references to statutes and
related regulations shall include any amendments of the same and any successor
statutes and regulations.  Whenever any
provision in any Loan Document refers to the knowledge (or an analogous phrase)
of any Credit Party, such words are intended to signify that such Credit Party
has actual knowledge or awareness of a particular fact or circumstance.


 


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ANNEX B (Section 1.2)


to


CREDIT
AGREEMENT


 


LETTERS OF
CREDIT


 


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


 


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


 


(ii)  If it
shall be illegal or unlawful for Borrower to incur Revolving Credit Advances as
contemplated by paragraph (b)(i) above because of an Event of Default described
in Sections 8.1(h) or (i) or otherwise or if it shall be illegal or
unlawful for any Revolving Lender to be deemed to have assumed a ratable share
of the reimbursement obligations owed to an L/C Issuer, or if the L/C Issuer is
a Revolving Lender, then (A)


 


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immediately
and without further action whatsoever, each Revolving Lender shall be deemed to
have irrevocably and unconditionally purchased from Agent (or such L/C Issuer,
as the case may be) an undivided interest and participation equal to such
Revolving Lender’s Pro Rata Share (based on the Revolving Loan Commitments) of
the Letter of Credit Obligations in respect of all Letters of Credit then
outstanding and (B) thereafter, immediately upon issuance of any Letter of
Credit, each Revolving Lender shall be deemed to have irrevocably and
unconditionally purchased from Agent (or such L/C Issuer, as the case may be)
an undivided interest and participation in such Revolving Lender’s Pro Rata
Share (based on the Revolving Loan Commitments) of the Letter of Credit
Obligations with respect to such Letter of Credit on the date of such
issuance.  Each Revolving Lender shall
fund its participation in all payments or disbursements made under the Letters
of Credit in the same manner as provided in the Agreement with respect to
Revolving Credit Advances.


 


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


 


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


 


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


 


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


 


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


 


(d)           Fees
and Expenses.  Borrower agrees to pay
to Agent for the benefit of Revolving Lenders, as compensation to such Lenders
for Letter of Credit Obligations incurred hereunder, (i) all costs and expenses
incurred by Agent or any Lender on account of such Letter of Credit
Obligations, and (ii) for each month during which any Letter of Credit
Obligation shall remain outstanding, a fee (the “Letter of Credit Fee”)
in an amount equal to three percent (3.00%) per annum multiplied by the maximum
amount available from time to time to be drawn under the applicable Letter of
Credit.  Such fee shall be paid to Agent
for the benefit of the Revolving Lenders in arrears, on the first day of each
month and on the Commitment Termination Date. 
In addition, Borrower shall pay to any L/C Issuer, on demand, such fees
(including all per annum fees), charges and expenses of such L/C Issuer in
respect of the issuance, negotiation, acceptance, amendment, transfer and
payment of such Letter of Credit or otherwise payable pursuant to the
application and related documentation under which such Letter of Credit is
issued.


 


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


 


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


 


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


 


A - 3





















 


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


 


(iii)          any draft, demand, certificate or any other document
presented under any Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;


 


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


 


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


 


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


 


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


 


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


 


A - 4





















 


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


 


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


 


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ANNEX C (Section 1.8)


to


CREDIT
AGREEMENT


 


CASH
MANAGEMENT SYSTEM


 


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


 


(a)           Before
the Effective Date and until the Termination Date, Borrower shall (i) establish
lock boxes (“Lock Boxes”) or, at Agent’s discretion, blocked accounts (“Blocked
Accounts”) at one or more of the banks set forth in Disclosure
Schedule (3.19), and shall request in writing and otherwise take such
reasonable steps to ensure that all Account Debtors forward payment directly to
such Lock Boxes, and (ii) deposit and cause the Secured Guarantors to deposit
or cause to be deposited promptly, and in any event no later than the first
Business Day after the date of receipt thereof, all cash, checks, drafts or
other similar items of payment relating to or constituting payments made in respect
of any and all Collateral (whether or not otherwise delivered to a Lock Box)
into one or more Blocked Accounts in Borrower’s name or any such Secured
Guarantor’s name and at a bank identified in Disclosure Schedule (3.19)
(each, a “Relationship Bank”).  On
or before the Original Closing Date, Borrower shall have established a
concentration account in its name (such account and any replacement or
successor thereof, the “Concentration Account”) at the bank that shall
be designated as the Concentration Account bank for Borrower in Disclosure
Schedule (3.19) (such bank and any replacement or successor thereof
reasonably satisfactory to Agent, the “Concentration Account Bank”).


 


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


 


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


 


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any
time at which an Event of Default described in Sections 8.1(a), 8.1(b) (as a
result of a breach of any of Sections 1.4, 1.8, 5.4(a), 5.8, 6.1, 6.2, 6.5,
6.6, 6.7, 6.8, 6.10, 6.12, 6.14, and 6.19), 8.1(f), 8.1(h) or 8.1(i) has
occurred and is continuing and (Y) if the Term Loan in full is repaid in
full, at any time after an Activation Trigger Event (as defined below) has
occurred and remains in effect or at any time at which an Event of Default
described in Sections 8.1(a), 8.1(b) (as a result of a breach of any of
Sections 1.4, 1.8, 5.4(a), 5.8, 6.1, 6.2, 6.5, 6.6, 6.7, 6.8, 6.10, 6.12, 6.14,
and 6.19), 8.1(f), 8.1(h) or 8.1(i) has occurred and is continuing (any of
the foregoing being referred to herein as an “Activation Event”), to
forward immediately all amounts in each Blocked Account to the Concentration
Account Bank and to commence the process of daily sweeps from such Blocked
Account into the Concentration Account and (B) with respect to the
Concentration Account Bank, such bank agrees from and after the receipt of an
Activation Notice from Agent upon the occurrence of an Activation Event, to
immediately forward all amounts received in the Concentration Account to the
Collection Account through daily sweeps from such Concentration Account into
the Collection Account. From and after the date Agent has delivered an
Activation Notice to any bank with respect to any Blocked Account(s), Borrower
shall not, and shall not cause or permit any Secured Guarantor to, accumulate
or maintain cash in Disbursement Accounts or payroll accounts as of any date of
determination in excess of checks outstanding against such accounts as of that
date and amounts necessary to meet minimum balance requirements.  As used herein, “Activation Trigger Event”
means any time that the Average Borrowing Availability is less than
$7,500,000.  Once an Activation Trigger
Event has occurred, it shall remain in effect until Agent has determined that
(i) the Average Borrowing Availability has exceeded $7,500,000 and (ii) no
Event of Default has occurred and continues to exist during such calendar
month.  As used herein, “Average
Borrowing Availability” means, as of any date of determination, the sum of
Borrowing Availability as of the last day of each of the two consecutive Fiscal
Months ending prior to such date of determination divided by two.


