Exhibit 10.2

WAIVER AND THIRD AMENDMENT TO CREDIT
AGREEMENT

 

             This WAIVER AND THIRD AMENDMENT TO CREDIT AGREEMENT ("Amendment")
is dated as of September 26, 2001  and is entered into by and between Cherokee
International, LLC, a California limited liability company (“Borrower”), Heller
Financial, Inc., in its capacity as Agent for the Lenders party to the Credit
Agreement described below (“Agent”), and the Lenders which are signatories
hereto.

             WHEREAS, Agent, Lenders and Borrower are parties to a certain
Credit Agreement dated as of April 30, 1999, as amended by that certain Consent,
Waiver and First Amendment to Credit Agreement, dated as of June 15, 2000, and
as further amended by that certain Second Amendment to Credit Agreement dated as
of March 30, 2001 (as such agreement has from time to time been further amended,
supplemented or otherwise modified, the "Agreement");and

             WHEREAS,  the Borrower is in default under various provisions of
the Agreement, which defaults (collectively, the “Existing Events of Default”)
constitute Events of Default under the Agreement.  A list of the Existing Events
of Default is attached hereto as Exhibit A; and

             WHEREAS, the Existing Events of Default have been waived through
September 26, 2001 pursuant to that certain Waiver and Forbearance Agreement
dated as of August 14, 2001, as amended by that certain First Amendment to
Waiver and Forbearance Agreement dated as of September 14, 2001, among Borrower,
Agent and the Lenders signatories thereto; and

             WHEREAS, the parties desire to amend the Agreement as hereinafter
set forth.

             NOW THEREFORE, in consideration of the mutual conditions and
agreements set forth in the Agreement and this Amendment, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged,  the parties hereto hereby agree as follows:

             1.          Definitions.  Capitalized terms used in this Amendment,
unless otherwise defined herein, shall have the meaning ascribed to such terms
in the Agreement.

             2.          Amendments.  Subject to the conditions set forth below,
the Agreement is amended as follows:

             (a)         Subsection 1.1(B)(1) is amended by deleting the
following sentence from such subsection:

The “Maximum Revolving Loan Balance” will be the lesser of (a) the “Borrowing
Base” (as calculated on Exhibit 4.6(F), the “Borrowing Base Certificate”) less
outstanding Risk Participation Liability or (b) the Revolving Loan Commitment
less outstanding Risk Participation Liability.

             (b)        Subsection 1.1(B)(2) is amended by adding the following
sentence to the end of such subsection:

Subject to the terms of this Agreement (including, without limitation to the
preceding sentence), the Lenders agree to provide Overadvance Revolving Loans to
the Borrower during the period from the Third Amendment Effective Date through
December 31, 2002 in an amount not to exceed $2,500,000.  Notwithstanding
anything contained in this Agreement to the contrary, the Base Rate Margin and
the LIBOR Margin applicable to such Overadvance Revolving Loans shall be equal
to 2% in excess of the Base Rate Margin and LIBOR Margin otherwise applicable to
Revolving Loans in accordance with the Pricing Table set forth in Subsection
1.2(A) hereof. Unless an earlier maturity is provided for herein, such
Overadvance Revolving Loans shall be due and payable on December 31, 2002.

             (c)         Subsection 2.9 is amended by deleting such subsection
in its entirety and inserting the following in lieu thereof:

2.9        Post-Closing Items.   Within thirty (30) days of the Closing Date the
Borrower will deliver to the Agent the items numbered 2 and 3 in the definition
of Post-Closing Documents and within sixty (60) days of the Closing Date the
Borrower will deliver to the Agent the item numbered 4 in the definition of
Post-Closing Documents.  By October 15, 2001 the Borrower will deliver to the
Agent the item numbered 1 in the definition of Post-Closing Documents.  Within
thirty (30) days of the Third Amendment Effective Date the Borrower will deliver
to the Agent the item numbered 5 in the definition of Post-Closing Documents.

             (d)        Subsection 3.1(B)(d) is amended by replacing the amount
“$5,000,000” appearing in such subsection with the amount “$6,500,000”.

             (e)         Subsection 3.3(L) is amended by replacing the amount
“$3,500,000” appearing in such subsection with the amount “$2,000,000”.

