Exhibit
10.29


 




 





 


SCIL 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 SCIL Lenders,


 


GENERAL ELECTRIC
CAPITAL CORPORATION,


 


as SCIL Agent and
SCIL Lender,


 


and


 


GECC CAPITAL
MARKETS GROUP, INC.


 


as Lead Arranger


 




 





 





















 


TABLE
OF CONTENTS


 


	
  1.

  	
  AMOUNT AND TERMS OF
  CREDIT

  	
   

  
	
   

  	
  1.2

  	
  [Intentionally Omitted]

  	
   

  
	
   

  	
  1.3

  	
  Prepayments

  	
   

  
	
   

  	
  1.4

  	
  Use of Proceeds

  	
   

  
	
   

  	
  1.5

  	
  Interest

  	
   

  
	
   

  	
  1.6

  	
  [Intentionally Omitted]

  	
   

  
	
   

  	
  1.7

  	
  [Intentionally Omitted]

  	
   

  
	
   

  	
  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

  	
  SCIL Loan 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

  	
   

  
	
   

  	
  3.17

  	
  [Intentionally Omitted]

  	
   

  
	
   

  	
  3.18

  	
  Insurance

  	
   

  
	
   

  	
  3.19

  	
  Deposit and Disbursement Accounts

  	
   

  
	
   

  	
  3.20

  	
  Government Contracts

  	
   

  



 


i





















 


	
   

  	
  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

  	
   

  
	
   

  	
  6.16

  	
  No Impairment
  of Intercompany Transfers

  	
   

  
	
   

  	
  6.17

  	
  No Speculative Transactions

  	
   

  
	
   

  	
  6.18

  	
  Changes
  Relating to Subordinated Debt; Material Contracts

  	
   

  
	
   

  	
  6.19

  	
  Holdings

  	
   

  



 


ii





















 


	
  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 SCIL AGENT

  	
   

  
	
   

  	
  9.1

  	
  Assignment and
  Participations

  	
   

  
	
   

  	
  9.2

  	
  Appointment of SCIL Agent

  	
   

  
	
   

  	
  9.3

  	
  SCIL Agent’s
  Reliance, Etc.

  	
   

  
	
   

  	
  9.4

  	
  GE Capital and Affiliates

  	
   

  
	
   

  	
  9.5

  	
  SCIL Lender Credit Decision

  	
   

  
	
   

  	
  9.6

  	
  Indemnification

  	
   

  
	
   

  	
  9.7

  	
  Successor SCIL Agent

  	
   

  
	
   

  	
  9.8

  	
  Setoff and Sharing of
  Payments

  	
   

  
	
   

  	
  9.9

  	
  Payments;
  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

  	
   

  
	
   

  	
  11.16

  	
  Advice of Counsel

  	
   

  
	
   

  	
  11.17

  	
  No Strict Construction

  	
   

  



 


iii





















 


INDEX
OF APPENDICES


 


	
  Annex
  A (Recitals)

  	
   

  	
  -

  	
   

  	
  Definitions

  
	
  Annex
  B (Section 1.8)

  	
   

  	
  -

  	
   

  	
  Cash
  Management System

  
	
  Annex C (Section 2.1(a))

  	
   

  	
  -

  	
   

  	
  Closing Checklist

  
	
  Annex D (Section 4.1(a))

  	
   

  	
  -

  	
   

  	
  Financial Statements and
  Projections — Reporting

  
	
  Annex E (Section 6.10)

  	
   

  	
  -

  	
   

  	
  Financial Covenants

  
	
  Annex F (Section 9.9(a))

  	
   

  	
  -

  	
   

  	
  Lenders’ Wire Transfer
  Information

  
	
  Annex G (Section 11.10)

  	
   

  	
  -

  	
   

  	
  Notice Addresses

  
	
  Annex
  H (from Annex A-Commitments definition)

  	
   

  	
  -

  	
   

  	
  Commitments
  as of Closing Date

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit 1.1(a)

  	
   

  	
  -

  	
   

  	
  Form of SCIL Note

  
	
  Exhibit 1.5(e)

  	
   

  	
  -

  	
   

  	
  Form of Notice of
  Conversion/Continuation

  
	
  Exhibit 6.1

  	
   

  	
   

  	
   

  	
  Form of Acquisition
  Compliance Certificate

  
	
  Exhibit 9.1(a)

  	
   

  	
  -

  	
   

  	
  Form of Assignment Agreement

  
	
  Exhibit E-1

  	
   

  	
   

  	
   

  	
  Form of Compliance
  Certificate

  
	
  Exhibit ECF

  	
   

  	
  -

  	
   

  	
  Form of
  Excess Cash Flow Computation

  
	
  Exhibit PA

  	
   

  	
  -

  	
   

  	
  Permitted
  Adjustments

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Schedule 1.1

  	
   

  	
  -

  	
   

  	
  SCIL 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

  
	
  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

  



 


iv





















 


This
SCIL 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 SCIL Lender, and as SCIL Agent for SCIL Lenders, and the other
SCIL Lenders signatory hereto from time to time.


 


RECITALS


 


WHEREAS,
Borrower, the other Credit Parties signatory thereto, General Electric Capital
Corporation, as First Lien Agent for the lenders signatory thereto from time to
time (the “First Lien Lenders”) and the First Lien Lenders are parties
to that Fourth Amended and Restated Credit Agreement, dated as of the date
hereof (as amended, restated, supplemented or otherwise modified from time to
time in accordance with the terms of the Intercreditor Agreement, the “First
Lien Credit Agreement”), pursuant to which the First Lien Lenders extended
to Borrower revolving and term credit facilities thereunder of up to One
Hundred Sixty-Five Million Dollars ($165,000,000) (collectively, the “First
Lien Loans”) for the purpose of (a) funding the repayment of the
balance of the outstanding amounts under the Prior Credit Agreement (as defined
in the First Lien Credit Agreement) and 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
therein;


 


WHEREAS,
Borrower has requested that SCIL Lenders extend a SCIL Loan facility to
Borrower of Forty-Five Million Dollars ($45,000,000) for the purposes of
(a) funding 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 for these purposes,
SCIL Lenders are willing to make such a loan to Borrower in such amount upon
the terms and conditions set forth herein;


 


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


 


(a)           SCIL Loan.


 


(i)            Subject to the terms and conditions hereof, each SCIL
Lender agrees to make a term loan (collectively, the “SCIL Loan”) on the
Closing Date to Borrower in the original principal amount of its SCIL Loan
Commitment.  The obligations of each SCIL
Lender hereunder shall be several and not joint.  The SCIL Loan shall be evidenced by


 





















 


promissory notes substantially in the form of Exhibit
1.1(a) (each a “SCIL Note” and collectively the “SCIL Notes”),
and, except as provided in Section 1.12, Borrower shall execute and
deliver each SCIL Note to the applicable SCIL Lender.  Each SCIL Note shall represent the obligation
of Borrower to pay the amount of the applicable SCIL Lender’s SCIL Loan
Commitment, together with interest thereon as prescribed in Section 1.5.


 


Borrower shall repay the principal amount of the SCIL
Loan in a single installment due on June 29, 2011.


 


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


 


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


 


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


 


1.2           [Intentionally
Omitted].


 


1.3           Prepayments.


 


(a)           Voluntary Prepayments; Reductions in SCIL Loan
Commitments.  To the extent not prohibited by the First
Lien Credit Agreement, Borrower may at any time on at least three (3) days’
prior written notice to SCIL Agent (i) voluntarily prepay all or part of
the SCIL Loan; 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.  Any such voluntary prepayment must be
accompanied by the payment of the Fee required by Section 1.9(b) if any,
plus the payment of any applicable LIBOR funding breakage costs in
accordance with Section 1.13(b).


 


(b)           Mandatory Prepayments.


 


(i)            [Intentionally Omitted].


 


(ii)           Following (but not before) the payment in full in cash
of all First Lien Loans, the complete discharge of all First Lien Obligations
(including the cash collateralization, cancellation or backing by standby
letters of credit of all Letters of Credit Obligations under and as defined in
the First Lien Credit Agreement) and the termination of all Commitments under
and as defined in the First Lien Credit Agreement (such events, collectively, a
“First Lien Payment Event”), immediately upon receipt by Borrower or any
Secured Guarantor of any proceeds of any cash asset disposition (excluding
proceeds of asset dispositions permitted


 


2





















 


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 SCIL 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 security interest to SCIL Agent in such
replacement assets when acquired (subject in priority to the Liens securing the
First Lien Obligations in the manner set forth in the Intercreditor Agreement),
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 SCIL Loan 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).


 


(iii)          Following (but not before) a First Lien Payment Event,
if Borrower or any Secured Guarantor shall suffer any Event of Loss, then such
Person shall (A) promptly notify the SCIL 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(c).


 


(iv)          Following (but not before) a First Lien Payment Event,
proceeds of Keyman Life Insurance pledged to the SCIL 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).


 


3





















 


(v)           To the extent not prohibited by the First Lien Credit
Agreement, 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 prepayments pursuant to Section 5.8
shall be applied in accordance with Section 1.3(c).


 


(vi)          Following (but not before) a First Lien Payment Event,
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 D or (B) the 15th day after the date on
which such annual audited Financial Statements were required to be delivered
pursuant to Annex D, 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 1.00, 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 SCIL 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 SCIL Agent.


 


(c)           Application of Mandatory Prepayments and Prepayments
from Insurance Proceeds and Condemnation Proceeds. 
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), or 1.3(b)(vi),
and any 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 Mortgages shall be applied as follows: first, to Fees and
reimbursable expenses of SCIL Agent then due and payable pursuant to any of the
Loan Documents; second, to interest then due and payable on the SCIL
Loan; third, to prepay the principal of the SCIL Loan; and fourth,
to any other outstanding Obligations.


 


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


 


1.4           Use of
Proceeds.  Borrower shall utilize the
proceeds of the SCIL Loan for the Refinancing and any related transaction
costs, fees and expenses, for the financing of Borrower’s ordinary working
capital and general corporate needs and for any other purpose not prohibited
hereunder, 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 Closing Date,


 


4





















 


including SCIL Loan 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.


 


(a)           Borrower shall pay interest to SCIL Agent, for the
ratable benefit of SCIL Lenders on the outstanding principal balance of the
SCIL Loan, in arrears on each applicable Interest Payment Date, (i) at the
Index Rate plus 7.25% per annum or (ii) at the election of
Borrower, the applicable LIBOR Rate plus 8.50% per annum.


 


(b)           If any payment on the SCIL 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 except if such day is the Scheduled Termination
Date) 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 SCIL 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 SCIL Agent of an
interest rate and Fees hereunder shall be final, binding and conclusive on
Borrower, absent manifest error.


 


(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 SCIL
Agent (or upon the written request of Requisite SCIL Lenders) confirmed by
written notice from SCIL Agent to Borrower, the interest rates applicable to
the SCIL Loan 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 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 SCIL 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 the
last sentence of this Section 1.5(e), Borrower shall have the option to
(i) convert at any time all or any part of outstanding SCIL Loan from
Index Rate Loans to LIBOR Loans, (ii) 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 (iii) continue all or any portion of the SCIL Loan
as a LIBOR Loan upon the expiration of the applicable LIBOR Period and the
succeeding LIBOR Period of that continued SCIL Loan shall commence on the first
day after the last day of the LIBOR Period of the Loan to be continued.  Any portion of the SCIL Loan 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 end of each LIBOR Period with respect to any LIBOR Loans
to be continued as such, or (2) the date on which Borrower wishes to
convert any Index Rate Loan to a LIBOR Loan for a LIBOR


 


5





















 


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 the last sentence of this Section 1.5(e)
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 SCIL 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).  Neither the SCIL Loan nor
any portion thereof may be made as or converted into a LIBOR Loan until the
earlier of (i) 45 days after the Closing Date and (ii) completion of the “Primary
Syndication” under and as defined in the First Lien Credit Agreement.  Except as otherwise expressly provided
herein, no SCIL Lender shall be obligated to convert or continue the SCIL Loan
or any portion thereof as a LIBOR Loan (and the SCIL Loan Commitments
referenced in Section 2.2 shall not be increased) 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 SCIL Agent or
Requisite SCIL Lenders have determined not to convert or continue the SCIL Loan
or any portion thereof as a LIBOR Loan 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 SCIL Lenders, and
SCIL Agent or Requisite SCIL Lenders have determined not to convert or continue
the SCIL Loan or any portion thereof as a LIBOR Loan 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
conversion or continuation of the SCIL Loan or any portion thereof as a LIBOR
Loan, and SCIL Agent or Requisite Revolving SCIL Lenders shall have determined
not to convert or continue the SCIL Loan or any portion thereof as a LIBOR Loan
as a result of that Event of Default.


