Exhibit
10.35


 




 





AMENDED AND RESTATED
CREDIT AGREEMENT


 


Dated as of June 19, 2003


 


among


 


ROLLER BEARING COMPANY OF
AMERICA, INC.


 


as Borrower,


 


THE OTHER CREDIT PARTIES
SIGNATORY HERETO,


 


as Credit Parties,


 


THE LENDERS SIGNATORY
HERETO


 


FROM TIME TO TIME,


 


as Lenders,


 


GENERAL ELECTRIC CAPITAL
CORPORATION,


 


as Agent and Lender,


 


and


 


GECC CAPITAL MARKETS
GROUP, INC.


 


as Lead Arranger




 





 

















 


TABLE OF CONTENTS


 


	
  1.

  	
  AMOUNT AND TERMS OF CREDIT

  
	
   

  	
  1.1

  	
  Credit Facilities.

  
	
   

  	
  1.2

  	
  Letters of Credit.

  
	
   

  	
  1.3

  	
  Prepayments.

  
	
   

  	
  1.4

  	
  Use of Proceeds

  
	
   

  	
  1.5

  	
  Interest and
  Applicable Margins.

  
	
   

  	
  1.6

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

  
	
   

  	
  1.7

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

  
	
   

  	
  1.8

  	
  Cash Management Systems

  
	
   

  	
  1.9

  	
  Fees.

  
	
   

  	
  1.10

  	
  Receipt of Payments

  
	
   

  	
  1.11

  	
  Application and
  Allocation of Payments.

  
	
   

  	
  1.12

  	
  Loan Account and Accounting

  
	
   

  	
  1.13

  	
  Indemnity.

  
	
   

  	
  1.14

  	
  Access

  
	
   

  	
  1.15

  	
  Taxes.

  
	
   

  	
  1.16

  	
  Capital
  Adequacy; Increased Costs; Illegality.

  
	
   

  	
  1.17

  	
  Credit Support

  
	
   

  	
  1.18

  	
  Conversion to Dollars

  
	
   

  	
  1.19

  	
  Judgment
  Currency; Contractual Currency.

  
	
   

  	
   

  	
   

  
	
  2.

  	
  CONDITIONS PRECEDENT

  
	
   

  	
  2.1

  	
  Conditions to the
  Initial Loans

  
	
   

  	
  2.2

  	
  Further Conditions to
  Each Loan

  
	
   

  	
  2.3

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

  
	
   

  	
   

  	
   

  
	
  3.

  	
  REPRESENTATIONS AND
  WARRANTIES

  
	
   

  	
  3.1

  	
  Corporate
  Existence; Compliance with Law

  
	
   

  	
  3.2

  	
  Executive Offices, Collateral
  Locations, FEIN

  
	
   

  	
  3.3

  	
  Corporate Power, Authorization,
  Enforceable Obligations

  
	
   

  	
  3.4

  	
  Financial
  Statements and Projections

  
	
   

  	
  3.5

  	
  Material Adverse Effect

  
	
   

  	
  3.6

  	
  Ownership of Property; Liens

  
	
   

  	
  3.7

  	
  Labor Matters

  
	
   

  	
  3.8

  	
  Ventures, Subsidiaries and
  Affiliates; Outstanding Stock and Indebtedness

  
	
   

  	
  3.9

  	
  Government Regulation

  
	
   

  	
  3.10

  	
  Margin Regulations

  
	
   

  	
  3.11

  	
  Taxes

  
	
   

  	
  3.12

  	
  ERISA.

  
	
   

  	
  3.13

  	
  No Litigation

  
	
   

  	
  3.14

  	
  Brokers

  
	
   

  	
  3.15

  	
  Intellectual Property

  



 


i

















 


	
   

  	
  3.16

  	
  Full Disclosure

  
	
   

  	
  3.17

  	
  Common Enterprise

  
	
   

  	
  3.18

  	
  Insurance

  
	
   

  	
  3.19

  	
  Deposit and Disbursement
  Accounts

  
	
   

  	
  3.20

  	
  Government Contracts

  
	
   

  	
  3.21

  	
  Customer and Trade
  Relations

  
	
   

  	
  3.22

  	
  Agreements and Other Documents

  
	
   

  	
  3.23

  	
  Solvency

  
	
   

  	
  3.24

  	
  Status of Holdings

  
	
   

  	
  3.25

  	
  Status of Schaublin Holding

  
	
   

  	
  3.26

  	
  Subordinated Debt; other
  Indebtedness

  
	
   

  	
  3.27

  	
  Motor Vehicles

  
	
   

  	
  3.28

  	
  Existing Intercompany
  Loans

  
	
   

  	
   

  	
   

  
	
  4.

  	
  FINANCIAL
  STATEMENTS AND INFORMATION

  
	
   

  	
  4.1

  	
  Reports and Notices.

  
	
   

  	
  4.2

  	
  Communication with
  Accountants

  
	
   

  	
   

  	
   

  
	
  5.

  	
  AFFIRMATIVE COVENANTS

  
	
   

  	
  5.1

  	
  Maintenance of Existence
  and Conduct of Business

  
	
   

  	
  5.2

  	
  Payment of Charges.

  
	
   

  	
  5.3

  	
  Books and Records

  
	
   

  	
  5.4

  	
  Insurance;
  Damage to or Destruction of Collateral.

  
	
   

  	
  5.5

  	
  Compliance with Laws

  
	
   

  	
  5.6

  	
  Supplemental Disclosure

  
	
   

  	
  5.7

  	
  Intellectual Property

  
	
   

  	
  5.8

  	
  [Intentionally Omitted]

  
	
   

  	
  5.9

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

  
	
   

  	
  5.10

  	
  Motor
  Vehicles

  
	
   

  	
  5.11

  	
  Further Assurances

  
	
   

  	
   

  	
   

  
	
  6.

  	
  NEGATIVE COVENANTS

  
	
   

  	
  6.1

  	
  Mergers, Subsidiaries, Etc.

  
	
   

  	
  6.2

  	
  Investments; Loans and
  Advances

  
	
   

  	
  6.3

  	
  Indebtedness.

  
	
   

  	
  6.4

  	
  Employee
  Loans and Affiliate Transactions.

  
	
   

  	
  6.5

  	
  Capital Structure and
  Business

  
	
   

  	
  6.6

  	
  Guaranteed Indebtedness

  
	
   

  	
  6.7

  	
  Liens

  
	
   

  	
  6.8

  	
  Sale of Stock and Assets

  
	
   

  	
  6.9

  	
  ERISA

  
	
   

  	
  6.10

  	
  Financial Covenants

  
	
   

  	
  6.11

  	
  [RESERVED]

  
	
   

  	
  6.12

  	
  Sale-Leasebacks

  
	
   

  	
  6.13

  	
  Cancellation of
  Indebtedness

  
	
   

  	
  6.14

  	
  Restricted Payments.

  



 


ii

















 


	
   

  	
  6.15

  	
  Change
  of Corporate Name or Location; Change of Fiscal Year

  
	
   

  	
  6.16

  	
  No Impairment
  of Intercompany Transfers

  
	
   

  	
  6.17

  	
  No Speculative Transactions

  
	
   

  	
  6.18

  	
  Changes
  Relating to Subordinated Debt; Material Contracts

  
	
   

  	
  6.19

  	
  Redemptions.

  
	
   

  	
  6.20

  	
  Holdings and Schaublin
  Holding.

  
	
   

  	
   

  	
   

  
	
  7.

  	
  TERM

  
	
   

  	
  7.1

  	
  Termination

  
	
   

  	
  7.2

  	
  Survival
  of Obligations Upon Termination of Financing Arrangements

  
	
   

  	
   

  	
   

  
	
  8.

  	
  EVENTS OF
  DEFAULT; RIGHTS AND REMEDIES

  
	
   

  	
  8.1

  	
  Events of Default

  
	
   

  	
  8.2

  	
  Remedies.

  
	
   

  	
  8.3

  	
  Waivers by Credit Parties

  
	
   

  	
   

  	
   

  
	
  9.

  	
  ASSIGNMENT
  AND PARTICIPATIONS; APPOINTMENT OF AGENT

  
	
   

  	
  9.1

  	
  Assignment and
  Participations.

  
	
   

  	
  9.2

  	
  Appointment of Agent

  
	
   

  	
  9.3

  	
  Agent’s
  Reliance, Etc.

  
	
   

  	
  9.4

  	
  GE Capital and Affiliates

  
	
   

  	
  9.5

  	
  Lender Credit Decision

  
	
   

  	
  9.6

  	
  Indemnification

  
	
   

  	
  9.7

  	
  Successor Agent

  
	
   

  	
  9.8

  	
  Setoff and Sharing of
  Payments

  
	
   

  	
  9.9

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

  
	
   

  	
   

  	
   

  
	
  10.

  	
  SUCCESSORS AND ASSIGNS

  
	
   

  	
  10.1

  	
  Successors and Assigns

  
	
   

  	
   

  	
   

  
	
  11.

  	
  MISCELLANEOUS

  
	
   

  	
  11.1

  	
  Complete
  Agreement; Modification of Agreement

  
	
   

  	
  11.2

  	
  Amendments and Waivers.

  
	
   

  	
  11.3

  	
  Fees and Expenses

  
	
   

  	
  11.4

  	
  No
  Waiver

  
	
   

  	
  11.5

  	
  Remedies

  
	
   

  	
  11.6

  	
  Severability

  
	
   

  	
  11.7

  	
  Conflict of Terms

  
	
   

  	
  11.8

  	
  Confidentiality

  
	
   

  	
  11.9

  	
  GOVERNING LAW

  
	
   

  	
  11.10

  	
  Notices

  
	
   

  	
  11.11

  	
  Section Titles

  
	
   

  	
  11.12

  	
  Counterparts

  
	
   

  	
  11.13

  	
  WAIVER OF JURY TRIAL

  
	
   

  	
  11.14

  	
  Press Releases and
  Related Matters

  
	
   

  	
  11.15

  	
  Reinstatement

  



 


iii

















 


	
   

  	
  11.16

  	
  Advice of Counsel

  
	
   

  	
  11.17

  	
  No Strict Construction

  



 


INDEX OF
APPENDICES


	
  Annex A (Recitals)

  	
  -

  	
  Definitions

  
	
  Annex B (Section 1.2)

  	
  -

  	
  Letters of Credit

  
	
  Annex C (Section 1.8)

  	
  -

  	
  Cash Management System

  
	
  Annex D (Section 2.1(a))

  	
  -

  	
  Closing Checklist

  
	
  Annex E (Section 4.1(a))

  	
  -

  	
  Financial Statements and Projections -- Reporting

  
	
  Annex F (Section 4.1(b))

  	
  -

  	
  Collateral Reports

  
	
  Annex G (Section 6.10)

  	
  -

  	
  Financial Covenants

  
	
  Annex H (Section 9.9(a))

  	
  -

  	
  Lenders’ Wire Transfer Information

  
	
  Annex I (Section 11.10)

  	
  -

  	
  Notice Addresses 

  
	
  Annex J (from Annex A- Commitments definition)

  	
  -

  	
  Commitments as of Effective Date

  
	
   

  	
   

  	
   

  
	
  Exhibit 1.1(a)(i)

  	
  -

  	
  Form of Notice of U.S. Revolving Credit Advance

  
	
  Exhibit 1.1(a)(ii)

  	
  -

  	
  Form of U.S. Revolving Note

  
	
  Exhibit 1.1(b)

  	
  -

  	
  Form of Term Note

  
	
  Exhibit 1.1(c)(ii)

  	
  -

  	
  Form of Swing Line Note

  
	
  Exhibit 1.1(d)(i)

  	
  -

  	
  Form of Notice of Schaublin Revolving Credit Advance

  
	
  Exhibit 1.1(d)(ii)

  	
  -

  	
  Form of Schaublin Revolving Note

  
	
  Exhibit 1.5(f)

  	
  -

  	
  Form of Notice of Conversion/Continuation

  
	
  Exhibit 4.1(b)(i)

  	
  -

  	
  Form of U.S. Borrowing Base Certificate

  
	
  Exhibit 4.1(b)(ii)

  	
  -

  	
  Form of Schaublin Borrowing Base Certificate

  
	
  Exhibit 6.1

  	
  -

  	
  Form of Acquisition Compliance Certificate

  
	
  Exhibit 9.1(a)

  	
  -

  	
  Form of Assignment Agreement

  
	
  Exhibit B-1

  	
  -

  	
  Application for Standby Letter of Credit

  
	
  Exhibit B-2

  	
  -

  	
  Application for Documentary Letter of Credit

  
	
  Exhibit E-1

  	
  -

  	
  Form of Compliance Certificate

  
	
  Exhibit E-2

  	
  -

  	
  Form of Schaublin Intercompany Loan and French
  Intercompany Loan Certificate

  
	
   

  	
   

  	
   

  
	
  Schedule  1.1

  	
  -

  	
  Agent’s Representatives

  
	
  Disclosure Schedule 
  2.1(d)

  	
  -

  	
  Capital Structure

  
	
  Disclosure Schedule 
  3.1

  	
  -

  	
  Type of Entity; State of Organization

  
	
  Disclosure Schedule 
  3.2

  	
  -

  	
  Executive Offices, Collateral Locations, FEIN

  
	
  Disclosure Schedule 
  3.4(A)

  	
  -

  	
  Financial Statements

  
	
  Disclosure Schedule 
  3.4(B)

  	
  -

  	
  Pro Forma

  
	
  Disclosure Schedule 
  3.4(C)

  	
  -

  	
  Projections

  
	
  Disclosure Schedule 
  3.6

  	
  -

  	
  Real Estate and Leases

  
	
  Disclosure Schedule 
  3.7

  	
  -

  	
  Labor Matters

  
	
  Disclosure Schedule 
  3.8

  	
  -

  	
  Ventures, Subsidiaries and Affiliates; Outstanding
  Stock

  
	
  Disclosure Schedule 
  3.11

  	
  -

  	
  Tax Matters

  



 


iv

















 


	
  Disclosure Schedule 
  3.12

  	
  -

  	
  ERISA Plans

  
	
  Disclosure Schedule 
  3.13

  	
  -

  	
  Litigation

  
	
  Disclosure Schedule 
  3.15

  	
  -

  	
  Intellectual Property

  
	
  Disclosure Schedule 
  3.18

  	
  -

  	
  Insurance

  
	
  Disclosure Schedule 
  3.19

  	
  -

  	
  Deposit and Disbursement Accounts

  
	
  Disclosure Schedule 
  3.20

  	
  -

  	
  Government Contracts

  
	
  Disclosure Schedule 
  3.22

  	
  -

  	
  Material Agreements

  
	
  Disclosure Schedule 
  3.28

  	
   

  	
  Existing Intercompany Loans

  
	
  Disclosure Schedule 
  5.1

  	
  -

  	
  Trade Names

  
	
  Disclosure Schedule 
  6.3

  	
  -

  	
  Indebtedness

  
	
  Disclosure Schedule 
  6.4(a)

  	
  -

  	
  Transactions with Affiliates

  
	
  Disclosure Schedule 
  6.4(b)

  	
  -

  	
  Transactions with Employees

  
	
  Disclosure Schedule 
  6.7

  	
  -

  	
  Existing Liens

  



 


v

















 


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


 


RECITALS


 


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


 


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


 


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


 


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


 


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


 


1.                                      AMOUNT AND TERMS OF CREDIT


 


1.1                                 Credit
Facilities.


 

















 


(a)                                  U.S.
Revolving Credit Facility.


 


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


 


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


 


(iii)                               Any provision of this
Agreement to the contrary notwithstanding, at the request of Borrower, in its
discretion Agent may (but shall have absolutely no obligation to) make U.S.
Revolving Credit Advances to Borrower on behalf of Revolving Lenders in amounts
that cause U.S. Borrowing Availability to be less than the Applicable
Availability Block (any such excess U.S. Revolving Credit Advances are
herein referred to collectively as “Overadvances”); provided, that (A) no such
event or occurrence shall cause or constitute a waiver of Agent’s, the Swing
Line Lender’s or Revolving Lenders’ right to refuse to make any further
Overadvances, Swing Line Advances or Revolving Credit Advances, or incur any
Letter of Credit Obligations, as the case may be, at any time that an
Overadvance exists, and (B) no Overadvance shall result in a Default or Event
of Default due to Borrower’s failure to comply with Section 1.3(b)(i)
for so long as Agent permits such Overadvance to remain outstanding, but


 


2

















 


solely
with respect to the amount of such Overadvance.  In addition, Overadvances may be made even if the conditions to
lending set forth in Section 2 have not been met.  All Overadvances shall constitute Index Rate
Loans, shall bear interest at the Default Rate and shall be payable within
three (3) Business Days after demand. 
Except as otherwise provided in Section 1.11(b), the authority of
Agent to make Overadvances is limited to an aggregate amount not to exceed
$2,000,000 at any time and shall not cause the Revolving Loan to exceed the
Maximum Amount.  No Overadvance shall be
outstanding for more than sixty (60) consecutive days, and not more than two
Overadvances shall be made in any period of one hundred eighty (180)
consecutive days, in each case without the consent of Requisite Revolving
Lenders.


