Exhibit 10.1





Exhibit 10.1




EXECUTION COPY




CREDIT AGREEMENT




by and among




ALTRA INDUSTRIAL MOTION, INC.




as Parent,




and




EACH OF ITS SUBSIDIARIES THAT ARE SIGNATORIES HERETO




as Borrowers,




THE LENDERS THAT ARE SIGNATORIES HERETO




as the Lenders,




and




WELLS FARGO FOOTHILL, INC.




as the Arranger and Administrative Agent




Dated as of November 30, 2004



 


 









 





TABLE OF CONTENTS




	 	 	 	 	 
	 
	 	 	 	 
	1. DEFINITIONS AND CONSTRUCTION
	 	 	 	1
	 
	 	 	 	 
	1.1 Definitions
	 	 	 	1
	 
	 	 	 	 
	1.2 Accounting Terms
	 	 	 	1
	 
	 	 	 	 
	1.3 Code
	 	 	 	1
	 
	 	 	 	 
	1.4 Construction
	 	 	 	1
	 
	 	 	 	 
	1.5 Schedules and Exhibits
	 	 	 	2
	 
	 	 	 	 
	2. LOAN AND TERMS OF PAYMENT
	 	 	 	2
	 
	 	 	 	 
	2.1 Revolver Advances
	 	 	 	2
	 
	 	 	 	 
	2.2 Intentionally Omitted
	 	 	 	2
	 
	 	 	 	 
	2.3 Borrowing Procedures and Settlements
	 	 	 	2
	 
	 	 	 	 
	2.4 Payments
	 	 	 	7
	 
	 	 	 	 
	2.5 Overadvances
	 	 	 	9
	 
	 	 	 	 
	2.6 Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations
	 	 	 	9
	 
	 	 	 	 
	2.7 Cash Management
	 	 	 	10
	 
	 	 	 	 
	2.8 Crediting Payments
	 	 	 	11
	 
	 	 	 	 
	2.9 Designated Account
	 	 	 	12
	 
	 	 	 	 
	2.10 Maintenance of Loan Account; Statements of Obligations
	 	 	 	12
	 
	 	 	 	 
	2.11 Fees
	 	 	 	12
	 
	 	 	 	 
	2.12 Letters of Credit
	 	 	 	12
	 
	 	 	 	 
	2.13 LIBOR Option
	 	 	 	15
	 
	 	 	 	 
	2.14 Capital Requirements
	 	 	 	17
	 
	 	 	 	 
	2.15 Joint and Several Liability of Borrowers
	 	 	 	17
	 
	 	 	 	 
	3. CONDITIONS; TERM OF AGREEMENT
	 	 	 	19
	 
	 	 	 	 
	3.1 Conditions Precedent to the Initial Extension of Credit
	 	 	 	19
	 
	 	 	 	 
	3.2 Conditions Precedent to all Extensions of Credit
	 	 	 	19
	 
	 	 	 	 
	3.3 Term
	 	 	 	20
	 
	 	 	 	 
	3.4 Effect of Termination
	 	 	 	20
	 
	 	 	 	 
	3.5 Early Termination by Borrowers
	 	 	 	20
	 
	 	 	 	 
	3.6 Conditions Subsequent to the Initial Extension of Credit
	 	 	 	20






 


i









 





	 	 	 	 	 
	4. REPRESENTATIONS AND WARRANTIES
	 	 	 	21
	 
	 	 	 	 
	4.1 No Encumbrances
	 	 	 	21
	 
	 	 	 	 
	4.2 Eligible Accounts
	 	 	 	22
	 
	 	 	 	 
	4.3 Eligible Inventory
	 	 	 	22
	 
	 	 	 	 
	4.4 Equipment
	 	 	 	22
	 
	 	 	 	 
	4.5 Location of Inventory and Equipment
	 	 	 	22
	 
	 	 	 	 
	4.6 Inventory Records
	 	 	 	22
	 
	 	 	 	 
	4.7 State of Incorporation; Location of Chief Executive
Office; Organizational Identification Number; Commercial
Tort Claims

	 	 	 	22
	 
	 	 	 	 
	
4.8 Due Organization and Qualification; Restricted Subsidiaries
	 	 	 	23
	 
	 	 	 	 
	4.9 Due Authorization; No Conflict
	 	 	 	23
	 
	 	 	 	 
	4.10 Litigation
	 	 	 	25
	 
	 	 	 	 
	4.11 No Material Adverse Change
	 	 	 	25
	 
	 	 	 	 
	4.12 Fraudulent Transfer
	 	 	 	25
	 
	 	 	 	 
	4.13 Employee Compliance
	 	 	 	25
	 
	 	 	 	 
	4.14 Environmental Condition
	 	 	 	26
	 
	 	 	 	 
	4.15 Intellectual Property
	 	 	 	26
	 
	 	 	 	 
	4.16 Leases
	 	 	 	26
	 
	 	 	 	 
	4.17 Deposit Accounts and Securities Accounts
	 	 	 	26
	 
	 	 	 	 
	4.18 Complete Disclosure
	 	 	 	26
	 
	 	 	 	 
	4.19 Indebtedness
	 	 	 	27
	 
	 	 	 	 
	4.20 Material Contracts
	 	 	 	27
	 
	 	 	 	 
	5. AFFIRMATIVE COVENANTS
	 	 	 	27
	 
	 	 	 	 
	5.1 Accounting System
	 	 	 	27
	 
	 	 	 	 
	5.2 Collateral Reporting
	 	 	 	27
	 
	 	 	 	 
	5.3 Financial Statements, Reports, Certificates
	 	 	 	27
	 
	 	 	 	 
	5.4 Intentionally Omitted
	 	 	 	27
	 
	 	 	 	 
	5.5 Inspection
	 	 	 	27






 


ii









 





	 	 	 	 	 
	5.6 Maintenance of Properties
	 	 	 	27
	 
	 	 	 	 
	5.7 Taxes
	 	 	 	28
	 
	 	 	 	 
	5.8 Insurance
	 	 	 	28
	 
	 	 	 	 
	5.9 Location of Inventory and Equipment
	 	 	 	29
	 
	 	 	 	 
	5.10 Compliance with Laws
	 	 	 	29
	 
	 	 	 	 
	5.11 Leases
	 	 	 	29
	 
	 	 	 	 
	5.12 Existence
	 	 	 	29
	 
	 	 	 	 
	5.13 Environmental
	 	 	 	29
	 
	 	 	 	 
	5.14 Intentionally Omitted
	 	 	 	30
	 
	 	 	 	 
	5.15 Control Agreements
	 	 	 	30
	 
	 	 	 	 
	5.16 Formation of Subsidiaries
	 	 	 	30
	 
	 	 	 	 
	5.17 Real Property
	 	 	 	30
	 
	 	 	 	 
	5.18 ERISA Compliance
	 	 	 	31
	 
	 	 	 	 
	6. NEGATIVE COVENANTS
	 	 	 	32
	 
	 	 	 	 
	6.1 Indebtedness
	 	 	 	32
	 
	 	 	 	 
	6.2 Liens
	 	 	 	33
	 
	 	 	 	 
	6.3 Restrictions on Fundamental Changes
	 	 	 	33
	 
	 	 	 	 
	6.4 Disposal of Assets
	 	 	 	34
	 
	 	 	 	 
	6.5 Change Name
	 	 	 	34
	 
	 	 	 	 
	6.6 Nature of Business
	 	 	 	34
	 
	 	 	 	 
	6.7 Prepayments and Amendments
	 	 	 	34
	 
	 	 	 	 
	6.8 Intentionally Omitted
	 	 	 	34
	 
	 	 	 	 
	6.9 Intentionally Omitted
	 	 	 	34
	 
	 	 	 	 
	6.10 Distributions
	 	 	 	35
	 
	 	 	 	 
	6.11 Fiscal Year
	 	 	 	36
	 
	 	 	 	 
	6.12 Investments
	 	 	 	36
	 
	 	 	 	 
	6.13 Transactions with Affiliates
	 	 	 	36
	 
	 	 	 	 
	6.14 Use of Proceeds
	 	 	 	37
	 
	 	 	 	 
	6.15 Intentionally Omitted
	 	 	 	37






 


iii









 





	 	 	 	 	 
	6.16 Financial Covenants
	 	 	 	38
	 
	 	 	 	 
	6.17 Acquisition Documents
	 	 	 	38
	 
	 	 	 	 
	6.18 Indenture Documents
	 	 	 	38
	 
	 	 	 	 
	6.19 Governing Documents
	 	 	 	38
	 
	 	 	 	 
	6.20 Real Property Collateral
	 	 	 	39
	 
	 	 	 	 
	7. EVENTS OF DEFAULT
	 	 	 	39
	 
	 	 	 	 
	8. THE LENDER GROUP’S RIGHTS AND REMEDIES
	 	 	 	41
	 
	 	 	 	 
	8.1 Rights and Remedies
	 	 	 	41
	 
	 	 	 	 
	8.2 Remedies Cumulative
	 	 	 	41
	 
	 	 	 	 
	9. TAXES AND EXPENSES
	 	 	 	42
	 
	 	 	 	 
	10. WAIVERS; INDEMNIFICATION
	 	 	 	42
	 
	 	 	 	 
	10.1 Demand; Protest; etc
	 	 	 	42
	 
	 	 	 	 
	10.2 The Lender Group’s Liability for Collateral
	 	 	 	42
	 
	 	 	 	 
	10.3 Indemnification
	 	 	 	42
	 
	 	 	 	 
	11. NOTICES
	 	 	 	43
	 
	 	 	 	 
	12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
	 	 	 	44
	 
	 	 	 	 
	13. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS
	 	 	 	44
	 
	 	 	 	 
	13.1 Assignments and Participations
	 	 	 	44
	 
	 	 	 	 
	13.2 Successors
	 	 	 	47
	 
	 	 	 	 
	14. AMENDMENTS; WAIVERS
	 	 	 	47
	 
	 	 	 	 
	14.1 Amendments and Waivers
	 	 	 	47
	 
	 	 	 	 
	14.2 Replacement of Holdout Lender
	 	 	 	48
	 
	 	 	 	 
	14.3 No Waivers; Cumulative Remedies
	 	 	 	48
	 
	 	 	 	 
	15. AGENT; THE LENDER GROUP
	 	 	 	48
	 
	 	 	 	 
	15.1 Appointment and Authorization of Agent
	 	 	 	48
	 
	 	 	 	 
	15.2 Delegation of Duties
	 	 	 	49
	 
	 	 	 	 
	15.3 Liability of Agent
	 	 	 	49
	 
	 	 	 	 
	15.4 Reliance by Agent
	 	 	 	49
	 
	 	 	 	 
	15.5 Notice of Default or Event of Default
	 	 	 	50







 


iv









 






	 	 	 	 	 
	15.6 Credit Decision
	 	 	 	50
	 
	 	 	 	 
	15.7 Costs and Expenses; Indemnification
	 	 	 	50
	 
	 	 	 	 
	15.8 Agent in Individual Capacity
	 	 	 	51
	 
	 	 	 	 
	15.9 Successor Agent
	 	 	 	51
	 
	 	 	 	 
	15.10 Lender in Individual Capacity
	 	 	 	51
	 
	 	 	 	 
	15.11 Withholding Taxes
	 	 	 	52
	 
	 	 	 	 
	15.12 Collateral Matters
	 	 	 	54
	 
	 	 	 	 
	15.13 Restrictions on Actions by Lenders; Sharing of Payments
	 	 	 	55
	 
	 	 	 	 
	15.14 Agency for Perfection
	 	 	 	55
	 
	 	 	 	 
	15.15 Payments by Agent to the Lenders
	 	 	 	55
	 
	 	 	 	 
	15.16 Concerning the Collateral and Related Loan Documents
	 	 	 	55
	 
	 	 	 	 
	15.17 Field Audits and Examination Reports; Confidentiality;
Disclaimers by Lenders; Other Reports and Information

		 	 	56
	 
	 	 	 	 
	
15.18 Several Obligations; No Liability
	 	 	 	56
	 
	 	 	 	 
	15.19 Bank Product Providers
	 	 	 	57
	 
	 	 	 	 
	16. GENERAL PROVISIONS
	 	 	 	57
	 
	 	 	 	 
	16.1 Effectiveness
	 	 	 	57
	 
	 	 	 	 
	16.2 Section Headings
	 	 	 	57
	 
	 	 	 	 
	16.3 Interpretation
	 	 	 	57
	 
	 	 	 	 
	16.4 Severability of Provisions
	 	 	 	57
	 
	 	 	 	 
	16.5 Counterparts; Electronic Execution
	 	 	 	57
	 
	 	 	 	 
	16.6 Revival and Reinstatement of Obligations
	 	 	 	57
	 
	 	 	 	 
	16.7 Confidentiality
	 	 	 	58
	 
	 	 	 	 
	16.8 Integration
	 	 	 	58
	 
	 	 	 	 
	16.9 Altra Industrial Motion, Inc. as Agent for Borrowers
	 	 	 	58






 


v









 






EXHIBITS AND SCHEDULES




	 	 	 
	Exhibit A-1	 	Form of Assignment and Acceptance

	Exhibit B-1	 	Form of Borrowing Base Certificate

	Exhibit C-1	 	Form of Compliance Certificate

	Exhibit L-1	 	Form of LIBOR Notice

	 	 	 

	Schedule A-1	 	Agent’s Account

	Schedule C-1	 	Commitments

	Schedule D-1	 	Designated Account

	Schedule P-1	 	Permitted Holders

	Schedule P-2	 	Permitted Liens

	Schedule P-3	 	Permitted Investments

	Schedule R-1	 	Real Property Collateral

	Schedule 1.1	 	Definitions

	Schedule 2.7(a)	 	Cash Management Banks

	Schedule 3.1	 	Conditions Precedent

	Schedule 4.5(a)	 	Inventory and Equipment Stored with Bailees or Warehousemen

	Schedule 4.5(b)	 	Locations of Inventory and Equipment

	Schedule 4.7(a)	 	States of Organization

	Schedule 4.7(b)	 	Chief Executive Offices

	Schedule 4.7(c)	 	Organizational Identification Numbers

	Schedule 4.7(d)	 	Commercial Tort Claims

	Schedule 4.8(b)	 	Capitalization of Borrowers

	Schedule 4.8(c)	 	Capitalization of Borrowers’ Restricted Subsidiaries

	Schedule 4.10	 	Litigation

	Schedule 4.13(a)	 	ERISA Plans

	Schedule 4.14	 	Environmental Matters

	Schedule 4.17	 	Deposit Accounts and Securities Accounts

	Schedule 4.19	 	Permitted Indebtedness

	Schedule 5.2	 	Collateral Reporting

	Schedule 5.3	 	Financial Statements, Reports, Certificates







 


 









 





CREDIT AGREEMENT




THIS CREDIT AGREEMENT (this “Agreement”), is entered into as of November 30, 2004, by
and among the lenders identified on the signature pages hereof (such lenders, together with their
respective successors and permitted assigns, are referred to hereinafter each individually as a
“Lender” and collectively as the “Lenders”), and WELLS FARGO FOOTHILL, INC.,
a California corporation, as the arranger and administrative agent for the Lenders (in such
capacity, together with its successors and assigns in such capacity, “Agent”), and ALTRA
INDUSTRIAL MOTION, INC., a Delaware corporation (“Parent”), and each of Parent’s
Subsidiaries identified on the signature pages hereof (Parent and such Subsidiaries are referred to
hereinafter each individually as a “Borrower”, and individually and collectively, jointly
and severally, as the “Borrowers”).




The parties agree as follows:



1. DEFINITIONS AND CONSTRUCTION.



1.1 Definitions. Capitalized terms used in this Agreement shall have the
meanings specified therefor on Schedule 1.1.



1.2 Accounting Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP. In the event of any change in GAAP that occurs after
the date of this Agreement that would affect the calculation or application of the financial or
other covenants contained herein, Agent and Borrowers agree to negotiate to amend such financial or
other covenants (or the definitions used therein) to eliminate the effect of such change and no
Event of Default shall be deemed to exist solely as a result of such change in GAAP during the
period prior to the effectiveness of such amendment; provided. that such financial or
other covenants shall continue to be calculated in the manner provided immediately prior to such
change until such amendment has been executed by Borrowers and the Required Lenders. When used
herein, the term “financial statements” shall include the notes and schedules thereto, if any.
Whenever the term “Borrowers” or the term “Parent” is used in respect of a financial covenant or a
related definition, it shall be understood to mean Borrowers and their Subsidiaries or Parent and
its Subsidiaries, as applicable, on a consolidated basis unless the context clearly requires
otherwise.



1.3 Code. Any terms used in this Agreement that are defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined herein, 
provided, however, that to the extent that the Code is used to define any term
herein and such term is defined differently in different Articles of the Code, the definition of
such term contained in Article 9 shall govern.



1.4 Construction. Unless the context of this Agreement or any other Loan
Document clearly requires otherwise, references to the plural include the singular, references to
the singular include the plural, and the terms “includes” and “including” are not limiting. The
words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement or any other
Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole
and not to any particular provision of this Agreement or such other Loan Document, as the case may
be. Section, subsection, clause, schedule, and exhibit references herein are to this Agreement
unless otherwise specified. Any reference in this Agreement or in the other Loan Documents to any
agreement, instrument, or document shall include all alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and
thereof, as applicable (subject to any restrictions on such alterations, amendments, changes,
extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set
forth herein). Any reference herein to the satisfaction, payment or repayment in full of the
Obligations or the Bank Product Obligations, as the case may be, shall mean the repayment in full
in cash (or cash collateralization or the provision of other security in accordance with the terms
hereof) of all Obligations other than contingent indemnification Obligations and other than any
Bank Product Obligations that, at such time, are allowed by the applicable Bank Product Provider to
remain outstanding and are not required to be repaid or cash collateralized
pursuant to the provisions of this Agreement. Any reference herein to any Person shall be
construed to include such Person’s successors and assigns. Any requirement of a writing contained
herein or in the other Loan Documents shall be satisfied by the transmission of a Record.


 


 









 





1.5 Schedules and Exhibits. All of the schedules and exhibits attached to
this Agreement shall be deemed incorporated herein by reference.



2. LOAN AND TERMS OF PAYMENT.




2.1 Revolver Advances.



(a) Subject to the terms and conditions of this Agreement, and during the term of
this Agreement, each Lender agrees (severally, not jointly or jointly and severally) to make
advances (“Advances”) to Borrowers in an amount at any one time outstanding not to exceed
such Lender’s Pro Rata Share of an amount equal to the lesser of (i) the Maximum Revolver Amount
less the Letter of Credit Usage, or (ii) the Borrowing Base less the Letter of Credit Usage.



(b) Anything to the contrary in this Section 2.1 notwithstanding, Agent
shall have the right to establish reserves in such amounts, and with respect to such matters, as
Agent in its Permitted Discretion shall deem necessary, against the Borrowing Base, including
reserves (i) with respect to (A) sums that Borrowers are required to pay by any Section of this
Agreement or any other Loan Document (such as taxes, assessments, insurance premiums, or, in the
case of leased assets, rents or other amounts payable under such leases) and have failed to pay,
and (B) amounts owing by Borrowers or their Restricted Subsidiaries to any Person to the extent
secured by a Lien on, or trust over, any of the Collateral (other than a Permitted Lien), which
Lien or trust, in the Permitted Discretion of Agent likely would have a priority superior to the
Agent’s Liens (such as Liens or trusts in favor of landlords, warehousemen, carriers, mechanics,
materialmen, laborers, or suppliers, or Liens or trusts for ad valorem, excise, sales, or other
taxes where given priority under applicable law) in and to such item of the Collateral, and
(ii) after the occurrence and during the continuance of an Event of Default, with respect to such
other matters as Agent in its Permitted Discretion shall deem necessary or appropriate. In
addition to the foregoing and subject to any specific limitations set forth in any other Loan
Document, Agent shall have the right to have the Inventory reappraised by a qualified appraisal
company selected by Agent from time to time after the Closing Date for the purpose of redetermining
the Eligible Inventory portion of the Collateral and, as a result, redetermining the Borrowing
Base.



(c) Amounts borrowed pursuant to this Section 2.1 may be repaid and, subject
to the terms and conditions of this Agreement, reborrowed at any time during the term of this
Agreement.



(d) Notwithstanding anything to the contrary contained herein, Lenders shall not be
obligated to make any Advances against any Inventory or Equipment located at any of the locations
set forth on Schedule 4.5(a) unless and until Agent shall have received reasonably
satisfactory information as to the value of the Inventory and/or Equipment stored at such locations
and as to the monthly rent payable in respect of such locations.




2.2 Intentionally Omitted.


2.3 Borrowing Procedures and Settlements.



(a) Procedure for Borrowing. Each Borrowing shall be made by an irrevocable written
request by an Authorized Person delivered to Agent. If Swing Lender is obligated to make a Swing
Loan pursuant to Section 2.3(b) below, such notice must be received by Agent no later
than 10:00 a.m. (California time) on the Business Day that is the requested Funding Date specifying
(i) the amount of such Borrowing, and (ii) the requested Funding Date, which shall be a Business
Day; provided, however, that if Swing Lender is not obligated to make a Swing
Loan as to a requested Borrowing, such notice must be received by Agent no later than 10:00 a.m.
(California time) on the Business Day prior to the date that is the requested Funding Date. At
Agent’s election, in lieu of delivering the above-described written request, any Authorized Person
may give Agent telephonic notice of such request by the required time. In such circumstances,
Borrowers agree that any such telephonic notice will be confirmed in writing within 24 hours of the
giving of such telephonic notice, but the failure to provide such written confirmation shall not
affect the validity of the request.




 


2









 





(b) Making of Swing Loans. In the case of a request for an Advance and so long as
either (i) the aggregate amount of Swing Loans made since the last Settlement Date plus the amount
of the requested Advance does not exceed $10,000,000, or (ii) Swing Lender, in its sole discretion,
shall agree to make a Swing Loan notwithstanding the foregoing limitation, Swing Lender, as a
Lender, shall make an Advance in the amount of such Borrowing (any such Advance made solely by
Swing Lender as a Lender pursuant to this Section 2.3(b) being referred to as a “Swing Loan” and such Advances being referred to collectively as “Swing Loans”)
available to Borrowers on the Funding Date applicable thereto by transferring immediately available
funds to Borrowers’ Designated Account. Each Swing Loan shall be deemed to be an Advance hereunder
and shall be subject to all the terms and conditions applicable to other Advances, except that all
payments on any Swing Loan shall be payable to Swing Lender as a Lender solely for its own
account. Subject to the provisions of Section 2.3(d)(ii), Swing Lender as a Lender shall
not make and shall not be
obligated to make any Swing Loan if Swing Lender has actual knowledge that (i) one or more of
the applicable conditions precedent set forth in Section 3 will not be satisfied on the
requested Funding Date for the applicable Borrowing, or (ii) the requested Borrowing would exceed
the Availability on such Funding Date. Swing Lender as a Lender shall not otherwise be required to
determine whether the applicable conditions precedent set forth in Section 3 have been
satisfied on the Funding Date applicable thereto prior to making any Swing Loan. The Swing Loans
shall be secured by the Agent’s Liens, constitute Obligations hereunder, and bear interest at the
rate applicable from time to time to Advances that are Base Rate Loans. Notwithstanding the
foregoing, after a Swing Loan is made and after settlement of such Swing Loan is effected in
accordance with Section 2.3(e), Administrative Borrower shall have the right to request
that such Swing Loan be eligible to be a LIBOR Rate Loan by exercising the LIBOR Option in
accordance with Section 2.13.




(c) Making of Loans.



(i) In the event that Swing Lender is not obligated to make a Swing Loan, then
promptly after receipt of a request for a Borrowing pursuant to Section 2.3(a), Agent
shall notify the Lenders, not later than 1:00 p.m. (California time) on the Business Day
immediately preceding the Funding Date applicable thereto, by telecopy, telephone, or other similar
form of transmission, of the requested Borrowing. Each Lender shall make the amount of such
Lender’s Pro Rata Share of the requested Borrowing available to Agent in immediately available
funds, to Agent’s Account, not later than 10:00 a.m. (California time) on the Funding Date
applicable thereto. After Agent’s receipt of the proceeds of such Advances, Agent shall make the
proceeds thereof available to Administrative Borrower on the applicable Funding Date by
transferring immediately available funds equal to such proceeds received by Agent to Administrative
Borrower’s Designated Account; provided, however, that, subject to the
provisions of Section 2.3(d)(ii), Agent shall not request any Lender to make, and no
Lender shall have the obligation to make, any Advance if Agent shall have actual knowledge that (1)
one or more of the applicable conditions precedent set forth in Section 3 will not be
satisfied on the requested Funding Date for the applicable Borrowing unless such condition has been
waived, or (2) the requested Borrowing would exceed the Availability on such Funding Date.




(ii) Unless Agent receives notice from a Lender prior to 9:00 a.m. (California time)
on the date of a Borrowing, that such Lender will not make available as and when required hereunder
to Agent for the account of Borrowers the amount of that Lender’s Pro Rata Share of the Borrowing,
Agent may assume that each Lender has made or will make such amount available to Agent in
immediately available funds on the Funding Date and Agent may (but shall not be so required), in
reliance upon such assumption, make available to Borrowers on such date a corresponding amount. If
and to the extent any Lender shall not have made its full amount available to Agent in immediately
available funds and Agent in such circumstances has made available to Borrowers such amount, that
Lender shall on the Business Day following such Funding Date make such amount available to Agent,
together with interest at the Defaulting Lender Rate for each day during such period. A notice
submitted by Agent to any Lender with respect to amounts owing under this subsection shall be
conclusive, absent manifest error. If such amount is so made available, such payment to Agent
shall constitute such Lender’s Advance on the date of Borrowing for all purposes of this
Agreement. If such amount is not made available to Agent on the Business Day following the Funding
Date, Agent will notify Administrative Borrower of such failure to fund and, upon demand by Agent,
Borrowers shall pay such amount to Agent for Agent’s account, together with interest thereon for
each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate
applicable at the time to the Advances composing such Borrowing. The failure of any Lender to make
any Advance on any Funding Date shall not relieve any other Lender of any obligation hereunder to
make an Advance on such Funding Date, but no Lender shall be responsible for the failure of any
other Lender to make the Advance to be made by such other Lender on any Funding Date.


 


3









 





(iii) Agent shall not be obligated to transfer to a Defaulting Lender any payments
made by Borrowers to Agent for the Defaulting Lender’s benefit, and, in the absence of such
transfer to the Defaulting Lender, Agent shall transfer any such payments to each other
non-Defaulting Lender member of the Lender Group ratably in accordance with their Commitments (but
only to the extent that such Defaulting Lender’s Advance was funded by the other members of the
Lender Group) or, if so directed by Administrative Borrower and if no Default or Event of Default
had occurred and is continuing (and to the extent such Defaulting Lender’s Advance was not funded
by the Lender Group), retain same to be re-advanced to Borrowers as if such Defaulting Lender had
made Advances to Borrowers. Subject to the foregoing, Agent may hold and, in its Permitted
Discretion, re-lend to Borrowers for the account of such Defaulting Lender the amount of all such
payments received and retained by Agent for the account of such Defaulting Lender. Solely for the
purposes of voting or consenting to matters with respect to the Loan Documents, such Defaulting
Lender shall be deemed not to be a “Lender” and such Lender’s Commitment shall be deemed to be
zero. This Section shall remain effective with respect to such Lender until (x) the Obligations
under this Agreement shall have been declared or shall have become immediately due and payable, (y)
the non-Defaulting Lenders, Agent, and Administrative Borrower shall have waived such Defaulting
Lender’s default in writing, or (z) the Defaulting Lender makes its Pro Rata Share of the
applicable Advance and pays to Agent all amounts owing by Defaulting Lender in respect thereof.
The operation of this Section shall not be construed to increase or otherwise affect the Commitment
of any Lender, to relieve or excuse the performance by such Defaulting Lender or any other Lender
of its duties and obligations hereunder, or to relieve or excuse the performance by Borrowers of
their duties and obligations hereunder to Agent or to the Lenders other than such Defaulting
Lender. Any such failure to fund by any Defaulting Lender shall constitute a material breach by
such Defaulting Lender of this Agreement and shall entitle Administrative Borrower at its option,
upon written notice to Agent, to arrange for a substitute Lender to assume the Commitment of such
Defaulting Lender, such substitute Lender to be reasonably acceptable to Agent. In connection with
the arrangement of such a substitute Lender, the Defaulting Lender shall have no right to refuse to
be replaced hereunder, and agrees to execute and deliver a completed form of Assignment and
Acceptance in favor of the substitute Lender (and agrees that it shall be deemed to have executed
and delivered such document if it fails to do so) subject only to being repaid its share of the
outstanding Obligations (including an assumption of its Pro
Rata Share of the Risk Participation Liability) without any premium or penalty of any kind
whatsoever; provided however, that any such assumption of the Commitment of such Defaulting Lender
shall not be deemed to constitute a waiver of any of the Lender Groups’ or Borrowers’ rights or
remedies against any such Defaulting Lender arising out of or in relation to such failure to fund.




(d) Protective Advances and Optional Overadvances.



(i) Agent hereby is authorized by Borrowers and the Lenders, from time to time in
Agent’s sole discretion, (A) after the occurrence and during the continuance of a Default or an
Event of Default, or (B) at any time that any of the other applicable conditions precedent set
forth in Section 3 are not satisfied, to make Advances to Borrowers on behalf of the
Lenders that Agent, in its Permitted Discretion deems necessary or desirable (1) to preserve or
protect the Collateral, or any portion thereof, (2) to enhance the likelihood of repayment of the
Obligations, or (3) to pay any other amount chargeable to Borrowers pursuant to the terms of this
Agreement, including Lender Group Expenses and the costs, fees, and expenses described in 
Section 9 (any of the Advances described in this Section 2.3(d)(i) shall be referred
to as “Protective Advances”).


 


4









 





(ii) Any contrary provision of this Agreement notwithstanding, the Lenders hereby
authorize Agent or Swing Lender, as applicable, and either Agent or Swing Lender, as applicable,
may, but is not obligated to, knowingly and intentionally, continue to make Advances (including
Swing Loans) to Borrowers notwithstanding that an Overadvance exists or thereby would be created,
so long as (A) after giving effect to such Advances, the outstanding Revolver Usage does not exceed
the Borrowing Base by more than $6,000,000, and (B) after giving effect to such Advances, the
outstanding Revolver Usage (except for and excluding amounts charged to the Loan Account for
interest, fees, or Lender Group Expenses) does not exceed the Maximum Revolver Amount. In the
event Agent obtains actual knowledge that the Revolver Usage exceeds the amounts permitted by the
immediately foregoing provisions, regardless of the amount of, or reason for, such excess, Agent
shall notify the Lenders as soon as practicable (and prior to making any (or any additional)
intentional Overadvances (except for and excluding amounts charged to the Loan Account for
interest, fees, or Lender Group Expenses) unless Agent determines that prior notice would result in
imminent harm to the Collateral or its value), and the Lenders thereupon shall, together with
Agent, jointly determine the terms of arrangements that shall be implemented with Borrowers
intended to reduce, within a reasonable time, the outstanding principal amount of the Advances to
Borrowers to an amount permitted by the foregoing provisions. In such circumstances, if any Lender
disagrees over the proposed terms of reduction or repayment of any Overadvance, the terms of
reduction or repayment thereof shall be implemented according to the determination of the Required
Lenders. Each Lender shall be obligated to settle with Agent as provided in Section
2.3(e) for the amount of such Lender’s Pro Rata Share of any unintentional Overadvances by
Agent reported to such Lender, any intentional Overadvances made as permitted under this
Section 2.3(d)(ii), and any Overadvances resulting from the charging to the Loan Account of
interest, fees, or Lender Group Expenses.



(iii) Each Protective Advance and each Overadvance shall be deemed to be an Advance
hereunder, except that no Protective Advance or Overadvance shall be eligible to be a LIBOR Rate
Loan and all payments on the Protective Advances shall be payable to Agent solely for its own
account. The Protective Advances and Overadvances shall be repayable on demand, secured by the
Agent’s Liens, constitute Obligations hereunder, and bear interest at the rate applicable from time
to time to Advances that are Base Rate Loans. The provisions of this Section 2.3(d) are
for the exclusive benefit of Agent, Swing Lender, and the Lenders and are not intended to benefit
any Borrower in any way.



 (e) Settlement. It is agreed that each Lender’s funded portion of the Advances is
intended by the Lenders to equal, at all times, such Lender’s Pro Rata Share of the outstanding
Advances. Such agreement notwithstanding, Agent, Swing Lender, and the other Lenders agree (which
agreement shall not be for the benefit of any Borrower) that in order to facilitate the
administration of this Agreement and the other Loan Documents, settlement among the Lenders as to
the Advances, the Swing Loans, and the Protective Advances shall take place on a periodic basis in
accordance with the following provisions:



(i) Agent shall request settlement (“Settlement”) with the Lenders on a
weekly basis, or on a more frequent basis if so determined by Agent, (1) on behalf of Swing Lender,
with respect to each outstanding Swing Loan, (2) for itself, with respect to the outstanding
Protective Advances, and (3) with respect to Borrowers’ or their respective Restricted
Subsidiaries’ Collections received by Agent, as to each by notifying the Lenders by telecopy,
telephone, or other similar form of transmission, of such requested Settlement, no later than 2:00
p.m. (California time) on the Business Day immediately prior to the date of such requested
Settlement (the date of such requested Settlement being the “Settlement Date”). Such
notice of a Settlement Date shall include a summary statement of the amount of outstanding
Advances, Swing Loans, and Protective Advances for the period since the prior Settlement Date.
Subject to the terms and conditions contained herein (including Section 2.3(c)(iii)):
(y) if a Lender’s balance of the Advances (including Swing Loans and Protective Advances) exceeds
such Lender’s Pro Rata Share of the Advances (including Swing Loans and Protective Advances) as of
a Settlement Date, then Agent shall, by no later than


 


5









 





 12:00 p.m. (California time) on the
Settlement Date, transfer in immediately available funds to a Deposit Account of such Lender (as
such Lender may designate), an amount such that each such Lender shall, upon receipt of such
amount, have as of the Settlement Date, its Pro Rata Share of the Advances (including Swing Loans
and Protective Advances), and (z) if a Lender’s balance of the Advances (including Swing Loans and
Protective Advances) is less than such Lender’s Pro Rata Share of the Advances (including Swing
Loans and Protective Advances) as of a Settlement Date, such Lender shall no later than 12:00 p.m.
(California time) on the Settlement Date transfer in immediately available funds to the Agent’s
Account, an amount such that each such Lender shall, upon transfer of such amount, have as of the
Settlement Date, its Pro Rata Share of the Advances (including Swing Loans and Protective
Advances). Such amounts made available to Agent under clause (z) of the immediately preceding
sentence shall be applied against the amounts of the applicable Swing Loans or Protective Advances
and, together with the portion of such Swing Loans or Protective Advances representing Swing
Lender’s Pro Rata Share thereof, shall constitute Advances of such Lenders. If any such
amount is not made available to Agent by any Lender on the Settlement Date applicable thereto to
the extent required by the terms hereof, Agent shall be entitled to recover for its account such
amount on demand from such Lender together with interest thereon at the Defaulting Lender Rate.



(ii) In determining whether a Lender’s balance of the Advances, Swing Loans, and
Protective Advances is less than, equal to, or greater than such Lender’s Pro Rata Share of the
Advances, Swing Loans, and Protective Advances as of a Settlement Date, Agent shall, as part of the
relevant Settlement, apply to such balance the portion of payments actually received in good funds
by Agent with respect to principal, interest, fees payable by Borrowers and allocable to the
Lenders hereunder, and proceeds of Collateral. To the extent that a net amount is owed to any such
Lender after such application, such net amount shall be distributed by Agent to that Lender as part
of such next Settlement.



(iii) Between Settlement Dates, Agent, to the extent no Protective Advances or Swing
Loans are outstanding, may pay over to Swing Lender any payments received by Agent, that in
accordance with the terms of this Agreement would be applied to the reduction of the Advances, for
application to Swing Lender’s Pro Rata Share of the Advances. If, as of any Settlement Date,
Collections of Borrowers or their respective Restricted Subsidiaries received by Agent since the
then immediately preceding Settlement Date have been applied to Swing Lender’s Pro Rata Share of
the Advances other than to Swing Loans, as provided for in the previous sentence, Swing Lender
shall pay to Agent for the accounts of the Lenders, and Agent shall pay to the Lenders, to be
applied to the outstanding Advances of such Lenders, an amount such that each Lender shall, upon
receipt of such amount, have, as of such Settlement Date, its Pro Rata Share of the Advances.
During the period between Settlement Dates, Swing Lender with respect to Swing Loans, Agent with
respect to Protective Advances, and each Lender (subject to the effect of agreements between Agent
and individual Lenders) with respect to the Advances other than Swing Loans and Protective
Advances, shall be entitled to interest at the applicable rate or rates payable under this
Agreement on the daily amount of funds employed by Swing Lender, Agent, or the Lenders, as
applicable.



(f) Notation. Agent shall record on its books the principal amount of the Advances
owing to each Lender, including the Swing Loans owing to Swing Lender, and Protective Advances
owing to Agent, and the interests therein of each Lender, from time to time and such records shall,
absent manifest error, conclusively be presumed to be correct and accurate.



(g) Lenders’ Failure to Perform. All Advances (other than Swing Loans and
Protective Advances) shall be made by the Lenders contemporaneously and in accordance with their
Pro Rata Shares. It is understood that (i) no Lender shall be responsible for any failure by any
other Lender to perform its obligation to make any Advance (or other extension of credit)
hereunder, nor shall any Commitment of any Lender be increased or decreased as a result of any
failure by any other Lender to perform its obligations hereunder, and (ii) no failure by any Lender
to perform its obligations hereunder shall excuse any other Lender from its obligations hereunder.


 


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2.4 Payments.





(a) Payments by Borrowers.




(i) Except as otherwise expressly provided herein, all payments by Borrowers shall
be made to Agent’s Account for the account of the Lender Group and shall be made in immediately
available funds, no later than 11:00 a.m. (California time) on the date specified herein. Any
payment received by Agent later than 11:00 a.m. (California time), shall be deemed to have been
received on the following Business Day and any applicable interest or fee shall continue to accrue
until such following Business Day.



(ii) Unless Agent receives notice from Administrative Borrower prior to the date on
which any payment is due to the Lenders that Borrowers will not make such payment in full as and
when required, Agent may assume that Borrowers have made (or will make) such payment in full to
Agent on such date in immediately available funds and Agent may (but shall not be so required), in
reliance upon such assumption, distribute to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent Borrowers do not make such payment in full to
Agent on the date when due, each Lender severally shall repay to Agent on demand such amount
distributed to such Lender, together with interest thereon at the Defaulting Lender Rate for each
day from the date such amount is distributed to such Lender until the date repaid.




(b) Apportionment and Application.



(i) Except as otherwise provided with respect to Defaulting Lenders and except as
otherwise provided in the Loan Documents (including agreements between Agent and individual
Lenders), aggregate principal and interest payments shall be apportioned ratably among the Lenders
(according to the unpaid principal balance of the Obligations to which such payments relate held by
each Lender) and payments of fees and expenses (other than fees or expenses that are for Agent’s
separate account, after giving effect to any agreements between Agent and individual Lenders) shall
be apportioned ratably among the Lenders having a Pro Rata Share of the Obligation to which a
particular fee relates. Except as provided in Section 2.4(b)(iii), all payments shall be
remitted to Agent and all such payments, and all proceeds of Collateral received by Agent, shall be
applied as follows:



(A) first, ratably to pay any Lender Group Expenses then due to Agent or any
of the Lenders under the Loan Documents until paid in full,



(B) second, ratably to pay any fees or premiums then due to Agent (for its
separate account, after giving effect to any agreements between Agent and individual Lenders) or
any of the Lenders under the Loan Documents until paid in full,



(C) third, to pay interest due in respect of all Protective Advances until
paid in full,



(D) fourth, to pay the principal of all Protective Advances until paid in
full,



(E) fifth, ratably to pay interest due in respect of the Advances (other than
Protective Advances) and the Swing Loans until paid in full,




(F) sixth, to pay the principal of all Swing Loans until paid in full,



(G) seventh, so long as no Event of Default has occurred and is continuing,
to pay the principal of all Advances until paid in full,


 


7









 





(H) eighth, so long as no Event of Default has occurred and is continuing, and
at Agent’s election (which election Agent agrees will not be made if an Overadvance would be
created thereby), to pay amounts then due and owing by Administrative Borrower or its Subsidiaries
in respect of Bank Products, until paid in full,



(I) ninth, if an Event of Default has occurred and is continuing, ratably
(i) to pay the principal of all Advances until paid in full, (ii) to Agent, to be held by Agent,
for the ratable benefit of Issuing Lender and Lenders, as cash collateral in an amount up to 105%
of the Letter of Credit Usage until paid in full, and (iii) to Agent, to be held by Agent, for the
benefit of the Bank Product Providers, as cash collateral in an amount up to the amount of the Bank
Product Reserve established prior to the occurrence of, and not in contemplation of, the subject
Event of Default until the obligations of Borrowers and their respective Restricted Subsidiaries in
respect of Bank Products have been paid in full or the cash collateral amount has been exhausted,




(J) tenth, if an Event of Default has occurred and is continuing, to pay any
other Obligations and Bank Product Obligations (including the provision of amounts to Agent, to be
held by Agent, for the benefit of the Bank Product Providers, as cash collateral in an amount up to
the amount determined by Agent in its Permitted Discretion as the amount necessary to secure the
obligations of Borrowers and their respective Restricted Subsidiaries in respect of Bank Products),
and



(K) eleventh, to Borrowers (to be wired to the Designated Account) or such
other Person entitled thereto under applicable law.



(ii) Agent promptly shall distribute to each Lender, pursuant to the applicable wire
instructions received from each Lender in writing, such funds as it may be entitled to receive,
subject to a Settlement delay as provided in Section 2.3(e).



(iii) In each instance, so long as no Event of Default has occurred and is
continuing, this Section 2.4(b) shall not apply to any payment made by Borrowers to Agent
and specified by Borrowers to be for the payment of specific Obligations then due and payable (or
prepayable) under any provision of this Agreement.



(iv) For purposes of the foregoing, “paid in full” means payment of all amounts owing
under the Loan Documents according to the terms thereof, including loan fees, service fees,
professional fees, interest (and specifically including interest accrued after the commencement of
any Insolvency Proceeding), default interest, interest on interest, and expense reimbursements,
whether or not any of the foregoing would be or is allowed or disallowed in whole or in part in any
Insolvency Proceeding.



(v) In the event of a direct conflict between the priority provisions of this
Section 2.4 and other provisions contained in any other Loan Document, it is the intention
of the parties hereto that such priority provisions in such documents shall be read together and
construed, to the fullest extent possible, to be in concert with each other. In the event of any
actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms and provisions of
this Section 2.4 shall control and govern.




(c) Mandatory Prepayments.



(i) At any time that an Event of Default has occurred and is continuing,
subject to Section 5.8(b), upon the receipt by Parent, any Borrower or any of their
respective Subsidiaries of Net Cash Proceeds in connection with the sale or disposition by any Loan
Party of property or assets pursuant to clauses (l) or (m) of the definition of Permitted
Dispositions, Borrowers shall immediately prepay the outstanding principal of the Advances in an
amount equal to 100% of such Net Cash Proceeds.






 


8









 







(ii) At any time that an Event of Default has occurred and is continuing, upon the
sale or issuance by any Loan Party or any of its Restricted Subsidiaries of any shares of Stock,
Borrowers shall immediately prepay the outstanding principal of the Advances in an amount equal to
100% of the Net Cash Proceeds received by such Person in connection therewith.



2.5 Overadvances. If, at any time or for any reason, the amount of
Obligations owed by Borrowers to the Lender Group pursuant to Section 2.1 or Section
2.12 is greater than any of the limitations set forth in Section 2.1, Section
2.3 or Section 2.12, as applicable (an “Overadvance”), Borrowers
immediately shall pay to Agent, in cash, the amount of such excess, which amount shall be used by
Agent to reduce the Obligations in accordance with the priorities set forth in Section
2.4(b); provided, however, that if an Overadvance occurs solely as a
result of Agent making a change in the criteria used to determine Eligible Accounts, Eligible
Finished Goods Inventory or Eligible Raw Materials Inventory, then Borrowers shall have 3 Business
Days to pay Agent, in cash, the amount of such excess. In addition, Borrowers hereby promise to
pay the Obligations (including principal, interest, fees, costs, and expenses) in Dollars in full
as and when due and payable under the terms of this Agreement and the other Loan Documents.



2.6 Interest Rates and Letter of Credit Fee: Rates, Payments, and
Calculations.



(a) Interest Rates. Except as provided in clause (c) below, all Obligations (except
for undrawn Letters of Credit) that have been charged to the Loan Account pursuant to the terms
hereof shall bear interest on the Daily Balance thereof as follows: (i) if the relevant Obligation
is an Advance that is a LIBOR Rate Loan, at a per annum rate equal to the LIBOR Rate plus the LIBOR
Rate Margin, and (ii) otherwise, at a per annum rate equal to the Base Rate plus the Base Rate
Margin.



The foregoing notwithstanding, at no time shall any portion of the Obligations bear interest
on the Daily Balance thereof at a per annum rate less than 3.75%. To the extent that interest
accrued hereunder at the rate set forth herein would be less than the foregoing minimum daily rate,
the interest rate chargeable hereunder for such day automatically shall be deemed increased to the
minimum rate.



(b) Letter of Credit Fee. Borrowers shall pay Agent (for the ratable benefit of the
Lenders, subject to any agreements between Agent and individual Lenders), a Letter of Credit fee
(in addition to the charges, commissions, fees, and costs set forth in Section 2.12(e))
which shall accrue at a rate equal to 2.00% per annum times the Daily Balance of the undrawn amount
of all outstanding Letters of Credit.



(c) Default Rate. Upon the occurrence and during the continuation of an Event of
Default, but solely at the election of Agent or the Required Lenders,



(i) all Obligations (except for undrawn Letters of Credit) that have been charged
to the Loan Account pursuant to the terms hereof shall bear interest on the Daily Balance thereof
at a per annum rate equal to 2 percentage points above the per annum rate otherwise applicable
hereunder, and



(ii) the Letter of Credit fee provided for above shall be increased to 2 percentage
points above the per annum rate otherwise applicable hereunder.



(d) Payment. Except as provided to the contrary in Section 2.11 or
Section 2.13(a), interest, Letter of Credit fees, and all other fees payable hereunder
shall be due and payable, in arrears, on the first day of each month during the term hereof.
Borrowers hereby authorize Agent, from time to time, without prior notice to Borrowers (except as
otherwise specifically provided in any Loan Document), to charge all interest and fees (when due
and payable), all Lender Group Expenses (as and when incurred), all charges, commissions, fees, and
costs provided for in Section 2.12(e) (as and when accrued or incurred), all fees and
costs provided for in Section 2.11 (as and when accrued or incurred), and all other
payments as and when due and payable under any Loan Document (including any amounts due and payable
to the Bank Product Providers in respect of Bank Products up to the amount of the Bank Product
Reserve) to Borrowers’ Loan Account,
which amounts thereafter shall constitute Advances hereunder and shall accrue interest at the rate
then applicable to Advances hereunder. Any interest not paid when due shall be compounded by being
charged to Borrowers’ Loan Account and shall thereafter constitute Advances hereunder and shall
accrue interest at the rate then applicable to Advances that are Base Rate Loans hereunder.


 


9









 





(e) Computation. All interest and fees chargeable under the Loan Documents shall be
computed on the basis of a 360 day year for the actual number of days elapsed. In the event the
Base Rate is changed from time to time hereafter, the rates of interest hereunder based upon the
Base Rate automatically and immediately shall be increased or decreased by an amount equal to such
change in the Base Rate.



(f) Intent to Limit Charges to Maximum Lawful Rate. In no event shall the interest
rate or rates payable under this Agreement, plus any other amounts paid in connection herewith,
exceed the highest rate permissible under any law that a court of competent jurisdiction shall, in
a final determination, deem applicable. Borrowers and the Lender Group, in executing and
delivering this Agreement, intend legally to agree upon the rate or rates of interest and manner of
payment stated within it; provided, however, that, anything contained herein to
the contrary notwithstanding, if said rate or rates of interest or manner of payment
exceeds the maximum allowable under applicable law, then, ipso facto, as of the date of this
Agreement, Borrowers are and shall be liable only for the payment of such maximum as allowed by
law, and payment received from Borrowers in excess of such legal maximum, whenever received, shall
be applied to reduce the principal balance of the Obligations to the extent of such excess.




2.7 Cash Management.




(a) Subject to Section 3.6(b), Borrowers shall and shall cause each of their
Restricted Subsidiaries to (i) establish and maintain cash management services of a type and on
terms reasonably satisfactory to Agent at one or more of the banks set forth on Schedule
2.7(a) (each a “Cash Management Bank”), and shall request in writing and otherwise
take such reasonable steps to ensure that all of their and their Restricted Subsidiaries’ Account
Debtors forward payment of the amounts owed by them directly to such Cash Management Bank, and (ii)
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 of their Collections (including those sent directly by their
Account Debtors to Borrowers or their Restricted Subsidiaries) into a bank account in Agent’s name
(a “Cash Management Account”) at one of the Cash Management Banks.