 


(f)            Notwithstanding anything to the contrary set forth in
this Section 1.5, if a court of competent jurisdiction determines
in a final order that the rate of interest payable hereunder exceeds the
highest rate of interest permissible under law (the “Maximum Lawful Rate”),
then so long as the Maximum Lawful Rate would be so exceeded, the rate of
interest payable hereunder shall be equal to the Maximum Lawful Rate; provided, however, that if at any time
thereafter the rate of interest payable hereunder is less than the Maximum
Lawful Rate, Borrower shall continue to pay interest hereunder at the Maximum
Lawful Rate until such time as the total interest received by SCIL Agent, on
behalf of SCIL Lenders, is equal to the total interest that would have been
received had the interest rate payable hereunder been (but for the operation of
this paragraph) the interest rate payable since the Closing Date as otherwise
provided in this Agreement.  Thereafter,
interest hereunder shall be paid at the rate(s) of interest and in the manner
provided in Sections 1.5(a) through (e), unless and until the rate of
interest


 


6





















 


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 SCIL Lender pursuant to the terms
hereof exceed the amount that such SCIL 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
SCIL Lender has received interest hereunder in excess of the Maximum Lawful
Rate, SCIL 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           [Intentionally
Omitted].


 


1.7           [Intentionally
Omitted].


 


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


 


1.9           Fees.


 


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


 


(b)           If Borrower pays after acceleration or prepays all or
any portion of the SCIL Loan and, whether voluntarily or involuntarily and
whether before or after acceleration of the Obligations, Borrower shall pay to
SCIL Agent, for the benefit of SCIL Lenders as liquidated damages and
compensation for the costs of being prepared to make funds available hereunder
an amount equal to the Applicable Percentage (as defined below) multiplied by
the principal amount of the SCIL Loan paid after acceleration or prepaid.  As used herein, the term “Applicable
Percentage” shall mean (x)  two
percent (2%), in the case of a prepayment on or prior to the first anniversary
of the Closing Date, (y) one percent (1%), in the case of a prepayment after
the first anniversary of the Closing Date but on or prior to the second
anniversary thereof, and (z) zero percent (0%), in the case of a prepayment
after the second anniversary of the Closing Date.  The Credit Parties agree that the Applicable
Percentages are a reasonable calculation of SCIL Lenders’ lost profits in view
of the difficulties and impracticality of determining actual damages resulting
from an early prepayment of the SCIL Loan. 
Notwithstanding the foregoing, no prepayment fee shall be payable by Borrower
upon a mandatory prepayment made pursuant to Sections 1.3(b) or 1.16(c);
provided that in the case of
prepayments made pursuant to Section 1.3(b)(ii), the transaction giving
rise to the applicable prepayment is expressly permitted under Section 6.


 


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 as of any date, all payments shall be deemed received on the
Business Day on which immediately


 


7





















 


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.  So long
as no Event of Default has occurred and is continuing and the Scheduled
Termination Date has not occurred, (i)  voluntary prepayments shall be
applied as determined by Borrower, subject to the provisions of Section
1.3(a); and (ii) mandatory prepayments shall be applied as set forth
in Section 1.3(c).  All payments
and prepayments shall be applied ratably to the portion of the SCIL Loan held
by each SCIL 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 Scheduled 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
SCIL Agent and the Requisite SCIL Lenders shall have the continuing exclusive
right to apply any and all such payments against the Obligations as SCIL Agent
and the Requisite SCIL Lenders may deem advisable notwithstanding any previous
entry by SCIL 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
SCIL Agent and the Requisite SCIL Lenders with respect thereto, payments shall
be applied to amounts then due and payable in the following order: (1) to Fees
and SCIL Agent’s expenses reimbursable hereunder; (2) to interest on the SCIL
Loan; (3) to principal payments on the SCIL Loan; and (4) to all other
Obligations, including expenses of SCIL Lenders to the extent reimbursable
under Section 11.3.


 


1.12         Loan
Account and Accounting.  SCIL Agent
shall maintain a loan account (the “Loan Account”) on its books to
record the SCIL 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 SCIL
Loan or any other Obligations.  All entries
in the Loan Account shall be made in accordance with SCIL Agent’s customary
accounting practices as in effect from time to time. The balance in the Loan
Account, as recorded on SCIL Agent’s most recent printout or other written
statement, shall be presumptive evidence of the amounts due and owing to SCIL
Agent and SCIL 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.  SCIL Agent shall render to Borrower a monthly
accounting of transactions with respect to the SCIL Loan setting forth the
balance of the Loan Account for the immediately preceding month.  Unless Borrower notifies SCIL 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 SCIL Lender may elect (which election may be
revoked) to dispense with the issuance of SCIL Notes to that SCIL Lender and
may rely on the Loan Account as evidence of the amount of Obligations from time
to time owing to it.


 


8





















 


1.13         Indemnity.


 


(a)           Each Credit Party that is a signatory hereto shall
jointly and severally indemnify and hold harmless each of SCIL Agent, SCIL
Lenders and their respective Affiliates, and each such Person’s respective
officers, directors, employees, attorneys, agents and representatives (each, an
“Indemnified Person”), from and against any and all suits, actions,
proceedings, claims, damages, losses, liabilities and expenses (including
reasonable attorneys’ fees and disbursements and other costs of investigation
or defense, including those incurred upon any appeal) that may be instituted or
asserted against or incurred by any such Indemnified Person as the result of credit
having been extended, suspended or terminated under this Agreement and the
other Loan Documents and the administration of such credit, and in connection
with or arising out of the transactions contemplated hereunder and thereunder
and any actions or failures to act in connection therewith, and legal costs and
expenses arising out of or incurred in connection with disputes between or
among any  parties to any of the Loan Documents (other than
disputes between and among SCIL Agent/or the SCIL 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 SCIL 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 SCIL
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 SCIL Lender


 


9





















 


under this subsection, each SCIL 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 SCIL 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 SCIL Lender shall provide Borrower
with its written calculation of all amounts payable pursuant to this Section
1.13(b), and such calculation shall be presumed to be correct unless
Borrower shall object in writing within twenty (20) Business Days of receipt
thereof, specifying the basis for such objection in detail.  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 SCIL Agent determines to be appropriate:
(a) provide SCIL 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 SCIL 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 SCIL 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 SCIL Agent, each such Credit Party shall
provide such access to SCIL Agent and to each SCIL Lender at all times and
without advance notice.  Furthermore, so
long as any Event of Default has occurred and is continuing, Borrower shall
provide SCIL Agent and each SCIL Lender with access to its suppliers and
customers.  Each Credit Party shall make
available to SCIL 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 SCIL Agent may reasonably request. 
Each Credit Party shall deliver any document or instrument necessary for
SCIL 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.  SCIL Agent will give SCIL Lenders
at least five (5) days’ prior written notice of regularly scheduled
audits.  Representatives of other SCIL
Lenders may accompany SCIL 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 SCIL 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) SCIL
Agent or SCIL Lenders, as applicable, receive an amount equal to the sum they
would have received had no


 


10





















 


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 SCIL 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 SCIL Agent and
each SCIL Lender for the full amount of Taxes (including any Taxes imposed by
any jurisdiction on amounts payable under this Section 1.15) paid by
SCIL Agent or such SCIL Lender, as appropriate, and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto, whether
or not such Taxes were correctly or legally asserted.


 


(c)           Each SCIL Lender organized under the laws of a
jurisdiction outside the United States (a “Foreign SCIL Lender”) shall
provide to Borrower and SCIL 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 SCIL Lender’s
entitlement to an exemption from United States withholding tax (a “Certificate
of Exemption”).  Any foreign Person
that seeks to become a SCIL Lender under this Agreement shall provide a
Certificate of Exemption to Borrower and SCIL Agent prior to becoming a SCIL
Lender hereunder.  No foreign Person may
become a SCIL Lender hereunder if such Person fails to deliver a Certificate of
Exemption in advance of becoming a SCIL 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 SCIL 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 SCIL Lender with any request or directive regarding
capital adequacy, reserve requirements or similar requirements (whether or not
having the force of law), in each case, adopted after the Closing Date, from
any central bank or other Governmental Authority increases or would have the
effect of increasing the amount of capital, reserves or other funds required to
be maintained by such SCIL Lender and thereby reducing the rate of return on
such SCIL Lender’s capital as a consequence of its obligations hereunder, then
Borrower shall from time to time upon demand by such SCIL Lender issued within
ninety (90) days after adoption thereof and setting forth a calculation of the
reduction (with a copy of such demand to SCIL Agent) pay to SCIL Agent, for the
account of such SCIL Lender, additional amounts sufficient to compensate such
SCIL Lender for such reduction.  A
certificate as to the amount of that reduction and showing the basis of the
computation thereof submitted by such SCIL Lender to Borrower and to SCIL 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


 


11





















 


force of law), in each case adopted after the Closing Date,
there shall be any increase in the cost to any SCIL Lender of agreeing to make
or making, funding or maintaining any Loan, then Borrower shall from time to
time, upon demand by such SCIL 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 SCIL Agent), pay to SCIL
Agent for the account of such SCIL Lender additional amounts sufficient to
compensate such SCIL Lender for such increased cost.  A certificate as to the amount of such
increased cost, submitted to Borrower and to SCIL Agent by such SCIL Lender,
shall be presumptive evidence of the matters set forth therein, absent manifest
error.  Each SCIL 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 SCIL Lender
shall, to the extent not inconsistent with such SCIL Lender’s internal policies
of general application, use reasonable commercial efforts to minimize costs and
expenses incurred by it and payable to it by Borrower pursuant to this Section
1.16(b).


 


(c)           Notwithstanding anything to the contrary contained
herein, if the introduction of or any change in any law or regulation (or any
change in the interpretation thereof) shall make it unlawful, or any central
bank or other Governmental Authority shall assert that it is unlawful, for any
SCIL Lender to agree to make or to make or to continue to fund or maintain any
LIBOR Loan, then, unless that SCIL Lender is able to make or to continue to
fund or to maintain such LIBOR Loan at another branch or office of that SCIL
Lender without, in that SCIL Lender’s opinion, adversely affecting it or its
Loans or the income obtained therefrom, on notice thereof and demand therefor
by such SCIL Lender to Borrower through SCIL Agent, (i) the obligation of
such SCIL 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 SCIL 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 SCIL Lender (an “Affected SCIL Lender”)
as provided in Sections 1.15(a), 1.15(b), 1.16(a) or 1.16(b), Borrower
may, at its option, notify SCIL Agent and such Affected SCIL Lender of its
intention to replace the Affected SCIL Lender. 
So long as no Default or Event of Default has occurred and is
continuing, Borrower, with the consent of SCIL Agent, may obtain, at Borrower’s
expense, a replacement SCIL Lender (“Replacement SCIL Lender”) for the
Affected SCIL Lender, which Replacement SCIL Lender must be reasonably
satisfactory to SCIL Agent.  If Borrower
obtains a Replacement SCIL Lender within one hundred eighty (180) days
following notice of its intention to do so, the Affected SCIL Lender must sell
and assign its portion of the SCIL Loan to such Replacement SCIL Lender for an
amount equal to the principal balance of all Loans held by the Affected SCIL
Lender and all accrued interest and Fees with respect thereto through the date
of such sale; provided, that
Borrower shall have reimbursed such Affected SCIL 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 SCIL
Lender if the Affected SCIL 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 SCIL Lender.  Furthermore, if Borrower gives a notice of
intention to replace and does not so replace such Affected SCIL Lender within
one hundred eighty (180) days thereafter,


 


12





















 


Borrower’s rights under this Section 1.16(d) shall
terminate with respect to the increased costs or additional amounts of such
Affected SCIL Lender giving rise to such notice to replace such Affected SCIL
Lender and Borrower shall promptly pay all increased costs and or additional
amounts demanded by such Affected SCIL 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 and the other
Loan Documents shall constitute one general obligation of Borrower secured,
until the Termination Date, by all of the Collateral.