 


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


 


(e)           The
Lock Boxes, Blocked Accounts, Disbursement Accounts and the Concentration
Account shall be cash collateral accounts, with all cash, checks and other
similar items of payment in such accounts securing payment of the Loans and all
other Obligations, and


 


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in
which Borrower and each Secured Guarantor shall have granted a Lien to Agent,
on behalf of itself and Lenders, pursuant to the Security Agreement.


 


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


 


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


 


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


 


	
  Bank:

  	
  Wachovia/First Union National Bank

  Charlotte, NC

  
	
   

  	
   

  
	
  ABA/Swift number:

  	
  031201467

  
	
   

  	
   

  
	
  Bank Account #:

  	
  2014146817950

  
	
   

  	
   

  
	
  Account Name:

  	
  Roller Bearing Company of America, Inc.

  



 


(i)            Any
provision of this Annex C to the contrary notwithstanding,


 


(A) the applicable Credit Parties may maintain
with Bank of America, Inc. the following Disbursement Accounts:  #01928-04511(Zero Balance),
#01923-04509(Payroll), #10277-09778(Zero Balance), #10277-01277(Payroll) and
#0007-5842-9716(Payroll) that are not a part of the Cash Management Systems
described in this Annex C as long as (i) the aggregate balance on
deposit in all such accounts does not exceed $10,000 at any time (net of checks
written but not yet cleared against the balance on deposit in such accounts),
(ii) in the case of each such account that is a payroll account,
(x) the disbursements of funds from such account are used solely to
satisfy the applicable Credit Party’s payroll obligations and (y) no funds
are deposited in such account earlier than two (2) days prior to the
distribution of funds from such account to satisfy the applicable Credit
Party’s payroll obligations, and (iii) in the case of each such account
that is a zero-balance account, the balance on deposit in such account as of


 


A - 3





















 


any
date of determination shall not be in excess of checks outstanding against such
account as of that date and amounts necessary to meet minimum balance
requirements;


 


(B) the applicable Credit Parties may maintain
with Fleet National Bank the Disbursement Account #0071630214 (Payroll) that is
not a part of the Cash Management Systems described in this Annex C as
long as (i) the aggregate balance on deposit in such account does not
exceed $10,000 at any time (net of checks written but not yet cleared against
the balance on deposit in such accounts), (ii) the disbursements of funds
from such account are used solely to satisfy the applicable Credit Party’s
payroll obligations and (iii) no funds are deposited in such account
earlier than two (2) days prior to the distribution of funds from such account
to satisfy the applicable Credit Party’s payroll obligations;


 


(C) the applicable Credit Parties may maintain
with First Source Bank the following Disbursement Accounts:  #4300 521 91(Payroll) and #128 5436 (Payroll)
that are not a part of the Cash Management Systems described in this Annex C
as long as (i) the aggregate balance on deposit in all such accounts does
not exceed $10,000 at any time (net of checks written but not yet cleared
against the balance on deposit in such accounts), (ii) the disbursements
of funds from each such account is used solely to satisfy the applicable Credit
Party’s payroll obligations and (iii) no funds are deposited in any such
account earlier than two (2) days prior to the distribution of funds from such
account to satisfy the applicable Credit Party’s payroll obligations; and


 


(D) the applicable Credit Parties may maintain
with First Source Bank the Disbursement Account # Midfirst Bank (Payroll) that
is not a part of the Cash Management Systems described in this Annex C
as long as (i) the aggregate balance on deposit in such account does not
exceed $10,000 at any time (net of checks written but not yet cleared against
the balance on deposit in such accounts), (ii) the disbursements of funds
from such account are used solely to satisfy the applicable Credit Party’s
payroll obligations and (iii) no funds are deposited in such account
earlier than two (2) days prior to the distribution of funds from such account
to satisfy the applicable Credit Party’s payroll obligations.


 


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ANNEX D (Section 2.1(a))


to


CREDIT
AGREEMENT


 


CHECKLIST


 


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


 


[See Attached Closing Checklist]


 


A - 1





















 


ANNEX E (Section 4.1(a))


to


CREDIT
AGREEMENT


 


FINANCIAL STATEMENTS AND
PROJECTIONS – REPORTING


 


Borrower shall deliver or cause to be delivered to
Agent or to Agent for distribution to the Lenders, as indicated, the following:


 


(a)           Monthly
Financials.  To Agent for
distribution to the Lenders, within forty-five (45) days after the end of each
Fiscal Month (other than a Fiscal Month that is the last month of a Fiscal
Quarter), financial information regarding Holdings, Borrower and its
Subsidiaries, certified by the Chief Financial Officer of Borrower, consisting
of consolidated and consolidating (i) unaudited balance sheets as of the close
of such Fiscal Month and the related statements of income and cash flows for
that portion of the Fiscal Year ending as of the close of such Fiscal Month;
(ii) unaudited statements of income and cash flows for such Fiscal Month,
setting forth in comparative form the figures for the corresponding period in
the prior year and the figures contained in the Projections for such Fiscal
Year, all prepared in accordance with GAAP (subject to normal year-end
adjustments); and (iii) a summary of the outstanding balance of all
Intercompany Notes as of the last day of that Fiscal Month.  Such financial information shall be
accompanied by an Officer Certificate of Borrower executed by the Chief
Financial Officer of Borrower, or another responsible officer of Borrower
having substantially the same authority and responsibility or otherwise
acceptable to Agent, certifying that (i) such financial information presents
fairly in accordance with GAAP (subject to normal year-end adjustments) the
financial position and results of operations of Holdings, Borrower and its
Subsidiaries, on a consolidated and consolidating basis, in each case as at the
end of such Fiscal Month and for that portion of the Fiscal Year then ended and
(ii) any other information presented is true, correct and complete in all
material respects and that there was no Default or Event of Default in
existence as of such time or, if a Default or Event of Default shall have
occurred and be continuing, describing the nature thereof and all efforts
undertaken to cure such Default or Event of Default.  In addition, Borrower shall deliver to Agent
and Lenders, within forty-five (45) days after the end of each Fiscal Month, a
management discussion and analysis of the financial performance of Holdings,
Borrower and its Subsidiaries prepared in accordance with Borrower’s past
practices.