 


(b)                                 Term
Loan.


 


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


 


(ii)                                  Borrower
shall repay the principal amount of the Term Loan in nineteen (19) consecutive
quarterly installments on the last day of September, December, March and June
of each year, commencing September 30, 2002, as follows:


 




	
  Payment Dates

  	
   

  	
  Installment
  Amounts

  
	
   

  	
   

  	
   

  
	
  September 30,
  2002 through and including March 31, 2007

  	
   

  	
  $

  	
  1,428,570 each

  






 


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


 


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


 


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


 


(c)                                  Swing
Line Facility.


 


(i)                                     Agent
shall notify the Swing Line Lender upon Agent’s receipt of any Notice of U.S.
Revolving Credit Advance.  Subject to
the terms and conditions hereof, the Swing Line Lender may, in its discretion,
make available from time to time until the


 


3

















 


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


 


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


 


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


 


4

















 


U.S.
Revolving Credit Advances shall be immediately paid to the Swing Line Lender
and applied to repay the Refunded Swing Line Loan.


 


(iv)                              If,
prior to refunding a Swing Line Loan with a U.S. Revolving Credit Advance
pursuant to Section 1.1(c)(iii), one of the events described in Sections
8.1(h) or 8.1(i) has occurred, then, subject to the provisions of Section
1.1(c)(v) below, each Revolving Lender shall, on the date such U.S.
Revolving Credit Advance was to have been made for the benefit of Borrower,
purchase from the Swing Line Lender an undivided participation interest in the
Swing Line Loan in an amount equal to its Pro Rata Share of such Swing Line
Loan.  Upon request, each Revolving
Lender shall promptly transfer to the Swing Line Lender, in immediately
available funds, the amount of its participation interest.


 


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


 


(d)                                 Schaublin
Revolving Credit Facility.


 


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


 


5

















 


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


 


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


 


1.2                                 Letters
of Credit.


 


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


 


1.3                                 Prepayments.


 


(a)                                  Voluntary
Prepayments; Reductions in Revolving Loan Commitments.  Borrower may at any time on at least three
(3) days’ prior written notice to Agent (i) voluntarily prepay all or part of
the Term Loan and/or (ii) permanently reduce (but not terminate) the Revolving
Loan Commitments; provided, that (A) any such prepayments or reductions shall
be in a minimum amount of $500,000 and integral multiples of $100,000 in excess
of such amount, (B) the Revolving Loan Commitments shall not be reduced to
an amount less than the greater of the amount of the Revolving Loans
outstanding or $30,000,000; (C) the U.S. Revolving Loan Commitment and the
Schaublin Revolving Loan Commitment shall be reduced pro  rata;
and (D) after giving effect to such reductions, Borrower shall comply with
Section 1.3(b)(i).  In addition,
Borrower may at any time on at least ten (10) days’ prior written notice to Agent
terminate the Revolving Loan Commitments, provided, that upon such termination all
Loans and other Obligations shall be immediately due and payable in full and
all Letter of Credit Obligations shall be cash collateralized or otherwise
satisfied in accordance with Annex B hereto.  Any such voluntary prepayment and any
reduction or termination of the Revolving Loan Commitments must be accompanied
by the payment of any applicable LIBOR funding breakage costs in accordance
with Section 1.13(b).  Upon any such
reduction or termination of the Revolving Loan Commitments, Borrower’s right to
request Revolving Credit Advances or


 


6

















 


request
that Letter of Credit Obligations be incurred on its behalf, or request Swing
Line Advances, shall simultaneously be permanently reduced or terminated, as
the case may be.  Each notice of partial
prepayment shall designate the Loan or other Obligations to which such
prepayment is to be applied; provided, that any partial prepayments of
the Term Loan made by Borrower shall be applied to prepay the scheduled
installments of the Term Loan in inverse order of maturity.


 


(b)                                 Mandatory
Prepayments.


 


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


 


(ii)                                  Immediately
upon receipt by Borrower, any Secured Guarantor or any RBC Swiss Group Member
of any proceeds of any cash asset disposition (excluding proceeds of asset
dispositions permitted by Section 6.8(a)) to the extent the net proceeds
of such asset dispositions exceed the Dollar Equivalent of $250,000 in the
aggregate in any Fiscal Year, Borrower shall prepay the Obligations in an
amount equal to all such proceeds, net of (A) commissions and other reasonable
and customary transaction costs, fees and expenses properly attributable to
such transaction and payable by Borrower, any Secured Guarantor or any RBC
Swiss Group Member in connection therewith (in each case, paid to
non-Affiliates), (B) transfer taxes, (C) amounts payable to holders of senior
Liens (to the extent such Liens constitute Permitted Encumbrances hereunder),
if any, and (D) an appropriate reserve for income taxes payable in cash in
connection therewith; provided, that if Borrower, the
applicable Secured Guarantor or RBC Swiss Group Member intends to reinvest all
or any portion of the net proceeds of any asset disposition within 270 days
thereafter in fixed assets and Borrower promptly notifies Agent of that
intention in writing, and if (x) no Event of Default shall have occurred
and be continuing at the date of such written notification, and
(y) Borrower, such Secured Guarantor or RBC Swiss Group Member, as the
case may be, grants a first security interest to Agent in such replacement
assets when acquired, then the amount of any such mandatory prepayment shall be
reduced by the amount to be reinvested; provided, further, that
if and to the extent that Borrower, such Secured Guarantor or RBC Swiss Group
Member, as the case may be, does not reinvest such net proceeds within that
270-day period, Borrower shall then repay the Loans, with net proceeds that
have not been reinvested on the last day of such 270-day period.  Any such prepayment shall be applied in
accordance with Section 1.3(c).


 


(iii)                               If Borrower, any Secured
Guarantor or any RBC Swiss Group Member shall suffer any Event of Loss, then
such Person shall (A) promptly notify Agent of such Event of Loss with
anticipated net proceeds in excess of the Dollar Equivalent of $1,000,000
(including the amount of the estimated net insurance proceeds net of amounts
payable to holders of senior Liens (to the extent such Liens constitute
Permitted Encumbrances


 


7

















 


hereunder,
if any) or other awards payable in connection with such Event of Loss) and
(B) promptly upon receipt of such proceeds by such Person, Borrower shall
prepay the Obligations, in an amount equal to such proceeds net of (x) all
money actually applied (or held in reserve pending such application) to repair
or reconstruct the damaged property or property affected by condemnation or
taking but subject to the terms of Section 5.4(c) and (y) all
out-of-pocket transaction costs and (z) related cash taxes.  Any such prepayment shall be applied in
accordance with Section 1.3(d).


 


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


 


(v)                                 If
Holdings or Borrower issues Stock, no later than the Business Day following the
date of receipt of any cash proceeds thereof net of underwriting discounts and
commissions and other reasonable costs paid to non-Affiliates in connection
therewith, Borrower shall prepay the Obligations in an amount equal to 50% of
such net proceeds.  Any such prepayment
shall be applied in accordance with Section 1.3(c).  Notwithstanding the foregoing two sentences,
Borrower need not prepay the Obligations in accordance with this Section
1.3(b)(v) in connection with (A) issuances of Stock of Holdings to the
extent (but only to the extent) the proceeds thereof are used to purchase,
retire, redeem or otherwise acquire for value all or any portion of the Zero
Coupon Debt, (B) issuances of Stock of Holdings to the existing Stockholders of
Holdings or to seller(s) involved in a Permitted Acquisition, in each case to the
extent (but only to the extent) that such Stock or the proceeds thereof are
immediately used as a consideration for all or a portion of the purchase price
of a Permitted Acquisition, so long as no Change of Control results after
giving effect to such issuance or series of related issuances, (C) issuance of
directors’ qualifying shares, (D) issuances of Stock of Holdings issued to any
holder of Indebtedness of Holdings or Borrower to the extent (but only to the
extent) issued in connection with an issuance, refinancing or restructuring of
Indebtedness permitted hereunder, so long as no Change of Control results after
giving effect to such issuance or a series of related issuances, and
(E) sales or issuances of common Stock to officers, directors or employees
of Holdings, Borrower or any Subsidiary, as the case may be, pursuant to a
management or employee benefit plan, to the extent the aggregate proceeds of
all common Stock so issued in excess of the redemptions of common Stock of
employees shall not exceed the Dollar Equivalent of $2,000,000 in any Fiscal
Year.


 


(c)                                  Application
of Certain Mandatory Prepayments. 
Any prepayments made by Borrower pursuant to Sections 1.3(b)(ii),
1.3(b)(iv) or 1.3(b)(v) above shall be applied as follows: first, to
Fees and reimbursable expenses of Agent then due and payable pursuant to any of
the Loan Documents; second, to interest then due and payable on the Term
Loan; third, to prepay the scheduled principal installments of the Term
Loan in inverse order of maturity, until such Term Loan shall have been prepaid
in full; fourth, to interest then due and payable on the Swing Line
Loan; fifth, to the principal balance of the Swing Line Loan until the
same has been repaid in full; sixth, to interest then due and payable on
the Revolving Credit Advances; seventh, to the outstanding principal
balance of Revolving Credit Advances until the same has been paid in full; and eighth,
to any Letter of Credit Obligations, to provide cash collateral therefor in the
manner set forth in Annex B, until all such Letter of Credit Obligations
have been fully cash collateralized in the manner set forth in Annex B; provided, that
(x) any mandatory prepayments


 


8

















 


made by
Borrower pursuant to Sections 1.3(b)(ii) or (iii) from the
proceeds of assets owned by the RBC Swiss Group Members shall be applied first
to the Schaublin Revolving Credit Advances (which application shall
respectively reduce each of the Schaublin Intercompany Loans) until the same
have been paid in full and then to the other Obligations in the order set forth
above or in the order set forth in clause (d) below (as
applicable); and (y) any mandatory prepayments made by Borrower pursuant
to Sections 1.3(b)(ii) or (iii) from the proceeds of assets
owned by Borrower or its Domestic Subsidiaries shall be applied as set forth
above or as set forth in clause (d) below (as applicable), except
that no amounts shall be applied to the Schaublin Revolving Credit Advances
until the U.S. Revolving Credit Advances have been paid in full and the Letter
of Credit Obligations have been cash collateralized.  Neither the Revolving Loan Commitments nor the Swing Line Loan
Commitment shall be permanently reduced by the amount of any such prepayments.


 


(d)                                 Application
of Prepayments from Insurance Proceeds and Condemnation Proceeds.  Prepayments from insurance or condemnation
proceeds in connection with an Event of Loss in accordance with Sections
1.3(b)(iii) and 5.4(c) and the Mortgage(s), respectively, shall be
applied as follows:  insurance proceeds
from casualties or losses to cash or Inventory located in the United States
shall be applied first, to the Swing Line Loans and, second, to U.S. Revolving
Credit Advances; insurance or condemnation proceeds from casualties or losses
to Equipment, Fixtures and Real Estate (other than Equipment, Fixtures and Real
Estate owned by Schaublin or any of the French Operating Companies) shall be
applied to scheduled installments of the Term Loan in inverse order of maturity.  All insurance or condemnation proceeds of
assets of the RBC Swiss Group Members shall, subject to Sections 1.3(b)(iii)
and 5.4(c), be applied to the Schaublin Revolving Loan (which application
shall respectively reduce each of the Schaublin Intercompany Loans).  Neither the Revolving Loan Commitments nor
the Swing Line Loan Commitment shall be permanently reduced by the amount of
any such prepayments.  If the precise
amount of insurance or condemnation proceeds allocable to Inventory as compared
to Equipment, Fixtures and Real Estate are not otherwise determined, the
allocation and application of those proceeds shall be jointly determined by
Agent and Borrower.


 


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


 


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


 


9

















 


1.5                                 Interest and Applicable Margins.


 


(a)                                  Borrower
shall pay interest to Agent, for the ratable benefit of Lenders in accordance
with the various Loans being made by each Lender, in arrears on each applicable
Interest Payment Date, at the following rates: 
(i) with respect to the Revolving Credit Advances, the Index Rate plus
the Applicable Revolver Index Margin per annum or, at the election of Borrower,
the applicable LIBOR Rate plus the Applicable Revolver LIBOR Margin per
annum, based on the aggregate Revolving Credit Advances outstanding from time
to time;  (ii) with respect to the Term
Loan, the Index Rate plus the Applicable Term Loan Index Margin per
annum or, at the election of Borrower, the applicable LIBOR Rate plus
the Applicable Term Loan LIBOR Margin per annum; and (iii) with respect to the
Swing Line Loan, the Index Rate plus the Applicable Revolver Index
Margin per annum.


 


The Applicable Margins
are as follows:


 


	
  Applicable
  Revolver Index Margin

  	
  1.25

  	
  %

  
	
   

  	
   

  	
   

  
	
  Applicable
  Revolver Index Margin

  	
  1.25

  	
  %

  
	
   

  	
   

  	
   

  
	
  Applicable
  Revolver LIBOR Margin

  	
  2.25

  	
  %

  
	
   

  	
   

  	
   

  
	
  Applicable
  Term Loan Index Margin

  	
  1.25

  	
  %

  
	
   

  	
   

  	
   

  
	
  Applicable
  Term Loan LIBOR Margin

  	
  2.25

  	
  %

  



 


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


 


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


 


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


 


(e)                                  Subject
to the conditions precedent set forth in Section 2.2, Borrower shall
have the option to (i) request that any Revolving Credit Advance be made as a
LIBOR Loan,


10

















 


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


 


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


 


11

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


12

















 


(viii)                        that is the obligation of an
Account Debtor that is the United States government or a political subdivision
thereof, or any state, county or municipality or department, agency or
instrumentality thereof, unless Borrower or the applicable Secured Guarantor
has complied with respect to such obligation with the Federal Assignment of Claims
Act of 1940, or any applicable state, county or municipal law restricting
assignment thereof, provided, that the Borrowing
Availability based on such obligations shall not in any event exceed $7,500,000
in the aggregate;


 


(ix)                                that
is the obligation of an Account Debtor located in a foreign country other than
Canada or the United Kingdom, unless payment thereof is assured by a letter of
credit or credit insurance assigned and delivered to Agent, satisfactory to
Agent as to form, amount and issuer;


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


13

















 


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


 


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


 


(xviii)                   that is payable in any currency
other than Dollars or Acceptable Foreign Currency.


 


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


 


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


 


(i)                                     that
does not arise from the sale of goods or the performance of services by
Schaublin in the ordinary course of its business;


 


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


 


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


 


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


 


14

















 


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


 


(vi)                              that
(A) is not owned by Schaublin or (B) is subject to any right, claim,
security interest or other interest of any other Person, other than Liens
described in clauses (a) and (g) of the definition of Permitted
Encumbrances and Liens in favor of Agent, on behalf of itself and Lenders but
only to the extent of such right, claim, security interest or other interest;


 


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


 


(viii)                        that is the obligation of an
Account Debtor that is a governmental entity, unless Schaublin has complied
with respect to such obligation with any applicable law restricting assignment
thereof;


 


(ix)                                that
is the obligation of an Account Debtor located in a country other than the
United States, Canada, Switzerland, France, the United Kingdom, Germany, Italy,
Spain, Australia, Denmark, the Netherlands or Luxemburg unless payment thereof
is assured by a letter of credit or credit insurance assigned and delivered to
Agent, satisfactory to Agent as to form, amount and issuer;


 


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


 


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


 


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


 


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


 


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


 


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


 


15

















 


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


 


(xiv)                         as to which Agent’s Lien
thereon, on behalf of itself and Lenders, or the Lien created by the Foreign
Collateral Documents is not a first priority perfected Lien;


 


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


 


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


 


(xvii)                      to the extent that such Account,
together with all other Accounts owing by such Account Debtor and its
Affiliates as of any date of determination exceed 15% of all Eligible Accounts
– Schaublin;


 


(xviii)                   that is payable in any currency
other than Dollars or an Acceptable Foreign Currency; or


 


(xix)                           to the
extent that a supplier of Schaublin can assert any right as to such Account by
reason of an extended reservation of title.


