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As filed with the Securities and Exchange Commission on May 11, 2005

Registration No. 333-

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM S-1
REGISTRATION STATEMENT
Under the Securities Act of 1933

RBC BEARINGS INCORPORATED
(Exact Name of Registrant as Specified in its Charter)

Delaware (State or other jurisdiction of incorporation or organization)	3562 (Primary Standard Industrial Classification Code number)	95-4372080 (I.R.S. Employer Identification No.)

One Tribology Center
Oxford, CT 06478
Telephone: (203) 267-7001
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)

Dr. Michael J. Hartnett
Chief Executive Officer
One Tribology Center
Oxford, CT 06478
Telephone: (203) 267-7001

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Copies to:

Joshua N. Korff, Esq.
Kirkland & Ellis LLP
Citigroup Center
153 East 53rd Street
New York, New York 10022-4611
(212) 446-4800

Valerie Ford Jacob, Esq.
Stuart H. Gelfond, Esq.
Fried, Frank, Harris, Shriver & Jacobson LLP
One New York Plaza
New York, New York 10004
(212) 859-8000

Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: o

If this Form is filed to registered additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. o

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price(1)	Amount of Registration Fee(1)


Common Stock, par value $ per share(2)	$143,750,000	$16,919.38

(1): Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2): Includes amount attributable to shares of Common Stock that may be purchased by the underwriters under an option to purchase additional shares.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion
Preliminary Prospectus dated May 11, 2005

PROSPECTUS

Shares

Common Stock

This is RBC Bearings Incorporated's initial public offering. RBC Bearings Incorporated is selling shares and certain of our stockholders are selling shares.

We expect the public offering price to be between $ and $ per share. Currently, no public market exists for the shares. After pricing of the offering, we expect that the shares will trade on the under the symbol " ."

Investing in the common stock involves risks that are described in the "Risk Factors" section beginning on page 8 of this prospectus.

	Per Share	Total
Public offering price	$	$
Underwriting discount	$	$
Proceeds, before expenses, to us	$	$
Proceeds, before expenses, to the selling stockholders	$	$

The underwriters may also purchase up to an additional shares from us at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover over-allotments.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The shares will be ready for delivery on or about , 2005.

Merrill Lynch & Co.

KeyBanc Capital Markets

Jefferies & Company, Inc.

The date of this prospectus is , 2005.

TABLE OF CONTENTS

		Page
Prospectus Summary		1
Risk Factors		8
Disclosure Regarding Forward-Looking Statements		20
Use of Proceeds		22
Industry and Market Data		23
Dividend Policy		23
Pre-Offering Transactions		23
Capitalization		25
Dilution		26
Selected Consolidated Historical Financial Data		27
Management's Discussion and Analysis of Financial Condition and Results of Operations		30
Business		46
Management		57
Related Party Transactions		68
Principal and Selling Stockholders		72
Description of Capital Stock		74
Description of Certain Indebtedness		76
Shares Eligible For Future Sale		79
Certain U.S. Federal Income Tax Considerations		81
Underwriting		85
Legal Matters		88
Experts		88
Where You Can Find Additional Information		88

You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

In this prospectus, unless the context otherwise requires, "Company," "RBCI," "we," "our" and "us" refer to RBC Bearings Incorporated and our subsidiaries; "RBCA" refers to Roller Bearing Company of America, Inc., our wholly-owned subsidiary and principal operating company; and "Whitney" refers to Whitney & Co., LLC, our principal equity sponsor. Our fiscal year consists of 52 or 53 weeks, ending on the Saturday closest to March 31; therefore, references to "fiscal 2004," "fiscal 2003," "fiscal 2002," "fiscal 2001" and "fiscal 2000" refer to our fiscal years ended April 3, 2004, March 29, 2003, March 30, 2002, March 31, 2001 and April 1, 2000, respectively.

This prospectus contains our registered and unregistered trademarks, service marks and trade names including: "Aerocres," "Heim," "Pitchlign," "Quadlube," "RBC Bearings," "RBC Roller," "Schaublin" and "Unibal." This prospectus also contains trademarks, service marks, copyrights and trade names of other companies.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. As a result, it does not contain all of the information that you should consider before investing in our common stock. You should read this entire prospectus, especially the section entitled "Risk Factors" and the consolidated financial statements and the related notes.

RBC Bearings Incorporated

We are a well known international manufacturer and marketer of highly engineered precision plain, roller and ball bearings. Bearings, which are integral to the manufacture and operation of most machines and mechanical systems, reduce wear to moving parts, facilitate proper power transmission and reduce damage and energy loss caused by friction. While we manufacture products in all major bearing categories, we focus primarily on highly technical or regulated bearing products for specialized markets that require sophisticated design, testing and manufacturing capabilities. Our unique expertise has enabled us to garner leading positions in most of the markets in which we compete including certain markets where we are the only manufacturer able to provide the required bearing solution. We estimate that approximately two-thirds of our net sales during fiscal 2004 were generated by products for which we hold the number one or two market position. We have been providing bearing solutions to our customers since 1919. Over the past ten years, under the leadership of our current management team, we have significantly broadened our end markets, products, customer base and geographic reach. We currently operate 16 manufacturing facilities in three countries.

We design, manufacture and market a broad portfolio of bearing products. The following table provides a summary of our product segments:

Segment	FY 2004 Sales		Representative Applications
Plain Bearings	$	77,578	•	Aircraft engine controls and landing gear
		(41%)	•	Helicopter rotors and missile launchers
			•	Mining and construction equipment

Roller Bearings	$	63,106	•	Aircraft hydraulics
		(34%)	•	Military and commercial truck chassis
			•	Packaging machinery and gear pumps

Ball Bearings	$	35,801	•	Radar and night vision systems
		(19%)	•	Airframe control and actuation
			•	Semiconductor equipment

Other		$10,846 (6%)	•	Precision ground ball screws for robotic handling and missile guidance
			•	Collets for machine tools

Our End Markets

We serve a broad range of end markets where we can add value with our specialty, precision bearing applications. We classify our customers into three principal categories: diversified industrial, aerospace and defense.

Diversified Industrial (62% of fiscal 2004 net sales). We manufacture bearing products for a wide range of diversified industrial markets, including construction and mining, heavy truck, packaging and semiconductor machinery. Our diversified industrial products target specialized market applications in

which our engineering and manufacturing capabilities provide us with unique competitive advantages. We believe opportunities exist for growth and margin expansion in this market as a result of increasing demand for industrial machinery, the introduction of new products and the expansion of aftermarket sales.

Aerospace (25% of fiscal 2004 net sales). We manufacture bearing products for a wide range of aerospace applications, including commercial airframes, commercial aircraft engines and private aircraft applications. We supply bearings for many of the commercial aircraft currently operating world-wide and are the primary supplier for many of our product lines. Many of our aerospace bearing products are designed and certified during the original development of the aircraft being served, which often makes us the primary bearing supplier for the life of the aircraft. We believe that growth and margin expansion in this segment will be driven primarily by expanding our international presence, new aircraft builds and the refurbishment and maintenance of existing commercial aircraft.

Defense (13% of fiscal 2004 net sales). We manufacture bearing products used by the U.S. Department of Defense and certain foreign governments for use in fighter jets, troop transports, naval vessels, helicopters, gas turbine engines, armored vehicles, guided weaponry and satellites. Our bearing products are manufactured to conform to U.S. military specifications and are typically custom designed during the original product design phase which often makes us the sole or primary bearing supplier for the life of the product. We believe that our current installed base of bearing products and our sophisticated engineering and manufacturing capabilities position us to benefit from growing replacement part demand caused by increased equipment utilization as well as the introduction of new weapons and transport systems.

Our Competitive Strengths

Leading Market Positions. We compete in specialized markets where we believe we are often the only supplier with the manufacturing expertise, business plan and engineering resources required to provide the required bearing solution. We estimate that approximately two-thirds of our net sales during fiscal 2004 were generated by products for which we hold the number one or two market position.

Diversified Revenue Base. We sell a wide array of bearing products to customers across many diverse end markets, each of which is influenced by different fundamental economic factors. Our products are sold to more than 5,500 customers, including original equipment manufacturers, or OEMs, and aftermarket distributors and service providers.

Proprietary Design and Manufacturing Capabilities. We believe that our design and manufacturing capabilities will allow us to maintain a leadership position as our customers continue to rely on us to develop new bearing solutions that can be manufactured cost effectively.

Experienced Management Team. Our management team possesses extensive managerial experience in the bearing industry, with our top five operating executives averaging over 20 years of bearing industry experience. We intend to retain and attract experienced professionals by leveraging our reputation as a premier provider of precision bearing solutions.

Our Growth Strategy

We intend to grow our business while continuing to focus on specialized markets for highly engineered bearing solutions. Key elements of our growth strategy include:

Expand Customer Base and Penetrate End Markets. We continually seek opportunities to penetrate new customers, geographic locations and bearing platforms with existing products or profitable new product opportunities. We intend to continue to expand our sales force, customer base and end markets and have identified a number of attractive growth opportunities domestically and abroad, including current projects in semiconductor machinery, airframe controls and missile guidance systems. In addition, our OEM relationships, coupled with our design expertise, provide us with extensive cross-selling opportunities on platforms that we do not currently supply.

Increase Aftermarket Sales. We intend to increase the percentage of our revenues derived from the replacement market by continuing to implement several initiatives. First, we will continue to seek opportunities to increase our sales to key existing distributors as well as expand our base of third party customers. Second, our new product and new end market initiatives are focused on high-growth platforms, such as 300 millimeter semiconductor manufacturing systems and the U.S. government's Joint Strike Fighter program that we expect will be in service for long periods and therefore create significant demand for replacement parts. Additionally, we will seek opportunities to develop new products that can be used as replacement parts for existing platforms. We believe that increasing our aftermarket sales of replacement parts will further enhance the continuity and predictability of our revenues and increase our profitability.

Pursue Selective Acquisitions. We believe that there will continue to be consolidation within the bearing industry that may present us with acquisition opportunities, particularly within the industrial and aerospace markets. We regularly evaluate opportunities to acquire bearing and precision-engineered component manufacturers which have complementary products, customers or distribution channels, provide significant potential for margin enhancement and further expand the breadth of our product portfolio.

Whitney & Co., LLC

Whitney & Co., LLC is our major equity sponsor and provides financial consulting and management advisory services to us. Whitney was established in 1946 by John Hay Whitney as one of the first U.S. firms involved in the development of the private equity industry. Today, Whitney remains a private firm owned by investing professionals, and its main activities are to provide private equity and debt capital for middle market growth companies. Whitney manages approximately $4 billion of assets for endowments, foundations and pension plans and is currently investing its fifth outside equity fund, Whitney V, L.P., a fund with committed capital of $1.1 billion.

Our Corporate Profile

RBC Bearings Incorporated is a Delaware corporation, and our principal executive offices are located at One Tribology Center, Oxford, CT 06478. Our telephone number is (203) 267-7001. Our website address is www.rbcbearings.com. Information on our website is not deemed to be a part of this prospectus.

The Offering

Common stock offered:
	By us	shares
	By the selling stockholders	shares
Common stock outstanding after the offering		shares
Use of proceeds		We estimate that our net proceeds from this offering without exercise of the over-allotment option will be approximately $ million. We intend to use these net proceeds, together with proceeds from the Refinancing Transaction, for:
		•	repayment of certain indebtedness, including:
			•	all of our $38.6 million in aggregate principal amount 13% Senior Subordinated Discount Debentures due 2009 plus accrued interest and redemption premium;
			•	all of our outstanding indebtedness, plus accrued interest and prepayment fee, under our $45.0 million Second Lien Term Loan; and
		•	redemption of all of our Class C preferred stock for $ million, including any accrued and unpaid dividends, and repurchase of 50% of our Class D preferred stock for $4.0 million.
		We will not receive any proceeds from the sale of the shares by the selling stockholders. See "Use of Proceeds," "Pre-Offering Transactions" and "Related Party Transactions."
Risk factors		See "Risk Factors" and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of the common stock.
Proposed symbol		" "

The number of shares of our common stock outstanding after the offering is based on an assumed initial offering price of $ per share. The number of shares outstanding after the offering excludes shares reserved for issuance under our stock option plans, of which options to purchase shares at an average option price of $ have been issued. Options to purchase shares of common stock will be outstanding under our stock option plans upon completion of this offering, of which options to purchase shares will be exercisable upon completion of this offering. This number assumes that the underwriters' over-allotment option is not exercised. If the over-allotment option is exercised in full, we will issue and sell additional shares.

Unless the context otherwise requires, all information in this prospectus (i) gives retroactive effect to a -for- stock split of the common stock which will occur immediately prior to the completion of this offering and (ii) assumes that this offering is consummated at an initial public offering price of $ per share (the midpoint of the range on the front cover of this prospectus) on , 2005. See "Use of Proceeds" and "Pre-Offering Transactions."

Summary Financial Data

The summary financial data for the fiscal years ended March 30, 2002, March 29, 2003, and April 3, 2004 have been derived from our historical consolidated financial statements audited by Ernst & Young LLP, independent auditors. The summary historical unaudited statement of operations and balance sheet data for the nine month period ended December 27, 2003 and January 1, 2005 have been derived from our unaudited historical consolidated financial statements included elsewhere in this prospectus, which in our opinion contains all adjustments necessary for a fair presentation of the consolidated financial data. Historical results are not necessarily indicative of the results expected in the future. You should read the data presented below together with, and qualified by reference to "Selected Consolidated Historical Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements included elsewhere in this prospectus.

			Fiscal Year Ended								Nine Month Period Ended
			March 30, 2002		March 29, 2003			April 3, 2004			December 27, 2003			January 1, 2005
			(in thousands, except share and per-share amounts)
Statement of Operations Data:
	Net sales⁽¹⁾		$	168,331	$	172,860		$	187,331		$	125,087		$	170,731
	Cost of sales			114,575		124,086			135,433			90,745			123,325

		Gross margin		53,756		48,774			51,898			34,342			47,406
	Selling, general and administrative			25,641		26,647			28,107			19,615			22,929
	Other, net			937		1,424			1,662			863			2,464

		Operating income		27,178		20,703			22,129			13,864			22,013
	Interest expense, net			23,440		21,023			20,380			15,289			14,335
	Loss (gain) on early extinguishment of debt⁽²⁾			—		(780	)		—			—			6,956
	Other non-operating expense (income)			17		298			16			12			(98	)

		Income (loss) before income taxes		3,721		162			1,733			(1,437	)		820
	Provision for (benefit from) income taxes			2,052		113			1,070			(492	)		303

		Net income (loss)	$	1,669	$	49		$	663		$	(945	)	$	517

	Net income (loss) per common share⁽³⁾:
		Basic	$	0.67	$	(0.51	)	$	(0.60	)	$	(1.01	)	$	(0.47	)
		Diluted	$	0.47	$	(0.51	)	$	(0.60	)	$	(1.01	)	$	(0.47	)
	Weighted average number of common and common equivalent shares outstanding:
		Basic		2,475,561		2,475,561			2,475,561			2,475,561			2,475,561
		Diluted		3,556,658		2,475,561			2,475,561			2,475,561			2,475,561
Pro Forma Data:⁽⁴⁾
	Pro forma net income (loss)							$						$
	Pro forma net income (loss) per common share:
		Basic						$						$
		Diluted						$						$
	Pro forma weighted average number of common and common equivalent shares outstanding:
		Basic
		Diluted

		Fiscal Year Ended						Nine Month Period Ended
		March 30, 2002		March 29, 2003		April 3, 2004		December 27, 2003		January 1, 2005
		(in thousands)
Other Financial Data:
	EBITDA⁽⁵⁾	$	36,266	$	29,224	$	31,295	$	21,384	$	29,455
	Capital expenditures		5,941		6,522		4,951		2,952		6,604

		As of January 1, 2005
		Actual			As Adjusted⁽⁴⁾
		(in thousands)
Balance Sheet Data:
	Cash	$	1,703		$
	Working capital		117,028
	Total assets		243,290
	Total debt		222,254
	Total stockholders' equity (deficit)		(14,651	)

(1): Our net sales were $172.9 million in fiscal 2003 and $168.3 million in fiscal 2002, an increase of $4.6 million or 2.7%. Net sales in the compared periods included net sales totaling $2.1 million in fiscal 2003 for RBC France, which was acquired in December 2002, and $5.2 million in fiscal 2003 and $3.7 million in fiscal 2002 generated by RBC Oklahoma, which was acquired effective August 2001. Excluding RBC France and RBC Oklahoma's sales, our net sales increased $1.0 million or 0.6% from period to period.
(2): Loss on extinguishment of debt of $7.0 million in the first quarter of fiscal 2005 included $4.3 million for non-cash write-off of deferred financing fees associated with retired debt, $1.8 million of redemption premium and $0.9 million of accrued interest for the 30 day call period related to the early extinguishment of our senior subordinated notes.
(3): The net loss per common share for certain periods is caused by the dividends accrued on the Class B preferred stock. See Note 2 of Notes to Consolidated Financial Statements and Note 2 to Notes of Unaudited Interim Consolidated Financial Statements.
(4): Assumes the following transactions were effected as of March 30, 2003 with respect to the Pro Forma Data, and as of January 1, 2005 with respect to the as adjusted Balance Sheet Data, presented above: (1) the Pre-Offering Transactions, (2) the sale by us of shares in this offering at an assumed initial public offering price of $ per share, (3) the repayment of all of our $38.6 million in the aggregate principal amount of our 13% Senior Subordinated Discount Debentures due 2009, (4) the repayment of all outstanding indebtedness under our $45 million Second Lien Term Loan; and (5) the Refinancing Transaction. In addition, pro forma amounts have been adjusted to reflect the exercise of options and warrants by some of the selling stockholders. These selling stockholders may exercise these options or warrants through a net share settlement. See "Pre-Offering Transactions," "Use of Proceeds" and "The Offering."
(5): EBITDA consists of net income (loss), plus interest expense, net, loss (gain) on early extinguishment of debt, provision for (benefit from) income taxes and depreciation and amortization. In evaluating our business, our management considers and uses EBITDA as one of a few key indicators of financial operating performance and as a measure of operating cash capacity. We use EBITDA as a key performance indicator because we believe it provides a more consistent basis for internal comparisons of operating performance. The calculation of EBITDA eliminates the effects of financing, income taxes and the accounting effects of capital spending, which items may vary for different periods unrelated to the overall operating performance and operating cash flows. EBITDA is also presented because it is frequently used by securities analysts, investors and other interested parties as a measure of financial

performance and debt service capacity and in the evaluation of companies in our industry; therefore, we believe it is a useful indicator to investors. EBITDA is not a recognized term under generally accepted accounting principles, and when analyzing our operating performance, investors should use EBITDA in addition to, not an alternative for, operating income, net income and cash flows from operating activities. Investors also should note that our presentation of EBITDA may not be comparable to similarly titled measures used by other companies. The following table provides a reconciliation of net income, the most directly comparable GAAP measure, to EBITDA.

		Fiscal Year Ended							Nine Month Period Ended
		March 30, 2002		March 29, 2003			April 3, 2004		December 27, 2003			January 1, 2005
		(in thousands)
Net income (loss)		$	1,669	$	49		$	663	$	(945	)	$	517
Add:
	Provision for (benefit from) income taxes		2,052		113			1,070		(492	)		303
	Interest expense, net		23,440		21,023			20,380		15,289			14,335
	Loss (gain) on early extinguishment of debt		—		(780	)		—		—			6,956
	Depreciation and amortization		9,105		8,819			9,182		7,532			7,344

EBITDA		$	36,266	$	29,224		$	31,295	$	21,384		$	29,455

RISK FACTORS

Our business, operating results or financial condition could be materially adversely affected by any of the following risks. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. You should carefully consider these risks before investing in shares of our common stock.

Risk Factors Related to Our Company

The bearing industry is highly competitive, and this competition could reduce our profitability or limit our ability to grow.

The global bearing industry is highly competitive, and we compete with many U.S. and non-U.S. companies, some of which benefit from lower labor costs and fewer regulatory burdens than us. We compete primarily based on product qualifications, product line breadth, service and price. Certain competitors are larger than us or subsidiaries of larger entities and may be better able to manage costs than us or may have greater financial resources than we have. Due to the competitiveness in the bearing industry we may not be able to increase prices for our products to cover increases in our costs, or we may face pressure to reduce prices, which could materially adversely affect our profitability. Competitive factors, including changes in market penetration, increased price competition and the introduction of new products and technology by existing and new competitors could have a material adverse effect on our business and results of operations.

The loss of a major customer could have a material adverse effect on our business and operations.

Our top ten customers generated 34% of our net sales during fiscal 2004. Accordingly, the loss of one or more of those customers or a substantial decrease in such customers' purchases from us could have a material adverse effect on our revenues and profitability.

In addition, the consolidation and combination of defense or other manufacturers may eliminate customers from the industry and/or put downward pricing pressures on sales of component parts sold by us which could have a material adverse effect on our business. Compliance with various government regulations may be required. Violations of such regulations could result in termination of all of our governmental related contracts, which may have material adverse effects on our operations.

Weakness in any of the industries in which our customers operate, as well as the cyclical nature of our customers' businesses generally, could materially adversely impact our revenues and profitability.

The commercial aerospace, mining and construction equipment and other diversified industrial industries to which we sell our products are, to varying degrees, cyclical and tend to decline in response to overall declines in industrial production. Margins in those industries are highly sensitive to demand cycles, and our customers in those industries historically have tended to delay large capital projects, including expensive maintenance and upgrades, during economic downturns. As a result, our business is also cyclical, and the demand for our products by these customers depends, in part, on overall levels of industrial production, general economic conditions and business confidence levels. Downward economic cycles have affected our customers and reduced sales of our products resulting in reductions in our revenues and net earnings. Any future material weakness in demand in any of these industries could have a material adverse effect on our revenues and profitability.

In addition, many of our customers have historically experienced periodic downturns, which often have had a negative effect on demand for our products. For example, the severe downturn in 2001 in the aerospace industry resulted in deferrals or cancellations in aircraft orders, which adversely affected the volume and price of orders placed for products used to manufacture commercial aircraft, including our bearings and other individual parts and components we manufacture. Previous industry downturns

have negatively affected, and future industry downturns may negatively affect, our net sales, gross margin and net income.

Future reductions or changes in U.S. government spending could negatively affect our business.

A significant portion of our sales are made directly or indirectly to the U.S. government to support military or other government projects. Our failure to obtain new government contracts, the cancellation of government contracts or reductions in federal budget appropriations regarding our products could result in materially reduced revenue. In addition, the funding of defense programs also competes with non-defense spending of the U.S. government. Our business is sensitive to changes in national and international priorities and the U.S. government budgets. A shift in government defense spending to other programs in which we are not involved or future reductions in U.S. government defense spending generally could have adverse consequences to our results of operations. If we, or our prime contracts for which we are a subcontractor, fail to win any particular bid, or we are unable to replace lost business as a result of a cancellation, expiration or completion of a contract, our revenues or cash flows could be reduced.

Fluctuating supply and costs of raw materials and energy resources could have a material adverse effect on our business.

Our business is dependent on the availability and cost of energy resources and raw materials, particularly steel, generally in the form of stainless and chrome steel which are commodity steel products. Raw materials represented approximately 39% of our overall costs for fiscal 2004. The availability and prices of raw materials and energy sources may be subject to curtailment or change due to, among other things, new laws or regulations, suppliers' allocations to other purchasers, interruptions in production by suppliers, changes in exchange rates and worldwide price levels. Although we currently maintain alternative sources for raw materials, our business is subject to the risk of price fluctuations and periodic delays in the delivery of certain raw materials. Disruptions in the supply of raw materials and energy resources could temporarily impair our ability to manufacture our products for our customers or require us to pay higher prices in order to obtain these raw materials or energy resources from other sources, which could thereby affect our sales and profitability.

For example, we purchase steel at market prices, which during the past 12 months have increased to historical highs as a result of a relatively low level of supply and a relatively high level of demand, and we have recently received notices of additional price increases from our suppliers. As a result, we are currently being assessed surcharges on certain of our purchases of steel, and in certain circumstances, we have experienced difficulty in identifying steel for purchase. If we are unable to purchase steel for our operations for a significant period of time, our operations would be disrupted, and our results of operations would be materially adversely affected. In addition, we may be unable to pass on the increased costs of raw materials to our customers, which could materially adversely affect our results of operations and financial condition.

We seek to, and have to date, successfully passed through a significant portion of our additional costs to our customers through steel surcharges or price increases. However, even if we are able to pass these steel surcharges or price increases to our customers, there may be a time lag of up to 12 weeks between the time a price increase goes into effect and our ability to implement surcharges or price increases, particularly for orders already in our backlog. As a result our gross margin percentage may decline, and we may not be able to implement other price increases for our products. We cannot provide assurances that we will be able to continue to pass these additional costs on to our customers at all or on a timely basis or that our customers will not seek alternative sources of supply if there are significant or prolonged increases in the price of steel or other raw materials or energy resources.

We may not be able to address technological advances or maintain customer relationships which are necessary to remain competitive within our businesses.

We believe that our customers rigorously evaluate their suppliers on the basis of product quality, price competitiveness, technical expertise, new product innovation, reliability and timeliness of delivery, product design capability, manufacturing expertise, operational flexibility and customer service. Our success will depend on our ability to continue to meet our customers' changing specifications with respect to these criteria. We must remain committed to product research and development, advanced manufacturing techniques and service to remain competitive. We may not be able to address technological advances in metallurgy or in materials science or introduce new products that may be necessary to remain competitive within our businesses, or our competitors may develop products superior to our products. Furthermore, we may be unable to adequately protect any of our own technological developments to produce a sustainable competitive advantage.

Our products are subject to certain approvals, and the loss of such approvals could adversely affect our revenues.

Essential to servicing the aerospace market is the ability to obtain product approvals. We have in excess of 32,000 product approvals, which enable us to provide products used in virtually all domestic aircraft platforms presently in production or operation. Product approvals are typically issued by the Federal Aviation Administration, or FAA, to designated OEMs who are Production Approval Holders of FAA approved aircraft. These Production Approval Holders provide quality control oversight and generally limit the number of suppliers directly servicing the commercial aerospace aftermarket. Regulations enacted by the FAA provide for an independent process (the Parts Manufacturer Approval, or PMA, process), which enables suppliers who currently sell their products to the Production Approval Holders, to sell products to the aftermarket. We have received over 2,400 PMA application approvals to date. Our foreign sales may be subject to similar approvals. Although we have not lost any material product approvals in the past, we cannot assure you that we will not lose approvals for our products in the future. The loss of product approvals could have a material adverse effect on our revenues and profitability.

Under certain circumstances, the U.S. government has the right to debar or suspend us from acting as a U.S. government contractor or subcontractor, and if we are suspended or debarred from acting as a government supplier for any reason, such an action would have a material adverse effect on our business.

In connection with our performance of government contracts, the federal government audits and reviews our performance, pricing practices and compliance with applicable laws, regulations and standards. It is possible that as a result of these audits, our revenues, cash flows, or results of operations could be materially adversely affected. For example, the government could disallow certain costs that it originally reimbursed, and we may be required to refund cash already collected. It is also possible that a government audit, review or investigation could uncover improper or illegal activities that would subject the company to civil, criminal and/or administrative sanctions, including, but not limited to, termination of contracts, reimbursement of payments received, fines, forfeiture of profits and suspension or debarment from doing business with federal government agencies. If any allegations of impropriety were made against us, whether or not true, our reputation could be adversely affected. If we were suspended or debarred from contracting with the federal government, or any specific agency, if our reputation was impaired or if the government ceased or significantly decreased the amount of business it does with us, our revenues and cash flow could be reduced. As a government contractor, we are also subject to various federal laws, regulations and standards. New laws, regulations or standards or changes to existing laws, regulations or standards could subject us to additional costs of compliance or liabilities and could result in material reductions to our results of operations, cash flow or revenues.

We have outstanding debt and may incur additional debt in the future for acquisitions or other purposes which could adversely affect our business.

As of January 1, 2005, our total outstanding debt consisted of $222.3 million, of which $115.1 million was outstanding under our $165.0 million senior credit facility, referred to as our Senior Credit Facility, comprised of a $55.0 million revolving credit facility, or Revolving Credit Facility, and a $110.0 million term loan, or Term Loan. We expect to amend or refinance our existing Senior Credit Facility to increase our borrowings under our Senior Credit Facility by $ million in connection with the Refinancing Transaction to be used for the purposes described under "Use of Proceeds." See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Pre-Offering Transactions—Refinancing Transaction."

To service our debt, we will require a significant amount of cash. Our ability to generate cash, make scheduled payments or to refinance our obligations depends on our successful financial and operating performance. Our financial and operating performance, cash flow and capital resources depend upon prevailing economic conditions and certain financial, business and other factors, many of which are beyond our control.

We may incur additional indebtedness in the future for acquisition, and the significant debt servicing costs associated with that indebtedness could have significant effects on our operations, including:

•: limit our ability to obtain additional financing to operate our business;
•: require us to dedicate a substantial portion of our cash flow to payments on our debt, reducing our ability to use our cash flow to fund working capital, capital expenditures and other general operational requirements;
•: limit our flexibility to plan for and react to changes in our business or industry;
•: place us at a competitive disadvantage relative to some of our competitors that have less debt than us; and
•: increase our vulnerability to general adverse economic and industry conditions, including changes in interest rates or a downturn in our business or the economy.

The occurrence of any one of these events could have a material adverse effect on our business, financial condition, results of operations and ability to grow our business.

Restrictions in our indebtedness agreements could limit our growth and our ability to respond to changing conditions.

The Senior Credit Facility, our $45.0 million second lien term loan, or Second Lien Term Loan, and our swiss franc 14.0 million Swiss credit facility (approximately $11.0 million) as of January 1, 2005, or Swiss Credit Facility, contain a number of restrictive covenants that limit our ability, among other things, to:

•: incur additional indebtedness and issue preferred stock and guarantee indebtedness;
•: create liens on our assets;
•: pay dividends or make other equity distributions;
•: purchase or redeem capital stock;
•: create restrictions on payments of dividends or other amounts to us by our restricted subsidiaries;
•: make investments;

•: merge, consolidate or sell assets;
•: engage in activities unrelated to our current business;
•: engage in transactions with our affiliates; and
•: sell or issue capital stock of certain subsidiaries.

In addition, the Senior Credit Facility and the Second Lien Term Loan contain other financial covenants requiring us to maintain a minimum fixed charge coverage ratio and maximum senior leverage ratios and to satisfy certain other financial conditions. Our Second Lien Term Loan prohibits us from incurring capital expenditures of more than $10 million per year. These restrictions could limit our ability to obtain future financings, make needed capital expenditures, withstand a future downturn in our business or the economy in general or otherwise conduct necessary corporate activities.

As of January 1, 2005, we had outstanding borrowings of $5.4 million and letters of credit of $20.3 million under our $55.0 million revolving credit facility. Under the Revolving Credit Facility, we have borrowing availability of $18.6 million as of January 1, 2005. Under our Swiss Credit Facility, or Swiss Revolver, we had borrowing availability of approximately $3.5 million (4.0 million SFr) as of January 1, 2005.

Increases in interest rates may increase our interest expense and adversely affect our profitability and cash flow.

Upon consummation of this offering, approximately % of our debt will be subject to variable interest rates. On December 31, 2004, we entered into a Rate Cap Transaction Agreement capping LIBOR at 5.00% on a notional amount of $50.0 million. This agreement expires on December 31, 2005. An increase in interest rates will increase our interest expense and may adversely affect our profitability and cash flow and our ability to service our indebtedness and to make distributions to our stockholders. In addition, an increase in interest rates may inhibit our ability to incur additional debt in the future, which may impair our ability to consummate desirable acquisitions. As of January 1, 2005, after giving effect to the offering, we had a total of $ million of variable rate debt bearing a weighted average interest rate of approximately % per annum.

Work stoppages and other labor problems could materially adversely affect us.

As of January 1, 2005, approximately 31% of our hourly employees in the U.S. and abroad were represented by labor unions. While we believe our relations with our employees are satisfactory, a lengthy strike or other work stoppage at any of our facilities could have a material adverse effect on us. In addition, any attempt by our employees not currently represented by a union to join a union could result in additional expenses, including with respect to wages, benefits and pension obligations. One of our collective bargaining agreements covering approximately 53 employees, was originally due to expire in the month of July 2004 and was extended to October 29, 2005. Of our remaining four collective bargaining agreements, one agreement covering approximately 51 employees will expire in June of 2007, two agreements covering approximately 124 employees will expire in January of 2008 and one agreement covering approximately 132 employees will expire in June of 2008.

Negotiations for the extension of these agreements may result in modifications to the terms of these agreements, and these modifications could cause us to incur increased costs relating to our labor force.

In addition, work stoppages at one or more of our customers or suppliers, including suppliers of transportation services, many of which have large unionized workforces, for labor or other reasons could also cause disruptions to our business that we cannot control and may materially adversely impact our business and results of operations.

Our business is capital intensive and may consume cash in excess of cash flow from our operations.

Our ability to remain competitive, sustain our growth and expand our operations largely depends on our cash flow from operations and our access to capital. We intend to fund our cash needs through operating cash flow and borrowings under our Senior Credit Facility. We may require additional equity or debt financing to fund our growth and debt repayment obligations. In addition, we may need additional capital to fund future acquisitions. Our business may not generate sufficient cash flow, and we may not be able to obtain sufficient funds to enable us to pay our debt obligations and capital expenditures or we may not be able to refinance on commercially reasonable terms, if at all. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Liquidity."

Unexpected equipment failures, catastrophic events or capacity constraints may increase our costs and reduce our sales due to production curtailments or shutdowns.

Our manufacturing processes are dependent upon critical pieces of equipment, such as furnaces, continuous casters and rolling equipment, as well as electrical equipment, such as transformers, and this equipment may, on occasion, be out of service as a result of unanticipated failures. In addition to equipment failures, our facilities are also subject to the risk of catastrophic loss due to unanticipated events such as fires, explosions, earthquakes or violent weather conditions. In the future, we may experience material plant shutdowns or periods of reduced production as a result of these types of equipment failures or catastrophes. Interruptions in production capabilities will inevitably increase our production costs and reduce sales and earnings for the affected period.

Certain of our facilities are operating at a single shift with light second and third shifts, and additional demand may require additional shifts and/or capital investments at these facilities. We cannot assure you that we will be able to add additional shifts as needed in a timely way and production constraints may result in lost sales. In certain markets we refrain from making additional capital investments to expand capacity where we believe market expansion in a particular end market is not sustainable or otherwise does not justify the expansion or capital investment. Our assumptions and forecasts regarding market conditions in these end markets may be erroneous and may result in lost earnings and inhibit our growth.

The occurrence of extraordinary events, such as a major terrorist attack in the U.S., may adversely affect our business, resulting in a decrease in our revenues.

Future terrorist attacks cannot be predicted, and their occurrence can be expected to negatively affect the economy of the U.S. and other countries in which we do business. Such attacks may materially adversely impact markets in which we operate, particularly commercial aerospace and may also impair our ability to conduct our manufacturing and other business activities for extended periods depending on the nature and severity of the event.

We may not be able to continue to make the acquisitions necessary for us to realize our growth strategy.

The acquisition of businesses that complement or expand our operations has been and continues to be an important element of our business strategy. We cannot assure you that we will be successful in identifying attractive acquisition candidates or completing acquisitions on favorable terms in the future. Our inability to acquire businesses, or to operate them profitably once acquired, could have a material adverse effect on our business, financial position, cash flows and growth.

The costs and difficulties of integrating acquired businesses could impede our future growth.

We cannot assure you that any future acquisition will enhance our financial performance. Our ability to effectively integrate any future acquisitions will depend on, among other things, the adequacy of our implementation plans, the ability of our management to oversee and operate effectively the combined operations and our ability to achieve desired operating efficiencies and sales goals. The integration of any acquired businesses might cause us to incur unforeseen costs, which would lower our future earnings and would prevent us from realizing the expected benefits of these acquisitions.

Even if we are able to integrate future acquired businesses with our operations successfully, we cannot assure you that we will realize all of the cost savings, synergies or revenue enhancements that we anticipate from such integration or that we will realize such benefits within the expected time frame.

We depend heavily on our senior management and other key personnel, the loss of whom could materially affect our financial performance and prospects.

Our business is managed by a small number of key executive officers, including Dr. Michael J. Hartnett. Our future success will depend on, among other things, our ability to keep the services of these executives and to hire other highly qualified employees at all levels. Dr. Hartnett is the only member of our senior management team with a long-term employment contract. The remainder of our key executives are at-will employees.

We compete with other potential employers for employees, and we may not be successful in hiring and retaining executives and other skilled employees that we need. Our ability to successfully execute our business strategy, market and develop our products and serve our customers could be adversely affected by a shortage of available skilled employees or executives.

Our international operations are subject to risks inherent in such activities.

We have established operations in certain countries outside the U.S., including Mexico, France and Switzerland. Of our 18 facilities, 4 are located outside the U.S., including 2 manufacturing facilities.

Approximately 19% of our sales were derived from sales outside the U.S. during fiscal year 2004. We expect that this proportion is likely to increase as we seek to increase our penetration of foreign markets, particularly within the aerospace and defense markets. Our foreign operations are subject to the risks inherent in such activities, such as foreign regulation, unsettled political conditions, currency devaluations, logistical and communications challenges, burdensome costs of complying with a variety of foreign laws, greater difficulties in protecting intellectual property and general economic conditions in these foreign markets. Our international operations may be materially adversely affected by changes in government policies, such as changes in laws and regulations (or the interpretation thereof), restrictions on imports and exports, sources of supply, duties or tariffs, the introduction of measures to control inflation, changes in the rate or method of taxation, the imposition of restrictions on currency conversion and remittances abroad, difficulty in staffing and managing geographically diverse operations, the expropriation of private enterprise and acts of terrorism or war or other acts that may cause social disruption. In addition, policy concerns particular to the U.S. with respect to a country in which we have operations could materially adversely affect our operations in that country.

Currency translation risks may adversely affect our results of operations.

Our Swiss operations utilize the Swiss franc as the functional currency and our French operations utilize the Euro as the functional currency. Foreign currency transaction gains and losses are included in earnings. Foreign currency transaction exposure arises primarily from the transfer of foreign currency from one subsidiary to another within the group and to foreign currency denominated trade receivables. Unrealized currency translation gains and losses are recognized upon translation of the foreign

subsidiaries' balance sheets to U.S. dollars. Because our financial statements are denominated in U.S. dollars, changes in currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have, an impact on our earnings. While we monitor exchange rates, we currently do not have exchange rate hedges in place to reduce the risk of an adverse currency exchange movement. Although currency fluctuations have not had a material impact on our financial performance in the past, such fluctuations may affect our financial performance in the future. The impact of future exchange rate fluctuations on our results of operations cannot be accurately predicted. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Foreign Currency Exchange Rates."

Our pension plans are underfunded, and we may be required to make significant future contributions to the plans.

As of January 1, 2005, we maintained noncontributory defined benefit pension plans covering substantially all of our union employees in our Heim division plant in Fairfield, Connecticut, our Nice subsidiary plant in Kulpsville, Pennsylvania, our Bremen subsidiary plant in Plymouth, Indiana and our Tyson subsidiary plant in Glasgow, Kentucky. As of January 1, 2005 and April 3, 2004, our plans were underfunded by $3.5 million and $4.6 million, respectively, which is the amount by which the accumulated benefit obligations exceed the sum of the fair market value of plans' assets. We are required to make cash contributions to our pension plans to the extent necessary to comply with minimum funding requirements imposed by employee benefit and tax laws. The amount of any such required contributions is determined based on annual actuarial valuation of the plans as performed by the plan's actuaries. The amount of future contributions will depend upon asset returns, then-current discount rates and a number of other factors, and, as a result, the amount we may elect or be required to contribute to our pension plans in the future may increase significantly. Additionally, there is a risk that if the Pension Benefit Guaranty Corporation concludes that its risk with respect to our pension plan may increase unreasonably if the plan continues to operate, if we are unable to satisfy the minimum funding requirement for the plans or if the plans become unable to pay benefits, then the Pension Benefit Guaranty Corporation could terminate the plans and take control of their assets. In such event, we may be required to make an immediate payment to the Pension Benefit Guaranty Corporation of all or a substantial portion of the underfunding as calculated by the Pension Benefit Guaranty Corporation based upon its own assumptions. The underfunding calculated by the Pension Benefit Guaranty Corporation could be substantially greater than the underfunding we have calculated because, for example, the Pension Benefit Guaranty Corporation may use a significantly lower discount rate. If such payment is not made, then the Pension Benefit Guaranty Corporation could place liens on a material portion of our assets and the assets of any members of our controlled group. Such action could adversely affect our financial condition and results of operations. For additional information concerning our pension plans and plan liabilities, see note 13 to our consolidated financial statements attached to this prospectus.

We may incur material losses for product liability and recall related claims.