 


(b)           Quarterly
Financials.  To Agent for
distribution to the Lenders, within forty-five (45) days after the end of each
Fiscal Quarter, consolidated and consolidating financial information regarding
Holdings, Borrower and its Subsidiaries, certified by the Chief Financial
Officer of Borrower, including (i) unaudited balance sheets as of the close of
such Fiscal Quarter and the related statements of income and cash flow for that
portion of the Fiscal Year ending as of the close of such Fiscal Quarter and
(ii) unaudited statements of income and cash flows for such Fiscal Quarter, in
each case setting forth in comparative form the figures for the corresponding
period in the prior year and the figures contained in the Projections for such
Fiscal Year, all prepared in accordance with GAAP (subject to normal year-end adjustments).  Such financial information shall be
accompanied by (A) a statement in reasonable detail in the form of Exhibit
E-1 (each, a “Compliance Certificate”) in respect of the Financial
Covenants that are tested on a quarterly basis and (B) an Officer Certificate
of Borrower executed by the Chief Financial Officer of Borrower, or another
responsible officer of Borrower having substantially


 


A - 1





















 


the
same authority and responsibility or otherwise acceptable to Agent, certifying
that (i) such financial information presents fairly in accordance with GAAP
(subject to normal year-end adjustments) the financial position, results of
operations and statements of cash flows of Holdings, Borrower and its Subsidiaries,
on both a consolidated and consolidating basis, as at the end of such Fiscal
Quarter and for that portion of the Fiscal Year then ended, (ii) any other
information presented is true, correct and complete in all material respects
and that there was no Default or Event of Default in existence as of such time
or, if a Default or Event of Default has occurred and is continuing, describing
the nature thereof and all efforts undertaken to cure such Default or Event of
Default.


 


(c)           Operating
Plan.  To Agent for distribution to
the Lenders, as soon as available, but not later than thirty (30) days after
the end of each Fiscal Year, an annual operating plan for Holdings and
Borrower, approved by the Board of Directors of Borrower, for the following
Fiscal Year, which (i) includes a statement of all of the material assumptions
on which such plan is based, (ii) includes monthly balance sheets and a
quarterly budget for the following year and (iii) integrates sales, gross
profits, operating expenses, operating profit, cash flow projections and
Borrowing Availability projections, all prepared on the same basis and in
similar detail as that on which operating results are reported (and in the case
of cash flow projections, representing management’s good faith estimates of
future financial performance based on historical performance), and including
plans for personnel, Capital Expenditures and facilities.


 


(d)           Annual
Audited Financials. To Agent for distribution to the Lenders, within ninety
(90) days after the end of each Fiscal Year, or on a later date on which filing
thereof is required with the Securities and Exchange Commission, audited
Financial Statements for Holdings, Borrower and its Subsidiaries on a
consolidated and (unaudited) consolidating basis, consisting of balance sheets
and statements of income and retained earnings and cash flows, setting forth in
comparative form in each case the figures for the previous Fiscal Year, which
Financial Statements shall be prepared in accordance with GAAP and certified without
qualification, by an independent certified public accounting firm of national
standing or otherwise acceptable to Agent. 
Such Financial Statements shall be accompanied by (i) the Compliance
Certificate showing the calculations used in determining compliance with the
Financial Covenants, (ii) a report from such accounting firm to the effect
that, in connection with their audit examination, nothing has come to their
attention to cause them to believe that a Default or Event of Default has
occurred with respect to the Financial Covenants (or specifying those Defaults
and Events of Default that they became aware of), it being understood that such
audit examination extended only to accounting matters and that no special
investigation was made with respect to the existence of Defaults or Events of
Default, (iii) the annual letters to such accountants in connection with their
audit examination detailing contingent liabilities and material litigation
matters, and (iv) an Officer Certificate of Borrower executed by the Chief
Executive Officer or Chief Financial Officer of Borrower, or another
responsible officer of Borrower having substantially the same authority and
responsibility or otherwise acceptable to Agent, certifying that all such
Financial Statements present fairly in accordance with GAAP the financial
position, results of operations and statements of cash flows of Holdings,
Borrower and its Subsidiaries on a consolidated and consolidating basis, as at
the end of such Fiscal Year and for the period then ended, and that there was
no Default or Event of Default in existence as of such time or, if a Default or
Event of Default has occurred and is continuing, describing the nature thereof
and all efforts undertaken to cure such Default or Event of Default.


 


A - 2





















 


(e)           Management
Letters.  To Agent for distribution
to the Lenders, within five (5) Business Days after receipt thereof by any
Credit Party, copies of all management letters, exception reports or similar
letters or reports received by such Credit Party from its independent certified
public accountants.


 


(f)            Default
Notices.  To Agent for distribution
to the Lenders, as soon as practicable, and in any event within five (5)
Business Days after an executive officer of Borrower has actual knowledge of
the existence of any Default, Event of Default or other event that has had a
Material Adverse Effect, telephonic or telecopied notice specifying the nature
of such Default or Event of Default or other event, including the anticipated
effect thereof, which notice, if given telephonically, shall be promptly
confirmed in writing on the next Business Day.


 


(g)           SEC
Filings and Press Releases.  To Agent
for distribution to the Lenders, promptly upon their becoming available, copies
of:  (i) all Financial Statements,
reports, notices and proxy statements made publicly available by any Credit
Party to its security holders; (ii) all regular and periodic reports and all
registration statements and prospectuses, if any, filed by any Credit Party
with any securities exchange or with the Securities and Exchange Commission or
any governmental or private regulatory authority; and (iii) all press releases
and other statements made available by any Credit Party to the public concerning
material changes or developments in the business of any such Person.


 


(h)           Subordinated
Debt and Equity Notices.  To Agent
for distribution to the Lenders, as soon as practicable, copies of all material
written notices given or received by any Credit Party with respect to any
Subordinated Debt or Stock of such Person, and, within three (3) Business Days
after any Credit Party obtains knowledge of any matured or unmatured event of
default with respect to any Subordinated Debt, notice of such event of default.