             (f)         Subsection 3.5(A) is amended by deleting such
subsection in its entirety and inserting the following in lieu thereof:

(A)       Borrower may make Permitted Tax Distributions and Permitted
Distributions for Pre-Closing Tax Liabilities, provided that from and after the
Third Amendment Effective Date until the Permitted Tax Distribution Trigger
Date, the Borrower may not make Permitted Tax Distributions.  On or after the
Permitted Tax Distribution Trigger Date, Borrower may make Restricted Junior
Payments in an amount equal to the amount of Permitted Tax Distributions which
Borrower was not permitted to make prior to the Permitted Tax Distribution
Trigger Date so long as Borrower can demonstrate on a pro forma basis that,
after giving effect to the making of such Restricted Junior Payments, it will be
in compliance with the financial covenants set forth in Sections 4.3, 4.4 and
4.5 herein.

             (g)        Subsection 3.5(D) is amended by deleting such subsection
in its entirety and inserting the following in lieu thereof:

(D)        Borrower may make payments (but not prepayments) of scheduled
interest and principal in accordance with the terms of the Subordinated Notes,
provided, that the Borrower may not make or permit to be made the interest
payment on the Subordinated Notes scheduled to be made in November, 2002 unless
no Default or Event of Default has occurred and is continuing and the
Subordinated Interest Payment Threshold will be satisfied as of September 30,
2002.

             (h)        Section 3 is amended by inserting the following new
Subsection at the end of such Section:

3.16      MAS Timeline.   Borrower shall cause the milestones set forth in the
MAS Timeline to be achieved on or prior to the applicable date for such
milestone set forth in the MAS Timeline.

             (i)          Section 4.1 of the Credit Agreement is amended by
amending such section in its entirety to be and to read as follows:

4.1        Capital Expenditure Limits.   Borrower shall not permit the aggregate
amount of all Capital Expenditures of Borrower and its Subsidiaries to exceed
(the “Capex Limit”) for each calendar year after 2000, $4,600,000 annually plus
10% of the amount of EBITDA for such calendar year (and not on Pro Forma EBITDA)
in excess of $48 million.

             (j)          Section 4.3 of the Credit Agreement is amended by
amending such section in its entirety to be and to read as follows:

4.3        Fixed Charge Coverage. Borrower shall not permit the Fixed Charge
Coverage on the last day of any fiscal quarter ending during any of the periods
set forth below to be less than the Fixed Charge Coverage set forth below for
such period:

Period Minimum Fixed
Charge Coverage

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9/30/01 0.62x 12/31/01 0.54x 3/31/02 0.43x 6/30/02 0.56x 9/30/02 0.81x 12/31/02
1.05x 3/31/03 1.05x 6/30/03 1.05x 9/30/03 1.05x 12/31/03 1.10x Thereafter 1.10x

 

“Fixed Charge Coverage” will be calculated as illustrated on Exhibit 4.6(D).

             (k)         Section 4.4 of the Credit Agreement is amended by
amending such section in its entirety to be and to read as follows:

4.4        Total Interest Coverage. Borrower shall not permit the Total Interest
Coverage on the last day of any fiscal quarter ending during any of the periods
set forth below to be less than the Total Interest Coverage set forth below for
such period:

Period Minimum Total
Interest Coverage

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9/30/01 1.10x 12/31/01 0.88x 3/31/02 0.71x 6/30/02 0.87x 9/30/02 1.26x 12/31/02
1.70x 3/31/03 2.00x 6/30/03 2.25x 9/30/03 2.40x 12/31/03 2.45x Thereafter 2.75x

“Total Interest Coverage” will be calculated as illustrated on Exhibit 4.6(D).

             (l)          Section 4.5 of the Credit Agreement is amended by
amending such section in its entirety to be and to read as follows:

4.5        Total Indebtedness to Pro Forma EBITDA Ratio. Borrower shall not
permit the Total Indebtedness to Pro Forma EBITDA Ratio calculated as of the
last day of any fiscal quarter for any of the periods set forth below to be
greater than the Total Indebtedness to Pro Forma EBITDA Ratio set forth below
for such period:

