Document:

Exhibit 10.34

 

CREDIT
AGREEMENT

 

between

 

Schaublin
SA

 

(hereinafter referred to as «Borrower» or
«Schaublin»),

 

and

 

CREDIT
SUISSE

 

(hereinafter referred to as the «Bank» or the
«Lender»)

 

 

December 8, 2003

 

 

TABLE OF
CONTENTS

 

	
  1.    FACILITY

  	
   

  
	
   

  	
   

  	
   

  
	
  1.1.

  	
  TYPE OF CREDIT
  FACILITIES

  	
   

  
	
  1.2.

  	
  AMOUNTS AND COMMITMENTS

  	
   

  
	
  1.3.

  	
  AVAILABILITY

  	
   

  
	
  1.4.

  	
  PURPOSE

  	
   

  
	
  1.5.

  	
  COMMITMENT PERIODS

  	
   

  
	
  1.6.

  	
  DRAWDOWN

  	
   

  
	
  1.7.

  	
  COLLATERAL/SECURITY

  	
   

  
	
   

  	
   

  	
   

  
	
  2.    ADVANCES

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1.

  	
  UTILIZATION

  	
   

  
	
  2.2.

  	
  NOTICE TO THE BANK

  	
   

  
	
  2.3.

  	
  MAXIMUM NUMBER OF
  ADVANCES

  	
   

  
	
  2.4.

  	
  MAXIMUM OUTSTANDING

  	
   

  
	
   

  	
   

  	
   

  
	
  3.    INTEREST
  AND COMMISSIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  3.1.

  	
  PAYMENT

  	
   

  
	
  3.2.

  	
  RATE AND CALCULATION
  ADVANCES

  	
   

  
	
  3.3.

  	
  MARGIN

  	
   

  
	
  3.4.

  	
  RATE AND
  CALCULATION CURRENT ACCOUNT

  	
   

  
	
  3.5.

  	
  COMMISSION

  	
   

  
	
  3.6.

  	
  DEFAULT
  RATE

  	
   

  
	
   

  	
   

  	
   

  
	
  4.    REPAYMENT,
  REDUCTION & CANCELLATION

  	
   

  
	
   

  	
   

  	
   

  
	
  4.1.

  	
  REPAYMENT

  	
   

  
	
  4.2.

  	
  CANCELLATION OF
  AMOUNTS AVAILABLE

  	
   

  
	
  4.3.

  	
  REDUCTION

  	
   

  
	
  4.4.

  	
  FINAL
  REPAYMENT

  	
   

  
	
  4.5.

  	
  CANCELLATION

  	
   

  
	
  4.6.

  	
  PREPAYMENT AND
  CANCELLATION

  	
   

  
	
   

  	
   

  	
   

  
	
  5.    PAYMENT
  AND TAXES

  	
   

  
	
   

  	
   

  	
   

  
	
  5.1.

  	
  MANNER OF PAYMENT

  	
   

  
	
  5.2.

  	
  TAXATION OF THE BANK,
  ETC.

  	
   

  
	
  5.3.

  	
  BUSINESS
  DAYS

  	
   

  
	
  5.4.

  	
  PARTIAL
  PAYMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  6.    CHANGES
  IN CIRCUMSTANCES

  	
   

  
	
   

  	
   

  	
   

  
	
  6.1.

  	
  INCREASED
  COSTS

  	
   

  
	
  6.2.

  	
  ESCAPE
  CLAUSE

  	
   

  
	
  6.3.

  	
  RESTRICTION CLAUSE

  	
   

  
	
  6.4.

  	
  ILLEGALITY

  	
   

  
	
   

  	
   

  	
   

  
	
  7.   UNDERTAKINGS,
  COVENANTS ETC.

  	
   

  
	
   

  	
   

  	
   

  
	
  7.1.

  	
  GENERAL UNDERTAKINGS

  	
   

  
	
  7.2.

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
   

  
	
  7.3.

  	
  SPECIFIC UNDERTAKINGS

  	
   

  
	
  7.4.

  	
  FINANCIAL COVENANTS

  	
   

  
	
  7.5.

  	
  OTHER
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  8.    SHAREHOLDER
  LOAN

  	
   

  
	
   

  	
   

  	
   

  
	
  9.    EVENTS
  OF DEFAULT

  	
   

  
	
   

  	
   

  	
   

  
	
  9.1.

  	
  EVENTS

  	
   

  
	
  9.2.

  	
  CONSEQUENCES

  	
   

  
	
   

  	
   

  	
   

  
	
  10.    SET-OFF

  	
   

  

 

2

 

	
  10.1.

  	
  SET-OFF

  	
   

  
	
  10.2.

  	
  CURRENCY CONVERSION

  	
   

  
	
   

  	
   

  	
   

  
	
  11.    INDEMNITIES

  	
   

  
	
   

  	
   

  	
   

  
	
  11.1.

  	
  GENERAL INDEMNITY

  	
   

  
	
  11.2.

  	
  CURRENCY INDEMNITY

  	
   

  
	
   

  	
   

  	
   

  
	
  12.    FEES
  AND EXPENSES

  	
   

  
	
   

  	
   

  	
   

  
	
  12.1.

  	
  STRUCTURING FEE

  	
   

  
	
  12.2.

  	
  EXPENSES

  	
   

  
	
  12.3.

  	
  VALUE
  ADDED TAX

  	
   

  
	
   

  	
   

  	
   

  
	
  13.    ASSIGNMENT,
  TRANSFER AND LENDING OFFICES

  	
   

  
	
   

  	
   

  	
   

  
	
  13.1.

  	
  NO ASSIGNMENT BY
  THE BORROWER

  	
   

  
	
  13.2.

  	
  ASSIGNMENT
  AND TRANSFER BY THE BANK

  	
   

  
	
   

  	
   

  	
   

  
	
  14.    NOTIFICATION

  	
   

  
	
   

  	
   

  	
   

  
	
  14.1.

  	
  BY THE
  BANK

  	
   

  
	
  14.2.

  	
  BY
  THE BORROWER

  	
   

  
	
  14.3.

  	
  OBJECTIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  15.    GOVERNING
  LAW AND JURISDICTION

  	
   

  
	
   

  	
   

  	
   

  
	
  16.    MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  16.1.

  	
  CONFIDENTIALITY

  	
   

  
	
  16.2.

  	
  NO WAIVER

  	
   

  
	
  16.3.

  	
  SEVERABILITY

  	
   

  
	
  16.4.

  	
  INTERPRETATION

  	
   

  
	
  16.5.

  	
  ORIGINALS

  	
   

  
	
   

  	
   

  	
   

  
	
  SPECIAL DEED OF PLEDGE

  	
   

  
	
   

  	
   

  
	
  ANNEX A

  	
  CONDITIONS PRECEDENT

  	
   

  
	
  ANNEX B

  	
  FIXED TERM ADVANCE
  REQUEST

  	
   

  
	
  ANNEX C

  	
  COMPLIANCE CERTIFICATE

  	
   

  
	
  ANNEX D

  	
  GENERAL CONDITIONS

  	
   

  
	
  ANNEX E

  	
  FORM “SPECIAL DEED OF
  PLEDGE”

  	
   

  
				

 

3

 

Whereas the Borrower has requested
the Bank for credit facilities (hereafter referred to as «Facilities»); and

 

whereas the Bank is prepared to grant
such Facilities to the Borrower under certain terms and conditions, therefore
the parties agree as follows:

 

1.     FACILITY

 

1.1.         TYPE OF CREDIT FACILITIES

 

The
Bank has agreed to make the following credit facilities (the «Facilities»)
available to the Borrower on the terms of this Agreement up to the maximum
amount specified under Clause 1.2..

 

1.2.         AMOUNTS AND COMMITMENTS

 

The
Bank has agreed to make available to the Borrower credit facilities (“Facilities”)
in an aggregate amount not to exceed CHF 12,000,000.00 (Swiss Francs twelve
million and o/oo), divided in two sub-facilities as defined hereafter:

 

	
  Facility
  A:

  	
  CHF 10,000,000.00
  (Swiss Francs ten million and o/oo)

  
	
   

  	
   

  
	
  Facility
  B:

  	
  CHF 2,000,000.00 (Swiss
  Francs two million and o/oo)

  

 

1.3.         AVAILABILITY

 

During
the Commitment Periods, the Borrower may borrow under the Facilities once the
Lender has received and is satisfied with any and all items listed in the Annex
A hereto.

 

1.4.         PURPOSE

 

The
Facilities are available for the following:

 

	
  Facility A:

  	
   

  	
  CHF
  10,000,000.00 (Swiss francs ten million and o/oo) to refinance existing
  shareholder loans from Schaublin Holding SA. Facility A is a result of the
  acquisition of the borrower by RBC and the acquisition of myonic SAS, Les
  Utils (F), subsequently renamed RBC France SAS (“RBCF”).

  
	
   

  	
   

  	
   

  
	
  Facility B:

  	
   

  	
  CHF
  2,000,000.00 (Swiss francs two million and o/oo) to finance general working
  capital and corporate purposes of Schaublin SA.

  

 

1.5.         COMMITMENT PERIODS

 

The
Facilities expiry dates will be the Final Repayment Dates (termination dates)
specified in Clause 4.4..

 

4

 

1.6.         DRAWDOWN

 

Shall
be carried out by notification to the Bank by the Borrower pursuant to Clause
2.2.. The Bank may, but is not obliged to accept simplified drawdown procedures
for Facility B, i.e. Fixed Term Advance Requests in a different form than
specified under Annex B.

 

1.7.         COLLATERAL/SECURITY

 

	
  Facility A & B:

  	
   

  	
  The
  following collateral/security shall be pledged and assigned to the Bank in
  order to secure Facility A until all liabilities under Facility A have been
  discharged and no commitment under Facility A is outstanding:

  

 

According to separate form “Special Deed of Pledge”, Schaublin Holding
SA will pledge and assign to the Bank 99.4% (1366 shares) of the present and
future share capital of Schaublin. Schaublin Holding SA is a wholly-owned
(100.0% of share capital) subsidiary of RBC.

 

The pledged shares have to be transferred to and deposited with the
Bank. In addition, Schaublin will provide the Bank with a resolution of the
Board of Directors to accept any inscription of a shareholder, without any
restriction, as designated by the Bank. This last requirement does not apply to
the qualification shares (“Qualifikationsaktien”).

 

 

2.     ADVANCES

 

2.1.         UTILIZATION

 

The
Facilities shall be available:

 

	
  Facility A:

  	
   

  	
  in
  the form of fixed term advances (hereafter collectively referred to as
  «Advances» and individually «Advance») for periods of one month up to twelve
  months, not to exceed the Final Repayment Date A. Facility A may be drawn in
  minimum amounts of CHF 500,000.00. The Bank may from time to time grant
  exceptions to the periods of availability upon the Borrower’s request;

  
	
   

  	
   

  	
   

  
	
  Facility B:

  	
   

  	
  in
  the form of fixed term advances (hereafter collectively referred to as
  «Advances» and individually «Advance») for periods of one month up to twelve
  months, not to exceed the Final Repayment Date B. Facility B may be drawn in
  minimum amounts of CHF 250,000.00 or their equivalent U.S. Dollars, Euros or
  Yen; and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  in
  the form of current account(s) and/or in the form of bank guarantees,
  performance bonds, letters of credit and currency transactions.

  

 

The
interest rate shall be determined separately for each Advance.