 


(i)            Supplemental
Schedules.  To Agent, supplemental
disclosures, if any, required by Section 5.6.


 


(j)            Litigation.  To Agent for distribution to the Lenders in
writing, promptly upon learning thereof, notice of any Litigation commenced or
threatened against any Credit Party that (i) seeks damages in excess of
$250,000, (ii) seeks injunctive relief affecting the business of any Credit
Party in any material respect, (iii) is asserted or instituted against any
Plan, its fiduciaries or its assets or against any Credit Party or ERISA
Affiliate in connection with any Plan, (iv) alleges criminal misconduct by any
Credit Party, (v) alleges the violation of any law regarding, or seeks remedies
in connection with, any Environmental Liabilities; or (vi) involves any product
recall.


 


(k)           Insurance
Notices.  To Agent, disclosure of
losses or casualties required by Section 5.4.


 


(l)            Lease
Default Notices.  To Agent, within
five (5) Business Days after receipt thereof, copies of (i) any and all default
notices received under or with respect to any leased location or public
warehouse where Collateral is located, and (ii) such other notices or documents
as Agent may reasonably request.


 


A - 3





















 


(m)          Lease
Amendments.  To Agent, promptly after
receipt thereof, copies of all material amendments to real estate leases.


 


(n)           Certain
Bank Accounts.  To Agent, promptly
upon request of Agent, copies of all bank statements provided to the applicable
Credit Parties relating to each of the bank accounts referenced in the paragraph
(i) of Annex C and, upon reasonable request of Agent from time to
time, such other information relating to such accounts.


 


(o)           Other
Documents.  To Agent for distribution
to the Lenders, such other financial and other information respecting any
Credit Party’s business or financial condition as Agent shall, from time to
time, reasonably request.


 


A - 4





















 


ANNEX F (Section 4.1(b))


to


CREDIT
AGREEMENT


 


COLLATERAL
REPORTS


 


Borrower shall deliver or cause to be delivered the
following:


 


(a)           To
Agent, within ten (10) Business Days after the end of each Fiscal Month
(together with a copy of all or any part of the following reports requested by
any Lender in writing after the Original Closing Date), each of the following
reports, each of which shall be prepared by the Borrower as of the last day of
the immediately preceding Fiscal Month:


 


(i)            a Borrowing Base Certificate with respect to Borrower and
Secured Guarantors, accompanied by such supporting detail and documentation as
shall be requested by Agent in its reasonable discretion;


 


(ii)           with respect to Borrower and Secured Guarantors, a summary
of Inventory by location and type with a supporting perpetual Inventory report,
in each case accompanied by such supporting detail and documentation as shall
be requested by Agent in its reasonable discretion; and


 


(iii)          with respect to Borrower and Secured Guarantors, a monthly
trial balance showing Accounts outstanding aged from invoice date as
follows:  1 to 30 days, 31 to 60 days, 61
to 90 days and 91 days or more, accompanied by such supporting detail and
documentation as shall be requested by Agent in its reasonable discretion.


 


(b)           As
long as Borrowing Availability is less than $10,000,000 at the time of the
delivery of the Borrowing Base Certificates in accordance with clause (a)
above, to Agent and each Lender, at the time of such delivery, each of the
following reports, each of which shall be prepared by Borrower as of the last
day of the immediately preceding Fiscal Month:


 


(i)            with respect to Borrower and Secured Guarantors, a
summary of Inventory by type with a supporting perpetual Inventory report;


 


(ii)           with respect to Borrower and Secured Guarantors, a monthly
trial balance showing Accounts outstanding aged from invoice date as
follows:  1 to 30 days, 31 to 60 days, 61
to 90 days and 91 days or more;


 


 (iii)         with
respect to Borrower and Secured Guarantors, agings of accounts payable (and
including information indicating the amounts then owing to owners and lessors
of leased premises, warehouses, processors and other third parties from time to
time in possession of any Collateral);


 


(iv)          schedules in a form satisfactory to Agent reflecting sales
made, credits issued, cash or other items of payment received and other data
relating to the collection of Accounts; and


 


A - 1





















 


(v)           the percentages of all Eligible Accounts owing to each of
the five (5) largest Account Debtors and their Affiliates (excluding the United
States government as Account Debtor).


 


(c)           To
Agent, at the time of delivery of each of the monthly Financial Statements
delivered pursuant to Annex E:


 


(i)            a reconciliation of the most recent Borrowing Base,
general ledger and month-end Inventory reports of Borrower to Borrower’s
general ledger and monthly Financial Statements delivered pursuant to such Annex
E, in each case accompanied by such supporting detail and documentation as
shall be requested by Agent in its reasonable discretion;


 


(ii)           a reconciliation of the perpetual inventory by location to
Borrower’s most recent Borrowing Base Certificate, general ledger and monthly
Financial Statements delivered pursuant to Annex E, in each case
accompanied by such supporting detail and documentation as shall be requested
by Agent in its reasonable discretion;


 


(iii)          an aging of accounts payable and a reconciliation of that
accounts payable aging to Borrower’s general ledger and monthly Financial
Statements delivered pursuant to Annex E, in each case accompanied
by such supporting detail and documentation as shall be requested by Agent in
its reasonable discretion;


 


(iv)          a reconciliation of the outstanding Loans as set forth in
the monthly Loan Account statement provided by Agent to Borrower’s general
ledger and monthly Financial Statements delivered pursuant to Annex E,
in each case accompanied by such supporting detail and documentation as shall
be requested by Agent in its reasonable discretion;


 


(d)           To
Agent, at the time of delivery of each of the quarterly or annual Financial
Statements delivered pursuant to Annex E, (i) a listing of government
contracts of Borrower subject to the Federal Assignment of Claims Act of 1940;
and (ii) a list of any applications for the registration of any Patent,
Trademark or Copyright filed by any Credit Party with the United States Patent
and Trademark Office, the United States Copyright Office or any similar office
or agency in the prior Fiscal Quarter;


 


(e)           Borrower,
at its own expense, shall deliver to Agent and Lenders the results of each
physical verification, if any, that Borrower or any of its Subsidiaries may in
their discretion have made, or caused any other Person to have made on their
behalf, of all or any portion of their Inventory (and, if a Default or an Event
of Default has occurred and be continuing, Borrower shall, upon the request of
Agent, conduct, and deliver the results of, such physical verifications as
Agent may require);