Period Maximum Total
Indebtedness to
Pro Forma
 EBITDA Ratio

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9/30/01 7.16x 12/31/01 9.92x 3/31/02 11.40x 6/30/02 9.53x 9/30/02 6.71x 12/31/02
5.25x 3/31/03 4.45x 6/30/03 4.05x 9/30/03 3.80x 12/31/03 3.75x 3/31/04 3.50x
6/30/04 3.25x Thereafter 3.00x

             (m)        Section 4 of the Credit Agreement is amended by
inserting a new subsection 4.8 into such Section, which subsection 4.8 shall
read as follows:

4.8        Sponsor Obligations. The parties agree that the Sponsor Guaranties
and the Sponsor Collateral constitute Security Documents.  Any proceeds obtained
by Agent or Borrower from the Sponsor Guaranties  and the Sponsor Collateral
shall be applied as a prepayment, to be applied first in prepayment of the Term
Loans, pro rata against all remaining scheduled installments, and if the Term
Loans shall have been repaid in full, then in prepayment of the Revolving Loan,
unless such proceeds relate to an Event of Default under Section 6.1(A) in which
case such proceeds shall be applied to cure such Event of Default.

             (n)        Section 6.5 of the Credit Agreement is amended by
deleting such Section in its entirety and inserting the following in lieu
thereof:

6.5        Financial Covenant Defaults. In the event of a violation of any of
the financial covenants set forth in Sections 4.3, 4.4 and 4.5 herein, unless
the Requisite Lenders have waived such violation in writing, during the 15-day
period immediately following the day on which Borrower was required to deliver
to Agent the financial statements and certificates for the quarter with respect
to which a violation occurred:  (a) the Lenders shall not be required to make
any Loans to Borrower; (b) the Agent may not accelerate the repayment of the
Loans unless there exists any other Event of Default that has not been cured or
waived in writing by the Requisite Lenders; (c) the Requisite Lenders may at
their option exercise their right to impose default interest as provided for in
this Agreement; and (d) Borrower may cure any such financial covenant default by
arranging for its shareholders or other Persons to make an equity contribution
of cash to Borrower or a payment under the Sponsor Guaranties (prior to the
Sponsor Release Date or the date on which the Sponsor Guaranties have been
terminated) in an amount necessary to bring Borrower into compliance with all
financial covenants as of the last day of the quarter as of which a violation
occurred, provided however, that a cure by an equity contribution of cash as set
forth in this clause (d) may only be exercised twice in any one calendar year
and may only be exercised four times prior to the Expiry Date.  Any such equity
contribution or payment under the Sponsor Guaranties shall be applied as a
prepayment, to be applied first in prepayment of the Term Loans, pro rata
against all remaining scheduled installments, and if the Term Loans shall have
been repaid in full, then in prepayment of the Revolving Loan.  For purposes of
this Section 6.5 only, any such equity contribution of cash or payment under the
Sponsor Guaranties made within the 15-day period described above (x) made
pursuant to the Sponsor Guaranties (or which reduce the Sponsors’ exposure under
the Sponsor Guaranties) and prior to the Sponsor Release Date shall be
considered (i) for purposes of determining compliance with Section 4.3 and 4.4,
to constitute additional EBITDA earned in the quarter as of which a violation
occurred, (ii) for purposes of determining compliance with Section 4.5, to
reduce the amount of Total Indebtedness outstanding on the last day of the
quarter as of which a violation occurred and (y) made after the Sponsor Release
Date shall be considered to constitute additional EBITDA during the immediately
preceding quarter; provided that, notwithstanding the foregoing, any equity
contributions made prior to the Sponsor Release Date which at the Sponsors’
election evidenced by a writing in form reasonably satisfactory to Agent, will
not reduce the Sponsor’s exposure under the Sponsor Guaranties, shall be
considered additional EBITDA during the immediately preceding quarter for
purposes of determining compliance with Sections 4.3, 4.4 and 4.5.  In the event
Borrower does not cure all financial covenant violations as provided in this
Section 6.5, there shall exist an Event of Default unless waived by the
Requisite Banks in writing.

