Document:

Execution Version  

SUBSIDIARY GUARANTY
AGREEMENT 

Dated as of August 23,
2007 

from 

THE SUBSIDIARY
GUARANTORS NAMED HEREIN 

for the benefit of 

THE HOLDERS OF THE NOTES 

RE: 

$150,000,000 Floating
Rate Series 2007A Senior Notes, Tranche A, 
due August 23, 2014 

$100,000,000 Floating Rate
Series 2007A Senior Notes, Tranche B, 
due August 23, 2017 

of 

REGAL-BELOIT CORPORATION 

TABLE OF CONTENTS 

	SECTION	HEADING	PAGE
	
SECTION 1.	GUARANTY	2
	
SECTION 2.	REPRESENTATIONS AND WARRANTIES	3
	
SECTION 3.	SUBSIDIARY GUARANTOR’S OBLIGATIONS UNCONDITIONAL	5
	
SECTION 4.	FULL RECOURSE OBLIGATIONS; PARI PASSU RANKING	10
	
SECTION 5.	WAIVER	10
	
SECTION 6.	WAIVER OF SUBROGATION	11
	
SECTION 7.	SUBORDINATION	12
	
SECTION 8.	EFFECT OF BANKRUPTCY PROCEEDINGS, ETC	12
	
SECTION 9.	TERM OF GUARANTY	13
	
SECTION 10.	CONTRIBUTION	13
	
SECTION 11.	LIMITATION OF LIABILITY	14
	
SECTION 12.	NEGATIVE PLEDGE	14
	
SECTION 13.	SUPPLEMENTAL AGREEMENT	14
	
SECTION 14.	DEFINITIONS AND TERMS GENERALLY	15
	
SECTION 15.	NOTICES	15
	
SECTION 16.	AMENDMENTS, ETC	16
	
SECTION 17.	CONSENT TO JURISDICTION; SERVICE OF PROCESS	16

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SECTION 18.	WAIVER OF JURY TRIAL	17
	
SECTION 19.	SURVIVAL	17
	
SECTION 20.	SEVERABILITY	18
	
SECTION 21.	SUCCESSORS AND ASSIGNS	18
	
SECTION 22.	TABLE OF CONTENTS; HEADINGS	18
	
SECTION 23.	COUNTERPARTS	18
	
SECTION 24.	GOVERNING LAW	18
	
SECTION 25.	RELEASE	18
	
SECTION 26.	COVENANT COMPLIANCE	19

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        SUBSIDIARY
GUARANTY AGREEMENT, dated as of August 23, 2007 (the “Guaranty”), from
each of: 

	 	(i) 	Hub
City, Inc. (a Delaware corporation);  

	 	(ii) 	Marathon
Electric Manufacturing Corporation (a Wisconsin corporation);  

	 	(iii) 	Marathon
Special Products Corporation, (an Ohio corporation);  

	 	(iv) 	Regal-Beloit
Electric Motors, Inc. (a Wisconsin corporation);  

	 	(v) 	Regal-Beloit
Flight Service, Inc. (a Wisconsin corporation); and  

	 	(vi) 	such
Subsidiaries as shall become parties hereto in accordance with           Section 13
hereof (each a “Subsidiary Guarantor”          and collectively
the “Subsidiary Guarantors”),  

for the benefit of the holders from
time to time of the Notes (as defined below) (the “Holders”). Capitalized
terms used herein are defined in Section 14 hereof or the Note Purchase Agreement
referred to below. 

        WHEREAS,
Regal-Beloit Corporation, a Wisconsin corporation (the “Company”) will
authorize the issue and sale of (i) $150,000,000 Floating Rate Series 2007A Senior
Notes, Tranche A due August 23, 2014 (the “Tranche A Notes”), and
(ii) $100,000,000 Floating Rate Series 2007A Senior Notes, Tranche B due August
23, 2017 (the “Tranche B Notes” and, together with the Tranche A
Notes, the “Notes”), pursuant to a Note Purchase Agreement, dated as of
the date hereof (as amended, modified or supplemented from time to time, the “Note
Purchase Agreement”) among the Company and the purchasers named therein. 

        WHEREAS,
the Company is authorized to issue Additional Notes (as such term is defined in the Note
Purchase Agreement) of one or more separate series from time to time in an aggregate
principal amount not to exceed $600,000,000 pursuant to Section 2.2 of the Note
Purchase Agreement. 

        WHEREAS,
the Additional Notes together with the Series 2007A Notes are collectively referred to as
the “Notes”. 

        WHEREAS,
each of the Subsidiary Guarantors is a Subsidiary of the Company. 

        WHEREAS, the
Company has agreed that certain of its Subsidiaries will guarantee the obligations of the
Company under the Notes and the Note Purchase Agreement. 

        WHEREAS,
the Subsidiary Guarantors each acknowledge that they will derive substantial benefits from
the issuance of the Notes. 

        NOW,
THEREFORE, in consideration of the premises and to induce the Holders to purchase the
Notes, each of the Subsidiary Guarantors, intending to be legally bound, hereby agrees for
the benefit of the Holders, as follows: 

SECTION 1.              GUARANTY.  

        Each
Subsidiary Guarantor with all other Subsidiary GuarantorS, hereby absolutely,
unconditionally and irrevocably guarantees, jointly and severally, as a primary obligor
and not merely as a surety, to each Holder and its successors and assigns, the full and
punctual payment and performance when due, whether at stated maturity, by acceleration or
otherwise, of the principal of and Make-Whole Amount, Prepayment Premium, LIBOR Breakage
Amount, and interest on (including, without limitation, interest, whether or not an
allowable claim, accruing after the date of filing of any petition in bankruptcy, or the
commencement of any bankruptcy, insolvency or similar proceeding relating to the Company)
the Notes and all other amounts under the Note Purchase Agreement and all other
obligations, agreements and covenants of the Company now or hereafter existing under the
Intercreditor Agreement and the Note Purchase Agreement whether for principal, Make-Whole
Amount, Prepayment Premium, LIBOR Breakage Amount, interest (including interest accruing
or becoming owing both prior to and subsequent to the commencement of any proceeding
against or with respect to the Company under any chapter of the Bankruptcy Code),
indemnification payments, expenses (including reasonable attorneys’ fees and
expenses) or otherwise, and all reasonable costs and expenses, if any, incurred by any
Holder in connection with enforcing any rights under this Guaranty (all such obligations
being the “Guaranteed Obligations”), and agrees to pay any and all
reasonable expenses incurred by each Holder in enforcing this Guaranty; provided
that, notwithstanding anything contained herein or in the Note Purchase Agreement to the
contrary, the maximum liability of each Subsidiary Guarantor hereunder and under the Note
Purchase Agreement shall in no event exceed such Guarantor’s Maximum Guaranteed
Amount, and provided further, each Subsidiary Guarantor shall be unconditionally
required to pay all amounts demanded of it hereunder prior to any determination of such
Maximum Guaranteed Amount and the recipient of such payment, if so required by a final
non-appealable order of a court of competent jurisdiction, shall then be liable for the
refund of any excess amounts. If any such rebate or refund is ever required, all other
Subsidiary Guarantors (and the Company) shall be fully liable for the repayment thereof to
the maximum extent allowed by applicable law. This Guaranty is an absolute, unconditional,
present and continuing guaranty of payment and not of collectibility and is in no way
conditioned upon any attempt to collect from the Company or any other action, occurrence
or circumstance whatsoever. Each Subsidiary Guarantor agrees that the Guaranteed
Obligations may at any time and from to time exceed the Maximum Guaranteed Amount of such
Subsidiary Guarantor without impairing this Guaranty or affecting the rights and remedies
of the Holders hereunder. 

        Notwithstanding
any stay, injunction or other prohibition preventing such action against the Company, if
for any reason whatsoever the Company shall fail or be unable duly, punctually and fully
to perform and (in the case of the payment of Guaranteed Obligations) pay such amounts as
and when the same shall become due and (in the case of the payment of Guaranteed
Obligations) payable or to perform or comply with any other Guaranteed Obligation, whether
or not such failure or inability shall constitute an “Event of Default” under
the Note Purchase Agreement or the Notes, each Subsidiary Guarantor will forthwith (in the
case of the payment of Guaranteed Obligations) pay or cause to be paid such amounts to the
Holders, in lawful money of the United States of America, at the place specified in the
Note Purchase Agreement, or perform or comply with such Guaranteed Obligations or cause
such Guaranteed Obligations to be performed or complied with, (in the case of the payment
of Guaranteed Obligations) together with interest (in the amounts and to the extent
required under such Notes) on any amount due and owing. 

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SECTION 2.              REPRESENTATIONS
AND WARRANTIES.  

