**Exhibit10.35**

 

 

AMENDED AND RESTATEDCREDIT AGREEMENT

 

Dated as of June 19, 2003

 

among

 

ROLLER BEARING COMPANY OFAMERICA, INC.

 

as Borrower,

 

THE OTHER CREDIT PARTIESSIGNATORY HERETO,

 

as Credit Parties,

 

THE LENDERS SIGNATORYHERETO

 

FROM TIME TO TIME,

 

as Lenders,

 

GENERAL ELECTRIC CAPITALCORPORATION,

 

as Agent and Lender,

 

and

 

GECC CAPITAL MARKETSGROUP, INC.

 

as Lead Arranger

 

 

----

 

**TABLE OF CONTENTS**

 
| 1.     | AMOUNT AND TERMS OF CREDIT      |
|--------|---------------------------------|
|   | 1.1                             | Credit Facilities. |
|   | 1.2                             | Letters of Credit. |
|   | 1.3                             | Prepayments. |
|   | 1.4                             | Use of Proceeds |
|   | 1.5                             | Interest and  Applicable Margins. |
|   | 1.6                             | Eligible  Accounts – U.S.; Eligible Accounts – Schaublin. |
|   | 1.7                             | Eligible  Inventory – U.S.; Eligible Inventory – Schaublin. |
|   | 1.8                             | Cash Management Systems |
|   | 1.9                             | Fees. |
|   | 1.10                            | Receipt of Payments |
|   | 1.11                            | Application and  Allocation of Payments. |
|   | 1.12                            | Loan Account and Accounting |
|   | 1.13                            | Indemnity. |
|   | 1.14                            | Access |
|   | 1.15                            | Taxes. |
|   | 1.16                            | Capital  Adequacy; Increased Costs; Illegality. |
|   | 1.17                            | Credit Support |
|   | 1.18                            | Conversion to Dollars |
|   | 1.19                            | Judgment  Currency; Contractual Currency. |
|   |                            |   |
| 2.     | CONDITIONS PRECEDENT            |
|   | 2.1                             | Conditions to the  Initial Loans |
|   | 2.2                             | Further Conditions to  Each Loan |
|   | 2.3                             | Conditions  to U.S. Revolving Credit Advances Funding Permitted Acquisitions |
|   |                            |   |
| 3.     | REPRESENTATIONS AND  WARRANTIES |
|   | 3.1                             | Corporate  Existence; Compliance with Law |
|   | 3.2                             | Executive Offices, Collateral  Locations, FEIN |
|   | 3.3                             | Corporate Power, Authorization,  Enforceable Obligations |
|   | 3.4                             | Financial  Statements and Projections |
|   | 3.5                             | Material Adverse Effect |
|   | 3.6                             | Ownership of Property; Liens |
|   | 3.7                             | Labor Matters |
|   | 3.8                             | Ventures, Subsidiaries and  Affiliates; Outstanding Stock and Indebtedness |
|   | 3.9                             | Government Regulation |
|   | 3.10                            | Margin Regulations |
|   | 3.11                            | Taxes |
|   | 3.12                            | ERISA. |
|   | 3.13                            | No Litigation |
|   | 3.14                            | Brokers |
|   | 3.15                            | Intellectual Property |

 

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|   | 3.16                                  | Full Disclosure                                                                             |
|--------|---------------------------------------|---------------------------------------------------------------------------------------------|
|   | 3.17                                  | Common Enterprise                                                                           |
|   | 3.18                                  | Insurance                                                                                   |
|   | 3.19                                  | Deposit and Disbursement  Accounts                                                          |
|   | 3.20                                  | Government Contracts                                                                        |
|   | 3.21                                  | Customer and Trade  Relations                                                               |
|   | 3.22                                  | Agreements and Other Documents                                                              |
|   | 3.23                                  | Solvency                                                                                    |
|   | 3.24                                  | Status of Holdings                                                                          |
|   | 3.25                                  | Status of Schaublin Holding                                                                 |
|   | 3.26                                  | Subordinated Debt; other  Indebtedness                                                      |
|   | 3.27                                  | Motor Vehicles                                                                              |
|   | 3.28                                  | Existing Intercompany  Loans                                                                |
|   |                                  |                                                                                        |
| 4.     | FINANCIAL  STATEMENTS AND INFORMATION |
|   | 4.1                                   | Reports and Notices.                                                                        |
|   | 4.2                                   | Communication with  Accountants                                                             |
|   |                                  |                                                                                        |
| 5.     | AFFIRMATIVE COVENANTS                 |
|   | 5.1                                   | Maintenance of Existence  and Conduct of Business                                           |
|   | 5.2                                   | Payment of Charges.                                                                         |
|   | 5.3                                   | Books and Records                                                                           |
|   | 5.4                                   | Insurance;  Damage to or Destruction of Collateral.                                         |
|   | 5.5                                   | Compliance with Laws                                                                        |
|   | 5.6                                   | Supplemental Disclosure                                                                     |
|   | 5.7                                   | Intellectual Property                                                                       |
|   | 5.8                                   | [Intentionally Omitted]                                                                     |
|   | 5.9                                   | Landlords’  Agreements, Mortgagee Agreements, Bailee Letters and Real Estate Purchases |
|   | 5.10                                  | Motor  Vehicles                                                                             |
|   | 5.11                                  | Further Assurances                                                                          |
|   |                                  |                                                                                        |
| 6.     | NEGATIVE COVENANTS                    |
|   | 6.1                                   | Mergers, Subsidiaries, Etc.                                                                 |
|   | 6.2                                   | Investments; Loans and  Advances                                                            |
|   | 6.3                                   | Indebtedness.                                                                               |
|   | 6.4                                   | Employee  Loans and Affiliate Transactions.                                                 |
|   | 6.5                                   | Capital Structure and  Business                                                             |
|   | 6.6                                   | Guaranteed Indebtedness                                                                     |
|   | 6.7                                   | Liens                                                                                       |
|   | 6.8                                   | Sale of Stock and Assets                                                                    |
|   | 6.9                                   | ERISA                                                                                       |
|   | 6.10                                  | Financial Covenants                                                                         |
|   | 6.11                                  | [RESERVED]                                                                                  |
|   | 6.12                                  | Sale-Leasebacks                                                                             |
|   | 6.13                                  | Cancellation of  Indebtedness                                                               |
|   | 6.14                                  | Restricted Payments.                                                                        |

 

ii

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|   | 6.15                                                 | Change  of Corporate Name or Location; Change of Fiscal Year               |
|--------|------------------------------------------------------|----------------------------------------------------------------------------|
|   | 6.16                                                 | No Impairment  of Intercompany Transfers                                   |
|   | 6.17                                                 | No Speculative Transactions                                                |
|   | 6.18                                                 | Changes  Relating to Subordinated Debt; Material Contracts                 |
|   | 6.19                                                 | Redemptions.                                                               |
|   | 6.20                                                 | Holdings and Schaublin  Holding.                                           |
|   |                                                 |                                                                       |
| 7.     | TERM                                                 |
|   | 7.1                                                  | Termination                                                                |
|   | 7.2                                                  | Survival  of Obligations Upon Termination of Financing Arrangements        |
|   |                                                 |                                                                       |
| 8.     | EVENTS OF  DEFAULT; RIGHTS AND REMEDIES              |
|   | 8.1                                                  | Events of Default                                                          |
|   | 8.2                                                  | Remedies.                                                                  |
|   | 8.3                                                  | Waivers by Credit Parties                                                  |
|   |                                                 |                                                                       |
| 9.     | ASSIGNMENT  AND PARTICIPATIONS; APPOINTMENT OF AGENT |
|   | 9.1                                                  | Assignment and  Participations.                                            |
|   | 9.2                                                  | Appointment of Agent                                                       |
|   | 9.3                                                  | Agent’s  Reliance, Etc.                                               |
|   | 9.4                                                  | GE Capital and Affiliates                                                  |
|   | 9.5                                                  | Lender Credit Decision                                                     |
|   | 9.6                                                  | Indemnification                                                            |
|   | 9.7                                                  | Successor Agent                                                            |
|   | 9.8                                                  | Setoff and Sharing of  Payments                                            |
|   | 9.9                                                  | Advances;  Payments; Non-Funding Lenders; Information; Actions in Concert. |
|   |                                                 |                                                                       |
| 10.    | SUCCESSORS AND ASSIGNS                               |
|   | 10.1                                                 | Successors and Assigns                                                     |
|   |                                                 |                                                                       |
| 11.    | MISCELLANEOUS                                        |
|   | 11.1                                                 | Complete  Agreement; Modification of Agreement                             |
|   | 11.2                                                 | Amendments and Waivers.                                                    |
|   | 11.3                                                 | Fees and Expenses                                                          |
|   | 11.4                                                 | No  Waiver                                                                 |
|   | 11.5                                                 | Remedies                                                                   |
|   | 11.6                                                 | Severability                                                               |
|   | 11.7                                                 | Conflict of Terms                                                          |
|   | 11.8                                                 | Confidentiality                                                            |
|   | 11.9                                                 | GOVERNING LAW                                                              |
|   | 11.10                                                | Notices                                                                    |
|   | 11.11                                                | Section Titles                                                             |
|   | 11.12                                                | Counterparts                                                               |
|   | 11.13                                                | WAIVER OF JURY TRIAL                                                       |
|   | 11.14                                                | Press Releases and  Related Matters                                        |
|   | 11.15                                                | Reinstatement                                                              |

 

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|   | 11.16 | Advice of Counsel      |
|--------|-------|------------------------|
|   | 11.17 | No Strict Construction |

 

**INDEX OFAPPENDICES**
| Annex A (Recitals)                             | -      | Definitions                                                                   |
|------------------------------------------------|--------|-------------------------------------------------------------------------------|
| Annex B (Section 1.2)                          | -      | Letters of Credit                                                             |
| Annex C (Section 1.8)                          | -      | Cash Management System                                                        |
| Annex D (Section 2.1(a))                       | -      | Closing Checklist                                                             |
| Annex E (Section 4.1(a))                       | -      | Financial Statements and Projections -- Reporting                             |
| Annex F (Section 4.1(b))                       | -      | Collateral Reports                                                            |
| Annex G (Section 6.10)                         | -      | Financial Covenants                                                           |
| Annex H (Section 9.9(a))                       | -      | Lenders’ Wire Transfer Information                                       |
| Annex I (Section 11.10)                        | -      | Notice Addresses                                                              |
| Annex J (from Annex A- Commitments definition) | -      | Commitments as of Effective Date                                              |
|                                           |   |                                                                          |
| Exhibit 1.1(a)(i)                              | -      | Form of Notice of U.S. Revolving Credit Advance                               |
| Exhibit 1.1(a)(ii)                             | -      | Form of U.S. Revolving Note                                                   |
| Exhibit 1.1(b)                                 | -      | Form of Term Note                                                             |
| Exhibit 1.1(c)(ii)                             | -      | Form of Swing Line Note                                                       |
| Exhibit 1.1(d)(i)                              | -      | Form of Notice of Schaublin Revolving Credit Advance                          |
| Exhibit 1.1(d)(ii)                             | -      | Form of Schaublin Revolving Note                                              |
| Exhibit 1.5(f)                                 | -      | Form of Notice of Conversion/Continuation                                     |
| Exhibit 4.1(b)(i)                              | -      | Form of U.S. Borrowing Base Certificate                                       |
| Exhibit 4.1(b)(ii)                             | -      | Form of Schaublin Borrowing Base Certificate                                  |
| Exhibit 6.1                                    | -      | Form of Acquisition Compliance Certificate                                    |
| Exhibit 9.1(a)                                 | -      | Form of Assignment Agreement                                                  |
| Exhibit B-1                                    | -      | Application for Standby Letter of Credit                                      |
| Exhibit B-2                                    | -      | Application for Documentary Letter of Credit                                  |
| Exhibit E-1                                    | -      | Form of Compliance Certificate                                                |
| Exhibit E-2                                    | -      | Form of Schaublin Intercompany Loan and French  Intercompany Loan Certificate |
|                                           |   |                                                                          |
| Schedule  1.1                             | -      | Agent’s Representatives                                                  |
| Disclosure Schedule   2.1(d)              | -      | Capital Structure                                                             |
| Disclosure Schedule   3.1                 | -      | Type of Entity; State of Organization                                         |
| Disclosure Schedule   3.2                 | -      | Executive Offices, Collateral Locations, FEIN                                 |
| Disclosure Schedule   3.4(A)              | -      | Financial Statements                                                          |
| Disclosure Schedule   3.4(B)              | -      | Pro Forma                                                                     |
| Disclosure Schedule   3.4(C)              | -      | Projections                                                                   |
| Disclosure Schedule   3.6                 | -      | Real Estate and Leases                                                        |
| Disclosure Schedule   3.7                 | -      | Labor Matters                                                                 |
| Disclosure Schedule   3.8                 | -      | Ventures, Subsidiaries and Affiliates; Outstanding  Stock                     |
| Disclosure Schedule   3.11                | -      | Tax Matters                                                                   |

 

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| Disclosure Schedule   3.12   | -      | ERISA Plans                       |
|-----------------------------------|--------|-----------------------------------|
| Disclosure Schedule   3.13   | -      | Litigation                        |
| Disclosure Schedule   3.15   | -      | Intellectual Property             |
| Disclosure Schedule   3.18   | -      | Insurance                         |
| Disclosure Schedule   3.19   | -      | Deposit and Disbursement Accounts |
| Disclosure Schedule   3.20   | -      | Government Contracts              |
| Disclosure Schedule   3.22   | -      | Material Agreements               |
| Disclosure Schedule   3.28   |   | Existing Intercompany Loans       |
| Disclosure Schedule   5.1    | -      | Trade Names                       |
| Disclosure Schedule   6.3    | -      | Indebtedness                      |
| Disclosure Schedule   6.4(a) | -      | Transactions with Affiliates      |
| Disclosure Schedule   6.4(b) | -      | Transactions with Employees       |
| Disclosure Schedule   6.7    | -      | Existing Liens                    |

 

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This AMENDED ANDRESTATED CREDIT AGREEMENT (this “Agreement”) is dated as ofJune 19, 2003 and is entered into by and among ROLLER BEARING COMPANY OFAMERICA, INC., a Delaware corporation (“Borrower”); the other CreditParties signatory hereto; GENERAL ELECTRIC CAPITAL CORPORATION, a Delawarecorporation (in its individual capacity, “GE Capital”), for itself, asLender, and as Agent for Lenders, and the other Lenders signatory hereto fromtime to time.

 

RECITALS

 

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

 

WHEREAS, Borrowerdesires to create a separate Revolving Loan subfacility under the existingcredit facility in an aggregate amount of up to $7,000,000 that will be usedsolely to fund loans from Borrower to Schaublin Holding, which will in turn usesuch proceeds solely to fund loans to Schaublin;

 

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

 

WHEREAS,capitalized terms used in this Agreement shall have the meanings ascribed tothem in Annex A and, for purposes of this Agreement and the other LoanDocuments, the rules of construction set forth in Annex A shallgovern.  All Annexes, DisclosureSchedules, Exhibits and other attachments (collectively, “Appendices”)hereto, or expressly identified to this Agreement, are incorporated herein byreference, and taken together with this Agreement, shall constitute but asingle agreement.  These Recitals shallbe construed as part of the Agreement.

 

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

 

**1.****                                      AMOUNT AND TERMS OF CREDIT**

 

## 1.1                                 CreditFacilities.

 

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### (a)                                  U.S.Revolving Credit Facility.

 

#### (i)                                     Subjectto the terms and conditions hereof, each Revolving Lender agrees to makeavailable to Borrower from time to time until the Commitment Termination Dateits Pro Rata Share of advances (each, a “U.S. Revolving Credit Advance”)in Dollars.  The Pro Rata Share of theU.S. Revolving Loan of any Revolving Lender shall not at any time exceed itsseparate U.S. Revolving Loan Commitment. The obligations of each Revolving Lender hereunder shall be several andnot joint.  Until the CommitmentTermination Date, Borrower may from time to time borrow, repay (without notice)and reborrow under this Section 1.1(a); *provided*, that the amount ofany U.S. Revolving Credit Advance to be made at any time shall not exceed U.S.Borrowing Availability at such time. U.S. Borrowing Availability may be further reduced by Reserves imposedby Agent in accordance with this Agreement. Each U.S. Revolving Credit Advance shall be made on notice byBorrower to one of the representatives of Agent identified in Schedule 1.1at the address specified therein.  Anysuch notice must be given no later than (1) 11:00 a.m. (Chicago time) onthe Business Day of the proposed U.S. Revolving Credit Advance, in the case ofan Index Rate Loan, or (2) 11:00 a.m. (Chicago time) on the date which isthree (3) Business Days prior to the proposed U.S. Revolving Credit Advance, inthe case of a LIBOR Loan.  Each suchnotice (a ”Notice of U.S. Revolving Credit Advance”) must be givenin writing (by telecopy or overnight courier) substantially in the form of Exhibit1.1(a)(i), and shall include the information required in such Exhibit.  If Borrower desires to have the U.S.Revolving Credit Advances bear interest by reference to a LIBOR Rate, it mustcomply with Section 1.5(e).

####  

#### (ii)                                  Exceptas provided in Section 1.12, Borrower shall execute and deliver to eachRevolving Lender a note to evidence the U.S. Revolving Loan Commitment of thatRevolving Lender.  Each note shall be inthe principal amount of the U.S. Revolving Loan Commitment of the applicableRevolving Lender, dated the Closing Date and substantially in the form of Exhibit1.1(a)(ii) (each a “U.S. Revolving Note” and, collectively, the “U.S.Revolving Notes”).  Each U.S.Revolving Note shall represent the obligation of Borrower to pay the amount ofthe relevant Revolving Lender’s U.S. Revolving Loan Commitment or, if less,such Revolving Lender’s Pro Rata Share of the aggregate unpaid principal amountof all U.S. Revolving Credit Advances to Borrower together with interestthereon as prescribed in Section 1.5. The entire unpaid balance of the U.S. Revolving Loan and all othernon-contingent monetary Obligations shall be immediately due and payable infull in immediately available funds on the Commitment Termination Date.

####  

#### (iii)                               Any provision of thisAgreement to the contrary notwithstanding, at the request of Borrower, in itsdiscretion Agent may (but shall have absolutely no obligation to) make U.S.Revolving Credit Advances to Borrower on behalf of Revolving Lenders in amountsthat cause U.S. Borrowing Availability to be less than the ApplicableAvailability Block (any such excess U.S. Revolving Credit Advances areherein referred to collectively as “Overadvances”); *provided*, that (A) no suchevent or occurrence shall cause or constitute a waiver of Agent’s, the SwingLine Lender’s or Revolving Lenders’ right to refuse to make any furtherOveradvances, Swing Line Advances or Revolving Credit Advances, or incur anyLetter of Credit Obligations, as the case may be, at any time that anOveradvance exists, and (B) no Overadvance shall result in a Default or Eventof Default due to Borrower’s failure to comply with Section 1.3(b)(i)for so long as Agent permits such Overadvance to remain outstanding, but

 

2

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

####  

### (b)                                 TermLoan.

 

#### (i)                                     Subjectto the terms and conditions hereof, each Term Lender agrees to make a term loan(collectively, the “Term Loan”) on the Closing Date to Borrower in theoriginal principal amount of its Term Loan Commitment.  The obligations of each Term Lenderhereunder shall be several and not joint. The Term Loan shall be evidenced by promissory notes substantially inthe form of Exhibit 1.1(b) (each a “Term Note” and collectivelythe “Term Notes”), and, except as provided in Section 1.12,Borrower shall execute and deliver each Term Note to the applicable TermLender.  Each Term Note shall representthe obligation of Borrower to pay the amount of the applicable Term Lender’sTerm Loan Commitment, together with interest thereon as prescribed in Section1.5.

####  

#### (ii)                                  Borrowershall repay the principal amount of the Term Loan in nineteen (19) consecutivequarterly installments on the last day of September, December, March and Juneof each year, commencing September 30, 2002, as follows:

 

| **Payment Dates**                                        |   | **Installment  Amounts** |
|----------------------------------------------------------|--------|--------------------------|
|                                                     |   |                     |
| September 30,  2002 through and including March 31, 2007 |   | $                        | 1,428,570 each |

 

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

 

#### (iii)                               Notwithstanding Section1.1(b)(ii), the aggregate outstanding principal balance of the Term Loanshall be due and payable in full in immediately available funds on theCommitment Termination Date, if not sooner paid in full.  No payment with respect to the Term Loan maybe reborrowed.

####  

#### (iv)                              Eachpayment of principal with respect to the Term Loan shall be paid to Agent forthe ratable benefit of each Term Lender, ratably in proportion to each suchTerm Lender’s respective Term Loan Commitment.

####  

### (c)                                  SwingLine Facility.

###  

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

 

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#### CommitmentTermination Date advances (each, a “Swing Line Advance”) in accordancewith any such notice.  The provisions ofthis Section 1.1(c) shall not relieve Revolving Lenders of theirobligations to make U.S. Revolving Credit Advances under Section 1.1(a);*provided*,that if the Swing Line Lender makes a Swing Line Advance pursuant to any suchnotice, such Swing Line Advance shall be in lieu of any U.S. Revolving CreditAdvance that otherwise may be made by Revolving Credit Lenders pursuant to suchnotice.  The aggregate amount of SwingLine Advances outstanding shall not exceed at any time the lesser of(A) the Swing Line Commitment and (B) the lesser of the Maximum Amount and(except for Overadvances) the U.S. Borrowing Base, in each case, lessthe outstanding balance of the U.S. Revolving Loan at such time (“Swing LineAvailability”).  Until theCommitment Termination Date, Borrower may from time to time borrow, repay and reborrowunder this Section 1.1(c).  EachSwing Line Advance shall be made pursuant to a Notice of Revolving CreditAdvance delivered by Borrower to Agent in accordance with Section 1.1(a).  Any such notice must be given no later than11:00 a.m. (Chicago time) on the Business Day of the proposed Swing LineAdvance.  Unless the Swing Line Lenderhas received at least one Business Day’s prior written notice from RequisiteRevolving Lenders instructing it not to make a Swing Line Advance, the SwingLine Lender shall, notwithstanding the failure of any condition precedent setforth in Sections 2.2, be entitled to fund that Swing Line Advance, andto have each Revolving Lender make U.S. Revolving Credit Advances in accordancewith Section 1.1(c)(iii) or purchase participating interests inaccordance with Section 1.1(c)(iv). Notwithstanding any other provision of this Agreement or the other LoanDocuments, the Swing Line Loan shall constitute an Index Rate Loan.  Borrower shall repay the aggregateoutstanding principal amount of the Swing Line Loan upon demand therefor byAgent.

####  

#### (ii)                                  Borrowershall execute and deliver to the Swing Line Lender a promissory note toevidence the Swing Line Commitment. Such note shall be in the principal amount of the Swing Line Commitmentof the Swing Line Lender, dated the Closing Date and substantially in the formof Exhibit 1.1(c)(ii)  (the “SwingLine Note”). The Swing Line Note shall represent the obligation of Borrowerto pay the amount of the Swing Line Commitment or, if less, the aggregateunpaid principal amount of all Swing Line Advances made to Borrower togetherwith interest thereon as prescribed in Section 1.5.  The entire unpaid balance of the Swing LineLoan and all other non-contingent Obligations shall be immediately due andpayable in full in immediately available funds on the Commitment TerminationDate if not sooner paid in full.

####  

#### (iii)                               The Swing Line Lender,at any time and from time to time in its sole and absolute discretion, but notless frequently than once each week, shall on behalf of Borrower (and Borrowerhereby irrevocably authorizes the Swing Line Lender to so act on its behalf)request each Revolving Lender (including the Swing Line Lender) to make aU.S. Revolving Credit Advance to Borrower (which shall be an Index RateLoan) in an amount equal to that Revolving Lender’s Pro Rata Share of theprincipal amount of the Swing Line Loan (the “Refunded Swing Line Loan”)outstanding on the date such notice is given. Unless any of the events described in Sections 8.1(h) or 8.1(i)has occurred (in which event the procedures of Section 1.1(c)(iv) shallapply) and regardless of whether the conditions precedent set forth in thisAgreement to the making of a U.S. Revolving Credit Advance are then satisfied,each Revolving Lender shall disburse directly to Agent, its Pro Rata Share of aU.S. Revolving Credit Advance on behalf of the Swing Line Lender, prior to 2:00p.m. (Chicago time), in immediately available funds on the Business Day nextsucceeding the date that notice is given. The proceeds of those

 

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

####  

#### (iv)                              If,prior to refunding a Swing Line Loan with a U.S. Revolving Credit Advancepursuant to Section 1.1(c)(iii), one of the events described in Sections8.1(h) or 8.1(i) has occurred, then, subject to the provisions of Section1.1(c)(v) below, each Revolving Lender shall, on the date such U.S.Revolving Credit Advance was to have been made for the benefit of Borrower,purchase from the Swing Line Lender an undivided participation interest in theSwing Line Loan in an amount equal to its Pro Rata Share of such Swing LineLoan.  Upon request, each RevolvingLender shall promptly transfer to the Swing Line Lender, in immediatelyavailable funds, the amount of its participation interest.

####  

#### (v)                                 EachRevolving Lender’s obligation to make U.S. Revolving Credit Advances inaccordance with Section 1.1(c)(iii) and to purchase participationinterests in accordance with Section 1.1(c)(iv) shall be absolute andunconditional and shall not be affected by any circumstance, including (A) anysetoff, counterclaim, recoupment, defense or other right that such RevolvingLender may have against the Swing Line Lender, Borrower or any other Person forany reason whatsoever; (B) the occurrence or continuance of any Default orEvent of Default; (C) any inability of Borrower to satisfy the conditionsprecedent to borrowing set forth in this Agreement at any time or (D) any othercircumstance, happening or event whatsoever, whether or not similar to any ofthe foregoing.  If any Revolving Lenderdoes not make available to Agent or the Swing Line Lender, as applicable,  the amount required pursuant to Sections1.1(c)(iii) or 1.1(c)(iv), as the case may be, the Swing Line Lender shallbe entitled to recover such amount on demand from such Revolving Lender,together with interest thereon for each day from the date of non-payment untilsuch amount is paid in full at the Federal Funds Rate for the first two (2)Business Days and at the Index Rate thereafter.

####  

### (d)                                 SchaublinRevolving Credit Facility.

 

#### (i)                                     Subjectto the terms and conditions hereof, each Revolving Lender agrees to makeavailable to Borrower from time to time until the Commitment Termination Dateits Pro Rata Share of advances (each, a “Schaublin Revolving Credit Advance”)in Dollars.  Until the CommitmentTermination Date, Borrower may from time to time borrow, repay (without notice)and reborrow under this Section 1.1(d); *provided*, that the amount ofany Schaublin Revolving Credit Advance to be made at any time shall not exceedthe Schaublin Borrowing Availability at such time.  Schaublin Borrowing Availability may be reduced by Reservesimposed by Agent in accordance with this Agreement.  Each Schaublin Revolving Credit Advance shall be made on noticeby Borrower to one of the representatives of Agent identified in Schedule1.1 at the address specified therein. Any such notice must be given no later than (1) 11:00 a.m. (Chicagotime) on the Business Day of the proposed Schaublin Revolving Credit Advance,in the case of an Index Rate Loan, or (2) 11:00 a.m. (Chicago time) on thedate which is 3 (three) Business Days prior to the proposed Schaublin RevolvingCredit Advance, in the case of a LIBOR Loan. Each such notice (a ”Notice of Schaublin Revolving CreditAdvance”) must be given in writing (by telecopy or overnight courier)substantially in the form of Exhibit 1.1(d)(i), and shall include theinformation required in such Exhibit. If Borrower desires to have the Schaublin Revolving Credit Advances bearinterest by reference to a LIBOR Rate, it must comply with Section 1.5(e).

 

5

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#### (ii)                                  Exceptas provided in Section 1.12, Borrower shall execute and deliver to eachRevolving Lender a note to evidence the Schaublin Revolving Loan Commitment ofthat Revolving Lender.  Each note shallbe in the principal amount of the Schaublin Revolving Loan Commitment of theapplicable Revolving Lender, dated the Effective Date and substantially in theform of Exhibit 1.1(d)(ii) (each a “Schaublin Revolving Note”and, collectively, the “Schaublin Revolving Notes”).  Each Schaublin Revolving Note shallrepresent the obligation of Borrower to pay the amount of the relevantRevolving Lender’s Schaublin Revolving Loan Commitment or, if less, suchRevolving Lender’s Pro Rata Share of the aggregate unpaid principal amount ofall Schaublin Revolving Credit Advances to Borrower together with interestthereon as prescribed in Section 1.5. The entire unpaid balance of the Schaublin Revolving Loan and all othernon-contingent monetary Obligations shall be immediately due and payable infull in immediately available funds on the Commitment Termination Date.

####  

### (e)                                  Relianceon Notices.  Agent shall be entitledto rely upon, and shall be fully protected in relying upon, any Notice of U.S.Revolving Credit Advance, Notice of Schaublin Revolving Credit Advance, Noticeof Conversion/Continuation or similar notice reasonably believed by Agent to begenuine.  Agent may assume that eachPerson executing and delivering any notice in accordance herewith was dulyauthorized, unless the responsible individual acting thereon for Agent hasactual knowledge to the contrary.

###  

## 1.2                                 Lettersof Credit.

##  

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

 

## 1.3                                 Prepayments.

##  

### (a)                                  VoluntaryPrepayments; Reductions in Revolving Loan Commitments.  Borrower may at any time on at least three(3) days’ prior written notice to Agent (i) voluntarily prepay all or part ofthe Term Loan and/or (ii) permanently reduce (but not terminate) the RevolvingLoan Commitments; *provided,*that (A) any such prepayments or reductions shallbe in a minimum amount of $500,000 and integral multiples of $100,000 in excessof such amount, (B) the Revolving Loan Commitments shall not be reduced toan amount less than the greater of the amount of the Revolving Loansoutstanding or $30,000,000; (C) the U.S. Revolving Loan Commitment and theSchaublin Revolving Loan Commitment shall be reduced prorata;and (D) after giving effect to such reductions, Borrower shall comply withSection 1.3(b)(i).  In addition,Borrower may at any time on at least ten (10) days’ prior written notice to Agentterminate the Revolving Loan Commitments, *provided,* that upon such termination allLoans and other Obligations shall be immediately due and payable in full andall Letter of Credit Obligations shall be cash collateralized or otherwisesatisfied in accordance with Annex B hereto.  Any such voluntary prepayment and anyreduction or termination of the Revolving Loan Commitments must be accompaniedby the payment of any applicable LIBOR funding breakage costs in accordancewith Section 1.13(b).  Upon any suchreduction or termination of the Revolving Loan Commitments, Borrower’s right torequest Revolving Credit Advances or

 

6

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### requestthat Letter of Credit Obligations be incurred on its behalf, or request SwingLine Advances, shall simultaneously be permanently reduced or terminated, asthe case may be.  Each notice of partialprepayment shall designate the Loan or other Obligations to which suchprepayment is to be applied; *provided,* that any partial prepayments ofthe Term Loan made by Borrower shall be applied to prepay the scheduledinstallments of the Term Loan in inverse order of maturity.

###  

### (b)                                 MandatoryPrepayments.

###  

#### (i)                                     Ifat any time the U.S. Borrowing Availability or Schaublin Borrowing Availabilityis less than the Applicable Availability Block, Borrower shall immediatelyrepay the aggregate outstanding U.S. Revolving Credit Advances and SchaublinRevolving Credit Advances, as the case may be, to the extent required toeliminate such deficiency.  If any suchdeficiency remains after repayment in full of the aggregate outstandingRevolving Credit Advances, Borrower shall provide cash collateral for theLetter of Credit Obligations in the manner set forth in Annex B tothe extent required to eliminate such excess or deficiency.  Notwithstanding the foregoing, anyOveradvance made pursuant to Section 1.1(a)(iii) shall be repaid only ondemand in accordance with such Section.