We are subject to a risk of product and recall related liability in the event that the failure of any of our products results in personal injury or death, property damage or does not conform to our customers' specifications. In particular, our products are installed in a number of types of vehicle fleets, including airplanes, trains, automobiles, heavy trucks and farm equipment, many of which are subject to government ordered as well as voluntary recalls by the manufacturer. If one of our products is found to be defective, causes a fleet to be disabled or otherwise results in a product recall, significant claims may be brought against us. Although we have not had any material product liability or recall related claims made against us, and we currently maintain product liability insurance coverage for product liability, although not for recall related claims, we cannot assure you that product liability or recall related claims, if made, would not exceed our insurance coverage limits or would be covered by insurance

which, in turn, may have a material adverse effect on our business, financial condition or results of operations.

Environmental regulations impose substantial costs and limitations on our operations, and environmental compliance may be more costly than we expect.

We are subject to various federal, state and local environmental laws and regulations, including those governing discharges of pollutants into the air and water, the storage, handling and disposal of wastes and the health and safety of employees. These laws and regulations could subject us to material costs and liabilities, including compliance costs, civil and criminal fines imposed for failure to comply with these laws and regulations and litigation costs. We also may be liable under the federal Comprehensive Environmental Response, Compensation, and Liability Act, or similar state laws, for the costs of investigation and clean-up of contamination at facilities currently or formerly owned or operated by us or at other facilities at which we have disposed of hazardous substances. In connection with such contamination, we may also be liable for natural resource damages, government penalties and claims by third parties for personal injury and property damage. Compliance with these laws and regulations may prove to be more limiting and costly than we anticipate. New laws and regulations, stricter enforcement of existing laws and regulations, the discovery of previously unknown contamination or the imposition of new clean-up requirements could require us to incur costs or become the basis for new or increased liabilities that could have a material adverse effect on our business, financial condition or results of operations. Investigation and remediation of contamination at some of our sites is ongoing. Actual costs to clean-up these sites may exceed our current estimates. Although we have indemnities for certain pre-closing environmental liabilities from the prior owners in connection with our acquisition of several of our facilities, we cannot assure you that the indemnities will be adequate to cover known or newly discovered pre-closing liabilities.

The interests of certain stockholders, particularly Whitney Investor and Dr. Hartnett, could conflict with those of other holders of our securities.

When this offering is completed, our executive officers, directors and stockholders who owned more than 5% of our outstanding common stock before the completion of this offering, will, in the aggregate, beneficially own shares representing approximately % of our capital stock. Whitney RBHC Investor, LLC ("Whitney Investor") and Dr. Hartnett will control % and % of our common stock, respectively. In addition, if these stockholders were to choose to act together, or with other significant shareholders, they could control, and will, in any event, have a large degree of influence over, matters submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to act together, could control the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of voting power could delay or prevent an acquisition of our company on terms that other stockholders may desire.

Our intellectual property and other proprietary rights are valuable, and any inability to protect them could adversely affect our business and results of operations; in addition, we may be subject to infringement claims by third parties.

Our ability to compete effectively is dependent upon our ability to protect and preserve the intellectual property and other proprietary rights and materials owned, licensed or otherwise used by us. We have numerous U.S. and foreign patents, U.S. trademark registrations and U.S. copyright registrations. Our patents are expected to expire by their own terms at various dates. We also have U.S. trademark and patent applications pending. We cannot assure you that our pending trademark and patent applications will result in trademark registrations and issued patents, and our failure to secure rights under these applications may limit our ability to protect the intellectual property rights that these

applications were intended to cover. Although we have attempted to protect our intellectual property and other proprietary rights both in the United States and in foreign countries through a combination of patent, trademark, copyright and trade secret protection and non-disclosure agreements, these steps may be insufficient to prevent unauthorized use of our intellectual property and other proprietary rights, particularly in foreign countries where the protection available for such intellectual property and other proprietary rights may be limited. We cannot assure you that any of our intellectual property rights will not be infringed upon or that our trade secrets will not be misappropriated or otherwise become known to or independently developed by competitors. We may not have adequate remedies available for any such infringement or other unauthorized use. We cannot assure you that any infringement claims asserted by us will not result in our intellectual property being challenged or invalidated, that our intellectual property will be held to be of adequate scope to protect our business or that we will be able to deter current and former employees, contractors or other parties from breaching confidentiality obligations and misappropriating trade secrets. In addition, we may become subject to claims against us which could require us to pay damages or limit our ability to use certain intellectual property and other proprietary rights found to be in violation of a third party's rights, and, in the event such litigation is successful, we may be unable to use such intellectual property and other proprietary rights at all or on reasonable terms. Regardless of its outcome, any litigation, whether commenced by us or third parties, could be protracted and costly and could have a material adverse effect on our business and results of operations.

Cancellation of orders in our backlog of orders could negatively impact our revenues.

As of January 1, 2005, we had an order backlog of $133.8 million, which we estimate will be fulfilled within the next 12 months. However, orders included in our backlog are subject to cancellation, delay or other modifications by our customers prior to fulfillment. For these reasons, we cannot assure you that our backlog will ultimately result in the actual receipt of revenues on orders included in our backlog.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. Any inability to provide reliable financial reports or prevent fraud could harm our business. We are in the process of instituting changes to our internal procedures to satisfy the requirements of the Sarbanes-Oxley Act of 2002, which require management and our auditors to evaluate and assess the effectiveness of our internal controls by March 31, 2007. Implementing these changes may take a significant amount of time and may require specific compliance training of our directors, officers and other personnel. We are continuing to evaluate and, where appropriate, enhance our policies, procedures and internal controls. If we fail to maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we could be subject to regulatory scrutiny, civil or criminal penalties or shareholder litigation. In addition, failure to maintain adequate internal controls could result in financial statements that do not accurately reflect our financial condition. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock. We cannot assure you that we will be able to complete the work necessary to fully comply with the requirements of the Sarbanes-Oxley Act or that management or our auditors will conclude that our internal controls are effective.

We will face new challenges and increased costs as a public company.

Our management team has historically operated our business as a privately held company. We expect that the obligations of being a public company, including substantial public reporting and

investor relations obligations, will require significant legal, accounting and other additional expenditures, as well as stock exchange listing requirements, which will place additional demands on our management and may require the hiring of additional personnel. These obligations and related expenses will increase our operating expenses and could divert our management's attention from our operations. We also expect these new rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these new rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

Risk Factors Related to this Offering

Provisions in our charter documents and under Delaware law may prevent or frustrate attempts by our stockholders to change our management and hinder efforts to acquire a controlling interest in us.

Provisions of our corporate charter and bylaws may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. These provisions include:

•: advance notice requirements for stockholder proposals and nominations;
•: the inability of stockholders to act by written consent or to call special meetings; and
•: the ability of our board of directors to designate the terms of and issue new series of preferred stock without stockholder approval.

The affirmative vote of the holders of at least 66²/3% of our shares entitled to vote is necessary to amend or repeal the above provisions of our charter. In addition, absent approval of our board of directors, many of our bylaw provisions may only be amended or repealed by the affirmative vote of the holders of at least 66²/3% of our shares entitled to vote.

Our charter authorizes the issuance of "blank check" preferred stock with such designations, rights and preferences as may be determined from time to time by our board of directors. Accordingly, the board of directors is empowered, without shareholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights that could materially adversely affect the voting power or other rights of the holders of our common stock, including purchasers in this offering. Holders of the common stock will not have preemptive rights to subscribe for a pro rata portion of any capital stock which may be issued by us. In the event of issuance, such preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of RBCI. Although we have no present intention to issue any new shares of preferred stock, we may do so in the future.

In addition, Section 203 of the Delaware General Corporation Law prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. Accordingly, Section 203 may discourage, delay or prevent a change in control of our company.

If you purchase shares of common stock in this offering, you will suffer immediate and substantial dilution of your investment.

Purchasers of common stock in this offering will pay a price per share that substantially exceeds the per share value of our tangible assets after subtracting our liabilities and the per share price paid by our existing stockholders and by persons who exercise currently outstanding options to acquire our common stock. Accordingly, based on the initial public offering price of $ per share, you will experience immediate and substantial dilution of $ per share, representing the difference between our pro forma net tangible book value per share after giving effect to this offering and the initial public offering price. In addition, purchasers of common stock in this offering will have contributed approximately % of the aggregate price paid by all purchasers of our stock but will own only approximately % of our common stock outstanding after this offering. See "Dilution."

An active trading market for our common stock may not develop.

Prior to this offering, there has been no public market for our common stock. Although our common stock will be approved for listing on the New York Stock Exchange or Nasdaq National Market, an active trading market for our shares may never develop or be sustained following this offering. The initial public offering price for our common stock was determined through negotiations with the underwriters. This initial public offering price may vary from the market price of our common stock after the offering. Investors may not be able to sell their common stock at or above the initial public offering price. We cannot assure you that a market will develop for our common stock or what the market price of our common stock will be. If a market does not develop or is not sustained, it may be difficult for you to sell your shares of common stock at an attractive price or at all. We cannot predict the prices at which our common stock will trade.

If there are substantial sales of our common stock, our stock price could decline.

If our existing stockholders sell a large number of shares of our common stock or the public market perceives that existing stockholders might sell shares of our common stock, the market price of our common stock could decline significantly. All of the shares being sold in this offering will be freely tradable without restriction or further registration under the federal securities laws, unless purchased by our "affiliates" as that term is defined in Rule 144 under the Securities Act. Substantially all of the remaining shares to be outstanding upon completion of this offering will be eligible for sale pursuant to Rule 144 upon the expiration of 180-day lock-up agreements.

Upon completion of this offering, Whitney Investor will have rights to require us to register its shares of common stock with the SEC. If we register Whitney Investor's shares of common stock following the expiration of the lock-up agreement, Whitney Investor can sell those shares in the public market. See "Related Party Transactions—Amended and Restated Stockholders Agreement; Registration Rights."

Promptly following this offering, we intend to register approximately shares of common stock that are authorized for issuance under our stock plans and outstanding stock options. As of , 2005, shares of our common stock were subject to outstanding options, all of which were immediately exercisable, but with respect to which we had the right to repurchase at the initial exercise price all but the shares issuable upon exercise of these options. Once we register the shares authorized for issuance under our stock plans, they can be freely sold in the public market upon issuance, subject to our repurchase rights, the lock-up agreements referred to above and the restrictions imposed on our affiliates under Rule 144.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains "forward-looking statements." All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; future growth rates in the markets we serve; increases in foreign sales; supply and cost of raw materials, any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words "may," "will," "estimate," "intend," "continue," "believe," "expect" or "anticipate" and other similar words.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, such as those disclosed in this prospectus. Factors that could cause our actual results, performance and achievements or industry results to differ materially from estimates or projections contained in forward-looking statements include, among others, the following:

•: weakness and cyclicality in any of the industries in which our customers operate;
•: changes in marketing, product pricing and sales strategies or developments of new products by us or our competitors;
•: future reductions in U.S. governmental spending;
•: suspension or debarment from acting as a government supplier;
•: our ability to obtain and retain product approvals;
•: supply and costs of raw materials, particularly steel, and energy resources and our ability to pass through these costs on a timely basis;
•: our ability to address technological advances in metallurgy or in material advances and introduce new products to remain competitive;
•: our ability to acquire and integrate complementary businesses;
•: unexpected equipment failures, catastrophic events or capacity constraints;
•: development of new litigation;
•: our ability to attract and retain our management team and other highly-skilled personnel;
•: increases in interest rates;
•: work stoppages and other labor problems for us and our customers or suppliers;
•: contractual limitations on our ability to expand our business;
•: regulatory developments in the U.S. and foreign countries;
•: developments or disputes concerning patents or other proprietary rights;
•: actual or anticipated changes in our earnings, fluctuations in our operating results or the failure to meet the expectations of financial market analysts and investors;
•: changes in accounting standards, policies, guidance, interpretation or principles;
•: risks associated with operating internationally, including currency translation risks;

•: the operating and stock performance of comparable companies;
•: acts of terrorism or major catastrophic events;
•: investors' perceptions of us and our industry; and
•: general economic, geopolitical, industry and market conditions.

Additional factors that could cause actual results to differ materially from our forward-looking statements are set forth in this prospectus, including under the headings "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and in our "Summary Financial Data" and the related notes. We do not intend, and undertake no obligation, to update any forward-looking statement. The Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act do not protect forward-looking statements we make in connection with this offering.

Before deciding whether to invest in our common shares, you should carefully consider the matters set forth under the heading "Risk Factors" and all other information contained in this prospectus. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements.

USE OF PROCEEDS

Assuming a public offering price of $ per share, we estimate that the net proceeds from this offering (without exercise of the over-allotment option), after deducting the underwriting discount and estimated expenses of the offering, will be approximately $ million. If the underwriters' over-allotment option is exercised in full, we estimate that we will receive net proceeds of approximately $ million. We will not receive any of the proceeds from the sale of shares by selling stockholders. We intend to use these net proceeds together with proceeds from the Refinancing Transaction, to:

•: redeem all of our $38.6 million in aggregate principal amount 13% Discount Debentures due 2009 plus accrued interest and redemption premium;
•: repay all of our outstanding indebtedness, plus accrued interest and prepayment fee, under our $45.0 million Second Lien Term Loan; and
•: redeem all of our Class C preferred stock for $ million, including any accrued and unpaid dividends, and repurchase 50% of our Class D preferred stock for $4.0 million, in connection with our Pre-Offering Transactions. See "Pre-Offering Transactions."

INDUSTRY AND MARKET DATA

The data included in this prospectus regarding markets, product categories, ranking and percentage of our sales to the aftermarket, including, but not limited to, the size of certain markets, product categories and sales volumes and our position and the positions of our competitors within these markets and product categories, are based on our estimates and definitions, which have been derived from management's knowledge and experience in the areas in which the relevant businesses operate, and information obtained from independent industry publications, reports by market research firms or other published independent sources. We believe that these sources, in each case, provide reasonable estimates. However, market share data is subject to change and cannot always be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey of market shares. In addition, consumption patterns and consumer preferences can and do change. In addition, we may define our markets in a way that may be different from how our competitors or others define their markets. As a result, you should be aware that market share, product categories, ranking, aftermarket sales and other similar data set forth herein, and estimates and beliefs based on such data, may not be reliable. References herein to our being a leader in a certain market or product category refer to our having a leading position based on sales in fiscal year 2004 of bearing products in such market or product category, unless the context otherwise requires.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our common stock and do not expect to pay cash dividends for the foreseeable future. Our current policy is to retain all of our earnings to finance future growth. In addition, covenants in our credit facilities restrict our ability to pay dividends. Any future declaration of dividends will be determined by our board of directors, based upon our earnings, capital requirements, financial condition, debt covenants, tax consequences and other factors deemed relevant by our board of directors.

PRE-OFFERING TRANSACTIONS

The following transactions, referred to as the Pre-Offering Transactions, will occur immediately prior to the completion of this offering:

Recapitalization

We currently have three classes of capital stock outstanding: Class B preferred stock, Class A common stock and Class B common stock. Immediately prior to the consummation of this offering, we will effectuate a series of transactions in order to, among other things, simplify our capital structure. Our simplified capital structure will have two classes of authorized capital stock (common stock and preferred stock), of which only shares of common stock will be outstanding after the offering. The recapitalization transaction will involve a number of steps to be effectuated contemporaneously with the consummation of the Refinancing Transaction (discussed below) and this offering. These steps will occur as follows:

Conversion of Class B Preferred Stock. Immediately prior to the consummation of the Recapitalization, all outstanding shares of Class B preferred stock will be converted in accordance with their terms into 738,558 shares of Class A common stock, shares of Class C preferred stock and 240,000 shares of Class D preferred stock.

July 15, 2005 redemption date, the aggregate redemption price of the Class C preferred stock would be approximately $30.4 million. This amount will increase at a rate of 0.02% for each additional day that the Class C preferred stock remains outstanding as a result of preferred dividends which will continue to accrue thereon.

Repurchase of Class D Preferred Stock. Immediately after the conversion of the Class B preferred stock, we shall repurchase all of the outstanding Class D preferred stock for an aggregate repurchase price equal to $8 million payable as follows: $4 million of the repurchase price shall be paid in cash using proceeds of this offering and the Refinancing Transaction, and $4 million shall be paid in shares of our Class A common stock based on the offering price (before giving effect to underwriters' discounts or commissions).

Reclassification of Class A Common Stock and Class B Common Stock. Immediately after the transactions described above, we will amend and restate our charter to provide for, among other things, authorized capital stock of million shares of common stock and million shares of preferred stock. As a result, all of our Class A common stock and Class B common stock (including shares of Class A common stock issued upon conversion of the Class B preferred stock and repurchase of the Class D preferred stock) will be reclassified as common stock, on a one-for-one basis.

Stock Split. We will amend and restate our charter to effect a : stock split of our common stock.

Stock Options and Warrants. Following the reclassification of our shares, all outstanding options and warrants to purchase our Class A common stock and Class B common stock will become exercisable into shares of our newly created common stock in accordance with the terms of our stock option plans and stock option and warrant agreements. We will freeze our existing 1998 Stock Option Plan and 2001 Stock Option Plan such that no further awards or grants may be made under them. We will establish a new 2005 Long-Term Incentive Plan which will provide for the issuance of stock options or other equity awards equal to 6% of our fully-diluted common stock, after giving effect to this offering. 60% of this amount will be awarded to Dr. Hartnett upon the consummation of this offering at the offering price, subject to vesting, and the remaining 40% will be reserved for grants to our employees (other than Dr. Hartnett) at the discretion of our board of directors. With the exception of options and warrants that are exercised in connection with this offering, all outstanding options and warrants to purchase common stock held by our employees will be subject to a lock-up period of not less than 180 days following the date of this prospectus. See "Use of Proceeds" and "Related Party Transactions—Pre-Offering Transactions."

Refinancing Transaction

We expect to amend or refinance our existing Senior Credit Facility to increase our borrowings under our Senior Credit Facility by $ million, referred to as the Refinancing Transaction. The proceeds from the Refinancing Transaction and the proceeds of this offering will be used for the purposes described under "Use of Proceeds."

CAPITALIZATION

The following table sets forth our cash and capitalization as of January 1, 2005 on an actual and as adjusted basis to give effect to the offering and Pre-Offering Transactions, as if they had occurred on that date.

This table should be read in conjunction with "Use of Proceeds," "Summary Financial Data," "Selected Consolidated Historical Financial Data" and the historical financial statements and related notes thereto included elsewhere in this prospectus. See also "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources," "Description of Certain Indebtedness" and "Pre-Offering Transactions."

				As of January 1, 2005
				Actual			As Adjusted
				(unaudited) (in thousands)
Cash				$	1,703		$

Debt
	Term loan			$	109,725		$
	Revolving credit facility⁽¹⁾				5,390
	Discount debentures				37,902
	Second lien term loan				45,000
	Other debt⁽²⁾				24,237

		Total debt			222,254
Stockholders' equity⁽³⁾
	Preferred stock				2
	Common stock				25
	Additional paid-in capital				33,485
	Accumulated other comprehensive loss				(2,226	)
	Accumulated deficit				(45,937	)

		Total stockholders' equity (deficit)			(14,651	)

			Total capitalization	$	207,603		$

(1): The amount shown for the Revolving Credit Facility excludes $20.3 of letters of credit drawn under our $25 million letter of credit subfacility under our Senior Credit Facility.
(2): Other debt consists of $7.5 million outstanding under the Swiss Term Loan, $16.6 million aggregate principal amount of our industrial revenue bonds and other debt of $0.1 million.
(3): Reflects the filing of our Amended and Restated Certificate of Incorporation upon completion of this offering, authorizing shares of common stock, of which are issued and outstanding after the consummation of this offering and shares of undesignated preferred stock, none of which are issued or outstanding as of the consummation of this offering. As of January 1, 2005, there were 2,475,461 shares of our Class A common stock and 100 shares of our Class B Common Stock outstanding. Additionally, as of such date, there were outstanding (a) warrants and options to purchase up to an additional 769,014 shares of our Class A common stock, (b) warrants and options to purchase 549,146 shares of our Class B common stock, and (c) 240,000 shares of our Class B exchangeable convertible participating preferred stock, or Class B preferred stock. All of our then outstanding classes of Class A and Class B common stock and Class B preferred stock were converted into common stock, redeemed or repurchased for cash or for common stock in connection with the Pre-Offering Transactions. See "Pre-Offering Transactions."

DILUTION

Our pro forma net tangible book value as of January 1, 2005 was approximately $ , or $ per share of common stock. Pro forma net tangible book value per share represents total tangible assets less total liabilities, divided by the number of outstanding shares of common stock after giving effect to the Pre-Offering Transactions. See "Pre-Offering Transactions." After giving effect to the Pre-Offering Transactions and the sale of the shares of common stock offered by us at an assumed initial public offering price of $ per share and after deducting underwriting discounts and estimated offering expenses, the pro forma as adjusted net tangible book value as of January 1, 2005 would have been $ , or approximately $ per share of common stock. This represents an immediate increase in net tangible book value of $ per share to existing stockholders and an immediate dilution in net tangible book value of $ per share to new investors in this offering. The following table illustrates this dilution on a per share basis:

Assumed initial public offering price per share		$
	Pro forma net tangible book value per share as of January 1, 2005
	Increase per share attributable to new investors
Pro forma as adjusted net tangible book value per share after this offering

Dilution per share to new investors		$

The following table sets forth, on a pro forma as adjusted basis as of January 1, 2005, after giving effect to the Pre-Offering Transactions, the differences between the number of shares of common stock purchased from us, the total consideration paid and the average price per share paid by existing stockholders and by new investors, before deducting underwriting discounts and commissions and estimated offering expenses, at an assumed initial public offering price of $ per share.

Except as otherwise indicated, the table below (i) includes shares of common stock issuable upon exercise of options that will be outstanding upon completion of this offering at exercise prices ranging from $ to $ per share, of which shares are subject to options which will be exercisable upon completion of this offering and (ii) excludes shares of common stock reserved for future issuance under our 2005 Long-Term Incentive Plan. See "Management—Stock Option Plans" and "Pre-Offering Transactions."

	Shares Purchased			Total Consideration
	Shares Purchased			Total Consideration			Average Price Per Share
	Number	Percent		Amount	Percent		Average Price Per Share
Existing Stockholders			%	$		%	$
New Investors			%			%

Total		100.0	%	$	100.0	%	$

If the underwriters' over-allotment option is exercised in full, the percentage of shares of common stock held by existing stockholders after this offering would be reduced to approximately %, and the number of shares of common stock held by new investors would increase to approximately % of the total number of shares of common stock outstanding after this offering.

SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA

The following table sets forth our selected consolidated historical financial and other data as of the dates and for the periods indicated. The selected financial data as of and for the years ended March 30, 2002, March 29, 2003 and April 3, 2004 have been derived from our historical consolidated financial statements audited by Ernst & Young LLP, independent auditors. The selected financial data as of and for the fiscal years ended April 1, 2000 and March 31, 2001 have been derived from our historical consolidated financial statements. The selected historical unaudited consolidated statement of operations and balance sheet data for the nine month periods ended December 27, 2003 and January 1, 2005 are derived from our unaudited historical consolidated financial statements included elsewhere in this prospectus, which in our opinion contains all adjustments necessary for a fair presentation of the consolidated financial data. Results for interim periods are not necessarily indicative of results that may be expected for a full fiscal year. Historical results are not necessarily indicative of the results expected in the future. You should read the data presented below together with, and qualified by reference to, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements included elsewhere in this prospectus.

			Fiscal Year Ended												Nine Month Period Ended
			April 1, 2000		March 31, 2001		March 30, 2002		March 29, 2003			April 3, 2004			December 27, 2003			January 1, 2005
			(in thousands, except share and per-share amounts)
Statement of Operations Data:
	Net sales⁽¹⁾			$177,148		$176,435		$168,331		$172,860			$187,331			$125,087			$170,731
	Cost of sales			119,888		116,245		114,575		124,086			135,433			90,745			123,325

		Gross margin		57,260		60,190		53,756		48,774			51,898			34,342			47,406
	Selling, general and administrative			25,156		27,043		25,641		26,647			28,107			19,615			22,929
	Other, net			709		776		937		1,424			1,662			863			2,464

		Operating income		31,395		32,371		27,178		20,703			22,129			13,864			22,013
	Interest expense, net			22,082		23,335		23,440		21,023			20,380			15,289			14,335
	Financing costs			—		3,600		—		—			—			—			—
	Loss (gain) on early extinguishment of debt⁽²⁾			—		—		—		(780	)		—			—			6,956
	Other non-operating expense (income)			7		16		17		298			16			12			(98	)

		Income (loss) before income taxes		9,306		5,420		3,721		162			1,733			(1,437	)		820
	Provision for (benefit from) income taxes			3,730		2,326		2,052		113			1,070			(492	)		303

		Income (loss) before extraordinary gain		5,576		3,094		1,669		49			663			(945	)		517
		Extraordinary gain, net		—		521		—		—			—			—			—

	Net income (loss)		$	5,576	$	3,615	$	1,669	$	49		$	663		$	(945	)	$	517

	Net income (loss) per common share⁽³⁾:
		Basic	$	5.68	$	2.61	$	0.67	$	(0.51	)	$	(0.60	)	$	(1.01	)	$	(0.47	)
		Diluted	$	1.59	$	1.02	$	0.47	$	(0.51	)	$	(0.60	)	$	(1.01	)	$	(0.47	)
	Weighted average number of common and common equivalent shares outstanding:
		Basic		982,360		1,385,072		2,475,561		2,475,561			2,475,561			2,475,561			2,475,561
		Diluted		3,508,103		3,528,305		3,556,658		2,475,561			2,475,561			2,475,561			2,475,561

			Fiscal Year Ended April 3, 2004	Nine Month Period Ended January 1, 2005
Pro Forma Data⁽⁴⁾:
	Pro forma net income (loss)		$	$
	Pro forma net income (loss) per common share:
		Basic	$	$
		Diluted	$	$
	Pro forma weighted average number of common and common equivalent shares outstanding:
		Basic
		Diluted

		Fiscal Year Ended										Nine Month Period Ended
		April 1, 2000		March 31, 2001		March 30, 2002		March 29, 2003		April 3, 2004		December 27, 2003		January 1, 2005
		(in thousands)
Other Financial Data:
	EBITDA⁽⁵⁾	$	40,287	$	37,917	$	36,266	$	29,224	$	31,295	$	21,384	$	29,455
	Capital expenditures		6,582		6,619		5,941		6,522		4,951		2,952		6,604

		As of
		As of															As of January 1, 2005
		April 1, 2000			March 31, 2001			March 30, 2002			March 29, 2003			April 3, 2004			As of January 1, 2005
		April 1, 2000			March 31, 2001			March 30, 2002			March 29, 2003			April 3, 2004			Actual			As Adjusted⁽⁴⁾
		(in thousands)
Balance Sheet Data:
	Cash	$	1,051		$	4,071		$	7,185		$	3,553		$	3,250		$	1,703		$
	Working capital		52,947			56,980			70,957			89,411			105,550			117,028
	Total assets		195,085			209,372			219,376			232,356			234,746			243,290
	Total debt		211,408			218,249			226,713			210,933			215,224			222,254
	Total stockholders' equity (deficit)		(46,000	)		(38,134	)		(37,567	)		(17,649	)		(16,285	)		(14,651	)

(1): Net sales were $168.3 million in fiscal 2002 compared to $176.4 million in fiscal 2001, a decrease of $8.1 million, or 4.6%. Net sales related to the RBC Oklahoma acquisition, which was effective on August 20, 2001, were $3.7 million in fiscal 2002. Net sales, excluding the RBC Oklahoma acquisition, decreased $11.8 million or 6.7% from fiscal 2001, primarily due to softness in the OEM heavy truck market, the industrial aftermarkets and the aerospace market after September 11, 2001.
: Our net sales were $172.9 million in fiscal 2003 and $168.3 million in fiscal 2002, an increase of $4.6 million, or 2.7%. Net sales in the compared periods included net sales totaling $2.1 million in fiscal 2003 for RBC France, which was acquired in December 2002, and $5.2 million in fiscal 2003 and $3.7 million in fiscal 2002 generated by RBC Oklahoma, which was acquired effective August 2001. Excluding RBC France and RBC Oklahoma's sales, our net sales increased $1.0 million or 0.6% from period to period.
(2): Loss on extinguishment of debt of $7.0 million in the first quarter of fiscal 2005 included $4.3 million for non-cash write-off of deferred financing fees associated with retired debt, $1.8 million of redemption premium and $0.9 million of accrued interest for the 30 day call period related to the early extinguishment of our senior subordinated notes.
(3): The net loss per common share for certain periods is caused by the dividends accrued on the Class B preferred stock. See Note 2 of Notes to Consolidated Financial Statements and Note 2 of Notes to Unaudited Interim Consolidated Financial Statements.
(4): Assumes the following transactions were effected as of March 30, 2003 with respect to the Pro Forma Data, and as of January 1, 2005 with respect to the as adjusted Balance Sheet Data, presented above: (1) the Pre-Offering Transactions, (2) the sale by us of shares in this offering at an assumed initial public offering price of $ per share, (3) the repayment of all of our $38.6 million in the aggregate principal amount of our 13% Senior Subordinated Discount Debentures due 2009, (4) the repayment of all outstanding indebtedness under our $45 million Second Lien Term Loan and (5) the Refinancing Transaction. In addition, pro forma amounts have been adjusted to reflect the exercise of options and warrants by some of the selling stockholders. These selling stockholders may exercise these options or warrants through a net share settlement. See "Pre-Offering Transactions," "Use of Proceeds" and "The Offering."
(5): EBITDA consists of net income (loss), plus interest expense, net, loss (gain) on early extinguishment of debt, provision for (benefit from) income taxes and depreciation and amortization. In evaluating our business, our management considers and uses EBITDA as one of a few key indicators of financial operating performance

and as a measure of operating cash capacity. We use EBITDA as a key performance indicator because we believe it provides a more consistent basis for internal comparisons of operating performance. The calculation of EBITDA eliminates the effects of financing, income taxes and the accounting effects of capital spending, which items may vary for different periods unrelated to the overall operating performance and operating cash flows. EBITDA is also presented because it is frequently used by securities analysts, investors and other interested parties as a measure of financial performance and debt service capacity and in the evaluation of companies in our industry; therefore, we believe it is a useful indicator to investors. EBITDA is not a recognized term under generally accepted accounting principles and when analyzing our operating performance, investors should use EBITDA in addition to, not an alternative for, operating income, net income and cash flows from operating activities. Investors also should note that our presentation of EBITDA may not be comparable to similarly titled measures used by other companies. The following table provides a reconciliation of net income, the most directly comparable GAAP measure, to EBITDA.

		Fiscal Year Ended											Nine Month Period Ended
		April 1, 2000		March 31, 2001		March 30, 2002		March 29, 2003			April 3, 2004		December 27, 2003			January 1, 2005
		(in thousands)
Net income (loss)		$	5,576	$	3,615	$	1,669	$	49		$	663	$	(945	)	$	517
Add:
	Provision for (benefit from) income taxes		3,730		2,326		2,052		113			1,070		(492	)		303
	Interest expense, net		22,082		23,335		23,440		21,023			20,380		15,289			14,335
	Loss (gain) on early extinguishment of debt		—		—		—		(780	)		—		—			6,956
	Depreciation and amortization		8,899		8,641		9,105		8,819			9,182		7,532			7,344

EBITDA		$	40,287	$	37,917	$	36,266	$	29,224		$	31,295	$	21,384		$	29,455

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the "Selected Consolidated Historical Financial Data," "Description of Certain Indebtedness" and our consolidated financial statements and the related notes included elsewhere in this prospectus. This prospectus contains, in addition to historical information, forward-looking statements that include risks, uncertainties and assumptions. See "Disclosure Regarding Forward-Looking Statements" for information about our presentation of forward-looking information in this prospectus. Factors that could cause such differences include those described under "Risk Factors."

Overview

We are a well known international manufacturer of highly engineered precision plain, roller and ball bearings. Our precision solutions are integral to the manufacture and operation of most machines and mechanical systems, reduce wear to moving parts, facilitate proper power transmission and reduce damage and energy loss caused by friction. While we manufacture products in all major bearing categories, we focus primarily on the higher end of the bearing market where we believe our value added manufacturing and engineering capabilities enable us to differentiate ourselves from our competitors and enhance profitability. We estimate that approximately two-thirds of our net sales during fiscal 2004 were generated by products for which we hold the number one or two market position. We have been providing bearing solutions to our customers since 1919. Over the past ten years, under the leadership of our current management team, we have significantly broadened our end markets, products, customer base and geographic reach. We currently operate 16 manufacturing facilities in three countries.

Demand for bearings generally follows the market for products in which bearings are incorporated and the economy as a whole. Purchasers of bearings include industrial equipment and machinery manufacturers, producers of commercial and military aerospace equipment such as missiles and radar systems, agricultural machinery manufacturers, construction and specialized equipment manufacturers and automotive and commercial truck manufacturers. The markets for our products are cyclical, and general market conditions could negatively impact our operating results. We have endeavored to mitigate the cyclicality of our product markets by entering into sole source relationships and long-term purchase orders, through diversification across multiple market segments within the aerospace, defense and diversified industrial segments, by increasing sales to the aftermarket and by focusing on developing highly customized solutions.

During the nine months ended January 1, 2005, the world economy continued to emerge from the slowdown experienced from 2000 to 2003, and we experienced favorable conditions across our three major markets: diversified industrial, aerospace and defense. In particular the economy of our diversified industrial market has been driven by strong requirements in non-residential construction, mining and the oil and gas sectors. These conditions have resulted in robust demand for bearings for both OEM and replacement markets. In the aerospace market a very strong recovery began, and we believe it is at its early stages. Expansion of the commercial aircraft sector, in response to increased passenger demand and the need of the carriers to upgrade the world-wide fleet, drove increased build schedules at Boeing and Airbus. In addition, demand for corporate aircraft remained strong. The defense sector continued to replace and develop its weapons and cargo platforms. This sector demonstrated increased requirements for replacement bearings for combat systems strained by extensive use in harsh environments over the past 3¹/2 years.

Over the nine months ending January 1, 2005, approximately 21% of our revenues were derived from sales outside the U.S. We expect this component of our business to increase in response to our emphasis on continued penetration of foreign markets, particularly those in aerospace and defense. During the nine-

month period ended January 1, 2005, steel prices have increased to historically high levels, responding to unprecedented levels of world demand. To date, we have generally been able to pass through these costs to our customers through price increases and the assessment of surcharges. These factors have resulted in favorable customer order volume resulting in total order bookings for the nine months ended January 1, 2005 of $206.4 million, an increase of $79.4 million, or 62.5%, compared to $127.0 million for the comparable period last year. Excluding our RBC-API unit, a fixed wing airframe product lines, and assets acquired from The Timken Company in December 2003, total order bookings for the nine months ended January 1, 2005, were $192.4 million, an increase of $65.4 million, or 51.5%, compared to $127.0 million for the comparable period last year.

Competition in the specialized bearing markets is based on engineering design, brand, lead times and reliability of product and service. These markets are generally not as price sensitive as the markets for standard bearings.

We have demonstrated expertise in acquiring and integrating bearing and precision-engineered component manufacturers that have complementary products or distribution channels and provide significant potential for margin enhancement. We have consistently increased the profitability of acquired businesses through a process of methods and systems improvement coupled with the introduction of complementary and proprietary new products. Since October 1992 we have completed 12 acquisitions which have significantly broadened our end markets, products, customer base and geographic reach.

Sources of Revenue

Revenue is generated primarily from sales of bearings to the diversified industrial market, the aerospace market and the defense market. Sales are often made pursuant to sole source relationships, long-term agreements and purchase orders with our clients. We recognize revenues principally from the sale of products at the point of passage of title, which is at the time of shipment. In certain instances, however, we recognize revenues under the contract method of accounting.

Sales to the diversified industrial market accounted for 65% of our net sales for the nine-month period ended January 1, 2005. Sales to the aerospace and defense market accounted for 35% of our net sales for the same period. We anticipate that sales to the aerospace and defense markets will increase as a percentage of our net sales.

Aftermarket sales of replacement parts for existing equipment platforms represented approximately 60% of our net sales for fiscal 2004. We continue to develop our OEM relationships which have established us as a leading supplier on many important aerospace and defense platforms. Over the past several years, we have experienced increased demand from the replacement parts market, particularly within the aerospace and defense sectors; one of our business strategies has been to increase the proportion of sales derived from this segment. We believe these activities increase the stability of our revenue base, strengthen our brand identity and provide multiple paths for revenue growth.

Approximately 21% of our sales were derived from sales outside the U.S. for the nine-month period ended January 1, 2005, an increase from 19% in fiscal 2004. We expect that this proportion will increase as we seek to increase our penetration of foreign markets, particularly within the aerospace and defense sectors. Our top ten customers, seven of which are OEMs and the remaining three are distributors, were responsible for generating 34% of our net sales in fiscal 2004 and 31% of our net sales for the nine-month period ended January 1, 2005. Out of the 31% of net sales generated by our top ten customers during the nine-month period, 16% was generated by our top three customers. No single customer was responsible for generating more than 4% of our net sales for the same period.

Cost of Revenues

Cost of sales include employee compensation and benefits, materials, outside processing, depreciation of manufacturing machinery and equipment, supplies and manufacturing overhead.

During the last twelve months our gross margin has been impacted by rising raw material prices, in particular, steel. In response, we have, to date, managed to pass on the majority of these price increases of raw materials to our customers through steel surcharges assessed on, or price increases of, our bearing products. However, we have from time to time experienced a time lag of up to 12 weeks in our ability to pass through steel surcharges to our customers which has negatively impacted our gross margins. We will continue to pass on raw materials price increases as competitive conditions allow.

We have not been significantly impacted by recent increases in energy prices because energy costs, the most significant component of which is natural gas used in heat treating operations, represent less than 5% of our overall costs.

We monitor gross margin performance through a process of monthly operation management reviews. We will develop new products to target certain markets allied to our strategies by first understanding volume levels and product pricing and then constructing manufacturing strategies to achieve defined margin objectives. We only pursue product lines where we believe that the developed manufacturing process will yield the targeted margins. Management monitors gross margins of all product lines on a monthly basis to determine which manufacturing processes or prices should be adjusted.

Selling, General and Administrative Expenses

Selling, general and administrative, or SG&A, expenses relate primarily to the compensation and associated costs of selling, general and administrative personnel, professional fees, insurance, facility costs and information technology. We expect SG&A expenses will increase in absolute terms as we increase our sales efforts and incur increased costs related to the anticipated growth of our business and the additional costs associated with operating as a public company.

Results of Operations

The following table sets forth the various components of our consolidated statements of operations, expressed as a percentage of net sales, for the periods indicated that are used in connection with the discussion herein.

	Fiscal Year Ended						Nine Month Period Ended
	March 30, 2002		March 29, 2003		April 3, 2004		December 27, 2003		January 1, 2005
Statement of Operations Data:
Net sales	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Gross margin	31.9		28.2		27.7		27.5		27.8
Selling, general and administrative	15.2		15.4		15.0		15.7		13.4
Other, net	0.6		0.8		0.9		0.7		1.4

Operating income	16.1		12.0		11.8		11.1		13.0
Interest expense, net	13.9		12.2		10.9		12.2		8.4
Loss (gain) on early extinguishment of debt	—		(0.5	)	—		—		4.1
Other non-operating expense, net	0.0		0.2		0.0		0.0		0.0

Income (loss) before income taxes	2.2		0.1		0.9		(1.1	)	0.5
Income tax expense (benefit)	1.2		0.1		0.6		(0.4	)	0.2

Net income (loss)	1.0		0.0		0.3		(0.7	)	0.3

Segment Information

We have four reportable segments: Plain Bearings, Roller Bearings, Ball Bearings and Corporate & Other. The following table shows our net sales and operating income with respect to each of our reporting segments for the last three fiscal years:

		Fiscal Year Ended
		March 30, 2002			March 29, 2003			April 3, 2004
		(in thousands)
Net External Sales
	Plain	$	65,976		$	67,448		$	77,578
	Roller		59,523			60,788			63,106
	Ball		32,531			34,038			35,801
	Corporate & Other		10,301			10,586			10,846

	Total	$	168,331		$	172,860		$	187,331

Operating Income
	Plain	$	20,403		$	16,782		$	18,573
	Roller		14,014			8,459			11,259
	Ball		7,522			7,009			6,676
	Corporate & Other		(14,761	)		(11,547	)		(14,379	)

	Total	$	27,178		$	20,703		$	22,129

Geographic Information

The following table summarizes our sales, by destination, for the periods shown:

		Fiscal Year Ended
		March 30, 2002		March 29, 2003		April 3, 2004
Geographic Revenues
	Domestic	$	154,354	$	155,579	$	166,763
	Foreign		13,977		17,281		20,568

	Total	$	168,331	$	172,860	$	187,331

Nine Months Ended January 1, 2005 Compared to Nine Months Ended December 27, 2003

Net Sales. Our net sales increased $45.6 million, or 36.5%, from $125.1 million for the nine months ended December 27, 2003 to $170.7 million for the nine months ended January 1, 2005. Our Plain Bearing reporting segment achieved net sales of $68.4 million, an increase of $12.9 million, or 23.2%, compared to $55.5 million for the same period last year. The increase of $12.9 million was mainly driven by strong demand across all markets especially mining and construction, aerospace and defense and favorable pricing. Our Roller Bearing reporting segment achieved net sales of $64.6 million, an increase of $25.4 million, or 64.8%, compared to $39.2 for the same period last year. $14.1 million of the increase was due to the inclusion of the RBC-API business unit. Excluding RBC-API, net sales for the Roller Bearing reporting segment increased $11.3 million, or 28.8%, compared to $39.2 million for the same period last year. The increase of $11.3 million was mainly due to strong product demand in aerospace, defense and heavy truck markets and favorable pricing. Our Ball Bearing reporting segment achieved net sales of $28.4 million, an increase of $5.6 million, or 24.6%, compared to $22.8 million for the same period last year. The increase of $5.6 million was primarily due to strong product demand in the aerospace, defense and industrial markets and favorable pricing. Our Corporate & Other reporting segment achieved net sales of $9.4 million, an increase of $1.8 million, or 23.7%, compared to $7.6 million for the same period last year.