 


(f)            Borrower,
at its own expense, shall deliver to Agent and Lenders such appraisals of its
assets as Agent may request at any time after the occurrence and during the
continuance of a Default or an Event of Default, such appraisals to be
conducted by an appraiser, and in form and substance reasonably satisfactory to
Agent;


 


A - 2





















 


(g)           Not
later than the tenth Business Day of (i) each Fiscal Quarter or
(ii) if an Activation Trigger Event has occurred and remains in effect,
each Fiscal Month (or more frequently as reasonably requested by the Agent), a
schedule of all Hedging Agreements, including notional amounts and a
statement setting forth in reasonable detail the amount of the amount of the
Hedging Termination Value Borrower and/or Secured Guarantors owe counterparties
to Specified Hedging Agreements based on a mark-to-market analysis and with due
regard to recent market volatility as of the last Business Day of the previous
Fiscal Quarter or Fiscal Month, as applicable (or if not available, the nearest
prior Business Day for which such evaluation is available); and


 


(h)           Such
other reports, statements and reconciliations with respect to the Borrowing
Base or Collateral or Obligations of any or all Credit Parties as Agent shall
from time to time request in its reasonable discretion, including additions and
reductions of Accounts on an intra-month basis; and


 


(i)            Borrower
shall cause to be delivered to Agent all financial, compliance, collateral and
other reports and notices required to be furnished to any lender under the
Schaublin Financing as and when such items are delivered to such lender(s).


 


A - 3





















 


ANNEX G (Section 6.10)


to


CREDIT
AGREEMENT


 


FINANCIAL
COVENANTS


 


Borrower shall not breach or fail to comply with,
and shall not permit Holdings to breach or fail to comply with, any of the
following financial covenant, each of which shall be calculated in accordance
with GAAP consistently applied:


 


(a)           Fixed
Charge Coverage Ratio.  Holdings,
Borrower and its Subsidiaries on a consolidated basis shall have at the end of
each Fiscal Quarter set forth below, a Fixed Charge Coverage Ratio for the
12-month period then ended of not less than the following: 


 


	
  1.15 to 1.00

  	
  for the Fiscal Quarter ending

  	
  September 30, 2004;

  
	
  1.15 to 1.00

  	
  for the Fiscal Quarter ending

  	
  December 31, 2004;

  
	
  1.20 to 1.00 for each Fiscal Quarter ending thereafter.

  



 


(b)           Senior
Leverage Ratio.  Holdings, Borrower and its Subsidiaries on a
consolidated basis shall have, at the end of each Fiscal Quarter set forth
below, a Senior Leverage Ratio as of the last day of such Fiscal Quarter and
for the 12-month period then ended of not more than the following:


 


	
  3.80 to 1.00

  	
  for the Fiscal Quarter ending

  	
  September 30, 2004;

  
	
  3.80 to 1.00

  	
  for the Fiscal Quarter ending

  	
  December 31, 2004;

  
	
  3.60 to 1.00

  	
  for the Fiscal Quarter ending

  	
  March 31, 2005;

  
	
  3.60 to 1.00

  	
  for the Fiscal Quarter ending

  	
  June 30, 2005;

  
	
  3.55 to 1.00

  	
  for the Fiscal Quarter ending

  	
  September 30, 2005;

  
	
  3.45 to 1.00

  	
  for the Fiscal Quarter ending

  	
  December 31, 2005;

  
	
  3.20 to 1.00

  	
  for the Fiscal Quarter ending

  	
  March 31, 2006;

  
	
  3.10 to 1.00

  	
  for the Fiscal Quarter ending

  	
  June 30, 2006;

  
	
  3.10 to 1.00

  	
  for the Fiscal Quarter ending

  	
  September 30, 2006;

  
	
  3.05 to 1.00

  	
  for the Fiscal Quarter ending

  	
  December 31, 2006;

  
	
  3.05 to 1.00

  	
  for the Fiscal Quarter ending

  	
  March 31, 2007;

  
	
  3.00 to 1.00

  	
  for the Fiscal Quarter ending

  	
  June 30, 2007;

  
	
  2.90 to 1.00

  	
  for the Fiscal Quarter ending

  	
  September 30, 2007;

  
	
  2.85 to 1.00

  	
  for the Fiscal Quarter ending

  	
  December 31, 2007;

  
	
  2.80 to 1.00

  	
  for the Fiscal Quarter ending

  	
  March 31, 2008;

  
	
  2.75 to 1.00 for each Fiscal Quarter ending thereafter.

  



 


(c)           SCIL
Leverage Ratio.  Holdings, Borrower and its Subsidiaries on a
consolidated basis shall have, at the end of each Fiscal Quarter set forth
below, a SCIL Leverage


 


A - 1





















 


Ratio
as of the last day of such Fiscal Quarter and for the 12-month period then
ended of not more than the following:


 


	
  5.05 to 1.00

  	
  for the Fiscal Quarter ending

  	
  September 30, 2004;

  
	
  5.05 to 1.00

  	
  for the Fiscal Quarter ending

  	
  December 31, 2004;

  
	
  4.80 to 1.00

  	
  for the Fiscal Quarter ending

  	
  March 31, 2005;

  
	
  4.80 to 1.00

  	
  for the Fiscal Quarter ending

  	
  June 30, 2005;

  
	
  4.75 to 1.00

  	
  for the Fiscal Quarter ending

  	
  September 30, 2005;

  
	
  4.60 to 1.00

  	
  for the Fiscal Quarter ending

  	
  December 31, 2005;

  
	
  4.30 to 1.00

  	
  for the Fiscal Quarter ending

  	
  March 31, 2006;

  
	
  4.20 to 1.00

  	
  for the Fiscal Quarter ending

  	
  June 30, 2006;

  
	
  4.15 to 1.00

  	
  for the Fiscal Quarter ending

  	
  September 30, 2006;

  
	
  4.10 to 1.00

  	
  for the Fiscal Quarter ending

  	
  December 31, 2006;

  
	
  4.10 to 1.00

  	
  for the Fiscal Quarter ending

  	
  March 31, 2007;

  
	
  4.05 to 1.00

  	
  for the Fiscal Quarter ending

  	
  June 30, 2007;

  
	
  3.95 to 1.00

  	
  for the Fiscal Quarter ending

  	
  September 30, 2007;

  
	
  3.85 to 1.00

  	
  for the Fiscal Quarter ending

  	
  December 31, 2007;

  
	
  3.80 to 1.00

  	
  for the Fiscal Quarter ending

  	
  March 31, 2008;

  
	
  3.75 to 1.00 for each Fiscal Quarter ending thereafter.