 

5

 

2.2.         NOTICE TO THE BANK

 

The
Bank’s decision to make an Advance shall further be subject to the condition
precedent that the Bank shall have received a Fixed Term Advance Request, as
defined in Annex B, at the latest by 12.00 a.m. Delémont time, three Business
Days prior to the date of such borrowing, specifying (i) the currency, (ii) the
term of the Advance, and (iii) unless previously supplied, details of an
account to which the Borrower wishes the payments in the currency specified to
be made. «Business Day» means a day on which the banks are open in Delémont.

 

2.3.         MAXIMUM NUMBER OF ADVANCES

 

Under
Facility A no more than 10 Advances altogether may be outstanding.

 

2.4.         MAXIMUM OUTSTANDING

 

The
aggregate amount of the Advances requested and drawn by the Borrower under
Facility A may not exceed the amount determined by the Bank for Facility A,
respectively, as specified in clause 1.2. above.

 

The
aggregate amount of the Advances requested and drawn by the Borrower under
Facility B, plus the aggregate outstanding under current account(s), bank
guarantees, performance bonds and letters of credit under Facility B, as
available, may not exceed the maximum amount determined by the Bank for
Facility B as specified in clause 1.2. above.

 

 

3.     INTEREST AND COMMISSIONS

 

3.1.         PAYMENT

 

The
Borrower shall pay interest accrued on each Advance in accordance with the
provisions of Clause 3.2., Clause 3.3. and Clause 3.6..

 

The
Borrower shall pay interest for current account(s) under Facility B in
accordance with the provisions of Clause 3.4. and Clause 3.6.. In addition,
Schaublin shall pay a Commission on the outstanding amount of each guarantee,
performance bond and letter of credit issued under Facility B in accordance
with the provisions of Clause 3.5. and Clause 3.6..

 

3.2.         RATE AND CALCULATION ADVANCES

 

The
interest rate applicable, per annum, to each Advance under the Facilities will
be the London Interbank Offered Rate («LIBOR»), for the relevant term and
currency, plus a Margin as defined in Clause 3.3..

 

«LIBOR»
is defined, in respect of any Advance or unpaid sum, as the annual percentage
rate displayed on Telerate page 3750 or 3740 at or about 11 a.m. (London time)
two Business Days prior to any drawdown or renewal of such Advances, or, if
unavailable, the rate determined by the Bank to be the rate which would have
been offered to the Bank by prime banks in the London interbank market on the
quotation date for deposits of a comparable amount to that Advance or other
sum, in the same

 

6

 

currency
and for a period comparable to its term, rounded to the next 1/16 of a percent.
Any and all interest and fees shall accrue from day to day and shall be
calculated on the basis of a year of 360 days and the actual number of days.
For any Advance with a maturity in excess of twelve months, LIBOR shall be
replaced by the Swap Rate. The «Swap Rate» is defined, in respect of any
Advance or unpaid sum, as the annual percentage rate determined by the Bank on
the date such term starts to be the rate which would have been offered to the
Bank by prime banks on the quotation date for deposits of a comparable amount
to that Advance or other sum, in the same currency and for a period comparable
to its term.

 

For
Advances with a maturity of up to six months, the Borrower shall pay interest accrued
on each Advance on the date of maturity of such Advance. For Advances with a
maturity in excess of six months, the Borrower shall pay interest at the end of
each calendar quarter and on the date of maturity of such Advance.

 

3.3.         MARGIN

 

Facility A:             The applicable interest Margin on Advances
drawn under Facility A depends on the Debt Capacity Ratio.

 

The
«Debt Capacity Ratio” is defined as senior bank debt divided by earnings before
interests, taxes, depreciation and amortization («EBITDA») and is calculated on
a consolidated basis, i.e. for Schaublin and all its subsidiaries. In the
context of «Debt Capacity Ratio” the Senior Bank Debt is being defined as the
amount due to the Bank as of the end of the measuring period, after giving
effect to the principal payment due on such date.

 

Until
receipt of the annual audited consolidated accounts of Schaublin as of March 31,
2004, the applicable interest margin shall be 2.25%. Thereafter, the applicable
interest Margin shall be adjusted for all drawings on an annual basis as of July 1
of the respective year, based upon the annual audited consolidated accounts of
Schaublin, according to the following pricing grid:

 

	
  Debt
  Capacity Ratio:

  	
   

  	
  Margin:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  >
  2.75x

  	
   

  	
  4.50

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  >
  2.50x and < 2.75x

  	
   

  	
  2.50

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  >
  2.25x and < 2.50x

  	
   

  	
  2.25

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  >
  1.75x and < 2.25x

  	
   

  	
  2.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  >
  1.25x and < l.75x

  	
   

  	
  1.75

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  >
  1.00x and < 1.25x

  	
   

  	
  1.50

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  <
  1.00x

  	
   

  	
  1.25

  	
  %

  

 

3.4.         RATE AND CALCULATION CURRENT
ACCOUNT

 

Schaublin
shall pay to the Bank at the end of each calendar quarter and pro rata on the
Final Repayment Date interest on the amount outstanding on current account(s)
under Facility B, increased by a quarterly utilization fee of 0.25%, calculated
on the highest used amount during that period. For utilizations in Swiss
Francs, the current account interest rate shall be 5.55% per annum. For
utilizations in other currencies, the respective interest rate offered by the
bank will be applied.

 

7

 

The
Bank has the right to adjust the current account interest rate at any time
according to prevailing market conditions and according to the financial
performance of the Borrower and/or the assigned credit rating of the Borrower
by the Bank, without notice period and at its sole discretion. Such change
shall only occur in case the Bank changes the rate on current account credit
limits applicable to borrowers similarily situated to the Borrower or if the
Bank adapts its internal rating.

 

3.5.         COMMISSION

 

At
the end of each calendar quarter and pro rata on the Final Repayment Date,
Schaublin shall pay to the Bank a Commission at a rate equal to the applicable
Margin per annum of Facility B on the outstanding amount of each guarantee,
performance bond and letter of credit issued under Facility B, whereby the
Commission shall be calculated on the basis of the actual number of days
elapsed and a year of 360 days.

 

3.6.         DEFAULT RATE

 

If
a Default, as defined in clause 9.1., has occurred and as long as such a
Default lasts, the applicable interest rate on Advances and on current account(s),
as well as the applicable Commission on the outstanding amount of each
guarantee, performance bond and letter of credit issued under Facility B, will
be increased by 2.00% per annum.

 

 

4.     REPAYMENT, REDUCTION & CANCELLATION

 

4.1.         REPAYMENT

 

The
Borrower shall repay each Advance, in the same currency as the one in which the
Advance was disbursed and on the account to be designated by the Bank, from
time to time, on its maturity date, together with the interest accrued thereon.

 

4.2.         CANCELLATION OF AMOUNTS AVAILABLE

 

Any
amount not drawn under Facility A (the unused portion) 45 days after the
signing of this Agreement will be deemed to be cancelled. Any amount so
cancelled shall permanently reduce the amount available under Facility A.

 

4.3.         REDUCTION

 

The
following reductions of Facility A are mandatory and such reductions shall
permanently reduce the amount available under Facility A.

 

	
  Date:

  	
   

  	
  Reduction in CHF:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2004

  	
   

  	
  500,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  September 30,
  2004

  	
   

  	
  1,000,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2005

  	
   

  	
  1,000,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  September 30,
  2005

  	
   

  	
  1,250,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2006

  	
   

  	
  1,250,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  September 30,
  2006

  	
   

  	
  1,000,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2007

  	
   

  	
  1,000,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  September 30,
  2007

  	
   

  	
  1,000,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2008

  	
   

  	
  750,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  September 30,
  2008

  	
   

  	
  750,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2009

  	
   

  	
  500,000.00

  	
   

  

 

8

 

4.4.         FINAL REPAYMENT

 

	
  Facility A:

  	
   

  	
  Schaublin
  shall repay in full all Advances (principal and accrued interest including
  fees and similar expenses or remuneration) under Facility A on March 31,
  2009 (“Final Repayment Date A”), if a Business Day as defined under 2.2.,
  otherwise according to clause 5.3.. The Bank’s commitment for Facility A shall
  automatically terminate on the close of business of the Final Repayment Date
  A. Schaublin may not borrow any Advance should the last day of its term fall
  after that date.

  
	
   

  	
   

  	
   

  
	
  Facility B:

  	
   

  	
  Schaublin
  shall repay in full all amounts outstanding under current accounts (principal
  and accrued interest including fees and similar expenses or remuneration)
  under Facility B on March 31, 2009 (“Final Repayment Date B”), if a
  Business Day as defined under 2.2., otherwise according to clause 5.3.. The
  Bank’s commitment for Facility B shall automatically terminate on the close
  of business of the Final Repayment Date B. Schaublin may not borrow any
  Advance should the last day of its term fall after that date. Any guarantee,
  performance bond and letter of credit issued under this Agreement and
  outstanding on the Final Repayment Date B shall be cash collateralized as of
  the Final Repayment Date B.

  

 

4.5.         CANCELLATION

 

	
  Facility A:

  	
   

  	
  On
  the giving of thirty days prior written notice to the Bank, Cancellation of
  Facility A will be permitted in minimum amounts of CHF 500,000.00 and
  integral multiples thereof. Any amount so cancelled shall permanently reduce
  the amount available under Facility A. Any notice of intended Cancellation
  shall be irrevocable.

  
	
   

  	
   

  	
   

  
	
  Facility B:

  	
   

  	
  Facility
  B and current accounts can be cancelled mutually at any time with immediate
  effect. Advances already granted under Facility B and any guarantee,
  performance bond and letter of credit issued under Facility B will remain
  unaffected by a Cancellation of Facility B until their maturity as restricted
  under Clause 2.1. and 4.4.. Furthermore, the Cancellation of an Advance or a
  current account granted under Facility B will not automatically result in the
  termination of Facility B as a whole. Any notice of intended Cancellation
  shall be irrevocable.

  

 

9

 

4.6.         PREPAYMENT AND CANCELLATION

 

If
the Borrower is required to make any payment to the Bank under Clause 5.2.
(Taxation of the Bank, etc.) or under Clause 6. (Changes in Circumstances), it
may prepay all or any one of the Advances to which the provisions of these
clauses apply by giving the Bank an irrevocable notice of prepayment and
cancellation and the Borrower will prepay the Advances ten (10) Business Days after
such notice is given. The unused portion of the commitment will be deemed to be
cancelled on the date of receipt of such notice by the Bank.

 

The
outstanding amounts shall be repaid without penalty, subject to payment to the
Bank of the difference, if negative, if any, of:

 

(a)           the amount of interest which the Bank is able
to obtain by placing an amount equal to the amount prepaid on deposit with
prime banks in the relevant interbank market for the remainder of relevant
interest period, as soon as reasonably practicable after receipt thereof from
the Borrower, less

 

(b)           the amount of interest which would otherwise
be payable to the Bank on the relevant amount received for the remainder of the
relevant interest period (less the margin).

 

The
certificate of the Bank setting out the amount shall, in the absence of a
manifest error, be prima facie evidence thereof.

 

 

5.     PAYMENT AND TAXES

 

5.1.         MANNER OF PAYMENT

 

Each
payment to be made by the Borrower must be:

 

(a)           remitted to any account which the Bank specifies;

 

(b)           made for value on the due date, in the
currency in which it is stated to be payable;

 

(c)           freely disposable outside of bilateral or
multilateral payment agreements which may exist at the time of payment, free
and clear of any and all present and future taxes, levies, imposts, duties,
deductions, withholdings, fees, liabilities and similar charges, now or
hereafter imposed by or on behalf of any taxing authority.

