Document:

Prepared by MerrillDirect

Exhibit 10.2

WAIVER AND THIRD AMENDMENT TO CREDIT

AGREEMENT

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

	Period	Minimum Fixed

  Charge Coverage
	

	

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

 

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

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

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

	Period	Minimum Total

  Interest Coverage
	

	

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

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

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

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

	Period	Maximum Total

  Indebtedness to

  Pro Forma
 EBITDA Ratio
	

	

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

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

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

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

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

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

PRICING TABLE

 

	Total Indebtedness

  to Pro Forma EBITDA

  Ratio	 	Base Rate

  Margin	 	Base

  Rate

  Margin	 	LIBOR Margin	 	LIBOR Margin	 
	

	 	

	 	

	 	

	 	

	 
	 	 	Revolving Loans

  and Term Loan

  A	 	Term

  Loan B	 	Revolving Loans

  and Term Loan

  A	 	Term

  Loan B	 
	 	 	

	 	

	 	

	 	

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

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

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

“Borrowing Base
Certificate” means the certificate to be submitted by the Borrower in the form
of

Exhibit 4.6(F).

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

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

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

	Period	 	Maximum Revolving Loan
  Balance
	

	 	

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[remainder
of page intentionally left blank]

 

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

 

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

	 	 	

	 	 	 	 	 
	Title:	Vice President	 	Title:	Chief
  Financial Officer
	 	

	 	 	

	 	 	 	 	 
	 	 	 	 	 
	BANK  AUSTRIA CREDITANSTALT
CORPORATE
  FINANCE, INC.	 
	 	 
	 	 
	By:	 	 
	 	

	 
	Title:	 	 
	 	

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

	 
	 	 	 
	Title:	Senior Vice
  President	 
	 	

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

	 
	 	 	 
	Title:	Senior Vice
  President	 
	 	

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

	 
	 	 	 
	Title:	Vice President	 
	 	

	 
	 	 	 
	FINOVA CAPITAL CORPORATION	 
	 	 	 
	 	 	 
	By:	/s/ Bruce
  Mettel	 
	 	

	 
	 	 	 
	Title:	Vice President	 
	 	

	 
						

 

CONSENT,
REAFFIRMATION AND AMENDEMENT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

	 	 	Name:	   Ian
  Schapiro
	 	 	 	

	 	 	Title:	Vice President
	 	 	 	

 

EXHIBIT A TO AMENDMENT

LIST OF EXISTING EVENTS
OF DEFAULT UNDER THE CREDIT AGREEMENT

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

UNITED COMMUNITY BANK OF WEST
GEORGIA

CHANGE IN CONTROL AGREEMENT

 

THIS
AGREEMENT made as of this ___ day of ___________, 2001, by and between UNITED
COMMUNITY BANK OF WEST GEORGIA, a Georgia Bank (the "Bank"), and
Timothy I. Warren (the "Executive");

WHEREAS, the Executive is a key
employee of the Bank and/or its wholly-owned subsidiaries, and an integral part
of the management team; and

WHEREAS, the Bank wishes to
assure both itself and its key employees of continuity of management and
objective control of the Bank; and

WHEREAS, the Bank considers it
desirable and in its best interests to enter into an agreement which provides
that in the event the Executive’s employment is terminated in conjunction with
a change in control of the Bank, the Executive shall, subject to the terms and
conditions provided for herein, receive a termination payment, which payment is
not intended to exceed the compensation the Executive could have reasonably
expected to receive in absence of a change in control of the Bank;

NOW, THEREFORE, the parties
agree as follows:

1.          BENEFITS PAYABLE UPON
CHANGE IN CONTROL.

(a)          The
term of this Agreement shall be for a rolling, one (1) year term commencing on
the date hereof, and shall be deemed automatically (without further action by
either the Bank or the Executive) to extend each day for an additional day such
that the remaining term of the Agreement shall continue to be one (1) year;
provided, that the Bank may, by notice to the Executive, cause this Agreement to
cease to extend automatically and, upon such notice, the "Term" of
this Agreement shall be one (1) year following such notice.

(b)          No
provision of this Paragraph 1 shall be operative unless, during the Term of this
Agreement, there has been a Change in Control of the Bank. Upon such a Change in
Control of the Bank, all the provisions of this Paragraph 1 shall become
operative immediately.

(c)          If
a Change in Control occurs during the term of this Agreement and the Executive’s
employment is terminated (i) within twelve (12) months following the date of the
Change in Control, or (ii) within three (3) months prior to the date of the
Change in Control as a part of such Change in Control, as a result of
Involuntary Termination or Voluntary Termination, the Executive shall be
entitled to a lump sum cash payment equal to two times the Executive’s total
compensation as shown on his federal W-2 Form (or similar form replacing such
form) for the calendar year preceding the calendar year in which the Executive’s
employment is terminated. The payment to the Executive shall be made not later
than fifteen (15) days after his termination of employment.

(d)          For
the purposes of this Paragraph 1, the following terms shall have the meanings
set forth below:

        (i)          The
        term "Change in Control" shall mean (A) the acquisition,
        directly or indirectly, by any "person" as such term is used
        in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
        amended, (excluding any "person" who on the date

         

         

         

        hereof owns
        or controls 10% or more of the voting power of the Bank’s Common
        Stock), of securities of the Bank representing an aggregate of
        twenty-five percent (25%) or more of the combined voting power of the
        Bank’s then outstanding securities within any twelve (12) month
        period; provided, that for purposes of this definition,
        "acquisition" shall not include shares which are received by a
        person through gift, inheritance, under a will or otherwise through the
        laws of descent and distribution; (B) during any period of two
        consecutive years, individuals who at the beginning of such period
        constitute the Board, cease for any reason to constitute at least a
        majority thereof, unless the election of each new director was approved
        in advance by a vote of at least a majority of the directors then still
        in office who were directors at the beginning of the period; or, (C) the
        occurrence of any other event or circumstance which is not covered by
        (A) or (B) above which the Board determines affects control of the Bank
        and adopts a resolution that such event or circumstance constitutes a
        Change in Control for the purposes of this Agreement.