        Each
Subsidiary Guarantor hereby represents and warrants on the date hereof as follows: 

        (a)                 All
representations and warranties contained in the Note Purchase Agreement that
          relate to such Subsidiary Guarantor are true and correct in all respects and
are           incorporated by reference with the same force and effect as though set
forth           herein in full.  

        (b)                 Such
Subsidiary Guarantor acknowledges that, any default in the due observance           or
performance by such Subsidiary Guarantor of any covenant, condition or
          agreement contained herein (if, after the running of any applicable notice and
          opportunity to cure periods provided in the Note Purchase Agreement, such
          default or event of default remains uncured) shall constitute an Event of
          Default.  

        (c)                 There
are no conditions precedent to the effectiveness of this Guaranty that           have not
been satisfied or expressly waived.  

        (d)                 Such
Subsidiary Guarantor has, independently and without reliance upon the           Holders
and based on such documents and information as it has deemed           appropriate, made
its own credit analysis and decision to enter into this           Guaranty. Such
Subsidiary Guarantor has investigated fully the benefits and           advantages which
will be derived by it from execution of this Guaranty, and the           Board of
Directors of such Subsidiary Guarantor has decided that a direct and/or           an
indirect benefit will accrue to such Subsidiary Guarantor by reason of the
          execution of this Guaranty.  

        (e)                 (i) This
Guaranty is not given with actual intent to hinder, delay or           defraud any Person
to which such Subsidiary Guarantor is or will become, on or           after the date
hereof, indebted; (ii) such Subsidiary Guarantor has           received at least a
reasonably equivalent value in exchange for the giving of           this Guaranty; (iii) such
Subsidiary Guarantor is not insolvent on the date           hereof and will not become
insolvent as a result of the giving of this Guaranty;           (iv) such Subsidiary
Guarantor is not engaged in a business or transaction,           nor is about to engage
in a business or transaction, for which any property           remaining with such
Subsidiary Guarantor constitutes an unreasonably small           amount of capital; and
(v) such Subsidiary Guarantor does not intend to           incur debts that will be
beyond such Subsidiary Guarantor’s ability to pay           as such debts mature.  

        (f)                 Each
Subsidiary Guarantor is a corporation or other legal entity duly
          organized and validly existing under the laws of its state of organization, and
          has the requisite power, authority and legal right under the laws of its state
          of organization to conduct its business as presently conducted and to execute,
          deliver and perform its obligations under this Guaranty.  

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        (g)                 The
execution, delivery and performance of this Guaranty have been duly           authorized
by all necessary corporate or other action on the part of each           Subsidiary
Guarantor, and does not require any consent or approval of, or the           giving of
notice to, or the taking of any other action in respect of, any           stockholder or
trustee or holder of any indebtedness or obligations of such           Subsidiary
Guarantor. This Guaranty constitutes a legal, valid and binding           obligation of
each Subsidiary Guarantor, enforceable against such           Subsidiary Guarantor in
accordance with its terms, except that such           enforceability is subject to any
limitations arising from bankruptcy,           insolvency, liquidation, moratorium,
reorganization and other similar laws of           general application relating to or
affecting the rights of creditors or pledgees           and to general principles of
equity (regardless of whether such enforceability           is considered in a proceeding
in equity or at law).  

        (h)                 The
execution, delivery and performance of this Guaranty does not and will not
          conflict with or result in any violation of or default under any provision of
          the Articles of Incorporation or by-laws or partnership agreement, as the case
          may be, of any Subsidiary Guarantor, or any indenture, mortgage, deed of trust,
          instrument, law, rule or regulation binding on any Subsidiary Guarantor or to
          which a Subsidiary Guarantor is a party.  

        (i)                 The
execution, delivery and performance of this Guaranty does not and will not
          result in violation of any judgment or order applicable to any Subsidiary
          Guarantor or result in the creation or imposition of any Lien on any of the
          properties or revenues of any Subsidiary Guarantor pursuant to any requirement
          of law or any indenture, mortgage, deed of trust or other instrument to which
          such Subsidiary Guarantor is a party.  

        (j)                 The
execution, delivery and performance of this Guaranty do not and will not
          conflict with and do not and will not require any consent, approval or
          authorization of, or registration or filing with, any governmental authority or
          agency of the state of organization of any Subsidiary Guarantor or of the
United           States or any State.  

        (k)                 There
are no pending or, to the knowledge of any Subsidiary Guarantor,           threatened
actions or proceedings against or affecting such Subsidiary Guarantor           or any of
its properties by or before any court or administrative agency or           arbiter that
would have a Material Adverse Effect or call into question the           validity or
enforceability of this Guaranty.  

        (l)                 Each
Subsidiary Guarantor’s obligations under this Guaranty are at least pari passu
in right of payment with all other senior unsecured and           unsubordinated
claims of the general creditors of such Subsidiary Guarantor.  

        (m)                 Each
Subsidiary Guarantor has validly and irrevocably submitted to the           jurisdiction
of the Supreme Court of the State of New York, New York County, and           the United
States District Court for the Southern District of New York.  

        (n)                 The
choice of the laws of the State of New York to govern this Guaranty is valid
          and binding.  

        (o)                 No
Subsidiary Guarantor is in breach of or default under or with respect to any
          instrument, document or agreement binding upon such Subsidiary Guarantor which
          breach or default is reasonably likely to have a Material Adverse Effect or
          result in the creation of a Lien on any property of such Subsidiary Guarantor
          other than Liens permitted under Section 10.5 of the Note Purchase
          Agreement. Each Subsidiary Guarantor is in compliance with all applicable
          requirements of law except such non-compliance as would not have a Material
          Adverse Effect.  

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        (p)                 The
execution, delivery and performance by each Subsidiary Guarantor of this
          Guaranty will not render such Subsidiary Guarantor insolvent, nor is it being
          made in contemplation of such Subsidiary Guarantor’s insolvency, and the
          Subsidiary Guarantor does not have an unreasonably small capital.  

SECTION 3.              SUBSIDIARY
GUARANTOR’S OBLIGATIONS UNCONDITIONAL.  

        (a)                 This
Guaranty shall constitute a guarantee of payment, performance and           compliance
and not of collection, and each Subsidiary Guarantor specifically           agrees that
it shall not be necessary, and that such Subsidiary Guarantor shall           not be
entitled to require, before or as a condition of enforcing the liability           of
such Subsidiary Guarantor under this Guaranty or requiring payment or
          performance of the Guaranteed Obligations by any Subsidiary Guarantor
hereunder,           or at any time thereafter, that any Holder: (a) file suit or
proceed to           obtain or assert a claim for personal judgment against the Company
or any other           Person that may be liable for or with respect to any Guaranteed
Obligation;           (b) make any other effort to obtain payment or performance of
any           Guaranteed Obligation from the Company or any other Person that may be
liable           for or with respect to such Guaranteed Obligation, except for the making
of the           demands, when appropriate, described in Section 1; (c) foreclose
          against, or seek to realize upon security now or hereafter existing for such
          Guaranteed Obligations; (d) except to the extent set forth in Section 1,
          exercise or assert any other right or remedy to which such Holder is or may be
          entitled in connection with any Guaranteed Obligation or any security or other
          guaranty therefor; or (e) assert or file any claim against the assets of
          the Company or any other Person liable for any Guaranteed Obligation. Each
          Subsidiary Guarantor agrees that this Guaranty shall be continuing, and that
the           Guaranteed Obligations will be paid and performed in accordance with their
terms           and the terms of this Guaranty, and are the primary, absolute and
unconditional           obligations of such Subsidiary Guarantor, irrespective of the
value,           genuineness, validity, legality, regularity or enforceability or lack
thereof of           any part of the Guaranteed Obligations or any agreement or
instrument relating           to the Guaranteed Obligations or this Guaranty, or the
existence of any           indemnities with respect to the existence of any other
guarantee of or security           for any of the Guaranteed Obligations, or any
substitution, release or exchange           of any other guarantee of or security for any
of the Guaranteed Obligations,           and, to the fullest extent permitted by
applicable law, irrespective of any           other circumstance whatsoever that might
otherwise constitute a legal or           equitable discharge or defense of a surety or
guarantor, it being the intent of           this Section 3 that the obligations of each
Subsidiary Guarantor hereunder shall           be irrevocable, primary, absolute and
unconditional under any and all           circumstances.  