 


2.             CONDITIONS PRECEDENT


 


2.1           Conditions
to the Initial Loans.  No SCIL Lender
shall be obligated to make the SCIL Loan on the Closing 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 SCIL Agent, or
waived in writing by SCIL Agent and Requisite SCIL 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, SCIL Agent and SCIL
Lenders; and SCIL Agent shall have received such documents, instruments,
agreements and legal opinions as SCIL 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 C, each in form and substance reasonably satisfactory to
SCIL Agent.


 


(b)           Prior Debt Obligations. 
SCIL Agent shall have received evidence satisfactory to SCIL 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 Closing Date.  Concurrently with
the funding of the SCIL Loan and the First Lien Loans and the deposit of the
Refinancing Proceeds with the trustee under the Prior Senior Subordinated
Indenture (the “Trustee”), the SCIL 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 SCIL Agent shall be directed by Borrower to fund all net proceeds
of the SCIL Loan to the Trustee in respect of the Refinancing on the Closing
Date and shall be satisfied that the First Lien Lenders have been directed by
Borrower to fund the remaining portion of the Refinancing Proceeds to the
Trustee on the Closing Date.


 


(c)           Approvals.  SCIL 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 SCIL Agent affirming that no such consents or
approvals are required.


 


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(d)           Opening Availability. 
The Eligible Accounts and Eligible Inventory supporting the Revolving
Credit Advances (each such capitalized term and other terms used in this clause
(d) not defined herein shall have the same meaning as set forth for such
term in the First Lien Credit Agreement) to be made on the Closing Date and the
outstanding Letter of Credit Obligations and the amount of the Reserves to be
established on the Closing Date shall be sufficient in value, as reasonably
determined by SCIL Agent, to provide Borrower with Borrowing Availability on
the Closing 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
Closing 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.


 


(e)           [Intentionally
Omitted].


 


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


 


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


 


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


 


(i)            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 SCIL 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 (as defined in the First Lien Credit Agreement)
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 (as defined in the First Lien Credit Agreement) on
hand) shall not exceed 5.66 times Adjusted EBITDA for the period of 12
consecutive months ended on April 30, 2004; and


 


14





















 


(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.


 


2.2           SCIL
Loan Commitment Increase Conditions. 



 


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


 


(i)            The
conditions set forth in clauses (A), (B) and (C) of the
last sentence of Section 1.5(e) have been satisfied;


 


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


 


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


 


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


 


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


 


15





















 


(vi)          The proposed SCIL Loan Commitment Increase has been
consented to in writing by the SCIL Lenders or New SCIL Lenders whose increase
in Commitments or New Commitments in the aggregate equals such proposed
Commitment Increase (it being understood and agreed that no SCIL Loan
Commitment of a SCIL Lender may be increased hereunder without such SCIL Lender’s
written consent);


 


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


 


(viii)        the proposed SCIL Loan Commitment Increase together
with any prior SCIL Loan Commitment Increase shall not exceed the SCIL Loan
Commitment Increase Cap;


 


(ix)           The interest rate pertaining to any portion of the
SCIL Loan which is the subject of any SCIL Loan Commitment Increase shall be
equal to the interest rate pertaining to the balance of the SCIL Loan under
this Agreement.  If, in connection with
any SCIL Loan Commitment Increase, any interest rate for any portion of the
SCIL Loan is increased, a reciprocal increase in the relevant interest rate for
the entire SCIL Loan under this Agreement shall be required to occur from and
after the effective date of such SCIL Loan Commitment Increase.   By way of example, if a proposed SCIL Loan
Commitment Increase consists of $20,000,000 of additional SCIL Loan Commitments
and Borrower agrees to increase interest rate for LIBOR Loans by 0.20% over the
interest rate then in effect under this Agreement to attract such additional
SCIL Loan Commitments, the interest rate for LIBOR Loans for the entire SCIL
Loan from and after the effective date of such SCIL Loan Commitment Increase
would be increased by such amount; and


 


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


 


(b)           Borrower, Credit Parties, SCIL Lenders and SCIL Agent
acknowledge and agree that each SCIL Loan Commitment Increase meeting the
conditions set forth in Section 2.2(a) (each, a “Qualifying SCIL Loan
Commitment Increase”) shall not require the consent of any SCIL Lender
other than those SCIL Lenders, if any, which have agreed to increase their SCIL
Loan Commitments in connection with such proposed Qualifying SCIL Loan
Commitment Increase.  Each SCIL Lender
hereby authorizes the SCIL Agent, without any further consent from or agreement
of such SCIL Lender, to execute on behalf of such SCIL Lender such amendments
to this Agreement and/or the other Loan Documents as may be necessary to
implement each such Qualifying SCIL Loan Commitment Increase.


 


3.             REPRESENTATIONS AND WARRANTIES


 


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


 


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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 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 Closing 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 Closing 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 SCIL Agent, on behalf of itself and
SCIL 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 Closing Date unless otherwise agreed to by SCIL Agent in
writing.  As of the Closing Date, each of
the Loan Documents shall be duly


 


17





















 


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, 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 SCIL Agent on or before the
Closing 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 December 27,
2003 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 SCIL Agent on or before the Closing 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 SCIL Agent on or before the Closing Date and attached
hereto as Disclosure Schedule (3.4(c)) have been prepared by Borrower in
light of the past operations of its and its Subsidiaries’ businesses, but
including future payments of known contingent liabilities, and reflect projections for the three year
period beginning on 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 Closing Date, reflect Borrower’s good
faith and reasonable estimates of the future financial performance of Borrower
and of the other information projected therein for the period set forth
therein.


 


3.5           Material
Adverse Effect.  Between March 31,
2003 and the Closing 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


 


18





















 


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
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 Closing 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
Closing 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
Closing 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 SCIL 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 Closing 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 Closing 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
Closing Date, the Liens granted to SCIL Agent pursuant to the Loan Documents
are perfected Liens, subject only to Permitted Encumbrances.  As of the Closing 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 Closing 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 Closing 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 Closing 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


 


19





















 


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 SCIL Agent); (e) to any Credit Party’s
knowledge, 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 Closing 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
Closing 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 Closing 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 Closing 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 SCIL Loan by SCIL Lenders
to 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 SCIL Loan 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


 


20





















 


any Margin Stock or for any other purpose that might
cause the SCIL Loan 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 taken any action that might cause any Loan
Document to violate any regulation of the Federal Reserve Board.


 


3.11         Taxes.  As of the Closing 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 Closing 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 Closing 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 Closing 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 Closing 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 Closing 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 SCIL
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


 


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defined in Section 406 of ERISA and Section 4975 of the IRC,
in connection with any Plan has occurred that would subject any Credit Party to
a material tax on prohibited transactions imposed by Section 502(l) of ERISA or
Section 4975 of the IRC, and no event has occurred with respect to a Plan which
would subject any 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 Closing 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 SCIL Loan 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 Closing 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


 


22





















 


numbers, as applicable, in Disclosure Schedule
(3.15).  To the knowledge of each
Credit Party, as of the Closing 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.  Except as set forth in Disclosure Schedule
(3.15), as of the Closing 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 or
Financial Statements or other written reports from time to time delivered
hereunder or any written statement furnished by or on behalf of any Credit
Party to SCIL Agent or any SCIL 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 SCIL Agent,
on behalf of itself and SCIL Lenders, pursuant to the Collateral Documents will
at all times be fully perfected Liens in and to the Collateral described
therein, subject, as to priority, only to Permitted Encumbrances.  On the Closing 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 Closing 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 Closing 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 Closing 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 Closing Date, there was no termination or
cancellation of:  the business
relationship of any


 


23





















 


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


 


3.22         Agreements
and Other Documents.  As of the
Closing Date, each Credit Party has provided to SCIL Agent or its counsel, on
behalf of SCIL Lenders, complete copies (or accurate summaries) of all of the
following agreements or documents to which it is subject and each of which is
listed in Disclosure Schedule (3.22) without duplication of the
agreements or documents provided as of the Closing Date 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 SCIL Loan to be made on the Closing Date or such other date as SCIL Loan
requested hereunder is made pursuant to the SCIL Loan Commitment Increase or
such other date as the SCIL Loan is continued or converted as a LIBOR Loan,
(b) the consummation of the Related Transactions and (c) 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 Closing 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
Closing Date, Borrower has delivered to SCIL 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 SCIL Loan do not violate any term or
provision of any of Discount Debentures Documents.


 


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


 


4.             FINANCIAL
STATEMENTS AND INFORMATION


 


4.1           Reports
and Notices.  From and after the
Closing Date and until the Termination Date, Borrower shall deliver to SCIL
Agent for distribution to the SCIL Lenders, the Financial Statements, notices,
Projections and other information at the times, to the Persons and in the
manner set forth in Annex D.


 


4.2           Communication
with Accountants.  Each Credit Party
executing this Agreement authorizes (a) SCIL Agent and (b) so long as an Event
of Default has occurred and is continuing, each SCIL 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 SCIL Agent and each SCIL 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 SCIL 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 storage or rental charges payable to
warehousemen and bailees, in each case, before any thereof shall become thirty
(30) days past due.


 


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(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 SCIL Agent
evidence reasonably acceptable to SCIL 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 SCIL Agent and
with insurers selected by the Credit Parties and reasonably acceptable to SCIL
Agent.  Such policies of insurance (or
the loss payable and additional insured endorsements delivered to SCIL Agent)
shall contain provisions pursuant to which the insurer agrees to provide thirty
(30) days’ prior written notice to SCIL 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, SCIL 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 SCIL Agent
deems reasonably advisable.  SCIL Agent
shall have no obligation to obtain insurance for any Credit Party or pay any
premiums therefor.  By doing so, SCIL
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 SCIL Agent and shall
be additional Obligations hereunder secured by the Collateral.


 


(b)           SCIL 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 SCIL Agent, each
Credit Party shall deliver to SCIL Agent from time to time a report of a
reputable insurance broker, reasonably satisfactory to SCIL Agent, with respect
to its insurance policies.


 


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(c)           Each Credit Party shall deliver to SCIL Agent, in form
and substance reasonably satisfactory to SCIL Agent, endorsements to (i) all
“All Risk” and business interruption insurance naming SCIL Agent, on behalf of
itself and SCIL Lenders, as loss payee, and (ii) all general liability and
other liability policies maintained by such Credit Party naming SCIL Agent, on
behalf of itself and SCIL Lenders, as additional insured.  Each Credit Party irrevocably makes, constitutes
and appoints SCIL Agent (and all officers, employees or agents designated by
SCIL 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.  SCIL 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 SCIL 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 SCIL Agent in the
collection or handling thereof, SCIL Agent shall either, at its option, apply
such proceeds to the reduction of the Obligations in accordance with Section 1.3(c)
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, SCIL Agent may apply
such insurance proceeds to the Obligations in accordance with Section 1.3(c).  All insurance proceeds that are to be made
available to Borrower to replace, repair, restore or rebuild the Collateral
shall be applied by SCIL 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, SCIL 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 SCIL 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(c); 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(c).