####  

#### (ii)                                  Immediatelyupon receipt by Borrower, any Secured Guarantor or any RBC Swiss Group Memberof any proceeds of any cash asset disposition (excluding proceeds of assetdispositions permitted by Section 6.8(a)) to the extent the net proceedsof such asset dispositions exceed the Dollar Equivalent of $250,000 in theaggregate in any Fiscal Year, Borrower shall prepay the Obligations in anamount equal to all such proceeds, net of (A) commissions and other reasonableand customary transaction costs, fees and expenses properly attributable tosuch transaction and payable by Borrower, any Secured Guarantor or any RBCSwiss Group Member in connection therewith (in each case, paid tonon-Affiliates), (B) transfer taxes, (C) amounts payable to holders of seniorLiens (to the extent such Liens constitute Permitted Encumbrances hereunder),if any, and (D) an appropriate reserve for income taxes payable in cash inconnection therewith; *provided*, *that* if Borrower, theapplicable Secured Guarantor or RBC Swiss Group Member intends to reinvest allor any portion of the net proceeds of any asset disposition within 270 daysthereafter in fixed assets and Borrower promptly notifies Agent of thatintention in writing, and if (x) no Event of Default shall have occurredand be continuing at the date of such written notification, and(y) Borrower, such Secured Guarantor or RBC Swiss Group Member, as thecase may be, grants a first security interest to Agent in such replacementassets when acquired, then the amount of any such mandatory prepayment shall bereduced by the amount to be reinvested; *provided*, *further*, *that*if and to the extent that Borrower, such Secured Guarantor or RBC Swiss GroupMember, as the case may be, does not reinvest such net proceeds within that270-day period, Borrower shall then repay the Loans, with net proceeds thathave not been reinvested on the last day of such 270-day period.  Any such prepayment shall be applied inaccordance with Section 1.3(c).

####  

#### (iii)                               If Borrower, any SecuredGuarantor or any RBC Swiss Group Member shall suffer any Event of Loss, thensuch Person shall (A) promptly notify Agent of such Event of Loss withanticipated net proceeds in excess of the Dollar Equivalent of $1,000,000(including the amount of the estimated net insurance proceeds net of amountspayable to holders of senior Liens (to the extent such Liens constitutePermitted Encumbrances

 

7

----

 

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

####  

#### (iv)                              Proceedsof Keyman Life Insurance pledged to Agent shall be immediately used to prepay theObligations in an amount equal to such proceeds, which shall be applied inaccordance with Section 1.3(c).

####  

#### (v)                                 IfHoldings or Borrower issues Stock, no later than the Business Day following thedate of receipt of any cash proceeds thereof net of underwriting discounts andcommissions and other reasonable costs paid to non-Affiliates in connectiontherewith, Borrower shall prepay the Obligations in an amount equal to 50% ofsuch net proceeds.  Any such prepaymentshall be applied in accordance with Section 1.3(c).  Notwithstanding the foregoing two sentences,Borrower need not prepay the Obligations in accordance with this Section1.3(b)(v) in connection with (A) issuances of Stock of Holdings to theextent (but only to the extent) the proceeds thereof are used to purchase,retire, redeem or otherwise acquire for value all or any portion of the ZeroCoupon Debt, (B) issuances of Stock of Holdings to the existing Stockholders ofHoldings or to seller(s) involved in a Permitted Acquisition, in each case to theextent (but only to the extent) that such Stock or the proceeds thereof areimmediately used as a consideration for all or a portion of the purchase priceof a Permitted Acquisition, so long as no Change of Control results aftergiving effect to such issuance or series of related issuances, (C) issuance ofdirectors’ qualifying shares, (D) issuances of Stock of Holdings issued to anyholder of Indebtedness of Holdings or Borrower to the extent (but only to theextent) issued in connection with an issuance, refinancing or restructuring ofIndebtedness permitted hereunder, so long as no Change of Control results aftergiving effect to such issuance or a series of related issuances, and(E) sales or issuances of common Stock to officers, directors or employeesof Holdings, Borrower or any Subsidiary, as the case may be, pursuant to amanagement or employee benefit plan, to the extent the aggregate proceeds ofall common Stock so issued in excess of the redemptions of common Stock ofemployees shall not exceed the Dollar Equivalent of $2,000,000 in any FiscalYear.

####  

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

 

8

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### made byBorrower pursuant to Sections 1.3(b)(ii) or (iii) from theproceeds of assets owned by the RBC Swiss Group Members shall be applied firstto the Schaublin Revolving Credit Advances (which application shallrespectively reduce each of the Schaublin Intercompany Loans) until the samehave been paid in full and then to the other Obligations in the order set forthabove or in the order set forth in clause (d) below (asapplicable); and (y) any mandatory prepayments made by Borrower pursuantto Sections 1.3(b)(ii) or (iii) from the proceeds of assetsowned by Borrower or its Domestic Subsidiaries shall be applied as set forthabove or as set forth in clause (d) below (as applicable), exceptthat no amounts shall be applied to the Schaublin Revolving Credit Advancesuntil the U.S. Revolving Credit Advances have been paid in full and the Letterof Credit Obligations have been cash collateralized.  Neither the Revolving Loan Commitments nor the Swing Line LoanCommitment shall be permanently reduced by the amount of any such prepayments.

###  

### (d)                                 Applicationof Prepayments from Insurance Proceeds and Condemnation Proceeds.  Prepayments from insurance or condemnationproceeds in connection with an Event of Loss in accordance with Sections1.3(b)(iii) and 5.4(c) and the Mortgage(s), respectively, shall beapplied as follows:  insurance proceedsfrom casualties or losses to cash or Inventory located in the United Statesshall be applied first, to the Swing Line Loans and, second, to U.S. RevolvingCredit Advances; insurance or condemnation proceeds from casualties or lossesto Equipment, Fixtures and Real Estate (other than Equipment, Fixtures and RealEstate owned by Schaublin or any of the French Operating Companies) shall beapplied to scheduled installments of the Term Loan in inverse order of maturity.  All insurance or condemnation proceeds ofassets of the RBC Swiss Group Members shall, subject to Sections 1.3(b)(iii)and 5.4(c), be applied to the Schaublin Revolving Loan (which applicationshall respectively reduce each of the Schaublin Intercompany Loans).  Neither the Revolving Loan Commitments northe Swing Line Loan Commitment shall be permanently reduced by the amount ofany such prepayments.  If the preciseamount of insurance or condemnation proceeds allocable to Inventory as comparedto Equipment, Fixtures and Real Estate are not otherwise determined, theallocation and application of those proceeds shall be jointly determined byAgent and Borrower.

###  

### (e)                                  NoImplied Consent.  Nothing in this Section1.3 shall be construed to constitute Agent’s or any Lender’s consent to anytransaction that is not permitted by other provisions of this Agreement or theother Loan Documents.

###  

1.4                                 Use of Proceeds. Borrower shall use the proceeds of the Term Loan, the U.S. RevolvingLoan and the Swing Line Loan for the Refinancing, Redemptions (includingRecapitalization) and any related transaction expenses, for the financing ofBorrower’s ordinary working capital and general corporate needs and for anyother purpose not prohibited hereunder, and Borrower may use the proceeds ofthe U.S. Revolving Loan to finance Permitted Acquisitions, subject to the termsand conditions set forth herein. Borrower shall use the proceeds of the Schaublin Revolving Loan to fundthe Schaublin Intercompany Loans and Schaublin shall use the proceeds of theSchaublin Intercompany Loans for the ordinary working capital and generalcorporate needs of Schaublin and for the making of Intercompany Loans to theFrench Operating Companies.

 

9

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## 1.5                                 Interest and Applicable Margins.

##  

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

###  

The Applicable Marginsare as follows:

 
| Applicable  Revolver Index Margin  | 1.25   | %      |
|------------------------------------|--------|--------|
|                               |   |   |
| Applicable  Revolver Index Margin  | 1.25   | %      |
|                               |   |   |
| Applicable  Revolver LIBOR Margin  | 2.25   | %      |
|                               |   |   |
| Applicable  Term Loan Index Margin | 1.25   | %      |
|                               |   |   |
| Applicable  Term Loan LIBOR Margin | 2.25   | %      |

 

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

###  

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

###  

### (d)                                 Solong as an Event of Default has occurred and is continuing under Section8.1(a), (h) or (i), or so long as any other Default or Event of Default hasoccurred and is continuing and at the election of Agent (or upon the writtenrequest of Requisite Lenders) confirmed by written notice from Agent toBorrower, the interest rates applicable to the Loans and the Letter of CreditFees shall be increased by two percentage points (2%) per annum above the ratesof interest or the rate of such Fees otherwise applicable hereunder (“DefaultRate”). Interest and Letter of Credit Fees at the Default Rate shall accruefrom the initial date of such Event of Default if such Event of Default aroseunder Section 8.1(a), (h) or (i) or from the date of thedelivery of the written notice from Agent to Borrower for all other Events ofDefault, until that Event of Default is cured or waived and shall be payableupon demand.

###  

### (e)                                  Subjectto the conditions precedent set forth in Section 2.2, Borrower shallhave the option to (i) request that any Revolving Credit Advance be made as aLIBOR Loan,

10

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

###  

### (f)                                    Notwithstandinganything to the contrary set forth in this Section 1.5, if a courtof competent jurisdiction determines in a final order that the rate of interestpayable hereunder exceeds the highest rate of interest permissible under law(the “Maximum Lawful Rate”), then so long as the Maximum Lawful Ratewould be so exceeded, the rate of interest payable hereunder shall be equal tothe Maximum Lawful Rate; *provided, however*, that if at any timethereafter the rate of interest payable hereunder is less than the MaximumLawful Rate, Borrower shall continue to pay interest hereunder at the MaximumLawful Rate until such time as the total interest received by Agent, on behalfof Lenders, is equal to the total interest that would have been received hadthe interest rate payable hereunder been (but for the operation of thisparagraph) the interest rate payable since the Closing Date as otherwiseprovided in this Agreement. Thereafter, interest hereunder shall be paid at therate(s) of interest and in the manner provided in Sections 1.5(a) through(e), unless and until the rate of interest again exceeds the Maximum LawfulRate, and at that time this paragraph shall again apply.  In no event shall the total interestreceived by any Lender pursuant to the terms hereof exceed the amount that suchLender could lawfully have received had the interest due hereunder beencalculated for the full term hereof at the Maximum Lawful Rate.  If the Maximum Lawful Rate is calculatedpursuant to this paragraph, such interest shall be calculated at a daily rateequal to the Maximum Lawful Rate divided by the number of days in the year inwhich such calculation is made.  If,notwithstanding the provisions of this Section 1.5(f), a court ofcompetent jurisdiction shall finally determine that a Lender has receivedinterest hereunder in excess of the Maximum Lawful Rate, Agent shall, to theextent permitted by applicable law, promptly apply such excess in the orderspecified in Section 1.11 and thereafter shall refund any excess toBorrower or as a court of competent jurisdiction may otherwise order.

 

11

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

##  

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

###  

#### (i)                                     thatdoes not arise from the sale of goods or the performance of services byBorrower or a Secured Guarantor in the ordinary course of its business;

####  

#### (ii)                                  (A) uponwhich Borrower’s or the applicable Secured Guarantor’s right to receive paymentis not absolute or is contingent upon the fulfillment of any conditionwhatsoever or (B) as to which Borrower or the applicable Secured Guarantoris not able to bring suit or otherwise enforce its remedies against the AccountDebtor through judicial process, or (C) if the Account represents aprogress billing consisting of an invoice for goods sold or used or servicesrendered pursuant to a contract under which the Account Debtor’s obligation topay that invoice is subject to Borrower’s or the applicable Secured Guarantor’scompletion of further performance under such contract or is subject to theequitable lien of a surety bond issuer;

####  

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

####  

#### (iv)                              thatis not a true and correct statement of bona fide indebtedness incurred in theamount of the Account for merchandise sold to or services rendered and acceptedby the applicable Account Debtor;

####  

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

####  

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

####  

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

 

12

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#### (viii)                        that is the obligation of anAccount Debtor that is the United States government or a political subdivisionthereof, or any state, county or municipality or department, agency orinstrumentality thereof, unless Borrower or the applicable Secured Guarantorhas complied with respect to such obligation with the Federal Assignment of ClaimsAct of 1940, or any applicable state, county or municipal law restrictingassignment thereof, *provided*, *that* the BorrowingAvailability based on such obligations shall not in any event exceed $7,500,000in the aggregate;

####  

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

####  

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

####  

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

####  

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

####  

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

#####  

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

#####  

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

#####  

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

####  

#### (xiv)                         as to which Agent’s Lienthereon, on behalf of itself and Lenders, is not a first priority perfectedLien;

####  

#### (xv)                            asto which any of the representations or warranties in the Loan Documents areuntrue in any material respect;

 

13

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

####  

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

####  

#### (xviii)                   that is payable in any currencyother than Dollars or Acceptable Foreign Currency.

####  

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

 

### (b)                                 EligibleAccounts – Schaublin.  All of theAccounts owned by Schaublin and reflected in the most recent SchaublinBorrowing Base Certificate delivered by Borrower to Agent shall be “EligibleAccounts – Schaublin” for purposes of this Agreement, except any Account towhich any of the exclusionary criteria set forth below applies.  Agent shall have the right to establish ormodify or eliminate Reserves against Eligible Accounts – Schaublinfrom time to time in its reasonable credit judgment to reflect issues withrespect to the collectability of Accounts arising or discovered by Agent afterthe Effective Date (including pursuant to Collateral audits conducted after theEffective Date).  In addition, Agentreserves the right, at any time and from time to time after the Effective Date,to adjust any of the criteria set forth below or to establish new criteria inits reasonable credit judgment to reflect changes in Schaublin’s businessoperations or the collectability of Accounts, subject to the approval ofRequisite Revolving Lenders in the case of adjustments or new criteria whichhave the effect of making more credit available.  Eligible Accounts – Schaublin shall not include any Account ofSchaublin:

###  

#### (i)                                     thatdoes not arise from the sale of goods or the performance of services bySchaublin in the ordinary course of its business;

####  

#### (ii)                                  (A) uponwhich Schaublin’s right to receive payment is not absolute or is contingentupon the fulfillment of any condition whatsoever or (B) as to whichSchaublin is not able to bring suit or otherwise enforce its remedies againstthe Account Debtor through judicial process, or (C) if the Accountrepresents a progress billing consisting of an invoice for goods sold or usedor services rendered pursuant to a contract under which the Account Debtor’sobligation to pay that invoice is subject to Schaublin’s completion of furtherperformance under such contract or is subject to the equitable lien of a suretybond issuer;

####  

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

####  

#### (iv)                              thatis not a true and correct statement of bona fide indebtedness incurred in theamount of the Account for merchandise sold to or services rendered and acceptedby the applicable Account Debtor;

 

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

####  

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

####  

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

####  

#### (viii)                        that is the obligation of anAccount Debtor that is a governmental entity, unless Schaublin has compliedwith respect to such obligation with any applicable law restricting assignmentthereof;

####  

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

####  

#### (x)                                   tothe extent Borrower or Schaublin or any Subsidiary thereof is liable for goodssold or services rendered by the applicable Account Debtor to Borrower orSchaublin or any Subsidiary thereof but only to the extent of the potentialoffset;

####  

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

####  

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

####  

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

#####  

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

#####  

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

 

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

####  

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

####  

#### (xv)                            asto which any of the representations or warranties in the Loan Documents areuntrue in any material respect;

####  

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

####  

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

####  

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

####  

#### (xix)                           to theextent that a supplier of Schaublin can assert any right as to such Account byreason of an extended reservation of title.

####  

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

 

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

##  

### (a)                                  EligibleInventory – U.S.  All of theInventory owned by Borrower or any Secured Guarantor and reflected in the mostrecent U.S. Borrowing Base Certificate delivered by Borrower to Agent shall be“Eligible Inventory – U.S.” for purposes of this Agreement, except anyInventory to which any of the exclusionary criteria set forth belowapplies.  Agent shall have the right toestablish, modify, or eliminate Reserves against Eligible Inventory – U.S. fromtime to time in its reasonable credit judgment to reflect issues with respectto the salability of Inventory arising or discovered by Agent after the ClosingDate.  In addition, Agent reserves theright, at any time and from time to time after the Closing Date, to adjust anyof the criteria set forth below or to establish new criteria in its reasonablecredit judgment to reflect changes in Borrower’s or the applicable SecuredGuarantor’s business operations or salability of Inventory, subject to theapproval of Requisite Revolving Lenders in the case of adjustments or newcriteria which have the effect of making more credit available.  Eligible Inventory – U.S. shall not includeany Inventory of Borrower or any Secured Guarantor that:

 

#### (i)                                     isnot owned by Borrower or any Secured Guarantor free and clear of all Liens andrights of any other Person (including the rights of a purchaser that has madeprogress payments and the rights of a surety that has issued a bond to assureBorrower’s or a Secured Guarantor’s performance with respect to thatInventory), except Liens described in

 

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

####  

#### (ii)                                  (A) isnot located on premises owned, leased or rented by Borrower or any SecuredGuarantor and set forth in Disclosure Schedule (3.2), or (B) is notlocated on premises acquired or leased by Borrower or any Secured Guarantor inconnection with any Permitted Acquisition, or (C) is stored at a leasedlocation, unless Agent has given its prior consent thereto and unless either(x) a reasonably satisfactory landlord waiver has been delivered to Agent, or(y) Reserves reasonably satisfactory to Agent have been established withrespect thereto, or (D) is stored with a bailee or warehouseman unless areasonably satisfactory, acknowledged bailee letter has been received by Agentand Reserves reasonably satisfactory to Agent have been established withrespect thereto, or (E) is located at a location owned by Borrower or anySecured Guarantor subject to a mortgage in favor of a lender other than Agent,unless a reasonably satisfactory mortgagee waiver has been delivered to Agent,or (F) is located at any site if the aggregate book value of Inventory atany such location is less than the Dollar Equivalent of $50,000;

####  

#### (iii)                               is placed on consignmentor is in transit, except for Inventory in transit between domestic locations ofCredit Parties as to which Agent’s Liens have been perfected at origin anddestination;

####  

#### (iv)                              iscovered by a negotiable document of title, unless such document has beendelivered to Agent with all necessary endorsements, free and clear of all Liensexcept those in favor of Agent and Lenders;

####  

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

####  

#### (vi)                              consistsof display items or packing or shipping materials, manufacturing supplies,custom-made Inventory which is not subject to an outstanding purchase orderthat is not revocable by its terms or is not sold in the ordinary course ofbusiness, work-in-process Inventory or replacement parts (excluding ComponentParts and Purchased Parts);

####  

#### (vii)                           is not of a type held forsale in the ordinary course of Borrower’s or the applicable Secured Guarantor’sbusiness;

####  

#### (viii)                        is not subject to a firstpriority lien in favor of Agent on behalf of itself and Lenders subject toPermitted Encumbrances;

####  

#### (ix)                                breachesin any material respect any of the representations or warranties pertaining toInventory set forth in the Loan Documents;

####  

#### (x)                                   consistsof any costs associated with “freight-in” charges;

####  

#### (xi)                                consistsof Hazardous Materials or goods that can be transported or sold only withlicenses that are not readily available; or

 

17

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#### (xii)                             is not covered by casualtyinsurance in accordance with Section 5.4.

####  

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

###  

#### (i)                                     isnot owned by Schaublin free and clear of all Liens and rights of any otherPerson (including the rights of a purchaser that has made progress payments andthe rights of a surety that has issued a bond to assure Borrower’s orSchaublin’s performance with respect to that Inventory), except Liens describedin clause (e) of the definition of Permitted Encumbrances and the Liensin favor of Agent, on behalf of itself and Lenders;

####  

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

####  

#### (iii)                               is placed on consignmentor is in transit;

####  

#### (iv)                              iscovered by a negotiable document of title, unless such document has beendelivered to Agent with all necessary endorsements, free and clear of all Liensexcept those in favor of Agent and Lenders;

####  

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

####  

#### (vi)                              consistsof display items or packing or shipping materials, manufacturing supplies,custom-made Inventory which is not subject to an outstanding purchase orderthat is not revocable by its terms or is not sold in the ordinary course ofbusiness, work-in-process Inventory or replacement parts (excluding ComponentParts and Purchased Parts);

####  

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

 

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#### (viii)                        is not subject to a firstpriority Lien in favor of Agent, on behalf of itself and Lenders, or the firstpriority Lien created by the Foreign Collateral Documents, subject to PermittedEncumbrances;

 

#### (ix)                                breachesin any material respect any of the representations or warranties pertaining toInventory set forth in the Loan Documents;

####  

#### (x)                                   consistsof any costs associated with “freight-in” charges;

####  

#### (xi)                                consistsof Hazardous Materials or goods that can be transported or sold only withlicenses that are not readily available; or

####  

#### (xii)                             is not covered by casualtyinsurance in accordance with Section 5.4.

####  

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

 

## 1.9                                   Fees.

##  

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

###  

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

###  

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

####  

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

####  

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

 

### (c)                                  Borrowershall pay to Agent, for the ratable benefit of Revolving Lenders, the Letter ofCredit Fee as provided in Annex B.

###  

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

 

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

 

## 1.11                           Application and Allocation of Payments.

##  

### (a)                                  Solong as no Event of Default has occurred and is continuing, (i) paymentsreceived in the ordinary course of business and not subject to clauses (ii),(iii) and (iv) below shall be applied, first, to the Swing Line Loan and,second, to the Revolving Loans; (ii) payments matching specific scheduledpayments then due shall be applied to those scheduled payments; (iii) voluntaryprepayments shall be applied as determined by Borrower, subject to theprovisions of Section 1.3(a); and (iv) mandatory prepayments shall beapplied as set forth in Sections 1.3(c) and 1.3(d).  All payments and prepayments applied to aparticular Loan shall be applied ratably to the portion thereof held by eachLender as determined by its Pro Rata Share. As to any other payment, and as to all payments made following theCommitment Termination Date, Borrower hereby irrevocably waives the right todirect the application of any and all payments received from or on behalf ofBorrower, and Borrower hereby irrevocably agrees that Agent shall have thecontinuing exclusive right to apply any and all such payments against the Obligationsas Agent may deem advisable notwithstanding any previous entry by Agent in theLoan Account or any other books and records. In the absence of a specific determination by Agent with respectthereto, payments made when an Event of Default has occurred and is continuingor following the Commitment Termination Date shall be applied to amounts thendue and payable in the following order: (1) to Fees and Agent’s expensesreimbursable hereunder; (2) to interest on the Swing Line Loan; (3) to principalpayments on the Swing Line Loan; (4) to interest on the other Loans, ratably inproportion to the interest accrued as to each Loan; (5) to principal paymentson the other Loans and to provide cash collateral for Letter of CreditObligations in the manner described in Annex B, ratably to theaggregate, combined principal balance of the other Loans and outstanding Letterof Credit Obligations; and (6) to all other Obligations including expenses ofLenders to the extent reimbursable under Section 11.3; *provided*,that, as to items (2) through (5) above, (x) payments funded from theassets or operations of Borrower and its Subsidiaries (excluding the RBC SwissGroup Members) shall be applied first to interest and principal of the Loansother than the interest and principal of the Schaublin Revolving Loan and tocash collateralize the Letter of Credit Obligations and then to interest andprincipal of the Schaublin Revolving Loan (which application shallcorresponding reduce each of the Schaublin Intercompany Loans) and(y) payments funded from the assets or operations of the RBC Swiss GroupMembers shall be applied first to interest and principal of the SchaublinRevolving Loan (which application shall corresponding reduce each of theSchaublin Intercompany Loans) and then, subject to applicable laws, to interestand principal of the other Loans and to cash collateralize the Letter of CreditObligations.

###  

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

 

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

###  

1.12                           Loan Account and Accounting.  Agent shall maintain a loan account (the “LoanAccount”) on its books to record all Advances and the Term Loan, allpayments made by or on behalf of Borrower, and all other debits and credits asprovided in this Agreement with respect to the Loans or any otherObligations.  All entries in the LoanAccount shall be made in accordance with Agent’s customary accounting practicesas in effect from time to time. The balance in the Loan Account, as recorded onAgent’s most recent printout or other written statement, shall be presumptiveevidence of the amounts due and owing to Agent and Lenders by Borrower; *provided,that* any failure to so record or any error in so recording shall notlimit or otherwise affect Borrower’s duty to pay the Obligations.  Agent shall render to Borrower a monthlyaccounting of transactions with respect to the Loans setting forth the balanceof the Loan Account for the immediately preceding month.  Unless Borrower notifies Agent in writing ofany objection to any such accounting (specifically describing the basis forsuch objection), within 90 days after the date thereof, each and every suchaccounting shall, absent manifest error, be deemed conclusive.  Only those items expressly objected to insuch notice shall be deemed to be disputed by Borrower.  Notwithstanding any provision hereincontained to the contrary, any Lender may elect (which election may be revoked)to dispense with the issuance of Notes to that Lender and may rely on the LoanAccount as evidence of the amount of Obligations from time to time owing to it.

 

## 1.13                           Indemnity.

##  

### (a)                                  EachDomestic Credit Party that is a signatory hereto shall jointly and severallyindemnify and hold harmless each of Agent, Lenders and their respectiveAffiliates, and each such Person’s respective officers, directors, employees,attorneys, agents and representatives (each, an “Indemnified Person”),from and against any and all suits, actions, proceedings, claims, damages,losses, liabilities and expenses (including reasonable attorneys’ fees anddisbursements and other costs of investigation or defense, including thoseincurred upon any appeal) that may be instituted or asserted against orincurred by any such Indemnified Person as the result of credit having beenextended, suspended or terminated under this Agreement and the other LoanDocuments and the administration of such credit, and in connection with orarising out of the transactions contemplated hereunder and thereunder and anyactions or failures to act in connection therewith, and legal costs andexpenses arising out of or incurred in connection with disputes between or amonganyparties to any of the Loan Documents (other than disputesbetween and among Agent/or the Lenders arising when no Event of Default hasoccurred and is continuing) (collectively, “Indemnified Liabilities”); *provided*,that no such Domestic Credit Party shall be liable for any indemnification toan Indemnified Person to the extent that any such suit, action, proceeding,claim, damage, loss, liability or expense results from that IndemnifiedPerson’s gross negligence or willful misconduct; *provided*, *further*,that any obligations of the Domestic Credit Parties to the Indemnified Personswith respect to Environmental Liabilities and Hazardous Materials shall begoverned exclusively by the terms

 

21

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

###  

### (b)                                 Toinduce Lenders to provide the LIBOR Rate option on the terms provided herein,if (i) any LIBOR Loans are repaid in whole or in part prior to the last day ofany applicable LIBOR Period (whether that repayment is made pursuant to anyprovision of this Agreement or any other Loan Document or occurs as a result ofacceleration, by operation of law or otherwise); (ii) Borrower shall default inpayment when due of the principal amount of or interest on any LIBOR Loan;(iii) Borrower shall refuse to accept any borrowing of, or shall request atermination of any borrowing, conversion into or continuation of LIBOR Loansafter Borrower has given notice requesting the same in accordance herewith; or(iv) Borrower shall fail to make any prepayment of a LIBOR Loan after Borrowerhas given a notice thereof in accordance herewith, then Borrower shallindemnify and hold harmless each Lender from and against all losses, costs andexpenses resulting from or arising from any of the foregoing.  Such indemnification shall include any loss(including loss of margin) or expense arising from the reemployment of fundsobtained by it or from fees payable to terminate deposits from which such fundswere obtained.  For the purpose ofcalculating amounts payable to a Lender under this subsection, each Lendershall be deemed to have actually funded its relevant LIBOR Loan through thepurchase of a deposit bearing interest at the LIBOR Rate in an amount equal tothe amount of that LIBOR Loan and having a maturity comparable to the relevantLIBOR Period; *provided*, *that* each Lender may fund each of itsLIBOR Loans in any manner it sees fit, and the foregoing assumption shall beutilized only for the calculation of amounts payable under thissubsection.  This covenant shall survivethe termination of this Agreement and the payment of the Notes and all otheramounts payable hereunder.  As promptlyas practicable under the circumstances, each Lender shall provide Borrower withits written calculation of all amounts payable pursuant to this Section1.13(b), and such calculation shall be presumed to be correct unlessBorrower shall object in writing within twenty (20) Business Days of receiptthereof, specifying the basis for such objection in detail.

###  

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

 

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determinedby Agent, each such Credit Party shall provide such access to Agent and to eachLender at all times and without advance notice.  Furthermore, so long as any Event of Default has occurred and iscontinuing, Borrower shall provide Agent and each Lender with access to itssuppliers and customers. Each Credit Party shall make available to Agent andits counsel, as quickly as is possible under the circumstances, originals orcopies of all books and records of the Credit Parties that Agent may reasonablyrequest.  Each Credit Party shalldeliver any document or instrument necessary for Agent, as it may from time totime reasonably request, to obtain records from any service bureau or otherPerson that maintains records for such Credit Party.  Agent and Lenders agree that Agent shall conduct three fieldCollateral audits of Borrower and the Secured Guarantors (approximately everysix months) during the first eighteen months following the Closing Date and, aslong as a Trigger Event has occurred and is continuing thereafter, Agent andLenders agree that Agent shall conduct a field Collateral audit of Borrower,the Secured Guarantors and Schaublin every six months from the date of the lastfield Collateral audit.  Agent will giveLenders at least five (5) days’ prior written notice of regularly scheduledaudits.  Representatives of otherLenders may accompany Agent’s representatives on regularly scheduled audits atno charge to Borrower.

 

## 1.15                           Taxes.

##  

### (a)                                  Anyand all payments by Borrower hereunder or under the Notes shall be made, inaccordance with this Section 1.15, free and clear of and withoutdeduction for any and all present or future Taxes.  If Borrower shall be required by law to deduct any Taxes from orin respect of any sum payable hereunder or under the Notes, (i) the sum payableshall be increased as much as shall be necessary so that after making allrequired deductions (including deductions applicable to additional sums payableunder this Section 1.15) Agent or Lenders, as applicable, receive anamount equal to the sum they would have received had no such deductions beenmade, (ii) Borrower shall make such deductions, and (iii) Borrower shall paythe full amount deducted to the relevant taxing or other authority inaccordance with applicable law.  Withinthirty (30) days after the date of any payment of any such Taxes, Borrowershall furnish to Agent the original or a certified copy of a receipt evidencingpayment thereof.

###  

### (b)                                 EachDomestic Credit Party that is a signatory hereto shall indemnify and, withinthirty (30) days of demand therefor, pay Agent and each Lender for the fullamount of Taxes (including any Taxes imposed by any jurisdiction on amountspayable under this Section 1.15) paid by Agent or such Lender, asappropriate, and any liability (including penalties, interest and expenses)arising therefrom or with respect thereto, whether or not such Taxes werecorrectly or legally asserted.

###  

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

 

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### Lenderhereunder.  No foreign Person may becomea Lender hereunder if such Person fails to deliver a Certificate of Exemptionin advance of becoming a Lender.

###  

## 1.16                           Capital Adequacy; Increased Costs; Illegality.

##  

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

###  

### (b)                                 If,due to either (i) the introduction of or any change in any law orregulation (or any change in the interpretation thereof) or (ii) thecompliance with any guideline or request from any central bank or otherGovernmental Authority (whether or not having the force of law), in each caseadopted after the Closing Date, there shall be any increase in the cost to anyLender of agreeing to make or making, funding or maintaining any Loan, thenBorrower shall from time to time, upon demand by such Lender issued withinninety (90) days after the introduction thereof or compliance therewith and settingforth a calculation of such increased costs (with a copy of such demand toAgent), pay to Agent for the account of such Lender additional amountssufficient to compensate such Lender for such increased cost.  A certificate as to the amount of such increasedcost, submitted to Borrower and to Agent by such Lender, shall be presumptiveevidence of the matters set forth therein, absent manifest error.  Each Lender agrees that, as promptly aspracticable after it becomes aware of any circumstances referred to above whichwould result in any such increased cost, the affected Lender shall, to theextent not inconsistent with such Lender’s internal policies of generalapplication, use reasonable commercial efforts to minimize costs and expensesincurred by it and payable to it by Borrower pursuant to this Section1.16(b).