        (b)                 Each
Subsidiary Guarantor hereby expressly waives notice of acceptance of and
          reliance upon this Guaranty, diligence, presentment, demand of payment or
          performance, protest and all other notices (except as otherwise provided for in
          Section 1) whatsoever, any requirement that the Holders exhaust any right,
power           or remedy or proceed against the Company or against any other Person
under any           other guarantee of, or security for, or any other agreement,
regarding any of           the Guaranteed Obligations. Each Subsidiary Guarantor further
agrees that,           subject solely to the requirement of making demands under Section
1, the           occurrence of any event or other circumstance that might otherwise
vary           the risk of the Company or such Subsidiary Guarantor or constitute a  defense
 (legal or equitable) available to, or a discharge of, or a counterclaim or
          right of set-off by, the Company or such Subsidiary Guarantor (other than the
          full and indefeasible due payment and performance of the Guaranteed
          Obligations), shall not affect the liability of the Subsidiary Guarantor
          hereunder.  

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        (c)                 The
obligations of each Subsidiary Guarantor under this Guaranty are not subject           to
any counterclaim, set-off, deduction, diminution, abatement, recoupment,
          suspension, deferment or defense based upon any claim such Subsidiary Guarantor
          or any other Person may have against the Company, any Holder or any other
          Person, and shall remain in full force and effect without regard to, and shall
          not be released, discharged or in any way affected by, any circumstances or
          condition whatsoever (other than the indefeasible payment in full of the
          Guaranteed Obligations) (whether or not such Subsidiary Guarantor or the
Company           shall have any knowledge or notice thereof), including:  

	 	        (i)                      any
renewal, extension, modification, increase, decrease, alteration or
               rearrangement of all or any part of the Guaranteed Obligations or any
instrument                executed in connection therewith, or any contract or
understanding with the                Company, the Holders, or any of them, or any other
Person, pertaining to the                Guaranteed Obligations;  

	 	        (ii)                      any
adjustment, indulgence, forbearance or compromise that might be granted or
               given by any Holder to the Company or any other Person liable on the
Guaranteed                Obligations, or the failure of any Holder to assert any claim
or demand or to                exercise any right or remedy against the Company or any
other Person under the                provisions of the Note Purchase Agreement, the
Notes or otherwise; or any                rescission, waiver, amendment or modification
of, or any release from any of the                terms or provisions of, the Note
Purchase Agreement, the Notes, any guarantee or                any other agreement;  

	 	        (iii)                      the
insolvency, bankruptcy arrangement, adjustment, composition, liquidation,
               disability, dissolution or lack of power of the Company or any other
Person at                any time liable for the payment of all or part of the Guaranteed
Obligations; or                any dissolution of the Company or any other such Person,
or any change,                restructuring or termination of the partnership structure
or existence of the                Company or any other such Person, or any sale, lease
or transfer of any or all                of the assets of the Company or any other such
Person, or any change in the                shareholders, partners, or members of the
Company or any other such Person; or                any default, failure or delay,
willful or otherwise, in the performance of the                Guaranteed Obligations;  

	 	        (iv)                      the
invalidity, illegality or unenforceability of all or any part of the
               Guaranteed Obligations, or any document or agreement executed in
connection with                the Guaranteed Obligations, for any reason whatsoever,
including the fact that                the Guaranteed Obligations, or any part thereof,
exceed the amount permitted by                law, the act of creating the Guaranteed
Obligations or any part is ultra                vires, the officers or
representatives executing the documents or otherwise                creating the
Guaranteed Obligations acted in excess of their authority, the                Guaranteed
Obligations violate applicable usury laws, the Company or any other                Person
has valid defenses, claims or offsets (whether at law, in equity or by
               agreement) which render the Guaranteed Obligations wholly or partially
               uncollectible from the Company or any other Person, the creation,
performance or                repayment of the Guaranteed Obligations (or the execution,
delivery and                performance of any document or instrument representing part
of the Guaranteed                Obligations or executed in connection with the
Guaranteed Obligations or given                to secure the repayment of the Guaranteed
Obligations) is illegal,                uncollectible, legally impossible or
unenforceable, or the documents or                instruments pertaining to the
Guaranteed Obligations have been forged or                otherwise are irregular or not
genuine or authentic;  

-6- 

	 	        (v)                      any
full or partial release of the liability of the Company on the Guaranteed
               Obligations or any part thereof, of any co-guarantors, or of any other
Person                now or hereafter liable, whether directly or indirectly, jointly,
severally, or                jointly and severally, to pay, perform, guarantee or assure
the payment of the                Guaranteed Obligations or any part thereof, it being
recognized, acknowledged                and agreed by each Subsidiary Guarantor that such
Subsidiary Guarantor may be                required to pay the Guaranteed Obligations in
full without assistance or support                of any other Person, and such
Subsidiary Guarantor has not been induced to enter                into this Guaranty on
the basis of a contemplation, belief, understanding or                agreement that any
parties other than the Company will be liable to perform the                Guaranteed
Obligations, or that the Holders will look to other parties to                perform the
Guaranteed Obligations;  

	 	        (vi)                      the
taking or accepting of any other security, collateral or guaranty, or other
               assurance of payment, for all or any part of the Guaranteed Obligations;  

	 	        (vii)                      any
release, surrender, exchange, subordination, deterioration, waste, loss or
               impairment (including negligent, unreasonable or unjustifiable impairment)
of                any collateral, property or security, at any time existing in
connection with,                or assuring or securing payment of, all or any part of
the Guaranteed                Obligations;  

	 	        (viii)                      the
failure of any Holder or any other Person to exercise diligence or
               reasonable care in the preservation, protection, enforcement, sale or
other                handling or treatment of all or any part of such collateral,
property or                security;  

	 	        (ix)                      the
fact that any collateral, security, security interest or lien contemplated
               or intended to be given, created or granted as security for the repayment
of the                Guaranteed Obligations shall not be properly perfected or created,
or shall                prove to be unenforceable or subordinate to any other security
interest or lien,                it being recognized and agreed by each Subsidiary
Guarantor that such Subsidiary                Guarantor is not entering into this
Guaranty in reliance on, or in contemplation                of the benefits of, the
validity, enforceability, collectibility or value of any                of the
collateral;  

-7- 

	 	        (x)                      any
payment by the Company to any Holder being held to constitute a preference
               under any Fraudulent Conveyance Law, or for any reason any Holder being
required                to refund such payment or pay such amount to the Company or
someone else;  

	 	        (xi)                      any
other action taken or omitted to be taken with respect to the Guaranteed
               Obligations, or the security and collateral therefor, whether or not such
action                or omission prejudices such Subsidiary Guarantor or increases the
likelihood                that such Subsidiary Guarantor will be required to pay the
Guaranteed                Obligations pursuant to the terms hereof, it being the
unambiguous and                unequivocal intention of such Subsidiary Guarantor that it
shall be obligated to                pay the Guaranteed Obligations when due,
notwithstanding any occurrence,                circumstance, event, action or omission
whatsoever, whether or not contemplated,                and whether or not otherwise or
particularly described herein, except for the                full and final payment and
satisfaction of the Guaranteed Obligations in cash;  

	 	        (xii)                      the
fact that all or any of the Guaranteed Obligations cease to exist by
               operation of law, including by way of a discharge, limitation or tolling
thereof                under applicable bankruptcy laws;  

	 	        (xiii)                      any
other circumstance (including any statute of limitations) that might in any
               manner or to any extent otherwise constitute a defense available to, vary
the                risk of, or operate as a discharge of, the Company or any Person as a
matter of                law or equity;  

	 	        (xiv)                 any
merger or consolidation of the Company or any Subsidiary Guarantor into or           with
any other Person;  

	 	        (xv)                      any
change in the ownership of any shares of capital stock of the Company, or
               any change in the relationship between the Company and such Subsidiary
Guarantor                or any termination of any such relationship;  

	 	        (xvi)                      any
default, failure or delay, willful or otherwise, in the performance by the
               Company, any Subsidiary Guarantor or any other Person of any obligations
of any                kind or character whatsoever under the Note Purchase Agreement or
any other                agreement;  

	 	        (xvii)                      any
sale, lease, transfer or other disposition of any of the assets of the
               Company, any Subsidiary Guarantor or any other Person to any other Person;  

	 	        (xviii)                      in
respect of the Company, any Subsidiary Guarantor or any other Person, any
               change of circumstances, whether or not foreseen or foreseeable, whether
or not                imputable to the Company, any Subsidiary Guarantor or any other
Person, or other                impossibility of performance through fire, explosion,
accident, labor                disturbance, floods, droughts, embargoes, wars (whether or
not declared), civil                commotion, acts of God or the public enemy, delays or
failure of suppliers or                carriers, inability to obtain materials, action of
any Federal or state                regulatory body or agency, change of law or any other
causes affecting                performance, or any other force majeure, whether
or not beyond the                control of the Company, any Subsidiary Guarantor or any
other Person and whether                or not of the kind hereinbefore specified; or  

-8- 

	 	        (xix)                      any
other occurrence, circumstance, or event whatsoever, whether similar or
               dissimilar to the foregoing, whether foreseen or unforeseen, and any other
               circumstance which might otherwise constitute a legal or equitable defense
or                discharge of the liabilities of a guarantor or surety or which might
otherwise                limit recourse against such Subsidiary Guarantor;  

provided that the specific
enumeration of the above-mentioned acts, failures or omissions shall not be deemed to
exclude any other acts, failures or omissions, though not specifically mentioned above, it
being the purpose and intent of this Guaranty and the parties hereto that the obligations
of each Subsidiary Guarantor shall be absolute and unconditional and shall not be
discharged, impaired or varied except by the payment and performance of all obligations of
the Company under the Note Purchase Agreement and the Notes in accordance with their
respective terms as each may be amended or modified from time to time. Without limiting
the foregoing, it is understood that repeated and successive demands may be made and
recoveries may be had hereunder as and when, from time to time, the Company or any
Subsidiary Guarantor shall default under or in respect of the terms of the Note Purchase
Agreement and that notwithstanding recovery hereunder for or in respect of any given
default or defaults by the Company or any Subsidiary Guarantor under the Note Purchase
Agreement, this Guaranty shall remain in full force and effect and shall apply to each and
every subsequent default. All waivers herein contained shall be without prejudice to the
Holders at their respective options to proceed against the Company, any Subsidiary
Guarantor or other Person, whether by separate action or by joinder. 