 


27





















 


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 SCIL 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 SCIL Agent and Requisite SCIL Lenders in writing, and
(b) no supplement shall be required or permitted as to representations and
warranties that relate solely to the Closing Date or the Closing 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.  To the extent
not prohibited by the First Lien Credit Agreement or the Intercreditor
Agreement, 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 First
Lien Obligations in accordance with Section 1.3(b)(v) of the First Lien
Credit Agreement 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;


 


28





















 


(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 in accordance with Section 1.3(b)(v) hereof and/or to
prepay First Lien Obligations in accordance with Section 1.3(b)(v) of
the First Lien Credit Agreement, (the application of such proceeds being
allocated between the prepayment of the Obligations and the First Lien
Obligations 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 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 promptly upon receipt thereof to the
extent permitted by the First Lien Credit Agreement.


 


(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


 


29





















 


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 SCIL 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 SCIL Agent.  After the Closing 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 Closing Date without the prior written consent of SCIL
Agent, unless and until (i) a reasonably satisfactory landlord agreement
or bailee letter, as appropriate, shall first or simultaneously have been
obtained with respect to such location or (ii) the First Lien Agent has
provided its written consent under and with respect to the First Lien Credit
Agreement to the waiver of such landlord agreement or bailee letter, as
applicable.  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 Closing Date, it shall first provide to SCIL Agent a
mortgage or deed of trust granting SCIL 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
SCIL Agent, casualty insurance and flood insurance, and such other documents,
instruments or agreements reasonably requested by SCIL Agent, in each case, in
form and substance reasonably satisfactory to SCIL 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 SCIL 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 SCIL Agent’s security
interest therein, signed by the relevant Credit Party, in a manner satisfactory
to SCIL Agent.


 


5.11         Interest
Rate. Within one hundred and eighty (180) days after the Closing 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 First Lien Term Loan and the SCIL Loan is
either (i) fixed rate Indebtedness or (ii) subject to Specified Hedging
Agreements.


 


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 SCIL Agent in its sole
discretion, so that the Indebtedness refinancing the Holdco


 


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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 SCIL 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 Closing 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) SCIL 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 SCIL 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 SCIL 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 SCIL 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 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


 


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competent jurisdiction; (b) each Credit Party may
maintain (but not increase) its existing investments in its Subsidiaries as of
the Closing 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 SCIL Agent for the benefit
of SCIL Lenders or otherwise subject to a perfected security interest in favor
of SCIL Agent for the benefit of SCIL Lenders (except as set forth in the
applicable Collateral Document), 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 SCIL 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 Closing 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 SCIL Loan and the other Obligations, (iii) unfunded
pension fund and other employee benefit plan obligations and liabilities to the
extent they are permitted to remain unfunded under applicable law, (iv)
existing Indebtedness described in Disclosure Schedule (6.3) (including
earn-outs payable to sellers of


 


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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, SCIL Agent or any
SCIL Lender, as reasonably determined by SCIL 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 SCIL Agent and subject to a perfected security
interest in favor of SCIL Agent pursuant to the terms of 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 SCIL 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 SCIL 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 SCIL 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 E 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, to the First Lien Term Loan, until the same has been
repaid in full; third, to interest then due and payable on the SCIL
Loan; fourth, the SCIL Loan, until the same has been repaid in full; and
fifth, to the First Lien Revolving


 


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Credit Advances in accordance with the First Lien Credit
Agreement; (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 First Lien Loan
Documents as in effect on the Closing 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) the First Lien Obligations;
(iii) 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); (iv) Indebtedness permitted by Section
6.3(a)(iv) upon any refinancing thereof in accordance with Section
6.3(a)(iv); (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, 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


 


34





















 


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 SCIL Agent or SCIL
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, (b) for Guaranteed Indebtedness incurred for the
benefit of any other Credit Party if the primary obligation is expressly
permitted by this Agreement; provided, that
neither Borrower nor any of its Domestic Subsidiaries shall create, incur,
assume or permit to exist any Guaranteed Indebtedness for the benefit of
Holdings or any Foreign Subsidiary; 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 (c) Guaranteed
Indebtedness incurred with respect to First Lien Obligations.


 


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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 SCIL Agent, on
behalf of itself and SCIL 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 First Lien
Obligations, subject to the Intercreditor Agreement and (f) Liens securing
other obligations not to exceed $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 SCIL Agent, on behalf of itself and SCIL 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 SCIL 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), SCIL 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


 


36





















 


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.


 


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 Closing Date,
(H) payments and distributions with respect to Holdco Debenture Debt
permitted in accordance with Section 6.3(a)(vii), (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 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, and (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


 


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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) SCIL 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 SCIL Agent pursuant to Annex
D 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 SCIL Agent delivered to SCIL Agent;


 


(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 Closing Date on, and the
redemption required as of the 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 E for the four quarter period
reflected in the Compliance Certificate most recently delivered pursuant to Annex
D 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


 


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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 SCIL
Agent and after SCIL Agent’s written acknowledgment that any reasonable action   requested
by SCIL Agent in connection therewith, including to continue the perfection of
any Liens in favor of SCIL Agent, on behalf of SCIL 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 SCIL Agent and SCIL Lenders and
after SCIL Agent’s written acknowledgment that any reasonable action requested
by SCIL Agent in connection therewith, including to continue the perfection of
any Liens in favor of SCIL Agent, on behalf of SCIL Lenders, in any Collateral,
has been completed or taken.  No Credit
Party shall change its Fiscal Year.


 


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, SCIL Agent
or any SCIL 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


 


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to perform its obligations under existing arrangements
with its stockholders and take actions incident thereto.


 


7.             TERM


 


7.1           Termination.  The financing arrangements contemplated
hereby shall be in effect until the Scheduled Termination Date, and the SCIL
Loan 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 SCIL Agent and SCIL 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
Scheduled Termination Date.  Except as
otherwise expressly provided herein or in any other Loan Document, all
undertakings, agreements, covenants, warranties and representations of or
binding upon the Credit Parties, and all rights of SCIL Agent and each SCIL
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 SCIL Loan or any of the other Obligations within three
(3) days after such payment is due; or (iii) fails to pay or reimburse SCIL
Agent or SCIL Lenders for any expense reimbursable hereunder or under any other
Loan Document within ten (10) days following SCIL 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 B or E,
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 Annex D (other than paragraph (d) of Annex D),
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 D,
and the same shall remain unremedied for fifteen (15) days or more.


 


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(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 SCIL 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 (other than the First Lien Obligations) or Guaranteed Indebtedness
(other than the Obligations or the First Lien 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, in cases other than the
First Lien Obligations, 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.


 


(f)            Any representation or warranty herein or in any Loan
Document or in any written statement, report, financial statement or
certificate made or delivered to SCIL Agent or any SCIL 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


 


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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
second priority Lien (except as otherwise permitted herein or therein) in any
of the Collateral purported to be covered thereby, and remains unremedied for a
period of ten (10) days after Borrower obtains knowledge thereof.


 


(l)            Any Change of Control occurs.


 


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


 


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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, SCIL Agent may (and at the written request of Requisite SCIL
Lenders shall), without notice except as otherwise expressly provided herein,
increase the rate of interest applicable to the SCIL Loan to the Default Rate.


 


(b)           If any Event of Default has occurred and is
continuing, SCIL Agent may (and at the written request of the Requisite SCIL
Lenders shall), without notice: (i) declare all or any portion of the
Obligations, including all or any portion of the SCIL Loan to be forthwith due
and payable, 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 (ii) exercise any rights and remedies provided to SCIL Agent
under the Loan Documents or at law or equity, including all remedies provided
under the Code.


 


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 SCIL
Agent on which any Credit Party may in any way be liable, and hereby ratifies
and confirms whatever SCIL Agent may do in this regard, (b) all rights to
notice and a hearing prior to SCIL Agent’s taking possession or control of, or
to SCIL Agent’s replevy, attachment or levy upon, the Collateral or any bond or
security that might be required by any court prior to allowing SCIL 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 SCIL AGENT


 


9.1           Assignment and
Participations.


 


(a)           Subject to the terms of this Section 9.1, any
SCIL Lender may make an assignment to a Qualified Assignee of, or sell
participations in, at any time or times, the Loan Documents, the SCIL Loan or
any portion thereof or interest therein, including any SCIL Lender’s rights,
title, interests, remedies, powers or duties thereunder.  Any assignment by a SCIL Lender shall:  (i) require the consent of SCIL 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, SCIL Agent; (ii) be conditioned on such assignee SCIL Lender
representing to the assigning SCIL Lender and SCIL 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) be conditioned
on such assignee SCIL Lender becoming a party to any SCIL Lender Agreement


 


43





















 


which may then be in effect; and (iv) after giving effect to
any such partial assignment, the assignee SCIL Lender shall have Commitments in
an amount at least equal to $5,000,000 and the assigning SCIL Lender shall have
retained Commitments in an amount at least equal to $5,000,000; (v) include a
payment to SCIL Agent of an assignment fee of $3,500.  In the case of an assignment by a SCIL 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 SCIL Lenders
hereunder.  The assigning SCIL 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 “SCIL Lender”.  In all instances, each SCIL Lender’s
liability to make the SCIL Loan hereunder shall be several and not joint and
shall be limited to such SCIL Lender’s Pro Rata Share of the SCIL Loan.  In the event SCIL Agent or any SCIL Lender
assigns or otherwise transfers all or any part of the Obligations, SCIL Agent
or any such SCIL Lender shall so notify Borrower and Borrower shall, upon the
request of SCIL Agent or such SCIL Lender, execute new SCIL Notes in exchange
for the SCIL Notes, if any, being assigned. 
Notwithstanding the foregoing provisions of this Section 9.1(a),
any SCIL Lender may at any time pledge all or any portion of the Obligations
held by it and all or any portion of such SCIL 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 SCIL Lender, Affiliates of such SCIL Lender or funds or accounts managed
by such SCIL Lender or an Affiliate of such SCIL Lender to
such Federal Reserve Bank or such Qualified Assignee (without requesting
the consent of the Borrower or the SCIL Agent but in each case by providing to
the SCIL 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 SCIL Lender from such SCIL 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.  SCIL Agent shall
maintain in its offices located at 100 California Street, 10th Floor, San
Francisco, California 94111 (or such other offices as SCIL Agent may elect from
time to time) a “register” for recording the name, address, the Pro Rata Share
of the SCIL Loan owing to each SCIL Lender. 
The entries in such register shall be presumptive evidence of the
amounts due and owing to each SCIL Lender in the absence of manifest
error.  Borrower, SCIL Agent and each
SCIL Lender may treat each Person whose name is recorded in such register
pursuant to the terms hereof as a SCIL Lender for all purposes of this
Agreement.  The register described herein
shall be available for inspection by Borrower and any SCIL Lender, at any
reasonable time upon reasonable prior notice.


 


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


 


44





















 


interest rate or Fees payable with respect to, all or any
portion of the SCIL Loan in which such holder participates, (ii) any extension
of the scheduled amortization of the principal amount of the SCIL 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 SCIL Agent nor any SCIL Lender (other
than the SCIL Lender selling a participation) shall have any duty to any
participant and may continue to deal solely with the SCIL Lender selling a participation
as if no such sale had occurred.


 


(c)           Except as expressly provided in this Section 9.1,
no SCIL Lender shall, as between Borrower and that SCIL Lender, or SCIL Agent
and that SCIL 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 SCIL Loan, the SCIL Notes or other
Obligations owed to such SCIL Lender.