###  

### (c)                                  Notwithstandinganything to the contrary contained herein, if the introduction of or any changein any law or regulation (or any change in the interpretation thereof) shallmake it unlawful, or any central bank or other Governmental Authority shallassert that it is unlawful, for any Lender to agree to make or to make or tocontinue to fund or maintain any LIBOR Loan, then, unless that Lender is ableto make or to continue to fund or to maintain such LIBOR Loan at another branchor office of that Lender without, in that Lender’s opinion, adversely affectingit or its Loans or the income obtained therefrom, on notice thereof and demandtherefor by such Lender to Borrower through Agent, (i) the obligation ofsuch Lender to agree to make or to make or to continue to fund or maintainLIBOR Loans shall terminate and (ii) Borrower shall forthwith prepay infull all outstanding LIBOR Loans owing to such Lender,

 

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### togetherwith interest accrued thereon, unless Borrower, within five (5) BusinessDays after the delivery of such notice and demand, converts all LIBOR Loansinto Index Rate Loans.

###  

### (d)                                 Withinfifteen (15) days after receipt by Borrower of written notice and demand fromany Lender (an “Affected Lender”) as provided in Sections 1.15(a),1.15(b), 1.16(a) or 1.16(b), Borrower may, at its option, notify Agent andsuch Affected Lender of its intention to replace the Affected Lender.  So long as no Default or Event of Defaulthas occurred and is continuing, Borrower, with the consent of Agent, mayobtain, at Borrower’s expense, a replacement Lender (“Replacement Lender”)for the Affected Lender, which Replacement Lender must be reasonably satisfactoryto Agent.  If Borrower obtains aReplacement Lender within 180 days following notice of its intention to do so,the Affected Lender must sell and assign its Loans and Commitments to suchReplacement Lender for an amount equal to the principal balance of all Loansheld by the Affected Lender and all accrued interest and Fees with respectthereto through the date of such sale; *provided*, *that* Borrower shall havereimbursed such Affected Lender for the additional amounts or increased coststhat it is entitled to receive under Sections 1.15(a), 1.15(b), 1.16(a) or1.16(b) through the date of such sale and assignment.  Notwithstanding the foregoing, Borrowershall not have the right to obtain a Replacement Lender if the Affected Lenderrescinds its demand for increased costs or additional amounts within 15 daysfollowing its receipt of Borrower’s notice of intention to replace suchAffected Lender.  Furthermore, ifBorrower gives a notice of intention to replace and does not so replace suchAffected Lender within 180 days thereafter, Borrower’s rights under this Section1.16(d) shall terminate with respect to the increased costs or additionalamounts of such Affected Lender giving rise to such notice to replace suchAffected Lender and Borrower shall promptly pay all increased costs and oradditional amounts demanded by such Affected Lender pursuant to Sections1.15(a), 1.15(b), 1.16(a) and 1.16(b).

###  

## 1.17                           CreditSupport

##  

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

###  

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

###  

### (c)                                  Allobligations of Schaublin Holding for the repayment of the SchaublinIntercompany Loans shall be secured by the Foreign Collateral of SchaublinHolding granted to Borrower pursuant to the Schaublin Holding Swiss PledgeAgreement by an assignment to Borrower, in form and substance satisfactory toAgent (the “Schaublin Holding Assignment”), of all rights and remediesof Schaublin Holding under the Foreign Collateral Documents described

 

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

###  

### (d)                                 AllObligations of Borrower (including the Schaublin Revolving Loan) shall besecured, in addition to the U.S. Collateral, by an assignment to Agent, onbehalf of itself and Lenders, in form and substance satisfactory to Agent (the“Borrower Assignment”), of all rights and remedies of Borrower under theForeign Collateral Documents and the Schaublin Holding Assignment described in clause(c) above.

###  

### (e)                                  EachCredit Party hereby consents to the Schaublin Assignment, the Schaublin HoldingAssignment and the Borrower Assignment and to any further assignment of rightsand remedies under the Foreign Collateral Documents by Agent, as applicable.

###  

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

###  

### (g)                                 Solong as no Event of Default has occurred and is continuing, Agent and Lendersshall not demand payment under any of the Intercompany Notes evidencing theSchaublin Intercompany Loans and the French Intercompany Loans.

###  

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

 

#### (i)                                     Conversionsto Dollars shall occur in accordance with prevailing exchange rates, asdetermined by Agent in its reasonable discretion, on the applicable date;

####  

#### (ii)                                  (A)The Dollar Equivalent of Schaublin Holding Intercompany Loans, SchaublinIntercompany Loans and French Intercompany Loans denominated in currenciesother than Dollars shall be marked to market on the last day of each FiscalMonth taking into account in each case the Dollar Equivalent of all SchaublinHolding Intercompany Loans, Schaublin Intercompany Loans, and FrenchIntercompany Loans and reported to Agent within ten (10) Business Days afterthe end of each Fiscal Month and (B) the Dollar Equivalent of each BorrowingBase shall be marked to market on the last day of each Fiscal Month andreported to Agent within ten (10) Business Days after the end of each FiscalMonth; and, in

 

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

####  

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

####  

## 1.19                           Judgment Currency; Contractual Currency.

##  

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

###  

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

###  

### (c)                                  Theterm “rate of exchange” in this Section 1.19 means the rate ofexchange at which Agent would, on the relevant date at or about noon (New YorkCity time), be prepared to sell the Obligation Currency against the JudgmentCurrency.

###  

### (d)                                 Anyamount received or recovered by Agent in respect of any sum expressed to be dueto it (whether for itself or as trustee for any other person) from any CreditParty under this Agreement or under any of the other Loan Documents in acurrency other than the currency (the “contractual currency”) in which such sumis so expressed to be due (whether as a result of, or from the enforcement of,any judgment or order of a court or tribunal of any jurisdiction, thewinding-up of Borrower or otherwise) shall only constitute a discharge ofBorrower to the extent of the amount of the contractual currency that Agent isable, in accordance with its usual practice, to purchase with the amount of thecurrency so received or recovered on the date of receipt or recovery (or, iflater, the first date on which such purchase is practicable).  If the amount of the contractual currency sopurchased is less than the amount of

 

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### thecontractual currency so expressed to be due, Borrower shall indemnify Agentagainst any loss sustained by it as a result, including the cost of making anysuch purchase.

###  

**2.****                                      CONDITIONS PRECEDENT**

 

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

 

### (a)                                  CreditAgreement; Loan Documents.  ThisAgreement or counterparts hereof shall have been duly executed by, anddelivered to, Borrower, Agent and Lenders; and Agent shall have received suchdocuments, instruments, agreements and legal opinions as Agent shall reasonablyrequest in connection with the transactions contemplated by this Agreement andthe other Loan Documents, including all those listed in the Closing Checklistattached hereto as Annex D, each in form and substance reasonablysatisfactory to Agent.

###  

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

###  

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

###  

### (d)                                 FinancialCovenant Compliance.  Agent shallhave received a Compliance Certificate for the 12-month period ended at the endof the Fiscal Quarter ended on December 31, 2002 which shows compliance withthe Fixed Charge Coverage Ratio Financial Covenant set forth on Annex G.

###  

### (e)                                  TheEffective Date Transactions shall have been concurrently consummated on theEffective Date.

###  

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

 

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### (a)                                  anyrepresentation or warranty by any Credit Party contained herein or in any otherLoan Document is untrue or incorrect as of such date in any material respect,except to the extent that such representation or warranty expressly relates toan earlier date and except for changes therein expressly permitted or expresslycontemplated by this Agreement, and Agent or Requisite Revolving Lenders havedetermined not to make such Advance or incur such Letter of Credit Obligationas a result of the fact that such warranty or representation is untrue orincorrect;

###  

### (b)                                 anyevent or circumstance (i) having a Material Adverse Effect as set forth inclauses (c) or (d) of the definition thereof or (ii) which couldreasonably be expected to result in costs, liabilities or damages, individuallyor in the aggregate, to any Credit Party or Credit Parties in an amount thatwould have caused the Fixed Charge Covenant Ratio Financial Covenant to havebeen breached if such event or occurrence had occurred and such costs,liabilities or damages had been paid on the first day of the Fiscal Quartermost recently ended or (iii) which results in an uninsured loss oftangible assets with a value in excess of $4,000,000 has occurred since thedate hereof as determined by the Requisite Revolving Lenders, and Agent orRequisite Revolving Lenders have determined not to make such Advance or incursuch Letter of Credit Obligation as a result of the fact that such event orcircumstance has occurred;

###  

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

###  

### (d)                                 aftergiving effect to any U.S. Revolving Credit Advance (or the incurrence of anyLetter of Credit Obligations (other than the Overadvances)) or after givingeffect to any Schaublin Revolving Credit Advance, U.S. Borrowing Availabilityor Schaublin Borrowing Availability shall be less than the Applicable AvailabilityBlock.

###  

The request andacceptance by Borrower of the proceeds of any Advance, the incurrence of anyLetter of Credit Obligations or the conversion or continuation of any Loaninto, or as, a LIBOR Loan shall be deemed to constitute, as of the datethereof, (i) a representation and warranty by Borrower that the conditions inthis Section 2.2  have beensatisfied and (ii) a reaffirmation by Borrower of the granting and continuanceof Agent’s Liens, on behalf of itself and Lenders, pursuant to the CollateralDocuments.

 

2.3                                 Conditions to U.S. RevolvingCredit Advances Funding Permitted Acquisitions.  In addition to the conditions set forth in Section2.2 with respect to all Advances, no Lender shall be obligated to advanceits Pro Rata Share of any U.S. Revolving Credit Advance used for the purpose offunding all or part of the purchase price of any acquisition of Stock, anypurchase of all or substantially all of the assets of any Person, or anybusiness or division of any Person or any acquisition of a Person by a merger,consolidation or any other combination unless the conditions set forth in Section6.1 hereof have been satisfied or provided for in a manner satisfactory toAgent or waived in writing by Agent and Lenders.

 

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**3.****                                      REPRESENTATIONS AND WARRANTIES**

# ** **

To induce Lendersto make the Loans and to incur Letter of Credit Obligations, the DomesticCredit Parties executing this Agreement, jointly and severally, make thefollowing representations and warranties to Agent and each Lender with respectto all Credit Parties (regardless of whether the text of any provision of this Article3 speaks to one party only), and the Foreign Credit Parties, severally,make the following representations and warranties to Agent and each Lender onlywith respect to itself (regardless of whether the text of any provision of thisArticle 3 speaks to more than one party), each and all of which shallsurvive the execution and delivery of this Agreement:

 

3.1                                 Corporate Existence; Compliancewith Law.  Such Credit Party (a)is a corporation, limited liability company or limited partnership dulyorganized, validly existing and in good standing (if it is a Domestic CreditParty or, if it is a Foreign Credit Party, it is in good standing only to theextent applicable) under the laws of its respective jurisdiction ofincorporation or organization set forth in Disclosure Schedule (3.1);(b) is duly qualified to conduct business and is in good standing in each otherjurisdiction where its ownership or lease of property or the conduct of itsbusiness requires such qualification, except where the failure to be soqualified would not have a Material Adverse Effect; (c) has the requisite powerand authority and the legal right to own, pledge, mortgage or otherwiseencumber and operate its properties, to lease the property it operates underlease and to conduct its business as now conducted; (d) subject to specificrepresentations regarding Environmental Laws contained in the Environmental IndemnityAgreement, has all material licenses, permits, consents or approvals from orby, and has made all material filings with, and has given all material noticesto, all Governmental Authorities having jurisdiction, to the extent requiredfor such ownership, operation and conduct, except as could not reasonably beexpected to have a Material Adverse Effect; (e) is in compliance with itscharter and bylaws or partnership or operating agreement, as applicable; and(f) subject to specific representations set forth herein regarding ERISA, taxand other laws, or specific representations regarding Environmental Laws setforth in the Environmental Indemnity Agreement, is in compliance with allapplicable provisions of law, except where the failure to comply, individuallyor in the aggregate, could not reasonably be expected to have a MaterialAdverse Effect.

 

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

 

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

 

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similaraction; (c) do not contravene any provision of such Person’s charter, bylaws orpartnership or operating agreement as applicable; (d) do not violate anyapplicable law or regulation, or any order or decree of any court orGovernmental Authority; (e) do not conflict with or result in the breachor termination of, constitute a default under or accelerate or permit theacceleration of any performance required by, any indenture, mortgage, deed oftrust, lease, or other material agreement or instrument to which such Person isa party or by which such Person or any of its property is bound; (f) do notresult in the creation or imposition of any Lien upon any of the property ofsuch Person other than those in favor of Agent, on behalf of itself and Lenders,pursuant to the Loan Documents; and (g) do not require the consent or approvalof any Governmental Authority or any other Person, except those referred to in Section2.1(c), all of which will have been duly obtained, made or complied withprior to or on the Effective Date.  Asof the Effective Date, each of the Loan Documents shall be duly executed anddelivered by such Credit Party that is a party thereto and each such LoanDocument shall constitute a legal, valid and binding obligation of such CreditParty enforceable against it in accordance with its terms, except as theenforceability thereof may be limited by applicable bankruptcy laws or similarlaws affecting creditors’ rights in general.

 

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

 

### (a)                                  FinancialStatements.  The following FinancialStatements attached hereto as Disclosure Schedule (3.4(a)) have beendelivered to Agent on or before the Closing Date:

###  

#### (i)                                     Theaudited consolidated and consolidating balance sheets at March 31, 2001 and therelated statements of income and cash flows of Holdings, Borrower and itsSubsidiaries for the Fiscal Year then ended, certified by Arthur Andersen LLP.

####  

#### (ii)                                  Theunaudited balance sheet(s) at March 30, 2002 and the related statement(s) ofincome and cash flows of Holdings, Borrower and its Subsidiaries for the fourFiscal Quarters then ended.

####  

### (b)                                 ProForma.  The Pro Forma delivered toAgent on or before the Closing Date and attached hereto as DisclosureSchedule (3.4(b)) was based on the unaudited consolidated and consolidatingbalance sheets of Borrower and its Subsidiaries dated March 30, 2002, and wasprepared in accordance with GAAP, with only such adjustments thereto as wouldbe required in accordance with GAAP.

###  

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

 

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### thereafter.  The Projections are based upon estimates andassumptions stated therein, all of which Borrower believes to be reasonable andfair in light of current conditions and current facts known to Borrower and, asof the Closing Date, reflect Borrower’s good faith and reasonable estimates ofthe future financial performance of Borrower and of the other informationprojected therein for the period set forth therein.

###  

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

 

3.6                                 Ownership of Property; Liens.  As of the Effective Date, the real estate (“RealEstate”) listed in Disclosure Schedule (3.6) includes all of thereal property owned, leased, subleased, or used by such Credit Party.  As of the Effective Date, such Credit Partyowns good and marketable fee simple title to all of its owned Real Estate, and validleasehold interests in all of its leased Real Estate, all as described on DisclosureSchedule (3.6), and copies of all such leases have been delivered toAgent.  Disclosure Schedule (3.6)further describes any Real Estate with respect to which such Credit Party is alessor, sublessor or assignor as of the Effective Date.  Such Credit Party also has good andmarketable title to, or valid leasehold interests in, all of its personalproperty and assets.  As of theEffective Date, none of the properties and assets of such Credit Party aresubject to any Liens other than Permitted Encumbrances, and such Credit Partyhas not received written notice of any facts, circumstances or conditions thatare likely to result in any Liens (including Liens arising under EnvironmentalLaws) on any Collateral other than Permitted Encumbrances.  As of the Effective Date, the Liens grantedto Agent pursuant to the Loan Documents are first priority perfected Liens,subject only to Permitted Encumbrances. As of the Effective Date, such Credit Party has to its knowledgereceived all deeds, assignments, waivers, consents, nondisturbance andattornment or similar agreements, bills of sale and other documents, and hasduly effected all recordings, filings and other actions reasonably necessary toestablish, protect and perfect such Credit Party’s right, title and interest inand to all such Real Estate and other properties and assets.  Disclosure Schedule (3.6) alsodescribes any purchase options, rights of first refusal or other similar contractualrights pertaining to any Real Estate. During the period from March 30, 2002 through the Effective Date, noportion of such Credit Party’s Real Estate has suffered any material damage byfire or other casualty loss that has not heretofore been repaired and restoredin all material respects to its original condition or otherwise remedied.  As of the Effective Date, all materialpermits required to have been issued or appropriate to enable the Real Estateto be lawfully occupied and used for all of the purposes

 

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forwhich it is currently occupied and used have been lawfully issued and are infull force and effect, except as could not reasonably be expected to have aMaterial Adverse Effect.

 

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

 

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

 

3.9                                 Government Regulation.  Such Credit Party is not an “investmentcompany” or an “affiliated person” of, or “promoter” or “principal underwriter”for, an “investment company,” as such terms are defined in the InvestmentCompany Act of 1940.  Such Credit Partyis not subject to regulation under the Public Utility Holding Company Act of1935, the Federal Power Act, or any other federal or state statute thatrestricts or limits its ability to incur Indebtedness or to perform itsobligations hereunder. The making of the Loans by Lenders to Borrower, theincurrence of the Letter of Credit Obligations on behalf of Borrower, theapplication of the proceeds thereof and repayment thereof will not violate anyprovision of any such statute or any rule, regulation or order issued by theSecurities and Exchange Commission.

 

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3.10                           Margin Regulations.  Such Credit Party is not engaged, nor will it engage, principallyor as one of its important activities, in the business of extending credit forthe purpose of “purchasing” or “carrying” any “margin stock” as such terms aredefined in Regulation U of the Federal Reserve Board as now and from time totime hereafter in effect (such securities being referred to herein as “MarginStock”).  Such Credit Party does notown any Margin Stock, and none of the proceeds of the Loans or other extensionsof credit under this Agreement will be used, directly or indirectly, for thepurpose of purchasing or carrying any Margin Stock, for the purpose of reducingor retiring any Indebtedness that was originally incurred to purchase or carryany Margin Stock or for any other purpose that might cause any of the Loans orother extensions of credit under this Agreement to be considered a “purposecredit” within the meaning of Regulations T, U or X of the Federal ReserveBoard.  Such Credit Party will not takeor permit to be taken any action that might cause any Loan Document to violateany regulation of the Federal Reserve Board.

 

3.11                           Taxes.  As of theEffective Date, all tax returns, reports and statements, including informationreturns, required by any Governmental Authority to be filed by such CreditParty have been filed with the appropriate Governmental Authority and allCharges have been paid prior to the date on which any fine, penalty, interestor late charge may be added thereto for nonpayment thereof (or any such fine,penalty, interest, late charge or loss has been paid),  excluding Charges or other amounts beingcontested in accordance with the terms described in Section 5.2(b).  As of the Effective Date, proper and accurateamounts have been withheld by each Credit Party from its respective employeesfor all periods in full and complete compliance with all applicable federal,state, local and foreign laws and such withholdings have been timely paid tothe respective Governmental Authorities. Disclosure Schedule (3.11) sets forth as of the Effective Datethose taxable years for which such Credit Party’s tax returns are currentlybeing audited by the IRS or any other applicable Governmental Authority and anyassessments or threatened assessments in connection with such audit, or thatare otherwise currently outstanding. Except as described in Disclosure Schedule (3.11), as of theEffective Date, no Credit Party has executed or filed with the IRS or any otherGovernmental Authority any agreement or other document extending, or having theeffect of extending, the period for assessment or collection of anyCharges.  As of the Effective Date,neither such Credit Party nor its predecessors are liable for any Charges:  (a) under any agreement (including any taxsharing agreements), except as described in Disclosure Schedule (3.11)or (b) to such Credit Party’s knowledge, as a transferee.  As of the Effective Date, such Credit Partyhas not agreed or been requested to make any adjustment under IRC Section481(a), by reason of a change in accounting method or otherwise, which wouldhave a Material Adverse Effect.

 

## 3.12                           ERISA.

##  

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

 

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### the IRC,and nothing has occurred that would cause the loss of such qualification ortax-exempt status.  Except as could notreasonably be expected to have a Material Adverse Effect, each Plan is incompliance with the applicable provisions of ERISA and the IRC, including thetimely filing of all reports required under the IRC or ERISA, including thestatement required by 29 CFR Section 2520.104-23.  Neither any Domestic Credit Party nor ERISA Affiliate has failedto make any contribution or pay any amount due as required by either Section412 of the IRC or Section 302 of ERISA or the terms of any such Plan.  Except as could not be reasonably beexpected to have a Material Adverse Effect, no “prohibited transaction,” asdefined in Section 406 of ERISA and Section 4975 of the IRC, in connection withany Plan has occurred that would subject any Credit Party to a material tax onprohibited transactions imposed by Section 502(l) of ERISA or Section 4975 ofthe IRC, and no event has occurred with respect to a Plan which would subjectany Domestic Credit Party to any material liability under Section 502(l) ofERISA.

###  

### (b)                                 Exceptas set forth in Disclosure Schedule (3.12): (i) no Title IV Plan has anyUnfunded Pension Liability; (ii) no ERISA Event or event described in Section4062(e) of ERISA with respect to any Title IV Plan has occurred or isreasonably expected to occur; (iii) there are no pending, or to the knowledgeof any Domestic Credit Party, threatened claims (other than claims for benefitsin the normal course), sanctions, actions or lawsuits, asserted or institutedagainst any Plan or any Person as fiduciary or sponsor of any Plan; (iv) noDomestic Credit Party or ERISA Affiliate has incurred or reasonably expects toincur any liability as a result of a complete or partial withdrawal from aMultiemployer Plan; (v) within the last five years no Title IV Plan of anyDomestic Credit Party or ERISA Affiliate has been terminated, whether or not ina “standard termination” as that term is used in Section 4041(b)(1) of ERISA,nor has any Title IV Plan of any Domestic Credit Party or ERISA Affiliate(determined at any time within the past five years) with Unfunded PensionLiabilities been transferred outside of the “controlled group” (within themeaning of Section 4001(a)(14) of ERISA) of any Domestic Credit Party or ERISAAffiliate (determined at such time); (vi) except in the case of any ESOP,Stock of all Credit Parties and their ERISA Affiliates makes up, in theaggregate, no more than 10% of fair market value of the assets of any Planmeasured on the basis of fair market value as of the latest valuation date ofany Plan; and (vii) no liability under any Title IV Plan has beensatisfied with the purchase of a contract from an insurance company that is notrated AAA by the Standard & Poor’s Corporation or an equivalent rating byanother nationally recognized rating agency.

 

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3.13                           No Litigation. No action, claim, lawsuit, demand, investigation or proceeding is nowpending or, to the knowledge of such Credit Party, threatened in writingagainst any Credit Party, before any Governmental Authority or before anyarbitrator or panel of arbitrators (collectively, “Litigation”),(a) that challenges such Credit Party’s right or power to enter into orperform any of its obligations under the Loan Documents to which it is a party,or the validity or enforceability of any Loan Document or any action takenthereunder, or (b) that is reasonably likely to be determined adversely to suchCredit Party and that, if so determined, would have a Material Adverse Effect.  Except as set forth on DisclosureSchedule (3.13), as of the Effective Date there is no Litigation pendingor, to such Credit Party’s knowledge, threatened that seeks damages in excessof the Dollar Equivalent of $250,000 or injunctive relief against, or allegescriminal misconduct of, such Credit Party.

 

3.14                           Brokers.  Nobroker or finder acting on behalf of such Credit Party or Affiliate thereofbrought about the obtaining, making or closing of the Loans, and neither suchCredit Party nor Affiliate thereof has any obligation to any Person in respectof any finder’s or brokerage fees in connection therewith.

 

3.15                           Intellectual Property.  As of the Effective Date, such Credit Partyowned or had rights to use all Intellectual Property necessary to continue toconduct its business as now or heretofore conducted by it or proposed to beconducted by it, and each Patent, Trademark, Copyright and License is listed,together with application or registration numbers, as applicable, in DisclosureSchedule (3.15).  To the knowledgeof such Credit Party, as of the Effective Date, such Credit Party conducts itsbusiness and affairs without infringement of or interference with anyIntellectual Property of any other Person in any material respect.  Except as set forth in DisclosureSchedule (3.15), as of the Effective Date, such Credit Party is not awareof any infringement claim by any other Person with respect to any IntellectualProperty.

 

3.16                           Full Disclosure.  No information contained in this Agreement, any of the other LoanDocuments, any Projections, Financial Statements or Collateral Reports or otherwritten reports from time to time delivered hereunder or any written statementfurnished by or on behalf of such Credit Party to Agent or any Lender pursuantto the terms of this Agreement contains or will contain any untrue statement ofa material fact or omits or will omit to state a material fact necessary tomake the statements contained herein or therein not misleading in light of thecircumstances under which they were made. Projections from time to time delivered hereunder are or will be basedupon the estimates and assumptions stated therein, all of which Borrowerbelieved at the time of delivery to be reasonable and fair in light of currentconditions and current facts known to Borrower as of such delivery date, andreflect Borrower’s good faith and reasonable estimates of the future financialperformance of Borrower and of the other information projected therein for theperiod set forth therein.  Such CreditParty will use its best efforts to ensure that the Liens granted to Agent, onbehalf of itself and Lenders, pursuant to the Collateral Documents will at alltimes be fully perfected first priority Liens in and to the Collateraldescribed therein, subject, as to priority, only to Permitted Encumbrances.

 

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

 

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of theissued and outstanding shares of Stock of Schaublin and each of the FrenchOperating Companies.  Borrower, SecuredGuarantors and Foreign Credit Parties make up a related organization of variousentities constituting a single economic and business enterprise so thatBorrower, Secured Guarantors and Foreign Credit Parties share a substantialidentity of interests such that any benefit received by any one of thembenefits the others.  Borrower andcertain of the Secured Guarantors and Foreign Credit Parties render services toor for the benefit of Borrower and/or other Secured Guarantors and ForeignCredit Parties, as the case may be, purchase or sell and supply goods to orfrom or for the benefit of the others, make loans, advances and provide otherfinancial accommodations to or for the benefit of Borrower, Secured Guarantorsand Foreign Credit Parties (including inter alia, the payment by Borrower andGuarantors of creditors of Borrower or Secured Guarantors and guarantees byBorrower and Secured Guarantors of indebtedness of Borrower and SecuredGuarantors and provide administrative, marketing, payroll and managementservices to or for the benefit of Borrower and other Secured Guarantors).  Borrower and Secured Guarantors havecentralized accounting, common officers and directors and are in certaincircumstances, identified to creditors as a single economic and businessenterprise.

 

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

 

3.19                           Deposit and Disbursement Accounts.  Disclosure Schedule (3.19) lists allbanks and other financial institutions at which such Credit Party maintainsdeposit or other accounts as of the Effective Date, including any DisbursementAccounts, and such Schedule correctly identifies the name, address andtelephone number of each depository, the name in which the account is held, adescription of the purpose of the account, and the complete account numbertherefor.

 

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

 

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

 

3.22                           Agreements and Other Documents.  As of the Effective Date, such Credit Partyhas, if a Domestic Credit Party or Schaublin, provided to Agent or its counsel,on behalf of Lenders, complete copies (or accurate summaries) of all of thefollowing agreements or documents to which it is subject and each of which islisted in Disclosure Schedule (3.22) without duplication of theagreements or documents provided as of the Closing Date:  supply agreements and purchase agreementsnot terminable by such Credit Party within sixty (60) days following writtennotice issued by such Credit Party and involving transactions in excess of$1,000,000 per annum; leases of Equipment having a remaining term of one yearor longer and

 

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

 

3.23                           Solvency.  Bothbefore and after giving effect to (a) the Loans and Letter of CreditObligations to be made or incurred on or prior to the Effective Date, if any,or such other date as Loans and Letter of Credit Obligations requestedhereunder are made or incurred, (b) the disbursement of the proceeds of suchLoans pursuant to the instructions of Borrower, and payment and accrual of alltransaction costs in connection with the foregoing, such Credit Party is andwill be Solvent.

 

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

 

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

 

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

 

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

 

3.28                           Existing Intercompany Loans.  Disclosure Schedule 3.28 sets forth(a) the aggregate outstanding balance in Dollar Equivalent of theintercompany loans from Borrower to Schaublin Holding as of close of businesson June 19, 2003 (the “Existing Schaublin Holding Intercompany Loans”),(b) the outstanding balance in Dollar Equivalents of the intercompanyloans from Schaublin Holding to Schaublin as of the close of business on June19, 2003 (the “Existing Schaublin Intercompany Loans”), and (c) theoutstanding balance in Dollar Equivalent of the intercompany loans fromSchaublin to RBC France as of the close of business on June 19, 2003, and (d)the outstanding balance in Dollar Equivalent of the intercompany loans fromSchaublin to Bovagnet as of close of business on June 19, 2003, which, togetherwith the

 

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outstandingintercompany loans to RBC France in the previous clause (c) arecollectively herein referred to as the “Existing French Intercompany Loans”.

 

**4.****                                      FINANCIAL STATEMENTS AND INFORMATION**

# ** **

## 4.1                                 Reportsand Notices.

##  

### (a)                                  Fromand after the Effective Date and until the Termination Date, Borrower shalldeliver to Agent or to Agent and Lenders, as required, the FinancialStatements, notices, Projections and other information at the times, to thePersons and in the manner set forth in Annex E.

###  

### (b)                                 Fromand after the Effective Date and until the Termination Date, Borrower shalldeliver to Agent or to Agent and Lenders, as required, the various CollateralReports (including U.S. Borrowing Base Certificate in the form of Exhibit4.1(b)(i) and Schaublin Borrowing Base Certificate in the form ofExhibit 4.1(b)(ii)) at the times, to the Persons and in the manner setforth in Annex F.

###  

4.2                                 Communication with Accountants.  Each Credit Party executing this Agreementauthorizes (a) Agent and (b) so long as an Event of Default has occurred and iscontinuing, each Lender, to communicate directly with its independent certifiedpublic accountants, including Ernst & Young, and authorizes and shallinstruct those accountants and advisors to disclose and make available to Agentand each Lender any reasonably requested information in its possession or underits control relating to any Credit Party with respect to the business, resultsof operations and financial condition of any Credit Party.

 

# **5.**                                      AFFIRMATIVE COVENANTS

# ** **

Each (x) DomesticCredit Party executing this Agreement jointly and severally agrees as to allCredit Parties (regardless of whether the text of any provision of this Article5 speaks to one party only) and (y) Foreign Credit Party executing thisAgreement severally agrees as to only itself (regardless of whether the text ofany provision of this Article 5 speaks to more than one party), thatfrom and after the Effective Date and until the Termination Date:

 

5.1                                 Maintenance of Existence and Conduct ofBusiness.  Except as otherwisepermitted by the Loan Documents, such Credit Party shall:  (i) do or cause to be done all thingsnecessary to preserve and keep in full force and effect its corporate existenceand its rights and franchises; (ii) continue to conduct its businesssubstantially as now conducted or as otherwise permitted hereunder; and (iii)at all times maintain, preserve and protect all of its assets and propertiesused or useful in the conduct of its business, and keep the same in goodrepair, working order and condition in all material respects (taking intoconsideration ordinary wear and tear) and from time to time make, or cause tobe made, all necessary or appropriate repairs, replacements and improvementsthereto consistent with industry practices, except in each case where thefailure to do so would result in a Material Adverse Effect.  Such Credit Party shall transact businessonly in such corporate and trade names as are set forth in DisclosureSchedule (5.1) or such other names as such Credit Party may provide toAgent on at least 30 days’ prior written notice.

 

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## 5.2                                 Paymentof Charges.