(b) Each Cash Management Bank shall establish and maintain Cash Management
Agreements with Agent and Borrowers, in form and substance reasonably acceptable to Agent. Each
such Cash Management Agreement shall provide, among other things, that (i) the Cash Management Bank
will comply with any instructions (each, a “Cash Disposition Instruction”), originated
by Agent directing the disposition of the funds in such Cash Management Account without further
consent by a Borrower or its Restricted Subsidiary, as applicable, (ii) the Cash Management Bank
has no rights of setoff or recoupment or any other claim against the applicable Cash Management
Account, other than for payment of its service fees and other charges directly related to the
administration of such Cash Management Account and for returned checks or other items of payment,
(iii) at any time after which the Agent so instructs such Cash Management Bank (a “Cash Sweep
Instruction”), it immediately will forward by daily sweep all amounts in the applicable Cash
Management Account to the Agent’s Account until such time (if any) as Agent notifies it that the
Cash Sweep Instruction is terminated pursuant to the last sentence of this Section 2.7(b); and (iv) if clause (iii) is not applicable, then Agent shall direct the Cash Management bank to
immediately transfer all such amounts to Borrowers’ Designated Account. Agent may issue a Cash
Sweep Instruction or Cash Disposition Instruction only on or after any date that: (x) an Event of
Default shall have occurred and be continuing or (y) the Borrowers’ average Excess Availability
during any consecutive 30-day period is less than $10,000,000. Agent shall terminate a Cash Sweep
Instruction by issuing new instructions to the Cash Management Bank within three (3) Business Days
after Borrowers’ average Excess Availability during any consecutive 30-day period exceeds
$10,000,000; provided, however, that in no event shall Agent be required to
terminate a Cash Sweep Instruction more than three (3) times during any consecutive twelve (12)
month period.


 


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(c) So long as no Default or Event of Default has occurred and is continuing,
Administrative Borrower may amend Schedule 2.7(a) to add or replace a Cash Management
Bank or Cash Management Account; provided, however, that (i) such prospective
Cash Management Bank shall be reasonably satisfactory to Agent, and (ii) prior to the time of the
opening of such Cash Management Account, a Borrower or its Restricted Subsidiary, as applicable,
and such prospective Cash Management Bank shall have executed and delivered to Agent a Cash
Management Agreement. Borrowers (or their Restricted Subsidiaries, as applicable) shall close any
of their Cash Management Accounts (and establish replacement cash management accounts in accordance
with the foregoing sentence) promptly and in any event within 45 days of notice from Agent that the
creditworthiness of any Cash Management Bank is no longer acceptable in Agent’s reasonable
judgment, or as promptly as practicable and in any event within 75 days of notice from Agent that
the operating performance, funds transfer, or availability procedures or performance of the Cash
Management Bank with respect to Cash Management Accounts or Agent’s liability under any Cash
Management Agreement with such Cash Management Bank is no longer acceptable in Agent’s reasonable
judgment.



(d) The Cash Management Accounts shall be cash collateral accounts subject to
Control Agreements.



(e) Notwithstanding anything to the contrary contained herein, Agent acknowledges
that the Cash Management Accounts may contain from time to time Trust Funds (as defined below),
which, by law, Borrowers and their Subsidiaries are required to collect and remit from time to time
but which, pending such remittance, shall be contained or held in the Cash Management Accounts.
Upon Agent’s delivery of a Cash Sweep Instruction, Cash Disposition Instruction or any other
exercise of control by Agent under a Control Agreement or a Cash Management Agreement, Agent agrees
to notify Borrowers and their Subsidiaries of such exercise (which notice may be by delivery of a
copy of such Cash Sweep Instruction, if any). Upon receipt of such notice, Borrowers and their
Subsidiaries shall send written notice to Agent certifying the type and amount of any Trust Funds
contained or held in the Cash Management Accounts. Within 3 Business Days after receipt of such
notice by Agent, Agent shall remit the amount of the Trust Funds to Borrowers and their
Subsidiaries for payment to the appropriate Person; provided, that, during such 3
Business Day period, Agent shall have the right to ask for further clarification, verification or
other supporting documentation with respect to any such type or amount certified by Borrowers or
their Subsidiaries as constituting Trust Funds and Agent shall not be required to remit the amount
of such Trust Funds so certified unless and until Agent is reasonably satisfied as to such
clarification, verification or other supporting documentation. For the purposes of this Agreement,
“Trust Funds” means all funds held by Borrowers and their Subsidiaries, as a fiduciary,
all taxes required to be collected or withheld (including, without limitation, federal and state
withholding taxes (including the employer’s share thereof), taxes owing to any governmental unit
thereof, sales, use and excise taxes, customs duties, import duties and independent customs
brokers’ charges), other taxes for which Borrowers and their Subsidiaries may become liable, and
accrued and unpaid employee compensation (including salaries, wages, benefits and expense
reimbursements).



2.8 Crediting Payments. The receipt of any payment item by Agent (whether
from transfers to Agent by the Cash Management Banks pursuant to the Cash Management Agreements or
otherwise) shall not be considered a payment on account unless such payment item is a wire transfer
of immediately available federal funds made to the Agent’s Account or unless and until such payment
item is honored when presented for payment. Should any payment item not be honored when presented
for payment, then Borrowers shall be deemed not to have made such payment and interest shall be
calculated accordingly. Anything to the contrary contained herein notwithstanding, any payment
item shall be deemed received by Agent only if it is received into the Agent’s Account on a
Business Day on or before 11:00 a.m. (California time). If any payment item is received into the
Agent’s Account on a non-Business Day or after 11:00 a.m. (California time) on a Business Day, it
shall be deemed to have been received by Agent as of the opening of business on the immediately
following Business Day.


 


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2.9 Designated Account. Agent is authorized to make the Advances, and
Issuing Lender is authorized to issue the Letters of Credit, under this Agreement based upon
telephonic or other instructions
received from anyone purporting to be an Authorized Person or, without instructions, if pursuant to
Section 2.6(d). Administrative Borrower agrees to establish and maintain the Designated
Account with the Designated Account Bank for the purpose of receiving the proceeds of the Advances
requested by Borrowers and made by Agent or the Lenders hereunder. Unless otherwise agreed by
Agent and Administrative Borrower, any Advance, Protective Advance, or Swing Loan requested by
Borrowers and made by Agent or the Lenders hereunder shall be made to the Designated Account.



2.10 Maintenance of Loan Account; Statements of Obligations. Agent shall
maintain an account on its books in the name of Borrowers (the “Loan Account”) on which
Borrowers will be charged with all Advances (including Protective Advances and Swing Loans) made by
Agent, Swing Lender, or the Lenders to Borrowers or for Borrowers’ account, the Letters of Credit
issued by Issuing Lender for Borrowers’ account, and with all other payment Obligations hereunder
or under the other Loan Documents, including, accrued interest, fees and expenses, and Lender Group
Expenses. In accordance with Section 2.8, the Loan Account will be credited with all
payments received by Agent from Borrowers or for Borrowers’ account, including all amounts received
in the Agent’s Account from any Cash Management Bank. In accordance with Section 2.6(d),
Agent shall render statements regarding the Loan Account to Administrative Borrower, including
principal, interest, fees, and including an itemization of all charges and expenses constituting
Lender Group Expenses owing, and such statements, absent manifest error, shall be conclusively
presumed to be correct and accurate and constitute an account stated between Borrowers and the
Lender Group unless, within 30 days after receipt thereof by Administrative Borrower,
Administrative Borrower shall deliver to Agent written objection thereto describing the error or
errors contained in any such statements.



2.11 Fees. Borrowers shall pay to Agent, as and when due and payable under the
terms of the Fee Letter, the fees set forth in the Fee Letter.




2.12 Letters of Credit.




(a) Subject to the terms and conditions of this Agreement, the Issuing Lender agrees
to issue letters of credit for the account of Borrowers (each, an “L/C”) or to purchase
participations or execute indemnities or reimbursement obligations (each such undertaking, an “L/C Undertaking”) with respect to letters of credit issued by an Underlying Issuer (as of the
Closing Date, the prospective Underlying Issuer is to be Wells Fargo) for the account of
Borrowers. Each request for the issuance of a Letter of Credit or the amendment, renewal, or
extension of any outstanding Letter of Credit shall be made in writing by an Authorized Person and
delivered to the Issuing Lender and Agent via hand delivery, telefacsimile, or other electronic
method of transmission reasonably in advance of the requested date of issuance, amendment, renewal,
or extension. Each such request shall be in form and substance satisfactory to the Issuing Lender
in its reasonable discretion and shall specify (i) the amount of such Letter of Credit, (ii) the
date of issuance, amendment, renewal, or extension of such Letter of Credit, (iii) the expiration
date of such Letter of Credit, (iv) the name and address of the beneficiary thereof (or the
beneficiary of the Underlying Letter of Credit, as applicable), and (v) such other information
(including, in the case of an amendment, renewal, or extension, identification of the outstanding
Letter of Credit to be so amended, renewed, or extended) as shall be necessary to prepare, amend,
renew, or extend such Letter of Credit. If requested by the Issuing Lender, Borrowers also shall
be an applicant under the application with respect to any Underlying Letter of Credit that is to be
the subject of an L/C Undertaking. The Issuing Lender shall have no obligation to issue a Letter
of Credit if any of the following would result after giving effect to the issuance of such
requested Letter of Credit:



(i) the Letter of Credit Usage would exceed the Borrowing Base less the outstanding
amount of Advances, or




(ii) the Letter of Credit Usage would exceed $10,000,000, or



(iii) the Letter of Credit Usage would exceed the Maximum Revolver Amount less the
outstanding amount of Advances.



 


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Borrowers and the Lender Group acknowledge and agree that certain Underlying Letters of Credit
may be issued to support letters of credit that already are outstanding as of the Closing Date.
Each Letter of Credit (and corresponding Underlying
Letter of Credit) shall be in form and substance acceptable to the Issuing Lender (in the
exercise of its reasonable discretion), including the requirement that the amounts payable
thereunder must be payable in Dollars. If Issuing Lender is obligated to advance funds under a
Letter of Credit, Borrowers immediately shall reimburse such L/C Disbursement to Issuing Lender
upon receiving written or telephonic notice of such L/C Disbursement by paying to Agent an amount
equal to such L/C Disbursement not later than 11:00 a.m., California time, on the date that such
L/C Disbursement is made, provided, that Administrative Borrower has received written or
telephonic notice of such L/C Disbursement prior to 10:00 a.m., California time, on such date, or,
if such notice has not been received by Administrative Borrower prior to such time on such date,
then not later than 11:00 a.m., California time, on the Business Day immediately following the day
that Administrative Borrower receives such notice, pursuant to the foregoing, and, in the absence
of such reimbursement, the L/C Disbursement immediately and automatically shall be deemed to be an
Advance hereunder and, thereafter, shall bear interest at the rate then applicable to Advances that
are Base Rate Loans under Section 2.6. To the extent an L/C Disbursement is deemed to be
an Advance hereunder, Borrowers’ obligation to reimburse such L/C Disbursement shall be discharged
and replaced by the resulting Advance. Promptly following receipt by Agent of any payment from
Borrowers pursuant to this paragraph, Agent shall distribute such payment to the Issuing Lender or,
to the extent that Lenders have made payments pursuant to Section 2.12(c) to reimburse
the Issuing Lender, then to such Lenders and the Issuing Lender as their interests may appear.



(b) Promptly following receipt of a notice of L/C Disbursement pursuant to
Section 2.12(a), each Lender agrees to fund its Pro Rata Share of any Advance deemed made
pursuant to the foregoing subsection on the same terms and conditions as if Borrowers had requested
such Advance and Agent shall promptly pay to Issuing Lender the amounts so received by it from the
Lenders. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing
the amount thereof) and without any further action on the part of the Issuing Lender or the
Lenders, the Issuing Lender shall be deemed to have granted to each Lender, and each Lender shall
be deemed to have purchased, a participation in each Letter of Credit, in an amount equal to its
Pro Rata Share of the Risk Participation Liability of such Letter of Credit, and each such Lender
agrees to pay to Agent, for the account of the Issuing Lender, such Lender’s Pro Rata Share of any
payments made by the Issuing Lender under such Letter of Credit. In consideration and in
furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to
Agent, for the account of the Issuing Lender, such Lender’s Pro Rata Share of each L/C Disbursement
made by the Issuing Lender and not reimbursed by Borrowers on the date due as provided in clause
(a) of this Section, or of any reimbursement payment required to be refunded to Borrowers for any
reason. Each Lender acknowledges and agrees that its obligation to deliver to Agent, for the
account of the Issuing Lender, an amount equal to its respective Pro Rata Share of each L/C
Disbursement made by the Issuing Lender pursuant to this Section 2.12(b) shall be
absolute and unconditional and such remittance shall be made notwithstanding the occurrence or
continuation of an Event of Default or Default or the failure to satisfy any condition set forth in
Section 3 hereof. If any such Lender fails to make available to Agent the amount of such
Lender’s Pro Rata Share of each L/C Disbursement made by the Issuing Lender in respect of such
Letter of Credit as provided in this Section, such Lender shall be deemed to be a Defaulting Lender
and Agent (for the account of the Issuing Lender) shall be entitled to recover such amount on
demand from such Lender together with interest thereon at the Defaulting Lender Rate until paid in
full.


 


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(c) Each Borrower hereby agrees to indemnify, save, defend, and hold the Lender
Group harmless from any loss, cost, expense, or liability, and reasonable attorneys fees incurred
by the Lender Group arising out of or in connection with any Letter of Credit; provided,
however, that no Borrower shall be obligated hereunder to indemnify for any loss, cost,
expense, or liability to the extent that it is caused by the gross negligence or willful misconduct
of the Issuing Lender or any other member of the Lender Group. Each Borrower agrees to be bound by
the Underlying Issuer’s regulations and interpretations of any Underlying Letter of Credit or by
Issuing Lender’s interpretations of any L/C issued by Issuing Lender to or for such Borrower’s
account, even though this interpretation may be different from such Borrower’s own, and each Borrower understands and agrees that the Lender Group shall not be liable for any error,
negligence, or mistake, whether of omission or commission, in following Borrowers’ instructions or
those contained in the Letter of Credit or any modifications, amendments, or supplements thereto.
Each Borrower understands that the L/C Undertakings may require Issuing Lender to indemnify the
Underlying Issuer for certain costs or liabilities arising out of claims by Borrowers against such
Underlying Issuer. Each Borrower hereby agrees to indemnify, save, defend, and hold the Lender
Group harmless with respect to any loss, cost, expense (including reasonable attorneys fees), or
liability incurred by the Lender Group under any L/C Undertaking as a result of the Lender Group’s
indemnification of any Underlying Issuer; provided, however, that no Borrower
shall be obligated hereunder to indemnify for any loss, cost, expense, or liability to the extent
that it is caused by the gross negligence or willful misconduct of the Issuing Lender or any other
member of the Lender Group. Each Borrower hereby acknowledges and agrees that neither the Lender
Group nor the Issuing Lender shall be responsible for delays, errors, or omissions resulting from
the malfunction of equipment in connection with any Letter of Credit.



(d) Each Borrower hereby authorizes and directs any Underlying Issuer to deliver to
the Issuing Lender all instruments, documents, and other writings and property received by such
Underlying Issuer pursuant to such Underlying Letter of Credit and to accept and rely upon the
Issuing Lender’s instructions with respect to all matters arising in connection with such
Underlying Letter of Credit and the related application.



(e) Any and all issuance charges, commissions, fees, and costs incurred by the
Issuing Lender relating to Underlying Letters of Credit shall be Lender Group Expenses for purposes
of this Agreement and immediately shall be reimbursable by Borrowers to Agent for the account of
the Issuing Lender; it being acknowledged and agreed by each Borrower that, as of the Closing Date,
the issuance charge imposed by the prospective Underlying Issuer is .825% per annum times the face
amount of each
Underlying Letter of Credit, that such issuance charge may be changed from time to time, and
that the Underlying Issuer also imposes a schedule of charges for amendments, extensions, drawings,
and renewals.



(f) If by reason of (i) any change after the Closing Date in any applicable law,
treaty, rule, or regulation or any change in the interpretation or application thereof by any
Governmental Authority, or (ii) compliance by the Underlying Issuer or the Lender Group with any
direction, request, or requirement (irrespective of whether having the force of law) of any
Governmental Authority or monetary authority including, Regulation D of the Federal Reserve Board
as from time to time in effect (and any successor thereto):



(i) any reserve, deposit, or similar requirement is or shall be imposed or modified
in respect of any Letter of Credit issued hereunder, or



(ii) there shall be imposed on the Underlying Issuer or the Lender Group any other
condition regarding any Underlying Letter of Credit or any Letter of Credit issued pursuant hereto;



and the result of the foregoing is to increase, directly or indirectly, the cost to the Lender
Group of issuing, making, guaranteeing, or maintaining any Letter of Credit or to reduce the amount
receivable in respect thereof by the Lender Group, then, and in any such case, Agent may, at any
time within a reasonable period after the additional cost is incurred or the amount received is
reduced, notify Administrative Borrower, and Borrowers shall pay on demand such amounts as Agent
may specify to be necessary to compensate the Lender Group for such additional cost or reduced
receipt, together with interest on such amount from the date of such demand until payment in full
thereof at the rate then applicable to Base Rate Loans hereunder. The determination by Agent of
any amount due pursuant to this Section, as set forth in a certificate setting forth the
calculation thereof in reasonable detail, shall, in the absence of manifest or demonstrable error,
be final and conclusive and binding on all of the parties hereto.


 


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2.13 LIBOR Option.




(a) Interest and Interest Payment Dates. In lieu of having interest charged at the
rate based upon the Base Rate, Borrowers shall have the option (the “LIBOR Option”) to
have interest on all or a portion of the Advances be charged at a rate of interest based upon the
LIBOR Rate. Interest on LIBOR Rate Loans shall be payable on the earliest of (i) the last day of
the Interest Period applicable thereto (provided, however, that, subject to the
following clauses (ii) and (iii), in the case of any Interest Period greater than 3 months in
duration, interest shall be payable at 3 month intervals after the commencement of the applicable
Interest Period and on the last day of such Interest Period), (ii) the occurrence of an Event of
Default in consequence of which the Required Lenders or Agent on behalf thereof have elected to
accelerate the maturity of all or any portion of the Obligations, or (iii) termination of this
Agreement pursuant to the terms hereof. On the last day of each applicable Interest Period, unless
Administrative Borrower properly has exercised the LIBOR Option with respect thereto, the interest
rate applicable to such LIBOR Rate Loan automatically shall convert to the rate of interest then
applicable to Base Rate Loans of the same type hereunder. At any time that an Event of Default has
occurred and is continuing, Borrowers no longer shall have the option to request that Advances bear
interest at a rate based upon the LIBOR Rate and Agent shall have the right to convert the interest
rate on all outstanding LIBOR Rate Loans to the rate then applicable to Base Rate Loans hereunder.




(b) LIBOR Election.




(i) Administrative Borrower may, at any time and from time to time, so long as no
Event of Default has occurred and is continuing, elect to exercise the LIBOR Option by notifying
Agent prior to 11:00 a.m. (California time) at least 3 Business Days prior to the commencement of
the proposed Interest Period (the “LIBOR Deadline”). Notice of Administrative Borrower’s
election of the LIBOR Option for a permitted portion of the Advances and an Interest Period
pursuant to this Section shall be made by delivery to Agent of a LIBOR Notice received by Agent
before the LIBOR Deadline, or by telephonic notice received by Agent before the LIBOR Deadline (to
be confirmed by delivery to Agent of a LIBOR Notice received by Agent prior to 5:00 p.m.
(California time) on the same day). Promptly upon its receipt of each such LIBOR Notice, Agent
shall provide a copy thereof to each of the Lenders.



(ii) Each LIBOR Notice shall be irrevocable and binding on Borrowers. In connection
with each LIBOR Rate Loan, each Borrower shall indemnify, defend, and hold Agent and the Lenders
harmless against any loss, cost, or expense incurred by Agent or any Lender as a result of (A) the
payment of any principal of any LIBOR Rate Loan other than on the last day of an Interest Period
applicable thereto (including as a result of an Event of Default), (B) the conversion of any LIBOR
Rate Loan other than on the last day of the Interest Period applicable thereto, or (C) the failure
to borrow, convert, continue or prepay any LIBOR Rate Loan on the date specified in any LIBOR
Notice delivered pursuant hereto (such losses, costs, and expenses, collectively, “Funding
Losses”). Funding Losses shall, with respect to Agent or any Lender, be deemed to equal the
amount determined by Agent or such Lender to be the excess, if any, of (1) the amount of interest
that would have accrued on the principal amount of such LIBOR Rate Loan had such event not
occurred, at the LIBOR Rate that would have been applicable thereto, for the period from the date
of such event to the last day of the then current Interest Period therefor (or, in the case of a
failure to borrow, convert or continue, for the period that would have been the Interest Period
therefor), minus (2) the amount of interest that would accrue on such principal amount for such
period at the interest rate which Agent or such Lender would be offered were it to be offered, at
the commencement of such period, Dollar deposits of a comparable amount and period in the London
interbank market. A certificate of Agent or a
Lender delivered to Administrative Borrower setting forth any amount or amounts that Agent or
such Lender is entitled to receive pursuant to this Section 2.13 shall be conclusive
absent manifest error unless the Administrative Borrower shall object in writing within seven (7)
Business Days of receipt thereof, specifying the basis for such objection in detail.


 


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(iii) Borrowers shall have not more than 5 LIBOR Rate Loans in effect at any given
time. Borrowers only may exercise the LIBOR Option for LIBOR Rate Loans of at least $1,000,000 and
integral multiples of $500,000 in excess thereof.



(c) Prepayments. Borrowers may prepay LIBOR Rate Loans or convert such Loans to
Base Rate Loans at any time; provided, however, that in the event that LIBOR
Rate Loans are so prepaid or converted on any date that is not the last day of the Interest Period
applicable thereto, including as a result of any automatic prepayment through the required
application by Agent of proceeds of Borrowers’ and their respective Restricted Subsidiaries’
Collections in accordance with Section 2.4(b) or for any other reason, including early
termination of the term of this Agreement or acceleration of all or any portion of the Obligations
pursuant to the terms hereof, each Borrower shall indemnify, defend, and hold Agent and the Lenders
and their Participants harmless against any and all Funding Losses in accordance with clause
(b)(ii) above.




(d) Special Provisions Applicable to LIBOR Rate.



(i) The LIBOR Rate may be adjusted by Agent with respect to any Lender on a
prospective basis to take into account any additional or increased costs to such Lender of
maintaining or obtaining any eurodollar deposits or increased costs, in each case, due to changes
in applicable law occurring subsequent to the commencement of the then applicable Interest Period,
including changes in tax laws (except changes of general applicability in tax laws relating to
taxes based on income, profits, receipts or capital) and changes in the reserve requirements
imposed by the Board of Governors of the Federal Reserve System (or any successor), excluding the
Reserve Percentage, which additional or increased costs would increase the cost of funding loans
bearing interest at the LIBOR Rate. In any such event, the affected Lender shall give
Administrative Borrower and Agent notice of such a determination and adjustment and Agent promptly
shall transmit the notice to each other Lender and, upon its receipt of the notice from the
affected Lender, Administrative Borrower may, by notice to such affected Lender (y) require such
Lender to furnish to Administrative Borrower a statement setting forth the basis for adjusting such
LIBOR Rate and the method for determining the amount of such adjustment accompanied by a
certificate of such Lender stating that it is charging such similar increased costs to similarly
situated borrowers, or (z) repay the LIBOR Rate Loans with respect to which such adjustment is made
(together with any amounts due under clause (b)(ii) above).



(ii) In the event that any change in market conditions or any law, regulation,
treaty, or directive, or any change therein or in the interpretation of application thereof, shall
at any time after the date hereof, in the reasonable opinion of any Lender, make it unlawful or
impractical for such Lender to fund or maintain LIBOR Rate Loans or to continue such funding or
maintaining, or to determine or charge interest rates at the LIBOR Rate, such Lender shall give
notice of such changed circumstances to Agent and Administrative Borrower and Agent promptly shall
transmit the notice to each other Lender and (y) in the case of any LIBOR Rate Loans of such Lender
that are outstanding, the date specified in such Lender’s notice shall be deemed to be the last day
of the Interest Period of such LIBOR Rate Loans, and interest upon the LIBOR Rate Loans of such
Lender thereafter shall accrue interest at the rate then applicable to Base Rate Loans, and (z)
Borrowers shall not be entitled to elect the LIBOR Option until such Lender determines that it
would no longer be unlawful or impractical to do so.



(e) No Requirement of Matched Funding. Anything to the contrary contained herein
notwithstanding, neither Agent, nor any Lender, nor any of their Participants, is required actually
to acquire eurodollar deposits to fund or otherwise match fund any Obligation as to which interest
accrues at the LIBOR Rate. The provisions of this Section shall apply as if each Lender or its
Participants had match funded any Obligation as to which interest is accruing at the LIBOR Rate by
acquiring eurodollar deposits for each Interest Period in the amount of the LIBOR Rate Loans.


 


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2.14 Capital Requirements. If, after the date hereof, either (i) the adoption
of or change in any law, rule, regulation or guideline regarding capital requirements for banks or
bank holding companies, or any
change in the interpretation or application thereof by any Governmental Authority charged with the
administration thereof, or (ii) compliance by any Lender or its parent bank holding company with
any guideline, request or directive of any such entity regarding capital adequacy (whether or not
having the force of law), has the effect of reducing the return on such Lender’s or such holding
company’s capital as a consequence of such Lender’s Commitments hereunder to a level below that
which such Lender or such holding company could have achieved but for such adoption, change, or
compliance (taking into consideration such Lender’s or such holding company’s then existing
policies with respect to capital adequacy and assuming the full utilization of such entity’s
capital) by any amount deemed in good faith by such Lender to be material and the result is an
increase in the cost to any Lender of funding or maintaining any Advances to Borrowers, then such
Lender may notify Administrative Borrower and Agent thereof. Following receipt of such notice,
Borrowers agree to pay such Lender on demand the amount of such reduction of return of capital as
and when such reduction is determined, payable within 90 days after presentation by such Lender of
a statement in the amount and setting forth in reasonable detail such Lender’s calculation thereof
and the assumptions upon which such calculation was based (which statement shall be deemed true and
correct absent manifest error). In determining such amount, such Lender may use any reasonable
averaging and attribution methods.




2.15 Joint and Several Liability of Borrowers.



(a) Each Borrower is accepting joint and several liability hereunder and under the
other Loan Documents in consideration of the financial accommodations to be provided by the Lender
Group under this Agreement, for the mutual benefit, directly and indirectly, of each Borrower and
in consideration of the undertakings of the other Borrowers to accept joint and several liability
for the Obligations.



(b) Each Borrower, jointly and severally, hereby irrevocably and unconditionally
accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other
Borrowers, with respect to the payment and performance of all of the Obligations (including,
without limitation, any Obligations arising under this Section 2.15), it being the
intention of the parties hereto that all the Obligations shall be the joint and several obligations
of each Borrower without preferences or distinction among them.



(c) If and to the extent that any Borrower shall fail to make any payment with
respect to any of the Obligations as and when due or to perform any of the Obligations in
accordance with the terms thereof, then in each such event the other Borrowers will make such
payment with respect to, or perform, such Obligation.



(d) The Obligations of each Borrower under the provisions of this Section
2.15 constitute the absolute and unconditional, full recourse Obligations of each Borrower
enforceable against each Borrower to the full extent of its properties and assets, irrespective of
the validity, regularity or enforceability of this Agreement or any other circumstances whatsoever.



(e) Except as otherwise expressly provided in this Agreement, each Borrower hereby
waives notice of acceptance of its joint and several liability, notice of any Advances or Letters
of Credit issued under or pursuant to this Agreement, notice of the occurrence of any Default,
Event of Default, or of any demand for any payment under this Agreement, notice of any action at
any time taken or omitted by Agent or Lenders under or in respect of any of the Obligations, any
requirement of diligence or to mitigate damages and, generally, to the extent permitted by
applicable law, all demands, notices and other formalities of every kind in connection with this
Agreement (except as otherwise provided in this Agreement). Each Borrower hereby assents to, and
waives notice of, any extension or postponement of the time for the payment of any of the
Obligations, the acceptance of any payment of any of the Obligations, the acceptance of any partial
payment thereon, any waiver, consent or other action or acquiescence by Agent or Lenders at any
time or times in respect of any default by any Borrower in the performance or satisfaction of any
term, covenant, condition or provision of this Agreement, and the taking, addition, substitution or
release, in whole or in part, at any time or times, of any security for any of the Obligations or
the addition, substitution or release, in whole or in part, of any Borrower. Without limiting the
generality of the foregoing, each Borrower assents to any other action or delay in acting or
failure to act on the part of any Agent or Lender with respect to the failure by any Borrower to
comply with any of its respective Obligations, including, without limitation, any failure strictly
or diligently to assert any right or to pursue any remedy or to comply fully with applicable laws
or regulations thereunder, which might, but for the provisions of this Section 2.15
afford grounds for terminating, discharging or relieving any Borrower, in whole or in part, from
any of its Obligations under this Section 2.15, it being the intention of each Borrower
that, so long as any of the Obligations hereunder remain unsatisfied, the Obligations of each
Borrower under this Section 2.15 shall not be discharged except by performance and then
only to the extent of such performance. The Obligations of each Borrower under this Section
2.15 shall not be diminished or rendered unenforceable by any winding up, reorganization,
arrangement, liquidation, reconstruction or similar proceeding with respect to any Borrower or any
Agent or Lender.


 


17









 






(f) Each Borrower represents and warrants to Agent and Lenders that such Borrower
is currently informed of the financial condition of Borrowers and of all other circumstances which
a diligent inquiry would reveal and which bear upon the risk of nonpayment of the Obligations.
Each Borrower further represents and warrants to Agent and Lenders that such Borrower has read and
understands the terms and conditions of the Loan Documents. Each Borrower hereby covenants that
such Borrower will continue to keep informed of Borrowers’ financial condition, the financial
condition of other guarantors, if any, and of all other circumstances which bear upon the risk of
nonpayment or nonperformance of the Obligations.



(g) Each Borrower waives all rights and defenses arising out of an election of
remedies by Agent or any Lender, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for a guaranteed obligation, has destroyed Agent’s or such
Lender’s rights of subrogation and reimbursement against such Borrower by the operation of Section
580(d) of the California Code of Civil Procedure or otherwise.



(h) Each Borrower waives all rights and defenses that such Borrower may have because
the Obligations are secured by Real Property. This means, among other things:



(i) Agent and Lenders may collect from such Borrower without first foreclosing on
any Collateral pledged by Borrowers.



(ii) If Agent or any Lender forecloses on any Real Property Collateral pledged by
Borrowers:



(A) The amount of the Obligations may be reduced only by the price for which that
collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale
price.



(B) Agent and Lenders may collect from such Borrower even if Agent or Lenders, by
foreclosing on the Real Property Collateral, has destroyed any right such Borrower may have to
collect from the other Borrowers.



This is an unconditional and irrevocable waiver of any rights and defenses such Borrower may have
because the Obligations are secured by Real Property. These rights and defenses include, but are
not limited to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of the California
Code of Civil Procedure.



(i) The provisions of this Section 2.15 are made for the benefit of Agent,
Lenders and their respective successors and assigns, and may be enforced by it or them from time to
time against any or all Borrowers as often as occasion therefor may arise and without requirement
on the part of any such Agent, Lender, successor or assign first to marshal any of its or their
claims or to exercise any of its or their rights against any Borrower or to exhaust any remedies
available to it or them against any Borrower or to resort to any other source or means of obtaining
payment of any of the Obligations hereunder or to elect any other remedy. The provisions of this
Section 2.15 shall remain in effect until all of the Obligations shall have been paid in
full or otherwise fully satisfied. If at any time, any payment, or any part thereof, made in
respect of any
of the Obligations, is rescinded or must otherwise be restored or returned by any Agent or Lender
upon the insolvency, bankruptcy or reorganization of any Borrower, or otherwise, the provisions of
this Section 2.15 will forthwith be reinstated in effect, as though such payment had not
been made.




 


18











 




(j) Each Borrower hereby agrees that it will not enforce any of its rights of
contribution or subrogation against any other Borrower with respect to any liability incurred by it
hereunder or under any of the other Loan Documents, any payments made by it to Agent or Lenders
with respect to any of the Obligations or any collateral security therefor until such time as all
of the Obligations have been paid in full in cash. Any claim which any Borrower may have against
any other Borrower with respect to any payments to any Agent or Lender hereunder or under any other
Loan Documents are hereby expressly made subordinate and junior in right of payment, without
limitation as to any increases in the Obligations arising hereunder or thereunder, to the prior
payment in full in cash of the Obligations and, in the event of any insolvency, bankruptcy,
receivership, liquidation, reorganization or other similar proceeding under the laws of any
jurisdiction relating to any Borrower, its debts or its assets, whether voluntary or involuntary,
all such Obligations shall be paid in full in cash before any payment or distribution of any
character, whether in cash, securities or other property, shall be made to any other Borrower
therefor.




(k) Each Borrower hereby agrees that, after the occurrence and during the
continuance of any Default or Event of Default, the payment of any amounts due with respect to the
indebtedness owing by any Borrower to any other Borrower is hereby subordinated to the prior
payment in full in cash of the Obligations. Each Borrower hereby agrees that after the occurrence
and during the continuance of any Default or Event of Default, such Borrower will not demand, sue
for or otherwise attempt to collect any indebtedness of any other Borrower owing to such Borrower
until the Obligations shall have been paid in full in cash. If, notwithstanding the foregoing
sentence, such Borrower shall collect, enforce or receive any amounts in respect of such
indebtedness, such amounts shall be collected, enforced and received by such Borrower as trustee
for Agent, and such Borrower shall deliver any such amounts to Agent for application to the
Obligations in accordance with Section 2.4(b).




3. CONDITIONS; TERM OF AGREEMENT.



3.1 Conditions Precedent to the Initial Extension of Credit. The obligation
of each Lender to make its initial extension of credit provided for hereunder, is subject to the
fulfillment, to the satisfaction of Agent and each Lender of each of the conditions precedent set
forth on Schedule 3.1 (the making of such initial extension of credit by a Lender being
conclusively deemed to be its satisfaction or waiver of the conditions precedent).




3.2 Conditions Precedent to all Extensions of Credit. The obligation of the
Lender Group (or any member thereof) to make any Advances hereunder at any time (or to extend any
other credit hereunder) shall be subject to the following conditions precedent:




(a) the representations and warranties contained in this Agreement and in the other
Loan Documents shall be true and correct in all material respects on and as of the date of such
extension of credit, as though made on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date);




(b) no Default or Event of Default shall have occurred and be continuing on the date
of such extension of credit, nor shall either result from the making thereof;




(c) no injunction, writ, restraining order, or other order of any nature restricting
or prohibiting, directly or indirectly, the extending of such credit shall have been issued and
remain in force by any Governmental Authority against any Borrower, Agent, any Lender, or any of
their Affiliates; and



(d) no Material Adverse Change shall have occurred.







 


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3.3 Term. This Agreement shall continue in full force and effect for a term
ending on the fifth anniversary of the date hereof (the “Maturity Date”). The foregoing
notwithstanding, the Lender Group, upon the election of the Required Lenders, shall have the right
to terminate its obligations under this Agreement immediately and without notice upon the
occurrence and during the continuation of an Event of Default.




3.4 Effect of Termination. On the date of termination of this Agreement, all
Obligations (including contingent reimbursement obligations of Borrowers with respect to
outstanding Letters of Credit) and Bank Product Obligations immediately shall become due and
payable without notice or demand and Borrowers agree to (a) either (i) provide cash collateral to
be held by Agent for the benefit of those Lenders in an amount equal to 105% of the Letter of
Credit Usage, or (ii) cause the original Letters of Credit to be returned to the Issuing Lender,
and (b) provide cash collateral or other security reasonably satisfactory to Agent (in an amount
determined by Agent as sufficient to satisfy the reasonably estimated credit exposure) to be held
by Agent for the benefit of the Bank Product Providers with respect to the Bank Product
Obligations). No termination of this Agreement, however, shall relieve or discharge Borrowers or
their respective Restricted Subsidiaries of their duties, Obligations, Bank Product Obligations, or
covenants hereunder or under any other Loan Document and the Agent’s Liens in the Collateral shall
remain in effect until all Obligations and Bank Product Obligations have been paid in full and the
Lender Group’s obligations to provide additional credit hereunder have been terminated. When this
Agreement has been terminated and all of the Obligations and Bank Product Obligations have been
paid in full and the Lender Group’s obligations to provide additional credit under the Loan
Documents have been terminated irrevocably, Agent will, at Borrowers’ sole expense, execute and
deliver any termination statements, lien releases, mortgage releases, re-assignments of trademarks,
discharges of security interests, and other similar discharge or release documents (and, if
applicable, in recordable form) as are reasonably necessary to release, as of record, the Agent’s
Liens and all notices of security interests and liens previously filed by Agent with respect to the
Obligations and Bank Product Obligations.




3.5 Early Termination by Borrowers. Borrowers have the option, at any time
upon 30 days prior written notice by Administrative Borrower to Agent, to terminate this Agreement
by paying to Agent, in cash, the Obligations and the Bank Product Obligations (including (a) either
(i) providing cash collateral to be held by Agent for the benefit of those Lenders in an amount
equal to 105% of the Letter of Credit Usage, or (ii) causing the original Letters of Credit to be
returned to the Issuing Lender, and (b) providing cash collateral or other security reasonably
satisfactory to Agent (in an amount determined by Agent as sufficient to satisfy the reasonably
estimated credit exposure) to be held by Agent for the benefit of the Bank Product Providers with
respect to the Bank Products Obligations), in full, together with the Applicable Prepayment
Premium. If Administrative Borrower has sent a notice of termination pursuant to the provisions of
this Section, then, absent an agreement to the contrary contained in any Loan Document, the
Commitments shall terminate and Borrowers shall be obligated to repay the Obligations and the Bank
Product Obligations (including (a) either (i) providing cash collateral to be held by Agent for the
benefit of those Lenders in an amount equal to 105% of the Letter of Credit Usage, or (ii) causing
the original Letters of Credit to be returned to the Issuing Lender, and (b) providing cash
collateral or other security reasonably satisfactory to Agent (in an amount determined by Agent as
sufficient to satisfy the reasonably estimated credit exposure) to be held by Agent for the benefit
of the Bank Product Providers with respect to the Bank Products Obligations), in full, together
with the Applicable Prepayment Premium, on the date set forth as the date of termination of this
Agreement in such notice.




3.6 Conditions Subsequent to the Initial Extension of Credit. The obligation
of the Lender Group (or any member thereof) to continue to make Advances (or otherwise extend
credit hereunder) is subject to the fulfillment, on or before the date applicable thereto, of each
of the conditions subsequent set forth below (the failure by Borrowers to so perform or cause to be
performed constituting an Event of Default):




(a) within 30 days after the Closing Date, Borrowers shall have delivered to Agent
certified copies of the policies of insurance, together with the endorsements thereto, as are
required by Section 5.8, the form and substance of which shall be reasonably satisfactory
to Agent and its counsel;







 


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(b) within 45 days after the Closing Date, Borrowers shall deliver to Agent Cash
Management Agreements and Control Agreements, in form and substance reasonably satisfactory to
Agent;




(c) within 90 days after the Closing Date, Borrowers shall use their commercially
reasonable efforts to deliver to Agent Collateral Access Agreements with respect to all leased
locations, including, without limitation, the following locations: Niagara International Trade
Center, 2221 Niagara Falls Boulevard, Wheatfield, New York; 701 I-85 North, Charlotte, North
Carolina; 14 Hayward Street, Quincy, Massachusetts; and 16319 Arthur Street, Cerritos, California
(it being understood and agreed that Agent may, in its Permitted Discretion, take a reserve for
rent payable in respect of any leased location for which a Collateral Access Agreement is not so
obtained);




(d) within 5 days (or, in the case of clause (iv) below, 10 days) after the Closing
Date, Borrowers shall deliver to Agent the following certificates representing shares of Stock
pledged under the Security Agreement, as well as Stock powers with respect thereto endorsed in
blank: (i) Certificate #5 for 65 Common Shares of 3091780 Nova Scotia Company, (ii) Certificate #7
for 65 Common Shares of 3091780 Nova Scotia Company, (iii) Certificate #102 for 10 shares of Kilian
Manufacturing Corporation, and (iv) a certificate representing 65% of the Stock of Warner Electric
UK Group Ltd.; and




(e) within 60 days after the Closing Date, the following conditions shall have been
satisfied with respect to all Real Property Collateral (other than the Real Property Collateral
located in the State of New York): (a) Agent shall have been granted a first priority Mortgage on
such Real Property Collateral; (b) Agent shall have received mortgagee title insurance policies (or
marked commitments to issue the same) for such Real Property Collateral issued by a title insurance
company reasonably satisfactory to Agent in an amount reasonably satisfactory to Agent assuring
Agent that the Mortgage on such Real Property Collateral is a valid and enforceable first priority
mortgage Lien on such Real Property Collateral free and clear of all defects and encumbrances
except Permitted Liens, and such mortgagee title insurance policies (or marked commitments to issue
the same) otherwise shall be in form and substance reasonably satisfactory to Agent; (c) Borrowers
and their Subsidiaries shall have paid to said title insurance company all expenses and premiums of
said title insurance company in connection with the issuance of such mortgagee title insurance
policies (or marked commitments to issue the same) and in addition shall, to the extent required,
have paid all recording costs, stamp taxes, mortgage taxes, intangibles taxes and other fees and
costs (including reasonable attorneys fees and expenses) incurred in connection therewith; and (d)
Agent shall have received such other documentation and opinions of counsel, in form and substance
reasonably satisfactory to Agent, in connection with the grant of such Mortgage as Agent shall
request in its Permitted Discretion, including, without limitation, surveys (or existing surveys
and survey affidavits that are (x) sufficient to have the “matters that would be shown on a survey”
exception deleted from the mortgagee policy of title insurance and (y) reasonably satisfactory to
Agent), financing statements and fixture filings.




4. REPRESENTATIONS AND WARRANTIES.



In order to induce the Lender Group to enter into this Agreement, each Borrower makes the
following representations and warranties to the Lender Group which shall be true, correct, and
complete, in all material respects, as of the date hereof, and shall be true, correct, and
complete, in all material respects, as of the Closing Date, and at and as of the date of the making
of each Advance (or other extension of credit) made thereafter, as though made on and as of the
date of such Advance (or other extension of credit) (except to the extent that such representations
and warranties relate solely to an earlier date) and such representations and warranties shall
survive the execution and delivery of this Agreement:




4.1 No Encumbrances. Borrowers and their respective Restricted Subsidiaries
have good and indefeasible title to, or a valid leasehold interest in, their material personal
property assets and good and marketable title to, or a valid leasehold interest in, their Real
Property, in each case, free and clear of Liens except for Permitted Liens.







 


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4.2 Eligible Accounts. As to each Account that is identified by a Borrower
as an Eligible Account in a borrowing base report submitted to Agent, such Account is (a) a bona
fide existing payment obligation of the applicable Account Debtors created by the sale and delivery
of Inventory or the rendition of services to such Account Debtors in the ordinary course of
Borrowers’ business, (b) owed to Borrowers without any known defenses, disputes, offsets,
counterclaims, or rights of cancellation, and (c) not excluded as ineligible by virtue of one or
more of the excluding criteria set forth in the definition of Eligible Accounts.



4.3 Eligible Inventory.



(a) As to each item of Inventory that is identified by a Borrower as Eligible Raw
Materials Inventory in a borrowing base report submitted to Agent, such Inventory is not excluded
as ineligible by virtue of one or more of the excluding criteria set forth in the definition of
Eligible Raw Materials Inventory.




(b) As to each item of Inventory that is identified by a Borrower as Finished Goods
Inventory in a borrowing base report submitted to Agent, such Inventory is (a) to such Borrower’s
knowledge, of good and merchantable quality, free from known defects, and (b) not excluded as
ineligible by virtue of one or more of the excluding criteria set forth in the definition of
Eligible Finished Goods Inventory.




4.4 Equipment. Each material item of Equipment of Borrowers and their
respective Restricted Subsidiaries is used or held for use in their business and, to such owner’s
knowledge, is in good working order, ordinary wear and tear and damage by casualty excepted.




4.5 Location of Inventory and Equipment. The Inventory and Equipment (other
than (i) vehicles, (ii) Equipment out for repair, (iii) Equipment and Inventory in transit between
locations identified on Schedule 4.5(b), (iv) dies, tools, patterns, molds and similar
items maintained with customers in the ordinary course of business, and (v) items of de minimus
value) of Borrowers and their respective Restricted Subsidiaries are not stored with a bailee,
warehouseman, or similar party (except as identified on Schedule 4.5(a), as such Schedule
shall be required to be updated pursuant to the immediately succeeding sentence) and are located
only at the locations identified on Schedule 4.5(b) (as such Schedule shall be required
to be updated pursuant to the immediately succeeding sentence). Administrative Borrower shall be
required to update Schedules 4.5(a) and Schedule 4.5(b) simultaneously with the
delivery of quarterly financial statements required pursuant to Section 5.3; provided,
that such Schedules shall be required to be updated only with respect to Equipment or Inventory
having an aggregate value of $250,000 or greater.




4.6 Inventory Records. Each Borrower keeps correct and accurate records
itemizing and describing the type, quality, and quantity of its and its Restricted Subsidiaries’
Inventory and the book value thereof.




4.7 State of Incorporation; Location of Chief Executive Office; Organizational
Identification Number; Commercial Tort Claims.




(a) The jurisdiction of organization of Borrowers and each of their respective
Restricted Subsidiaries is set forth on Schedule 4.7(a).




(b) The chief executive office of Borrowers and each of their respective Restricted
Subsidiaries is located at the address indicated on Schedule 4.7(b) (as such Schedule may
be updated pursuant to Section 5.9).




(c) Borrowers’ and each of their respective Restricted Subsidiaries’ organizational
identification numbers, if any, are identified on Schedule 4.7(c).







 


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(d) As of the Closing Date, Borrowers and their respective Restricted Subsidiaries
do not hold any commercial tort claims, except as set forth on Schedule 4.7(d).




4.8 Due Organization and Qualification; Restricted Subsidiaries.




(a) Each Borrower is duly organized and existing and in good standing under the laws
of the jurisdiction of their organization and qualified to do business in any state where the
failure to be so qualified reasonably could be expected to result in a Material Adverse Change.




(b) Set forth on Schedule 4.8(b) is a complete and accurate description of
the authorized capital Stock of each Borrower and their respective Restricted Subsidiaries, by
class, and, as of the Closing Date, a description of the number of shares of each such class that
are issued and outstanding. Other than as described on Schedule 4.8(b), as of the
Closing Date, there are no subscriptions, options, warrants, or calls relating to any shares of
each Borrower’s or any of their respective Restricted Subsidiaries’ capital Stock, including any
right of conversion or exchange under any outstanding security or other instrument. None of
Borrowers or any of their respective Restricted Subsidiaries is subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital
Stock or any security convertible into or exchangeable for any of its capital Stock.




(c) Set forth on Schedule 4.8(c) is a complete and accurate list of each
Borrower’s direct and indirect Restricted Subsidiaries, showing, as of the Closing Date, the number
and the percentage of the outstanding shares of each class of common and preferred Stock authorized
for each of such Restricted Subsidiaries owned directly or indirectly by the applicable Borrower.
All of the outstanding capital Stock of each such Restricted Subsidiary has been validly issued and
is fully paid and non-assessable.




4.9 Due Authorization; No Conflict.




(a) The execution, delivery, and performance by each Borrower of this Agreement, the
other Loan Documents and the Acquisition Documents to which each is a party have been duly
authorized by all necessary action on the part of such Borrower.




(b) (i) The execution, delivery, and performance by each Borrower of this Agreement
and the other Loan Documents to which it is a party do not (A) violate any material provision of
federal, state, or local law or regulation applicable to any Borrower, the Governing Documents of
any Borrower, or any material order, judgment, or decree of any court or other Governmental
Authority binding on any Borrower, (B) conflict with, result in a breach of, or constitute (with
due notice or lapse of time or both) a default under any material contractual obligation of any
Borrower, (C) result in or require the creation or imposition of any Lien of any nature whatsoever
upon any properties or assets of any Borrower, other than Permitted Liens, or (D) require any
approval or consent of any Person under any material contractual obligation of any Borrower, other
than consents or approvals that have been obtained and that are still in force and effect; and (ii)
the execution, delivery, and performance by each Borrower of the Acquisition Documents to which it
is a party do not (A) violate any provision of federal, state, or local law or regulation
applicable to any Borrower, the Governing Documents of any Borrower, or any order, judgment, or
decree of any court or other Governmental Authority binding on any Borrower, (B) conflict with,
result in a breach of, or constitute (with due notice or lapse of time or both) a default under any
contractual obligation of any Borrower, (C) result in or require the creation or imposition of any
Lien of any nature whatsoever upon any properties or assets of any Borrower, other than Permitted
Liens, or (D) require any approval or consent of any Person under any contractual obligation of any
Borrower, other than consents or approvals that have been obtained and that are still in force and
effect, which, in each of cases (A), (B), (C) and (D) of this clause (ii), could reasonably be
expected to result in a Material Adverse Change.