 


(d)           Each Credit Party executing this Agreement shall
assist any SCIL Lender permitted to sell assignments or participations under
this Section 9.1 as reasonably required to enable the assigning or
selling SCIL 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 SCIL Lender may furnish any information concerning
Credit Parties in the possession of such SCIL Lender from time to time to
assignees and participants (including prospective assignees and participants); provided that such SCIL Lender shall
obtain from assignees or participants confidentiality covenants substantially
equivalent to those contained in Section 11.8.


 


(f)            No SCIL Lender shall assign or sell participations in
any portion of its Loan or Commitments to a potential SCIL Lender or
participant, if, as of the date of the proposed assignment or sale, the
assignee SCIL 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 SCIL Lender (a “Granting SCIL Lender”), may grant to a
special purpose funding vehicle (an “SPC”), identified as such in
writing by the Granting SCIL Lender to SCIL Agent and Borrower, the option to
provide to Borrower all or any part of the SCIL Loan that such Granting SCIL
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 the SCIL Loan; and (ii) if an SPC elects not to
exercise such option or otherwise fails to provide all or any part of the SCIL


 


45





















 


Loan, the Granting SCIL Lender shall be obligated to make
such SCIL Loan pursuant to the terms hereof. 
The making of the SCIL Loan by an SPC hereunder shall utilize the Pro
Rata Share of the Granting SCIL Lender to the same extent, and as if such SCIL
Loan were made by such Granting SCIL 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
SCIL Lender).  Any SPC may (i) with
notice to, but without the prior written consent of, Borrower and SCIL Agent
and assign all or a portion of its interests in the SCIL Loan to the Granting
SCIL Lender or to any financial institutions (consented to by Borrower and SCIL
Agent) providing liquidity and/or credit support to or for the account of such
SPC to support the funding or maintenance of the SCIL Loan and (ii) disclose on
a confidential basis any non-public information relating to its SCIL Loan 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 SCIL Lender, all or any of whose SCIL Loan are being
funded by an SPC at the time of such amendment. 
For the avoidance of doubt, the Granting SCIL 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 SCIL Lender under the Loan Documents,
continue to be the SCIL Lender of record hereunder.


 


9.2           Appointment
of SCIL Agent.  GE Capital is hereby
appointed to act on behalf of all SCIL Lenders as SCIL Agent under this
Agreement and the other Loan Documents. 
The provisions of this Section 9.2 are solely for the benefit of
SCIL Agent and SCIL 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, SCIL Agent shall act solely as an
agent of SCIL 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. 
SCIL Agent shall have no duties or responsibilities except for those
expressly set forth in this Agreement and the other Loan Documents.  The duties of SCIL Agent shall be mechanical
and administrative in nature and SCIL 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 SCIL Lender.  Except as expressly set forth in this Agreement
and the other Loan Documents, SCIL 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 SCIL Agent nor any
of its Affiliates nor any of their respective officers, directors, employees,
agents or representatives shall be liable to any SCIL 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 SCIL
Lender hereby irrevocably authorizes SCIL Agent to execute and deliver the
Intercreditor Agreement and to observe and perform each and all of the
obligations of SCIL Agent under the Intercreditor Agreement and to take such
action or to refrain from taking such action on behalf of itself and the SCIL
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 SCIL Lender
agrees to be, and is, bound by the provisions of the Intercreditor Agreement
and each future SCIL Lender, by taking an assignment of, or


 


46





















 


purchasing participations in, the Loan Documents, the SCIL Loan 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
SCIL Agent shall request instructions from Requisite SCIL Lenders or all
affected SCIL Lenders with respect to any act or action (including failure to
act) in connection with this Agreement or any other Loan Document, then SCIL
Agent shall be entitled to refrain from such act or taking such action unless
and until SCIL Agent shall have received instructions from Requisite SCIL
Lenders or all affected SCIL Lenders, as the case may be, and SCIL Agent shall
not incur liability to any Person by reason of so refraining.  SCIL 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 SCIL 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 SCIL Agent, expose SCIL Agent to Environmental
Liabilities or (c) if SCIL 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 SCIL Agent
has not received sufficient cash deposits to satisfy expected liabilities and
expenses related to such action.  Without
limiting the foregoing, no SCIL Lender shall have any right of action
whatsoever against SCIL Agent as a result of SCIL Agent acting or refraining
from acting hereunder or under any other Loan Document in accordance with the
instructions of Requisite SCIL Lenders or all affected SCIL Lenders, as
applicable.


 


9.3           SCIL Agent’s Reliance, Etc.  Neither SCIL 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, SCIL Agent: 
(a) may treat the payee of any SCIL Note as the holder thereof until
SCIL Agent receives written notice of the assignment or transfer thereof signed
by such payee and in form reasonably satisfactory to SCIL 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
SCIL Lender and shall not be responsible to any SCIL 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 SCIL 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


 


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Documents as any other SCIL Lender and may exercise
the same as though it were not SCIL Agent; and the term “SCIL Lender” or “SCIL
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 SCIL Agent and without any duty to account
therefor to SCIL Lenders.  GE Capital or
one or more of Affiliates may also purchase certain equity interests in
Holdings, which is a corporation that currently owns 100% of the outstanding Stock
of Borrower.  GE Capital and its
Affiliates may accept fees and other consideration from any Credit Party for
services in connection with this Agreement or otherwise without having to
account for the same to SCIL Lenders.  GE
Capital also acts as agent for the holders of the SCIL Loan.  Each SCIL Lender acknowledges the potential
conflict of interest between GE Capital as a SCIL Lender holding
disproportionate interests in the Loans, GE Capital or its Affiliates as a
Stockholder and GE Capital as SCIL 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           SCIL
Lender Credit Decision.  Each SCIL
Lender acknowledges that it has, independently and without reliance upon SCIL
Agent or any other SCIL 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 SCIL Lender also acknowledges that it
will, independently and without reliance upon SCIL Agent or any other SCIL
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 SCIL
Lender acknowledges the potential conflict of interest of each other SCIL
Lender as a result of SCIL Lenders holding disproportionate interests in the
Loans, and expressly consents to, and waives any claim based upon, such
conflict of interest.


 


9.6           Indemnification.  SCIL Lenders agree to indemnify SCIL 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 SCIL 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 SCIL Agent in
connection therewith (all such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits costs, expenses or disbursements,
collectively, the “SCIL Agent Indemnified Items”); provided, that no SCIL Lender shall be
liable to SCIL Agent for that portion, if any, of such SCIL Agent Indemnified
Items which resulted from SCIL Agent’s gross negligence or willful misconduct.
Without limiting the foregoing, each SCIL Lender agrees to reimburse SCIL 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 SCIL Agent in connection with the preparation,
execution, delivery, administration, modification,


 


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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 SCIL Agent is not reimbursed for such
expenses by the Credit Parties upon demand.


 


9.7           Successor
SCIL Agent.  SCIL Agent may resign at
any time by giving not less than thirty (30) days’ prior written notice thereof
to SCIL Lenders and Borrower.  Upon any
such resignation, the Requisite SCIL Lenders shall have the right to appoint a
successor SCIL Agent.  If no successor
SCIL Agent shall have been so appointed by the Requisite SCIL Lenders and shall
have accepted such appointment within thirty (30) days after the resigning SCIL
Agent’s giving notice of resignation, then the resigning SCIL Agent may, on
behalf of SCIL Lenders, appoint a successor SCIL Agent, which shall be a SCIL
Lender, if a SCIL 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 SCIL Agent
has been appointed pursuant to the foregoing, within thirty (30) days after the
date such notice of resignation was given by the resigning SCIL Agent, such
resignation shall become effective and the Requisite SCIL Lenders shall
thereafter perform all the duties of SCIL Agent hereunder until such time, if
any, as the Requisite SCIL Lenders appoint a successor SCIL Agent as provided
above. Any successor SCIL Agent appointed by SCIL Agent or Requisite SCIL
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 or if the successor SCIL Agent is Cerberus
Capital Management, L.P., or any of its Affiliates or managed funds.  Upon the acceptance of any appointment as
SCIL Agent hereunder by a successor SCIL Agent, such successor SCIL Agent shall
succeed to and become vested with all the rights, powers, privileges and duties
of the resigning SCIL Agent.  Upon the
earlier of the acceptance of any appointment as SCIL Agent hereunder by a
successor SCIL Agent or the effective date of the resigning SCIL Agent’s
resignation, the resigning SCIL 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 SCIL Agent shall
continue.  After any resigning SCIL
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 SCIL 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(d), each SCIL 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 SCIL
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 SCIL Lender
exercising the foregoing right of setoff or otherwise receiving any payment on
account of the Obligations in


 


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excess of its Pro Rata Share thereof determined in
accordance with Section 1.11 shall purchase for cash (and the other
SCIL Lenders or holders shall sell) such participations in each such other SCIL
Lender’s or holder’s Pro Rata Share of the Obligations as would be necessary to
cause such SCIL Lender to share the amount so offset or otherwise received with
each other SCIL 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 SCIL 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 SCIL 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 SCIL Lenders and holders and (b) any SCIL Lender so
purchasing a participation in the SCIL Loan made or other Obligations held by
other SCIL 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 SCIL Lender or holder were a direct holder of the Loans and the other
Obligations in the amount of such participation.  Notwithstanding the foregoing, if all or any
portion of the offset amount or payment otherwise received is thereafter recovered
from the SCIL Lender that has exercised the right of offset, the purchase of
participations by that SCIL Lender shall be rescinded and the purchase price
restored without interest.


 


9.9           Payments;
Information; Actions in Concert. 


 


(a)           Payments. On the 2nd Business Day of each calendar month or
more frequently at SCIL Agent’s election (each, a “Settlement Date”),
SCIL Agent shall advise each SCIL Lender by telephone, or telecopy of the
amount of such SCIL Lender’s Pro Rata Share of principal, interest and Fees
paid for the benefit of SCIL Lenders with respect to the SCIL Loan.  Such payments shall be made by wire transfer
to such SCIL Lender’s account (as specified by such SCIL Lender in Annex F
or the applicable Assignment Agreement) not later than 1:00 p.m. (Chicago time)
on the next Business Day following each Settlement Date.


 


(b)           Return of Payments.


 


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


 


(ii)           If SCIL Agent determines at any time that any amount
received by SCIL 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, SCIL Agent will not be required to distribute any portion thereof to
any SCIL Lender.  In addition, each SCIL
Lender will repay to SCIL Agent on demand any portion of such amount that SCIL
Agent has distributed to such SCIL Lender, together with interest at such rate,
if any, as SCIL Agent is required to pay to Borrower or such other Person,
without setoff, counterclaim or deduction of any kind.


 


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


 


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


 


(d)           Actions in Concert.  Anything in
this Agreement to the contrary notwithstanding, each SCIL Lender hereby agrees
with each other SCIL Lender that no SCIL Lender shall take any action to
protect or enforce its rights arising out of this Agreement or the SCIL Notes
(including exercising any rights of setoff) without first obtaining the prior
written consent of SCIL Agent and Requisite SCIL Lenders, it being the intent
of SCIL 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 SCIL Agent or Requisite SCIL Lenders.  With respect to any action by SCIL Agent to
enforce the rights and remedies of SCIL Agent and the SCIL Lenders under this
Agreement and the other Loan Documents, each SCIL Lender hereby consents to the
jurisdiction of the court in which such action is maintained, and agrees to
deliver its SCIL Notes to SCIL Agent to the extent necessary to enforce the
rights and remedies of SCIL Agent for the benefit of the SCIL 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, SCIL Agent, SCIL 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 SCIL Agent and all SCIL Lenders.  Any such purported assignment, transfer,
hypothecation or other conveyance by any Credit Party without the prior express
written consent of SCIL Agent and all SCIL 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, SCIL Agent and SCIL 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 SCIL Agent or any SCIL 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 amendments to the definition of the term
“Qualified Assignee”, which shall be in writing and signed by Requisite SCIL
Lenders, and except for actions expressly permitted to be taken by SCIL 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 SCIL Agent and Borrower, and by Requisite SCIL
Lenders or all affected SCIL 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 SCIL 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 SCIL
Agent, Requisite SCIL 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 the last sentence of Section 1.5(e)
shall be effective unless the same shall be in writing and signed by SCIL
Agent, Requisite SCIL 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 set forth in the last
sentence of Section 1.5(e) unless the same shall be in writing and
signed by SCIL Agent, Requisite SCIL Lenders and Borrower.