  



 


provided, that solely for the purposes of paragraphs (b) and (c)
of this Annex G, any net proceeds received from issuance of Stock to
Michael J. Hartnett, Whitney & Co. or any Related Stockholder Party or
contribution by Michael J. Hartnett, Whitney & Co. or any Related
Stockholder Party to capital that are used to repay the Term Loan subsequent to
the end of any Fiscal Quarter, but prior to the date on which the Compliance
Certificate is required to be delivered pursuant to subsection Annex E
with respect to such Fiscal Quarter, the Term Loan shall be deemed to have been
repaid as of the last day of the relevant period for the purpose of calculating
SCIL Leverage Ratio or Senior Leverage Ratio related thereto and if, after
giving effect thereto Holdings, Borrower and its Subsidiaries shall be in
compliance with paragraphs (b) and (c) of this Annex G,
Holdings, Borrower and its Subsidiaries shall be deemed to have satisfied the
requirements hereof as of the relevant date of determination with the same
effect as through no failure to comply herewith at such date had occurred, and
the applicable breach or default hereof which had occurred shall be deemed
cured for all purposes of the Agreement; provided,
however, that notwithstanding anything herein to the contrary, in no
event shall (i) Holdings, Borrower or any of its Subsidiaries be entitled
to avail itself of the preceding proviso more than once during the term of the
Agreement and (ii) the aggregate amount of the net proceeds received from
Stock issuances to the Permitted Stockholders and contribution by the Permitted
Stockholders to capital that are used to repay the Term Loan described in the
preceding proviso exceed $3,000,000.


 


(d)           Maximum
Capital Expenditures.  Borrower and
its Subsidiaries on a consolidated basis shall not make Capital Expenditures
during any Fiscal Year that exceed $10,000,000 in the aggregate.


 


Unless otherwise specifically provided herein, any
accounting term used in the Agreement shall have the meaning customarily given
such term in accordance with GAAP, and all financial computations hereunder
shall be computed in accordance with GAAP consistently


 


A - 2





















 


applied.  That certain items or computations are
explicitly modified by the phrase “in accordance with GAAP” shall in no way be
construed to limit the foregoing.  If any
“Accounting Changes” (as defined below) occur and such changes result in a
change in the calculation of the financial covenants, standards or terms used
in the Agreement or any other Loan Document, then Borrower, Agent and Lenders
agree to enter into negotiations in order to amend such provisions of the
Agreement so as to equitably reflect such Accounting Changes with the desired
result that the criteria for evaluating the financial condition of Holdings,
Borrower and its Subsidiaries shall be the same after such Accounting Changes
as if such Accounting Changes had not been made; provided, however,
that the agreement of Requisite Lenders to any required amendments of such
provisions shall be sufficient to bind all Lenders.  If Agent, Borrower and Requisite Lenders
agree upon the required amendments, then after appropriate amendments have been
executed and the underlying Accounting Change with respect thereto has been
implemented, any reference to GAAP contained in the Agreement or in any other
Loan Document shall, only to the extent of such Accounting Change, refer to
GAAP, consistently applied after giving effect to the implementation of such
Accounting Change.  Until such time as
Agent, Borrower and Requisite Lenders agree upon such amendments, all calculations
of financial covenants and other standards and terms in accordance with the
Agreement and the other Loan Documents shall be made without regard to the
underlying Accounting Change, but all Financial Statements delivered pursuant
to this Agreement shall be prepared and delivered in accordance with GAAP,
consistently applied after giving effect to such Accounting Changes.  For purposes of Section 8.1, a
breach of a Financial Covenant contained in this Annex G shall be
deemed to have occurred as of any date of determination by Agent or as of the
last day of any specified measurement period, regardless of when the Financial
Statements reflecting such breach are delivered to Agent.  “Accounting Changes” means (i) changes
in accounting principles required by the promulgation of any rule, regulation,
pronouncement or opinion by the Financial Accounting Standards Board of the
American Institute of Certified Public Accountants (or successor thereto or any
agency with similar functions), (ii) changes in accounting principles concurred
in by Borrower’s certified public accountants; (iii) purchase accounting
adjustments under A.P.B. 16 or 17 and EITF 88-16, and the application of the
accounting principles set forth in FASB 109, including the establishment of
reserves pursuant thereto and any subsequent reversal (in whole or in part) of
such reserves; and (iv) the reversal of any reserves established as a
result of purchase accounting adjustments. 
All such adjustments resulting from expenditures made subsequent to the
Original Closing Date (including capitalization of costs and expenses or
payment of pre-Original Closing Date liabilities) shall be treated as expenses
in the period the expenditures are made and deducted as part of the calculation
of EBITDA in such period.


 


A - 3





















 


ANNEX H (Section 9.9(a))


to


CREDIT
AGREEMENT


 


LENDERS’
WIRE TRANSFER INFORMATION


 


	
  Agent

  	
   

  	
   

  
	
  Name:

  	
   

  	
  General Electric Capital Corporation

  
	
  Bank:

  	
   

  	
  DeutscheBank Trust Company Americas

  
	
   

  	
   

  	
  New York, New York

  
	
  ABA #:

  	
   

  	
  021001033

  
	
  Account #:

  	
   

  	
  50232854

  
	
  Account Name:

  	
   

  	
  GECC/CAF Depository

  
	
  Reference:

  	
   

  	
  CFN 4731

  
	
   

  	
   

  	
   

  
	
  LaSalle

  	
   

  	
   

  
	
  Name:

  	
   

  	
  LaSalle Bank National Association

  
	
  Bank:

  	
   

  	
  LaSalle Bank National Association

  
	
   

  	
   

  	
  Chicago, Illinois

  
	
  ABA #:

  	
   

  	
  071000505

  
	
  Account #:

  	
   

  	
  1378018-7300

  
	
  Account Name:

  	
   