 


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(c) (i) Other than the filing of financing statements, and the recordation of the
Mortgages, the execution, delivery, and performance by each Borrower of this Agreement and the
other Loan
Documents to which it is a party do not require any registration with, consent, or approval of, or
notice to, or other action with or by, any Governmental Authority, other than consents or approvals
that have been obtained and that are still in force and effect; and (ii) other than the filing of
financing statements, and the recordation of the Mortgages, the execution, delivery, and
performance by each Borrower of the Acquisition Documents to which it is a party do not require any
registration with, consent, or approval of, or notice to, or other action with or by, any
Governmental Authority, other than consents or approvals that have been obtained and that are still
in force and effect and other than those items which could not reasonably be expected to result in
a Material Adverse Change.




(d) (i) This Agreement and the other Loan Documents to which each Borrower is a
party, and all other documents contemplated hereby and thereby, when executed and delivered by such
Borrower will be the legally valid and binding obligations of such Borrower, enforceable against
such Borrower in accordance with their respective terms, except as enforcement may be limited by
equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors’ rights generally; and (ii) the Acquisition Documents to which
each Borrower is a party, and all other documents contemplated hereby and thereby, when executed
and delivered by such Borrower will be the legally valid and binding obligations of such Borrower,
enforceable against such Borrower in accordance with their respective terms, except as enforcement
may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or
similar laws relating to or limiting creditors’ rights generally and except to the extent that the
lack of such enforceability could not reasonably be expected to result in a Material Adverse
Change.




(e) The Agent’s Liens in the Collateral are validly created, perfected, and first
priority Liens to the extent provided for in the other Loan Documents, subject only to Permitted
Liens.




(f) (i) The execution, delivery, and performance by each Guarantor of the Loan
Documents to which it is a party have been duly authorized by all necessary action on the part of
such Guarantor; and (ii) the execution, delivery, and performance by each Guarantor of the
Acquisition Documents to which it is a party have been duly authorized by all necessary action on
the part of such Guarantor except to the extent that the lack of such authorization could not
reasonably be expected to result in a Material Adverse Change.




(g) The execution, delivery, and performance by each Guarantor of the Loan Documents
to which it is a party do not (i) violate any material provision of federal, state, or local law or
regulation applicable to such Guarantor, the Governing Documents of such Guarantor, or any material
order, judgment, or decree of any court or other Governmental Authority binding on such Guarantor,
(ii) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both)
a default under any material contractual obligation of such Guarantor, (iii) result in or require
the creation or imposition of any Lien of any nature whatsoever upon any properties or assets of
such Guarantor, other than Permitted Liens, or (iv) require any approval or consent of any Person
under any material contractual obligation of such Guarantor, other than consents or approvals that
have been obtained and that are still in force and effect.




(h) Other than the filing of financing statements and the recordation of the
Mortgages, the execution, delivery, and performance by each Guarantor of the Loan Documents to
which such Guarantor is a party do not require any registration with, consent, or approval of, or
notice to, or other action with or by, any Governmental Authority, other than consents or approvals
that have been obtained and that are still in force and effect.




(i) (i) The Loan Documents to which each Guarantor is a party, and all other
documents contemplated hereby and thereby, when executed and delivered by such Guarantor will be
the legally valid and binding obligations of such Guarantor, enforceable against such Guarantor in
accordance with their respective terms, except as enforcement may be limited by equitable
principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or
limiting creditors’ rights generally; and (ii) the
Acquisition Documents to which each Guarantor is a party, and all other documents contemplated
hereby and thereby, when executed and delivered by such Guarantor will be the legally valid and
binding obligations of such Guarantor, enforceable against such Guarantor in accordance with their
respective terms, except as enforcement may be limited by equitable principles or by bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights
generally and except to the extent that the lack of such enforceability could not reasonably be
expected to result in a Material Adverse Change.


 


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4.10 Litigation. Other than those matters disclosed on Schedule 4.10,
there are no actions, suits, or proceedings pending or, to the knowledge of each Borrower,
threatened against any Borrower or any of its Restricted Subsidiaries that (a) if adversely
determined, could result in a Material Adverse Change or (b) relate to this Agreement or any other
Loan Documents or any transaction contemplated hereby or thereby.




4.11 No Material Adverse Change. All financial statements relating to
Borrowers and their respective Restricted Subsidiaries that have been delivered by Borrowers to the
Lender Group have been prepared in accordance with GAAP (except, in the case of unaudited financial
statements, for the lack of footnotes and being subject to year-end audit adjustments) and present
fairly in all material respects, Borrowers’ and their respective Restricted Subsidiaries’ financial
condition as of the date thereof and results of operations for the period then ended. There has
not been a Material Adverse Change with respect to Borrowers and their respective Restricted
Subsidiaries since October 1, 2004.



4.12 Fraudulent Transfer.



(a) Each Borrower and each of their respective Restricted Subsidiaries, taken as a
whole, is Solvent.



(b) No transfer of property is being made by any Borrower or any of its Restricted
Subsidiaries and no obligation is being incurred by any Borrower or any of its Restricted
Subsidiaries in connection with the transactions contemplated by this Agreement or the other Loan
Documents with the intent to hinder, delay, or defraud either present or future creditors of
Borrowers or any of their respective Restricted Subsidiaries.




4.13 Employee Compliance.




(a) Set forth on Schedule 4.13(a) is a complete and accurate list of all
Plans that meet the definition of an “employee pension benefit plan” under Section 3(2) of ERISA
and that are currently maintained or contributed to by any Borrower, any of their respective
Restricted Subsidiaries or any of their respective ERISA Affiliates as of the Closing Date.




(b) each Borrower, their respective Restricted Subsidiaries, and their respective
ERISA Affiliates are in compliance in all material respects with all applicable provisions and
requirements of ERISA and the regulations and published interpretations thereunder with respect to
each Plan, and have performed all their obligations in all material respects under each Plan.



(c) No ERISA Event has occurred or is reasonably expected to occur.



(d) All liabilities under each Plan are (i) funded to at least the minimum level
required by law or, if higher, to the level required by the terms governing the Plans, (ii) insured
with a reputable insurance company, (iii) provided for or recognized in the financial statements
most recently delivered to Agent pursuant to Section 5.3 hereof to the extent required by
GAAP or (iv) estimated in the formal notes to the financial statements most recently delivered to
Agent pursuant to Section 5.3 hereof to the extent required by GAAP.



(e) To the best knowledge of each Borrower, there are no circumstances which may
give rise to a material liability in relation to any Plan which is not funded, insured, provided
for, recognized or estimated in the manner described in subsection (d) above.



 


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4.14 Environmental Condition. Except as set forth on Schedule 4.14 or
disclosed in the Phase I Environmental Site Assessment prepared by URS, and except for matters that
would not reasonably be expected to result in the Borrowers or any of their respective Restricted
Subsidiaries incurring material liability, (a) to Borrowers’ knowledge, none of Borrowers’ or their
respective Restricted Subsidiaries’ properties or assets has ever been used by Borrowers, any of
their respective Restricted Subsidiaries, or by previous owners or operators in the disposal of, or
to produce, store, handle, treat, release, or transport, any Hazardous Materials, where such use,
production, storage, handling, treatment, release or transport was in violation, in any material
respect, of any applicable Environmental Law, (b) to Borrowers’ knowledge, none of Borrowers’ nor
any of their respective Restricted Subsidiaries’ properties is or has ever been designated or
identified pursuant to any environmental protection statute as a site requiring investigation or
remediation due to the disposal or release of Hazardous Materials, (c) none of Borrowers nor any of
their respective Restricted Subsidiaries have received notice that a Lien arising under any
Environmental Law has attached to any revenues of any Borrower or any of its Restricted
Subsidiaries or to any Real Property owned or operated by Borrowers or any of their respective
Restricted Subsidiaries, and (d) none of Borrowers nor any of their respective Restricted
Subsidiaries have received a summons, citation, notice, or directive from the United States
Environmental Protection Agency or any other federal or state governmental agency (“Environmental Claim”) concerning any action or omission by any Borrower or any of its
Restricted Subsidiaries resulting in the releasing or disposing of Hazardous Materials into the
environment other than Environmental Claims that would not reasonably be expected to result in a
Material Adverse Change, and there are no material Environmental Claims currently pending against
Borrowers or any of their respective Restricted Subsidiaries.




4.15 Intellectual Property. Except for the matters which could not reasonably
be expected to result in a Material Adverse Change, each Borrower and each of their respective
Restricted Subsidiaries owns, or holds licenses in, all trademarks, trade names, copyrights,
patents, patent rights, and licenses that are necessary to the conduct of its business as currently
conducted.




4.16 Leases. Except for the matters which could not reasonably be expected to
result in a Material Adverse Change, Borrowers and their respective Restricted Subsidiaries enjoy
peaceful and undisturbed possession under all leases material to their business and to which they
are parties or under which they are operating and all of such material leases are valid and
subsisting and no material default by Borrowers or their respective Restricted Subsidiaries exists
under any of them except for payments which are the subject of a Permitted Protest.




4.17 Deposit Accounts and Securities Accounts. As of the Closing Date, set
forth on Schedule 4.17 is a listing of all of Borrowers’ and their respective Restricted
Subsidiaries’ Deposit Accounts and Securities Accounts, including, with respect to each bank or
securities intermediary (a) the name and address of such Person, and (b) the account numbers of the
Deposit Accounts or Securities Accounts maintained with such Person.




4.18 Complete Disclosure. All factual information furnished by or on behalf of
Borrowers or their respective Restricted Subsidiaries with respect to Borrowers or such Restricted
Subsidiaries in writing to Agent or any Lender for purposes of or in connection with this Agreement
and the other Loan Documents is, when taken as a whole with all other furnished information, true
and accurate in all material respects on the date as of which such information is dated or
certified and not incomplete by omitting to state any fact necessary to make such information (when
taken as a whole with all other furnished information) not misleading in any material respect at
such time in light of the circumstances under which such information was provided. On the Closing
Date, the Projections received by Agent pursuant to clause (t) of Schedule 3.1 represent,
and as of the date on which any other Projections are delivered to Agent, such additional
Projections represent Borrowers’ good faith estimate of their and their respective Restricted
Subsidiaries’ future
performance for the periods covered thereby (it being understood that the Projections are subject
to significant uncertainties and contingencies, many of which are beyond control and that no
assurance is or can be given that the Projections will be realized and that actual results may vary
from such Projections and such variances may be material).


 


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4.19 Indebtedness. Set forth on Schedule 4.19 is a true and complete
list of all Indebtedness of each Borrower and each of their respective Restricted Subsidiaries
outstanding immediately prior to the Closing Date that is to remain outstanding after the Closing
Date and such Schedule accurately reflects the aggregate principal amount of such Indebtedness and
describes the principal terms thereof.




4.20 Material Contracts. Except for matters which, either individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse Change, each
Material Contract (a) is in full force and effect and is binding upon and enforceable against each
Person that is a party thereto in accordance with its terms, (b) has not been otherwise amended or
modified (except as not otherwise prohibited hereby), and (c) is not in default due to the action
of any Borrower or any of its Restricted
Subsidiaries.




5. AFFIRMATIVE COVENANTS.



Each Borrower covenants and agrees that, until termination of all of the Commitments and
payment in full of the Obligations, Borrowers shall and shall cause each of their respective
Restricted Subsidiaries to do all of the following:




5.1 Accounting System. Maintain a system of accounting that enables
Borrowers to produce financial statements in accordance with GAAP and maintain records pertaining
to the Collateral that contain information as from time to time reasonably may be requested by
Agent. Borrowers also shall keep a reporting system that shows all additions, sales, claims,
returns, and allowances with respect to their and their respective Restricted Subsidiaries’ sales.




5.2 Collateral Reporting. Provide Agent with each of the reports set forth
on Schedule 5.2 at the times specified therein. In addition, each Borrower agrees to
cooperate fully with Agent to facilitate and implement, where appropriate, a system of electronic
collateral reporting in order to provide electronic reporting of each of the items set forth above.




5.3 Financial Statements, Reports, Certificates. Deliver to Agent each of
the financial statements, reports, or other items set forth on Schedule 5.3 at the time
specified herein. In addition, Parent agrees that no Restricted Subsidiary of Parent will have a
fiscal year different from that of Parent.



5.4 Intentionally Omitted.



5.5 Inspection. Subject to any specific limitations set forth in any other
Loan Document, permit Agent and each of its duly authorized representatives or agents to visit any
of its properties and inspect any of its assets or books and records, to examine and make copies of
its books and records, and to discuss its affairs, finances, and accounts with, and to be advised
as to the same by, its officers and employees at such reasonable times and intervals as Agent may
designate and, so long as no Default or Event of Default exists, with reasonable prior notice to
Administrative Borrower.




5.6 Maintenance of Properties. Maintain and preserve all of their properties
which are necessary or useful in the proper conduct to their business in good working order and
condition, ordinary wear, tear, and casualty excepted (and except where the failure to do so could
not be expected to result in a Material Adverse Change), and comply at all times with the
provisions of all material leases to which it is a party as lessee (except where the failure to do
so could not reasonably be expected to result in a Material Adverse Change), so as to prevent any
loss or forfeiture thereof or thereunder.







 


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5.7 Taxes. Cause all material assessments and taxes, whether real, personal,
or otherwise, due or payable by, or imposed, levied, or assessed against Borrowers, their
respective Restricted Subsidiaries, or any of their respective assets to be paid in full, before
delinquency or before the expiration of any extension period, except to the extent that the
validity of such assessment or tax shall be the subject of a Permitted Protest. Borrowers will and
will cause their respective Restricted Subsidiaries to make timely payment or deposit of all tax
payments and withholding taxes required of them by applicable laws, including those laws concerning
F.I.C.A., F.U.T.A., state disability, and local, state, and federal income taxes, and will, upon
request, furnish Agent with proof reasonably satisfactory to Agent indicating that the applicable
Borrower or applicable Restricted Subsidiary has made such payments or deposits (except to the
extent the subject of a Permitted Protest).



5.8 Insurance.




(a) At Borrowers’ expense, maintain insurance respecting their and their respective
Restricted Subsidiaries’ assets wherever located, covering loss or damage by fire, theft,
explosion, and all other hazards and risks as ordinarily are insured against by other Persons
engaged in the same or similar businesses and in the same geographic area. Borrowers also shall
maintain business interruption, public liability, and product liability insurance, as well as
insurance against larceny, embezzlement, and criminal misappropriation. All such policies of
insurance shall be in such amounts and with such insurance companies as are reasonably satisfactory
to Agent. Borrowers shall deliver copies of all such policies to Agent with an endorsement naming
Agent as the sole loss payee (under a reasonably satisfactory lender’s loss payable endorsement) or
additional insured, as appropriate. Each policy of insurance or endorsement shall contain a clause
requiring the insurer to give not less than 30 days prior written notice to Agent in the event of
cancellation of the policy for any reason whatsoever.




(b) Administrative Borrower shall give Agent prompt notice of any loss exceeding
$500,000 covered by such insurance. So long as no Event of Default has occurred and is continuing,
Borrowers shall have the exclusive right to adjust any losses payable under any such insurance
policies which are less than $500,000. Following the occurrence and during the continuation of an
Event of Default, or in the case of any losses payable under such insurance exceeding $500,000,
Agent shall have the exclusive right to adjust any losses payable under any such insurance
policies, without any liability to Borrowers whatsoever in respect of such adjustments. Any monies
received as payment for any loss under any insurance policy mentioned above (other than liability
insurance policies) or as payment of any award or compensation for condemnation or taking by
eminent domain, shall be paid over to Agent to be applied at the option of the Required Lenders
either to the prepayment of the Obligations or to be disbursed to Administrative Borrower under
staged payment terms reasonably satisfactory to the Required Lenders for application to the cost of
repairs, replacements, or restorations; provided, however, that, with respect
to any such monies in an aggregate amount during any 12 consecutive month period not in excess of
$500,000, so long as (A) no Default or Event of Default shall have occurred and is continuing, (B)
Borrowers’ Excess Availability is greater than $10,000,000, (C) Administrative Borrower shall have
given Agent prior written notice of the intention of Borrowers or their respective Restricted
Subsidiaries to apply such monies to the costs of repairs, replacement, or restoration of the
property which is the subject of the loss, destruction, or taking by condemnation, (D) the monies
are held in a cash collateral account in which Agent has a perfected first-priority security
interest, and (E) Borrowers or their respective Restricted Subsidiaries complete such repairs,
replacements, or restoration within 360 days after the initial receipt of such monies, Borrowers
shall have the option to apply such monies to the costs of repairs, replacement, or restoration of
the property which is the subject of the loss, destruction, or taking by condemnation unless and to
the extent that such applicable period shall have expired without such repairs, replacements, or
restoration being made, in which case, any amounts remaining in the cash collateral account shall
be paid to Agent and applied as set forth above.




(c) Borrowers will not, and will not suffer or permit their respective Restricted
Subsidiaries to, take out separate insurance concurrent in form or contributing in the event of
loss with that required to be maintained under this Section 5.8, unless Agent is included
thereon as an additional insured or
loss payee under a lender’s loss payable endorsement. Administrative Borrower promptly shall
notify Agent whenever such separate insurance is taken out, specifying the insurer thereunder and
full particulars as to the policies evidencing the same, and copies of such policies promptly shall
be provided to Agent.


 


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5.9 Location of Inventory and Equipment. Keep Borrowers’ and their
respective Restricted Subsidiaries’ Inventory and Equipment (other than (i) vehicles, (ii)
Equipment out for repair, (iii) Equipment and Inventory in transit between locations identified on
Schedule 4.5(b), (iv) items stored with a bailee, warehouseman, or similar party to the
extent disclosed on Schedule 4.5(a), (v) dies, tools, patterns, molds and similar items
maintained with customers in the ordinary course of business, and (vi) items of de minimus value)
only at the locations identified on Schedule 4.5(b) and their chief executive offices
only at the locations identified on Schedule 4.7(b); provided, however, that Administrative Borrower may amend Schedule 4.5(b) or Schedule 4.7(b) so
long as (A) with respect to Schedule 4.5(b), such amendment occurs by written notice to
Agent in accordance with the last sentence of Section 4.5, and with respect to 
Schedule 4.7(b), such amendment occurs by written notice to Agent not less than 30 days prior
to the date on which such chief executive office is relocated, (B) such new location is within the
continental United States, and (C) at the time of such written notification, the applicable
Borrower or Restricted Subsidiary (x) with respect to any location at which books and records
(other than prior years’ historical records) are maintained or Inventory and/or Equipment having an
aggregate value of $2,000,000 or greater is maintained, obtains a Collateral Access Agreement with
respect thereto and (y) with respect to any other location, uses its commercially reasonable
efforts to provide Agent a Collateral Access Agreement with respect thereto.




5.10 Compliance with Laws. Comply with the requirements of all applicable
laws, rules, regulations, and orders of any Governmental Authority, other than laws, rules,
regulations, and orders the non-compliance with which, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Change.




5.11 Leases. Except for matters which could not reasonably be expected to
result in a Material Adverse Change, pay when due all rents and other amounts payable under any
material leases to which any Borrower or any of its Restricted Subsidiaries is a party or by which
any Borrower’s or any of their respective Restricted Subsidiaries’ properties and assets are bound,
unless such payments are the subject of a Permitted Protest.




5.12 Existence. Except as permitted by Section 6.3 and Section
6.4, at all times preserve and keep in full force and effect each Borrower’s and each of their
respective Restricted Subsidiaries’ valid existence and, except to the extent failure to do so
could not reasonably be expected to result in a Material Adverse Change, good standing and any
rights, franchises, permits, licenses, authorizations, approvals, entitlements and accreditations
material to their businesses.



5.13 Environmental.




(a) Keep any property either owned or operated by any Borrower or any of its
Restricted Subsidiaries free of any Environmental Liens or post bonds or other financial assurances
sufficient to satisfy the obligations or liability evidenced by such Environmental Liens, (b)
comply, in all material respects, with Environmental Laws and provide to Agent reasonable
documentation of such compliance which Agent reasonably requests, provided that, so long
as no Default or Event of Default shall have occurred and be continuing, Agent shall not make such
a request more than once per any consecutive 12-month period, (c) promptly notify Agent of any
release of a Hazardous Material in any reportable quantity from or onto property owned or operated
by any Borrower or any of its Restricted Subsidiaries and take any Remedial Actions required to
abate said release or otherwise to come into material compliance with applicable Environmental Law,
and (d) promptly, but in any event within 10 Business Days of its receipt thereof, provide Agent
with written notice of any of the following: (i) notice that an Environmental Lien has been filed
against any of the real or personal property of any Borrower or any of its Restricted Subsidiaries,
(ii) commencement of any Environmental Action or notice that an Environmental Action will be filed
against any Borrower or any of its
Restricted Subsidiaries which Environmental Action could reasonably be expected to result in any
Borrower or any of its Restricted Subsidiaries incurring material liability under Environmental
Laws, and (iii) notice of a violation, citation, or other administrative order which reasonably
could be expected to result in a Material Adverse Change.


 


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5.14 Intentionally Omitted.



5.15 Control Agreements. Subject to Section 3.6(b), take all
reasonable steps in order for Agent to obtain control in accordance with Sections 8-106, 9-104,
9-105, 9-106, and 9-107 of the Code with respect to (subject to the proviso contained in 
Section 6.12) all of its Securities Accounts, Deposit Accounts, electronic chattel paper,
investment property, and letter of credit rights.




5.16 Formation of Subsidiaries. At the time that any Borrower or any Guarantor
forms any direct or indirect Subsidiary or acquires any direct or indirect Subsidiary after the
Closing Date and such Subsidiary is a Restricted Subsidiary, such Borrower or such Guarantor shall
(a) cause such new Restricted Subsidiary to provide to Agent a joinder to this Agreement or the
Guaranty, as applicable (it being understood and agreed that Agent shall determine, in its
Permitted Discretion, whether such new Restricted Subsidiary would become a Borrower or a
Guarantor, based primarily on whether such new Restricted Subsidiary would be an operating company
that would generate Borrowing Base), and the Security Agreement, together with such other security
documents (including Mortgages with respect to any Real Property of such new Restricted Subsidiary,
subject to Section 5.17), as well as appropriate financing statements (and with respect to
all property subject to a Mortgage, fixture filings), all in form and substance reasonably
satisfactory to Agent (including being sufficient to grant Agent a first priority Lien (subject to
Permitted Liens) in and to the assets of such newly formed or acquired Restricted Subsidiary), (b)
provide to Agent a pledge agreement and appropriate certificates and powers or financing
statements, hypothecating all of the direct or beneficial ownership interest in such new Restricted
Subsidiary, in form and substance reasonably satisfactory to Agent, and (c) provide to Agent all
other documentation, including one or more opinions of counsel reasonably satisfactory to Agent,
which in its opinion is appropriate with respect to the execution and delivery of the applicable
documentation referred to above (including policies of title insurance or other documentation with
respect to all property subject to a Mortgage). Notwithstanding the foregoing, if a Subsidiary
that is so formed or acquired is a Controlled Foreign Corporation, then clause (a) of the
immediately preceding sentence shall not be applicable and, with respect to clause (b) of the
immediately preceding sentence, such pledge shall be limited to 65% of the voting power of all
classes of capital Stock of such Subsidiary entitled to vote. Any document, agreement, or
instrument executed or issued pursuant to this Section 5.16 shall be a Loan Document.
Notwithstanding the foregoing, Agent and Lenders shall not be obligated to consent to any such
formation or acquisition of a Subsidiary unless such formation or acquisition is otherwise
expressly permitted hereunder.




5.17 Real Property. Upon the acquisition of any fee interest in Real Property
with a purchase price or Fair Market Value in excess of $500,000 (other than Real Property located
in the State of New York or in any other state having substantially similar real estate mortgage
taxes), promptly notify Agent of the acquisition of such Real Property and within 60 days (or such
longer time as Agent, in its reasonable discretion, may agree) thereafter: (a) grant Agent a first
priority Mortgage on such Real Property; (b) deliver mortgagee title insurance policies (or marked
commitments to issue the same) for such Real Property issued by a title insurance company
reasonably satisfactory to Agent in an amount reasonably satisfactory to Agent assuring Agent that
the Mortgage on such Real Property Collateral is a valid and enforceable first priority mortgage
Lien on such Real Property Collateral free and clear of all defects and encumbrances except
Permitted Liens, and such mortgagee title insurance policies (or marked commitments to issue the
same) otherwise shall be in form and substance reasonably satisfactory to Agent; (c) Borrowers and
their Subsidiaries shall pay to said title insurance company all expenses and premiums of said
title insurance company in connection with the issuance of such mortgagee title insurance policies
(or marked commitments to issue the same) and in addition shall, to the extent required, pay all
recording costs, stamp taxes, mortgage taxes, intangibles taxes and other fees and costs (including
reasonable attorneys fees and expenses) incurred in
connection therewith; and (d) execute and/or deliver to Agent such other documentation and opinions
of counsel, in form and substance reasonably satisfactory to Agent, in connection with the grant of
such Mortgage as Agent shall request in its Permitted Discretion, including, without limitation,
surveys (or existing surveys and survey affidavits that are (x) sufficient to have the “matters
that would be shown on a survey” exception deleted from the mortgagee policy of title insurance and
(y) reasonably satisfactory to Agent), financing statements and fixture filings.


 


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5.18 ERISA Compliance




(a) Each Borrower shall do, and shall cause each of their respective Restricted
Subsidiaries and ERISA Affiliates to do, each of the following: (i) maintain each Plan in
compliance in all material respects with the applicable provisions of ERISA, the IRC and each other
applicable federal or state law; (ii) cause each Qualified Plan to maintain its qualified status
under Section 401(a) of the IRC; (iii) make all required contributions to each Plan; (iv) ensure
that all liabilities under each Plan are (A) funded to at least the minimum level required by law
or, if higher, to the level required by the terms governing such Plan; (B) insured with a reputable
insurance company; or (C) provided for or recognized in the financial statements most recently
delivered to Agent under Section 5.3 (to the extent required by GAAP); and (v) ensure
that the contributions or premium payments to or in respect of each Plan are and continue to be
promptly paid at no less than the rates required under the rules of such Plan and in accordance
with the most recent actuarial advice received in relation to such Plan and applicable law.




(b) Deliver to Agent such certifications or other evidence of compliance with the
provisions of Section 4.13 as Agent may from time to time reasonably request.




(c) Promptly notify Agent of each of the following ERISA events affecting any
Borrower, any of their respective Restricted Subsidiaries or any ERISA Affiliates (but in no event
more than ten (10) days after such event), together with a copy of each notice with respect to such
event that may be required to be filed with a Governmental Authority and each notice delivered by a
Governmental Authority to any Borrower, any of their respective Restricted Subsidiaries or any
ERISA Affiliates with respect to such event:




(i) an ERISA Event;




(ii) the adoption of any new Pension Plan by any Borrower, any of their respective
Restricted Subsidiaries or any ERISA Affiliates; or




(iii) except as required under the terms of any collective bargaining agreement, the
adoption of any amendment to a Pension Plan, if such amendment will result in a material increase
in benefits or unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA).




(d) Promptly deliver to Agent, upon request, copies of (i) each Schedule B
(Actuarial Information) to the annual report (Form 5500 Series) filed by any Borrower, any of their
respective Restricted Subsidiaries or any ERISA Affiliates with the Internal Revenue Service with
respect to each Pension Plan; (ii) all notices received by any Borrower, any of their respective
Restricted Subsidiaries or any of their respective ERISA Affiliates from a Multiemployer Plan
sponsor concerning an ERISA Event; and (iii) such other documents or governmental reports or
filings relating to any Plan as Agent shall reasonably request.


 


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6. NEGATIVE COVENANTS.



Borrowers covenant and agree that, until termination of all of the Commitments and payment in
full of the Obligations, Borrowers will not and will not permit any of their respective Restricted
Subsidiaries to do any of the following:



6.1 Indebtedness. Create, incur, assume, suffer to exist, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any Indebtedness,
except:




(a) Indebtedness evidenced by this Agreement and the other Loan Documents, together
with Indebtedness owed to Underlying Issuers with respect to Underlying Letters of Credit,



(b) Indebtedness set forth on Schedule 4.19,



(c) Permitted Purchase Money Indebtedness,



(d) refinancings, renewals, or extensions of Indebtedness permitted under clauses
(b) and (c) of this Section 6.1 (and continuance or renewal of any Permitted Liens
associated therewith) so long as: (i) such refinancings, renewals, or extensions do not result in
an increase in the principal amount of the Indebtedness so refinanced, renewed, or extended, (ii)
such refinancings, renewals, or extensions do not result in a shortening of the average weighted
maturity of the Indebtedness so refinanced, renewed, or extended, nor are they on terms or
conditions, that, taken as a whole, are materially more burdensome or restrictive to the applicable
Borrower, (iii) if the Indebtedness that is refinanced, renewed, or extended was subordinated in
right of payment to the Obligations, then the terms and conditions of the refinancing, renewal, or
extension Indebtedness must include subordination terms and conditions that are at least as
favorable to the Lender Group, taken as a whole, as those that were applicable to the refinanced,
renewed, or extended Indebtedness, and (iv) the Indebtedness that is refinanced, renewed, or
extended is not recourse to any Person that is liable on account of the Obligations other than
those Persons which were obligated with respect to the Indebtedness that was refinanced, renewed,
or extended or as otherwise permitted pursuant to Section 6.1,



(e) endorsement of instruments or other payment items for deposit,



(f) Indebtedness consisting of Permitted Investments,



(g) Indebtedness represented by any notes issued pursuant to the Indenture,
including any Senior Notes (or any other evidence of indebtedness for borrowed money under the
Senior Notes or the Indenture) in an aggregate principal amount not to exceed $165,000,000 (provided, however, that such Indebtedness may exceed $165,000,000 up to $250,000,000
so long as with respect to the incurrence of any such Indebtedness in excess of $165,000,000, both
immediately before and immediately after giving effect to any such incurrence, (i) no Default or
Event of Default shall have occurred and be continuing and (ii) the Borrowers and the Restricted
Subsidiaries shall be in pro forma compliance with the covenants set forth in Section
6.16) at any one time outstanding and any Refinancing Indebtedness in respect thereof (whether
in whole or in part),




(h) Hedge Agreements entered into in the ordinary course of business and not for
speculative purposes;




(i) Indebtedness of a Loan Party to another Loan Party and any Refinancing
Indebtedness in respect thereof (whether in whole or in part) so long as such Indebtedness is
subject to the Intercompany Subordination Agreement;




(j) Guarantees by a Loan Party of Indebtedness incurred by another Loan Party so
long as the incurrence of such Indebtedness is otherwise permitted by the terms hereof;




(k) Permitted Subordinated Indebtedness in an aggregate principal amount not to
exceed $75,000,000 and any Refinancing Indebtedness in respect thereof so long as with respect to
the incurrence of any such Permitted Subordinated Indebtedness, both immediately before and
immediately after giving effect to any such incurrence, the Borrowers and the Restricted
Subsidiaries shall be in pro forma compliance with the covenants set forth in Section
6.16;







 


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(l) Indebtedness (other than for borrowed money) solely to the extent subject to
Permitted Liens;




(m) (i) Permitted Acquired Indebtedness and (ii) Indebtedness of any Borrower and the
Restricted Subsidiaries owed to the seller of any property acquired in a Permitted Acquisition on
an unsecured subordinated basis, which subordination shall be on terms reasonably satisfactory to
Agent, in each case, so long as both immediately prior and after giving effect thereto, (x) no
Event of Default shall exist or result therefrom, and (y) the Borrowers and the Restricted
Subsidiaries will be in pro forma compliance with the covenants set forth in Section
6.16, after giving effect to such Permitted Acquisition and the incurrence or issuance of such
Indebtedness;




(n) Indebtedness consisting of promissory notes issued by any Borrower or any
Restricted Subsidiary to current or former directors, officers, employees and consultants, their
respective estates, spouses or former spouses to finance the purchase or redemption of Stock
permitted by Section 6.10;




(o) Indebtedness consisting of obligations of any Borrower or any Restricted
Subsidiary under deferred compensation, adjustment of purchase price, earn outs, indemnification or
other similar arrangements incurred by such Person in connection with the Acquisition Transactions,
Permitted Acquisitions and Permitted Dispositions;




(p) cash management obligations and other Indebtedness in respect of netting
services, overdraft protections and similar arrangements, in each case in connection with cash
management and Deposit Accounts and incurred in the ordinary course of business; and




(q) additional Indebtedness of Borrowers and their Restricted Subsidiaries in an
aggregate principal amount not to exceed $15,000,000 at any time outstanding solely to the extent
that such Indebtedness consists of either (i) Purchase Money Indebtedness or (ii) Indebtedness that
is subordinated to the Obligations on terms reasonably satisfactory to Agent.




6.2 Liens. Create, incur, assume, or suffer to exist, directly or
indirectly, any Lien on or with respect to any of its assets, of any kind, whether now owned or
hereafter acquired, or any income or profits therefrom, except for Permitted Liens (including Liens
that are replacements of Permitted Liens to the extent that the original Indebtedness is
refinanced, renewed, or extended under Section 6.1 and so long as the replacement Liens
only encumber those assets that secured the refinanced, renewed, or extended Indebtedness and
proceeds thereof or additions or accessions thereto).




6.3 Restrictions on Fundamental Changes. Enter into any merger,
consolidation, reorganization, or recapitalization, or liquidate, wind up, or dissolve itself (or
suffer any liquidation or dissolution), except that:




(a) any Borrower or any Restricted Subsidiary may merge with (i) any Borrower
(including a merger, the purpose of which is to reorganize such Borrower into a new jurisdiction),
or (ii) any one or more other Restricted Subsidiaries; provided that a Borrower shall be
the continuing or surviving Person or the continuing or surviving Person shall expressly assume the
obligations of such Borrower in a manner reasonably acceptable to Agent;




(b) any Borrower or Restricted Subsidiary may liquidate or dissolve or change its
legal form so long as its assets are transferred to (i) in the case of a Borrower, to another
Borrower and (ii) in the case of a Restricted Subsidiary, to a Loan Party or any other Restricted
Subsidiary;




(c) so long as no Default or Event of Default has occurred and is continuing or would
result therefrom, any Borrower or Restricted Subsidiary may merge with any other Person in order to
effect an Investment permitted pursuant to Section 6.12; provided that the continuing or
surviving Person shall be a
Restricted Subsidiary, which together with each of its Restricted Subsidiaries, shall have complied
with the requirements of Section 5.16;


 


33









 






(d) the Borrowers and the Restricted Subsidiaries may consummate the Acquisition
Transactions; and




(e) so long as no Event of Default exists or would result therefrom, a merger,
consolidation, reorganization, recapitalization, liquidation, windup or dissolution, the sole
purpose of which is to effect a Disposition permitted pursuant to Section 6.4.




6.4 Disposal of Assets. Other than Permitted Dispositions, convey, sell,
lease, license, assign, transfer, or otherwise dispose of (collectively, a “Disposition”)
any of the assets of any Borrower or any of its Restricted Subsidiaries.




6.5 Change Name. Change any Borrower’s or any of their respective Restricted
Subsidiaries’ name, organizational identification number, jurisdiction of organization, or
organizational identity; provided, however, that any Borrower or any of its
Restricted Subsidiaries may change its name upon at least 10 days prior written notice by Parent or
Administrative Borrower to Agent of such change so long as, (a) at the time of such written
notification, such Borrower or such Restricted Subsidiary provides any financing statements
necessary to perfect and continue perfected the Agent’s Liens and (b) immediately after such name
change, Administrative Borrower provides Agent with evidence of such name change (including copies
of any related public filings).




6.6 Nature of Business. Engage in any material line of business
substantially different from those lines of business conducted by Borrowers and the Restricted
Subsidiaries on the Closing Date other than any businesses reasonably related or ancillary thereto.




6.7 Prepayments and Amendments. Except in connection with a refinancing
permitted by Section 6.1,




(a) optionally prepay, redeem, defease, purchase, or otherwise acquire any
Indebtedness of any Borrower or any Restricted Subsidiary of a Borrower, except (i) Purchase Money
Indebtedness, (ii) the Obligations in accordance with this Agreement; (iii) Borrowers may
optionally redeem the Senior Notes to the extent permitted by the Indenture so long as (x) no Event
of Default has occurred and is continuing or would result therefrom and (y) Borrowers’ Excess
Availability exceeds $10,000,000 after giving effect to any such payment, and (iv) any other
Indebtedness (other than Permitted Subordinated Indebtedness) so long as (x) no Event of Default
has occurred and is continuing or would result therefrom and (y) Borrowers’ Excess Availability
exceeds $10,000,000 after giving effect to any such payment;




(b) make any payment on account of Indebtedness that has been contractually
subordinated in right of payment if such payment is not permitted at such time under the
subordination terms and conditions, or




(c) directly or indirectly, amend, modify, alter, increase, or change any of the
terms or conditions of any agreement, instrument, document, indenture, or other writing evidencing
or concerning the Senior Notes or any Permitted Subordinated Indebtedness in a manner materially
adverse to the interests of the Lender Group other than to consummate a Refinancing Indebtedness in
respect thereof.




6.8 Intentionally Omitted.



6.9 Intentionally Omitted.





 


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6.10 Distributions. Make any distribution or declare or pay any dividends (in
cash or other property, other than common Stock) on, or purchase, acquire, redeem, or retire (a
“Restricted Payment”) any of Parent’s Stock, of any class, whether now or hereafter
outstanding, except as follows:




(a) to pay Holdings to enable it to pay general corporate overhead expenses of
Holdings, including franchise taxes and other fees required to maintain the existence of Holdings,
insurance premiums and indemnification claims made by directors or officers of Holdings
attributable to the ownership or operation of any Loan Party;




(b) (i) so long as (x) no Default or Event of Default has occurred and is continuing
or would result therefrom and (y) immediately after giving effect thereto, Borrowers shall have
Excess Availability of not less than $10,000,000, to pay reasonable fees paid to non-independent
members of Holdings’ Board of Directors, (ii) to pay reasonable expenses incurred by
non-independent members of Holdings’ Board of Directors, and (iii) to pay reasonable fees paid to
and expenses incurred by independent members of Holdings’ Board of Directors, collectively for
clauses (i), (ii) and (iii), in an aggregate amount not to exceed $500,000 in any fiscal year;




(c) so long as (i) no Default or Event of Default has occurred and is continuing or
would result therefrom and (ii) immediately after giving effect thereto, Borrowers shall have
Excess Availability of not less than $3,000,000, to permit Holdings to purchase, repurchase, redeem
or otherwise acquire shares of capital Stock of any Loan Party from employees, former employees,
directors or former directors of such Loan Party (or permitted transferees of such employees,
former employees, directors or former directors), pursuant to the terms of agreements (including
employment agreements) or plans (or amendments thereto) approved by such Loan Party’s Board of
Directors under which such Persons purchase or sell, or are granted the option to purchase or sell,
shares of such Stock; provided, that the aggregate amount of such repurchases and other
acquisitions in any calendar year shall not exceed $500,000;




(d) so long as (i) no Default or Event of Default has occurred and is continuing or
would result therefrom and (ii) immediately after giving effect thereto, Borrowers shall have
Excess Availability of not less than $1,000,000, to permit Holdings to pay management fees pursuant
to the terms of the Management Agreement; provided, that the aggregate amount of such
management fees in any calendar year shall not exceed $1,000,000; provided, further, that in the
event the payment of such management fees is restricted based on Excess Availability, such
management fees shall continue to accrue, and all accrued but unpaid amounts shall be payable
following the increase in Excess Availability above such limitation (after giving effect to any
payment of such accrued but unpaid amounts);




(e) Restricted Payments made on the Closing Date to consummate the Acquisition
Transactions;




(f) to the extent constituting Restricted Payments, the Borrowers and the
Restricted Subsidiaries may enter into transactions expressly permitted by Section 6.4 or
Section 6.12;




(g) cashless repurchases of Stock deemed to occur upon exercise of stock options or
warrants if such Stock represents a portion of the exercise price of such options or warrants;




(h) to Holdings (or any direct or indirect parent of Holdings) to be used solely to
pay federal, state and local income taxes made no earlier than five days prior to the date on which
such Person is required to make such payment in an amount not to exceed the aggregate tax liability
attributable to Borrowers and their respective Subsidiaries for such calendar year determined as if
Borrowers and their respective Subsidiaries were a separate affiliated group (as defined in Section
1504 of the IRC, as amended) filing a consolidated return, or, to the extent applicable, a separate
group filing combined or unitary returns, and then only to the extent that any such payments are
actually paid by Holdings to governmental entities; and






 


35









 







(i) so long as (i) no Default or Event of Default has occurred and is continuing or
would result therefrom and (ii) immediately after giving effect thereto, Borrowers shall have
Excess Availability of not less than $10,000,000, other Restricted Payments not to exceed
$10,000,000 in the aggregate since the Closing Date; provided that such amount may be
increased by an amount equal to amounts available for Restricted Payments pursuant to Section
4.09(iii) of the Indenture.




6.11 Fiscal Year. Modify or change its fiscal year.



6.12 Investments. Except for Permitted Investments, directly or indirectly,
make or acquire any Investment, or incur any liabilities (including contingent obligations) for or
in connection with any Investment; provided, however, that Borrowers and their
respective Restricted Subsidiaries shall not have Permitted Investments (other than in the Cash
Management Accounts) in Deposit Accounts or Securities Accounts in an aggregate amount in excess of
$50,000 (exclusive of Trust Funds) at any one time unless the applicable Borrower or the applicable
Restricted Subsidiary, and the applicable securities intermediary or bank have entered into Control
Agreements governing such Permitted Investments in order to perfect (and further establish) the
Agent’s Liens in such Permitted Investments. Subject to the foregoing proviso, Borrowers shall not
and shall not permit their respective Restricted Subsidiaries to establish or maintain any Deposit
Account or Securities Account unless Agent shall have received a Control Agreement in respect of
such Deposit Account or Securities Account.




6.13 Transactions with Affiliates. Directly or indirectly enter into or permit
to exist any transaction with any Affiliate of any Borrower except for transactions that (a) are in
the ordinary course of Borrowers’ business, (b) are upon fair and reasonable terms and (c) are no
less favorable to Borrowers or their respective Restricted Subsidiaries, as applicable, than would
be obtained in an arm’s length transaction with a non-Affiliate; provided, 
however, that if any such transaction involves aggregate payments or other property with a
Fair Market Value in excess of $2,500,000, it shall be approved by a majority of the members of the
Board of Directors of Parent (including a majority of the disinterested members thereof), such
approval to be evidenced by board resolutions stating that the Parent’s Board of Directors has
determined that such transactions comply with the foregoing provisions, and if any such transaction
involves an aggregate Fair Market Value of more than $5,000,000, Parent will, prior to the
consummation thereof, obtain a favorable opinion as to the fairness of the financial terms of such
transactions or series of related transactions to the applicable Loan Party, from an Independent
Financial Advisor and file the same with Agent; provided, further, 
however, that such restrictions shall not apply to:




(a) transactions exclusively between or among Holdings and its Subsidiaries
permitted hereby;




(b) reasonable fees and compensation paid to, and indemnity provided for directors,
officers, employees and consultants to Holdings and its Subsidiaries (provided, that to the extent
otherwise covered by clauses (b) or (d) of Section 6.10, then such clauses of 
Section 6.10 shall also apply);




(c) any Permitted Acquisition from a non-Affiliate that is an arm’s length
transaction and fails to comply with this Section solely because such a non-Affiliate becomes an
Affiliate as a result of such Permitted Acquisition;



(d) transactions otherwise permitted by this Agreement;



(e) any Investment permitted pursuant to Section 6.12;



(f) any sale of the Stock of any Loan Party in exchange for equity contributions
from Parent;







 


36









 







(g) any merger or other transaction with an Affiliate solely for the purpose of
reincorporating a Loan Party in another jurisdiction or creating a holding company, to the extent
otherwise permitted by this Agreement;




(h) any employment, stock option, stock repurchase, employee benefit compensation,
business expense reimbursement, severance, termination or other employment-related agreements,
arrangements or plans entered into in good faith by a Loan Party in the ordinary course of
business;




(i) sales or purchases of inventory, other products or services to or from any
Affiliate of the Borrowers entered into in the ordinary course of business on terms no less
favorable to the Borrowers and its Subsidiaries than those that could be obtained at the time of
such sale or purchase in arm’s-length dealings with a Person who is not an Affiliate;




(j) any agreement in effect as of the Closing Date or any transaction contemplated
thereby and any amendment thereto so long as any such amendment or replacement agreement is not
more disadvantageous to Borrowers or the Restricted Subsidiaries in any material respect than the
original agreement as in effect on the Closing Date; and



(k) the Management Agreement.



6.14 Use of Proceeds. Use the proceeds of the Advances for any purpose other
than (a) on the Closing Date, to pay transactional fees, costs, and expenses incurred in connection
with this Agreement, the other Loan Documents, and the transactions contemplated hereby and thereby
and to backstop or replace Letters of Credit, and (b) thereafter, consistent with the terms and
conditions hereof, to finance ongoing working capital, capital expenditure, and general corporate
needs of Borrowers, including Permitted Acquisitions, and for its lawful and permitted purposes.



6.15 Intentionally Omitted.


 


37









 





6.16 Financial Covenants.




(a) Fixed Charge Coverage Ratio. Fail to maintain or achieve a Fixed Charge
Coverage Ratio, measured on a fiscal quarter-end basis, of at least the required amount set forth
in the following table for the “Applicable Period” set forth opposite thereto; provided,
however, that, with respect to any “Applicable Period”, if daily average Excess
Availability was at least $12,500,000 during the 30 day period immediately preceding the applicable
date of determination and on the applicable date of determination, then the foregoing covenant
shall not apply for such applicable period:



	 	 	 	 	 
	Applicable Ratio	 	 	Applicable Period
	1.05:1.0	 	 	For the 4 quarter period
 ending March 31, 2005

	1.10:1.0	 	 	For the 4 quarter period
 ending June 30, 2005

	1.10:1.0	 	 	For the 4 quarter period
 ending September 30, 2005

	1.10:1.0	 	 	For the 4 quarter period
 ending December 31, 2005

	1.20:1.0	 	 	For the 4 quarter period
 ending each fiscal quarter thereafter







(b) Capital Expenditures. Make Capital Expenditures in any fiscal year in excess of
the amount set forth in the following table for the applicable period:




	 	 	 	 	 
	Applicable Amount	 	 	Applicable Period
	$	7,900,000	 	 	fiscal year 2005

	$	8,200,000	 	 	fiscal year 2006

	$	8,300,000	 	 	fiscal year 2007

	$	8,500,000	 	 	fiscal year 2008

	$	8,800,000	 	 	fiscal year 2009 and each fiscal year thereafter







provided, however, that up to 75% of the difference between the amount of Capital
Expenditure that may be made in any fiscal year and the amount of Capital Expenditures actually
made in such fiscal year, may be made in the immediately succeeding fiscal year; provided
further, however, that with respect to any Permitted Acquisitions, the “Applicable
Amount” for the “Applicable Period” in which such Permitted Acquisition is consummated shall be
increased by an amount equal to the product of (a) 1.25 times (b) the average amount per year of
Capital Expenditures made by such acquired Person during the immediately preceding three (3) year
period.



6.17 Acquisition Documents. Amend, modify or waive in any way materially
adverse to the Lender Group, any term or provision of the Acquisition Documents.




6.18 Indenture Documents. Amend, modify or waive in any way materially adverse
to the Lender Group, any term or provision of the Indenture Documents.




6.19
Governing Documents. Amend, modify or waive in any way materially adverse
to the Lender Group, any term or provision of any Governing Document of any Borrower or Guarantor.







 


38









 







6.20 Real Property Collateral. Without in any manner limiting Section
6.2, execute and deliver a mortgage with respect to any Real Property located in the State of
New York or any other Real Property for which Borrowers and their Restricted Subsidiaries are not
required to grant a Mortgage pursuant to Section 5.17, except (a) in favor of Agent or
(b) if the Agent has been, or will simultaneously be, granted a first priority mortgage with
respect thereto, in favor of the Trustee as a second priority mortgage to the extent permitted by
the Intercreditor Agreement.