##  

### (a)                                  Subjectto Section 5.2(b), such Credit Party shall pay and discharge or cause tobe paid and discharged promptly all Charges payable by it, including(i) Charges imposed upon it, its income and profits, or any of itsproperty (real, personal or mixed) and all Charges with respect to tax, socialsecurity and unemployment withholding with respect to its employees,(ii) lawful claims for labor, materials, supplies and services orotherwise, and (iii) all storage or rental charges payable to warehousemenand bailees, in each case, before any thereof shall become thirty (30) dayspast due.

###  

### (b)                                 SuchCredit Party may in good faith contest, by appropriate proceedings, thevalidity or amount of any Charges, Taxes or claims described in Section5.2(a); *provided*,*that*(i) adequate reserves with respect to such contest are maintained on the booksof such Credit Party, in accordance with GAAP; (ii) no Lien shall be imposed tosecure payment of such Charges (other than payments to warehousemen and/orbailees) that is superior to any of the Liens securing the Obligations and suchcontest is maintained and prosecuted continuously and with diligence andoperates to suspend collection or enforcement of such Charges, (iii) no tangibleasset of such Credit Party becomes subject to forfeiture or loss during thependency of such contest, and (iv) such Credit Party shall promptly pay ordischarge such contested Charges, Taxes or claims and all additional charges,interest, penalties and expenses, if any, and shall deliver to Agent evidencereasonably acceptable to Agent of such compliance, payment or discharge, ifsuch contest is terminated or discontinued adversely to such Credit Party orthe conditions set forth in this Section 5.2(b) are no longer met.

###  

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

 

## 5.4                                 Insurance; Damage to or Destruction of Collateral.

##  

### (a)                                  TheCredit Parties shall, at their sole cost and expense, maintain the policies ofinsurance described on Disclosure Schedule (3.18) as in effect on thedate hereof or otherwise in form and amounts determined by the Credit Partiesand reasonably acceptable to Agent and with insurers selected by the CreditParties and reasonably acceptable to Agent. Such policies of insurance (or the loss payable and additional insuredendorsements delivered to Agent) shall contain provisions pursuant to which theinsurer agrees to provide thirty (30) days’ prior written notice to Agent inthe event of any non-renewal, cancellation or amendment of any such insurancepolicy.  If such Credit Party at anytime or times hereafter shall fail to obtain or maintain any of the policies ofinsurance required above or to pay all premiums relating thereto, Agent may atany time or times thereafter obtain and maintain such policies of insurance andpay such premiums and take any other action with respect thereto that Agentdeems reasonably advisable.  Agent shallhave no obligation to obtain insurance for such Credit Party or pay any premiumstherefor.  By doing so, Agent shall notbe deemed to have waived any Default or Event of Default arising from suchCredit Party’s failure to maintain such insurance or pay any premiums therefor.  All sums so disbursed, including reasonableattorneys’ fees, court costs and

 

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### othercharges related thereto, shall be payable on demand by Borrower to Agent andshall be additional Obligations hereunder secured by the Collateral.

###  

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

###  

### (c)                                  SuchCredit Party shall deliver to Agent, in form and substance reasonablysatisfactory to Agent, endorsements to (i) all “All Risk” and businessinterruption insurance naming Agent, on behalf of itself and Lenders, as losspayee, and (ii) all general liability and other liability policies maintainedby such Credit Party naming Agent, on behalf of itself and Lenders, asadditional insured.  Such Credit Partyirrevocably makes, constitutes and appoints Agent (and all officers, employeesor agents designated by Agent), so long as any Event of Default has occurredand is continuing, as such Credit Party’s true and lawful agent andattorney-in-fact for the purpose of making, settling and adjusting claims undersuch “All Risk” policies of insurance, endorsing the name of such Credit Partyon any check or other item of payment for the proceeds of such “All Risk”policies of insurance and for making all determinations and decisions withrespect to such “All Risk” policies of insurance.  Agent shall have no duty to exercise any rights or powers grantedto it pursuant to the foregoing power-of-attorney.  Borrower shall promptly notify Agent of any Event of Loss and ofany loss, damage, or destruction to the Collateral in the amount of $250,000 ormore, whether or not covered by insurance. After deducting from the insurance proceeds received in connection withsuch Event of Loss the expenses, if any, incurred by Agent in the collection orhandling thereof, Agent shall either, at its option, apply such proceeds to thereduction of the Obligations in accordance with Section 1.3(d) orpermit or require such Credit Party to use such money, or any part thereof, toreplace, repair, restore or rebuild the Collateral in a diligent andexpeditious manner with materials and workmanship of substantially the samequality as existed before the loss, damage or destruction.  Notwithstanding the foregoing, if an Eventof Loss giving rise to insurance proceeds could not reasonably be expected tohave a Material Adverse Effect (after giving effect to the application of theinsurance proceeds to repair and restoration) and such insurance proceeds donot exceed the Dollar Equivalent of $2,000,000******in the aggregate, the applicable CreditParty may elect, in its discretion, to replace, restore, repair or rebuild theproperty; *provided,that* if such Credit Party has not completed or entered into bindingagreements to complete such replacement, restoration, repair or rebuildingwithin 270 days of such casualty, Agent may apply such insurance proceeds tothe Obligations in accordance with Section 1.3(d).  All insurance proceeds that are to be madeavailable to Borrower or the applicable RBC Swiss Group Member to replace,repair, restore or rebuild the Collateral shall be applied by Agent to reducethe outstanding principal balance of the U.S. Revolving Loan or the SchaublinRevolving Loan, as the case may be (which application shall not result in apermanent reduction of either Revolving Loan Commitment) and upon such application,Agent shall establish a Reserve against the U.S. Borrowing Base or theSchaublin Borrowing Base, as applicable, in an amount equal to the amount ofsuch proceeds so applied.  Thereafter,such funds shall be made available to such Credit Party to provide funds toreplace, repair, restore or rebuild the Collateral as

 

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### follows:(i) Borrower shall request a U.S. Revolving Credit Advance or a SchaublinRevolving Credit Advance (as applicable) be made to such Credit Party in theamount requested to be released; (ii) so long as the conditions set forth in Section2.2 have been met and subject to the provisions of any Mortgage encumberingsuch Collateral, Revolving Lenders shall make such U.S. Revolving CreditAdvance or Schaublin Revolving Credit Advance (as applicable); and (iii) in thecase of insurance proceeds applied against either Revolving Loan, the Reserveestablished with respect to such insurance proceeds shall be reduced by theamount of such Revolving Credit Advance. To the extent not used to replace, repair, restore or rebuild theCollateral, such insurance proceeds shall be applied in accordance with Section1.3(d); *provided*,*that*in the case of insurance proceeds pertaining to such Credit Party other thanBorrower or the RBC Swiss Group Members, such insurance proceeds shall beapplied to the Loans owing by Borrower.

###  

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

 

5.6                                 Supplemental Disclosure.  From time to time as may be reasonablyrequested by Agent (which request will not be made more frequently than onceeach year absent the occurrence and continuance of an Event of Default), theCredit Parties shall supplement each Disclosure Schedule hereto, or anyrepresentation herein or in any other Loan Document, with respect to any matterhereafter arising that, if existing or occurring at the date of this Agreement,would have been required to be set forth or described in such DisclosureSchedule or as an exception to such representation or that is necessary tocorrect any information in such Disclosure Schedule or representation which hasbeen rendered inaccurate thereby (and, in the case of any supplements to anyDisclosure Schedule, such Disclosure Schedule shall be appropriately marked toshow the changes made therein); *provided, that* (a) no such supplement toany such Disclosure Schedule or representation shall amend, supplement orotherwise modify any Disclosure Schedule or representation, or be or be deemeda waiver of any Event of Default resulting from the matters disclosed therein,except as consented to by Agent and Requisite Lenders in writing and(b) no supplement shall be required or permitted as to representations andwarranties that relate solely to the Closing Date or the Effective Date, asapplicable.

 

5.7                                 Intellectual Property.  Such Credit Party will conduct its businessand affairs without infringement of or interference with any IntellectualProperty of any other Person in any material respect, except as could notreasonably be expected to have a Material Adverse Effect.

 

## 5.8                                 [IntentionallyOmitted]

##  

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

 

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thatlocation, and shall otherwise be satisfactory in form and substance to Agent.With respect to such locations or warehouse space leased or owned as of theEffective Date and thereafter, if Agent has not received a landlord ormortgagee agreement or bailee letter as of the Effective Date (or, if later, asof the date such location is acquired or leased), Eligible Inventory – U.S. orEligible Inventory – Schaublin, as applicable, at that location shall besubject to such Reserves as may be established by Agent in its reasonablecredit judgment.  After the EffectiveDate, no real property or warehouse space shall be leased by such Credit Party,and no material amount of Inventory shall be shipped to a processor orconverter under arrangements established after the Effective Date without theprior written consent of Agent (which consent, in Agent’s discretion, may beconditioned upon the exclusion from the U.S. Borrowing Base or SchaublinBorrowing Base of Eligible Inventory – U.S. or Eligible Inventory – Schaublinat that location or the establishment of Reserves reasonably acceptable toAgent) or, unless and until a reasonably satisfactory landlord agreement orbailee letter, as appropriate, shall first or simultaneously have been obtainedwith respect to such location.  SuchCredit Party shall timely and fully pay and perform its obligations in allmaterial respects under all leases and other agreements with respect to eachleased location or public warehouse where any Collateral is or may belocated.  Except to the extent otherwisepermitted hereunder, if such Credit Party proposes to acquire a fee ownershipinterest in Real Estate after the Effective Date, it shall first provide toAgent a mortgage or deed of trust granting Agent a first priority Lien on suchReal Estate, together with environmental audits, mortgage title insurancecommitment, real property survey, local counsel opinion(s), and, if required byAgent, casualty insurance and flood insurance, and such other documents,instruments or agreements reasonably requested by Agent, in each case, in formand substance reasonably satisfactory to Agent.

 

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

 

## 5.11                           FurtherAssurances.  SuchCredit Party shall, at such Credit Party’s expense, execute any and all furtherdocuments, financing statements, agreements and instruments, and take allfurther action (including filing Code and other financing statements, mortgagesand deeds of trust) as may be required under applicable law, or that Agent may reasonablyrequest, in order to effectuate the transactions contemplated by the LoanDocuments and in order to grant, preserve, protect and perfect the validity andpriority of the security interests created or intended to be created by theLoan Documents.

 

# **6.**                                      NEGATIVECOVENANTS

 

Each (x) DomesticCredit Party executing this Agreement jointly and severally agrees as to allCredit Parties (regardless of whether the text of any provision of this Article6 speaks to one party only) and (y) Foreign Credit Party executing thisAgreement severally agrees as to only itself (regardless of whether the text ofany provision of this Article 6 speaks to more than one party), thatfrom and after the Effective Date until the Termination Date:

 

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## 6.1                                 Mergers, Subsidiaries,Etc.

##  

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

###  

### (b)                                 Borroweror any Secured Guarantor or an Acquisition Company (or Holdings, so long ascontemporaneously therewith, all assets so acquired are transferred to Borroweror any Secured Guarantor), may (i) acquire all or substantially all of theassets of a Qualified Target or assets that constitute all or substantially allof the assets of a division or operating unit of a Qualified Target, (ii)purchase 100% of the outstanding Stock of a Qualified Target, (iii) purchasenot less than 80% of each class of outstanding Stock of a Qualified Target as longas, without limitation to conditions required for Permitted Acquisition setforth below, Agent will be granted a first priority perfected Lien (subject toPermitted Encumbrances and except as contemplated by clauses (A) and (C)of Section 6.1(b)(iv)) in all in the assets and Stock of the QualifiedTarget, and Agent shall have received lien search results (and in the case of aQualified Target incorporated in England full search reports from CompaniesHouse), financing statements and supplemental security agreements, a Guaranty,environmental indemnity agreements, blocked account agreements and othercollateral documents in connection therewith as requested by Agent, or (iv)participate in a merger of a Qualified Target with and into Borrower or a SecuredGuarantor or the merger of an Acquisition Company into a Qualified Target (withBorrower as the sole Stockholder of Qualified Target after giving effectthereto) or the merger of a Qualified Target into an Acquisition Company (eachsuch acquisition, purchase or merger being an “Acquisition”), subject tosatisfaction of each of the following conditions (and each such Acquisitionshall be a “Permitted Acquisition” only upon satisfaction of each of thefollowing conditions):

###  

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

####  

#### (ii)                                  suchAcquisition shall only involve a Qualified Target which business would notsubject Agent or any Lender to regulatory or third party approvals inconnection with the exercise of its rights and remedies under this Agreement orany other Loan Documents other than approvals applicable to the exercise ofsuch rights and remedies with respect to Borrower prior to such Acquisition;

####  

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

 

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#### (iv)                              noadditional Indebtedness, Guaranteed Indebtedness or other liabilities shall beincurred, assumed or otherwise be reflected on a consolidated balance sheet ofBorrower and Qualified Target after giving effect to such Acquisition, except(A) U.S. Revolving Credit Advances made hereunder that are made inaccordance with the terms of Section 2.3, (B) trade payables and accruedexpenses, each in existence at the time of the Acquisition and not created inanticipation thereof and each arising in ordinary course, (C) IndustrialRevenue Bond Financing, Capital Leases and purchase money Indebtedness, not toexceed in the aggregate 25% of total consideration paid for such PermittedAcquisition (including the book value of assumed liabilities), each inexistence at the time of Acquisition and not created in anticipation thereofand each arising in the ordinary course of business, and (D) unsecuredAcquisition Subordinated Debt (1) with a maturity date after the maturity ofthe Obligations in an amount not to exceed $5,000,000 in the aggregate or (2)with an earlier maturity but subject to Reserve against the U.S. Borrowing Basein an amount equal to the maximum aggregate payments payable thereunder;

####  

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

####  

#### (vi)                              atthe closing of any Acquisition, Agent will be granted a first priorityperfected Lien (subject to Permitted Encumbrances and except as contemplated byclauses (A) and (C) of Section 6.1(b)(iv)) in all assetsacquired pursuant thereto or, in the case of equity purchase, in the assets andStock of the Qualified Target, and Borrower shall have executed such documentsand taken such actions as may be reasonably required by Agent in connectiontherewith, and Agent shall have received lien search results (and in the caseof a Qualified Target incorporated in England full search reports fromCompanies House), financing statements and supplemental security agreements, aGuaranty, environmental indemnity agreements, blocked account agreements andother collateral documents and other documents reasonably requested by Agent;

####  

#### (vii)                           at thetime of such Acquisition and immediately after giving effect thereto (includingany U.S. Revolving Credit Advance in connection therewith), no Default or Eventof Default shall have occurred and be continuing;

####  

#### (viii)                        at leastfive (5) days before the closing date for the Permitted Acquisition, Agentshall have received the following financial statements consisting of balancesheets, statements of income and retained earnings and cash flows with respectto the Qualified Target to the extent such financial statements exist or areobtained by such date: (A) annual financial statements for the most recent3-year period preceding the Acquisition; (B) monthly financial statements forthe most recent 4-quarter period preceding the Acquisition; and (C) monthlyfinancial statements for year-to-date preceding the Acquisition, setting forthin comparative form the figures for the two previous years;

####  

#### (ix)                                atleast five (5) days before the closing date for the Permitted Acquisition,Agent shall have received all pro forma financial statements consisting ofbalance sheets, statements of income and retained earnings and cash flows withrespect to the Qualified

 

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#### Target prepared by Borrower or a Secured Guarantor, asapplicable, in connection with such Acquisition;

####  

#### (x)                                   Agentshall have not less than seven (7) days to review (without, however, the rightto approve or disapprove), environmental audits with respect to real estateacquired in connection with a Permitted Acquisition and with respect toQualified Targets acquired by merger or Stock purchase or where contingentliabilities are to be assumed, litigation, actuarial studies and similar contingentliability analyses with respect to the Qualified Target;

####  

#### (xi)                                atleast seven (7) days prior to the date of such Acquisition, Agent shall havereceived copies of the draft acquisition agreement (which may be subject tofurther negotiation) and related agreements, instruments, and other documentsreasonably requested by Agent and, promptly following the closing date for suchPermitted Acquisition, final drafts of the foregoing;

####  

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

 

##### (A)                              a pro forma consolidated balancesheet, income statement and cash flow statement of Holdings and itsSubsidiaries (the “Acquisition Pro Forma”), based on recent financialstatements, which shall fairly present in all material respects the assets,liabilities, financial condition and results of operations of Holdings and itsSubsidiaries in accordance with GAAP consistently applied, but taking intoaccount such Permitted Acquisition and the funding of the U.S. Revolving Loanin connection therewith, including detailed acquisition adjustments acceptableto Agent, and such Acquisition Pro Forma shall reflect that (x) averagedaily U.S. Borrowing Availability for the 90-day period preceding theconsummation of such Permitted Acquisition would have exceeded the ApplicableAvailability Block on a pro forma basis (after giving effect to such PermittedAcquisition (including acquired Eligible Accounts and Eligible Inventory as towhich an audit has been completed) and the U.S. Revolving Loan funded inconnection therewith as if made on the first day of such period) and theAcquisition Projections (as hereinafter defined) shall reflect that suchBorrowing Availability exceeding the Applicable Availability Block shallcontinue for at least two (2) years after the consummation of such Acquisition,and (y) on a pro forma basis, no Event of Default has occurred and iscontinuing or would result after giving effect to such Acquisition and Borrowerwould have been in compliance with the Fixed Charge Coverage Ratio FinancialCovenant set forth in Annex G for the four quarter period reflected inthe Compliance Certificate most recently delivered to Agent pursuant to AnnexE prior to the consummation of such Acquisition (after giving effect tosuch Permitted Acquisition and the U.S. Revolving Loan funded in connectiontherewith as if made on the first day of such period);

#####  

##### (B)                                updated versions of the mostrecently delivered Projections covering the 1-year period commencing on thedate of such Acquisition and

 

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

#####  

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

#####  

##### (D)                               a certificate in the form of Exhibit6.1 (the “Acquisition Compliance Certificate”) showing compliancewith the terms and provision of clauses (C) and (D) of Section6.1(b)(iv), and a designation of assets, if any, in accordance with Section6.8(d) with respect to such Acquisition.

#####  

Notwithstandingthe foregoing, the Accounts and Inventory of the Qualified Target shall not beincluded in Eligible Accounts and Eligible Inventory until a field audit ofQualified Target has been satisfactorily completed, including the establishmentof Reserves required in Agent’s reasonable credit judgment to address theincrementally adverse effect of laws applicable to a Qualified Target locatedoutside of the United States of America.

 

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

 

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## certificates of deposit maturing no more than one year from the date ofcreation thereof issued by commercial banks incorporated under the laws of theUnited States of America, each having combined capital, surplus and undividedprofits of not less than $300,000,000 and having a senior unsecured rating of“A” or better by a nationally recognized rating agency (an “A Rated Bank”),(iv) time deposits maturing no more than thirty (30) days from the date ofcreation thereof with A Rated Banks and (v) mutual funds that invest solely inone or more of the investments described in clauses (i) through (iv)above; (d) Borrower may make investments in the capital Stock of any ofthe Secured Guarantors; (e) Borrower and the Secured Guarantors may makeinvestments in Borrower and Secured Guarantors consisting of the intercompanyloans in accordance with Section 6.3; (f) Borrower may maintain(but not increase) the Existing Schaublin Holding Intercompany Loan; it beingunderstood and agreed that Schaublin Holding may repay the Existing SchaublinHolding Intercompany Loan, in whole or in part, and Borrower may make new loansto Schaublin Holding in the amount not to exceed the amount of such repayments(and, in any event, as long as the aggregate outstanding amount of such newloans, when added to the unpaid principal balance of the Existing SchaublinHolding Intercompany Loan remaining, if any, after such repayments, does notexceed at any date of determination the Dollar Equivalent of $9,655,624.91),(g) Schaublin Holding may maintain (but not increase) the Existing SchaublinIntercompany Loan; it being understood and agreed that Schaublin may repay theExisting Schaublin Intercompany Loan, in whole or in part, and SchaublinHolding may make new loans to Schaublin Holding in the amount not to exceed theamount of such repayments, (and, in any event, as long as the aggregateoutstanding amount of such new loans, when added to the unpaid principalbalance of the Existing Schaublin Intercompany remaining, if any, after suchrepayments, does not exceed at any date of determination the Dollar Equivalentof $9,655,624.91); (h) Schaublin may maintain (but not increase) theExisting French Intercompany Loans; it being understood and agreed that one ormore French Operating Companies may repay the relevant Existing FrenchIntercompany Loan, in whole or in part, and Schaublin may make new loans to theFrench Operating Companies in an amount not to exceed, in the aggregate, theamount of such repayments (and, in any event, as long as the aggregateoutstanding amount of all such new loans to one or more French OperatingCompanies, when added to the unpaid principal balance of the Existing FrenchIntercompany Loans remaining, if any, after such repayments, does not exceed atany date of determination the Dollar Equivalent of $269,616.00);(i) Borrower may make intercompany loans to Schaublin Holding with theproceeds of the Schaublin Revolving Loan and in an aggregate amount not toexceed the sum of the outstanding principal balance of the Schaublin RevolvingLoan; (j) Schaublin Holding may make intercompany loans to Schaublin withthe proceeds of the intercompany loans from Borrower referenced in the above clause(i) and in an aggregate amount not to exceed the outstanding balance of theSchaublin Revolving Loan; (k) Borrower may make additional investments,loans or advances after the Effective Date in or to Schaublin Holding as longas the aggregate outstanding amount thereof at any date of determination doesnot exceed the Dollar Equivalent of $2,000,000 (such intercompany loans beingthe “Additional Schaublin Holding Intercompany Loans”; and together withthe intercompany loans described in the above clauses (f) and (i),the “Schaublin Holding Intercompany Loans”); (l) Schaublin Holdingmay make intercompany loans to Schaublin after the Effective Date with theproceeds of the intercompany loans from Borrower referenced in the above clause(k) as long as the aggregate outstanding amount thereof as of any date ofdetermination does not exceed the Dollar Equivalent of $2,000,000 (suchintercompany loans being the “Additional Schaublin

 

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

 

## 6.3                                 Indebtedness.

##  

### (a)                                  SuchCredit Party shall not create, incur, assume or permit to exist anyIndebtedness, except (without duplication) (i) Indebtedness secured by purchasemoney security interests and Capital Leases permitted in Section 6.7(c),(ii) the Loans and the other Obligations, (iii) unfunded pension fund and otheremployee benefit plan obligations and liabilities to the extent they arepermitted to remain unfunded under applicable law, (iv) existing Indebtednessdescribed in Disclosure Schedule (6.3) (including earn-outs payable tosellers of businesses, if any, constituting Indebtedness) and refinancingsthereof or amendments or modifications thereto that do not have the effect ofincreasing the principal amount thereof or changing the amortization thereof(other than to extend the same) and that are otherwise on terms and conditionsno less favorable to any Credit Party, Agent or any Lender, as reasonablydetermined by Agent, than the terms of the Indebtedness being refinanced,amended or modified, (v) Indebtedness specifically permitted under Section6.1, (vi) Indebtedness consisting of intercompany loans and advances madeby Borrower to any Secured Guarantor or by any Secured Guarantor to Borrower oranother Secured Guarantor or consisting of intercompany loans and advances tothe extent permitted under Sections 6.2(f), (g), (h), (i) ,(j), (k),(l) and(m)**;***provided*,that:  (A) Borrower shall have executedand delivered to each such Secured Guarantor, and each such Secured Guarantorshall have executed and delivered to Borrower or another such SecuredGuarantor, as applicable, and Schaublin Holding, Schaublin and each of the FrenchOperating Companies shall have executed and delivered to Borrower, SchaublinHolding or

 

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### Schaublin, as applicable, as of the Effective Date, ademand note (collectively, the “Intercompany Notes”) to evidence anysuch intercompany Indebtedness owing at any time by Borrower to such SecuredGuarantor or by such Secured Guarantor to Borrower or such other SecuredGuarantor or by Schaublin Holding Schaublin or each of the French OperatingCompanies to Borrower, Schaublin Holding or Schaublin (as applicable), whichIntercompany Notes shall be in form and substance reasonably satisfactory toAgent and shall be pledged and delivered or assigned to Agent pursuant to theapplicable Pledge Agreement or Security Agreement or other Collateral Documentas additional collateral security for the Obligations; (B) Borrower and eachSecured Guarantor, Schaublin Holding, Schaublin and the French OperatingCompanies shall record all intercompany transactions on its books and recordsin a manner reasonably satisfactory to Agent; (C) the obligations of Borrowerand each Secured Guarantor under any such Intercompany Notes shall besubordinated to the Obligations in a manner reasonably satisfactory to Agent;(D) no Event of Default has occurred and is continuing or would resultafter giving effect to any such proposed intercompany loan; and (E) theaggregate balance of all such intercompany loans owing by any Secured Guarantorincurred during the time that the EBITDA of such Secured Guarantor has beennegative for a trailing twelve month period ending on the last day of anyFiscal Month shall not be increased by more than the Dollar Equivalent of$2,000,000 over the amount of such Secured Guarantor’s or French OperatingCompany’s intercompany loan obligations as of the last day of such period; *provided,that* a Secured Guarantor or a French Operating Company shall nolonger be subject to the Dollar Equivalent of $2,000,000 limitation if thatSecured Guarantor has had positive EBITDA for the trailing twelve-month periodsending on the last day of six consecutive Fiscal Months; *provided*, *further*,that if a Secured Guarantor has been subject to that $2,000,000 limitation,then became exempt from it and again has a negative EBITDA for a trailingtwelve-month period, not more than $2,000,000 of additional intercompany loansmay be received by it after the date when it again has a negative EBITDA; (vii)unsecured Indebtedness of Borrower so long as such unsecured Indebtedness issubordinated to the Obligations in a manner and form satisfactory to Agent andLenders in their sole discretion, as to right and time of payment and as to anyother terms, rights and remedies thereunder and so long as (A) no Event ofDefault has occurred and is continuing or would result after giving effect tosuch unsecured Indebtedness; (B) Holdings was, on a pro forma basis, incompliance with the Fixed Charge Coverage Ratio Financial Covenant set forth onAnnex G as of the last day of the Fiscal Quarter reflected in theCompliance Certificate most recently delivered prior to the date such unsecuredIndebtedness is incurred (after giving effect to such unsecured Indebtednessand the use thereof as if incurred on the first day of such period); and (C)the proceeds of such Indebtedness have been wholly used, promptly upon receiptthereof, to directly pay (by way of refinancing or exchange) the followingIndebtedness in the following order:  first,the Senior Subordinated Debt, until the same has been repaid in full; second,the Zero Coupon Debt, until the same has been repaid in full; third,interest then due and payable on the Revolving Credit Advances; fourth,the outstanding principal balance of the Revolving Credit Advances until thesame has been repaid in full; fifth, interest then due and payable onthe Term Loan; and sixth, the scheduled principal installments of theTerm Loan in inverse order of maturity; (viii) Indebtedness of a QualifiedTarget assumed or incurred in a Permitted Acquisition described in Section 6.1(a)(iv)as long as such Indebtedness was not incurred in contemplation of suchPermitted Acquisition; (ix) Indebtedness resulting from endorsement ofnegotiable instruments for collection in the ordinary course of business; (x)Indebtedness arising with respect to customary indemnification and purchaseprice

 

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

###  

### (b)                                 Duringthe first two years following the Closing Date, such Credit Party shall not,directly or indirectly, voluntarily purchase, redeem, defease or prepay: anyprincipal of, premium, if any, interest or other amount payable in respect ofany Indebtedness, other than (i) the Obligations; (ii) Indebtedness secured bya Permitted Encumbrance if the asset securing such Indebtedness has been soldor otherwise disposed of in accordance with Sections 6.8(b) or (c);(iii) Indebtedness permitted by Section 6.3(a)(iv) upon any refinancingthereof in accordance with Section 6.3(a)(iv) or Section 6.3(a)(vii);(iv) intercompany Indebtedness; and (v) as otherwise permitted by Section6.14; *provided,that* after the first two years following the Closing Date, ifBorrower purchases, prepays or redeems other Indebtedness, Borrower shall meetthe minimum U.S. Borrowing Availability set forth in Section 6.14(b)after giving effect thereto.

###  

## 6.4                                 Employee Loans and Affiliate Transactions.

##  

### (a)                                  SuchCredit Party shall not enter into or be a party to any transaction with anyother Credit Party or any Affiliate thereof except (i) in the ordinary courseof and pursuant to the reasonable requirements of such Credit Party’s businessand upon fair and reasonable terms that are no less favorable to such CreditParty than would be obtained in a comparable arm’s length transaction with aPerson not an Affiliate of such Credit Party (ii) as and to the extentpermitted in Section 6.13(e) and (iii) as and to the extent permitted bySection 6.3(a)(vi).  All suchtransactions existing as of the date hereof are described in DisclosureSchedule (6.4(a)).

###  

### (b)                                 Excludingloans set forth in Disclosure Schedule (6.4(b)), such Credit Party shallnot enter into any lending or borrowing transaction with any employees of anyCredit Party, except loans to its respective employees on an arm’s-length basisin the ordinary course of business consistent with past practices for traveland entertainment expenses, relocation costs and similar purposes up to amaximum of the Dollar Equivalent of $250,000 to any employee and up to amaximum of the Dollar Equivalent of $1,000,000******in the aggregate at any one time outstandingand except for loans or advances made in connection with a management oremployee stock ownership program, the proceeds of which are immediatelyinvested in Holdings’ Stock and contributed to the capital of Borrower.

###  

## 6.5                                 CapitalStructure and Business. Such Credit Party shall not amend its charter or bylaws in a manner thatcould reasonably be expected to adversely affect Agent or Lenders or suchCredit Party’s duty or ability to repay the Obligations.  Such Credit Party shall not engage

 

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

 

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

 

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

 

## 6.8                                 Saleof Stock and Assets. Such Credit Party shall not sell, transfer, convey, assign or otherwisedispose of any of its properties or other assets, including the Stock of any ofits Subsidiaries (whether in a public or a private offering or otherwise) orany of its Accounts, other than (a) the sale of Inventory in the ordinarycourse of business, (b) the sale, transfer, conveyance or other disposition bya Credit Party of Equipment, Fixtures and Real Estate that are obsolete or nolonger used or useful in such Credit Party’s business and having a book valuenot exceeding the Dollar Equivalent of $500,000 in the aggregate in any FiscalYear, (c) the sale, transfer, conveyance or other disposition of otherEquipment and Fixtures having a value not exceeding the Dollar Equivalent of$500,000 in the aggregate in any Fiscal Year, and (d) assets acquired as partof a Permitted Acquisition and designated for disposition in a written noticeto

 

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

 

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

 

## 6.10                           FinancialCovenants. Borrower shall not breach or fail to comply with any of the FinancialCovenants.

 

## 6.11                           [RESERVED]

##  

## 6.12                           Sale-Leasebacks.  Such Credit Party shall not engage in anysale-leaseback, synthetic lease or similar transaction involving any of itsassets.

 

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

 

## 6.14                           RestrictedPayments.

##  

### (a)                                  SuchCredit Party shall not make any Restricted Payment, except (i) payments ofinterest and principal of intercompany loans and advances between Borrower andSecured Guarantors and between the French Operating Companies, Schaublin andSchaublin Holding, and Schaublin, Schaublin Holding and Borrower, respectively,to the extent such intercompany loans and advances are permitted by Section6.2 and Section 6.3, (ii) dividends and distributions bySubsidiaries of Borrower paid to Borrower or to an intermediate Subsidiary ofBorrower which is the direct holder of Stock in the Subsidiary making adividend on other distribution, as applicable, (iii) transactionspermitted under Section 6.4(b), (iv) payments of management fees toWhitney & Co. in equal quarterly installments, as long as such payments ofmanagement fees do not exceed $450,000 in the aggregate during any Fiscal Year,(v) scheduled payments of interest with respect to the Senior SubordinatedDebt or any refinancing thereof permitted under Section 6.3(a)(vii)subject to the subordination provisions set forth in the applicable notepurchase agreement or indenture, (vi) dividends or distributions payable toHoldings solely in common Stock of Holdings, (vii) payments to Dr. MichaelJ. Hartnett not to exceed those set forth in that certain Employment Agreement,dated December 18, 2000, by and between Borrower and Dr. Michael J. Hartnett,as in effect on the Closing Date and (viii) payments and distributionswith respect to Zero Coupon Debt and Senior Subordinated Notes permitted inaccordance with Section 6.3(a)(vii); and *provided, that* no Event ofDefault has occurred and is continuing or would result after giving effect to anyRestricted Payment pursuant to clause (iv) above.