Gross Margin. Our gross margin was $47.4 million for the nine months ended January 1, 2005, an increase of $13.1 million, or 38.0%, compared to $34.3 million for the nine months ended December 27, 2003. Excluding RBC-API, our gross margin increased by $6.5 million, or 18.8%, in the nine months ended January 1, 2005 mainly due to the strong product demand across all of our markets. Gross margin as a percentage of net sales increased 0.3%, from 27.5% for the nine months ended December 27, 2003, to 27.8% for the nine months ended January 1, 2005. This increase is primarily the result of changes in our product volume and a slightly higher margin due to product mix, partially offset by increased raw materials and labor costs. We were able to maintain our gross margin percentage through price increases and raw material surcharges to customers which offset the impact of raw material price increases of up to 40% as well as steel surcharges for the nine-month period.

Selling, General and Administrative Expenses. Our SG&A expenses increased by $3.3 million, or 16.8%, to $22.9 million for the nine months ended January 1, 2005 from $19.6 million for the comparable period last year. Excluding the RBC-API acquisition, SG&A expenses increased $2.7 million, or 13.8%, for the nine months ended January 1, 2005. The increase of $2.7 million was mainly due to an increase in personnel necessary to support our increased sales volume. As a percentage of net sales, SG&A expenses declined to 13.4% for the nine months ended January 1, 2005 from 15.7% for the nine months ended December 27, 2003 primarily due to a 36.5% increase in net sales during fiscal 2005.

Other, net. Other operating expense for the nine months ended January 1, 2005 was $2.5 million compared to $0.9 million for the comparable period last year. For the nine months ended January 1,

2005, other operating expense, net included $1.7 million for disposal of manufacturing fixed assets and $0.4 million of Whitney management fees. For the nine months ended December 27, 2003, other operating expense, net included $0.4 million of acquisition costs and $0.3 million of management fees.

Operating Income. Operating income increased by $8.1 million to $22.0 million for the nine months ended January 1, 2005 as compared to $13.9 million for the nine months ended December 27, 2003. On a reporting segment basis, operating income from the Plain Bearing reporting segment was $16.6 million for the nine months ended January 1, 2005, an increase of $3.9 million, or 30.7%, compared to $12.7 million for the nine months ended December 27, 2003. Our Roller Bearing reporting segment achieved operating income of $10.6 million for the nine months ended January 1, 2005, an increase of $4.5 million, or 73.7%, compared to $6.1 million for the same period last year. Our Ball Bearing reporting segment achieved operating income of $5.7 million for the nine months ended January 1, 2005, an increase of $1.1 million, or 23.9%, compared to $4.6 million for the same period last year.

Interest Expense, net. Interest expense, net decreased by $1.0 million, to $14.3 million for the nine months ended January 1, 2005 compared to $15.3 million for the nine months ended December 27, 2003. Amortization of deferred financing costs and debt discount are recorded as a component of net interest expense. Amortization expenses included in interest expense, net were $0.9 million for the nine months ended January 1, 2005 and $1.2 million for the same period last year.

Loss on Early Extinguishment of Debt. For the nine months ended January 1, 2005, loss on extinguishment of debt of $7.0 million included $4.3 million for non-cash write-off of deferred financing fees associated with retired debt, $1.8 million of redemption premium and $0.9 million in interest expense for the 30 day call period related to the early extinguishment of Senior Subordinated notes.

Income Before Income Taxes. Income before taxes increased by $2.2 million for the nine months ended January 1, 2005 to $0.8 million from a loss of $1.4 million for the nine months ended December 27, 2003, primarily as a result of higher gross margin, partially offset by higher operating expenses, disposal of manufacturing fixed assets, and a loss on extinguishment of debt in the first nine months of fiscal 2005.

Income Taxes. Income tax expense was $0.3 million for the nine months ended January 1, 2005, as compared to a tax benefit of $0.5 million for the comparable period last year. As a percentage of pre-tax income, the nine month effective income tax rate was 37% as compared to 34% for the comparable period for the prior year. The increase in income tax expense was primarily due to the favorable performance of the business for the nine months ended January 1, 2005, as compared to the prior year.

The tax expense for the nine months ended January 1, 2005 does not reflect the provisions in the American Jobs Creations Act of 2004, or JCA, relating to repatriation of foreign earnings. The JCA creates a temporary incentive for U.S. corporations to repatriate foreign earnings by providing an 85 percent dividends received deduction for certain dividends from controlled foreign corporations. The deduction is subject to a number of limitations, and, at present, significant uncertainty remains with respect to interpretation of numerous provisions in the JCA. As such, we are not yet in a position to decide on whether, and to what extent, it might repatriate foreign earnings. We are awaiting the issuance of further regulatory guidance and passage of statutory technical corrections with respect to certain provisions in the JCA prior to determining the amounts, if any, we will repatriate and we expect to be in a position to finalize its assessment during 2005.

Net Income. Net income was $0.5 million for the first nine months of fiscal 2005 as compared to a net loss of $0.9 million for the first nine months of fiscal 2004.

Fiscal 2004 Compared to Fiscal 2003

Net Sales. Our net sales increased $14.4 million, or 8.3%, from $172.9 million in fiscal 2003 to $187.3 million in fiscal 2004. Our Plain Bearing reporting segment achieved net sales of $77.6 million, an increase of $10.2 million, or 15.0%, compared to $67.4 million for fiscal 2003. $6.4 million of the increase was due to a full year inclusion of the net sales of RBC France which was acquired in December 2002. The remaining increase of $3.8 million was mainly due to aerospace and defense demand for spherical plain bearings and increased volume for journal and rod end bearings for the industrial market. Our Roller Bearing reporting segment achieved net sales of $63.1 million, an increase of $2.3 million, or 3.8%, compared to $60.8 million for fiscal 2003. Included in fiscal year 2004 were net sales from RBC-API which was acquired in December 2003. Excluding RBC-API, net sales for the Roller Bearing reporting segment decreased by $3.8 million mainly due to the continued contraction in the industrial and heavy truck markets for these bearings. Our Ball Bearing reporting segment achieved net sales of $35.8 million, an increase of $1.8 million, or 5.2%, compared to $34.0 million for fiscal year 2003. The increase of $1.8 million was mainly due to strength in certain aerospace and defense applications. Our Corporate & Other reporting segment achieved net sales of $10.8 million in fiscal 2004 compared to $10.6 million for fiscal 2003, an increase of $0.2 million.

Gross Margin. Our gross margin was $51.9 million in fiscal 2004, an increase of $3.1 million, or 6.4%, compared to $48.8 million for fiscal 2003. Gross margin as a percentage of net sales decreased 0.5%, from 28.2% for fiscal 2003 to 27.7% for fiscal 2004. The gross margins for fiscal 2004 and fiscal 2003 reflected one-time expenses associated with the start-up of our Mexico manufacturing operations, the reengineering of our Tyson manufacturing processes at our Tyson subsidiary plant in Glasgow, Kentucky and the relocation of our Bremen manufacturing facility to Plymouth, Indiana. These charges totaled $1.7 million in fiscal 2004 and $2.3 million in fiscal 2003. Excluding these costs, and the additive gross margin in fiscal 2004 from our RBC-API acquisition, our gross margin decreased $0.5 million, primarily the result of changes in our product mix.

Selling, General and Administrative Expenses. SG&A expenses increased by approximately 5.5%, or $1.5 million, to $28.1 million in fiscal 2004 from $26.6 million in fiscal 2003. The increase of $1.5 million was mainly due to the addition of RBC-API in December 2003. Excluding the effects of the RBC-API acquisition in fiscal year 2004, SG&A expenses increased $0.7 million, or 2.0%. As a percentage of net sales, SG&A expenses were 15.0% for fiscal 2004 compared to 15.4% for fiscal 2003.

Other Operating Expense, net. Other operating expense, net for fiscal 2004 was $1.7 million compared to $1.4 million for fiscal 2003. The fiscal 2004 expenses included management fees of $0.5 million, fixed asset disposals of $0.2 million and acquisition expenses of $0.4 million. Fiscal 2003 expenses were $1.4 million and included Whitney management fees of $0.4 million and fixed asset disposals of $0.9 million associated with the relocation of our Bremen manufacturing facility.

Operating Income. Operating income increased by approximately $1.4 million, or 6.8%, to $22.1 million in fiscal 2004 compared to $20.7 million in fiscal 2003. On a reporting segment basis, operating income from the Plain Bearing reporting segment was $18.6 million in fiscal 2004, an increase of $1.8 million, or 10.7%, compared to $16.8 million in fiscal 2003. Our Roller Bearing reporting segment achieved operating income of $11.3 million in fiscal 2004, an increase of 2.8 million, or 33.1%, compared to $8.5 million for fiscal 2003. Our Ball Bearing reporting segment achieved operating income of $6.8 million in fiscal 2004, a decrease of $0.2 million compared to $7.0 million for fiscal 2003.

Interest Expense, net. Interest expense, net decreased by $0.6 million to $20.4 million in fiscal 2004 as compared to $21.0 million in fiscal 2003. Amortization of deferred financing costs and debt discount are recorded as a component of net interest expense. Amortization expenses included in interest

expense, net was $1.6 million in fiscal 2004 and $3.3 million in fiscal 2003. Excluding the amortization of deferred financing costs and debt discount, interest expense, net increased by $1.1 million.

Gain on Early Extinguishment of Debt. In fiscal 2003 we retired early $28.8 million of debentures which resulted in a gain of $0.8 million.

Income Before Income Taxes. Income before income taxes increased by $1.5 million to $1.7 million in fiscal 2004 from $0.2 million in fiscal 2003. This increase was primarily due to fiscal 2004 higher operating income of $1.4 million.

Income Taxes. Income tax expense was $1.1 million for fiscal 2004 as compared to $0.1 million for the comparable period last year. As a percentage of pre-tax income, the fiscal 2004 effective tax rate was 61.7% compared to 69.8% for fiscal year 2003. The difference between the statutory and effective tax rates is primarily due to non-deductible expenses. At April 3, 2004, we had net operating loss carryforwards of approximately $14.7 million to offset future federal and state income taxes, which expire at various dates through 2004. At April 3, 2004, we also had a research and development tax credit carryforwards of approximately $0.9 million to offset future federal income taxes which expire at various dates through 2020. In addition, we have an alternative minimum tax credit carryforwards of approximately $1.6 million.

Net Income. Net income increased $0.6 million in fiscal 2004 to $0.7 million compared to $0.1 million in fiscal 2003.

Fiscal 2003 Compared to Fiscal 2002

Net Sales. Our net sales in increased $4.6 million, or 2.7%, from $168.3 million in fiscal 2002 to $172.9 million in fiscal 2003. Our Plain Bearing reporting segment achieved net sales of $67.4 million, an increase of $1.4 million, or 2.2%, compared to $66.0 million for fiscal 2002. Excluding $2.1 million from RBC France which was acquired in December 2002, net sales for the Plain Bearing reporting segment decreased $0.7 million mainly due to a decrease in worldwide product demand from the industrial markets. Our Roller Bearing reporting segment achieved net sales of $60.8 million, an increase of $1.3 million, or 2.1%, compared to $59.5 million in fiscal 2002. Excluding $1.5 million from RBC Oklahoma which was acquired in August 2001, net sales for the Plain Bearing reporting segment decreased by $0.2 million mainly due to a decrease in worldwide product demand from the aerospace and industrial markets. Our Ball Bearing reporting segment achieved net sales of $34.0 million, an increase of $1.5 million, or 4.6%, compared to $32.5 million in fiscal 2002. The increase of $1.5 million was primarily due to an increase in demand in the aerospace defense market. Our Corporate & Other reporting segment achieved sales of $10.6 million, an increase of $0.3 million, or 2.8%, compared to $10.3 million in fiscal 2002.

Gross Margin. Despite the increase in our net sales in fiscal 2003, our gross margin decreased by $5.0 million, or 9.3%, to $48.8 million for fiscal 2003, as compared to $53.8 million for fiscal 2002. Gross margin as a percentage of net sales decreased 3.7%, from 31.9% for fiscal 2002 to 28.2% for fiscal 2003. This decrease was primarily the result of a sharp decrease in product demand in the aerospace and industrial markets post September 11, 2001.

Selling, General and Administrative Expenses. Our selling, general and administrative, or SG&A, expenses increased by approximately 3.9%, or $1.0 million, to $26.6 million in fiscal 2003 from $25.6 million in fiscal 2002. Most of this increase was attributable to our acquisitions of RBC France and RBC Oklahoma in fiscal 2003. As a percentage of net sales, SG&A expenses were 15.4% in fiscal 2003 compared to 15.2% in fiscal 2002.

Other Operating Expense, net. Other operating expense, net for fiscal 2003 was $1.4 million compared to $0.9 million for fiscal 2002. This increase was primarily attributable to expenses associated

with the relocation of our plant in Bremen, Indiana. Fiscal 2003 expenses included Whitney management fees of $0.4 million and fixed asset disposals of $0.9 million associated with the relocation of our Bremen manufacturing facility.

Operating Income. Operating income decreased by approximately $6.5 million to $20.7 million in fiscal 2003 from $27.2 million in fiscal 2002. Specifically, the Plain Bearing reporting segment achieved operating income of $16.8 million in fiscal 2003, a decrease of $3.6 million compared to $20.4 million for fiscal 2002. Our Roller Bearing reporting segment achieved operating income of $8.5 million in fiscal 2003, a decrease of $5.5 million compared to $14.0 million for fiscal 2002. Our Ball Bearing reporting segment achieved operating income of $7.0 million in fiscal 2003, a decrease of $0.5 million compared to $7.5 million in fiscal 2002.

Interest Expense. Interest expense decreased by $2.4 million, or 10.3%, to $21.0 million in fiscal 2003 as compared to $23.4 million in fiscal 2002. The decrease in interest expense was primarily due to a debenture retirement of $28.8 million in fiscal 2003 and lower interest rates in effect on the term loan and old revolving credit facility.

Gain on Early Extinguishment of Debt. In fiscal 2003 we retired early $28.8 million of debentures which resulted in a gain of $0.8 million.

Income Before Income Taxes. Income before income taxes decreased by $3.5 million, or 94.6%, to $0.2 million in fiscal 2003 from $3.7 million in fiscal 2002. This decrease was primarily due to lower operating income of $6.5 million and higher financing costs of $0.3 million and was offset somewhat by non-operating income in fiscal 2003 of $0.8 million and lower interest expense of $2.4 million.

Income Taxes. Income tax expense was $0.1 million for the fiscal year 2003 as compared to $2.1 million for the comparable period last year. As a percentage of pre-tax income, the fiscal 2003 effective rate was 69.8% compared to 55.1% for fiscal year 2002. The difference between the statutory and effective tax rates is primarily due to non-deductible expenses and non-deductible goodwill amortization in fiscal year 2002.

Net Income. Net income decreased $1.6 million, or 97.1%, to $0.1 million in fiscal 2003 compared to $1.7 million in fiscal 2002.

Liquidity and Capital Resources

Our business is capital intensive. Our capital requirements include manufacturing equipment and materials. In addition, we have historically fueled our growth in part through acquisitions. We have historically met our working capital, capital expenditure requirements and acquisition funding needs through our net cash flows provided by operations, various debt arrangements and sale of equity to private investors.

For the nine months ended January 1, 2005, we generated cash of $4.7 million from operating activities compared to $0.1 million for the nine months ended December 27, 2003. The increase in cash generated from operations reflected an increase in operating income of $8.1 million, partially offset by increasing working capital requirements. Working capital at January 1, 2005, was $117.0 million compared to $105.6 million at April 3, 2004.

Investing activities consumed $7.7 million in the nine months ended January 1, 2005, consisting of $6.3 million related to capital expenditures and $1.2 million related to the acquisition of US Bearings. Cash used for investing activities for the nine months ended December 27, 2003 was $9.2 million, consisting principally of $3.0 million for capital expenditures and $6.6 million related to the acquisition of RBC-API.

For the nine months ended January 1, 2005, we had net cash provided by financing activities of $1.4 million, compared to $15.1 million for the comparable period a year earlier. Financing cash flows for the most recent period consisted principally of cash flows related to our debt refinancing. Cash used in financing activities consisted of net repayments on the Senior Credit Facility of $1.6 million, and payments on capital lease obligations of $0.2 million.

On June 29, 2004, we entered into the $165.0 million Senior Credit Facility, comprised of a $55.0 million Revolving Credit Facility and a $110.0 million Term Loan. In addition, on June 29, 2004, we entered into a $45.0 million Second Lien Term Loan. Each loan is secured by a lien against substantially all of our assets and subjects us to standard affirmative and negative covenants, as well as financial leverage tests. As of January 1, 2005, we were in compliance with all such covenants and leverage tests. The Second Lien Term Loan also contains a covenant that limits our capital expenditures to $10 million per annum and requires that a portion of the proceeds of this offering is used to repay outstanding indebtedness under the Second Lien Term Loan. The Senior Credit Facility and the Second Lien Term Loan bear interest at floating rates. As of January 1, 2005, the blended interest rate for the Senior Credit Facility and the Second Lien Term Loan was equal to 7.8%. As of January 1, 2005, we had outstanding borrowings of $5.4 million and outstanding letters of credit of $20.3 million under the Revolving Credit Facility and borrowing availability of $18.7 million. See "Description of Certain Indebtedness—Senior Credit Facility."

Mandatory prepayments in respect of the Term Loan or permanent reductions to the commitments under the Revolving Credit Facility, as applicable, are required in an amount equal to (a) 100% of the net cash proceeds of all asset sales and dispositions by RBCI and its subsidiaries, subject to certain exceptions, (b) 100% of the net cash proceeds from extraordinary receipts (including, without limitation, proceeds from certain key-man life policies) and (c) 100% of the net cash proceeds from equity issuances by us and our subsidiaries, subject to certain exceptions; provided that in the event of certain qualified public offerings of equity securities by us, net cash proceeds thereof shall be used first to repay our outstanding 13% Senior Subordinated Discount Debentures, or Discount Debentures, until paid in full, second 50% of any remaining proceeds must be used to repay our Second Lien Term Loan and third, any remaining proceeds, up to 50% may be used to make restricted payments, including redemptions of our common and preferred stock, and up to 50% may be used to repay our Second Lien Term Loan and any remaining unused balance may be used for general corporate purposes. This offering will constitute a qualified public offering as defined under the Senior Credit Facility. Accordingly, all of the outstanding Discount Debentures will be paid in full out of the proceeds of this offering. In addition, a change of control will result in a default under the Senior Credit Facility and the Second Lien Term Loan. Because this offering is a qualified public offering, as defined in the Senior Credit Facility and the Second Lien Term Loan, this offering will not constitute a change of control under either of these agreements.

On December 8, 2003, Schaublin entered into a bank credit facility, or Swiss Credit Facility, with Credit Suisse providing for 10.0 million Swiss Francs, or approximately $8.0 million, of term loans, or Swiss Term Loans, and up to 2.0 million Swiss Francs, or approximately $1.6 million, of revolving credit loans and letters of credit, or the Swiss Revolver. The credit agreement for the Swiss Credit Facility contains affirmative and negative covenants regarding the Schaublin financial position and results of operations and other terms customary to such financings. As of January 1, 2005, we were in compliance with all such covenants. On November 8, 2004, we amended the Swiss Credit Facility to increase the Swiss Revolver to 4.0 million Swiss Francs, or approximately $3.5 million. As of January 1, 2005, $7.5 million was outstanding under the Swiss Term Loans, and no loans or letters of credit were outstanding under the Swiss Revolver.

In connection with this offering and the Refinancing Transaction, we expect to amend or refinance our Senior Credit Facility to provide for additional borrowings under our Senior Credit Facility in an amount of $ . See "Pre-Offering Transactions—Refinancing Transaction."

We believe that after giving effect to the Refinancing Transaction our current cash and cash equivalents, cash flow from operations and capacity under the Revolving Credit Facility and Swiss Revolver will provide adequate cash to fund our working capital, capital expenditure, debt service and other cash requirements for our existing businesses for the foreseeable future. Our ability to meet future working capital, capital expenditure and debt service requirements will depend on our future financial performance, which will be affected by a range of economic, competitive and business factors, particularly interest rates, cyclical changes in our end markets and prices for steel and our ability to pass through price increases on a timely basis, many of which are outside of our control. In addition, future acquisitions could have a significant impact on our liquidity position and our need for additional funds.

Capital Expenditures. We made capital expenditures of $6.6 million during the first nine months of fiscal 2005 as compared to $3.0 million during the first nine months of fiscal 2004. This increase in capital expenditures was primarily due to purchases of machinery and equipment and leasehold improvements. We made capital expenditures of $5.0 million during fiscal 2004 and expect to make capital expenditures of approximately $9.2 million during fiscal 2005 and $10.0 million during fiscal 2006 in connection with our existing business. We intend to fund the remainder of our fiscal 2005 and 2006 capital expenditures principally through existing cash, internally generated funds and borrowings under our Revolving Credit Facilities. We generally expect capital expenditures to remain at higher levels than fiscal 2004 as we invest in new manufacturing capability. We may also make substantial additional capital expenditures in connection with acquisitions. Although there are no present understandings, commitments or agreements with respect to the acquisition of any other businesses, we do evaluate acquisition opportunities regularly.

From time to time we evaluate our existing facilities and operations and their strategic importance to us. If we determine that a given facility or operation does not have future strategic importance, we may sell, partially or completely, relocate production lines, consolidate or otherwise dispose of those operations. Although we believe our operations would not be impaired by such dispositions, relocations or consolidations, we could incur cash or non-cash charges in connection with them.

Obligations and Commitments

The following tables outline what we regard as our significant contractual obligations and commercial commitments as of January 1, 2005, on (a) an actual basis and (b) a pro forma basis after giving effect to repayments of indebtedness from the proceeds of this offering. The tables do not represent all of our contractual obligations and commercial commitments that we have entered into.

Actual

	Payments Due By Period
Significant Contractual Obligations	Total		Less than 1 Year		1 to 3 Years		3 to 5 Years		More than 5 Years
	(in thousands)
Senior debt⁽¹⁾	$	222,254	$	8,183	$	6,007	$	42,184	$	165,880
Capital lease obligations		515		185		208		122		—
Operating leases⁽²⁾		13,926		2,593		4,259		3,367		3,707

Total significant contractual cash obligations	$	236,695	$	10,961	$	10,474	$	45,673	$	169,587

Pro Forma⁽³⁾

	Payments Due By Period
Significant Contractual Obligations	Total		Less than 1 Year		1 to 3 Years		3 to 5 Years		More than 5 Years
	(in thousands)
Senior debt⁽¹⁾⁽³⁾	$		$		$		$		$
Capital lease obligations		515		185		208		122		—
Operating leases⁽²⁾		13,926		2,593		4,259		3,367		3,707

Total significant contractual cash obligations	$		$		$		$		$

(1): Includes (a) the Senior Credit Facility, including $5.4 million outstanding under the Revolving Credit Facility, excluding amounts drawn under our letter of credit subfacility, (b) the Second Lien Term Loan, (c) Discount Debentures and (d) other senior debt consisting of the Swiss Term Loans, industrial revenue bonds and other debt of $24.2 million.
(2): Operating leases are primarily real estate leases and are estimated as unchanged from fiscal year 2004.
(3): Reflects repayment of all of our outstanding Discount Debentures, the Second Lien Term Loan and the increase in our borrowings under our Senior Credit Facility resulting from the Refinancing Transaction. See "Pre-Offering Transactions—Refinancing Transaction."

Quarterly Results of Operations

		Quarter Ended
		June 29, 2002			Sept 28, 2002			Dec 28, 2002			March 29, 2003		June 28, 2003			Sept 27, 2003			Dec 27, 2003			April 3, 2004		July 3, 2004			Oct 2, 2004		Jan 1, 2005
		(in thousands, except per share data)
Net sales		$	38,521		$	41,249		$	41,496		$	51,594	$	39,737		$	42,449		$	42,901		$	62,244	$	56,195		$	56,391	$	58,145
Gross margin			11,456			11,412			11,182			14,724		10,966			11,708			11,668			17,556		15,293			15,381		16,732
Operating income			5,160			4,795			4,861			5,887		4,572			5,107			4,185			8,265		5,998			7,423		8,592
Net income (loss)		$	(626	)	$	(19	)	$	(277	)	$	971	$	(185	)	$	(40	)	$	(720	)	$	1,608	$	(3,771	)	$	1,708	$	2,580
Net income (loss) per common share:
	Basic	$	(0.25	)	$	(0.14	)	$	(0.31	)	$	0.15	$	(0.28	)	$	(0.23	)	$	(0.51	)	$	0.32	$	(1.75	)	$	0.36	$	0.62
	Diluted	$	(0.25	)	$	(0.14	)	$	(0.31	)	$	0.10	$	(0.28	)	$	(0.23	)	$	(0.51	)	$	0.24	$	(1.75	)	$	0.25	$	0.61

Recent Accounting Pronouncements

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment of ARB No. 43, Chapter 4." The amendments made by SFAS No. 151 clarify that abnormal amounts of idle facility expense, freight, handling costs and wasted materials (spoilage) should be recognized as current-period charges and require the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. The guidance is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. It is not believed that the adoption of SFAS No. 151 will have a material impact on our consolidated financial position, results of operations or cash flows.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based Payment." SFAS No. 123(R) that will require that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. SEAS No. 123(R) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. SFAS No. 123(R) replaces FASB Statement No. 123, "Accounting for Stock-Based Compensation", and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS No. 123, as originally issued in 1995, established as

preferable a fair value-based method of accounting for share-based payment transactions with employees. However, that Statement permitted entities the option of continuing to apply the guidance in APB Opinion No. 25 as long as the footnotes to financial statements disclosed what net income would have been had the preferable fair value-based method been used. Public entities will be required to apply SFAS No. 123(R) as of the first interim or annual reporting period that begins after June 15, 2005. SFAS No. 123(R) permits public companies to adopt its requirements using one of two methods:

1. A "modified prospective" method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS No. 123(R) for all share-based payments granted after the effective date and (b) based on requirements of SFAS No. 123 for all awards granted to employees prior to the effective date of SFAS No. 123 (R) that remain unvested on the effective date.

2. A "modified retrospective" method which includes the requirements of the modified prospective method described above, but also permits entities to restate based on the amount previously recognized under SFAS No. 123 for purpose of pro forma disclosures either (a) all prior periods presented or (b) prior interim periods of the year of adoption.

We are currently evaluating these transition methods and determining the effect on our consolidated results of operations and whether the adoption will result in amounts that are similar to the current pro-forma disclosures under SFAS No. 123. For fiscal 2005, we will continue to disclose stock-based compensation information in accordance with SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure—an Amendment of FASB Statement No. 123," and SFAS No. 123.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to product returns, bad debts, inventories, recoverability of intangible assets, income taxes, financing operations, pensions and other post-retirement benefits and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition. We recognize revenue in accordance with SEC Staff Accounting Bulletin 101 "Revenue Recognition in Financial Statements as amended by Staff Accounting Bulletin 104. The SEC requires that the following four basic criteria must be met before the Company recognizes revenue:

•: Persuasive evidence of an arrangement exists;
•: Delivery has occurred or services have been rendered;
•: The seller's price to the buyer is fixed or determinable; and
•: Collectibility is reasonably assured.

We recognizes revenue upon the passage of title on the sale of manufactured goods, which is at time of shipment, and under the units-of-delivery method in a limited number of aerospace long-term projects.

Accounts Receivable. We are required to estimate the collectability of our accounts receivable, which requires a considerable amount of judgment in assessing the ultimate realization of these receivables, including the current credit-worthiness of each customer. Changes in required reserves may occur in the future as conditions in the marketplace change.

Inventory. Inventories are stated at the lower of cost or market value. Cost is principally determined by the first-in, first-out method. We account for inventory under a full absorption method. We record adjustments to the value of inventory based upon past sales history and forecasted plans to sell our inventories. The physical condition, including age and quality, of the inventories is also considered in establishing its valuation. These adjustments are estimates, which could vary significantly, either favorably or unfavorably, from actual requirements if future economic conditions, customer inventory levels or competitive conditions differ from our expectations.

Goodwill and Intangible Assets. We adopted the provisions of SFAS No. 141, "Business Combinations," and Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," ("SFAS No. 142") at the beginning of fiscal 2003. These standards require that all business combinations be accounted for using the purchase method and that goodwill (representing the excess of the amount paid to acquire a company over the estimated fair value of the net assets acquired) and intangible assets with indefinite useful lives not be amortized but instead be tested for impairment annually (performed by us during the fourth quarter of each fiscal year), or when events or circumstances indicate that its value may have declined. Goodwill had been amortized by the straight-line method over a 40-year period through March 30, 2002. Effective with fiscal 2003, goodwill amortization was suspended in conjunction with the adoption of SFAS No. 142.

Definite-lived intangible assets are being amortized over their useful lives of 5 to 15 years. Also included in intangible assets is an asset relating to our minimum pension liability.

Stock Based Compensation. We account for options and warrants granted to employees using the intrinsic value method pursuant to APB No. 25, "Accounting for Stock Issued to Employees," under which no compensation cost has been recognized since the exercise price of all grants issued was at or above the fair market value of our common stock at the date of grant as determined by the board of directors. Had compensation cost for option and warrant grants to employees been determined based on the fair value at the grant dates consistent with SFAS No. 123, "Accounting for Stock-Based Compensation," our net income would have been reduced to the following pro-forma amounts:

		Fiscal Year Ended
		April 3, 2004			March 29, 2003			March 30, 2002
Net income, as reported		$	663		$	49		$	1,669
Less: stock-based compensation expense determined under fair value method, net of tax			131			56			—

Pro-forma net income (loss)		$	532		$	(7	)	$	1,669

Net income (loss) per common share, as reported:
	Basic	$	(0.60	)	$	(0.51	)	$	0.67
	Diluted		(0.60	)		(0.51	)		0.47
Net income (loss) per common share, pro-forma:
	Basic	$	(0.65	)	$	(0.53	)	$	0.67
	Diluted		(0.65	)		(0.53	)		0.47

For purposes of the pro-forma disclosures, the estimated fair value of the options and warrants is amortized to expense over the service period that generally is the option or warrant vesting period. The weighted average fair value of options and warrants granted was $0.6 million in fiscal 2004 and $1.6 million in fiscal 2003. During fiscal 2001, in conjunction with an accelerated vesting decision, all outstanding warrants and options became fully vested. During fiscal 2002, there were no issuances of warrants or options; therefore, no pro-forma stock-based compensation adjustment was necessary.

The fair value for our options and warrants was estimated at the date of grant using a Black-Scholes option-pricing model with the following weighted-average assumptions.

	Fiscal Year Ended
	April 3, 2004		March 29, 2003
Dividend yield	0.0	%	0.0	%
Expected weighted-average life	3.0		3.0
Risk-free interest rate	3.5	%	3.5	%
Expected volatility	0.1	%	0.1	%

The Black-Scholes pricing model was developed for use in estimating the fair value of traded options and warrants which have no vesting restrictions and are fully transferable. In addition, option and warrant valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because our warrants have characteristics significantly different from those of traded options and warrants, and because changes in the subjective input assumptions can materially affect the fair value estimate, the existing models do not necessarily provide a reliable single measure of the fair value of its options and warrants.

Impact of Inflation and Changes in Prices of Raw Materials and Supplies

To date, inflation in the economy as a whole has not significantly affected our operations. However we purchase steel at market prices, which during the past 12 months have increased to historical highs as a result of a relatively low level of supply and a relatively high level of demand, and we have recently received notices of additional price increases from our suppliers. To date, we have generally been able to pass through these price increases through price increases on our products, the assessment of steel surcharges on our customers or entry into long term agreements with our customers which often contain escalator provisions tied to our invoiced price of steel. However, even if we are able to pass these steel surcharges or price increases to our customers, there may be a time lag of up to 12 weeks between the time a price increase goes into effect and our ability to implement surcharges or prices increases, particularly for orders already in our backlog. As a result our gross margin percentage may decline, and we may not be able to implement other price increases for our products.

Competitive pressures and the terms of certain of our long-term contracts may require us to absorb at least part of these cost increases, particularly during periods of high inflation. Our principal raw material is 440c and 52100 wire and rod steel (types of stainless and chrome steel), which has historically been readily available. Recently, because of extraordinarily high demand for certain grades of steel, suppliers have in some instances allocated certain types of steel in limited quantities to customers. However, to date, we have never experienced a work stoppage due to a supply shortage. We maintain multiple sources for raw materials including steel and have various supplier agreements. Through sole source arrangements, supplier agreements and pricing, we have been able to minimize our exposure to fluctuations in raw material prices.

Our suppliers and sources of raw materials are based in the U.S., Europe and Asia. We believe that our sources are adequate for our needs in the foreseeable future, that there exist alternative suppliers for our raw materials and that in most cases readily available alternative materials can be used for most of our raw materials.

Quantitative and Qualitative Disclosure About Market Risk

We are exposed to market risks, which arise during the normal course of business from changes in interest rates and foreign currency exchange rates.

Interest Rates. We are exposed to market risk from changes in the interest rates on a significant portion of our outstanding indebtedness. Outstanding balances under our Senior Credit Facility bear interest at a variable rate based on prime (for any day, a floating rate equal to the higher of (1) the rate publicly posted as the base rate posted by at least 75% of the nation's 30 largest banks or (2) the Federal Funds Rate plus 50 basis points per year) or LIBOR (the London inter-bank offered rate for deposits in U.S. dollars for the applicable LIBOR Period) ranging from 30 to 120 days as adjusted each interest period. As of January 1, 2005, based on the aggregate amount of $160.1 million outstanding under our Senior Credit Facility, as of such date, a 100 basis point change in interest rates would have changed our interest expense by approximately $1.6 million per year.

We continually evaluate our exposure to interest rate fluctuations and follow established policies and procedures to implement strategies designed to manage the amount of variable rate indebtedness outstanding at any point in time in an effort to mitigate the effect of interest rate fluctuations on our earnings and cash flows. On December 31, 2004 we entered into a Rate Cap Transaction Agreement capping LIBOR at 5.0% on a notional amount of $50.0 million. This agreement expires on December 31, 2005.

Interest rate fluctuations affect the fair market value of our fixed rate debt, but with respect to such fixed rate instruments, do not impact our earnings or cash flows.

Foreign Currency Exchange Rates. As a result of increased sales in Europe, our exposure to risk associated with fluctuating currency exchange rates between the U.S. dollar, the Euro and the Swiss Franc has increased. Our Swiss operations utilize the Swiss franc as the functional currency and our French operations utilize the Euro as the functional currency. Foreign currency transaction gains and losses are included in earnings. Approximately 21% of our sales are derived from sales outside the U.S. for the nine month period ended January 1, 2005. We expect that this proportion is likely to increase as we seek to increase our penetration of foreign markets, particularly within the aerospace and defense markets. Foreign currency transaction exposure arises primarily from the transfer of foreign currency from one subsidiary to another within the group, and to foreign currency denominated trade receivables. Unrealized currency translation gains and losses are recognized upon translation of the foreign subsidiaries' balance sheets to U.S. dollars. Because our financial statements are denominated in U.S. dollars, changes in currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have, an impact on our earnings. We currently do not have exchange rate hedges in place to reduce the risk of an adverse currency exchange movement. Although currency fluctuations have not had a material impact on our financial performance in the past, such fluctuations may materially affect our financial performance in the future. The impact of future exchange rate fluctuations on our results of operations cannot be accurately predicted.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

BUSINESS

RBC Bearings Incorporated

The Bearing Industry

The bearing industry is a highly fragmented multi-billion dollar market. Purchasers of bearings include producers of commercial and military aerospace equipment, automotive and commercial truck manufacturers, industrial equipment and machinery manufacturers, agricultural machinery manufacturers and construction, mining and specialized equipment manufacturers.

Demand for bearings generally follows the market for products in which bearings are incorporated and the economy as a whole. In general, the bearing industry grew through the 1990's and peaked in 1998. A number of factors, including an economic downturn and reduced capital investment, led to a historic reduction in bearings demand between 1998 and 2002. In 2003, the industry began to experience a turnaround, with bearing shipments increasing over the previous year.

According to an industry source, demand for bearings in the U.S. is projected to increase 5.2% per year through 2008. We believe many of the end markets we serve will grow at a higher rate over the comparable period. The increased demand for bearings in the diversified industrial market is being influenced by growth in industrial machinery and equipment shipments and increasing nonresidential construction activity. In addition, increased usage of existing machinery will significantly improve aftermarket demand for replacement bearing products. In the aerospace market, aging of the existing commercial aircraft fleet along with carrier traffic growth is expected to continue to expand demand for our bearing solutions. Lastly, strong growth in the defense market is being influenced by modernization programs necessitating increased spending on new equipment, as well as continued utilization of deployed equipment supporting robust aftermarket demand for replacement bearings.

Our Competitive Strengths

Leading Market Positions. We compete in specialized markets where we believe we are often the only supplier with the manufacturing expertise, business plan and engineering resources required to provide the required bearing solution. We estimate that approximately two-thirds of our net sales during fiscal 2004 were generated by products for which we hold the number one or two market position. Most of our products undergo lengthy and rigorous customer certification processes and/or approvals, while our aerospace and defense products generally require additional FAA and military certification, respectively. We often participate in our customers' product design process, and, in many cases, our bearings are the only products that are certified for use with the product. This is evidenced by our strong customer relationships, many of which are greater than 20 years.

Diversified Revenue Base. We sell a wide array of bearing products to customers across many diverse end markets, each of which is influenced by different fundamental economic factors. Our products are sold both to OEMs, and to aftermarket distributors and service providers. In addition, we

currently sell our products to more than 5,500 customers, and no single customer represented more than 4.0% of our net sales during fiscal 2004. Our diversified revenue base mitigates the impact of any single product or customer on our financial performance.

Large Installed Product Base with Recurring Aftermarket Revenue Stream. We provide bearings to a large and growing number of applications for which our products have been tested and certified. Our bearing products are approved for over 32,000 applications, many of which are part of aerospace, defense and industrial platforms that can be in service for as long as several decades, thereby requiring continuing aftermarket support. Many of our products are critical to the performance of the equipment in which they are installed but represent a small percentage of the ongoing maintenance expense of the equipment. Aftermarket sales of replacement parts for existing equipment platforms represented approximately 60% of our net sales for fiscal 2004. We believe we are well positioned to continue to capture recurring revenue from these product lines in the future due to the high customer switching costs and our high service levels associated with most of the equipment in which our products are installed.

Proprietary Design and Manufacturing Capabilities. We believe that our bearing engineering and manufacturing expertise, including our dedicated team of engineers and proprietary manufacturing capabilities, positions us to provide high quality, innovative solutions to our targeted markets in a timely way. We also believe that our design and manufacturing capabilities will allow us to maintain a leadership position as our customers continue to rely on us to develop new bearing solutions that can be manufactured cost effectively.

Disciplined Acquisition Program with History of Successful Integration. We have demonstrated expertise in acquiring and integrating bearing and precision-engineered component manufacturers that have complementary products or distribution channels and provide significant potential for margin enhancement. We have consistently increased the profitability of acquired businesses through a process of methods and systems improvement coupled with the introduction of complementary and proprietary new products. Since October 1992 we have completed 12 acquisitions which have significantly broadened our end markets, products, customer base and geographic reach.

