**Exhibit10.34**

 

**LIMITED WAIVER AND AMENDMENT NO. 1****TO****CREDIT AGREEMENT**

 

This LIMITED WAIVER AND AMENDMENT NO.  1 TO CREDIT AGREEMENT (this “Amendment”)is entered into as of this 5th day of February, 2003, by and among ROLLERBEARING COMPANY OF AMERICA, INC., a Delaware corporation (“Borrower”);the other Credit Parties signatory hereto; GENERAL ELECTRIC CAPITALCORPORATION, a Delaware corporation (in its individual capacity, “GE Capital”),for itself, as Lender, and as Agent for Lenders, and the other Lenderssignatory hereto from time to time. Unless otherwise specified herein, capitalized terms used in thisAmendment shall have the meanings ascribed to them in Annex A to theCredit Agreement (as hereinafter defined).

 

**RECITALS**

 

WHEREAS, Borrower, the other Credit Parties, Agent andLenders entered into that certain Credit Agreement dated as of May 30, 2002 (asamended, supplemented, restated or otherwise modified from time to time, the “CreditAgreement”);

 

WHEREAS, in December, 2002, Borrower made a cash dividendto Holdings in the amount of $2,506,530 (the “December Dividend”) theproceeds of which were used by Holdings to pay the semiannual interest dueDecember 15 under the Discount Debentures and the Discount DebenturesIndenture;

 

WHEREAS, Borrower has informed Agent and Lenders thatthe payment of the December Dividend, as a Restricted Payment under the SeniorSubordinated Indenture, did not comply with the terms of the SeniorSubordinated Indenture (“the Senior Subordinated Indenture Default”);and

 

WHEREAS, Borrower has requested that Agent and Lenders(i) grant limited waivers with respect to the Credit Agreement in connectionwith the payment of the December Dividend and (ii) amend certain provisions ofthe Credit Agreement, all upon the terms and subject to the conditions asherein set forth.

 

NOW THEREFORE, in consideration of the foregoingrecitals, mutual agreements contained herein and for good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged,Agent, Lenders, Borrower and the Credit Parties agree as follows:

 

**SECTION 1.   Amendments**.  The Credit Agreement is hereby amended as follows:

 

(a)                                  Section1.1(a)(iii) of the Credit Agreement is amended by replacing the phrase “to beless than $7,500,000” with the phrase “to be less than $3,500,000 during theperiod from January 31, 2003 through April 30, 2003 or to be less than$7,500,000 at any other time”.

 

(b)                                 Section1.3(b)(i) of the Credit Agreement is amended by replacing the phrase “is lessthan $7,500,000” with the phrase “is less than $3,500,000 during the periodfrom January 31, 2003 through April 30, 2003 or is less than $7,500,000 at anyother time”.

 

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(c)                                  Section1.3(b)(v) of the Credit Agreement is amended by adding thereto the followingclause (C), relettering existing clauses (C) through (E) as clauses (D) through(F):

 

(C) the Holdings February2003 Issuance, so long as all proceeds of such issuance are invested inBorrower within one Business Day following the receipt thereof by Holdings;

 

(d)                                 Section1.6(h) of the Credit Agreement is amended by adding at the end thereof thefollowing:

 

*provided*, that theBorrowing Availability based on such obligations shall not in any event exceed$7,500,000 in the aggregate;

 

(e)                                  Section2.2(d) of the Credit Agreement is amended by replacing the phrase “shall beless than $7,500,000” with the phrase “shall be less than $3,500,000 during theperiod from January 31, 2003 through April 30, 2003 or shall be less than$7,500,000 at any other time”.

 

(f)                                    Section6.2 of the Credit Agreement is hereby amended by adding thereto the followingclause (k), relettering existing clause (k) as clause (1):

 

(k) Borrower may make (i)a one-time loan to (A) Schaublin for the purpose of repaying in its entiretythe Swiss Loan and the related indebtedness to Credit Suisse and (B) RBC Francefor the purpose of repaying in its entirety its outstanding indebtedness toCCF, *provided*,that such loan shall not exceed the Dollar equivalent of Swiss Francs10,375,000 in the aggregate, and (ii) from time to time loans to SchaublinHolding or any of the Schaublin Operating Companies to provide working capitalfinancing and for other general corporate purposes, *provided*, that theoutstanding balance of any such loans shall not exceed at any time $1,000,000in the aggregate (collectively, the “Schaublin Loans,”);

 

(g)                                 Section6.3 of the Credit Agreement is hereby amended by amending and restating clause(vi) thereof as follows:

 

(vi)  Indebtedness consisting of intercompanyloans and advances, made by Borrower to any Secured Guarantor or by any SecuredGuarantor to Borrower or another Secured Guarantor or Indebtedness consistingof the Schaublin Loans made by Borrower to Schaublin Holding or any of theSchaublin Operating Companies; *provided, that*:*(*A) Borrower shall haveexecuted and delivered to each such Secured Guarantor, and each such SecuredGuarantor and Schaublin Holding and each Schaublin Operating Company shall haveexecuted and delivered to Borrower or

 