 

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### (b)                                 Notwithstandingthe foregoing Section 6.14(a), Borrower may pay cash dividends toHoldings (“Dividends”) as long as (A) promptly upon receipt thereof,Holdings immediately uses all of the proceeds of such Dividends solely for oneor more of the following purposes:  (i)payment of scheduled interest as of the Closing Date on, and the redemptionrequired as of the Closing Date of, the Zero Coupon Debt, (ii) payment ofdividends on the preferred Stock of Holdings, (iii) payments at such times andin such amounts as are sufficient to enable Holdings to pay the federal andstate income taxes attributable to the taxable income of Borrower andSubsidiaries pursuant to the Tax Sharing Agreement, (iv) repurchase ofHoldings’ Stock from employees or former employees an aggregate amount not toexceed $500,000 per year, it being agreed that no more than $100,000 of suchaggregate amount may consist of such repurchases from employees whoseemployment continues, (v) Dividends from Borrower to Holdings not to exceed$100,000 in the aggregate in any Fiscal Year to pay the operating expenses ofHoldings, and (vi) funding Redemptions as long as such Dividends paid for Redemptionsdo not exceed $30,000,000 in the aggregate after the Closing Date; (B) noDefault or Event of Default and no default or an event of default under anySubordinated Debt Document, Discount Debentures Documents or any other debtinstrument of Holdings, Borrower or any other Credit Party or in respect of thecharter of Holdings, Borrower or any other Credit Party has occurred and iscontinuing or would result after giving effect to any such Dividend orRedemption and any U.S. Revolving Credit Advances used to fund such Dividend;(C) Borrower and Holdings are in compliance with the Fixed Charge CoverageRatio set forth in Annex G for the four quarter period reflected in theCompliance Certificate most recently delivered pursuant to Annex E priorto such proposed Dividend and all U.S. Revolving Credit Advances used to fundsuch Dividend (after giving effect to such proposed Redemption, Dividend andRevolving Credit Advances as if made on the first day of such period); (D)Borrower has U.S. Borrowing Availability of at least $10,000,000, after givingeffect to the proposed Dividend and U.S. Revolving Credit Advances used to fundsuch Dividend and without any manipulation of working capital of Borrower, and(E) if the proceeds of the U.S. Revolving Credit Advances used to fundRedemptions exceed $9,000,000 in the aggregate, then, in addition to satisfyingthe conditions of the foregoing clauses (A) through (D) of this Section6.14(b), the Leverage Ratio at the end of the following Fiscal Quarters andfor the 12-month period then ended (calculated as if any proposed Redemption,Dividends and all Revolving Credit Advances used to fund such Dividends hadbeen made on the first day of such period) shall not be greater than the ratioset forth below for such Fiscal Quarter:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3.850to 1.0 thereafter.

 

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

###  

## 6.15                           Change of Corporate Name or Location; Change of FiscalYear.  Such CreditParty shall not (a) change its name as it appears in official filings in thestate of its incorporation or other organization, (b) change its chiefexecutive office, principal place of business, corporate offices or warehousesor locations at which Collateral is held or stored, or the location of itsrecords concerning the Collateral, (c) change the type of entity that it is,(d) cause to be changed its organization identification number, if any, issuedby its state of incorporation or other organization, or (e) change its state ofincorporation or organization or incorporate or organize in any additionaljurisdictions, in each case without at least thirty (30) days prior writtennotice to Agent and after Agent’s written acknowledgment that any reasonableaction requested by Agent in connection therewith, including to continue theperfection of any Liens in favor of Agent, on behalf of Lenders, in anyCollateral, has been completed or taken, and *provided, that* any such newlocation shall be in the continental United States, except for new locationsestablished by Schaublin or French Operating Companies which may be inSwitzerland or France, as applicable. Without limiting the foregoing, no CreditParty shall cause to be changed its name, identity or corporate structure inany manner that might make any financing or continuation statement filed inconnection herewith seriously misleading as such term is defined in and/or usedin the Code or any other then applicable provision of the Code except uponprior written

 

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

 

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

 

## 6.17                           NoSpeculative Transactions.  Such Credit Party shall not engage in any transaction involvingcommodity options, futures contracts or similar transactions, except solely tohedge against fluctuations in the prices of commodities owned or purchased byit and the values of foreign currencies receivable or payable by it andinterest swaps, caps or collars.

 

## 6.18                           Changes Relating to Subordinated Debt; MaterialContracts.  SuchCredit Party shall not change or amend the terms of any Subordinated Debt (orany indenture or agreement in connection therewith) if the effect of suchamendment is to:  (a) increase theinterest rate on such Subordinated Debt; (b) change the dates upon whichpayments of principal or interest are due on such Subordinated Debt other thanto extend such dates; (c) change any default or event of default other than todelete or make less restrictive any default provision therein, or add anycovenant with respect to such Subordinated Debt; (d) change the redemption orprepayment provisions of such Subordinated Debt other than to extend the datestherefor or to reduce the premiums payable in connection therewith; (e) grant anysecurity or collateral to secure payment of such Subordinated Debt; or (f)change or amend any other term if such change or amendment would materiallyincrease the obligations of the Credit Party thereunder or confer additionalmaterial rights on the holder of such Subordinated Debt in a manner adverse toany Credit Party, Agent or any Lender.

 

## 6.19                           Redemptions.

##  

### (a)                                  Proceedsof Loans used by Borrower to fund the Recapitalization on the Closing Date orat any time prior to December 16, 2002 shall not exceed $30,000,000 in theaggregate.

###  

### (b)                                 Priorto any Recapitalization payment, Borrower shall deliver to Agent evidencedemonstrating Borrower’s continued compliance with the Financial Covenantsafter giving effect to such payment.

###  

## 6.20                           Holdings and Schaublin Holding.

##  

### (a)                                  Holdingsshall not engage in any trade or business or incur any Indebtedness other thanthe Zero Coupon Debt or any refinancing thereof.

###  

### (b)                                 SchaublinHolding shall not engage in any trade or business or incur any Indebtednessother than the Schaublin Holding Intercompany Loans.

 

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# **7.**                                      TERM

 

## 7.1                                 Termination.  The financing arrangements contemplatedhereby shall be in effect until the Commitment Termination Date, and the Loansand all other Obligations shall be automatically due and payable in full onsuch date.

 

## 7.2                                 Survival of Obligations Upon Termination of FinancingArrangements. Except as otherwise expressly provided for in the Loan Documents, notermination or cancellation (regardless of cause or procedure) of any financingarrangement under this Agreement shall in any way affect or impair theobligations, duties and liabilities of the Credit Parties or the rights ofAgent and Lenders relating to any unpaid portion of the Loans or any otherObligations, due or not due, liquidated, contingent or unliquidated or anytransaction or event occurring prior to such termination, or any transaction orevent, the performance of which is required after the Commitment TerminationDate.  Except as otherwise expresslyprovided herein or in any other Loan Document, all undertakings, agreements,covenants, warranties and representations of or binding upon the CreditParties, and all rights of Agent and each Lender, all as contained in the LoanDocuments shall continue in full force and effect until the Termination Date; *provided*,that the provisions of Section 11, the payment obligations under Sections1.15 and 1.16, and the indemnities contained in the Loan Documents shallsurvive the Termination Date.

 

# **8.**                                      EVENTSOF DEFAULT; RIGHTS AND REMEDIES

# ** **

## 8.1                                 Eventsof Default.  Theoccurrence of any one or more of the following events (regardless of the reasontherefor) shall constitute an “Event of Default” hereunder:

 

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

###  

### (b)                                 AnyCredit Party fails or neglects to perform, keep or observe any of theprovisions of Sections 1.4, 1.8, 5.4(a) or 6, any of the provisions setforth in Annexes C or G, respectively, or any of the provisions of Section3.2 of the Environmental Indemnity Agreement.

###  

### (c)                                  Borrowerfails or neglects to perform, keep or observe any of the provisions of Section4 or any provisions set forth in Annexes E or F, respectively, andthe same shall remain unremedied for five (5) days or more.

###  

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

###  

### (e)                                  Adefault or breach occurs (A) under any agreement, document or instrument towhich any Credit Party is a party that evidences any of the Schaublin HoldingIntercompany Loans, Schaublin Intercompany Loans or French Intercompany Loansor under

 

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### any Foreign Collateral Document or (B) under any otheragreement, document or instrument to which any Credit Party is a party that isnot cured within any applicable grace period therefor, and such default orbreach (i) involves the failure to make any payment when due in respect of anyIndebtedness or Guaranteed Indebtedness (other than the Obligations) of anyCredit Party in excess of the Dollar Equivalent of $3,000,000 in the aggregate(including (x) undrawn committed or available amounts and (y) amounts owing toall creditors under any combined or syndicated credit arrangements), or (ii)causes, or permits any holder of such Indebtedness or Guaranteed Indebtednessor a trustee to cause, Indebtedness or Guaranteed Indebtedness or a portionthereof in excess of the Dollar Equivalent of $3,000,000 in the aggregate tobecome due prior to its stated maturity or prior to its regularly scheduleddates of payment, or cash collateral to be demanded in respect thereof, in eachcase, regardless of whether such default is waived, or such right is exercised,by such holder or trustee.

###  

### (f)                                    Anyinformation contained in any Borrowing Base Certificate is untrue or incorrectin any respect resulting in the making of a Revolving Credit Advance in excessof the actual applicable Borrowing Availability less the ApplicableAvailability Block (other than inadvertent, immaterial errors not exceeding theDollar Equivalent $150,000 in any Borrowing Base Certificate), or anyrepresentation or warranty herein or in any Loan Document or in any writtenstatement, report, financial statement or certificate (other than a BorrowingBase Certificate) made or delivered to Agent or any Lender by any Credit Partyis untrue or incorrect in any material respect as of the date when made ordeemed made.

###  

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

###  

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

###  

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

 

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### trustee or sequestrator (or similar official) for suchCredit Party or Holdings or for any substantial part of any such Credit Party’sassets or of assets of Holdings, (iii) any Foreign Credit Party ceases to payor suspends payment of all or any class of its debts or any Credit Party makesan assignment for the benefit of creditors, (iv) takes any action infurtherance of any of the foregoing, (v) admits in writing its inability to, oris generally unable to, pay its debts as such debts become due or becomesinsolvent (on a going concern or, in the case of a Foreign Credit Party only,on a balance sheet basis), or (vi) enters into any agreement for therescheduling, restructuring or readjustment of its debts or any class thereof.

###  

### (j)                                     Anuninsured final judgment or judgments for the payment of money in excess of theDollar Equivalent of $500,000 in the aggregate at any time are outstandingagainst one or more of the Credit Parties and the same are not, within thirty(30) days after the entry thereof, discharged or execution thereof stayed orbonded pending appeal, or such judgments are not discharged prior to theexpiration of any such stay.

###  

### (k)                                  Anymaterial provision of any Loan Document for any reason ceases to be valid,binding and enforceable in accordance with its terms (or any Credit Party shallchallenge the enforceability of any Loan Document or shall assert in writing,or engage in any action or inaction based on any such assertion, that anyprovision of any of the Loan Documents has ceased to be or otherwise is notvalid, binding and enforceable in accordance with its terms), or any Liencreated under any Loan Document ceases to be a valid and perfected firstpriority Lien (except as otherwise permitted herein or therein) in any of theCollateral purported to be covered thereby, and remains unremedied for a periodof ten (10) days after Borrower obtains knowledge thereof.

###  

### (l)                                     AnyChange of Control occurs.

###  

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

###  

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

###  

## 8.2                                 Remedies.

##  

### (a)                                  Ifany Default or Event of Default has occurred and is continuing, Agent may (andat the written request of the Requisite Revolving Lenders shall), withoutnotice, suspend the Revolving Loan facilities with respect to additionalAdvances and/or the incurrence of additional Letter of Credit Obligations,whereupon any additional Advances and additional Letter of Credit Obligationsshall be made or incurred in Agent’s sole discretion (or in the sole discretionof the Requisite Revolving Lenders, if such suspension occurred at theirdirection) so long as such Default or Event of Default is continuing.  If any Default or Event of Default hasoccurred and is continuing, Agent may (and at the written request of RequisiteLenders shall),

 

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### without notice except as otherwise expressly providedherein, increase the rate of interest applicable to the Loans and the Letter ofCredit Fees to the Default Rate.

###  

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

###  

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

 

# **9.**                                      ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT

# ** **

## 9.1                                 Assignment and Participations.

##  

### (a)                                  Subjectto the terms of this Section 9.1, any Lender may make an assignment to aQualified Assignee of, or sell participations in, at any time or times, theLoan Documents, Loans, Letter of Credit Obligations and any Commitment or anyportion thereof or interest therein, including any Lender’s rights, title,interests, remedies, powers or duties thereunder; *provided, however*, that eachsuch assignment must be of a fixed percentage of all of such Lender’s rightsand obligations hereunder.  Anyassignment by a Lender shall: (i) require the consent of Agent (which consent shall not beunreasonably withheld or delayed with respect to a Qualified Assignee) and theexecution of an assignment agreement (an “Assignment Agreement”substantially in the form attached hereto as Exhibit 9.1(a) andotherwise in form and substance reasonably satisfactory to, and acknowledgedby, Agent; (ii) be conditioned on such assignee Lender representing to theassigning Lender and Agent that it is purchasing the applicable Loans to beassigned to it for its own account, for investment purposes and not with a viewto the distribution thereof; (iii) after giving effect to any such partialassignment, the

 

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### assignee Lender shall have Commitments in an amount atleast equal to $5,000,000 and the assigning Lender shall have retainedCommitments in an amount at least equal to $5,000,000; (iv) include a paymentto Agent of an assignment fee of $3,500; and (v) so long as no Event of Defaultshall have occurred or be continuing, require the consent of Borrower (whichconsent shall not be unreasonably withheld or delayed with respect to aQualified Assignee).  In the case of anassignment by a Lender under this Section 9.1, the assignee shallhave, to the extent of such assignment, the same rights, benefits andobligations as all other Lenders hereunder. The assigning Lender shall be relieved of its obligations hereunder withrespect to its Commitments or assigned portion thereof from and after the dateof such assignment.  Borrower herebyacknowledges and agrees that any assignment shall give rise to a directobligation of Borrower to the assignee and that the assignee shall beconsidered to be a “Lender”.  In allinstances, each Lender’s liability to make Loans hereunder shall be several andnot joint and shall be limited to such Lender’s Pro Rata Share of theapplicable Commitment.  In the eventAgent or any Lender assigns or otherwise transfers all or any part of theObligations, Agent or any such Lender shall so notify Borrower and Borrowershall, upon the request of Agent or such Lender, execute new Notes in exchangefor the Notes, if any, being assigned. Notwithstanding the foregoing provisions of this Section 9.1(a),any Lender may at any time pledge the Obligations held by it and such Lender’srights under this Agreement and the other Loan Documents to a Federal ReserveBank; *provided,that* no such pledge to a Federal Reserve Bank shall release suchLender from such Lender’s obligations hereunder or under any other LoanDocument.

###  

### (b)                                 Anyparticipation by a Lender of all or any part of its Commitments shall be madewith the understanding that all amounts payable by Borrower hereunder shall bedetermined as if that Lender had not sold such participation, and that theholder of any such participation shall not be entitled to require such Lenderto take or omit to take any action hereunder except actions directly affecting(i) any reduction in the principal amount of, or interest rate or Fees payablewith respect to, any Loan in which such holder participates, (ii) any extensionof the scheduled amortization of the principal amount of any Loan in which suchholder participates or the final maturity date thereof, and (iii) any releaseof all or substantially all of the Collateral (other than in accordance withthe terms of this Agreement, the Collateral Documents or the other LoanDocuments).  Neither Borrower nor anyother Credit Party shall have any obligation or duty to any participant.  Neither Agent nor any Lender (other than theLender selling a participation) shall have any duty to any participant and maycontinue to deal solely with the Lender selling a participation as if no suchsale had occurred.

###  

### (c)                                  Exceptas expressly provided in this Section 9.1, no Lender shall, as betweenBorrower and that Lender, or Agent and that Lender, be relieved of any of itsobligations hereunder as a result of any sale, assignment, transfer ornegotiation of, or granting of participation in, all or any part of the Loans, theNotes or other Obligations owed to such Lender.

###  

### (d)                                 EachCredit Party executing this Agreement shall assist any Lender permitted to sellassignments or participations under this Section 9.1 as reasonablyrequired to enable the assigning or selling Lender to effect any suchassignment or participation, including the preparation of informationalmaterials for, and the participation of management in meetings with, potentialassignees or participants.  Each CreditParty executing this Agreement shall certify the correctness, completeness andaccuracy of all descriptions of such Credit Party and its affairs contained inany selling materials provided by it and all other information provided by it

 

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### and included in such materials, except that anyProjections delivered by Borrower shall only be certified by Borrower as havingbeen prepared by Borrower in compliance with the representations contained in Section3.4(c).

###  

### (e)                                  ALender may furnish any information concerning Credit Parties in the possessionof such Lender from time to time to assignees and participants (includingprospective assignees and participants); *provided, that* such Lender shall obtainfrom assignees or participants confidentiality covenants substantiallyequivalent to those contained in Section 11.8.

###  

### (f)                                    NoLender shall assign or sell participations in any portion of its Loan orCommitments to a potential Lender or participant, if, as of the date of theproposed assignment or sale, the assignee Lender or participant would besubject to capital adequacy or similar requirements under Section 1.16(a),increased costs under Section 1.16(b), an inability to fund LIBOR Loansunder Section 1.16(c), or taxes in accordance with Section 1.15(a)or Section 1.15(b).

###  

### (g)                                 Notwithstandinganything to the contrary contained herein, any Lender (a “Granting Lender”),may grant to a special purpose funding vehicle (an “SPC”), identified assuch in writing by the Granting Lender to Agent and Borrower, the option toprovide to Borrower all or any part of any Loans that such Granting Lenderwould otherwise be obligated to make to Borrower pursuant to this Agreement; *provided,that*(i) nothing herein shall constitute a commitment by any SPC tomake any Loan; and (ii) if an SPC elects not to exercise such option orotherwise fails to provide all or any part of such Loan, the Granting Lendershall be obligated to make such Loan pursuant to the terms hereof.  The making of a Loan by an SPC hereundershall utilize the Commitment of the Granting Lender to the same extent, and asif such Loan were made by such Granting Lender.  No SPC shall be liable for any indemnity or similar paymentobligation under this Agreement (all liability for which shall remain with theGranting Lender).  Any SPC may (i) withnotice to, but without the prior written consent of, Borrower and Agent andassign all or a portion of its interests in any Loans to the Granting Lender orto any financial institutions (consented to by Borrower and Agent) providingliquidity and/or credit support to or for the account of such SPC to supportthe funding or maintenance of Loans and (ii) disclose on a confidential basisany non-public information relating to its Loans to any rating agency,commercial paper dealer or provider of any surety, guaranty or credit orliquidity enhancement to such SPC.  ThisSection 9.1(g) may not be amended without the prior written consent ofeach Granting Lender, all or any of whose Loans are being funded by an SPC atthe time of such amendment.  For theavoidance of doubt, the Granting Lender shall for all purposes, includingwithout limitation, the approval of any amendment or waiver of any provision ofany Loan Document or the obligation to pay any amount otherwise payable by the GrantingLender under the Loan Documents, continue to be the Lender of record hereunder.

###  

## 9.2                                 Appointmentof Agent.  GECapital is hereby appointed to act on behalf of all Lenders as Agent under thisAgreement and the other Loan Documents. The provisions of this Section 9.2 are solely for the benefit ofAgent and Lenders and no Credit Party nor any other Person shall have anyrights as a third party beneficiary of any of the provisions hereof.  In performing its functions and duties underthis Agreement and the other Loan Documents, Agent shall act solely as an agentof Lenders and does not assume and shall not be deemed to have assumed anyobligation toward or relationship of agency or trust with or for any CreditParty or

 

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## any other Person.  Agent shallhave no duties or responsibilities except for those expressly set forth in thisAgreement and the other Loan Documents. The duties of Agent shall be mechanical and administrative in nature andAgent shall not have, or be deemed to have, by reason of this Agreement, anyother Loan Document or otherwise a fiduciary relationship in respect of anyLender.  Except as expressly set forthin this Agreement and the other Loan Documents, Agent shall not have any dutyto disclose, and shall not be liable for failure to disclose, any informationrelating to any Credit Party or any of their respective Subsidiaries or anyAccount Debtor that is communicated to or obtained by GE Capital or any of itsAffiliates in any capacity.  NeitherAgent nor any of its Affiliates nor any of their respective officers,directors, employees, agents or representatives shall be liable to any Lenderfor any action taken or omitted to be taken by it hereunder or under any otherLoan Document, or in connection herewith or therewith, except for damagescaused by its or their own gross negligence or willful misconduct.

 

If Agent shallrequest instructions from Requisite Lenders, Requisite Revolving Lenders or allaffected Lenders with respect to any act or action (including failure to act)in connection with this Agreement or any other Loan Document, then Agent shallbe entitled to refrain from such act or taking such action unless and untilAgent shall have received instructions from Requisite Lenders, RequisiteRevolving Lenders or all affected Lenders, as the case may be, and Agent shallnot incur liability to any Person by reason of so refraining.  Agent shall be fully justified in failing orrefusing to take any action hereunder or under any other Loan Document (a) ifsuch action would, in the opinion of Agent, be contrary to law or the terms ofthis Agreement or any other Loan Document, (b) if such action would, in theopinion of Agent, expose Agent to Environmental Liabilities or (c) if Agentshall not first be indemnified to its satisfaction against any and allliability and expense which may be incurred by it by reason of taking orcontinuing to take any such action. Without limiting the foregoing, no Lender shall have any right of actionwhatsoever against Agent as a result of Agent acting or refraining from actinghereunder or under any other Loan Document in accordance with the instructionsof Requisite Lenders, Requisite Revolving Lenders or all affected Lenders, asapplicable.

 

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

 

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

 

## 9.4                                 GECapital and Affiliates. With respect to its Commitments hereunder, GE Capital shall have thesame rights and powers under this Agreement and the other Loan Documents as anyother Lender and may exercise the same as though it were not Agent; and theterm “Lender” or “Lenders” shall, unless otherwise expressly indicated, includeGE Capital in its individual capacity. GE Capital and its Affiliates may lend money to, invest in, andgenerally engage in any kind of business with, any Credit Party, any of theirAffiliates and any Person who may do business with or own securities of anyCredit Party or any such Affiliate, all as if GE Capital were not Agent andwithout any duty to account therefor to Lenders.  GE Capital or one or more of Affiliates may also purchase certainequity interests in Holdings, which is a corporation that currently owns 100%of the outstanding Stock of Borrower. GE Capital and its Affiliates may accept fees and other considerationfrom any Credit Party for services in connection with this Agreement or otherwisewithout having to account for the same to Lenders. *** ***EachLender acknowledges the potential conflict of interest between GE Capital as aLender holding disproportionate interests in the Loans, GE Capital or itsAffiliates as a Stockholder and GE Capital as Agent; *provided, that* any equityinvestment by GE Capital shall not exceed 7.5% in the aggregate of the Stock ofHoldings outstanding on a fully diluted basis, and shall not exceed $7,500,000of investments in the aggregate.

 

## 9.5                                 LenderCredit Decision. Each Lender acknowledges that it has, independently and without relianceupon Agent or any other Lender and based on the Financial Statements referredto in Section 3.4(a) and such other documents and information as it hasdeemed appropriate, made its own credit and financial analysis of the CreditParties and its own decision to enter into this Agreement.  Each Lender also acknowledges that it will,independently and without reliance upon Agent or any other Lender and based onsuch documents and information as it shall deem appropriate at the time,continue to make its own credit decisions in taking or not taking action underthis Agreement.  Each Lenderacknowledges the potential conflict of interest of each other Lender as aresult of Lenders holding disproportionate interests in the Loans, andexpressly consents to, and waives any claim based upon, such conflict ofinterest.

 

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

 

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

 

## 9.7                                 SuccessorAgent.  Agent mayresign at any time by giving not less than 30 days’ prior written noticethereof to Lenders and Borrower.  Uponany such resignation, the Requisite Lenders shall have the right to appoint asuccessor Agent.  If no successor Agentshall have been so appointed by the Requisite Lenders and shall have acceptedsuch appointment within 30 days after the resigning Agent’s giving notice ofresignation, then the resigning Agent may, on behalf of Lenders, appoint asuccessor Agent, which shall be a Lender, if a Lender is willing to accept suchappointment, or otherwise shall be a commercial bank or financial institutionor a subsidiary of a commercial bank or financial institution if suchcommercial bank or financial institution is organized under the laws of theUnited States of America or of any State thereof and has a combined capital andsurplus of at least $300,000,000.  If nosuccessor Agent has been appointed pursuant to the foregoing, within thirty(30) days after the date such notice of resignation was given by the resigningAgent, such resignation shall become effective and the Requisite Lenders shallthereafter perform all the duties of Agent hereunder until such time, if any,as the Requisite Lenders appoint a successor Agent as provided above. Anysuccessor Agent appointed by Agent or Requisite Lenders hereunder shall besubject to the approval of Borrower, such approval not to be unreasonably withheldor delayed; *provided,that* such approval shall not be required if a Default or an Event ofDefault has occurred and is continuing. Upon the acceptance of any appointment as Agent hereunder by a successorAgent, such successor Agent shall succeed to and become vested with all therights, powers, privileges and duties of the resigning Agent.  Upon the earlier of the acceptance of anyappointment as Agent hereunder by a successor Agent or the effective date ofthe resigning Agent’s resignation, the resigning Agent shall be discharged fromits duties and obligations under this Agreement and the other Loan Documents,except that any indemnity rights or other rights in favor of such resigningAgent shall continue.  After anyresigning Agent’s resignation hereunder, the provisions of this Section 9shall inure to its benefit as to any actions taken or omitted to be taken by itwhile it was acting as Agent under this Agreement and the other Loan Documents.

 

## 9.8                                 Setoffand Sharing of Payments. In addition to any rights now or hereafter granted under applicable lawand not by way of limitation of any such rights, upon the occurrence and duringthe continuance of any Event of Default and subject to Section 9.9(f),each Lender is hereby authorized at any time or from time to time, withoutnotice to any Credit Party or to any other Person, any such notice being herebyexpressly waived, to offset and to appropriate and to apply any and allbalances held by it at any of its offices for the account of Borrower or any Guarantor(regardless of whether such balances are then due to Borrower or any Guarantor)and any other properties or assets at any time held or owing by that Lender orthat holder to or for the credit or for the account of Borrower or anyGuarantor against and on account of any of the Obligations that are if not paidwhen due.  Any Lender exercising theforegoing right of setoff or otherwise receiving any payment on account of theObligations in excess of its Pro Rata Share thereof shall purchase for cash(and the other Lenders or holders shall sell) such participations in each suchother Lender’s or holder’s Pro Rata Share of the Obligations as would benecessary to cause such Lender to share the amount so offset or otherwisereceived with each other Lender or holder in accordance with their respectivePro Rata Shares, (other than offset rights exercised by any Lender with respectto Sections 1.13, 1.15 or 1.16). Each Credit Party agrees, to the fullest extent permitted by law, that(a) any Lender may

 

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## exercise the foregoing right to offset with respect to amounts inexcess of its Pro Rata Share of the Obligations and may sell participations insuch amounts so offset to other Lenders and holders and (b) any Lender sopurchasing a participation in the Loans made or other Obligations held by otherLenders or holders may exercise all rights of offset, bankers’ lien,counterclaim or similar rights with respect to such participation as fully asif such Lender or holder were a direct holder of the Loans and the otherObligations in the amount of such participation.  Notwithstanding the foregoing, if all or any portion of theoffset amount or payment otherwise received is thereafter recovered from theLender that has exercised the right of offset, the purchase of participationsby that Lender shall be rescinded and the purchase price restored withoutinterest.

 

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

##  

### (a)                                  Advances;Payments.

###  

#### (i)                                     RevolvingLenders shall refund or participate in the Swing Line Loan in accordance with clauses(iii) and (iv) of Section 1.1(c). If the Swing Line Lender declines to make a Swing Line Loan or if SwingLine Availability is zero, Agent shall notify Revolving Lenders, promptly afterreceipt of a Notice of U.S. Revolving Credit Advance and in any event prior to1:00 p.m. (Chicago time) on the date such Notice of Revolving Advance isreceived, by telecopy, telephone or other similar form of transmission.  Each Revolving Lender shall make the amountof such Lender’s Pro Rata Share of such Revolving Credit Advance available toAgent in same day funds by wire transfer to Agent’s account as set forth in AnnexH not later than 3:00 p.m. (Chicago time) on the requested funding date, inthe case of an Index Rate Loan and not later than 11:00 a.m. (Chicago time) onthe requested funding date in the case of a LIBOR Loan.  After receipt of such wire transfers (or, inAgent’s sole discretion, before receipt of such wire transfers), subject to theterms hereof, Agent shall make the requested U.S. Revolving Credit Advance toBorrower.  All payments by eachRevolving Lender shall be made without setoff, counterclaim or deduction of anykind.

####  

#### (ii)                                  Onthe 2nd Business Day of each calendar week or more frequently at Agent’selection (each, a “Settlement Date”), Agent shall advise each Lender bytelephone, or telecopy of the amount of such Lender’s Pro Rata Share ofprincipal, interest and Fees paid for the benefit of Lenders with respect toeach applicable Loan.  Provided thateach Lender has funded all payments and Advances required to be made by it andpurchased all participations required to be purchased by it under thisAgreement and the other Loan Documents as of such Settlement Date, Agent shallpay to each Lender such Lender’s Pro Rata Share of principal, interest and Feespaid by Borrower since the previous Settlement Date for the benefit of suchLender on the Loans held by it.  To theextent that any Lender (a “Non-Funding Lender”) has failed to fund allsuch payments and Advances or failed to fund the purchase of all suchparticipations, Agent shall be entitled to set off the funding short-fallagainst that Non-Funding Lender’s Pro Rata Share of all payments receivedfrom Borrower.  Such payments shall bemade by wire transfer to such Lender’s account (as specified by such Lender in AnnexH or the applicable Assignment Agreement) not later than 1:00 p.m. (Chicagotime) on the next Business Day following each Settlement Date.

 

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### (b)                                 Availabilityof Lender’s Pro Rata Share.  Agentmay assume that each Revolving Lender will make its Pro Rata Share of eachRevolving Credit Advance available to Agent on each funding date.  If such Pro Rata Share is not, in fact, paidto Agent by such Revolving Lender when due, Agent will be entitled to recoversuch amount on demand from such Revolving Lender without setoff, counterclaimor deduction of any kind.  If anyRevolving Lender fails to pay the amount of its Pro Rata Share forthwith uponAgent’s demand, Agent shall promptly notify Borrower and Borrower shallimmediately repay such amount to Agent. Nothing in this Section 9.9(b) or elsewhere in this Agreement orthe other Loan Documents shall be deemed to require Agent to advance funds onbehalf of any Revolving Lender or to relieve any Revolving Lender from itsobligation to fulfill its Commitments hereunder or to prejudice any rights thatBorrower may have against any Revolving Lender as a result of any default bysuch Revolving Lender hereunder.  To theextent that Agent advances funds to Borrower on behalf of any Revolving Lenderand is not reimbursed therefor on the same Business Day as such Advance ismade, Agent shall be entitled to retain for its account all interest accrued onsuch Advance until reimbursed by the applicable Revolving Lender.