 


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


 


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


 


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


 


(i)                                     is
not owned by Borrower or any Secured Guarantor free and clear of all Liens and
rights of any other Person (including the rights of a purchaser that has made
progress payments and the rights of a surety that has issued a bond to assure
Borrower’s or a Secured Guarantor’s performance with respect to that
Inventory), except Liens described in


 


16

















 


clauses
(a), (d), (e) and (g) of the definition
of Permitted Encumbrances and the Liens in favor of Agent, on behalf of itself
and Lenders;


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


17

















 


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


 


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


 


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


 


(ii)                                  (A)
is located at any site if the aggregate book value of Inventory at any such
location is less than the Dollar Equivalent of $50,000 or (B) is located at any
site other than a warehouse with respect to which a Swiss Warehouse Control
Agreement has been executed and delivered;


 


(iii)                               is placed on consignment
or is in transit;


 


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


 


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


 


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


 


(vii)                           is not of a type held for
sale in the ordinary course of Schaublin’s business;


 


18

















 


(viii)                        is not subject to a first
priority Lien in favor of Agent, on behalf of itself and Lenders, or the first
priority Lien created by the Foreign Collateral Documents, subject to Permitted
Encumbrances;


 


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


 


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


 


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


 


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


 


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


 


1.9                                   Fees.


 


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


 


(b)                                 As
additional compensation for the Revolving Lenders, Borrower shall pay to Agent,
for the ratable benefit of such Lenders, in arrears, on the first Business Day
of each month prior to the Commitment Termination Date and on the Commitment
Termination Date, a Fee for Borrower’s non-use of available funds in an amount
equal to:


 


(i)                                     one-half
of one percent (0.50%) per annum, if the amount of the Revolving Loans,
including the Swing Line Loan, is equal to or greater than 50% of the Maximum
Amount, or


 


(ii)                                  three-fourths
of one percent (0.75%) per annum, if the amount of the Revolving Loans,
including the Swing Line Loan, is less than 50% of the Maximum Amount,


 


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


 


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


 


(d)                                 Borrower
shall pay to Agent, for the ratable benefit of Lenders, an amendment fee on the
Effective Date equal to 0.10% of the aggregate Commitments.


 


19

















 


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


 


1.11                           Application and Allocation of Payments.


 


(a)                                  So
long as no Event of Default has occurred and is continuing, (i) payments
received in the ordinary course of business and not subject to clauses (ii),
(iii) and (iv) below shall be applied, first, to the Swing Line Loan and,
second, to the Revolving Loans; (ii) payments matching specific scheduled
payments then due shall be applied to those scheduled payments; (iii) voluntary
prepayments shall be applied as determined by Borrower, subject to the
provisions of Section 1.3(a); and (iv) mandatory prepayments shall be
applied as set forth in Sections 1.3(c) and 1.3(d).  All payments and prepayments applied to a
particular Loan shall be applied ratably to the portion thereof held by each
Lender as determined by its Pro Rata Share. 
As to any other payment, and as to all payments made following the
Commitment Termination Date, Borrower hereby irrevocably waives the right to
direct the application of any and all payments received from or on behalf of
Borrower, and Borrower hereby irrevocably agrees that Agent shall have the
continuing exclusive right to apply any and all such payments against the Obligations
as Agent may deem advisable notwithstanding any previous entry by Agent in the
Loan Account or any other books and records. 
In the absence of a specific determination by Agent with respect
thereto, payments made when an Event of Default has occurred and is continuing
or following the Commitment Termination Date shall be applied to amounts then
due and payable in the following order: (1) to Fees and Agent’s expenses
reimbursable hereunder; (2) to interest on the Swing Line Loan; (3) to principal
payments on the Swing Line Loan; (4) to interest on the other Loans, ratably in
proportion to the interest accrued as to each Loan; (5) to principal payments
on the other Loans and to provide cash collateral for Letter of Credit
Obligations in the manner described in Annex B, ratably to the
aggregate, combined principal balance of the other Loans and outstanding Letter
of Credit Obligations; and (6) to all other Obligations including expenses of
Lenders to the extent reimbursable under Section 11.3; provided,
that, as to items (2) through (5) above, (x) payments funded from the
assets or operations of Borrower and its Subsidiaries (excluding the RBC Swiss
Group Members) shall be applied first to interest and principal of the Loans
other than the interest and principal of the Schaublin Revolving Loan and to
cash collateralize the Letter of Credit Obligations and then to interest and
principal of the Schaublin Revolving Loan (which application shall
corresponding reduce each of the Schaublin Intercompany Loans) and
(y) payments funded from the assets or operations of the RBC Swiss Group
Members shall be applied first to interest and principal of the Schaublin
Revolving Loan (which application shall corresponding reduce each of the
Schaublin Intercompany Loans) and then, subject to applicable laws, to interest
and principal of the other Loans and to cash collateralize the Letter of Credit
Obligations.


 


(b)                                 Agent
is authorized to, and at its sole election may, charge to the U.S. Revolving
Loan balance on behalf of Borrower and cause to be paid all Fees, Charges,


 


20

















 


reimbursable
expenses (including insurance premiums in accordance with Section 5.4(a))
and interest and principal, other than principal of the Revolving Loans, owing
by Borrower under this Agreement or any of the other Loan Documents if and to
the extent Borrower fails to pay promptly any such amounts as and when due,
even if the amount of such charges would exceed U.S. Borrowing Availability at
such time.  At Agent’s option and to the
extent permitted by law, any charges so made shall constitute part of the U.S.
Revolving Loan hereunder.


 


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


 


1.13                           Indemnity.


 


(a)                                  Each
Domestic Credit Party that is a signatory hereto shall jointly and severally
indemnify and hold harmless each of Agent, Lenders and their respective
Affiliates, and each such Person’s respective officers, directors, employees,
attorneys, agents and representatives (each, an “Indemnified Person”),
from and against any and all suits, actions, proceedings, claims, damages,
losses, liabilities and expenses (including reasonable attorneys’ fees and
disbursements and other costs of investigation or defense, including those
incurred upon any appeal) that may be instituted or asserted against or
incurred by any such Indemnified Person as the result of credit having been
extended, suspended or terminated under this Agreement and the other Loan
Documents and the administration of such credit, and in connection with or
arising out of the transactions contemplated hereunder and thereunder and any
actions or failures to act in connection therewith, and legal costs and
expenses arising out of or incurred in connection with disputes between or among
any  parties to any of the Loan Documents (other than disputes
between and among Agent/or the Lenders arising when no Event of Default has
occurred and is continuing) (collectively, “Indemnified Liabilities”); provided,
that no such Domestic Credit Party shall be liable for any indemnification to
an Indemnified Person to the extent that any such suit, action, proceeding,
claim, damage, loss, liability or expense results from that Indemnified
Person’s gross negligence or willful misconduct; provided, further,
that any obligations of the Domestic Credit Parties to the Indemnified Persons
with respect to Environmental Liabilities and Hazardous Materials shall be
governed exclusively by the terms


 


21

















 


and
provisions of the Environmental Indemnity Agreement and not by the terms and
provisions of this Section 1.13 or any other term and provision of this
Agreement or any other Loan Document other than the Environmental Indemnity
Agreement.  NO INDEMNIFIED PERSON SHALL
BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY LOAN DOCUMENT, ANY
SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER
PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT,
PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT
OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT
OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.


 


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


 


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


 


22

















 


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


 


1.15                           Taxes.


 


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


 


(b)                                 Each
Domestic Credit Party that is a signatory hereto shall indemnify and, within
thirty (30) days of demand therefor, pay Agent and each Lender for the full
amount of Taxes (including any Taxes imposed by any jurisdiction on amounts
payable under this Section 1.15) paid by Agent or such Lender, as
appropriate, and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto, whether or not such Taxes were
correctly or legally asserted.


 


(c)                                  Each
Lender organized under the laws of a jurisdiction outside the United States (a
“Foreign Lender”) as to which payments to be made under this Agreement
or under the Notes are exempt from United States withholding tax under an
applicable statute or tax treaty shall provide to Borrower and Agent a properly
completed and executed IRS Form W-8ECI or Form W-8BEN or other applicable form,
certificate or document prescribed by the IRS or the United States certifying
as to such Foreign Lender’s entitlement to such exemption (a “Certificate of
Exemption”).  Any foreign Person
that seeks to become a Lender under this Agreement shall provide a Certificate
of Exemption to Borrower and Agent prior to becoming a


 


23

















 


Lender
hereunder.  No foreign Person may become
a Lender hereunder if such Person fails to deliver a Certificate of Exemption
in advance of becoming a Lender.


 


1.16                           Capital Adequacy; Increased Costs; Illegality.


 


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


 


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


 


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


 


24

















 


together
with interest accrued thereon, unless Borrower, within five (5) Business
Days after the delivery of such notice and demand, converts all LIBOR Loans
into Index Rate Loans.


 


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


 


1.17                           Credit
Support


 


(a)                                  All
Loans to Borrower and all of the other Obligations of Borrower and the
Obligations of Secured Guarantors arising under this Agreement and the other
Loan Documents shall constitute one general obligation of Borrower and Secured
Guarantors secured, until the Termination Date, by all of the U.S. Collateral.


 


(b)                                 All
obligations of Schaublin for the repayment of the Schaublin Intercompany Loans
shall be secured by the Foreign Collateral of Schaublin granted to Schaublin
Holding pursuant to the Schaublin Swiss Pledge Agreement, Schaublin French
Pledge Agreement (RBC France), Schaublin French Pledge Agreement (Bovagnet),
the Swiss Warehouse Control Agreement, by an assignment to Schaublin Holding,
in form and substance satisfactory to Agent (the “Schaublin Assignment”),
of all rights and remedies of Schaublin under the Intercompany Notes executed
and delivered by each of the French Operating Companies and the other Foreign
Collateral Documents executed and/or delivered by Schaublin.


 


(c)                                  All
obligations of Schaublin Holding for the repayment of the Schaublin
Intercompany Loans shall be secured by the Foreign Collateral of Schaublin
Holding granted to Borrower pursuant to the Schaublin Holding Swiss Pledge
Agreement by an assignment to Borrower, in form and substance satisfactory to
Agent (the “Schaublin Holding Assignment”), of all rights and remedies
of Schaublin Holding under the Foreign Collateral Documents described


 


25

















 


in clause
(b) above and the other Foreign Collateral Documents executed and/or
delivered by Schaublin Holding.


 


(d)                                 All
Obligations of Borrower (including the Schaublin Revolving Loan) shall be
secured, in addition to the U.S. Collateral, by an assignment to Agent, on
behalf of itself and Lenders, in form and substance satisfactory to Agent (the
“Borrower Assignment”), of all rights and remedies of Borrower under the
Foreign Collateral Documents and the Schaublin Holding Assignment described in clause
(c) above.


 


(e)                                  Each
Credit Party hereby consents to the Schaublin Assignment, the Schaublin Holding
Assignment and the Borrower Assignment and to any further assignment of rights
and remedies under the Foreign Collateral Documents by Agent, as applicable.


 


(f)                                    Each
Credit Party acknowledges and agrees that (i) the ultimate assignee of all
rights and remedies under the Foreign Collateral Documents (and of the
“control” of Inventory under the Swiss Warehouse Control Agreement, as such
term is defined therein) is Agent, on behalf of itself and the Lenders,
(ii) it shall not waive, amend or otherwise modify any of its rights or
remedies under the Foreign Collateral Documents without the express prior
written consent thereto of Agent and Lenders (and each Credit Party
acknowledges that Agent and Lenders are entering into this Agreement and
extending the Commitments in reliance upon the foregoing covenant of Credit
Parties in this clause (f)) and (iii) so long as an Event of
Default has occurred and is continuing, Agent and its assignees may enforce all
rights and remedies of Credit Parties under the Foreign Collateral Documents.


 


(g)                                 So
long as no Event of Default has occurred and is continuing, Agent and Lenders
shall not demand payment under any of the Intercompany Notes evidencing the
Schaublin Intercompany Loans and the French Intercompany Loans.


 


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


 


(i)                                     Conversions
to Dollars shall occur in accordance with prevailing exchange rates, as
determined by Agent in its reasonable discretion, on the applicable date;


 


(ii)                                  (A)
The Dollar Equivalent of Schaublin Holding Intercompany Loans, Schaublin
Intercompany Loans and French Intercompany Loans denominated in currencies
other than Dollars shall be marked to market on the last day of each Fiscal
Month taking into account in each case the Dollar Equivalent of all Schaublin
Holding Intercompany Loans, Schaublin Intercompany Loans, and French
Intercompany Loans and reported to Agent within ten (10) Business Days after
the end of each Fiscal Month and (B) the Dollar Equivalent of each Borrowing
Base shall be marked to market on the last day of each Fiscal Month and
reported to Agent within ten (10) Business Days after the end of each Fiscal
Month; and, in


 


26

















 


addition,
if Borrowing Availability is less than $5,500,000, the Dollar Equivalents
described in clauses (A) and (B) shall be marked to market on
each Friday and reported to Agent within five (5) Business Days so long as
Borrowing Availability remains less than $5,500,000.


 


(iii)                               Unless otherwise
specifically set forth in this Agreement, all monetary amounts shall be in
Dollars and all Obligations shall be paid in Dollars.


 


1.19                           Judgment Currency; Contractual Currency.


 


(a)                                  If,
for the purpose of obtaining or enforcing judgment against any Credit Party in
any court in any jurisdiction, it becomes necessary to convert into any other
currency (such other currency being hereinafter in this Section 1.19
referred to as the “Judgment Currency”) an amount due under any Loan
Document in any currency (the “Obligation Currency”) other than the
Judgment Currency, the conversion shall be made at the rate of exchange
prevailing on the Business Day immediately preceding (i) the date of
actual payment of the amount due, in the case of any proceeding in the courts
of any jurisdiction that will give effect to such conversion being made on such
date, or (ii) the date on which the judgment is given, in the case of any proceeding
in the courts of any other jurisdiction (the applicable date as of which such
conversion is made pursuant to this Section 1.19 being hereinafter
referred to as the “Judgment Conversion Date”).


 


(b)                                 If,
in the case of any proceeding in the court of any jurisdiction referred to in Section 1.19(a),
there is a change in the rate of exchange prevailing between the Judgment
Conversion Date and the date of actual receipt for value of the amount due, the
applicable Credit Party shall pay such additional amount (if any, but in any
event not a lesser amount) as may be necessary to ensure that the amount
actually received in the Judgment Currency, when converted at the rate of
exchange prevailing on the date of payment, will produce the amount of the
Obligation Currency which could have been purchased with the amount of the
Judgment Currency stipulated in the judgment or judicial order at the rate of
exchange prevailing on the Judgment Conversion Date.  Any amount due from a Credit Party under this Section 1.19(b)
shall be due as a separate debt and shall not be affected by judgment being
obtained for any other amounts due under or in respect of any of the Loan
Documents.


 


(c)                                  The
term “rate of exchange” in this Section 1.19 means the rate of
exchange at which Agent would, on the relevant date at or about noon (New York
City time), be prepared to sell the Obligation Currency against the Judgment
Currency.


 


(d)                                 Any
amount received or recovered by Agent in respect of any sum expressed to be due
to it (whether for itself or as trustee for any other person) from any Credit
Party under this Agreement or under any of the other Loan Documents in a
currency other than the currency (the “contractual currency”) in which such sum
is so expressed to be due (whether as a result of, or from the enforcement of,
any judgment or order of a court or tribunal of any jurisdiction, the
winding-up of Borrower or otherwise) shall only constitute a discharge of
Borrower to the extent of the amount of the contractual currency that Agent is
able, in accordance with its usual practice, to purchase with the amount of the
currency so received or recovered on the date of receipt or recovery (or, if
later, the first date on which such purchase is practicable).  If the amount of the contractual currency so
purchased is less than the amount of


 


27

















 


the
contractual currency so expressed to be due, Borrower shall indemnify Agent
against any loss sustained by it as a result, including the cost of making any
such purchase.


 


2.                                      CONDITIONS PRECEDENT


 


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


 


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


 


(b)                                 Approvals.  Agent shall have received (i) satisfactory
evidence that the Credit Parties have obtained all required consents and
approvals of all Persons (including all requisite Governmental Authorities) to
the execution, delivery and performance of this Agreement and the other Loan
Documents or (ii) an officer’s certificate in form and substance reasonably
satisfactory to Agent affirming that no such consents or approvals are
required.  In addition, Agent shall have
received an officer’s certificate in form and substance reasonably satisfactory
to Agent affirming that execution, delivery and performance of this Agreement
and the other Loan Documents do not violate any term or provision of any of (i)
the Subordinated Debt Documents and (ii) the Discount Debentures Documents,
including, without limitation, a representation and warranty that the extension
of Loans and the Obligations under and in accordance with this Agreement and
the other Loan Documents are permitted by the terms and provisions of (x) the
Subordinated Debt Documents and (y) the Discount Debentures Documents.


 


(c)                                  Capital
Structure: Other Indebtedness. 
Except as described on Disclosure Schedule 2.1(d) the capital
structure of each Credit Party has not materially changed since March 30, 2002
and the terms and conditions of all Indebtedness of each Credit Party shall be
acceptable to Agent in its sole discretion.


 


(d)                                 Financial
Covenant Compliance.  Agent shall
have received a Compliance Certificate for the 12-month period ended at the end
of the Fiscal Quarter ended on December 31, 2002 which shows compliance with
the Fixed Charge Coverage Ratio Financial Covenant set forth on Annex G.


 


(e)                                  The
Effective Date Transactions shall have been concurrently consummated on the
Effective Date.


 


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


 


28

















 


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


 


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


 


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


 


(d)                                 after
giving effect to any U.S. Revolving Credit Advance (or the incurrence of any
Letter of Credit Obligations (other than the Overadvances)) or after giving
effect to any Schaublin Revolving Credit Advance, U.S. Borrowing Availability
or Schaublin Borrowing Availability shall be less than the Applicable Availability
Block.