 

If deduction of any such taxes shall at any time during the continuance
of the Facilities be required by or under the authority of any government, the
Borrower shall pay such amount in respect of principal and interest as may be
necessary in order that the amounts effectively received by the Bank after such
deduction shall be equal to the respective amount of principal and interest
which would have been paid to the Bank if no such deduction had been made.

 

5.2.         TAXATION OF THE BANK, ETC.

 

If
the Bank is required to make any payment on account of tax (other than tax
imposed on the net income of its lending office by the jurisdiction in which it
is incorporated or in which its lending office is located) in respect of any
sum received or receivable by it under this Agreement, or if any liability in

 

10

 

respect
of any such payment is asserted, imposed, levied or assessed against the Bank,
the Borrower shall on the Bank’s demand, pay the Bank an amount equal to the
amount which the Bank is required to pay, together with any interest, penalties
and expenses payable or incurred in connection with it.

 

5.3.         BUSINESS DAYS

 

If
any payment under this Agreement becomes due on a day which is not a Business
Day, the due date for that payment will be extended to the next day which is a
Business Day, unless such Business Day shall fall in the following calendar
month, in which event the due date will be the immediately preceding Business
Day.

 

5.4.         PARTIAL PAYMENT

 

If
at any time the Bank receives a smaller payment than the amount of any payment
due, it may apply the amount effectively received in or towards discharge of
the Borrower’s liabilities in any order selected by the Bank under the
respective Facility for which the payment has been made.

 

 

6.     CHANGES IN CIRCUMSTANCES

 

6.1.         INCREASED COSTS

 

If
the result of any change in any law, regulation or official directive (whether
or not having the force of law), or in the interpretation or application
thereof, or compliance by the Bank with any request or directive of any
applicable monetary or fiscal agent or authority or banking authority (whether
or not having the force of law) is to increase the cost (including an
increase of costs resulting from an adverse change in the calculation basis of
the Bank’s own fund requirements) of the Bank of maintaining or funding any
Advance or is to reduce the amount of principal or interest receivable, then
upon demand by the Bank, the Borrower shall pay to the Bank such amount as
shall compensate the Bank for such additional cost or reduction.

 

6.2.         ESCAPE CLAUSE

 

In
case the Bank should not be able to grant or renew Advances in the currency
requested by the Borrower owing to any present or future currency restrictions
or similar circumstances (i.e. initiated by Central Banks, Governments or any
other public authority or body) the Bank reserves the right to advance another
freely available currency at that date. The Bank’s opinion as to whether a
currency is available or not shall be conclusive and binding on the Borrower,
except in case of manifest error.

 

6.3.         RESTRICTION CLAUSE

 

Should
the Swiss National Bank or any other government body or authority impose
restrictions of any kind or nature on the Bank affecting the Facilities, the
Bank shall have the right to request that the conditions of the present
Facilities be renegotiated by sending without delay written notice to the
Borrower.

 

11

 

Should
no consent be reached following a negotiation period of thirty (30) days, the
Borrower and the Bank shall have the right to cancel the Facilities with
immediate effect and without having to pay any penalty, whereby any and all
amounts owed by the Borrower to the Bank shall immediately become due for
repayment.

 

6.4.         ILLEGALITY

 

The
Bank will notify the Borrower if it reasonably believes that it is, or will be,
acting illegally or contrary to any applicable rules and regulations in
relation to the Facilities («Notice of Illegality”), specifying the reason
therefore. The Bank shall thereupon use its best efforts to transfer and/or
assign its rights under these Facilities to another bank not affected by such
illegality or violation of rules and regulations. If the Bank notifies the
Borrower in writing within twenty (20) Business Days after dispatching a copy
of the aforementioned Notice of Illegality to the Borrower, the commitment of
the Bank under this Agreement will thereupon terminate. For the transfer and/or
the assignment of the Bank’s rights and/or obligations and to prepare such a
transfer or assignment of the bank’s rights and/or obligations, the Borrower
releases the Bank from the obligation to observe banking secrecy. If the Bank
so requires, the Borrower will prepay any Advance which is affected by any such
illegality or violation on the date specified by the Lender in the notice.

 

 

7.     UNDERTAKINGS, COVENANTS ETC.

 

7.1.         GENERAL UNDERTAKINGS

 

The
Borrower agrees that until all of its liabilities under this Agreement have
been discharged and as long as any commitment is outstanding:

 

(a)           Default: the Borrower shall notify the Bank immediately
if any Event of Default or any potential Event of Default occurs or may
reasonably be expected to occur;

 

(b)           Information: the Borrower shall inform the Bank without
delay of any event which is appropriate to materially adversely affect the
credit quality of the Facilities, such as major disposals of assets or
acquisitions. It will supply the Bank with any information regarding the
Borrower and any of its subsidiaries and their financial affairs and those of
any of their subsidiaries which the Bank may request.

 

(c)           Pari Passu: it will ensure that its liabilities under this
Agreement will rank at least equally with any and all other present and future
liabilities of the Borrower and/or its subsidiaries other than those which are
mandatorily privileged by law;

 

(d)           Negative Undertakings: in case the Borrower wants to untertake one of
the following actions under (i) to (vii), it will provide the Bank in advance
with detailed information. Should the Bank acting reasonably conclude that such
undertaking represents a Material Adverse Change, such undertaking would
constitute an Event of Default according to Clause 9.1 (i).

 

(i)            Negative Pledge: create any encumbrance or permit any
encumbrance to exist over all or any of its assets or revenues or of the assets
or revenues of all or any of its subsidiaries, other than liens to secure
equipment financing or future permitted loans; or

 

12

 

(ii)           Guarantees: give any guarantee, indemnity or other
security in connection with any other liability of any other person otherwise
than in the normal course of its business; or

 

(iii)          Capital Commitment: authorize or accept any capital commitments
outside the normal course of its business; or

 

(iv)          Merger: consolidate with or merge into any other body
corporate, or merge any other body corporate into itself; or

 

(v)           Disposal of Assets or
Revenues: dispose, transfer,
grant or lease its assets or assets of its subsidiaries, except if such
disposal, transfer, grant or lease is made in the ordinary course of business.
The disposal, transfer, grant or lease of (a) patents, (b) trademarks, and (c)
shares of subsidiaries of the Borrower, however, are not regarded as being in
the ordinary course of business; or

 

(vi)          Major Acquisitions: purchase or undertake to purchase (either
itself or through any of its subsidiaries) assets other than the planned Capex
in kind and amounts as defined in the Business plan remitted to the Bank and as
limited in clause 7.5 (b), which will result in a major change in the ability
of the Borrower to fulfill its present and future obligations in relation to
the Facilities, or a change of its business activities; or

 

(vii)         Reorganization: Enter into a de-merger or reorganization which
will result in a major change in the ability of the Borrower to fulfill their
present and future obligations in relation to the Facilities.

 

7.2.         REPRESENTATIONS AND WARRANTIES

 

The
Borrower represents and warrants to the Bank that:

 

(a)           the Borrower is a company duly organized and
validly existing under the laws of its country of incorporation with full power
and authority under such laws to own its properties and to conduct its
business;

 

(b)           the making and performance of the Facilities
have been duly authorized by all necessary corporate action of the Borrower and

 

(i)            do not contravene any provision of any
applicable law or the Borrower’s articles of association, and

 

(ii)           will not result in a breach of or constitute a
default under any contractual provisions, the breach of which would impair the
Borrower’s ability to perform its obligations under this Agreement;

 

(c)           this Agreement is valid and legally
enforceable in accordance with its terms against the Borrower in its country of
incorporation;

 

(d)           there are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened against the Borrower
or any of its subsidiaries before any court, tribunal or governmental body,
agency, authority or other instrumentality which might substantially adversely
affect the financial condition of the Borrower and/or of any of its
subsidiaries or their ability to perform their obligations hereunder;

 

7.3.         SPECIFIC UNDERTAKINGS

 

Schaublin agrees that until all of its and its subsidiaries’ liabilities
under this Agreement have been discharged and no commitment is outstanding:

 

13

 

(a)           it will remit annual audited consolidated
accounts of Schaublin and its subsidiaries, including a covenant compliance
certificate pursuant to Clause 7.3.(c) hereafter, within 120 days after the end
of each financial year;

 

(b)           it will remit annual audited accounts of
Schaublin SA within 120 days after the end of each financial year;

 

(c)           it will remit annual audited accounts of
Schaublin Holding SA within 120 days after the end of each financial year;

 

(d)           it will remit quarterly consolidated
financial key figures of Schaublin and its subsidiaries, including a covenant
compliance certificate pursuant to Clause 7.3.(c) hereafter, within 90 days
after the end of each financial quarter. These consolidated financial key
figures shall contain at least (1) revenues, (2) order backlog, (3) EBITDA, (4)
total debt, and (5) all other relevant figures to calculate the Financial
Covenants;

 

(e)           it will remit on a quarterly basis a covenant
compliance certificate, as defined in Annex C, showing the detailed calculation
of each Financial Covenant and signed by the Chief Financial Officer of
Schaublin;

 

(f)            it will remit annual audited accounts of RBCF
within 120 days after the end of each financial year. For the fiscal year 2003
the financial year of RBCF will end at December 31 and will be changed to March 31
in 2004;

 

(g)           it will remit annual consolidated budgets of
Schaublin an its subsidiaries and a restated three-year business plan with key
financial projections within 30 days after their completion, but no later than April 30
of each year;

 

(h)           it represents and warrants that it has no
knowledge of any past, present or future fact related to the environment,
health and safety, which could materially affect it and/or any of its
subsidiaries in a negative way.

 

7.4.         FINANCIAL COVENANTS

 

The
following Financial Covenants as well as the ratio used for the Margin
calculation (ratio and amounts) to be calculated based on the consolidated
accounts of Schaublin must be permanently satisfied by Schaublin and all of its
subsidiaries on a consolidated basis. The calculation of the ratio shall as a
rule be carried out by Schaublin quarterly for the past 12 months (rolling
calculation period) and be remitted at the latest to the Bank 60 days after the
end of the calculation period. The first calculation period shall be January 1
until 31, March 2003. However, the Bank shall be entitled to demand the
financial data required to check on the compliance with the Covenants at any
time. The Financial Covenants will be restated and amended in case of a change
of Schaublin’s and/or any of its subsidiaries accounting principles/policies
(especially in case of dissolution of hidden reserves, revaluation of assets,
capital gains from disposal of assets, change in accounting method(s), change
in depreciation and amortization policy, etc.):

 

(a)           Minimum Interest Coverage Ratio

 

Definition:

 

Interest
Coverage Ratio: Consolidated EBITDA divided by consolidated Total
Net Interest (as defined in Annex C).

 

Minimum ratio at any time: 7.50x

 

14

 

(b)           Minimum Net Worth

 

Definition:

 

Minimum Net Worth: Consolidated equity of Schaublin and its
subsidiaries, including subordinated shareholder loans.

 

Minimum ratios:

 

	
  Period:

  	
   

  	
  Net Worth in CHF:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  until
  March 31, 2004

  	
   

  	
  CHF
  14,000,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Thereafter
  for all periods

  	
   

  	
  CHF
  15,000,000.00

  	
   

  

 

Net Worth is being defined as the consolidated equity including subordinated
loans as of the end of the measuring period, after giving effect to a possible
repayment on the subordinated loans as set in Clause 8 on such date.