Our Growth Strategy

We intend to grow our business while continuing to focus on specialized markets for highly engineered bearing solutions. Key elements of our growth strategy include:

Continue to Develop Innovative Bearing Solutions. We intend to leverage our design and manufacturing expertise and our extensive customer relationships to continue to develop new products for markets where we believe there are substantial growth opportunities. We analyze new product opportunities carefully by taking into account projected market prices and volumes and expected manufacturing costs, only pursuing new product lines that we believe will achieve our gross margin targets. Recent examples of our new product and process innovation include lightweight aircraft structural components that integrate bearing products for the Airbus series of aircraft, corrosion resistant materials for aircraft bearings and patented new designs that improve the service performance of cam followers for the oil and gas, packaging and material handling industries. Our ability to develop new custom engineered products strengthens existing customer relationships and creates new business opportunities for us.

manufacturers and foreign defense manufacturers that support the U.S. government. In addition, in the last three years we have added sales support in the following 9 locations: Chicago, the greater New York City area, Syracuse, Charlotte, Dallas/Forth Worth, Detroit, Southern California, Montreal, Canada and Paris, France and have been able to increase aftermarket sales in these regions. We currently have sales offices in over 10 other U.S. cities as well as other international locations such as Aachen, Germany, Cheltenham, England and Delemont, Switzerland. We intend to continue to expand our sales force, customer base and end markets and have identified a number of attractive growth opportunities domestically and abroad, including current projects in semiconductor machinery, airframe controls and missile guidance systems. In addition, our OEM relationships, coupled with our design expertise, provide us with extensive cross-selling opportunities on platforms that we do not currently supply.

Increase Aftermarket Sales. Aftermarket sales accounted for approximately 60% of our net sales for fiscal 2004. Such sales included both sales to third party distributors and a portion of our sales to OEMs for replacement bearings. We intend to increase the percentage of our revenues derived from the replacement market by continuing to implement several initiatives. First, we will continue to seek opportunities to increase our sales to key existing distributors as well as expand our base of third party customers. Second, our new product and new end market initiatives are focused on high-growth platforms, such as 300 millimeter semiconductor manufacturing systems and the U.S. government's Joint Strike Fighter program that we expect will be in service for long periods and therefore create significant demand for replacement parts. Additionally, we will seek opportunities to develop new products that can be used as replacement parts for existing platforms. For example, we have been approved recently to supply replacement bearings on the U.S. Navy's fleet of Harrier aircraft. We believe that increasing our aftermarket sales of replacement parts will further enhance the continuity and predictability of our revenues and increase our profitability.

Pursue Selective Acquisitions. We believe that there will continue to be consolidation within the bearing industry that may present us with acquisition opportunities, particularly within the industrial and aerospace markets. This consolidation is being driven by an ongoing trend among OEMs to utilize fewer suppliers in order to simplify procurement, increase manufacturing efficiency and reduce costs; and, because we are one of the more well known and established suppliers of high quality specialty bearing products, it is a trend that has often worked in our favor. We regularly evaluate opportunities, some of which may be material, to acquire bearing and precision-engineered component manufacturers which have complementary products, customers or distribution channels, provide significant potential for margin enhancement and further expand the breadth of our product portfolio.

Customers and Markets

We serve a broad range of end markets where we can add value with our specialty, precision bearing products and applications. We classify our customers into three principal categories: diversified industrial, aerospace and defense.

•: Diversified Industrial Market (62% of fiscal 2004 net sales)

We manufacture bearing products for a wide range of diversified industrial markets, including construction and mining, heavy truck, packaging and semiconductor machinery. Nearly all mechanical devices and machinery require bearings to relieve friction where one part moves relative to another. Our products target existing market applications in which our engineering and manufacturing capabilities provide us with a competitive advantage in the marketplace.

Our largest diversified industrial customers include Applied Materials, Caterpillar, Chicago Rawhide, Eaton, Hitachi Construction Machinery, Parker-Hannifin Corporation and various aftermarket distributors including Applied Industrial, Motion Industries and McMaster Carr. We believe that the diversification of our sales among the various markets of the industrial bearings market reduces our exposure to downturns in any individual market. We believe opportunities exist for growth and margin improvement in this market as a result of increasing demand for industrial machinery, the introduction of new products and the expansion of aftermarket sales.

•: Aerospace Market (25% of fiscal 2004 net sales)

We supply bearings for use in commercial and private aircraft. We supply bearings for many of the commercial aircraft currently operating world-wide and are the primary supplier for many of our product lines. This includes military contractors for airplanes, helicopters and missile systems. Commercial aerospace customers generally require precision products, often of special materials, made to unique designs and specifications. Many of our aerospace bearing products are designed and certified during the original development of the aircraft being served, which often makes us the primary bearing supplier for the life of the aircraft.

Our largest aerospace customers include Airbus, Boeing, General Electric, Lockheed Martin, Raytheon, Rolls Royce, Pratt and Whitney and various aftermarket channels. We estimate that over 75% of commercial aerospace net sales are actually used as replacement parts, as bearings are regularly replaced on aircraft in conjunction with routine maintenance procedures. We believe our strong relationships with OEMs helps drive our aftermarket sales since a portion of OEM sales are ultimately intended for use as replacement parts. We believe that growth and margin expansion in this segment will be driven primarily by expanding our international presence and the refurbishment and maintenance of existing commercial aircraft.

•: Defense Market (13% of fiscal 2004 net sales)

We manufacture bearing products used by the U.S. Department of Defense and certain foreign governments for use in fighter jets, troop transports, naval vessels, helicopters, gas turbine engines, armored vehicles, guided weaponry and satellites. We manufacture an extensive line of standard products that conform to many domestic military application requirements, as well as customized products designed for unique applications. We specialize in the manufacture of high precision ball and roller bearings, commercial ball bearings and metal-to-metal and self-lubricating plain bearings for the defense market. Our bearing products are manufactured to conform to U.S. military specifications and are typically custom designed during the original product design phase, which often makes us the sole or primary bearing supplier for the life of the product. In addition to products that meet military specifications, these customers often require precision products made of specialized materials to custom designs and specifications. Product approval for use on military equipment is often a lengthy process ranging from six months to ten years.

Our largest defense customers include the U.S. Department of Defense and all branches of the U.S. military. Sales consist primarily of replacement bearings on programs for which we are the sole source supplier. We believe that our current installed base of bearing products and our sophisticated engineering and manufacturing capabilities position us to benefit from growing replacement part demand caused by increased equipment utilization as well as the introduction of new weapons and transport systems. Appropriations for maintenance and repairs for product platforms serviced by us have generally remained relatively stable, even during periods where defense spending was in relative decline, such as the early to mid-1990s. With increased government spending on defense, demands for the repair and maintenance of the product platforms serviced by us have strengthened in the past year.

Products

Bearings are employed to fulfill several functions including reduction of friction, transfer of motion and carriage of loads. We design, manufacture and market a broad portfolio of bearing products. The following table provides a summary of our product segments:

Segment	FY 2004 Sales		Representative Applications
Plain Bearings	$	77,578	•	Aircraft engine controls and landing gear
		(41%)	•	Helicopter rotors and missile launchers
			•	Mining and construction equipment

Roller Bearings	$	63,106	•	Aircraft hydraulics
		(34%)	•	Military and commercial truck chassis
			•	Packaging machinery and gear pumps

Ball Bearings	$	35,801	•	Radar and night vision systems
		(19%)	•	Airframe control and actuation
			•	Semiconductor equipment

Other	$	10,846	•	Precision ground ball screws for robotic handling and
		(6%)		missile guidance
			•	Collets for machine tools

Plain Bearings. Plain bearings are primarily used to rectify inevitable misalignments in various mechanical components, such as aircraft controls, helicopter rotors, or in heavy mining and construction equipment. Such misalignments are either due to machining inaccuracies or result when components change position relative to each other. Plain bearings are produced with either self-lubricating or metal-to-metal designs and consist of several sub-classes, including rod end bearings, spherical plain bearings and journal bearings. Sales of plain bearings accounted for 41% of our net sales in fiscal 2004.

Roller Bearings. Roller bearings are anti-friction products that utilize cylindrical rolling elements. We produce three main designs: tapered roller bearings, needle roller bearings and needle bearing track rollers and cam followers. We produce medium sized tapered roller bearings used primarily in heavy truck axle applications. We offer several needle roller bearing designs that are used in both industrial applications and certain US military aircraft platforms. These products are generally specified for use where there are high loads and the design is constrained by space considerations. A significant portion of the sales of this product is to the aftermarket. Needle bearing track rollers and cam followers have wide and diversified use in the industrial market and are often prescribed as a primary component in articulated aircraft wings. We believe we are the world's largest producer of aircraft needle bearing track rollers. The sale of roller bearings accounted for 34% of our net sales in fiscal 2004.

Ball Bearings. Ball bearings are devices which utilize high precision ball elements to reduce friction in high speed applications. We specialize in four main types of ball bearings: high precision aerospace, airframe control, thin section and industrial ball bearings. High precision aerospace bearings are primarily sold to customers in the defense industry that require more technically sophisticated bearing products, such as missile guidance systems, providing higher degrees of fault tolerance given the criticality of the applications in which they are used. Airframe control ball bearings are precision ball bearings that are plated to resist corrosion and are qualified under a military specification. Thin section ball bearings are specialized bearings that use extremely thin cross sections and give specialized machinery manufacturers many advantages. We produce a general line of industrial ball bearings sold primarily to the aftermarket. Ball bearings accounted for 19% of our net sales in fiscal 2004.

Other. Our other products consist primarily of precision linear precision products and machine tool collets. Linear products are precision ground ball bearing screws that offer repeatable positioning

accuracy in defense, machine tools, robotic handling and semiconductor equipment. We also have several application development programs for linear precision products in progress in guided missile, unmanned aircraft, and "smart bomb" applications. Machine tool collets are cone-shaped metal sleeves, used for holding circular or rodlike pieces in a lathe or other machine, that provide effective part holding and accurate part location during machining operations. Other accounted for approximately 6% of our fiscal 2004 net sales.

Product Design and Development

We produce specialized bearings which are often tailored to the specifications of a customer or application. Our sales professionals are highly experienced engineers who collaborate with our customers on a continual basis to develop bearing solutions. The product development cycle can follow many paths which are dependent on the end market or channel. The process normally takes between 3-6 years from concept to sale depending upon the application and the market. A common route that is used for major OEM projects begins when our design engineers meet with their customer counterparts at the machine design conceptualization stage and work with them through the conclusion of the product development.

Often, at the early stage, a bearing design concept is produced that addresses the expected demands of the application. Environmental demands are many but normally include load, stress, heat, thermal gradients, vibration, lubricant supply, corrosion resistance, with one or two of these environmental constraints being predominant in the design consideration. A bearing design must perform reliably for a period of time specified by the customer's product objectives.

Once a bearing is designed, a mathematical simulation is created to replicate the expected application environment and thus allow optimization with respect to these design variables. Upon conclusion of the design and simulation phase, samples are produced and laboratory testing commences at one of our test laboratories. The purpose of this testing phase is not only to verify the design and the simulation model but also to allow further design improvement where needed. Finally, upon successful field testing by the customer, the product is ready for sale.

Manufacturing and Operations

Our manufacturing strategies are focused on product reliability, quality and service. Custom and standard products are produced according to manufacturing schedules that ensure maximum availability of popular items for immediate sale while carefully considering the economies of lot production and special products. Capital programs and manufacturing methods development are focused on quality improvement and low production costs. A monthly review of product line production performance assures an environment of continuous attainment of profitability goals.

Capacity. Our plants currently run on a single shift, and light second and third shifts at selected locations, to meet the demands of our customers. We believe that current capacity levels and future annual estimated capital expenditures on equipment equal to approximately 4% of sales should permit us to effectively meet demand levels for the foreseeable future. We also believe that we have the ability to increase capacity and move to full second or third shifts when required.

Inventory Management. Our increasing emphasis on the distributor/aftermarket sector has required us to maintain greater inventories of a broader range of products than the OEM market historically demanded. We operate an inventory management program designed to balance customer delivery requirements with economically optimal inventory levels. In this program, each product is categorized based on characteristics including order frequency, number of customers and sales volume. Using this classification system, our primary goal is to maintain a sufficient supply of standard items while minimizing warehousing costs. In addition, production cost savings are achieved by optimizing plant scheduling around inventory levels and customer delivery requirements. This leads to more efficient

utilization of manufacturing facilities and minimizes plant production changes while maintaining sufficient inventories to service customer needs.

Sales, Marketing and Distribution

Our marketing strategy is aimed at increasing sales within our three primary markets, targeting specific applications in which we can exploit our competitive strengths. To effect this strategy, we seek to expand into geographic areas not previously served by us and we continue to capitalize on new markets and industries for existing and new products. We employ a technically proficient sales force and utilize marketing managers, product managers, customer service representatives and product application engineers in our selling efforts.

We have accelerated the development of our sales force through the hiring of sales personnel with prior bearing industry experience, complemented by an in-house training program. We intend to continue to hire and develop expert sales professionals and strategically locate them to implement our expansion strategy. Today, our direct sales force is located to service North America, Europe and Latin America and is responsible for selling all of our products. This selling model leverages our relationship with key customers and provides opportunities to market multiple product lines to both established and potential customers. We also sell our products through a well-established, global network of industrial and aerospace distributors. This channel primarily provides our products to smaller OEM customers and the end users of bearings that require local inventory and service. In addition, specific larger OEM customers are also serviced through this channel to facilitate requirements for "Just In Time" deliveries or "Kan Ban" systems. Our worldwide distributor network provides our customers with more than 1,500 points of sale for our products. We intend to continue to focus on building distributor sales volume.

The sale of our products is supported by a well-trained and experienced customer service organization. This organization provides customers with instant access to key information regarding their bearing purchase and delivery requirements. We also provide customers with updated information through our web site, and we have developed on-line integration with specific customers, enabling more efficient ordering and timely order fulfillment for those customers.

We store product inventory in four company-owned and operated warehouses located on the East and West coasts of the U.S., France and in Switzerland. The inventory is located in these warehouses based on thorough analysis of customer demand to provide superior service and product availability to our customers.

Competition

Our principal competitors include Kaydon Corporation, New Hampshire Ball Bearings and McGill Manufacturing Company, Inc., although we compete with different companies for each of our product lines. We believe that for the majority of our products, the principal competitive factors affecting our business are product qualifications, product line breadth, service and price. Although some of our current and potential competitors may have greater financial, marketing, personnel and other resources than us, we believe that we are well positioned to compete with regard to each of these factors in each of the markets in which we operate.

Product Qualifications. Many of the products we produce are qualified for the application by the OEM, the U.S. Department of Defense, the FAA or a combination of these agencies. These credentials have been achieved for thousands of distinct items after years of design, testing and improvement. In many cases patent protection presides, in all cases there is strong brand identity and in numerous cases we have the exclusive product for the application.

Product Line Breadth. Our products encompass an extraordinarily broad range of designs which often create a critical mass of complementary bearings and components for our markets. This position allows many of our industrial and aircraft customers the ability for a single manufacturer to provide the engineering service and product breadth needed to achieve a series of OEM design objectives or aftermarket requirements. This ability enhances our value to the OEM considerably while strengthening our overall market position.

Service. Product design, performance, reliability, availability, quality, technical and administrative support are elements that define the service standard for this business. Our customers are sophisticated and demanding, as our products are fundamental and enabling components to the construction or operating of their machinery. We maintain inventory levels of our most popular items for immediate sale and service well over 15,000 voice and electronic contacts per month. Our customers have high expectations regarding product availability, and the primary emphasis of our service efforts is to ensure the widest possible range of available products and delivering them on a timely basis.

Price. We believe our products are priced competitively in the markets we serve. We continually evaluate our manufacturing and other operations to maximize efficiencies in order to reduce costs, eliminate unprofitable products from our portfolio and maximize our profit margins. While we compete with larger bearing manufacturers who direct the majority of their business activities, investments and expertise toward the automotive industries, our sales in this industry are only a small percentage of our business. We invest considerable effort to develop our price to value algorithms and we price to market levels where required by competitive pressures.

Suppliers and Raw Materials

We obtain raw materials, component parts and supplies from a variety of sources and generally from more than one supplier. Our principal raw material is steel. Our suppliers and sources of raw materials are based in the U.S., Europe and Asia. We purchase steel at market prices, which during the past 12 months have increased to historical highs as a result of a relatively low level of supply and a relatively high level of demand, and we have recently received notices of additional price increases from our suppliers. To date, we have generally managed to pass through these raw materials price increases to our customers by assessing steel surcharges on, or price increases of, our bearing products. However, we have from time to time experienced a time lag of up to 12 weeks in our ability to pass through steel surcharges to our customers which has negatively impacted our gross margins. We will continue to pass on raw materials price increases as competitive conditions allow.

Recently because of extraordinarily high demand for certain grades of steel, suppliers have in some instances allocated certain types of steel in limited quantities to customers. However, to date, we have never experienced a work stoppage due to a supply shortage. We believe that our sources for raw materials, including steel, are adequate for our needs in the foreseeable future, that there exist alternative suppliers for our raw materials and that in most cases readily available alternative materials can be used for most of our raw materials. However, we cannot provide any assurances of the availability or the prices thereof. We do not believe that the loss of any one supplier would have a material adverse effect on our financial condition or results of operations.

Backlog

As of January 1, 2005, we had an order backlog of $133.8 million, as compared to a backlog of $85.0 million as of December 27, 2003 (which excludes amounts relating to RBC-API which was acquired in December 2003). The amount of backlog includes orders which we estimate will be fulfilled

within the next 12 months; however, orders included in our backlog are subject to cancellation, delay or other modifications by our customers prior to fulfillment. We sell many of our products pursuant to contractual agreements, single source relationships or long-term purchase orders, each of which may permit early termination by the customer. However, due to the nature of many of the products supplied by us and the lack of availability of alternative suppliers to meet the demands of such customers' orders in a timely manner, we believe that it is not practical or prudent for most of our customers to shift their bearing business to other suppliers.

Employees

We had approximately 1,172 hourly employees and 502 salaried employees as of January 1, 2005, of whom 250 were employed in our European and Mexican operations. We believe that our employee relations are satisfactory.

We are subject to several collective bargaining agreements covering unionized workers, as follows:

•: collective bargaining agreements with the United Auto Workers covering substantially all of the hourly employees at our West Trenton, New Jersey; Fairfield, Connecticut and Bremen, Indiana plants. These agreements expire on June 30, 2007, January 31, 2008 and October 29, 2005, respectively;
•: collective bargaining agreements with the United Steelworkers covering substantially all the hourly employees at our Glasgow, Kentucky and Kulpsville, Pennsylvania plants. These agreements expire on June 13, 2008, and January 31, 2008, respectively; and
•: a labor agreement with the Association of Swiss Engineering Employers covering substantially all of the hourly employees at our Delemont, Switzerland plant. This agreement expires on December 31, 2005.

As of January 1, 2005, approximately 800 of our hourly employees, or 69%, are non-unionized.

Intellectual Property

We own U.S. and foreign patents and trademark registrations and U.S. copyright registrations, and have U.S. trademark and patent applications pending. We file patent applications and maintain patents to protect certain technology, inventions and improvements that are important to the development of our business, and we file trademark applications and maintain trademark registrations to protect product names that have achieved brand-name recognition among our customers. We also rely upon trade secrets, know-how and continuing technological innovation to develop and maintain our competitive position. Many of our brands are well recognized by our customers and are considered valuable assets of our business. We do not believe, however, that any individual item of intellectual property is material to our business. See "Risk Factors".

Regulation

Product Approvals. Essential to servicing the aerospace market is the ability to obtain product approvals. We have in excess of 32,000 product approvals, which enable us to provide products used in virtually all domestic aircraft platforms presently in production or operation. Product approvals are typically issued by the FAA to designated OEMs who are Production Approval Holders of FAA approved aircraft. These Production Approval Holders provide quality control oversight and generally limit the number of suppliers directly servicing the commercial aerospace aftermarket. Regulations enacted by the FAA provide for an independent process (the Parts Manufacturer Approval, or PMA, process), which enables suppliers who currently sell their products to the Production Approval Holders, to sell products to the aftermarket. We have received over 2,400 PMA approvals to date and have approximately 633 active PMA applications in process.

With respect to military government contracts, and in accordance with 10 U.S.C. 2534, current DoD regulations (the Department of Defense Federal Acquisition Regulation Supplement, also known as the "DFARS") contain a domestic source preference for ball and roller bearings and bearing components that are manufactured in the United States or Canada. In general, these regulations prohibit the DoD, with limited exceptions, from procuring ball and roller bearings and bearing components unless they are manufactured in the U.S. or Canada. The DoD has only a limited authority to waive this prohibition. This prohibition, however, does not apply to contracts or subcontracts for commercial items, except for when commercial ball and roller bearings are being acquired as end items. It also does not apply to ball and roller bearings manufactured in the U.K. This current domestic source preference is set to expire in October 2005. We do not know whether Congress will take any action to extend this preference beyond this period.

We are subject to various other federal laws, regulations and standards. New laws, regulations or standards or changes to existing laws, regulations or standards could subject us to significant additional costs of compliance or liabilities, and could result in material reductions to our results of operations, cash flow or revenues.

Environmental Matters

We are subject to federal, state and local environmental laws and regulations, including those governing discharges of pollutants into the air and water, the storage, handling and disposal of wastes and the health and safety of employees. We also may be liable under the Comprehensive Environmental Response, Compensation, and Liability Act or similar state laws for the costs of investigation and cleanup of contamination at facilities currently or formerly owned or operated by us, or at other facilities at which we have disposed of hazardous substances. In connection with such contamination, we may also be liable for natural resource damages, government penalties and claims by third parties for personal injury and property damage. Agencies responsible for enforcing these laws have authority to impose significant civil or criminal penalties for non-compliance. We believe we are currently in material compliance with all applicable requirements of environmental laws. We do not anticipate material capital expenditures for environmental controls in fiscal years 2005 or 2006.

Investigation and remediation of contamination is ongoing at some of our sites. In particular, state agencies have been overseeing groundwater monitoring activities at our facilities in Hartsville, South Carolina and Fairfield, Connecticut. At Hartsville, we are monitoring low levels of contaminants in the groundwater caused by former operations. The state will permit us to cease monitoring activities after two consecutive sampling periods demonstrate contaminants are below action levels. In connection with the purchase of our Fairfield, Connecticut facility in 1996, we agreed to assume responsibility for completing clean-up efforts previously initiated by the prior owner. We submitted data to the state that we believe demonstrates that no further remedial action is necessary although the state may require additional cleanup or monitoring. Although there can be no assurance, we do not expect any of those to be material.

We received notice in 2003 from the U.S. EPA that we had been named a potentially responsible de minimis party for past disposal of hazardous substances at the Operating Industries, Inc.'s landfill in Monterey, California. Any such disposal would have been conducted prior to our ownership, and we notified the former owners of a potential claim for indemnification pursuant to the terms of our asset purchase agreements. We are currently negotiating a de minimis settlement with the U.S. EPA and expect that any settlement, even if we are unsuccessful in obtaining indemnification, will not be material to our results of operations or to our business.

Properties

Our principal executive offices are located at One Tribology Center, Oxford, Connecticut 06478. We also use this facility for manufacturing our plain bearing products, both Teflon® lined and metal-to-metal, and commercial ball bearings.

In addition, we own facilities in Hartsville, South Carolina; Fairfield, Connecticut; Kulpsville, Pennsylvania; Rancho Dominguez, California; Santa Ana, California; Walterboro, South Carolina; Bremen, Indiana; and Scionzier Cedex, France, as well as a small parcel of real property in Oxford, Connecticut which may be used for expansion of our manufacturing operations at that location. We also have leases in effect with respect to facilities in the following locations until the following dates: West Trenton, New Jersey, February 10, 2009; Oxford, Connecticut, September 30, 2014; Torrington, Connecticut, December 22, 2006; Plymouth, Indiana, May 15, 2022; Glasgow, Kentucky, June 30, 2005; Delemont, Switzerland, December 31, 2009; Reynosa, Tamaulipas, Mexico, September 20, 2005; Oklahoma City, Oklahoma, December 31, 2008, Les Ulis Cedex, France, July 1, 2010, and Chatsworth, California, November 11, 2006.

We believe that our existing property, facilities and equipment are generally in good condition, are well maintained and adequate to carry on our current operations. We also believe that our existing manufacturing facilities have sufficient capacity to meet increased customer demand. Substantially all of our owned domestic properties and most of our other assets are subject to a lien securing our obligations under our Senior Credit Facility and Second Lien Term Loan.

Legal Proceedings

From time to time, we are involved in litigation and administrative proceedings which arise in the ordinary course of our business. We do not believe that any litigation or proceeding in which we are currently involved, either individually or in the aggregate, is likely to have a material adverse effect on our business, financial condition, operating results, cash flows or prospects.

MANAGEMENT

The following table sets forth certain information concerning our directors and executive officers. Each director is elected for a one-year term or until such person's successor is duly elected and qualified.

Name	Age	Positions
Dr. Michael J. Hartnett	59	Chairman, President and Chief Executive Officer
Daniel A. Bergeron	45	Vice President and Chief Financial Officer
Phillip H. Beausoleil	62	General Manager, ITB and TDC
Thomas C. Crainer	48	General Manager, Heim, RBC-API and Schaublin SA
Richard J. Edwards	50	General Manager, RBC Divisions
Robert Anderson	84	Director
Richard R. Crowell	50	Director
Dr. Amir Faghri	54	Director
William P. Killian	70	Director
Michael Stone	42	Director

Dr. Michael J. Hartnett has been the President and Chief Executive Officer since April 1992 and Chairman of the board of directors since June 1993. Prior to that, Dr. Hartnett served as Vice President and General Manager of our Industrial Tectonics Bearings Corporation, or ITB, subsidiary from 1990, following eighteen years at The Torrington Company, one of the three largest bearings manufacturers in the U.S. While at Torrington Company, Dr. Hartnett held the position of Vice President and General Manager of the Aerospace Business Unit and was, prior to that, Vice President of the Research and Development Division. Dr. Hartnett holds an undergraduate degree from University of New Haven, a Masters degree from Worcester Polytechnic Institute and a Ph.D. in Applied Mechanics from the University of Connecticut. Dr. Hartnett has also developed numerous patents, authored more than two dozen technical papers and is well known for his contributions to the field of tribology, the study of friction. Dr. Hartnett currently serves as a director of Aftermarket Technology Company, a publicly-held company in the business of re-manufacturing aftermarket components for automobiles.

Daniel A. Bergeron joined us in May 2003 as Vice President, Finance. On August 5, 2003, he was appointed Vice President and Chief Financial Officer. From November 2002 through May 2003, he served as Vice President and Chief Financial Officer of Allied Healthcare International, Inc., a publicly-held provider of healthcare staffing services. Mr. Bergeron served as Vice President and Chief Financial Officer at Paragon Networks International, Inc., a telecommunications company, from June 2000 to October 2002. From April 1998 to February 2000, he served as Vice President and Chief Financial Officer of Tridex Corporation, a publicly-held software company. From July 1987 to March 1998, Mr. Bergeron held various financial reporting positions with Dorr-Oliver Inc., an international engineering and manufacturing company, including Vice President and Chief Financial Officer from 1994 to March 1998. Mr. Bergeron holds a B.S. in Finance from Northeastern University and a M.B.A. from the University of New Haven.

Phillip H. Beausoleil spent three years as Plant Manager for the SKF Kulpsville, Pennsylvania facility before joining us in 1993 as Plant Manager of the Santa Ana, California division, Transport Dynamics. In 1995, the general manager responsibilities at Industrial Tectonics Bearings, or ITB, in

California were given to Mr. Beausoleil. He also spent 23 years at New Hampshire Ball Bearing, the last five years as General Manager of its Astro Division.

Thomas C. Crainer joined us in 1986 as Plant Manager at the ITB division in California and was promoted to General Manager in 1995. In 2000, Mr. Crainer became General Manager for RBC Schaublin. In 2003, he returned to the U.S. to assume additional responsibilities for our Heim Bearings, Engineered Component and Aircraft Products facilities. He had previously been employed for six years at TRW Bearing in Falconer, NY as Manufacturing Supervisor, Production Control Manager and Manufacturing Manager. His undergraduate degree in Business Administration is from St. Bonaventure University. In 1991 he received an M.B.A. from the University of Phoenix.

Richard J. Edwards joined the Company as Manufacturing Manager for the Hartsville, South Carolina facility in 1990. He was named General Manager of the RBC Divisions in 1996. Prior to joining us, Mr. Edwards spent six years with The Torrington Company as Materials Manager and Plant Superintendent in the Tyger River plant. He holds a Bachelor of Science degree in Production Operations Management from Arizona State University.

Robert Anderson has been a director since June 1998. Mr. Anderson has served as Chairman Emeritus of Rockwell Corporation since February 1990. He also serves as a director of Aftermarket Technology Corporation and is a member of the Caltech Board of Trustees and a graduate of the Anderson School of the University of California, Los Angeles.

Richard R. Crowell has been a director since June 1992. Mr. Crowell is President and a Managing General Partner of Aurora Capital Group, a private equity investment firm. Prior to establishing Aurora in 1991, Mr. Crowell was a Managing Partner of Acadia Partners, a New York-based investment fund formed with The Robert M. Bass Group. From 1983 to 1987, he was a Managing Director, Corporate Finance for Drexel Burnham Lambert. He serves on the board of directors of Aftermarket Technologies Inc. Impaxx, Inc., Tartan Textile Services, Inc., ADCO Global, Inc. and Quality Distribution Service Partners, Inc. Mr. Crowell earned a B.A. in English Literature from the University of California, Santa Cruz and an M.B.A. from the Anderson School of the University of California, Los Angeles.

Dr. Amir Faghri has been a director since July 2004. Dr. Faghri is presently the Dean of the School of Engineering of the University of Connecticut. He joined the university in 1994 as Head of the Mechanical Engineering Department. Dr. Faghri is published extensively in the area of heat transfer and is the sole inventor of six U.S. patents. He has been a consultant for several major research centers, including Los Alamos, Oak Ridge National Laboratories and Intel Corporation. He is a Fellow of ASME. He received a B.S. from Oregon State University and an M.S. and a Ph.D. from the University of California, Berkeley.

William P. Killian has been a director since October 2001. Mr. Killian has reported directly to and advised CEOs of Fortune 500, NYSE corporations on strategy, corporate growth, acquisitions and divestitures for 25 years. From 1986 until his retirement in 2000, Mr. Killian was Corporate Vice President, Development and Strategy for Johnson Controls, Inc. a $20 billion global market leader in automotive systems and facility management and controls. Currently, he serves as a member of the board of directors of Aqua-Chem, Inc. and Premix, Inc. Mr. Killian holds a Bachelor of Chemical Engineering from Georgia Tech and a Master of Engineering Administration from the University of Utah.

Michael Stone has been a director since April 2002. Mr. Stone is a Managing Partner of Whitney. He has been with Whitney since 1989 and has been a senior investor in each of Whitney's outside equity funds. Previously, he was with Bain & Company where he worked with manufacturing and pharmaceutical clients and Bain Capital-owned entities. He received a B.A. from Duke University and a M.B.A. from Harvard Business School. Mr. Stone is a director of several private companies.

Board of Directors

Our board of directors will consist of up to 9 members. We currently have 6 members on our board of directors. A majority of our board of directors are independent. The term of office for each director will be until his successor is elected or appointed, with elections for each directorship being held annually. We expect to add an additional board member to serve as an independent financial expert on our audit committee within six months after this offering.

Committees of Our Board of Directors

The standing committees of our board of directors consist of an audit committee, a compensation committee and a corporate governance and nominating committee. Mr. Stone and Dr. Hartnett currently serve on our audit committee, Messrs. Crowell, Anderson and Killian serve on our compensation committee, and Mr. Stone, Dr. Hartnett and Dr. Faghri serve on our corporate governance and nominating committee. Within one year of the consummation of this offering, all the members of our corporate governance and nominating committee and, upon consummation of this offering, we expect that all of the members of our audit committee will be "independent" as defined by applicable securities exchange rules.

Audit Committee

The principal duties and responsibilities of our audit committee are as follows:

•: to monitor our financial reporting process and internal control system;
•: to appoint and replace our independent outside auditors from time to time, determine their compensation and other terms of engagement and oversee their work;
•: to oversee the internal audit function; and
•: to oversee our compliance with legal, ethical and regulatory matters.

The audit committee has the power to investigate any matter brought to its attention within the scope of its duties. It also has the authority to retain counsel and advisors to fulfill its responsibilities and duties. We intend to comply with future audit committee requirements as they become applicable to us.

Compensation Committee

The principal duties and responsibilities of our compensation committee are as follows:

•: to provide oversight on the development and implementation of the compensation policies, strategies, plans and programs for our key employees and outside directors and disclosure relating to these matters;
•: to review and approve the compensation of our chief executive officer and the other executive officers of us and our subsidiaries; and
•: to provide oversight concerning selection of officers, management succession planning, performance of individual executives and related matters.

Each member of our compensation committee will be an "outside" director as that term is defined in 162(m) of the Internal Revenue Code of 1986, as amended, and a "non-employee" director within the meaning of Rule 16b-3 of the rules under the Securities Exchange Act of 1934.

Corporate Governance and Nominating Committee

The principal duties and responsibilities of our corporate governance and nominating committee are as follows:

•: to establish criteria for board and committee membership and recommend to our board of directors proposed nominees for election to the board of directors and for membership on committees of the board of directors;
•: to make recommendations regarding proposals submitted by our shareholders; and
•: to make recommendations to our board of directors regarding corporate governance matters and practice.

Compensation of Directors

Independent members of our board of directors are paid $20,000 per year, payable quarterly, and are entitled to annual stock option grants at the discretion of the compensation committee of the board of directors for their services. In addition, we expect to revise our compensation policy to provide for payments for service on any board committee and reimbursements for reasonable out-of-pocket expenses incurred in connection with attendance at board meetings or of any committee thereof.

Code of Ethics

Our board of directors has adopted a code of business conduct and ethics applicable to our directors, officers and employees. To the extent they are not already embodied therein, we will, prior to the completion of this offering, supplement this code with corporate governance guidelines in accordance with applicable securities exchange listing standards. A copy of our code of ethics is available, upon request, by writing to: Attn: Corporate Secretary, RBC Bearings Incorporated, One Tribology Center, Oxford, CT 06478.

Corporate Governance Guidelines

To help discharge its responsibilities, our board of directors will adopt corporate governance guidelines on significant corporate governance issues prior to the consummation of this offering. These guidelines address such matters as director independence, committee membership and structure, meetings and executive sessions, director selection, retirement, and training, among other things.

Limitation on Director's Liability and Indemnification

Our amended and restated certificate of incorporation will limit the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except liability for:

•: any breach of their duty of loyalty to the corporation or its stockholders;
•: acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
•: unlawful payments of dividends or unlawful stock repurchases or redemptions; or
•: any transaction from which the director derived an improper personal benefit.

The limitation of liability does not apply to liabilities arising under the federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission.

Our restated certificate of incorporation provides that we will indemnify our directors and officers and may indemnify our employees and other agents to the fullest extent permitted by law. We believe

that indemnification under our restated certificate of incorporation covers at least negligence and gross negligence on the part of indemnified parties. Our restated certificate of incorporation also permits us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in his or her capacity as an officer, director, employee or other agent.

The limited liability and indemnification provisions in our restated certificate of incorporation may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty and may reduce the likelihood of derivative litigation against our directors and officers, even though a derivative action, if successful, might otherwise benefit us and our stockholders. A stockholder's investment in us may be adversely affected to the extent we pay the costs of settlement or damage awards against our directors and officers under these indemnification provisions.

At present, there is no pending litigation or proceeding involving any of our directors, officers or employees in which indemnification is sought, nor are we aware of any threatened litigation that may result in claims for indemnification.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted for directors, officers and controlling persons of us pursuant to the foregoing provisions or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, or SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

Executive Compensation

The following table sets forth the cash and other compensation paid by us in fiscal 2004, 2003 and 2002 to Dr. Hartnett, our Chairman, President and Chief Executive Officer, and our next four most highly paid executive officers, or the Named Executive Officers. (Amounts shown below are in dollars.)

SUMMARY COMPENSATION TABLE

		Annual Compensation									Long-Term Compensation Awards
Name and Principal Position	Year	Salary(a)			Bonus			Other Annual Compensation			Securities Underlying Options/SARs			All Other Compensation
Dr. Michael J. Hartnett Chairman, President & Chief Executive Officer	2004 2003 2002	$	560,442 413,437 413,437		$	— 175,034 50,684	(d) (e)	$	8,685 11,832 20,373	(b) (b) (b)		— — —		$	15,000 — 7,958	(c) (c)
Phillip H. Beausoleil General Manager, ITB and TDC	2004 2003 2002		204,269 189,371 170,668			50,000 45,000 60,600	(f) (d) (e)		— — —		$	— 5,000 —	(h)		7,605 7,854 6,354	(g) (g) (g)
Daniel A. Bergeron Vice President and Chief Financial Officer	2004 2003 2002		152,769 — —	(i)		— — —			6,000 — —	(j)		— — —			— — —
Thomas C. Crainer General Manager, Heim, RBC-API and Schaublin SA	2004 2003 2002		211,835 224,228 195,000			— 37,000 —	(d)		5,702 5,960 5,280	(k) (k) (k)		— 5,000 —	(h)		5,708 5,329 5,329	(l) (l) (l)
Richard J. Edwards General Manager, RBC Divisions	2004 2003 2002		202,448 172,917 173,165			35,000 30,000 25,000	(f) (d) (e)		12,800 9,573 12,083	(m) (m) (m)		10,000 5,000 —	(n) (h)		— 3,750 3,167	(o) (o)

(a): Includes amounts deferred by the executive pursuant to our 401(k) Plan.
(b): Consists of leased vehicles for use by Dr. Hartnett.
(c): Consists of employer match contributed to Dr. Hartnett's SERP account.
(d): Bonus earned in fiscal 2002 and paid in fiscal 2003. Bonus for fiscal 2003 was paid in fiscal 2004.
(e): Bonus earned in fiscal 2001 and paid in fiscal 2002. Bonus for fiscal 2002 was paid in fiscal 2003.

(f): Bonus earned in fiscal 2003 and paid in fiscal 2004. Bonus for fiscal 2004 will be paid in fiscal 2005.
(g): Consists of employer match contributed to Mr. Beausoleil's SERP account.
(h): Options granted under the 2001 Stock Option Plan. Options with respect to 66% of such shares are exercisable as of April 3, 2004.
(i): Mr. Bergeron joined us on May 27, 2003. His annual base salary is $180,000.
(j): Consists of $6,000 car allowance for Mr. Bergeron.
(k): Consists of a leased vehicle for use by Mr. Crainer.
(l): Consists of employer match contributed to Mr. Crainer's SERP account.
(m): Consists of a leased vehicle for use by Mr. Edwards.
(n): Options granted under the 2001 Stock Option Plan. Options with respect to 50% of such shares are exercisable as of April 3, 2004.
(o): Consists of employer match contributed to Mr. Edwards' SERP account.

Option Grants in Last Fiscal Year

The following table provides information with respect to stock options granted to our named executive officers during fiscal 2004:

	Individual Grants						Potential Realizable Value At Assumed Annual Rates of Stock Price Appreciation for Option Term
	Number of Securities Underlying Options/SARs Granted	% of Total Options Granted to Employees in 2004
Name				Exercise or Base Price per Share
Name				Exercise or Base Price per Share		Expiration Date	5%		10%
Richard J. Edwards	10,000	4.4	%	$	20.00	July 1, 2012	$	94,334	$	239,061

Aggregated Stock Option Exercises in Last Fiscal Year and Fiscal Year-end Option Values

The following table sets forth the number of exercisable and unexercisable options and warrants held by each of the Named Executive Officers at April 3, 2004. None of our securities were acquired during fiscal 2004 upon the exercise of stock options by the Named Executive Officers. All the numbers in the table set forth below have been adjusted for our 100-for-1 stock split effective March 4, 2002.

Fiscal Year-End Option and Warrant Values

	Number of Securities Underlying Unexercised Options and Warrants at Fiscal Year-End		Value of Unexercised In-the-Money Options and Warrants at Fiscal Year-End
Name
Name	Exercisable	Unexercisable	Exercisable		Unexercisable(a)
Dr. Michael J. Hartnett(b)	725,063	—	$	14,501,260	$	—
Daniel A. Bergeron	—	—		—		—
Phillip H. Beausoleil	28,450	—		569,000		—
Richard J. Edwards	72,520	5,000		1,450,400		100,000
Thomas C. Crainer	23,240	—		464,800		—

(a): Based upon a per share price of $20.00.
(b): The options and warrants are held by Dr. Hartnett and by Hartnett Family Investments, L.P.