 


(c)           No amendment, modification, termination or waiver
shall, unless in writing and signed by SCIL Agent and each SCIL Lender directly
affected thereby:  (i) increase the
principal amount of any SCIL Lender’s Pro Rata Share (which action shall be
deemed only to affect those SCIL Lenders whose Pro Rata Share are increased and
must be approved by Requisite SCIL Lenders, including those SCIL Lenders whose
Pro Rata Share are increased); (ii) reduce the principal of, rate of interest
on or Fees payable with respect to the SCIL Loan of any affected SCIL 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 the SCIL Loan of any affected SCIL Lender; (iv)
waive, forgive, defer, extend or postpone any payment of interest or Fees as to
any affected SCIL 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 SCIL Lenders); (vi) change
the percentage of the Commitments or of the aggregate unpaid principal amount
of the SCIL Loan that shall be required for SCIL Lenders or any of them to take
any action hereunder (which action shall be deemed to directly affect all SCIL
Lenders); and (vii) amend or waive this Section 11.2 or the
definitions of the terms “Requisite SCIL Lenders” insofar as such definition
affects the substance of this Section 11.2 (which action shall be
deemed to directly affect all SCIL Lenders). 
Furthermore, no amendment, modification, termination or waiver affecting
the rights or duties of SCIL Agent under this Agreement or any other Loan
Document shall be effective unless in writing and


 


52





















 


signed by SCIL Agent in addition to SCIL Lenders required
hereinabove to take such action.  Each
amendment, modification, termination or waiver shall be effective only in the
specific instance and for the specific purpose for which it was given.  No amendment, modification, termination or
waiver shall be required for SCIL Agent to take additional Collateral pursuant
to any Loan Document. No amendment, modification, termination or waiver of any
provision of any SCIL Note shall be effective without the written concurrence
of the holder of that SCIL 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 SCIL
Notes at the time outstanding and each future holder of the SCIL Notes.


 


(d)           If, in connection with any proposed amendment,
modification, waiver or termination (a “Proposed Change”): requiring the
consent of all affected SCIL Lenders, the consent of Requisite SCIL Lenders is
obtained, but the consent of other SCIL Lenders whose consent is required is
not obtained (any such SCIL Lender whose consent is not obtained being referred
to as a “Non-Consenting SCIL Lender”), then, so long as SCIL Agent is
not a Non-Consenting SCIL Lender, at Borrower’s request SCIL Agent, or a Person
reasonably acceptable to SCIL Agent, shall have the right with SCIL Agent’s consent
and in SCIL Agent’s sole discretion (but shall have no obligation) to purchase
from such Non-Consenting SCIL Lenders, and such Non-Consenting SCIL Lenders
agree that they shall, upon SCIL Agent’s request, sell and assign to SCIL Agent
or such Person, all of the Pro Rata Share of such Non-Consenting SCIL Lenders
for an amount equal to the principal balance of the SCIL Loan held by the
Non-Consenting SCIL 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) and a release of all
claims against SCIL Agent and SCIL 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,
SCIL 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) SCIL 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) SCIL Agent (and, with respect
to clauses (c) and (d) below, all SCIL Lenders) for all reasonable
out-of-pocket fees, costs and expenses, including the reasonable fees, costs
and expenses of counsel or other advisors (including environmental and
management consultants and appraisers) incurred in connection with the
negotiation, preparation and filing and/or recordation of the Loan Documents
and incurred in connection with:


 


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


 


53





















 


(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 SCIL Loan made pursuant hereto or its rights hereunder or
thereunder;


 


(c)           any litigation, contest, dispute, suit, proceeding or
action (whether instituted by SCIL Agent, any SCIL 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 SCIL 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 SCIL Loan during the pendency of one or more Events of
Default; provided that in the
case of reimbursement of counsel for SCIL Lenders other than SCIL Agent, such
reimbursement shall be limited to one counsel for all such SCIL 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 SCIL Agent or
any SCIL Lender against any or all of the Credit Parties or any other Person
that may be obligated to SCIL Agent or any SCIL 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 SCIL Loan during the pendency of
one or more Events of Default; provided
that in the case of reimbursement of counsel for SCIL Lenders other than SCIL
Agent, such reimbursement shall be limited to one counsel for all such SCIL
Lenders;


 


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


 


(f)            efforts to (i) monitor the SCIL Loan 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.  Without limiting the
generality of the foregoing, such expenses, costs, charges and fees may
include: fees, costs and expenses of accountants, environmental advisors,
appraisers, investment bankers, management and other consultants and
paralegals; court costs and expenses; photocopying and duplication expenses;
court reporter fees, costs and expenses; long distance telephone charges; air
express charges; telegram or telecopy charges; secretarial overtime charges;
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


 


54





















 


auditors, a per diem charge at the SCIL Agent’s 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 Closing Date, the SCIL Agent’s
applicable rate for auditors is $750 per person per day.


 


11.4         No
Waiver.  SCIL Agent’s or any SCIL
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 SCIL Agent or such SCIL 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 SCIL
Agent or any SCIL Lender, unless such waiver or suspension is by an instrument
in writing signed by an officer of or other authorized employee of SCIL Agent
and the applicable required SCIL Lenders and directed to Borrower specifying
such suspension or waiver.


 


11.5         Remedies.  SCIL Agent’s and SCIL Lenders’ rights and
remedies under this Agreement shall be cumulative and nonexclusive of any other
rights and remedies that SCIL Agent or any SCIL 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.  SCIL Agent and each SCIL Lender agree to use
commercially reasonable efforts (equivalent to the efforts SCIL Agent or such
SCIL 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 SCIL Agent and any SCIL
Lender may disclose such information (a) to Persons employed or engaged by SCIL
Agent or such SCIL Lender, including any agents that have been granted access
pursuant to Section 1.14; (b) to any bona fide assignee or participant
or potential assignee or participant that has agreed to comply with the
covenant contained in this Section 11.8 (and any such bona fide assignee
or participant or potential assignee or participant may disclose such
information to


 


55





















 


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 SCIL Agent or such SCIL Lender to be compelled by any
court decree, subpoena or legal or administrative order or process; (d) as, on
the advice of SCIL Agent’s or such SCIL 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 SCIL Agent or such SCIL
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 SCIL Loan 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 SCIL 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 SCIL Loan; or (h) that ceases to be confidential through no fault of
SCIL Agent or any SCIL 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 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, SCIL
AGENT AND SCIL 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 SCIL AGENT, SCIL 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 SCIL
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 SCIL 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


 


56





















 


OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT
PARTY AT THE ADDRESS SET FORTH IN ANNEX G 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 G 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 SCIL Agent)
designated in Annex G 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


 


57





















 


TO RESOLVE ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG SCIL AGENT, SCIL 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 SCIL Agent or any SCIL Lender of a tombstone or similar
advertising material relating to the financing transactions contemplated by
this Agreement.  SCIL Agent or such SCIL
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.  SCIL Agent reserves the right
to provide to industry trade organizations information necessary and customary
for inclusion in league table measurements.


 


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


 


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


 


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


 


[Signature
Page Follows]


 


58





















 


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:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SCIL AGENT AND SCIL
  LENDERS:

  
	
   

  	
   

  
	
   

  	
  GENERAL
  ELECTRIC CAPITAL

  
	
   

  	
  CORPORATION,
  as SCIL Agent and SCIL Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Duly
  Authorized Signatory

  
						



 


 


[Signature Page to the SCIL 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:

  	
   

  	
   

  
						



 





















 


	
   

  	
  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:

  	
   

  	
   

  
						



 





















 


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 E.


 


“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
Projections” has the meaning ascribed to it in clause(xiv)(B) 
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 SCIL Agent
and SCIL 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 SCIL Agent’s and SCIL 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
B.


 


“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 SCIL Agent (in consultation with Requisite SCIL 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
SCIL Lender” has the meaning ascribed to it in Section 1.16(d).


 


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


 


A-2





















 


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) SCIL Agent and each SCIL 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.


 


“Agreement”
means the SCIL Credit Agreement by and among Borrower, the other Credit Parties
party thereto, GE Capital, as SCIL Agent and SCIL Lender and the other SCIL
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.


 


“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 B.


 


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


 


“Borrower
Mexican Pledge Agreement” means the Pledge Agreement of even date herewith
executed by Borrower in favor of SCIL Agent, on behalf of itself and SCIL
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 of even date herewith executed
by Borrower in favor of SCIL Agent, on behalf of itself and SCIL 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 of even date herewith
executed by Borrower in favor of SCIL Agent, on behalf of itself and SCIL
Lenders, 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.


 


“Borrower
Mexican Pledge Agreement” means the Pledge Agreement of even date herewith
executed by Borrower in favor of SCIL Agent, on behalf of itself and SCIL
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.


 


A-3





















 


“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
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 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


 


A-4





















 


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
C.


 


“Closing
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 SCIL Agent and the Requisite SCIL Lenders.


 


“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, SCIL
Agent’s or any SCIL 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 security interest or Lien in favor of SCIL Agent, on behalf
of itself and SCIL Lenders, to secure the Obligations.


 


A-5





















 


“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.


 


“Collection
Account” means that certain account of SCIL Agent, account number
502-328-54 in the name of SCIL 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 SCIL Agent as the “Collection Account.”


 


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


 


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


 


“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 SCIL 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 SCIL Agent, on behalf of itself and SCIL
Lenders on such financial assets, and agrees to follow the instructions or
entitlement orders of First Lien Agent (or SCIL Agent following a First Lien
Payment Event) 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 SCIL Agent, on behalf of itself and SCIL 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


 


A-6





















 


Copyright Office or in any similar office or agency of
the United States, any state or territory thereof, or any other country or any
political subdivision thereof, and (b) all reissues, extensions or renewals
thereof.


 


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


 


“Credit
Parties” means 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 First Lien Revolving Loan and
the First Lien 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.


 


“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.


 


A-7





















 


“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 SCIL 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-8





















 


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.


 


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


 


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


 


A-9





















 


“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.


 


“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


 


A-10





















 


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 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 SCIL 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 SCIL Agent or any SCIL 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 D.


 


A-11





















 


“First
Lien Agent” means GE Capital in its capacity as agent for the First Lien
Lenders or any successor agent for the First Lien Lenders.


 


“First Lien
Credit Agreement” has the meaning set forth in the Recitals hereto.


 


“First Lien
Lenders” has the meaning set forth in the Recitals hereto.


 


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


 


“First Lien
Loans has the meaning set forth in the Recitals hereto.


 


“First
Lien Payment Event” has the meaning ascribed to it in Section 1.3(b)(ii).


 


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


 


“First Lien
Revolving Loans” shall mean the “Revolving Loans” as defined in Annex A to
the First Lien Credit Agreement.


 


“First Lien
Payment Event” has the meaning ascribed to it in Section 1.3(b).


 


“First Lien
Swing Line Loans” shall mean the “Swing Line Loans” as defined in Annex A
to the Senior Credit Agreement.


 


“First Lien
Term Loan” shall mean the “Term Loan” as defined in Annex A to the Senior
Credit Agreement.


 


“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-12





















 


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.