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another such SecuredGuarantor, as applicable, a demand note (collectively, the “IntercompanyNotes”) to evidence any such intercompany Indebtedness owing at any time byBorrower to such Secured Guarantor or by such Secured Guarantor, SchaublinHolding and the Schaublin Operating Companies to Borrower or such other SecuredGuarantor, as applicable, which Intercornpany Notes shall be in form andsubstance reasonably satisfactory to Agent and shall be pledged and deliveredto Agent pursuant to the applicable Pledge Agreement or Security Agreement asadditional collateral security for the Obligations; (B) Borrower, each SecuredGuarantor, Schaublin Holding and each of the Schaublin Operating Companiesshall record all intercompany transactions on its books and records in a mannerreasonably satisfactory to Agent; (C) the obligations of Borrower and eachSecured Guarantor under any such Intercompany Notes shall be subordinated tothe Obligations in a manner reasonably satisfactory to Agent; (D) no Event ofDefault shall be continuing after giving effect to any such proposedintercompany loan; and (E) the aggregate balance of all such intercompanyloans, including the Schaublin Loans, owing by any Secured Guarantor, SchaublinHolding or any of the Schaublin Operating Companies incurred during the timethat the EBITDA of such Person has been negative for a trailing twelve monthperiod ending on the last day of any Fiscal Month shall not be increased bymore than $2,000,000 over the amount of such Person’s intercompany loanobligations as of the last day of such period; *provided, that* a SecuredGuarantor, Schaublin Holding or any of the Schaublin Operating Companies, asthe case may be, shall no longer be subject to that $2,000,000 limitation ifthat Secured Guarantor, Schaublin Holding or the Schaublin Operating Company,as applicable, has had positive EBITDA for the trailing twelve-month periodsending on the last day of six consecutive Fiscal Months; *provided*, *further*,that if a Secured Guarantor, Schaublin Holding or any of the SchaublinOperating Companies, as the case may be, has been subject to that $2,000,000limitation, then became exempt from it and again has a negative EBITDA for atrailing twelve-month period, not more than $2,000,000 of additionalintercompany loans may be received by it after the date when it again has anegative EBITDA;

 

(h)                                 Section6.14 of the Credit Agreement is hereby amended by adding thereto the followingclause (d):

 

(d) Notwithstanding theforegoing Section 6.14(a), Borrower may pay a Dividend to Holdings in anamount not to exceed $3,050,000 as long as (i) the Holdings February Issuancehas occurred and the proceeds thereof were used in accordance with Section1.3(b)(v)(C); (ii) promptly upon receipt of the proceeds of such

 

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Dividend, Holdingsimmediately uses all of such proceeds solely to redeem the Preferred Stock ofHoldings issued pursuant to the Holdings February Issuance; and (iii) noDefault or Event of Default has occurred and is continuing.

 

(i)                                     Section6.14(a) of the Credit Agreement is hereby amended by amending and restatingclauses (a) and (e) thereof as follows:

 

(a) payments of interestand principal of intercompany loans and advances between Borrower and SecuredGuarantors, Schaublin Holding and Schaublin Operating Companies to the extentpermitted by Section 6.3;

 

(e) payments ofmanagement fees to Whitney & Co.  inequal quarterly installments, as long as such payments of management fees donot exceed $450,000 in the aggregate during any Fiscal Year and a payment of afee to Whitney & Co.  not to exceed$151,261.50 in connection with the Holdings February 2003 Issuance;

 

(j)                                     Section6.16 of the Credit Agreement is amended by replacing the phrase “SecuredGuarantor” with the phrase “Secured Guarantor, Schaublin Holding or any of theSchaublin Operating Companies”.

 

(k)                                  Section8.1(f) of the Credit Agreement is amended by replacing the phrase “less$7,500,000” with the phrase “less $3,500,000 during the period fromJanuary 31, 2003 through April 30, 2003 or less $7,500,000 at any other time”.

 

(l)                                     Section8.1(m) of the Credit Agreement is amended by replacing the phrase “SecuredGuarantor” with the phrase “Secured Guarantor, Schaublin Holding or any of theSchaublin Operating Companies”.

 

(m)                               AnnexA to the Credit Agreement is hereby amended by adding the followingdefinitions thereto in their appropriate alphabetical order:

 

“Bovagnet” meansEstablissements J.  Bovagnet SA, aFrench *sociétéanomyme* and subsidiary of Schaublin.

 

“Holdings February2003 Issuance” means an issuance by Holdings of shares of its Class APreferred Stock occurring on or before February 15, 2003 resulting in grosscash proceeds not to exceed $3,025,230.

 

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

 

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“Schaublin” meansSchaublin SA, a Swiss corporation and wholly-owned subsidiary of SchaublinHolding (excluding directors’ qualifying shares).

 

“Schaublin Holding”means Schaublin Holding SA, a Swiss corporation and wholly-owned subsidiary ofBorrower (excluding directors’ qualifying shares).

 

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

 

“Schaublin OperatingCompanies” means Schaublin, Bovagnet and RBC France.

 

“Swiss Loan” meansthe Indebtedness of RBC Schaublin S.A. to Credit Suisse pursuant to the terms of the Credit Agreement dated asof December 27, 1999, as amended and restated by that certain Credit Agreementdated as of December 12, 2002, not to exceed Swiss Francs 11,375,000 in theaggregate.”

 

(n)                                 Paragraph(b) of Annex G to the Credit Agreement is hereby amended by replacingthe phrase “to exceed $7,500,000” with the phrase “to exceed $3,500,000 duringthe period from January 31, 2003 through April 30, 2003 and to exceed$7,500,000 at any other time”.

 

(o)                                 Exhibit4.1(b) to the Credit Agreement is hereby replaced with Exhibit 4.1(b)attached hereto.

 

**SECTION 2.   Limited Waiver**.  Borrower hereby acknowledges and agrees thatan Event of Default exists under Section 6.14(b)(B) of the Credit Agreement byvirtue of Borrower’s payment of the December Dividend that resulted in theSenior Subordinated Indenture Default (the “Existing Default”).  Immediately upon the effectiveness of thisAmendment, Agent and Lenders hereby waive the Existing Default, *provided*,that Agent and Lenders shall receive no later than February 15, 2003 acertificate from Borrower representing and warranting to Agent and Lenders thatthe Senior Subordinated Indenture Default has been cured and that no default orevent of default exists under the Senior Subordinated Indenture and the other SubordinatedDebt Documents (it being understood and agreed that if Agent and Lenders do notreceive such certificate as provided herein or any declaration, demand,exercise of any default rights and remedies or other action is taken withrespect to the Subordinated Indenture Default, Agent’s and Lenders’ waiverhereunder shall terminate and be of no further force and effect), and *provided*,*further*,that nothing contained herein shall in any way waive, release, modify or limitBorrower’s or any Credit Party’s obligations to otherwise comply with all termsand conditions of the Credit Agreement and the other Loan Documents nor any ofAgent’s and Lenders’ rights and privileges in respect thereof.