There was no public market for any of our common stock underlying the options and warrants reflected on the table.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table summarizes information about securities authorized for issuance under the Company's equity compensation plans and other agreements as of April 3, 2004:

				(c)
	(a)	(b)		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options and Warrants	Weighted-Average Exercise Price of Outstanding Options and Warrants
Equity compensation plans approved by security holders	121,397	$	28.31	336,873
Equity compensation plans not approved by security holders	585,227	$	1.77	—

Total	706,624	$	6.33	336,873

Stock Option Plans

1998 Stock Option Plan

Effective February 18, 1998, we adopted the RBC Bearings Incorporated (f/k/a Roller Bearing Holding Company, Inc.) 1998 Stock Option Plan. The terms of the 1998 option plan provide for the grant of options to purchase up to 3,365,596 shares of Class A common stock to officers and employees of, and consultants (including members of the board of directors) to us and our subsidiaries. Options granted may be either incentive stock options (under Section 422 of the Internal Revenue Code) or non-qualified stock options. The 1998 option plan, which expires on December 31, 2008, is to be governed by our board of directors or a committee to which the Board delegates its responsibilities. As of January 1, 2005, there were outstanding options to purchase 185,770 shares of Class A common stock granted under the 1998 option plan, all of which were exercisable. The 2001 Stock Option Plan will be frozen and no additional stock options will be awarded pursuant to the plan.

The exercise price of options granted under the 1998 option plan shall be determined by our board of directors, but in no event less than 100% of the Fair Market Value (as defined in the 1998 option plan) of the Class A common stock on the date of grant. Options granted under the 1998 option plan may be exercised during the period set forth in the agreement pursuant to which the options are granted, but in no event more than ten years following grant.

The number of shares of Class A common stock for which options may be granted under the 1998 option plan shall be increased, and the number of shares for which outstanding options shall be exercisable, and the exercise price thereof, shall be adjusted upon the happening of stock dividends, stock splits, recapitalizations and certain other capital events regarding our company or the Class A common stock. Upon any merger, consolidation or combination where shares of Class A common stock are converted into cash, securities or other property, outstanding options shall be converted into the right to receive upon exercise the consideration as would have been payable in exchange for the shares of Class A common stock underlying such options had such options been exercised prior to such event. The number and kind of shares holders of options will be entitled to receive will be adjusted in accordance with the terms of the plan in connection with the Pre-Offering Transactions consummated prior to this offering. See "Related Party Transactions—Pre-Offering Transactions."

Options granted under the 1998 option plan are not transferable by the holders thereof except by the laws of descent and distribution. Our board of directors has the right to establish such rules and regulations concerning the 1998 option plan and to make such determinations and interpretations of the terms thereof as it deems necessary or advisable.

2001 Stock Option Plan

The RBC Bearings Incorporated (f/k/a Roller Bearing Holding Company, Inc.) 2001 Stock Option Plan was adopted in fiscal 2002 and amended and restated on October 24, 2003. The terms of the 2001 option plan provide for the grant of options to purchase up to 403,421 shares of Class A common stock to our officers and employees of, and consultants (including members of our board of directors) to, us and our subsidiaries selected by the CEO to participate in the plan. Options granted may be either incentive stock options (under Section 422 of the Internal Revenue Code) or non-qualified stock options. The 2001 option plan, which expires in July, 2011, is to be governed our board of directors or a committee to which the board of directors delegates its responsibilities. As of January 1, 2005, there were outstanding options to purchase 186,396.5 shares of Class A common stock granted under the 2001 option plan, 127,730 of which were exercisable. Upon consummation of this offering, the 2001 Stock Option Plan will be frozen and no additional stock options will be awarded pursuant to the plan.

The exercise price of options granted under the 2001 option plan shall be determined by the board of directors, but in no event less than 100% of the Fair Market Value (as defined in the 2001 option plan) of the Class A common stock on the date of grant. Options granted under the 2001 option plan may be exercised during the period set forth in the agreement pursuant to which the options are granted, but in no event more than ten years following grant.

The 2001 Stock Option Plan provides that the number of shares of Class A common stock for which options may be granted under the plan are to be increased, and the number of shares for which outstanding options shall be exercisable, and the exercise price thereof, shall be adjusted upon the happening of stock dividends, stock splits, recapitalizations and certain other capital events regarding our Company or the Class A common stock. Upon any merger, consolidation or combination where shares of Class A common stock are converted into cash securities or other property, outstanding options shall be converted into the right to receive upon exercise the consideration as would have been payable in exchange for the shares of Class A common stock underlying such options had such options been exercised prior to such event. The number and kind of shares holders of options will be entitled to receive will be adjusted in accordance with the terms of the plan in connection with our Pre-Offering Transactions consummated prior to this offering. See "Related Party Transactions—Pre-Offering Transactions."

Options granted under the 2001 option plan are not transferable by the holders thereof except (1) by the laws of descent and distribution, (2) transfers to members of any holder's immediate family (which for purposes of the 2001 option plan shall be limited to the participant's children, grandchildren and spouse), (3) to one or more trusts for the benefit of such family members, or (4) to partnerships or limited liability companies in which such family members and/or trusts are the only partners or members; provided, that options may be transferred pursuant to sections (2) through (4) hereof only if the option expressly so provides, or as otherwise approved by the CEO or the board of directors in their discretion. Our board of directors has the right to establish such rules and regulations concerning the 2001 option plan and to make such determinations and interpretations of the terms thereof as it deems necessary or advisable.

2005 Long-Term Incentive Plan

We will adopt our 2005 Long-Term Incentive Plan effective upon the completion of this offering. The plan provides for grants of stock options, restricted stock and performance awards. Our directors, officers and other employees and persons who engage in services for us are eligible for grants under the plan. The purpose of the plan is to provide these individuals with incentives to maximize stockholder value and otherwise contribute to our success and to enable us to attract, retain and reward the best available persons for positions of responsibility.

A total of 6% of our fully-diluted shares of our common stock will be authorized for issuance under the plan, subject to adjustment in the event of a reorganization, stock split, merger or similar change in our corporate structure or the outstanding shares of common stock. Of this amount, 60% will be awarded to Dr. Hartnett at the time of this offering at the offering price and the remaining 40% will be reserved for grants to other employees. In connection with this offering, we will not be granting any shares of restricted stock, leaving all of the shares available for issuance under the plan. Our compensation committee will administer the plan. Our board also has the authority to administer the plan and to take all actions that the compensation committee is otherwise authorized to take under the plan. The terms and conditions of each award made under the plan, including vesting requirements, will be set forth consistent with the plan in a written agreement with the grantee.

Stock Options. Under the plan, the compensation committee or the board may award grants of incentive stock options and other non-qualified stock options. The compensation committee also has the authority to grant options that will become fully vested and exercisable automatically upon a change in control. The compensation committee may not, however, award to any one person in any calendar year options to purchase common stock equal to more than 10% of the total number of shares authorized under the plan, and it may not award incentive options first exercisable in any calendar year whose underlying shares have a fair market value greater than $100,000 determined at the time of grant.

The compensation committee will determine the exercise price and term of any option in its discretion, however, the exercise price may not be less than 100% of the fair market value of a share of common stock on the date of grant. In the case of any incentive stock option, the option must be exercised within 10 years of the date of grant. The exercise price of an incentive option awarded to a person who owns stock constituting more than 10% of our voting power may not be less than 110% of such fair market value on such date and the option must be exercised within five years of the date of grant.

Restricted Stock. Under the plan, the compensation committee may award restricted stock subject to the conditions and restrictions, and for the duration that it determines in its discretion.

Stock Appreciation Rights. Provided that our common stock is traded on an established securities market, the compensation committee may grant stock appreciation rights, or SARs, subject to the terms and conditions contained in the plan. Under the plan, the exercise price of an SAR must equal the fair market value of a share of our common stock on the date the SAR was granted. Upon exercise of a SAR, the grantee will receive an amount in shares of our common stock equal to the difference between the fair market value of a share of common stock on the date of exercise and the exercise price of the SAR, multiplied by the number of shares as to which the SAR is exercised.

Performance Awards. The compensation committee may grant performance awards contingent upon achievement by the grantee or by us, of set goals and objectives regarding specified performance criteria, over a specified performance cycle. Awards may include specific dollar-value target awards, performance units, the value of which is established at the time of grant, and/or performance shares, the value of which is equal to the fair market value of a share of common stock on the date of grant. The value of a performance award may be fixed or fluctuate on the basis of specified performance criteria. A performance award may be paid out in cash and/or shares of common stock or other securities.

Amendment and Termination of the Plan. The board may amend or terminate the plan in its discretion, except that no amendment will become effective without prior approval of our stockholders if such approval is necessary for continued compliance with the performance-based compensation exception of Section 162(m) of the Internal Revenue Code or any stock exchange listing requirements.

If not previously terminated by the board, the plan will terminate on the tenth anniversary of its adoption.

401(k) Plan

We maintain the Roller Bearing Company of America 401(k) Retirement Plan, or the 401(k) Plan, a plan established pursuant to Section 401(k) of the Internal Revenue Code, for the benefit of our non-union employees. All non-union employees who have completed six months of service with us are entitled to participate. Subject to various limits, employees are entitled to defer up to 25% of their annual salary on a pre-tax basis and up to an additional 10% of their annual salary on an after-tax basis. We previously matched 50% of an employee's pre-tax contribution up to 10% of annual salary. Effective October 1, 2001, we suspended matching contributions to the 401(k) Plan. Employees vest in our contributions ratably over three years.

Effective April 3, 2004, we resumed matching contributions to our 401(k) Plan at a rate of 25% of an employees' pre-tax contribution up to 4% of annual salary. We also maintain a smaller 401(k) plan for non-union employees at our Miller bearing facility. We also maintain three 401(k) plans for our union employees. Subject to various limits, union employees are entitled to defer up to 25% of their annual salary on a pre-tax basis. We make employer contributions (matching and, in some cases, non-elective contributions) based on requirements in applicable collective bargaining agreements.

Supplemental Retirement Plan

Effective September 1, 1996, we adopted a non-qualified supplemental retirement plan, or SERP, for a select group of highly compensated and management employees designated by our board of directors. The SERP allows eligible employees to elect to defer until termination of their employment the receipt of up to 25% of their current salary. We make contributions equal to the lesser of 50% of the deferrals or 3.5% of the employee's annual salary, which vest in full after three years of service following the effective date of the SERP. Accounts are paid, either in a lump sum or installments, upon retirement, death or termination of employment. Accounts are generally payable from our general assets although it is intended that we set aside in a "rabbi trust" invested in annuity contracts amounts necessary to pay benefits. Employees' rights to receive payments are subject to the rights of our creditors.

Compensation Committee Interlocks and Insider Participation

The current compensation of our executive officers, other than our Chief Executive Officer's, which was determined in accordance with his employment agreement with us, was determined by our Chief Executive Officer in consultations with our board of directors. Our compensation committee was formed on November 9, 2004, which has undertaken responsibility for oversight with respect to executive compensation issues. See "Management—Committees of our Board of Directors—Compensation Committee." No member of our compensation committee will serve as a member of the board of directors or compensation committee of an entity that has one or more executive officers serving as a member of our board of directors or compensation committee.

Dr. Hartnett Employment Agreement

On December 18, 2000, we entered into an employment agreement with Dr. Hartnett. Under the terms of the employment agreement, Dr. Hartnett was employed as our Chief Executive Officer. The term of Dr. Hartnett's employment agreement is set to expire on December 17, 2005. We expect to enter into an amended or new employment agreement on substantially similar terms to the current agreement described below.

Dr. Hartnett's current agreement provided for a base salary for the fiscal year ended April 3, 2004 of $560,442. Dr. Hartnett's base salary is subject to an automatic annual increase effective December 1 of each year during the term in a percentage amount equal to the greater of (i) five percent (5%) or (ii) the percentage change in the consumer price index for the prior year. Dr. Hartnett is also entitled to an annual performance bonus with respect to each fiscal year during which he remains an employee in an amount determined as a percentage of Dr. Hartnett's base salary, based on the amount by which our performance exceeds (or fails to meet) EBITDA targets in an operating plan.

The employment agreement also contains non-competition provisions prohibiting the Dr. Hartnett from competing against us during the term of the employment agreement and for two years thereafter without our prior written consent. Dr. Hartnett is also entitled to certain additional benefits (beyond those generally available to our employees) including medical and hospitalization insurance, and additional life insurance. We are also required to maintain an apartment in Los Angeles for use by Dr. Hartnett while on business.

RELATED PARTY TRANSACTIONS

Except as described below, since March 29, 2001, we have not been a party to, nor have we currently proposed, any transaction or series of similar transactions in which the amount exceeds $60,000, and in which any director, executive officer, holder of more than 5% of our common stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than compensation agreements and other agreements, which are described in the "Management" section of this prospectus. We believe that each of the following transactions, other than the loans to our executives, are on terms no less favorable than we could obtain from an unrelated third party.

Set forth below is a summary of certain agreements and arrangements, as well as other transactions between us and related parties which have taken place during our most recent fiscal year or agreements with respect to transactions entered into in our prior fiscal year among related parties and other material agreements which remain in effect as January 1, 2005.

Sale of Class B Exchangeable Convertible Participating Preferred Stock

On July 29, 2002, Dr. Hartnett purchased 10,000 shares and Whitney Investor, through an affiliate, purchased 230,000 shares of Class B Exchangeable Convertible Participating Preferred Stock of RBCI in exchange for gross proceeds of $24.0 million, referred to as the 2002 Class B Sale. In connection with the purchase, we paid a fee of $750,000 to Whitney, and we amended the terms of our management services agreement with Whitney. Following the closing of the sale, we utilized the proceeds of the sale and certain of our cash on hand to repurchase approximately $30.4 million in principal amount at maturity of our Discount Debentures. This repurchase satisfied our obligation to make a scheduled redemption payment relating to such debt in December 2002. For more information on Whitney Investor's beneficial ownership of our equity securities, see "Principal and Selling Stockholders."

The holders of our Class B preferred stock are entitled to an 8% per annum accumulating dividend and are further entitled to participate in any dividends paid to the holders of shares of our common stock. The Class B preferred stock is subject to conversion by us or exchange by the holders thereof. In either situation, each share of Class B preferred stock would yield a number of shares of our Class A common stock determined by reference to a formula set forth in our Amended and Restated Certificate of Incorporation (which includes anti-dilution protections), a number of shares of our Class C redeemable preferred stock also determined by reference to a formula set forth in our amended and restated certificate of incorporation and one share of Class D preferred stock. Any holders of Class C preferred stock would be entitled to an 8% per annum accumulating dividend. The Class C preferred stock is subject to redemption by us at our option but is not subject to mandatory redemption. The Class D preferred stock entitles the holders thereof, upon liquidation, to a payment determined by reference to a formula set forth in our amended and restated certificate of incorporation.

Dr. Hartnett Loan

In connection with a recapitalization which took place in May of 1997, we loaned Dr. Hartnett, our President and Chief Executive Officer, $500,000 to purchase shares of our capital stock. The loan does not bear interest and is due on the earlier of (i) June 23, 2007, (ii) the consummation of a sale of our company or (iii) the consummation of an initial public offering by us. The loan is secured by a pledge of Dr. Hartnett's shares of RBCI to us. The loan will be repaid in full prior to the consummation of this offering.

Amended and Restated Stockholders Agreement; Registration Rights

On February 6, 2003, in connection with an investment in us by Dr. Hartnett and Whitney V, L.P., or Whitney V, we entered into an Amended and Restated Stockholders' Agreement with Dr. Hartnett, Hartnett Family Investments, L.P., or the Hartnett Partnership, Whitney V and the Whitney Investor. We will amend this agreement to eliminate provisions related to transfer restrictions and provisions with respect to seats on our board of directors. We expect that Whitney Investor will have information and observer rights upon the completion of this offering. The stockholders' agreement also contains provisions with respect to registration rights that will remain in place after this offering is consummated. However, we will make other modifications and amendments as a result of the consummation of the Pre-Offering Transactions. The principal terms of this agreement include:

Piggyback Registration. Whenever we propose to register a public offering of our common stock, upon any request by Dr. Hartnett or Whitney Investor, we are required to include their shares in the offering, subject to customary cutback provisions.

Demand Registration. Commencing on the earlier of (1) 6 months after an effective date of an initial public offering of our common stock and (2) February 6, 2006, the holders of the majority of shares owned by Whitney Investor or permitted transferees shall have the right, on two occasions, to demand that we prepare and file with the Securities and Exchange Commission a registration statement to permit the public offering of the shares owned by those parties demanding such registration. This right will be made subject to a lock-up agreement between Whitney Investor and our underwriters in connection with this offering which will prevent Whitney Investor from exercising this right until the applicable lock-up period of 180 days has either expired or been waived.

We will bear all registration expenses, except underwriting discounts and selling commissions, incurred in connection with the registrations described above. We have agreed with Dr. Hartnett and Whitney Investor (or their permitted transferees) to indemnify each other against certain liabilities, including liabilities under federal and state securities laws.

Class A Preferred Stock Transaction

In February 2003, we raised capital from Dr. Hartnett and Whitney V, an affiliate of Whitney Investor. On February 6, 2003, Dr. Hartnett and Whitney V bought an aggregate of 1,008.41 shares of our Class A preferred stock for $3 per share, or an aggregate purchase price of approximately $3.0 million. The Class A preferred stock was the most senior of our capital stock in terms of liquidation preference and was entitled to an accrued dividend at 8% per annum. In connection with the sale of the Class A preferred stock, we paid to Whitney closing fees in the amount of $200,000, and reimbursed Whitney for expenses of approximately $35,000 incurred in connection with the purchase. Pursuant to the terms of the Purchase Agreement for the Class A preferred stock, on February 10, 2003, we exercised our option to repurchase such stock for the purchase price plus all accrued dividends. Accordingly, no Class A preferred stock is outstanding as of the date hereof. The purpose of this transaction was to provide an infusion to our equity capital and to the equity capital of our subsidiary RBCA in order to cure defaults of certain covenants contained in our credit agreement and in the indentures governing our Discount Debentures and previously outstanding RBCA notes. These defaults resulted from RBCA having made certain restricted payments in the fourth quarter of 2002 at a time when it technically was not permitted to do so. Such payments included (1) advances in the amounts of $519,000 and $450,000 that RBCA made to our subsidiary, Schaublin Holding, on December 10, 2002 and December 13, 2002, respectively, in connection with an acquisition by Schaublin of Myonic, and (2) a dividend in the amount of approximately $2.5 million that RBCA made to us on December 13, 2003 for purposes of financing an interest payment due on our Discount Debentures. As a result of the equity infusion, the defaults described above were cured or waived. This transaction was unanimously approved by the disinterested members of our board of directors and the

terms thereof were unanimously determined by such Boards of Directors to have been no less favorable to us than those that could be obtained on the date thereof in arm's-length dealings with a person who was not an affiliate of ours.

Amended and Restated Management Services Agreement

On July 29, 2002, in connection with the investment in us by Dr. Hartnett and an affiliate of Whitney Investor, we entered into an Amended and Restated Management Services Agreement with Whitney. Pursuant to the agreement, Whitney provides us certain services in exchange for an annual advisory fee of approximately $500,000 (subject to reduction upon the occurrence of specified circumstances). In addition, we paid Whitney a one-time fee of approximately $800,000. This agreement will be terminated upon consummation of this offering on terms agreeable to Whitney and us.

Pre-Offering Transactions

As of January 1, 2005, there were 2,475,461 shares of our Class A Common Stock and 100 shares of our Class B common stock outstanding. Additionally, as of such date, there were outstanding (1) warrants and options to purchase up to an additional 769,014 shares of our Class A common stock, (2) warrants and options to purchase 549,146 shares of our Class B common stock, and (3) 240,000 shares of our Class B exchangeable convertible participating preferred stock, or Class B preferred stock, which was convertible into shares of Class A common stock, Class C straight preferred stock and Class D straight preferred stock. Dr. Hartnett owned all of our Class B common stock, options and warrants to purchase Class B common stock, as well as 10,000 shares of our Class B preferred stock. Dr. Hartnett's shares of Class B common stock entitled him majority voting control with respect to our capital stock. The balance of 230,000 shares of Class B preferred stock was held by Whitney Investor.

The following transactions, referred to as the Pre-Offering Transactions, will occur immediately prior to the completion of this offering:

Recapitalization

Conversion of Class B Preferred Stock. Immediately prior to the consummation of the recapitalization, all outstanding shares of Class B preferred stock will be converted in accordance with their terms into 738,558 shares of Class A common stock, shares of Class C preferred stock and 240,000 shares of Class D preferred stock.

Redemption of Class C Preferred Stock. Immediately after the conversion of the Class B preferred stock, we shall use proceeds of this offering and the Refinancing Transaction to redeem all outstanding Class C preferred stock, including any accrued and unpaid dividends, for an aggregate redemption price determined in accordance with our pre-offering charter. Assuming a July 15, 2005 redemption date, the aggregate redemption price of the Class C preferred stock would be approximately $30.4 million. This amount will increase at a rate of 0.02% for each additional day that the Class C preferred stock remains outstanding as a result of preferred dividends which will continue to accrue thereon.

Reclassification of Class A Common Stock and Class B Common Stock. Immediately after the transactions described above, we will amend and restate our certificate to provide for, among other things, authorized capital stock of million shares of common stock and million shares of preferred stock. As a result, all of our Class A common stock and Class B common stock (including shares of Class A common stock issued upon conversion of the Class B preferred stock and repurchase of the Class D preferred stock) will be reclassified as common stock, on a one-for-one basis.

Stock Split. We will amend and restate our charter to effect a : stock split of our common stock.

Stock Options and Warrants. Following the reclassification of our shares, all outstanding options and warrants to purchase our Class A common stock and Class B common stock will become exercisable into shares of our newly created common stock in accordance with the terms of our stock option plans and stock option and warrant agreements. We will freeze our existing 1998 Stock Option Plan and 2001 Stock Option Plan such that no further awards or grants may be made under them. We will establish a new 2005 Long Term Incentive Plan which will provide for the issuance of stock options or other equity awards equal to 6% of our fully-diluted common stock, after giving effect to this offering. 60% of this amount will be awarded to Dr. Hartnett upon the consummation of this offering at the offering price, subject to vesting, and the remaining 40% will be reserved for grants to our employees (other than Dr. Hartnett) at the discretion of our board of directors. With the exception of options and warrants that are exercised in connection with this offering, all outstanding options and warrants to purchase common stock held by our employees will be subject to a lock-up period of not less than 180 days following the date of this prospectus. See "Use of Proceeds" and "Related Party Transactions—Pre-Offering Transactions."

Refinancing Transaction

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information known to us with respect to the beneficial ownership of our common stock as of , 2005 prior to the offering of common stock contemplated hereby, and as adjusted to reflect the Pre-Offering Transactions and the sale of common stock in this offering, by (1) each stockholder known by us to own beneficially more than 5% of our common stock, (2) each of the named executive officers, (3) each of our directors and (4) all of our directors and executive officers as a group. The table below assumes no exercise of the underwriters' over-allotment option. Beneficial ownership is determined in accordance with the rules of the SEC. Such rules provide that in computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options or warrants held by that person that are currently exercisable or will become exercisable within 60 days after , 2005 are deemed outstanding. Such shares are not deemed outstanding for purposes of computing percentage ownership of any other person.

Some of the selling stockholders will be selling shares in this offering that they will acquire by exercising options through a net share settlement.

Dr. Hartnett is offering shares, a significant portion of which he will acquire upon exercising options in connection with this offering. Of these shares, will be sold through a limited partnership, Hartnett Family Investments, L.P., of which Dr. Hartnett is a general partner.

Unless otherwise indicated in the footnotes below (1) the persons and entities named in the table have sole voting and investment power with respect to all shares beneficially owned, subject to community property laws where applicable and (2) unless otherwise indicated, the address of each of the individuals listed in the table is RBC Bearings Incorporated, One Tribology Center, Oxford, CT 06478.

	Shares Beneficially Owned Prior to the Offering							Shares Beneficially Owned After the Offering
Name(a)	Common Stock		Percentage of Common Stock		Number of Shares Offered	Common Stock		Percentage of Common Stock
Dr. Michael J. Hartnett		(a)		%			%		%
Daniel A. Bergeron
Phillip H. Beausoleil
Richard J. Edwards
Thomas C. Crainer
William P. Killian	*	(c)	*					*
Robert Anderson	*	(b)	*					*
Richard R. Crowell	*	(b)	*					*
Dr. Amir Faghri	*	(b)	*					*
Michael Stone(e)		(e)
Whitney RBHC Investor, LLC(g)		(g)
Hartnett Family Investments, L.P.		(h)

All directors and officers as a group (11 persons)		(i)	100.0	%		100.0	%

*: Less than 1%

(a) Consists of (1) options granted to Dr. Hartnett under the 1998 Stock Option Plan to purchase up to shares of our common stock that are currently exercisable or exercisable within 60 days of

2005 (2) the Hartnett Option, and (3) shares of our common stock. The above amount does not include shares of common stock beneficially owned by Dr. Hartnett as a result of his interest in Hartnett Family Investments, L.P. (the "Hartnett Partnership"). Dr. Hartnett would be deemed to beneficially own at total of shares of common stock, or % of our common stock including the interests of the Hartnett Partnership. See footnotes (i) and (j) below.

(b) Consists of shares of our common stock issuable upon exercise of stock options that are currently exercisable or exercisable within 60 days of, 2005.

(c) Consists of shares of our common stock issuable upon exercise of stock options currently exercisable or exercisable within 60 days of , 2005 Mr. Killian maintains his address at Unit 1801/1802, 888 Boulevard of the Arts, Sarasota, Florida 34236.

(d) Mr. Stone maintains his address at c/o Whitney & Co., 177 Broad Street, Stamford, Connecticut, 06901.

(e) Shares of common stock owned by Whitney RBHC Investor, LLC. The Managing Member of Whitney RBHC Investor, LLC is Whitney V, L.P., the general partner of which is Whitney Equity Partners V, LLC. Mr. Stone is a Managing Member of Whitney Equity Partners V, LLC and for the purposes of Section 13 of the Exchange Act, he may be deemed to share voting and dispositive power over such shares and to be a beneficial owner of such securities. Mr. Stone disclaims beneficial ownership of securities held by Whitney RBHC Investor, LLC, except to the extent of his pecuniary interest in such securities.

(f) Whitney RBHC Investor, LLC maintains its address at 177 Broad Street, Stamford, Connecticut, 06901.

(g) Shares of common stock, owned by Whitney RBHC Investor, LLC. The Managing Member of Whitney RBHC Investor, LLC is Whitney V, L.P. Whitney V, L.P. disclaims beneficial ownership of such securities, except to the extent of his pecuniary interest.

(h) Shares of common stock owned by Hartnett Family Investments, L.P., a Delaware limited partnership, whose general partner is Dr. Hartnett. Dr. Hartnett, by virtue of his general partnership interest, would be deemed to beneficially own all of the shares of Hartnett Family Investments, L.P.

(i) Includes shares of common stock beneficially owned by Dr. Hartnett as a result of his general partnership interest in the Hartnett Partnership.

DESCRIPTION OF CAPITAL STOCK

General

Pursuant to the Pre-Offering Transactions which will take place immediately prior to completion of this offering, and upon completion of the offering we will be authorized to issue shares of common stock, $0.01 par value, and shares of preferred stock, $0.01 par value. In addition, upon completion of this offering, there will be no preferred stock outstanding, as all of the outstanding preferred stock will be converted into shares of common stock or will be redeemed or repurchased with a portion of the net proceeds of this offering. See "Use of Proceeds" and "Related Party Transactions—Pre-Offering Transactions." As of January 1, 2005, there were 2,481,007 shares of our Class A common stock and 100 shares of our Class B common stock outstanding. Additionally, as of such date, there were outstanding (1) warrants and options to purchase up to an additional 760,494 shares of our Class A common stock, (2) warrants and options to purchase 549,146 shares of our Class B common stock, and (3) 240,000 shares of our Class B exchangeable convertible participating preferred stock, or Class B preferred stock, which was convertible into shares of Class A common stock, Class C straight preferred stock and Class D straight preferred stock. Dr. Hartnett owned all of our Class B common stock, options and warrants to purchase Class B common stock, as well as 10,000 shares of our Class B preferred stock. Dr. Hartnett's shares of Class B common stock entitled him majority voting control with respect to our capital stock. The balance of 230,000 shares of Class B preferred stock was held by Whitney Investor. The following description of our capital stock does not purport to be complete and is subject to and qualified in its entirety by our amended and restated certificate of incorporation and bylaws, which are included as exhibits to the Registration Statement of which this prospectus forms a part, and by the provisions of applicable Delaware law.

Common Stock

Upon the completion of this offering, there will be shares of common stock outstanding and shares reserved for issuance under our stock option plans, of which options to purchase shares at an average option price of $ have been issued. The holders of common stock will be entitled to one vote per share on all matters to be voted upon by the stockholders. Subject to preferences that may be applicable to any outstanding preferred stock, the holders of common stock will be entitled to receive ratably such dividends, if any, as may be declared from time to time by the board of directors out of funds legally available for that purpose. In the event of a liquidation, dissolution or winding up of our company, the holders of common stock will be entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock, if any, then outstanding. The common stock will have no preemptive or conversion rights or other subscription rights. There will be no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock will be fully paid and nonassessable, and the shares of common stock to be issued upon the closing of this offering will be fully paid and nonassessable.

Preferred Stock

Pursuant to our amended and restated charted to be filed prior to the completion of this offering, our board of directors will be authorized, subject to any limitations prescribed by law, without stockholder approval, from time to time to issue up to an aggregate of shares of preferred stock, $ par value per share, in one or more series, each of the series to have such rights and preferences, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be determined by our board of directors. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of holders of any preferred stock that may be issued in the future. Issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect

of making it more difficult for others to acquire, or of discouraging others from attempting to acquire, a majority of our outstanding voting stock. We have no present plans to issue any shares of preferred stock.

Delaware Anti-Takeover Law and Charter and Bylaw Provisions

Provisions of Delaware law and our certificate of incorporation and bylaws could make it more difficult to acquire us by means of a tender offer, a proxy contest or otherwise and the removal of incumbent officers and directors. These provisions, summarized below, are expected to discourage types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to first negotiate with us. We believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms.

We are subject to Section 203 of the Delaware General Corporation Law, an anti-takeover law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years following the date the person became an interested stockholder, unless (with certain exceptions) the "business combination" or the transaction in which the person became an interested stockholder is approved in a prescribed manner. Generally, a "business combination" includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. Generally, an "interested stockholder" is a person who, together with affiliates and associates, owns (or within three years prior to the determination of interested stockholder status, did own) 15% or more of a corporation's voting stock. The existence of this provision would be expected to have an anti-takeover effect with respect to transactions not approved in advance by the board of directors, including discouraging attempts that might result in a premium over the market price for the shares of common stock held by stockholders.

Registration Rights

Subject to limitations contained in our Amended and Restated Stockholders Agreement dated February 6, 2003, between us, Dr. Hartnett, the Hartnett Partnership and Whitney Investor, the holders of the majority of shares owned by Whitney Investor or its affiliates or permitted transferees shall have the right, on two occasions, to demand that we prepare and file with the Securities and Exchange Commission a registration statement to permit the public offering of the shares owned by those parties demanding such registration. This right will be made subject to a lock-up agreement between Whitney Investor and our underwriters in connection with this offering which, unless waived, will prevent Whitney Investor from exercising this right until 180 days after the date of this Prospectus. Whenever we propose to register a public offering of our common stock, upon any request by Dr. Hartnett or Whitney Investor, we are required to include their shares in the offering, subject to customary cutback provisions.

Transfer Agent and Registrar

The transfer agent and registrar for the common stock is .

DESCRIPTION OF CERTAIN INDEBTEDNESS

Senior Credit Facility

On June 29, 2004, we entered into a senior credit facility totaling $165 million, or the Senior Credit Facility, summarized below. The following description does not purport to be complete and is qualified in its entirety by reference to the credit agreement, which is available from us upon request.

The Senior Credit Facility consists of (1) the 6.5-year $55.0 million Revolving Credit Facility (including the $25.0 million letter of credit subfacility available for the issuance of letters of credit) and (2) the 6.5-year $110.0 million Term Loan. The credit agreement requires us to make annual amortization payments (payable in quarterly installments) equal to 1% of the balance of the Term Loan in years one through six and the remaining balance is due at maturity in 2010.

Mandatory prepayments in respect of the Term Loan or permanent reductions to the commitments under the Revolving Credit Facility, as applicable, are required in an amount equal to, (a) 100% of the net cash proceeds of all asset sales and dispositions by us or our and its subsidiaries, subject to certain exceptions, (b) 100% of the net cash proceeds from extraordinary receipts (including, without limitation, proceeds from certain key-man life policies) and (c) 100% of the net cash proceeds from equity issuances by us and our subsidiaries, subject to certain exceptions; provided that in the event of certain qualified public offerings of equity securities by us, net cash proceeds thereof shall be used first to repay our outstanding Discount Debentures until paid in full; second 50% of any remaining proceeds must be used to repay our Second Lien Term Loan and third, any remaining proceeds, up to 50% may be used to make restricted payments, including redemptions of our common and preferred stock, and up to 50% may be used to repay our Second Lien Term Loan and any remaining unused balance may be used for general corporate purposes. This offering will constitute a qualified public offering as defined under the Senior Credit Facility. Accordingly, all of the outstanding Discount Debentures will be paid in full out of the proceeds of this offering.

Voluntary prepayments and commitment reductions are permitted in whole or in part, without premium or penalty, subject to minimum prepayment or reduction requirements, provided that voluntary prepayments of LIBOR loans on a date other than the last day of the relevant interest period will be subject to the payment of customary breakage costs, if any.

All of our obligations under the Senior Credit Facility will be unconditionally guaranteed by us and each existing and subsequently acquired or organized subsidiary other than foreign subsidiaries after the consummation of this offering. The obligations under the Term Loan and the Revolving Credit Facility (including the guarantees) are secured by substantially all of our present and future assets and all present and future assets of each guarantor, including but not limited to (1) a first-priority pledge of all of RBCA's outstanding capital stock owned by us, (2) a first-priority pledge of all of the outstanding capital stock owned by us or any guarantor in any domestic subsidiary, (3) a first-priority pledge of 66% and 65.34% of the outstanding capital stock of RBC Schaublin Holdings S.A. and RBC de Mexico S de R. L. de C.V., respectively and (4) a perfected first-priority security interests in all of our present and future assets and the present and future assets of each guarantor, subject to certain limited exceptions.

The Revolving Credit Facility bears interest at a floating rate, and at RBCA's option so long as no event of default has occurred or is continuing, of either the higher of the base rate on corporate loans or the federal funds rate plus 50 basis points, plus 1.75%; or the offered rate for deposits on U.S. Dollars in the London interbank market for the relevant interest period which is published by the British Bankers Association, or LIBOR rate, plus 3.00%. The Term Loan bears interest at a floating rate, at our option so long as no event of default has occurred or is continuing, of either the higher of the base rate on corporate loans posted by at least 75% of the nation's 30 largest banks published in The Wall Street Journal, or Base Rate, or the federal funds rate plus 50 basis points, plus 2.50%; or

LIBOR plus 3.75%. As of January 1, 2005, the blended interest rate on the Senior Credit Facility and Second Lien Term Loan (discussed below) was 7.8%.

In addition, the lenders under the Revolving Credit Facility are entitled to be paid a fee on unused commitments under that facility at a rate equal to 0.50% per annum, payable monthly in arrears. With respect to the letter of credit subfacility, an additional fee, equal to the product of the average daily undrawn face amount of all letters of credit issued, guaranteed or supported by risk participation agreements multiplied by a per annum rate equal to the applicable margin applied to LIBOR rate loans, i.e. 3.0% is payable monthly in arrears together with any fees and charges incurred by the administrative agent to a letter of credit issuer.

During the existence of any default under the credit agreement, the applicable margins applied to all obligations under the senior credit facilities would increase by 2% per year.

The credit agreement documentation contains customary representations and warranties and customary covenants restricting our, and our domestic subsidiaries' ability to, among other things and subject to various exceptions, (1) declare dividends, make distributions or redeem or repurchase capital stock, (2) prepay, redeem or repurchase other debt, (3) incur liens or grant negative pledges, (4) make loans and investments, (5) incur additional indebtedness or guarantees, (6) amend or otherwise alter our organizational documents or any debt and other material agreements, (7) make capital expenditures, (8) engage in mergers, acquisitions and asset sales, (9) conduct transactions with affiliates, (10) alter the nature of our businesses, (11) change our fiscal quarter or our fiscal year, (12) engage in "sale-leaseback" transactions, (13) cancel indebtedness owing to us or our subsidiaries or (14) prohibit restricted subsidiaries from funding dividends or distributions or repaying intercompany loans. We and our subsidiaries also will be required to comply with specified financial covenants (including, without limitation, a leverage ratio and a fixed charge coverage ratio) and various affirmative covenants.

Events of default under the credit agreement include, but are not limited to, (1) our failure to pay principal, interest, fees or other amounts under the credit agreement when due or after expiration of a grace period, (2) any representation or warranty proving to have been materially incorrect when made, (3) covenant defaults subject, with respect to certain covenants, to a grace period, (4) bankruptcy events, (5) a cross default to certain other debt, (6) unsatisfied final judgments over a threshold, (7) a change of control, (8) ERISA defaults and (9) the invalidity or impairment of any loan document or any security interest.

In addition, the credit agreement includes customary provisions regarding breakage or redeployment costs incurred in connection with prepayments, changes in capital adequacy and capital requirements or their interpretation, illegality, unavailability, reserves without proration or offset and payments free and clear of withholding.

We expect to amend or refinance our existing Senior Credit Facility to increase our borrowings under our Senior Credit Facility by $ million in connection with the Refinancing Transaction. The proceeds from the Refinancing Transaction, together with the proceeds of this offering, will be used for for the purposes described under the heading "Use of Proceeds." See "Pre-Offering Transactions—Refinancing Transactions." See "Pre-Offering Transactions," "The Offering" and "Use of Proceeds."

Second Lien Term Loan

On June 29, 2004, we entered into a Second Lien Term Loan totaling $45.0 million with a seven year maturity. The Second Lien Term Loan is secured by a second priority security interest in the assets secured by the Term Loan and the Revolving Credit Facility set forth above, pursuant to an intercreditor agreement. The Second Lien Term Loan bears interest at a floating rate, at RBCA's option so long as no event of default has occurred or is continuing, of either the higher of the Base Rate or the federal funds rate plus 50 basis points, plus 7.25%; or LIBOR plus 8.50%. All of our

outstanding indebtedness under the Second Lien Term Loan will be repaid out of the proceeds of this offering and the Refinancing Transaction.

Swiss Credit Facility

On December 8, 2003, Schaublin Holding S.A. entered into a bank credit facility with Credit Suisse Zurich providing for 10.0 million swiss francs or approximately $8.0 million in term loan, or Swiss Term Loan, and up to 2.0 million swiss francs, or approximately $1.6 million, of revolving credit loans and letters of credit, referred to as the Swiss Revolver. We have pledged 99.4% of the present and future share capital of Schaublin (1,366 shares) to the agent under this credit facility to secure Schaublin's obligation thereunder. This credit facility contains customary representation and warranties, affirmative and negative covenants and events of defaults, as well as certain financial covenants applicable solely to Schaublin. The Swiss Term Loan is payable in semi-annual installments ranging from approximately $0.4 million, to approximately $1.0 million and matures on March 31, 2009. The Swiss Terms Loan bears interest at variable rates, calculated at LIBOR plus a margin which varies based on debt capacity ratios determined annually, payable quarterly. On November 8, 2004, we amended the Swiss Credit Facility to increase the Swiss Revolver to 4.0 million swiss francs, or approximately $3.5 million. As of January 1, 2005, $7.5 million was outstanding under the Swiss Term Loan, and no loans or letters of credit were outstanding under the Swiss Revolver.

Industrial Revenue Bonds

During fiscal 1995, we entered into a loan agreement with the South Carolina Jobs Economic Development Authority, or SC JEDA, which provides for borrowings up to $10.7 million under two industrial development revenue bonds, or IRBs. During fiscal 1999 we entered into an additional loan agreement with the SC JEDA which provides for borrowings up to $3.0 million under an industrial development revenue bond. Additionally, during fiscal 2000, we entered into a loan agreement with the California Infrastructure and Economic Development Bank, or CIEDB, which provides for borrowings up to $4.8 million under an industrial development revenue bond (the CIEDB Series 1999 IRB). The proceeds from these IRBs are restricted for working capital requirements and capital expenditure purposes.

On March 1, 2002, we retired the unused portion of the SC JEDA Series 1998 IRB of $1.8 million by asking the state of South Carolina to collapse the bond to just the amount of money that had been used, thereby reducing the debt and the restricted marketable securities balances by $1.8 million.

As of January 1, 2005, $18.2 million of the proceeds have been expended (including accumulated interest of $1.6 million), and the remaining $12.0 million is invested by the trustee in marketable securities.

The SC JEDA Series 1994 A IRB, SC JEDA Series 1994 B IRB and the SC JEDA Series 1998 IRB are secured by a letter of credit issued under the letter of credit subfacility under the Revolving Credit Facility. The CIEDB Series 1999 IRB is likewise secured by an irrevocable direct-pay letter of credit issued by one of our existing lenders.