 

(c)           Maximum Debt Capacity Ratio

 

Definition:

 

Debt Capacity: Consolidated senior bank debt divided by
consolidated trailing twelve-month EBITDA. Senior Bank Debt is being defined as
the amount due to the Bank as of the end of the measuring period, after giving
effect to the principal payment on such date.

 

Maximum ratios:

 

	
  Period:

  	
   

  	
  Debt Capacity Ratio:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  until
  March 31, 2004

  	
   

  	
  2.75

  	
  x

  
	
   

  	
   

  	
   

  	
   

  
	
  until
  March 31, 2005

  	
   

  	
  2.25

  	
  x

  
	
   

  	
   

  	
   

  	
   

  
	
  until
  March 31, 2006

  	
   

  	
  1.50

  	
  x

  
	
   

  	
   

  	
   

  	
   

  
	
  thereafter

  	
   

  	
  1.25

  	
  x

  

 

(d)           Minimum Inventory Turnover Rate

 

Definition:

 

Inventory Turnover: Consolidated trailing twelve-month Cost of
Goods Sold (COGS) divided by Inventory as stated at the end of the measuring
period.

 

Minimum ratio at any time: 1.00x

 

(e)           Debt Restriction

 

No additional financial debt or similar obligations provided to the
Borrower and/or its subsidiaries shall be allowed without prior written consent
of the Bank, with the following exceptions:

 

(i)            revolving line of credit and letters of credit
facilities of EUR 750,000.00 (Euros seven hundred fifty thousand and o/oo) in
aggregate at the maximum for RBCF granted by a local bank.

 

15

 

(ii)           existing lease financing provided to the
Borrower;

 

(iii)          existing subordinated debt provided by
Schaublin Holding of CHF 1,375,000.00 (Swiss francs one million and three
hundred seventy-five thousand and o/oo) to the Borrower;

 

(iv)          Subordinated debt in form of a shareholder
loan by Schaublin Holding as defined in Clause 8.

 

(d)           Violation of financial covenants

 

A violation of any financial covenant described above may be cured by a
capital contribution by the Borrower’s parent, i.e. such capital contribution
shall effectively be treated as an increase to EBITDA for compliance
measurement purposes.

 

7.5.         OTHER COVENANTS

 

(a)           Capital expenditures (“Capex”)

Capex are limited
to the amounts projected in the business plan.

 

Projected Capex

 

	
  Period
  (fiscal year)

  	
   

  	
  Max. amounts in CHF

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1.4.2003
  to 31.3.2004

  	
   

  	
  975,000.00

  	
   

  
	
  1.4.2004
  to 31.3.2005

  	
   

  	
  945,000.00

  	
   

  
	
  1.4.2005
  to 31.3.2006

  	
   

  	
  945,000.00

  	
   

  
	
  thereafter
  per fiscal year

  	
   

  	
  950,000.00

  	
   

  

 

(b)           Transaction with Shareholders / Related Parties

The Borrower undertakes for itself and its subsidiaries for the whole
duration of these Facilities not to provide any credit or similar financial
support to their shareholders or any related parties to them, as well as not to
enter into any obligation or provide any financial or other support which is
not in due course of business. All other transactions in normal course of
business shall be done on an arm’s length basis, including transactions between
the Borrower and its ultimate parent company in the USA and the latter
affiliated companies.

 

(c)           Insurance Coverage and Environmental Risk

The Borrower confirms and undertakes for itself and its subsidiaries and
for the whole duration of this Agreement to have adequate insurance coverage
for their assets, losses due to interruption of business activities,
responsibility claim of third parties as well as all other usual
insurance coverage for such business activities.

 

The Borrower confirms and undertakes for itself and its subsidiaries and
for the whole duration of this Agreement not to enter in business activities
which could bear any material environmental risk.

 

16

 

8.     SHAREHOLDER LOAN

 

Schaublin
Holding will provide the Borrower with a shareholder loan in the amount of CHF
150,000.00 (Swiss Francs one hundred fifty thousand and o/oo). This loan will
be subordinated to the Bank’s Debt and will bear an interest rate of 3.00%. The
subordinated loan(s) of total CHF 1,525,000.00 may be repaid to the extent that
(i) the financial covenant levels set in this credit agreement under clause
7.4. are still met after such payment and (ii) all amortizations due
under Facility A on or before such date as set in clause 4.3 shall have been
made.

 

 

9.     EVENTS OF DEFAULT

 

9.1.         EVENTS

 

The
occurrence of any of the following is an Event of Default:

 

(a)           Non-Payment: the Borrower, after a remedy period of seven
(7) Business Days from the due date, shall fail to pay any amount of principal
or interest, or any other amount due hereunder, when same becomes due and
payable under this Agreement; or

 

(b)           Breach of Obligations: the Borrower and/or any one of its
subsidiaries and/or any third party mentioned in this Agreement fails to
perform or to observe any of the material terms and conditions and/or material
undertakings contained in this Agreement and (if capable of remedy) such
failure is not remedied within twenty (20) days of its occurrence; or

 

(c)           Misrepresentation: any representation or warranty made by the
Borrower or any third party under or in connection with this Agreement shall
turn out to have been incorrect or misleading in any substantial material
respect; or

 

(d)           Cross-Default: the Borrower or any of its subsidiaries

 

(i)            after giving effect to any applicable grace
period, shall fail to pay for borrowed money other than money referred to under
this Agreement, or any interest or premium thereon, when due (whether at
scheduled maturity or by prepayment, acceleration, demand or otherwise) or any
other default under any agreement or instrument relating to any such
indebtedness, or any other event shall occur, if the effect of such default or
event is to accelerate, or to permit the acceleration of the maturity of such
indebtedness, or any such indebtedness shall be declared to be due and payable,
or required to be prepaid to the stated maturity thereof, except for the case
that the aggregate amount of such default or event shall not exceed CHF
250,000.00 per event and CHF 500,000.00 per annum; or

 

(ii)           (a) becomes bound to repay prematurely any
other loan or obligation by reason of a default by the Borrower or (as the case
may be) any one of its subsidiaries which is followed by an appropriate demand
of such repayment except where the Borrower or (as the case may be) any one of
its subsidiaries are taking action in good faith to dispute the validity of the
obligation to repay such other loan or obligation prematurely, except for the
case that the aggregate amount of such default or event shall not exceed CHF
250,000.00 per event and CHF 500,000.00 per annum; or (b) fail to make any
payment of principal, premium or interest in respect of such other loan or
obligation, or any payment under a guarantee in respect of any loan or other
obligation, on the due date for such

 

17

 

repayment or within any grace period specified in the agreement or other
instrument constituting such other loan, obligation or guarantee as aforesaid,
except for the case that the aggregate amount of such default or event shall
not exceed CHF 250,000.00 per event and CHF 500,000.00 per annum.

 

(e)           Winding-up or Dissolution: any order is made by any competent court or
other authority or resolution passed by the Borrower for the dissolution or
winding-up of the Borrower or any order is made by any competent court or other
authority for the dissolution or winding-up of any of its subsidiaries or for
the appointment of a liquidator, receiver or trustee of the Borrower or (as the
case may be) any of its subsidiaries or of the whole or any part of the
undertaking or assets of the Borrower or (as the case may be) any of its
subsidiaries which would be material in the context of this Agreement or the
Borrower or (as the case may be) any of its subsidiaries apply for «Sursis
Concordataire» (within the meaning ascribed to that expression by the laws of
Switzerland) or an equivalent legal institution in case of any subsidiary; or

 

(f)            Insolvency: the Borrower or (as the case may be) any of
its subsidiaries stop or threaten or declare their intention to cease payments
or are unable to, or admit to creditors generally its inability to pay its
debts as they fall due, or is finally adjudicated or found bankrupt or
insolvent, or makes any conveyance or assignment for the benefit of or enter
into any composition or other arrangement with its creditors generally; or

 

(g)           Change of Control: any change of control in Schaublin

 

For the present purposes «Change of Control» shall mean:

 

That Schaublin is not anymore controlled 100% directly or indirectly by
Roller Bearing Company of America, Inc. and RBCF is not anymore controlled 100%
directly or indirectly by Schaublin; or

 

(h)           Security Enforceable: any present or future security on, over or
with respect to the assets of the Borrower and/or any one of its subsidiaries
become enforceable or any beneficiary of encumbrances takes possession or a
receiver is appointed of the whole or any material part of the undertaking,
property and assets of the Borrower and/or any one of its subsidiaries or a
distress or execution is levied or enforced upon or sued for all or any
material part of the assets of the Borrower and/or any one of its subsidiaries;
or

 

(i)            General Material Adverse
Change: a change in the
business, operations, sales, costs, assets or liabilities of the Borrower
and/or any of its subsidiaries which individually or in the aggregate, have
materially affected or are likely in the future to materially affect the
financial condition, net worth and profitability of the Borrower; or

 

(j)            Unlawfulness, Invalidity: it is or becomes unlawful for the Borrower to
perform promptly any of its obligations under this Agreement or for the Bank to
exercise any of its rights under this Agreement, or if this Agreement for any
other reason becomes invalid or unenforceable or ceases to be in full force and
effect, or if the Borrower does or causes or permit to be done anything which
evidences an intention to contest or repudiate this Agreement wholly or in
part; or

 

(k)           Compliance with Laws: the Borrower and/or any one of its
subsidiaries ceases or will cease to comply with any law, regulation or
requirement applicable to it in the carrying out of their business if such
failure to comply would materially impair its ability to perform their
obligations under this Agreement.

 

18

 

9.2.         CONSEQUENCES

 

If
an Event of Default occurs, the Bank may, upon notice in writing to the
Borrower immediately terminate the commitment and declare all Advances and all
other Bank debts hereunder to be forthwith due and payable, whereupon the
unpaid principal amount of such Advances together with accrued interest to the
date of declaration and all other amounts due hereunder shall become
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the Borrower.

 

 

10.  SET-OFF

 

10.1.       SET-OFF

 

The
Bank may at any time take all or any of the following steps:

 

(a)           open a new account in the name of the Borrower
(defined as Schaublin, as applicable) and debit that account, or debit an
existing account of the Borrower with any amount due to the Bank by the
respective Borrower;

 

(b)           combine or consolidate, regardless of
currency, all or any of the accounts with the Bank in the name of the
respective Borrower or to which the respective Borrower is beneficially
entitled at any of the Bank’s branches in any country or territory; and

 

(c)           (after taking into account any combination or
consolidation of accounts), set off any amount standing to the credit of any
such account by applying any such credit balance in or towards payment of any
amount due to the Bank.

 

10.2.       CURRENCY CONVERSION

 

The
Bank may at any time use any of the Borrower’s credit balances with the Bank to
purchase at the Bank’s applicable spot rate of exchange any other currency or
currencies which the Bank considers necessary to reduce or discharge any amount
due to the Bank, and may apply that currency or those currencies in or towards
payment of those amounts.

 

 

11.  INDEMNITIES

 

11.1.       GENERAL INDEMNITY

 

The
Borrower will indemnify the Bank against all losses (including but not limited
to losses from liquidating or re-employing deposits from third parties which
were acquired to effect or maintain the Facilities or any part of them) and
expenses which the Bank may incur (after taking into account any payments to
the Bank of interest at a default rate) as a result of the occurrence of:

 

(a)           an Event of Default; and/or

 

(b)           the failure of the Borrower to pay any amount
due under this Agreement on the due date; and/or

 

19

 

(c)           any Advance being repaid or prepaid for any
reason otherwise than on the last day of its term; and/or

 

(d)           any Advance not being borrowed for any reason
(excluding default by the Bank) after a notice requesting that Advance has been
sent to the Bank by the Borrower.