 

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**SECTION 3.   Conditions to Effectiveness**.  This Amendment shall be effective uponsatisfaction of the following conditions precedent:

 

(a)                                  ThisAmendment shall have been executed and delivered by Lenders and the CreditParties.

 

(b)                                 EachLender executing this Amendment shall have been paid an amendment fee equal tothe product of (i) 15 basis points multiplied by (ii) the sum of (x) theportion of the principal balance of the Term Loan held by such Lender plus(y) the Revolving Loan Commitment of such Lender, which fee shall benon-refundable and fully earned upon execution hereof by the Lenders.

 

(c)                                  Theexecution and delivery or satisfaction of each of the agreements, documents orother instruments or conditions set forth in the closing checklist attachedhereto as Annex A (the “Closing Checklist”), in a form, substanceand manner satisfactory to Agent.

 

**SECTION 4.   Limited Waiver and Amendment**.  The limited waiver and amendments set forthherein are effective solely for the purposes set forth herein and shall belimited precisely as written and shall not be deemed to (i) except as expresslyprovided in this Amendment, be a consent to any amendment, waiver ormodification of any term or condition of the Credit Agreement or of any otherLoan Document or (ii) prejudice any right or rights that Agent or Lenders maynow have or may have in the future under or in connection with the CreditAgreement or any other Loan Document.

 

**SECTION 5.   Representations And Warranties Of Credit Parties**.

 

(a)                                  Theexecution, delivery and performance by each Credit Party of this Amendment hasbeen duly authorized by all necessary corporate action and this Amendment is alegal, valid and binding obligation of such Credit Party enforceable againstsuch Credit Party in accordance with its terms, except as the enforcementthereof may be subject to (i) the effect of any applicable bankruptcy,insolvency, reorganization, moratorium or similar law affecting creditors’rights generally and (ii) general principles of equity (regardless of whethersuch enforcement is sought in a proceeding in equity or at law);

 

(b)                                 Eachof the representations and warranties contained in the Credit Agreement is trueand correct in all material respects on and as of the date hereof as if made onthe date hereof, except to the extent that such representations and warrantiesexpressly relate to an earlier date; and

 

(c)                                  Neitherthe execution, delivery and performance of this Amendment by each Credit Partynor the consummation of the transactions contemplated hereby does or shallcontravene, result in a breach of, or violate (i) any provision of such CreditParty’s certificate or articles of incorporation or bylaws, (ii) any law orregulation, or any order or decree of any court or government instrumentality,or (iii) any indenture, mortgage, deed of trust, lease, agreement or otherinstrument to which such Credit Party or any of its Subsidiaries is a party orby which such Credit Party or any of its Subsidiaries or any of their propertyis bound, except in any such case

 

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to the extent suchconflict or breach has been waived by a written waiver document, a copy ofwhich has been delivered to Agent on or before the date hereof.

 

**SECTION 6.   Reference To And Effect Upon The Credit Agreement**.

 

(a)                                  Exceptas specifically set forth above, the Credit Agreement and the other LoanDocuments shall remain in full force and effect and are hereby ratified andconfirmed.

 

(b)                                 Theexecution, delivery and effectiveness of this Amendment shall not operate as awaiver of any right, power or remedy of Agent or any Lender under the CreditAgreement or any other Loan Document, nor constitute amendment of any provisionof the Credit Agreement or any other Loan Document, except as specifically setforth herein.  Upon the effectiveness ofthis Amendment, each reference in the Credit Agreement to “this Agreement”,“hereunder”, “hereof’, “herein” or words of similar import shall mean and be areference to the Credit Agreement as amended hereby.

 

(c)                                  EachCredit Party acknowledges and agrees that the execution and delivery by Agentand Requisite Lenders of this Amendment shall not be deemed (i) to create acourse of dealing or otherwise obligate Agent or Lenders to forbear, waive,consent or execute similar amendments under the same or similar circumstancesin the future, or (ii) to amend, relinquish or impair any right of Agent orLenders to receive any indemnity or similar payment from any Person or entityas a result of any matter arising from or relating to this Amendment.

 

**SECTION 7.   Costs And Expenses**.  As provided in Section 11.3 of the CreditAgreement, Borrowers agree to reimburse Agent for all fees, costs and expenses,including the fees, costs and expenses of counsel or other advisors for advice,assistance, or other representation in connection with this Amendment.

 

**SECTION 8.   GOVERNING LAW**.  THIS AMENDMENT SHALL BE GOVERNED BY ANDCONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAWSPROVISIONS) OF THE STATE OF NEW YORK.

 

**SECTION 9.   Headings**.  Section headings in this Amendment are included herein forconvenience of reference only and shall not constitute a part of this Amendmentfor any other purposes.

 

**SECTION 10.   Counterparts**.  This Amendment may be executed in any number of counterparts,each of which when so executed shall be deemed an original, but all suchcounterparts shall constitute one and the same instrument.  In the event that any signature is deliveredby facsimile transmission, such signature shall create a valid and bindingobligation of the party executing (or on whose behalf the signature isexecuted) the same with the same force and effect as if such facsimilesignature page were an original thereof, and such party shall promptly followits facsimile signature page by mailing of a hard copy original.