As of January 1, 2005, we had $16.7 million aggregate principal amount of our industrial revenue bonds outstanding.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, we will have shares of our common stock outstanding. If the underwriters exercise their over-allotment option, we will have a total of shares of our common stock outstanding. Of these shares, all of the shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, unless such shares are purchased by "affiliates" as that term is defined in Rule 144 under the Securities Act. The remaining shares of common stock held by existing stockholders are "restricted securities" as that term is defined in Rule 144 under the Securities Act, described below. Subject to such restrictions and applicable law, the holders of shares of common stock will be free to sell any and all shares of common stock that they beneficially owns at various times commencing 180 days after the date of this prospectus. The holders of shares of common stock will be free to sell any shares of common stock they beneficially own on , 2005.

We cannot make any predictions as to the number of shares that may be sold in the future or the effect, if any, that sales of these shares, or the availability of these shares for future sale, will have on the prevailing market prices of our common stock. Sales of a significant number of shares of our common stock in the public market, or the perception that these sales could occur, could adversely affect prevailing market prices of our common stock and could impair our ability to raise equity capital in the future.

Lock-Up Agreements

We, our officers and directors and substantially all of our stockholders, option holders and warrant holders have agreed, subject to exceptions, that we or they will not, for a period of 180 days after the date of this prospectus (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, or otherwise dispose of or transfer any shares of our common stock or any securities convertible into or exchangeable or exercisable for common stock, or file, or cause to be filed, any registration statement under the Securities Act of 1933, as amended, with respect to any of the foregoing securities, (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the locked-up securities, whether any such swap or transaction is to be settled by delivery of common stock or other securities, in cash or otherwise or (iii) publicly disclose the intention to make any of the foregoing transactions with respect to the locked-up securities, without the prior written consent of Merrill Lynch & Co., which may release all or a portion of the shares subject to this lock-up agreement at any time without prior notice.

Rule 144

In general, under Rule 144, as currently in effect, beginning 90 days after the date of this prospectus, a person who has beneficially owned shares of our common stock for at least one year would be entitled to sell within any three-month period a number of shares that does not exceed the greater of: 1% of the number of shares of common stock then outstanding, which will equal approximately shares immediately after this offering; or the average weekly trading volume of our common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.

Sales under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us.

Rule 144(k)

Under Rule 144(k), a person who is not deemed to have been one of our affiliates at any time during the 90 days preceding a sale, and who has beneficially owned the shares proposed to be sold for

at least two years, including the holding period of any prior owner other than an affiliate, is entitled to sell the shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.

Rule 701

Rule 701, as currently in effect, permits resales of shares in reliance upon Rule 144 but without compliance with certain restrictions, including the holding period requirement, of Rule 144. Any of our employees, officers, directors or consultants who purchased shares under a written compensatory plan or contract may be entitled to rely on the resale provisions of Rule 701. Rule 701 permits affiliates to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. Rule 701 further provides that non-affiliates may sell their shares in reliance on Rule 144 without having to comply with the holding period, public information, volume limitation or notice provisions of Rule 144. All holders of Rule 701 shares are required to wait until 90 days after the date of this prospectus before selling their shares. However, in addition substantially all Rule 701 shares are subject to lock-up agreements and will only become eligible for sale at the earlier of the expiration of the 180-day lock-up agreements or no sooner than 90 days after the offering upon obtaining the prior written consent of Merrill Lynch & Co.

Stock Option

We intend to file a Registration Statement on Form S-8 registering shares of common stock subject to outstanding options or reserved for future issuance under our stock plans. As of , 2005, options to purchase a total shares were outstanding and shares were reserved for future issuance under our stock plans. Common stock issued upon exercise of outstanding vested options, other than common stock issued to our affiliates is available for immediate resale in the open market, subject to the applicable lock-up agreements, as described above, and in compliance with Rule 144. Substantially all of our optionholders will execute 180-day lock-up agreements with the underwriters.

Registration Rights

Beginning 180 days after the date of this offering, holders of shares of our common stock will be able to require us to conduct a registered public offering of their shares. They have demand rights on two occasions. In addition, holders of shares of our common stock have piggyback registration rights to have their shares included for sale in subsequent registered offerings of our common stock, subject to customary cut-back provisions. See "Description of Capital Stock—Registration Rights." Registration of such shares under the Securities Act would, except for shares purchased by affiliates, result in such shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of such registration.

CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS

UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS

The following is a summary of the material U.S. federal income and estate tax consequences of the acquisition, ownership and disposition of our common stock by a non-U.S. holder. As used in this summary, the term "non-U.S. holder" means a beneficial owner of our common stock that is not, for United States federal income tax purposes:

•: an individual who is a citizen or resident of the United States;
•: a corporation (or other entity classified as a corporation for these purposes) created or organized in or under the laws of the United States or of any political subdivision of the United States;
•: a partnership (including any entity or arrangement classified as a partnership for these purposes);
•: an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or
•: a trust, if (1) a United States court is able to exercise primary supervision over the trust's administration and one or more "United States persons" (within the meaning of the U.S. Internal Revenue Code) has the authority to control all of the trust's substantial decisions, or (2) the trust has a valid election in effect under applicable U.S. Treasury regulations to be treated as a "United States person."

An individual may be treated as a resident of the United States in any calendar year for United States federal income tax purposes, instead of a nonresident, by, among other ways, being present in the United States on at least 31 days in that calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year. For purposes of this calculation, an individual would count all of the days present in the current year, one-third of the days present in the immediately preceding year and one-sixth of the days present in the second preceding year. Residents are taxed for U.S. federal income purposes as if they were U.S. citizens.

If a partnership or other pass-through entity (including an entity or arrangement treated as a partnership or other type of pass-through entity for U.S federal income tax purposes) owns our common stock, the tax treatment of a partner or beneficial owner of the partnership or other pass-through entity may depend upon the status of the partner or beneficial owner and the activities of the partnership or entity and by certain determinations made at the partner or beneficial owner level. Partners and beneficial owners in partnerships or other pass-through entities that own our common stock should consult their own tax advisors as to the particular U.S. federal income and estate tax consequences applicable to them.

This summary does not discuss all of the aspects of U.S. federal income and estate taxation that may be relevant to a non-U.S. holder in light of the non-U.S. holder's particular investment or other circumstances. In particular, this summary only addresses a non-U.S. holder that holds our common stock as a capital asset (generally, investment property) and does not address:

•: special U.S. federal income tax rules that may apply to particular non-U.S. holders, such as financial institutions, insurance companies, tax-exempt organizations, U.S. expatriates, and dealers and traders in securities or currencies;
•: non-U.S. holders holding our common stock as part of a conversion, constructive sale, wash sale or other integrated transaction or a hedge, straddle or synthetic security;
•: any U.S. state and local or non-U.S. or other tax consequences; and

•: the U.S. federal income or estate tax consequences for the beneficial owners of a non-U.S. holder.

This summary is based on provisions of the U.S. Internal Revenue Code of 1986, as amended, applicable U.S. Treasury regulations and administrative and judicial interpretations, all as in effect or in existence on the date of this prospectus. Subsequent developments in U.S. federal income or estate tax law, including changes in law or differing interpretations, which may be applied retroactively, could have a material effect on the U.S. federal income and estate tax consequences of purchasing, owning and disposing of our common stock as set forth in this summary. Each non-U.S. holder should consult a tax advisor regarding the U.S. federal, state, local and non-U.S. income and other tax consequences of acquiring, holding and disposing of our common stock.

Dividends

We do not anticipate paying cash dividends on our common stock in the foreseeable future. See "Dividend Policy." In the event, however, that we pay dividends on our common stock, we will have to withhold a U.S. federal withholding tax at a rate of 30%, or a lower rate under an applicable income tax treaty, from the gross amount of the dividends paid to a non-U.S. holder. Non-U.S. holders should consult their own tax advisors regarding their entitlement to benefits under a relevant income tax treaty.

In order to claim the benefit of an applicable income tax treaty, a non-U.S. holder will be required to provide a properly executed U.S. Internal Revenue Service Form W-8BEN (or other applicable form) in accordance with the applicable certification and disclosure requirements. Special rules apply to partnerships and other pass-through entities and these certification and disclosure requirements also may apply to beneficial owners of partnerships and other pass-through entities that hold our common stock. A non-U.S. holder that is eligible for a reduced rate of U.S. federal withholding tax under an income tax treaty may obtain a refund or credit of any excess amounts withheld by filing an appropriate claim for a refund with the U.S. Internal Revenue Service. Non-U.S. holders should consult their own tax advisors regarding their entitlement to benefits under a relevant income tax treaty and the manner of claiming the benefits.

Dividends that are effectively connected with a non-U.S. holder's conduct of a trade or business in the United States and, if required by an applicable income tax treaty, are attributable to a permanent establishment maintained by the non-U.S. holder in the United States, will be taxed on a net income basis at the regular graduated rates and in the manner applicable to United States persons. In that case, we will not have to withhold U.S. federal withholding tax if the non-U.S. holder provides a properly executed U.S. Internal Revenue Service Form W-8ECI (or other applicable form) in accordance with the applicable certification and disclosure requirements. In addition, a "branch profits tax" may be imposed at a 30% rate, or a lower rate under an applicable income tax treaty, on dividends received by a foreign corporation that are effectively connected with the conduct by that foreign corporation of a trade or business in the United States.

Gain on Disposition of Common Stock

A non-U.S. holder generally will not be taxed on any gain recognized on a disposition of our common stock unless:

•: the gain is effectively connected with the non-U.S. holder's conduct of a trade or business in the United States and, if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by the non-U.S. holder in the United States; in these cases, the gain will be taxed on a net income basis at the regular graduated rates and in the manner applicable to United States persons (unless an applicable income tax treaty provides otherwise) and, if the

non-U.S. holder is a foreign corporation, the "branch profits tax" described above may also apply;

•: the non-U.S. holder is an individual who holds our common stock as a capital asset, is present in the United States for more than 182 days in the taxable year of the disposition and meets other requirements (in which case, except as otherwise provided by an applicable income tax treaty, the gain, which may be offset by U.S. source capital losses, generally will be subject to a flat 30% U.S. federal income tax, even though the non-U.S. holder is not considered a resident alien under the U.S. Internal Revenue Code); or
•: we are or have been a "U.S. real property holding corporation" for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition or the period that the non-U.S. holder held our common stock.

Generally, a corporation is a "U.S. real property holding corporation" if the fair market value of its "U.S. real property interests" equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. The tax relating to stock in a U.S. real property holding corporation generally will not apply to a non-U.S. holder whose holdings, direct and indirect, at all times during the applicable period, constituted 5% or less of our common stock, provided that our common stock was regularly traded on an established securities market. We believe that we are not currently, and we do not anticipate becoming in the future, a U.S. real property holding corporation.

We have applied to have our common stock listed on a nationally recognized U.S. securities exchange. Although not free from doubt, our common stock should be considered to be regularly traded on an established securities market for any calendar quarter during which it is regularly quoted on the securities exchange by brokers or dealers that hold themselves out to buy or sell our common stock at the quoted price. If we were to be a U.S. real property holding corporation and if our common stock were not considered to be regularly traded on a nationally recognized securities exchange at any time during the applicable calendar year, then a non-5% holder would be taxed for U.S. federal income tax purposes on any gain realized on the disposition of our common stock on a net income basis as if the gain were effectively connected with the conduct of a U.S. trade or business by the non-5% holder during the taxable year and, in such case, the person acquiring our common stock from a non-5% holder generally would have to withhold 10% of the amount of the proceeds of the disposition. Such withholding may be reduced or eliminated pursuant to a withholding certificate issued by the U.S. Internal Revenue Service in accordance with applicable U.S. Treasury regulations. We urge all non-U.S. holders to consult their own tax advisors regarding the application of these rules to them.

Federal Estate Tax

Our common stock that is owned or treated as owned by an individual who is not a U.S. citizen or resident of the United States (as specially defined for U.S. federal estate tax purposes) at the time of death will be included in the individual's gross estate for U.S. federal estate tax purposes, unless an applicable estate tax or other treaty provides otherwise and, therefore, may be subject to U.S. federal estate tax.

Information Reporting and Backup Withholding Tax

Dividends paid to a non-U.S. holder may be subject to U.S. information reporting and backup withholding. A non-U.S. holder will be exempt from backup withholding if the non-U.S. holder provides a properly executed U.S. Internal Revenue Service Form W-8BEN or otherwise meets documentary evidence requirements for establishing its status as a non-U.S. holder or otherwise establishes an exemption.

The gross proceeds from the disposition of our common stock may be subject to U.S. information reporting and backup withholding. If a non-U.S. holder sells our common stock outside the United States through a non-U.S. office of a non-U.S. broker and the sales proceeds are paid to the non-U.S. holder outside the United States, then the U.S. backup withholding and information reporting requirements generally will not apply to that payment. However, U.S. information reporting, but not U.S. backup withholding, will apply to a payment of sales proceeds, even if that payment is made outside the United States, if a non-U.S. holder sells our common stock through a non-U.S. office of a broker, such broker does not have documentary evidence in its files that the non-U.S. holder is not a United States person and certain other conditions are met (unless the non-U.S. holder otherwise establishes an exemption) and the broker:

•: is a United States person;
•: derives 50% or more of its gross income in specified periods from the conduct of a trade or business in the United States;
•: is a "controlled foreign corporation" for U.S. federal income tax purposes; or
•: is a foreign partnership, if at any time during its tax year either one or more of its partners are United States persons who in the aggregate hold more than 50% of the income or capital interests in the partnership or the foreign partnership is engaged in a United States trade or business.

If a non-U.S. holder receives payments of the proceeds of a sale of our common stock to or through a U.S. office of a broker, the payment is subject to both U.S. backup withholding and information reporting unless the non-U.S. holder provides a properly executed U.S. Internal Revenue Service Form W-8BEN certifying that the non-U.S. Holder is not a "United States person" or the non-U.S. holder otherwise establishes an exemption.

A non-U.S. holder generally may obtain a refund of any amounts withheld under the backup withholding rules that exceed the non-U.S. holder's U.S. federal income tax liability by filing a refund claim with the U.S. Internal Revenue Service.

UNDERWRITING

We intend to offer the shares through the underwriters. Merrill Lynch, Pierce, Fenner & Smith Incorporated, KeyBanc Capital Markets, a division of McDonald Investments, Inc., and Jefferies & Company, Inc. are acting as representatives of the underwriters named below. Subject to the terms and conditions described in a purchase agreement among us, the selling stockholders and the underwriters, we and the selling stockholders have agreed to sell to the underwriters, and the underwriters severally have agreed to purchase from us and the selling stockholders, the number of shares listed opposite their names below.

Underwriter		Number of Shares
Merrill Lynch, Pierce, Fenner & Smith Incorporated
KeyBanc Capital Markets, a division of McDonald Investments, Inc.
Jefferies & Company, Inc.

Total

The underwriters have agreed to purchase all of the shares sold under the purchase agreement if any of these shares are purchased. If an underwriter defaults, the purchase agreement provides that the purchase commitments of the nondefaulting underwriters may be increased or the purchase agreement may be terminated.

We and the selling stockholders have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.

The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the purchase agreement, such as the receipt by the underwriters of officer's certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

Commissions and Discounts

The representatives have advised us and the selling stockholders that the underwriters propose initially to offer the shares to the public at the initial public offering price on the cover page of this prospectus and to dealers at that price less a concession not in excess of $ per share. The underwriters may allow, and the dealers may reallow, a discount not in excess of $ per share to other dealers. After the initial public offering, the public offering price, concession and discount may be changed.

The following table shows the public offering price, underwriting discount and proceeds before expenses to us and the selling stockholders. The information assumes either no exercise or full exercise by the underwriters of their over-allotment option.

	Per Share	Without Option	With Option
Public offering price	$	$	$
Underwriting discount	$	$	$
Proceeds, before expenses, to us	$	$	$
Proceeds, before expenses, to the selling stockholders	$	$	$

The expenses of the offering, not including the underwriting discount, are estimated at $ and are payable by us.

Over-allotment Option

We have granted an option to the underwriters to purchase up to additional shares at the public offering price less the underwriting discount. The underwriters may exercise this option for 30 days from the date of this prospectus solely to cover any over-allotments. If the underwriters exercise this option, each will be obligated, subject to conditions contained in the underwriting agreement, to purchase a number of additional shares proportionate to that underwriter's initial amount reflected in the above table.

Reserved Shares

At our request, the underwriters have reserved for sale, at the initial public offering price, up to % of the shares offered by this prospectus for sale to some of our directors, officers, employees, distributors, dealers, business associates and related persons. If these persons purchase reserved shares, this will reduce the number of shares available for sale to the general public. Any reserved shares that are not orally confirmed for purchase within one day of the pricing of this offering will be offered by the underwriters to the general public on the same terms as the other shares offering by this prospectus.

No Sales of Similar Securities

We, our executive officers and directors, the selling stockholders, option holders and warrant holders have agreed, with exceptions, not to sell or transfer any common stock for 180 days after the date of this prospectus without first obtaining the written consent of Merrill Lynch. Specifically, we and these other individuals have agreed not to directly or indirectly:

•: offer, pledge, sell or contract to sell any common stock,
•: sell any option or contract to purchase any common stock,
•: purchase any option or contract to sell any common stock,
•: grant any option, right or warrant for the sale of any common stock,
•: lend or otherwise dispose of or transfer any common stock,
•: request or demand that we file a registration statement related to the common stock, or
•: enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of any common stock whether any such swap or transaction is to be settled by delivery of shares or other securities, in cash or otherwise.

This lock-up provision applies to common stock and to securities convertible into or exchangeable or exercisable for or repayable with common stock. It also applies to common stock owned now or acquired later by the person executing the agreement or for which the person executing the agreement later acquires the power of disposition.

Merrill Lynch has informed us that while it does not currently expect to release the entities or persons bound by the lock-up arrangements, including affiliates, prior to the end of the lock-up period, it retains the right to do so at any time without notice at its sole discretion.

Stock Exchange Listing

We expect the shares to be approved for listing on a nationally recognized securities exchange under the symbol " ." In order to meet the requirements for listing on an exchange, the underwriters and the international managers may be required to undertake to sell a minimum number of shares to a minimum number of beneficial owners as required by the securities exchange.

Before this offering, there has been no public market for our common stock. The initial public offering price will be determined through negotiations among us, the selling stockholders and the representatives. In addition to prevailing market conditions, the factors to be considered in determining the initial public offering price are:

•: the valuation multiples of publicly traded companies that the representatives believe to be comparable to us,
•: our financial information,
•: the history of, and the prospects for, our company and the industry in which we compete,
•: an assessment of our management, our past and present operations, and the prospects for, and timing of, our future revenues,
•: the present state of our development, and
•: the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours.

An active trading market for the shares may not develop. It is also possible that after the offering the shares will not trade in the public market at or above the initial public offering price.

The underwriters do not expect to sell more than 5% of the shares in the aggregate to accounts over which they exercise discretionary authority.

Price Stabilization, Short Positions and Penalty Bids

Until the distribution of the shares is completed, SEC rules may limit underwriters and selling group members from bidding for and purchasing our common stock. However, the representatives may engage in transactions that stabilize the price of the common stock, such as bids or purchases to peg, fix or maintain that price.

If the underwriters create a short position in the common stock in connection with the offering, i.e., if they sell more shares than are listed on the cover of this prospectus, the representatives may reduce that short position by purchasing shares in the open market. The representatives may also elect to reduce any short position by exercising all or part of the over-allotment option described above. Purchases of the common stock to stabilize its price or to reduce a short position may cause the price of the common stock to be higher than it might be in the absence of such purchases.

The representatives may also impose a penalty bid on underwriters and selling group members. This means that if the representatives purchase shares in the open market to reduce the underwriter's short position or to stabilize the price of such shares, they may reclaim the amount of the selling concession from the underwriters and selling group members who sold those shares. The imposition of a penalty bid may also affect the price of the shares in that it discourages resales of those shares.

Neither we nor any of the underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common stock. In addition, neither we nor any of the underwriters makes any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

Selling Restrictions

Each underwriter has agreed that (i) it has not offered or sold, and prior to the six months after the date of issue of the shares will not offer or sell any shares to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995, (ii) it has complied, and will comply with, all applicable provisions of the Financial Services and Markets Act 2000 of Great Britain ("FSMA") with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom and (iii) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of any shares in circumstances in which section 21(1) of the FSMA does not apply to the issuer.

Internet Distribution

Merrill Lynch will be facilitating Internet distribution for this offering to certain of its Internet subscription customers. Merrill Lynch intends to allocate a limited number of shares for sale to its online brokerage customers. An electronic prospectus is available on the Internet Web site maintained by Merrill Lynch. Other than the prospectus in electronic format, the information on the Merrill Lynch Web site is not part of this prospectus.

Other Relationships

Some of the underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us. They have received customary fees and commissions for these transactions.

LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for us by Kirkland & Ellis LLP, New York, New York. Certain legal matters will be passed upon for the underwriters by Fried, Frank, Harris, Shriver & Jacobson LLP, New York, New York.

EXPERTS

The consolidated financial statements of RBC Bearings Incorporated at April 3, 2004 and March 29, 2003, and for each of the three years in the period ended April 3, 2004, appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed a registration statement on Form S-1, including relevant exhibits and schedules, under the Securities Act with the SEC for the common stock we are offering by this prospectus. This prospectus, which contains a part of the registration statement, does not include all of the information contained in the registration statement. You should read the registration statement and its exhibits for additional information. Statements in this prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete. In each instance, reference is made to the copy of such document or contract filed as an exhibit to the registration statement, and each such statement is qualified in all respects by such reference. As a result of this offering, we will also be

required to file annual, quarterly and current reports, proxy statements and other information with the SEC.

You may read and copy all or any portion of the registration statement or any reports, statements or other information that we file at the SEC's Public Reference Room at 450 Fifth Street, N.W., Room 1024, Washington D.C. 20549. You can request copies of these documents, upon payment of a duplicating fee, by writing to the Securities and Exchange Commission. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. Our SEC filings, including the registration statement, are also available to the public on the Internet at the SEC's web site at http://www.sec.gov.

RBC Bearings Incorporated

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets as of April 3, 2004 and March 29, 2003		F-3
Consolidated Statements of Operations for the years ended April 3, 2004, March 29, 2003 and March 30, 2002		F-4
Consolidated Statements of Stockholders' Deficit and Comprehensive Income (Loss) for the years ended April 3, 2004, March 29, 2003 and March 30, 2002		F-5
Consolidated Statements of Cash Flows for the years ended April 3, 2004, March 29, 2003 and March 30, 2002		F-6
Notes to Consolidated Financial Statements		F-7 to F-37

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
RBC Bearings Incorporated

We have audited the accompanying consolidated balance sheets of RBC Bearings Incorporated as of April 3, 2004 and March 29, 2003, and the related consolidated statements of operations, stockholders' deficit and comprehensive income (loss), and cash flows for each of the three years in the period ended April 3, 2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of RBC Bearings Incorporated at April 3, 2004 and March 29, 2003, and the consolidated results of its operations and its cash flows for each of the three years in the period ended April 3, 2004, in conformity with accounting principles generally accepted in the United States.

As discussed in Note 8 to the consolidated financial statements, in 2003 the Company changed its method of accounting for goodwill, pursuant to the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.

Stamford, Connecticut
July 2, 2004

F-2

RBC Bearings Incorporated

Consolidated Balance Sheets

(dollars in thousands, except share data)

			April 3, 2004			March 29, 2003
ASSETS
Current assets:
	Cash		$	3,250		$	3,553
	Accounts receivable, net of allowance for doubtful accounts of $770 in 2004 and $744 in 2003			44,516			39,691
	Inventory			90,504			86,188
	Deferred income taxes			2,342			2,400
	Prepaid expenses and other current assets			2,454			3,106

		Total current assets		143,066			134,938
Property, plant and equipment, net				56,249			57,772
Restricted marketable securities				12			113
Goodwill				25,150			25,150
Intangible assets, net of accumulated amortization of $449 in 2004 and $105 in 2003				2,853			2,090
Deferred financing costs, net of accumulated amortization of $7,849 in 2004 and $6,332 in 2003				5,628			5,975
Other assets				1,788			6,318

		Total assets	$	234,746		$	232,356

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
	Accounts payable		$	13,618		$	13,927
	Accrued expenses and other current liabilities			13,276			15,505
	Current portion of long-term debt			10,421			15,946
	Capital lease obligations			201			149

		Total current liabilities		37,516			45,527
	Long-term debt, less current portion			204,803			194,987
	Capital lease obligations, less current portion			225			75
	Other non-current liabilities			8,487			9,416

		Total liabilities		251,031			250,005
Commitments and contingencies (Note 17)				—			—
Class C redeemable preferred stock, $0.01 par value; authorized shares: 900,000 in 2004 and 2003; none issued and outstanding				—			—
Stockholders' deficit:
	Class A preferred stock, $0.01 par value; authorized shares: 15,500 in 2004 and 2003; none issued and outstanding			—			—
	Class B exchangeable convertible participating preferred stock, $0.01 par value; authorized shares: 240,000 in 2004 and 2003; issued and outstanding shares: 240,000 in 2004 and 2003			2			2
	Class D preferred stock, $0.01 par value; authorized shares: 240,000 in 2004 and 2003; none issued and outstanding			—			—
	Class A voting common stock, $.01 par value; authorized shares: 8,000,000 in 2004 and 10,000,000 in 2003; issued and outstanding shares: 2,475,461 in 2004 and 2003			25			25
	Class B super voting common stock, $.01 par value; authorized shares: 1,000,000 in 2004 and 10,000,000 in 2003; issued and outstanding shares: 100 in 2004 and 2003			—			—
	Additional paid-in capital			33,485			33,485
	Accumulated other comprehensive loss			(3,343	)		(4,044	)
	Accumulated deficit			(46,454	)		(47,117	)

		Total stockholders' deficit		(16,285	)		(17,649	)

		Total liabilities and stockholders' deficit	$	234,746		$	232,356

See accompanying notes.

F-3

RBC Bearings Incorporated

Consolidated Statements of Operations

(dollars in thousands, except share data)

			Fiscal Year Ended
			April 3, 2004 (53 weeks)		March 29, 2003		March 30, 2002
Net sales			$187,331		$172,860		$168,331
Cost of sales			135,433		124,086		114,575

	Gross margin		51,898		48,774		53,756
Operating expenses:
	Selling, general and administrative		28,107		26,647		25,641
	Other, net		1,662		1,424		937

	Total operating expenses		29,769		28,071		26,578

		Operating income	22,129		20,703		27,178
Interest expense, net			20,380		21,023		23,440
Gain on early extinguishment of debt			—		(780	)	—
Other non-operating expenses			16		298		17

	Income before income taxes		1,733		162		3,721
Provision for income taxes			1,070		113		2,052

		Net income	$ 663		$ 49		$ 1,669

Net income (loss) per common share:
	Basic		$ (0.60	)	$ (0.51	)	$ 0.67
	Diluted		$ (0.60	)	$ (0.51	)	$ 0.47
Weighted average common shares:
	Basic		2,475,561		2,475,561		2,475,561
	Diluted		2,475,561		2,475,561		3,556,658

See accompanying notes.

F-4

RBC Bearings Incorporated

Consolidated Statements of Stockholders' Deficit and Comprehensive Income (Loss)

(dollars in thousands)

	Preferred Stock			Common Stock
										Accumulated Other Comprehensive Loss
							Additional Paid-in Capital						Accumulated Deficit			Total Stockholders' Deficit			Comprehensive Income/ (Loss)
	Shares	Amount		Shares	Amount		Additional Paid-in Capital						Accumulated Deficit			Total Stockholders' Deficit			Comprehensive Income/ (Loss)
Balance at March 31, 2001	—	$	—	2,475,561	$	25	$	10,598		$	78		$	(48,835	)	$	(38,134	)
Net income	—		—	—		—		—			—			1,669			1,669		$	1,669
Currency translation adjustments	—		—	—		—		—			76			—			76			76
Minimum pension liability adjustment, net of taxes	—		—	—		—		—			(1,178	)		—			(1,178	)		(1,178	)

Comprehensive income																			$	567

Balance at March 30, 2002	—		—	2,475,561		25		10,598			(1,024	)		(47,166	)		(37,567	)
Net income	—		—	—										49			49		$	49
Issuance of Class B preferred stock	240,000		2	—		—		22,887			—			—			22,889
Issuance of Class A preferred stock	—		—	—		—		3,025			—			—			3,025
Repurchase of Class A preferred stock	—		—	—		—		(3,025	)		—			—			(3,025	)
Currency translation adjustments	—		—	—		—		—			(1,455	)		—			(1,455	)		(1,455	)
Minimum pension liability adjustment, net of taxes	—		—	—		—		—			(1,565	)		—			(1,565	)		(1,565	)

Comprehensive loss																			$	(2,971	)

Balance at March 29, 2003	240,000		2	2,475,561		25		33,485			(4,044	)		(47,117	)		(17,649	)
Net income (53 weeks)	—		—	—		—		—			—			663			663		$	663
Currency translation adjustments	—		—	—		—		—			63			—			63			63
Minimum pension liability adjustment, net of taxes	—		—	—		—		—			638			—			638			638

Comprehensive income																			$	1,364

Balance at April 3, 2004	240,000	$	2	2,475,561	$	25	$	33,485		$	(3,343	)	$	(46,454	)	$	(16,285	)

See accompanying notes.

F-5

RBC Bearings Incorporated

Consolidated Statements of Cash Flows

(dollars in thousands)

			Fiscal Year Ended
			April 3, 2004 (53 weeks)			March 29, 2003			March 30, 2002
Cash flows from operating activities:
Net income			$	663		$	49		$	1,669
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation			8,838			8,714			8,304
	Deferred income taxes			2,219			401			(648	)
	Amortization of intangible assets			344			105			801
	Amortization of deferred financing costs and debt discount			1,580			3,304			9,257
	Loss on disposition of assets			236			858			22
	Other			—			28			28
	Changes in operating assets and liabilities, net of acquisitions:
		Accounts receivable		(4,447	)		1,032			(1,558	)
		Inventory		44			(8,713	)		(8,586	)
		Prepaid expenses and other current assets		652			(688	)		(1,100	)
		Other non-current assets		2,718			(2,631	)		108
		Accounts payable		(309	)		(1,009	)		(548	)
		Accrued expenses and other current liabilities		(5,507	)		1,693			(3,734	)
		Other non-current liabilities		513			880			4,139

	Net cash provided by operating activities			7,544			4,023			8,154
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired				(5,944	)		(2,822	)		(2,128	)
Purchase of property, plant and equipment				(4,951	)		(6,522	)		(5,941	)
Proceeds from restricted marketable securities				101			1,143			940
Proceeds from sale of land				—			—			627

	Net cash used in investing activities			(10,794	)		(8,201	)		(6,502	)
Cash flows from financing activities:
Net (decrease) increase in revolving credit facility				(6,083	)		(20,018	)		9,000
Issuance of Class B preferred stock, net of fees				—			22,889			—
Retirement of senior secured discount debentures				—			(28,766	)		—
Issuance of Class A preferred stock				—			3,025			—
Repurchase of Class A preferred stock				—			(3,025	)		—
Payment of Industrial Revenue Bond				—			—			(1,845	)
Proceeds from Industrial Revenue Bond				—			—			1,845
Proceeds from senior credit facility				10,000			40,664			—
Payments on term loans				(7,741	)		(5,328	)		(7,139	)
Principal payments on capital lease obligations				(173	)		(457	)		(773	)
Restructure of foreign debt				—			7,127			—
Financing fees paid in connection with senior credit facility				(1,090	)		(3,226	)		—
Proceeds from Swiss credit facility				7,971			—			—
Retirement of RBCA's senior credit facility				—			(10,974	)		—

Net cash provided by financing activities				2,884			1,911			1,088
Effect of exchange rate changes on cash				63			(1,365	)		374

Cash and cash equivalents:
Increase (decrease) during the year				(303	)		(3,632	)		3,114
Cash, at beginning of year				3,553			7,185			4,071

Cash, at end of year			$	3,250		$	3,553		$	7,185

Supplemental disclosures of cash flow information:
Cash paid during the year for:
	Interest		$	19,073		$	15,745		$	14,127

	Income taxes		$	321		$	671		$	255

See accompanying notes.

F-6

RBC Bearings Incorporated

Notes to Consolidated Financial Statements

(dollars in thousands, except share and per share data)

1. Organization and Business

RBC Bearings Incorporated ("Company", collectively with its subsidiaries), is a Delaware corporation. The Company operates in four reportable business segments—roller bearings, plain bearings, ball bearings and corporate and other—in which it manufactures roller bearing components and assembled parts and designs and manufactures high-precision roller and ball bearings. The Company sells to a wide variety of original equipment manufacturers ("OEMs") and distributors who are widely dispersed geographically. In fiscal 2004, 2003 and 2002, no one customer accounted for more than 4.0% of the Company's sales. The Company's segments are further discussed in Note 20.

2. Summary of Significant Accounting Policies

General

The consolidated financial statements include the accounts of RBC Bearings Incorporated, Roller Bearing Company of America, Inc. ("RBCA") and its wholly-owned subsidiaries, Industrial Tectonics Bearings Corporation ("ITB"), RBC Linear Precision Products, Inc. ("LPP"), RBC Nice Bearings, Inc. ("Nice"), Bremen Bearings, Inc. ("Bremen"), Miller Bearings, Inc. ("Miller"), Tyson Bearings., Inc. ("Tyson"), Schaublin, RBC de Mexico ("Mexico"), RBC Oklahoma, Inc. ("RBC Oklahoma") and RBC Aircraft Products, Inc. ("API"), as well as its Transport Dynamics ("TDC"), Heim ("Heim") and Engineered Components ("ECD") divisions. All material intercompany balances and transactions have been eliminated in consolidation.

The Company has a fiscal year consisting of 52 or 53 weeks, ending on the Saturday closest to March 31. Based on this policy, fiscal year 2004 contained 53 weeks and fiscal years 2003 and 2002 contained 52 weeks.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Inventory

Inventories are stated at the lower of cost or market, using the first-in, first-out method.

Shipping and Handling

The sales price billed to customers includes the costs associated with shipping and handling, which is included in net sales. The costs to the Company for shipping and handling are included in cost of sales.

Property, Plant, and Equipment

Property, plant, and equipment are recorded at cost. Depreciation and amortization of property, plant and equipment, including equipment under capital leases, is provided for by the straight-line method over the estimated useful lives (3 to 39 years) of the respective assets or the lease term, if shorter. Amortization of assets under capital leases is reported within depreciation and amortization. The cost of equipment under capital leases is equal to the lower of the net present value of the

F-7

minimum lease payments or the fair market value of the leased equipment at the inception of the lease. Expenditures for normal maintenance and repairs are charged to expense as incurred.

Recognition of Revenue and Accounts Receivable and Concentration of Credit Risk

The Company recognizes revenue only after the following four basic criteria are met:

•: Persuasive evidence of an arrangement exists;
•: Delivery has occurred or services have been rendered;
•: The seller's price to the buyer is fixed or determinable; and
•: Collectibility is reasonably assured.

Revenue is recognized upon the passage of title, which is at the time of shipment. In addition, revenue on long-term aerospace contracts at ITB is recognized under the percentage-of-completion (units-of-delivery method). Accounts receivable, net of applicable allowances, are recorded when goods are shipped.

The Company sells to a large number of OEMs and distributors who service the aftermarket. The Company's credit risk associated with accounts receivable is minimized due to its customer base and wide geographic dispersion. The Company performs ongoing credit evaluations of its customers' financial condition and generally does not require collateral or charge interest on outstanding amounts. At April 3, 2004 and March 29, 2003, the Company had no significant concentrations of credit risk.

Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company reviews the collectibility of its receivables on an ongoing basis taking into account a combination of factors. The Company reviews potential problems, such as past due accounts, a bankruptcy filing or deterioration in the customer's financial condition, to ensure the Company is adequately accrued for potential loss. Accounts are considered past due based on when payment was originally due. If a customer's situation changes, such as a bankruptcy or creditworthiness, or there is a change in the current economic climate, the Company may modify its estimate of the allowance for doubtful accounts. The Company will write-off accounts receivable after reasonable collection efforts have been made and the accounts are deemed uncollectible.

Goodwill and Amortizable Intangible Assets

The Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets," at the beginning of fiscal 2003. These standards require that all business combinations be accounted for using the purchase method and that goodwill (representing the excess of the amount paid to acquire a company over the estimated fair value of the net assets acquired) and intangible assets with indefinite useful lives not be amortized but instead be tested for impairment annually (performed by the Company during the fourth quarter of each fiscal year), or when events or circumstances indicate that

F-8

its value may have declined. Goodwill had been amortized by the straight-line method over a 40-year period through March 30, 2002. Effective with fiscal 2003, goodwill amortization was suspended in conjunction with the adoption of SFAS No. 142.

Definite-lived intangible assets are being amortized over their useful lives of 5 to 15 years. Also included in intangible assets is an asset relating to the Company's minimum pension liability, as further described in Note 13.

Deferred Financing Costs

Deferred financing costs are amortized by the effective interest method over the lives of the related credit agreements (5 to 23 years).

Income Taxes

The Company accounts for income taxes using the liability method, which requires it to recognize a current tax liability or asset for current taxes payable or refundable and a deferred tax liability or asset for the estimated future tax effects of temporary differences between the financial statement and tax reporting bases of assets and liabilities to the extent that they are realizable. Deferred tax expense (benefit) results from the net change in deferred tax assets and liabilities during the year.

Temporary differences relate primarily to the timing of deductions for depreciation, goodwill amortization relating to the acquisition of operating divisions, basis differences arising from acquisition accounting, pension and retirement benefits, and various accrued and prepaid expenses. Deferred tax assets and liabilities are recorded at the rates expected to be in effect when the temporary differences are expected to reverse.

Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed by dividing net income (loss) available to common stockholders by the weighted-average number of common shares outstanding. Diluted net income (loss) per common share is computed by dividing net income (loss) by the sum of the weighted-average number of common shares, dilutive common share equivalents then outstanding using the treasury stock method and the assumed conversion of preferred stock to common shares. Common equivalent shares consist of the incremental common shares issuable upon the exercise of stock options and warrants.

If the above calculation results in a net loss available to common stockholders (due to a net loss for the period or the effect of accrued preferred stock dividends) and if the effect of including common shares equivalents and the assumed conversion of preferred stock is anti-dilutive, then diluted net loss per common share will equal basic net loss per common share.

F-9

The table below reflects the calculation of weighted-average shares outstanding for each year presented as well as the computation of basic and diluted net income (loss) per common share:

			Fiscal Year Ended
			April 3, 2004 (53 weeks)		March 29, 2003		March 30, 2002
Numerator:
	Net income		$ 663		$ 49		$1,669
	Accrued preferred stock dividends		(2,144	)	(1,313	)	—

	Numerator for basic net income (loss) per common share—income (loss) available to common stockholders		(1,481	)	(1,264	)	1,669
	Effect of preferred stock dividends		2,144		1,313		—

	Numerator for diluted net income (loss) per common share—income (loss) available to common stockholders after assumed conversion of preferred stock		$ 663		$ 49		$1,669

Denominator:
	Denominator for basic net income (loss) per common share—weighted-average shares		2,475,561		2,475,561		2,475,561
	Effect of dilutive securities:
		Employee stock options and warrants	874,131		1,081,232		1,081,097
		Convertible preferred stock	738,558		491,698		—

	Dilutive potential common shares		1,612,689		1,572,930		1,081,097

	Denominator for diluted net income (loss) per common share—adjusted weighted-average shares and assumed conversions		4,088,250		4,048,491		3,556,658

Basic net income (loss) per common share			$ (0.60	)	$ (0.51	)	$ 0.67
Diluted net income (loss) per common share			$ (0.60	)	$ (0.51	)	$ 0.47

For additional disclosures regarding the outstanding preferred stock and the employee stock options and warrants, see Note 16.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are used for, but not limited to, the accounting for the allowance for doubtful accounts, valuation of inventories, accrued expenses, depreciation and amortization and pension and postretirement obligations.

F-10

Impairment of Long-Lived Assets

The Company assesses the net realizable value of its long-lived assets and evaluates such assets for impairment whenever indicators of impairment are present.

For amortizable long-lived assets to be held and used, if indicators of impairment are present, management determines whether the sum of the estimated undiscounted future cash flows are less than the carrying amount. The amount of asset impairment, if any, is based on the excess of the carrying amount over its fair value, which is estimated based on projected discounted future operating cash flows using a discount rate reflecting the Company's average cost of funds. To date, no indicators of impairment exist.

Long-lived assets to be disposed of by sale or other means are reported at the lower of carrying amount or fair value, less costs to sell.