 


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


 


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


 


29

















 


3.                                      REPRESENTATIONS AND WARRANTIES


 


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


 


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


 


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


 


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


 


30

















 


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


 


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


 


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


 


(i)                                     The
audited consolidated and consolidating balance sheets at March 31, 2001 and the
related statements of income and cash flows of Holdings, Borrower and its
Subsidiaries for the Fiscal Year then ended, certified by Arthur Andersen LLP.


 


(ii)                                  The
unaudited balance sheet(s) at March 30, 2002 and the related statement(s) of
income and cash flows of Holdings, Borrower and its Subsidiaries for the four
Fiscal Quarters then ended.


 


(b)                                 Pro
Forma.  The Pro Forma delivered to
Agent on or before the Closing Date and attached hereto as Disclosure
Schedule (3.4(b)) was based on the unaudited consolidated and consolidating
balance sheets of Borrower and its Subsidiaries dated March 30, 2002, and was
prepared in accordance with GAAP, with only such adjustments thereto as would
be required in accordance with GAAP.


 


(c)                                  Projections.  The Projections delivered to Agent on or
before the Closing Date and attached hereto as Disclosure Schedule (3.4(c))
have been prepared by Borrower in light of the past operations of its and its
Subsidiaries’ businesses, but including future payments of known contingent
liabilities,  and reflect projections for the three year period beginning
on March 31, 2002, on a month-by-month basis for the first year and on a
year-by-year basis


 


31

















 


thereafter.  The Projections are based upon estimates and
assumptions stated therein, all of which Borrower believes to be reasonable and
fair in light of current conditions and current facts known to Borrower and, as
of the Closing Date, reflect Borrower’s good faith and reasonable estimates of
the future financial performance of Borrower and of the other information
projected therein for the period set forth therein.


 


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


 


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


 


32

















 


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


 


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


 


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


 


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


 


33

















 


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


 


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


 


3.12                           ERISA.


 


(a)                                  Disclosure
Schedule (3.12) lists (i) all ERISA Affiliates and (ii) all Plans and
separately identifies all Pension Plans, including Title IV Plans,
Multiemployer Plans, ESOPs and Welfare Plans, including all Retiree Welfare
Plans.  Copies of all such listed Plans
(other than Multiemployer Plans), together with a copy of the latest form
IRS/DOL 5500-series form for each such Plan and the most recent actuarial
report for any Title IV Plans and Welfare Plans have been delivered to
Agent.  Except with respect to
Multiemployer Plans, each Qualified Plan has been determined by the IRS to
qualify under Section 401 of the IRC, the trusts created thereunder have been
determined to be exempt from tax under the provisions of Section 501 of


 


34

















 


the IRC,
and nothing has occurred that would cause the loss of such qualification or
tax-exempt status.  Except as could not
reasonably be expected to have a Material Adverse Effect, each Plan is in
compliance with the applicable provisions of ERISA and the IRC, including the
timely filing of all reports required under the IRC or ERISA, including the
statement required by 29 CFR Section 2520.104-23.  Neither any Domestic Credit Party nor ERISA Affiliate has failed
to make any contribution or pay any amount due as required by either Section
412 of the IRC or Section 302 of ERISA or the terms of any such Plan.  Except as could not be reasonably be
expected to have a Material Adverse Effect, no “prohibited transaction,” as
defined in Section 406 of ERISA and Section 4975 of the IRC, in connection with
any Plan has occurred that would subject any Credit Party to a material tax on
prohibited transactions imposed by Section 502(l) of ERISA or Section 4975 of
the IRC, and no event has occurred with respect to a Plan which would subject
any Domestic Credit Party to any material liability under Section 502(l) of
ERISA.


 


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


 


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


 


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


 


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


 


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


 


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


 


36

















 


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


 


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


 


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


 


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


 


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


 


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


 


37

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


38

















 


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


 


4.                                      FINANCIAL STATEMENTS AND INFORMATION


 


4.1                                 Reports
and Notices.


 


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


 


(b)                                 From
and after the Effective Date and until the Termination Date, Borrower shall
deliver to Agent or to Agent and Lenders, as required, the various Collateral
Reports (including U.S. Borrowing Base Certificate in the form of Exhibit
4.1(b)(i) and Schaublin Borrowing Base Certificate in the form of
Exhibit 4.1(b)(ii)) at the times, to the Persons and in the manner set
forth in Annex F.


 


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


 


5.                                      AFFIRMATIVE COVENANTS


 


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


 


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


 


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5.2                                 Payment
of Charges.


 


(a)                                  Subject
to Section 5.2(b), such Credit Party shall pay and discharge or cause to
be paid and discharged promptly all Charges payable by it, including
(i) Charges imposed upon it, its income and profits, or any of its
property (real, personal or mixed) and all Charges with respect to tax, social
security and unemployment withholding with respect to its employees,
(ii) lawful claims for labor, materials, supplies and services or
otherwise, and (iii) all storage or rental charges payable to warehousemen
and bailees, in each case, before any thereof shall become thirty (30) days
past due.


 


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


 


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


 


5.4                                 Insurance; Damage to or Destruction of Collateral.


 


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


 


40

















 


other
charges related thereto, shall be payable on demand by Borrower to Agent and
shall be additional Obligations hereunder secured by the Collateral.


 


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


 


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


 


41

















 


follows:
(i) Borrower shall request a U.S. Revolving Credit Advance or a Schaublin
Revolving Credit Advance (as applicable) be made to such Credit Party in the
amount requested to be released; (ii) so long as the conditions set forth in Section
2.2 have been met and subject to the provisions of any Mortgage encumbering
such Collateral, Revolving Lenders shall make such U.S. Revolving Credit
Advance or Schaublin Revolving Credit Advance (as applicable); and (iii) in the
case of insurance proceeds applied against either Revolving Loan, the Reserve
established with respect to such insurance proceeds shall be reduced by the
amount of such Revolving Credit Advance. 
To the extent not used to replace, repair, restore or rebuild the
Collateral, such insurance proceeds shall be applied in accordance with Section
1.3(d); provided,
that
in the case of insurance proceeds pertaining to such Credit Party other than
Borrower or the RBC Swiss Group Members, such insurance proceeds shall be
applied to the Loans owing by Borrower.


 


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


 


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


 


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


 


5.8                                 [Intentionally
Omitted]


 


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


 


42

















 


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


 


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


 


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


 


6.                                      NEGATIVE
COVENANTS


 


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


 


43

















 


6.1                                 Mergers, Subsidiaries,
Etc.


 


(a)                                  Such
Credit Party shall not directly or indirectly, by operation of law or
otherwise, (i) form or acquire any Subsidiary, or (ii) merge with,
consolidate with, acquire all or substantially all of the assets or Stock of,
or otherwise combine with or acquire, any Person, except (A) any Credit
Party may merge with another Credit Party, provided, that Borrower shall be the
survivor of any such merger to which it is a party and (B) Borrower or any
Secured Guarantor may consummate a Permitted Acquisition as defined in and in
accordance with Section 6.1(b) below or form one or more Acquisition
Companies for the sole purpose of completing a Permitted Acquisition.


 


(b)                                 Borrower
or any Secured Guarantor or an Acquisition Company (or Holdings, so long as
contemporaneously therewith, all assets so acquired are transferred to Borrower
or any Secured Guarantor), may (i) acquire all or substantially all of the
assets of a Qualified Target or assets that constitute all or substantially all
of the assets of a division or operating unit of a Qualified Target, (ii)
purchase 100% of the outstanding Stock of a Qualified Target, (iii) purchase
not less than 80% of each class of outstanding Stock of a Qualified Target as long
as, without limitation to conditions required for Permitted Acquisition set
forth below, Agent will be granted a first priority perfected Lien (subject to
Permitted Encumbrances and except as contemplated by clauses (A) and (C)
of Section 6.1(b)(iv)) in all in the assets and Stock of the Qualified
Target, and Agent shall have received lien search results (and in the case of a
Qualified Target incorporated in England full search reports from Companies
House), financing statements and supplemental security agreements, a Guaranty,
environmental indemnity agreements, blocked account agreements and other
collateral documents in connection therewith as requested by Agent, or (iv)
participate in a merger of a Qualified Target with and into Borrower or a Secured
Guarantor or the merger of an Acquisition Company into a Qualified Target (with
Borrower as the sole Stockholder of Qualified Target after giving effect
thereto) or the merger of a Qualified Target into an Acquisition Company (each
such acquisition, purchase or merger being an “Acquisition”), subject to
satisfaction of each of the following conditions (and each such Acquisition
shall be a “Permitted Acquisition” only upon satisfaction of each of the
following conditions):


 


(i)                                     Agent
shall receive at least 30 days’ prior written notice of such Acquisition, which
notice shall include a reasonably detailed description of such Acquisition,
which may be subject to further negotiation, and a copy of any executed letter
of intent relating thereto;


 


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


 


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


 


44

















 


(iv)                              no
additional Indebtedness, Guaranteed Indebtedness or other liabilities shall be
incurred, assumed or otherwise be reflected on a consolidated balance sheet of
Borrower and Qualified Target after giving effect to such Acquisition, except
(A) U.S. Revolving Credit Advances made hereunder that are made in
accordance with the terms of Section 2.3, (B) trade payables and accrued
expenses, each in existence at the time of the Acquisition and not created in
anticipation thereof and each arising in ordinary course, (C) Industrial
Revenue Bond Financing, Capital Leases and purchase money Indebtedness, not to
exceed in the aggregate 25% of total consideration paid for such Permitted
Acquisition (including the book value of assumed liabilities), each in
existence at the time of Acquisition and not created in anticipation thereof
and each arising in the ordinary course of business, and (D) unsecured
Acquisition Subordinated Debt (1) with a maturity date after the maturity of
the Obligations in an amount not to exceed $5,000,000 in the aggregate or (2)
with an earlier maturity but subject to Reserve against the U.S. Borrowing Base
in an amount equal to the maximum aggregate payments payable thereunder;


 


(v)                                 the
assets acquired in such Acquisition shall be free and clear of all Liens (other
than Permitted Encumbrances and except as contemplated by clauses (A)
and (C) of Section 6.1(b)(iv));


 


(vi)                              at
the closing of any Acquisition, Agent will be granted a first priority
perfected Lien (subject to Permitted Encumbrances and except as contemplated by
clauses (A) and (C) of Section 6.1(b)(iv)) in all assets
acquired pursuant thereto or, in the case of equity purchase, in the assets and
Stock of the Qualified Target, and Borrower shall have executed such documents
and taken such actions as may be reasonably required by Agent in connection
therewith, and Agent shall have received lien search results (and in the case
of a Qualified Target incorporated in England full search reports from
Companies House), financing statements and supplemental security agreements, a
Guaranty, environmental indemnity agreements, blocked account agreements and
other collateral documents and other documents reasonably requested by Agent;


 


(vii)                           at the
time of such Acquisition and immediately after giving effect thereto (including
any U.S. Revolving Credit Advance in connection therewith), no Default or Event
of Default shall have occurred and be continuing;


 


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


 


(ix)                                at
least five (5) days before the closing date for the Permitted Acquisition,
Agent shall have received all pro forma financial statements consisting of
balance sheets, statements of income and retained earnings and cash flows with
respect to the Qualified


 


45

















 


Target prepared by Borrower or a Secured Guarantor, as
applicable, in connection with such Acquisition;


 


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


 


(xi)                                at
least seven (7) days prior to the date of such Acquisition, Agent shall have
received copies of the draft acquisition agreement (which may be subject to
further negotiation) and related agreements, instruments, and other documents
reasonably requested by Agent and, promptly following the closing date for such
Permitted Acquisition, final drafts of the foregoing;


 


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


 


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


 


(B)                                updated versions of the most
recently delivered Projections covering the 1-year period commencing on the
date of such Acquisition and


 


46

















 


otherwise
prepared in accordance with the Projections (the “Acquisition Projections”)
and based upon historical financial data of a recent date reasonably
satisfactory to Agent, taking into account such Permitted Acquisition;


 


(C)                                a certificate of the Chief Financial
Officer of Holdings and Borrower to the effect that: (w) Holdings on a
consolidated basis (after taking into consideration all rights of contribution
and indemnity Borrower has against Holdings and each other Subsidiary of
Holdings) will be Solvent upon the consummation of the Permitted Acquisition;
(x) the Acquisition Pro Forma fairly presents the financial condition of
Holdings (on a consolidated basis) as of the date thereof after giving effect
to the Acquisition; (y) the Acquisition Projections are reasonable estimates of
the future financial performance of Holdings (on a consolidated basis)
subsequent to the date thereof based upon the historical performance of
Holdings, Borrower and the Qualified Target and show that Holdings (on a
consolidated basis) shall continue to be in compliance with the Fixed Charge
Coverage Ratio set forth in Annex G for the 2-year period thereafter;
and (z) Holdings and Borrower have completed their due diligence investigation
with respect to the Qualified Target and such Permitted Acquisition; and


 


(D)                               a certificate in the form of Exhibit
6.1 (the “Acquisition Compliance Certificate”) showing compliance
with the terms and provision of clauses (C) and (D) of Section
6.1(b)(iv), and a designation of assets, if any, in accordance with Section
6.8(d) with respect to such Acquisition.


 


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


 


6.2                                 Investments;
Loans and Advances. 
Except as otherwise expressly permitted by this Section 6, such
Credit Party shall not make or permit to exist any investment in, or make,
accrue or permit to exist loans or advances of money to, any Person, through
the direct or indirect lending of money, holding of securities or otherwise,
except that:  (a) Borrower and Credit
Parties may hold investments comprised of notes payable, or stock or other
securities issued by Account Debtors to Borrower pursuant to negotiated
agreements with respect to settlement of such Account Debtor’s Accounts in the
ordinary course of business; (b) each Credit Party may maintain (but not
increase) its existing investments in its Subsidiaries as of the Effective Date
which are not Credit Parties; (c) so long as no Default or Event of
Default has occurred and is continuing, Credit Parties may make investments,
subject to a Control Letter in favor of Agent for the benefit of Lenders or
otherwise subject to a perfected security interest in favor of Agent for the
benefit of Lenders, in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency
thereof maturing within one year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc., (iii)


 


47

















 


certificates of deposit maturing no more than one year from the date of
creation thereof issued by commercial banks incorporated under the laws of the
United States of America, each having combined capital, surplus and undivided
profits of not less than $300,000,000 and having a senior unsecured rating of
“A” or better by a nationally recognized rating agency (an “A Rated Bank”),
(iv) time deposits maturing no more than thirty (30) days from the date of
creation thereof with A Rated Banks and (v) mutual funds that invest solely in
one or more of the investments described in clauses (i) through (iv)
above; (d) Borrower may make investments in the capital Stock of any of
the Secured Guarantors; (e) Borrower and the Secured Guarantors may make
investments in Borrower and Secured Guarantors consisting of the intercompany
loans in accordance with Section 6.3; (f) Borrower may maintain
(but not increase) the Existing Schaublin Holding Intercompany Loan; it being
understood and agreed that Schaublin Holding may repay the Existing Schaublin
Holding Intercompany Loan, in whole or in part, and Borrower may make new loans
to Schaublin Holding in the amount not to exceed the amount of such repayments
(and, in any event, as long as the aggregate outstanding amount of such new
loans, when added to the unpaid principal balance of the Existing Schaublin
Holding Intercompany Loan remaining, if any, after such repayments, does not
exceed at any date of determination the Dollar Equivalent of $9,655,624.91),
(g) Schaublin Holding may maintain (but not increase) the Existing Schaublin
Intercompany Loan; it being understood and agreed that Schaublin may repay the
Existing Schaublin Intercompany Loan, in whole or in part, and Schaublin
Holding may make new loans to Schaublin Holding in the amount not to exceed the
amount of such repayments, (and, in any event, as long as the aggregate
outstanding amount of such new loans, when added to the unpaid principal
balance of the Existing Schaublin Intercompany remaining, if any, after such
repayments, does not exceed at any date of determination the Dollar Equivalent
of $9,655,624.91); (h) Schaublin may maintain (but not increase) the
Existing French Intercompany Loans; it being understood and agreed that one or
more French Operating Companies may repay the relevant Existing French
Intercompany Loan, in whole or in part, and Schaublin may make new loans to the
French Operating Companies in an amount not to exceed, in the aggregate, the
amount of such repayments (and, in any event, as long as the aggregate
outstanding amount of all such new loans to one or more French Operating
Companies, when added to the unpaid principal balance of the Existing French
Intercompany Loans remaining, if any, after such repayments, does not exceed at
any date of determination the Dollar Equivalent of $269,616.00);
(i) Borrower may make intercompany loans to Schaublin Holding with the
proceeds of the Schaublin Revolving Loan and in an aggregate amount not to
exceed the sum of the outstanding principal balance of the Schaublin Revolving
Loan; (j) Schaublin Holding may make intercompany loans to Schaublin with
the proceeds of the intercompany loans from Borrower referenced in the above clause
(i) and in an aggregate amount not to exceed the outstanding balance of the
Schaublin Revolving Loan; (k) Borrower may make additional investments,
loans or advances after the Effective Date in or to Schaublin Holding as long
as the aggregate outstanding amount thereof at any date of determination does
not exceed the Dollar Equivalent of $2,000,000 (such intercompany loans being
the “Additional Schaublin Holding Intercompany Loans”; and together with
the intercompany loans described in the above clauses (f) and (i),
the “Schaublin Holding Intercompany Loans”); (l) Schaublin Holding
may make intercompany loans to Schaublin after the Effective Date with the
proceeds of the intercompany loans from Borrower referenced in the above clause
(k) as long as the aggregate outstanding amount thereof as of any date of
determination does not exceed the Dollar Equivalent of $2,000,000 (such
intercompany loans being the “Additional Schaublin