  	
  LaSalle Bank National Association

  
	
  Reference:

  	
   

  	
  Roller Bearing Co of America

  
	
   

  	
   

  	
   

  
	
  Oppenheimer

  	
   

  	
   

  
	
  Name:

  	
   

  	
  Oppenheimer Senior Floating Rate Fund

  
	
  Bank:

  	
   

  	
  DeutscheBank Trust Company Americas

  
	
   

  	
   

  	
  New York, New York

  
	
  ABA #:

  	
   

  	
  021-001-033

  
	
  Account #:

  	
   

  	
  01-419-663

  
	
  Reference:

  	
   

  	
  Opp. SFRF 33982

  
	
   

  	
   

  	
   

  
	
  Amalgamated

  	
   

  	
   

  
	
  Name:

  	
   

  	
  Amalgamated Bank

  
	
  Bank:

  	
   

  	
  Amalgamated Bank

  
	
   

  	
   

  	
  New York, New York

  
	
  ABA #:

  	
   

  	
  026003379

  
	
  Account #:

  	
   

  	
  133426227

  
	
  Account Name:

  	
   

  	
  Roller Bearing Company of America, Inc.

  
	
  Reference:

  	
   

  	
  f/b/o “Roller Bearing”

  
	
   

  	
   

  	
   

  
	
  Wachovia

  	
   

  	
   

  
	
  Name:

  	
   

  	
  Wachovia Bank National Association

  
	
  Bank:

  	
   

  	
  Wachovia Bank National Association

  
	
   

  	
   

  	
  Charlotte, North Carolina

  
	
  ABA #:

  	
   

  	
  053000219

  



 


A - 1





















 


	
  Account #:

  	
   

  	
  04659360006116

  
	
  Account Name:

  	
   

  	
  First Union/Charlotte

  
	
  Reference:

  	
   

  	
  Credit Derivatives - CIB Group

  



 


A - 2





















 


ANNEX I (Section 11.10)


to


CREDIT
AGREEMENT


 


NOTICE
ADDRESSES


 


	
  (A)

  	
   

  	
  If to Agent or GE Capital, at

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  General Electric Capital Corporation

  
	
   

  	
   

  	
  100 California Street, 10th Floor

  
	
   

  	
   

  	
  San Francisco, California 94111

  
	
   

  	
   

  	
  Attention:

  	
  Daniel Shapiro and Neel Morey

  
	
   

  	
   

  	
  Telecopier No.: (415) 277-7443

  
	
   

  	
   

  	
  Telephone No.: (415) 277-7400

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with copies to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  General Electric Capital Corporation

  
	
   

  	
   

  	
  500 W. Monroe Street, 16th Floor

  
	
   

  	
   

  	
  Chicago, Illinois 60661

  
	
   

  	
   

  	
  Attention:

  	
  Andrew Packer

  
	
   

  	
   

  	
  Telecopier No.: (312) 441-6876

  
	
   

  	
   

  	
  Telephone No.: (312) 441-7244

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Latham & Watkins

  
	
   

  	
   

  	
  233 S. Wacker Drive, Suite 5800

  
	
   

  	
   

  	
  Chicago, Illinois 60606

  
	
   

  	
   

  	
  Attention: David G. Crumbaugh

  
	
   

  	
   

  	
  Telecopier No.: (312) 993-9767

  
	
   

  	
   

  	
  Telephone No.: (312) 876-7700

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  General Electric Capital Corporation

  
	
   

  	
   

  	
  201 Merritt 7

  
	
   

  	
   

  	
  6th Floor

  
	
   

  	
   

  	
  Norwalk, CT 06856-5201

  
	
   

  	
   

  	
  Attention: Corporate Counsel-Commercial Finance – GE Global Sponsor
  Finance

  
	
   

  	
   

  	
  Telecopier No.: (203) 956-4216

  
	
   

  	
   

  	
  Telephone No.: (203) 956-4000

  



 


A - 1





















 


	
   

  	
   

  	
  (B)           If to Borrower, at

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Roller Bearing Company of America, Inc.

  
	
   

  	
   

  	
  60 Round Hill Road

  
	
   

  	
   

  	
  P. O. Box 430

  
	
   

  	
   

  	
  Fairfield, Connecticut 06430-0430

  
	
   

  	
   

  	
  Attention: Chief Financial Officer

  
	
   

  	
   

  	
  Telecopier No.: (203) 256-0775

  
	
   

  	
   

  	
  Telephone No.: (203) 255-1511

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With copies to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Kirkland & Ellis LLP

  
	
   

  	
   

  	
  153 East 53rd Street

  
	
   

  	
   

  	
  New York, NY 10022

  
	
   

  	
   

  	
  Attention: Frederick Tanne and Armand A. Della Monica

  
	
   

  	
   

  	
  Telecopier No.: (212) 446-4900

  
	
   

  	
   

  	
  Telephone No.: (212) 446-4800

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (C)           If to Lenders, at

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LaSalle Bank National Association

  
	
   

  	
   

  	
  135 S. LaSalle Street

  
	
   

  	
   

  	
  Chicago, Illinois 60603

  
	
   

  	
   

  	
  Attention: Sean P. Silver

  
	
   

  	
   

  	
  Telecopier No.: (312) 904-9046

  
	
   

  	
   

  	
  Telephone No.: (312) 904-9026

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Oppenheimer Funds, Inc.

  
	
   

  	
   

  	
  6803 S. Tucson Way

  
	
   

  	
   

  	
  Englewood, Colorado 80112

  
	
   

  	
   

  	
  Attention: Bill Campbell

  
	
   

  	
   

  	
  Telecopier No.: (303) 768-4383

  
	
   

  	
   

  	
  Telephone No.: (303) 768-2806

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Amalgamated Bank

  
	
   

  	
   

  	
  15 Union Square

  
	
   

  	
   

  	
  New York, New York 10003-3378

  
	
   

  	
   

  	
  Attention: J Bruce Meredith

  
	
   

  	
   

  	
  Telecopier No.: (212) 462-3713

  
	
   

  	
   

  	
  Telephone No.: (212) 462-3756

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  



 


A - 2





















 


	
   

  	
   

  	
  Wachovia Bank National Association

  
	
   

  	
   

  	
  201 South College Street

  
	
   

  	
   

  	
  Charlotte, North Carolina 28288

  
	
   