Foreign Currency Translation and Transactions

Assets and liabilities of the Company's foreign operations are translated into U.S. dollars using the exchange rate in effect at the balance sheet date. Results of operations are translated using the average exchange rate prevailing throughout the period. The effects of exchange rate fluctuations on translating foreign currency assets and liabilities into U.S. dollars are included in accumulated other comprehensive loss, while gains and losses resulting from foreign currency transactions, which were not material for any of the fiscal years presented, are included in selling, general and administrative expenses. Net income of the Company's foreign operations for fiscal 2004, 2003 and 2002 amounted to $2,242, $3,068 and $1,328, respectively.

Fair Value of Financial Instruments

The carrying amounts reported in the balance sheet for cash, accounts receivable, prepaids and other current assets, and accounts payable and accruals approximate their fair value.

The carrying amounts of the Company's Senior Subordinated notes payable and discount debentures approximate fair value and are estimated based on the quoted market price of similar debt instruments. The carrying amounts of the Company's borrowings under its Senior Credit Facility, Swiss Credit Facility and Industrial Development Revenue Bonds approximate fair value, as these obligations have interest rates which vary in conjunction with current market conditions.

Early Extinguishment of Debt

SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections", was issued in April 2002 and addresses the reporting of gains and losses resulting from the extinguishment of debt, accounting for sale-leaseback transactions and rescinds or amends other existing authoritative pronouncements. SFAS No. 145 requires that any gain or loss on extinguishment of debt that does not meet the criteria of Accounting Principles Board Opinion ("APB") No. 30 for classification as an extraordinary item shall not be classified as extraordinary and shall be included in earnings from continuing operations. The gain on early extinguishment of debt in

F-11

fiscal year 2003 has been classified as non-operating income in the accompanying consolidated statements of operations.

Accumulated Other Comprehensive Loss

The components of comprehensive income (loss) that relate to the Company are net income, foreign currency translation adjustments and pension plan additional minimum liability, all of which are presented in the consolidated statements of stockholders' deficit and comprehensive income (loss).

The following summarizes the activity within each component of accumulated other comprehensive income (loss):

	Currency Translation			Minimum Pension Liability			Total
Balance at March 31, 2001	$	12		$	66		$	78
Currency translation		76			—			76
Minimum pension liability		—			(1,178	)		(1,178	)

Balance at March 30, 2002		88			(1,112	)		(1,024	)
Currency translation		(1,455	)		—			(1,455	)
Minimum pension liability		—			(1,565	)		(1,565	)

Balance at March 29, 2003		(1,367	)		(2,677	)		(4,044	)
Currency translation		63			—			63
Minimum pension liability		—			638			638

Balance at April 3, 2004	$	(1,304	)	$	(2,039	)	$	(3,343	)

Stock-Based Compensation

The Company accounts for options and warrants granted to employees using the intrinsic value method pursuant to APB No. 25, "Accounting for Stock Issued to Employees," under which no compensation cost has been recognized since the exercise price of all grants issued was at or above the fair market value of the Company's common stock at the date of grant as determined by the Board of Directors. Had compensation cost for these grants been determined based on the fair value at the grant

F-12

dates consistent with SFAS No. 123, "Accounting for Stock-Based Compensation," the Company's net income would have been reduced to the following pro-forma amounts:

		Fiscal Year Ended
		April 3, 2004			March 29, 2003			March 30, 2002
Net income, as reported		$	663		$	49		$	1,669
Less: stock-based compensation expense determined under fair value method, net of tax			131			56			—

Pro-forma net income (loss)		$	532		$	(7	)	$	1,669

Net income (loss) per common share, as reported:
	Basic	$	(0.60	)	$	(0.51	)	$	0.67
	Diluted	$	(0.60	)	$	(0.51	)	$	0.47
Net income (loss) per common share, pro-forma:
	Basic	$	(0.65	)	$	(0.53	)	$	0.67
	Diluted	$	(0.65	)	$	(0.53	)	$	0.47

For purposes of the pro-forma disclosures, the estimated fair value of the options and warrants is amortized to expense over the service period that generally is the option or warrant vesting period. The weighted average fair value of options and warrants granted was $578 in fiscal 2004 and $1,557 in fiscal 2003. During fiscal 2001, in conjunction with an accelerated vesting decision, all outstanding warrants and options became fully vested. During fiscal 2002, there were no issuances of warrants or options; therefore, no pro-forma stock-based compensation adjustment was necessary.

The fair value for the Company's options and warrants was estimated at the date of grant using a Black-Scholes option-pricing model with the following weighted-average assumptions.

	Fiscal Year Ended
	April 3, 2004		March 29, 2003
Dividend yield	0.0	%	0.0	%
Expected weighted-average life	3.0		3.0
Risk-free interest rate	3.5	%	3.5	%
Expected volatility	0.1	%	0.1	%

F-13

Recent Account Pronouncements

In January 2003, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 46, "Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin (ARB) No. 51", ("FIN 46"). FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after June 15, 2003. However, in December 2003, the FASB deferred the effective date of FIN 46 to the end of the first interim or annual period ending after December 15, 2003 for those arrangements involving special purpose entities entered into prior to February 1, 2003. All other arrangements within the scope of FIN 46 are subject to its provisions beginning in 2004. The Company adopted FIN 46, as required, with no material impact to its consolidated financial position or results of operations.

3. Acquisitions

In a transaction effective as of August 20, 2001, RBCA, through its wholly-owned subsidiary, RBC Oklahoma, purchased certain assets used in the design, development, manufacture, assembly and sale of tapered thrust bearings, universal joints, synchronizing rings and GTRAG bearings, previously owned by Driveline Technologies, Inc., from Prime Financial Corporation and Congress Financial Corporation (Southwest), for an aggregate purchase price of $2,400.

In a transaction effective as of December 2002, RBCA, through its wholly-owned subsidiary, Schaublin, SA, purchased all of the outstanding capital stock of myonic SAS ("Myonic"). The capital stock of Myonic was purchased from myonic AG, a Swiss corporation. Myonic is engaged in the sale of bearings manufactured by Schaublin and third parties. The total consideration paid by the Company was $2,822, of which $1,722 was allocated to goodwill, which is expected to be deductible for income tax purposes. The corporate name of Myonic has since been changed to RBC France SAS. RBC France is included in the plain bearings reportable segment.

Effective December 22, 2003, API, a wholly-owned subsidiary of RBCA, purchased the airframe control bearing business of Timken Corp., located in Torrington, CT. The total consideration paid was $5,944. The preliminary purchase price allocation, which will be completed upon receipt of the intangible asset valuation, is as follows: accounts receivable ($379), inventory ($4,361), property, plant and equipment ($2,601), intangible assets ($997) and accrued expenses ($2,394). The products associated with the acquisition are complementary with products already provided by other Company businesses. API is included in the roller bearings reportable segment.

The results of operations subsequent to the effective dates of the acquisitions are included in the results of operations of the Company. Unaudited pro-forma consolidated results of operations of the Company, based upon pre-acquisition unaudited historical information provided for the years ended

F-14

April 3, 2004, March 29, 2003 and March 30, 2002, as if the Myonic and API acquisitions took place on April 1, 2001, are as follows:

		Fiscal Year Ended
		April 3, 2004		March 29, 2003		March 30, 2002
Net sales		$	209,384	$	207,800	$	205,116
Net income		$	2,943	$	3,734	$	5,569
Net income per common share:
	Basic	$	0.25	$	0.75	$	2.25
	Diluted	$	0.18	$	0.56	$	1.57

4. Allowance for Doubtful Accounts

The activity in the allowance for doubtful accounts consists of the following:

Fiscal Year Ended	Balance at Beginning of Year		Additions		Write-offs			Balance at End of Year
April 3, 2004	$	744	$	378	$	(352	)	$	770
March 29, 2003		621		123		—			744
March 30, 2002		257		364		—			621

F-15

5. Inventory

Inventory consists of the following:

	April 3, 2004		March 29, 2003
Raw materials	$	3,611	$	2,707
Work in process		25,798		17,745
Finished goods		61,095		65,736

	$	90,504	$	86,188

6. Property, Plant and Equipment

Property, plant and equipment consist of the following:

	April 3, 2004		March 29, 2003
Land	$	6,983	$	6,983
Buildings		15,492		14,081
Machinery and equipment		105,143		99,670

		127,618		120,734
Less: accumulated depreciation and amortization		71,369		62,962

	$	56,249	$	57,772

7. Restricted Marketable Securities

Restricted marketable securities, which are classified as available for sale, consist of short-term investments of $12 and $113 at April 3, 2004 and March 29, 2003, respectively, which were purchased with proceeds from industrial development revenue bonds issued by the Company during fiscal 2000, 1999 and 1995. The use of these investments is restricted primarily for capital expenditure requirements in accordance with the applicable loan agreement and, accordingly, are classified as non-current. These investments consist of highly liquid investments with insignificant interest rate risk and original maturities of three months or less, and are carried at market value, which approximates cost.

8. Goodwill and Amortizable Intangible Assets

On March 31, 2002, the Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets", which eliminates the amortization of goodwill and instead requires that goodwill be tested for impairment at least annually. Transitional impairment tests of goodwill made by the Company during the quarter ended June 29, 2002, and annual impairment tests made during the quarters ended March 29, 2003 and April 3, 2004, did not require adjustment to the carrying value of its goodwill. There were no changes to goodwill during the two years in the period ended April 3, 2004.

F-16

Goodwill balances, by segment, for the two years in the period ended April 3, 2004 are as follows:

	Fiscal Year Ended
	April 3, 2004		March 29, 2003
Roller	$	15,673	$	15,673
Plain		9,477		9,477

	$	25,150	$	25,150

Per the provisions of SFAS No. 142, the Company's definite-lived intangible assets, consisting primarily of acquired distribution agreements and customer lists, are amortized over their useful lives of five years. Also included in intangible assets is an asset relating to the Company's minimum pension liability, as further described in Note 13.

Actual results of operations for the years ended April 3, 2004 and March 29, 2003, and the pro-forma results of operations for the year ended March 30, 2002 had we applied the non-amortization provisions of SFAS 142 in fiscal 2002, is as follows:

		Fiscal Year Ended
		April 3, 2004			March 29, 2003			March 30, 2002
Net income, as reported		$	663		$	49		$	1,669
Add: Goodwill amortization, net of tax			—			—			481

Pro-forma net income		$	663		$	49		$	2,150

Pro-forma net income (loss) per common share:
	Basic	$	(0.60	)	$	(0.51	)	$	0.87

	Diluted	$	(0.60	)	$	(0.51	)	$	0.60

Amortization expense for definite-lived intangible assets during the fiscal years ended 2004, 2003 and 2002 was $344, $105, and $0, respectively. Estimated amortization expense for the five succeeding fiscal years and thereafter is as follows:

2005	$	462
2006		462
2007		462
2008		357
2009		118
2010 and thereafter		409

F-17

9. Accrued Expenses and Other Current Liabilities

The significant components of accrued expenses and other current liabilities are as follows:

	April 3, 2004		March 29, 2003
Employee compensation and related benefits	$	3,782	$	2,713
Interest		4,742		5,161
Other		4,752		7,631

	$	13,276	$	15,505

10. Debt

During fiscal 1998, the Company issued $110,000 aggregate principal amount of 9⁵/8% Senior Subordinated Notes due 2007 ("Notes"). The Notes paid interest semi-annually and had an original maturity date of June 15, 2007, but could be redeemed at the Company's option earlier under certain conditions specified in the indenture (the "Indenture") pursuant to which the Notes were issued. The Notes were unsecured and subordinate to all existing and future Senior Indebtedness (as defined in the Indenture) of the Company. The Notes were fully, unconditionally and irrevocably guaranteed jointly and severally, on a senior subordinated basis, by each of the domestic wholly-owned subsidiaries of RBCA. The Notes were repaid on June 29, 2004 (Note 21).

During fiscal 1998, the Company issued $40,000 of Senior Subordinated Discount Debentures ("Debentures") due in 2009, which had an aggregate principal amount at maturity of $74,882. During fiscal 2003, the Company made principal payments on this debt of $30,400. At April 3, 2004, the principal amount due at maturity is $38,562. The Debentures accrue interest at 13% per annum with no periodic payments due until June 2002, after which time interest is payable in cash, semi-annually. The Debentures generally did not require the payment of cash interest until December 15, 2002, and do not mature until June 15, 2009. The Debentures are callable at any point subsequent to June 2002, at a premium to the principal amount declining to par at the end of June 2008. Additionally, the Company may, at any time at its option, redeem the Debentures, in whole or in part, with the net cash proceeds of one or more public equity offerings by the Company. The Debentures are senior secured obligations of the Company, senior in right of payment to all existing and future subordinated indebtedness of the Company. The Debentures are secured by all of the outstanding common stock of RBCA.

RBCA and its domestic subsidiaries entered into a $94,000 senior secured credit facility ("Senior Credit Facility"), dated May 30, 2002, with General Electric Capital Corporation, as agent and lender, Congress Financial Corporation (Western), as lender, GECC Capital Markets Group, as lead arranger, and other lenders signatory thereto from time to time, consisting of a $40,000 term loan ("Term Loans") and a $54,000 revolving credit facility ("Revolving Credit Facility"). This credit facility was amended and restated on December 19, 2003 to add a further $10,000 term loan ("Term Loan B"). In connection with this credit facility, RBCA and its domestic subsidiaries granted liens and mortgages on substantially all of their existing and future personal and real property. In addition, RBCA pledged all

F-18

of its capital stock in its domestic subsidiaries and a portion of its capital stock in its directly-owned foreign subsidiaries.

The proceeds of the Term Loans were used to pay off RBCA's senior credit facility, dated June 23, 1997, by and between RBCA, Credit Suisse First Boston, as administrative agent, and the lenders thereto, to pay fees and expenses with respect to the new credit facility and for other corporate purposes. The Revolving Credit Facility is available for issuances of letters of credit of up to $25,000 and for loans in connection with acquisitions, working capital needs or other general corporate purposes.

On June 19, 2003, RBCA further amended and restated the Senior Credit Facility in order to increase its liquidity and to facilitate the funding of RBCA's foreign operations. The Senior Credit Facility now includes a structure under which RBCA may include certain of its foreign assets within the "collateral borrowing base" that sets forth the amounts that RBCA may borrow under its Revolving Credit Facility. As part of this amendment, RBCA has created intercompany loan and asset pledge arrangements (including pledges of certain foreign assets) that are all ultimately assigned to the lenders as further collateral to secure the borrowings under the Senior Credit Facility.

The Senior Credit Facility is secured by substantially all of the Company's assets. Under the terms of the Senior Credit Facility, the Company is required to comply with various operational and financial covenants, including minimum EBITDA, minimum fixed charge coverage, total interest coverage and maximum leverage ratio, as defined in the credit agreements.

In addition, the Senior Credit Facility places limitations on the Company's capital expenditures in any fiscal year, restricts its ability to pay dividends, requires the Company to obtain the lenders' consents to certain acquisitions and contains mandatory prepayment provisions which include prepayments from the sale of the Company's stock and 50% of excess cash flow, as defined.

On December 8, 2003, Schaublin entered into a bank credit facility (the "Swiss Credit Facility") with Credit Suisse providing for 10,000 swiss francs, or approximately $8,000, of term loans (the "Swiss Term Loans") and up to 2,000 swiss francs, or approximately $1,600, of revolving credit loans and letters of credit (the "Swiss Revolving Credit Facility"). RBCA pledged 99.4% of the present and future share capital of Schaublin (1,366 shares) against this facility. In connection with the purchase of Myonic, RBCA entered into an eighteen-month loan ("Myonic Loan") with the Seller for 500 Euros, or approximately $399.

In connection with the purchase of Tyson, the Company entered into a loan for $1,072 with the former owner of Tyson for the purchase of certain leasehold improvements, which are included in property, plant and equipment. This loan bears interest at 9.0% and is paid monthly. The term of the loan is for 75 months and ends in June 2005.

At April 3, 2004, $19,880 of the Revolving Credit Facility was being utilized to provide letters of credit to secure the Company's obligations relating to certain Industrial Development Revenue Bonds ($16,655), described below, and a letter of credit securing a captive insurance policy primarily in relation to workers compensation ($2,975). A letter of credit fee of 2.25% per annum, payable quarterly in arrears, is required on the outstanding amount of the letter of credit. As of April 3, 2004,

F-19

the Company had the ability to borrow up to an additional $13,990 under the Revolving Credit Facility. Borrowings outstanding under this facility as of April 3, 2004 were $2,500. A commitment fee of 0.5%, or 0.75% per annum, payable quarterly in arrears, is required on the unused portion of the Revolving Credit Facility, which is calculated on the percentage of the revolver that is not utilized. The interest rate for borrowings outstanding on this facility as of April 3, 2004 was 5.25%.

During fiscal 1995, the Company entered into a loan agreement with the South Carolina Jobs Economic Development Authority ("SC JEDA") which provides for borrowings up to $10,700 under two industrial development revenue bonds (Series 1994 A and B) and, during fiscal 1999, the Company entered into an additional loan agreement with the SC JEDA which provides for borrowings up to $3,000 under an industrial development revenue bond (Series 1998). The interest rate is variable and based on the 90-day U.S. Treasury Bill rate. Additionally, during fiscal 2000, the Company entered into a loan agreement with the California Infrastructure and Economic Development Bank which provides for borrowings up to $4,800 under an industrial development revenue bond (Series 1999) (collectively, "Bonds"). The interest rate on the Bonds is variable and based on the Bond Market Association 7-day Municipal Swap Index. The proceeds from the Bonds are restricted for working capital requirements and capital expenditure purposes. On March 1, 2002, the Company retired the unused portion of the Series 1998 bonds of $1,845, thereby reducing the amount of the loan agreement and the restricted marketable securities balances by this amount. As of April 3, 2004, $18,254 of the proceeds have been expended (including accumulated interest of $1,611), and the remaining $12 is invested by the trustee in marketable securities. The Series 1994 A and B bonds and the Series 1998 bonds are secured by an irrevocable direct-pay letter of credit issued by one of the Company's lenders. The letter of credit is equal to the aggregate principal amount of the bonds plus not less than forty-five days' interest thereon, calculated at 12% per annum ($12,026 at April 3, 2004). The Series 1999 bonds are likewise secured by an irrevocable direct-pay letter of credit issued by one of the Company's lenders. The Company's obligation to its lenders is secured pursuant to the provisions of the Credit Facility and is equal to the aggregate principal amount of the bonds plus not less than fifty days' interest thereon, calculated at 12% per annum ($4,879 at April 3, 2004).

F-20

The balances payable under all borrowing facilities are as follows:

	April 3, 2004		March 29, 2003
9⁵/8% Senior Subordinated Notes Payable	$	110,000	$	110,000
13% Senior Subordinated Discount Debentures		37,806		37,663
Senior Credit Facility
Term Loans, payable in quarterly installments of $1,428, commencing September 30, 2002, with final payment of $12,857 due May 30, 2007; bears interest at variable rates, payable monthly and upon maturity at prime or LIBOR, at the Company's election		30,000		37,143
Term Loan B, payable May 30, 2007; bears interest at variable rates, payable monthly and upon maturity at prime or LIBOR, at the Company's election		10,085		—
Revolving Credit Facility		2,500		8,582
Swiss Credit Facility
Term Loan, payable in semi-annual installments ranging from approximately $400, commencing March 31, 2004, to approximately $1,000 from September 30, 2005, with final payment due March 31, 2009; bears interest at variable rates, payable quarterly		7,480		—
Other Loans		698		890
Industrial Development Revenue Bonds
Series 1994 A, due in annual installments of $180 beginning September 1, 2006, graduating to $815 on September 1, 2014, with final payment due on September 1, 2017; bears interest at a variable rate, payable monthly through December 2017		7,700		7,700
Series 1994 B, bears interest at a variable rate, payable monthly through December 2017		3,000		3,000
Series 1998, bearing interest at variable rates, payable monthly through December 2021		1,155		1,155
Series 1999, bearing interest at variable rates, payable monthly through April 2024		4,800		4,800

Total Debt		215,224		210,933
Less: Current Portion		10,421		15,946

Long-Term Debt	$	204,803	$	194,987

The current portion of long-term debt as of April 3, 2004 and March 29, 2003 includes $2,500 and $8,582, respectively, of borrowings on the Revolving Credit Facility.

The Company is subject to fluctuating interest rates that may impact its consolidated results of operations or cash flows for its variable rate Senior Credit Facility, Swiss Credit Facility and Industrial

F-21

Development Revenue Bonds. As of April 3, 2004, the weighted average interest rate on the Company's debt was approximately 8.6%.

RBCA incurred approximately $4,137 of fees primarily related to costs associated with the issuance of the Senior Credit Facility. RBCA also incurred approximately $5,458 of fees related to costs associated with the issuance of the Notes and $180 of fees related to costs associated with the Swiss Credit Facility. These costs have been capitalized as deferred financing costs and are being amortized over the term of the respective debt.

Maturities of debt during each of the following five fiscal years and thereafter are as follows:

2005	$	10,421
2006		7,749
2007		7,289
2008		24,321
2009		110,983
Thereafter		54,461

Total	$	215,224

11. Obligations Under Capital Leases

Machinery and equipment additions under capital leases amounted to $458, $0 and $0 in fiscal 2004, 2003 and 2002, respectively. The average imputed rate of interest on capital leases at each year end is 4.4%, 7.0% and 6.7% in fiscal 2004, 2003 and 2002, respectively.

Included in property, plant and equipment are the following assets held under capital leases:

	April 3, 2004			March 29, 2003
Machinery and equipment	$	6,512		$	6,054
Accumulated depreciation		(5,612	)		(5,210	)

	$	900		$	844

F-22

Future minimum lease payments under capital leases at April 3, 2004 are as follows:

2005		$	214
2006			137
2007			99
2008			2

	Total minimum lease payments		452
Less: amount representing interest			26

Present value of net minimum lease payments			426
Less: current maturities			201

	Non-current capital lease obligations	$	225

12. Other Non-Current Liabilities

The significant components of other non-current liabilities consist of:

	April 3, 2004		March 29, 2003
Deferred income taxes	$	—	$	229
Additional minimum pension liability		3,979		4,935
Other post-retirement benefits		2,995		3,153
Other		1,513		1,099

	$	8,487	$	9,416

13. Pension Plans

At April 3, 2004, the Company has noncontributory defined benefit pension plans covering union employees in its Heim division plant in Fairfield, Connecticut, its Nice subsidiary plant in Kulpsville, Pennsylvania, its Bremen subsidiary plant in Plymouth, Indiana and its Tyson subsidiary plant in Glasgow, Kentucky.

Plan assets are comprised primarily of U.S. government securities, corporate bonds and stocks. The plans provide benefits of stated amounts based on a combination of an employee's age and years of service. The Company uses a December 31 measurement date for its plans. The Company expects to contribute approximately $2,000 to its pension plans in fiscal year 2005.

F-23

The following table sets forth net periodic benefit cost of the Company's plans for the three fiscal years in the period ended April 3, 2004:

		Fiscal Year Ended
		April 3, 2004			March 29, 2003			March 30, 2002
Components of net periodic benefit cost:
	Service cost	$	497		$	361		$	276
	Interest cost		923			894			864
	Expected return on plan assets		(803	)		(912	)		(984	)
	Amortization of prior service cost		19			(4	)		(29	)
	Amortization of losses		343			108			38
	Plan administrative expenses		—			—			54

	Net periodic benefit cost	$	979		$	447		$	219

The following tables set forth the funded status of the Company's defined benefit pension plans, the amount recognized in the balance sheet at April 3, 2004 and March 29, 2003, and the principal weighted-average assumptions inherent in their determination:

		April 3, 2004			March 29, 2003
Change in benefit obligation:
	Benefit obligation at beginning of year	$	14,420		$	12,684
	Service cost		497			361
	Interest cost		923			894
	Plan amendments		246			290
	Actuarial loss		117			909
	Benefits paid		(783	)		(718	)

	Benefit obligation at end of year		15,420			14,420
Change in plan assets:
	Fair value of plan assets at beginning of year		9,143			10,341
	Actual return on plan assets		1,760			(921	)
	Employer contributions		669			441
	Benefits paid		(783	)		(718	)

	Fair value of plan assets at end of year		10,789			9,143

Reconciliation of funded status at end of year:
	Underfunded status		(4,631	)		(5,277	)
	Unrecognized prior service cost		302			75
	Unrecognized actuarial net loss		3,677			4,860

	Net amount recognized in the balance sheet	$	(652	)	$	(342	)

Amounts recognized in the balance sheet:
	Minimum pension liability	$	(4,631	)	$	(5,277	)
	Intangible asset		583			473
	Accumulated other comprehensive loss		3,396			4,462

	Net amount recognized in the balance sheet	$	(652	)	$	(342	)

F-24

Benefits under the union plans are not a function of employees' salaries; thus, the accumulated benefit obligation equals the projected benefit obligation.

The assumptions used in determining the net periodic benefit cost information are as follows:

		FY2004		FY2003		FY2002
Discount rate		6.50	%	7.25	%	7.50	%
Expected long-term rate of return on plan assets		9.00	%	9.00	%	9.00	%

The discount rate used in determining the funded status as of April 3, 2004 and March 29, 2003 is 6.25% and 6.50%, respectively.

In developing the overall expected long-term return on plan assets assumption, a building block approach was used in which rates of return in excess of inflation were considered separately for equity securities and debt securities. The excess returns were weighted by the representative target allocation and added along with an appropriate rate of inflation to develop the overall expected long-term return on plan assets assumption.

The Company recorded a minimum pension liability of $4,631 and $5,277 at April 3, 2004 and March 29, 2003, respectively. This liability represents the amount by which the accumulated benefit obligation exceeds the sum of the fair market value of plan assets. The additional minimum pension liability at April 3, 2004 and March 29, 2003 of $3,979 and $4,935, respectively, is offset by an intangible asset to the extent of previously unrecognized prior service cost. The intangible assets of $583 and $473 at April 3, 2004 and March 29, 2003, respectively, are included on the line item entitled "Intangible assets" in the consolidated balance sheet. The remaining amounts of $2,039 and $2,677, net of deferred income taxes of $1,357 and $1,785, respectively, are recorded as a component of stockholders' deficit on the line item titled "Accumulated other comprehensive loss" in the consolidated balance sheet at April 3, 2004 and March 29, 2003, respectively. The intangible asset in 2004 and 2003 is greater than the unrecognized prior service cost because two of the Company's plans have an unrecognized negative prior service cost.

The Company's investment program objective is to achieve a rate of return on plan assets which will fund the plan liabilities and provide for required benefits while avoiding undue exposure to risk to the plan and increases in funding requirements.

At March 29, 2003, the target allocation for each category of plan assets was 35 percent equity investments and 65 percent fixed income investments. During fiscal year 2004, the Company undertook a review of its investment policy with regard to plan assets, including allocation of plan assets among investment categories. As part of this review, the Company established a new target allocation of plan assets which, on April 3, 2004, was 100 percent equity investments.

F-25

The following benefit payments, which reflect future service as appropriate, are expected to be paid. The benefit payments are based on the same assumptions used to measure the Company's benefit obligation at the end of fiscal 2004.

2005	$	823
2006		866
2007		869
2008		918
2009		1,003
2010–2015		6,326

In addition, the Company has a defined contribution plan under Section 401(k) of the Internal Revenue Code for all of its employees not covered by a collective bargaining agreement. The plan is funded by eligible participants through employee contributions and by Company contributions equal to a percentage of eligible employee compensation. Effective October 1, 2001, the Company suspended matching contributions to this plan. Employer contributions under this plan amounted to $602 in fiscal 2002. Effective April 4, 2004, the Company resumed a program of employer matching contributions to this plan.

Effective September 1, 1996, the Company adopted a non-qualified Supplemental Executive Retirement Plan ("SERP") for a select group of highly compensated management employees designated by the Board of Directors of the Company. The SERP allows eligible employees to elect to defer, until termination of their employment, the receipt of up to 25% of their current salary. The Company makes contributions equal to the lesser of 50% of the deferrals, or 3.5% of the employees' annual salary, which vest in full after three years of service following the effective date of the SERP. Employer contributions under this plan amounted to $58, $52, and $69 in fiscal 2004, 2003 and 2002, respectively.

14. Postretirement Health Care and Life Insurance Benefits

The Company, for the benefit of employees at its Heim, West Trenton, Nice, Tyson and Bremen facilities, sponsors contributory defined benefit health care plans that provide postretirement medical and life insurance benefits to union employees who have attained certain age and/or service requirements while employed by the Company. The plans are unfunded and costs are paid as incurred. Postretirement benefit obligations are included in "Other non-current liabilities" in the consolidated balance sheet.

The Company uses a March 31 measurement date for its plans. The Company expects to contribute approximately $340 to its postretirement benefit plans in fiscal year 2005.

On December 8, 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 (the "Act") was signed into law. The Company is evaluating how and when any Federal subsidies would apply. The postretirement benefit obligation and net periodic benefit cost shown in the tables below do not reflect the possible effects of the Act on the Company's benefit programs. Specific authoritative guidance on the accounting for the Federal subsidy is pending and that guidance, when published, could require the Company to change previously reported information.

F-26

Information with respect to the postretirement medical and life insurance plans follows:

	April 3, 2004			March 29, 2003
Accumulated benefit obligation at beginning of year	$	4,995		$	4,589
Service cost		238			55
Interest cost		249			319
Plan amendments		(1,300	)		—
Actuarial loss		317			252
Benefits paid		(336	)		(220	)

Accumulated benefit obligation at end of year		4,163			4,995
Unrecognized prior service cost		658			(162	)
Unrecognized net loss		(1,826	)		(1,680	)

	$	2,995		$	3,153

Components of net periodic postretirement benefit cost are as follows:

	Fiscal Year Ended
	April 3, 2004			March 29, 2003			March 30, 2002
Service cost	$	238		$	55		$	61
Interest cost		249			319			317
Prior service cost amortization		(481	)		(71	)		(71	)
Amount of loss recognized		172			91			97

	$	178		$	394		$	404

During fiscal 2004, the plans were amended to contractually limit the benefit to be provided for certain groups of current and future retirees. As a result, there is no health care trend associated with these groups. The effect of a 1% annual increase and decrease in the assumed cost trend rate would increase the accumulated postretirement benefit obligation by approximately 3.6% and 3.2%, respectively, for these plans; the annual service and interest cost components in the aggregate would not be materially affected. The discount rate used in determining the accumulated postretirement benefit obligation was 6.25% at April 3, 2004, 7.25% at March 29, 2003 and 7.50% at March 30, 2002. The discount rate used in determining the net periodic benefit cost was 6.50% for fiscal 2004, 7.25% for fiscal 2003 and 7.5% for fiscal year 2002.

2005	$	340
2006		340
2007		360
2008		380
2009		400
2010–2015		2,200

F-27

15. Income Taxes

Income (loss) before income taxes for the Company's domestic and foreign operations are as follows:

	Fiscal Year Ended
	April 3, 2004			March 29, 2003			March 30, 2002
Domestic	$	(860	)	$	(3,182	)	$	2,117
Foreign		2,593			3,344			1,604

	$	1,733		$	162		$	3,721

The provision for income taxes consists of the following:

		Fiscal Year Ended
		April 3, 2004			March 29, 2003			March 30, 2002
Current:
	Federal	$	(1,299	)	$	(493	)	$	2,194
	State		(201	)		(71	)		230
	Foreign		351			276			276

			(1,149	)		(288	)		2,700
Deferred:
	Federal		1,921			352			(656	)
	State		298			49			8

			2,219			401			(648	)

Total		$	1,070		$	113		$	2,052

A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations follows:

	Fiscal Year Ended
	April 3, 2004			March 29, 2003			March 30, 2002
Income taxes using U.S. federal statutory rate	$	589		$	55		$	1,265
State income taxes, net of federal benefit		58			(13	)		143
Amortization of goodwill		—			—			196
Officer's life insurance		59			57			41
Meals and entertainment		38			61			51
ETI benefit		(70	)		(70	)		—
Adjustment of taxes to tax returns as filed		225			(1	)		369
Other		171			24			(13	)

	$	1,070		$	113		$	2,052

F-28

Net deferred tax assets consist of the following:

		April 3, 2004			March 29, 2003
Deferred tax assets:
	Post retirement benefits	$	1,117		$	969
	Employee compensation accruals		769			1,205
	Alternative minimum tax credits		1,558			1,558
	Net operating losses		3,694			2,874
	Inventory		2,133			1,177
	Stock warrants		2,103			2,103
	Other		2,252			2,166

	Total deferred tax assets		13,626			12,052
Deferred tax liabilities:
	Property, plant and equipment		(6,743	)		(4,596	)
	Unremitted foreign earnings		(3,524	)		(2,557	)
	Amortizaton of goodwill		(964	)		(742	)

	Total deferred tax liabilities		(11,231	)		(7,895	)

	Net deferred tax assets	$	2,395		$	4,157

At April 3, 2004, the Company has net operating loss carryforwards of approximately $14,729 to offset future federal and state income taxes, which expire at various dates through 2024. At April 3, 2004, the Company also has research and development tax credit carryforwards of approximately $882 to offset future federal income taxes which expire at various dates through 2020. In addition, the Company has alternative minimum tax credit carryforwards of approximately $1,558. The net operating loss carryforwards and research and development tax credit carryforwards may be subject to the limitations provided in IRC Sections 382 and 383.

16. Stockholders' Deficit

Class A Preferred Stock. The Class A Preferred Stock is the most senior of the Company's capital stock for the purposes of the payment of dividends and distributions upon a liquidation or deemed liquidation event. The holders of Class A Preferred Stock are entitled to an accrued dividend at a rate of 8% per annum payable when and if declared by the Company's board of directors. As of April 3, 2004, no dividends have accrued on the Class A Preferred Stock. The stated value of the Class A Preferred Stock is $3,000 per share. Except to the extent required by law, holders of Class A Preferred Stock have no voting rights.

Class B Exchangeable Convertible Participating Preferred Stock. The Class B Preferred Stock ranks junior to the Class A Preferred Stock, is on par with the Class C Preferred Stock, and is senior to all other classes of stock with respect to payment of dividends. The Class B Preferred Stock ranks junior to the Class A Preferred Stock, and is senior to all other classes of stock with respect to distributions upon a liquidation or deemed liquidation event.

F-29

The Class B Preferred Stock is subject to conversion by the Company or exchange by the holders thereof. In either situation, each share of Class B Preferred Stock would yield upon conversion (i) a number of shares of Class A Common Stock determined by multiplying the number of shares of Class B Preferred Stock to be converted by the stated value of the Class B Preferred Stock and dividing the result by the conversion price then in effect, (ii) a number of shares of Class C Preferred Stock determined by multiplying the number of Class B Preferred Stock to be converted by the sum of the stated value of the shares and the amount of all unpaid dividends thereon and dividing the result by the stated value of the Class C Preferred Stock, and (iii) one share of Class D Preferred Stock. The stated value of the Class B Preferred Stock is $100 per share. The Class B Preferred Stock is subject to mandatory conversion upon the consummation of an Initial Public Offering or an Organic Transaction (each as defined in the Company's Amended and Restated Certificate of Incorporation).

The Class B Preferred Stock entitles the holders thereof, upon a liquidation or deemed liquidation event, to a payment of its stated value plus an amount determined by reference to a formula set forth in the Company's Amended and Restated Certificate of Incorporation. The holders of Class B Preferred Stock are entitled to an accrued dividend at a rate of 8% per annum payable when and if declared by the Company's board of directors. Such dividends shall accrue whether or not they have been decleared and whether or not there are profits. The holders of Class B Preferred Stock are further entitled to participate in any dividends paid to the holders of shares of Common Stock. As of April 3, 2004, the amount of accumulated undeclared and unpaid dividends on the Class B Preferred Stock equaled approximately $3.5 million. Except to the extent required by law, holders of Class B Preferred Stock have no voting rights.

During July 2002, two investors in the Company purchased an aggregate of 240,000 shares of its Class B Exchangeable Convertible Participating Preferred Stock in exchange for gross proceeds of $24,000. In connection with the purchase, the Company paid a fee of $750 to one of the investors and amended the terms of the Whitney (a related party) management services agreement. Following the closing of the sale, the Company utilized the proceeds of the sale and certain of the Company's cash on hand to repurchase approximately $30,400 (Note 10) in principal amount at maturity of certain debt. This repurchase satisfied the Company's obligation to make a scheduled redemption payment relating to such debt. The Company recognized a pre-tax gain on the extinguishment of this debt obligation of approximately $780, net of transaction expenses of $406, during fiscal 2003, which has been recorded as non-operating income.

Class C Redeemable Preferred Stock. The Class C Preferred Stock ranks junior to the Class A Preferred Stock, on par with the Class B Preferred Stock, and senior to all other classes of stock with respect to payment of dividends. The Class C Preferred Stock ranks junior to the Class A Preferred Stock and Class B Preferred Stock, and senior to all other classes of stock with respect to distributions upon a liquidation or deemed liquidation event.

The holders of Class C Preferred Stock are entitled to an accrued dividend at a rate of 8% per annum payable when and if declared by the Company's board of directors. As of April 3, 2004, no dividends have accrued on the Class C Preferred Stock. The Class C Preferred Stock is subject to redemption by the Company at its option. If shares of Class C Preferred Stock are issued in exchange for shares of Class B Preferred Stock, the Company is required to redeem such shares no later than one business day following the day of such issuance. The stated value of the Class C Preferred Stock is

F-30

$100 per share. Except to the extent required by law, holders of Class C Preferred Stock have no voting rights.

Class D Preferred Stock. The Class D Preferred Stock ranks junior to the Class A Preferred Stock, Class B Preferred Stock and Class C Preferred Stock, and senior to all other classes of stock with respect to the payment of dividends and distributions upon a liquidation or deemed liquidation event. The Class D Preferred Stock entitles the holders thereof, upon a liquidation or deemed liquidation event, to a payment determined by reference to a formula set forth in the Company's Amended and Restated Certificate of Incorporation. Except to the extent required by law, holders of Class D Preferred Stock have no voting rights.

Class A and Class B Common Stock. The Company has 2,475,461 shares of Class A Common Stock outstanding held by 7 holders, and 100 shares of Class B Common Stock outstanding held by Dr. Michael J. Hartnett, the Company's founder and Chief Executive Officer. In addition, as of April 3, 2004, there were outstanding warrants and options to purchase up to an additional 706,624 shares of the Company's Class A Common Stock and 549,146 shares of Class B Common Stock.

Holders of Class A Common Stock are entitled to one vote per share. Until certain events occur, the holders of Class B Common Stock are entitled to 51% of the voting power of the Company's issued and outstanding common stock.

Stock Option Plans

2001 Stock Option Plan

The RBC Bearings Incorporated (f/k/a Roller Bearing Holding Company, Inc.) 2001 Stock Option Plan was adopted in fiscal 2002 and amended and restated on October 24, 2003. The terms of the 2001 option plan provide for the grant of options or warrants to purchase up to 403,421 shares of Class A Common Stock to officers and employees of, and consultants (including members of the Company's board of directors) of, the Company and its subsidiaries selected by the CEO to participate in the plan. Options granted may be either incentive stock options (under Section 422 of the Internal Revenue Code) or non-qualified stock options. The 2001 option plan, which expires in July 2011, is governed by the Company's board of directors, or a committee to which the Board delegates its responsibilities.

1998 Stock Option Plan

Effective February 18, 1998, the Company adopted the RBC Bearings Incorporated (f/k/a Roller Bearing Holding Company, Inc.) 1998 Stock Option Plan. The terms of the 1998 option plan provide for the grant of options or warrants to purchase up to 3,365,596 shares of Class A Common Stock to officers and employees of, and consultants (including members of the Company's board of directors) to, the Company and its subsidiaries. Options granted may be either incentive stock options (under Section 422 of the Internal Revenue Code) or non-qualified stock options. The 1998 option plan, which expires on December 31, 2008, is governed by the Company's board of directors or a committee to which the Board delegates its responsibilities.

F-31

The exercise price of options granted under the 2001 and 1998 option plans is determined by the board of directors, but in no event is less than 100% of the fair market value of the Class A Common Stock.

A summary of the status of the Company's warrants and stock options outstanding as of April 3, 2004, March 29, 2003 and March 30, 2002, and changes during the years ended on those dates, is presented below:

	Number Of Class A Common Stock Warrants/Options		Weighted Average Exercise Price
Outstanding, March 31, 2001	606,087		$	1.88
Cancelled fiscal 2002	(1,310	)		5.14

Outstanding, March 30, 2002	604,777			1.88
Awarded fiscal 2003	114,097			30.00
Cancelled fiscal 2003	(31,520	)		24.95

Outstanding, March 29, 2003	687,354			5.30
Awarded fiscal 2004	37,300			24.49
Cancelled fiscal 2004	(18,030	)		12.03

Outstanding, April 3, 2004	706,624			6.16

Certain members of management left the Company during fiscal 2003 without exercising the vested portion of 16,410 Class A warrants and, accordingly, the warrants were cancelled.