        (d)                 Each
Subsidiary Guarantor hereby consents and agrees that any Holder or Holders           from
time to time, with or without any further notice to or assent from any           other
Subsidiary Guarantor may, without in any manner affecting the liability of           any
Subsidiary Guarantor under this Guaranty, and upon such terms and conditions           as
any such Holder or Holders may deem advisable:  

	 	        (i)                      extend
in whole or in part (by renewal or otherwise), modify, change,                compromise,
release or extend the duration of the time for the performance or                payment
of any debt, liability or obligation of the Company or any Subsidiary
               Guarantor or of any other Person secondarily or otherwise liable for any
debt,                liability or obligations of the Company on the Note Purchase
Agreement or the                Notes, or waive any Default or Event of Default with
respect thereto, or waive,                modify, amend or change any provision of any
other agreement or waive this                Guaranty; or  

	 	        (ii)                      sell,
release, surrender, modify, impair, exchange or substitute any and all
               property, of any nature and from whomsoever received, held by, or for the
               benefit of, any such Holder as direct or indirect security for the payment
or                performance of any debt, liability or obligation of the Company, any
Subsidiary                Guarantor or of any other Person secondarily or otherwise
liable for any debt,                liability or obligation of the Company on the Note
Purchase Agreement or the                Notes; or  

-9- 

	 	        (iii)                      settle,
adjust or compromise any claim of the Company or any Subsidiary                Guarantor
against any other Person secondarily or otherwise liable for any debt,
               liability or obligation of the Company on the Note Purchase Agreement or
the                Notes; or  

	 	        (iv)                      purchase
Additional Notes form time to time from the Company pursuant to the                terms
and provisions of the Note Purchase Agreement.  

Each Subsidiary Guarantor hereby
ratifies and confirms any such extension, renewal, change, sale, release, waiver,
surrender, exchange, modification, amendment, impairment, substitution, settlement,
adjustment, compromise or purchase Additional Notes and that the same shall be binding
upon it, and hereby waives, to the fullest extent permitted by law, any and all defenses,
counterclaims or offsets which it might or could have by reason thereof, it being
understood that such Subsidiary Guarantor shall at all times be bound by this Guaranty and
remain liable hereunder. 

        (e)                 All
rights of any Holder may be transferred or assigned at any time in           accordance
with the Note Purchase Agreement and shall be considered to be           transferred or
assigned at any time or from time to time upon the transfer of           such Note in
accordance with the Note Purchase Agreement without the consent of           or notice to
the Subsidiary Guarantors under this Guaranty.  

        (f)                 No
Holder shall be under any obligation: (i) to marshal any assets in favor
          of the Subsidiary Guarantors or in payment of any or all of the liabilities of
          the Company or any Subsidiary Guarantor under or in respect of the Notes or the
          obligations of the Company and the Subsidiary Guarantors under the Note
Purchase           Agreement or (ii) to pursue any other remedy that the Subsidiary
Guarantors           may or may not be able to pursue themselves and that may lighten the
Subsidiary           Guarantors’ burden, any right to which each Subsidiary
Guarantor hereby           expressly waives.  

SECTION 4.              FULL
RECOURSE OBLIGATIONS; PARI PASSU RANKING.  

        Subject
to the Maximum Guaranteed Amount specified above, the obligations of each Subsidiary
Guarantor set forth herein constitute the full recourse obligations of such Subsidiary
Guarantor enforceable against it to the full extent of all its assets and properties. 

        The
respective obligations under this Guaranty of the Subsidiary Guarantors are and at all
times shall remain direct and unsecured obligations of the Subsidiary Guarantors ranking
pari passu as against the assets of the Subsidiary Guarantors without any
preference among themselves and pari passu with all other present and future
unsecured Debt (actual or contingent) of the Subsidiary Guarantors which is not
expressed to be subordinate or junior in rank to any other unsecured Debt of the
Subsidiary Guarantors. 

SECTION 5.              WAIVER.  

        Each
Subsidiary Guarantor unconditionally waives, to the extent permitted by applicable law: 

-10- 

	 	        (a)                      notice
of any of the matters referred to in Section 3;  

	 	        (b)                      notice
to such Subsidiary Guarantor of the incurrence of any of the Guaranteed
               Obligations, notice to such Subsidiary Guarantor of any breach or default
by the                Company or such Subsidiary Guarantor with respect to any of the
Guaranteed                Obligations or any other notice that may be required, by
statute, rule of law or                otherwise, to preserve any rights of any Holder
against such Subsidiary                Guarantor;  

	 	        (c)                      presentment
to the Company or such Subsidiary Guarantor or of payment from the                Company
or such Subsidiary Guarantor with respect to any Note or other                Guaranteed
Obligation or protest for nonpayment or dishonor;  

	 	        (d)                      any
right to the enforcement, assertion, exercise or exhaustion by any Holder of
               any right, power, privilege or remedy conferred in any Note, the Note
Purchase                Agreement or otherwise;  

	 	        (e)                      any
requirement of diligence on the part of any Holder;  

	 	        (f)                      any
requirement to mitigate the damages resulting from any default under the
               Notes or the Note Purchase Agreement;  

	 	        (g)                      any
notice of any sale, transfer or other disposition of any right, title to or
               interest in any Note or other Guaranteed Obligation by any Holder,
assignee or                participant thereof, or in the Note Purchase Agreement;  

	 	        (h)                      any
release of any Subsidiary Guarantor from its obligations hereunder resulting
               from any loss by it of its rights of subrogation hereunder; and  

	 	        (i)                      any
other circumstance whatsoever which might otherwise constitute a legal or
               equitable discharge, release or defense of a guarantor or surety or which
might                otherwise limit recourse against such Subsidiary Guarantor (other
than the                indefeasible payment in full of the Guaranteed Obligations).  

SECTION 6.               WAIVER OF
SUBROGATION. 

        Notwithstanding
any payment or payments made by any Subsidiary Guarantor hereunder, or any application by
any Holder of any security or of any credits or claims, no Subsidiary Guarantor will
assert or exercise any rights of any Holder or of such Subsidiary Guarantor against the
Company to recover the amount of any payment made by such Subsidiary Guarantor to any
Holder hereunder by way of any claim, remedy or subrogation, reimbursement, exoneration,
contribution, indemnity, participation or otherwise arising by contract, by statute, under
common law or otherwise, and such Subsidiary Guarantor shall not have any right of
recourse to or any claim against assets or property of the Company, in each case unless
and until the Guaranteed Obligations have been paid in full. Until such time (but not
thereafter), each Subsidiary Guarantor hereby expressly waives any right to exercise any
claim, right or remedy which such Subsidiary Guarantor may now have or hereafter acquire
against the Company or any other Subsidiary Guarantor that arises under the Notes, the
Note Purchase Agreement or from the performance by any Subsidiary Guarantor of the
guaranty hereunder including any claim, remedy or right of subrogation, reimbursement,
exoneration, contribution, indemnification or participation in any claim, right or remedy
of any Holder against the Company or any Subsidiary Guarantor, or any security that any
Holder now has or hereafter acquires, whether or not such claim, right or remedy arises in
equity, under contract, by statute, under common law or otherwise. If any amount shall be
paid to a Subsidiary Guarantor by the Company or another Subsidiary Guarantor after
payment in full of the Guaranteed Obligations, and all or any portion of the Guaranteed
Obligations shall thereafter be reinstated in whole or in part and any Holder is required
to repay any sums received by any of them in payment of the Guaranteed Obligations, this
Guaranty shall be automatically reinstated and such amount shall be held in trust for the
benefit of the Holders and shall forthwith be paid to the Holders to be credited and
applied to the Guaranteed Obligations, whether matured or unmatured. The provisions of
this paragraph shall survive the termination of this Guaranty, and any satisfaction and
discharge of the Company by virtue of any payment, court order or any Federal or state
law. 