###  

### (c)                                  Returnof Payments.

###  

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

####  

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

####  

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

 

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

###  

### (e)                                  Disseminationof Information.  Agent shall usereasonable efforts to provide Lenders with any notice of Default or Event ofDefault received by Agent from, or delivered by Agent to, any Credit Party,with notice of any Event of Default of which Agent has actually become awareand with notice of any action taken by Agent following any Event of Default; *provided,that* Agent shall not be liable to any Lender for any failure to doso, except to the extent that such failure is attributable to Agent’s grossnegligence or willful misconduct. Lenders acknowledge that Borrower is required to provide FinancialStatements and Collateral Reports to Lenders in accordance with Annexes Eand F hereto and agree that Agent shall have no duty to provide the sameto Lenders.

###  

### (f)                                    Actionsin Concert.  Anything in thisAgreement to the contrary notwithstanding, each Lender hereby agrees with eachother Lender that no Lender shall take any action to protect or enforce itsrights arising out of this Agreement or the Notes (including exercising anyrights of setoff) without first obtaining the prior written consent of Agentand Requisite Lenders, it being the intent of Lenders that any such action toprotect or enforce rights under this Agreement and the Notes shall be taken inconcert and at the direction or with the consent of Agent or RequisiteLenders.  With respect to any action byAgent to enforce the rights and remedies of Agent and the Lenders under thisAgreement and the other Loan Documents, each Lender hereby consents to thejurisdiction of the court in which such action is maintained, and agrees todeliver its Notes to Agent to the extent necessary to enforce the rights andremedies of Agent for the benefit of the Lenders under the Mortgages inaccordance with the provisions hereof.

###  

# **10.**                               SUCCESSORSAND ASSIGNS

 

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

 

# **11.**                               MISCELLANEOUS

 

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

 

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

 

## 11.2                           Amendmentsand Waivers.

##  

### (a)                                  Exceptfor actions expressly permitted to be taken by Agent, no amendment,modification, termination or waiver of any provision of this Agreement or anyother Loan Document, or any consent to any departure by any Credit Partytherefrom, shall in any event be effective unless the same shall be in writingand signed by Agent and Borrower, and by Requisite Lenders, Requisite RevolvingLenders or all affected Lenders, as applicable.  Except as set forth in clauses (b) and (c) below, all suchamendments, modifications, terminations or waivers shall require the writtenconsent of Requisite Lenders.

###  

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

###  

### (c)                                  Noamendment, modification, termination or waiver shall, unless in writing andsigned by Agent and each Lender directly affected thereby:  (i) increase the principal amount of anyLender’s Commitment (which action shall be deemed only to affect those Lenderswhose Commitments are increased and must be approved by Requisite Lenders,including those lenders whose Commitments are increased); (ii) reduce theprincipal of, rate of interest on or Fees payable with respect to any Loan orLetter of Credit Obligations of any affected Lender; (iii) waive or extend anyscheduled payment date (other than payment dates of mandatory prepayments underSection 1.3(b)(ii)-(iv)) or final maturity date of the principal amountof any Loan of any affected Lender; (iv) waive, forgive, defer, extend orpostpone any payment of interest or Fees as to any affected Lender; (v) releaseany Guaranty or except as otherwise permitted herein or in the other LoanDocuments, release, or permit any Credit Party to sell or otherwise dispose of,any Collateral with a value exceeding $3,000,000 in the aggregate (which actionshall be deemed to directly affect all Lenders); (vi) change the percentage ofthe Commitments or of the aggregate unpaid principal amount of the Loans thatshall be required for Lenders or any of them to take any action hereunder(which action shall be deemed to directly

 

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### affect all Lenders); and (vii) amend or waive this Section11.2 or the definitions of the terms “Requisite Lenders” or “RequisiteRevolving Lenders” insofar as such definitions affect the substance of this Section11.2 (which action shall be deemed to directly affect all Lenders).  Furthermore, no amendment, modification,termination or waiver affecting the rights or duties of Agent or L/C Issuerunder this Agreement or any other Loan Document shall be effective unless inwriting and signed by Agent or L/C Issuer, as the case may be, in addition toLenders required hereinabove to take such action.  Each amendment, modification, termination or waiver shall beeffective only in the specific instance and for the specific purpose for whichit was given.  No amendment,modification, termination or waiver shall be required for Agent to takeadditional Collateral pursuant to any Loan Document. No amendment,modification, termination or waiver of any provision of any Note shall beeffective without the written concurrence of the holder of that Note.  No notice to or demand on any Credit Partyin any case shall entitle such Credit Party or any other Credit Party to anyother or further notice or demand in similar or other circumstances.  Any amendment, modification, termination,waiver or consent effected in accordance with this Section 11.2 shall bebinding upon each holder of the Notes at the time outstanding and each futureholder of the Notes.

###  

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

###  

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

####  

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

####  

#### (iii)                               requiringthe consent of Requisite Lenders, the consent of Lenders holding 51% or more ofthe aggregate Commitments is obtained, but the consent of Requisite Lenders is notobtained,

####  

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

 

### (e)                                  Uponpayment in full in cash and performance of all of the Obligations (other thanindemnification Obligations), termination of the Commitments and a release ofall claims against Agent and Lenders, and so long as no suits, actionsproceedings, or claims are pending or threatened against any Indemnified Personasserting any damages, losses or liabilities that are Indemnified Liabilities,Agent shall deliver to Borrower termination statements,

 

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### mortgage releases and other documents necessary orappropriate to evidence the termination of the Liens securing payment of theObligations.

###  

## 11.3                           Feesand Expenses. Borrower shall reimburse (i) Agent for all reasonable out-of-pocketfees, costs and expenses (including the reasonable fees and expenses of all ofits counsel, advisors, consultants and auditors) and (ii) Agent (and, withrespect to clauses (c) and (d) below, all Lenders) for all reasonableout-of-pocket fees, costs and expenses, including the reasonable fees, costsand expenses of counsel or other advisors (including environmental andmanagement consultants and appraisers) incurred in connection with thenegotiation, preparation and filing and/or recordation of the Loan Documentsand incurred in connection with:

 

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

###  

### (b)                                 anyamendment, modification or waiver of, or consent with respect to, ortermination of, any of the Loan Documents or advice in connection with thesyndication and administration of the Loans made pursuant hereto or its rightshereunder or thereunder;

###  

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

###  

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

###  

### (e)                                  anyworkout or restructuring of the Loans during the pendency of one or more Eventsof Default; and

###  

### (f)                                    effortsto (i) monitor the Loans or any of the other Obligations, and (ii) verify,protect, evaluate, assess, appraise, collect, sell, liquidate or otherwisedispose of any of the Collateral;

 

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

 

## 11.4                           No Waiver.  Agent’s or any Lender’s failure, at any timeor times, to require strict performance by the Credit Parties of any provisionof this Agreement or any other Loan Document shall not waive, affect ordiminish any right of Agent or such Lender thereafter to demand strictcompliance and performance herewith or therewith.  Any suspension or waiver of an Event of Default shall notsuspend, waive or affect any other Event of Default whether the same is prioror subsequent thereto and whether the same or of a different type.  Subject to the provisions of Section 11.2,none of the undertakings, agreements, warranties, covenants and representationsof any Credit Party contained in this Agreement or any of the other LoanDocuments and no Default or Event of Default by any Credit Party shall bedeemed to have been suspended or waived by Agent or any Lender, unless suchwaiver or suspension is by an instrument in writing signed by an officer of orother authorized employee of Agent and the applicable required Lenders anddirected to Borrower specifying such suspension or waiver.

 

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

 

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

 

## 11.7                           Conflictof Terms.  Exceptas otherwise provided in this Agreement or any of the other Loan Documents byspecific reference to the applicable provisions of this Agreement, if anyprovision contained in this Agreement conflicts with any provision in any of theother Loan Documents, the provision contained in this Agreement shall governand control.

 

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

 

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## following receipt thereof, except that Agent and any Lender maydisclose such information (a) to Persons employed or engaged by Agent or suchLender, including any agents that have been granted access pursuant to Section1.14; (b) to any bona fide assignee or participant or potential assignee orparticipant that has agreed to comply with the covenant contained in this Section11.8 (and any such bona fide assignee or participant or potential assigneeor participant may disclose such information to Persons employed or engaged bythem as described in clause (a) above); (c) as required or requested byany Governmental Authority or reasonably believed by Agent or such Lender to becompelled by any court decree, subpoena or legal or administrative order orprocess; (d) as, on the advice of Agent’s or such Lender’s counsel, is requiredby law; (e) in connection with the exercise of any right or remedy under theLoan Documents or in connection with any Litigation to which Agent or suchLender is a party; or (f) that ceases to be confidential through no faultof Agent or any Lender.

 

## 11.9                           GOVERNING LAW. **EXCEPT AS OTHERWISE EXPRESSLY PROVIDEDIN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OFCONSTRUCTION, VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONSSHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THEINTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE ANDPERFORMED IN THAT STATE AND ANY APPLICABLE LAWS OF THE UNITED STATES OFAMERICA.  EACH CREDIT PARTY HEREBYCONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORKCOUNTY, CITY OF NEW YORK, NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEARAND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE CREDIT PARTIES, AGENT ANDLENDERS PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TOANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHERLOAN DOCUMENTS; *PROVIDED*, THAT AGENT, LENDERS AND THE CREDIT PARTIESACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURTLOCATED OUTSIDE OF NEW YORK COUNTY AND; *PROVIDED*, *FURTHER*THAT NOTHING IN THISAGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT ORTAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THECOLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENTOR OTHER COURT ORDER IN FAVOR OF AGENT. EACH CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCHJURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH CREDITPARTY HEREBY WAIVES ANY OBJECTION THAT SUCH CREDIT PARTY MAY HAVE BASED UPONLACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUMNONCONVENIENSAND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS ISDEEMED APPROPRIATE BY SUCH COURT.  EACHCREDIT PARTY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHERPROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCHSUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIEDMAIL ADDRESSED TO SUCH CREDIT PARTY AT THE ADDRESS SET FORTH IN ANNEX IOF THIS AGREEMENT AND**

 

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

 

## 11.10                     Notices.  Except as otherwise provided herein,whenever it is provided herein that any notice, demand, request, consent,approval, declaration or other communication shall or may be given to or servedupon any of the parties by any other parties, or whenever any of the partiesdesires to give or serve upon any other parties any communication with respectto this Agreement, each such notice, demand, request, consent, approval,declaration or other communication shall be in writing and shall be deemed tohave been validly served, given or delivered (a) upon the earlier of actualreceipt and three (3) Business Days after deposit in the United States Mail,registered or certified mail, return receipt requested, with proper postageprepaid, (b) upon transmission, when sent by telecopy or other similarfacsimile transmission (with such telecopy or facsimile promptly confirmed bydelivery of a copy by personal delivery or United States Mail as otherwiseprovided in this Section 11.10); (c) one (1) Business Day after depositwith a reputable overnight courier with all charges prepaid or (d) whendelivered, if hand-delivered by messenger, all of which shall be addressed tothe party to be notified and sent to the address or facsimile number indicatedin Annex I or to such other address (or facsimile number) as may besubstituted by notice given as herein provided.  The giving of any notice required hereunder may be waived in writingby the party entitled to receive such notice. Failure or delay in delivering copies of any notice, demand, request,consent, approval, declaration or other communication to any Person (other thanBorrower or Agent) designated in Annex I to receive copies shall in noway adversely affect the effectiveness of such notice, demand, request,consent, approval, declaration or other communication.

 

## 11.11                     SectionTitles.  TheSection titles and Table of Contents contained in this Agreement are and shallbe without substantive meaning or content of any kind whatsoever and are not apart of the agreement between the parties hereto.

 

## 11.12                     Counterparts.  This Agreement may be executed in any numberof separate counterparts, each of which shall collectively and separatelyconstitute one agreement.

 

## 11.13                     WAIVEROF JURY TRIAL**.  BECAUSE DISPUTES ARISING IN CONNECTION WITHCOMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY ANEXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERALLAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIRDISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATIONOF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETOWAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ALL RIGHT TO TRIAL BY JURY IN ANYACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING INCONTRACT, TORT OR OTHERWISE, AMONG AGENT, LENDERS AND ANY CREDIT PARTY ARISINGOUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIPESTABLISHED AMONG THEM IN CONNECTION WITH, THIS**

 

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## **AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THETRANSACTIONS RELATED THERETO.**

 

## 11.14                     Press Releases and Related Matters.  Each Credit Party executing this Agreementagrees that neither it nor its Affiliates will in the future issue any pressreleases or other public disclosure using the name of GE Capital or itsaffiliates or referring to this Agreement, the other Loan Documents without atleast two (2) Business Days’ prior notice to GE Capital and without the priorwritten consent of GE Capital unless (and only to the extent that) such CreditParty or Affiliate is required to do so under law and then, in any event, suchCredit Party or Affiliate will consult with GE Capital before issuing any pressrelease.  Each Credit Party consents tothe publication by Agent or any Lender of a tombstone or similar advertisingmaterial relating to the financing transactions contemplated by thisAgreement.  Agent or such Lender shallprovide a draft of any such tombstone or similar advertising material to eachCredit Party for review and comment prior to the publication thereof.  Agent reserves the right to provide toindustry trade organizations information necessary and customary for inclusionin league table measurements.

 

## 11.15                     Reinstatement.  This Agreement shall remain in full forceand effect and continue to be effective should any petition be filed by oragainst any Credit Party for liquidation or reorganization, should any CreditParty become insolvent or make an assignment for the benefit of any creditor orcreditors or should a receiver or trustee be appointed for all or anysignificant part of any Credit Party’s assets, and shall continue to beeffective or to be reinstated, as the case may be, if at any time payment andperformance of the Obligations, or any part thereof, is, pursuant to applicablelaw, rescinded or reduced in amount, or must otherwise be restored or returnedby any obligee of the Obligations, whether as a “voidable preference,”“fraudulent conveyance,” or otherwise, all as though such payment orperformance had not been made.  In theevent that any payment, or any part thereof, is rescinded, reduced, restored orreturned, the Obligations shall be reinstated and deemed reduced only by suchamount paid and not so rescinded, reduced, restored or returned.

 

## 11.16                     Adviceof Counsel.  Eachof the parties represents to each other party hereto that it has discussed thisAgreement and, specifically, the provisions of Sections 11.9 and 11.13,with its counsel.

 

## 11.17                     NoStrict Construction. The parties hereto have participated jointly in the negotiation anddrafting of this Agreement.  In theevent an ambiguity or question of intent or interpretation arises, thisAgreement shall be construed as if drafted jointly by the parties hereto and nopresumption or burden of proof shall arise favoring or disfavoring any party byvirtue of the authorship of any provisions of this Agreement.

 

[**Signature Page Follows**]

 

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IN WITNESSWHEREOF, this Agreement has been duly executed as of the date first writtenabove.

 
|   | **BORROWER:**                                                            |
|--------|--------------------------------------------------------------------------|
|   |                                                                     |   |
|   | **ROLLER  BEARING COMPANY OF AMERICA,  INC.**,****a Delaware corporation |
|   |                                                                     |   |
|   |                                                                     |   |
|   | By:                                                                      | /s/Michael Gostomski |   |
|   | Name:                                                                    | Michael  Gostomski |   |
|   | Title:                                                                   |   | Executive Vice  President |   |
|   |                                                                     |   |
|   | **GENERAL  ELECTRIC CAPITAL****CORPORATION,**as Agent and Lender         |
|   |                                                                     |   |
|   |                                                                     |   |
|   | By:                                                                      | /s/ | Duly Authorized Signatory |   |
|   |                                                                     | Duly Authorized Signatory |   |
|   |                                                                     |   |
|   | **CONGRESS  FINANCIAL CORPORATION  (CENTRAL)**, as Lender                |
|   |                                                                     |   |
|   |                                                                     |   |
|   | By:                                                                      | /s/ | Duly Authorized Signatory |   |
|   |                                                                     | Duly Authorized Signatory |
|        |                                                                          |  |  |  |  |  |

 

[Signature Page to theAmended and Restated Credit Agreement]

 

----

 

The followingPersons are signatories to this Agreement in their capacity as Credit Partiesand not as Borrowers.

 
|   | **CREDIT  PARTIES:**                                                    |
|--------|-------------------------------------------------------------------------|
|   |                                                                    |   |
|   | **INDUSTRIAL  TECTONICS BEARINGS  CORPORATION**, a Delaware corporation |
|   |                                                                    |   |
|   |                                                                    |   |
|   | By:                                                                     | /s/Michael Gostomski |   |
|   | Name:                                                                   | Michael  Gostomski |   |
|   | Title:                                                                  |   | Executive Vice  President |   |
|   |                                                                    |   |
|   | **RBC  NICE BEARINGS INC.,**a Delaware corporation                      |
|   |                                                                    |   |
|   |                                                                    |   |
|   | By:                                                                     | /s/Michael Gostomski |   |
|   | Name:                                                                   | Michael  Gostomski |   |
|   | Title:                                                                  |   | Executive Vice  President |   |
|   |                                                                    |   |   |
|   | **BREMEN  BEARINGS, INC.**, a Delaware corporation                      |
|   |                                                                    |   |
|   |                                                                    |   |
|   | By:                                                                     | /s/Michael Gostomski |   |
|   | Name:                                                                   | Michael  Gostomski |   |
|   | Title:                                                                  |   | Executive Vice  President |   |
|   |                                                                    |   |
|   | **TYSON  BEARING COMPANY**,**INC.,**a Delaware  corporation             |
|   |                                                                    |   |
|   |                                                                    |   |
|   | By:                                                                     | /s/Michael Gostomski |   |
|   | Name:                                                                   | Michael  Gostomski |   |
|   | Title:                                                                  |   | Executive Vice  President |   |
|   |                                                                    |   |
|   | **RBC  LINEAR PRECISION PRODUCTS, INC.**, a  Delaware corporation       |
|   |                                                                    |   |
|   |                                                                    |   |
|   | By:                                                                     | /s/Michael Gostomski |   |
|   | Name:                                                                   | Michael  Gostomski |   |
|   | Title:                                                                  |   | Executive Vice  President |   |
|   |                                                                    |   |
|   | **MILLER  BEARING COMPANY, INC.**, a Delaware  corporation              |
|   |                                                                    |   |
|   |                                                                    |   |
|   | By:                                                                     | /s/Michael Gostomski |   |
|   | Name:                                                                   | Michael  Gostomski |   |
|   | Title:                                                                  |   | Executive Vice  President |   |
|        |                                                                         |  |  |  |  |  |

 

----

 
|   | **RBC  OKLAHOMA, INC.**, a Delaware  corporation                                      |
|--------|---------------------------------------------------------------------------------------|
|   |                                                                                  |   |
|   |                                                                                  |   |
|   | By:                                                                                   | /s/Michael Gostomski |   |
|   | Name:                                                                                 | Michael  Gostomski |   |
|   | Title:                                                                                |   | Executive Vice  President |   |
|   |                                                                                  |   |
|   | **SCHAUBLIN  HOLDING S.A.,**a corporation  incorporated under the laws of Switzerland |
|   |                                                                                  |   |
|   |                                                                                  |   |
|   | By:                                                                                   | /s/Michael Gostomski |   |
|   | Name:                                                                                 | Michael  Gostomski |   |
|   | Title:                                                                                | President |   |
|   |                                                                                  |   |
|   | **SCHAUBLIN  S.A.,**a  corporation incorporated under the  laws of Switzerland        |
|   |                                                                                  |   |
|   |                                                                                  |   |
|   | By:                                                                                   | /s/Michael Gostomski |   |
|   | Name:                                                                                 | Michael Gostomski |   |
|   | Title:                                                                                | President |   |
|   |                                                                                  |   |
|   | **ETABLISSEMENTS  J. BOVAGNET S.A.,**a French*société**anomyme*             |
|   |                                                                                  |   |
|   |                                                                                  |   |
|   | By:                                                                                   | /s/Michael Gostomski |   |
|   | Name:                                                                                 | Michael  Gostomski |   |
|   | Title:                                                                                |   | Authorized  Person |   |
|   |                                                                                  |   |
|   | **RBC  FRANCE SAS,**a French *société**par actions  simplifiée*        |
|   |                                                                                  |   |
|   |                                                                                  |   |
|   | By:                                                                                   | /s/Michael Gostomski |   |
|   | Name:                                                                                 | Michael  Gostomski |   |
|   | Title:                                                                                |   | Authorized  Person |   |
|        |                                                                                       |  |  |  |  |  |  |

 

----

 

**ANNEX A****(Recitals)**

**to**

**CREDIT AGREEMENT**

 

**DEFINITIONS**

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“AcquisitionCompany” means a Delaware corporation, limited liability company or limitedpartnership that is a direct or indirect wholly-owned Subsidiary of Borrowerformed for the sole purpose of completing a Permitted Acquisition of aQualified Target.

 

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“AcquisitionCompliance Certificate” has the meaning ascribed to it in Section6.1(b)(xii).

 

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

 

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

 

“AcquisitionSubordinated Debt” means Indebtedness issued to seller(s) as considerationfor a Permitted Acquisition in an amount, on such terms, and subordinated tothe Obligations in a manner and form satisfactory to Agent and Lenders in theirreasonable discretion as to right and time of payment and as to any otherterms, rights and remedies thereunder, *provided*,*that* Borrower may determinethe maturity date thereof and Agent’s and Lenders’ discretion with respect tosubordination provisions shall not preclude a maturity date otherwise permittedunder Section 6.1 of the Agreement.

 

“ActivationEvent” and “Activation Notice” have the meanings ascribed thereto in AnnexC.

 

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

 

“AdjustedEBITDA” means for any period with respect to Holdings, on a consolidatedbasis, an amount equal to (i) EBITDA of Holdings, on a consolidated basis, forsuch period, plus (ii) to the extent that the calculation thereof hasbeen approved by Agent (in consultation with Requisite Lenders) and to theextent not included in such EBITDA, the aggregate EBITDA for such period on proforma basis of any Qualified Target of a Permitted Acquisition which closedwithin such period (it being understood that any EBITDA of such QualifiedTarget shall be included in the EBITDA of Holdings, on a consolidated basis,only for those Fiscal Quarters in such period occurring prior to the closing ofsuch Permitted Acquisition, (iii) less the aggregate EBITDA of any Person orassets, as the case may be, sold by the Holdings or any Subsidiary thereof (ifsuch EBITDA is positive), the sale of which closed during such period.

 

“AdjustedFunded Debt” means with respect to Holdings, without duplication, allIndebtedness for borrowed money evidenced by notes, bonds, debentures, orsimilar evidences of Indebtedness that by its terms matures more than one yearfrom the date of creation thereof, or is directly or indirectly renewable orextendible at Holdings’ option under a revolving credit or similar agreementobligating the lender or lenders to extend credit over a period of more thanone year from the date of creation thereof, and specifically including CapitalLease Obligations, current maturities of long-term debt, and also includingGuaranteed Indebtedness consisting of guaranties of Adjusted Funded Debt ofother Person and Letter of Credit Obligations plus outstanding preferredStock of Holdings which by its terms (or by the terms of any security which isconvertible into it or exchangeable for it) or upon the happening of anevent:  (i) entitled its holder toa dividend payable in cash or (ii) matures or is mandatorily redeemable inwhole or in part pursuant to a sinking funds obligation or otherwise or isredeemable at the option of its holder, in whole or in part, on or prior to theTermination Date less any unrestricted cash on hand of Holdings and itsSubsidiaries.  For purposes of thisdefinition, the following Indebtedness

 

A-2

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

A-3

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

 

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

 

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

 

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

 

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

 

“AustralianDollar” means the lawful currency of Australia.

 

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

 

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

 

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

 

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

 

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

 

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

 

“BorrowingAvailability” means, as of any date of determination, the lesser of(i) the Maximum Amount and (ii) the Aggregate Borrowing Base, in eachcase, less the sum of the aggregate Revolving Loans and Swing Line Loanthen outstanding.

 

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

 

A-4

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

 

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

 

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

 

“CanadianDollar” means the lawful currency of Canada.

 

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

 

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

 

“Capital LeaseObligation” means, with respect to any Capital Lease of any Person, theamount of the obligation of the lessee thereunder that, in accordance withGAAP, would appear on a balance sheet of such lessee in respect of such CapitalLease.

 

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

 

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

 

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

 

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

 

“Change ofControl” shall be deemed to have occurred if (a) (i) Michael J. Hartnettand his Permitted Transferees shall cease to own directly or indirectly,beneficially or of record (including indirectly through Hartnett FamilyInvestments, L.P.), those shares or rights to acquire those shares of capitalStock of Holdings which entitle their holder to majority number of votes (*i.e.*,to that number of votes per share on all matters to be voted upon by Holdingswhich entitle such holder, in the aggregate, to 51% of the voting power of theissued and outstanding common Stock of Holdings), other than as a result of thedeath or permanent disability of Michael J. Hartnett or the completion of aQualified Public Offering or (ii) such shares of Capital Stock cease to entitlethe holder thereof to such majority number of votes (either because a VotingEvent as defined in the charter of Holdings has occurred or otherwise); (b)******following the completionof a Qualified Public Offering, any person or group (within the meaning of Rule13d-5 of the Securities Exchange Act of 1934) other than Michael J. Hartnettand/or his Permitted

 

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Transferees,funds managed by Affiliates of Whitney & Co. or one or more equity sponsorswith funds under management of at least $500,000,000, shall have acquiredbeneficial ownership (within the meaning of Rule 13d-3 promulgated by theSecurities and Exchange Commission under the Securities Exchange Act of 1934)of 30% or more of the issued and outstanding shares of capital Stock ofHoldings under ordinary circumstances; (c) during any period of twelveconsecutive calendar months, individuals who at the beginning of such periodconstituted the board of directors of Holdings (together with any new directorswhose election by the board of directors of Holdings or whose nomination forelection by the Stockholders of Holdings was approved by a vote of at leasttwo-thirds of the directors then still in office who either were directors atthe beginning of such period or whose election or nomination for election waspreviously so approved) cease for any reason other than death or disability toconstitute a majority of the directors then in office; (d) funds managed byAffiliates of Whitney & Co. and/or one or more equity sponsors with fundsunder management of at least $500,000,000 ceases to own directly or indirectly,beneficially or of record shares representing at least 50.1% of the Stock (on afully diluted basis) of Holdings other than as a result of Qualified PublicOffering; (e) Holdings ceases to own and control all of the economic and votingrights associated with all of the outstanding capital Stock of Borrower; (f)Borrower ceases to own, directly or indirectly, and control all of the economicand voting rights associated with all of the outstanding capital Stock of anyof its Subsidiaries other than as a result of a dissolution of a Subsidiaryresulting in the distribution of its assets to Borrower or the merger of anySubsidiary with Borrower or another Subsidiary of Borrower and other thandirectors’ qualifying shares and up to 10% of the shares of Bovagnet or RBCFrance owned by its management, or (g) any change in control (or similar event,however denominated) with respect to Holdings, Borrower or any Subsidiary shalloccur under and as defined in any indenture or agreement to which Holdings,Borrower or any Subsidiary is a party in respect of Indebtedness in an aggregateoriginal principal amount in excess of $3,000,000 which results in a default oran event of default thereunder or an obligation to prepay or redeem all or anymaterial portion of such Indebtedness unless irrevocably waived by the holdersthereof***.***

 

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

 

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

 

“ClosingChecklist” means the schedule, including all appendices, exhibits orschedules thereto, listing certain documents and information to be delivered inconnection with the Agreement, the other Loan Documents and the transactionscontemplated thereunder, substantially in the form attached hereto as AnnexD.

 

“Closing Date”means May 30, 2002.

 

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

 

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

 

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

 

“CollateralReports” means the reports with respect to the Collateral referred to in AnnexF.

 

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

 

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

 

“CommitmentTermination Date” means the earliest of (a) May 30, 2007, (b) the date oftermination of Lenders’ obligations to make Advances and to incur Letter ofCredit Obligations or permit existing Loans to remain outstanding pursuant to Section8.2(b), and (c) the date of indefeasible prepayment in full by Borrower ofthe Loans and the cancellation and return (or stand-by guaranty) of all Lettersof Credit or the cash collateralization of all Letter of Credit Obligationspursuant to Annex B, and the permanent reduction of the Commitments tozero dollars ($0).

 

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

 

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on theEffective Date, as to each of clauses (a) and (b), as such Commitmentsmay be reduced, amortized or adjusted from time to time in accordance with theAgreement.

 

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

 

“ComponentParts” means parts machined at Borrower’s or a Secured Guarantor’s facilitywhich are placed in storage for later assembly.

 

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

 

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

 

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

 

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

 

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

 

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

 

“CostingReserve” means a reserve with respect to the variance between the perpetualcost of Inventory and the invoice cost of Inventory.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“DomesticCredit Parties” means Borrower and its Domestic Subsidiaries.

 

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

 

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provisionfor income taxes, (ii) Interest Expense, (iii) loss from extraordinary itemsfor such period, (iv) depreciation and amortization for such period, (v)amortized debt discount for such period, (vi) the amount of any deduction toconsolidated net income as the result of any grant of any Stock or equityrights to any employee of such Person, in each case to the extent included inthe calculation of consolidated net income of such Person for such period inaccordance with GAAP, but without duplication, (vii) any aggregate net lossduring such period arising from the sale, exchange or other disposition ofcapital assets of such Person, (viii) with the consent of Agent, which shallnot be unreasonably withheld, any non-recurring losses or charges that havebeen deducted from the consolidated net income of such Person in accordancewith GAAP, and (ix) the amount of any reduction to the consolidated net incomeof Holdings as the result of the Restricted Payment described and permittedpursuant to Section 6.14(a)(iv). For purposes of this definition, the following items shall be excludedin determining consolidated net income of a Person:  (1) the income (or deficit) of any other Person accrued prior tothe date it became a Subsidiary of, or was merged or consolidated into, suchPerson or any of such Person’s Subsidiaries; (2) the income (or deficit) of anyother Person (other than a Subsidiary) in which such Person has an ownershipinterest, except to the extent any such income has actually been received bysuch Person in the form of cash dividends or distributions; (3) theundistributed earnings of any Subsidiary of such Person to the extent that thedeclaration or payment of dividends or similar distributions by such Subsidiaryis not at the time permitted by the terms of any contractual obligation orrequirement of law applicable to such Subsidiary; (4) any restoration to incomeof any contingency reserve, except to the extent that provision for suchreserve was made out of income accrued during such period; (5) any write-downof assets (other than Accounts or Inventory) and any write-down of goodwill (tothe extent it is a write-down of goodwill only), or write-up of any asset; (6)any net gain from the collection of the proceeds of life insurance policies;(7) any net gain arising from the acquisition of any securities, or theextinguishment, under GAAP, of any Indebtedness, of such Person, (8) in thecase of a successor to such Person by consolidation or merger or as a transfereeof its assets, any earnings of such successor prior to such consolidation,merger or transfer of assets, (9) any deferred credit representing the excessof equity in any Subsidiary of such Person at the date of acquisition of suchSubsidiary over the cost to such Person of the investment in such Subsidiary,and (10) any other non-cash expenses or deductions in connection with theissuances or modifications of stock options or rights issued to employees ordirectors.

 

“Effective Date”means June 19, 2003.

 

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

 

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

 

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

 

“EligibleAccounts-U.S.” has the meaning ascribed to it in Section 1.6(a) ofthe Agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Equipment”means all “equipment,” as such term is defined in the Code, now owned orhereafter acquired by any Credit Party, wherever located and, in any event,including all such Credit Party’s machinery and equipment, including processingequipment, conveyors, machine tools, data processing and computer equipment,including embedded software and peripheral equipment and all engineering,processing and manufacturing equipment, office machinery, furniture, materialshandling equipment, tools, attachments, accessories, automotive equipment,trailers, trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stockand other equipment of every kind and nature, trade fixtures and fixtures notforming a part of real property, together with all additions and accessionsthereto, replacements therefor, all parts therefor, all substitutes for any ofthe foregoing, fuel therefor, and all manuals, drawings, instructions,warranties and rights with respect thereto, and all products and proceedsthereof and condemnation awards and insurance proceeds with respect thereto.