 


“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 SCIL Lender
or SCIL 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 First Lien Loans 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 E to the
Agreement.


 


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


 


A-13





















 


“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 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 SCIL
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


 


A-14





















 


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 SCIL Agent and SCIL Lenders in respect of the
Obligations.


 


“Guarantors”
means each Secured Guarantor and each other Person, if any, that executes a
guaranty or other similar agreement in favor of SCIL Agent, for itself and the
ratable benefit   of SCIL 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
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.


 


A-15





















 


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


 


“Indebtedness”
means, with respect to any Person, without duplication (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property
payment for which is deferred 12 months or more, but excluding obligations to
trade creditors incurred in the ordinary course of business that are unsecured
and not overdue by more than 6 months unless being contested in good faith, (b)
all reimbursement and other obligations with respect to letters of credit,
bankers’ acceptances and surety bonds, whether or not matured, (c) all
obligations evidenced by notes, bonds, debentures or similar instruments, (d)
all indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (e)
all Capital Lease Obligations and the present value (discounted at the Index
Rate as in effect on the Closing Date) of future rental payments under all
synthetic leases, (f) all obligations of such Person under commodity purchase
or option agreements or other commodity price hedging arrangements, in each
case whether contingent or matured, (g) all obligations of such Person under
any 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 the SCIL 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.


 


A-16





















 


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


 


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


 


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


 


“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 SCIL Agent and GE
Capital as agent for the holders of the First Lien Loans, 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 SCIL 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 the SCIL
Loan has been paid in full and (y) the Scheduled 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


 


A-17





















 


liability
companies, partnership interests, treasuries, certificates of deposit, and
mutual fund shares; (b) all securities entitlements of any Credit Party,
including the rights of such Credit Party to any securities account and the
financial assets held by a securities intermediary in such securities account
and any free credit balance or other money owing by any securities intermediary
with respect to that account; (c) all securities accounts of any Credit Party;
(d) all commodity contracts of any Credit Party; and (e) all commodity accounts
held by any Credit Party.


 


“IRB Loan”
shall mean Indebtedness evidenced by any of the following: (a) the Loan
Agreement dated as of September 1, 1994, between South Carolina Jobs-Economic
Development Authority (the “Authority”) and Borrower relating to
$7,700,000 Variable Rate Demand Industrial Development Revenue Bonds (Roller
Bearing Company of America, Inc. Project) Series 1994A, (b) the Trust Indenture
dated as of September 1, 1994, by and between the Authority and Mark Twain
Bank, as trustee, with respect to the bonds described in clause (a) of
this definition, (c) the Loan Agreement dated as of September 1, 1994, between
the Authority and Borrower relating to $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 SCIL Agent,
in an amount of at least $10,000,000.


 


“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.


 


A-18





















 


“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 SCIL 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 SCIL Agent equal
to:


 


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


 


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


 


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


 


A-19





















 


“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 Intercreditor
Agreement, the Environmental Indemnity Agreement, the GE Capital Fee Letter and
all other agreements, instruments, documents and certificates identified in the
Closing Checklist executed and delivered to, or in favor of, SCIL Agent or any
SCIL 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 SCIL Agent or any SCIL
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 First Lien Credit Agreement or the First Lien Loan
Documents or any agreement, document or instrument delivered by the Credit
Parties to the Trustee relating to the Refinancing.


 


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


 


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


 


“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 SCIL Agent’s Liens, on behalf of itself and SCIL Lenders, on
the Collateral or the priority of such Liens, or (d) SCIL Agent’s or any SCIL
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 SCIL Lenders as of that date.


 


A-20





















 


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


 


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


 


“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 SCIL Agent on behalf of itself and
SCIL Lenders with respect to the Mortgaged Properties, all in form and
substance reasonably satisfactory to SCIL 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 SCIL
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 SCIL Agent to become a SCIL Lender under this Agreement in connection with
a Commitment Increase.


 


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


 


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


 


“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 SCIL Agent or any SCIL 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.


 


“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 SCIL Agent, executed on
behalf of Holdings, Borrower or any other Credit Party, in each case in
accordance with the Agreement.


 


“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.


 


A-21





















 


“Patent
Security Agreements” means the Patent Security Agreements made in favor of
SCIL Agent, on behalf of itself and SCIL 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 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
SCIL 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 SCIL Agent, at the expense
of the Borrower, by an independent, third-party appraiser designated by the
SCIL 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.


 


A-22





















 


“Permitted
Encumbrances” means the following encumbrances: (a) Liens for taxes or
assessments or other governmental Charges not yet due and payable or which are
being contested in accordance with Section 5.2(b); (b) pledges or
deposits of money securing statutory obligations under workmen’s compensation,
unemployment insurance, social security or public liability laws or similar
legislation (excluding Liens under ERISA); (c) pledges or deposits of money
securing bids, tenders, contracts (other than contracts for the payment of
money) or leases to which any Credit Party is a party as lessee made in the
ordinary course of business; (d) inchoate and unperfected workers’,
mechanics’  or similar liens arising in
the ordinary course of business, so long as such Liens attach only to
Equipment, Fixtures and/or Real Estate; (e) carriers’, warehousemen’s,
suppliers’ or other similar possessory liens arising in the ordinary course of
business and securing liabilities not yet due and payable or which are being
contested in accordance with Section 5.2(b), so long as such Liens
attach only to Inventory; (f) deposits securing, or in lieu of, surety, appeal
or customs bonds in proceedings to which any Credit Party is a party; (g) any
attachment or judgment lien not constituting an Event of Default under Section
8.1(j); (h) zoning restrictions, easements, licenses, or other restrictions
on the use of any Real Estate or other minor irregularities in title (including
leasehold title) thereto, so long as the same do not materially impair the use,
value, or marketability of such Real Estate; (i) presently existing or
hereafter created Liens in favor of SCIL Agent, on behalf of SCIL 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


 


A-23





















 


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, SCIL Agent will be granted a perfected Lien
(subject to 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 SCIL
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 SCIL Agent, or (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) (capitalized terms used
in this definition which are not defined in this Agreement shall have the
meanings ascribed to such terms in the First Lien Credit Agreement):


 


(i)            SCIL Agent shall receive at least
thirty (30) days’ (or any shorter period if requested by such Credit Party and
consented to by SCIL 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 SCIL Agent or any
SCIL 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) First Lien Revolving Loans made under the First Lien Credit Agreement
that are made in accordance with the terms of Section 2.3 or First Lien Loans
made in respect of an Increased Commitment under the First Lien Credit
Agreement or an additional SCIL Loan made in respect of a SCIL Loan Commitment
Increase under this Agreement, (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


 


A-24





















 


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 under and as defined in the First Lien
Credit Agreement;


 


(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”);


 


(vi)          such Qualified Target is a
Domestic Person and at the closing of the Domestic Acquisition of such
Qualified Target, SCIL Agent will be granted a 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 SCIL Agent in connection therewith, and SCIL 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 SCIL Agent;


 


(vii)         at the time of such Domestic
Acquisition and immediately after giving effect thereto (including any First
Lien Revolving Loans, First Lien Loans made in respect of an Increased
Commitment under the First Lien Credit Agreement or an additional SCIL Loan
made in respect of a SCIL Loan Commitment Increase under this Agreement 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, SCIL 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, SCIL 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)            SCIL 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


 


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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 SCIL Agent
in writing) prior to the date of such Domestic Acquisition, SCIL Agent shall
have received copies of the draft acquisition agreement and related agreements,
instruments, and other documents reasonably requested by SCIL 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 SCIL
Agent:


 


(A)          a pro forma consolidated balance sheet, income
statement and cash flow statement of Holdings and its Subsidiaries (the “Acquisition
Pro Forma”), based on recent financial statements, which shall fairly
present in all material respects the assets, liabilities, financial condition
and results of operations of Holdings and its Subsidiaries in accordance with
GAAP consistently applied, but taking into account such Permitted Loan Funded
Acquisition and the funding of the First Lien Revolving Loan and/or SCIL Loan
in connection therewith, including detailed acquisition adjustments acceptable
to SCIL 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 First Lien 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
E for the four quarter period reflected in the Compliance Certificate most
recently delivered to SCIL Agent pursuant to Annex D 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 SCIL 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


 


A-26





















 


substantially the same authority and
responsibility or other responsible officer acceptable to
SCIL 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 E 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


 


(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.


 


“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 or by a Foreign Acquisition
shall be a “Permitted Non-Loan Funded Acquisition” only upon
satisfaction of each of the following conditions):


 


(i)            SCIL 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;


 


(ii)           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;


 


(iii)          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 SCIL Agent has no Liens, (B) unsecured
Indebtedness issued to seller(s) in such Foreign Acquisition; (C) cash
which is provided by


 


A-27





















 


Foreign
Subsidiaries, (D) Stockholder Proceeds or (E) combination of any of
the foregoing clauses (A), (B), (C) or (D);


 


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


 


(v)           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;


 


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


 


(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 SCIL 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 E for the four quarter
period reflected in the Compliance Certificate most recently delivered to SCIL
Agent pursuant to Annex D 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 SCIL 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 SCIL 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


 


A-28





















 


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


 


(vii)         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 SCIL Agent in its reasonable discretion, on the date of
determination); and


 


(viii)        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 SCIL 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 SCIL
Lenders in writing).


 


“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.


 


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


 


“Plan”
means, at any time, an “employee benefit plan,” as defined in Section 3(3) of
ERISA, that any 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 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.


 


A-30





















 


“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 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 SCIL Lender, (a) prior to the
SCIL Loan Commitment Termination Date, with respect to the SCIL Loan, the
percentage obtained by dividing (i) the SCIL Loan Commitment of that SCIL
Lender by (ii) the aggregate SCIL Loan Commitments of all SCIL Lenders, as any
such percentages may be adjusted by assignments permitted pursuant to Section
9.1 and (b) with respect to the SCIL Loan on and after the SCIL Loan
Commitment Termination Date, the percentage obtained by dividing (i) the
aggregate outstanding principal balance of the SCIL Loan held by that SCIL
Lender, by (ii) the outstanding principal balance of the SCIL Loan held by all
SCIL Lenders.


 


“Qualified
Assignee” means (a) any SCIL Lender, any Affiliate of any SCIL Lender and,
with respect to any SCIL 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 SCIL
Lender or by an Affiliate of such investment advisor, and (b) any commercial
bank, savings and loan association or savings bank or any other entity which is
an “accredited investor” (as defined in Regulation D under the Securities Act
or 1933) which extends credit or buys loans as one of its businesses, including
insurance companies, mutual funds, lease financing companies and commercial
finance companies, in each case, which has a rating of BBB or higher from
S&P and a rating of Baa2 or higher from Moody’s at the date that it becomes
a SCIL Lender and which, through its applicable lending office, is capable of
lending to Borrower without the imposition of any withholding or similar taxes;
provided that no Person
determined by SCIL Agent to be acting in the capacity of a vulture fund or
distressed debt purchaser shall be a Qualified Assignee and no Person or
Affiliate of such Person (other than a Person that is already a SCIL 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-31





















 


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


 


“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 SCIL Loan and
the First Lien Loan that Borrower causes to be paid to the Trustee on the
Closing 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.


 


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


 


“Related
Transactions” means the borrowing under the SCIL Loan on the Closing Date,
the Refinancing, the borrowing of the First Lien 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 First Lien Loan
Documents 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
SCIL Lender” has the meaning ascribed to it in Section 1.16(d).


 


“Requisite SCIL
Lenders” means SCIL Lenders having (a) more than 51% of the
Commitments of all SCIL 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 SCIL Lenders
shall exist, “Requisite SCIL Lenders” shall mean both such SCIL Lenders.