-11- 

SECTION 7.              SUBORDINATION.  

        If
any Subsidiary Guarantor is or becomes the holder of any indebtedness payable by the
Company or another Subsidiary Guarantor, each Subsidiary Guarantor hereby subordinates all
indebtedness owing to it from the Company or such other Subsidiary Guarantor to all
indebtedness of the Company to the Holders, and agrees that, during the continuance of any
Event of Default, it shall not accept any payment on the same until payment in full of the
Guaranteed Obligations and shall in no circumstance whatsoever attempt to set-off or
reduce any obligations hereunder because of such indebtedness. If any amount shall
nevertheless be paid in violation of the foregoing to a Subsidiary Guarantor by the
Company or another Subsidiary Guarantor prior to payment in full of the Guaranteed
Obligations, such amount shall be held in trust for the benefit of the Holders and shall
forthwith be paid to the Holders to be credited and applied to the Guaranteed Obligations,
whether matured or unmatured. 

SECTION 8.              EFFECT
OF BANKRUPTCY PROCEEDINGS, ETC.  

        (a)                 If
after receipt of any payment of, or proceeds of any security applied (or
          intended to be applied) to the payment of all or any part of, the Guaranteed
          Obligations, any Holder is for any reason compelled to surrender or voluntarily
          surrenders (under circumstances in which it believes it could reasonably be
          expected to be so compelled if it did not voluntarily surrender), such payment
          or proceeds to any Person (i) because such payment or application of
          proceeds is or may be avoided, invalidated, declared fraudulent, set aside,
          determined to be void or voidable as a preference, fraudulent conveyance,
          fraudulent transfer, impermissible set-off or a diversion of trust funds or
          (ii) for any other similar reason, including, without limitation,
          (x) any judgment, decree or order of any court or administrative body
          having jurisdiction over any Holder or any of their respective properties or
          (y) any settlement or compromise of any such claim effected by any Holder
          with any such claimant (including the Company), then the Guaranteed Obligations
          or part thereof intended to be satisfied shall be reinstated and continue, and
          this Guaranty shall continue in full force as if such payment or proceeds had
          not been received, notwithstanding any revocation thereof or the cancellation
of           any Note or any other instrument evidencing any Guaranteed Obligations or
          otherwise, and the Subsidiary Guarantors, jointly and severally, shall be
liable           to pay the Holders, and hereby do indemnify the Holders and hold them
harmless           for, the amount of such payment or proceeds so surrendered and all
expenses           (including reasonable attorneys’ fees, court costs and expenses
          attributable thereto) incurred by any Holder in defense of any claim made
          against any of them that any payment or proceeds received by any Holder in
          respect of all or part of the Guaranteed Obligations must be surrendered. The
          provisions of this paragraph shall survive the termination of this Guaranty,
and           any satisfaction and discharge of the Company by virtue of any payment,
court           order or any Federal or state law.  

-12- 

        (b)                 If
an event permitting the acceleration of the maturity of any of the Guaranteed
          Obligations shall at any time have occurred and be continuing, and such
          acceleration shall at such time be prevented by reason of the pendency against
          the Company or any other Person of any case or proceeding contemplated by
          Section 8(a) hereof, then, for the purpose of defining the obligation of
          any Subsidiary Guarantor under this Guaranty, the maturity of the principal
          amount of the Guaranteed Obligations shall be deemed to have been accelerated
          with the same effect as if an acceleration had occurred in accordance with the
          terms of such Guaranteed Obligations, and such Subsidiary Guarantor shall
          forthwith pay such principal amount, all accrued and unpaid interest thereon,
          and all other Guaranteed Obligations, due or that would have become due but for
          such case or proceeding, without further notice or demand.  

SECTION 9.              TERM
OF GUARANTY.  

        This
Guaranty and all guarantees, covenants and agreements of each Subsidiary Guarantor
contained herein shall continue in full force and effect and shall not be discharged until
such time as all of the principal of and interest on the Notes, the other Guaranteed
Obligations and other independent payment obligations of such Subsidiary Guarantor under
this Guaranty shall be paid in cash and performed in full, and all of the agreements of
each of the other Subsidiary Guarantors hereunder shall be duly paid in cash and performed
in full. 

SECTION 10.              CONTRIBUTION.  

        In
order to provide for just and equitable contribution among the Subsidiary Guarantors, each
Subsidiary Guarantor agrees that, to the extent any Subsidiary Guarantor makes any payment
hereunder on any date which, when added to all preceding payments made by such Subsidiary
Guarantor hereunder, would result in the aggregate payments by such Subsidiary Guarantor
hereunder exceeding its Percentage (as defined below) of all payments then or theretofore
made by all Subsidiary Guarantors hereunder, such Subsidiary Guarantor shall have a right
of contribution against each other Subsidiary Guarantor whose aggregate payments then or
theretofore made hereunder are less than its Percentage of all payments by all Subsidiary
Guarantors then or theretofore made hereunder, in an amount such that, after giving effect
to any such contribution rights, each Subsidiary Guarantor will have paid only its
Percentage of all payments by all Subsidiary Guarantors then or theretofore made
hereunder. A Subsidiary Guarantor’s “Percentage” on any date shall mean the
percentage obtained by dividing (a) the Adjusted Net Assets of such Subsidiary
Guarantor on such date by (b) the sum of the Adjusted Net Assets of all Subsidiary
Guarantors on such date. “Adjusted Net Assets” means, for each Subsidiary
Guarantor on any date, the lesser of (i) the amount by which the fair value of the
property of such Subsidiary Guarantor exceeds the total amount of liabilities, including
contingent liabilities, but excluding liabilities under this Guaranty, of such Subsidiary
Guarantor on such date and (ii) the amount by which the present fair salable value of
the assets of such Subsidiary Guarantor on such date exceeds the amount that will be
required to pay the probable liability of such Subsidiary Guarantor on its debts,
excluding debt in respect of this Guaranty, as they become absolute and matured. 

-13- 

SECTION 11.              LIMITATION
OF LIABILITY.  

        Each
Subsidiary Guarantor hereby confirms that it is the intention of such Subsidiary Guarantor
that the guarantee by such Subsidiary Guarantor pursuant to this Guaranty not constitute a
fraudulent transfer or conveyance for purposes of Title 11 of the United States Code,
the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar
applicable Federal or state law (all such statutes and laws are collectively referred to
as “Fraudulent Conveyance Laws”). To effectuate the foregoing intention,
each Subsidiary Guarantor hereby irrevocably agrees that the obligations of such
Subsidiary Guarantor under this Guaranty shall be limited to the amount as will, after
giving effect to all rights to receive any collections from or payments by or on behalf of
any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary
Guarantor pursuant to Section 10 hereof, result in the obligations of such Subsidiary
Guarantor under this Guaranty not constituting such a fraudulent transfer or conveyance.
In the event that the liability of any Subsidiary Guarantor hereunder is limited pursuant
to this Section 11 to an amount that is less than the total amount of the Guaranteed
Obligations, then it is understood and agreed that the portion of the Guaranteed
Obligations for which such Subsidiary Guarantor is liable hereunder shall be the last
portion of the Guaranteed Obligations to be repaid. 

SECTION 12.              NEGATIVE
PLEDGE.  

        Except
as permitted under Section 10.5 of the Note Purchase Agreement, no Subsidiary
Guarantor that is a Significant Subsidiary will create any Lien on its assets to any other
Person during the pendency of this Guaranty except for Liens permitted by
Section 10.5 of the Note Purchase Agreement. 

SECTION 13.              SUPPLEMENTAL
AGREEMENT.  

        Upon
execution and delivery by a Subsidiary of a Supplemental Agreement substantially in the
form of Exhibit A hereto, such Subsidiary shall become a Subsidiary Guarantor
hereunder with the same force and effect as if originally named as a Subsidiary Guarantor
herein. The execution and delivery of any such instrument shall not require the consent of
any other Subsidiary Guarantor hereunder. The rights and obligations of each Subsidiary
Guarantor hereunder shall remain in full force and effect notwithstanding the addition of
any new Subsidiary Guarantor as a party to this Guaranty. 

-14- 

SECTION 14.              DEFINITIONS
AND TERMS GENERALLY.  

        (a)                 Unless
otherwise defined herein, capitalized terms defined in the Note Purchase
          Agreement are used herein as defined therein. In addition, the following terms
          shall have the following meanings.  