             (o)         Subsection 1.2(A) is amended by replacing the Pricing
Table appearing in such subsection with the following Pricing Table:

PRICING TABLE

 

Total Indebtedness
to Pro Forma EBITDA
Ratio   Base Rate
Margin   Base
Rate
Margin   LIBOR Margin   LIBOR Margin  

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      Revolving Loans
and Term Loan
A   Term
Loan B   Revolving Loans
and Term Loan
A   Term
Loan B      

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  Greater than or equal to 7.50   2.50%   3.00%   3.75%   4.25%   Greater than
or equal to 6.50:1 but less than 7.50:1   2.25%   2.75%   3.50%   4.00%  
Greater than or equal to 5.50:1 but less than 6.50:1   2.00%   2.50%   3.25%  
3.75%   Greater than or equal to 4.75:1 but less than 5.50:1   1.75%   2.25%  
3.00%   3.50%   Greater than or equal to 4.00:1 but less than 4.75:1   1.50%  
2.00%   2.75%   3.25%   Greater than or equal to 3.25:1 but less than 4.00:1  
1.25%   2.00%   2.50%   3.25%   Less than 3.25:1   1.00%   2.00%   2.25%   3.25%
 

             (p)        Subsection 10.1 is amended by inserting the following
definitions in their proper alphabetical order, or, where applicable, replacing
an existing definition with the applicable below definition:

“Borrowing Base” means the borrowing base calculated pursuant to the Borrowing
Base Certificate.

“Borrowing Base Certificate” means the certificate to be submitted by the
Borrower in the form of
Exhibit 4.6(F).

“MAS” means Mechanical and Automation Systems, an operating division of
Borrower.

“MAS Timeline” means that certain timeline delivered by Borrower to Agent on the
Third Amendment Effective Date setting forth certain dates by which certain
milestones for exploring the potential sale of MAS shall be completed.

“Maximum Revolving Loan Balance” shall be determined for the applicable period
based upon the below grid:

Period   Maximum Revolving Loan Balance

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Prior to Third Amendment Effective Date   lesser of (a) the Borrowing Base plus
any Overadvance Revolving Loans less outstanding Risk Participation Liability or
(b) the Revolving Loan Commitment less outstanding Risk Participation Liability
      Third Amendment Effective Date through 10/19/01   lesser of (a) Borrowing
Base plus any Overadvance Revolving Loans less outstanding Risk Participation
Liability or (b) $15,000,000 less outstanding Risk Participation Liability      
10/20/01 – 4/19/02   (A) so long as Borrower makes the scheduled interest
payment on the Subordinated Notes due November 1, 2001 (which payment may only
be made in accordance with the terms of this Agreement), the lesser of (a) the
Borrowing Base plus any Overadvance Revolving Loans less outstanding Risk
Participation Liability or (b) $20,000,000 less outstanding Risk Participation
Liability, or (B) if Borrower fails to make such interest payment on the
Subordinated Notes, the lesser of (a) Borrowing Base plus any Overadvance
Revolving Loans less outstanding Risk Participation Liability or (b) $15,000,000
less outstanding Risk Participation Liability       4/20/02 and thereafter   (A)
so long as Borrower makes the scheduled interest payment on the Subordinated
Notes due November 1, 2001 and May 1, 2002 (which payments may only be made in
accordance with the terms of this Agreement), the lesser of (a) the Borrowing
Base plus any Overadvance Revolving Loans less outstanding Risk Participation
Liability or (b) $25,000,000 less outstanding Risk Participation Liability, (B)
if Borrower makes either the November 1, 2001 or the May 1, 2002 interest
payment but fails to make both interest payments, the lesser of (a) Borrowing
Base plus any Overadvance Revolving Loans less outstanding Risk Participation
Liability or (b) $20,000,000 less outstanding Risk Participation Liability or
(C) if Borrower fails to make the November 1, 2001 and the May 1, 2002 interest
payments on the Subordinated Notes, the lesser of (a) Borrowing Base plus any
Overadvance Revolving Loans less outstanding Risk Participation Liability or (b)
$15,000,000 less outstanding Risk Participation Liability

“Permitted Tax Distribution Threshold” means the satisfaction of the following
as of the last day of any fiscal quarter occurring after the Third Amendment
Effective Date: (i) the Fixed Charge Coverage is greater than 1.05x, provided
that in calculating Fixed Charges for purposes of this definition no deduction
for interest paid in kind shall be made and (ii) the Total Indebtedness to Pro
Forma EBITDA Ratio, calculated on a rolling four quarter basis ending on the
last day of such fiscal quarter, is less than 5.00x.