 

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

 

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

 

“ERISA Event”means, with respect to any Domestic Credit Party or any ERISA Affiliate, (a)any event described in Section 4043(c) of ERISA with respect to a Title IVPlan; (b) the withdrawal of any Credit Party or ERISA Affiliate from a Title IVPlan subject to Section 4063 of ERISA during a plan year in which it was a substantialemployer, as defined in Section 4001(a)(2) of ERISA; (c) the complete orpartial withdrawal of any Domestic Credit Party or any ERISA Affiliate from anyMultiemployer Plan; (d) the filing of a notice of intent to terminate a TitleIV Plan or the treatment of a plan amendment as a termination under Section4041 of ERISA; (e) the institution of proceedings to terminate a Title IV Planor Multiemployer Plan by the PBGC; (f) the failure by any Domestic Credit Partyor ERISA Affiliate to make when due required contributions to a MultiemployerPlan or Title IV Plan unless such failure is cured within 30 days; (g) anyother event or condition that might reasonably be expected to constitutegrounds under Section 4042 of ERISA for the termination of, or the appointmentof a trustee to administer, any Title IV Plan or Multiemployer Plan or for theimposition of liability under Section 4069 or 4212(c) of ERISA; (h) thetermination of a Multiemployer Plan under Section 4041A of ERISA or thereorganization or insolvency of a Multiemployer Plan under Section 4241 or 4245of ERISA; or (i) the loss of a Qualified Plan’s qualification or taxexempt status; or (j) the termination of a Plan described in Section 4064 ofERISA.

 

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

 

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

 

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

 

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

 

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

 

“ExistingFrench Intercompany Loans” has the meaning ascribed to it in Section3.28.

 

“ExistingSchaublin Holding Intercompany Loans” has the meaning ascribed to it in Section3.28.

 

“ExistingSchaublin Intercompany Loans” has the meaning ascribed to it in Section3.28.

 

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

 

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

 

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

 

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

 

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

 

“FinancialStatements” means the consolidated and consolidating income statements,statements of cash flows and balance sheets of Borrower delivered in accordancewith Section 3.4 and Annex E.

 

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

 

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“Fiscal Quarter”means any of the quarterly accounting periods of Borrower, ending on the lastSaturday of June, September, and December and on the Saturday closest to March31 of each year.

 

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

 

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

 

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

 

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

 

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

 

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

 

“ForeignCollateral Documents” means the Schaublin Swiss Pledge Agreement, theSchaublin French Pledge Agreement (RBC France), the Schaublin French PledgeAgreement (Bovagnet), the Schaublin Holding Pledge Agreement, the SwissWarehouse Control Agreement

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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casualty,whether covering personal property, real property, tangible rights orintangible rights, all liability, life, key man and business interruptioninsurance, and all unearned premiums), uncertificated securities, choses inaction, deposit, checking and other bank accounts, rights to receive taxrefunds and other payments, rights to receive dividends, distributions, cash,Instruments and other property in respect of or in exchange for pledged Stockand Investment Property, rights of indemnification, all books and records,correspondence, credit files, invoices and other papers, including withoutlimitation all tapes, cards, computer runs and other papers and documents inthe possession or under the control of such Credit Party or any computer bureauor service company from time to time acting for such Credit Party.

 

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

 

“GovernmentalAuthority” means any nation or government, any state or other politicalsubdivision thereof, and any agency, department or other entity exercisingexecutive, legislative, judicial, regulatory or administrative functions of orpertaining to government.

 

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

 

“GuaranteedIndebtedness” means, as to any Person, any obligation of such Personguaranteeing, providing comfort or otherwise supporting any Indebtedness,lease, dividend, or other obligation (“primary obligation”) of any otherPerson (the “primary obligor”) in any manner, including any obligationor arrangement of such Person to (a) purchase or repurchase any suchprimary obligation, (b) advance or supply funds (i) for the purchase orpayment of any such primary obligation or (ii) to maintain working capitalor equity capital of the primary obligor or otherwise to maintain the net worthor solvency or any balance sheet condition of the primary obligor, (c) purchaseproperty, securities or services primarily for the purpose of assuring theowner of any such primary obligation of the ability of the primary obligor tomake payment of such primary obligation, (d) protect the beneficiary of sucharrangement from loss (other than product warranties given in the ordinarycourse of business) or (e) indemnify the owner of such primary obligationagainst loss in respect thereof.  Theamount of any Guaranteed Indebtedness at any time shall be deemed to be anamount equal to the lesser at such time of (x) the stated or determinableamount of the primary obligation in respect of which such GuaranteedIndebtedness is incurred and (y) the maximum amount for which such Person maybe liable pursuant to the terms of the instrument embodying such GuaranteedIndebtedness, or, if not stated or determinable, the maximum reasonablyanticipated liability (assuming full performance) in respect thereof.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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InterestRates” as the Bank prime loan rate or its equivalent), and (ii) the FederalFunds Rate plus 50 basis points per annum.  Each change in any interest rate provided for in the Agreementbased upon the Index Rate shall take effect at the time of such change in theIndex Rate.

 

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

 

“IndustrialRevenue Bond Financing” means financing of acquisition of real estate andimprovements thereto, Fixtures and Equipment involved in industrial orcommercial projects from proceeds of tax-exempt or taxable bonds issues bystate or local government agency.

 

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

 

“IntellectualProperty” means any and all Licenses, Patents, Copyrights, Trademarks, andthe goodwill associated with such Trademarks.

 

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

 

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

 

“InterestPayment Date” means (a) as to any Index Rate Loan, the first Business Dayof each month to occur while such Loan is outstanding, and (b) as to any LIBORLoan, the last day of the applicable LIBOR Period and, in addition, in the caseof a LIBOR Period in excess of three months, the last day of the third month ofsuch LIBOR Period, *provided, that*, in addition to theforegoing, each of (x) the date upon which all of the Commitments have beenterminated and the Loans have been paid in full and (y) the CommitmentTermination Date shall be deemed to be an “Interest Payment Date” withrespect to any interest that has then accrued under the Agreement.

 

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

 

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

 

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

 

“IRC” meansthe Internal Revenue Code of 1986, as amended, and all regulations promulgatedthereunder.

 

“IRS” meansthe Internal Revenue Service.

 

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

 

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

 

“Keyman LifeInsurance” means a keyman life insurance policy on Michael J. Hartnett froman insurance company and on terms and conditions acceptable to Agent, in anamount of at least $10,000,000.

 

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

 

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

 

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

 

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

 

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

 

“Letters ofCredit” means documentary or standby letters of credit issued for theaccount of Borrower by any L/C Issuer, and bankers’ acceptances issued byBorrower, for which Agent and Lenders have incurred Letter of CreditObligations.

 

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

 

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

 

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

 

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

 

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

 

(a)                                  ifany LIBOR Period would otherwise end on a day that is not a LIBOR Business Day,such LIBOR Period shall be extended to the next succeeding LIBOR Business Dayunless the result of such extension would be to carry such LIBOR Period intoanother calendar month in which event such LIBOR Period shall end on theimmediately preceding LIBOR Business Day;

 

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

 

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

 

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

 

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

 

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

 

(b)                                 anumber equal to 1.0 minus the aggregate (but without duplication) of therates (expressed as a decimal fraction) of reserve requirements in effect onthe day that is two (2) LIBOR Business Days prior to the beginning of suchLIBOR Period (including basic, supplemental, marginal and emergency reservesunder any regulations of the Federal Reserve Board or other GovernmentalAuthority having jurisdiction with respect thereto, as now and from time totime in effect) for Eurocurrency funding (currently referred to as “EurocurrencyLiabilities” in Regulation D of the Federal Reserve Board that are required tobe maintained by a member bank of the Federal Reserve System.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“MasterDocumentary Agreement” means the Master Agreement for Documentary Lettersof Credit dated as of the Closing Date between Borrower, as Applicant, and GECapital, as Issuer.

 

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

 

“Material AdverseEffect” means a material adverse effect on (a) the business, assets,operations, prospects or financial or other condition of the Credit Partiesconsidered as a whole, (b) Borrower’s ability to pay any of the Loans or any ofthe other Obligations in accordance with the terms of the Agreement, (c) theCollateral or Agent’s Liens, on behalf of itself and Lenders, on the Collateralor the priority of such Liens, or (d) Agent’s or any Lender’s rights andremedies under the Agreement and the other Loan Documents.  Without limiting the generality of theforegoing, any event or occurrence adverse to one or more Credit Parties whichresults or could reasonably be expected to result in costs, liabilities ordamages, individually, or in the aggregate, to any Credit Party or CreditParties in an amount that would have caused the Fixed Charge Covenant RatioFinancial Covenant to have been breached if such event or occurrence hadoccurred and such costs, liabilities or damages had been paid on the first dayof the Fiscal Quarter most recently ended.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Notice ofConversion/Continuation” has the meaning ascribed to it in Section1.5(e).

 

“Notice ofSchaublin Revolving Credit Advance” has the meaning ascribed to it in Section1.1(d)(i).

 

“Notice of U.S.Revolving Credit Advance” has the meaning ascribed to it in Section1.1(a).

 

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

 

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

 

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

 

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

 

“ParticipatingMember State” means any member state which adopts the euro unit of thesingle currency pursuant to the Treaty.

 

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

 

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

 

“Patents”means all of the following in which any Credit Party now holds or hereafteracquires any interest: (a) all letters patent of the United States or any othercountry, all registrations and recordings thereof, and all applications forletters patent of the United States or of any other country, includingregistrations, recordings and applications in the United States Patent andTrademark Office or in any similar office or agency of the United States, anyState or any other country, and (b) all reissues, continuations,continuations-in-part or extensions thereof.

 

“PBGC”means the Pension Benefit Guaranty Corporation.

 

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

 

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

 

“PermittedEncumbrances” means the following encumbrances: (a) Liens for taxes orassessments or other governmental Charges not yet due and payable or which arebeing contested in accordance with Section 5.2(b); (b) pledges ordeposits of money securing statutory obligations under workmen’s compensation,unemployment insurance, social security or public liability laws or similarlegislation (excluding Liens under ERISA); (c) pledges or deposits of moneysecuring bids, tenders, contracts (other than contracts for the payment ofmoney) or leases to which any Credit Party is a party as lessee made in theordinary course of business; (d) inchoate and unperfected workers’,mechanics’  or similar liens arising inthe ordinary course of business, so long as such Liens attach only toEquipment, Fixtures and/or Real Estate; (e) carriers’, warehousemen’s,suppliers’ or other similar possessory liens arising in the ordinary course ofbusiness and securing liabilities not yet due and payable or which are beingcontested in accordance with Section 5.2(b), so long as such Liensattach only to Inventory; (f) deposits securing, or in lieu of, surety, appealor customs bonds in proceedings to which any Credit Party is a party; (g) anyattachment or judgment lien not constituting an Event of Default under Section8.1(j); (h) zoning restrictions, easements, licenses, or other restrictionson the use of any Real Estate or other minor irregularities in title (includingleasehold title) thereto, so long as the same do not materially impair the use,value, or marketability of such Real Estate; (i) presently existing orhereafter created Liens in favor of Agent, on behalf of Lenders; (j) Liensexpressly permitted under clauses (b) and (c) of Section 6.7 ofthe Agreement, (k) Liens securing the IRB Loans, (l) Liens securing IndustrialRevenue Bond Financing incurred or assumed after the date hereof permittedunder the terms of the Agreement, (m) deposits made in the ordinary course ofbusiness to secure liability to insurance carriers, (n) leases or subleasesgranted to others not materially interfering with the business of the CreditParties, (o) any interest or title of a landlord or a sublandlord under anylease, (o) Liens consisting of owner’s rights to raw materials held onconsignment at 999 Happy Valley Road, Glasgow, Kentucky 42141 that aresegregated and clearly labeled, (p) Liens arising from precautionary Codefinancing statements with respect to

 

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

 

“PermittedTransferee” means, with respect to any Person, if such Person is anindividual, (i) a member of the Immediate Family of such Person, (ii) a trustor other similar legal entity for the primary benefit of such Person and/or oneor more members of his Immediate Family, or (iii) a partnership, limitedpartnership, limited liability company, corporation or other entity in whichsuch Person alone or together with members of his Immediate Family possess 100%of the outstanding voting securities.

 

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

 

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

 

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

 

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

 

“Prior LenderObligations” means liabilities, obligations and indebtedness of Borrowerunder and pursuant to the Existing Credit Agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“QualifiedAssignee” means (a) any Lender, any Affiliate of any Lender and, withrespect to any Lender that is an investment fund that invests in commercialloans, any other investment fund that invests in commercial loans and that ismanaged or advised by the same investment advisor as such Lender or by anAffiliate of such investment advisor, and (b) any commercial bank, savings andloan association or savings bank or any other entity which is an “accreditedinvestor” (as defined in Regulation D under the Securities Act or 1933) whichextends credit or buys loans as one of its businesses, including insurancecompanies, mutual funds, lease financing companies and commercial financecompanies, in each case, which has a rating of BBB or higher from S&P and arating of Baa2 or higher from Moody’s at the date that it becomes a Lender andwhich, through its applicable lending office, is capable of lending to Borrowerwithout the imposition of any withholding or similar taxes; *provided,that* no Person determined by Agent to be acting in the capacity of avulture fund or distressed debt purchaser shall be a Qualified Assignee and noPerson or Affiliate of such Person (other than a Person that is already aLender) holding Subordinated Debt or Stock issued by any Credit Party shall bea Qualified Assignee.

 

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

 

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

 

“QualifiedTarget” means a corporation, limited partnership, limited liability companyor partnership or a similar Person that is incorporated, formed or organizedunder the laws of one of the United States of America, Canada or England, withsubstantially all of its assets located in the United States of America, Canadaor England and that is engaged in a business engaged in by Borrower or anyCredit Party or a business substantially similar or related thereto.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“RequisiteLenders” means Lenders having (a) more than 66 2/3% of the Commitmentsof all Lenders, or (b) if the Commitments have been terminated, more than66 2/3% of the aggregate outstanding amount of the Loans, *provided,that* in the case of two Lenders, “Requisite Lenders” shall mean bothsuch Lenders.

 

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

 

“Reserves”means, with respect to the U.S. Borrowing Base or Schaublin Borrowing Base (a)reserves established by Agent from time to time against Eligible Inventory –U.S. or Eligible Inventory – Schaublin pursuant to Section 5.9, (b)reserves established pursuant to Section 5.4(c), and (c) such otherreserves against Eligible Accounts – U.S., Eligible Accounts – Schaublin,Eligible Inventory – U.S. and Eligible Inventory – Schaublin that Agent may, inits reasonable credit judgment, establish from time to time in accordance with Sections1.6 and 1.7.  Withoutlimiting the generality of the foregoing, a Timing Reserve, an Unapplied CashReserve, a Costing Reserve, a reserve for dilution with respect to Accounts tothe extent dilution exceeds five percent (5%) of Accounts, a reserveestablished in accordance with Section 6.1(b)(iv) and any other reserveexpressly provided for under the Agreement shall be deemed to be a reasonableexercise of Agent’s credit judgment.

 

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

 

“RetireeWelfare Plan” means, at any time, a Welfare Plan that provides forcontinuing coverage or benefits for any participant or any beneficiary of aparticipant after such participant’s termination of employment, other thancontinuation coverage provided pursuant to Section 4980B of the IRC and at thesole expense of the participant or the beneficiary of the participant.

 

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

 

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“RevolvingLenders” means, as of any date of determination, Lenders having a RevolvingLoan Commitment.

 

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

 

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

 

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

 

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

 

“SchaublinBorrowing Base Certificate” means a certificate to be executed anddelivered from time to time by Borrower in the form attached to the Agreementas Exhibit 4.1(b)(ii).

 

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

 

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

 

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

 

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

 

(c)                                  30%of the book value of Eligible Inventory –Schaublin consisting of ComponentParts and Purchased Parts valued at the lower of cost (determined on afirst-in, first-out basis) or market, *provided, that* the value of ComponentParts and Purchased Parts included in the Schaublin Borrowing Base shall notexceed 25% of the total value of all Eligible Inventory – Schaublin (includingthe Eligible Inventory –Schaublin consisting of Component Parts and PurchasedParts);

 

“SchaublinFrench Pledge Agreement (Bovagnet)” means the Declaration of Pledge of aSecurities Account executed by Schaublin in favor of Schaublin Holding (therights and remedies of Schaublin Holding thereunder being assigned to Agent, onbehalf of itself and

 

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

 

“SchaublinFrench Pledge Agreement (RBC France)” means the Declaration of Pledge of aSecurities Account executed by Schaublin in favor of Schaublin Holding (therights and remedies of Schaublin Holding thereunder being assigned to Agent, onbehalf of itself and Lenders) dated as of the Effective Date, pledging allStock of RBC France, governed by French law.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“SchaublinRevolving Loan Sublimit” mean, as of any date of determination, an amountequal to the Schaublin Revolving Loan Commitments of all Lenders as of thatdate.

 

“SchaublinRevolving Loan Commitment” means (a) as to any Revolving Lender, theaggregate commitment of such Revolving Lender to make Schaublin RevolvingCredit Advances as set forth on Annex J to the Agreement or in the mostrecent Assignment Agreement executed by such Revolving Lender and (b) as to allRevolving Lenders, the aggregate commitment of all Revolving Lenders to makeSchaublin Revolving Credit Advances, which aggregate commitment shall be SevenMillion Dollars ($7,000,000), as such aggregate commitment may be furtheradjusted, if at all, from time to time in accordance with the Agreement.

 

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

 

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“SchaublinSwiss Pledge Agreement” means the Pledge Agreement executed by Schaublin infavor of Schaublin Holding (the rights and remedies of Schaublin Holdingthereunder being assigned to Agent, on behalf of itself and Lenders), dated asof the Effective Date, granting a Lien on (i) all bank accounts of Schaublin,(ii) all Accounts of Schaublin and (iii) all Inventory of Schaublin, andsecuring the payment and performance of the Schaublin Intercompany Loans, theFrench Intercompany Loans and other obligations under the Foreign CollateralDocuments of Schaublin, governed by Swiss law.

 

“SecuredGuarantor” means a Guarantor (i) that has executed a full recourseGuaranty of all of the Obligations, (ii) that is a Domestic Subsidiary ofBorrower (other than Bunting Acquisition Corp., a Delaware corporation),(iii) that has granted Agent a first priority perfected Lien on all orsubstantially all of its assets to secure payments and performance of the Obligations,(iv) with respect to which Agent has received all opinions, certificatesand other documents requested by Agent, and (v) whose outstanding equityinterests have been pledged to Agent to secure payment and performance of theObligations.

 

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

 

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

 

“SeniorSubordinated Indenture” means to that certain Indenture dated as of June15, 1997 among Borrower, its Subsidiaries party thereto and United States TrustCompany of New York, as trustee.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Sterling”means the lawful currency of Great Britain.

 

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

 

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

 

“SubordinatedDebt” means the Senior Subordinated Debt and any other Indebtedness of anyCredit Party in an amount, on such terms, and subordinated to the Obligationsin a manner and form satisfactory to Agent and Lenders in their sole discretionas to right and time of payment and as to any other terms, rights and remediesthereunder.

 

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

 

“Subsidiary”means, with respect to any Person, (a) any corporation of which an aggregate ofmore than 50% of the outstanding Stock having ordinary voting power to elect amajority of the board of directors of such corporation (irrespective ofwhether, at the time, Stock of any other class or classes of such corporationshall have or might have voting power by reason of the happening of anycontingency) is at the time, directly or indirectly, owned legally orbeneficially by such Person or one or more Subsidiaries of such Person, or withrespect to which any such Person has the right to vote or designate the vote of50% or more of such Stock whether by proxy, agreement, operation of law orotherwise, and (b) any partnership or limited liability company in which suchPerson and/or one or more Subsidiaries of such Person shall have an interest(whether in the form of voting or participation in profits or capitalcontribution) of more than 50% or of which any such Person is a general partneror may exercise the powers of a general partner.  Unless the context otherwise requires, each reference to aSubsidiary shall be a reference to a Subsidiary of Borrower.

 

“SubsidiaryGuaranty” means the Subsidiary Guaranty dated as of the Closing Dateexecuted by each Secured Guarantor in favor of Agent, on behalf of itself andLenders.

 

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“SupportingObligations” means all “supporting obligations” as such term is defined inthe Code, including letters of credit and guaranties issued in support ofAccounts, Chattel Paper, Documents, General Intangibles, Instruments, orInvestment Property.

 

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

 

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

 

“Swing LineCommitment” means, as to the Swing Line Lender, the commitment of the SwingLine Lender to make Swing Line Advances as set forth on Annex J to theAgreement, which commitment constitutes a subfacility of the U.S. RevolvingLoan Commitment of the Swing Line Lender.

 

“Swing LineLender” means GE Capital.

 

“Swing LineLoan” means at any time, the aggregate amount of Swing Line Advancesoutstanding to Borrower.

 

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

 

“Swiss Francs”means the lawful currency of Switzerland.

 

“SwissWarehouse Control Agreement” means the agreement among Agent, Borrower,Schaublin, Schaublin Holding and an inventory controller, dated as of theEffective Date, pursuant to which Schaublin is pledging its inventory byconveying the right of possession over the inventory to Agent and which isproviding for effective control over Schaublin’s inventory by Agent or its authorizedrepresentative.

 

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

 

“Taxes”means taxes, levies, imposts, deductions, Charges or withholdings, and allliabilities with respect thereto, excluding taxes imposed on or measured by thenet income of Agent or a Lender by the jurisdictions under the laws of whichAgent and Lenders are organized or conduct business or any politicalsubdivision thereof.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Unapplied CashReserve” means a reserve equal to cash received in payment of Accounts thathas not been applied to payment thereof in the general ledger.

 

“UnfundedPension Liability” means, at any time, the aggregate amount, if any, of thesum of (a) the amount by which the present value of all accrued benefits undereach Title IV Plan exceeds the fair market value of all assets of such Title IVPlan allocable to such benefits in

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“U.S. BorrowingBase Certificate” means a certificate to be executed and delivered fromtime to time by Borrower in the form attached to the Agreement as Exhibit4.1(b)(i).

 

“U.S.Collateral” means the property of Borrower and Secured Guarantors coveredby the U.S. Security Agreement, the Mortgages and the other U.S. CollateralDocuments and any other property of Borrower or a Secured Guarantor, real orpersonal, tangible or intangible, now existing or hereafter acquired, that mayat any time be or become subject to a security interest or Lien in favor ofAgent to secure any or all of the Obligations.

 

“U.S. CollateralDocuments” means the U.S. Security Agreement, the U.S. Pledge Agreements,the Guaranties, the Mortgages, the Patent Securities Agreements, the TrademarkSecurity Agreements, the Copyright Security Agreements, and all other similaragreements entered into guaranteeing payment of, or granting a Lien uponproperty as security for payment of, the Obligations.

 

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“U.S. PledgeAgreements” means the Borrower Pledge Agreement, the Borrower Swiss PledgeAgreement, and any other pledge agreement entered into after the Closing Dateby any Domestic Credit Party (as required by the Agreement or any other LoanDocument).

 

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

 

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

 

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

 

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

 

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

 

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

 

“Zero CouponDebt” means Indebtedness evidenced by Discount Debentures.

 

Rules ofconstruction with respect to accounting terms used in the Agreement or theother Loan Documents shall be as set forth in Annex G.  All other undefined terms contained in anyof the Loan Documents shall, unless the context indicates otherwise, have themeanings provided for by the Code to the extent the same are used or definedtherein; in the event that any term is defined differently in differentArticles or Divisions of the Code, the definition contained in Article orDivision 9 shall control.  Unlessotherwise specified, references in the Agreement or any of the Appendices to aSection, subsection or clause refer to such Section, subsection or clause ascontained in the Agreement.  The words“herein,” “hereof” and “hereunder” and other words of similar import refer tothe Agreement as a whole, including all Annexes, Exhibits and Schedules, as thesame may from time to time be amended, restated, modified or supplemented, andnot to any particular section, subsection or clause contained in the Agreementor any such Annex, Exhibit or Schedule.

 

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

 

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“including”, “includes” and “include” shall be deemed to be followed bythe words “without limitation”; the word “or” is not exclusive; references toPersons include their respective successors and assigns (to the extent and onlyto the extent permitted by the Loan Documents) or, in the case of governmentalPersons, Persons succeeding to the relevant functions of such Persons; and allreferences to statutes and related regulations shall include any amendments ofthe same and any successor statutes and regulations.  Whenever any provision in any Loan Document refers to theknowledge (or an analogous phrase) of any Credit Party, such words are intendedto signify that such Credit Party has actual knowledge or awareness of aparticular fact or circumstance.

 

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**ANNEX B****(Section1.2)**

**to**

**CREDIT AGREEMENT**

 

**LETTERS OF CREDIT**

 

(a)                                  Issuance.Subject to the terms and conditions of the Agreement, Agent and RevolvingLenders agree to incur, from time to time prior to the Commitment TerminationDate, upon the request of Borrower and for Borrower’s account, Letter of CreditObligations by causing Letters of Credit to be issued by GE Capital or aSubsidiary thereof or a bank or other legally authorized Person selected by oracceptable to Agent in its sole discretion (each, an “L/C Issuer”) forBorrower’s account and guaranteed by Agent; *provided, that* if the L/C Issuer is aRevolving Lender, then such Letters of Credit shall not be guaranteed by Agentbut rather each Revolving Lender shall, subject to the terms and conditionshereinafter set forth, purchase (or be deemed to have purchased) riskparticipations in all such Letters of Credit issued with the written consent ofAgent, as more fully described in paragraph (b)(ii) below. The aggregate amountof all such Letter of Credit Obligations shall not at any time exceed the leastof (i) Twenty-Five Million Dollars ($25,000,000) (the “L/C Sublimit”),and (ii) the Maximum Amount less the aggregate outstanding principalbalance of the U.S. Revolving Credit Advances and the Swing Line Loan, and(iii) the U.S. Borrowing Base less the aggregate outstanding principalbalance of the U.S. Revolving Credit Advances and the Swing Line Loan.  No such Letter of Credit shall have anexpiry date that is more than one year following the date of issuance thereof,unless otherwise determined by Agent in its sole discretion, and neither Agentnor Revolving Lenders shall be under any obligation to incur Letter of CreditObligations in respect of, or purchase risk participations in, any Letter ofCredit having an expiry date that is later than the Commitment TerminationDate.

 

(b)(i)  Advances Automatic; Participations.  In the event that Agent or any RevolvingLender shall make any payment on or pursuant to any Letter of CreditObligation, such payment shall then be deemed automatically to constitute aU.S. Revolving Credit Advance under Section 1.1(a) of the Agreementregardless of whether a Default or Event of Default has occurred and iscontinuing and notwithstanding Borrower’s failure to satisfy the conditionsprecedent set forth in Section 2, and each Revolving Lender shall beobligated to pay its Pro Rata Share thereof in accordance with theAgreement.  The failure of any RevolvingLender to make available to Agent for Agent’s own account its Pro Rata Share ofany such U.S. Revolving Credit Advance or payment by Agent under or in respectof a Letter of Credit shall not relieve any other Revolving Lender of itsobligation hereunder to make available to Agent its Pro Rata Share thereof, butno Revolving Lender shall be responsible for the failure of any other RevolvingLender to make available such other Revolving Lender’s Pro Rata Share of anysuch payment.

 

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

 

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

 

(c)                                  CashCollateral.  (i) If Borrower isrequired to provide cash collateral for any Letter of Credit Obligationspursuant to the Agreement prior to the Commitment Termination Date, Borrowerwill pay to Agent for the ratable benefit of itself and Revolving Lenders cashor cash equivalents acceptable to Agent (“Cash Equivalents”) in anamount equal to 103% of the maximum amount then available to be drawn undereach applicable Letter of Credit outstanding, plus fees and expenses reasonablyexpected to be incurred in connection with draws thereunder.  Such funds or Cash Equivalents shall be heldby Agent in a cash collateral account (the “Cash Collateral Account”)maintained at a bank or financial institution acceptable to Agent.  The Cash Collateral Account shall be in thename of Borrower and shall be pledged to, and subject to the control of, Agent,for the benefit of Agent and Lenders, in a manner satisfactory to Agent.  Borrower hereby pledges and grants to Agent,on behalf of itself and Lenders, a security interest in all such funds and CashEquivalents held in the Cash Collateral Account from time to time and allproceeds thereof, as security for the payment of all amounts due in respect ofthe Letter of Credit Obligations and other Obligations, whether or not thendue.  The Agreement, including this AnnexB, shall constitute a security agreement under applicable law.

 

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

 

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

 

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

 

(iv)                              NeitherBorrower nor any Person claiming on behalf of or through Borrower shall haveany right to withdraw any of the funds or Cash Equivalents held in the CashCollateral Account, except that upon the termination of all Letter of CreditObligations and the payment of all amounts payable by Borrower to Agent andLenders in respect thereof, any funds remaining in the Cash Collateral Accountshall be applied to other Obligations then due and owing and upon payment infull of such Obligations, any remaining amount shall be paid to Borrower or asotherwise required by law.  Interestearned on deposits in the Cash Collateral Account shall be for the account ofAgent.

 

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

 

(e)                                  Requestfor Incurrence of Letter of Credit Obligations.  Borrower shall give Agent at least two (2) Business Days’ priorwritten notice requesting the incurrence of any Letter of CreditObligation.  The notice shall beaccompanied by the form of the Letter of Credit (which shall be acceptable tothe L/C Issuer) and a completed Application for Standby Letter of Credit******or Application forDocumentary Letter of Credit as applicable in the form Exhibit B-1 or B-2attached hereto.  Notwithstandinganything contained herein to the contrary, Letter of Credit applications byBorrower and approvals by Agent and the L/C Issuer may be made and transmittedpursuant to electronic codes and security measures mutually agreed upon andestablished by and among Borrower, Agent and the L/C Issuer.

 

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

 

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

 

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(ii)                                  theexistence of any claim, setoff, defense or other right that Borrower or any ofits Affiliates or any Lender may at any time have against a beneficiary or anytransferee of any Letter of Credit (or any Persons or entities for whom anysuch transferee may be acting), Agent, any Lender, or any other Person, whetherin connection with the Agreement, the Letter of Credit, the transactionscontemplated herein or therein or any unrelated transaction (including anyunderlying transaction between Borrower or any of its Affiliates and thebeneficiary for which the Letter of Credit was procured);

 

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

 

(iv)                              paymentby Agent (except as otherwise expressly provided in paragraph (g)(ii)(C) below)or any L/C Issuer under any Letter of Credit or guaranty thereof againstpresentation of a demand, draft or certificate or other document that does notcomply with the terms of such Letter of Credit or such guaranty;

 

(v)                                 anyother circumstance or event whatsoever, that is similar to any of theforegoing; or

 

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

 

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

 

(ii)                                  Asbetween Agent and any Lender and Borrower, Borrower assumes all risks of the actsand omissions of, or misuse of any Letter of Credit by beneficiaries of anyLetter of Credit.  In furtherance andnot in limitation of the foregoing, to the fullest extent permitted by lawneither Agent nor any Lender shall be responsible for:  (A) the form, validity, sufficiency,accuracy, genuineness or legal effect of any document issued by any party inconnection with the application for and issuance of any Letter of Credit, evenif it should in fact prove to be in any or all respects invalid, insufficient,inaccurate, fraudulent or forged; (B) the validity or sufficiency of anyinstrument transferring or assigning or purporting to transfer or assign anyLetter of Credit or the rights or benefits thereunder or proceeds thereof, inwhole or in part, that may prove to be invalid or ineffective for any reason;(C) failure of the beneficiary of any Letter of Credit to comply fullywith conditions required in order to demand payment under such Letter ofCredit;

 

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

 

(iii)                               Nothingcontained herein shall be deemed to limit or to expand any waivers, covenantsor indemnities made by Borrower in favor of any L/C Issuer in any letter ofcredit application, reimbursement agreement or similar document, instrument oragreement between Borrower and such L/C Issuer, including an Application andAgreement for Documentary Letter of Credit or a Master Documentary Agreementand a Master Standby Agreement entered into with Agent.