        “Adjusted
Net Assets”  has the meaning specified in Section 10 hereof. 

        “Fraudulent
Conveyance Laws”  has the meaning specified in Section 11 hereof. 

        “Guaranteed Obligations”
 has the meaning specified in Section 1 hereof. 

        “Guaranty”
 has the meaning specified in the introduction hereto. 

        “Holders”
 has the meaning specified in the introduction hereto. 

        “Material
Adverse Effect” means a material adverse effect (a) on the business,
financial condition, operations or Properties of a Subsidiary Guarantor or (b) on its
ability to perform its obligations hereunder. 

        “Maximum
Guaranteed Amount” shall mean, for each Subsidiary Guarantor, the maximum amount
which any Subsidiary Guarantor could pay under this Guaranty without having such payment
set aside as a fraudulent transfer or conveyance or similar action under Fraudulent
Conveyance Law. 

        “Note
Purchase Agreement”  has the meanings specified in the Recitals hereto. 

        “Notes”
 has the meanings specified in the Recitals hereto. 

        “Percentage”
 has the meaning specified in Section 10 hereof. 

        “Required
Holders”  is has the meaning specified in the Note Purchase Agreement. 

        “Subsidiary
Guarantor”  has the meaning specified in the introduction hereto. 

        (b)                 Whenever
the context may require, any pronoun shall include the corresponding           masculine,
feminine and neuter forms. The words “include,”          “includes” and
“including” shall be deemed to be followed by           the phrase “without
limitation.” All references herein to Articles,           Sections, Exhibits and
Schedules shall be deemed references to Articles and           Sections of, and Exhibits
and Schedules to, this Guaranty unless the context           shall otherwise require.  

SECTION 15.              NOTICES. 

        All
notices under the terms and provisions hereof shall be in writing (with charges prepaid),
and shall be delivered or sent by hand, by telecopy, by express courier service or by
registered or certified mail, return receipt requested, postage prepaid, addressed, 

-15- 

	 	        (a)                      if
to any Holder, at the address set forth in the Note Purchase Agreement, or at
               such other address as any such Holder shall from time to time designate to
the                Company,  

	 	        (b)                      if
to a Subsidiary Guarantor, at the address of such Subsidiary Guarantor set
               forth on the signature pages hereto or at such other address as such
Subsidiary                Guarantor shall from time to time designate in writing to each
Holder (with a                copy to the Company as set forth in the Note Purchase
Agreement).  

A notice or communication shall be
deemed to have been duly given and effective: 

	 	(a) 	when
delivered (whether or not accepted), if personally delivered;  

	 	(b) 	five
business days after being deposited in the mail, postage prepaid, if
               delivered by first-class mail (whether or not accepted);  

	 	(c) 	when
sent, if sent via facsimile;  

	 	(d) 	when
delivered if sent by registered or certified mail (whether or not
               accepted); and  

	 	(e) 	on
the next Business Day if timely delivered by an overnight air courier, with
               charges prepaid (whether or not accepted).  

SECTION 16.              AMENDMENTS,
ETC. 

        No
amendment, alteration, modification or waiver of any term or provision of this Guaranty,
nor consent to any departure by any Subsidiary Guarantor therefrom, shall in any event be
effective unless the same shall be in writing and consented to by the Required Holders
provided, however, that any amendment, alteration, modification or waiver of
the terms and conditions contained in Section 1 hereof shall require consent from all
Holders, and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. 

SECTION 17.              CONSENT
TO JURISDICTION; SERVICE OF PROCESS. 

        (a)                 Each
Subsidiary Guarantor irrevocably submits to the nonexclusive in           personam jurisdiction
of any New York State or federal court sitting in New           York City, over any suit,
action or proceeding arising out of or relating to           this Guaranty or the Notes.
To the fullest extent it may effectively do so under           applicable law, each
Subsidiary Guarantor irrevocably waives and agrees not to           assert, by way of
motion, as a defense or otherwise, any claim that it is not           subject to the in
personam jurisdiction of any such court, any objection           that it may now or
hereafter have to the laying of the venue of any such suit,           action or
proceeding brought in any such court and any claim that any such suit,           action
or proceeding brought in any such court has been brought in an           inconvenient
forum.  

-16- 

        (b)                 Each
Subsidiary Guarantor agrees, to the fullest extent it may effectively do so
          under applicable law, that a final judgment in any suit, action or proceeding
of           the nature referred to in paragraph (a) of this Section 17 brought in
any           such court shall be conclusive and binding upon such party, subject to
rights of           appeal and may be enforced in the courts of the United States of
America or the           State of New York (or any other courts to the jurisdiction of
which such party           is or may be subject) by a suit upon such judgment.  

        (c)                 Each
Subsidiary Guarantor consents to process being served in any suit, action           or
proceeding of the nature referred to in paragraph (a) of this Section 17
          by mailing a copy thereof by registered or certified mail, postage prepaid,
          return receipt requested, to the address of each Subsidiary Guarantor specified
          in Section 15 or at such other address of which you shall then have been
          notified pursuant to said Section or to any agent for service of process
          appointed pursuant to the provisions of Section 27. Each Subsidiary
          Guarantor agrees that such service upon receipt (i) shall be deemed in every
          respect effective service of process upon it in any such suit, action or
          proceeding and (ii) shall, to the full extent permitted by law, be taken
          and held to be valid personal service upon and personal delivery to such party.
          Notices hereunder shall be conclusively presumed received as evidenced by a
          delivery receipt furnished by the United States Postal Service or any reputable
          commercial delivery service.  

        (d)                 Nothing
in this Section 17 shall affect the right of any holder of Notes to           serve
process in any manner permitted by law, or limit any right that the           holders of
any of the Notes may have to bring proceedings against any Subsidiary           Guarantor
in the courts of any appropriate jurisdiction or to enforce in any           lawful
manner a judgment obtained in one jurisdiction in any other jurisdiction.  

SECTION 18.              WAIVER
OF JURY TRIAL.  

        EACH
SUBSIDIARY GUARANTOR AND BY ITS ACCEPTANCE HEREOF EACH HOLDER, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO TRIAL BY
JURY IN ANY LEGAL OR EQUITABLE ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS GUARANTY OR THE NOTE PURCHASE AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR
THEREBY OR THE SUBJECT MATTER OF ANY OF THE FOREGOING. 

SECTION 19.              SURVIVAL.  

        All
warranties, representations and covenants made by each Subsidiary Guarantor herein or in
any written certificate or other instrument required to be delivered by it or on its
behalf hereunder or under the Note Purchase Agreement shall be considered to have been
relied upon by the Holders and shall survive the execution and delivery of this Guaranty,
regardless of any investigation made by any Holder or on such Holder’s behalf. All
statements in any such certificate or other instrument shall constitute warranties and
representations by such Subsidiary Guarantor hereunder. 

-17- 

SECTION 20.              SEVERABILITY.  

        Any
provision of this Guaranty which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted by
applicable law, each Subsidiary Guarantor hereby waives any provision of law that renders
any provisions hereof prohibited or unenforceable in any respect. 

SECTION 21.              SUCCESSORS
AND ASSIGNS.  

        The
terms of this Guaranty shall be binding upon each Subsidiary Guarantor and its successors
and assigns and shall inure to the benefit of the Holders and their respective successors
and assigns. 

SECTION 22.              TABLE
OF CONTENTS; HEADINGS.  

        The
section and paragraph headings in this Guaranty and the table of contents are for
convenience of reference only and shall not modify, define, expand or limit any of the
terms or provisions hereof, and all references herein to numbered sections, unless
otherwise indicated, are to sections in this Guaranty. 

SECTION 23.              COUNTERPARTS.  

        This
Guaranty may be executed in any number of counterparts, each of which shall be an
original, but all of which together shall constitute one instrument. 

SECTION 24.              GOVERNING
LAW.  

        This
Guaranty shall in all respects be governed by, and construed and interpreted in accordance
with, the laws of the State of New York, without regard to the conflicts of laws
principles of such state. 

SECTION 25.              RELEASE. 

        Notwithstanding
any other provision hereof to the contrary, including without limitation
Section 3(c)(v), 3(c)(xiv), 3(c)(xv) and 3(c)(xvii), a Subsidiary Guarantor shall be
automatically released from its guaranty hereunder upon the sale, disposition or exchange
of all or substantially all of the stock or the assets of such Subsidiary Guarantor
permitted pursuant to Section 10.6 or Section 10.7 of the Note Purchase Agreement or
if otherwise expressly permitted by the terms of the Note Purchase Agreement to be so
released. 

-18- 

SECTION 26.              COVENANT
COMPLIANCE.  