  	
   

  	
  Attention: Ken Gacevich

  
	
   

  	
   

  	
  Telecopier No.: (704) 715-0067

  
	
   

  	
   

  	
  Telephone No.: (704) 715-7083

  



 


A - 3





















 


ANNEX J (from Annex A - Commitments definition)


to


CREDIT
AGREEMENT


 


PRO RATA
SHARE


 


	
  Commitments

  	
   

  	
  Lender(s)

  	
   

  	
  Pro Rata
  Share

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Revolving Loan Commitment (including a Swing Line Commitment of
  $5,000,000):

  $37,500,000

  	
   

  	
  General Electric Capital
  Corporation

  	
   

  	
  68.1818% (Revolving Loan
  Pro Rata Share)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Term Loan Commitment:

  $90,000,000

  	
   

  	
  General Electric Capital
  Corporation

  	
   

  	
  81.8182% (Term Loan Pro
  Rata Share)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Revolving Loan Commitment:

  $12,500,000

  	
   

  	
  LaSalle Bank National
  Association

  	
   

  	
  22.7273% (Revolving Loan
  Pro Rata Share)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Term Loan Commitment:

  $10,000,000

  	
   

  	
  Oppenheimer Senior
  Floating Rate Fund

  	
   

  	
  9.0909% (Term Loan Pro
  Rata Share)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Revolving Loan Commitment:

  $5,000,000

  	
   

  	
  Amalgamated Bank

  	
   

  	
  9.0909% (Revolving Loan
  Pro Rata Share)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Term Loan Commitment:

  $5,000,000

  	
   

  	
  Amalgamated Bank

  	
   

  	
  4.5455% (Term Loan Pro
  Rata Share)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Term Loan Commitment:

  $5,000,000

  	
   

  	
  Wachovia Bank National
  Association

  	
   

  	
  4.5455% (Term Loan Pro
  Rata Share)

  



 


A - 1





















 


EXHIBIT ECF to


 


CREDIT
AGREEMENT


 


Roller Bearing Company of America


 


Excess Cash Flow Recapture Calculation for Fiscal Year
December 31, 200   


 


	
   

  	
   

  	
   

  	
  FY200  

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Consolidated Net Income(1)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (a)

  	
  Plus:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Depreciation(2)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Amortization(2)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Interest Expense(2)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  the amount of any reduction to the consolidated net income of
  Holdings as the result of the Restricted Payment described and permitted
  pursuant to Section 6.14(a)(E){Whitney & Co. Management Fees}
  or Section 6.14(b)(v){Holdco Operating Expenses}

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Subtotal

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
  Change in Working Capital(3)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (c)

  	
  Less:  Cash Capital
  Expenditures

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (d)

  	
  Less:  

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Interest Expense(4)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Scheduled Principal Payments(5)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


A - 2





















 


	
   

  	
  Plus:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (e)

  	
       Extraordinary Loss (or
  minus
      Extraordinary Gain)(6)

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
       Cost of Related
  Transactions(7)

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (f)

  	
  Plus:  (non-cash taxes deducted
  from Consolidated Net Income)

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Excess Cash Flow

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Required Prepayment (%)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Required Prepayment ($)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 










	
   

  	
  (1)  This Excess Cash Flow
  calculation shall pertain to the consolidated net income of Holdings and its
  Subsidiaries for the Fiscal Year ending as of the date set forth above.  All financial terms used in this Exhibit
  shall be deemed to relate to Holdings and its Subsidiaries on a consolidated
  basis for the Fiscal Year ended as of the date set forth above.

   

  
	
   

  	
  (2)  Exclude portion of
  depreciation, amortization and/or Interest Expense not included in
  consolidated net income.

   

  
	
   

  	
  (3) Plus decreases or minus increases in Working Capital.

   

  
	
   

  	
  (4)  Include paid and accrued
  interest.  If included in Interest
  Expense, exclude any original issue discount, interest paid in kind and
  amortized debt discount.

   

  
	
   

  	
  (5)  Principal payments include
  both those paid and payable on Funded Debt (except in the case of the
  Revolving Loan, principal payments that are not accompanied by a permanent
  reduction in the Revolving Loan Commitments).

   

  
	
   

  	
  (6)  Cash items not included in
  consolidated net income and/or non-cash items included in consolidated net
  income.

   

  
	
   

  	
  (7)  Cost of fees incurred in
  connection with the Related Transaction to the extent not included in
  consolidated net income.

  



 


A - 3





















 


EXHIBIT PA to


 


CREDIT
AGREEMENT


 


	
   

  	
   

  	
  Fiscal Year 2004

  	
   

  
	
  In
  Dollars

  	
   

  	
  Q1

  	
   

  	
  Q2

  	
   

  	
  Q3

  	
   

  	
  Q4

  	
   

  	
  Total

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Bremen

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Plant Relocation/Mfg.
  process redesign

  	
   

  	
  186,000

  	
   

  	
  213,000

  	
   

  	
  210,000

  	
   

  	
  190,000

  	
   

  	
  799,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tyson

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Manufacturing Process
  Re-design

  	
   

  	
  253,000

  	
   

  	
  221,000

  	
   

  	
  201,000

  	
   

  	
  187,000

  	
   

  	
  862,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Mexico

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Mexico stat-up transfer
  pricing

  	
   

  	
  223,000

  	
   

  	
  222,000

  	
   

  	
  222,000

  	
   

  	
  —

  	
   

  	
  667,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  622,000

  	
   

  	
  656,000

  	
   

  	
  633,000

  	
   

  	
  377,000

  	
   

  	
  2,328,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  API Pro Forma EBITDA

  	
   

  	
  1,586,000

  	
   

  	
  1,586,000

  	
   

  	
  1,586,000

  	
   

  	
  —

  	
   

  	
  4,757,000

  	
   

  



 





















 


DISCLOSURE SCHEDULE 6.12


to


CREDIT
AGREEMENT


 


SALE-LEASEBACK
REAL ESTATE


 


(1)           NICE Ball Bearings Facility


2060
Detwiler Road


Kulpsville,
Montgomery County, PA


 


(2)           Transport Dynamics


3131
W. Segerstrom Avenue


Santa
Ana, CA  92704


 


(3)           Roller Bearing Company of America


Corporate
Headquarters


60
Round Hill Road


Fairfield,
CT  06824