 


48

















 


Intercompany Loans”; and together with the
intercompany loans described in the above clauses (g) and (j),
the “Schaublin Intercompany Loans”); (m) Schaublin may make
additional intercompany loans to one or more French Operating Companies after
the Effective Date from the proceeds of the Additional Schaublin Intercompany
Loans or from cash on hand (such additional intercompany loans being the “Additional
French Intercompany Loans”; and together with the new loans and the
Existing French Intercompany Loans described in the above clause (h),
the “French Intercompany Loans”) as long as (A) the aggregate
outstanding principal amount of the Additional French Intercompany Loans, when
added to the aggregate outstanding amount of the new intercompany loans and the
Existing French Intercompany Loans described in the above clause (h),
does not to exceed the Dollar Equivalent of $1,000,000, (B) no Default or
Event of Default has occurred and is continuing or would result after giving
effect to the proposed intercompany loan and (C) Borrowing Availability
shall be at least $5,500,000 after giving effect to each of the proposed
intercompany loans; (n) Credit Parties may make loans and advances to employees
permitted under Section 6.4(b); (o) Borrower and the Secured
Guarantors may form Acquisition Companies for the purpose of making Permitted
Acquisitions and make Permitted Acquisitions; (m) each Credit Party may
provide cash collateral to Agent in accordance with the Loan Documents;
(p) each Credit Party may enter into hedging arrangements in the ordinary
course of business, (q) Borrower and Secured Guarantors may make
additional investments after the Closing Date in RBC de Mexico S De R.L. de CV
in an aggregate amount not to exceed $1,000,000 in the aggregate (which may
include transferred Equipment with an appraised orderly liquidation value not
to exceed $500,000 in the aggregate) during the first two years following the
Closing Date, which limitations shall be increased to $1,500,000 and $750,000
respectively as of the second anniversary of the Closing Date; and (r) Credit
Parties may make other investments not to exceed the Dollar Equivalent of
$1,000,000 in the aggregate.


 


6.3                                 Indebtedness.


 


(a)                                  Such
Credit Party shall not create, incur, assume or permit to exist any
Indebtedness, except (without duplication) (i) Indebtedness secured by purchase
money security interests and Capital Leases permitted in Section 6.7(c),
(ii) the Loans and the other Obligations, (iii) unfunded pension fund and other
employee benefit plan obligations and liabilities to the extent they are
permitted to remain unfunded under applicable law, (iv) existing Indebtedness
described in Disclosure Schedule (6.3) (including earn-outs payable to
sellers of businesses, if any, constituting Indebtedness) and refinancings
thereof or amendments or modifications thereto that do not have the effect of
increasing the principal amount thereof or changing the amortization thereof
(other than to extend the same) and that are otherwise on terms and conditions
no less favorable to any Credit Party, Agent or any Lender, as reasonably
determined by Agent, than the terms of the Indebtedness being refinanced,
amended or modified, (v) Indebtedness specifically permitted under Section
6.1, (vi) Indebtedness consisting of intercompany loans and advances made
by Borrower to any Secured Guarantor or by any Secured Guarantor to Borrower or
another Secured Guarantor or consisting of intercompany loans and advances to
the extent permitted under Sections 6.2(f), (g), (h), (i) ,(j), (k),(l) and
(m); provided,
that:  (A) Borrower shall have executed
and delivered to each such Secured Guarantor, and each such Secured Guarantor
shall have executed and delivered to Borrower or another such Secured
Guarantor, as applicable, and Schaublin Holding, Schaublin and each of the French
Operating Companies shall have executed and delivered to Borrower, Schaublin
Holding or


 


49

















 


Schaublin, as applicable, as of the Effective Date, a
demand note (collectively, the “Intercompany Notes”) to evidence any
such intercompany Indebtedness owing at any time by Borrower to such Secured
Guarantor or by such Secured Guarantor to Borrower or such other Secured
Guarantor or by Schaublin Holding Schaublin or each of the French Operating
Companies to Borrower, Schaublin Holding or Schaublin (as applicable), which
Intercompany Notes shall be in form and substance reasonably satisfactory to
Agent and shall be pledged and delivered or assigned to Agent pursuant to the
applicable Pledge Agreement or Security Agreement or other Collateral Document
as additional collateral security for the Obligations; (B) Borrower and each
Secured Guarantor, Schaublin Holding, Schaublin and the French Operating
Companies shall record all intercompany transactions on its books and records
in a manner reasonably satisfactory to Agent; (C) the obligations of Borrower
and each Secured Guarantor under any such Intercompany Notes shall be
subordinated to the Obligations in a manner reasonably satisfactory to Agent;
(D) no Event of Default has occurred and is continuing or would result
after giving effect to any such proposed intercompany loan; and (E) the
aggregate balance of all such intercompany loans owing by any Secured Guarantor
incurred during the time that the EBITDA of such Secured Guarantor has been
negative for a trailing twelve month period ending on the last day of any
Fiscal Month shall not be increased by more than the Dollar Equivalent of
$2,000,000 over the amount of such Secured Guarantor’s or French Operating
Company’s intercompany loan obligations as of the last day of such period; provided,
that a Secured Guarantor or a French Operating Company shall no
longer be subject to the Dollar Equivalent of $2,000,000 limitation if that
Secured Guarantor has had positive EBITDA for the trailing twelve-month periods
ending on the last day of six consecutive Fiscal Months; provided, further,
that if a Secured Guarantor has been subject to that $2,000,000 limitation,
then became exempt from it and again has a negative EBITDA for a trailing
twelve-month period, not more than $2,000,000 of additional intercompany loans
may be received by it after the date when it again has a negative EBITDA; (vii)
unsecured Indebtedness of Borrower so long as such unsecured Indebtedness is
subordinated to the Obligations in a manner and form satisfactory to Agent and
Lenders in their sole discretion, as to right and time of payment and as to any
other terms, rights and remedies thereunder and so long as (A) no Event of
Default has occurred and is continuing or would result after giving effect to
such unsecured Indebtedness; (B) Holdings was, on a pro forma basis, in
compliance with the Fixed Charge Coverage Ratio Financial Covenant set forth on
Annex G as of the last day of the Fiscal Quarter reflected in the
Compliance Certificate most recently delivered prior to the date such unsecured
Indebtedness is incurred (after giving effect to such unsecured Indebtedness
and the use thereof as if incurred on the first day of such period); and (C)
the proceeds of such Indebtedness have been wholly used, promptly upon receipt
thereof, to directly pay (by way of refinancing or exchange) the following
Indebtedness in the following order:  first,
the Senior Subordinated Debt, until the same has been repaid in full; second,
the Zero Coupon Debt, until the same has been repaid in full; third,
interest then due and payable on the Revolving Credit Advances; fourth,
the outstanding principal balance of the Revolving Credit Advances until the
same has been repaid in full; fifth, interest then due and payable on
the Term Loan; and sixth, the scheduled principal installments of the
Term Loan in inverse order of maturity; (viii) Indebtedness of a Qualified
Target assumed or incurred in a Permitted Acquisition described in Section 6.1(a)(iv)
as long as such Indebtedness was not incurred in contemplation of such
Permitted Acquisition; (ix) Indebtedness resulting from endorsement of
negotiable instruments for collection in the ordinary course of business; (x)
Indebtedness arising with respect to customary indemnification and purchase
price


 


50

















 


adjustment obligations incurred in connection with
Permitted Acquisitions; (xii) Indebtedness incurred in the ordinary course of
business with respect to surety and appeal bonds, performance and
return-of-money bonds and other similar obligations not exceeding at any time
the Dollar Equivalent of $250,000 in aggregate outstanding liability; (xiii)
Indebtedness incurred in connection with interest swap agreements or
arrangements designed to protect Borrower or any Subsidiary against fluctuation
in interest rates, and not entered into for speculation, entered into with any
Lender (or any Affiliate thereof) with respect to the Loans, in each case with the
consent of Agent, which shall not be unreasonably withheld; (xiv) currency
hedging arrangements; and (xv) Indebtedness not permitted by clauses (i)
through (xiv) above, so long as much Indebtedness, in the aggregate at
any time outstanding, does not exceed the Dollar Equivalent $500,000.


 


(b)                                 During
the first two years following the Closing Date, such Credit Party shall not,
directly or indirectly, voluntarily purchase, redeem, defease or prepay: any
principal of, premium, if any, interest or other amount payable in respect of
any Indebtedness, other than (i) the Obligations; (ii) Indebtedness secured by
a Permitted Encumbrance if the asset securing such Indebtedness has been sold
or otherwise disposed of in accordance with Sections 6.8(b) or (c);
(iii) Indebtedness permitted by Section 6.3(a)(iv) upon any refinancing
thereof in accordance with Section 6.3(a)(iv) or Section 6.3(a)(vii);
(iv) intercompany Indebtedness; and (v) as otherwise permitted by Section
6.14; provided,
that after the first two years following the Closing Date, if
Borrower purchases, prepays or redeems other Indebtedness, Borrower shall meet
the minimum U.S. Borrowing Availability set forth in Section 6.14(b)
after giving effect thereto.


 


6.4                                 Employee Loans and Affiliate Transactions.


 


(a)                                  Such
Credit Party shall not enter into or be a party to any transaction with any
other Credit Party or any Affiliate thereof except (i) in the ordinary course
of and pursuant to the reasonable requirements of such Credit Party’s business
and upon fair and reasonable terms that are no less favorable to such Credit
Party than would be obtained in a comparable arm’s length transaction with a
Person not an Affiliate of such Credit Party (ii) as and to the extent
permitted in Section 6.13(e) and (iii) as and to the extent permitted by
Section 6.3(a)(vi).  All such
transactions existing as of the date hereof are described in Disclosure
Schedule (6.4(a)).


 


(b)                                 Excluding
loans set forth in Disclosure Schedule (6.4(b)), such Credit Party shall
not enter into any lending or borrowing transaction with any employees of any
Credit Party, except loans to its respective employees on an arm’s-length basis
in the ordinary course of business consistent with past practices for travel
and entertainment expenses, relocation costs and similar purposes up to a
maximum of the Dollar Equivalent of $250,000 to any employee and up to a
maximum of the Dollar Equivalent of $1,000,000  in the aggregate at any one time outstanding
and except for loans or advances made in connection with a management or
employee stock ownership program, the proceeds of which are immediately
invested in Holdings’ Stock and contributed to the capital of Borrower.


 


6.5                                 Capital
Structure and Business. 
Such Credit Party shall not amend its charter or bylaws in a manner that
could reasonably be expected to adversely affect Agent or Lenders or such
Credit Party’s duty or ability to repay the Obligations.  Such Credit Party shall not engage


 


51

















 


in any business other than the businesses currently engaged in by the
Credit Parties or any business reasonably related thereto.  Such Credit Party (if not Holdings or
Borrower) shall not issue any additional shares of Stock.


 


6.6                                 Guaranteed
Indebtedness. 
Such Credit Party shall not create, incur, assume or permit to exist any
Guaranteed Indebtedness except (a) by endorsement of instruments or items of
payment for deposit to the general account of any Credit Party, and (b) for
Guaranteed Indebtedness incurred for the benefit of any other Credit Party if
the primary obligation is expressly permitted by this Agreement; provided,
that neither Borrower nor any of its Domestic Subsidiaries shall
create, incur, assume or permit to exist any Guaranteed Indebtedness for the
benefit of Holdings or any Foreign Subsidiary.


 


6.7                                 Liens.  Such Credit Party shall not create, incur,
assume or permit to exist any Lien on or with respect to its Accounts.  Such Credit Party shall not create, incur,
assume or permit to exist any Lien on or with respect to any of its other
properties or assets (whether now owned or hereafter acquired) except for (a)
Permitted Encumbrances; (b) Liens in existence on the date hereof (exclusive of
Liens of the Prior Lenders, discharged on the Closing Date or the Effective
Date) and summarized on Disclosure Schedule (6.7) securing the
Indebtedness described on Disclosure Schedule (6.3) and permitted
refinancings, extensions and renewals thereof, including extensions or renewals
of any such Liens; provided, that the principal amount of the
Indebtedness so secured is not increased and the Lien does not attach to any
other property; and (c) Liens created after the date hereof by conditional sale
or other title retention agreements (including Capital Leases) or in connection
with purchase money Indebtedness with respect to real estate, improvements
thereto, or Equipment and Fixtures acquired by any Credit Party in the ordinary
course of business, involving the incurrence of an aggregate amount of purchase
money Indebtedness and Capital Lease Obligations of not more than the Dollar
Equivalent of $5,000,000 outstanding at any one time for all such Liens (provided,
that such Liens attach only to the assets subject to such purchase
money debt and such Indebtedness is incurred within 30 days following such
purchase and does not exceed 100% of the purchase price of the subject assets),
(d) Liens permitted in accordance with Section 6.1 and (e) Liens
securing other obligations not to exceed the Dollar Equivalent of $500,000 in
the aggregate.  In addition, such Credit
Party shall not become a party to any agreement, note, indenture or instrument,
or take any other action, that would prohibit the creation of a Lien on any of
its properties or other assets in favor of Agent, on behalf of itself and
Lenders, as additional collateral for the Obligations, except operating leases,
Capital Leases or Licenses which prohibit Liens upon the assets that are
subject thereto.


 


6.8                                 Sale
of Stock and Assets. 
Such Credit Party shall not sell, transfer, convey, assign or otherwise
dispose of any of its properties or other assets, including the Stock of any of
its Subsidiaries (whether in a public or a private offering or otherwise) or
any of its Accounts, other than (a) the sale of Inventory in the ordinary
course of business, (b) the sale, transfer, conveyance or other disposition by
a Credit Party of Equipment, Fixtures and Real Estate that are obsolete or no
longer used or useful in such Credit Party’s business and having a book value
not exceeding the Dollar Equivalent of $500,000 in the aggregate in any Fiscal
Year, (c) the sale, transfer, conveyance or other disposition of other
Equipment and Fixtures having a value not exceeding the Dollar Equivalent of
$500,000 in the aggregate in any Fiscal Year, and (d) assets acquired as part
of a Permitted Acquisition and designated for disposition in a written notice
to


 


52

















 


Agent when acquired.  With
respect to any disposition of assets or other properties permitted pursuant to clauses
(b) and (c) above, subject to compliance with Section 1.3(b),
Agent agrees on reasonable prior written notice to release its Lien on such
assets or other properties in order to permit the applicable Credit Party to
effect such disposition and shall execute and promptly deliver to Borrower, at
Borrower’s expense, appropriate UCC-3 termination statements and other releases
as reasonably requested by Borrower.


 


6.9                                 ERISA.  Such Credit Party shall not, or shall cause
or permit any ERISA Affiliate to, cause or permit to occur an event that could
result in the imposition of a Lien under Section 412 of the IRC or Section 302
or 4068 of ERISA or cause or permit to occur an ERISA Event to the extent such
ERISA Event could reasonably be expected to have a Material Adverse Effect.


 


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


 


6.11                           [RESERVED]


 


6.12                           Sale-Leasebacks.  Such Credit Party shall not engage in any
sale-leaseback, synthetic lease or similar transaction involving any of its
assets.


 


6.13                           Cancellation
of Indebtedness. 
Such Credit Party shall not cancel any claim or debt owing to it, except
for reasonable consideration negotiated on an arm’s–length basis and in the
ordinary course of its business consistent with past practices.


 


6.14                           Restricted
Payments.


 


(a)                                  Such
Credit Party shall not make any Restricted Payment, except (i) payments of
interest and principal of intercompany loans and advances between Borrower and
Secured Guarantors and between the French Operating Companies, Schaublin and
Schaublin Holding, and Schaublin, Schaublin Holding and Borrower, respectively,
to the extent such intercompany loans and advances are permitted by Section
6.2 and Section 6.3, (ii) dividends and distributions by
Subsidiaries of Borrower paid to Borrower or to an intermediate Subsidiary of
Borrower which is the direct holder of Stock in the Subsidiary making a
dividend on other distribution, as applicable, (iii) transactions
permitted under Section 6.4(b), (iv) payments of management fees to
Whitney & Co. in equal quarterly installments, as long as such payments of
management fees do not exceed $450,000 in the aggregate during any Fiscal Year,
(v) scheduled payments of interest with respect to the Senior Subordinated
Debt or any refinancing thereof permitted under Section 6.3(a)(vii)
subject to the subordination provisions set forth in the applicable note
purchase agreement or indenture, (vi) dividends or distributions payable to
Holdings solely in common Stock of Holdings, (vii) payments to Dr. Michael
J. Hartnett not to exceed those set forth in that certain Employment Agreement,
dated December 18, 2000, by and between Borrower and Dr. Michael J. Hartnett,
as in effect on the Closing Date and (viii) payments and distributions
with respect to Zero Coupon Debt and Senior Subordinated Notes permitted in
accordance with Section 6.3(a)(vii); and provided, that no Event of
Default has occurred and is continuing or would result after giving effect to any
Restricted Payment pursuant to clause (iv) above.