 

[Signature PageFollows]

 

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IN WITNESS WHEREOF, the parties hereto have executedand delivered this Amendment as of the date first written above.

 
|   | **BORROWER**                                                       |
|--------|--------------------------------------------------------------------|
|   |                                                               |   |
|   | **ROLLER BEARING COMPANY OF  AMERICA, INC.**, Delaware corporation |
|   |                                                               |   |
|   | By:                                                                | /s/ Anthony S.  Cavalieri |   |
|   |                                                               | Name: Anthony S.  Cavalieri |
|   |                                                               | Title: Chief Financial  Officer |
|   |                                                               |   |
|   | **GENERAL ELECTRIC CAPITAL  CORPORATION**, as Agent and Lender     |
|   |                                                               |   |
|   | By:                                                                | /s/ Ken T. Murray |   |
|   |                                                               | Duly Authorized  Signatory |
|   |                                                               |   |
|   | **CONGRESS FINANCIAL CORPORATION  (WESTERN)**, as Lender           |
|   |                                                               |   |
|   | By:                                                                | /s/ Jeffrey K. Scott |   |
|   |                                                               | Name: Jeffrey K. Scott |
|   |                                                               | Title: Vice President |

 

**[SignaturePage to Limited Waiver and Amendment No. 1]**

 

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

 
|   | **CREDIT PARTIES:**                                                    |
|--------|------------------------------------------------------------------------|
|   |                                                                   |   |
|   | **INDUSTRIAL TECTONICS BEARINGS  CORPORATION**, a Delaware corporation |
|   |                                                                   |   |
|   | By:                                                                    | /s/ Anthony S.  Cavalieri |   |
|   |                                                                   | Name: Anthony S.  Cavalieri |
|   |                                                                   | Title: Chief Financial  Officer |
|   |                                                                   |   |
|   | **RBC NICE BEARINGS INC.**, a Delaware  corporation                    |
|   |                                                                   |   |
|   | By:                                                                    | /s/ Anthony S.  Cavalieri |   |
|   |                                                                   | Name: Anthony S.  Cavalieri |
|   |                                                                   | Title: Chief Financial  Officer |
|   |                                                                   |   |
|   | **BREMEN BEARINGS, INC.**, a Delaware  corporation                     |
|   |                                                                   |   |
|   | By:                                                                    | /s/ Anthony S.  Cavalieri |   |
|   |                                                                   | Name: Anthony S.  Cavalieri |
|   |                                                                   | Title: Chief Financial  Officer |
|   |                                                                   |   |
|   | **TYSON BEARING COMPANY, INC.**, a  Delaware corporation               |
|   |                                                                   |   |
|   | By:                                                                    | /s/ Anthony S.  Cavalieri |   |
|   |                                                                   | Name: Anthony S. Cavalieri |
|   |                                                                   | Title: Chief Financial  Officer |
|   |                                                                   |   |
|   | **RBC LINEAR PRECISION PRODUCTS, INC.**,  a Delaware corporation       |
|   |                                                                   |   |
|   | By:                                                                    | /s/ Anthony S.  Cavalieri |   |
|   |                                                                   | Name: Anthony S.  Cavalieri |
|   |                                                                   | Title: Chief Financial  Officer |

 

S - 2

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|   | **MILLER BEARING COMPANY, INC.**, a  Delaware corporation |
|--------|-----------------------------------------------------------|
|   |                                                      |   |
|   | By:                                                       | /s/ Anthony S.  Cavalieri |   |
|   |                                                      | Name: Anthony S.  Cavalieri |
|   |                                                      | Title: Chief Financial  Officer |
|   |                                                      |   |
|   | **RBC OKLAHOMA, INC.**, a Delaware  corporation           |
|   |                                                      |   |
|   | By:                                                       | /s/ Anthony S.  Cavalieri |   |
|   |                                                      | Name: Anthony S.  Cavalieri |
|   |                                                      | Title: Chief Financial  Officer |

 

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**ANNEX A**

 

**CLOSING CHECKLIST**

 

**for**

 

**LIMITED WAIVER AND AMENDMENT NO. I TO****CREDIT AGREEMENT**

 

**byand among**

 

**GENERAL ELECTRIC CAPITAL CORPORATION,**

 

**asAgent,**

 

**ROLLER BEARING COMPANY OF AMERICA, INC.,**

 

**asBorrower,**

 

**THE OTHER CREDIT PARTIES SIGNATORY THERETO,**

 

**asCredit Parties, and**

 

**THE LENDERS FROM TIME TO TIME SIGNATORY THERETO**

 

**February5, 2003**

 

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**1.**                                      LimitedWaiver and Amendment No. 1

 

(i)                                     AnnexA - Closing Checklist

 

(ii)                                  Exhibit4.1(b) to Credit Agreement (Borrowing Base Certificate)

 

**2.**                                      Joinder Agreementadding Schaublin Holding, Schaublin, Bovagnet and RBC France as Credit Partiesunder the Credit Agreement, as set forth therein

 

**3.**                                      DemandPromissory Note by Schaublin Holding

 

(i)                                     Endorsement

 

**4.**                                      DemandPromissory Note by Schaublin

 

(i)                                     Endorsement

 

**5.**                                      DemandPromissory Note by Bovagnet

 

(i)                                     Endorsement

 

**6.**                                      DemandPromissory Note by RBC France

 

(i)                                     Endorsement

 

**7.**                                      Copies of a dulyexecuted payoff letter, in form and substance satisfactory to Agent, executedby all parties to the Swiss Loan documents evidencing repayment in full of allobligations relating to the Swiss Loans, together with appropriate terminationsof agreements, pledges, releases of liens and similar documents in form andsubstance satisfactory to Agent

 

**8.**                                      Copies of a dulyexecuted payoff letter, in form and substance satisfactory to Agent, executedby all parties to the credit facility between RBC France and CCF evidencingrepayment in full of all obligations relating to such credit facility, togetherwith appropriate terminations of agreements, pledges, releases of liens andsimilar documents in form and substance satisfactory to Agent

 

**9.**                                      Post ClosingMatters Agreement

 

A-1

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EXHIBIT 4.1(b)toCREDIT AGREEMENT

 

**BORROWINGBASE CERTIFICATE**

 

**ROLLERBEARING COMPANY OF AMERICA, INC.**

 

Date:                ,      

 

This Certificate is givenby Roller Bearing Company of America, Inc., a Delaware corporation (“Borrower”)pursuant to Section 4.1(b) of that certain Credit Agreement dated as of May 30,2002 among Borrower, the other Credit Parties party thereto, the Lenders fromtime to time party thereto and General Electric Capital Corporation, as agentfor the Lenders (as such agreement may have been amended, restated,supplemented or otherwise modified from time to time the “Credit Agreement”).  Capitalized terms used herein withoutdefinition shall have the meanings set forth in the Credit Agreement.