7. EVENTS OF DEFAULT.



Any one or more of the following events shall constitute an event of default (each, an
“Event of Default”) under this Agreement:




7.1 If Borrowers fail to pay when due and payable, or when declared due and payable,
(a) all or any portion of the Obligations consisting of interest, fees, or charges due the Lender
Group, reimbursement of Lender Group Expenses, or other amounts (other than any portion thereof
constituting principal) constituting Obligations (including any portion thereof that accrues after
the commencement of an Insolvency Proceeding, regardless of whether allowed or allowable in whole
or in part as a claim in any such Insolvency Proceeding), and such failure continues for a period
of 3 Business Days, or (b) all or any portion of the principal of the Obligations);



7.2 If any Borrower or any of its Restricted Subsidiaries



(a) fails to perform or observe any covenant or other agreement contained in any of
Sections 5.5, 5.8, 5.12 (as to existence), and 6.1 through 
6.20 of this Agreement or Section 6 of the Security Agreement;




(b) fails to perform or observe any covenant or other agreement contained in any of
Sections 2.7, 5.2, and 5.3 of this Agreement and such failure continues for a
period of 3 Business Days after written notice thereof is given to Administrative Borrower by
Agent;




(c) fails to perform or observe any covenant or other agreement contained in any of
Sections 5.6, 5.7, 5.9, 5.15, 5.16, and 5.17
of this Agreement and such failure continues for a period of 10 Business Days after written notice
thereof is given to Administrative Borrower by Agent; or




(d) fails to perform or observe any covenant or other agreement contained in this
Agreement, or in any of the other Loan Documents; in each case, other than any such covenant or
agreement that is the subject of another provision of this Section 7 (in which event such
other provision of this Section 7 shall govern), and such failure continues for a period
of 20 Business Days after written notice thereof is given to Administrative Borrower by Agent;




7.3 If any of any Borrower’s or any of its Restricted Subsidiaries’ assets with an
individual fair market value of $1,000,000 or more or assets with an aggregate fair market value of
$3,000,000 or more is attached, seized, subjected to a writ or distress warrant, or is levied upon,
or comes into the possession of any third Person and the same is not discharged before the earlier
of 30 days after the date it first arises or 5 days prior to the date on which such property or
asset is subject to forfeiture by such Borrower or the applicable Restricted Subsidiary;




7.4 If an Insolvency Proceeding is commenced by any Borrower or any of its
Restricted Subsidiaries;







 


39









 







7.5 If an Insolvency Proceeding is commenced against any Borrower or any of its
Restricted Subsidiaries, and any of the following events occur: (a) the applicable Borrower or
Restricted Subsidiary consents to the institution of such Insolvency Proceeding against it, (b) the
petition commencing the Insolvency Proceeding is not timely controverted, (c) the petition
commencing the Insolvency Proceeding is not dismissed within 60 calendar days of the date of the
filing thereof, (d) an interim trustee is appointed to take possession of all or any substantial
portion of the properties or assets of, or to operate all or any substantial portion of the
business of, any Borrower or any such Restricted Subsidiary, or (e) an order for relief shall have
been issued or entered therein;




7.6 If any Borrower or any of its Restricted Subsidiaries is enjoined, restrained,
or in any way prevented by court order from continuing to conduct all or any material part of its
business affairs;




7.7 If one or more judgments, orders, or awards involving an individual amount of
$1,000,000 or more or an aggregate amount of $3,000,000, or more (except to the extent fully
covered by insurance pursuant to which the insurer has accepted liability therefor in writing)
shall be entered or filed against any Borrower or any of its Restricted Subsidiaries or with
respect to any of their respective assets, and the same is not released, discharged, bonded
against, or stayed pending appeal before 30 days after the date it first arises;




7.8 If there is a default in one or more agreements to which any Borrower or any of
its Restricted Subsidiaries is a party with one or more third Persons relative to Indebtedness of
any Borrower or any of its Restricted Subsidiaries involving an aggregate amount of $3,000,000 or
more, and (a) such default (i) occurs at the final maturity of the obligations thereunder, or
(ii) results in a right by such third Person(s), irrespective of whether exercised, to accelerate
the maturity of the applicable Borrower’s or Restricted Subsidiary’s obligations thereunder, or (b)
or any such Indebtedness obligations shall be required to be prepaid or redeemed (other than by a
regularly scheduled required prepayment or redemption), prior to the stated maturity thereof;




7.9 If any warranty, representation, statement, or Record made herein or in any
other Loan Document or delivered to Agent or any Lender in connection with this Agreement or any
other Loan Document proves to be untrue in any material respect as of the date of issuance or
making or deemed making thereof;




7.10 If the obligation of any Guarantor under the Guaranty is limited or terminated by
operation of law or by such Guarantor or any such Guarantor becomes the subject of an Insolvency
Proceeding;




7.11 If the Security Agreement or any other Loan Document that purports to create a
Lien, shall, for any reason, fail or cease to create a valid and perfected and, except to the
extent permitted by the terms hereof or thereof, first priority Lien on or security interest in the
Collateral covered hereby or thereby, except as permitted under this Agreement;




7.12 Any provision of any Loan Document shall at any time for any reason be declared
to be null and void, or the validity or enforceability thereof shall be contested by any Borrower
or any of its Restricted Subsidiaries, or a proceeding shall be commenced by any Borrower or any of
its Restricted Subsidiaries, or by any Governmental Authority having jurisdiction over any Borrower
or any of its Restricted Subsidiaries, seeking to establish the invalidity or unenforceability
thereof, or any Borrower or any of its Restricted Subsidiaries shall deny that it has any liability
or obligation purported to be created under any Loan Document;



7.13 If any Change of Control shall have occurred;


 


40









 





7.14 If (a) there shall occur and be continuing any “Event of Default” (or any
comparable term) under, and as defined in any Indenture Document, (b) any of the Obligations for
any reason shall cease to be “Credit Agreement Secured Obligations” (or any comparable terms)
under, and as defined in the Intercreditor Agreement, (c) any Indebtedness other than the
Obligations shall constitute “Credit Agreement Senior
Obligations” (or any comparable term) under, and as defined in, any Intercreditor Agreement or any
other document evidencing or governing any Indebtedness that has been contractually subordinated in
right of payment to the Obligations, except as expressly permitted by this Agreement, (d) any
holder of any Senior Note shall fail to perform or comply with any of the subordination provisions
of the documents evidencing or governing such Indebtedness, or (e) the subordination provisions of
the Intercreditor Agreement shall, in whole or in part, terminate, cease to be effective or cease
to be legally valid, binding and enforceable against any holder of such Indebtedness; or




7.15 If there occurs one or more ERISA Events which results in or otherwise is
associated with liability of any Borrower, any of its Restricted Subsidiaries, or any of their
respective ERISA Affiliates in excess of $3,000,000 in the aggregate during the term of this
Agreement.




8. THE LENDER GROUP’S RIGHTS AND REMEDIES.



8.1 Rights and Remedies. Upon the occurrence, and during the continuation,
of an Event of Default, the Required Lenders (at their election but without notice of their
election and without demand) may authorize and instruct Agent to do any one or more of the
following on behalf of the Lender Group (and Agent, acting upon the instructions of the Required
Lenders, shall do the same on behalf of the Lender Group), all of which are authorized by
Borrowers:




(a) Declare all or any portion of the Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and payable;




(b) Cease or restrict advancing money or extending credit to or for the benefit of
Borrowers under this Agreement, under any of the Loan Documents, or under any other agreement
between Borrowers and the Lender Group;




(c) Terminate this Agreement and any of the other Loan Documents as to any future
liability or obligation of the Lender Group, but without affecting any of the Agent’s Liens in the
Collateral and without affecting the Obligations; and




(d) The Lender Group shall have all other rights and remedies available at law or in
equity or pursuant to any other Loan Document.




The foregoing to the contrary notwithstanding, upon the occurrence of any Event of Default
described in Section 7.4 or Section 7.5, in addition to the remedies set forth
above, without any notice to Borrowers or any other Person or any act by the Lender Group, the
Commitments shall automatically terminate and the Obligations then outstanding, together with all
accrued and unpaid interest thereon and all fees and all other amounts due under this Agreement and
the other Loan Documents, shall automatically and immediately become due and payable, without
presentment, demand, protest, or notice of any kind, all of which are expressly waived by
Borrowers.



8.2 Remedies Cumulative. The rights and remedies of the Lender Group under
this Agreement, the other Loan Documents, and all other agreements shall be cumulative. The Lender
Group shall have all other rights and remedies not inconsistent herewith as provided under the
Code, by law, or in equity. No exercise by the Lender Group of one right or remedy shall be deemed
an election, and no waiver by the Lender Group of any Event of Default shall be deemed a continuing
waiver. No delay by the Lender Group shall constitute a waiver, election, or acquiescence by it.


 


41









 





9. TAXES AND EXPENSES.



If any Borrower or any of its Restricted Subsidiaries fails to pay any monies (whether taxes,
assessments, insurance premiums, or, in the case of leased properties or assets, rents or other
amounts payable
under such leases) due to third Persons, or fails to make any deposits or furnish any required
proof of payment or deposit, all as required under the terms of this Agreement, then, Agent, in its
sole discretion and without prior notice to such Person, may do any or all of the following: (a)
except for payments which are the subject of a Permitted Protest, make payment of the same or any
part thereof, (b) set up such reserves against the Borrowing Base or the Maximum Revolver Amount as
Agent deems necessary in its Permitted Discretion to protect the Lender Group from the exposure
created by such failure, or (c) in the case of the failure to comply with Section 5.8
hereof, obtain and maintain insurance policies of the type described in Section 5.8 and
take any action with respect to such policies as Agent deems prudent in its Permitted Discretion.
Any such amounts paid by Agent shall constitute Lender Group Expenses and any such payments shall
not constitute an agreement by the Lender Group to make similar payments in the future or a waiver
by the Lender Group of any Event of Default under this Agreement. Except in connection with
payments made by Agent pursuant to clause (a) above, Agent need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual official notice for the
payment thereof shall be conclusive evidence that the same was validly due and owing.




10. WAIVERS; INDEMNIFICATION.



10.1 Demand; Protest; etc. Each Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of documents, instruments, chattel paper,
and guarantees at any time held by the Lender Group on which any Borrower may in any way be liable.




10.2 The Lender Group’s Liability for Collateral. Each Borrower hereby agrees
that: (a) so long as Agent complies with its obligations, if any, under the Code, the Lender Group
shall not in any way or manner be liable or responsible for: (i) the safekeeping of the
Collateral, (ii) any loss or damage thereto occurring or arising in any manner or fashion from any
cause, (iii) any diminution in the value thereof, or (iv) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other Person, and (b) all risk of loss, damage, or
destruction of the Collateral shall be borne by Borrowers.




10.3 Indemnification. Each Borrower shall pay, indemnify, defend, and hold the
Agent-Related Persons, the Lender-Related Persons, and each Participant (each, an “Indemnified
Person”) harmless (to the fullest extent permitted by law) from and against any and all
claims, demands, suits, actions, investigations, proceedings, liabilities, fines, costs, penalties
and damages, and all reasonable fees and disbursements of attorneys, experts and consultants and
other costs and expenses actually incurred in connection therewith or in connection with the
enforcement of this indemnification (as and when they are incurred and irrespective of whether suit
is brought), at any time asserted against, imposed upon, or incurred by any of them (a) in
connection with or as a result of or related to the execution, delivery, enforcement, performance,
or administration (including any restructuring or workout with respect hereto) of this Agreement,
any of the other Loan Documents, or the transactions contemplated hereby or thereby or the
monitoring of Borrowers’ and their respective Restricted Subsidiaries’ compliance with the terms of
the Loan Documents, (b) with respect to any investigation, litigation, or proceeding related to
this Agreement, any other Loan Document, or the use of the proceeds of the credit provided
hereunder (irrespective of whether any Indemnified Person is a party thereto), or any act,
omission, event, or circumstance in any manner related thereto, and (c) in connection with or
arising out of any presence or release of Hazardous Materials at, on, under, to or from any assets
or properties owned, leased or operated by any Borrower or any of its Subsidiaries or any
Environmental Actions, Environmental Liabilities and Costs or Remedial Actions related in any way
to any such assets or properties of any Borrower or any of its Subsidiaries (all the foregoing,
collectively, the “Indemnified Liabilities”) provided, however, that
any claim with respect to taxes should be governed solely by Section 15.11. The
foregoing to the contrary notwithstanding, Borrowers shall have no obligation to any Indemnified
Person under this Section 10.3 with respect to any Indemnified Liability that a court of
competent jurisdiction finally determines to have resulted from the gross negligence or willful
misconduct of such Indemnified Person. This provision shall survive the termination of this
Agreement and the repayment of the Obligations. If any Indemnified Person makes any payment to any
other Indemnified Person with respect to an Indemnified Liability as to which
Borrowers were required to indemnify the Indemnified Person receiving such payment, the Indemnified
Person making such payment is entitled to be indemnified and reimbursed by Borrowers with respect
thereto. WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH
RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY
NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.


 


42









 






11. NOTICES.



Unless otherwise provided in this Agreement, all notices or demands by Borrowers or Agent to
the other relating to this Agreement or any other Loan Document shall be in writing and (except for
financial statements and other informational documents which may be sent by first-class mail,
postage prepaid) shall be personally delivered or sent by registered or certified mail (postage
prepaid, return receipt requested), overnight courier, electronic mail (at such email addresses as
Parent, Administrative Borrower or Agent, as applicable, may designate to each other in accordance
herewith), or telefacsimile to Borrowers in care of Administrative Borrower or to Agent, as the
case may be, at its address set forth below:




	 	 	 	 	 
	 

	 	If to Parent of Administrative Borrower:
	 	ALTRA INDUSTRIAL MOTION, INC.
	 

	 	 	 	14 Hayward St.
	 

	 	 	 	Quincy, Massachusetts 02171
	 

	 	 	 	Attn: Michael L. Hurt
	 

	 	 	 	Fax No.: (617) 689-6202
	 
	 	 	 	 
	 

	 	with copies to:
	 	GENSTAR CAPITAL, L.P.
	 

	 	 	 	Four Embarcadero Center
	 

	 	 	 	Suite 1900
	 

	 	 	 	San Francisco, CA 94111
	 

	 	 	 	Attn: Darren J. Gold
	 

	 	 	 	Fax No.: (415) 834-2383
	 
	 	 	 	 
	 

	 	 	 	and
	 
	 	 	 	 
	 

	 	 	 	WEIL, GOTSHAL & MANGES LLP
	 

	 	 	 	200 Crescent Court, Suite 300
	 

	 	 	 	Dallas, Texas 75201
	 

	 	 	 	Attn: Angela L. Fontana, Esq.
	 

	 	 	 	Fax No.: (214) 746-7777
	 
	 	 	 	 
	 

	 	If to Agent:
	 	WELLS FARGO FOOTHILL, INC.
	 

	 	 	 	One Boston Place
	 

	 	 	 	Boston, Massachusetts 02108
	 

	 	 	 	Attn: Business Finance Manager
	 

	 	 	 	Fax No.: (617) 523-5839
	 
	 	 	 	 
	 

	 	with copies to:
	 	MORRISON & FOERSTER LLP
	 

	 	 	 	1290 Avenue of the Americas, 40th Floor
	 

	 	 	 	New York, New York 10104-0050
	 

	 	 	 	Attn: Mark B. Joachim, Esq.
	 

	 	 	 	Fax No.: (212) 468-7900







 


43












 




Agent and Borrowers may change the address at which they are to receive notices hereunder, by
notice in writing in the foregoing manner given to the other party. All notices or demands sent in
accordance with this Section 11, other than notices by Agent in connection with
enforcement rights against the Collateral under the provisions of the Code, shall be deemed
received on the earlier of the date of actual receipt or 3 Business Days after the deposit thereof
in the mail or, where permitted by law, transmitted by telefacsimile or any other method set forth
above.



12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.




(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY
PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT), THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES
HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.



(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND TO
THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF
NEW YORK,  PROVIDED,  HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION
WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.
EACH BORROWER AND EACH MEMBER OF THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE
LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF  FORUM NON CONVENIENS OR TO OBJECT
TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS  SECTION 12(b) .



(c) EACH BORROWER AND EACH MEMBER OF THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH BORROWER AND EACH MEMBER
OF THE LENDER GROUP REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.



13. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.





13.1 Assignments and Participations.



(a) Any Lender may assign and delegate to one or more assignees (each an
“Assignee”) that are Eligible Transferees all, or any ratable part of all, of the
Obligations, the Commitments and the other rights and obligations of such Lender hereunder and
under the other Loan Documents, in a minimum amount of $5,000,000; provided, however, that Borrowers and Agent may continue to deal solely and directly with such Lender in
connection with the interest so assigned to an Assignee until (i) written notice of such
assignment, together with payment instructions, addresses, and related information with respect to
the Assignee, have been given to Administrative Borrower and Agent by such Lender and the Assignee,
(ii) such
Lender and its Assignee have delivered to Administrative Borrower and Agent an Assignment and
Acceptance, and (iii) the assigning Lender or Assignee has paid to Agent for Agent’s separate
account a processing fee in the amount of $3,500. Anything contained herein to the contrary
notwithstanding, the payment of any fees shall not be required and the Assignee need not be an
Eligible Transferee if such assignment is in connection with any merger, consolidation, sale,
transfer, or other disposition of all or any substantial portion of the business or loan portfolio
of the assigning Lender.


 


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(b) From and after the date that Agent notifies the assigning Lender (with a copy to
Administrative Borrower) that it has received an executed Assignment and Acceptance and payment of
the above-referenced processing fee and the satisfaction of the other conditions in Section
13.1(a), (i) the Assignee thereunder shall be a party hereto and, to the extent that rights
and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance,
shall have the rights and obligations of a Lender under the Loan Documents, and (ii) the assigning
Lender shall, to the extent that rights and obligations hereunder and under the other Loan
Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights (except with respect to Section 10.3 hereof) and be released from any future
obligations under this Agreement (and in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender’s rights and obligations under this Agreement and the
other Loan Documents, such Lender shall cease to be a party hereto and thereto), and such
assignment shall effect a novation between Borrowers and the Assignee; provided, 
however, that nothing contained herein shall release any assigning Lender from obligations
that survive the termination of this Agreement, including such assigning Lender’s obligations under
 Article 16 and Section 16.7 of this Agreement.



(c) By executing and delivering an Assignment and Acceptance, the assigning Lender
thereunder and the Assignee thereunder confirm to and agree with each other and the other parties
hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning
Lender makes no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement
or any other Loan Document furnished pursuant hereto, (ii) such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to the financial condition of
Borrowers or the performance or observance by Borrowers of any of their obligations under this
Agreement or any other Loan Document furnished pursuant hereto, (iii) such Assignee confirms that
it has received a copy of this Agreement, together with such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter into such Assignment
and Acceptance, (iv) such Assignee will, independently and without reliance upon Agent, such
assigning Lender 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, (v) such Assignee appoints and authorizes Agent to take such actions and to
exercise such powers under this Agreement as are delegated to Agent, by the terms hereof, together
with such powers as are reasonably incidental thereto, and (vi) such Assignee agrees that it will
perform all of the obligations which by the terms of this Agreement are required to be performed by
it as a Lender.



(d) Immediately upon Agent’s receipt of the required processing fee payment and the
fully executed Assignment and Acceptance and the satisfaction of the other conditions in 
Section 13.1(a), this Agreement shall be deemed to be amended to the extent, but only to the
extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the
Commitments arising therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Lender pro tanto.



(e) Any Lender may at any time sell to one or more commercial banks, financial
institutions, or other Persons (a “Participant”) participating interests in all or any
portion of its Obligations, the Commitment, and the other rights and interests of that Lender (the
“Originating Lender”) hereunder and under the other Loan Documents; provided,
 however, that (i) the Originating Lender shall remain a “Lender” for all purposes of this
Agreement and the other Loan Documents and the Participant receiving the participating interest in
the Obligations, the Commitments, and the other rights and interests of the Originating Lender
hereunder shall not constitute a “Lender” hereunder or under the other Loan Documents and the
Originating Lender’s obligations under this Agreement shall remain unchanged, (ii) the Originating
Lender shall remain solely responsible for the performance of such obligations, (iii) Borrowers,
Agent, and the Lenders shall continue to deal solely and directly with the Originating Lender in
connection with the Originating Lender’s rights and obligations under this Agreement and the other
Loan Documents, (iv) no Originating Lender shall transfer or grant any participating interest under
which the Participant has the right to approve any amendment to, or any consent or waiver with
respect to, this Agreement or any other Loan Document, except to



 


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the extent such amendment to, or consent or waiver with respect to this Agreement or of any other Loan Document would (A) extend the
final maturity date of the Obligations hereunder in which such Participant is participating, (B)
reduce the interest rate applicable to the Obligations hereunder in which such Participant is
participating, (C) release all or substantially all of the Collateral or guaranties (except to the
extent expressly provided herein or in any of the Loan Documents) supporting the Obligations
hereunder in which such Participant is participating, (D) postpone the payment of, or reduce the
amount of, the interest or fees payable to such Participant through such Lender, or (E) change the
amount or due dates of scheduled principal repayments or prepayments or premiums, and (v) all
amounts payable by Borrowers hereunder shall be determined as if such Lender had not sold such
participation, except that, if amounts outstanding under this Agreement are due and unpaid, or
shall have been declared or shall have become due and payable upon the occurrence of an Event of
Default, each Participant shall be deemed to have the right of set off in respect of its
participating interest in amounts owing under this Agreement to the same extent as if the amount of
its participating interest were owing directly to it as a Lender under this Agreement. The rights
of any Participant only shall be derivative through the Originating Lender with whom such
Participant participates and no Participant shall have any rights under this Agreement or the other
Loan Documents or any direct rights as to the other Lenders, Agent, Borrowers, the Collections of
Borrowers or their respective Subsidiaries, the Collateral, or otherwise in respect of the
Obligations. No Participant shall have the right to participate directly in the making of
decisions by the Lenders among themselves.



(f) In connection with any such assignment or participation or proposed assignment
or participation, a Lender may, subject to the provisions of Section 16.7, disclose all
documents and information which it now or hereafter may have relating to Borrowers and their
respective Restricted Subsidiaries and their respective businesses.



(g) Any other provision in this Agreement notwithstanding, any Lender may at any
time create a security interest in, or pledge, all or any portion of its rights under and interest
in this Agreement in favor of any Federal Reserve Bank in accordance with Regulation A of the
Federal Reserve Bank or U.S. Treasury Regulation 31 CFR § 203.24, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under applicable law.



(h) Agent (on behalf of Borrowers) shall maintain, or cause to be maintained, a
register (the “Register”) on which it enters the name of a Lender as the registered owner
of each Advance held by such Lender. Other than in connection with an assignment by a Lender of
all or any portion of its Commitment to an Affiliate of such Lender (i) a Registered Loan may be
assigned or sold in whole or in part only by registration of such assignment or sale on the
Register and (ii) any assignment or sale of all or part of such Registered Loan may be effected
only by registration of such assignment or sale on the Register, together with the surrender of any
note, if any, evidencing the same duly endorsed by (or accompanied by a written instrument of
assignment or sale duly executed by) the holder of such note, if any, whereupon, at the request of
the designated assignee(s) or transferee(s), one or more new notes in the same aggregate principal
amount shall be issued to the designated assignee(s) or transferee(s). Prior to the registration
of assignment or sale of any Registered Loan, Borrowers shall treat the Person in whose name such
Loan is registered as the owner thereof for the purpose of receiving all payments thereon and for
all other purposes, notwithstanding notice to the contrary. In the case of any assignment by a
Lender of all or any portion of its Commitment to an Affiliate of such Lender, and which assignment
is not recorded in the Register, the assigning Lender, on behalf of Borrowers, shall maintain a
register comparable to the Register.


 


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13.2 Successors. This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; provided, however,
that Borrowers may not assign this Agreement or any rights or duties hereunder without the Lenders’
prior written consent and any prohibited assignment shall be absolutely void ab initio. No
consent to assignment by the Lenders shall release any Borrower from its Obligations. A Lender may
assign this Agreement and the other Loan Documents and its rights and duties hereunder and
thereunder pursuant to Section 13.1 hereof and, except as expressly required pursuant to
 Section 13.1 hereof, no consent or approval by any Borrower is required in connection
with any such assignment.



14. AMENDMENTS; WAIVERS.




14.1 Amendments and Waivers. No amendment or waiver of any provision of this
Agreement or any other Loan Document (other than Bank Product Agreements), and no consent with
respect to any departure by Borrowers or any of their respective Restricted Subsidiaries therefrom,
shall be effective unless the same shall be in writing and signed by the Required Lenders (or by
Agent at the written request of the Required Lenders) and Administrative Borrower (on behalf of all
Loan Parties) and then any such waiver or consent shall be effective, but only in the specific
instance and for the specific purpose for which given; provided, however, that
no such waiver, amendment, or consent shall, unless in writing and signed by all of the Lenders
affected thereby and Administrative Borrower (on behalf of all Loan Parties), do any of the
following:



(a) increase or extend any Commitment of any Lender,



(b) postpone or delay any date fixed by this Agreement or any other Loan Document
for any payment of principal, interest, fees, or other amounts due hereunder or under any other
Loan Document,



(c) reduce the principal of, or the rate of interest on, any loan or other extension
of credit hereunder, or reduce any fees or other amounts payable hereunder or under any other Loan
Document,



(d) change the Pro Rata Share that is required to take any action hereunder,



(e) amend or modify this Section or any provision of this Agreement providing for
consent or other action by all Lenders,



(f) other than as permitted by Section 15.12, release Agent’s Lien in and
to any of the Collateral,



(g) change the definition of “Required Lenders” or “Pro Rata Share”,



(h) contractually subordinate any of the Agent’s Liens,



(i) release any Borrower or any Guarantor from any obligation for the payment of
money,



(j) change the definition of Borrowing Base or the definitions of Eligible
Accounts, Eligible Inventory, Maximum Revolver Amount, or change Section 2.1(b), or



(k) amend any of the provisions of Section 15.



and, provided further, however, that no amendment, waiver or consent shall, unless
in writing and signed by Agent, Issuing Lender, or Swing Lender, as applicable, affect the rights
or duties of Agent, Issuing Lender, or Swing Lender, as applicable, under this Agreement or any
other Loan Document. The foregoing notwithstanding, any amendment, modification, waiver, consent,
termination, or release of, or with respect to, any provision of this Agreement or any other Loan
Document that relates only to the relationship of the Lender
Group among themselves, and that does not affect the rights or obligations of Borrowers, shall not
require consent by or the agreement of Borrowers.


 


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14.2 Replacement of Holdout Lender.



(a) If any action to be taken by the Lender Group or Agent hereunder requires the
unanimous consent, authorization, or agreement of all Lenders, and a Lender (“Holdout
Lender”) fails to give its consent, authorization, or agreement, then Agent, upon at least 5
Business Days prior irrevocable notice to the Holdout Lender, may permanently replace the Holdout
Lender with one or more substitute Lenders (each, a “Replacement Lender”), and the
Holdout Lender shall have no right to refuse to be replaced hereunder. Such notice to replace the
Holdout Lender shall specify an effective date for such replacement, which date shall not be later
than 15 Business Days after the date such notice is given.



(b) Prior to the effective date of such replacement, the Holdout Lender and each
Replacement Lender shall execute and deliver an Assignment and Acceptance, subject only to the
Holdout Lender being repaid its share of the outstanding Obligations (including an assumption of
its Pro Rata Share of the Risk Participation Liability) without any premium or penalty of any kind
whatsoever. If the Holdout Lender shall refuse or fail to execute and deliver any such Assignment
and Acceptance prior to the effective date of such replacement, the Holdout Lender shall be deemed
to have executed and delivered such Assignment and Acceptance. The replacement of any Holdout
Lender shall be made in accordance with the terms of Section 13.1 . Until such time as
the Replacement Lenders shall have acquired all of the Obligations, the Commitments, and the other
rights and obligations of the Holdout Lender hereunder and under the other Loan Documents, the
Holdout Lender shall remain obligated to make the Holdout Lender’s Pro Rata Share of Advances and
to purchase a participation in each Letter of Credit, in an amount equal to its Pro Rata Share of
the Risk Participation Liability of such Letter of Credit.



14.3 No Waivers; Cumulative Remedies. No failure by Agent or any Lender to
exercise any right, remedy, or option under this Agreement or any other Loan Document, or delay by
Agent or any Lender in exercising the same, will operate as a waiver thereof. No waiver by Agent
or any Lender will be effective unless it is in writing, and then only to the extent specifically
stated. No waiver by Agent or any Lender on any occasion shall affect or diminish Agent’s and each
Lender’s rights thereafter to require strict performance by Borrowers or any of their respective
Restricted Subsidiaries of any provision of this Agreement. Agent’s and each Lender’s rights under
this Agreement and the other Loan Documents will be cumulative and not exclusive of any other right
or remedy that Agent or any Lender may have.



15. AGENT; THE LENDER GROUP.




15.1 Appointment and Authorization of Agent. Each Lender hereby designates and
appoints WFF as its representative under this Agreement and the other Loan Documents and each
Lender hereby irrevocably authorizes Agent to execute and deliver each of the other Loan Documents
on its behalf and to take such other action on its behalf under the provisions of this Agreement
and each other Loan Document and to exercise such powers and perform such duties as are expressly
delegated to Agent by the terms of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. Agent agrees to act as such on the express conditions
contained in this Section 15. The provisions of this Section 15 (other than
the proviso to Section 15.11(a) ) are solely for the benefit of Agent, and the Lenders,
and Borrowers and their respective Restricted Subsidiaries shall have no rights as a third party
beneficiary of any of the provisions contained herein. Any provision to the contrary contained
elsewhere in this Agreement or in any other Loan Document notwithstanding, Agent shall not have any
duties or responsibilities, except those expressly set forth herein, nor shall Agent have or be
deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other
Loan Document or otherwise exist against Agent; it being expressly understood and agreed that the
use of the word “Agent” is for convenience only, that WFF is merely the representative of the
Lenders, and only has the contractual duties set forth herein. Except as expressly otherwise
provided in this Agreement, Agent shall have and



 


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may use its sole discretion with respect to exercising or
refraining from exercising any discretionary rights or taking or refraining from taking any actions
that Agent expressly is entitled to take or assert under or pursuant to this Agreement and the
other Loan Documents. Without limiting the generality of the foregoing, or of any other provision
of the Loan Documents that provides rights or powers to Agent, Lenders agree that Agent shall have
the right to exercise the following powers as long as this Agreement remains in effect: (a)
maintain, in accordance with the Loan Documents and its customary business practices, ledgers and
records reflecting the status of the Obligations, the Collateral, the Collections of Borrowers and
their respective Restricted Subsidiaries, and related matters, (b) execute or file any and all
financing or similar statements or notices, amendments, renewals, supplements, documents,
instruments, proofs of claim, notices and other written agreements with respect to the Loan
Documents, (c) make Advances, for itself or on behalf of Lenders as provided in the Loan Documents,
(d) exclusively receive, apply, and distribute the Collections of Borrowers and their respective
Restricted Subsidiaries as provided in the Loan Documents, (e) open and maintain such bank accounts
and cash management arrangements as Agent deems necessary and appropriate in accordance with the
Loan Documents for the foregoing purposes with respect to the Collateral and the Collections of
Borrowers and their respective Restricted Subsidiaries, (f) perform, exercise, and enforce any and
all other rights and remedies of the Lender Group with respect to the Loan Parties, the
Obligations, the Collateral, the Collections of Borrowers and their respective Restricted
Subsidiaries, or otherwise related to any of same as provided in the Loan Documents, and (g) incur
and pay such Lender Group Expenses as Agent may deem necessary or appropriate for the performance
and fulfillment of its functions and powers pursuant to the Loan Documents.



15.2 Delegation of Duties. Agent may execute any of its duties under this
Agreement or any other Loan Document by or through agents, employees or attorneys in fact and shall
be entitled to advice of counsel concerning all matters pertaining to such duties. Agent shall not
be responsible for the negligence or misconduct of any agent or attorney in fact that it selects as
long as such selection was made without gross negligence or willful misconduct.



15.3 Liability of Agent. None of the Agent-Related Persons shall (a) be liable
for any action taken or omitted to be taken by any of them under or in connection with this
Agreement or any other Loan Document or the transactions contemplated hereby (except for its own
gross negligence or willful misconduct), or (b) be responsible in any manner to any of the Lenders
for any recital, statement, representation or warranty made by any Borrower or any Subsidiary or
Affiliate of any Borrower, or any officer or director thereof, contained in this Agreement or in
any other Loan Document, or in any certificate, report, statement or other document referred to or
provided for in, or received by Agent under or in connection with, this Agreement or any other Loan
Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of any Borrower or any other party to any
Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be
under any obligation to any Lender to ascertain or to inquire as to the observance or performance
of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document,
or to inspect the books and records or properties of Borrowers or the books or records or
properties of any of Borrowers’ Subsidiaries or Affiliates.



15.4 Reliance by Agent. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit,
letter, telegram, telefacsimile or other electronic method of transmission, telex or telephone
message, statement or other document or conversation believed by it to be genuine and correct and
to have been signed, sent, or made by the proper Person or Persons, and upon advice and statements
of legal counsel (including counsel to Borrowers or counsel to any Lender), independent accountants
and other experts selected by Agent. Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document unless Agent shall first receive such
advice of legal counsel and until such advice is received, Agent shall act, or refrain from acting,
as it deems reasonably advisable. If Agent so requests, it shall first be indemnified to its
reasonable satisfaction by the Lenders against any and all liability and expense that may be
incurred by it by reason of taking or continuing to take any such action. Agent shall in all cases
be fully protected in acting, or in
refraining from acting, under this Agreement or any other Loan Document in accordance with a
request or consent of the requisite Lenders and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.


 


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15.5 Notice of Default or Event of Default. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except with respect to
defaults in the payment of principal, interest, fees, and expenses required to be paid to Agent for
the account of the Lenders and, except with respect to Events of Default of which Agent has actual
knowledge, unless Agent shall have received written notice from a Lender or Administrative Borrower
referring to this Agreement, describing such Default or Event of Default, and stating that such
notice is a “notice of default.” Agent promptly will notify the Lenders of its receipt of any such
notice or of any Event of Default of which Agent has actual knowledge. If any Lender obtains
actual knowledge of any Event of Default, such Lender promptly shall notify the other Lenders and
Agent of such Event of Default. Each Lender shall be solely responsible for giving any notices to
its Participants, if any. Subject to Section 15.4, Agent shall take such action with
respect to such Default or Event of Default as may be requested by the Required Lenders in
accordance with Section 8; provided, however, that unless and until
Agent has received any such request, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of Default as it shall deem
advisable.



15.6 Credit Decision. Each Lender acknowledges that none of the Agent-Related
Persons has made any representation or warranty to it, and that no act by Agent hereinafter taken,
including any review of the affairs of Borrowers and their respective Subsidiaries or Affiliates,
shall be deemed to constitute any representation or warranty by any Agent-Related Person to any
Lender. Each Lender represents to Agent that it has, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, prospects, operations, property,
financial and other condition and creditworthiness of Borrowers and any other Person party to a
Loan Document, and all applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend credit to Borrowers.
Each Lender also represents that it will, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Loan Documents, and to make such investigations as it deems
necessary to inform itself as to the business, prospects, operations, property, financial and other
condition and creditworthiness of Borrowers and any other Person party to a Loan Document. Except
for notices, reports, and other documents expressly herein required to be furnished to the Lenders
by Agent, Agent shall not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of Borrowers and any other Person party to a Loan Document that may
come into the possession of any of the Agent-Related Persons.



15.7 Costs and Expenses; Indemnification. Agent may incur and pay Lender Group
Expenses to the extent Agent reasonably deems necessary or appropriate for the performance and
fulfillment of its functions, powers, and obligations pursuant to the Loan Documents, including
court costs, attorneys fees and expenses, fees and expenses of financial accountants, advisors,
consultants, and appraisers, costs of collection by outside collection agencies, auctioneer fees
and expenses, and costs of security guards or insurance premiums paid to maintain the Collateral,
whether or not Borrowers are obligated to reimburse Agent or Lenders for such expenses pursuant to
this Agreement or otherwise. Agent is authorized and directed to deduct and retain sufficient
amounts from the Collections of Borrowers and their respective Restricted Subsidiaries received by
Agent to reimburse Agent for such out-of-pocket costs and expenses prior to the distribution of any
amounts to Lenders. In the event Agent is not reimbursed for such costs and expenses from the
Collections of Borrowers and their respective Restricted Subsidiaries received by Agent, each
Lender hereby agrees that it is and shall be obligated to pay to or reimburse Agent for the amount
of such Lender’s Pro Rata Share thereof. Whether or not the transactions contemplated hereby are
consummated, the Lenders shall indemnify upon demand the Agent-Related Persons (to the extent not
reimbursed by or on behalf of Borrowers and without



 


50









 






limiting the obligation of Borrowers to do so), according to their Pro Rata Shares,
from and against any and all Indemnified Liabilities; provided, however, that
no Lender shall be liable for the payment to any Agent-Related Person of any portion of such
Indemnified Liabilities resulting solely from such Person’s gross negligence or willful misconduct
nor shall any Lender be liable for the obligations of any Defaulting Lender in failing to make an
Advance or other extension of credit hereunder. Without limitation of the foregoing, each Lender
shall reimburse Agent upon demand for such Lender’s Pro Rata Share of any costs or out of pocket
expenses (including reasonable attorneys, accountants, advisors, and consultants fees and expenses)
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, any
other Loan Document, or any document contemplated by or referred to herein or therein, to the
extent that Agent is not reimbursed for such expenses by or on behalf of Borrowers. The
undertaking in this Section shall survive the payment of all Obligations hereunder and the
resignation or replacement of Agent.



15.8 Agent in Individual Capacity. WFF and its Affiliates may make loans to,
issue letters of credit for the account of, accept deposits from, acquire equity interests in, and
generally engage in any kind of banking, trust, financial advisory, underwriting, or other business
with Borrowers and their respective Subsidiaries and Affiliates and any other Person party to any
Loan Documents as though WFF were not Agent hereunder, and, in each case, without notice to or
consent of the other members of the Lender Group. The other members of the Lender Group
acknowledge that, pursuant to such activities, WFF or its Affiliates may receive information
regarding Borrowers or their respective Affiliates and any other Person party to any Loan Documents
that is subject to confidentiality obligations in favor of Borrowers or such other Person and that
prohibit the disclosure of such information to the Lenders, and the Lenders acknowledge that, in
such circumstances (and in the absence of a waiver of such confidentiality obligations, which
waiver Agent will use its reasonable best efforts to obtain), Agent shall not be under any
obligation to provide such information to them. The terms “Lender” and “Lenders” include WFF in
its individual capacity.



15.9 Successor Agent. Agent may resign as Agent upon 45 days notice to the
Lenders. If Agent resigns under this Agreement, the Required Lenders shall appoint a successor
Agent for the Lenders. If no successor Agent is appointed prior to the effective date of the
resignation of Agent, Agent may appoint, after consulting with the Lenders, a successor Agent. If
Agent has materially breached or failed to perform any material provision of this Agreement or of
applicable law, the Required Lenders may agree in writing to remove and replace Agent with a
successor Agent from among the Lenders. In any such event, upon the acceptance of its appointment
as successor Agent hereunder, such successor Agent shall succeed to all the rights, powers, and
duties of the retiring Agent and the term “Agent” shall mean such successor Agent and the retiring
Agent’s appointment, powers, and duties as Agent shall be terminated. After any retiring Agent’s
resignation hereunder as Agent, the provisions of this Section 15 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent under this
Agreement. If no successor Agent has accepted appointment as Agent by the date which is 45 days
following a retiring Agent’s notice of resignation, the retiring Agent’s resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of the duties of Agent
hereunder until such time, if any, as the Lenders appoint a successor Agent as provided for above.



15.10 Lender in Individual Capacity. Any Lender and its respective Affiliates
may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity
interests in and generally engage in any kind of banking, trust, financial advisory, underwriting
or other business with Borrowers and their respective Subsidiaries and Affiliates and any other
Person party to any Loan Documents as though such Lender were not a Lender hereunder without notice
to or consent of the other members of the Lender Group. The other members of the Lender Group
acknowledge that, pursuant to such activities, such Lender and its respective Affiliates may
receive information regarding Borrowers or their Affiliates and any other Person party to any Loan
Documents that is subject to confidentiality obligations in favor of Borrowers or such other Person
and that prohibit the disclosure of such information to the Lenders, and the Lenders acknowledge
that, in such circumstances (and in the absence of a waiver of such confidentiality obligations,
which waiver such
Lender will use its reasonable best efforts to obtain), such Lender shall not be under any
obligation to provide such information to them. With respect to the Swing Loans and Protective
Advances, Swing Lender shall have the same rights and powers under this Agreement as any other
Lender and may exercise the same as though it were not the sub-agent of Agent.


 


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15.11 Withholding Taxes.



(a) All payments made by any Borrower hereunder or under any note or other Loan
Document will be made without setoff, counterclaim, or other defense. In addition, except as
provided in this Section, all such payments will be made free and clear of, and without deduction
or withholding for, any present or future Taxes, and in the event any deduction or withholding of
Taxes is required, each Borrower shall comply with the penultimate sentence of this Section
15.11(a). “Taxes” shall mean, any taxes, levies, imposts, duties, fees, assessments or other
charges of whatever nature now or hereafter imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein with respect to such payments (but excluding (i)
any tax imposed by any jurisdiction or by any political subdivision or taxing authority thereof or
therein measured by or based on the net income, capital, receipts or profits of any Lender, (ii)
franchise or similar taxes, (iii) any non-United States taxes imposed by the jurisdictions under
the laws of which the Lender or Agent, as the case may be, is organized, conducts business or has a
present or former connection (other than by reason of the transactions contemplated hereby or by
the other Loan Documents), or any political subdivision thereof, in effect on the Closing Date (or,
in the case of (A) an Assignee, the date of the Assignment and Acceptance, (B) a successor Lender,
the date such successor Lender becomes a Lender hereunder and (C) a successor Agent, the date of
the appointment of such Agent) applicable to such Lender or Agent, as the case may be, but not
excluding any United States withholding tax payable with respect to interest arising under any Loan
Document as a result of any change in such laws occurring after the Closing Date (or the date of
such Assignment and Acceptance, the date such successor Lender becomes a Lender or the date of the
appointment of such Agent), (iv) any taxes that are attributable to such Lender’s or Agent’s
failure to comply with the requirements of Section 15.11(b) and (v) all liabilities,
penalties and interest with respect to any of the forgoing excluded taxes) and all interest,
penalties or similar liabilities with respect thereto. If any Taxes are so levied or imposed, each
Borrower agrees to pay the full amount of such Taxes and such additional amounts as may be
necessary so that every payment of all amounts due under this Agreement, any note, or Loan
Document, including any amount paid pursuant to this Section 15.11(a) after withholding
or deduction for or on account of any Taxes, will not be less than the amount provided for herein;
provided, however, that Borrowers shall not be required to increase any such amounts if the
increase in such amount payable results from Agent’s or such Lender’s own willful misconduct or
gross negligence (as finally determined by a court of competent jurisdiction). Each Borrower will
furnish to Agent as promptly as is commercially reasonable after the date the payment of any Tax is
due pursuant to applicable law certified copies of any tax receipts provided by the taxing
authority evidencing such payment by any Borrower.



(b) (i) Each Lender, Assignee, successor Lender, Agent or successor Agent that is
not a “United States person” within the meaning of Section 7701(a)(30) of the IRC (each, a “Foreign Lender”) shall deliver to the Administrative Borrower and Agent, on or prior to the
date which is fifteen (15) Business Days after the Closing Date (or upon accepting an assignment of
an interest herein), two duly signed, properly completed copies of either IRS Form W-8BEN or any
successor thereto (relating to such Foreign Lender and entitling it to an exemption from, or
reduction of, United States withholding tax on all payments to be made to such Foreign Lender by a
Borrower or any other Loan Party pursuant to this Agreement or any other Loan Document) or IRS Form
W-8ECI or any successor thereto (relating to all payments to be made to such Foreign Lender by a
Borrower or any other Loan Party pursuant to this Agreement or any other Loan Document) or such
other evidence reasonably satisfactory to Administrative Borrower and Agent that such Foreign
Lender is entitled to an exemption from, or reduction of, United States withholding tax, including
any exemption pursuant to Section 881(c) of the IRC, and in the case of a Foreign Lender claiming
such an exemption under Section 881(c) of the IRC, a certificate that establishes in writing to the
Administrative Borrower and the Administrative Agent that such Foreign Lender is not (i) a “bank”
as defined in Section 881(c)(3)(A) of the IRC, (ii) a 10-percent shareholder within the meaning of
Section 871(h)(3)(B) of the IRC, or (iii) a Controlled Foreign Corporation related to



 


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a Borrower with the meaning of Section 864(d) of the IRC.
Thereafter and from time to time, each such Foreign Lender shall (A) within a commercially
reasonable period submit to the Administrative Borrower and Agent such additional duly and properly
completed and signed copies of one or more of such forms or certificates (or such successor forms
or certificates as shall be adopted from time to time by the relevant United States taxing
authorities) as may then be available under then current United States laws and regulations to
avoid, or such evidence as is reasonably satisfactory to the Administrative Borrower and Agent of
any available exemption from, or reduction of, United States withholding taxes in respect of all
payments to be made to such Foreign Lender by a Borrower or other Loan Party pursuant to this
Agreement, or any other Loan Document, in each case, (1) on or before the date that any such form,
certificate or other evidence expires or becomes obsolete, (2) after the occurrence of any event
requiring a change in the most recent form, certificate or evidence previously delivered by it to
the Administrative Borrower and Agent and (3) from time to time thereafter if reasonably requested
by the Administrative Borrower or the Administrative Agent, and (B) within a commercially
reasonable period notify the Administrative Borrower and Agent of any change in circumstances which
would modify or render invalid any claimed exemption or reduction.



(ii) The Borrowers shall not be required to pay any additional amount or any indemnity payment
to (A) any Foreign Lender with respect to any taxes required to be deducted or withheld solely on
the basis of the information, certificates or statements of exemption such Lender transmits
pursuant to this Section 15.11(b) or (B) any Lender if such Lender shall have failed to satisfy the
foregoing provisions of this Section 15.11(b).



(c) If a Lender claims an exemption from withholding tax in a jurisdiction other
than the United States, Lender agrees with and in favor of Agent and Borrowers, to deliver to Agent
any such form or forms, as may be required under the laws of such jurisdiction as a condition to
exemption from, or reduction of, foreign withholding or backup withholding tax before receiving its
first payment under this Agreement and at any other time reasonably requested by Agent or
Administrative Borrower.



Lender agrees promptly to notify Agent and Administrative Borrower of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.



(d) If any Lender is entitled to a reduction in the applicable withholding tax,
Agent may withhold from any interest payment to such Lender an amount equivalent to the applicable
withholding tax after taking into account such reduction. If the forms or other documentation
required by subsection (b) or (c) of this Section 15.11 are not delivered to Agent, then
Agent may withhold from any interest payment to such Lender not providing such forms or other
documentation an amount equivalent to the applicable withholding tax.



(e) If the IRS or any other Governmental Authority of the United States or other
jurisdiction asserts a claim that Agent did not properly withhold tax from amounts paid to or for
the account of any Lender due to a failure on the part of the Lender (because the appropriate form
was not delivered, was not properly executed, or because such Lender failed to notify Agent of a
change in circumstances which rendered the exemption from, or reduction of, withholding tax
ineffective, or for any other reason) such Lender shall indemnify and hold Agent harmless for all
amounts paid, directly or indirectly, by Agent, as tax or otherwise, including penalties and
interest, and including any taxes imposed by any jurisdiction on the amounts payable to Agent under
this Section 15.11, together with all costs and expenses (including attorneys fees and
expenses). The obligation of the Lenders under this subsection shall survive the payment of all
Obligations and the resignation or replacement of Agent.


 


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(f) Each Lender agrees that, upon the occurrence of any event giving rise to the
operation of Section 15.11(a) with respect to such Lender, it will, if requested by the
Administrative Borrower, use reasonable efforts (subject to overall policy considerations of such
Lender) to designate another lending office for any loans affected by such event with the object of
avoiding the consequences of such event; provided, that such designation is made on terms
that cause such Lender and its lending office(s) to suffer no
economic, legal or regulatory disadvantage, and provided, further, that nothing in
this Section shall affect or postpone any of the obligations of the Borrowers or the rights of any
Lender pursuant to Section 15.11(a). In determining whether designating another lending
office would cause such Lender or its lending office(s) to suffer economic disadvantage, such
Lender shall disregard any economic disadvantage that the Administrative Borrower agrees, in form
and substance reasonably satisfactory to such Lender, to indemnify and hold such Lender harmless
therefrom. If, after such reasonable efforts by such Lender, such Lender does not so designate a
different one of its lending offices so as to avoid the consequences of such event, then the
Administrative Borrower may, at its sole expense and effort, upon notice to such Lender and the
Agent, require such Lender to assign and delegate, without recourse, all its interests, rights and
obligations under this Agreement to an assignee that shall assume such obligations (which assignee
may be another Lender, if a Lender accepts such assignment, and which assignee shall be reasonably
acceptable to Agent). A Lender shall not be required to make any such assignment and delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling
such Borrower to require such assignment and delegation cease to apply.