 

11.2.       CURRENCY INDEMNITY

 

If
any payment in connection with this Agreement is made or recovered in a currency
other than that in which it is required to be paid then, if the payment to the
Bank (when converted at the Bank’s rate of exchange on the date of payment or,
in the case of a liquidation of a company of Schaublin and/or one of its
subsidiaries, the latest date for the determination of liabilities permitted by
the applicable law) falls short of the amount remaining unpaid under this
Agreement, the Borrower will indemnify the Bank against the amount of such
shortfall.

 

 

12.  FEES AND EXPENSES

 

12.1.       STRUCTURING FEE

 

Schaublin
will pay to the Bank a structuring fee of CHF 50,000.00, payable within 30 days
as from the signing of this Agreement.

 

12.2.       EXPENSES

 

All
out-of-pocket expenses, costs, charges, tax and expenses, including legal fees,
incurred by the Bank in connection with the negotiation, preparation and
completion of this Agreement shall be borne by the Bank. Out-of-pocket
expenses, including legal fees, incurred in connection with any change,
reorganization, amendment of this Agreement after the signing date shall be
borne by the Borrower.

 

12.3.       VALUE ADDED TAX

 

All
amounts stated in this agreement to be payable by the Borrower are exclusive of
value added tax or any similar tax property chargeable in respect of services
under this Agreement, and the Borrower will pay all tax of this nature together
with the amounts on which such tax shall be levied.

 

 

13.  ASSIGNMENT, TRANSFER AND
LENDING OFFICES

 

13.1.       NO ASSIGNMENT BY THE BORROWER

 

The
Borrower may not assign or transfer any of its rights or obligations under this
Agreement, except with the prior written approval of the Bank.

 

13.2.       ASSIGNMENT AND TRANSFER BY
THE BANK

 

20

 

The
Bank shall be entitled to transfer or assign the whole or any part of its
rights and obligations under the Facility to an affiliated, controlled or
related company or other entity and provided that such assignment will not in
any way be prejudicial to the Borrower from a tax perspective, subject to prior
notification of the Borrower. In particular, the Bank shall not be entitled to
transfer or assign the whole or any part of its rights and/or obligations under
this Agreement if the consequence was that all or any of the Facilities would
be deemed to be a bond for Swiss tax purposes. Any other transfer/assignment
may be effected with the prior written approval of the Borrower only, which
approval shall not be unduly withheld. For the transfer and/or the assignment
of the Bank’s rights and/or obligations and to prepare such a transfer and/or
assignment of the Bank’s rights and/or obligations the Borrower releases the
Bank from the obligation to observe banking secrecy.

 

 

14.  NOTIFICATION

 

14.1.       BY THE BANK

 

All
notification by the Bank to the Borrower as well as all correspondence in
connection with these Facilities shall be delivered either in person, sent by
mail or telefax and shall be deemed to have been duly given if addressed to:

 

Schaublin
SA

c/o
Roller Bearing Company of America, Inc.

60
Round Hill Road

Fairfield,
CT 06430

USA

Attention:
Michael S. Gostomski

Telephone:
001 (203) 255-1511

Telefax:
001 (203) 256-0775

 

With
a copy to:

 

Schaublin
SA

Attention:
Jean-Paul Tardif, Operations Director

Rue
de la Blancherie 9

2800
Delémont

 

14.2.       BY THE BORROWER

 

All
notification by the Borrower to the Bank as well as all correspondence in
connection with these Facilities shall be delivered either in person, sent by
mail or telefax and shall be deemed to have been duly given if addressed to:

 

CREDIT SUISSE

Attention: C. Saucy

P.O. Box 237

2800 Delémont

Telephone: ++41 (0)32 421 95 23

Telefax: ++41 (0)32 421 95 88

 

21

 

14.3.       OBJECTIONS

 

Any
objection by the Borrower relating to the execution or non-execution of any
order of any kind as well as any objection to any statement of account or any
other communication must be made within seven Business Days upon receipt of the
respective communication; otherwise the execution or non-execution of the order
as well as the pertinent statements and communications are deemed to have been
approved.

 

 

15.  GOVERNING LAW AND
JURISDICTION

 

This
Agreement will be governed by and construed in accordance with Swiss law, which
shall also govern any decision as to the validity of this choice of law clause.

 

Any
dispute arising out of or in connection with this Agreement shall be settled by
the competent courts of the canton of Jura and the Swiss Confederation, venue
being Delémont, provided always that the Bank shall be entitled to institute
proceedings against the Borrower before any competent court, including, but not
limited to the courts competent at the places or registered offices of the
Borrower or any of its subsidiaries.

 

 

16.  MISCELLANEOUS

 

16.1.       CONFIDENTIALITY

 

The
parties hereto will keep the information contained in this Agreement
confidential subject to agreed exceptions, such as disclosure required by law,
disclosure of information already in the public domain without default by any
of the parties hereto and disclosure to professional advisors on a need to know
basis.

 

16.2.       NO
WAIVER

 

The
Bank shall not be considered having waived any of its rights under this
Agreement if it has not exercised such right in a given case or has exercised
such rights only partially.

 

16.3.      SEVERABILITY

 

If,
at any time, any provision of this Agreement is or becomes illegal, invalid or
unenforceable in any respect under the laws of any jurisdiction, neither the
legality, validity or enforceability of the remaining provisions hereof nor the
legality, validity or enforceability of such provision under the law of any
other jurisdiction shall in any way be affected or impaired thereby and the
Borrower and the Lender agree that any void provision shall be replaced by a
new provision being as close as possible to the void one.

 

16.4.       INTERPRETATION

 

Words importing the plural shall include the singular and vice versa.
CHF shall mean Swiss Francs and vice versa. EUR shall mean Euros and vice
versa.

 

22

 

16.5.       ORIGINALS

 

The
parties hereto have executed this Agreement - constituting the legally binding
Agreement - in three originals (two for the Borrower and one for the Bank).

 

The
enclosed General Conditions are integral part except as stated otherwise within
this Agreement. In case of a contradiction between this Agreement and the
General Conditions, this Agreement shall prevail.

 

SIGNED
on behalf of each of the parties:

 

Delémont,
December 8, 2003

 

 

	
  The
  Borrower:

  	
   

  
	
   

  	
   

  
	
  Schaublin
  SA

  	
  /s/ Michael S. Gostomski

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Third
  Party:

  	
   

  
	
   

  	
   

  
	
  Schaublin
  Holding SA

  	
  /s/ Michael S. Gostomski

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  The
  Bank:

  	
   

  
	
   

  	
   

  
	
  CREDIT
  SUISSE

  	
  /s/ Th. Lovis

  	
  /s/ C. Saucy

  	
   

  
	
   

  	
   

  
	
   

  	
  Th.
  Lovis

  	
   

  	
  C.
  Saucy

  
	
   

  	
  Director

  	
   

  	
  Assistant
  Vice President

  
							

 

23

 

ANNEX A

 

CONDITIONS PRECEDENT-

ITEMS REQUIRED BEFORE AN ADVANCE OR OTHER FUNDS MAY BE BORROWED

 

The
Bank shall not be obliged to permit any drawdown by the Borrower, and the
Borrower shall not give any notice of drawing, unless and until the Bank has
received the following documents and evidence and has found them to be
satisfactory in form and substance:

 

(a)           any obligation of the Bank to permit the
initial drawdown shall be subject to the following conditions precedent:

 

(i)            formation and existence of Schaublin SA and
all its subsidiaries;

 

(ii)           certified copies of the constitutional
documents for each company entering into financing documentation;

 

(iii)          Board resolutions confirming the approval for
entering into financing documentation for each company entering into financing
documentation;

 

(iv)          completion and execution of all loan
documentation relating to the Facilities, including execution of all required
guarantee and security documentation;

 

(v)           transfer of all the pledged shares requested
in this Agreement into safe custody accounts with the Bank;

 

(vi)          all necessary corporate authorizations for the
entry into the transaction documents;

 

(vii)         receipt of financial information in form and
substance satisfactory to the Bank;

 

(viii)        no Material Adverse Change in operations,
business, properties, conditions (financial or otherwise) or prospects of the
Borrower and all of their subsidiaries since March 31, 2003 (audited
numbers) and September 30, 2003.

 

(ix)           absence of any material pending or threatened
litigation or other proceedings;

 

(x)            compliance with and maintenance of all
applicable laws and regulations, including all required regulatory consents and
approvals (unless failure to comply which does not materially impair the
Borrower’s ability to perform their obligations under this Agreement).

 

(b)           any obligation of the Bank to permit any
drawdown under this Agreement shall be subject to the following conditions
precedent:

 

(i)            all Representations and Warranties made by the
Borrower in this Agreement or in the security documents are true and correct;

 

(ii)           no Event of Default has occurred and is
continuing or will occur as a result of drawdown;

 

(iii)          no breach of any provisions under this
Agreement or the security documents;

 

(iv)          receipt of duly completed and signed Fixed
Term Advance Request by the Bank, unless the Bank accepts a simplified drawdown
procedure for Advances under Facility B;

 

(v)           such other documents relating to any of the
matters contemplated herein as the Bank may reasonably request.

 

24

 

ANNEX B

 

FIXED TERM ADVANCE REQUEST

 

From:                                                                  [Name of company, address] («Borrower»)

 

To:                                                                              Credit Suisse, Delémont («Lender»)

 

Date                     

 

Dear Sirs,

 

We
refer to the Agreement (as from time to time amended, varied, novated or
supplemented, the «Facilities») dated December 8, 2003, and made between
Schaublin and Credit Suisse.

 

We
hereby give you notice that we wish to make a fixed term Advance under these
Facilities as follows:

 

	
  Facility
  (A, B):

  	
   

  	
   

  
	
   

  	
   

  
	
  Currency:

  	
   

  	
   

  
	
   

  	
   

  
	
  Amount:

  	
   

  	
   

  
	
   

  	
   

  
	
  First
  value date:

  	
   

  	
   

  
	
   

  	
   

  
	
  Duration:

  	
   

  	
   

  
	
   

  	
   

  
	
  To
  be transferred to account:

  	
  No:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Beneficiary:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Bank:

  	
   

  	
   

  
												

 

We
confirm that at the date thereof, the Representations and Undertakings set out
in the Agreement are true and no event which is or may become (with the passage
of time, the giving notice, the making of any determination under the Agreement
or any combination thereof) an Event of Default has occurred.

 

	
  Yours
  Sincerely,

  
	
   

  
	
   

  
	
  For
  and on behalf of [Name of company]

  

 

25

 

ANNEX C

 

COMPLIANCE CERTIFICATE

 

The
undersigned officer of Schaublin hereby certifies that he is the Chief
Financial Officer of Schaublin, and that as such he is authorized to execute
this compliance certificate required to be furnished pursuant to the Credit
Agreement, dated December 8, 2003, and further certifies that:

 

1)              Attached
hereto is a copy of the Borrower’s quarterly statements for the period ending
[                  ],
which contains the consolidated balance sheet and the related consolidated
statements of income and cash flows of Schaublin and all its subsidiaries,
setting forth in each case in comparable form the figures for the previous year
(collectively the “Financial Statements”).

 

2)              The
Financial Statements are complete and correct in all material respects and were
prepared in reasonable detail and in accordance with the Swiss Generally
Accepted Accounting Principles (FER or IAS applied consistently throughout the
periods reflected therein.

 

3)              The
undersigned has no knowledge of any Default or Event of Default.