 


53

















 


(b)                                 Notwithstanding
the foregoing Section 6.14(a), Borrower may pay cash dividends to
Holdings (“Dividends”) as long as (A) promptly upon receipt thereof,
Holdings immediately uses all of the proceeds of such Dividends solely for one
or more of the following purposes:  (i)
payment of scheduled interest as of the Closing Date on, and the redemption
required as of the Closing Date of, the Zero Coupon Debt, (ii) payment of
dividends on the preferred Stock of Holdings, (iii) payments at such times and
in such amounts as are sufficient to enable Holdings to pay the federal and
state income taxes attributable to the taxable income of Borrower and
Subsidiaries pursuant to the Tax Sharing Agreement, (iv) repurchase of
Holdings’ Stock from employees or former employees an aggregate amount not to
exceed $500,000 per year, it being agreed that no more than $100,000 of such
aggregate amount may consist of such repurchases from employees whose
employment continues, (v) Dividends from Borrower to Holdings not to exceed
$100,000 in the aggregate in any Fiscal Year to pay the operating expenses of
Holdings, and (vi) funding Redemptions as long as such Dividends paid for Redemptions
do not exceed $30,000,000 in the aggregate after the Closing Date; (B) no
Default or Event of Default and no default or an event of default under any
Subordinated Debt Document, Discount Debentures Documents or any other debt
instrument of Holdings, Borrower or any other Credit Party or in respect of the
charter of Holdings, Borrower or any other Credit Party has occurred and is
continuing or would result after giving effect to any such Dividend or
Redemption and any U.S. Revolving Credit Advances used to fund such Dividend;
(C) Borrower and Holdings are in compliance with the Fixed Charge Coverage
Ratio set forth in Annex G for the four quarter period reflected in the
Compliance Certificate most recently delivered pursuant to Annex E prior
to such proposed Dividend and all U.S. Revolving Credit Advances used to fund
such Dividend (after giving effect to such proposed Redemption, Dividend and
Revolving Credit Advances as if made on the first day of such period); (D)
Borrower has U.S. Borrowing Availability of at least $10,000,000, after giving
effect to the proposed Dividend and U.S. Revolving Credit Advances used to fund
such Dividend and without any manipulation of working capital of Borrower, and
(E) if the proceeds of the U.S. Revolving Credit Advances used to fund
Redemptions exceed $9,000,000 in the aggregate, then, in addition to satisfying
the conditions of the foregoing clauses (A) through (D) of this Section
6.14(b), the Leverage Ratio at the end of the following Fiscal Quarters and
for the 12-month period then ended (calculated as if any proposed Redemption,
Dividends and all Revolving Credit Advances used to fund such Dividends had
been made on the first day of such period) shall not be greater than the ratio
set forth below for such Fiscal Quarter:


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


54

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


3.850
to 1.0 thereafter.


 


(c)                                  In
addition, Borrower may pay Dividends to Holdings for Redemptions that occur
after the total Dividends paid for Redemptions exceed or will exceed, after
giving effect to such Dividend, $30,000,000 in the aggregate, so long as (x)
the Leverage Ratio set forth in Section 6.14(b) above shall be complied
with; (y) no Default or Event of Default or a default or an event of default
under any Subordinated Debt Documents, Discount Debentures Documents or any
other debt instrument of Holdings, Borrower or any other Credit Party or in
respect of charter of Holdings, Borrower or any other Credit Party has occurred
and is continuing or would result after giving effect to any such Dividend,
Redemption or the U.S. Revolving Credit Advance used to fund such Dividend; and
(z) Borrower and Holdings are in compliance with the Fixed Charge Coverage
Ratio set forth in Annex G for the four quarter period reflected in the
Compliance Certificate most recently delivered pursuant to Annex E prior
to such proposed Dividends and all U.S. Revolving Credit Advances to be used to
fund such proposed Dividend (after giving effect to such proposed Dividend and
as if made on the first day of such period).


 


6.15                           Change of Corporate Name or Location; Change of Fiscal
Year.  Such Credit
Party shall not (a) change its name as it appears in official filings in the
state of its incorporation or other organization, (b) change its chief
executive office, principal place of business, corporate offices or warehouses
or locations at which Collateral is held or stored, or the location of its
records concerning the Collateral, (c) change the type of entity that it is,
(d) cause to be changed its organization identification number, if any, issued
by its state of incorporation or other organization, or (e) change its state of
incorporation or organization or incorporate or organize in any additional
jurisdictions, in each case without at least thirty (30) days prior written
notice to Agent and after Agent’s written acknowledgment that any reasonable
action requested by Agent in connection therewith, including to continue the
perfection of any Liens in favor of Agent, on behalf of Lenders, in any
Collateral, has been completed or taken, and provided, that any such new
location shall be in the continental United States, except for new locations
established by Schaublin or French Operating Companies which may be in
Switzerland or France, as applicable. Without limiting the foregoing, no Credit
Party shall cause to be changed its name, identity or corporate structure in
any manner that might make any financing or continuation statement filed in
connection herewith seriously misleading as such term is defined in and/or used
in the Code or any other then applicable provision of the Code except upon
prior written


 


55

















 


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


 


6.16                           No Impairment of Intercompany Transfers.  Such Credit Party shall not directly or
indirectly enter into or become bound by any agreement, instrument, indenture
or other obligation (other than this Agreement and the other Loan Documents)
that could directly or indirectly restrict, prohibit or require the consent of
any Person with respect to the payment of dividends or distributions or the
making or repayment of intercompany loans by a Secured Guarantor to Borrower.


 


6.17                           No
Speculative Transactions.  Such Credit Party shall not engage in any transaction involving
commodity options, futures contracts or similar transactions, except solely to
hedge against fluctuations in the prices of commodities owned or purchased by
it and the values of foreign currencies receivable or payable by it and
interest swaps, caps or collars.


 


6.18                           Changes Relating to Subordinated Debt; Material
Contracts.  Such
Credit Party shall not change or amend the terms of any Subordinated Debt (or
any indenture or agreement in connection therewith) if the effect of such
amendment is to:  (a) increase the
interest rate on such Subordinated Debt; (b) change the dates upon which
payments of principal or interest are due on such Subordinated Debt other than
to extend such dates; (c) change any default or event of default other than to
delete or make less restrictive any default provision therein, or add any
covenant with respect to such Subordinated Debt; (d) change the redemption or
prepayment provisions of such Subordinated Debt other than to extend the dates
therefor or to reduce the premiums payable in connection therewith; (e) grant any
security or collateral to secure payment of such Subordinated Debt; or (f)
change or amend any other term if such change or amendment would materially
increase the obligations of the Credit Party thereunder or confer additional
material rights on the holder of such Subordinated Debt in a manner adverse to
any Credit Party, Agent or any Lender.


 


6.19                           Redemptions.


 


(a)                                  Proceeds
of Loans used by Borrower to fund the Recapitalization on the Closing Date or
at any time prior to December 16, 2002 shall not exceed $30,000,000 in the
aggregate.


 


(b)                                 Prior
to any Recapitalization payment, Borrower shall deliver to Agent evidence
demonstrating Borrower’s continued compliance with the Financial Covenants
after giving effect to such payment.


 


6.20                           Holdings and Schaublin Holding.


 


(a)                                  Holdings
shall not engage in any trade or business or incur any Indebtedness other than
the Zero Coupon Debt or any refinancing thereof.


 


(b)                                 Schaublin
Holding shall not engage in any trade or business or incur any Indebtedness
other than the Schaublin Holding Intercompany Loans.


 


56

















 


7.                                      TERM


 


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


 


7.2                                 Survival of Obligations Upon Termination of Financing
Arrangements. 
Except as otherwise expressly provided for in the Loan Documents, no
termination or cancellation (regardless of cause or procedure) of any financing
arrangement under this Agreement shall in any way affect or impair the
obligations, duties and liabilities of the Credit Parties or the rights of
Agent and Lenders relating to any unpaid portion of the Loans or any other
Obligations, due or not due, liquidated, contingent or unliquidated or any
transaction or event occurring prior to such termination, or any transaction or
event, the performance of which is required after the Commitment Termination
Date.  Except as otherwise expressly
provided herein or in any other Loan Document, all undertakings, agreements,
covenants, warranties and representations of or binding upon the Credit
Parties, and all rights of Agent and each Lender, all as contained in the Loan
Documents shall continue in full force and effect until the Termination Date; provided,
that the provisions of Section 11, the payment obligations under Sections
1.15 and 1.16, and the indemnities contained in the Loan Documents shall
survive the Termination Date.


 


8.                                      EVENTS
OF DEFAULT; RIGHTS AND REMEDIES


 


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


 


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


 


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


 


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


 


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


 


(e)                                  A
default or breach occurs (A) under any agreement, document or instrument to
which any Credit Party is a party that evidences any of the Schaublin Holding
Intercompany Loans, Schaublin Intercompany Loans or French Intercompany Loans
or under


 


57

















 


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


 


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


 


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


 


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


 


(i)                                     Any
Credit Party or Holdings (and, in the case of any Foreign Credit Party, its
shareholders or directors acting with respect to such Credit Party) (i) files a
petition or convenes any meeting seeking relief under the Bankruptcy Code or
any other applicable federal, state or foreign bankruptcy or other similar law,
(ii) convenes any meeting, presents any petition, consents to or fails to contest
in a timely and appropriate manner or takes any other step for the purposes of
the institution of proceedings thereunder or to the filing of any such petition
or to the appointment of or taking possession by a custodian, administrator,
receiver, liquidator, assignee,


 


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trustee or sequestrator (or similar official) for such
Credit Party or Holdings or for any substantial part of any such Credit Party’s
assets or of assets of Holdings, (iii) any Foreign Credit Party ceases to pay
or suspends payment of all or any class of its debts or any Credit Party makes
an assignment for the benefit of creditors, (iv) takes any action in
furtherance of any of the foregoing, (v) admits in writing its inability to, or
is generally unable to, pay its debts as such debts become due or becomes
insolvent (on a going concern or, in the case of a Foreign Credit Party only,
on a balance sheet basis), or (vi) enters into any agreement for the
rescheduling, restructuring or readjustment of its debts or any class thereof.


 


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


 


(k)                                  Any
material provision of any Loan Document for any reason ceases to be valid,
binding and enforceable in accordance with its terms (or any Credit Party shall
challenge the enforceability of any Loan Document or shall assert in writing,
or engage in any action or inaction based on any such assertion, that any
provision of any of the Loan Documents has ceased to be or otherwise is not
valid, binding and enforceable in accordance with its terms), or any Lien
created under any Loan Document ceases to be a valid and perfected first
priority Lien (except as otherwise permitted herein or therein) in any of the
Collateral purported to be covered thereby, and remains unremedied for a period
of ten (10) days after Borrower obtains knowledge thereof.


 


(l)                                     Any
Change of Control occurs.


 


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


 


(n)                                 Holdings
shall fail to pledge all of the Stock of Borrower as Collateral within ten (10)
days after payment in full of the Zero Coupon Debt.


 


8.2                                 Remedies.


 


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


 


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without notice except as otherwise expressly provided
herein, increase the rate of interest applicable to the Loans and the Letter of
Credit Fees to the Default Rate.


 


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


 


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


 


9.                                      ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT


 


9.1                                 Assignment and Participations.


 


(a)                                  Subject
to the terms of this Section 9.1, any Lender may make an assignment to a
Qualified Assignee of, or sell participations in, at any time or times, the
Loan Documents, Loans, Letter of Credit Obligations and any Commitment or any
portion thereof or interest therein, including any Lender’s rights, title,
interests, remedies, powers or duties thereunder; provided, however, that each
such assignment must be of a fixed percentage of all of such Lender’s rights
and obligations hereunder.  Any
assignment by a Lender shall: 
(i) require the consent of Agent (which consent shall not be
unreasonably withheld or delayed with respect to a Qualified Assignee) and the
execution of an assignment agreement (an “Assignment Agreement”
substantially in the form attached hereto as Exhibit 9.1(a) and
otherwise in form and substance reasonably satisfactory to, and acknowledged
by, Agent; (ii) be conditioned on such assignee Lender representing to the
assigning Lender and Agent that it is purchasing the applicable Loans to be
assigned to it for its own account, for investment purposes and not with a view
to the distribution thereof; (iii) after giving effect to any such partial
assignment, the


 


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assignee Lender shall have Commitments in an amount at
least equal to $5,000,000 and the assigning Lender shall have retained
Commitments in an amount at least equal to $5,000,000; (iv) include a payment
to Agent of an assignment fee of $3,500; and (v) so long as no Event of Default
shall have occurred or be continuing, require the consent of Borrower (which
consent shall not be unreasonably withheld or delayed with respect to a
Qualified Assignee).  In the case of an
assignment by a Lender under this Section 9.1, the assignee shall
have, to the extent of such assignment, the same rights, benefits and
obligations as all other Lenders hereunder. 
The assigning Lender shall be relieved of its obligations hereunder with
respect to its Commitments or assigned portion thereof from and after the date
of such assignment.  Borrower hereby
acknowledges and agrees that any assignment shall give rise to a direct
obligation of Borrower to the assignee and that the assignee shall be
considered to be a “Lender”.  In all
instances, each Lender’s liability to make Loans hereunder shall be several and
not joint and shall be limited to such Lender’s Pro Rata Share of the
applicable Commitment.  In the event
Agent or any Lender assigns or otherwise transfers all or any part of the
Obligations, Agent or any such Lender shall so notify Borrower and Borrower
shall, upon the request of Agent or such Lender, execute new Notes in exchange
for the Notes, if any, being assigned. 
Notwithstanding the foregoing provisions of this Section 9.1(a),
any Lender may at any time pledge the Obligations held by it and such Lender’s
rights under this Agreement and the other Loan Documents to a Federal Reserve
Bank; provided,
that no such pledge to a Federal Reserve Bank shall release such
Lender from such Lender’s obligations hereunder or under any other Loan
Document.


 


(b)                                 Any
participation by a Lender of all or any part of its Commitments shall be made
with the understanding that all amounts payable by Borrower hereunder shall be
determined as if that Lender had not sold such participation, and that the
holder of any such participation shall not be entitled to require such Lender
to take or omit to take any action hereunder except actions directly affecting
(i) any reduction in the principal amount of, or interest rate or Fees payable
with respect to, any Loan in which such holder participates, (ii) any extension
of the scheduled amortization of the principal amount of any Loan in which such
holder participates or the final maturity date thereof, and (iii) any release
of all or substantially all of the Collateral (other than in accordance with
the terms of this Agreement, the Collateral Documents or the other Loan
Documents).  Neither Borrower nor any
other Credit Party shall have any obligation or duty to any participant.  Neither Agent nor any Lender (other than the
Lender selling a participation) shall have any duty to any participant and may
continue to deal solely with the Lender selling a participation as if no such
sale had occurred.


 


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


 


(d)                                 Each
Credit Party executing this Agreement shall assist any Lender permitted to sell
assignments or participations under this Section 9.1 as reasonably
required to enable the assigning or selling Lender to effect any such
assignment or participation, including the preparation of informational
materials for, and the participation of management in meetings with, potential
assignees or participants.  Each Credit
Party executing this Agreement shall certify the correctness, completeness and
accuracy of all descriptions of such Credit Party and its affairs contained in
any selling materials provided by it and all other information provided by it


 


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and included in such materials, except that any
Projections delivered by Borrower shall only be certified by Borrower as having
been prepared by Borrower in compliance with the representations contained in Section
3.4(c).


 


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


 


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


 


(g)                                 Notwithstanding
anything to the contrary contained herein, any Lender (a “Granting Lender”),
may grant to a special purpose funding vehicle (an “SPC”), identified as
such in writing by the Granting Lender to Agent and Borrower, the option to
provide to Borrower all or any part of any Loans that such Granting Lender
would otherwise be obligated to make to Borrower pursuant to this Agreement; provided,
that (i) nothing herein shall constitute a commitment by any SPC to
make any Loan; and (ii) if an SPC elects not to exercise such option or
otherwise fails to provide all or any part of such Loan, the Granting Lender
shall be obligated to make such Loan pursuant to the terms hereof.  The making of a Loan by an SPC hereunder
shall utilize the Commitment of the Granting Lender to the same extent, and as
if such Loan were made by such Granting Lender.  No SPC shall be liable for any indemnity or similar payment
obligation under this Agreement (all liability for which shall remain with the
Granting Lender).  Any SPC may (i) with
notice to, but without the prior written consent of, Borrower and Agent and
assign all or a portion of its interests in any Loans to the Granting Lender or
to any financial institutions (consented to by Borrower and Agent) providing
liquidity and/or credit support to or for the account of such SPC to support
the funding or maintenance of Loans and (ii) disclose on a confidential basis
any non-public information relating to its Loans to any rating agency,
commercial paper dealer or provider of any surety, guaranty or credit or
liquidity enhancement to such SPC.  This
Section 9.1(g) may not be amended without the prior written consent of
each Granting Lender, all or any of whose Loans are being funded by an SPC at
the time of such amendment.  For the
avoidance of doubt, the Granting Lender shall for all purposes, including
without limitation, the approval of any amendment or waiver of any provision of
any Loan Document or the obligation to pay any amount otherwise payable by the Granting
Lender under the Loan Documents, continue to be the Lender of record hereunder.