        Each
Subsidiary Guarantor agrees to comply with each of the covenants contained herein and in
the Note Purchase Agreement that imposes or purports to impose, by reference to such
Subsidiary Guarantor, express or otherwise, through agreements with the Company,
restrictions or obligations on such Subsidiary Guarantor. 

-19- 

        IN
WITNESS WHEREOF, each party hereto has caused this Guaranty to be duly executed as of the
date first above written. 

		HUB CITY, INC.
	

 	By:  /s/ David A. Barta
		        David A. Barta
		        Treasurer
	

 	MARATHON ELECTRIC MANUFACTURING CORPORATION
	

 	By:  /s/ David A. Barta
		        David A. Barta
		        Treasurer
	

 	MARATHON SPECIAL PRODUCTS CORPORATION
	

 	By:  /s/ David A. Barta
		        David A. Barta
		        Treasurer
	

 	REGAL-BELOIT ELECTRIC MOTORS, INC.
	

 	By:  /s/ David A. Barta
		        David A. Barta
		        Treasurer
	

 	REGAL-BELOIT FLIGHT SERVICE, INC.
	

 	By:  /s/ David A. Barta
		        David A. Barta
		        Treasurer

-20-FIRST AMENDMENT 

        THIS
FIRST AMENDMENT (this “Amendment”) dated as of August 23, 2007 is entered
into among REGAL-BELOIT CORPORATION (the “Company”), various financial
institutions and BANK OF AMERICA, N.A., as Administrative Agent. 

W
I T N E S S E T H: 

        WHEREAS,
the Company, various financial institutions (the “Banks”) and the
Administrative Agent are parties to a Second Amended and Restated Credit Agreement dated
as of April 30, 2007 (the “Credit Agreement”; capitalized terms used but
not defined herein have the respective meanings given to them in the Credit Agreement);
and 

        WHEREAS,
the Company intends to issue senior notes on or about the date hereof, and has requested
certain amendments to the Credit Agreement in connection therewith; 

        NOW,
THEREFORE, in consideration of the foregoing, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the parties
hereto agree as follows: 

        SECTION 1.    AMENDMENTS
TO CREDIT AGREEMENT.  Effective on the Amendment Effective Date (as defined below),
the Credit Agreement is amended as follows: 

        1.1    Addition
of Definitions.  The following new definitions are added to Section 1.1 of the Credit
Agreement in proper sequence: 

	 	        Designated
Debtmeans “Debt” as defined in the Note Purchase Agreement.  

	 	        Intercreditor
Agreement means the Intercreditor Agreement dated as of August 23, 2007 among various
creditors of the Company and its Subsidiaries (including the Banks) and Bank of America,
as Designated Agent. 

	 	        Note
Purchase Agreement means the Note Purchase Agreement dated as of August 23, 2007 among
the Company and the purchasers of notes issued pursuant thereto. 

	 	        Senior
Notes means, collectively, the notes issued pursuant to the Note Purchase Agreement. 

        1.2    Amendment
to Definition of Funded Debt.  The definition of “Funded Debt” is amended in its
entirety to read as follows: 

	 	        Funded
Debt means all Debt of the Company and its Subsidiaries, excluding (i) contingent
obligations in respect of undrawn letters of credit and Suretyship Liabilities (except, in
each case, to the extent constituting Suretyship Liabilities in respect of Debt), (ii)
Hedging Obligations, (iii) Securitization Obligations to the extent such obligations would
not be required to be included on the consolidated balance sheet of the Company in
accordance with GAAP and (iv) obligations to pay the deferred purchase price of services. 

-1- 

        1.3    Amendment
to Section 10.7. Section 10.7 is amended by (i) deleting the word “and” at
the end of clause (m), (ii) redesignating clause (n) thereof as clause “(o)” and
(iii) inserting the following new clause (n) in proper sequence: “(n) Debt arising
under the Note Purchase Agreement, the Senior Notes and the Subsidiary Guaranty (as
defined in the Note Purchase Agreement); and”.  

        1.4    Amendment
to Section 10.15. Clause (v) of the first proviso to Section 10.15 is amended in its
entirety to read as follows: “(v) imposed by law or contained in any Loan Document,
any Hedging Agreement with a Bank or an Affiliate of a Bank or the Note Purchase
Agreement (without giving effect to any amendment to the lien covenant contained in the
Note Purchase Agreement except to the extent that a corresponding amendment is made to Section
10.8); or”.  

        1.5    Amendment
to Section 10.17. Section 10.17 is amended by adding the following sentence at the
end thereof: “Without limiting the foregoing, the Company will cause any Subsidiary
that guarantees, or that is required by the terms of the Note Purchase Agreement or any
Senior Note to guarantee, Debt in respect of the Note Purchase Agreement and/or any
Senior Note, to be a party to the Subsidiary Guaranty.” 

        1.6    Addition
of Section 10.18. The following new Section 10.18 is added to the Credit Agreement in
proper sequence:  

	 	        10.18
Intercreditor Agreement. Not permit any Subsidiary to have any bank credit facility
or other Designated Debt agreement or instrument (a “Designated Debt
Agreement”) (or any Suretyship Liability with respect to any Designated Debt
Agreement of the Company or any other Subsidiary Guarantor) that could permit unsecured
Designated Debt to be outstanding thereunder in an aggregate principal amount in excess of
10% of consolidated total assets of the Company and its Subsidiaries (the
“Threshold Debt Amount”), unless each provider of such Designated Debt
(and each beneficiary of any such Suretyship Liability and each such Subsidiary if it is
not already a party to the Intercreditor Agreement), becomes a party to the Intercreditor
Agreement, in accordance with the terms thereof. The following Designated Debt shall be
excluded from the Threshold Debt Amount: (a) Designated Debt outstanding under overdraft
lines of credit incurred in the ordinary course of business, (b) Designated Debt of
Subsidiaries in an amount equal to $19,725,166 (or an equivalent amount in foreign
currency) and listed on Schedule 10.7, (c) secured Designated Debt of Subsidiaries,
including Securitization Obligations, and (d) Designated Debt of Subsidiaries in which the
providers of such Designated Debt (and beneficiaries of any Suretyship Liability) are
parties to the Intercreditor Agreement. 

        1.7    Amendments
to Section 12.1.  Section 12.1 is amended as follows: 

-2- 

            (a)              Clause
(a) of Section 12.1.4 is amended in its entirety to read as follows:           “(a)
Failure by the Company to comply with or to perform any covenant set           forth in
Sections 10.1.5(a), 10.5 through 10.9, 10.12,10.17 or
10.18".  

            (b)              The
following new Section 12.1.10 is added in proper sequence:  

	 	        12.1.10
Invalidity of Intercreditor Agreement. The Intercreditor Agreement ceases to be in
full force and effect for any reason whatsoever (other than in accordance with the terms
thereof), including a determination by any Governmental Authority or court that the
Intercreditor Agreement is invalid, void or unenforceable. 

        1.8    Addition
of Section 14.20.  The following new Section 14.20 is added to the Credit Agreement
in proper sequence: 

	 	        14.20
Most Favored Lender. If at any time (a)(i) the Company enters into any credit
agreement, loan agreement, note purchase agreement or other like agreement under which the
Company may incur Designated Debt in excess of $50,000,000, including the Note Purchase
Agreement and the Senior Notes (a “Principal Lending Agreement”) and (ii)
any such Principal Lending Agreement at any time includes a covenant that expressly limits
either: (x) the sale, lease or disposition of assets by the Company and/or any Subsidiary
during any period of 12 consecutive months to less than 15% of the book value of
consolidated tangible assets of the Company and its Subsidiaries, or (y) the incurrence of
Designated Debt by any Foreign Subsidiary, in either case that is not contained in this
Agreement, or if such covenant that is contained in the Principal Lending Agreement is
more favorable to such creditors of the Company than a similar covenant contained in this
Agreement, or (b) the Company issues an additional series of Senior Notes pursuant to any
Supplement (as defined in the Note Purchase Agreement) that has an “additional
covenant” (within the meaning of Section 2.2(iii) of the Note Purchase Agreement),
the Company shall give written notice thereof to the Administrative Agent not later than
10 days following the date of execution of such Principal Lending Agreement or amendment
thereof or Supplement, as the case may be (each a “Subject Agreement”).
Effective on the date of execution of a Subject Agreement, such covenant (or covenants)
and related definitions that are contained in such Subject Agreement (collectively, the
“Incorporated Covenants”) shall be deemed to have been incorporated
herein and any event of default in respect of any such Incorporated Covenant shall be
deemed to be an Event of Default hereunder, subject to all applicable terms and provisions
of this Agreement, including the right of the Required Banks to waive or not waive any
breach thereof (independent of any right of any other creditor of the Company in respect
of any such Incorporated Covenants). Without limiting the foregoing, any amendment,
elimination or termination of any Incorporated Covenant in accordance with the terms of
the applicable Subject Agreement (including as a result of the termination of such Subject
Agreement) shall constitute an immediate amendment, elimination or termination, as the
case may be, of such Incorporated Covenant hereunder. 