 

4)              The
following calculations as of
[                    ]
support the statement made in paragraph 3 above with respect to the Credit
Agreement.

 

i)                 Minimum
Interest Coverage Ratio

 

	
  Total
  Interest Expenses

  	
                        

  
	
  - Total Interest Income

  	
                        

  
	
  Total
  Net Interest Expenses “B”

  	
                        

  
	
   

  	
                        

  
	
  Consolidated
  Net Income

  	
                        

  
	
  +
  Taxes

  	
                        

  
	
  + Total Net Interest Expenses “B”

  	
                        

  
	
  EBIT

  	
                        

  
	
  +
  Amortization of Goodwill

  	
                        

  
	
  + Depreciation

  	
                        

  
	
  EBITDA
  “A”

  	
                        

  
	
   

  	
                        

  
	
  Minimum
  Interest Coverage Ratio (“A” divided by “B”)

  	
                        

  
	
   

  	
   

  
	
  Covenant
  Minimum

  	
         7.50x      

  

 

26

 

 

ii)              Minimum
Net Worth

 

	
  Consolidated
  Share Capital

  	
                   

  
	
  +
  Consolidated Reserves

  	
                   

  
	
  +
  Consolidated Retained Earnings

  	
                   

  
	
  +
  Subordinated shareholder loans

  	
                   

  
	
  Net
  Worth

  	
                   

  
	
   

  	
   

  
	
  Covenant
  Minimum

  	
                   

  

 

iii)           Maximum
Debt Capacity Ratio

 

	
  Consolidated
  Senior Bank Debt “A”

  	
                   

  
	
  Consolidated
  EBITDA (as determined in i) above) “B”

  	
                   

  
	
   

  	
                   

  
	
  Maximum
  Debt Capacity Ratio (“A” divided by “B”)

  	
                   

  
	
   

  	
                   

  
	
  Covenant
  Maximum

  	
                   

  

 

iv)          Minimum
Inventory Turnover Rate

 

	
  Cost
  of Goods sold “A”

  	
                   

  
	
  Inventory
  “B”

  	
                   

  
	
   

  	
                   

  
	
  Minimum
  Inventory Trunover Rate (“A” divided by “B”)

  	
                   

  
	
   

  	
                   

  
	
  Covenant
  Minimum

  	
     1.00x   

  

 

 

	
   

  	
  Schaublin
  SA

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Name,
  Title)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Date)

  

 

27

 

ANNEX D

 

GENERAL CONDITIONS

 

See
separate Document

 

28

 

ANNEX E

 

Special Deed of Pledge

 

1.              The undersigned

 

Schaublin Holding SA

Rue de la Blancherie 9

2800 Delémont

 

(hereinafter referred to as pledgor)

 

herewith pledges in favour
of Credit Suisse (hereinafter referred to as Bank) the securities, savings and
investment books of any kind (hereinafter referred to as books), loan stock
rights not evidenced by certificates (especially securities for which the issue
of certificates is deferred), metal deposits and other valuables listed
hereafter and held by the Bank or held under their name but for the pledgor’s
account by any agent or representative of the Bank, as well as any rights to
recovery of possession of such assets. Securities which are not in bearer form
are pledged to the Bank in accordance with Article 901, Section 2 of
the Swiss Civil Code (hereinafter referred to as the SCC).

 

The pledge also includes all forfeited, current and future associated
rights such as interest and dividend payments and subscription rights.

 

2.              The purpose of this pledge is to cover any and
all claims of the Bank against

 

Schaublin SA

Blancherie 9

2800 Delémont

 

(hereinafter referred to as debtor)

 

as a result of any contract or agreement entered into or to be entered
into in the future within the framework of business relationships. This applies
to both the principal and the accrued and maturing interest, commissions and
fees. Collateral deposited with one of the Bank’s offices is also liable for
claims of other offices of the Bank. In the case of several claims, the Bank
shall determine for which claim the collateral or liquidation proceeds are
liable.

 

3.              The pledgor hereby assigns to the Bank all
insurance and other private or public law claims (including expropriation claims) accruing to him with
respect to the aforementioned securities and property, and the Bank are
entitled to effect the necessary communications and to collect such proceeds or
indemnification and to give receipt on his behalf .

 

4.              The present pledge shall be in addition to and
independent of any existing or future guarantees and shall remain in force
until such time as the obligations to the Bank shall have been fulfilled in
their entirety. The release of individual pledged items from the pledge does
not affect the Bank’s lien on the other pledged items. In the event that
collateral is exchanged, the new items shall be subject to this pledge without
further formalities. This applies in particular to repayments of titles,
whereby the corresponding proceeds replace the title and become subject to the
pledge. The whole item is subject to this pledge, even if its value is
increased by reason of additional payments or for any other reason.

 

29

 

 

5.              Should the bank refrain from exercising its
right of pledged property, or delay in doing so, this neither constitutes a
waiver of the Bank’s right nor does it entail any responsability for the Bank.
Upon their claims becoming due, the Bank shall also be entitled to dispose of
the pledged collateral at its discretion, provided, however, previous notice
has been given to the debtor. The obligation to give notice shall be waived in
the event of impending danger (marked fluctuations in market prices, etc.). The
Bank is entitled to institute ordinary execution for payment of a debt against
the debtor without having first to realise the collateral by forced execution
or by free sale. In doing so, the Bank does not, however, waive its rights
under the lien or pledge.

 

6.              If the deed of pledge is issued on behalf of
third parties, all notices shall be deemed to be valid if they have been sent
to the debtor. In the case of pledged books, the Bank is entitled to notify the
issuer that a book has been pledged. The pledger undertakes to cooperate with
the Bank to transfer the collateral to a new buyer. Pledged securities which
are not in bearer form are hereby assigned blank to the Bank in the event that
it should become necessary to dispose of them.

 

7.              The Bank’s form of Safe Custody Regulations
and General Conditions, receipt of which is hereby confirmed, supplement the
terms of this contract.

 

8.              For the fulfilment of all commitments arising
from the establishment of this pledge, the pledgor elects special domicile at CREDIT SUISSE in Delémont.

 

Swiss law shall be applicable in the interpretation of this pledge. Any dispute
arising out of or in connection with this document shall be submitted for
judgement to the ordinary Courts of the
Canton of Jura subject to appeal to the Swiss Federal Court at
Lausanne. The Bank has, however, the right to take legal action before the
court at the undersigned’s domicile or before any other competent court.

 

30

 

List
of pledged assets, rights and claims

 

	
  Number of shares

  	
   

  
	
   

  	
   

  
	
  -1366-

  	
  Pledge of 99.4% of the
  shares of Schaublin SA, Delémont, with a nominal value of CHF 100’000.–

  

 

 

	
  Place,
  date

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  
	
  Delémont,
  December 8, 2003

  	
  /s/ Michael S. Gostomski

  	
   

  
	
   

  	
   

  
	
   

  	
   Board of Directors of Schaublin Holding SA

  

 

The
board of directors of Schaublin SA, Delémont, hereby agrees to the pledge by
Schaublin Holding SA of 1366 shares of Schaublin SA in favour of CREDIT SUISSE.
The board understands that the pledge is made in order to support its
indebtedness towards CREDIT SUISSE. This deed of pledge is hereby ratified by
the board of Schaublin SA. If the collateral is realised by forced execution or
by free sale, the board of Schaublin SA herewith already agrees to register any
new acqueror of the shares in the shareholders’ registry.

 

 

	
  Delémont,
  December 8, 2003

  	
  /s/ Michael S. Gostomski

  	
   

  
	
   

  	
   

  
	
   

  	
  Board of Directors of Schaublin SA

  

 

31

 

General
Conditions

 

These
General Conditions govern the relationship between CREDIT SUISSE (hereinafter
referred to as Bank) and its clients subject to any special agreement and the
established rules of banking practice.

 

For
the sake of clarity, the Bank uses only masculine pronouns in its forms. These
are to be understood as including both sexes.

 

Art. 1   identity check

 

The
Bank undertakes to check carefully the identity of its clients and their
authorised agents. The client is liable for any damage resulting from failure
to recognise falsifications or incorrect identification provided that the Bank
has exercised the degree of due care usual in banking transactions.

 

Art. 2 Legal Incapacity

 

The
client is liable for any damage resulting from his incapacity to act provided
that such incapacity to act was not apparent to the Bank on exercising the
degree of due care usual in banking transactions. The client is liable in all
cases for any damage or loss resulting from incapacity on the part of his
authorised agent or other third party.

 

Art. 3 Communications from the Bank

 

Communications
from the Bank are deemed to have been duly transmitted if sent to the last
address supplied to the Bank by the client.

 

Art. 4 Errors in transmission

 

Damage
resulting from the use of postal services, fax, telephone, telex, e-mail and
other means of communication or transport, such as from loss, delay,
misunderstandings, mutilation or duplicate dispatch is to be borne by the
client provided that the Bank has exercised the degree of due care usual in
banking transactions.

 

Art. 5 Defective execution of instructions

 

In
the event of damage resulting from the defective execution, late execution or
non-execution of instructions (with the exception of instructions relating to
stock exchange transactions), the Bank’s liability is limited to an amount
equal to the loss of interest, unless its attention has been expressly directed
to the risk of more extensive damage at the time of and in respect of such
instructions.

 

Art. 6 Saturday an official holiday

 

In
business transactions with the Bank, Saturday shall be treated as an official
Bank holiday.

 

Art. 7 Complaints

 

Complaints
by a client relating to the execution of instructions as well as to other communications
must be lodged immediately upon receipt of the communication concerned and at
the latest within the particular period specified by the Bank. If the Bank
fails to send a communication which the client expects, the client must
nevertheless lodge his complaint as if he had received the communication by
ordinary mail. Any damage arising from delay in making a complaint is to be
borne by the client.

 

Objections
concerning account or safekeeping account statements must be submitted within
one month of receipt. Upon expiry of this period the statement is deemed to
have been approved.

 

Art. 8 Right of lien and set-off

 

The
Bank has a right of lien on all assets it holds for the account of a client
whether in its own custody or placed elsewhere and a right of set-off as
regards all funds credited to a client’s account in respect of all claims which
the Bank may have against the client, irrespective of the due dates of such
claims or currencies in which they are expressed. Immediately upon default by
the client the Bank shall be entitled to dispose, either by forced sale or in
the open market, of any assets over which it has a right of lien.

 

Art. 9 Accounts

 

The
Bank reserves the right to alter its interest and commission rates at any time,
e.g. in the event of changes in market conditions and to advise the client of
such change in writing or by other suitable means. No deductions are allowed
from interest and commissions due to the Bank. Any expenses, taxes or other
charges are to be borne by the client. If the client gives several
instructions, the total amount of which exceeds his available balance, the Bank
will decide at its discretion which of the instructions to carry out, in whole
or in part, irrespective of the date they bear or the date of their receipt by
the Bank.

 

Art. 10 Accounts in foreign currencies

 

The
Bank’s assets corresponding to the client’s credit balances in foreign currency
are held in the same currency

 

1

 

in or outside of the
country whose currency is involved. The client bears proportionately to his
share all the economic and legal consequences which, as a result of measures
taken by the country in question, affect all the Bank’s assets in the country
of the currency or in the country where the funds are invested.

 

The
obligations of the Bank arising from accounts in foreign currencies will be
discharged exclusively at the place of business of the branches or offices at
which the accounts in question are held solely through the establishment of a
credit entry at a Bank branch, a correspondent bank or a bank nominated by the
client in the country of the currency.