 


9.2                                 Appointment
of Agent.  GE
Capital is hereby appointed to act on behalf of all Lenders as Agent under this
Agreement and the other Loan Documents. 
The provisions of this Section 9.2 are solely for the benefit of
Agent and Lenders and no Credit Party nor any other Person shall have any
rights as a third party beneficiary of any of the provisions hereof.  In performing its functions and duties under
this Agreement and the other Loan Documents, Agent shall act solely as an agent
of Lenders and does not assume and shall not be deemed to have assumed any
obligation toward or relationship of agency or trust with or for any Credit
Party or


 


62

















 


any other Person.  Agent shall
have no duties or responsibilities except for those expressly set forth in this
Agreement and the other Loan Documents. 
The duties of Agent shall be mechanical and administrative in nature and
Agent shall not have, or be deemed to have, by reason of this Agreement, any
other Loan Document or otherwise a fiduciary relationship in respect of any
Lender.  Except as expressly set forth
in this Agreement and the other Loan Documents, Agent shall not have any duty
to disclose, and shall not be liable for failure to disclose, any information
relating to any Credit Party or any of their respective Subsidiaries or any
Account Debtor that is communicated to or obtained by GE Capital or any of its
Affiliates in any capacity.  Neither
Agent nor any of its Affiliates nor any of their respective officers,
directors, employees, agents or representatives shall be liable to any Lender
for any action taken or omitted to be taken by it hereunder or under any other
Loan Document, or in connection herewith or therewith, except for damages
caused by its or their own gross negligence or willful misconduct.


 


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


 


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


 


63

















 


liability under or in respect of this Agreement or the other Loan
Documents by acting upon any notice, consent, certificate or other instrument
or writing (which may be by telecopy, telegram, cable or telex) believed by it
to be genuine and signed or sent by the proper party or parties.


 


9.4                                 GE
Capital and Affiliates. 
With respect to its Commitments hereunder, GE Capital shall have the
same rights and powers under this Agreement and the other Loan Documents as any
other Lender and may exercise the same as though it were not Agent; and the
term “Lender” or “Lenders” shall, unless otherwise expressly indicated, include
GE Capital in its individual capacity. 
GE Capital and its Affiliates may lend money to, invest in, and
generally engage in any kind of business with, any Credit Party, any of their
Affiliates and any Person who may do business with or own securities of any
Credit Party or any such Affiliate, all as if GE Capital were not Agent and
without any duty to account therefor to Lenders.  GE Capital or one or more of Affiliates may also purchase certain
equity interests in Holdings, which is a corporation that currently owns 100%
of the outstanding Stock of Borrower. 
GE Capital and its Affiliates may accept fees and other consideration
from any Credit Party for services in connection with this Agreement or otherwise
without having to account for the same to Lenders.  Each
Lender acknowledges the potential conflict of interest between GE Capital as a
Lender holding disproportionate interests in the Loans, GE Capital or its
Affiliates as a Stockholder and GE Capital as Agent; provided, that any equity
investment by GE Capital shall not exceed 7.5% in the aggregate of the Stock of
Holdings outstanding on a fully diluted basis, and shall not exceed $7,500,000
of investments in the aggregate.


 


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


 


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


 


64

















 


each other Loan Document, to the extent that Agent is not reimbursed
for such expenses by Credit Parties.


 


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


 


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


 


65

















 


exercise the foregoing right to offset with respect to amounts in
excess of its Pro Rata Share of the Obligations and may sell participations in
such amounts so offset to other Lenders and holders and (b) any Lender so
purchasing a participation in the Loans made or other Obligations held by other
Lenders or holders may exercise all rights of offset, bankers’ lien,
counterclaim or similar rights with respect to such participation as fully as
if such Lender or holder were a direct holder of the Loans and the other
Obligations in the amount of such participation.  Notwithstanding the foregoing, if all or any portion of the
offset amount or payment otherwise received is thereafter recovered from the
Lender that has exercised the right of offset, the purchase of participations
by that Lender shall be rescinded and the purchase price restored without
interest.


 


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


 


(a)                                  Advances;
Payments.


 


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


 


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


 


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(b)                                 Availability
of Lender’s Pro Rata Share.  Agent
may assume that each Revolving Lender will make its Pro Rata Share of each
Revolving Credit Advance available to Agent on each funding date.  If such Pro Rata Share is not, in fact, paid
to Agent by such Revolving Lender when due, Agent will be entitled to recover
such amount on demand from such Revolving Lender without setoff, counterclaim
or deduction of any kind.  If any
Revolving Lender fails to pay the amount of its Pro Rata Share forthwith upon
Agent’s demand, Agent shall promptly notify Borrower and Borrower shall
immediately repay such amount to Agent. 
Nothing in this Section 9.9(b) or elsewhere in this Agreement or
the other Loan Documents shall be deemed to require Agent to advance funds on
behalf of any Revolving Lender or to relieve any Revolving Lender from its
obligation to fulfill its Commitments hereunder or to prejudice any rights that
Borrower may have against any Revolving Lender as a result of any default by
such Revolving Lender hereunder.  To the
extent that Agent advances funds to Borrower on behalf of any Revolving Lender
and is not reimbursed therefor on the same Business Day as such Advance is
made, Agent shall be entitled to retain for its account all interest accrued on
such Advance until reimbursed by the applicable Revolving Lender.


 


(c)                                  Return
of Payments.


 


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


 


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


 


(d)                                 Non-Funding
Lenders.  The failure of any
Non-Funding Lender to make any Revolving Credit Advance or any payment required
by it hereunder, or to purchase any participation in any Swing Line Loan to be
made or purchased by it on the date specified therefor shall not relieve any
other Lender (each such other Revolving Lender, an “Other Lender”) of
its obligations to make such Advance or purchase such participation on such
date, but neither any Other Lender nor Agent shall be responsible for the
failure of any Non-Funding Lender to make an Advance, purchase a participation
or make any other payment required hereunder. 
Notwithstanding anything set forth herein to the contrary, a Non-Funding
Lender shall not have any voting or consent rights under or with respect to any
Loan Document or constitute a “Lender” or a “Revolving Lender” (or be included
in the calculation of “Requisite Lenders” or “Requisite Revolving Lenders”
hereunder) for any voting or consent rights under or with respect to any Loan
Document.  At Borrower’s request, Agent
or a Person acceptable to Agent shall have the right with Agent’s consent and
in Agent’s sole discretion (but shall have no obligation) to purchase from any
Non-Funding Lender, and each Non-Funding Lender agrees that it shall, at
Agent’s request, sell and assign to Agent or such Person, all of the
Commitments of that Non-Funding


 


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Lender for an amount equal to the principal balance of
all Loans held by such Non-Funding Lender and all accrued interest and fees
with respect thereto through the date of sale, such purchase and sale to be
consummated pursuant to an executed Assignment Agreement.


 


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


 


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


 


10.                               SUCCESSORS
AND ASSIGNS


 


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


 


11.                               MISCELLANEOUS


 


11.1                           Complete Agreement; Modification of Agreement.  The Loan Documents constitute the complete
agreement between the parties with respect to the subject matter thereof and
may not be modified, altered or amended except as set forth in Section 11.2.  Any letter of


 


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interest, commitment letter, or fee letter (other than the GE Capital
Fee Letter or any confidentiality agreement), if any, between any Credit Party
and Agent or any Lender or any of their respective Affiliates, predating this
Agreement and relating to a financing of substantially similar form, purpose or
effect shall be superseded by this Agreement.


 


11.2                           Amendments
and Waivers.


 


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


 


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


 


(c)                                  No
amendment, modification, termination or waiver shall, unless in writing and
signed by Agent and each Lender directly affected thereby:  (i) increase the principal amount of any
Lender’s Commitment (which action shall be deemed only to affect those Lenders
whose Commitments are increased and must be approved by Requisite Lenders,
including those lenders whose Commitments are increased); (ii) reduce the
principal of, rate of interest on or Fees payable with respect to any Loan or
Letter of Credit Obligations of any affected Lender; (iii) waive or extend any
scheduled payment date (other than payment dates of mandatory prepayments under
Section 1.3(b)(ii)-(iv)) or final maturity date of the principal amount
of any Loan of any affected Lender; (iv) waive, forgive, defer, extend or
postpone any payment of interest or Fees as to any affected Lender; (v) release
any Guaranty or except as otherwise permitted herein or in the other Loan
Documents, release, or permit any Credit Party to sell or otherwise dispose of,
any Collateral with a value exceeding $3,000,000 in the aggregate (which action
shall be deemed to directly affect all Lenders); (vi) change the percentage of
the Commitments or of the aggregate unpaid principal amount of the Loans that
shall be required for Lenders or any of them to take any action hereunder
(which action shall be deemed to directly


 


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affect all Lenders); and (vii) amend or waive this Section
11.2 or the definitions of the terms “Requisite Lenders” or “Requisite
Revolving Lenders” insofar as such definitions affect the substance of this Section
11.2 (which action shall be deemed to directly affect all Lenders).  Furthermore, no amendment, modification,
termination or waiver affecting the rights or duties of Agent or L/C Issuer
under this Agreement or any other Loan Document shall be effective unless in
writing and signed by Agent or L/C Issuer, as the case may be, in addition to
Lenders required hereinabove to take such action.  Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given.  No amendment,
modification, termination or waiver shall be required for Agent to take
additional Collateral pursuant to any Loan Document. No amendment,
modification, termination or waiver of any provision of any Note shall be
effective without the written concurrence of the holder of that Note.  No notice to or demand on any Credit Party
in any case shall entitle such Credit Party or any other Credit Party to any
other or further notice or demand in similar or other circumstances.  Any amendment, modification, termination,
waiver or consent effected in accordance with this Section 11.2 shall be
binding upon each holder of the Notes at the time outstanding and each future
holder of the Notes.


 


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


 


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


 


(ii)                                  requiring
the consent of Requisite Revolving Lenders, the consent of Revolving Lenders
holding 51% or more of the aggregate Revolving Loan Commitments is obtained,
but the consent of Requisite Revolving Lenders is not obtained, or


 


(iii)                               requiring
the consent of Requisite Lenders, the consent of Lenders holding 51% or more of
the aggregate Commitments is obtained, but the consent of Requisite Lenders is not
obtained,


 


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


 


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


 


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mortgage releases and other documents necessary or
appropriate to evidence the termination of the Liens securing payment of the
Obligations.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


71

















 


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


 


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


 


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


 


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


 


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


 


11.8                           Confidentiality.  Agent and each Lender agree to use
commercially reasonable efforts (equivalent to the efforts Agent or such Lender
applies to maintain the confidentiality of its own confidential information) to
maintain as confidential all confidential information provided to them by the
Credit Parties and designated as confidential for a period of 2 years


 


72

















 


following receipt thereof, except that Agent and any Lender may
disclose such information (a) to Persons employed or engaged by Agent or such
Lender, including any agents that have been granted access pursuant to Section
1.14; (b) to any bona fide assignee or participant or potential assignee or
participant that has agreed to comply with the covenant contained in this Section
11.8 (and any such bona fide assignee or participant or potential assignee
or participant may disclose such information to Persons employed or engaged by
them as described in clause (a) above); (c) as required or requested by
any Governmental Authority or reasonably believed by Agent or such Lender to be
compelled by any court decree, subpoena or legal or administrative order or
process; (d) as, on the advice of Agent’s or such Lender’s counsel, is required
by law; (e) in connection with the exercise of any right or remedy under the
Loan Documents or in connection with any Litigation to which Agent or such
Lender is a party; or (f) that ceases to be confidential through no fault
of Agent or any Lender.


 


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


 


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


 


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


 


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


 


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


 


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


 


74

















 


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


 


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


 


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


 


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


 


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


 


[Signature Page Follows]


 


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


 


	
   

  	
  BORROWER:

  
	
   

  	
   

  	
   

  
	
   

  	
  ROLLER
  BEARING COMPANY OF AMERICA,

  INC.,  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/Michael Gostomski

  	
   

  
	
   

  	
  Name: 

  	
  Michael
  Gostomski

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Executive Vice
  President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GENERAL
  ELECTRIC CAPITAL

  CORPORATION,
  as Agent and Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/

  	
  Duly Authorized Signatory

  	
   

  
	
   

  	
   

  	
  Duly Authorized Signatory

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CONGRESS
  FINANCIAL CORPORATION

  (CENTRAL), as Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/

  	
  Duly Authorized Signatory

  	
   

  
	
   

  	
   

  	
  Duly Authorized Signatory

  
							



 


[Signature Page to the
Amended and Restated Credit Agreement]


 

















 


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


 


	
   

  	
  CREDIT
  PARTIES:

  
	
   

  	
   

  	
   

  
	
   

  	
  INDUSTRIAL
  TECTONICS BEARINGS

  CORPORATION, a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/Michael Gostomski

  	
   

  
	
   

  	
  Name: 

  	
  Michael
  Gostomski

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Executive Vice
  President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  RBC
  NICE BEARINGS INC., a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/Michael Gostomski

  	
   

  
	
   

  	
  Name: 

  	
  Michael
  Gostomski

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Executive Vice
  President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  BREMEN
  BEARINGS, INC., a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/Michael Gostomski

  	
   

  
	
   

  	
  Name: 

  	
  Michael
  Gostomski

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Executive Vice
  President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TYSON
  BEARING COMPANY, INC., a Delaware

  corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/Michael Gostomski

  	
   

  
	
   

  	
  Name: 

  	
  Michael
  Gostomski

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Executive Vice
  President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  RBC
  LINEAR PRECISION PRODUCTS, INC., a

  Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/Michael Gostomski

  	
   

  
	
   

  	
  Name: 

  	
  Michael
  Gostomski

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Executive Vice
  President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MILLER
  BEARING COMPANY, INC., a Delaware

  corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/Michael Gostomski

  	
   

  
	
   

  	
  Name: 

  	
  Michael
  Gostomski

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Executive Vice
  President

  	
   

  
							



 

















 


	
   

  	
  RBC
  OKLAHOMA, INC., a Delaware

  corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/Michael Gostomski

  	
   

  
	
   

  	
  Name: 

  	
  Michael
  Gostomski

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Executive Vice
  President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SCHAUBLIN
  HOLDING S.A., a corporation

  incorporated under the laws of Switzerland

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/Michael Gostomski

  	
   

  
	
   

  	
  Name: 

  	
  Michael
  Gostomski

  	
   

  
	
   

  	
  Title:

  	
  President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SCHAUBLIN
  S.A., a
  corporation incorporated under the

  laws of Switzerland

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/Michael Gostomski

  	
   

  
	
   

  	
  Name: 

  	
  Michael Gostomski

  	
   

  
	
   

  	
  Title:

  	
  President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ETABLISSEMENTS
  J. BOVAGNET S.A., a French

  société
  anomyme

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/Michael Gostomski

  	
   

  
	
   

  	
  Name: 

  	
  Michael
  Gostomski

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Authorized
  Person

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  RBC
  FRANCE SAS, a French société  par actions

  simplifiée

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/Michael Gostomski

  	
   

  
	
   

  	
  Name: 

  	
  Michael
  Gostomski

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Authorized
  Person

  	
   

  
								



 

















 


ANNEX A (Recitals)


to


CREDIT AGREEMENT


 


DEFINITIONS


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-1

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-2

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-3

















 


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


 


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


 


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


 


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


 


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


 


“Australian
Dollar” means the lawful currency of Australia.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-4

















 


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


 


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


 


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


 


“Canadian
Dollar” means the lawful currency of Canada.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-5

















 


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


 


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


 


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


 


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


 


“Closing Date”
means May 30, 2002.


 


A-6

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-7

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-8

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-9

















 


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


 


“Effective Date”
means June 19, 2003.


 


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


 


A-10

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-11

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-12

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-13

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-14

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-15

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-16

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-17

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-18

















 


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


 


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


 


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


 


“IRS” means
the Internal Revenue Service.


 


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


 


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


 


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


 


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


 


A-19

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-20

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-21

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-22

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-23

















 


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


 


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


 


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


 


“PBGC”
means the Pension Benefit Guaranty Corporation.


 


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


 


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


 


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


 


A-24

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-25

















 


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


 


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


 


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


 


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


 


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


 


A-26

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-27

















 


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


 


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


 


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


 


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


 


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


 


A-28

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-29

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-30

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-31

















 


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


 


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


 


“Sterling”
means the lawful currency of Great Britain.