-3- 

        SECTION
2.    REPRESENTATIONS AND WARRANTIES.  The Company represents
and warrants to the Banks and the Administrative Agent that: 

        2.1    Authorization;
No Conflict. The execution and delivery by the Company of this Amendment and the
performance by the Company of its obligations under the Credit Agreement as amended
hereby (as so amended, the “Amended Credit Agreement”) are within the
corporate powers of the Company, have been duly authorized by all necessary corporate
action on the part of the Company (including any necessary shareholder action), have
received all necessary governmental and other third-party approvals (if any shall be
required), and do not and will not (a) violate any provision of law or any order, decree
or judgment of any court or other government agency that is binding on the Company or any
other Loan Party, (b) contravene or conflict with, or result in a breach of, any
provision of the certificate of incorporation, partnership agreement, by-laws or other
organizational documents of the Company or any other Loan Party or (c) contravene or
conflict with, or result in a Lien under, any material agreement, indenture, instrument
or other document that is binding on the Company or any other Loan Party.  

        2.2    Validity
and Binding Nature. This Amendment has been duly executed and delivered by the
Company, and this Amendment and the Amended Credit Agreement are legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with their
respective terms, subject to bankruptcy, insolvency and similar laws affecting the
enforceability of creditors’ rights generally and to general principles of equity.  

        2.3    Reaffirmation
of Representations and Warranties. The representations and warranties contained in
Section 9 of the Amended Credit Agreement are true and correct in all material
respects on the date of this Amendment (except to the extent stated to relate to an
earlier date, in which case such representations and warranties are true and correct in
all material respects as of such earlier date).  

        SECTION
3.     CONDITIONS PRECEDENT. This Amendment shall become
effective on the date (the “Amendment Effective Date”) on which the
Administrative Agent has received the following:  

        3.1    Counterparts.
 Executed counterparts of this Amendment from the Company and the Required Banks. 

        3.2    Confirmation.
 A confirmation, substantially in the form of Exhibit A hereto, executed by each Loan
Party. 

        3.3    Certified
copy of Note Purchase Agreement and Related Documents. Copies of the Note Purchase
Agreement and the subsidiary guaranty executed pursuant thereto, each certified as true,
correct and complete by an Executive Officer.  

-4- 

        3.4    Intercreditor
Agreement.  A copy of the Intercreditor Agreement executed by each party thereto. 

        SECTION
4.    Miscellaneous.  

        4.1    Expenses.
The Company agrees to pay on demand all reasonable out-of-pocket costs and expenses of
the Administrative Agent (including reasonable and documented fees, charges and expenses
of counsel for the Administrative Agent) in connection with the preparation, negotiation,
execution and delivery of this Amendment and all other instruments or documents provided
for herein or delivered or to be delivered hereunder or in connection herewith. All
obligations provided in this Section 4.1 shall survive any termination of this
Amendment and the Amended Credit Agreement.  

        4.2    Captions.
Section captions used in this Amendment are for convenience only and shall not affect the
construction of this Amendment.  

        4.3    Governing
Law. THIS AMENDMENT SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE
STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH
STATE. Wherever possible each provision of this Amendment shall be interpreted in such
manner as to be effective and valid under applicable laws, but if any provision of this
Amendment shall be prohibited by or invalid under such laws, such provision shall be
ineffective to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Amendment.  

        4.4    Counterparts.
This Amendment may be executed in any number of counterparts, and by the parties hereto
on the same or separate counterparts, and each such counterpart, when executed and
delivered, shall be deemed to be an original, but all such counterparts shall together
constitute but one and the same Amendment. A counterpart hereof (or a signature page
hereto) delivered by facsimile or in .pdf or similar electronic format shall be effective
as an original.  

        4.5    References
to Credit Agreement. Except as herein amended, the Credit Agreement shall remain in
full force and effect and is hereby ratified in all respects. After the effectiveness of
this Amendment, each reference in the Amended Credit Agreement to “this Agreement,”“hereunder,” “hereof,” “herein” or
words of like import, and each reference to the Credit Agreement in any Loan Document and
in any other agreement, document or other instrument executed and delivered pursuant to
the Credit Agreement, shall mean and be a reference to the Amended Credit Agreement.  

        4.6    Successors
and Assigns. This Amendment shall be binding upon the parties hereto and their
respective successors and assigns, and shall inure to the sole benefit of the parties
hereto and the successors and assigns of the Administrative Agent and the Banks.  

-5- 

        4.7    Intercreditor
Agreement. The Required Banks acknowledge that the Administrative Agent will enter
into, and Bank of America will act as designated agent (in such capacity, the “Designated
Agent”) under, the Intercreditor Agreement. The Required Banks authorize (i) the
Administrative Agent to enter into the Intercreditor Agreement on behalf of the Banks and
to execute and deliver such documents as may reasonably be required or appropriate in
connection therewith and (ii) Bank of America to act as Designated Agent on behalf of the
Banks and various other creditors under the Intercreditor Agreement.  

-6- 

        IN
WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment as of the
day and year first above written. 

		REGAL-BELOIT CORPORATION
	

 	By:  /s/ David A. Barta
		        David A. Barta
		        Vice President and Chief Financial Officer

S-1 

		BANK OF AMERICA, N.A., as Administrative Agent
	

 	By:  /s/ Kristine Thennes
		Name:  Kristine Thennes
		Title:  Vice President

S-2 

		BANK OF AMERICA, N.A., as Issuing Bank, Swing Line Bank
		and a Bank
	

 	By:  /s/ Steven K. Kessler
		Name:  Steven K. Kessler
		Title:  Senior Vice President

S-3 

		M&I MARSHALL & ILSLEY BANK, as a Co-Documentation
		Agent and as a Bank
	

 	By:  /s/ James R. Miller
		Name:  James R. Miller
		Title:  Sr. Vice Pres.
	

 	By:  /s/ Donald J. Robinson-Gay
		Name:  Donald J. Robinson-Gay
		Title:  Vice President

S-4 

		WACHOVIA BANK NATIONAL ASSOCIATION, as a Co-Documentation
		Agent and as a Bank
	

 	By:  /s/ C. Jeffrey Seaton
		Name:  C. Jeffrey Seaton
		Title:  Managing Director

S-5 

		U.S. BANK, NATIONAL ASSOCIATION, as a Co-Documentation
		Agent and as a Bank
		By:  /s/ Matthew J. Schulz
		Name:  Matthew J. Schulz
		Title:  Vice President

S-6 

		BMO CAPITAL MARKETS FINANCING, INC., as a
		Co-Documentation Agent and as a Bank
	

 	By:  /s/ Christopher C. Cavaiani
		Name:  Christopher C. Cavaiani
		Title:  Vice President

S-7 

		SUMITOMO MITSUI BANKING 
CORPORATION, NEW YORK
	

 	By:  /s/ Leo E. Pagarigan
		Name:  Leo E. Pagarigan
		Title:  General Manager

S-9 

		NATIONAL CITY BANK
	

 	By:  /s/ Rachel M. Williamson
		Name:  Rachel M. Williamson
		Title:  Vice President

 

S-10 

		THE NORTHERN TRUST COMPANY
	

 	By:  /s/ Rick J. Gomez
		Name:  Rick J. Gomez, on behalf of Roger McDougal
		Title:  Commercial Banking Officer

S-11 

		WELLS FARGO BANK NA
	

 	By:   /s/ Paul J. Hennessy 
		Name:   Paul J. Hennessy
		Title:   Vice President

S-12 

		FIFTH THIRD BANK, a Michigan Banking Corporation
	

 	By:  /s/ Neil G. Mesch
		Name:  Neil G. Mesch
		Title:  Vice President

S-13 

		JPMORGAN CHASE BANK, N.A.
	

 	By:  /s/ Brian L. Grossman
		Name:  Brian L. Grossman
		Title:  Vice President

S-14 

		CITICORP USA, INC.
	

 	By:  /s/ Thomas Ng
		Name:  Thomas Ng
		Title:  Vice President

S-15 

		KEYBANK NATIONAL ASSOCIATION
	

 	By:  /s/ Mary K. Young
		Name:  Mary K. Young
		Title:  Senior Vice President

S-16 

		UBS LOAN FINANCE LLC
	

 	By:  /s/ Mary E. Evans
		Name:  Mary E. Evans
		Title:  Associate Director
	

 	By:  /s/ Irja R. Otsa
		Name:  Irja R. Otsa
		Title:  Associate Director

S-17

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