 

Art. 11 Drafts, cheques and other instruments

 

The
Bank reserves the right to debit the client’s account with unpaid drafts,
cheques or other instruments, previously credited or discounted. Pending the
settlement of any outstanding debit balance, the Bank retains a claim to
payment of the total amount of the draft, cheque or similar instrument, plus
related claims against any party liable under the instrument, whether such
claims emanate from the instrument or exist for any other legal reason.

 

Art. 12 Termination of business relationship

 

The
Bank or the client may terminate the business relationship at any time and at
either’s own discretion.

The
Bank may in particular cancel credit facilities at any time and demand
repayment of debts without notice.

 

Art. 13 Outsourcing of operations

 

The
Bank reserves the right to outsource, in whole or in part, certain areas of
business (e.g. funds transfer and securities operations).

 

Art. 14 Applicable law and venue for legal proceedings

 

All legal relations between the client and the Bank
are governed by Swiss law. The exclusive venue for any kind of legal
proceedings is Zurich or the place of business of the Swiss branch of the Bank
with which the contractual relationship exists. The Bank also reserves the
right to take legal action against the client before any other competent court.

 

Art. 15 Bank customer secrecy

 

All
agents, employees and representatives of the Bank are obliged by law to treat
the business transactions of the client with confidentiality. The client
releases the Bank from its obligation to secrecy in so far as this is necessary
to safe-guard the legitimate interests of the Bank: 

 

•                  in the case of legal proceedings against the
Bank initiated by the client

•                  to secure claims of the Bank and enable it to
make use of securities of the client or third parties

•                  to collect claims by the Bank against the
client

•                  in the case of client accusations against the
Bank in public or to the authorities in Switzerland or abroad

•                  to the extent the terms applying to
transactions in foreign securities or rights demand disclosure.

 

All
legal obligations imposed upon the Bank to disclose information are expressly
reserved.

 

Art. 16 Amendments to the General Conditions

 

The
Bank reserves the right to amend the General Conditions at any time. The client
will be notified in writing or by other suitable means.

 

2

 

Safe
Custody Regulations

 

General
Provisions

 

Art. 1  Validity

 

These
Safe Custody Regulations shall apply, in addition to the General Conditions of
the Bank, to all assets and other objects of value (hereinafter called “Safe
Custody Assets”) accepted by the Bank for safe custody.

These
Regulations shall be supplementary to any special contractual agreements or
special regulations for special safe custody accounts.

 

Art. 2 Acceptance of Safe Custody Assets

 

The
Bank will accept

 

a)              securities
for safe custody and administration, as a rule in open safekeeping accounts

 

b)             precious
metals for safe custody, as a rule in open
safekeeping accounts

 

c)              money
market and capital market investments not issued in the form of securities for
entry and administration in open safekeeping
accounts

 

d)             documents
of title or documents evidencing entitlements for safe custody, as a
rule in open safekeeping accounts

 

e)              valuables
and other appropriate objects for safe custody, as a rule in sealed safe deposit arrangements.

 

Separate
regulations shall apply to sealed safe deposit arrangements.

The
Bank may refuse to accept Safe Custody Assets without stating any reasons.

 

Art. 3 Verification of Safe Custody Assets

 

The
Bank may verify Safe Custody Assets delivered to the Bank by the depositor or
by third parties for the account of the depositor for authenticity and blocking
or freezing notifications, without thereby assuming any liability for such
verification. In particular, the Bank shall be obliged to undertake
administrative acts only after such verification is completed. Accordingly, the
Bank shall not be obliged during the verification period to execute any sales
orders or other transactions in which the assets must be released to a third
party against payment.

 

The
Bank shall undertake the verification of the Safe Custody Assets in accordance
with the resources and documents at its disposal. Foreign Safe Custody Assets
may be given to the depository or another suitable agent in the relevant
country for verification.

 

Art. 4 Book-entry securities with a similar function as
securities

 

Certificated
Securities and book-entry securities with a similar function for which no
physical certificates are issued shall be treated the same. The rules on
commission (art. 425 et seq. Swiss Code of Obligations) shall apply to the
relationship between the depositor and the Bank.

 

Art. 5 Duty of due Care of the Bank

 

The
Bank shall exercise the same degree of due care in safeguarding the Safe
Custody Assets as if such assets were the property of the Bank.

 

Art. 6 Delivery and disposal of the Safe Custody Assets

 

The
depositor may at any time, subject to notice periods and provisions of the law
as well as pledges, charges, liens, rights of retention or set-off and other
similar entitlements of the Bank, demand that the Safe Custody Assets be
delivered to him or put at his disposal. The usual time to effect delivery in
the market concerned must be observed.

The
Safe Custody Assets shall be transported or dispatched for the account and at
the risk of the depositor. If no instructions are received from the depositor,
the Bank may insure and declare the value of the Safe Custody Assets at its own
discretion.

 

Art. 7 Remuneration of the Bank

 

The
remuneration of the Bank shall be calculated according to the fee tariff in
force at the time. The Bank reserves the right to change the fee tariff at any
time. Changes shall be notified to the depositor in an appropriate manner.

 

Art. 8 Duration of the Agreement

 

The
Agreement shall generally be for an indefinite period. The legal relationships
established by these Regulations shall not lapse upon the death, incapacity or
bankruptcy of the depositor.

 

Art. 9 Amendments to the Safe Custody Regulations

 

The
Bank may amend the Safe Custody Regulations at any time. Amendments shall be
notified to the depositor in writing or another appropriate manner.

 

Special
Provisions for Open Safekeeping Accounts

 

Art. 10 Form of safekeeping

 

The
Bank is explicitly authorised to deposit Safe Custody Assets with third parties
in its own name but for the account and at the risk of the depositor. Unless
instructed to the contrary, the Bank is also authorised to hold the Safe
Custody Assets in collective deposit according to their type or to deposit them
with a central collective depository. Depositors

 

3

 

shall
have a right of co-ownership based on the ratio of Safe Custody Assets
deposited by them to all Safe Custody Assets in the collective depository,
provided that the collective depository is in Switzerland. This does not
include Safe Custody Assets which, because of their form or for other reasons,
have to be kept separately in safe custody.

Safe
Custody Assets held abroad shall be subject to the laws and customs of the
place of deposit. If the applicable law of the foreign country renders it
difficult or impossible for the Bank to return assets deposited abroad or to
transfer the proceeds from the sale of such assets, then the Bank shall only be
obliged to procure for the depositor a claim for the return of property or
payment of the sums involved, provided that such a claim exists and is
assignable.

Safe
Custody Assets in registered form may be registered in the name of the
depositor. The depositor hereby accepts the disclosure of its name to the third
party depository. Alternatively the Bank may register the assets in its own
name or in the name of a third party, in either case for the account and at the
risk of the depositor, especially if it is not customary or possible to
register the assets in the name of the depositor.

 

Safe
Custody Assets redeemable by drawings may also be held according to their type
in collective safe custody; drawn lots shall be allocated amongst the
depositors by the Bank, using a method which guarantees all depositors the same
chance of inclusion in the sub-drawing as under the main drawing.

 

Art. 11 Administration

 

The
Bank shall, without specific instructions from the depositor, attend to the
usual administrative matters such as the collection of dividends and interest,
repayments of principal, monitoring of drawings, redemptions and maturities,
conversions and subscription rights, etc. and shall also normally require
depositors to take the measures incumbent on them pursuant to par. 2 of this
article. In this regard the Bank shall rely on the customary information media
available to it but does not assume any responsibility therefore. The Bank
shall notify the depositor on the deposit statement or by other means if it is
unable to administer individual assets in the usual manner. The administrative
actions in respect of registered shares without coupons shall be carried out
only if the address for delivery of dividends and subscription rights is that
of the Bank.

 

Unless
otherwise agreed, it shall be the responsibility of the depositor to take all
other measures to obtain and preserve the rights accruing on the Safe Custody
Assets, in particular to issue instructions for the handling of conversions,
the exercise, purchase or sale of subscription rights and the exercise of
conversion rights. If instructions from the depositor are not received in time,
the Bank shall be authorised, but not obliged, to act at its discretion
(including to debit the customer’s account, for example when exercising subscription
rights).

 

Art. 12 Postponed printing of certificates

 

If
it is intended to postpone the issuance of certificates for the duration of the
deposit for safe custody with the Bank, the Bank shall be explicitly authorised
to

 

a)              cause
the respective certificates to be cancelled upon their delivery into the
safekeeping account

b)             carry
out the usual administrative actions for the account of the depositor during
the safe custody and give the issuer the necessary instructions and obtain the
necessary information, and

c)              demand
the physical issuance of the certificates on behalf of the depositor upon their
delivery out of the safekeeping account.

 

Art. 13 Fiduciary Acceptance of Safe Custody Assets

 

If
it is not customary or possible for title to the Safe Custody Assets to be
vested in the depositor, the Bank may purchase the Safe Custody Assets or cause
them to be purchased in its own name or in the name of a third party and to
exercise the rights arising thereunder or cause them to be exercised, at all times
for the account and at the risk of the depositor.

 

Art. 14 Credits and debits

 

Amounts
(principal, income, fees, expenses, etc.) shall be credited or debited to the
account pursuant to the booking instructions as agreed, unless instructed
otherwise by the depositor. Such amounts shall be converted into the currency
of the relevant account if necessary.

Changes
to the account instructions must be received by the Bank at least 5 bank
business days before the transaction falls due.

 

Art. 15 Statements

 

The
Bank shall provide the depositor with a statement of the Safe Custody Assets in
the safekeeping account, as a rule at the end of the year. The statement
may also include other assets which are not subject to the Safe Custody
Regulations. Safekeeping account valuations shall be based on non-binding
prices and market values taken from the usual bank sources of information. The
Bank shall not assume any liability for the accuracy of these valuations or for
further information relating to the posted assets.

 

4

 

SCHAUBLIN SA

MINUTES OF THE BOARD OF DIRECTORS’ MEETING OF

DECEMBER 8, 2003

 

A meeting of the members of the Board of Directors
of Schaublin SA, a Swiss corporation (the “Company”), was held on December 8,
2003, at the office of Raaflaub Attorneys-at-Law, located at Stadelhoferstrasse
42, CH-8001 Zurich.

 

The
meeting was called by Michael Gostomski for the purpose of obtaining credit
facilities with Credit Suisse. The notice was duly given to the entire board,
consisting of:

 

Michael Gostomski

Carl-Ludwig Raaflaub

Ulrich Spiess

Michael J. Hartnett

Silvia Yurekli-Zbomik

 

The
following directors were present, comprising a quorum of the board:

 

Michael Gostomski

Carl-Ludwig Raaflaub

Silvia Yurekli-Zbomik

 

The President of the Board, Michael Gostomski, appointed Silvia
Yurekli-Zbomik to act as secretary.

 

The following resolution was adopted by an unanimous vote of the
present directors:

 

WHEREAS,
the Board of Directors has previously determined that it will be in the best
interest of the Company to enter into a Credit Agreement with Credit Suisse;
and

 

WHEREAS,
pursuant to the Credit Agreement 99.4% (1366) shares of the present and future
share capital of the Company must be pledged by Schaublin Holding to Credit Suisse.

 

NOW,
THEREFORE, it
is:                                                                                                                      .

 

RESOLVED,
that the Company shall acknowledge that 1366 shares of the Company (the “Pledged
Shares”) have been pledged to Credit Suisse and that such Pledged Shares have
been endorsed in favor of the bearer and deposited with Credit Suisse; and

 

RESOLVED,
that the Company shall accept without any restriction any inscription of a
shareholder on the Pledged Shares as designated by Credit Suisse, and shall
register such shareholders as the record owner of the Pledged Shares in the
share register of the Company.