 


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


 


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


 


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


 


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


 


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


 


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


 


A-32

















 


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


 


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


 


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


 


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


 


“Swing Line
Lender” means GE Capital.


 


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


 


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


 


“Swiss Francs”
means the lawful currency of Switzerland.


 


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


 


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


 


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


 


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


 


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


 


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


 


A-33

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-34

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-35

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


A-36

















 


“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-37

















 


ANNEX B (Section
1.2)


to


CREDIT AGREEMENT


 


LETTERS OF CREDIT


 


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


 


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


 


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


 


B-1

















 


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


 


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


 


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


 


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


 


B-2

















 


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


 


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


 


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


 


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


 


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


 


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


 


B-3

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


B-4

















 


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


 


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


 


B-5

















 


ANNEX C (Section
1.8)


to


CREDIT AGREEMENT


 


CASH MANAGEMENT SYSTEM


 


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


 


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


 


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


 


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


 


C-1

















 


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


 


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


 


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


 


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


 


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


 


C-2

















 


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


 


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


 


	
  Bank:

  	
   

  	
  Wachovia/First Union National Bank

  Charlotte, NC

  
	
   

  	
   

  	
   

  
	
  ABA/Swift number:

  	
   

  	
  031201467

  
	
   

  	
   

  	
   

  
	
  Bank Account #:

  	
   

  	
  2014146817950

  
	
   

  	
   

  	
   

  
	
  Account Name:

  	
   

  	
  Roller Bearing Company of America, Inc.

  



 


C-3

















 


ANNEX D (Section
2.1(a))


to


CREDIT AGREEMENT


 


CLOSING CHECKLIST


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


H.                                    Charter
and Good Standing.  For each RBC
Swiss Group Member and each French Operating Company, such Person’s (a) charter
and all amendments thereto, (b) good standing certificates (including
verification of tax status) in its jurisdiction of incorporation and (c) good
standing certificates (including verification of tax status) and certificates
of qualification to conduct business in each jurisdiction where its ownership
or lease of property or the conduct


 


D-1

















 


of its
business requires such qualification, each dated a recent date prior to the
Effective Date and certified by the applicable Secretary of State or other
authorized Governmental Authority.


 


I.                                         Bylaws
and Resolutions.  For each RBC Swiss
Group Member and each French Operating Company, (a) such Person’s bylaws,
together with all amendments thereto and (b) resolutions of such Person’s Board
of Directors, approving and authorizing the execution, delivery and performance
of the Loan Documents to which such Person is a party and the transactions to
be consummated in connection therewith, each certified as of the Effective Date
by such Person’s corporate secretary or an assistant secretary as being in full
force and effect without any modification or amendment.


 


J.                                        Incumbency
Certificates.  For each Credit
Party, signature and incumbency certificates of the officers of each such
Person executing any of the Loan Documents, certified as of the Effective Date
by such Person’s corporate secretary or an assistant secretary as being true,
accurate, correct and complete.


 


K.                                    Opinions
of Counsel.  Duly executed originals
of opinions of McDermott, Will & Emery, Orrick, Herrington & Sutcliffe
and Raaflaub Law Offices, each counsel for the Credit Parties, in form and
substance reasonably satisfactory to Agent and its counsel, dated the Effective
Date.


 


L.                                      Foreign
Collateral Documents and Borrower Swiss Pledge Agreement.  Duly executed originals of the Schaublin
Holding Pledge Agreement, the Schaublin Swiss Pledge Agreement, the Schaublin
French Pledge Agreement (RBC France), the Schaublin French Pledge Agreement
(Bovagnet), the Swiss Warehouse Control Agreement, and the Borrower Swiss
Pledge Agreement, accompanied by (as applicable and to the extent required under
applicable law) (a) share certificates representing all of the outstanding
Stock being pledged pursuant to such pledge agreements and stock powers for
such share certificates executed in blank and (b) the original Intercompany
Notes and other instruments evidencing Indebtedness being pledged pursuant to
such pledge agreements, duly endorsed in blank.


 


M.                                 Officer’s
Certificate.  Agent shall have
received duly executed originals of a certificate of the Chief Executive
Officer and Chief Financial Officer of Borrower, dated the Effective Date,
stating that, since March 30, 2002, except as set forth in such
certificate:  (a) no event or condition
has occurred or is existing which could reasonably be expected to have a
Material Adverse Effect; (b) there has been no material adverse change in the
industry in which Borrower operates; (c) no Litigation has been commenced
which, if successful, would have a Material Adverse Effect or could challenge
any of the transactions contemplated by the Agreement and the other Loan
Documents; (d) there have been no Restricted Payments made by any Credit Party;
and (e) there has been no material increase in liabilities, liquidated or
contingent, and no material decrease in assets of Borrower or any of its
Subsidiaries.


 


N.                                    Waivers.  Agent, on behalf of Lenders, shall have
received landlord waivers and consents, bailee letters and mortgagee agreements
in form and substance satisfactory to Agent, in each case as required pursuant
to Section 5.9.


 


D-2

















 


O.                                    Appraisals.  Agent shall have received appraisals as to
all Inventory of Schaublin.


 


P.                                      Additional
Swiss Security Documents.  [To
be determined]


 


Q.                                    Additional
French Security Documents.  [To
be determined]


 


D-3

















 


ANNEX E (Section
4.1(a))


to


CREDIT AGREEMENT


 


FINANCIAL STATEMENTS AND
PROJECTIONS – REPORTING


 


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


 


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


 


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


 


E-1

















 


if
flows of Holdings, Borrower and its Subsidiaries, on both a consolidated and
consolidating basis, as at the end of such Fiscal Quarter and for that portion
of the Fiscal Year then ended, (ii) any other information presented is true,
correct and complete in all material respects and that there was no Default or
Event of Default in existence as of such time or, if a Default or Event of
Default has occurred and is continuing, describing the nature thereof and all
efforts undertaken to cure such Default or Event of Default.


 


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


 


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


 


E-2

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


E-3

















 


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


 


(n)                                 French
Intercompany Loans and Schaublin Intercompany Loans Certificate.  Together with each Borrowing Base
Certificate submitted to Agent, and in any event within ten (10) Business Days
after the end of each Fiscal Month, to Agent a certificate with respect to the
balances and advances of the Schaublin Intercompany Loans and French
Intercompany Loans in the form of Exhibit E-2 executed by each Credit
Party signatory thereto.


 


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


 


E-4

















 


ANNEX F (Section
4.1(b))


to


CREDIT AGREEMENT


 


COLLATERAL REPORTS


 


Borrower shall
deliver or cause to be delivered the following:


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


F-1

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


F-2

















 


(f)                                    Borrower,
at its own expense, shall deliver to Agent and Lenders a desk top appraisal of
Inventory of Borrower, the Secured Guarantors and Schaublin on the second
anniversary of the Closing Date to be conducted by an appraiser, and in form
and substance reasonably satisfactory to Agent, and Borrower, at its own
expense, shall deliver to Agent and Lenders such appraisals of its assets and
the assets of Secured Guarantors and Schaublin as Agent may request at any time
after the occurrence and during the continuance of a Default or an Event of Default,
such appraisals to be conducted by an appraiser, and in form and substance
reasonably satisfactory to Agent; and


 


(g)                                 Such
other reports, statements and reconciliations with respect to the U.S.
Borrowing Base, Schaublin Borrowing Base or Collateral or Obligations of any or
all Credit Parties as Agent shall from time to time request in its reasonable
discretion, including additions and reductions of Accounts on an intra-month
basis.


 


F-3

















 


ANNEX G (Section
6.10)


to


CREDIT AGREEMENT


 


FINANCIAL COVENANTS


 


Borrower shall not
breach or fail to comply with, and shall not permit Holdings to breach or fail
to comply with, any of the following financial covenants, each of which shall
be calculated in accordance with GAAP consistently applied:


 


(a)                                  Fixed
Charge Coverage Ratio.  Holdings, on
a consolidated basis shall have at the end of each Fiscal Quarter a Fixed
Charge Coverage Ratio for the 12-month period then ended of not less than 1.10
to 1.00.


 


(b)                                 Minimum
Borrowing Availability.  Except for
Overadvances outstanding under Section 1.1(a)(iii) and the greater
minimum Borrowing Availability required at times and amounts set forth in Sections
6.3(b) and 6.14, Borrower shall, at all times, cause the Borrowing
Availability to exceed $5,000,000.


 


Unless otherwise
specifically provided herein, any accounting term used in the Agreement shall
have the meaning customarily given such term in accordance with GAAP, and all
financial computations hereunder shall be computed in accordance with GAAP
consistently applied.  That certain
items or computations are explicitly modified by the phrase “in accordance with
GAAP” shall in no way be construed to limit the foregoing.  If any “Accounting Changes” (as defined
below) occur and such changes result in a change in the calculation of the
financial covenants, standards or terms used in the Agreement or any other Loan
Document, then Borrower, Agent and Lenders agree to enter into negotiations in
order to amend such provisions of the Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating the
financial condition of Holdings, Borrower and its Subsidiaries shall be the
same after such Accounting Changes as if such Accounting Changes had not been
made; provided,
however,
that the agreement of Requisite Lenders to any required amendments of such
provisions shall be sufficient to bind all Lenders.  “Accounting Changes” means (i) changes in accounting
principles required by the promulgation of any rule, regulation, pronouncement
or opinion by the Financial Accounting Standards Board of the American
Institute of Certified Public Accountants (or successor thereto or any agency
with similar functions), (ii) changes in accounting principles concurred in by
Borrower’s certified public accountants; (iii) purchase accounting adjustments
under A.P.B. 16 or 17 and EITF 88-16, and the application of the accounting
principles set forth in FASB 109, including the establishment of reserves
pursuant thereto and any subsequent reversal (in whole or in part) of such
reserves; and (iv) the reversal of any reserves established as a result of
purchase accounting adjustments.  All
such adjustments resulting from expenditures made subsequent to the Closing Date
(including capitalization of costs and expenses or payment of pre-Closing Date
liabilities) shall be treated as expenses in the period the expenditures are
made and deducted as part of the calculation of EBITDA in such period.  If Agent, Borrower and Requisite Lenders
agree upon the required amendments, then after appropriate amendments have been
executed and the underlying Accounting Change with respect thereto has been
implemented, any reference to GAAP contained in the Agreement or in any other
Loan Document shall, only to the extent of such Accounting Change, refer to
GAAP,


 


G-1

















 


if consistently applied after giving effect to the implementation of
such Accounting Change.  If Agent,
Borrower and Requisite Lenders cannot agree upon the required amendments within
30 days following the date of implementation of any Accounting Change, then all
Financial Statements delivered and all calculations of financial covenants and
other standards and terms in accordance with the Agreement and the other Loan
Documents shall be prepared, delivered and made without regard to the
underlying Accounting Change.  For
purposes of Section 8.1, a breach of a Financial Covenant contained in
this Annex G shall be deemed to have occurred as of any date of
determination by Agent or as of the last day of any specified measurement
period, regardless of when the Financial Statements reflecting such breach are
delivered to Agent.


 


G-2

















 


ANNEX H (Section
9.9(a))


to


CREDIT AGREEMENT


 


LENDERS’ WIRE TRANSFER INFORMATION





 


	
  Name:

  	
   

  	
  General Electric Capital Corporation

  
	
  Bank:

  	
   

  	
  Bankers Trust Company

  
	
   

  	
   

  	
  New York, New York

  
	
  ABA #:

  	
   

  	
  021001033

  
	
  Account #:

  	
   

  	
  50232854

  
	
  Account Name:

  	
   

  	
  GECC/CAF Depository

  
	
  Reference:

  	
   

  	
  CFN 4731

  



 


H-1

















 


ANNEX I (Section
11.10)


to


CREDIT AGREEMENT


 


NOTICE ADDRESSES


 


	
  (A)

  	
   

  	
  If to Agent or GE Capital, at

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  General Electric Capital Corporation

  
	
   

  	
   

  	
  100 California Street, 10th Floor

  
	
   

  	
   

  	
  San Francisco, California 94111

  
	
   

  	
   

  	
  Attention: 
  John Goodwin and Neel Morey

  
	
   

  	
   

  	
  Telecopier No.: 
  (415) 277-7443

  
	
   

  	
   

  	
  Telephone No.: 
  (415) 277-7400

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with copies to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  General Electric Capital Corporation

  
	
   

  	
   

  	
  500 W. Monroe Street, 16th Floor

  
	
   

  	
   

  	
  Chicago, Illinois 60661

  
	
   

  	
   

  	
  Attention: 
  Andrew Packer

  
	
   

  	
   

  	
  Telecopier No.: 
  (312) 441-6876

  
	
   

  	
   

  	
  Telephone No.: 
  (312) 441-7244

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Latham & Watkins

  
	
   

  	
   

  	
  233 S. Wacker Drive, Suite 5800

  
	
   

  	
   

  	
  Chicago, Illinois 60606

  
	
   

  	
   

  	
  Attention: 
  David G. Crumbaugh

  
	
   

  	
   

  	
  Telecopier No.: 
  (312) 993-9767

  
	
   

  	
   

  	
  Telephone No.: 
  (312) 876-7700

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  General Electric Capital Corporation

  
	
   

  	
   

  	
  201 High Ridge Road

  
	
   

  	
   

  	
  Stamford, Connecticut 06927-5100

  
	
   

  	
   

  	
  Attention: 
  Corporate Counsel-Commercial Finance

  
	
   

  	
   

  	
  Telecopier No.: 
  (203) 316-7889

  
	
   

  	
   

  	
  Telephone No.: 
  (203) 316-7552

  



 


I-1

















 


	
  (B)

  	
   

  	
  If to Borrower, at

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Roller Bearing Company of America, Inc.

  
	
   

  	
   

  	
  60 Round Hill Road

  
	
   

  	
   

  	
  P. O. Box 430

  
	
   

  	
   

  	
  Fairfield, Connecticut 06430-0430

  
	
   

  	
   

  	
  Attention: 
  Chief Financial Officer

  
	
   

  	
   

  	
  Telecopier No.: 
  (203) 256-0775

  
	
   

  	
   

  	
  Telephone No.: 
  (203) 255-1511

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With copies to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  McDermott, Will & Emery

  
	
   

  	
   

  	
  50 Rockefeller Plaza

  
	
   

  	
   

  	
  New York, New York 10020-1605

  
	
   

  	
   

  	
  Attention: 
  C. David Goldman

  
	
   

  	
   

  	
  Telecopier No.: 
  (212) 547-5444

  
	
   

  	
   

  	
  Telephone No.: 
  (212) 547-5512

  
	
   

  	
   

  	
   

  
	
  (C)

  	
   

  	
  If to Lenders, at

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Congress Financial Corporation (Central)

  
	
   

  	
   

  	
  150 South Wacker Drive, Suite 2200

  
	
   

  	
   

  	
  Chicago, Illinois 60606

  
	
   

  	
   

  	
  Attention: 
  Vicky Geist

  
	
   

  	
   

  	
  Telecopier No.: 
  (312) 332-0424

  
	
   

  	
   

  	
  Telephone No.: 
  (312) 332-0420

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With copies to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Otterbourg, Steindler, Houston & Rosen, P.C.

  
	
   

  	
   

  	
  230 Park Avenue

  
	
   

  	
   

  	
  New York, New York 10169

  
	
   

  	
   

  	
  Attention: 
  David W. Morse, Esq.

  
	
   

  	
   

  	
  Telecopier No.: 
  (212) 682-6104

  
	
   

  	
   

  	
  Telephone No.: 
  (212) 661-9100

  



 


I-2

















 


ANNEX J (from Annex
A - Commitments definition)


to


CREDIT AGREEMENT


 


PRO RATA SHARE


 


	
  Commitments

  	
   

  	
  Lender(s)

  	
   

  	
  Pro Rata
  Share (of the

  applicable Loan)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Revolving Loan Commitment (including a Swing Line
  Commitment of $5,000,0000): $34,468,085.11

  	
   

  	
  General Electric
  Capital Corporation

  	
   

  	
  63.8297%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Term Loan Commitment: $25,531,914.89

  	
   

  	
  General Electric
  Capital Corporation

  	
   

  	
  63.8297%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Revolving Loan Commitment:  $19,531,914.89

  	
   

  	
  Congress Financial
  Corporation (Central)

  	
   

  	
  36.1702%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Term Loan Commitment: $14,468,085.11

  	
   

  	
  Congress Financial
  Corporation (Central)

  	
   

  	
  36.1702%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Schaublin
  Revolving Loan Commitment $4,468,085.11 (sublimit of GE Capital’s Revolving
  Loan Commitment)

  	
   

  	
  General Electric
  Capital Corporation

  	
   

  	
  63.8297%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Schaublin
  Revolving Loan Commitment $2,531,914.89 (sublimit of Congress Financial
  Corporation (Central)’s Revolving Loan Commitment)

  	
   

  	
  Congress Financial
  Corporation (Central)

  	
   

  	
  36.1702%