15.12 Collateral Matters.



(a) The Lenders hereby irrevocably authorize Agent, at its option and in its sole
discretion, to release any Lien on any Collateral (i) upon the termination of the Commitments and
payment and satisfaction in full by Borrowers of all non-contingent Obligations, (ii) constituting
property being sold or disposed of if a release is required or desirable in connection therewith
and if Administrative Borrower certifies to Agent that the sale or disposition is permitted under
 Section 6.4 of this Agreement or the other Loan Documents (and Agent may rely
conclusively on any such certificate, without further inquiry), (iii) constituting property in
which none of any Borrower or any of its Restricted Subsidiaries owned any interest at the time the
Agent’s Lien was granted nor at any time thereafter, or (iv) constituting property leased to a
Borrower or any of its Restricted Subsidiaries under a lease that has expired or is terminated in a
transaction permitted under this Agreement. Except as provided above, Agent will not execute and
deliver a release of any Lien on any Collateral without the prior written authorization of (y) if
the release is of all or substantially all of the Collateral, all of the Lenders, or (z) otherwise,
the Required Lenders. Upon request by Agent or Administrative Borrower at any time, the Lenders
will confirm in writing Agent’s authority to release any such Liens on particular types or items of
Collateral pursuant to this Section 15.12; provided, however, that
(1) Agent shall not be required to execute any document necessary to evidence such release on terms
that, in Agent’s opinion, would expose Agent to liability or create any obligation or entail any
consequence other than the release of such Lien without recourse, representation, or warranty, and
(2) such release shall not in any manner discharge, affect, or impair the Obligations or any Liens
(other than those expressly being released) upon (or obligations of Borrowers in respect of) all
interests retained by Borrowers or any of their respective Restricted Subsidiaries, including, the
proceeds of any sale, all of which shall continue to constitute part of the Collateral.



(b) Agent shall have no obligation whatsoever to any of the Lenders to assure that
the Collateral exists or is owned by Borrowers or any of their respective Restricted Subsidiaries
or is cared for, protected, or insured or has been encumbered, or that the Agent’s Liens have been
properly or sufficiently or lawfully created, perfected, protected, or enforced or are entitled to
any particular priority, or to exercise at all or in any particular manner or under any duty of
care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers
granted or available to Agent pursuant to any of the Loan Documents, it being understood and agreed
that in respect of the Collateral, or any act, omission, or event related thereto, subject to the
terms and conditions contained herein, Agent may act in any manner it may deem appropriate, in its
sole discretion given Agent’s own interest in the Collateral in its capacity as one of the Lenders
and that Agent shall have no other duty or liability whatsoever to any Lender as to any of the
foregoing, except as otherwise provided herein.


 


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15.13 Restrictions on Actions by Lenders; Sharing of Payments.



(a) Each of the Lenders agrees that it shall not, without the express written
consent of Agent, set off against the Obligations, any amounts owing by such Lender to Borrowers or
any of their respective Restricted Subsidiaries or any deposit accounts of Borrowers or any of
their respective Restricted Subsidiaries now or hereafter maintained with such Lender. Each of the
Lenders further agrees that it shall not, unless specifically requested to do so in writing by
Agent, take or cause to be taken any action, including, the commencement of any legal or equitable
proceedings, to foreclose any Lien on, or otherwise enforce any security interest in, any of the
Collateral.



(b) If, at any time or times any Lender shall receive (i) by payment, foreclosure,
setoff, or otherwise, any proceeds of Collateral or any payments with respect to the Obligations,
except for any such proceeds or payments received by such Lender from Agent pursuant to the terms
of this Agreement, or (ii) payments from Agent in excess of such Lender’s ratable portion of all
such distributions by Agent, such Lender promptly shall (A) turn the same over to Agent, in kind,
and with such endorsements as may be required to negotiate the same to Agent, or in immediately
available funds, as applicable, for the account of all of the Lenders and for application to the
Obligations in accordance with the applicable provisions of this Agreement, or (B) purchase,
without recourse or warranty, an undivided interest and participation in the Obligations owed to
the other Lenders so that such excess payment received shall be applied ratably as among the
Lenders in accordance with their Pro Rata Shares; provided, however, that to
the extent that such excess payment received by the purchasing party is thereafter recovered from
it, those purchases of participations shall be rescinded in whole or in part, as applicable, and
the applicable portion of the purchase price paid therefor shall be returned to such purchasing
party, but without interest except to the extent that such purchasing party is required to pay
interest in connection with the recovery of the excess payment.



15.14 Agency for Perfection. Agent hereby appoints each other Lender as its
agent (and each Lender hereby accepts such appointment) for the purpose of perfecting the Agent’s
Liens in assets which, in accordance with Article 8 or Article 9, as applicable, of the Code can be
perfected only by possession or control. Should any Lender obtain possession or control of any
such Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent’s request
therefor shall deliver possession or control of such Collateral to Agent or in accordance with
Agent’s instructions.



15.15 Payments by Agent to the Lenders. All payments to be made by Agent to the
Lenders shall be made by bank wire transfer of immediately available funds pursuant to such wire
transfer instructions as each party may designate for itself by written notice to Agent.
Concurrently with each such payment, Agent shall identify whether such payment (or any portion
thereof) represents principal, premium, fees, or interest of the Obligations.



15.16 Concerning the Collateral and Related Loan Documents. Each member of the
Lender Group authorizes and directs Agent to enter into this Agreement and the other Loan
Documents. Each member of the Lender Group agrees that any action taken by Agent in accordance
with the terms of this Agreement or the other Loan Documents relating to the Collateral and the
exercise by Agent of its powers set forth therein or herein, together with such other powers that
are reasonably incidental thereto, shall be binding upon all of the Lenders.


 


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15.17 Field Audits and Examination Reports; Confidentiality; Disclaimers by Lenders;
Other Reports and Information. By becoming a party to this Agreement, each Lender:



(a) is deemed to have requested that Agent furnish such Lender, promptly after it
becomes available, a copy of each field audit or examination report (each a “Report” and
collectively, “Reports”) prepared by or at the request of Agent, and Agent shall so
furnish each Lender with such Reports,



(b) expressly agrees and acknowledges that neither the Borrowers nor the Agent (i)
make any representation or warranty as to the accuracy of any Report, and (ii) shall be liable for
any information contained in any Report,



(c) expressly agrees and acknowledges that the Reports are not comprehensive audits
or examinations, that Agent or other party performing any audit or examination will inspect only
specific information regarding Borrowers and their respective Restricted Subsidiaries and will rely
significantly upon the books and records of Borrowers and their respective Restricted Subsidiaries,
as well as on representations of Borrowers’ and their respective Restricted Subsidiaries’
personnel,



(d) agrees to keep all Reports and other material, non-public information regarding
Borrowers and their respective Restricted Subsidiaries and their operations, assets, and existing
and contemplated business plans in a confidential manner in accordance with Section 16.7,
and



(e) without limiting the generality of any other indemnification provision contained
in this Agreement, agrees: (i) to hold Agent and any such other Lender preparing a Report harmless
from any action the indemnifying Lender may take or fail to take or any conclusion the indemnifying
Lender may reach or draw from any Report in connection with any loans or other credit
accommodations that the indemnifying Lender has made or may make to Borrowers, or the indemnifying
Lender’s participation in, or the indemnifying Lender’s purchase of, a loan or loans of Borrowers;
and (ii) to pay and protect, and indemnify, defend and hold Agent, and any such other Lender
preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs,
expenses, and other amounts (including, attorneys fees and costs) incurred by Agent and any such
other Lender preparing a Report as the direct or indirect result of any third parties who might
obtain all or part of any Report through the indemnifying Lender.



In addition to the foregoing: (x) any Lender may from time to time request of Agent in writing
that Agent provide to such Lender a copy of any report or document provided by Borrowers and their
respective Restricted Subsidiaries to Agent that has not been contemporaneously provided by
Borrowers and their respective Restricted Subsidiaries to such Lender, and, upon receipt of such
request, Agent promptly shall provide a copy of same to such Lender, (y) to the extent that Agent
is entitled, under any provision of the Loan Documents, to request additional reports or
information from Borrowers and their respective Restricted Subsidiaries, any Lender may, from time
to time, reasonably request Agent to exercise such right as specified in such Lender’s notice to
Agent, whereupon Agent promptly shall request of the applicable Person the additional reports or
information reasonably specified by such Lender, and, upon receipt thereof from the applicable
Person, Agent promptly shall provide a copy of same to such Lender, and (z) any time that Agent
renders to Administrative Borrower a statement regarding the Loan Account, Agent shall send a copy
of such statement to each Lender.



15.18 Several Obligations; No Liability. Notwithstanding that certain of the
Loan Documents now or hereafter may have been or will be executed only by or in favor of Agent in
its capacity as such, and not by or in favor of the Lenders, any and all obligations on the part of
Agent (if any) to make any credit available hereunder shall constitute the several (and not joint)
obligations of the respective Lenders on a ratable basis, according to their Commitments, to make
an amount of such credit not to exceed, in principal amount, at any one time outstanding, the
amount of their Commitments. Nothing contained herein shall confer upon any Lender any interest
in, or subject any Lender to any liability for, or in respect of, the business, assets, profits,
losses, or liabilities of any other Lender. Each Lender shall be solely responsible for notifying
its Participants of any matters relating to the Loan Documents to the extent any such notice may be
required, and no Lender shall have any obligation, duty, or liability to any Participant of any
other Lender. Except as provided in Section 15.7, no member of the Lender Group shall
have any liability for the acts of any other member of the Lender Group. No Lender shall be
responsible to any Borrower or any other Person for any failure by any other Lender to fulfill its
obligations to make credit available hereunder, nor to advance for it or on its behalf in
connection with its Commitment, nor to take any other action on its behalf hereunder or in
connection with the financing contemplated herein.



 


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15.19 Bank Product Providers. Each Bank Product Provider shall be deemed a party
hereto for purposes of any reference in a Loan Document to the parties for whom Agent is acting; it
being understood and agreed that the rights and benefits of such Bank Product Provider under the
Loan Documents consist exclusively of such Bank Product Provider’s right to share in payments and
collections out of the Collateral as more fully set forth herein. In connection with any such
distribution of payments and collections, Agent shall be entitled to assume no amounts are due to
any Bank Product Provider unless such Bank Product Provider has notified Agent in writing of the
amount of any such liability owed to it prior to such distribution.



16. GENERAL PROVISIONS.




16.1 Effectiveness. This Agreement shall be binding and deemed effective when
executed by each Borrower, Agent, and each Lender whose signature is provided for on the signature
pages hereof.



16.2 Section Headings. Headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything contained in each
Section applies equally to this entire Agreement.



16.3 Interpretation. Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed against the Lender Group or Borrowers, whether under any rule of
construction or otherwise. On the contrary, this Agreement has been reviewed by all parties and
shall be construed and interpreted according to the ordinary meaning of the words used so as to
accomplish fairly the purposes and intentions of all parties hereto.



16.4 Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.



16.5 Counterparts; Electronic Execution. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts, each of which, when
executed and delivered, shall be deemed to be an original, and all of which, when taken together,
shall constitute but one and the same Agreement. Delivery of an executed counterpart of this
Agreement by telefacsimile or other electronic method of transmission shall be equally as effective
as delivery of an original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile or other electronic method of transmission
also shall deliver an original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The foregoing shall apply to each other Loan Document mutatis mutandis.



16.6 Revival and Reinstatement of Obligations. If the incurrence or payment of
the Obligations by any Borrower or any Guarantor or the transfer to the Lender Group of any
property should for any reason subsequently be declared to be void or voidable under any state or
federal law relating to creditors’ rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences, or other voidable or recoverable payments of money or
transfers of property (collectively, a “Voidable Transfer”), and if the Lender Group is
required to repay or restore, in whole or in part, any such Voidable Transfer, or elects to do so
upon the reasonable advice of its counsel, then, as to any such Voidable Transfer, or the amount
thereof that
the Lender Group is required or elects to repay or restore, and as to all reasonable costs,
expenses, and attorneys fees of the Lender Group related thereto, the liability of Borrowers or
such Guarantor automatically shall be revived, reinstated, and restored and shall exist as though
such Voidable Transfer had never been made.


 


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16.7 Confidentiality. Agent and Lenders each individually (and not jointly or
jointly and severally) agree that material, non-public information regarding Borrowers and their
respective Subsidiaries, their operations, assets, and existing and contemplated business plans
shall be treated by Agent and the Lenders in a confidential manner, and shall not be disclosed by
Agent and the Lenders to Persons who are not parties to this Agreement, except: (a) to attorneys
for and other advisors, accountants, auditors, and consultants to any member of the Lender Group
for matters in connection with this Agreement, (b) to Subsidiaries and Affiliates of any member of
the Lender Group (including the Bank Product Providers), provided that any such Subsidiary or
Affiliate shall have agreed to receive such information hereunder subject to the terms of this 
Section 16.7, (c) as may be required by statute, decision, or judicial or administrative
order, rule, or regulation, (d) as may be agreed to in advance by Parent or Administrative Borrower
or its Subsidiaries or as requested or required by any Governmental Authority pursuant to any
subpoena or other legal process, (e) as to any such information that is or becomes generally
available to the public (other than as a result of prohibited disclosure by Agent or the Lenders or
their respective Affiliates and Subsidiaries), (f) in connection with any assignment, prospective
assignment, sale, prospective sale, participation or prospective participations, or pledge or
prospective pledge of any Lender’s interest under this Agreement, provided that any such assignee,
prospective assignee, purchaser, prospective purchaser, participant, prospective participant,
pledgee, or prospective pledgee shall have agreed in writing to receive such information hereunder
and keep it confidential subject to the terms of this Section, and (g) in connection with any
litigation or other adversary proceeding involving parties hereto which such litigation or
adversary proceeding involves claims related to the rights or duties of such parties under this
Agreement or the other Loan Documents. The provisions of this Section 16.7 shall survive
for 2 years after the payment in full of the Obligations.



16.8 Integration. This Agreement, together with the other Loan Documents,
reflects the entire understanding of the parties with respect to the transactions contemplated
hereby and shall not be contradicted or qualified by any other agreement, oral or written, before
the date hereof.



16.9 Altra Industrial Motion, Inc. as Agent for Borrowers. Each Borrower
hereby irrevocably appoints Altra Industrial Motion, Inc. as the borrowing agent and
attorney-in-fact for all Borrowers (the “Administrative Borrower”) which appointment
shall remain in full force and effect unless and until Agent shall have received prior written
notice signed by each Borrower that such appointment has been revoked and that another Loan Party
has been appointed Administrative Borrower. Each Borrower hereby irrevocably appoints and
authorizes the Administrative Borrower (a) to provide Agent with all notices with respect to
Advances and Letters of Credit obtained for the benefit of any Borrower and all other notices and
instructions under this Agreement and (b) to take such action as the Administrative Borrower deems
appropriate on its behalf to obtain Advances and Letters of Credit and to exercise such other
powers as are reasonably necessary to carry out the purposes of this Agreement. It is understood
that the handling of the Loan Account and Collateral in a combined fashion, as more fully set forth
herein, is done solely as an accommodation to Borrowers in order to utilize the collective
borrowing powers of Borrowers in the most efficient and economical manner and at their request, and
that Lender Group shall not incur liability to any Borrower as a result hereof. Each Borrower
expects to derive benefit, directly or indirectly, from the handling of the Loan Account and the
Collateral in a combined fashion since the successful operation of each Borrower is dependent on
the continued successful performance of the integrated group. To induce the Lender Group to do so,
and in consideration thereof, each Borrower hereby jointly and severally agrees to indemnify each
member of the Lender Group and hold each member of the Lender Group harmless against any and all
liability, expense, loss or claim of damage or injury, made against the Lender Group by any
Borrower or by any third party whosoever, arising from or incurred by reason of (a) the handling of
the Loan Account and Collateral as herein provided, (b) the Lender Group’s relying on any
instructions of the Administrative Borrower, or (c) any other action taken by the Lender Group
hereunder or under the other Loan Documents, except that Borrowers will
have no liability to the relevant Agent-Related Person or Lender-Related Person under this
Section 16.9 with respect to any liability that has been finally determined by a court of
competent jurisdiction to have resulted solely from the gross negligence or willful misconduct of
such Agent-Related Person or Lender-Related Person, as the case may be.



[Signature pages to follow.]




 


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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered
as of the date first above written.



	 	 	 	 	 	 	 	 	 	 	 
	 	 	ALTRA INDUSTRIAL MOTION, INC., a Delaware corporation,

WARNER ELECTRIC LLC, a Delaware limited liability company,

KILIAN MANUFACTURING CORPORATION, a Delaware corporation,

WARNER ELECTRIC TECHNOLOGY LLC, a Delaware limited liability company,

FORMSPRAG LLC, a Delaware limited liability company,

BOSTON GEAR LLC, a Delaware limited liability company,

NUTTALL GEAR LLC, a Delaware limited liability company	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	Name: Michael L. Hurt	 	 
	 	 	 	 	Title: Chief Executive Officer	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	AMERIDRIVES INTERNATIONAL, L.P., a Delaware limited partnership,	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	American Enterprises MPT Corp., its general partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Name: Michael L. Hurt	 	 
	 	 	 	 	 	 	Title: Chief Executive Officer	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	WELLS FARGO FOOTHILL, INC.,

a California corporation, as Agent and as a Lender	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

	 	 







 


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Final Version




EXHIBIT
A-1




FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT




This ASSIGNMENT AND ACCEPTANCE AGREEMENT (“Assignment Agreement”) is entered into as of                      between
 _____ 

(“Assignor”), solely in its capacity as Lender, and
 _____ 
(“Assignee”). Reference is made
to the Agreement described in Annex I hereto (the “Credit Agreement”). Capitalized
terms used herein and not otherwise defined shall have the meanings ascribed to them in the Credit
Agreement.



1. In accordance with the terms and conditions of Section 13 of the Credit Agreement, the
Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes
from the Assignor, that interest in and to the Assignor’s rights and obligations under the Loan
Documents as of the date hereof with respect to the Obligations owing to the Assignor, and
Assignor’s portion of the Commitments, all to the extent specified on Annex I.



2. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of
the interest being assigned by it hereunder and that such interest is free and clear of any
adverse claim and (ii) it has full power and authority, and has taken all action necessary, to
execute and deliver this Assignment Agreement and to consummate the transactions contemplated
hereby; (b) makes no representation or warranty and assumes no responsibility with respect to (i)
any statements, representations or warranties made in or in connection with the Loan Documents, or
(ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the
Loan Documents or any other instrument or document furnished pursuant thereto; (c) makes no
representation or warranty and assumes no responsibility with respect to the financial condition of
any Borrower or any Guarantor or the performance or observance by any Borrower or any Guarantor of
any of their respective obligations under the Loan Documents or any other instrument or document
furnished pursuant thereto, and (d) represents and warrants that the amount set forth as the
purchase price on Annex I represents the amount owed by Borrowers to Assignor with respect
to Assignor’s share of the Advances assigned hereunder, as reflected on Assignor’s books and
records.



3. The Assignee (a) confirms that it has received copies of the Credit Agreement and the
other Loan Documents, together with copies of the financial statements referred to therein and
such other documents and information as it has deemed appropriate to make its own credit analysis
and decision to enter into this Assignment Agreement; (b) agrees that it will, independently and
without reliance upon Agent, Assignor, or any other Lender, based upon such documents and
information as it shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking any action under the Loan Documents; (c) confirms that it is an Eligible
Transferee; (d) appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under the Loan Documents as are delegated to Agent by the terms thereof,
together with such powers as are reasonably incidental thereto; (e) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a Lender, [and (f) attaches the forms prescribed by the Internal
Revenue Service of the United States certifying as to the Assignee’s status for purposes of
determining exemption from United States withholding taxes with respect to all payments to be made
to the Assignee under the Credit Agreement or such other documents as are necessary to indicate
that all such payments are subject to such rates at a rate reduced by an applicable tax treaty.]


 


 









 





4. Following the execution of this Assignment Agreement by the Assignor and Assignee, the Assignor
will deliver this Assignment Agreement to the Agent for recording by the Agent. The effective date
of this Assignment (the “Settlement Date”) shall be the latest to occur of (a) the date of the
execution and delivery hereof by the Assignor and the Assignee, (b) the receipt by Agent for its
sole and
separate account a processing fee in the amount of $3,500 (if required by the Credit Agreement),
(c) the receipt of any required consent of the Agent, and (d) the date specified in Annex
I.



5. As of the Settlement Date (a) the Assignee shall be a party to the Credit Agreement and,
to the extent of the interest assigned pursuant to this Assignment Agreement, have the rights and
obligations of a Lender thereunder and under the other Loan Documents, and (b) the Assignor shall,
to the extent of the interest assigned pursuant to this Assignment Agreement, relinquish its
rights and be released from its obligations under the Credit Agreement and the other Loan
Documents, provided, however, that nothing contained herein shall release any assigning
Lender from obligations that survive the termination of this Assignment Agreement, including such
assigning Lender’s obligations under Article 13, Article 15 and Section
16.7 of the Credit Agreement.



6. Upon the Settlement Date, Assignee shall pay to Assignor the purchase price (as set forth
in Annex I). From and after the Settlement Date, Agent shall make all payments that are due
and payable to the holder of the interest assigned hereunder (including payments of principal,
interest, fees and other amounts) to Assignor for amounts which have accrued up to but excluding
the Settlement Date and to Assignee for amounts which have accrued from and after the Settlement
Date. On the Settlement Date, Assignor shall pay to Assignee an amount equal to the portion of any
interest, fee, or any other charge that was paid to Assignor prior to the Settlement Date on
account of the interest assigned hereunder and that are due and payable to Assignee with respect
thereto, to the extent that such interest, fee or other charge relates to the period of time from
and after the Settlement Date.



7. This Assignment Agreement may be executed in counterparts and by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument. This Assignment Agreement may be
executed and delivered by telecopier or other facsimile transmission all with the same force and
effect as if the same were a fully executed and delivered original manual counterpart.



8. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.


 


 









 





IN WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement and Annex I
hereto to be executed by their respective officers, as of the first date written above.



	 	 	 	 	 
	 	[NAME OF ASSIGNOR]



as Assignor

 	 
	 	By:  	
 	 
	 	 	Name:  	
 	 
	 	 	Title:  	
 	 
	 
	 	[NAME OF ASSIGNEE]



as Assignee

 	 
	 	By:  	
 	 
	 	 	Name:  	
 	 
	 	 	Title:  	
 	 





	 	 	 	 	 
	ACCEPTED THIS
               
DAY OF                	 	 
	 
	 	 	 	 
	WELLS FARGO FOOTHILL, INC.,

a California corporation, as Agent
	 
	 	 	 	 
	By: 
	  
	 	 
	 

	 Name: 
	 
	 	 
	 

	 Title:	 
	 	 





 


 









 





ANNEX FOR ASSIGNMENT AND ACCEPTANCE




ANNEX I




1. Borrowers:




Altra Industrial Motion, Inc., a Delaware corporation, Warner Electric LLC, a
Delaware limited liability company, Kilian Manufacturing Corporation, a
Delaware corporation, Warner Electric Technology LLC, a Delaware limited
liability company, Formsprag LLC, a Delaware limited liability company,
Boston Gear LLC, a Delaware limited liability company, Nuttall Gear LLC, a
Delaware limited liability company, and Ameridrives International, L.P., a
Delaware limited partnership.



2. Name and Date of Credit Agreement:




Credit Agreement, dated as of November 30, 2004, by and among Altra
Industrial Motion, Inc., a Delaware corporation (“Parent”), Borrowers, the
lenders from time to time a party thereto (the “Lenders”), Wells Fargo
Foothill, Inc., a California corporation, as the arranger and
administrative agent for the Lenders.



	 	 	 	 	 
	3. Date of Assignment Agreement:
	 	                         	 
	 
	4. Amounts:
	 	 	 	 
	 
	a. Assigned Amount of Commitment
	 	$	                          	 
	 
	b. Assigned Amount of Advances
	 	$	                          	 
	 
	5. Settlement Date:
	 	 	                          	 
	 
	6. Purchase Price
	 	$	                          	 
	 
	7. Notice and Payment Instructions, etc.
	 	 	 	 






	 	 	 	 	 	 	 	 	 
	 

	 	Assignee:
	 	 	 	Assignor:	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 

	 	 	 	 

	 	 






 


 









 





	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	8. Agreed and Accepted:	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	[ASSIGNOR]	 	 	 	[ASSIGNEE]	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	By:
	 	 	 	 	 	 	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	 	 	 	 	 	 	Name:	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:
	 	 	 	 	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 	 	 	 	 	 	 

	 	 






	 	 	 	 	 	 	 
	Accepted:


WELLS FARGO FOOTHILL, INC.,

a California corporation, as Agent	 	 
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 	 	   	 	 
	 

	 	Name:	 	   	 	 
	 

	 	Title:	 	   	 	 







 


 









 







FINAL VERSION




EXHIBIT
B-1




FORM OF BORROWING BASE CERTIFICATE




Wells Fargo Foothill, Inc.

One Boston Place, 18th Floor

Boston, Massachusetts 02108

Attn: Business Finance Manager



The undersigned, Altra Industrial Motion, Inc., a Delaware corporation (“Parent”), pursuant to
Schedule 5.2 of that certain Credit Agreement dated as of November 30, 2004 (as amended,
restated, amended and restated, modified, supplemented, refinanced, renewed, or extended from time
to time, the “Credit Agreement”), entered into among Parent, its subsidiaries signatory thereto
(collectively with Parent, “Borrowers”), the lenders signatory thereto from time to time and Wells
Fargo Foothill, Inc., a California corporation, as the arranger and administrative agent (in such
capacity, together with its successors and assigns, if any, in such capacity, “Agent”), hereby
certifies to Agent that the following items, calculated in accordance with the terms and
definitions set forth in the Credit Agreement for such items are true and correct in all material
respects, and that no Default or Event of Default has occurred and is continuing after giving
effect to any currently requested Advances nor shall either be the result from making the requested
Advance.



All initially capitalized terms used in this Borrowing Base Certificate have the meanings
set forth in the Credit Agreement unless specifically defined herein.



[Remainder of page intentionally left blank.]





 


 









 







Effective Date of Calculation:
 _____________ 




	 	 	 	 	 	 	 	 	 
	A. Borrowing Base Calculation
	 	 	 	 	 	 	 	 
	 
	1. Eligible Accounts
	 	 	 	 	 	 	 	 
	 
	a. 85% of Eligible Accounts1
	 	$	                    	 	 	 	 	 
	 
	b. the amount, if any, of the Dilution Reserve
	 	$	                    	 	 	 	 	 
	 
	c.
Item 1.a. minus Item 1.b
	 	 	 	 	 	$	                    	 
	 
	2. Eligible Inventory
	 	 	 	 	 	 	 	 
	 
	a. $15,000,000
	 	$	15,000,000	 	 	 	 	 
	 
	b. 50% of the net book value of Eligible Inventory2
	 	$	                    	 	 	 	 	 
	 
	c. The lesser of Items 2.a. and 2.b.
	 	 	 	 	 	$	                    	 
	 
	3. Eligible Real Property and Equipment
	 	 	 	 	 	 	 	 
	 
	a. $7,500,000
	 	$	7,500,000	 	 	 	 	 
	 
	b. 20% of the Eligible Real Property and Equipment Book
Value3
	 	$	                    	 	 	 	 	 
	 
	c. The lesser of Items 3.a. and 3.b.
	 	 	 	 	 	$	                    	 
	 
	4. Reserves
	 	 	 	 	 	 	 	 
	 
	a. Bank Products Reserve
	 	$	                    	 	 	 	 	 





	 	 	 
	1	 	See Annex A

	 
	2	 	See Annex B

	 
	3	 	See Annex C




 


- 2 -









 








	 	 	 	 	 	 	 	 	 
	b. the sum of the aggregate amount of
reserves, if any, established by Agent under Section
2.1(b) of the Credit Agreement (including reserves
implemented in respect of Eligible Inventory and
Eligible Equipment located at one of the locations on
Schedule 4.5(a) that are not subject to a Collateral
Access Agreement)
	 	$	                    	 	 	 	 	 
	 
	c. Sum of Items 4.a. and 4.b.
	 	 	 	 	 	$	                    	 
	 
	5. Borrowing
Base (Item 1.c. plus Item 2.c.
plus Item 3.c. minus Item 4.c.):
	 	 	 	 	 	$	                    	 
	 
	6. Availability Calculation
	 	 	 	 	 	 	 	 
	 
	a. (i) Maximum Revolver Amount
	 	$	30,000,000	 	 	 	 	 
	 
	(ii) Letter of Credit Usage
	 	$	                    	 	 	 	 	 
	 
	(iii) outstanding Advances
	 	$	                    	 	 	 	 	 
	 
	(iv) Item 6.a.(i) minus Item 6.a.(ii) minus Item 6.a.(iii)
	 	$	                    	 	 	 	 	 
	 
	b. (i) Borrowing Base
	 	$	                    	 	 	 	 	 
	 
	(ii) Letter of Credit Usage
	 	$	                    	 	 	 	 	 
	 
	(iii) outstanding Advances
	 	$	                    	 	 	 	 	 
	 
	(iv) Item 6.b.(i) minus Item 6.b.(ii) minus Item 6.b.(iii)
	 	$	                    	 	 	 	 	 
	 
	c. lesser of Item 6.a. and 6.b.
	 	 	 	 	 	$	                    	 






 


- 3 -









 





	 	 	 	 	 	 	 	 	 
	B. Letters of Credit Calculation
	 	 	 	 	 	 	 	 
	 
	1. maximum L/C amount
	 	 	 	 	 	$	10,000,000	 
	 
	2. L/Cs permitted under Borrowing Base
	 	 	 	 	 	 	 	 
	 
	a. Borrowing
Base (from Section A, Item 5)
	 	$	                    	 	 	 	 	 
	 
	b. Amount of current outstanding Advances
	 	$	                    	 	 	 	 	 
	 
	c. Item
2.a. minus Item 2.b.
	 	 	 	 	 	$	                    	 
	 
	3. Maximum Revolver Limitation
	 	 	 	 	 	 	 	 
	 
	a. Maximum Revolver Amount
	 	$	                    	 	 	 	 	 
	 
	b. Amount of current outstanding Advances
	 	$	                    	 	 	 	 	 
	 
	c.
Item 3.a minus Item 3.b
	 	 	 	 	 	$	                    	 
	 
	4. Letter of Credit Usage plus the amount of any
proposed Letters of Credit
	 	 	 	 	 	$	                    	 
	 
	5. No L/C
Availability if Item 4 is greater than Item 1, Item 2.c or Item 3.c.
	 	 	 	 	 	$	                    	 





 


- 4 -









 





Additionally, the undersigned hereby certifies and represents and warrants to the Lender Group
on behalf of Borrowers that (i) as of the date hereof, each representation or warranty contained in
or pursuant to any Loan Document, any agreement, instrument, certificate, document or other writing
furnished at any time under or in connection with any Loan Document, is true and correct in all
material respects (except to the extent any representation or warranty expressly related to an
earlier date), (ii) no Default or Event of Default has occurred and is continuing on the date
hereof, nor will any thereof occur after giving effect to the request above, and (iii) all of the
foregoing is true and correct as of the effective date of the calculations set forth above and that
such calculations have been made in accordance with the requirements of the Credit Agreement.




Effective date of calculation:                     



	 	 	 	 	 
	 	ALTRA INDUSTRIAL MOTION, INC.,

a Delaware corporation, as Administrative Borrower

 	 
	 	By:  	
 	 
	 	 	Name:  	
 	 
	 	 	Title:  	
 	 



 


- 5 -









 





	 	 	 	 	 



Annex A




	 	 	 	 	 	 	 	 	 
	Total Accounts: Accounts created by a Borrower in the ordinary
course arising out of sale of goods or rendition of services
	 	 	 	 	 	$	                    	 
	 
	 	 	 	 	 	 	 	 
	less (without duplication)
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Accounts that the Account Debtor (i) has failed to pay
within 90 days (or, with respect to Accounts with
selling terms of more than 60 days, 105 days) after
the original invoice date, (ii) are more than 60 days
after the due date, or (iii) Accounts with selling
terms of more than 120 days,
	 	$	                    	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Accounts owed by an Account Debtor (or its Affiliates)
where 50% or more of all Accounts owed by that Account
Debtor (or its Affiliates) are deemed ineligible under
the immediately preceding clause
	 	$	                    	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Accounts with respect to which the Account Debtor is
an Affiliate of any Borrower or an employee or agent
of any Borrower or any Affiliate of Borrower
	 	$	                    	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Accounts arising in a transaction wherein goods are
placed on consignment or are sold pursuant to a
guaranteed sale, a sale or return, a sale on approval,
a bill and hold, or any other terms by reason of which
the payment by the Account Debtor may be conditional
	 	$	                    	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Accounts that are not payable in Dollars
	 	$	                    	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Accounts with respect to which the Account Debtor
either (i) does not maintain its chief executive office
in the United States, or (ii) is not organized under
the laws of the United States or any state thereof, or
(iii) is the government of any foreign country or
sovereign state, or of any state, province,
municipality, or other political subdivision thereof,
or of any department, agency, public corporation, or
other instrumentality thereof, unless (x) the Account
is supported by an irrevocable letter of credit
reasonably satisfactory to Agent (as to form,
substance, and issuer or domestic confirming bank) that
has been delivered to Agent and is directly drawable by
Agent, or (y) the Account is covered by credit
insurance in form, substance, and amount, and by an
insurer, reasonably satisfactory to Agent,
	 	$	                    	 	 	 	 	 






 


- 6 -









 





	 	 	 	 	 	 	 	 	 
	Accounts with respect to which the Account Debtor is the United
States or any department, agency, or instrumentality of the United
States or any state of the United States (exclusive, however, of
Accounts with respect to which the applicable Borrower has complied,
to the reasonable satisfaction of Agent, with the Assignment of Claims
Act, 31 USC § 3727, or any similar state or local law, if applicable),
	 	$	                    	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Accounts with respect to which the Account Debtor claims a credit from
any Borrower, has or has asserted a right of setoff, or has disputed
its obligation to pay all or any portion of the Account, to the extent
of such claim, right of setoff, or dispute,
	 	$	                    	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Accounts with respect to an Account Debtor whose total obligations
owing to Borrowers exceed 10% (such percentage, as applied to a
particular Account Debtor, being subject to reduction by Agent in its
Permitted Discretion if the creditworthiness of such Account Debtor
deteriorates) of all Eligible Accounts, to the extent of the
obligations owing by such Account Debtor in excess of such percentage;
provided, however, that as to the following Account Debtors, a
percentage limitation of 20% (in lieu of 10%) shall apply for purposes
hereof: Motion Industries, Kaman, John Deere, Mitsubishi, W.W. Granger
and AIT; provided, further, however, that, in each case, the amount of
Eligible Accounts that are excluded because they exceed the foregoing
percentage shall be determined by Agent based on all of the otherwise
Eligible Accounts prior to giving effect to any eliminations based
upon the foregoing concentration limit,
	 	$	                    	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Accounts with respect to which the Account Debtor is subject to an
Insolvency Proceeding, is not Solvent, or as to which a Borrower has
received written notice of an imminent Insolvency Proceeding of such
Account Debtor,
	 	$	                    	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Accounts with respect to which the Account Debtor is located in a
state or jurisdiction (e.g., New Jersey, Minnesota, and West Virginia)
that requires, as a condition to access to the courts of such
jurisdiction, that a creditor qualify to transact business, file a
business activities report or other report or form, or take one or
more other actions, unless the applicable Borrower has so qualified,
filed such reports or forms, or taken such actions (and, in each case,
paid any required fees or other charges), except to the extent that
the applicable Borrower may qualify subsequently as a foreign entity
authorized to transact business in such state or jurisdiction and gain
access to such courts, without incurring any cost or penalty viewed by
Agent, in its Permitted Discretion, to be significant in amount, and
such later qualification cures any access to such courts to enforce
payment of such Account,
	 	$	                    	 	 	 	 	 






 


- 7 -









 





	 	 	 	 	 	 	 	 	 
	Accounts, the collection of which, Agent, in its
Permitted Discretion, believes to be doubtful by reason
of the Account Debtor’s financial condition,
	 	 	 	$	                    	 	 	 
	 
	 	 	 	 	 	 	 	 
	Accounts that are not subject to a valid and perfected
first priority Agent’s Lien,
	 	 	 	$	                    	 	 	 
	 
	 	 	 	 	 	 	 	 
	Accounts with respect to which (i) the goods giving rise
to such Account have not been shipped and billed to the
Account Debtor, or (ii) the services giving rise to such
Account have not been performed and billed to the Account
Debtor
	 	 	 	$	                    	 	 	 
	 
	 	 	 	 	 	 	 	 
	Accounts that represent the right to receive progress
payments or other advance billings that are due prior to
the completion of performance by the applicable Borrower
of the subject contract for goods or services.
	 	 	 	$	                    	 	 	 
	 
	 	 	 	 	 	 	 	 
	Total Excluded Accounts
	 	 	 	 	 	$	                     	 
	 
	 	 	 	 	 	 	 	 
	Eligible Accounts (Total Accounts less Total Excluded Accounts):
	 	 	 	 	 	$	                     	 





 


- 8 -









 





Annex B




	 	 	 	 	 	 	 	 	 
	1. Total
Finished Goods Inventory: Inventory consisting of first
quality finished goods held for sale in the ordinary course of
Borrowers’ business
	 	 	 	 	 	$	                    	 
	 
	 	 	 	 	 	 	 	 
	less (without duplication)
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Inventory which Borrower does not have good, valid, and
marketable title thereto
	 	$	                    	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Inventory not located at one of the locations in the
continental United States set forth on Schedule 4.5(a) or
4.5(b) to the Credit Agreement (or in-transit from one such
location to another such location)
	 	$	                    	 	 	 	 	 
	 
	Inventory not subject to a valid and perfected first
priority Agent’s Lien
	 	$	                    	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Inventory consisting of goods returned or rejected by a
Borrower’s customers
	 	$	                    	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Inventory consisting of goods that are obsolete or slow
moving, work-in-process, raw materials or goods that
constitute spare parts, packaging and shipping materials,
supplies used or consumed in Borrower’s business, bill and
hold goods, defective goods, “seconds,” or Inventory
acquired on consignment
	 	$	                    	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Total Excluded Finished Goods Inventory
	 	 	 	 	 	$	                    	 
	 
	 	 	 	 	 	 	 	 
	Eligible
Finished Goods Inventory (Total Finished Goods Inventory less Total Excluded Finished Goods Inventory):
	 	 	 	 	 	$	                    	 
	 
	 	 	 	 	 	 	 	 
	2. Total
Raw Materials Inventory: Inventory consisting of first
quality raw materials to be used in Borrowers’ production process
	 	 	 	 	 	$	                    	 
	 
	 	 	 	 	 	 	 	 
	less (without duplication)
	 	 	 	 	 	 	 	 
	 
	Inventory which Borrower does not have good, valid, and
marketable title thereto
	 	$	                    	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Inventory not located at one of the locations in the
continental United States set forth on Schedule 4.5(a) or
4.5(b) to the Credit Agreement (or in-transit from one such
location to another such location)
	 	$	                    	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Inventory not subject to a valid and perfected first
priority Agent’s Lien
	 	$	                    	 	 	 	 	 






 


- 9 -









 





	 	 	 	 	 	 	 	 	 
	Inventory consisting of goods that are obsolete or slow moving,
work-in-process, finished goods, or goods that constitute spare parts, packaging
and shipping materials, supplies used or consumed in Borrower’s business, bill
and hold goods, defective goods, “seconds,” or Inventory acquired on consignment
	 	$	                    	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Total Excluded Raw Materials Inventory
	 	 	 	 	 	$	                    	 
	 
	 	 	 	 	 	 	 	 
	Eligible Raw Materials Inventory (Total Raw Materials Inventory less Total Excluded Raw Materials Inventory):
	 	 	 	 	 	$	                    	 
	 
	 	 	 	 	 	 	 	 
	Eligible Inventory (Eligible Finished Goods Inventory plus Eligible Raw Materials Inventory):
	 	 	 	 	 	$	                    	 






 


- 10 -









 





Annex C




	 	 	 	 	 
	Eligible
Equipment: Net book value of Equipment of Borrowers located at
the locations identified on Schedule 4.5(a) or 4.5(b) hereto, as such schedules may be amended or
supplemented from time to time in accordance with the Credit Agreement, such value to be as
determined from time to time by a qualified appraisal company selected by Agent, net of all
related costs and expense.
	 	$	                    	 
	 
	 	 	 	 
	Eligible
Real Property: Net book value of the Real Property Collateral of Borrowers located in
the United States as determined from time to time by a qualified appraisal company selected by
Agent, net of all related costs and expenses; provided,
however, that no such Real Property
Collateral shall be deemed to be “Eligible Real Property” until all of the following conditions
are satisfied with respect thereto: (a) Agent shall have been granted a first priority Mortgage
on such Real Property Collateral; (b) Agent shall have received mortgagee title insurance
policies (or marked commitments to issue the same) for such Real Property Collateral issued by
a title insurance company reasonably satisfactory to Agent in an amount reasonably satisfactory
to Agent assuring Agent that the Mortgage on such Real Property Collateral is a valid and
enforceable first priority mortgage Lien on such Real Property Collateral free and clear of all
defects and encumbrances except Permitted Liens, and such mortgagee title insurance policies
(or marked commitments to issue the same) otherwise shall be in form and substance reasonably
satisfactory to Agent; (c) Borrowers and their Subsidiaries shall have paid to said title
insurance company all expenses and premiums of said title insurance company in connection with
the issuance of such mortgagee title insurance policies (or marked commitments to issue the
same) and in addition shall, to the extent required, have paid all recording costs, stamp
taxes, mortgage taxes, intangibles taxes and other fees and costs (including reasonable
attorneys fees and expenses) incurred in connection therewith; and (d) Agent shall have
received such other documentation and opinions of counsel, in form and substance reasonably
satisfactory to Agent, in connection with the grant of such Mortgage as Agent shall request in
its Permitted Discretion, including, without limitation, surveys (or existing surveys and
survey affidavits that are (x) sufficient to have the “matters that would be shown on a survey”
exception deleted from the mortgagee policy of title insurance and (y) reasonably satisfactory
to Agent), financing statements and fixture filings.
	 	$	                    	 
	 
	 	 	 	 
	Eligible Real Property and Equipment Book Value (Eligible Equipment plus Eligible Real Property)
	 	$	                    	 







 


- 11 -











 




FinalVersion




EXHIBIT
C-1 




FORM OF COMPLIANCE CERTIFICATE




[on Parent’s letterhead]





			
	To:	 	Wells Fargo Foothill, Inc.

One Boston Place, 18th
Floor
 Boston, Massachusetts 02108

Attn: Business Finance Division Manager







				
	 	Re:	 	Compliance Certificate
dated                  






Ladies and Gentlemen:



Reference
is made to that certain CREDIT AGREEMENT (the “Credit
Agreement”) dated as of
November 30, 2004, by and among the lenders identified on the signature pages thereof (such
lenders, together with their respective successors and permitted assigns, are referred to
hereinafter each individually as a “Lender” and
collectively as the “Lenders”), WELLS FARGO
FOOTHILL, INC., a California corporation, as the arranger and administrative agent for the Lenders
(“Agent”), ALTRA INDUSTRIAL MOTION, INC., a Delaware
corporation (“Parent”), and each of its
Subsidiaries party thereto. Capitalized terms used in this Compliance Certificate have the
meanings set forth in the Credit Agreement unless specifically defined herein.



Pursuant to Schedule 5.3 of the Credit Agreement, the undersigned officer of Parent
hereby certifies on behalf of Parent, and not individually, that:



1. The financial information of Parent and its Subsidiaries furnished in Schedule 1
attached hereto, has been prepared in accordance with GAAP (except for year-end adjustments
and the lack of
footnotes), and fairly presents in all material respects the financial condition of Parent and
its Subsidiaries.



2. Such officer has reviewed the terms of the Credit Agreement and has made, or
caused to be made under his/her supervision, a review in reasonable detail of the transactions
and condition of
the Loan Parties during the accounting period covered by the financial statements delivered
pursuant to
Schedule 5.3 of the Credit Agreement.



3. Such review has not disclosed the existence on and as of the date hereof, and the
undersigned does not have actual knowledge of the existence as of the date hereof, of any
event or condition
that constitutes a Default or Event of Default, except for such conditions or events listed on
Schedule 2
attached hereto, specifying the nature and period of existence thereof and what action the
Loan Parties have
taken, are taking, or propose to take with respect thereto.



4. The representations and warranties of the Loan Parties set forth in the Credit
Agreement and the other Loan Documents are true and correct in all material respects on and as
of the date
hereof (except to the extent they relate to a specified date), except as set forth on
Schedule 3 attached hereto.



5. The
Loan Parties are in compliance with the applicable covenants contained in Section 6.16 of the Credit Agreement as demonstrated on Schedule 4 hereof.


 


 









 






IN WITNESS WHEREOF, this Compliance Certificate is executed by the undersigned this
                     day
of                     ,                     .




	 	 	 	 	 
	 	ALTRA INDUSTRIAL MOTION, INC.,

a Delaware corporation

 	 
	 	By:  	 	 
	 	 	Name: 	 	 
	 	 	Title:  	 	 



 


 









 





SCHEDULE 1 




Financial Information



 


 









 





SCHEDULE 2 




Default or Event of Default



 


 









 





SCHEDULE 3 




Representations and Warranties



 


 









 





SCHEDULE 4 




Financial Covenants




1. Fixed Charge Coverage Ratio.




Parent’s and its Subsidiaries’ Fixed Charge Coverage Ratio, measured on a
quarter-end basis,
for the 4 quarter period ending                     ,                      is                     :1.0, which [is/is not] greater than or equal to the
amount set forth in Section 6.16(a) of the Credit Agreement for the corresponding period.



2. Capital Expenditures.




Parent’s and Borrowers’ Capital Expenditures from the beginning of Parent’s most
recent
fiscal year to the date hereof is                     , (i) which [is/is not] less than or equal to the amount set
forth in
Section 6.16(b) of the Credit Agreement for the corresponding period.


 


 









 





Final Version




EXHIBIT
L-1




FORM OF LIBOR NOTICE




Wells Fargo Foothill, Inc., as Agent

under the below referenced Credit Agreement

One Boston Place

Boston, Massachusetts 02108




Ladies and Gentlemen:




Reference hereby is made to that certain Credit Agreement, dated as of November 30, 2004 (the
“Credit Agreement”), among Altra Industrial Motion, Inc., a Delaware corporation (“Parent”), each
of its Subsidiaries signatory thereto (Parent and such Subsidiaries each, a “Borrower” and
collectively, “Borrowers”), the lenders signatory thereto (the “Lenders”), and Wells Fargo
Foothill, Inc., a California corporation, as the arranger and administrative agent for the Lenders
(“Agent”). Capitalized terms used herein and not otherwise defined herein shall have the meanings
ascribed to them in the Credit Agreement.



This LIBOR Notice represents Administrative Borrower’s request to elect the LIBOR Option with
respect to [all or a portion of [outstanding Advances] bearing interest at a rate determined by
reference to the Base Rate] [the continuation of an outstanding LIBOR Rate Loan] in the amount of
$                     (the “LIBOR Rate Advance”)[, and is a written confirmation of the telephonic notice of
such election given to Agent].



The LIBOR Rate Advance will have an Interest Period of [1, 2, 3 or 6] month(s)
commencing on                     .



This LIBOR Notice further confirms Borrowers’ acceptance, for purposes of determining the rate
of interest based on the LIBOR Rate under the Credit Agreement, of the LIBOR Rate as determined
pursuant to the Credit Agreement.



Administrative Borrower represents and warrants that (i) as of the date hereof, each
representation or warranty contained in or pursuant to any Loan Document is true and correct in all
material respects (except to the extent any representation or warranty expressly related to an
earlier date) and (ii) no Default or Event of Default has occurred and is continuing on the date
hereof, nor will any thereof occur after giving effect to the request above.


 


 









 





Wells Fargo Foothill, Inc., as Agent

Page 2




	 	 	 	 	 	 	 
	 

	 	Dated:	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	ALTRA INDUSTRIAL MOTION, INC.,

a Delaware corporation, as
Administrative Borrower
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	Name: 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Title: 	 
	 

	 	 	 	 	 	 






Acknowledged by:




WELLS FARGO FOOTHILL, INC.,

a California corporation, as Agent




	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 

	 	 	 	 
	 	 	Name:
	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	Title:
	 	 	 	 
	 

	 	 	 	 	 	 







 


 









 







Schedule A-1




Agent’s Account




An account at a bank designated by Agent from time to time as the account into which
Administrative Borrower shall make all payments to Agent for the benefit of the Lender Group and
into which the Lender Group shall make all payments to Agent under this Agreement and the other
Loan Documents; unless and until Agent notifies Administrative Borrower and the Lender Group to the
contrary, Agent’s Account shall be that certain deposit account bearing account number 323-266193
and maintained by Agent with JPMorgan Chase Bank, 4 New York Plaza, 15th Floor, New York, New York
10004, ABA #021000021.