“Permitted Tax Distribution Trigger Date” means the date on which the Permitted
Tax Distribution Threshold is achieved.

“Post-Closing Documents” means (1) a pledge agreement, stock power and all other
documents necessary for the Agent to obtain, for the benefit of Agent and
Lenders, a perfected first priority security interest in the stock of Borrower’s
Subsidiary in India,(2) a landlord waiver and consent for each of Borrower’s
facilities in Tustin, CA, in form and substance acceptable to Agent, (3) bank
agency agreements with each institution at which Borrower and its Domestic
Subsidiaries maintain depository accounts, (4) a partial release of the lien
filed against the Patel Family Trust with respect to the membership interest of
the Borrower held by such trust, and (5) tri-party bank account agreements from
each financial institution where the Borrower maintains an account.

“Sponsors ” means OCM/GFI Power Opportunities Fund, L.P., OCM Principal
Opportunities Fund, L.P., CSFB Cherokee Equity Investors, LLC, Oxford Cherokee
Inc., GFI Two LLC and RIT Capital Partners, plc.

“Sponsor Guaranties” means those certain Guaranties dated as of Third Amendment
Effective Date among Agent and the Sponsors.

“Sponsor Collateral” means those certain letters of credit provided by financial
institutions having a rating of at least “A-” from Standard & Poor's Corporation
or at least “A3” from Moody's Investors Service, Inc., or such other financial
institutions as may be acceptable to Agent, on behalf of CSFB Cherokee Equity
Investors, LLC, Oxford Cherokee Inc., GFI Two LLC and RIT Capital Partners, plc
in an aggregate amount on the Third Amendment Effective Date equal to
$2,466,050.18, provided that the letter of credit issued for the account of GFI
Two LLC may be issued by American Business Bank.

“Sponsor Release Date” means the date on which the Sponsor Release Threshold is
achieved.

“Sponsor Release Threshold” means the satisfaction of the following as of the
last day of any fiscal quarter occurring after the Third Amendment Effective
Date: (i) the Fixed Charge Coverage is greater than 1.05x, provided that in
calculating Fixed Charges for purposes of this definition no deduction for
interest paid in kind shall be made and (ii) the Total Indebtedness to Pro Forma
EBITDA Ratio, calculated on a rolling four quarter basis ending on the last day
of such fiscal quarter, is less than 4.50x.

“Subordinated Interest Payment Threshold” means the satisfaction of the
following as of the last day of the fiscal quarter ending September 30, 2002:
(i) the Fixed Charge Coverage is greater than 1.05x, provided, that in
calculating Fixed Charges for purposes of this definition no deduction for
interest paid in kind shall be made and (ii) the Total Indebtedness to Pro Forma
EBITDA Ratio is less than 5.00x, provided that in calculating Pro Forma EBITDA
for purposes of this clause (ii), the Borrower shall not use its Pro Forma
EBITDA for the prior four fiscal quarters but instead shall use the product of
(x) its Pro Forma EBITDA for the six months ending on September 30, 2002
multiplied by (y) two, provided further, that in calculating Total Indebtedness
to Pro Forma EBITDA Ratio for purposes of this clause (ii), the amount of the
next scheduled interest payment on the Subordinated Notes shall be treated as
Indebtedness of the Borrower outstanding on the last day of the fiscal quarter
for which the Subordinated Interest Payment Threshold is being calculated.

“Third Amendment Effective Date” means September 26, 2001.

             3.          Waiver.            Agent and Lenders hereby waive the
Existing Events of Default.  This waiver shall not be deemed to constitute a
waiver of any other Event of Default or any future breach of the Agreement or
any of the other Loan Documents.

             4.          Conditions.  The effectiveness of this Amendment is
subject to the following conditions precedent (unless specifically waived in
writing by Agent):

                           (a)         Borrower shall have executed and
delivered this Amendment, and such other documents and instruments as Agent may
reasonably require shall have been executed and/or delivered to Agent;

                           (b)        All proceedings taken in connection with
the transactions contemplated by this Amendment and all documents, instruments
and other legal matters incident thereto shall be reasonably satisfactory to
Agent and its legal counsel;

                           (c)         No Default or Event of Default other than
the Existing Events of Default shall have occurred and be continuing;