 

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**ANNEX C****(Section1.8)**

**to**

**CREDIT AGREEMENT**

 

**CASH MANAGEMENT SYSTEM**

 

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

 

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

 

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

 

(c)                                  Onor before the Effective Date (or such later date as Agent shall consent to inwriting), the Concentration Account Bank, each bank where a DisbursementAccount is maintained and all other Relationship Banks, shall have entered intotri-party blocked account agreements with Agent, for the benefit of itself andLenders, and Borrower and the Secured Guarantors or Schaublin, as applicable,in form and substance reasonably acceptable to Agent, which shall becomeoperative on or prior to the Effective Date. Each such blocked account agreement shall provide, among other things,that (i) all items of payment deposited in such account and proceeds thereofdeposited in the Concentration Account are held by such bank as agent orbailee-in-possession for Agent, on behalf of itself and Lenders, (ii) the bankexecuting such agreement has no rights of setoff or recoupment or any otherclaim against such account, as the case may be, other than for payment of itsservice fees and other charges directly related to the administration of suchaccount and for returned checks or other items of payment, and (iii) from andafter the Effective Date (A) with respect to banks at which a Blocked Accountis maintained, such bank agrees, from and after the receipt of a notice (an “ActivationNotice”) from Agent (which Activation Notice may be given by Agent at anytime at which an Event of

 

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Defaultdescribed in Sections 8.1(a), 8.1(b) (as a result of a breach of any ofSections 1.4, 1.8, 5.4(a), 6.1, 6.2, 6.5, 6.6, 6.7, 6.8, 6.10, 6.12, 6.14, and6.19), 8.1(f), 8.1(h) or 8.1(i) has occurred and is continuing (any of theforegoing being referred to herein as an “Activation Event”), to forwardimmediately all amounts in each Blocked Account to the Concentration AccountBank and to commence the process of daily sweeps from such Blocked Account intothe Concentration Account and (B) with respect to the Concentration AccountBank, such bank agrees from and after the receipt of an Activation Notice fromAgent upon the occurrence of an Activation Event, to immediately forward allamounts received in the Concentration Account to the Collection Account throughdaily sweeps from such Concentration Account into the Collection Account. Fromand after the date Agent has delivered an Activation Notice to any bank withrespect to any Blocked Account(s), Borrower shall not, and shall not cause orpermit any Secured Guarantor or Schaublin to, accumulate or maintain cash inDisbursement Accounts or payroll accounts as of any date of determination inexcess of checks outstanding against such accounts as of that date and amountsnecessary to meet minimum balance requirements.

 

(d)                                 Solong as no Default or Event of Default has occurred and is continuing, Borrowermay amend Disclosure Schedule (3.19) to add or replace a RelationshipBank, Lock Box or Blocked Account or to replace any Concentration Account orany Disbursement Account; *provided, that* prior to the time of theopening of such account or Lock Box, Borrower or the Secured Guarantors orSchaublin, as applicable, and such bank shall have executed and delivered toAgent a tri-party blocked account agreement, in form and substance reasonablysatisfactory to Agent. Borrower shall close any of its depository, lock box orconcentration accounts (and establish replacement accounts in accordance withthe foregoing sentence) promptly and in any event within 30 days followingnotice from Agent that the creditworthiness of any bank holding an account isno longer acceptable in Agent’s reasonable judgment, or as promptly aspracticable and in any event within 60 days following notice from Agent thatthe operating performance, funds transfer or availability procedures orperformance with respect to accounts or Lock Boxes of the bank holding suchaccounts or Agent’s liability under any tri-party blocked account agreementwith such bank is no longer acceptable in Agent’s reasonable judgment.

 

(e)                                  TheLock Boxes, Blocked Accounts, Disbursement Accounts and the ConcentrationAccount shall be cash collateral accounts, with all cash, checks and othersimilar items of payment in such accounts securing payment of the Loans and allother Obligations, and in which Borrower and each Secured Guarantor shall havegranted a Lien to Agent, on behalf of itself and Lenders, pursuant to theSecurity Agreement.

 

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

 

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

 

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agreesthat all cash, checks or other items of payment constituting proceeds ofCollateral are part of the Collateral. All proceeds of the sale or other disposition of any Collateral, shallbe deposited directly into Blocked Accounts.

 

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

 
| Bank:             |   | Wachovia/First Union National Bank  Charlotte, NC |
|-------------------|--------|---------------------------------------------------|
|              |   |                                              |
| ABA/Swift number: |   | 031201467                                         |
|              |   |                                              |
| Bank Account #:   |   | 2014146817950                                     |
|              |   |                                              |
| Account Name:     |   | Roller Bearing Company of America, Inc.           |

 

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**ANNEX D****(Section2.1(a))**

**to**

**CREDIT AGREEMENT**

 

**CLOSING CHECKLIST**

 

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

 

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

 

B.                                     RevolvingNotes.  Duly executed originals ofthe Revolving Notes for each applicable Lender, dated the Closing Date or theEffective Date, as applicable.

 

C.                                     SecurityInterests.  (a) Evidencesatisfactory to Agent that Agent (for the benefit of itself and Lenders) has avalid and perfected first priority security interest in the Collateral,including (i) such documents duly executed by each of the RBC Swiss GroupMembers and French Operating Companies and as Agent may request in order toperfect its security interests in the Collateral and (ii) copies of Lien searchreports listing all effective Liens with respect to RBC Swiss Group Members.

 

E.                                      InitialSchaublin Borrowing Base Certificate. Duly executed originals of Schaublin Borrowing Base Certificates fromBorrower, dated the Effective Date, reflecting information concerning EligibleAccounts – Schaublin and Eligible Inventory – Schaublin as of April 30, 2003.

 

F.                                      ForeignCredit Parties Insurance.  Satisfactoryevidence the insurance policies required by Section 5.4 with respect toForeign Credit Parties are in full force and effect, together with appropriateevidence showing loss payable and/or additional insured clauses orendorsements, as requested by Agent, in favor of Agent, on behalf of Lenders.

 

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

 

H.                                    Charterand Good Standing.  For each RBCSwiss Group Member and each French Operating Company, such Person’s (a) charterand all amendments thereto, (b) good standing certificates (includingverification of tax status) in its jurisdiction of incorporation and (c) goodstanding certificates (including verification of tax status) and certificatesof qualification to conduct business in each jurisdiction where its ownershipor lease of property or the conduct

 

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of itsbusiness requires such qualification, each dated a recent date prior to theEffective Date and certified by the applicable Secretary of State or otherauthorized Governmental Authority.

 

I.                                         Bylawsand Resolutions.  For each RBC SwissGroup Member and each French Operating Company, (a) such Person’s bylaws,together with all amendments thereto and (b) resolutions of such Person’s Boardof Directors, approving and authorizing the execution, delivery and performanceof the Loan Documents to which such Person is a party and the transactions tobe consummated in connection therewith, each certified as of the Effective Dateby such Person’s corporate secretary or an assistant secretary as being in fullforce and effect without any modification or amendment.

 

J.                                        IncumbencyCertificates.  For each CreditParty, signature and incumbency certificates of the officers of each suchPerson executing any of the Loan Documents, certified as of the Effective Dateby such Person’s corporate secretary or an assistant secretary as being true,accurate, correct and complete.

 

K.                                    Opinionsof Counsel.  Duly executed originalsof opinions of McDermott, Will & Emery, Orrick, Herrington & Sutcliffeand Raaflaub Law Offices, each counsel for the Credit Parties, in form andsubstance reasonably satisfactory to Agent and its counsel, dated the EffectiveDate.

 

L.                                      ForeignCollateral Documents and Borrower Swiss Pledge Agreement.  Duly executed originals of the SchaublinHolding Pledge Agreement, the Schaublin Swiss Pledge Agreement, the SchaublinFrench Pledge Agreement (RBC France), the Schaublin French Pledge Agreement(Bovagnet), the Swiss Warehouse Control Agreement, and the Borrower SwissPledge Agreement, accompanied by (as applicable and to the extent required underapplicable law) (a) share certificates representing all of the outstandingStock being pledged pursuant to such pledge agreements and stock powers forsuch share certificates executed in blank and (b) the original IntercompanyNotes and other instruments evidencing Indebtedness being pledged pursuant tosuch pledge agreements, duly endorsed in blank.

 

M.                                 Officer’sCertificate.  Agent shall havereceived duly executed originals of a certificate of the Chief ExecutiveOfficer and Chief Financial Officer of Borrower, dated the Effective Date,stating that, since March 30, 2002, except as set forth in suchcertificate:  (a) no event or conditionhas occurred or is existing which could reasonably be expected to have aMaterial Adverse Effect; (b) there has been no material adverse change in theindustry in which Borrower operates; (c) no Litigation has been commencedwhich, if successful, would have a Material Adverse Effect or could challengeany of the transactions contemplated by the Agreement and the other LoanDocuments; (d) there have been no Restricted Payments made by any Credit Party;and (e) there has been no material increase in liabilities, liquidated orcontingent, and no material decrease in assets of Borrower or any of itsSubsidiaries.

 

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

 

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

 

P.                                      AdditionalSwiss Security Documents.  **[**Tobe determined**]**

 

Q.                                    AdditionalFrench Security Documents.  **[**Tobe determined**]**

 

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**ANNEX E****(Section4.1(a))**

**to**

**CREDIT AGREEMENT**

 

FINANCIAL STATEMENTS ANDPROJECTIONS – REPORTING

 

Borrower shalldeliver or cause to be delivered to Agent or to Agent and Lenders, asindicated, the following:

 

(a)                                  MonthlyFinancials.  To Agent and Lenders,within 45 days after the end of each Fiscal Month (other than a Fiscal Monththat is the last month of a Fiscal Quarter), financial information regardingHoldings, Borrower and its Subsidiaries, certified by the Chief Financial Officerof Borrower, consisting of consolidated and consolidating (i) unaudited balancesheets as of the close of such Fiscal Month and the related statements ofincome and cash flows for that portion of the Fiscal Year ending as of theclose of such Fiscal Month; (ii) unaudited statements of income and cash flowsfor such Fiscal Month, setting forth in comparative form the figures for thecorresponding period in the prior year and the figures contained in theProjections for such Fiscal Year, all prepared in accordance with GAAP (subjectto normal year-end adjustments); and (iii) a summary of the outstanding balanceof all Intercompany Notes as of the last day of that Fiscal Month.  Such financial information shall beaccompanied by the certification of the Chief Financial Officer of Borrowerthat (i) such financial information presents fairly in accordance with GAAP(subject to normal year-end adjustments) the financial position and results ofoperations of Holdings, Borrower and its Subsidiaries, on a consolidated andconsolidating basis, in each case as at the end of such Fiscal Month and forthat portion of the Fiscal Year then ended and (ii) any other informationpresented is true, correct and complete in all material respects and that therewas no Default or Event of Default in existence as of such time or, if aDefault or Event of Default shall have occurred and be continuing, describingthe nature thereof and all efforts undertaken to cure such Default or Event ofDefault.  In addition, Borrower shall deliverto Agent and Lenders, within 45 days after the end of each Fiscal Month, amanagement discussion and analysis of the financial performance of Holdings,Borrower and its Subsidiaries prepared in accordance with Borrower’s pastpractices.

 

(b)                                 QuarterlyFinancials.  To Agent and Lenders,within 45 days after the end of each Fiscal Quarter, consolidated andconsolidating financial information regarding Holdings, Borrower and itsSubsidiaries, certified by the Chief Financial Officer of Borrower, including(i) unaudited balance sheets as of the close of such Fiscal Quarter and therelated statements of income and cash flow for that portion of the Fiscal Yearending as of the close of such Fiscal Quarter and (ii) unaudited statements ofincome and cash flows for such Fiscal Quarter, in each case setting forth incomparative form the figures for the corresponding period in the prior year andthe figures contained in the Projections for such Fiscal Year, all prepared inaccordance with GAAP (subject to normal year-end adjustments).  Such financial information shall beaccompanied by (A) a statement in reasonable detail in the form of ExhibitE-1 (each, a “Compliance Certificate”) in respect of the FixedCharge Coverage Ratio Financial Covenant that is tested on a quarterly basisand (B) the certification of the Chief Financial Officer of Borrower that(i) such financial information presents fairly in accordance with GAAP (subjectto normal year-end adjustments) the financial position, results of operationsand statements of cash

 

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ifflows of Holdings, Borrower and its Subsidiaries, on both a consolidated andconsolidating basis, as at the end of such Fiscal Quarter and for that portionof the Fiscal Year then ended, (ii) any other information presented is true,correct and complete in all material respects and that there was no Default orEvent of Default in existence as of such time or, if a Default or Event ofDefault has occurred and is continuing, describing the nature thereof and allefforts undertaken to cure such Default or Event of Default.

 

(c)                                  OperatingPlan.  To Agent and Lenders, as soonas available, but not later than 30 days after the end of each Fiscal Year, anannual operating plan for Holdings and Borrower, approved by the Board ofDirectors of Borrower, for the following Fiscal Year, which (i) includes astatement of all of the material assumptions on which such plan is based, (ii)includes monthly balance sheets and a quarterly budget for the following yearand (iii) integrates sales, gross profits, operating expenses, operatingprofit, cash flow projections **(**and shows such projections separately withrespect to the French Operating Companies), U.S. Borrowing Availability andSchaublin Borrowing Availability projections, all prepared on the same basisand in similar detail as that on which operating results are reported (and inthe case of cash flow projections, representing management’s good faithestimates of future financial performance based on historical performance), andincluding plans for personnel, Capital Expenditures and facilities.

 

(d)                                 AnnualAudited Financials. To Agent and Lenders, within ninety (90) days after theend of each Fiscal Year, or on a later date on which filing thereof is requiredwith the Securities and Exchange Commission, audited Financial Statements forHoldings, Borrower and its Subsidiaries on a consolidated and (unaudited)consolidating basis, consisting of balance sheets and statements of income andretained earnings and cash flows, setting forth in comparative form in eachcase the figures for the previous Fiscal Year, which Financial Statements shallbe prepared in accordance with GAAP and certified without qualification, by anindependent certified public accounting firm of national standing or otherwiseacceptable to Agent.  Such FinancialStatements shall be accompanied by (i) the Compliance Certificate showing thecalculations used in determining compliance with the Fixed Charge CoverageRatio Financial Covenant, (ii) a report from such accounting firm to the effectthat, in connection with their audit examination, nothing has come to theirattention to cause them to believe that a Default or Event of Default hasoccurred with respect to the Fixed Charge Coverage Ratio Financial Covenant (orspecifying those Defaults and Events of Default that they became aware of), itbeing understood that such audit examination extended only to accountingmatters and that no special investigation was made with respect to theexistence of Defaults or Events of Default, (iii) the annual letters to suchaccountants in connection with their audit examination detailing contingentliabilities and material litigation matters, and (iv) the certification of theChief Executive Officer or Chief Financial Officer of Borrower that all suchFinancial Statements present fairly in accordance with GAAP the financialposition, results of operations and statements of cash flows of Holdings,Borrower and its Subsidiaries on a consolidated and consolidating basis, as atthe end of such Fiscal Year and for the period then ended, and that there wasno Default or Event of Default in existence as of such time or, if a Default orEvent of Default has occurred and is continuing, describing the nature thereofand all efforts undertaken to cure such Default or Event of Default.

 

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(e)                                  ManagementLetters.  To Agent and Lenders,within five (5) Business Days after receipt thereof by any Credit Party, copiesof all management letters, exception reports or similar letters or reportsreceived by such Credit Party from its independent certified publicaccountants.

 

(f)                                  DefaultNotices.  To Agent and Lenders, assoon as practicable, and in any event within five (5) Business Days after anexecutive officer of Borrower has actual knowledge of the existence of anyDefault, Event of Default or other event that has had a Material AdverseEffect, telephonic or telecopied notice specifying the nature of such Defaultor Event of Default or other event, including the anticipated effect thereof,which notice, if given telephonically, shall be promptly confirmed in writingon the next Business Day.

 

(g)                               SECFilings and Press Releases.  ToAgent and Lenders, promptly upon their becoming available, copies of:  (i) all Financial Statements, reports,notices and proxy statements made publicly available by any Credit Party to itssecurity holders; (ii) all regular and periodic reports and all registrationstatements and prospectuses, if any, filed by any Credit Party with anysecurities exchange or with the Securities and Exchange Commission or anygovernmental or private regulatory authority; and (iii) all press releases andother statements made available by any Credit Party to the public concerningmaterial changes or developments in the business of any such Person.

 

(h)                               SubordinatedDebt and Equity Notices.  To Agentand Lenders, as soon as practicable, copies of all material written noticesgiven or received by any Credit Party with respect to any Subordinated Debt orStock of such Person, and, within three (3) Business Days after any CreditParty obtains knowledge of any matured or unmatured event of default withrespect to any Subordinated Debt, notice of such event of default.

 

(i)                                     SupplementalSchedules.  To Agent, supplementaldisclosures, if any, required by Section 5.6.

 

(j)                                     Litigation.  To Agent and Lenders in writing, promptlyupon learning thereof, notice of any Litigation commenced or threatened againstany Credit Party that (i) seeks damages in excess of the Dollar Equivalent of$250,000, (ii) seeks injunctive relief, (iii) is asserted or instituted againstany Plan, its fiduciaries or its assets or against any Credit Party or ERISAAffiliate in connection with any Plan, (iv) alleges criminal misconduct by anyCredit Party, (v) alleges the violation of any law regarding, or seeks remediesin connection with, any Environmental Liabilities; or (vi) involves any productrecall.

 

(k)                                  InsuranceNotices.  To Agent, disclosure oflosses or casualties required by Section 5.4.

 

(l)                                     LeaseDefault Notices.  To Agent, withinfive (5) Business Days after receipt thereof, copies of (i) any and all defaultnotices received under or with respect to any leased location or public warehousewhere Collateral is located, and (ii) such other notices or documents as Agentmay reasonably request.

 

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(m)                               LeaseAmendments.  To Agent, promptlyafter receipt thereof, copies of all material amendments to real estate leases.

 

(n)                                 FrenchIntercompany Loans and Schaublin Intercompany Loans Certificate.  Together with each Borrowing BaseCertificate submitted to Agent, and in any event within ten (10) Business Daysafter the end of each Fiscal Month, to Agent a certificate with respect to thebalances and advances of the Schaublin Intercompany Loans and FrenchIntercompany Loans in the form of Exhibit E-2 executed by each CreditParty signatory thereto.

 

(n)                                 OtherDocuments.  To Agent and Lenders, suchother financial and other information respecting any Credit Party’s business orfinancial condition as Agent or any Lender shall, from time to time, reasonablyrequest.

 

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**ANNEX F****(Section4.1(b))**

**to**

**CREDIT AGREEMENT**

 

**COLLATERAL REPORTS**

 

Borrower shalldeliver or cause to be delivered the following:

 

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

 

(i)                                     aU.S. Borrowing Base Certificate with respect to Borrower and Secured Guarantorsand a Schaublin Borrowing Base Certificate with respect to Schaublin,accompanied by such supporting detail and documentation as shall be requestedby Agent in its reasonable discretion;

 

(ii)                                  withrespect to Borrower, Secured Guarantors and Schaublin, a summary of Inventoryby location and type with a supporting perpetual Inventory report, in each caseaccompanied by such supporting detail and documentation as shall be requestedby Agent in its reasonable discretion; and

 

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

 

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

 

(i)                                     withrespect to Borrower, Secured Guarantors and Schaublin, a summary of Inventory bytype with a supporting perpetual Inventory report;

 

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

 

(ii)                                withrespect to Borrower, Secured Guarantors and Schaublin, agings of accountspayable (and including information indicating the amounts then owing to ownersand lessors of leased premises, warehouses, processors and other third partiesfrom time to time in possession of any Collateral);

 

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(iii)                               schedulesin a form satisfactory to Agent reflecting sales made, credits issued, cash orother items of payment received and other data relating to the collection ofAccounts; and

 

(iv)                              thepercentages of all Eligible Accounts owing to each of the five (5) largestAccount Debtors and their Affiliates (excluding the United States government asAccount Debtor).

 

(b)                                 ToAgent, at the time of delivery of each of the monthly Financial Statementsdelivered pursuant to Annex E:

 

(i)                                     areconciliation of the most recent U.S. Borrowing Base and Schaublin BorrowingBase, general ledger and month-end Inventory reports of Borrower to Borrower’sgeneral ledger and monthly Financial Statements delivered pursuant to such AnnexE, in each case accompanied by such supporting detail and documentation asshall be requested by Agent in its reasonable discretion;

 

(ii)                                  areconciliation of the perpetual inventory by location to Borrower’s most recentU.S. Borrowing Base and Schaublin Borrowing Base, general ledger and monthlyFinancial Statements delivered pursuant to Annex E, in each caseaccompanied by such supporting detail and documentation as shall be requestedby Agent in its reasonable discretion;

 

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

 

(iv)                              areconciliation of the outstanding Loans as set forth in the monthly LoanAccount statement provided by Agent to Borrower’s general ledger and monthly FinancialStatements delivered pursuant to Annex E, in each case accompaniedby such supporting detail and documentation as shall be requested by Agent inits reasonable discretion;

 

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

 

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

 

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(f)                                    Borrower,at its own expense, shall deliver to Agent and Lenders a desk top appraisal ofInventory of Borrower, the Secured Guarantors and Schaublin on the secondanniversary of the Closing Date to be conducted by an appraiser, and in formand substance reasonably satisfactory to Agent, and Borrower, at its ownexpense, shall deliver to Agent and Lenders such appraisals of its assets andthe assets of Secured Guarantors and Schaublin as Agent may request at any timeafter the occurrence and during the continuance of a Default or an Event of Default,such appraisals to be conducted by an appraiser, and in form and substancereasonably satisfactory to Agent; and

 

(g)                                 Suchother reports, statements and reconciliations with respect to the U.S.Borrowing Base, Schaublin Borrowing Base or Collateral or Obligations of any orall Credit Parties as Agent shall from time to time request in its reasonablediscretion, including additions and reductions of Accounts on an intra-monthbasis.

 

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**ANNEX G****(Section6.10)**

**to**

**CREDIT AGREEMENT**

 

**FINANCIAL COVENANTS**

 

Borrower shall notbreach or fail to comply with, and shall not permit Holdings to breach or failto comply with, any of the following financial covenants, each of which shallbe calculated in accordance with GAAP consistently applied:

 

### (a)                                  FixedCharge Coverage Ratio.  Holdings, ona consolidated basis shall have at the end of each Fiscal Quarter a FixedCharge Coverage Ratio for the 12-month period then ended of not less than 1.10to 1.00.

###  

### (b)                                 MinimumBorrowing Availability.  Except forOveradvances outstanding under Section 1.1(a)(iii) and the greaterminimum Borrowing Availability required at times and amounts set forth in Sections6.3(b) and 6.14, Borrower shall, at all times, cause the BorrowingAvailability to exceed $5,000,000.

###  

Unless otherwisespecifically provided herein, any accounting term used in the Agreement shallhave the meaning customarily given such term in accordance with GAAP, and allfinancial computations hereunder shall be computed in accordance with GAAPconsistently applied.  That certainitems or computations are explicitly modified by the phrase “in accordance withGAAP” shall in no way be construed to limit the foregoing.  If any “Accounting Changes” (as definedbelow) occur and such changes result in a change in the calculation of thefinancial covenants, standards or terms used in the Agreement or any other LoanDocument, then Borrower, Agent and Lenders agree to enter into negotiations inorder to amend such provisions of the Agreement so as to equitably reflect suchAccounting Changes with the desired result that the criteria for evaluating thefinancial condition of Holdings, Borrower and its Subsidiaries shall be thesame after such Accounting Changes as if such Accounting Changes had not beenmade; *provided*,*however*,that the agreement of Requisite Lenders to any required amendments of suchprovisions shall be sufficient to bind all Lenders.  “Accounting Changes” means (i) changes in accountingprinciples required by the promulgation of any rule, regulation, pronouncementor opinion by the Financial Accounting Standards Board of the AmericanInstitute of Certified Public Accountants (or successor thereto or any agencywith similar functions), (ii) changes in accounting principles concurred in byBorrower’s certified public accountants; (iii) purchase accounting adjustmentsunder A.P.B. 16 or 17 and EITF 88-16, and the application of the accountingprinciples set forth in FASB 109, including the establishment of reservespursuant thereto and any subsequent reversal (in whole or in part) of suchreserves; and (iv) the reversal of any reserves established as a result ofpurchase accounting adjustments.  Allsuch adjustments resulting from expenditures made subsequent to the Closing Date(including capitalization of costs and expenses or payment of pre-Closing Dateliabilities) shall be treated as expenses in the period the expenditures aremade and deducted as part of the calculation of EBITDA in such period.  If Agent, Borrower and Requisite Lendersagree upon the required amendments, then after appropriate amendments have beenexecuted and the underlying Accounting Change with respect thereto has beenimplemented, any reference to GAAP contained in the Agreement or in any otherLoan Document shall, only to the extent of such Accounting Change, refer toGAAP,

 

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if consistently applied after giving effect to the implementation ofsuch Accounting Change.  If Agent,Borrower and Requisite Lenders cannot agree upon the required amendments within30 days following the date of implementation of any Accounting Change, then allFinancial Statements delivered and all calculations of financial covenants andother standards and terms in accordance with the Agreement and the other LoanDocuments shall be prepared, delivered and made without regard to theunderlying Accounting Change.  Forpurposes of Section 8.1, a breach of a Financial Covenant contained inthis Annex G shall be deemed to have occurred as of any date ofdetermination by Agent or as of the last day of any specified measurementperiod, regardless of when the Financial Statements reflecting such breach aredelivered to Agent.

 

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**ANNEX H****(Section9.9(a))**

**to**

**CREDIT AGREEMENT**

 

**LENDERS’ WIRE TRANSFER INFORMATION**

 
| Name:         |   | General Electric Capital Corporation |
|---------------|--------|--------------------------------------|
| Bank:         |   | Bankers Trust Company                |
|          |   | New York, New York                   |
| ABA #:        |   | 021001033                            |
| Account #:    |   | 50232854                             |
| Account Name: |   | GECC/CAF Depository                  |
| Reference:    |   | CFN 4731                             |

 

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**ANNEX I****(Section11.10)**

**to**

**CREDIT AGREEMENT**

 

**NOTICE ADDRESSES**

 
| (A)    |   | If to Agent or GE Capital, at                          |
|--------|--------|--------------------------------------------------------|
|   |   |                                                   |
|   |   | General Electric Capital Corporation                   |
|   |   | 100 California Street, 10th Floor                      |
|   |   | San Francisco, California 94111                        |
|   |   | Attention:   John Goodwin and Neel Morey          |
|   |   | Telecopier No.:   (415) 277-7443                  |
|   |   | Telephone No.:   (415) 277-7400                   |
|   |   |                                                   |
|   |   | with copies to:                                        |
|   |   |                                                   |
|   |   | General Electric Capital Corporation                   |
|   |   | 500 W. Monroe Street, 16th Floor                       |
|   |   | Chicago, Illinois 60661                                |
|   |   | Attention:   Andrew Packer                        |
|   |   | Telecopier No.:   (312) 441-6876                  |
|   |   | Telephone No.:   (312) 441-7244                   |
|   |   |                                                   |
|   |   | and                                                    |
|   |   |                                                   |
|   |   | Latham & Watkins                                   |
|   |   | 233 S. Wacker Drive, Suite 5800                        |
|   |   | Chicago, Illinois 60606                                |
|   |   | Attention:   David G. Crumbaugh                   |
|   |   | Telecopier No.:   (312) 993-9767                  |
|   |   | Telephone No.:   (312) 876-7700                   |
|   |   |                                                   |
|   |   | and                                                    |
|   |   |                                                   |
|   |   | General Electric Capital Corporation                   |
|   |   | 201 High Ridge Road                                    |
|   |   | Stamford, Connecticut 06927-5100                       |
|   |   | Attention:   Corporate Counsel-Commercial Finance |
|   |   | Telecopier No.:   (203) 316-7889                  |
|   |   | Telephone No.:   (203) 316-7552                   |

 

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| (B)    |   | If to Borrower, at                               |
|--------|--------|--------------------------------------------------|
|   |   |                                             |
|   |   | Roller Bearing Company of America, Inc.          |
|   |   | 60 Round Hill Road                               |
|   |   | P. O. Box 430                                    |
|   |   | Fairfield, Connecticut 06430-0430                |
|   |   | Attention:   Chief Financial Officer        |
|   |   | Telecopier No.:   (203) 256-0775            |
|   |   | Telephone No.:   (203) 255-1511             |
|   |   |                                             |
|   |   | With copies to:                                  |
|   |   |                                             |
|   |   | McDermott, Will & Emery                      |
|   |   | 50 Rockefeller Plaza                             |
|   |   | New York, New York 10020-1605                    |
|   |   | Attention:   C. David Goldman               |
|   |   | Telecopier No.:   (212) 547-5444            |
|   |   | Telephone No.:   (212) 547-5512             |
|   |   |                                             |
| (C)    |   | If to Lenders, at                                |
|   |   |                                             |
|   |   | Congress Financial Corporation (Central)         |
|   |   | 150 South Wacker Drive, Suite 2200               |
|   |   | Chicago, Illinois 60606                          |
|   |   | Attention:   Vicky Geist                    |
|   |   | Telecopier No.:   (312) 332-0424            |
|   |   | Telephone No.:   (312) 332-0420             |
|   |   |                                             |
|   |   | With copies to:                                  |
|   |   |                                             |
|   |   | Otterbourg, Steindler, Houston & Rosen, P.C. |
|   |   | 230 Park Avenue                                  |
|   |   | New York, New York 10169                         |
|   |   | Attention:   David W. Morse, Esq.           |
|   |   | Telecopier No.:   (212) 682-6104            |
|   |   | Telephone No.:   (212) 661-9100             |

 

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**ANNEX J****(from AnnexA - Commitments definition)**

**to**

**CREDIT AGREEMENT**

 

**PRO RATA SHARE**

 
| **Commitments**                                                                                                                             |   | **Lender(s)**                             |   | **Pro Rata  Share (of the  applicable Loan)** |
|---------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|-----------------------------------------------|
|                                                                                                                                        |   |                                      |   |                                          |
| Revolving Loan Commitment (including a Swing Line  Commitment of $5,000,0000): $34,468,085.11                                               |   | General Electric  Capital Corporation     |   | 63.8297%                                      |
|                                                                                                                                        |   |                                      |   |                                          |
| Term Loan Commitment: $25,531,914.89                                                                                                        |   | General Electric  Capital Corporation     |   | 63.8297%                                      |
|                                                                                                                                        |   |                                      |   |                                          |
| Revolving Loan Commitment:  $19,531,914.89                                                                                             |   | Congress Financial  Corporation (Central) |   | 36.1702%                                      |
|                                                                                                                                        |   |                                      |   |                                          |
| Term Loan Commitment: $14,468,085.11                                                                                                        |   | Congress Financial  Corporation (Central) |   | 36.1702%                                      |
|                                                                                                                                        |   |                                      |   |                                          |
| Schaublin  Revolving Loan Commitment $4,468,085.11 (sublimit of GE Capital’s Revolving  Loan Commitment)                               |   | General Electric  Capital Corporation     |   | 63.8297%                                      |
|                                                                                                                                        |   |                                      |   |                                          |
| Schaublin  Revolving Loan Commitment $2,531,914.89 (sublimit of Congress Financial  Corporation (Central)’s Revolving Loan Commitment) |   | Congress Financial  Corporation (Central) |   | 36.1702%                                      |

 

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