 


 









 





SCHEDULE
C-1




COMMITMENTS




	 	 	 	 	 
	Name of Lender	 	Commitment
	 
	Wells Fargo Foothill, Inc.

	 	$	30,000,000.00





 


2









 





SCHEDULE
D-1




DESIGNATED ACCOUNT




Account Name: WFBIUS6S

ABA Routing #: 121000248

Bank Name: Wells Fargo Bank, National Association

Bank Account #: 4121073308



 


3









 





SCHEDULE
P-1




PERMITTED HOLDERS




Genstar Capital, L.P. and its Affiliates.





 


4









 







SCHEDULE P-2




PERMITTED LIENS




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Original File	 	 
	 	 	 	 	 	 	Number, Lien	 	 
	 	 	 	 	 	 	Number, or	 	 
	 	 	 	 	 	 	Judgment Case	 	 
	Jurisdiction	 	Debtor Name	 	Secured Party	 	Number and Date	 	Description
	 
	 	 	 	 	 	 	 	 
	DE-SOS

	 	Boston Gear LLC
	 	J.P. Morgan Leasing Inc.
	 	1125259 7 09/27/2001
	 	Equipment
	DE-SOS

	 	 	 	Dell Financial Services
	 	2225191 0 09/06/2002
	 	Equipment
	DE-SOS

	 	 	 	Dell Financial Services
	 	3233068 9 09/09/2003
	 	Equipment
	DE-SOS

	 	 	 	Dell Financial Services
	 	3243294 9 09/19/2003
	 	Equipment
	DE-SOS

	 	 	 	Dell Financial Services
	 	4054198 9 02/26/2004
	 	Equipment
	DE-SOS

	 	 	 	Cisco Systems Capital Corporation
	 	1078983 9 08/07/2001
	 	Equipment
	MA-SOS

	 	 	 	Dell Financial Services
	 	759100 11/28/2000
	 	Equipment
	MA-SOS

	 	 	 	Dell Financial Services
	 	763361 12/15/2000
	 	Equipment
	MA-SOS

	 	 	 	Dell Financial Services
	 	774826 01/30/2001
	 	Equipment
	MA-SOS

	 	 	 	CIT Communications Finance

Corporation
	 	778262 02/09/2001
	 	Equipment
	MA-SOS

	 	 	 	Dell Financial Services, L.P.
	 	200100109030

02/22/2001
	 	Equipment
	MA-SOS

	 	 	 	Dell Financial Services, L.P.
	 	200102209350

05/11/2001
	 	Equipment
	MA-SOS

	 	 	 	Dell Financial Services, L.P.
	 	200102915710

06/05/2001
	 	Equipment
	MA-SOS

	 	 	 	Dell Financial Services, L.P.
	 	200106320150

08/02/2001
	 	Equipment





 


5









 





	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Original File	 	 
	 	 	 	 	 	 	Number, Lien	 	 
	 	 	 	 	 	 	Number, or	 	 
	 	 	 	 	 	 	Judgment Case	 	 
	Jurisdiction	 	Debtor Name	 	Secured Party	 	Number and Date	 	Description
	 
	 	 	 	 	 	 	 	 
	MA-SOS

	 	 	 	Dell Financial Services, L.P.
	 	2001104475140-08/07/2001
	 	Equipment
	MA-SOS

	 	 	 	Cisco Systems Capital Corporation
	 	200104484700 08/07/2001
	 	Equipment
	MA-SOS

	 	 	 	Dell Financial Services, L.P.
	 	200105122070 08/31/2001
	 	Equipment
	MA-SOS

	 	 	 	Dell Financial Services, L.P.
	 	200105372600 09/14/2001
	 	Equipment
	MA-SOS

	 	 	 	Dell Financial Services, L.P.
	 	200106879540 11/14/2001
	 	Equipment
	MA-SOS

	 	 	 	Dell Financial Services, L.P.
	 	200106946530 11/16/2001
	 	Equipment
	MA-SOS

	 	 	 	Dell Financial Services, L.P.
	 	200107543260 12/12/2001
	 	Equipment
	MA-SOS

	 	 	 	Dell Financial Services, L.P.
	 	200107903640 12/27/2001
	 	Equipment
	MA-SOS

	 	 	 	Dell Financial Services, L.P.
	 	200208302270 01/14/2002
	 	Equipment
	MA-SOS

	 	 	 	Dell Financial Services, L.P.
	 	200208371050 01/17/2002
	 	Equipment
	MA-SOS

	 	 	 	Dell Financial Services, L.P.
	 	200208446190 01/22/2002
	 	Equipment
	 
	 	 	 	 	 	 	 	 
	CA-LA County

	 	Warner Electric, Inc.
	 	State Tax Lien
	 	96 1358381 08/21/1996
	 	Franchise Tax Lien
$194.00
	DE-SOS

	 	 	 	CISCO Systems Capital Corporation
	 	1019952 6 03/05/2001
	 	Equipment
	DE-SOS

	 	 	 	Avnet Computer, a division of
Avent, Inc.
	 	2000791 8 01/02/2002
	 	Equipment
	DE-SOS

	 	 	 	Dana Commercial Credit Corporation
	 	2063389 5 02/19/2002
	 	Equipment





 


6









 





	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Original File	 	 
	 	 	 	 	 	 	Number, Lien	 	 
	 	 	 	 	 	 	Number, or	 	 
	 	 	 	 	 	 	Judgment Case	 	 
	Jurisdiction	 	Debtor Name	 	Secured Party	 	Number and Date	 	Description
	 
	 	 	 	 	 	 	 	 
	DE-SOS

	 	 	 	US Bancorp
	 	2251335 0 09/30/2002
	 	Equipment
	DE-SOS

	 	 	 	US Bancorp
	 	2299060 8 11/15/2002
	 	Equipment
	DE-SOS

	 	 	 	CISCO Systems Capital Corporation
	 	2325910 2 12/11/2002
	 	In lieu of filing
	DE-SOS

	 	 	 	CIT Communications Finance

Corporation
	 	3036825 1 03/06/2003
	 	Equipment
	DE-SOS

	 	 	 	Dell Financial Services
	 	3054953 8 03/06/2003
	 	Equipment
	DE-SOS

	 	 	 	Dell Financial Services
	 	3089161 7 04/04/2003
	 	Equipment
	DE-SOS

	 	 	 	CIT Communications Finance

Corporation
	 	3093379 9 04/10/2003
	 	Equipment
	DE-SOS

	 	 	 	CitiCapital Technology Finance, Inc.
	 	3095480 3 04/04/2003
	 	Equipment
	DE-SOS

	 	 	 	US Bancorp
	 	3286769 8 10/31/2003
	 	Equipment
	DE-SOS

	 	 	 	CIT Communications Finance

Corporation
	 	4068791 5 03/11/2004
	 	Equipment
	DE-SOS

	 	 	 	Dell Financial Services
	 	4172700 9 06/22/2004
	 	Equipment
	DE-SOS

	 	 	 	US Bancorp
	 	4213764 6 07/29/2004
	 	Equipment
	IL-SOS

	 	 	 	Dell Financial Services, L.P.
	 	4152504 FS

01/14/2000
	 	Equipment
	IL-SOS

	 	 	 	Dell Financial Services, L.P.
	 	4259461 FS

08/28/2000
	 	Equipment
	IL-SOS

	 	 	 	CISCO Systems Capital Corporation
	 	4347998 FS 03/02/01
	 	Equipment
	IL-SOS

	 	 	 	Dell Financial Services, L.P.
	 	4368943 FS

04/11/2001
	 	Equipment
	IL-SOS

	 	 	 	Dana Commercial Credit Corporation
	 	4407565 FS

06/28/2001
	 	Equipment






 


7









 







	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Original File	 	 
	 	 	 	 	 	 	Number, Lien	 	 
	 	 	 	 	 	 	Number, or	 	 
	 	 	 	 	 	 	Judgment Case	 	 
	Jurisdiction	 	Debtor Name	 	Secured Party	 	Number and Date	 	Description
	 
	 	 	 	 	 	 	 	 
	IL-SOS

	 	 	 	CCA Financial, LLC
	 	4407567 FS

06/28/2001
	 	Equipment
	IL-SOS

	 	 	 	CCA Financial, LLC
	 	4407568 FS

06/28/2001
	 	Equipment
	IL-SOS

	 	 	 	Dell Financial Services, L.P.
	 	7402252 FS

08/11/2003
	 	Equipment
	IL-SOS

	 	 	 	Dell Financial Services, L.P.
	 	7402260 FS

08/11/2003
	 	Equipment
	IL-SOS

	 	 	 	Dell Financial Services, L.P.
	 	8120528 FS

01/16/2004
	 	Equipment
	IL-SOS

	 	 	 	Dell Financial Services, L.P.
	 	8171238 FS

01/28/2004
	 	Equipment
	IL-SOS

	 	 	 	Dell Financial Services, L.P.
	 	8649383 FS

05/06/2004
	 	Equipment
	IL-SOS

	 	 	 	Dell Financial Services, L.P.
	 	8959072 FS

08/05/2004
	 	Equipment
	IL-SOS

	 	 	 	Dell Financial Services, L.P.
	 	8959285 FS

08/05/2004
	 	Equipment
	IL-SOS

	 	 	 	Dell Financial Services, L.P.
	 	9003916 FS

08/20/2004
	 	Equipment
	IL-SOS

	 	 	 	Dell Financial Services, L.P.
	 	9149503 FS

10/07/2004
	 	Equipment
	IL-SOS

	 	 	 	Dell Financial Services, L.P.
	 	9160604 FS

10/12/2004
	 	Equipment
	IL-SOS

	 	 	 	Dell Financial Services, L.P.
	 	9242376 FS

11/05/2004
	 	Equipment
	VA-SOS

	 	 	 	US Bancorp
	 	021021/7176-7
10/16/??
	 	Equipment
	 
	 	 	 	 	 	 	 	 
	DE-SOS

	 	Kilian Manufacturing Corporation
	 	Toyota Motor Credit Corporation
	 	22071862

8/9/2002
	 	Equipment





 


8









 





	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Original File	 	 
	 	 	 	 	 	 	Number, Lien	 	 
	 	 	 	 	 	 	Number, or	 	 
	 	 	 	 	 	 	Judgment Case	 	 
	Jurisdiction	 	Debtor Name	 	Secured Party	 	Number and Date	 	Description
	 
	 	 	 	 	 	 	 	 
	DE-SOS

	 	 	 	IOS Capital
	 	42964692 10/15/2004
	 	Equipment
	NY-SOS

	 	 	 	Pangate Handling Systems of New
York, Inc.
	 	[                    ]

12/1/97
	 	Equipment
	NY-SOS

	 	 	 	Pangate Handling Systems of New
York, Inc.
	 	069039 
4/7/2000
	 	Equipment
	 

	 	Ameridrives International, L.P.
	 	Bankers Trust Company1
	 	 	 	Trademarks






 








	 	 	 
	1	 	Certain trademarks may be subject to a Security Agreement between Zurn Industries,
Inc. and Bankers Trust Company, in favor of Bankers Trust Company, as
of January 21, 1997, recorded
on February 12, 1997 at Reel/Frame 1555/0945.






 


9











 




SCHEDULE P-3




PERMITTED INVESTMENTS




Equity Investments in:




	1.	 	The subsidiaries listed on Schedule 4.7(c).

	 
	2.	 	3091780 Nova Scotia Company

	 
	3.	 	Kilian Canada, ULC

	 
	4.	 	Warner Electric UK Group Ltd. (UK)

	 
	5.	 	Warner Electric UK Holding Ltd.

	 
	6.	 	Wichita Company Ltd. (UK)

	 
	7.	 	Warner Electric (Holding) SAS

	 
	8.	 	Warner Electric Europe SAS

	 
	9.	 	Warner Electric Group GmbH

	 
	10.	 	Warner Electric Verwaltungs GmbH

	 
	11.	 	Stieber GmbH

	 
	12.	 	Warner Electric (Neth) Holding, B.V.

	 
	13.	 	Warner Electric (Singapore) Ltd.

	 
	14.	 	Warner Electric (Taiwan) Ltd.

	 
	15.	 	Warner Electric Australia Pty. Ltd.

	 
	16.	 	Warner Shui Hing Limited

	 
	17.	 	Warner Electric (Thailand) Ltd.






The following intercompany indebtedness:2




	1.	 	Warner Electric International Holding holds a note from Warner Electric Group GmbH with a face amount of $14,586,675.

	 
	2.	 	Warner Electric International Holding holds a note from Warner Electric Group GmbH with a face value of 3,316,544.40 euros.

	 
	3.	 	Warner Electric International Holding holds a note from Warner Electric (Holding) SAS with a face amount of $2,888,283.

	 
	4.	 	Warner Electric International Holding holds a note from Warner Electric (Holding) SAS with a face value of $8,572,691.99.

	 
	5.	 	Warner Electric International Holding is owed approximately $3.3 million from Warner Electric (Holding) SAS.

	 
	6.	 	Warner Electric International Holding holds a note from Warner Electric Group Ltd. With a face amount of $2,254,241.

	 
	7.	 	Ameridrives International LP holds a note from Nuttall Gear LLC with a face amount of $13,251,525.

	 
	8.	 	Ameridrives International LP is owed approximately $1.7 million from Warner Electric LLC.






Joint Ventures:




	1.	 	Warner Electric LLC holds 40% of Elastomeric Actuators Inc.







 



	 	 	 
	2	 	Amounts may not reflect interest charges and other borrowings/repayments based on the cash flow of the applicable entities.





 


10









 







SCHEDULE
R-1




REAL PROPERTY COLLATERAL




	 	 	 	 	 
	Owner	 	Address	 	County
	 
	 	 	 	 
	Kilian Manufacturing Corporation

	 	1728 Burnet Ave. 
Syracuse, NY 13206
	 	Onondaga
	 
	 	 	 	 
	Ameridrives International, L.P.

	 	1802 Pittsburgh Avenue 
Erie, PA 16502
	 	Erie
	 
	 	 	 	 
	Warner Electric, LLC

	 	23601 Hoover Road 
Warren, MI 48089
	 	Macomb
	 
	 	 	 	 
	Warner Electric, LLC

	 	802 East Short Street 
Columbia City, IN 46725
	 	Whitley
	 
	 	 	 	 
	Warner Electric, LLC

	 	449 Gardner Street 
South Beloit, IL 61080
	 	Winnebago
	 
	 	 	 	 
	Warner Electric, LLC 



	 	2800 Fisher Road 
Wichita Falls, TX 76302	 	Wichita





 


11









 





Final Version




Schedule 1.1




As used in the Agreement, the following terms shall have the following definitions:



“Account” means an account (as that term is defined in the Code).



“Account Debtor” means any Person who is obligated on an Account, chattel paper, or a
general intangible.



“ACH Transactions” means any cash management or related services (including the
Automated Clearing House processing of electronic fund transfers through the direct Federal
Reserve Fedline system) provided by a Bank Product Provider for the account of Borrowers or any of
their respective Restricted Subsidiaries.



“Acquisition Documents” means the Stock Purchase Agreement, the LLC Purchase
Agreement, the Merger Agreement, and the other documents, instruments and agreements executed and
delivered in connection with the Acquisition Transactions, or otherwise relating thereto.



“Acquisition Transactions” means the transactions contemplated by the Stock Purchase
Agreement, the LLC Purchase Agreement and the Merger Agreement.




“Administrative Borrower” has the meaning specified therefor in
Section 16.9.




“Advances” has the meaning specified therefor in Section 2.1(a).



“Affiliate” means, as applied to any Person, any other Person who controls, is
controlled by, or is under common control with, such Person. For purposes of this definition,
“control” means the possession, directly or indirectly through one or more intermediaries, of the
power to direct the management and policies of a Person, whether through the ownership of Stock, by
contract, or otherwise; provided, however, that, for purposes of the definition of Eligible
Accounts and Section 6.13 hereof: (a) any Person which owns directly or indirectly 10% or
more of the Stock having ordinary voting power for the election of directors or other members of
the governing body of a Person or 10% or more of the partnership or other ownership interests of a
Person (other than as a limited partner of such Person) shall be deemed an Affiliate of such
Person, (b) each director (or comparable manager) of a Person shall be deemed to be an Affiliate of
such Person, and (c) each partnership or joint venture in which a Person is a general partner or
joint venturer shall be deemed an Affiliate of such Person.




“Agent” has the meaning specified therefor in the preamble to the
Agreement.



“Agent-Related Persons” means Agent, together with its Affiliates, officers,
directors, employees, attorneys, and agents.




“Agent’s Account” means the Deposit Account of Agent identified on Schedule A-1.



“Agent’s Liens” means the Liens granted by Borrowers and their respective Restricted
Subsidiaries to Agent under the Loan Documents.




“Agreement” means the Credit Agreement to which this Schedule 1.1
is attached.



“Applicable Prepayment Premium” has the meaning specified therefore in the Fee
Letter.


 


 









 





“Asset Sale” means any direct or indirect sale, issuance, conveyance, transfer,
lease (other than operating leases entered into in the ordinary course of business, consistent
with past practice), assignment or other transfer of:




(a) any Stock of any Borrower or any of its Restricted Subsidiaries; or



(b) any other property or assets of any Borrower or any of its Restricted Subsidiaries other
than in the ordinary course of business, consistent with past practice;




provided, that Asset Sales shall not include:



(1) a transaction or series of related transactions for which the applicable Loan Party
received aggregate consideration of less than $2,500,000;



(2) any distribution permitted pursuant to Section 6.10 or a transaction included in
the definition of Permitted Investment;




(3) the sale of Cash Equivalents;



(4) the creation of a Permitted Lien (but not the sale or other disposition of the property
subject to such Lien); and




(5) a transfer from a Loan Party to another Loan Party.




“Assignee” has the meaning specified therefor in Section 13.1(a).



“Assignment and Acceptance” means an Assignment and Acceptance Agreement
substantially in the form of Exhibit A-1.




“Authorized Person” means any officer or employee of Administrative
Borrower.



“Availability” means, as of any date of determination, the amount that Borrowers are
entitled to borrow as Advances hereunder (after giving effect to all then outstanding Obligations
(other than Bank Product Obligations) and all sublimits and reserves then applicable hereunder).



“Bank Product” means any financial accommodation extended to any Borrower or their
respective Restricted Subsidiaries by a Bank Product Provider (other than pursuant to the Loan
Documents) including: (a) ACH Transactions, (b) cash management, including controlled
disbursement, accounts or services, or (c) transactions under Hedge Agreements.



“Bank Product Agreements” means those agreements entered into from time to time by
any Borrower or any of its Restricted Subsidiaries with a Bank Product Provider in connection with
the obtaining of any of the Bank Products.



“Bank Product Obligations” means all obligations, liabilities, contingent
reimbursement obligations, fees, and expenses owing by any Borrower or any of its Restricted
Subsidiaries to any Bank Product Provider pursuant to or evidenced by the Bank Product Agreements
and irrespective of whether for the payment of money, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, and including all such amounts
that any Borrower or any of its Restricted Subsidiaries are obligated to reimburse to Agent or any
member of the Lender Group as a result of Agent or such member of the Lender Group purchasing
participations from, or executing indemnities or reimbursement obligations to, a Bank Product
Provider with respect to the Bank Products provided by such Bank Product Provider to any Borrower
or any of its Restricted Subsidiaries.


 


2









 






“Bank Product Provider” means Wells Fargo or any of its Affiliates.



“Bank Product Reserve” means, as of any date of determination, the amount of reserves
that Agent has established (based upon the Bank Product Providers’ reasonable determination of the
credit exposure of Borrowers and their respective Restricted Subsidiaries in respect of Bank
Products) in respect of Bank Products then provided or outstanding.



“Bankruptcy Code” means title 11 of the United States Code, as in effect from time to
time.



“Base LIBOR Rate” means the rate per annum, determined by Agent in accordance with
its customary procedures, and utilizing such electronic or other quotation sources as it considers
appropriate (rounded upwards, if necessary, to the next 1/100%), to be the rate at which Dollar
deposits (for delivery on the first day of the requested Interest Period) are offered to major
banks in the London interbank market 2 Business Days prior to the commencement of the requested
Interest Period, for a term and in an amount comparable to the Interest Period and the amount of
the LIBOR Rate Loan requested (whether as an initial LIBOR Rate Loan or as a continuation of a
LIBOR Rate Loan or as a conversion of a Base Rate Loan to a LIBOR Rate Loan) by Administrative
Borrower in accordance with the Agreement, which determination shall be conclusive in the absence
of manifest error.



“Base Rate” means, the rate of interest announced, from time to time, within Wells
Fargo at its principal office in San Francisco as its “prime rate”, with the understanding that
the “prime rate” is one of Wells Fargo’s base rates (not necessarily the lowest of such rates) and
serves as the basis upon which effective rates of interest are calculated for those loans making
reference thereto and is evidenced by the recording thereof after its announcement in such
internal publications as Wells Fargo may designate.



“Base Rate Loan” means the portion of the Advances that bears interest at a rate
determined by reference to the Base Rate.




“Base Rate Margin” means 1.25 percentage points.



“Board of Directors” means the board of directors (or comparable managers or other
equivalents) of any Borrower or any of its Restricted Subsidiaries or any committee thereof duly
authorized to act on behalf of the board of directors (or comparable managers or other
equivalents).



“Borrower” and “Borrowers” have the respective meanings specified therefor in
the preamble to the Agreement.



“Borrowing” means a borrowing hereunder consisting of Advances made on the same day
by the Lenders (or Agent on behalf thereof), or by Swing Lender in the case of a Swing Loan, or by
Agent in the case of a Protective Advance, in each case, to Administrative Borrower.




“Borrowing Base” means, as of any date of determination, the result of:



(a) 85% of the amount of Eligible Accounts, less the amount, if
any, of the Dilution Reserve, plus




(b) the lesser of



(i) $15,000,000 and




(ii) 50% of the net book value of Eligible Inventory, plus




(c) the lesser of




(i) $7,500,000 and




(ii) 20% of the Eligible Real Property and Equipment Book Value,
minus




 


3









 







(d) the sum of (i) the Bank Product Reserve, and (ii) the aggregate amount of reserves, if
any, established by Agent under Section 2.1(b).




“Borrowing Base Certificate” means a certificate in the form of
Exhibit B-1.



“Business Day” means any day that is not a Saturday, Sunday, or other day on which
banks are authorized or required to close in the state of New York, except that, if a
determination of a Business Day shall relate to a LIBOR Rate Loan, the term “Business Day” also
shall exclude any day on which banks are closed for dealings in Dollar deposits in the London
interbank market.



“Capital Expenditures” means, with respect to any Person for any period, the
aggregate of all expenditures by such Person and its Subsidiaries during such period that are
capital expenditures as determined in accordance with GAAP, whether such expenditures are paid in
cash or financed.



“Capitalized Lease Obligation” means that portion of the obligations under a Capital
Lease that is required to be capitalized in accordance with GAAP.



“Capital Lease” means a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.




“Cash Disposition Instruction” has the meaning specified therefor in
Section 2.7(b).



“Cash Equivalents” means (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States or issued by any agency thereof and backed by the
full faith and credit of the United States, in each case maturing within 1 year from the date of
acquisition thereof, (b) marketable direct obligations issued by any state of the United States or
any political subdivision of any such state or any public instrumentality thereof maturing within 1
year from the date of acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor’s Rating Group (“S&P”) or Moody’s
Investors Service, Inc. (“Moody’s”), (c) commercial paper maturing no more than 270 days
from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1
from S&P or at least P-1 from Moody’s, (d) certificates of deposit or bankers’ acceptances maturing
within 1 year from the date of acquisition thereof issued by any bank organized under the laws of the United States, any state thereof or the District of Columbia or the United States branch of a
foreign bank having at the date of acquisition thereof combined
capital and surplus of not less
than $250,000,000, (e) Deposit Accounts maintained with (i) any bank that satisfies the criteria
described in clause (d) above, or (ii) any other bank organized under the laws of the United States
or any state thereof so long as the amount maintained with any such other bank is less than or
equal to $100,000 and is insured by the Federal Deposit Insurance Corporation, (f) repurchase
obligations of any commercial bank satisfying the requirements of clause (d) of this definition or
recognized securities dealer having combined capital
and surplus of net less than $250,000,000, provided that such repurchase obligations have a term
of not more than seven (7) days and are securities that otherwise satisfy the criteria in clause
(a) or (d) above, and (g) Investments in money market funds substantially all of whose assets are
invested in the types of assets described in clauses (a) through (f) above.




 


4









 








“Cash Management Account” has the meaning specified therefor in
Section 2.7(a).



“Cash Management Agreements” means those certain cash management agreements, in form
and substance reasonably satisfactory to Agent, each of which is among a Borrower or one of its
Restricted Subsidiaries, Agent, and one of the Cash Management Banks.




“Cash Management Bank” has the meaning specified therefor in Section
2.7(a).




“Cash Sweep Instruction” has the meaning specified therefor in Section
2.7(b).



“Change of Control” means that (a) at any time prior to the first occurrence of a
Qualified IPO, Permitted Holders cease for any reason to be the beneficial owner (as defined in
Sections 13(d) and 14(d) of the Exchange Act), directly or indirectly, of 51% or more of the Stock
of Parent having the right to vote for the election of members of the Board of Directors thereof,
(b) at any time after the first occurrence of a Qualified IPO, (i) any “person” or “group” (within
the meaning of Sections 13(d) and 14(d) of the Exchange Act) is or becomes the beneficial owner
(as defined in Sections 13(d) and 14(d) of the Exchange Act), directly or indirectly, of more than
35% of the Stock of Parent having the right to vote for the election of members of the Board of
Directors thereof, and (ii) Permitted Holders cease for any reason to be the beneficial owner (as
defined in Sections 13(d) and 14(d) of the Exchange Act), directly or indirectly, of more of the
Stock of Parent having the right to vote for the election of members of the Board of Directors
thereof than such other “person” or “group,” (c) except for transactions permitted under
Section 6.3 or Section 6.4, any Borrower fails to own or control, directly or
indirectly, 100% of the Stock of each of its Subsidiaries that are Borrowers or Restricted
Subsidiaries (after giving effect to the Acquisition Transactions) having the right to vote for
the election of members of the Board of Directors thereof, or (d) a “Change of Control” (or other
comparable term) shall occur under any Indenture Document or any document evidencing any Permitted
Subordinated Indebtedness of Parent or its Subsidiaries.



“Closing Date” means the date of the making of the initial Advance (or other
extension of credit) hereunder or the date on which Agent sends Administrative Borrower a written
notice that each of the conditions precedent set forth in Section 3.1 either have been
satisfied or have been waived.




“Code” means the New York Uniform Commercial Code, as in effect from time to time.



“Collateral” means all assets and interests in assets and proceeds thereof now owned
or hereafter acquired by Borrowers or any of their respective Restricted Subsidiaries in or upon
which a Lien is granted under any of the Loan Documents.



“Collateral Access Agreement” means a landlord waiver, bailee letter, or
acknowledgement agreement of any lessor, warehouseman, processor, consignee, or other Person in
possession of, having a Lien upon, or having rights or interests in Borrower’s or any of their
respective Restricted Subsidiaries’ books and records, Equipment or Inventory, in each case, in
form and substance reasonably satisfactory to Agent.



“Collections” means all cash, checks, notes, instruments, and other items of payment
(including insurance proceeds, proceeds of cash sales, rental proceeds, and tax refunds).


 


5









 





“Commitment” means, with respect to each Lender, its Commitment, and, with respect
to all Lenders, their Commitments, in each case as such Dollar amounts are set forth beside such
Lender’s name under the applicable heading on
Schedule C-1 or in the Assignment and
Acceptance pursuant to which such Lender became a Lender hereunder, as such amounts may be
reduced or increased from time to time pursuant to assignments made in accordance with the
provisions of Section 13.1.



“Compliance Certificate” means a certificate substantially in the form of Exhibit
C-1 delivered by the chief financial officer, controller, treasurer, vice president of finance
or another officer performing comparable duties to those typically granted to any of the foregoing
of Parent to Agent.



“Consolidated EBITDA” means, with respect to any fiscal period, the sum (without
duplication) of:




(a) Consolidated Net Income; and




(b) to the extent Consolidated Net Income has been reduced thereby:




(i) all income taxes paid or accrued in accordance with GAAP for such period;




(ii) Interest Expense and interest attributable to write-offs of deferred financing costs;




(iii) management fees paid pursuant to the Management Agreement;




(iv) non-cash non-recurring charges;

(v) cash non-recurring charges in an aggregate amount not to exceed
$1,000,000 in any fiscal year; and




(vi) Consolidated Non-cash Charges less any non-cash items
increasing Consolidated Net Income for such period.




all as determined on a consolidated basis in accordance with GAAP.



“Consolidated Net Income” means, for any period, the aggregate net income (or loss)
of Parent and its Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided, that there shall be excluded therefrom (to the extent otherwise
included therein):



(a) gains from Asset Sales and extraordinary gains, in each case together with any provision
for taxes on such gains;



(b) the net income (but not loss) of any Subsidiary of Parent to the extent that the
declaration of dividends or similar distributions by that Subsidiary of that income is restricted
by contract, operation of law or otherwise;



(c) the net income (but not loss) of any Person, other than a Borrower or a Restricted
Subsidiary of any Borrower, except to the extent of cash dividends or distributions paid to any
Borrower or any of its Restricted Subsidiaries by such Person;


 


6









 





(d) any restoration to income of any material contingency reserve, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at any time following
the Closing Date;



(e) income or loss attributable to discontinued operations (including without limitation,
operations disposed of during such period whether or not such operations were classified or
discontinued);



(f) all gains realized on or because of the purchase or other acquisition by any Borrower, or
any of their respective Restricted Subsidiaries of any securities of such Person or any of its
Restricted Subsidiaries;




(g) the cumulative effect of a change in accounting principles; and



(h) in the case of a successor to Parent by consolidation or merger or as a transferee of the
Parent’s assets, any earnings of the successor corporation prior to such consolidations, merger or
transfer of assets.



“Consolidated Non-cash Charges” mean, with respect to any Person, for any period, the
aggregate depreciation, amortization and other non-cash items and expenses of such Person and its
consolidated Subsidiaries to the extent they reduce Consolidated Net Income of such Person for
such period, determined on a consolidated basis in accordance with GAAP (excluding any such
charges constituting an extraordinary item or loss or any such charge that requires an accrual of
or a reserve for cash charges for any future period).



“Control Agreement” means a control agreement, in form and substance reasonably
satisfactory to Agent, executed and delivered by a Borrower or one of their respective Restricted
Subsidiaries, Agent, and the applicable securities intermediary (with respect to a Securities
Account) or bank (with respect to a Deposit Account).



“Controlled Foreign Corporation” means “controlled foreign corporation” as defined in
the IRC.



“Copyright Security Agreement” has the meaning specified therefor in the Security
Agreement.



“Daily Balance” means, as of any date of determination and with respect to any
Obligation, the amount of such Obligation owed at the end of such day.



“Default” means an event, condition, or default that, with the giving of notice, the
passage of time, or both, would be an Event of Default.



“Defaulting Lender” means any Lender that fails to make any Advance (or other
extension of credit) that it is required to make hereunder on the date that it is required to do so
hereunder.



“Defaulting Lender Rate” means (a) for the first 3 days from and after the date the
relevant payment is due, the Base Rate, and (b) thereafter, the interest rate then applicable to
Advances that are Base Rate Loans (inclusive of the Base Rate Margin applicable thereto).




“Deposit Account” means any deposit account (as that term is defined in the
Code).


 


7









 





“Designated Account” means the Deposit Account of Administrative Borrower identified
on Schedule D-1.




“Designated Account Bank” has the meaning specified therefor in
Schedule D-1.



“Dilution” means, as of any date of determination, a percentage, based upon the
experience of the immediately prior 180 consecutive days, that is the result of dividing the
Dollar amount of (a) bad debt write-downs, discounts, advertising allowances, credits, or other
dilutive items with respect to Borrowers’ Accounts during such period, by (b) Borrowers’ billings
with respect to Accounts during such period.



“Dilution Reserve” means, as of any date of determination, an amount sufficient to
reduce the advance rate against Eligible Accounts by 1 percentage point for each percentage point
by which Dilution is in excess of 5.0%.




“Disposition” has the meaning specified therefor in Section 6.4.




“Dollars” or “$” means United States dollars.



“EBITDA” means, with respect to any fiscal period and any Person, such Person’s and
its Subsidiaries’ consolidated net earnings (or loss), minus extraordinary gains and interest
income, plus interest expense, income taxes, and depreciation and amortization for such period, in
each case, as determined in accordance with GAAP.



“Eligible Accounts” means those Accounts created by a Borrower in the ordinary course
of its business, that arise out of its sale of goods or rendition of services, and that are not
excluded as ineligible by virtue of one or more of the excluding criteria set forth below;
provided, however, that such criteria may be revised from time to time by Agent in Agent’s
Permitted Discretion to address the results of any audit performed by Agent from time to time
after the Closing Date; provided, further, however, that Agent shall use
commercially reasonable efforts to notify Administrative Borrower at or before the time such
eligibility criteria are revised. In determining the amount to be included, Eligible Accounts
shall be calculated net of customer deposits and unapplied cash. Eligible Accounts shall not
include the following:



(a) Accounts that the Account Debtor (i) has failed to pay within 90 days (or, with respect
to Accounts with selling terms of more than 60 days, 105 days) after the original invoice date,
(ii) are more than 60 days after the due date, or (iii) Accounts with selling terms of more than
120 days,



(b) Accounts owed by an Account Debtor (or its Affiliates) where 50% or more of all Accounts
owed by that Account Debtor (or its Affiliates) are deemed ineligible under clause (a) above,



(c) Accounts with respect to which the Account Debtor is an Affiliate of any Borrower or an
employee or agent of any Borrower or any Affiliate of any Borrower,



(d) Accounts arising in a transaction wherein goods are placed on consignment or are sold
pursuant to a guaranteed sale, a sale or return, a sale on approval, a bill and hold, or any other
terms by reason of which the payment by the Account Debtor may be conditional,




(e) Accounts that are not payable in Dollars,


 


8









 





(f) Accounts with respect to which the Account Debtor either (i) does not maintain its chief
executive office in the United States, or (ii) is not organized under the laws of the United
States or any state thereof, or (iii) is the government of any foreign country or sovereign
state, or of any state, province, municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality thereof, unless (x) the Account
is supported by an irrevocable letter of credit reasonably satisfactory to Agent (as to form,
substance, and issuer or domestic confirming bank) that has been delivered to Agent and is
directly drawable by Agent, or (y) the Account is covered by credit insurance in form, substance,
and amount, and by an insurer, reasonably satisfactory to Agent,



(g) Accounts with respect to which the Account Debtor is the United States or any
department, agency, or instrumentality of the United States or any state of the United States
(exclusive, however, of Accounts with respect to which the applicable Borrower has complied, to
the reasonable satisfaction of Agent, with the Assignment of Claims Act, 31 USC § 3727, or any
similar state or local law, if applicable),



(h) Accounts with respect to which the Account Debtor claims a credit from any Borrower, has
or has asserted a right of setoff, or has disputed its obligation to pay all or any portion of the
Account, to the extent of such claim, right of setoff, or dispute,



(i) Accounts with respect to an Account Debtor whose total obligations owing
to Borrowers exceed 10% (such percentage, as applied to a particular Account Debtor, being subject
to reduction by Agent in its Permitted Discretion if the creditworthiness of such Account Debtor
deteriorates) of all Eligible Accounts, to the extent of the obligations owing by such Account
Debtor in excess of such percentage; provided, however, that as to the following
Account Debtors, a percentage limitation of 20% (in lieu of 10%) shall apply for purposes hereof:
Motion Industries, Kaman, John Deere, Mitsubishi, W.W. Granger and AIT; provided,
further, however, that, in each case, the amount of Eligible Accounts that are
excluded because they exceed the foregoing percentage shall be determined by Agent based on all of
the otherwise Eligible Accounts prior to giving effect to any eliminations based upon the
foregoing concentration limit,



(j) Accounts with respect to which the Account Debtor is subject to an
Insolvency Proceeding, is not Solvent, or as to which a Borrower has received written notice of an
imminent Insolvency Proceeding of such Account Debtor,



(k) Accounts with respect to which the Account Debtor is located in a state or jurisdiction
(e.g., New Jersey, Minnesota, and West Virginia) that requires, as a condition to access to the
courts of such jurisdiction, that a creditor qualify to transact business, file a business
activities report or other report or form, or take one or more other actions, unless the applicable
Borrower has so qualified, filed such reports or forms, or taken such actions (and, in each case,
paid any required fees or other charges), except to the extent that the applicable Borrower may
qualify subsequently as a foreign entity authorized to transact business in such state or
jurisdiction and gain access to such courts, without incurring any cost or penalty viewed by Agent,
in its Permitted Discretion, to be significant in amount, and such later qualification cures any
access to such courts to enforce payment of such Account,



(l) Accounts, the collection of which, Agent, in its Permitted Discretion,
believes to be doubtful by reason of the Account Debtor’s financial condition,




(m) Accounts that are not subject to a valid and perfected first priority Agent’s Lien,


 


9









 





(n) Accounts with respect to which (i) the goods giving rise to such Account have not been
shipped and billed to the Account Debtor, or (ii) the services giving rise to such Account have
not been performed and billed to the Account Debtor, or



(o) Accounts that represent the right to receive progress payments or other advance billings
that are due prior to the completion of performance by the applicable Borrower of the subject
contract for goods or services.



“Eligible Equipment” means the Equipment of Borrowers located at the locations
identified on Schedules 4.5(a) and 4.5(b) hereto, as such schedules may be amended
or supplemented from time to time in accordance with the Agreement.



“Eligible Finished Goods Inventory” means Inventory of Borrowers consisting of first
quality finished goods held for sale in the ordinary course of Borrowers’ business and that is not
excluded as ineligible by virtue of one or more of the excluding criteria set forth below;
provided, however, that such criteria may be revised from time to time by Agent in
Agent’s Permitted Discretion to address the results of any audit or appraisal performed by Agent
from time to time after the Closing Date; provided, further, however, that Agent
shall use commercially reasonable efforts to notify Administrative Borrower at or before the time
such eligibility criteria are revised. In determining the amount to be so included, Inventory
shall be valued at the lower of cost computed on a first-in first-out basis in accordance with
GAAP or market value on a basis consistent with Borrowers’ historical accounting practices. An
item of Inventory shall not be included in Eligible Finished Goods Inventory if:




(a) a Borrower does not have good, valid, and marketable title thereto,



(b) it is not located at one of the locations in the continental United States set forth on
Schedules 4.5(a) and 4.5(b), as such schedules may be amended from time to time in
accordance with the Agreement (or in-transit from one such location to another such location),




(c) it is not subject to a valid and perfected first priority Agent’s Lien,




(d) it consists of goods returned or rejected by a Borrower’s customers, or



(e) it consists of goods that are obsolete or slow moving, work-in-process, raw materials, or
goods that constitute spare parts, packaging and shipping materials, supplies used or consumed in
a Borrower’s business, bill and hold goods, defective goods, “seconds,” or Inventory acquired on
consignment.



“Eligible Inventory” means, collectively, Eligible Finished Goods Inventory and
Eligible Raw Materials Inventory.



“Eligible Raw Materials Inventory” means Inventory of Borrowers consisting of first
quality raw materials to be used in Borrowers’ production process and that is not excluded as
ineligible by virtue of one or more of the excluding criteria set forth below; provided,
however, that such criteria may be revised from time to time by Agent in Agent’s Permitted
Discretion to address the results of any audit or appraisal performed by Agent from time to time
after the Closing Date; provided, further, however, that Agent shall use commercially
reasonable efforts to notify Administrative Borrower at or before the time such eligibility
criteria are revised. In determining the amount to be so included, Inventory shall be valued at the
lower of cost computed on a first-in first-out basis in accordance with GAAP or market value on a
basis consistent with Borrowers’ historical accounting practices. An item of Inventory shall not be
included in Eligible Raw Materials Inventory if:




(a) a Borrower does not have good, valid, and marketable title thereto,


 


10









 





(b) it is not located at one of the locations in the continental United States set forth on
Schedules 4.5(a) and 4.5(b), as such schedules may be amended or supplemented from time to
time in accordance with the Agreement (or in-transit from one such location to another such
location),




(c) it is not subject to a valid and perfected first priority Agent’s Lien, or



(d) it consists of goods that are obsolete or slow moving, work-in-process, finished goods,
or goods that constitute spare parts, packaging and shipping materials, supplies used or consumed
in a Borrower’s business, bill and hold goods, defective goods, “seconds,” or Inventory acquired
on consignment.



“Eligible Real Property” means the Real Property Collateral of Borrowers located in
the United States; provided, however, that no such Real Property Collateral shall be
deemed to be “Eligible Real Property” until all of the following conditions are satisfied with
respect thereto: (a) Agent shall have been granted a first priority Mortgage on such Real Property
Collateral; (b) Agent shall have received mortgagee title insurance policies (or marked
commitments to issue the same) for such Real Property Collateral issued by a title insurance
company reasonably satisfactory to Agent in an amount reasonably satisfactory to Agent assuring
Agent that the Mortgage on such Real Property Collateral is a valid and enforceable first priority
mortgage Lien on such Real Property Collateral free and clear of all defects and encumbrances
except Permitted Liens, and such mortgagee title insurance policies (or marked commitments to
issue the same) otherwise shall be in form and substance reasonably satisfactory to Agent; (c)
Borrowers and their Subsidiaries shall have paid to said title insurance company all expenses and
premiums of said title insurance company in connection with the issuance of such mortgagee title
insurance policies (or marked commitments to issue the same) and in addition shall, to the extent
required, have paid all recording costs, stamp taxes, mortgage taxes, intangibles taxes and other
fees and costs (including reasonable attorneys fees and expenses) incurred in connection
therewith; and (d) Agent shall have received such other documentation and opinions of counsel, in
form and substance reasonably satisfactory to Agent, in connection with the grant of such Mortgage
as Agent shall request in its Permitted Discretion, including, without limitation, surveys (or
existing surveys and survey affidavits that are (x) sufficient to have the “matters that would be
shown on a survey” exception deleted from the mortgagee policy of title insurance and (y)
reasonably satisfactory to Agent), financing statements and fixture filings.



“Eligible Real Property and Equipment Book Value” means the net book value of the
Eligible Real Property and the Eligible Equipment, such value to be as determined from time to
time by a qualified appraisal company selected by Agent, net of all related costs and expenses.



“Eligible Transferee” means (a) a commercial bank organized under the laws of the
United States, or any state thereof, and having total assets in excess of $250,000,000, (b) a
commercial bank organized under the laws of any other country which is a member of the Organization
for Economic Cooperation and Development or a political subdivision of any such country and which
has total assets in excess of $250,000,000, provided that such bank is acting through a branch or
agency located in the United States, (c) a finance company, insurance company, or other financial
institution or fund that is engaged in making, purchasing, or otherwise investing in commercial
loans in the ordinary course of its business and having (together with its Affiliates) total assets
in excess of $250,000,000, (d) any Affiliate (other than individuals) of a Lender, (e) so long as
no Event of Default has occurred and is continuing, any other Person approved by Agent and
Administrative Borrower (which approval of Administrative Borrower shall not be unreasonably
withheld, delayed, or conditioned), and (f) during the continuation of an Event of Default, any
other Person approved by Agent.


 


11









 





“Environmental Actions” means any complaint, summons, citation, notice, directive,
order, claim, litigation, investigation, judicial or administrative proceeding or judgment from
any Governmental Authority, or any third party alleging violations of Environmental Laws or
releases of Hazardous Materials in violation of Environmental Laws from (a) any assets,
properties, or businesses of any Borrower, any of their respective Subsidiaries, or any of their
predecessors in interest, (b) from adjoining properties or businesses, or (c) from or onto any
facilities which received Hazardous Materials generated by any Borrower, any of their respective
Subsidiaries, or any of their predecessors in interest.




“Environmental Claim” has the meaning specified therefore in Section
4.14.



“Environmental Law” means any applicable federal, state, provincial, foreign or local
statute, law, rule, regulation, ordinance, code, binding and enforceable guideline, binding and
enforceable written policy or rule of common law now or hereafter in effect and in each case as
amended, or any binding judicial or administrative interpretation thereof, including any judicial
or administrative order, consent decree or judgment, in each case, to the extent binding on any
Borrower or any of their respective Subsidiaries, relating to the environment, or the effect of
the environment on employee health, in each case as amended from time to time.



“Environmental Liabilities” means all liabilities, monetary obligations, losses,
damages, punitive damages, consequential damages, treble damages, costs and expenses (including
all reasonable fees, disbursements and expenses of counsel, experts, or consultants, and costs of
investigation and feasibility studies), fines, penalties, sanctions, and interest incurred as a
result of any claim or demand, or Remedial Action required, by any Governmental Authority or any
third party, and which relate to any Environmental Action.



“Environmental Lien” means any Lien in favor of any Governmental Authority for
Environmental Liabilities.




“Equipment” means equipment (as that term is defined in the Code).



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



“ERISA Affiliate” means each business or entity which is a member of a “controlled
group of corporations”, under “common control” or an “affiliated service group” with any Borrower
or any of its Restricted Subsidiaries within the meaning of Section 414(b), (c) or (m) of the IRC,
required to be aggregated with any Borrower or any of its Restricted Subsidiaries under Section
414(o) of the IRC, or is under “common control” with any Borrower or any of its Restricted
Subsidiaries, within the meaning of Section 4001(a)(14) of ERISA.



“ERISA Event” means (a) a reportable event as defined in Section 4043 of ERISA and the
regulations issued under such Section with respect to a Pension Plan, excluding, however, such
events as to which the PBGC by regulation has waived the requirement of Section 4043(a) of ERISA
that it be notified within 30 days of the occurrence of such event; (b) a withdrawal by any
Borrower, any of their respective Restricted Subsidiaries, or any ERISA Affiliate from a Pension
Plan or the termination of any Pension Plan resulting in liability under Sections 4063 or 4064 of
ERISA; (c) the withdrawal of any Borrower, any of their respective Restricted Subsidiaries, or
ERISA Affiliate in a complete or partial withdrawal (within the meaning of Section 4203 and 4205 of
ERISA) from any Multiemployer Plan if there is any potential liability therefor, or the receipt by
any Borrower, any of their respective Restricted Subsidiaries, or ERISA Affiliate of notice from
any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245
of ERISA; (d) the filing of a notice of intent to terminate, the treatment of a plan



 


12












 




amendment as a termination under Section 4041(c) of ERISA, or the treatment of a plan amendment as a
termination under Section 4041(e) of ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan; (e) the imposition of liability on any Borrower, any of their respective
Restricted Subsidiaries, or any ERISA Affiliate pursuant to Sections 4062(e) or 4069 of ERISA or
by reason of the application of Section 4212(c) of ERISA; (f) the failure by any Borrower, any of
their respective Restricted Subsidiaries, or any ERISA Affiliate to make any required contribution
to a Pension Plan, or the failure to meet the minimum funding standard of Section 412 of the IRC
with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the
IRC) or the failure to make by its due date a required installment under Section 412(m) of the IRC
with respect to any Pension Plan or the failure to make any required contribution to a
Multiemployer Plan; (g) an event or condition which 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 Pension Plan or Multiemployer Plan; (h) the imposition of any material liability
under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of
ERISA, upon any Borrower, any of their respective Restricted Subsidiaries or any ERISA Affiliate;
(i) an application for a funding waiver under Section 303 of ERISA or an extension of any
amortization period pursuant to Section 412 of the IRC with respect to any Pension Plan; (j) the
occurrence of a non-exempt prohibited transaction under Sections 406 or 407 of ERISA for which any
Borrower, or any of their respective Restricted Subsidiaries, may be directly or indirectly liable
and which is reasonably expected to result in a material liability to any Borrower or any of its
Restricted Subsidiaries; (k) the occurrence of an act or omission which could give rise to the
imposition on any Borrower, any of their respective Restricted Subsidiaries, or any ERISA
Affiliate of material fines, material penalties, material taxes or material related charges under
Chapter 43 of the IRC or under Sections 409, 502(c),
(i) or (1) or 4071 of ERISA; (l) the
assertion of a material claim (other than routine claims for benefits) against any Plan or the
assets thereof, or against any Borrower or any of its Restricted Subsidiaries in connection with
any such Plan; (m) receipt from the Internal Revenue Service of notice of the failure of any
Qualified Plan to qualify under Section 401(a) of the IRC, or the failure of any trust forming
part of any Qualified Plan to fail to qualify for exemption from taxation under Section 501(a) of
the IRC; or (n) the imposition of any lien on any of the rights, properties or assets of any
Borrower, any of their respective Restricted Subsidiaries, or any ERISA Affiliate, in either case
pursuant to Section 302(f) of ERISA or Title IV of ERISA or to the penalty or excise tax
provisions of the IRC or to Section 401(a)(29) or 412(n) of the IRC.