 


“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


 


A-32





















 


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


 


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


 


“Scheduled
Termination Date” means the earliest of (a) June 29, 2011, (b) the date of
termination of SCIL Lenders’ obligations to permit existing SCIL Loan to remain
outstanding pursuant to Section 8.2(b), and (c) the date of prepayment
in full in cash by Borrower of the SCIL Loan.


 


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


 


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


 


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“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
Loan Documents minus (ii) the sum of (x) the Credit Parties’
consolidated unrestricted cash and Cash Equivalents (as defined in the First
Lien Credit Agreement) on hand in excess of $1,000,000 but not in excess of
$4,000,000 (other than any cash or Cash Equivalents (as defined in the First
Lien Credit Agreement) constituting proceeds of an asset disposition by any
Credit Party for which SCIL Agent and First Lien Agent have received notice
from Borrower pursuant to Section 1.3(b)(ii) hereof and Section
1.3(b)(ii) of the First Lien Credit Agreement, respectively, that such
proceeds will be reinvested in fixed assets) and (y) the Credit Parties’
consolidated unrestricted cash and Cash Equivalents (as defined in the First
Lien Credit Agreement) 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 SCIL Agent and First
Lien Agent (in lieu of its right retain such proceeds for reinvestment in fixed
assets pursuant to Section 1.3(b)(ii) hereof and Section 1.3(b)(ii)
of the First Lien Credit Agreement) that such proceeds will be used to prepay
the First Lien Loans in accordance with the terms and provisions of the
First Lien Credit Agreement and, following a First Lien Payment Event, the SCIL
Loans in accordance with the terms and provisions hereof (provided,
that with respect to the First Lien 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.


 


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


 


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


 


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


 


“SCIL Loan
Commitment” means (a) as to any SCIL Lender with a SCIL Loan Commitment,
the commitment of such SCIL Lender to make its Pro Rata Share of the SCIL Loan
as set forth on Annex H to the Agreement or in the most recent
Assignment Agreement executed by such SCIL Lender, and (b) as to all SCIL
Lenders with a SCIL Loan Commitment, the aggregate commitment of all SCIL
Lenders to make the SCIL Loan, which aggregate commitment shall be Forty-Five
Million Dollars ($45,000,000) on the Closing Date; provided that, upon satisfaction of the conditions to the
increase in SCIL Loan Commitments specified in Section 2.2, SCIL Loan
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 commitments under the First Lien Credit Agreement Loan
effectuated after the Closing Date, (ii) an amount that, after 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 “SCIL Loan Commitment Increase” and the aggregate
amount of all such increases permitted hereunder being the “SCIL Loan
Commitment Increase Cap”) and such amount may be reduced,


 


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amortized
or adjusted from time to time in accordance with the Agreement.  After advancing the SCIL Loan (including,
without limitation, after advancing the SCIL Loan pursuant to the SCIL Loan
Commitment Increase), each reference to a SCIL Lender’s SCIL Loan Commitment
shall refer to that SCIL Lender’s Pro Rata Share of the outstanding SCIL Loan.


 


“SCIL Loan
Commitment Termination Date” means the later of (1) the date on which each
SCIL Lender has funded its SCIL Loan Commitment as in effect on the Closing
Date to Borrower and (2) the Closing Date.


 


“Security
Agreement” means the Security Agreement of even date herewith entered into
by and among SCIL Agent, on behalf of itself and SCIL 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 SCIL Agent (ii) that is a Domestic Subsidiary of Borrower
(other than Bunting Acquisition Corp., a Delaware corporation), (iii) that has
granted SCIL 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 SCIL Agent has received all opinions, certificates and other
documents requested by SCIL Agent, and (v) whose outstanding equity interests
have been pledged to SCIL 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 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 (as defined in the First
Lien Credit Agreement) on hand in excess of $1,000,000 but not in excess of
$4,000,000 (other than any cash or Cash Equivalents (as defined in the First
Lien Credit Agreement) constituting proceeds of an asset disposition by any Credit
Party for which SCIL Agent and First Lien Agent have received notice from
Borrower pursuant to Section 1.3(b)(ii) hereof and Section 1.3(b)(ii)
of the First Lien Credit Agreement, respectively, that such proceeds will be
reinvested in fixed assets) and (y) the Credit Parties’ consolidated
unrestricted cash and Cash Equivalents (as defined in the First Lien Credit
Agreement) 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 SCIL Agent and First Lien Agent (in
lieu of its right retain such proceeds for reinvestment in fixed assets
pursuant to Section 1.3(b)(ii) hereof and Section 1.3(b)(ii) of
the First Lien Credit Agreement) that such proceeds will be used to prepay the
First Lien Loans in accordance with the terms and provisions of the
First Lien Credit Agreement and, following a First Lien Payment Event, the SCIL
Loans in accordance with the terms and provisions hereof (provided, that with respect to the First
Lien Revolving Loan, Senior Debt shall include the


 


A-35





















 


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” shall
have the same meaning as set forth for such term in the First Lien Credit
Agreement.


 


“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).


 


“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
SCIL Agent and SCIL Lenders and subordinated to the First Lien Obligations in a
manner and form satisfactory to the First Lien Agent and the First Lien
Lenders, in each case in their sole discretion as to right and time of payment
and as to any other terms, rights and remedies thereunder. 


 


A-36





















 


“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 Closing Date executed
by each Secured Guarantor in favor of SCIL Agent, on behalf of itself and SCIL
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.


 


“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 SCIL Agent or a SCIL Lender and (ii) franchise taxes (imposed in
lieu of taxes imposed on or measured by net income) of SCIL Agent or a SCIL
Lender, in each case, by the jurisdictions under the laws of which SCIL Agent
and SCIL Lenders are organized or conduct business or any political subdivision
thereof.


 


“Termination
Date” means the date on which (a) the SCIL Loans have been indefeasibly
repaid in full and (b) all other Obligations under the Agreement and the other
Loan Documents have been completely discharged.


 


A-37





















 


“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 SCIL Agent, on behalf of SCIL 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.


 


“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.


 


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


 


“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 D.


 


Rules of
construction with respect to accounting terms used in the Agreement or the
other Loan Documents shall be as set forth in Annex E.  All other undefined terms contained


 


A-38





















 


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.


 


A-39





















 


ANNEX B (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 Closing Date and until the Termination Date, Borrower shall (i) establish
lock boxes (“Lock Boxes”) or, at SCIL 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 Closing Date, Borrower shall have established a concentration
account in its name (such account and any replacement or successor thereof, the
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”) which bank shall be reasonably
satisfactory to SCIL Agent.


 


(b)           [Intentionally
Omitted]


 


(c)           On
or before the Closing Date (or such later date as SCIL 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 SCIL Agent, for the benefit of itself
and SCIL Lenders, and Borrower and the Secured Guarantors, as applicable, in
form and substance reasonably acceptable to SCIL Agent, which shall become
operative on or prior to the Closing Date. 
Subject to the Intercreditor Agreement, 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 First Lien
Agent and after the occurrence of a First Lien Payment Event, SCIL Agent, on
behalf of itself and SCIL 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 Closing 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
SCIL Agent (which Activation Notice may be given by SCIL Agent following (but
not before) a First Lien Payment Event has occurred 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


 


B-1





















 


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 SCIL 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 SCIL 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.


 


(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 SCIL Agent a tri-party blocked account agreement, in form and
substance reasonably satisfactory to SCIL Agent.  Following (but not before) a First Lien
Payment Event, 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 SCIL Agent (so long as a First Lien Payment Event has
occurred) that the creditworthiness of any bank holding an account is no longer
acceptable in SCIL Agent’s reasonable judgment, or as promptly as practicable
and in any event within sixty (60) days following notice from SCIL 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
SCIL Agent’s liability under any tri-party blocked account agreement with such
bank is no longer acceptable in SCIL 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 SCIL Loan and
all other Obligations, and in which Borrower and each Secured Guarantor shall
have granted a Lien to SCIL Agent (subject to no Lien other than Permitted
Encumbrances), on behalf of itself and SCIL Lenders, pursuant to the Security
Agreement.


 


(f)            Subject
to the Intercreditor Agreement, all amounts deposited in the Collection Account
shall be deemed received by SCIL Agent in accordance with Section 1.10
and shall be applied (and allocated) by SCIL 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)           Subject
to the Intercreditor Agreement, 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 SCIL
Agent, for the benefit of itself


 


B-2





















 


and
SCIL 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)           Any
provision of this Annex B 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 B 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 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 B 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 B 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 B 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


 


B-3





















 


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.


 


B-4





















 


ANNEX C (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 SCIL Agent in form and substance
satisfactory to SCIL Agent on or prior to the Closing 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]


 


C-1





















 


ANNEX D (Section 4.1(a))


to


CREDIT
AGREEMENT


 


FINANCIAL STATEMENTS AND
PROJECTIONS — REPORTING


 


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


 


(a)           Monthly
Financials.  To SCIL Agent for
distribution to the SCIL 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
SCIL 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 SCIL Agent and SCIL 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 SCIL Agent for distribution
to the SCIL 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


 


D-1





















 


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 the same authority and
responsibility or otherwise acceptable to SCIL 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 SCIL Agent for distribution
to the SCIL 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 SCIL Agent for distribution to the SCIL 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 SCIL 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 SCIL 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


 


D-2





















 


Fiscal
Year and for the period then ended, and that there was no Default or Event of
Default in existence as of such time or, if a Default or Event of Default has
occurred and is continuing, describing the nature thereof and all efforts
undertaken to cure such Default or Event of Default.


 


(e)           Management
Letters.  To SCIL Agent for
distribution to the SCIL 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 SCIL Agent for
distribution to the SCIL 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 SCIL
Agent for distribution to the SCIL 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 SCIL
Agent for distribution to the SCIL 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 SCIL Agent,
supplemental disclosures, if any, required by Section 5.6.


 


(j)            Litigation.  To SCIL Agent for distribution to the SCIL
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 SCIL Agent, disclosure
of losses or casualties required by Section 5.4.


 


D-3





















 


(l)            Lease
Default Notices.  To SCIL 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 SCIL Agent may reasonably request.


 


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


 


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


 


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


 


D-4





















 


ANNEX E (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 Ratio as of the last day of such Fiscal Quarter and for
the 12-month period then ended of not more than the following:


 


E-1





















 


	
  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
E, 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 First Lien 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 First Lien 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 E, 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 First Lien 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 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


 


E-2





















 


covenants,
standards or terms used in the Agreement or any other Loan Document, then
Borrower, SCIL Agent and SCIL 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
SCIL Lenders to any required amendments of such provisions shall be sufficient
to bind all SCIL Lenders.  If SCIL Agent,
Borrower and Requisite SCIL 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 SCIL Agent, Borrower and
Requisite SCIL 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 SCIL Agent or as of the
last day of any specified measurement period, regardless of when the Financial
Statements reflecting such breach are delivered to SCIL 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
Closing Date (including capitalization of costs and expenses or payment of
pre-Closing Date liabilities) shall be treated as expenses in the period the
expenditures are made and deducted as part of the calculation of EBITDA in such
period.


 


E-3





















 


ANNEX F (Section 9.9(a))


to


CREDIT
AGREEMENT


 


SCIL
LENDERS’ WIRE TRANSFER INFORMATION


 


	
  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

  



 


F-1





















 


ANNEX G (Section 11.10)


to


CREDIT
AGREEMENT


 


NOTICE
ADDRESSES


 


(A)          If to SCIL 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


 


G-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


 


G-2





















 


ANNEX H
(from Annex A - Commitments definition)


to


CREDIT
AGREEMENT


 


PRO RATA
SHARE


 


	
  Commitments

  	
   

  	
  SCIL
  Lender(s)

  	
   

  	
  Pro Rata
  Share

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SCIL Loan Commitment: $45,000,000

  	
   

  	
  General Electric Capital Corporation

  	
   

  	
  100%

  



 


H-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)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 





















 


	
   

  	
  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.


 





















 


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