                           (d)        Borrower shall have paid Agent for the
benefit of Lenders an amendment fee in the amount of $176,154.17, to be paid to
each Lender based upon their respective Pro Rata Share (determined in accordance
with clause (c) of the definition thereof);

                           (e)         Agent shall have received, for the
benefit of Lenders, (i) a legal opinion in form and substance reasonably
satisfactory to Agent from counsel to each of OCM/GFI Power Opportunities Fund,
L.P., and OCM Principal Opportunities Fund, L.P.; and (ii) such financial
statements executed by Borrower as Agent may request;

                           (f)         Borrower shall have delivered to Agent
and Lenders an Excess Cash Flow Certificate in the form of Exhibit 1.5(B) to the
Agreement, which certificate shall remove the impact of any purchased working
capital and shall otherwise be in form and substance reasonably satisfactory to
Agent;

                           (g)        Borrower shall have delivered to Agent and
Lenders a timeline outlining the stages for exploring the potential sale of
Mechanical and Automation Systems, an operating division of Borrower, which
outline shall be in form and substance reasonably satisfactory to the Agent;

                           (h)        Agent shall have received the Sponsor
Collateral, which shall be in form and substance satisfactory to Agent;

                           (i)          Agent shall have received financial
statements from each Sponsor party to a Sponsor Guaranty not secured by a letter
of credit (other than OCM/GFI Power Opportunities Fund, L.P.) demonstrating that
such Sponsor is in compliance with its obligations under Section 12 of its
Sponsor Guaranty; and

                           (j)          Agent shall have received financial
statements and a certificate from the general partner of OCM/GFI Power
Opportunities Fund, L.P. certifying that it is in compliance with its
obligations under Section 12 of its Sponsor Guaranty.

             5.          Representations and Warranties.        To induce Agent
and Lenders to enter into this Amendment, Borrower represents and warrants to
Agent and Lenders:

                           (a)         that the execution, delivery and
performance of this Amendment has been duly authorized by all requisite limited
liability company action on the part of Borrower and that this Amendment has
been duly executed and delivered by Borrower; and

                           (b)        that each of the representations and
warranties set forth in Section 5 of the Agreement (other than those which, by
their terms, specifically are made as of certain date prior to the date hereof)
are true and correct in all material respects as of the date hereof (after
giving effect to this Amendment).

             6.          Severability.    Any provision of this Amendment held
by a court of competent jurisdiction to be invalid or unenforceable shall not
impair or invalidate the remainder of this Amendment and the effect thereof
shall be confined to the provision so held to be invalid or unenforceable.

             7.          References.     Any reference to the Agreement
contained in any  document, instrument or agreement executed in connection with
the Agreement shall be deemed to be a reference to the Agreement as modified by
this Amendment.

             8.          Counterparts.  This Amendment may be executed in one or
more counterparts, each of which shall constitute an original, but all of which
taken together shall be one and the same instrument.

             9.          Ratification.  The terms and provisions set forth in
this Amendment shall modify and supersede all inconsistent terms and provisions
of the Agreement and shall not be deemed to be a consent to the modification or
waiver of any other term or condition of the Agreement.  Except as expressly
modified and superseded by this Amendment, the terms and provisions of the
Agreement are ratified and confirmed and shall continue in full force and
effect.

[remainder of page intentionally left blank]

 

                           IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed under seal and delivered by their respective
duly authorized officers on the date first written above.

 

HELLER FINANCIAL, INC.,
as Agent and Lender   CHEROKEE INTERNATIONAL, LLC           By: /s/ Jacquelene
M. Hermie   By: /s/ R. Van Ness Holland, Jr.  

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          Title: Vice President   Title: Chief Financial Officer  

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                    BANK  AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.           By:      

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  Title:      

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              FLEET CAPITAL CORPORATION               By: /s/ Mark D. Newlun    

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        Title: Senior Vice President    

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              U.S. BANK               By: /s/ James Mitchell    

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        Title: Senior Vice President    

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        KEY CORPORATE CAPITAL INC.               By: /s/ Joseph F. Barber    

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        Title: Vice President    

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        FINOVA CAPITAL CORPORATION               By: /s/ Bruce Mettel    

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        Title: Vice President    

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CONSENT, REAFFIRMATION AND AMENDEMENT