“Event of Default” has the meaning specified therefor in Section 7.



“Excess Availability” means, as of any date of determination, the amount equal to
Availability minus the aggregate amount, if any, of all trade payables of Borrowers and their
Restricted Subsidiaries more than sixty (60) days past due (excluding payments which are the
subject of a Permitted Protest so long as Agent receives documentation with respect to such
Permitted Protest that is reasonably satisfactory to Agent), in each case as determined by Agent
in its Permitted Discretion.



“Exchange Act” means the Securities Exchange Act of 1934, as in effect from time to time.



“Fair Market Value” means, with respect to any asset or property, the price which
could be negotiated in an arm’s length, free market transaction, for cash, between a willing seller
and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the
transaction. Fair Market Value shall be determined by the Board of Directors of a Loan Party acting
reasonably and in good faith, and shall be evidenced by a resolution of such Loan Party’s Board of
Directors.



“Fee Letter” means that certain fee letter between Borrowers and Agent, in form and substance
reasonably satisfactory to Agent.


 


13









 





“Fixed Charges” means with respect to Parent and its Subsidiaries for any period, the sum,
without duplication, of (a) Interest Expense, (b) principal payments required to be paid during
such period in respect of Indebtedness, and (c) all federal, state, and local income taxes
accrued for such period.



“Fixed Charge Coverage Ratio” means, with respect to Parent and its Subsidiaries for
any period, the ratio of (a) Consolidated EBITDA for such period minus Capital Expenditures made
(to the extent not already incurred in a prior period) or incurred during such period, to (b)
Fixed Charges for such period.



“Foreign Lender” has the meaning specified therefore in Section
15.11(b)(i).



“Funding Date” means the date on which a Borrowing occurs.



“Funding Losses” has the meaning specified therefor in Section
2.13(b)(ii).



“GAAP” means generally accepted accounting principles as in effect from time to time in the
United States, consistently applied.



“Governing Documents” means, with respect to any Person, the certificate or articles
of incorporation, by-laws, or other organizational documents of such Person.



“Governmental Authority” means any federal, state, local, or other governmental or
administrative body, instrumentality, board, department, or agency or any court, tribunal,
administrative hearing body, arbitration panel, commission, or other similar dispute-resolving
panel or body.



“Guarantors” means each Restricted Subsidiary of Parent that is not a Borrower and each other
Subsidiary of Parent that executes a joinder to the Guaranty after the Closing Date in accordance
with Section 5.16; and “Guarantor” means any one of them.



“Guaranty” means that certain general continuing guaranty executed and delivered by each
Guarantor in favor of Agent for the benefit of the Lender Group and the Bank Product Providers, in
form and substance satisfactory to Agent.



“Hazardous Materials” means (a) substances that are defined or listed in, or
otherwise classified pursuant to, any applicable Environmental Laws or regulations as “hazardous
substances,” “hazardous materials,” “hazardous wastes,” “toxic substances,” or any other
formulation intended to define, list, or classify substances by reason of deleterious properties
such as ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity, or “EP
toxicity,” (b) oil, petroleum, or petroleum derived substances, natural gas, natural gas liquids,
synthetic gas, drilling fluids, produced waters, and other wastes associated with the exploration,
development, or production of crude oil, natural gas, or geothermal resources, (c) any flammable
substances or explosives or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of polychlorinated biphenyls
in excess of 50 parts per million.



“Hedge Agreement” means any and all agreements, or documents now existing or hereafter
entered into by a Borrower or any of their respective Restricted Subsidiaries that provide for an
interest rate, credit, commodity or equity swap, cap, floor, collar, forward foreign exchange
transaction, currency swap, cross currency rate swap, currency option, or any combination of, or
option with respect to, these or similar transactions, for the purpose of hedging a Borrower’s or
any of their respective Restricted Subsidiaries’ exposure to fluctuations in interest or exchange
rates, loan, credit exchange, security or currency valuations or commodity prices.


 


14









 





“Holdings” means Altra Holdings, Inc., a Delaware corporation.



“Holdout Lender” has the meaning specified therefor in Section 14.2(a).



“Indebtedness” means (a) all obligations for borrowed money, (b) all obligations evidenced by
bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations
in respect of letters of credit, bankers acceptances, (c) all obligations as a lessee under
Capital Leases, (d) all obligations or liabilities of others secured by a Lien on any asset of a
Person or its Subsidiaries, irrespective of whether such obligation or liability is assumed (with
the amount of such Indebtedness being the lesser of the Indebtedness secured thereby or the book
value of the assets constituting security therefor), (e) all obligations to pay the deferred
purchase price of assets (other than trade payables incurred in the ordinary course of business
and repayable in accordance with customary trade practices), (f) all obligations owing under Hedge
Agreements, and (g) any obligation guaranteeing or intended to guarantee (whether directly or
indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any
other Person that constitutes Indebtedness under any of clauses (a) through (f) above.



“Indenture” means the Indenture, dated as of November 30, 2004, by and among Parent, the
Subsidiaries of Parent party thereto and Trustee.



“Indenture Documents” means the Indenture and, the Senior Notes, the Collateral
Agreements (as defined in the Indenture), and all other documents, instruments and agreements
executed or delivered by any of the Parent and its Subsidiaries in connection therewith.



“Indemnified Liabilities” has the meaning specified therefor in
Section 10.3.



“Indemnified Person” has the meaning specified
therefor in Section 10.3.



“Independent Financial Advisor” means a nationally-recognized accounting, appraisal
or investment banking firm: (i) that does not, and whose directors, officers and employees or
Affiliates do not, have a direct or indirect financial interest in Parent; and (ii) that, in the
judgment of the Board of Directors of Parent, is otherwise independent and qualified to perform
the task for which it is to be engaged.



“Insolvency Proceeding” means any proceeding commenced by or against any Person under
any provision of the Bankruptcy Code or under any other state or federal bankruptcy or insolvency
law, assignments for the benefit of creditors, formal or informal moratoria, compositions,
extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other
similar relief and including the appointment of a trustee, receiver, administrative receiver,
administrator or similar officer.



“Intercompany Subordination Agreement” means a subordination agreement executed and
delivered by Borrowers, each of their respective Restricted Subsidiaries and Agent, the form and
substance of which is reasonably satisfactory to Agent.



“Intercreditor Agreement” means the Intercreditor Agreement dated as of the date
hereof between WFF and Trustee, as amended, modified, supplemented or restated from time to time.



“Interest Expense” means, for any period, the aggregate of the interest expense of
Parent and its Restricted Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP, and including, without duplication, (a) all amortization or accretion of
original issue discount; (b) the interest component of Capitalized Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by Parent and its Restricted Subsidiaries during such
period; and (c) net cash costs under all Interest Swap Obligations (including amortization of
fees).


 


15









 





“Interest Period” means, with respect to each LIBOR Rate Loan, a period commencing on the
date of the making of such LIBOR Rate Loan (or the continuation of a LIBOR Rate Loan or the
conversion of a Base Rate Loan to a LIBOR Rate Loan) and ending 1, 2, 3 or 6 months thereafter;
provided, however, that (a) if any Interest Period would end on a day that is not a
Business Day, such Interest Period shall be extended (subject to clauses (c)-(e) below) to the
next succeeding Business Day, (b) interest shall accrue at the applicable rate based upon the
LIBOR Rate from and including the first day of each Interest Period to, but excluding, the day on
which any Interest Period expires, (c) any Interest Period that would end on a day that is not a
Business Day shall be extended to the next succeeding Business Day unless such Business Day falls
in another calendar month, in which case such Interest Period shall end on the next preceding
Business Day, (d) with respect to an Interest Period that begins on the last 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 Interest Period), the Interest Period shall end on the last Business Day
of the calendar month that is 1, 2, 3 or 6 months after the date on which the Interest Period
began, as applicable, and (e) Borrowers (or Administrative Borrower on behalf thereof) may not
elect an Interest Period which will end after the Maturity Date.



“Interest Swap Obligations” means the obligations of any Person pursuant to any
arrangement with any other Person, whereby, directly or indirectly, such Person is entitled to
receive from time to time periodic payments calculated by applying either a floating or a fixed
rate of interest on a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same notional amount
and shall include, without limitation, interest rate swaps, caps, floors, collars and similar
agreements.



“Inventory” means inventory (as that term is defined in the Code).



“Investment” means, with respect to any Person, any investment by such Person in any other
Person (including Affiliates) in the form of loans, guarantees, advances, or capital contributions
(excluding (a) commission, travel, and similar advances to officers, directors, employees and
consultants of such Person made in the ordinary course of business, and (b) extensions of trade
credit arising in the ordinary course of business consistent with past practice), purchases or
other acquisitions of Indebtedness, Stock, or all or substantially all of the assets of such other
Person (or of any division or business line of such other Person), and any other items that are or
would be classified as investments on a balance sheet prepared in accordance with GAAP.



“IRC” means the Internal Revenue Code of 1986, as in effect from time to time, and the
regulations promulgated thereunder.



“Issuing Lender” means WFF or any other Lender that, at the request of Administrative Borrower
and with the consent of Agent (not to be unreasonably withheld, conditioned or delayed), agrees, in
such Lender’s sole discretion, to become an Issuing Lender for the purpose of issuing L/Cs or L/C
Undertakings pursuant to Section 2.12.



“L/C” has the meaning specified therefor in Section 2.12(a).



“L/C Disbursement” means a payment made by the Issuing Lender pursuant to a Letter of
Credit.



“L/C Undertaking” has the meaning specified therefor in Section
2.12(a).


 


16









 





“Lender” and “Lenders” have the respective meanings set forth in the preamble to the
Agreement, and shall include any other Person made a party to the Agreement in accordance with the
provisions of Section 13.1.



“Lender Group” means, individually and collectively, each of the Lenders (including the
Issuing Lender) and Agent.



“Lender Group Expenses” means all (a) costs or expenses (including taxes, and
insurance premiums) required to be paid by any Borrower or any of its Restricted Subsidiaries under
any of the Loan Documents that are paid, advanced, or incurred by the Lender Group, (b) fees or
charges paid or incurred by Agent in connection with the Lender Group’s transactions with any
Borrower or any of its Restricted Subsidiaries, including, fees or charges for photocopying,
notarization, couriers and messengers, telecommunication, public record searches (including tax
lien, litigation, and UCC searches and including searches with the patent and trademark office, the
copyright office, or the department of motor vehicles), filing, recording, publication, appraisal
(including periodic collateral appraisals or business valuations to the extent of the fees and
charges (and up to the amount of any limitation) contained in the Agreement), real estate surveys,
real estate title policies and endorsements, and environmental audits, (c) costs and expenses
incurred by Agent in the disbursement of funds to Borrowers or other members of the Lender Group
(by wire transfer or otherwise), (d) charges paid or incurred by Agent resulting from the dishonor
of checks, (e) reasonable costs and expenses paid or incurred by the Lender Group to correct any
default or enforce any provision of the Loan Documents, or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, preparing for sale, or advertising to sell the
Collateral, or any portion thereof, irrespective of whether a sale is consummated, (f) audit fees
and expenses of Agent related to any inspections or audits to the extent of the fees and charges
(and up to the amount of any limitation) contained in the Agreement, (g) reasonable costs and
expenses of third party claims or any other suit paid or incurred by the Lender Group in enforcing
or defending the Loan Documents or in connection with the transactions contemplated by the Loan
Documents or the Lender Group’s relationship with any Borrower or any of its Restricted
Subsidiaries, (h) Agent’s and each Lender’s reasonable costs and expenses (including attorneys
fees) incurred in advising, structuring, drafting, reviewing, administering, syndicating, or
amending the Loan Documents, and (i) Agent’s and each Lender’s reasonable costs and expenses
(including attorneys, accountants, consultants, and other advisors fees and expenses) incurred in
terminating, enforcing (including attorneys, accountants, consultants, and other advisors fees and
expenses incurred in connection with a “workout,” a “restructuring,” or an Insolvency Proceeding
concerning any Borrower or any of its Restricted Subsidiaries or in exercising rights or remedies
under the Loan Documents), or defending the Loan Documents, irrespective of whether suit is
brought, or in taking any Remedial Action concerning the Collateral.



“Lender-Related Person” means, with respect to any Lender, such Lender, together with
such Lender’s Affiliates, officers, directors, employees, attorneys, and agents.



“Letter of Credit” means an L/C or an L/C Undertaking, as the context requires.



“Letter of Credit Usage” means, as of any date of determination, the aggregate
undrawn amount of all outstanding Letters of Credit.



“LIBOR Deadline” has the meaning specified therefor in
Section 2.13(b)(i). 



“LIBOR Notice” means a written notice in the
form of Exhibit L-1.



“LIBOR Option” has the meaning specified therefor in
Section 2.13(a).


 


17









 





“LIBOR Rate” means, for each Interest Period for each LIBOR Rate Loan, the rate per annum
determined by Agent (rounded upwards, if necessary, to the next 1/100%) by dividing (a) the Base
LIBOR Rate for such Interest Period, by (b) 100% minus the Reserve Percentage. The LIBOR Rate
shall be adjusted on and as of the effective day of any change in the Reserve Percentage.



“LIBOR Rate Loan” means each portion of an Advance that bears interest at a rate
determined by reference to the LIBOR Rate.



“LIBOR Rate Margin” means 2.50 percentage points.



“Lien” means, with respect to any asset, any mortgage, lien (statutory or other), charge,
deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, security
agreement, conditional sale or trust receipt, or other security interest in, on or of such asset
to secure or provide for the payment of any obligation of any Person, whether arising by contract,
operation of law or otherwise, and also includes reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases, and other title exceptions
and encumbrances affecting Real Property.



“LLC Purchase Agreement” means the LLC Purchase Agreement, dated as of October 25,
2004, among Warner Electric Holding Inc., Colfax Corporation and Holdings.



“Loan Account” has the meaning specified therefor in Section 2.10.



“Loan Documents” means the Agreement, the Cash Management Agreements, the Copyright
Security Agreement, the Control Agreements, the Fee Letter, the Guaranty, the Intercompany
Subordination Agreement, the Intercreditor Agreement, the Letters of Credit, the Mortgages, the
Patent Security Agreement, the Security Agreement, the Trademark Security Agreement, the
Perfection Certificate, executed by any Loan Party in connection with the Agreement, and any other
agreement entered into, now or in the future, by any Loan Party and the Lender Group in connection
with the Agreement.



“Loan Parties” means, collectively, Borrowers and Guarantors, and “Loan Party” means any one
of them.



“Management Agreement” means that certain Advisor Services Agreement dated as of the
Closing Date by and between Parent, Holdings and Genstar Capital L.P.



“Material Adverse Change” means (a) a material adverse change in the business,
operations, assets, liabilities or condition (financial or otherwise) of Borrowers and their
Restricted Subsidiaries, taken as a whole, (b) a material impairment of a Borrower’s or any of its
Restricted Subsidiaries’ ability to perform its obligations under the Loan Documents to which it is
a party or of the Lender Group’s ability to enforce the Obligations or realize upon the Collateral,
or (c) a material impairment of the enforceability or priority of the Agent’s Liens with respect to
the Collateral as a result of an action or failure to act on the part of a Borrower or a Restricted
Subsidiary of a Borrower.



“Maturity Date” has the meaning specified therefor in Section 3.3.



“Material Contract” means, with respect to any Person, any contract or agreement,
whether entered into as of the Closing Date or after the Closing Date, if the breach of any such
contract or agreement or the failure of any such contract or agreement to be in full force and
effect could be reasonably expected to result in a Material Adverse Change.



“Maximum Revolver Amount” means $30,000,000.


 


18









 





“Merger Agreement” means the Certificate of Ownership and Merger dated as of the
date hereof, by and between Parent and Power Transmission Holding LLC.



“Moody’s” has the meaning specified therefore in the definition of Cash
Equivalents.



“Mortgage Policy” has the meaning specified therefor in
Schedule 3.1(v).



“Mortgages” means, individually and collectively, one or more mortgages, deeds of trust, or
deeds to secure debt, executed and delivered by any Borrower or any of its Restricted Subsidiaries
in favor of Agent, in form and substance reasonably satisfactory to Agent, that encumber the Real
Property Collateral.



“Multiemployer Plan” means a “multiemployer plan” (within the meaning of Section
3(37) of ERISA) to which any Borrower, any of its Restricted Subsidiaries, or any ERISA Affiliate
makes, is making, is obligated, or within the last six years has been obligated, to make
contributions.



“Net Cash Proceeds” means (a) with respect to the sale or issuance by any Person of
any shares of its Stock, the aggregate amount of cash received (directly or indirectly) from time
to time (whether as initial consideration or through the payment or disposition of deferred
consideration) by or on behalf of such Person in connection therewith, after deducting therefrom
only (i) costs and expenses related thereto incurred by such Person in connection therewith
(including, without limitation, legal, accounting and investment banking fees, and underwriting
discounts and commissions), (ii) transfer taxes paid by such Person in connection therewith and
(iii) net income taxes to be paid in connection therewith (after taking into account any tax
credits or deductions and any tax sharing arrangements), and (b) with respect to any sale or
disposition by any Person thereof of property or assets, the amount of Collections received
(directly or indirectly) from time to time (whether as initial consideration or through the payment
of deferred consideration) by or on behalf of such Person in connection therewith after deducting
therefrom only (i) the amount of any Indebtedness secured by any Permitted Lien on any asset (other
than (A) Indebtedness owing to Agent or any Lender under the Agreement or the other Loan Documents
and (B) Indebtedness assumed by the purchaser of such asset) which is required to be, and is,
repaid in connection with such disposition, (ii) reasonable expenses related thereto incurred by
such Person in connection therewith, and (iii) taxes paid or payable to any taxing authorities by
such Person in connection therewith, in each case to the extent, but only to the extent, that the
amounts so deducted are, at the time of receipt of such cash, actually paid or payable to a Person
that is not an Affiliate and are properly attributable to such transaction.



“Obligations” means all loans, Advances, debts, principal, interest (including any interest
that accrues after the commencement of an Insolvency Proceeding regardless of whether allowed or
allowable in whole or in part as a claim in any such Insolvency Proceeding), contingent
reimbursement obligations with respect to outstanding Letters of Credit, premiums, liabilities
(including all amounts charged to Borrowers’ Loan Account pursuant hereto), obligations (including
indemnification obligations), fees (including the fees provided for in the Fee Letter), charges,
costs, Lender Group Expenses (including any fees or expenses that accrue after the commencement of
an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a
claim in any such Insolvency Proceeding), guaranties, covenants, and duties of any kind and
description owing by Borrowers to the Lender Group pursuant to or evidenced by the Loan Documents
and irrespective of whether for the payment of money, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, and including all interest
not paid when due and all Lender Group Expenses that Borrowers are required to pay or reimburse by
the Loan Documents, by law, or otherwise. Any reference in the Agreement or in the Loan Documents
to the Obligations shall
include all or any portion thereof and any extensions, modifications, renewals, or alterations
thereof, both prior and subsequent to any Insolvency Proceeding.


 


19









 





“Originating Lender” has the meaning specified therefor in
Section 13.1(e). 



“Overadvance” has the meaning specified therefor in
Section 2.5. 



“Parent” has the meaning specified therefor in the
preamble to the Agreement.


“Participant” has the meaning specified therefor
in Section 13.1(e).



“Patent Security Agreement” has the meaning specified therefore in the Security
Agreement.



“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all
of its functions under ERISA.



“Pension Plan” means an employee pension benefit plan (as defined in Section 3(2) of ERISA)
other than a Multiemployer Plan (a) that is or has within the last six years maintained or
sponsored by any Borrower, any of its Restricted Subsidiaries, or any ERISA Affiliate or to which
any Borrower, any of its Restricted Subsidiaries, or any ERISA Affiliate has within the last six
years made, or was obligated to make, contributions, and (b) that is or was subject to Section 412
of the IRC, Section 302 of ERISA or Title IV of ERISA.



“Perfection Certificate” means the representations and warranties of officers form
submitted by Agent to Administrative Borrower, together with Borrowers’ and Guarantors’ completed
responses to the inquiries set forth therein, the form and substance of such responses to be
reasonably satisfactory to Agent.



“Permitted Acquired Indebtedness” means Indebtedness of any other Person whose assets
or Stock are acquired by Parent or a Restricted Subsidiary in a Permitted Acquisition;
provided, that such Indebtedness (a) (i) was existing at the time such Person becomes a
Restricted Subsidiary or at the time it merges or consolidates with or into Parent or any
Restricted Subsidiary or assumed in connection with the acquisition of assets from such Person or
(ii) was incurred by such Person in connection with, or in anticipation or contemplation of, such
Person becoming a Subsidiary upon the consummation of the acquisition of all or substantially all
of the assets or all of the Capital Stock of such Person by Parent or any Restricted Subsidiary,
(b) is without recourse to any Loan Party or any of the Restricted Subsidiaries or any of their
respective properties and assets, other than the Person or the assets to which such Indebtedness
relates, and (c) both immediately prior to and immediately after giving effect to such
Indebtedness, Borrowers and their respective Restricted Subsidiaries shall be in pro forma
compliance with the covenants set forth in Section 6.16.



“Permitted Acquisition(s)” means any acquisition by Holdings, the Borrowers or any of
their Subsidiaries of assets or capital Stock of a Person, provided that each of the
following conditions is satisfied:



(a) such assets or capital Stock are related to the business permitted under Section
6.6;



(b) such Person delivers to Agent written confirmation, supported by reasonably
detailed calculations, that on a pro forma basis, created by adding the historical combined
financial
statements of Parent and its Subsidiaries (including the combined financial statements of any
other
Person or assets that were the subject of a prior Permitted Acquisition during the relevant
period) to
the historical financial statements of the Person or assets to be acquired (adjusted to eliminate
expense items that would not have been incurred and include income items that would have been
recognized, in each case, if the combination had been accomplished at the beginning of the
relevant period; such eliminations and inclusions to be mutually agreed upon by Borrowers and
Agent, such approval not to be unreasonably withheld by Agent), Borrowers and the Restricted
Subsidiaries would have been in compliance with their obligations under the Agreement, including
without limitation, the financial covenants specified in Section 6.16 for the four (4)
quarters immediately prior to the proposed date of consummation of the proposed acquisition and
demonstrating that there is no Default or Event of Default after giving effect to such
acquisition;


 


20









 





(c) no Default or Event of Default exists prior to or immediately after giving effect to
such acquisition;



(d) Borrowers shall have updated the schedules to each of the other Loan Documents,
as applicable; provided, that in no event may any schedule be updated in a manner that
would reflect
or evidence a Default or Event of Default;



(e) such Person delivers (i) projections for the Person whose Stock or assets are
proposed to acquired and (ii) updated pro forma Projections for Parent and its Subsidiaries
evidencing
compliance on a pro forma basis (in the manner contemplated in clause (b) above) with
Section 6.16
for the 12 months following the date of such acquisition (on a quarter-by-quarter basis), in
each case
in form and content reasonably acceptable to Agent;



(f) each entity formed or acquired shall become a Guarantor pursuant to the Loan
Documents and Agent shall receive a first priority Lien in all of its assets or the acquired
assets, as the
case may be, to the extent required pursuant to Section 5.16;



(g) such acquisition shall be consensual and shall have been approved by the board of
directors of the Person whose Stock or assets are proposed to be acquired;



(h) the Person so acquired shall have EBITDA of no less than negative $5,000,000 measured as
of the date of such acquisition;



(i) the aggregate purchase price (including assumption of Permitted Acquired Indebtedness) of
all such Permitted Acquisitions does not exceed $75,000,000 during the term of the Agreement; and



(j) Borrowers’ Excess Availability will equal at least $5,000,000, in each case both before
and immediately after giving effect to any such Permitted Acquisition.



“Permitted Discretion” means a determination made in the exercise of reasonable (from
the perspective of a secured asset-based lender) business judgment.



“Permitted Dispositions” means:



(a) Disposition of assets that are substantially worn, damaged, or obsolete in the
ordinary course of business,



(b) sales of Inventory in the ordinary course of business including intercompany sales
at transfer prices, prescribed by the IRC,



(c) the use or transfer of money or Cash Equivalents,


 


21









 





(d) the licensing of patents, trademarks, copyrights, and other intellectual property
rights in the ordinary course of business,



(e) the transfer of assets from any Loan Party to another Loan Party,



(f) Dispositions permitted by Sections 6.3, 6.10 and 6.12 and Liens permitted
by
Section 6.2,



(g) leases, subleases, licenses or sublicenses of property in the ordinary course of
business and which do not materially interfere with the business of any Borrower or any of
the
Restricted Subsidiaries,



(h) the transfer of assets (i) among the Borrowers and the Restricted Subsidiaries and (ii)
from the Borrowers and the Restricted Subsidiaries to Unrestricted Subsidiaries, provided
that any sale, transfer or disposition pursuant to this clause (ii) for a cash price less than
the Fair Market Value of such assets shall be deemed to be an Investment subject to Section
6.12;



(i) Disposition of property to the extent that (i) such property is exchanged for credit
against the purchase price of similar replacement property or (ii) the proceeds of such
Disposition are promptly applied to the purchase price of such replacement property;



(j) Dispositions of accounts receivable that are not Eligible Accounts in connection with the
collection or compromise thereof;



(k) subject to Section 5.8 of the Agreement, transfers of property arising directly
from condemnation and casualty events;



(l) so long as no Default or Event of Default has occurred and is continuing or would result
therefrom, Dispositions of assets identified to Agent prior to the Closing Date so long (i) such
Disposition is made for a price at least equal to the Fair Market Value of the assets so disposed,
(ii) the net cash proceeds of such assets are reinvested in assets useful in the business of
Borrowers and the Restricted Subsidiaries (including Permitted Acquisitions) within 360 days of
such sale, (iii) Administrative Borrower shall have given Agent at least five (5) days prior
written notice of its intent to make a Disposition subject to this
clause (l), such notice to
describe the assets that Borrowers intend to dispose of, (iv) Administrative Borrower shall have
delivered to Agent a pro forma Borrowing Base Certificate reflecting the reduction in the
Borrowing Base resulting from such Disposition, and (v) 100% of the net book value of the proceeds
from such Dispositions shall be used to pay any outstanding Advances; and



(m) so long as no Default or Event of Default has occurred and is continuing or would result
therefrom, Dispositions not otherwise permitted in clauses
(a) through (l) so long as (i) after
giving effect thereto, the Fair Market Value of the assets so disposed would not exceed $25,000,000
in the aggregate during the term of the Agreement, (ii) Administrative Borrower shall have given
Agent at least five (5) days prior written notice of its intent to make a Disposition subject to
this clause (m), such notice to describe the assets that Borrowers intend to dispose of, (iii)
Administrative Borrower shall have delivered to Agent a pro forma Borrowing Base Certificate
reflecting the reduction in the Borrowing Base resulting from such Disposition, and (iv) 100% of
the net book value of the proceeds from such Dispositions shall be used to pay any outstanding
Advances.



 


22









 





“Permitted Holder” means the Persons identified on
Schedule P-1.



“Permitted Investments” means:




(a) Investments in cash and Cash Equivalents,



(b) Investments in negotiable instruments for collection,



(c) advances made in connection with purchases of goods or services in the ordinary
course of business,



(d) Investments received in settlement of amounts due to any Borrower or any
Restricted Subsidiary effected in the ordinary course of business or owing to any Borrower or
any
Restricted Subsidiary as a result of Insolvency Proceedings involving an Account Debtor,
supplier or
in respect of any other Investment or upon the foreclosure or enforcement of any Lien in favor
of a
Borrower or a Restricted Subsidiary;



(e) so long as no Default or Event of Default has occurred and is continuing or would
result therefrom, Investments by any Loan Party in a newly created Restricted Subsidiary that
is or
immediately after such Investment will be a Guarantor or any Permitted Acquisition;



(f) Investments among Borrowers and the Restricted
Subsidiaries;



(g) Investments in the Senior Notes;



(h) Hedge Agreements entered into in the ordinary course of Loan Parties’ businesses and
otherwise permitted under the Agreement;



(i) Investments consisting of consideration received by a Loan Party as a result of a
Permitted Disposition;



(j) Investments existing on the Closing Date and disclosed in Schedule P-3 hereto and
any modification, replacement, renewal or extension thereof; provided that the amount of
the original Investment is not increased by the terms of such Investment and such modification,
replacement, renewal or extension is otherwise permitted by Section 6.12;



(k) Investments consisting of Indebtedness, Liens, fundamental changes, Dispositions,
Restricted Payments and Capital Expenditures permitted under Sections 6.1, 6.2,
6.3, 6.4, 6.10 and 6.16(b), respectively;



(l) the Acquisition Transactions;



(m) Guarantees by Borrowers or any Restricted Subsidiary of leases (other than Capital Lease
Obligations) or of other obligations that do not constitute Indebtedness, in each case entered
into in the ordinary course of business;



(n) loans and advances to employees, officers and directors of Holdings or any of its
Subsidiaries, in the ordinary course of business, consistent with past practice, for bona fide
business purposes and in accordance with applicable laws, in an aggregate amount not to exceed
$500,000 at any time outstanding;



(o) so long as no Default or Event of Default has occurred and is continuing or would result
therefrom, Investments in any Unrestricted Subsidiary by any Loan Party, provided that (i)
the aggregate amount of such Investments at any time outstanding does not exceed $20,000,000
(valued at cost at the time of making thereof, which for purposes of Dispositions pursuant to
clause (h)(ii) of the definition of Permitted Dispositions shall be deemed to be the amount by
which the Fair Market Value exceeds the price received in cash, net of return of return of capital,
dividends, principal or similar
amounts) and (ii) after giving effect to each such Investment, Borrowers shall have Excess
Availability of not less than $5,000,000;


 


23









 





(p) loans and advances to Holdings in lieu of, and not in excess of, the amount of
Restricted Payments to the extent permitted to be made to Parent in accordance with Section
6.10; and



(q) other Investments that (net of any cash repayment of or return on such Investments
theretofore received) do not exceed $2,500,000 in any fiscal year so long as (i) no Default or
Event of Default has occurred and is continuing or would result therefrom and (ii) after giving
effect to each such Investment, Borrowers shall have Excess Availability of not less than
$10,000,000.



“Permitted Liens” means:



(a) Liens held by Agent or Lenders to secure the Obligations,



(b) Liens for unpaid taxes, assessments, or other governmental charges or levies that
either (i) are not yet delinquent, or (ii) do not constitute an Event of Default and for which
the
underlying taxes, assessments, charges or levies are the subject of Permitted Protests,



(c) Liens set forth on Schedule P-2,



(d) judgment Liens that do not constitute an Event of Default under Section 7.7 of the
Agreement,



(e) the interests of lessors, sublessors or licensors under operating leases,



(f) purchase money Liens or the interests of lessors under Capital Leases to the extent that
such Liens or interests secure Permitted Purchase Money Indebtedness and so long as such Lien
attaches only to the asset purchased or acquired and the proceeds thereof,



(g) Liens arising by operation of law in favor of warehousemen, landlords, carriers,
mechanics, materialmen, laborers, or suppliers or other similar Liens imposed by operation of law
or pursuant to customary reservations or retentions of title, incurred in the ordinary course of
business and not in connection with the borrowing of money, and which Liens either (i) are for
sums not yet delinquent, or (ii) are the subject of Permitted Protests,



(h) Liens on cash, securities or similar instruments deposited (or Liens securing any letter
of credit issued in respect of) (i) worker’s compensation, unemployment insurance, and other types
of social security, or similar obligations, (ii) the making or entering into of bids, tenders,
leases, statutory obligations, contracts and similar obligations incurred in the ordinary course
of business and not in connection with the borrowing of money, or (iii) performance, return of
money, surety or appeal or similar bonds in connection with obtaining such bonds in the ordinary
course of business,



(i) with respect to any Real Property, easements, rights of way, title defects and
irregularities, and zoning and other applicable municipal or governmental restrictions that (i) do
not materially interfere with or impair the use or operation thereof and (ii) are not
Environmental Liens,



(j) Liens encumbering deposits made to secure obligations arising from statutory, regulatory,
contractual, or warranty requirements of any Borrower or any of its Restricted Subsidiaries,
including rights of offset and setoff,



(k) Liens securing Hedge Agreements relating to Indebtedness otherwise permitted under the
Agreement,


 


24









 





(l) Liens securing Permitted Acquired Indebtedness, provided that: such Liens do not
extend to or cover any property or assets of Borrowers or of any Restricted Subsidiaries other
than the property or assets acquired in the Permitted Acquisition pursuant to which such
Indebtedness became Permitted Acquired Indebtedness of any Borrower or any of its Restricted
Subsidiaries,



(m) Liens securing the Indenture and the Indenture Documents,



(n) Liens securing the reimbursement obligations with respect to commercial letters of
credit which encumber documents and other property relating to such letters of credit and
products and proceeds thereof to the extent such letters of credit are permitted to be incurred
hereunder,



(o) Liens upon specific items of inventory or other goods and proceeds of any Person
securing such Person’s obligations solely in respect of bankers’ acceptances issued or created
for the account of such Person in the ordinary course of business to facilitate the purchase,
shipment or storage of such inventory or other goods,



(p) Liens on property consisting of a definitive agreement to dispose of such property in a
Permitted Disposition,



(q) Liens that are contractual rights of set-off (i) relating to the establishment of
depository relations with banks not given in connection with the issuance of Indebtedness or (ii)
relating to pooled deposit or sweep accounts of any Borrower or any Restricted Subsidiary to permit
satisfaction of overdraft or similar obligations, in each case incurred in the ordinary course of
business,



(r) leases, subleases, licenses or sublicenses granted by any Borrower or the Restricted
Subsidiaries to third parties in the ordinary course of business and not interfering in any
material respect with the ordinary course of the business of the Borrower and the Restricted
Subsidiaries, and



(s) Liens securing Refinancing Indebtedness which is incurred to refinance any Indebtedness
which has been secured by a Lien that is a Permitted Lien under clause (a) through (r) of this
definition, provided, however, that (x) if there is any Refinancing Indebtedness in
respect of the Indebtedness evidenced by the Senior Notes (or any Refinancing Indebtedness in
respect thereof), any Lien permitted under this clause (s) shall only be permitted if such Lien is
subordinated upon substantially the same terms and conditions as the Intercreditor Agreement, (y)
such Liens are no less favorable to the Lender Group than the Liens in respect of the Indebtedness
being refinanced, and (z) such Liens do not extend to or cover any property or assets of any Loan
Party not securing the Indebtedness so refinanced.



“Permitted Protest” means the right of any Borrower or any of its Restricted
Subsidiaries to protest any Lien (other than any Lien that secures the Obligations), taxes (other
than payroll taxes or taxes that are the subject of a United States federal tax lien), rental
payment, or other obligation, provided that (a) a reserve with respect to such obligation is
established on any Borrower’s or any of their respective Restricted Subsidiaries’ books and
records in such amount as is required under GAAP, (b) any such protest is instituted promptly and
prosecuted diligently by any Borrower or the Restricted Subsidiaries, as applicable, in good
faith, and (c) Agent is satisfied that, while any such protest is pending, there will be no
impairment of the enforceability or validity of any of the Agent’s Liens.



“Permitted Purchase Money Indebtedness” means, as of any date of determination,
Purchase Money Indebtedness in an aggregate principal amount outstanding at any one time not in
excess of $5,000,000.


 


25









 





“Permitted Subordinated Indebtedness” means any unsecured Indebtedness of any
Borrowers that (a) is expressly subordinated to the prior payment in full in cash of the
Obligations on terms and conditions reasonably satisfactory to Agent, (b) is not scheduled to
mature prior to the date that is ninety-one (91) days after the scheduled Maturity Date, and (d)
has covenant, default and remedy provisions no more restrictive, or mandatory prepayment,
repurchase or redemption provisions no more onerous or expansive in scope than those set forth in
the Indenture.



“Person” means natural persons, corporations, limited liability companies, limited
partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land
trusts, business trusts, or other organizations, irrespective of whether they are legal entities,
and governments and agencies and political subdivisions thereof.



“Plan” means (a) an employee benefit plan (as defined in Section 3(3) of ERISA) other than a
Multiemployer Plan which is or was within the last six years maintained or sponsored by any
Borrower or any of its Restricted Subsidiaries or to which any Borrower or any of its Restricted
Subsidiaries has within the last six years made, or was obligated to make, contributions, (b) a
Pension Plan, or (c) a Qualified Plan.



“Projections” means Borrowers’ forecasted (a) balance sheets, (b) profit and loss statements,
and (c) cash flow statements, all prepared on a basis consistent, unless otherwise noted therein,
with Parent’s historical financial statements, together with appropriate supporting details and a
statement of underlying assumptions.



“Pro Rata Share” means, as of any date of determination:



(a) with respect to a Lender’s obligation to make Advances and right to receive
payments of principal, interest, fees, costs, and expenses with respect thereto, (i) prior to
the
Commitments being terminated or reduced to zero, the percentage obtained by dividing (y) such
Lender’s Commitment, by (z) the aggregate Commitments of all Lenders, and (ii) from and after
the
time that the Commitments have been terminated or reduced to zero, the percentage obtained by
dividing (y) the aggregate outstanding principal amount of such Lender’s Advances by (z) the
aggregate outstanding principal amount of all Advances,



(b) with respect to a Lender’s obligation to participate in Letters of Credit, to
reimburse the Issuing Lender, and right to receive payments of fees with respect thereto, (i)
prior to
the Commitments being terminated or reduced to zero, the percentage obtained by dividing (y)
such
Lender’s Commitment, by (z) the aggregate Commitments of all Lenders, and (ii) from and after
the
time that the Commitments have been terminated or reduced to zero, the percentage obtained by
dividing (y) the aggregate outstanding principal amount of such Lender’s Advances by (z) the
aggregate outstanding principal amount of all Advances,



(c) with respect to all other matters as to a particular Lender (including the
indemnification obligations arising under Section 15.7), the percentage obtained by
dividing (i) such
Lender’s Commitment, by (ii) the aggregate amount of Commitments of all Lenders;
provided,
however, that in the event the Commitments have been terminated or reduced to zero,
Pro Rata Share
under this clause shall be the percentage obtained by dividing (A) the outstanding principal
amount of
such Lender’s Advances plus such Lender’s ratable portion of the Risk Participation Liability
with
respect to outstanding Letters of Credit, by (B) the outstanding principal amount of all
Advances plus
the aggregate amount of the Risk Participation Liability with respect to outstanding Letters
of Credit.



“Protective Advances” has the meaning specified therefore in Section
2.3(d)(i).


 


26









 





“Purchase Money Indebtedness” means Indebtedness (other than the Obligations, but
including Capitalized Lease Obligations), incurred at the time of, or within 180 days after,
the acquisition of any fixed assets for the purpose of financing all or any part of the
acquisition cost thereof.



“Qualified Cash” means, as of any date of determination, the amount of unrestricted cash
and Cash Equivalents of Borrowers and their Restricted Subsidiaries that is in Deposit Accounts
or in Securities Accounts, or any combination thereof, and which such Deposit Accounts or
Securities Accounts are the subject of Control Agreements and are maintained by branch offices
of the banks or securities intermediaries located within the United States.



“Qualified IPO” means an underwritten public offering of common Stock of Parent pursuant
to a registration statement filed with the SEC (other than on Form S-8).



“Qualified Plan” means an employee benefit plan (as defined in Section 3(3) of ERISA)
other than a Multiemployer Plan (a) that is or was within the last six years maintained or
sponsored by any Borrower, any of its Restricted Subsidiaries or any ERISA Affiliate or to
which any Borrower, any of its Restricted Subsidiaries or any ERISA Affiliate has within the
last six years made or was obligated to make, contributions, and (b) that is intended to be
tax-qualified under Section 401(a) of the IRC.



“Real Property” means any fee estates in real property now owned or hereafter acquired by
any Borrower or any of its Restricted Subsidiaries, together with all buildings, structures and
the improvements thereto and all licenses, easements and appurtenances relating thereto,
wherever located.



“Real Property Collateral” means the Real Property identified on Schedule
R-1 (as such Schedule may be amended or supplemented from time to time) and any Real
Property hereafter acquired by any Borrower or any of its Restricted Subsidiaries.



“Record” means information that is inscribed on a tangible medium or which is stored in an
electronic or other medium and is retrievable in perceivable form.



“Refinancing Indebtedness” means any Indebtedness of any Loan Party issued in exchange
for, or the net proceeds of which are used to extend, refinance, renew, replace, defease, repay,
prepay, redeem, retire or refund other Indebtedness of Borrower or any of its Restricted
Subsidiaries; provided, that, other than with respect to the Obligations:



(a) the principal amount (or accreted value, if applicable) of such
Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable)
of the Indebtedness extended, refinanced, renewed, replaced, defeased, repaid, prepaid,
redeemed, retired or refunded (plus all accrued interest on such Indebtedness and the amount of
all fees, expenses, premiums and defeasance costs incurred in connection therewith);



(b) such Refinancing Indebtedness has a final maturity date no earlier
than
the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased, repaid, prepaid, redeemed, retired or refunded;



(c) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased, repaid, prepaid, redeemed, retired or refunded is subordinated in right of payment to
the Obligations, such Refinancing Indebtedness is subordinated in right of payment to the
Obligations on terms at least as favorable to the Lender Group as those contained in the
documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased, repaid, prepaid, redeemed,
retired or refunded; and




 


27












 





(d) such Indebtedness is recourse solely to the Loan Parties which are obligated on
the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded.



“Register” has the meaning specified therefor in Section 13.1(h).



“Remedial Action” means all actions required by Governmental Authority or
Environmental Law taken in response to a violation of Environmental Laws to (a) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate, or in any way address Hazardous Materials in
the indoor or outdoor environment, (b) prevent or minimize a release or threatened release of
Hazardous Materials so they do not migrate or endanger or threaten to endanger public health or
welfare or the indoor or outdoor environment, (c) restore or reclaim natural resources or the
environment, (d) perform any pre-remedial studies, investigations, or post-remedial operation and
maintenance activities, or (e) conduct any other actions with respect to Hazardous Materials
authorized by Environmental Laws.



“Replacement Lender” has the meaning specified therefor in Section
14.2(a).



“Report” has the meaning specified therefor in Section 15.17.



“Required Availability” means that the sum of (a) Excess Availability, plus (b)
Qualified Cash exceeds $10,000,000.



“Required Lenders” means, at any time, Lenders whose aggregate Pro Rata Shares
(calculated under clause (d) of the definition of Pro Rata Shares) exceed 50%.



“Reserve Percentage” means, on any day, for any Lender, the maximum percentage
prescribed by the Board of Governors of the Federal Reserve System (or any successor Governmental
Authority) for determining the reserve requirements (including any basic, supplemental, marginal,
or emergency reserves) that are in effect on such date with respect to eurocurrency funding
(currently referred to as “eurocurrency liabilities”) of that Lender, but so long as such Lender
is not required or directed under applicable regulations to maintain such reserves, the Reserve
Percentage shall be zero.



“Restricted Payment” has the meaning specified therefor in Section
6.10.



“Restricted Subsidiary” means any Subsidiary of Parent (including any Subsidiary
formed or acquired after the Closing Date that is organized under the laws of a jurisdiction of
the United States of America or any state, territory or subdivision thereof) other than the
Unrestricted Subsidiaries.



“Revolver Usage” means, as of any date of determination, the sum of (a) the amount of
outstanding Advances, plus (b) the amount of the Letter of Credit Usage.



“Risk Participation Liability” means, as to each Letter of Credit, all reimbursement
obligations of Borrowers to the Issuing Lender with respect to an L/C Undertaking, consisting of
(a) the amount available to be drawn or which may become available to be drawn, (b) all amounts
that have been paid by the Issuing Lender to the Underlying Issuer to the extent not reimbursed by
Borrowers, whether by the making of an Advance or otherwise, and (c) all accrued and unpaid
interest, fees, and reasonable expenses payable with respect thereto.




“S&P” has the meaning specified therefore in the definition of Cash
Equivalents.


 


28









 





“SEC” means the United States Securities and Exchange Commission and any
successor thereto.



“Securities Account” means a “securities account” (as that term is defined in
the Code).



“Security Agreement” means a security agreement, in form and substance
reasonably satisfactory to Agent, executed and delivered by Borrowers and Guarantors to
Agent.



“Senior Notes” means the $165,000,000 aggregate principal amount of 9% Senior
Secured Notes due 2011 issued by Parent as described in the Indenture.



“Settlement” has the meaning specified therefor in Section
2.3(e)(i).



“Settlement Date” has the meaning specified therefor in Section
2.3(e)(i).



“Solvent” means, with respect to any Person on a particular date, that, such
Person is not insolvent (as such term is defined in the Uniform Fraudulent Transfer Act).



“Stock” means all shares, options, warrants, interests, participations, or
other equivalents (regardless of how designated) of or in a Person, 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 SEC
under the Exchange Act).



“Stock Purchase Agreement” means the Stock Purchase Agreement, dated as of
September 2, 2004, by and between Timken U.S. Corporation, Kilian Holdings, Inc., The Kilian
Company and 3091780 Nova Scotia Company;



“Subsidiary” of a Person means a corporation, partnership, limited liability
company, or other entity in which that Person directly or indirectly owns more than 50% of
the shares of Stock having (without regard to any contingency) ordinary voting power to
elect a majority of the board of directors (or appoint other comparable managers) of such
corporation, partnership, limited liability company, or other entity.



“Swing Lender” means WFF or any other Lender that, at the request of
Administrative Borrower and with the consent of Agent agrees, in such Lender’s sole
discretion, to become the Swing Lender under Section 2.3(b).



“Swing Loan” has the meaning specified therefor in Section
2.3(b)(i).



“Taxes” has the meaning specified therefor in Section 15.11.



“Trademark Security Agreement” has the meaning specified therefor in the Security
Agreement.



“Trustee” means the Bank of New York, N.A. in its capacity as Trustee and
Collateral Agent under the Indenture.



“Trust Funds” has the meaning specified therefor in Section
2.7(e).



“Underlying Issuer” means a third Person which is the beneficiary of an L/C
Undertaking and which has issued a letter of credit at the request of the Issuing Lender for
the benefit of Borrowers.


 


29









 





“Underlying Letter of Credit” means a letter of credit that has been issued by an
Underlying Issuer.



“United States” means the United States of America.



“Unrestricted Subsidiary” means (a) any Subsidiary of Parent that is organized under
the laws of a jurisdiction other than the United States of America or any state, territory or
subdivision thereof and (b) any Person whose assets or Stock are acquired by Parent or a
Restricted Subsidiary in a Permitted Acquisition if in connection with, or in anticipation or
contemplation of, such Person becoming a Subsidiary upon the consummation of such Permitted
Acquisition, first priority Liens on such acquired assets or Stock are granted in favor of a
Person other than Agent.



“Voidable Transfer” has the meaning specified therefor in Section
16.6.



“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any
date, the number of years obtained by dividing:



(a) the sum of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of principal, including
payment at final maturity, in respect of the Indebtedness, by (ii) the number of years (calculated
to the nearest one-twelfth) that will elapse between such date and the making of such payment; by



(b) the then outstanding principal amount of such Indebtedness.



“Wells Fargo” means Wells Fargo Bank, National Association, a national banking
association.



“WFF” means Wells Fargo Foothill, Inc., a California corporation.


 


30









 





SCHEDULE 2.7(a)




CASH MANAGEMENT BANKS




Wells Fargo Bank, National Association

Bank of America

Mellon Bank

Wachovia

La Salle



 


 









 





Final Version




Schedule 3.1




The obligation of each Lender to make its initial extension of credit provided for in the
Agreement is subject to the fulfillment, to the reasonable satisfaction of Agent and each Lender
(the making of such initial extension of credit by any Lender being conclusively deemed to be its
satisfaction or waiver of the following), of each of the following conditions precedent:



(a) the Closing Date shall occur on or before November 30, 2004;



(b) Agent shall have received each of the following documents, in form and substance
reasonably satisfactory to Agent, duly executed, and each such document shall be in full force and
effect:



(i) a disbursement letter or funds flow statement executed and delivered by
Borrowers to Agent regarding the extensions of credit to be made on the Closing Date, the form and
substance of which is reasonably satisfactory to Agent,



(ii) the Fee Letter,



(iii) the Guaranty,



(iv) the Intercompany Subordination Agreement,



(v) the Intercreditor Agreement,



(vi) the Patent Security Agreement,



(vii) the Perfection Certificate,



(viii) the Security Agreement, together with all certificates representing the shares
of Stock pledged thereunder except as provided in Section 3.6(d), as well as Stock powers
with respect thereto endorsed in blank, and



(ix) the Trademark Security Agreement.