 

The undersigned is dulyauthorized to execute and deliver this Certificate on behalf of Borrower.  By executing this Certificate such officerhereby certifies to Agent and Lenders on behalf of Borrowers and without personalliability that:

 

(a)                                  Attachedhereto as Schedule 1 is a calculation of the proposed Borrowing Base forBorrower as of the above date;

 

(b)                                 Basedon such schedule, the proposed Borrowing Base as of the above date is:

 

$________

 

(c)                                  exceptas set forth on Schedule 2 hereto, Borrower is in compliance with theMinimum Borrowing Availability contained in Annex G of the CreditAgreement, as demonstrated on Schedule 2 hereto

 

(d)                                 Agentshall have the right to establish or modify or eliminate Reserves againstEligible Accounts and Eligible Inventory from time to time in its reasonablecredit judgment to reflect issues with respect to the collectability ofAccounts arising or discovered by Agent after the Closing Date or to reflectissues with respect to the salability of Inventory arising or discovered byAgent after the Closing Date.  Inaddition, Agent reserves the right at any time to adjust any of the criteriaset forth below and to establish new criteria in its reasonable credit judgmentto reflect changes in the Borrower’s or the applicable Secured Guarantor’sbusiness operations, the collectability of Accounts or salability of Inventory,subject to the approval of Requisite Revolving Lenders in the case ofadjustments or new criteria which have the effect of making more credit

 

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available.  Borrower acknowledges that the exercise byAgent of any right pursuant to this clause (d) shall have the effect ofadjusting the proposed Borrowing Base set forth above.

 

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IN WITNESS WHEREOF, Borrower has caused thisCertificate to be executed by its                                  this            day of                   ,      .

 
|   | **ROLLER BEARING COMPANY OF  AMERICA, INC.** |
|--------|----------------------------------------------|
|   |                                         |
|   | By:                                          |   |   |
|   |                                         |
|   | Its:                                         |   |   |

 

[Signature Page toBorrowing Base Certificate]

 

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Schedule 1to Exhibit 4.1(b)

 

**BORROWING BASE CALCULATION**

 

**ROLLER BEARING COMPANY OF AMERICA, INC.**

 

[All dollar amounts are in thousands]

 
| Line  1 |   | Accounts of the  Borrower and Secured Guarantors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | $      |   | * |
|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|---|
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |   |
|    |   | Less:          Ineligible Accounts:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |   |
|    |   | Accounts that do not  arise from the sale of goods or the performance of services by Borrower or a  Secured Guarantor in the ordinary course of its business;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |   |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |   |
|    |   | Accounts (i) upon which  Borrower’s or the applicable Secured Guarantor’s right to receive payment is  not absolute or is contingent upon the fulfillment of any condition  whatsoever or (ii) as to which Borrower or the applicable Secured Guarantor  is not able to bring suit or otherwise enforce its remedies against the  Account Debtor through judicial process, or (iii) if the Account represents a  progress billing consisting of an invoice for goods sold or used or services  rendered pursuant to a contract under which the Account Debtor’s obligation  to pay that invoice is subject to Borrower’s or the Secured Guarantors’  completion of further performance under such contract or is subject to the  equitable lien of a surety bond issuer; *[Note: includes pre-bill]* |   |   |   |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |   |
|    |   | Any Account to the  extent that any defense, counterclaim, setoff or dispute is asserted as to  such Account; *[Note: current portion of a positive balance on the Account aging  coded “RPS”]*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |   |
|    |   | Accounts that are not  true and correct statements of bona fide indebtedness incurred in the amount  of the Account for merchandise sold to or services rendered and accepted by  the applicable Account Debtor;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |   |
|    |   | Accounts with respect  to which an invoice has not been sent to the applicable Account Debtor;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |   |

 

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|   |   | Accounts that (i) are  not owned by Borrower or a Secured Guarantor or (ii) are subject to any  right, claim, security interest or other interest of any other Person, other  than Liens described in clauses (a) and (g) of the definition  of Permitted Encumbrances in the Credit Agreement and Liens in favor of  Agent, on behalf of itself and Lenders but only to the extent of such right,  claim, security interest or other interest;                                                                                                                                                        |   |   |   |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |
|   |   | Accounts that arise  from a sale to any director, officer, other employee or Affiliate of any  Credit Party, or to any entity that has any common officer with any Credit  Party;                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |
|   |   | Accounts that are the  obligations of an Account Debtor that is the United States government or a  political subdivision thereof, or any state, county or municipality or  department, agency or instrumentality thereof, unless Borrower, or the  applicable Secured Guarantor, has complied with respect to such obligation  with the Federal Assignment of Claims Act of 1940, or any applicable state,  county or municipal law restricting assignment thereof; *provided*, that the  Borrowing Availability based on such obligations shall not in any event  exceed $7,500,000 in the aggregate; |   |   |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |
|   |   | Accounts that are the  obligations of an Account Debtor located in a foreign country other than (A)  Canada (excluding the province of Newfoundland, the Northwest Territories and  the Territory of Nunavut) or (B) the United Kingdom, unless payment thereof  is assured by a letter of credit assigned and delivered to Agent or credit  insurance, satisfactory to Agent as to form, amount and issuer;                                                                                                                                                                                           |   |   |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |
|   |   | Accounts to the extent  Borrower or any Secured Guarantor or any Subsidiary thereof is liable for  goods sold or services rendered by the applicable Account Debtor to Borrower  or any Secured Guarantor or any Subsidiary thereof but only to the extent of  the potential offset;                                                                                                                                                                                                                                                                                                                   |   |   |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |
|   |   | Accounts that arise  with respect to goods that are delivered on a bill-and-hold, cash-on-delivery  basis or placed on consignment, guaranteed sale or other terms by reason of  which the payment by the Account Debtor is or may be conditional;                                                                                                                                                                                                                                                                                                                                                     |   |   |   |

 