             The undersigned (“Guarantor”) hereby (i) acknowledges receipt of a
copy of the foregoing Waiver and Third Amendment to Credit Agreement and the
Sponsor Guaranties; (ii) consents to Borrower’s execution and delivery thereof;
(iii) agrees to be bound thereby; and (iv) affirms that nothing contained
therein shall modify in any respect whatsoever its guaranty of the obligations
of Borrower to Agent and Lenders pursuant to the terms of that certain Guaranty
dated as of April 30, 1999, (the “Guaranty”) and reaffirms that the Guaranty is
and shall continue to remain in full force and effect.  Although Guarantor has
been informed of the matters set forth herein and has acknowledged and agreed to
same, Guarantor understands that Agent and Lenders have no obligation to inform
Guarantor of such matters in the future or to seek Guarantor’s acknowledgment or
agreement to future amendments or waivers, and nothing herein shall create such
a duty.

              In addition, in order to induce Lenders to execute the foregoing
Waiver and Third Amendment to Credit Agreement, Guarantor hereby agrees that the
Guaranty is hereby amended by adding the following language to the end of
Section 4 of the Guaranty:

“Without limiting the generality, scope or meaning of any of the foregoing or
any other provision of this Guaranty, Guarantor:

(a)         acknowledges that Section 2856 of the California Civil Code
authorizes and validates waivers of a guarantor's rights of subrogation and
reimbursement and certain other rights and defenses available to Guarantor under
California law;

(b)        waives all rights of subrogation, reimbursement, indemnification, and
contribution and all other rights and defenses that are or may become available
by reason of Sections 2787 to 2855, inclusive, of the California Civil Code;

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

(d)        waives all rights and defenses that Guarantor may have because the
Borrower’s debt is secured by real property.  This means, among other things:

             (i)          Agent and Lenders may collect from Guarantor without
first foreclosing on any real or personal property collateral pledged by
Borrower;

             (ii)         If Agent  forecloses on any real property collateral
pledged by  Borrower:

                           (1)         the amount of the debt may be reduced
only by the price for which that collateral is sold at the foreclosure sale,
even if the collateral is worth more than the sale price; and

                           (2)         Agent or any Lender may collect from
Guarantor even if Agent, by foreclosing on the real property collateral, has
destroyed any right Guarantor may have to collect from Borrower.

This is an unconditional and irrevocable waiver of any rights and defenses
Guarantor may have because Borrower’s debt is secured by real property.  These
rights and defenses include, but are not limited to, any rights or defenses
based upon Sections 580a, 580b, 580d, or 726 of the California Code of Civil
Procedure; and

(e)         waives all rights and defenses, if any, now or hereafter arising
under the laws of the State of Illinois, which are the same as or similar to the
rights and defenses waived as described above.”

             IN WITNESS WHEREOF, the undersigned has executed this Consent,
Reaffirmation and Amendment on and as of the date of such Amendment.

    CHEROKEE INTERNATIONAL FINANCE, INC.,     a California corporation          
By:    /s/ Ian Schapiro      

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    Name:    Ian Schapiro      

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    Title: Vice President      

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EXHIBIT A TO AMENDMENT

LIST OF EXISTING EVENTS OF DEFAULT UNDER THE CREDIT AGREEMENT

1. Borrower permitting the Fixed Charge Coverage for the fiscal quarter ended
June 30, 2001 to be less than 1.0 to 1.0, constituting a breach of subsection
4.3 of the Credit Agreement and an Event of Default pursuant to subsection
6.1(C).     2. Borrower permitting the Total Interest Coverage for the fiscal
quarter ended June 30, 2001 to be less than 1.65 to 1.0, constituting a breach
of subsection 4.4 of the Credit Agreement and an Event of Default pursuant to
subsection 6.1(C).     3. Borrower permitting the Total Indebtedness to Pro
Forma EBITDA Ratio for the fiscal quarter ended June 30, 2001 to be greater than
5.25 to 1.0, constituting a breach of subsection 4.5 of the Credit Agreement and
an Event of Default pursuant to subsection 6.1(C).     4. Borrower permitting
Indebtedness owing by the ITS Companies to non-affiliated third parties in an
aggregate amount exceeding $5,000,000, constituting a breach of subsection
3.1(B)(d) of the Credit Agreement and an Event of Default pursuant to subsection
6.1(C).