(c) Agent and its counsel shall have reviewed the Acquisition Documents and the Indenture
Documents, and shall be reasonably satisfied in all respects with the Acquisition Documents and
the Indenture Documents;



(d) On the Closing Date, Parent and its Subsidiaries shall have consummated all transactions
contemplated by the Indenture Documents and furnished evidence thereof to Agent. Borrowers shall
have delivered a certificate (dated as of the Closing Date) of an Authorized Person attaching true
and correct copies of the Indenture Documents. Such certificate of the Authorized Person shall
certify that the attached documents are true and correct copies of the Indenture Documents and
that such documents have been entered into by the Loan Parties in compliance with all applicable
laws and all necessary approvals and are in full force and effect;



(e) Agent shall have received a certificate from Parent’s Secretary attesting that there
exists no (i) litigation, investigation or proceeding (judicial or administrative) pending or, to
Parent’s
knowledge, threatened against any Loan Party, or any of their respective Subsidiaries by any
Governmental Authority arising out of the transactions contemplated by or effected in connection
with the Acquisition Documents or the Indenture Documents, (ii) injunction, writ or restraining
order restraining or prohibiting the transactions contemplated by the Acquisition Documents or
the Indenture Documents, or (iii) suit, action, investigation, or proceeding (judicial or
administrative) pending or, to Parent’s knowledge, threatened against any Loan Party or any of
their respective Subsidiaries, which, in the case of clauses (i) and (iii), could reasonably be
expected to result in a Material Adverse Change;


 


 









 





(f) All director, stockholder, and material governmental and third party consents and
approvals necessary in connection with each aspect of the Acquisition Transactions, and the
transactions contemplated by the Indenture Documents shall have been obtained or waived by Agent
(without the imposition of any conditions that are not acceptable to Agent) and shall remain in
effect; all applicable waiting periods shall have expired without any adverse action being taken
by any competent authority; and no law or regulation shall be applicable in the reasonable
judgment of Agent that restrains, prevents or imposes material adverse conditions upon any aspect
of the Acquisition Transactions or transactions contemplated by the Indenture Documents;



(g) Agent shall have received a certificate from the Secretary of each Borrower (i) attesting
to the resolutions of such Borrower’s Board of Directors authorizing (x) its execution, delivery,
and performance of this Agreement and the other Loan Documents to which such Borrower is a party,
(y) authorizing specific officers of such Borrower to execute the same and (ii) attesting to the
incumbency and signatures of such specific officers of such Borrower;



(h) Agent shall have received copies of each Borrower’s Governing Documents, as amended,
modified, or supplemented to the Closing Date, certified by the Secretary of such Borrower;



(i) Agent shall have received a certificate of status with respect to each
Borrower, dated
within 30 days of the Closing Date, such certificate to be issued by the appropriate officer of
the jurisdiction of organization of such Borrower, which certificate shall indicate that such
Borrower is in good standing in such jurisdiction (together with a bringdown certificate dated
within 1 day of the Closing Date);



(j) Agent shall have received certificates of status with respect to each Borrower,
each
dated within 30 days of the Closing Date, such certificates to be issued by the appropriate
officer of the jurisdictions (other than the jurisdiction of organization of such Borrower) in
which its failure to be duly qualified or licensed would constitute a Material Adverse Change,
which certificates shall indicate that such Borrower is in good standing in such jurisdictions;



(k) Agent shall have received a certificate from the Secretary of each Guarantor (i)
attesting to the resolutions of such Guarantor’s Board of Directors authorizing (x) its execution,
delivery, and performance of the Loan Documents to which such Guarantor is a party, (y)
authorizing specific officers of such Guarantor to execute the same and (ii) attesting to the
incumbency and signatures of such specific officers of Guarantor;



(l) Agent shall have received copies of each Guarantor’s Governing Documents, as
amended, modified, or supplemented to the Closing Date, certified by the Secretary of such
Guarantor;



(m) Agent shall have received a certificate of status with respect to each Guarantor, dated
within 30 days of the Closing Date, such certificate to be issued by the appropriate officer of the
jurisdiction of organization of such Guarantor, which certificate shall indicate that such
Guarantor is in good standing in such jurisdiction (together with a bringdown certificate dated
within 1 day of the Closing Date);


 


-2-









 





(n) Agent shall have received certificates of status with respect to each Guarantor, each
dated within 30 days of the Closing Date, such certificates to be issued by the appropriate
officer of the jurisdictions (other than the jurisdiction of organization of such Guarantor) in
which its failure to be duly qualified or licensed would constitute a Material Adverse Change,
which certificates shall indicate that such Guarantor is in good standing in such jurisdictions;



(o) Agent shall have received a certificate of insurance, together with the endorsements
thereto, as are required by Section 5.8, the form and substance of which shall be
satisfactory to Agent;



(p) Agent shall have received an opinion of Borrowers’ counsel in form and substance
reasonably satisfactory to Agent;



(q) Borrowers shall have the Required Availability after giving effect to the initial
extensions of credit hereunder and the payment of all fees and expenses required to be paid by
Borrowers on the Closing Date under this Agreement or the other Loan Documents;



(r) Agent shall have completed its business, legal and collateral due diligence, the
results
of which shall be satisfactory to Agent;



(s) Agent shall have received completed reference checks with respect to Borrowers’
senior management, and any required Patriot Act compliance, the results of which are reasonably
satisfactory to Agent in its sole discretion;



(t) Agent shall have received a set of Projections for the 3 year period following
the
Closing Date (on a year by year basis), in form and substance (including as to scope and underlying
assumptions) satisfactory to Agent;



(u) Borrowers shall have paid all Lender Group Expenses incurred in connection with the
transactions evidenced by this Agreement;



(v) Agent shall have received Uniform Commercial Code, tax lien and litigation searches, the
results of which shall be reasonably satisfactory to Agent;



(w) Parent shall have received net cash proceeds in the form of the Senior Notes consisting
of cash in an aggregate amount not less than $157,717,000, and Agent shall have received
satisfactory evidence thereof;



(x) Parent shall have received net proceeds in cash and stock in an aggregate amount equal to
at least $26,300,000 from Permitted Holder, and Agent shall have received evidence, reasonably
satisfactory to Agent in all respects, of such equity investment, and as of the Closing Date,
Parent shall have aggregate equity and other contributions from Permitted Holder and other
investors in an amount equal to at least $49,000,000;



(y) Agent and its counsel shall be satisfied with the corporate structure of Parent and its
Subsidiaries following the Acquisition Transactions;



(z) Borrowers and each of their respective Subsidiaries shall have received all licenses,
approvals or evidence of other actions required by any Governmental Authority in connection with
the execution and delivery by Borrowers or their respective Subsidiaries of the Loan Documents and
Acquisition Documents or with the consummation of the transactions contemplated thereby that are
required by law to be held or received;


 


-3-









 





(aa) Agent shall have received evidence (reasonably satisfactory to Agent) of the payment of
the indebtedness under that certain Credit Agreement dated as of May 30, 2003, by and between CLFX
Corporation and Allweiler AG, as Borrowers; Colfax Corporation; Merrill Lynch; Pierce, Fenner &
Smith Incorporated, as Sole Bookrunning Lead Arranger and Syndication Agent; Wachovia Bank,
National Association, as Documentation Agent; The Bank of Nova Scotia, as Administrative Agent; and
the other Lender Parties as such term is defined therein, and termination of any and all security
interests related thereto; and



(bb) all other documents and legal matters in connection with the transactions contemplated by
this Agreement shall have been delivered, executed, or recorded and shall be in form and substance
satisfactory to Agent.


 


-4-









 





SCHEDULE 4.5(a)




INVENTORY AND EQUIPMENT STORED

WITH BAILEES OR WAREHOUSEMEN




Vendor Name & Address




Southern Cast Products

1010 Wile Rd.

P.O. Box 8644

Meridian, MS 39303-3644




Ferralloy, Inc.

28001 Ranney Parkway

Cleveland, OH 44145




Wuxi Casting Co.

Shixin Rd. No. 70

Jiangsu Prov.

China




EB Industries, Inc.

90 Carolyn Blvd.

Farmingdale, NY 11735




Hardinger Transfer

1314 West 18th Street

Erie, PA 16502

(stores property monthly in 8000 sf warehouse)




Accurate Specialties

N12W24360

Bluemound Road

Waukesha, WI 53188




Babs Foundry

135 East Hodges Street

Norton, MA 02766




Bardane
Mfg.

P.O. Box 70

Jermyn, PA 18433




Bokers

3104 Snelling Ave.

Minneapolis, MN 55406




CAPT

1363 Ridgeway St.

Pomona, CA 91768




Creative Automation Systems

80 Moose Loop Rd.

Louisburg, NC 27549




Donsco

124 North Front Street

P.O. Box 2001

Wrightsville, PA 17368



 


 









 





Vendor Name & Address




Enterprise Foundry

P.O. Box 1564 South Ave.

Lewiston, ME 04241




Friends Foundry

416 Pond Street

Woonsocket, RI 02895




General Machine and Foundry

P.O. Box 480

Wilton, NH 03086




General Machine Works

515 Prospect St.

P.O. Box 546

York, PA 17405




Getchell and Sons

P.O. Box 17028

Smithfield, RI 02917




Gupta Permold Corp.

234 Lott Road

Pittsburgh, PA 15235




Hamburg

P.O. Box 147

Hamburg, PA 19526




Insulfab

P.O. Box 4277

Spartanburg, SC 29305




Interstate Gasket

P.O. Box 207

Leicester, MA 01524




Richmond Industries

One Chris Court

Dayton, NJ 08810




RL Hudson

415 Industrial Court

Greer, SC 29651




Spirol International

321 Remington Rd.

Stow, OH 44224




Standard Steel Speciality

P.O. Box 20

Beaver Falls, PA 15010




Symmco

P.O. Box F

101 South Park St.

Sykesville, PA 15865




Unicast Company

241 North Washington St.

Boyertown, PA 19512




Unimacts

203 Tunbridge Road

Baltimore, MD 21212



 


 









 





Vendor Name & Address




Unitex

14780 Bar Harbor Rd.

Bldg A

Fontana, CA 92336




Walker Machine and Foundry

P.O. Box 171

Howard Hall Road

Athens, NY 12015




West Point Foundry

P.O. Box 589

2021 Stateline Rd.

West Point, GA 31833




Elmira Heat Treating Company

407 South Kinyon St.

Elmira, NY 14904




General Heat Treating Company

6770 Benedict Rd.

East Syracuse, NY 13057




Triple Cities Metal Finishing Corporation

349 Industrial Park Dr.

Binghamton, NY 13904




H. M. Quackenbush, Inc.

220 Prospect St.

Herkimer, NY 13350




Surface Finish Technologies, Inc.

215 Judson Street

Elmira, NY 14901




Anoplate Corporation

459 Pulaski St.

Syracuse, NY 13204




AuTech Plastics

31 Allen St.

Auburn, NY 13021




Centennial Plastics Manufacturing LTD

2590 South Sheridan Way

Mississaugo, Ontario

Canada




Mid-States Rubber Products, Inc.

1230 South Race St.

P.O. Box 370

Princeton, IN 47670



 


 









 





Vendor Name & Address




Kulp

30 Stokes Ave.

E. Stroudsburg, PA 18301




Clearfield Machine

520 South Third St.

Clearfield, PA 16830




Fairmount Foundry

P.O. Box 466

Front & Pine Streets

Hamburg, PA 19526




Unicast

241 N. Washington

Boyertown, PA 19512




Crescent Brass

701 Park Ave.

Reading, PA 19611




Buffalo Metal Castings

1875 Elmwood Ave.

Buffalo, NY 14207




Tricast LTD.

2128 Killian Rd.

Akron, OH 44312




Knapp

1207 Sweitzer Ave.

Akron, OH 44301




Domestic

275 North Queen St.

Shippensburg, PA 17257




Liberty

550 So. Liberty Rd.

Delaware, OH 43015




Col-pump

131 East Railroad St.

Columbiana, OH 44408




A J Rose Mfg Company

38000 Chester Road

Avon, OH 44011




Allegheny
Plastics Inc.

Building 3, Avenue A

Leetsdale, PA 15056




American
Gear Inc.

910 Swanson Drive

P.O. Box 156

Prophetstown, IL 61277




American
Sintered Technologies Inc.

513 East Second Street

Emporium, PA 15834



 


 









 





Vendor Name & Address




Ataco
Steel Products Corp.

6809 Hwy 60

P.O. Box 466

Cedarburg, WI 53012




Atlantic Precision Spring

P.O. Box 158

100 Ronzo Road

Forestville, CT 06010




Automated
Engineering Corp.

2802 Leslie Road

Tampa, FL 33619




Baker Manufacturing Company

133 Enterprise Street

Evansville, WI 53536




Bremen
Castings Inc.

P.O. Box 129

500 North Baltimore Street

Bremen, IN 46506




Bremskerl North America

P.O. Box 965

Arlington Heights, IL 60006-0965




Capitol
Stampings Corp.

2700 W North Avenue

Milwaukee, WI 53208




Capstan
Tennessee Inc.

315 Cardiff Valley Road

Rockwood, TN 37854




Chambers
Gasket & Manufacturing Co.

4701 West Rice Street

Chicago, IL 60651-3377




Converse
Industries Inc.

5601 95th Avenue

Kenosha, WI 53144




Curto Ligonier Foundries

1215 North 31st Avenue

Melrose Park, IL 60160



 


 









 





Vendor Name & Address




Dekalb Forge Company

East Pleasant St.

P.O. Box 369

Dekalb, IL 60115




Dudek & Bock Spring Mfg Co.

5100 West Roosevelt Road

Chicago, IL 60644




East Star Zhejiang Linhai Dong Xing

Lin Hai City

Zhe Jiang Province

China

317016




Eck
Industries Inc.

1602 North 8th Street

P.O. Box 967

Manitowoc, WI 54221




Eckmann Pressed Metal Company

5300 21st Street

P.O. Box 1616

Racine, WI 53401




Eclipse
Manufacturing Co.

1828 Oakland Avenue

Sheboygan, WI 53081




Elco Industries, Inc.

US 29 Bypass S

Logansport, IN 46947




Elco
Sintered Alloys Company Inc.

Route 948

P.O. Box 183

Kersey, PA 15846




Engineered Assemblies

W137 N5669 Williams Place

Menomonee Falls, WI 53051




Fabex Brake Products

133 Oak Street

West Bend, WI 53095




Feintool
Cincinnati Inc.

11280 Cornell Park Drive

Cincinnati, OH 45242



 


 









 





Vendor Name & Address




Fincor Automation

3750 East Market St.

York, PA 17402




Flambeau Micro Company

1655 Corporate Center Dr.

P.O. Box 650

Sun Prairie, WI 53590-0650




Forgings & Stampings Inc.

1025 23rd Avenue

Rockford, IL 61104




Four Star Stamping, Inc.

601 13th Avenue South

Hopkins, MN 55343




GKN Sintered Metals-Zeeland

475 North Centennial

Zeeland, MI 49464




Gord Industrial Plastics, Inc.

1310 E. Sixth Street

Sandwich, IL 60548




Great Lakes Friction Products Inc.

8601 North 43 St.

Milwaukee, WI 53209




Grove Die Casting

1339 Industrial Park Dr.

Union Grove, WI 53182




Hampshire Specialty Products

365 Keyes Avenue

Hampshire, IL 60140




Harris

5500 Bill Harris Rd.

(P.O. Box 4199)

Longview, TX 75606-2084




Herker Industries

N57 W13760 Carmen Avenue

Menomonee Falls, WI 53051




Illinois Broaching Company

4210 N. Grace

Schiller Park, IL 60176



 


 









 





Vendor Name & Address




Illinois
Forge Inc.

2900 East Rock Falls Road

Rock Falls, IL 61071




Induction
Heat Treating Corp.

775 Tek Drive

Crystal Lake, IL 60014




Jef-Scot Metal

926 North Lake Street

Boyne City, MI 49712




Kapco Inc.

1046 Hickory Street

Grafton, WI 53024-0228




Kirsh Foundry Inc.

125 Rowell St.

Beaver Dam, WI 53916-2347




Kruger

1233 36th Street

Wichita Falls, TX 76302




Legacy Plastics

5040 27th Avenue

Rockford, IL 61109




Line
Group Inc.

539 West Algonquin Road

Arlington Heights, IL 60005




Luitink Manufacturing

W140 N8700 Lilly Road

P.O. Box 366

Menomonee Falls, WI 53051




Manitowoc Foundry

2701 Division Street

(P.O. Box 548)

Manitowoc, WI 54221-0548




Maron
Products Inc.

1301 Industrial Drive

Mishawaka, IN 46544




Matthew-Warren Incorporated

P.O. Box 7008

500 E. Ottawa Street

Logansport, IN 46947-7008



 


 









 





Vendor Name & Address




McKinley Iron

P.O. Box 790

Fort Worth, TX 76101-0790




Michigan
Precision Industries Inc.

One Grand Avenue

Deerfield, WI 53531




Mid West Spring Muskegon Plant

1935 E Laketon Ave.

Muskegon, MI 49442




Mid-City Foundry

1521 West Bruce Street

(P.O. Box 04696)

Milwaukee, WI 53204-0696




Millin Group

18015 St James Road

Brookfield, WI 53045




Milwaukee Forge

1532 East Oklahoma Avenue

Milwaukee, WI 53207-2433




Missouri
Pressed Metals Inc.

1200 E Boonville Rd

P.O. Box 1544

Sedalia, MO 65302-1544




Morgan Advanced Ceramics

26 Madison Road

Fairfield, NJ 07004




Morrow Foundry

1115 West 12th Street

Coffeyville, KS 67337




N E W Industries

36 West Yew Street

Sturgeon Bay, WI 54235




New Hampshire Industries

68 Etna Road

Lebanon, NH 03766




Non-Metallic Components

650 Northern Court

Poynette, WI 53955



 


 









 





Vendor Name & Address




Nyloncraft
Inc.

616 W Mc Kinley Hwy

Mishawaka, IN 46545




Ogallala Electronics

601 West 1st Street

P.O. Box 59

Ogallala, NE 69153




Oil City

909 S. 12th Street

(P.O. Drawer 1560)

Corsicana, TX 75151-1560




Olson Pattern & Foundry Works

2135 15th Street

P.O. Box 6106

Rockford, IL 61125




Phoenix Casting

906 Juniata Ave.

(P.O. Box 308)

Juniata, NE 68955




Portland Forge

250 E Lafayette

P.O. Box 905

Portland, IN 47371-0905




Premier
Tooling & Mfg.

8853 Kapp Drive

Peosta, IA 52068-9447




Production
Stamping Corp.

301 E Vienna Avenue

Milwaukee, WI 53212




Putnam
Precision Molding Inc.

11 Danco Road

Putnam, CT 06260




Quad City Die Casting Co.

3800 River Dr.

Moline, IL 61265




Qualified Products LLC

5801 W Franklin Dr.

Franklin, WI 53132



 


 









 





Vendor Name & Address




Quality Spring Products

355 Jay Street

Coldwater, MI 49036




Racine Steel Castings Company

BR Holdings Ltd.

1442 N. Memorial Drive

Racine, WI 53404




Reliance Tool

617 N State Street

Elgin, IL 60123




Resinoid
Engineering Corp.

251 O’Neill Drive

Hebron, OH 43025




Richland Foundry

1000 Foundry Drive

(P.O. Box 609)

Richland Center, WI 53581




Rockford Products Corporation

707 Harrison Avenue

Rockford, IL 61104-7162




Roloff Manufacturing

400 Gertrude Street

(P.O. Box 7002)

Kaukauna, WI 54130-7002




Scan-Pac Mfg. Company

N 84 W 13510 Leon Road

Menomonee Falls, WI 53051




Scot
Forge Co.

Box 88085

Milwaukee, WI 53288-0085




Shima American Corporation

222 Spring Lake Drive

Itasca, IL 60143




Sinteris,
Inc.

325 Chatham Street North

P.O. Box 280

Blenheim, Ontario Noplao

Ontario, Canada



 


 









 





Vendor Name & Address




SM & F Foundry

P.O. Box 4080

South Bend, IN 46634




Southern
Cast Products Inc.

1010 Wile Road

P.O. Box 3644

Meridian, MS 39303




St
Charles Stamping Co.

318 North 4th Street

P.O. Box 869

St Charles, IL 60174




State Line Foundries

Hwy 251, North

P.O. Box 530

Roscoe, IL 61073




State Line Foundry

Highway 251 North

Roscoe, IL 61073




Stecker Machine

5107 County Road C

Manitowoc, WI 54220




Stone Container Corporation

2350 Springbrook Ct.

Beloit, WI 53511




Supreme Casting

7901 North 73rd Street

Milwaukee, WI 53223




Texas Aluminum

204 Penland Street

(P.O. Box 1409)

Fort Worth, TX 76101




Thermoset

6411 W Mequon Rd.

Mequon, WI 53092




Torrance Casting

3131 Commerce Street

La Crosse, WI 54603



 


 









 





Vendor Name & Address




Vermilion

100 N. 6th Avenue

(P.O. Box 27)

Hoopeston, IL 60942




Viking Forge

4500 Crane Center Drive

Streetsboro, OH 44241-5080




Westwood Aluminum

1242 Lincoln Ave.

Waukesha, WI 53186




Whittet-Higgins Company

33 Higginson Avenue

Central Falls, RI 02863




Winnebago
Foundry Inc.

132 Blackhawk Blvd.

So Beloit, IL 61080




Wisconsin Metal Products Company

1807 Dekoven Avenue

P.O. Box 335

Racine, WI 53401-0335




Worthington Steel Company

100 Worthington Drive

Porter, IN 46304




All Power

3146 Market Street

Green Bay, WI 54304




Meurer Company

7402 West Becher Street

Milwaukee, WI 53219




JT Chapman

3251 Royalty Row

Irving, TX 75062




Baldor Mtrs & Drives

900 Sq. Zero

Fort Smith, AR 72908



 


 









 





SCHEDULE 4.5(b)




LOCATIONS OF INVENTORY AND EQUIPMENT




16319 Arthur St.

Cerritos, CA 90703




Suite 330

485 South Frontage Road

Burr Ridge, IL 60527




449 Gardner Street

South Beloit, IL 61080




960 Gardner St.

South Beloit, IL 61080




802 E. Short Street

Columbia City, IN 46725




722 E. Swihart Street

Columbia City, IN 46725




14 Hayward Street

Quincy, MA 02171




23601 Hoover Road

Warren, MI 48089-3994




701 Carrier Drive

Charlotte, NC 28216




1728 Burnet Ave.

Syracuse, NY 13206




2221 Niagara Falls Boulevard

Niagara Falls, NY 14304




1802 Pittsburgh Avenue

Erie, PA 16502




2800 Fisher Road

Wichita Falls, TX 76302




1703 Pearl Street

Waukesha, WI 53186





 


 












 




SCHEDULE 4.7(a)




STATES OF ORGANIZATION




	 	 	 
	Entity	 	Jurisdiction of Organization
	Altra Industrial Motion, Inc.

	 	Delaware
	American Enterprises MPT Corp.

	 	Delaware
	American Enterprises MPT Holdings, L.P.

	 	Delaware
	Ameridrives International, L.P.

	 	Delaware
	Boston Gear LLC

	 	Delaware
	Formsprag LLC

	 	Delaware
	Kilian Manufacturing Corporation

	 	Delaware
	Nuttall Gear LLC

	 	Delaware
	Warner Electric LLC

	 	Delaware
	Warner Electric International Holding, Inc.

	 	Delaware
	Warner Electric Technology LLC

	 	Delaware
	The Kilian Company

	 	Delaware







 


 









 








SCHEDULE 4.7(b)




CHIEF EXECUTIVE OFFICES




	 	 	 
	Entity	 	Chief Executive Office
	Altra Industrial Motion, Inc.

	 	14 Hayward Street
 Quincy, MA
02171
	American Enterprises MPT Corp.

	 	14 Hayward Street
 Quincy, MA
02171
	American Enterprises MPT Holdings, L.P.

	 	14 Hayward Street
 Quincy, MA
02171
	Ameridrives International, L.P.

	 	14 Hayward Street
 Quincy, MA
02171
	Boston Gear LLC

	 	14 Hayward Street
 Quincy, MA
02171
	Formsprag LLC

	 	14 Hayward Street
 Quincy, MA
02171
	Kilian Manufacturing Corporation

	 	14 Hayward Street
 Quincy, MA
02171
	Nuttall Gear LLC

	 	14 Hayward Street
 Quincy, MA
02171
	Warner Electric LLC

	 	14 Hayward Street
 Quincy, MA
02171
	Warner Electric International Holding, Inc.

	 	14 Hayward Street
 Quincy, MA
02171
	Warner Electric Technology LLC

	 	14 Hayward Street
 Quincy, MA
02171
	The Kilian Company

	 	14 Hayward Street
 Quincy, MA
02171







 


 









 







SCHEDULE 4.7(c)




ORGANIZATION IDENTIFICATION NUMBERS




	 	 	 	 	 
	Entity	 	Organizational Identification Numbers
	Altra Industrial Motion, Inc.

	 	 	3878606	 
	American Enterprises MPT Corp.

	 	 	2673186	 
	American Enterprises MPT Holdings, L.P.

	 	 	2686543	 
	Ameridrives International, L.P.

	 	 	2673483	 
	Boston Gear LLC

	 	 	3822981	 
	Formsprag LLC

	 	 	3534967	 
	Kilian Manufacturing Corporation

	 	 	0817664	 
	Nuttall Gear LLC

	 	 	2765519	 
	Warner Electric LLC

	 	 	3142038	 
	Warner Electric International
Holding, Inc.

	 	 	3142042	 
	Warner Electric Technology LLC

	 	 	3142046	 
	The Kilian Company

	 	 	3843712	 





 


 









 





SCHEDULE 4.7(d)




COMMERCIAL TORT CLAIMS




None.



 


 









 




SCHEDULE 4.8(b)




CAPITALIZATION OF BORROWERS




	 	 	 	 	 	 	 
	Entity	 	Class	 	Authorized	 	Issued and Outstanding
	Altra Industrial Motion, Inc.
	 	Common	 	1,000	 	1,000
	 
	 	 	 	par $0.001	 	par $0.001
	American Enterprises MPT Corp.
	 	Common	 	200,100,000	 	200,002,000 common
	 
	 	 	 	par $0.001	 	 
	 	 	 	 	 	 	 
	 
	 	Preferred	 	400,000	 	 
	 
	 	 	 	par $0.001	 	 
	American Enterprises MPT Holdings, L.P.
	 	59.4% - LP Interest	 	N/A	 	N/A
	 
	 	40.6% - GP Interest	 	 	 	 
	Ameridrives International, L.P.
	 	99% - LP Interest	 	N/A	 	N/A
	 
	 	1% - GP Interest	 	 	 	 
	Boston Gear LLC
	 	One undivided member	 	One undivided	 	One undivided member 
	 
	 	interest	 	member interest	 	interest
	Formsprag LLC
	 	member interest	 	961,429 Units	 	961,429 Units
	Kilian Manufacturing Corporation
	 	Common	 	100	 	10
	 
	 	 	 	without par value	 	 
	Nuttall Gear LLC
	 	One undivided member	 	One undivided member	 	One undivided member
	 
	 	interest	 	interest	 	interest
	The Kilian Company
	 	Common	 	125,000	 	8,767
	 
	 	 	 	Par $0.00001	 	common
	 	 	 	 	 	 	 
	 
	 	Series A Preferred Stock	 	100,000	 	87,656
	 
	 	 	 	Par $0.00001	 	Series A Preferred Stock







	 	 	 	 	 	 	 
	Entity	 	Class	 	Authorized	 	Equity
	Warner Electric LLC
	 	One undivided member	 	One undivided	 	One undivided
	 
	 	interest	 	member interest	 	member interest
	Warner Electric International Holding, Inc.
	 	Common	 	1,000	 	1,000
	 
	 	 	 	par $1.00	 	 
	Warner Electric Technology LLC
	 	One undivided member	 	One undivided	 	One undivided
	 
	 	interest	 	member interest	 	member interest








 















 





SCHEDULE 4.8(c)




CAPITALIZATION OF BORROWERS’ RESTRICTED SUBSIDIARIES




	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Number of	 	 	 	Percentage
	Owner	 	Restricted Subsidiary	 	Shares/Units	 	Class of Interests	 	Owned
	Altra Industrial Motion,
Inc. (as successor to Power
Transmission Holding LLC)

	 	American
Enterprises MPT
Corp.
	 	 	200,002,000	 	 	common
	 	 	100%	 
	Altra Industrial Motion,
Inc. (as successor to Power
Transmission Holding LLC)

	 	Boston Gear LLC
	 	 	N/A	 	 	member interest
	 	 	100%	 
	Altra Industrial Motion, Inc.

	 	The Kilian Company
	 	 	8,767 87,656	 	 	common 

Series A
Preferred Stock
	 	 	100%	 
	Altra Industrial Motion,
Inc. (as successor to Power
Transmission Holding LLC)

	 	Warner Electric LLC
	 	 	N/A	 	 	member interest
	 	 	100%	 
	Altra Industrial Motion,
Inc. (as successor to Power
Transmission Holding LLC)

	 	Warner Electric
International
Holding, Inc.
	 	 	1,000	 	 	common
	 	 	100%	 
	Altra Industrial Motion,
Inc. (as successor to Power
Transmission Holding LLC)

	 	Warner Electric

Technology LLC
	 	 	N/A	 	 	member interest
	 	 	100%	 
	Altra Industrial Motion,
Inc. (as successor to Power
Transmission Holding LLC)

	 	American
Enterprises MPT
Holdings, L.P.
	 	 	N/A	 	 	general and limited
partnership
interests
	 	40.6% (including 1%

general partnership
interest)






 


 









 





	 	 	 	 	 	 	 	 	 	 	 	 	 
	Owner	 	Restricted
Subsidiary	 	Number of 

Shares/Units	 	Class of Interests	 	Percentage 

Owned
	American Enterprises MPT
Holdings, L.P.

	 	Ameridrives
International, L.P.
	 	 	N/A	 	 	limited partnership interest
	 	 	99%	 
	American Enterprises MPT Corp.

	 	American Enterprises
MPT Holdings, L.P.
	 	 	N/A	 	 	limited partnership interest
	 	 	59.4%	 
	American Enterprises MPT Corp.

	 	Ameridrives
International, L.P.
	 	 	N/A	 	 	general partnership interest
	 	 	1%	 
	American Enterprises MPT Corp.

	 	Nuttall Gear LLC
	 	 	N/A	 	 	member interest
	 	 	100%	 
	Ameridrives International, L.P.

	 	Formsprag LLC
	 	 	258,429	 	 	member interest
	 	 	30%	 
	The Kilian Company

	 	Kilian Manufacturing

Corporation
	 	 	10	 	 	common
	 	 	100%	 
	Warner Electric LLC

	 	Formsprag LLC
	 	 	603,000	 	 	member interest
	 	 	70%	 











 


 









 










SCHEDULE 4.10




LITIGATION




None.





 


 









 







SCHEDULE 4.13(a)




PENSION PLANS





	•	 	Kilian Manufacturing Corporation Salary Savings Retirement Plan.

	 
	•	 	Pursuant to the LLC Purchase Agreement dated October 25, 2004 by and among
Warner Electric Holdings, Inc. (“Seller”), Colfax Corporation (Parent of the
Seller) and CPT Acquisition Corp. (“Buyer”), Buyer will establish a defined
benefit plan for the benefit of continuing employees as of the Closing Date.
Buyer will accept a transfer of assets and liabilities from the Colfax plans with
respect to such continuing employees. Unfunded Benefit Liabilities with respect
to such continuing employees has been estimated to be approximately $19.1
million. Based on the asset allocation methodology required under IRC
414(l)
and the funded level of the Colfax Plans, the new defined benefit plan will receive
a transfer of assets of not more than $4.7 million. Thus the new defined benefit
plan will be less than 90% funded and will require deficit reduction quarterly
contributions. Annual contributions for the new defined benefit plan have been
estimated to be $6.6 million in 2005 declining to $2 million in 2009.

	 
	•	 	Pursuant to the LLC Purchase Agreement dated October 25, 2004 by and among
Warner Electric Holdings, Inc. (“Seller”), Colfax Corporation (Parent of the
Seller) and CPT Acquisition Corp. (“Buyer”), Buyer will establish a defined
contribution plan for the benefit of continuing employees as of the Closing Date.
Buyer’ defined contribution plan will accept direct rollovers from the Colfax
defined contribution plan with respect to such continuing employees.

	 
	•	 	Pursuant to the LLC Purchase Agreement dated October 25, 2004 by and among
Warner Electric Holdings, Inc. (“Seller”), Colfax Corporation (Parent of the
Seller) and CPT Acquisition Corp. (“Buyer”), Buyer will assume or continue
retirement benefits for certain non-U.S. employees. The benefit liabilities for
non-U.S. defined benefit plans is estimated to be $3 million; there are no assets
associated with these plans.






 


 









 







SCHEDULE 4.14




ENVIRONMENTAL MATTERS





1. Any finding or condition disclosed in the following environmental reports:





	 	•	 	URS Corporation, Phase I Environmental Site Assessment, Warner Electric, a
Division of Colfax Power Transmission Group, 449 Gardner Street, South Beloit,
IL, November 11, 2004

	 
	 	•	 	URS Corporation, Phase I Environmental Site Assessment, Warner Electric, a
Division of Colfax Power Transmission Group, 960 Gardner Street, South Beloit,
IL, November 11, 2004

	 
	 	•	 	URS Corporation, Phase I Environmental Site Assessment, Boston Gear, a
Division of Colfax Power Transmission Group, 16319 Arthur Street, Cerritos,
CA, November 11, 2004

	 
	 	•	 	URS Corporation, Phase I Environmental Site Assessment, Nuttall Gear
Company, a Division of the Colfax Power Transmission Group, 2221 Niagara
Falls Boulevard, Niagara Falls, NY, November 11, 2004

	 
	 	•	 	URS Corporation, Phase I Environmental Site Assessment, Stieber GmbH, a
Division of Colfax Power Transmission Group, Dieselstrasse 14, 85748 Garching,
Germany, November 11, 2004

	 
	 	•	 	URS Corporation, Phase I Environmental Site Assessment, Ameridrives
Couplings, a Division of Ameridrives International, LP, 1802 Pittsburgh Avenue,
Erie, PA, November 11, 2004

	 
	 	•	 	URS Corporation, Phase I Environmental Site Assessment, Warner Electric
Europe, a Division of Colfax, Route De Spay, 72700 Allonnes, France,
November 11, 2004

	 
	 	•	 	URS Corporation, Phase I Environmental Site Assessment, Warner Electric
(Wichita Clutch), a Division of Colfax Corporation, 2800 Fisher Road, Wichita
Falls, TX, November 11, 2004

	 
	 	•	 	URS Corporation, Phase I Environmental Site Assessment, Warner Electric, a
Division of Colfax Equipment Company, 802 East Short Street, Columbia City,
IN, November 11, 2004

	 
	 	•	 	URS Corporation, Phase I Environmental Site Assessment, Warner & Tourco, a
Division of Colfax, ZI Saint Barthelemy D’Anjou, Rue De Champfleur, Saint
Barthelemy D’Anjou, France, November 11, 2004

	 
	 	•	 	URS Corporation, Phase I
Environmental Site Assessment, Shui Hing
Manufacturing Factory, a Division of Warner Shui Hing Limited, Songshan
Industrial Zone, Bogang Village, Bao An District, Shenzhen City, Guangdong
Province, China, November 11, 2004





 


 









 





	 	•	 	URS Corporation, Phase I Environmental Site Assessment, Stieber GmbH, a
Division of Colfax Corporation, Hatschekstrasse 36, 69126, Heidelberg,
Germany, November 11, 2004

	 
	 	•	 	URS Corporation, Phase I Environmental Site Assessment, Boston Gear, a
Division of Colfax Power Transmission Group, 14 Hayward Street, Quincy, MA,
November 11, 2004

	 
	 	•	 	URS Corporation, Phase I Environmental Site Assessment, Boston Gear, a
Division of Colfax Corporation, 701 Interstate 85 North (Carrier Drive),
Charlotte, NC, November 11, 2004

	 
	 	•	 	URS Corporation, Phase I Environmental Site Assessment, Wichita Clutch, 325
Ampthill Road, Bedford, United Kingdom, November 11, 2004

	 
	 	•	 	URS Corporation, Phase I Environmental Site Assessment, Formsprag Clutch, a
Division of Colfax Power Transmission Group, 23601 Hoover Road, Warren, MI,
November 11, 2004






2. The Company formerly owned a site in Roscoe, IL, which is known to have
contamination associated with the release of chlorinated solvents. Dana Corporation,
which formerly owned the Roscoe facility, is responsible for remediating the
contamination in the area of the former plant. It is our understanding that the remediation
is being done pursuant to an order. The Company’s former parent, i.e., the seller, has
agreed to retain any liability the Company might incur due to its former ownership of the
Roscoe site. Note, the contamination did not occur while the Company owned or
operated the site.



3. As with most manufacturers, the Company and its Subsidiaries generates
hazardous wastes, which are transported off site for treatment or disposal. A party that
arranges for the disposal or treatment of hazardous wastes may be liable for the cost of
remediating if the disposal or treatment site becomes contaminated.




 


 











 




SCHEDULE 4.17




DEPOSIT ACCOUNTS AND SECURITIES ACCOUNTS




	 	 	 	 	 
	Borrower/Restricted Subsidiary	 	Bank Name	 	Account Number
	 
	 	 	 	 
	Ameridrives International L.P.
	 	Bank of America	 	3750781472
	Ameridrives International L.P.
	 	Bank of America	 	3299912446
	Ameridrives International L.P.
	 	Bank of America	 	3299916280
	Ameridrives International L.P.
	 	Bank of America	 	3299976664
	Ameridrives International L.P.
	 	Bank of America	 	8188010323
	Ameridrives International L.P.
	 	Bank of America	 	8188511820
	Ameridrives International L.P.
	 	Bank of America	 	3750782028
	Ameridrives International L.P.
	 	PNC Bank	 	20-55-002-0367500
	Ameridrives International L.P.
	 	National City Bank of PA	 	967206455
	Ameridrives International L.P.
	 	Bank One, NA	 	121000000020678425
	Formsprag LLC
	 	Bank of America	 	3299980427
	Formsprag LLC
	 	National City Bank	 	628613937
	Formsprag LLC
	 	National City Bank	 	981674298
	Nuttall Gear LLC
	 	Bank of America	 	3299961724
	Nuttall Gear LLC
	 	Bank of America	 	8188810324
	Warner Electric LLC
	 	Bank of America	 	3751467863
	Warner Electric LLC
	 	Bank of America	 	3299781262
	Warner Electric LLC
	 	Bank of America	 	3299980351
	Warner Electric LLC
	 	Fort Financial Credit Union	 	42339
	Warner Electric LLC
	 	Bank of America - Toronto	 	44571230
	Warner Electric LLC
	 	Bank of America	 	3299980369
	Warner Electric LLC
	 	Lake City Bank	 	030643
	Warner Electric LLC
	 	Bank of America	 	3299980401
	Warner Electric LLC
	 	Bank of America	 	3299980419
	Warner Electric LLC
	 	Bank of America	 	3299980435
	Warner Electric LLC
	 	Bank One	 	1559038086
	Kilian Manufacturing Corporation
	 	Wachovia	 	2018640831218
	Kilian Manufacturing Corporation
	 	La Salle	 	5590078613
	Kilian Manufacturing Corporation
	 	La Salle	 	5800441874
	Altra Industrial Motion, Inc.
	 	Wells Fargo Bank	 	4121073308






 


 









 





SCHEDULE 4.19




PERMITTED INDEBTEDNESS




Capital Leases with the following (as of October 1, 2004, capital leases totaled
approximately $1,631,000):



	 	 	 
	Debtor Name	 	Secured Party
	 
	 	 
	Boston Gear LLC

	 	J.P. Morgan Leasing Inc.
	 

	 	Dell Financial Services
	 

	 	CIT Communications Finance Corporation
	 

	 	Dell Financial Services, L.P.
	 

	 	Cisco Systems Capital Corporation
	 

	 	Siebel Systems Incorporated
	 
	 	 
	Warner Electric, Inc.

	 	CISCO Systems Capital Corporation
	 

	 	Avnet Computer, a division of Avent, Inc.
	 

	 	Dana Commercial Credit Corporation
	 

	 	US Bancorp
	 

	 	CIT Communications Finance Corporation
	 

	 	Dell Financial Services
	 

	 	CitiCapital Technology Finance, Inc.
	 

	 	Dell Financial Services, L.P.
	 

	 	Dana Commercial Credit Corporation
	 

	 	CCA Financial, LLC
	 

	 	Avaya Financial Services
	 

	 	GE Capital






 


 









 





The following intercompany debt:3




	1.	 	Nuttall Gear LLC has issued a note to Ameridrives International, L.P. with a face value of
$13,251,525.







	2.	 	Warner Electric LLC debt owed to Ameridrives International, L.P. for approximately
$1.7 million.





 





	 	 	 
	3	 	Amounts may not reflect interest charges and other borrowings/repayments based on the cash
flow of the applicable entities.




 


 









 






Final Version



Schedule 5.2



Provide Agent (and if so requested by Agent, with copies
 for each Lender) with each of the documents set forth below at the following times in form satisfactory to Agent:




Monthly (provided, however, that if Excess Availability of Borrowers is less than $10,000,000, then weekly)



(a) an Account roll-forward with supporting details supplied from sales journals, collection journals, credit registers and any other records, and



(b) Inventory system/perpetual reports specifying the cost and the wholesale market value of Borrowers’ and their Subsidiaries’ Inventory, by category, with additional detail showing additions to and deletions therefrom (delivered electronically in an acceptable format, if Borrowers have implemented electronic reporting).



Monthly (not later than (a) during the period from the Closing Date until the date that is 90 days after the
Closing Date, the 20th day of each month; and (b) thereafter, the 15th day of each month)



(c) a Borrowing Base Certificate,



(d) a detailed aging, by total, of Borrowers’ Accounts, together with a reconciliation and supporting documentation for any reconciling items noted (delivered electronically in an acceptable format, if Borrowers have implemented electronic reporting),



(e) a detailed calculation of those Accounts that are not eligible for the Borrowing Base, if Borrowers have not implemented electronic reporting,



(f) a detailed Inventory system/perpetual report together with a reconciliation to Borrowers’ general ledger accounts (delivered electronically in an acceptable format, if Borrowers have implemented electronic reporting),



(g) a detailed calculation of Inventory categories that are not eligible for the Borrowing Base, if Borrowers have not implemented electronic reporting,



(h) a summary aging, by vendor, of Borrowers’ and their respective Restricted Subsidiaries’ accounts payable and any book overdrafts (delivered electronically in an acceptable format, if Borrowers have implemented electronic reporting) and an aging, by vendor, of any held checks,



(i) a detailed report regarding Borrowers’ and their respective Restricted Subsidiaries’ cash and Cash Equivalents, including an indication of which amounts constitute Qualified Cash,



(j) a monthly Account roll-forward, in a format acceptable to Agent in its discretion, tied to the beginning and ending account receivable balances of Borrowers’ general ledgers,



(k) proof of payment of Borrowers’ and their respective Restricted Subsidiaries’ applicable taxes, and



(l) a detailed summary of Loan Parties’ fixed assets reflecting the book value of Loan Parties’ Real Property and Equipment.


 


 









 





Monthly (no later than the 30th day of each month)



(m) a reconciliation of Accounts, trade accounts payable, and Inventory of Borrowers’ and their respective Restricted Subsidiaries’ general ledger accounts to their monthly financial statements including any book reserves related to each category.



Quarterly



(n) a report regarding Borrowers’ and their respective Restricted Subsidiaries’ accrued, but unpaid, ad valorem taxes.



Annually



(o) a detailed list of Borrowers’ and their respective Restricted Subsidiaries’ customers, with address and contact information.



Promptly, and in any event within 5 days after occurrence thereof



(p) if (i) any Borrower consigns any Inventory or sells any Inventory on bill and hold, sale or return, sale on approval, or other conditional terms of sale, (ii) such Inventory is included in the Borrowing Base immediately prior to the time of such consignment or sale, and (iii) the aggregate amount of such Inventory satisfying clauses (i) and (ii) above, after giving effect to any such consignment
 or sale, exceeds $100,000, then Administrative Borrower shall deliver notice thereof to Agent describing the Inventory so consigned or sold and shall deliver to Agent a pro forma Borrowing Base Certificate reflecting the reduction in the Borrowing Base resulting from such consignment or sale (unless Agent determines, in its Permitted Discretion, that such Inventory shall remain in the Borrowing Base), and



(q) if (i) any Borrower or
Restricted Subsidiary stores any Inventory or Equipment with a bailee, warehouseman or similar party, (ii) such
Inventory or Equipment is included in the Borrowing Base immediately prior to the time of such storage with a bailee,
warehouseman or similar party, and (iii) the aggregate amount of such Inventory and/or Equipment satisfying clauses
(i) and (ii) above, after giving effect to any such storage with a bailee, warehouseman or similar party, exceeds $100,000, then Administrative
Borrower shall deliver notice thereof to Agent describing the Inventory or Equipment so stored with a bailee,
warehouseman or similar party and shall deliver to Agent a pro forma Borrowing Base Certificate reflecting the
reduction in the Borrowing Base resulting from such storage with a bailee,
warehouseman or similar party (unless Agent determines, in its Permitted Discretion, that such Inventory or Equipment shall remain in the Borrowing Base).



Upon request by Agent



(r) such other reports as to the Collateral or the financial condition of Borrowers and their respective Restricted Subsidiaries, as Agent may reasonably request.


 


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Final Version




Schedule 5.3




Deliver to Agent, with copies to each Lender, each of the financial statements, reports,
or other items set forth below at the following times in form satisfactory to
Agent:



Monthly (not later than (a) during the period from the Closing Date until the date that is 90 days after the Closing Date, 45 days after the end of each month and (b) thereafter, 30 days after the end of each month)



(a) an unaudited consolidated and consolidating balance sheet, income statement, and statement of cash flow covering Parent’s and its Subsidiaries’ operations during the prior month, and



(b) a Compliance Certificate.



Quarterly (not later than (a) for fiscal year 2004, 75 days after the end of each fiscal quarter of Parent
and (b) thereafter, 60 days after the end of each fiscal quarter of Parent)



(c) an unaudited consolidated and consolidating balance sheet, income statement,
and statement of cash flow covering Parent’s and its Subsidiaries’ operations during
the prior fiscal quarter and during the period commencing on the first day of the
applicable fiscal year and ending on the last day of the prior quarter,



(d) a Compliance Certificate, and



(e) to the extent not delivered pursuant to clause (i) or (j) below, copies of Material
Contracts entered into since the delivery of the previous Compliance Certificate,
together with any material amendments to any existing Material Contracts entered
into since the delivery of the previous Compliance Certificate.



Annually (not later than (a) for fiscal year 2004, 120 days after the end of each of Parent’s fiscal years and (b) thereafter, 90 days after the end of each of Parent’s fiscal years)



(f) consolidated and consolidating financial statements of Parent and its Subsidiaries for each such fiscal year, audited by independent certified public accountants reasonably
acceptable to Agent and certified, without any qualifications (including any (A) “going concern” or like qualification or exception, (B) qualification or exception as to the scope of
such audit, or (C) qualification which relates to the treatment or classification of any item and which, as a condition to the removal of such qualification, would require an adjustment
to such item, the effect of which would be to cause any noncompliance with the provisions of Section 6.16), by such accountants to have been prepared in accordance with GAAP (such
audited financial statements to include a balance sheet, income statement, and statement of cash flow and, if prepared, such accountants’ letter to management), and



(g) a Compliance Certificate.


 


 









 





Annually (not later than 15 days after the start of each of Parent’s fiscal years)



(h) copies of Borrowers’ Projections, in form and substance (including as to scope and underlying assumptions)
satisfactory to Agent, in its Permitted Discretion, for the forthcoming fiscal year, quarter by quarter, certified by
the chief financial officer of Parent as being such officer’s good faith estimate of the financial performance of Borrowers
during the period covered thereby.



if and when filed by any Borrower,



(i) Form 10-Q quarterly reports, Form 10-K annual reports, and Form 8-K current reports,



(j) any other filings made by any Borrower with the SEC (and, to the extent not included in any such filings, Borrowers
shall promptly provide Agent with true and complete copies of any and all material documents delivered to any Person pursuant to,
or in connection with, the Acquisition Documents and the Indenture Documents), and



(k) any other information that is provided by any Borrower to its shareholders generally.



promptly, but in any event within 5 days after any Borrower or any of its Subsidiaries has knowledge of any event or condition that
constitutes a Default or an Event of Default,



(l) notice of such event or condition and a statement of the curative action that Borrowers propose to take with respect thereto.



promptly after the commencement thereof, but in any event within 5 days after the service of process with respect thereto on Parent, any
Borrower or any of their respective Restricted Subsidiaries,



(m) notice of all actions, suits, or proceedings brought by or against Parent, any Borrower or any of
their respective Restricted Subsidiaries before any Governmental Authority which reasonably could be expected to result in
a Material Adverse Change.



upon the request of Agent,



(n) any other information reasonably requested relating to the financial
condition of Borrowers or their respective Restricted Subsidiaries.




 


-2-