2

----

 
|   |   | Accounts that are in  default; *provided*,  that, an Account shall be deemed in default upon the occurrence of any of the  following:                                                                                                                                                                                                                                                                              |   |   |   |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |
|   |   | (i)                           the  Account is not paid within the earlier of: 60 days following its due date or  120 days following its original invoice date; unless payment thereof is  secured by a letter of credit satisfactory to Agent as to form, substance and  issuer. |   |   |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |
|   |   | past due credits                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |
|   |   | (ii)                        the  Account Debtor obligated upon such Account suspends business, makes a general  assignment for the benefit of creditors or fails to pay its debts generally  as they come due; or                                                                               |   |   |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |
|   |   | (iii)                     a petition  is filed by or against any Account Debtor obligated upon such Account under  any bankruptcy law or any other federal, state or foreign (including any  provincial) receivership, insolvency relief or other law or laws for the  relief of debtors;                      |   |   |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |
|   |   | *Accounts excluded under the  default criteria (i) - (iii) above shall be excluded in their entirety,  meaning that any past due credits with respect thereto shall also be excluded  thereunder*                                                                                                                                                                                                                  |   |   |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |
|   |   | Accounts that are the  obligations of an Account Debtor if 50% or more of the Dollar amount of all  Accounts owing by that Account Debtor are ineligible under the criteria of Accounts  in default set forth immediately above                                                                                                                                                                                    |   |   |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |
|   |   | Accounts as to which  Agent’s Lien thereon, on behalf of itself and Lenders, is not a first  priority perfected Lien;                                                                                                                                                                                                                                                                                         |   |   |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |
|   |   | Accounts as to which  any of the representations or warranties in the Loan Documents are untrue in  any material respect;                                                                                                                                                                                                                                                                                          |   |   |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |
|   |   | Accounts to the extent  such Account is evidenced by a judgment, Instrument or Chattel Paper;                                                                                                                                                                                                                                                                                                                      |   |   |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |
|   |   | Accounts to the extent  that such Accounts, together with all other Accounts owing by such Account  Debtor and its Affiliates (excluding the United States government as Account  Debtor) as of any date of determination exceed 15% of all Eligible Accounts;                                                                                                                                                     |   |   |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |
|   |   | Accounts that are  payable in any currency other than Dollars, Canadian Dollars, Pounds Sterling  or Euros.                                                                                                                                                                                                                                                                                                        |   |   |   |

 

3

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|    |   | (i)                            Dollar  equivalent of Accounts payable in Canadian Dollars:                                                                                                                                                                                                                                                                                                                            | $      |   |   |   |   |
|---------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |
|    |   | (ii)                         Dollar  equivalent of Accounts payable in Pounds Sterling:                                                                                                                                                                                                                                                                                                                                              | $      |   |   |   |   |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |
|    |   | (iii)                      Dollar  equivalent of Accounts payable in Euros:                                                                                                                                                                                                                                                                                                                                                                         | $      |   |   |   |   |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |
|    |   | Dollar equivalent of an  Account shall be calculated at the rate at which Canadian Dollars, Pounds  Sterling (British Pound), or Euros as applicable, may be exchanged into  U.S.  dollars as published in The Wall  Street Journal.                                                                                                                                                                                                                                                                                                                    |   |   |   |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |
| Line  2 |   | Less Unapplied Cash  Reserves, if any                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |
| Line  3 |   | Total Ineligible  Accounts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |
| Line  4 |   | Total Eligible Accounts  (Accounts less Total Ineligible Accounts and Reserves, if any (Line 1 less  Line 3)                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |
|    |   | Advance Rate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | 85     | %      |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |
| Line  5 |   | Accounts Availability                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |
| Line  6 |   | Less Dilution Reserve,  if any                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |
| Line  7 |   | Net Accounts  Availability                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |
| Line  8 |   | Inventory (other than  Component Parts and Purchased Parts)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   |   |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |
|    |   | Less:          Ineligible Inventory:                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |
|    |   | Inventory that is not  owned by Borrower or any Secured Guarantor free and clear of all Liens and  rights of any other Person (including the rights of a purchaser that has made  progress payments and the rights of a surety that has issued a bond to assure  Borrower’s or a Secured Guarantor’s performance with respect to that  Inventory), except Liens described in clauses (a), (d), (e)  and (g) of the definition of Permitted Encumbrances in the Credit  Agreement and the Liens in favor of Agent, on behalf of itself and Lenders; |   |   |   |

 

4

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|   |   | Inventory that (i) is  not located on premises owned, leased or rented by Borrower or any Secured  Guarantor and set forth in Disclosure Schedule (3.2), (ii) is not  located on premises acquired or leased by Borrower or any Secured Guarantor  in connection with any Permitted Acquisition, or (iii) is stored at a leased  location, unless Agent has given its prior consent thereto and unless either  (x) a reasonably satisfactory landlord waiver has been delivered to Agent, or  (y) Reserves reasonably satisfactory to Agent have been established with  respect thereto, or (iii) is stored with a bailee or warehouseman unless a  reasonably satisfactory, acknowledged bailee letter has been received by  Agent and Reserves reasonably satisfactory to Agent have been established  with respect thereto, or (iv) is located at a location owned by Borrower or  any Secured Guarantor subject to a mortgage in favor of a lender other than  Agent, unless a reasonably satisfactory mortgagee waiver has been delivered  to Agent, or (v) is located at any site if the aggregate book value of  Inventory at any such location is less than $50,000; |   |   |   |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |
|   |   | Inventory that is  placed on consignment or is in transit, except for Inventory in transit  between domestic locations of Credit Parties as to which Agent’s Liens have  been perfected at origin and destination;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |
|   |   | Inventory that is  covered by a negotiable document of title, unless such document has been  delivered to Agent with all necessary endorsements, free and clear of all  Liens except those in favor of Agent and Lenders;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |
|   |   | Inventory that is  excess, obsolete, slow moving (in excess of 2-years’ supply),                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |
|   |   | unsalable (scrap),                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |
|   |   | shopworn, seconds,  damaged or unfit for sale;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |
|   |   | Inventory that consists  of display items or packing or shipping materials, manufacturing supplies,  Inventory which is not subject to an outstanding purchase order that is not  revocable by its terms or is not sold in the ordinary course of business,  work-in-process Inventory or replacement parts;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |
|   |   | custom-made                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   |   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |
|   |   | Inventory that is not  of a type held for sale in the ordinary course of Borrower’s or the  applicable Secured Guarantor’s business;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |

 

5

----

 
|     |   | Inventory that is not  subject to a first priority lien in favor of Agent on behalf of itself and  Lenders subject to Permitted Encumbrances (includes Inventory at foreign  locations); |   |   |   |
|----------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
|     |   |                                                                                                                                                                                     |   |   |   |
|     |   | Inventory that breaches  in any material respect any of the representations or warranties pertaining  to Inventory set forth in the Loan Documents;                                      |   |   |   |
|     |   |                                                                                                                                                                                     |   |   |   |
|     |   | Inventory that consists  of any costs associated with “freight-in” charges;                                                                                                    |   |   |   |
|     |   |                                                                                                                                                                                     |   |   |   |
|     |   | Inventory that consists  of Hazardous Materials or goods that can be transported or sold only with  licenses that are not readily available; or                                          |   |   |   |
|     |   |                                                                                                                                                                                     |   |   |   |
|     |   | Inventory that is not  covered by casualty insurance in accordance with Section 5.4 of the  Credit Agreement.                                                                            |   |   |   |
|     |   |                                                                                                                                                                                     |   |   |   |
| Line  10 |   | Less Costing Reserves,  if any                                                                                                                                                           |   |   |   |
|     |   |                                                                                                                                                                                     |   |   |   |
| Line  11 |   | Less Gross Margin Reserve,  if any                                                                                                                                                       |   |   |   |
|     |   |                                                                                                                                                                                     |   |   |   |
| Line  12 |   | Less Shipping Overhead  Reserve, if any                                                                                                                                                  |   |   |   |
|     |   |                                                                                                                                                                                     |   |   |   |
| Line  13 |   | Less Timing Reserve, if  any                                                                                                                                                             |   |   |   |
|     |   |                                                                                                                                                                                     |   |   |   |
| Line  14 |   | Less Intercompany  Profit                                                                                                                                                                |   |   |   |
|     |   |                                                                                                                                                                                     |   |   |   |
| Line  15 |   | Total Ineligible  Inventory                                                                                                                                                              |   |   |   |
|     |   |                                                                                                                                                                                     |   |   |   |
| Line  16 |   | Total Eligible Finished  Goods and Raw Material Inventory (Line 8 less Line 15 (excluding Component  Parts and Purchased Parts, “FG & RM Eligible Inventory”)              |   |   |   |
|     |   |                                                                                                                                                                                     |   |   |   |
|     |   | Advance Rate                                                                                                                                                                             |   | 65     | %      |
|     |   |                                                                                                                                                                                     |   |   |   |
| Line  17 |   | FG & RM Inventory  Availability                                                                                                                                                      |   |   |   |
|     |   |                                                                                                                                                                                     |   |   |   |
| Line  18 |   | Landlord Wavier/Rent  Reserve, if any                                                                                                                                                    |   |   |   |
|     |   |                                                                                                                                                                                     |   |   |   |
| Line  19 |   | Net FG & RM  Inventory Availability                                                                                                                                                  |   |   |   |

 

6

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| Line  20 |   | Inventory consisting of  Component Parts and Purchased Parts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |   |
|----------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |
|     |   | Less:  Ineligible Component Parts and Purchased Parts:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |
|     |   | Component Parts and  Purchased Parts that are not owned by Borrower or any Secured Guarantor free  and clear of all Liens and rights of any other Person (including the rights  of a purchaser that has made progress payments and the rights of a surety  that has issued a bond to assure Borrower’s or a Secured Guarantor’s  performance with respect to that Inventory), except Liens described in clauses(a), (d), (e) and (g) of the definition of  Permitted Encumbrances in the Credit Agreement and the Liens in favor of  Agent, on behalf of itself and Lenders;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |
|     |   | Component Parts and  Purchased Parts that (i) are not located on premises owned, leased or rented  by Borrower or any Secured Guarantor and set forth in Disclosure Schedule  (3.2), (ii) are not located on premises acquired or leased by Borrower or  any Secured Guarantor in connection with any Permitted Acquisition, or (iii)  are stored at a leased location, unless Agent has given its prior consent  thereto and unless either (x) a reasonably satisfactory landlord waiver has  been delivered to Agent, or (y) Reserves reasonably satisfactory to Agent  have been established with respect thereto, or (iii) is stored with a bailee  or warehouseman unless a reasonably satisfactory, acknowledged bailee letter  has been received by Agent and Reserves reasonably satisfactory to Agent have  been established with respect thereto, or (iv) are located at a location  owned by Borrower or any Secured Guarantor subject to a mortgage in favor of  a lender other than Agent, unless a reasonably satisfactory mortgagee waiver  has been delivered to Agent, or (v) are located at any site if the aggregate  book value of Inventory at any such location is less than $50,000; |   |   |   |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |
|     |   | Component Parts and  Purchased Parts that are placed on consignment or are in transit, except for  Component Parts and Purchased Parts in transit between domestic locations of  Credit Parties as to which Agent’s Liens have been perfected at origin and  destination;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |
|     |   | Component Parts and  Purchased Parts that are covered by a negotiable document of title, unless  such document has been delivered to Agent with all necessary endorsements,  free and clear of all Liens except those in favor of Agent and Lenders;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |
|     |   | Component Parts and  Purchased Parts that are excess, obsolete, slow moving (in excess of 2-years’  supply), or unfit for sale;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |
|     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |
|     |   | Component Parts and  Purchased Parts that are not subject to a first priority lien in favor of  Agent on behalf of itself and Lenders subject to Permitted Encumbrances;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |

 