        (ii)          The
        term "Cause" shall mean and be limited to any act that
        constitutes, on the part of the Executive, fraud, dishonesty, a felony
        or gross malfeasance of duty and that directly results in material
        injury to the Bank.

        (iii)          The
        term "Disability" shall mean the Executive’s inability as a
        result of physical or mental incapacity to substantially perform his
        duties for the Bank on a full-time basis for a period of six (6) months.

        (iv)          The
        term "Involuntary Termination" shall mean termination of
        employment that is involuntary on the part of the Executive and that
        occurs for reasons other than for Cause, Disability, voluntary
        retirement (including early retirement) within the meaning of the Bank’s
        retirement plan, or death.

        (v)         The
        term "Voluntary Termination" shall mean termination of
        employment that is voluntary on the part of the Executive, and, in the
        judgment of the Executive, is due to (A) a reduction of the Executive’s
        responsibilities resulting solely from the assignment to the Executive
        of any duties inconsistent with his positions, duties or
        responsibilities as in effect immediately prior to the Change in
        Control; (B) a reduction in the Executive’s compensation (other than a
        reduction resulting from performance related bonuses, so long as such
        bonuses are paid under plans reasonably designed to avoid any such
        reduction except as the result of relatively poor performance results)
        or the failure to provide substantially equivalent benefits, or (C) a
        forced relocation more than 15 miles from Executive’s principal
        assigned location prior to such change in control. A termination shall
        not be considered voluntary within the meaning of this Agreement if such
        termination is a result of Cause, Disability, voluntary retirement
        (including early retirement) within the meaning of the Bank’s
        retirement plan, or death of the Executive.

2.          LIMITATION
OF BENEFITS.

(a)          Notwithstanding
anything in this Agreement to the contrary, if any of the compensation or
benefits payable, or to be provided, to the Executive by the Bank under this
Agreement are treated as Excess Severance Payments (whether alone or in
conjunction with payments or benefits outside of this Agreement), the
compensation and benefits provided under this Agreement shall be modified or
reduced in the manner provided in Paragraph (b) below to the extent necessary so
that the compensation and benefits payable or to be provided to Executive under
this Agreement that are treated as Severance Payments, as well as any
compensation or benefits provided outside of this Agreement that are so treated,
shall not cause the Bank to have paid an Excess Severance Payment. In computing
such amount, the parties shall take into account all provisions of Code Section
280G, and the regulations thereunder, including making appropriate adjustments
to such calculation for amounts established to be Reasonable Compensation.

 

 

 

(b)          In
the event that the amount of any Severance Payments which would be payable to or
for the benefit of the Executive under this Agreement must be modified or
reduced to comply with this Paragraph, the Executive shall direct which
Severance Payments are to be modified or reduced; provided, however, that no
increase in the amount of any payment shall be made without the consent of the
Bank.

(c)         This
Paragraph shall be interpreted so as to avoid the imposition of excise taxes on
the Executive under Section 4999 of the Code or the disallowance of a deduction
to the Bank pursuant to Section 280G(a) of Code with respect to amounts payable
under this Agreement. In connection with any Internal Revenue Service
examination, audit or other inquiry, the Bank and Executive agree to take action
to provide, and to cooperate in providing, evidence to the Internal Revenue
Service (and, if applicable, the state revenue department) that the compensation
and benefits provided under this Agreement do not result in the payment of
Excess Severance Payments.

(d)          In
addition to the limits otherwise provided in this Article, to the extent
permitted by law the Executive may in his sole discretion elect to reduce (or
change the timing of) any payments he may be eligible to receive under this
Agreement to prevent the imposition of excise taxes on the Executive under
Section 4999 of the Code or otherwise reduce or delay liability for taxes owed
under the Code.

(e)          For
the purposes of this Paragraph 2, the following terms shall have the meanings
set forth below:

        (i)         The
        term "Excess Severance Payment" shall have the same meaning as
        the term "excess parachute payment" defined in Section
        280G(b)(1) of the Code.

        (ii)          The
        term "Severance Payment" shall have the same meaning as the
        term "parachute payment" defined in Section 280G(b)(2) of the
        Code.

        (iii)          The
        term "Reasonable Compensation" shall have the same meaning as
        provided in Section 280G(b)(4) of the Code.

3.       MISCELLANEOUS.

(a)          This
Agreement shall be binding upon, and inure to the benefit of, the Executive and
his executors, representatives and assigns, and the Bank and its successors and
assigns.

(b)          This
Agreement shall be governed by, and construed and enforced in accordance with,
the laws of the State of Georgia.

(c)          This
Agreement shall not be construed as giving to the Executive the right to be
retained in the employ of the Bank or any of its affiliates.

(d)          This
Agreement may only be amended by an instrument in writing executed by both of
the parties.

 

 

IN WITNESS WHEREOF, the
undersigned have executed this Agreement as of the date first above written.

 

	
Executive:

 

___________________________________

Timothy I. Warren

    	
 UNITED COMMUNITY BANK OF

WEST GEORGIA

 

By:_____________________________________

Title:____________________________________

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