 

There being no further business to transact, the meeting was adjourned.

 

 

	
   

  	
  /s/
  Michael Gostomski

  	
   

  
	
  December 8,
  2003

  	
  Michael
  Gostomski

  
	
   

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  December 8,
  2003

  	
  /s/
  Silvia Yurekli-Zbomik

  	
   

  
	
   

  	
  Silvia
  Yurekli-Zbomik

  
	
   

  	
  Secretary

  

 

 

	
  

  	
  CREDIT
  SUISSE

  
	
   

  
	
   

  	
  Bleicherweg
  72

  	
  Direct
  Line

  	
  01
  - 333 52 30

  
	
   

  	
  P.O. Box
  100

  	
  Telefax

  	
  01
  - 333 67 76

  
	
   

  	
  8070
  Zurich

  	
  Email

  	
  daniel.gutmann@credit-suisse.com

  
	
   

  	
   

  	
   

  
	
  Daniel
  Gutmann

  	
  Roller
  Bearing Company of America, Inc. 

  
	
  Structured
  Finance

  	
  60
  Roundhill Road

  
	
  BAFR

  	
  Fairfield,
  CT 06824

  
	
   

  	
  USA

  
	
   

  	
   

  
	
   

  	
  Attn:
  Michael S. Gostomski

  
	
   

  	
   

  
	
  KOPIE

  	
   

  
	
   

  	
   

  
	
   

  	
  December 3,
  2003

  

 

Credit
Agreement - Clarification

 

Gentlemen

 

You
have asked for a clarification of the intent of Section 7.5 (b) of
the proposed Credit Agreement between Schaublin SA and Credit Suisse. Section 7.5
(b) reads, in its entirety, as follows:

 

The Borrower undertakes for itself and its
subsidiaries for the whole duration of these Facilities not to provide any
credit or similar financial support to their shareholders or any related
parties to them, as well as not to enter into any obligation or provide any
financial or other support which is not in due course of business. All other
transactions in normal course of business shall be done on an arm’s length
basis, including transactions between the Borrower and its ultimate parent
company in the USA and the latter affiliated companies.

 

The
question has arisen as to whether it is the intent of this provision to
prohibit Schaublin SA and its subsidiaries from making advances or loans to
their parent corporations or related entities. This letter will confirm our
statement to you that Schaublin SA and its subsidiaries have the ability to
make such loans and advances, to make intercompany transfers, sales, etc.
without restriction so long as such transactions occur in the due course of
business of Schaublin SA or such subsidiaries.

 

	
  Sincerely,

  	
   

  
	
   

  	
   

  
	
  CREDIT
  SUISSE

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/Daniel
  Gutmann 

  	
   

  	
  /s/
  Ralf Hippenmeyer

  	
   

  
	
  Daniel
  Gutmann 

  	
  Ralf
  Hippenmeyer

  
	
  Director

  	
  Vice-PresidentExhibit
10.35

 

 

AMENDMENT

 

No 1

 

to

 

CREDIT
AGREEMENT

 

Between

 

Schaublin
S.A.

Delémont

 

(hereinafter referred to as the «Borrower» or
«Schaublin»)

 

and

 

CREDIT
SUISSE

 

(hereinafter referred to as the «Bank»)

 

Dated 8, November 2004

 

 

Whereas the Borrower has
requested the Bank for various amendments to the original credit agreement,
dated December 8, 2003, and

 

Whereas the Bank is
prepared to approve the amendment requests as stated below under the
corresponding clauses of the credit agreement. All terms and conditions not
specifically mentioned in this amendment agreement will remain in place as
agreed in the Credit Agreement between Credit Suisse and Schaublin SA, dated December 8,
2003.

 

The Borrower and the Bank
agree on the following amendments:

 

1.2                               Amounts and Commitments

 

The Bank has agreed to
make available to the Borrower under the Facility B an amount not to exceed CHF
4’000’000,- (Swiss Francs four million and o/oo; previously Swiss Francs two
million and o/oo).

 

3.3                               Margin

 

The applicable interest
margin on Advances drawn under Facility A and B depends on the Debt Capacity
Ratio.

 

The «Debt Capacity Ratio»
is defined as senior bank debt divided by earnings before interests, taxes,
depreciation and amortization («EBITDA») and is calculated on a consolidated
basis, i.e. for Schaublin and all its subsidiaries. In the context of «Debt
Capacity Ratio» the Senior Bank Debt is being defined as the amount due to the
Bank as of the end of the measuring period, after giving effect to the
principal payment due on such date.

 

Until receipt of the
consolidated accounts of Schaublin as of March 31, 2005, the applicable
interest margin shall be 2.00%. Thereafter, the applicable interest Margin
shall be adjusted for all drawings on an annual basis as of July 1 of the
respective year, based upon the annual consolidated accounts of Schaublin,
according to the following pricing grid:

 

	
  Debt Capacity Ratio:

  	
   

  	
  Margin:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  >2.75x

  	
   

  	
  4.50

  	
  %

  
	
  >2.50x
  and < 2.75x

  	
   

  	
  2.50

  	
  %

  
	
  >2.25x
  and < 2.50x

  	
   

  	
  2.25

  	
  %

  
	
  >1.75x
  and < 2.25x

  	
   

  	
  2.00

  	
  %

  
	
  >1.25x
  and < 1.75x

  	
   

  	
  1.75

  	
  %

  
	
  >1.00x
  and < 1.25x

  	
   

  	
  1.50

  	
  %

  
	
  <
  1.00x

  	
   

  	
  1.25

  	
  %

  

 

2

 

7.3                               Specific Undertakings

 

The
specific undertakings requested are amended as follows:

 

Schaublin
agrees that until all of its and its subsidiaries’ liabilities under the Credit
Agreement have been discharged and no commitment is outstanding:

 

(a)          it will remit annual audited accounts of Schaublin, including a
covenant compliance certificate pursuant to Clause 7.3.(d) hereafter,
within 120 days after the end of each financial year;

 

(b)         it will remit annual audited accounts of Schaublin Holding within 120
days after the end of each financial year;

 

(c)          it will remit semi-annual consolidated financial key figures of
Schaublin SA and its subsidiaries, including a covenant compliance certificate
pursuant to Clause 7.3.(d) hereafter, within 90 days after the end of each
financial semester. These consolidated financial key figures shall contain at
least (1) revenues, (2) order backlog, (3) EBITDA, (4) total
debt, and (5) all other relevant figures to calculate the financial
covenants;

 

(d)         it will remit on a semi-annual basis a covenant compliance certificate,
as defined hereafter in Annex C, showing a detailed calculation of each financial
covenant and signed by the Chief Financial Officer of Schaublin;

 

(e)          it will remit annual audited accounts of all its subsidiaries 120 days
after the end of each financial year;

 

(f)            it will remit annual consolidated budgets of
Schaublin and its subsidiaries and a restated three-year business plan with key
financial projections within 30 days after their completion, but no later than April 30
of each year;

 

(g)         it represents and warrants that it has no knowledge of any past,
present or future fact related to the environment, health and safety, which
could materially affect it and/or any of its subsidiaries in a negative way.

 

	
  SIGNED
  on behalf of each of the parties:

  	
   

  
	
   

  	
   

  
	
  Delémont,
  8, November 2004

  	
   

  
	
   

  	
   

  
	
  The Bank:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  CREDIT SUISSE

  	
  /s/ Claude Saucy

  	
   

  	
  /s/ Philippe
  Gay-Crosier

  
	
   

  	
  Claude Saucy

  	
   

  	
  Philippe Gay-Crosier

  
	
  The Borrower:

  	
   

  
	
   

  	
   

  
	
  Schaublin S.A.

  	
  /s/
  Michael S. Gostomski

  	
   

  
	
   

  	
   

  
	
  Third Party:

  	
   

  
	
   

  	
   

  
	
  Schaublin Holding SA

  	
  /s/
  Michael S. Gostomski

  	
   

  
					

 

3

 

	
  Minimum Net Worth

  	
   

  
	
   

  	
   

  
	
  Consolidated Share
  Capital

  	
   

  	
   

  	
   

  
	
  + Consolidated Reserves

  	
   

  	
   

  	
   

  
	
  + Consolidated Retained
  Earnings

  	
   

  	
   

  	
   

  
	
  + Subordinated
  shareholder loans

  	
   

  	
   

  	
   

  
	
  Net Worth

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Covenant Minimum

  	
   

  
	
   

  	
   

  
	
  Maximum Debt Capacity
  Ratio

  	
   

  
	
   

  	
   

  
	
  Consolidated Senior
  Bank Debt “A”

  	
   

  	
   

  	
   

  
	
  Consolidated EBITDA (as
  determined in i) above) “B”

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Maximum Debt Capacity
  Ratio (“A” divided by “B”)

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Covenant Maximum

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Minimum Inventory
  Turnover Rate

  	
   

  
	
   

  	
   

  
	
  Cost of Goods sold “A”

  	
   

  	
   

  	
   

  
	
  Inventory “B”

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Minimum Inventory
  Turnover Rate (“A” divided by “B”)

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Covenant Minimum

  	
   

  	
  1.00x

  	
   

  
	
   

  	
   

  
	
   

  	
  Schaublin SA

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Name, Title)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Date)

  
						

 

4

 

ANNEX C

 

COMPLIANCE
CERTIFICATE

 

The undersigned officer
of Schaublin SA hereby certifies that he is the Chief Financial Officer of
Schaublin SA, and that as such he is authorized to execute this compliance
certificate required to be furnished pursuant to the Credit Agreement, dated December 8,
2003, and to the Amendment No 1, dated November 08, 2004, and further
certifies that:

 

Attached hereto is a copy
of the Borrower’s consolidated semi-annual statements for the period ending [                      ],
which contains the consolidated balance sheet and the related consolidated
statements of income and cash flows of Schaublin and all of its subsidiaries,
setting forth in each case in comparable form the figures for the previous year
(collectively the “Financial Statements”).

 

The Financial Statements
are complete and correct in all material respects and were prepared in
reasonable detail and in accordance with the Generally Accepted Accounting
Principles (FER or International Financial Reporting Standards – IFRS) applied
consistently throughout the periods reflected therein.

 

The undersigned has no
knowledge of any Default or Event of Default.

 

The following
calculations as of [                        ]
support the statement made in paragraph 3 above with respect to the Credit
Agreement.

 

	
  Minimum Interest
  Coverage Ratio

  	
   

  
	
   

  	
   

  
	
  Total Interest Expenses

  	
   

  	
   

  	
   

  
	
  - Total Interest Income

  	
   

  	
   

  	
   

  
	
  Total Net Interest
  Expenses “B”

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Consolidated Net Income

  	
   

  	
   

  	
   

  
	
  + Taxes

  	
   

  	
   

  	
   

  
	
  + Total Net Interest
  Expenses “B”

  	
   

  
	
  ./. Extraordinary
  Non-operating Items

  	
   

  	
   

  	
   

  
	
  EBIT

  	
   

  	
   

  	
   

  
	
  + Amortization of
  Goodwill

  	
   

  	
   

  	
   

  
	
  + Depreciation

  	
   

  	
   

  	
   

  
	
  EBITDA “A”

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Minimum Interest
  Coverage Ratio (“A” divided by “B”)

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Covenant Minimum

  	
   

  	
  7.50x

  	
   

  

 

5

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00084-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00084-of-00352.parquet"}]]