7

----

 
|     |   | Component Parts and  Purchased Parts that breach in any material respect any of the  representations or warranties pertaining to Component Parts and Purchased  Parts set forth in the Loan Documents;                                              |   |   |      |
|----------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|
|     |   |                                                                                                                                                                                                                                                |   |   |      |
|     |   | Component Parts and  Purchased Parts that consist of any costs associated with “freight-in”  charges;                                                                                                                                     |   |   |      |
|     |   |                                                                                                                                                                                                                                                |   |   |      |
|     |   | Component Parts and  Purchased Parts that consist of Hazardous Materials or goods that can be  transported or sold only with licenses that are not readily available; or                                                                            |   |   |      |
|     |   |                                                                                                                                                                                                                                                |   |   |      |
|     |   | Component Parts and  Purchased Parts that are not covered by casualty insurance in accordance with  Section 5.4 of the Credit Agreement.                                                                                                            |   |   |      |
|     |   |                                                                                                                                                                                                                                                |   |   |      |
| Line  21 |   | Total Ineligible  Component Parts and Purchased Parts                                                                                                                                                                                               |   |   |      |
|     |   |                                                                                                                                                                                                                                                |   |   |      |
| Line  22 |   | Total Eligible  Component Parts and Purchased Parts (Line 20 less Line 21)                                                                                                                                                                          |   |   |      |
|     |   |                                                                                                                                                                                                                                                |   |   |      |
| Line  23 |   | Total Eligible  Inventory (Line 19 plus Line 22)                                                                                                                                                                                                    |   |   |      |
|     |   |                                                                                                                                                                                                                                                |   |   |      |
| Line  24 |   | 25% of Total Eligible  Inventory                                                                                                                                                                                                                    |   |   |      |
|     |   |                                                                                                                                                                                                                                                |   |   |      |
| Line  25 |   | Total Eligible  Component Parts and Purchased Parts in excess of 25% of the total  value of the Total Eligible Inventory, if any                                                                                                                    |   |   |      |
|     |   |                                                                                                                                                                                                                                                |   |   |      |
|     |   | Line 22 less  Line 25                                                                                                                                                                                                                               |   |   |      |
|     |   |                                                                                                                                                                                                                                                |   |   |      |
|     |   | Advance Rate                                                                                                                                                                                                                                        |   | 30     | %         |
|     |   |                                                                                                                                                                                                                                                |   |   |      |
| Line  26 |   | Component Parts and  Purchase Parts Availability                                                                                                                                                                                                    |   |   |      |
|     |   |                                                                                                                                                                                                                                                |   |   |      |
| Line  27 |   | Borrowing Base (Line 7 plus  Line 19 plus Line 26)                                                                                                                                                                                                  |   |   |      |
|     |   |                                                                                                                                                                                                                                                |   |   |      |
|     |   | Less: Revolving Loan  outstanding other than Overadvances (*i.e.*, the sum of (i) the aggregate  amount of Revolving Credit Advances outstanding to Borrower, plus (ii)  the aggregate Letter of Credit Obligations incurred on behalf of Borrower) |   |   |      |
|     |   |                                                                                                                                                                                                                                                |   |   |      |
|     |   | Less:  Swing Line Loan outstanding other than Overadvances                                                                                                                                                                                          |   |   |      |
|     |   |                                                                                                                                                                                                                                                |   |   |      |
|     |   | Less: Required Minimum  Borrowing Availability                                                                                                                                                                                                      |   | $      | 7,500,000 | * |
|     |   |                                                                                                                                                                                                                                                |   |   |      |
|     |   | Borrowing Availability                                                                                                                                                                                                                              |   |   |      |
|          |        |                                                                                                                                                                                                                                                     |        |        |           |  |

 

----

*3,500,000 during theperiod from January 31, 2003 through April 30, 2003

 

8

----

 

Schedule 2to Exhibit 4.1(b)

 

**MINIMUMBORROWING AVAILABILITY**

**(SectionE(b))**

 
| A.                                             |   | Maximum Amount                                                                                                                                                                                                                                      |      | $      |   |   |
|------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------|--------|--------|--------|
|                                           |   |                                                                                                                                                                                                                                                |      |   |   |
| B.                                             |   | Borrowing Base (from  Schedule 1 to Exhibit 4.1 (b above)                                                                                                                                                                                           |      | $      |   |   |
|                                           |   |                                                                                                                                                                                                                                                |      |   |   |
| C.                                             |   | The lesser of ***A*** and ***B*** above                                                                                                                                                                                                             |      | $      |   |   |
|                                           |   |                                                                                                                                                                                                                                                |      |   |   |
| D.                                             |   | Overadvances made but  not demanded under Section 1.1(a)(iii) of the Credit Agreement                                                                                                                                                               |      | $      |   |   |
|                                           |   |                                                                                                                                                                                                                                                |      |   |   |
| E.                                             |   | Revolving Loan  outstanding other than Overadvances in***D***(i.e., the sum of (i the  aggregate amount of Revolving Credit Advances outstanding to Borrower plus  (ii the aggregate Letter of Credit Obligations incurred on behalf of  Borrower.) |      | $      |   |   |
|                                           |   |                                                                                                                                                                                                                                                |      |   |   |
| F.                                             |   | Swing Line Loan  outstanding                                                                                                                                                                                                                        |      | $      |   |   |
|                                           |   |                                                                                                                                                                                                                                                |      |   |   |
| G.                                             |   | ***E***plus***F***                                                                                                                                                                                                                                  |      | $      |   |   |
|                                           |   |                                                                                                                                                                                                                                                |      |   |   |
| H.                                             |   | Borrowing Availability  (C minus G)                                                                                                                                                                                                                 |      | $      |   |   |
|                                           |   |                                                                                                                                                                                                                                                |      |   |   |
| Required Minimum  Borrowing Availability $7.50 |   | $                                                                                                                                                                                                                                                   | 7,500,000 | *      |
|                                           |   |                                                                                                                                                                                                                                                |      |   |   |
| In Compliance                                  |   | Yes/No                                                                                                                                                                                                                                              |      |

 

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*3,500,000 for the period from January 31, 2003 through April 30, 2003

 

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