The Company has also issued warrants to purchase 549,146 shares of Class B Supervoting Common Stock to Dr. Hartnett, the Company's CEO. There has been no warrant activity with respect to the Class B Supervoting Common Stock during fiscal 2004, 2003 and 2002.

F-32

The following table summarizes information about stock options and warrants outstanding at April 3, 2004:

Exercise Price and Weighted Average Exercise Price	Options/Warrants Outstanding	Weighted Average Contractual Life	Options/Warrants Exercisable
Class A
$1.00	476,847	3.3 years	476,847
$5.14	108,380	3.8 years	108,380
$30.00	106,597	8.5 years	90,764
$20.00	10,000	9.5 years	5,000
$8.00	4,800	9.5 years	1,600

	706,624		682,591

Class B
$1.00	424,146	3.3 years	424,146
$5.14	125,000	3.3 years	125,000

	549,146		549,146

17. Commitments and Contingencies

The Company leases factory facilities under non-cancelable operating leases, which expire on various dates through February 2009, with rental expense aggregating $1,801, $1,657 and $1,403 in fiscal 2004, 2003 and 2002, respectively.

The Company also has non-cancelable operating leases for transportation, computer and office equipment, which expire at various dates. Rental expense for fiscal 2004, 2003 and 2002 aggregated $579, $747 and $759, respectively.

The aggregate future minimum lease payments under operating leases are as follows:

2005	$	2,551
2006		2,211
2007		1,972
2008		1,733
2009		1,634
Thereafter		3,707

	$	13,808

The Company entered into an agreement with Whitney, a related party, whereby a quarterly management services fee is paid for certain consulting and management advisory services, as directed by the board of directors of the Company and agreed to by Whitney. Such ongoing fees aggregated $450, $375, and $188 for fiscal 2004, 2003 and 2002, respectively. At April 3, 2004 and March 29, 2003, amounts payable to Whitney were $338 and $113, respectively.

F-33

The Company enters into government contracts and subcontracts that are subject to audit by the government. In the opinion of the Company's management, the results of such audits, if any, are not expected to have a material impact on the financial condition or results of operations of the Company.

The Company is subject to federal, state and local environmental laws and regulations, including those governing discharges of pollutants into the air and water, the storage, handling and disposal of wastes and the health and safety of employees. The Company also may be liable under the Comprehensive Environmental Response, Compensation, and Liability Act or similar state laws for the costs of investigation and cleanup of contamination at facilities currently or formerly owned or operated by the Company, or at other facilities at which the Company may have disposed of hazardous substances. In connection with such contamination, the Company may also be liable for natural resource damages, government penalties and claims by third parties for personal injury and property damage. Agencies responsible for enforcing these laws have authority to impose significant civil or criminal penalties for non-compliance. The Company believes it is currently in material compliance with all applicable requirements of environmental laws. The Company does not anticipate material capital expenditures for environmental controls in fiscal years 2005 or 2006.

Investigation and remediation of contamination is ongoing at some of the Company's sites. In particular, state agencies have been overseeing groundwater monitoring activities at the Company's facilities in Hartsville, South Carolina and Fairfield, Connecticut. At Hartsville, the Company is monitoring low levels of contaminants in the groundwater caused by former operations. The state will permit the Company to cease monitoring activities after two consecutive sampling periods demonstrate contaminants are below action levels. In connection with the purchase of the Fairfield, Connecticut facility in 1996, the Company agreed to assume responsibility for completing cleanup efforts previously initiated by the prior owner. The Company submitted data to the state that the Company believes demonstrates that no further remedial action is necessary, although the state may require additional cleanup or monitoring. Although there can be no assurance, the Company does not expect any of those to be material.

The Company received notice in 2003 from the U.S. Environmental Protection Agency that the Company had been named a potentially responsible de minimis party for past disposal of hazardous substances at the Operating Industries, Inc. Landfill in Monterey, Calif. Any such disposal would have been conducted prior to the Company's ownership, and the Company notified the former owners of a potential claim for indemnification based on the indemnity described above. The Company is currently negotiating a de minimis settlement with the U.S. Environmental Protection Agency and expects that any settlement, even if the Company is unsuccessful in obtaining indemnification, will not be material to its financial position or results of operations.

There are various claims and legal proceedings against the Company relating to its operations in the normal course of business, none of which the Company believes is material to its financial position or results of operations. The Company currently maintains insurance coverage for product liability claims.

F-34

18. Other Expense, Net

Other expense, net is comprised of the following:

	Fiscal Year Ended
	April 3, 2004		March 29, 2003		March 30, 2002
Amortization of goodwill	$	—	$	—	$	801
Management fees		525		375		188
Loss on disposition of assets		236		858		22
Write-off of acquisition costs		399		—		—
Provision for doubtful accounts		378		123		364
Other expense (income)		124		68		(438	)

	$	1,662	$	1,424	$	937

19. Related Party Transactions

The Company has loaned Dr. Michael J. Hartnett, President and Chief Executive Officer of the Company and RBCA, $500 to purchase shares of capital stock of the Company. The loan does not bear interest and is due on the earlier of (i) June 23, 2007, (ii) the consummation of a sale of the Company or (iii) the consummation of an initial public offering of the Company. The loan is secured by a pledge of Dr. Hartnett's shares in the Company.

20. Reportable Segments

The Company operates through operating segments for which separate financial information is available, and for which operating results are evaluated regularly by the Company's chief operating decision maker in determining resource allocation and assessing performance. Those operating segments with similar economic characteristics and that meet all other required criteria, including nature of the products and production processes, distribution patterns and classes of customers, are aggregated as reportable segments. Certain other operating segments do not exhibit the common attributes mentioned above and do not meet the quantitative thresholds for separate disclosure, and their information is combined and disclosed as "Corporate and Other".

The Company has four reportable business segments engaged in the manufacture and sale of the following:

Roller Bearings. Roller bearings are anti-friction bearings that use rollers instead of balls. The Company manufactures four basic types of roller bearings: heavy duty needle roller bearings with inner rings, tapered roller bearings, track rollers and aircraft roller bearings.

Plain Bearings. Plain bearings are produced with either self-lubricating or metal-to-metal designs and consist of several sub-classes, including rod end bearings, spherical plain bearings and journal bearings. Unlike ball bearings, which are used in high-speed rotational applications, plain bearings are primarily used to rectify inevitable misalignments in various mechanical components.

F-35

Ball Bearings. The Company manufactures four basic types of ball bearings: high precision aerospace, airframe control, thin section and commercial ball bearings which are used in high-speed rotational applications,

Corporate and Other. Corporate and other consists of expenses incurred at the corporate office and two minor operating locations that do not fall into the above segmented categories. The Company produces precision ground ball bearing screws at its Linear Precision Products (LPP) plant that offer repeatable positioning accuracy in machine tools, transfer lines, robotic handling and semiconductor equipment. The Company's Schaublin location produces precision machine tool collets that provide effective part holding and accurate part location during machining operations.

The accounting policies of the reportable segments are the same as those described in Note 2. Segment performance is evaluated based on segment net sales, operating income and total assets. Items not allocated to segment operating income include corporate administrative expenses and certain other amounts. Identifiable assets by reportable segment consist of those directly identified with the segment's operations. Corporate assets consist of cash, fixed assets and certain prepaid expenses.

		Fiscal Year Ended
		April 3, 2004			March 29, 2003			March 30, 2002
Net External Sales
	Roller	$	63,106		$	60,788		$	59,523
	Plain		77,578			67,448			65,976
	Ball		35,801			34,038			32,531
	Corporate and other		10,846			10,586			10,301

		$	187,331		$	172,860		$	168,331

Operating Income
	Roller	$	11,259		$	8,459		$	14,014
	Plain		18,573			16,782			20,403
	Ball		6,676			7,009			7,522
	Corporate and other		(14,379	)		(11,547	)		(14,761	)

		$	22,129		$	20,703		$	27,178

Total Assets
	Roller	$	44,402		$	40,647		$	41,528
	Plain		112,441			106,675			94,965
	Ball		21,145			20,440			18,243
	Corporate and other		56,758			64,594			65,579

		$	234,746		$	232,356		$	220,315

Capital Expenditures
	Roller	$	2,108		$	2,201		$	2,746
	Plain		1,535			2,187			1,080
	Ball		795			563			1,002
	Corporate and other		513			1,571			1,113

		$	4,951		$	6,522		$	5,941

F-36

Depreciation & Amortization
	Roller	$	2,453	$	2,298	$	2,228
	Plain		2,568		2,341		2,455
	Ball		1,549		1,638		1,574
	Corporate and other		2,612		2,542		2,848

		$	9,182	$	8,819	$	9,105

Geographic External Sales
	Domestic	$	166,763	$	155,579	$	154,354
	Foreign		20,568		17,281		13,977

		$	187,331	$	172,860	$	168,331

Geographic Long-Lived Assets
	Domestic	$	52,956	$	53,798	$	55,645
	Foreign		3,293		3,974		3,891

		$	56,249	$	57,772	$	59,536

Intersegment Sales
	Roller	$	1,669	$	1,818	$	1,220
	Plain		880		1,787		3,182
	Ball		397		18		952
	Corporate and other		6,349		5,135		3,254

		$	9,295	$	8,758	$	8,608

All intersegment revenues are eliminated in consolidation.

21. Subsequent Event

On June 29, 2004, the Company closed a $210,000 debt refinancing agreement led and arranged by General Electric Capital Corporation. The agreement provides a $55,000 revolving credit agreement, a $110,000 term loan and a $45,000 second lien term loan. Each loan is secured by a lien against substantially all of the assets of the Company and subjects the Company to standard affirmative and negative covenants, as well as financial leverage tests. The proceeds were used to refinance the existing senior credit facility and to redeem outstanding debt. Most notably, concurrently with the funding, the Company issued a notice of redemption to the noteholders of the 9⁵/8% Senior Subordinated Notes issued pursuant to an indenture and due June 15, 2007. The requisite funds, approximately $113,000 (101.6041% of the principal amount), were irrevocably put on deposit with the trustee, Bank of New York, for redemption on July 29, 2004. In June 2004, $4,303 in unamortized deferred finance costs associated with the retired debt were charged to other non-operating expenses and deferred finance fees of $4,500 were capitalized associated with the new debt refinancing arrangement.

F-37

RBC Bearings Incorporated

Index to Unaudited Interim Consolidated Financial Statements

Consolidated Balance Sheets as of January 1, 2005 and April 3, 2004		F-39
Consolidated Statements of Operations for the nine months ended January 1, 2005 and December 27, 2003		F-40
Consolidated Statements of Stockholders' Deficit and Comprehensive Income (Loss) for the nine months ended January 1, 2005 and December 27, 2003		F-41
Consolidated Statements of Cash Flows for the nine months ended January 1, 2005 and December 27, 2003		F-42
Notes to Unaudited Interim Consolidated Financial Statements		F-43 to F-53

F-38

RBC Bearings Incorporated

Consolidated Balance Sheets

(dollars in thousands, except share data)

			January 1, 2005			April 3, 2004
			(unaudited)
ASSETS
Current assets:			$	1,703		$	3,250
	Cash
	Accounts receivable, net of allowance for doubtful accounts of $541 at January 1, 2005 and $770 at April 3, 2004			46,773			44,516
	Inventory			99,351			90,504
	Deferred income taxes			2,410			2,342
	Prepaid expenses and other current assets			3,688			2,454

		Total current assets		153,925			143,066
Property, plant and equipment, net of accumulated depreciation of $75,761 at January 1, 2005 and $71,369 at April 3, 2004				54,233			56,249
Restricted marketable securities				12			12
Goodwill				25,150			25,150
Intangible assets, net of accumulated amortization of $796 at January 1, 2005 and $449 at April 3, 2004				3,083			2,853
Deferred financing costs, net of accumulated amortization of $1,096 at January 1, 2005 and $7,849 at April 3, 2004				5,023			5,628
Other assets				1,864			1,788

		Total assets	$	243,290		$	234,746

LIABILITIES & STOCKHOLDERS' DEFICIT
Current liabilities:
	Accounts payable		$	17,955		$	13,618
	Accrued expenses and other current liabilities			10,574			13,276
	Current portion of long-term debt			8,183			10,421
	Capital lease obligations			185			201

		Total current liabilities		36,897			37,516
	Long-term debt, less current portion			214,071			204,803
	Capital lease obligations, less current portion			330			225
	Other non-current liabilities			6,643			8,487

		Total liabilities		257,941			251,031
Class C redeemable preferred stock, $0.01 par value; authorized shares: 900,000 at January 1, 2005 and April 3, 2004; none issued and outstanding				—			—
Stockholders' deficit:
	Class A preferred stock, $0.01 par value; authorized shares; 15,500 at January 1, 2005 and April 3, 2004; none issued and outstanding			—			—
	Class B exchangeable convertible participating preferred stock, $0.01 par value; authorized shares: 240,000 at January 1, 2005 and April 3, 2004; issued and outstanding shares: 240,000 at January 1, 2005 and April 3, 2004			2			2
	Class D preferred stock, $0.01 par value; authorized shares: 240,000 at January 1, 2005 and April 3, 2004; none issued and outstanding			—			—
	Class A voting common stock, $.01 par value; authorized shares: 8,000,000 at January 1, 2005 and April 3, 2004; issued and outstanding shares: 2,475,461 at January 1, 2005 and April 3, 2004			25			25
	Class B super voting common stock, $.01 par value; authorized shares: 1,000,000 at January 1, 2005 and April 3, 2004; issued and outstanding shares: 100 at January 1, 2005 and April 3, 2004			—			—
	Additional paid-in capital			33,485			33,485
	Accumulated other comprehensive loss			(2,226	)		(3,343	)
	Accumulated deficit			(45,937	)		(46,454	)

		Total stockholders' deficit		(14,651	)		(16,285	)

		Total liabilities and stockholders' deficit	$	243,290		$	234,746

See notes to unaudited interim consolidated financial statements

F-39

RBC Bearings Incorporated

Consolidated Statements of Operations

(dollars in thousands, except share data)
(unaudited)

			Nine Months Ended
			January 1, 2005		December 27, 2003
Net sales			$170,731		$125,087
Cost of sales			123,325		90,745

	Gross margin		47,406		34,342
Operating expenses
	Selling, general and administrative		22,929		19,615
	Other, net		2,464		863

	Total operating expenses		25,393		20,478

		Operating income	22,013		13,864
Interest expense, net			14,335		15,289
Loss on early extinguishment of debt			6,956		—
Other non-operating expense (income)			(98	)	12

	Income (loss) before income taxes		820		(1,437	)
Provision for (benefit from) income taxes			303		(492	)

	Net income (loss)		$ 517		$ (945	)

Net income (loss) per common share:
	Basic		$ (0.47	)	$ (1.01	)
	Diluted		$ (0.47	)	$ (1.01	)
Weighted average common shares:
	Basic		2,475,561		2,475,561
	Diluted		2,475,561		2,475,561

See notes to unaudited interim consolidated financial statements

F-40

RBC Bearings Incorporated

Consolidated Statements of Stockholders' Deficit and Comprehensive Income/(Loss)

(dollars in thousands)

		Preferred Stock			Common Stock
										Accumulated Other Comprehensive Loss
								Additional Paid-in Capital					Accumulated Deficit			Total Stockholders' Deficit			Comprehensive Income/ Loss
		Shares	Amount		Shares	Amount		Additional Paid-in Capital					Accumulated Deficit			Total Stockholders' Deficit			Comprehensive Income/ Loss
Balance at March 29, 2003		240,000	$	2	2,475,561	$	25	$	33,485	$	(4,044	)	$	(47,117	)	$	(17,649	)
	Net income (53 weeks)	—		—	—		—		—		—			663			663		$	663
	Currency translation adjustments	—		—	—		—		—		63			—			63			63
	Minimum pension liability adjustment, net of taxes	—		—	—		—		—		638			—			638			638

	Comprehensive income																		$	1,364

Balance at April 3, 2004		240,000		2	2,475,561		25		33,485		(3,343	)		(46,454	)		(16,285	)
	Net income (unaudited)	—		—	—		—		—		—			517			517		$	517
	Currency translation adjustments (unaudited)	—		—	—		—		—		1,117			—			1,117			1,117

	Comprehensive income (unaudited)																		$	1,634

Balance at January 1, 2005 (unaudited)		240,000	$	2	2,475,561	$	25	$	33,485	$	(2,226	)	$	(45,937	)	$	(14,651	)

See notes to unaudited interim consolidated financial statements

F-41

RBC Bearings Incorporated

Consolidated Statements of Cash Flows

(dollars in thousands)
(Unaudited)

				Nine Months Ended
				January 1, 2005			December 27, 2003
Cash flows from operating activities:
	Net income (loss)			$	517		$	(945	)
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Depreciation			6,997			7,274
		Deferred income taxes			(68	)		(69	)
		Amortization of intangible assets			347			258
		Amortization of deferred financing costs and debt discount			898			1,227
		Loss on disposition of assets			1,841			—
		Loss on early extinguishment of debt			4,303			—
		Other			12			34
		Changes in operating assets and liabilities, net of acquisitions:
			Accounts receivable		(1,263	)		3,973
			Inventory		(6,767	)		(6,573	)
			Prepaid expenses and other current assets		(1,222	)		58
			Other non-current assets		169			879
			Accounts payable and other current liabilities		837			(7,764	)
			Other non-current liabilities		(1,896	)		1,751

		Net cash provided by operating activities			4,705			103
Cash flows from investing activities:
	Purchase of property, plant & equipment				(6,604	)		(2,952	)
	Proceeds from sale of assets				110			—
	Acquisition of businesses, net of cash acquired				(1,228	)		(6,364	)
	Proceeds from restricted marketable securities				—			101

		Net cash used in investing activities			(7,722	)		(9,215	)
Cash flows from financing activities:
	Net increase in revolving credit facility				2,890			2,500
	Financing fees paid in connection with credit facility				(4,500	)		(748	)
	Retirement of senior subordinated notes payable				(110,000	)		—
	Proceeds from senior credit facility				—			10,000
	Proceeds from new credit facility				155,000			—
	Increase in foreign debt				—			7,971
	Payments on term loans				(41,750	)		(4,515	)
	Principal payments on capital lease obligations				(211	)		(140	)

		Net cash provided by financing activities			1,429			15,068
Effect of exchange rate changes on cash					41			651

Cash and cash equivalents:
	(Decrease) increase during the period				(1,547	)		6,607
	Cash, at beginning of period				3,250			3,553

	Cash, at end of period			$	1,703		$	10,160

Supplemental disclosures of cash flow information:
	Cash paid during the period for:
		Interest		$	17,307		$	18,512

		Income taxes		$	224		$	201

See notes to unaudited interim consolidated financial statements

F-42

RBC Bearings Incorporated

Notes to Unaudited Interim Consolidated Financial Statements

(dollars in thousands, except share and per share data)

The consolidated financial statements included herein have been prepared by RBC Bearings Incorporated (collectively with its subsidiaries, the "Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The fiscal year-end balance sheet data have been derived from the Company's audited financial statements, but does not include all disclosures required by generally accepted accounting principles in the United States. The interim financial statements furnished with this report have been prepared on a consistent basis with the Company's audited financial statements and notes thereto included herein for the fiscal year ended April 3, 2004. These statements reflect all adjustments, consisting only of items of a normal recurring nature, which are, in the opinion of management, necessary for the fair presentation of the consolidated financial condition and consolidated results of operations for the interim periods presented. These financial statements should be read in conjunction with the Company's audited financial statements and notes thereto included herein.

The consolidated financial statements include the accounts of RBC Bearings Incorporated, Roller Bearing Company of America, Inc. ("RBCA") and its wholly-owned subsidiaries, Industrial Tectonics Bearings Corporation ("ITB"), RBC Linear Precision Products, Inc. ("LPP"), RBC Nice Bearings, Inc. ("Nice"), Bremen Bearings, Inc. ("Bremen"), Miller Bearings, Inc. ("Miller"), Tyson Bearings., Inc. ("Tyson"), Schaublin, RBC de Mexico ("Mexico"), RBC Oklahoma, Inc. ("RBC Oklahoma") and RBC Aircraft Products, Inc. ("API"), as well as its Transport Dynamics ("TDC"), Heim ("Heim"), Engineered Components ("ECD") and U.S. Bearings ("USB") divisions. All material intercompany balances and transactions have been eliminated in consolidation.

1. Acquisitions

Effective December 22, 2004, RBCA purchased certain net assets of the U.S. Bearing division of Network Electronic Corporation, a manufacturer of lined and unlined spherical, rod-end and other specialty bearings located in Chatsworth, California. The total consideration paid was $1,228. The purchase price allocation is as follows: inventory ($522), property, plant and equipment ($585), intangible assets ($438) and accrued expenses ($317). All of the products associated with the acquisition are complementary with products already provided by other Company businesses.

Effective December 22, 2003, API, a wholly-owned subsidiary of RBCA, purchased the airframe control bearing business of Timken Corp. located in Torrington, CT. The total consideration paid was $5,471. The purchase price allocation is as follows: accounts receivable ($379), inventory ($3,911), property, plant, and equipment ($2,439), intangible assets ($1,136) and accrued expenses ($2,394). The products associated with the acquisition are complementary with products already provided by other Company businesses.

F-43

ended January 1, 2005 and December 27, 2003, as if the USB and API acquisitions took place on March 30, 2003, are as follows:

		January 1, 2005			December 27, 2003
Net sales		$	172,281		$	148,690
Net income		$	777		$	1,595
Net income (loss) per common share:
	Basic	$	(0.37	)	$	0.01
	Diluted	$	(0.37	)	$	0.01

2. Net Income (Loss) Per Common Share

If the above calculation results in a net loss available to common stockholders (due to a net loss for the period or the effect of accrued preferred stock dividends) and if the effect of including common share equivalents and the assumed conversion of preferred stock is anti-dilutive, then diluted net loss per common share will equal basic net loss per common share.

F-44

The table below reflects the calculation of weighted-average shares outstanding for each year presented as well as the computation of basic and diluted net income (loss) per common share:

Numerator:
	Net income (loss)		$ 517		$ (945	)
	Accrued preferred stock dividends		(1,693	)	(1,561	)

	Numerator for basic net income (loss) per common share—income (loss) available to common stockholders		(1,176	)	(2,506	)
	Effect of preferred stock dividends		1,693		1,561

	Numerator for diluted net income (loss) per common share—income (loss) available to common stockholders after assumed conversion of preferred stock		$ 517		$ (945	)

Denominator:
	Denominator for basic net income (loss) per common share—weighted-average shares		2,475,561		2,475,561
	Effect of dilutive securities:
		Employee stock options and warrants	1,031,578		874,908
		Convertible preferred stock	738,558		738,558

	Dilutive potential common shares		1,770,136		1,613,466

	Denominator for diluted net income (loss) per common share—adjusted weighted-average shares and assumed conversions		4,245,697		4,089,027

Basic net income (loss) per common share			$ (0.47	)	$ (1.01	)
Diluted net income (loss) per common share			$ (0.47	)	$ (1.01	)

3. Inventory

Inventories are stated at the lower of cost or market, using the first-in, first-out method, and are summarized below:

	January 1, 2005		April 3, 2004
Raw materials	$	5,260	$	3,611
Work in process		28,188		25,798
Finished goods		65,903		61,095

	$	99,351	$	90,504

4. Accumulated Other Comprehensive Loss

F-45

The following summarizes the activity within accumulated other comprehensive loss:

	Currency Translation			Minimum Pension Liability			Total
Balance at March 29, 2003	$	(1,367	)	$	(2,677	)	$	(4,044	)
Currency translation adjustments		63			—			63
Minimum pension liability		—			638			638

Balance at April 3, 2004		(1,304	)		(2,039	)		(3,343	)
Currency translation adjustments		1,117			—			1,117

Balance at January 1, 2005	$	(187	)	$	(2,039	)	$	(2,226	)

5. Stock-Based Compensation

		Nine Months Ended
		January 1, 2005			December 27, 2003
Net income (loss), as reported		$	517		$	(945	)
Less: stock-based compensation expense determined under fair value method, net of tax			42			21

Pro-forma net income (loss)		$	475		$	(966	)

Net income (loss) per common share, as reported:
	Basic	$	(0.47	)	$	(1.01	)

	Diluted	$	(0.47	)	$	(1.01	)

Net income (loss) per common share, pro-forma:
	Basic	$	(0.49	)	$	(1.02	)

	Diluted	$	(0.49	)	$	(1.02	)

The Company has issued 65,000 options to purchase Class A Common Stock at an exercise price of $20.00 during the nine months ended January 1, 2005. Determining the fair value of the Company's Class A Common Stock requires making subjective and complex judgments and estimates. The Company employed the market approach to estimate the enterprise value. The market approach involves applying an appropriate market multiple, compared to like public companies in the Company's industry, to the operating performance for the twelve months ended April 3, 2004 and the actual and projected operating performance for the twelve months ended April 2, 2005. The options issued during

F-46

the nine-month period ended January 1, 2005 were based on this valuation and approved by the Company's Board of Directors. The Company and the Board of Directors anticipate that a retrospective review and assessment will be performed due to the pending initial public offering to determine any change in the fair market value of the Company's enterprise value, which could result in recording deferred compensation and compensation expense for the fiscal year ending April 2, 2005.

6. Debt

On June 29, 2004, the Company closed a $210,000 debt refinancing agreement (the "New Credit Facility") led and arranged by General Electric Capital Corporation. The agreement provides a $55,000 revolving credit agreement (the "New Revolving Credit Facility"), a $110,000 term loan (the "New Term Loan"), and a $45,000 second lien term loan (the "SCIL Loan"). Each loan is secured by a lien against substantially all of the assets of the Company and subjects the Company to standard affirmative and negative covenants, as well as financial leverage tests. The proceeds were used to refinance the existing senior credit facility and to redeem outstanding debt. Most notably, concurrently with funding, the Company issued a notice of redemption to the noteholders of the Senior Subordinated Notes issued pursuant to an indenture and due June 15, 2007. The requisite funds, approximately $113,000 (101.6041% of the principal amount), were irrevocably put on deposit with the trustee, Bank of New York, for redemption July 29, 2004. This amount includes a redemption premium of $1,771 that was recorded as a loss on extinguishment of debt, as was $4,303 in unamortized deferred finance fees associated with this debt and $882 in interest expense during the call period. Deferred finance fees of $4,500 were capitalized associated with the new debt refinancing arrangement.

Approximately $20,300 of the New Revolving Credit Facility is being utilized to provide letters of credit to secure RBCA's obligations relating to certain Industrial Development Revenue Bonds and insurance programs. As of January 1, 2005, RBCA had the ability to borrow up to an additional $18,618 under the New Revolving Credit Facility.

The New Revolving Credit Facility bears interest at a floating rate of either the higher of the base rate on corporate loans or the federal funds rate plus 50 basis points, plus 1.75%; or LIBOR plus 3.00%. The Company has the right to elect the applicable interest rate on the New Revolving Credit Facility. The New Term Loan bears interest at a floating rate of either the higher of the base rate on corporate loans or the federal funds rate plus 50 basis points, plus 2.50%; or LIBOR plus 3.75%. The Company has the right to elect the applicable interest rate on the New Term Loan. The SCIL Loan bears interest at a floating rate of either the higher of the base rate on corporate loans or the federal funds rate plus 50 basis points, plus 7.25%; or LIBOR plus 8.50%. The Company has the right to elect the applicable interest rate on the SCIL Loan. As of January 1, 2005, the blended interest rate on this debt refinancing agreement was 7.80%.

On December 8, 2003, Schaublin entered into a bank credit facility (the "Swiss Credit Facility") with Credit Suisse providing for 10,000 swiss francs, or approximately $8,000, of term loans (the "Swiss Term Loans") and up to 2,000 swiss francs, or approximately $1,600, of revolving credit loans (the "Swiss Revolving Credit Facility"). RBCA pledged 99.4% of the present and future share capital of Schaublin (1,366 shares) against this facility. On November 8, 2004, Schaublin amended the Swiss Credit Facility to increase the Swiss Revolving Credit Facility to 4,000 swiss francs, or approximately $3,500. As of January 1, 2005, there were no borrowings outstanding under the Swiss Revolving Credit Facility.

F-47

The balances payable under all borrowing facilities are as follows:

	January 1, 2005		April 3, 2004
9⁵/8% Senior Subordinated Notes Payable	$	—	$	110,000
13% Senior Subordinated Discount Debentures		37,902		37,806
New Credit Facility
New Term Loan, payable in quarterly installments of $275, commencing October 1, 2004, with final payment of $103,125 due December 29, 2010; bears interest at variable rates, payable monthly and upon maturity at prime or LIBOR, at the Company's election		109,725		—
SCIL Loan, payable June 29, 2011; bears interest at variable rates, payable monthly and upon maturity at prime or LIBOR, at the Company's election.		45,000		—
New Revolving Credit Facility		5,390		—
Senior Credit Facility
Term Loans, payable in quarterly installments of $1,428, commencing September 30, 2002, with final payment of $12,857 due May 30, 2007; bears interest at variable rates, payable monthly and upon maturity at prime or LIBOR, at the Company's election		—		30,000
Term Loan B, payable May 30, 2007; bears interest at variable rates, payable monthly and upon maturity at prime or LIBOR, at the Company's election; three percent of interest accrues as paid in kind additions to principal outstanding		—		10,085
Revolving Credit Facility		—		2,500
Swiss Credit Facility
Term Loan, payable in semi-annual installments ranging from approximately $400, commencing March 31, 2004, to approximately $1,000 from September 30, 2005, with final payment due March 31, 2009; bears interest at variable rates, payable quarterly		7,457		7,480
Other Loans		125		698
Industrial Development Revenue Bonds
Series 1994 A, due in annual installments of $180 beginning September 1, 2006, graduating to $815 on September 1, 2014, with final payment due on September 1, 2017; bears interest at a variable rate, payable monthly through December 2017		7,700		7,700
Series 1994 B, bears interest at a variable rate, payable monthly through December 2017		3,000		3,000
Series 1998, bears interest at variable rates, payable monthly through December 2021.		1,155		1,155
Series 1999, bearing interest at variable rates, payable monthly through April 2024		4,800		4,800

Total Debt		222,254		215,224
Less: Current Portion		8,183		10,421

Long-Term Debt	$	214,071	$	204,803

The current portion of long-term debt as of January 1, 2005 and April 3, 2004 includes $5,390 and $2,500, respectively, of borrowings under the revolving credit facilities.

F-48

The Company's exposure to interest rate risk is derived from its outstanding variable-rate debt obligations which primarily consist of the New Credit Facility and the SCIL loan. The Company is subject to fluctuating interest rates on $184,227 of debt. In December 2004, RBCA entered into an interest rate cap agreement with LaSalle Bank on $50 million of notes payable maturing on October 1, 2010. The agreement caps the LIBOR interest rate at five percent and matures on December 31, 2005. The interest rate cap agreement is being accounted for as an economic hedge. There was no material impact on the financial statements of the Company for the nine months ended January 1, 2005 of the interest rate cap agreement.

7. Disposal of Fixed Assets

During the nine-month period ended January 1, 2005, the Company had a non-cash charge of $1,841 on the loss on sale and disposal of property, plant, and equipment related to the consolidation of production lines and outsourcing certain components to low-cost producers. This amount was classified as an "other, net" operating expense in the consolidated statements of operations.

8. Pension and Postretirement Plans

At January 1, 2005, the Company has noncontributory defined benefit pension plans covering union employees in its Heim division plant in Fairfield, Connecticut, its Nice subsidiary plant in Kulpsville, Pennsylvania, its Bremen subsidiary plant in Plymouth, Indiana and its Tyson subsidiary plant in Glasgow, Kentucky.

In its consolidated financial statements for the year ended April 3, 2004, the Company stated it expected to contribute $2,000 to its defined benefit plans and $340 to its retiree medical plans during the 2005 fiscal year. As of January 1, 2005, $1,100 has been contributed to the defined benefit plans and $210 has been contributed to the retiree medical plans. For the remainder of fiscal 2005, the Company intends to contribute $107 to its defined benefit plans and $70 to the retiree medical plans.

F-49

The following tables illustrate the components of net periodic benefit cost for the Company's pension and other postretirement benefits plans:

		Pension Benefits Nine Months Ended
		January 1, 2005			December 27, 2003
Components of net periodic benefit cost:
	Service cost	$	381		$	373
	Interest cost		708			692
	Expected return on plan assets		(549	)		(596	)
	Amortization of losses		14			267

	Net periodic benefit cost	$	554		$	736

		Other Postretirement Benefits Nine Months Ended
		January 1, 2005			December 27, 2003
Components of net periodic benefit cost:
	Service cost	$	168		$	179
	Interest cost		186			187
	Prior service cost amortization		(314	)		(361	)
	Amount of loss recognized		123			129

	Net periodic benefit cost	$	163		$	134

On December 8, 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 (the "Act") was signed into law. The Company is evaluating how and when any Federal subsidies would apply. The postretirement benefit obligation and net periodic benefit cost in the financial statements do not reflect the possible effects of the Act on the Company's benefit programs. Specific authoritative guidance on the accounting for the Federal subsidy is pending and that guidance, when published, could require the Company to change previously reported information.

9. Related Party Transactions

In connection with a management services agreement with Whitney, RBCA incurred fees of $338 in each of the nine-month periods ended January 1, 2005 and December 27, 2003. At January 1, 2005 and December 27, 2003, amounts payable to Whitney were $450 and $113, respectively.

10. Income Taxes

The effective income tax rates for the nine-month periods ended January 1, 2005 and December 27, 2003 are 37% and 34.2%, respectively.

F-50

11. Reportable Segments

The Company operates through operating segments for which separate financial information is available, and for which operating results are evaluated regularly by the Company's chief operating decision maker in determining resource allocation and assessing performance. These operating segments have similar economic characteristics and met all other required criteria, including nature of the products and production processes, distribution patterns and classes of customers. The Company aggregates these operating segments for reporting purposes. Certain other operating segments do not exhibit the common attributes mentioned above and, therefore, information about them is reported separately, along with those operating segments which do not meet the quantitative thresholds for separate disclosure, and their information is combined and disclosed as "Corporate and Other".

The Company has four reportable business segments engaged in the manufacture and sale of the following:

Roller Bearings. Roller bearings are anti-friction bearings that use rollers instead of balls. The Company manufactures four basic types of roller bearings: heavy duty needle roller bearings with inner rings, tapered roller bearings, track rollers and aircraft roller bearings.

Plain Bearings. Plain bearings are produced with either self-lubricating or metal-to-metal designs and consist of several sub-classes, including rod end bearings, spherical plain bearings and journal bearings. Unlike ball bearings, which are used in high-speed rotational applications, plain bearings are primarily used to rectify inevitable misalignments in various mechanical components.

Ball Bearings. The Company manufactures four basic types of ball bearings: high precision aerospace, airframe control, thin section and commercial ball bearings which are used in high-speed rotational applications.

Corporate and Other. Corporate and other consists of expenses incurred at the corporate office and its holding company parent, and two minor operating locations that do not fall into the above segmented categories. The Company produces precision ground ball bearing screws at its Linear Precision Products (LPP) plant that offer repeatable positioning accuracy in machine tools, transfer lines, robotic handling and semiconductor equipment. The Company's Schaublin location produces precision machine tool collets that provide effective part holding and accurate part location during machining operations.

F-51

Segment performance is evaluated based on segment net sales, operating income and total assets. Items not allocated to segment operating income include corporate administrative expenses and certain other amounts. Corporate assets consist of cash, fixed assets and certain prepaid expenses.

		Nine Months Ended
		January 1, 2005			December 27, 2003
Net External Sales
	Roller	$	64,643		$	39,193
	Plain		68,354			55,494
	Ball		28,357			22,807
	Corporate and other		9,377			7,593

		$	170,731		$	125,087

Operating Income
	Roller	$	10,550		$	6,132
	Plain		16,572			12,691
	Ball		5,699			4,598
	Corporate and other		(10,808	)		(9,557	)

		$	22,013		$	13,864

Geographic External Sales
	Domestic	$	151,164		$	110,332
	Foreign		19,567			14,755

		$	170,731		$	125,087

Intersegment Sales
	Roller	$	4,821		$	1,220
	Plain		1,628			129
	Ball		2,695			502
	Corporate and other		7,124			4,393

		$	16,268		$	6,244

All intersegment revenues are eliminated in consolidation.

12. Recently Issued Accounting Pronouncements

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment of ARB No. 43, Chapter 4." The amendments made by SFAS No. 151 clarify that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized as current-period charges and require the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. The guidance is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. It is not believed that the adoption of SFAS No. 151 will have a material impact on the consolidated financial position, results of operations or cash flows of the Company.

F-52

In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based Payment." SFAS No. 123(R) will require that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. SEAS No. 123(R) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. SFAS No. 123(R) replaces FASB Statement No. 123, "Accounting for Stock-Based Compensation", and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS No. 123, as originally issued in 1995, established as preferable a fair value-based method of accounting for share-based payment transactions with employees. However, that Statement permitted entities the option of continuing to apply the guidance in APB Opinion No. 25, as long as the footnotes to financial statements disclosed what net income would have been had the preferable fair value-based method been used. Public entities will be required to apply SFAS No. 123(R) as of the first interim or annual reporting period that begins after June 15, 2005. SFAS No. 123(R) permits public companies to adopt its requirements using one of two methods:

1.: A "modified prospective" method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS No. 123(R) for all share-based payments granted after the effective date and (b) based on requirements of SFAS No. 123 for all awards granted to employees prior to the effective date of SFAS No. 123 (R) that remain unvested on the effective date.
2.: A "modified retrospective" method which includes the requirements of the modified prospective method described above, but also permits entities to restate based on the amount previously recognized under SFAS No. 123 for purpose of pro forma disclosures either (a) all prior periods presented or (b) prior interim periods of the year of adoption.

The Company is currently evaluating these transition methods and determining the effect on the Company's consolidated results of operations and whether the adoption will result in amounts that are similar to the current pro-forma disclosures under SFAS No. 123. For fiscal 2005, the Company will continue to disclose stock-based compensation information in accordance with SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure—an Amendment of FASB Statement No. 123," and SFAS No. 123.

F-53

Through and including , 2005 (the 25^th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

Shares

Common Stock

PROSPECTUS

Merrill Lynch & Co.

KeyBanc Capital Markets

Jefferies & Company, Inc.

, 2005

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by RBC Bearings Incorporated in connection with the offer and sale of the securities being registered. All amounts are estimates except the SEC registration fee and the NASD filing fee.

SEC registration fee	$	16,831.10
NASD filing fee		13,000.00
Stock Exchange listing fee		*
Transfer Agent's Fee		*
Trustee's fee		*
Printing and engraving costs		*
Legal fees and expenses		*
Accounting fees and expenses		*
Miscellaneous		*

Total	$

Item 14. Indemnification of Directors and Officers

Delaware. The General Corporation Law of the State of Delaware ("DGCL") authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors' fiduciary duties. The certificates of incorporation of the Delaware registrants include a provision that eliminates the personal liability of directors for monetary damages for actions taken as a director, except for liability for breach of duty of loyalty; for acts or omissions not in good faith or involving intentional misconduct or knowing violation of law; under Section 174 of the DGCL (unlawful dividends and stock repurchases); or for transactions from which the director derived improper personal benefit.

The certificates of incorporation of the Delaware registrants provide that these registrants must indemnify their directors and officers to the fullest extent authorized by the DGCL and must also pay expenses incurred in defending any such proceeding in advance of its final disposition upon delivery of an undertaking, by or on behalf of an indemnified person, to repay all amounts so advanced if it should be determined ultimately that such person is not entitled to be indemnified under this section or otherwise.

The indemnification rights set forth above shall not be exclusive of any other right which an indemnified person may have or hereafter acquire under any statute, provision of our certificate of incorporation, our by laws, agreement, vote of stockholders or disinterested directors or otherwise.

The purchase agreement to be entered into between RBC Bearings Incorporated and the underwriters in connection with this offering will include provisions pursuant to which the underwriters indemnify the directors and officers of RBC Bearings Incorporated.

RBC Bearings Incorporated maintains insurance to protect itself and its directors and, officers and those of its subsidiaries against any such expense, liability or loss, whether or not it would have the power to indemnify them against such expense, liability or loss under applicable law.

II-1

Item 15. Recent Sales of Unregistered Securities

None.

Item 16. Exhibits and Financial Statement Schedules

(a): Exhibit. The following exhibits are filed as part of this Registration Statement.

1.1		Form of Purchase Agreement.*
3.1		Form of Amended and Restated Certificate of Incorporation of RBC Bearings Incorporated dated , 2005.
3.3		Form of Bylaws of RBC Bearings Incorporated.
4.3		Form of stock certificate for common stock.*
5.1		Form of Opinion of Kirkland & Ellis LLP.
10.1		Indenture, dated as of June 15, 1997 between RBC Bearings Incorporated (f/k/a Roller Bearing Holding Company, Inc.) and the United States Trust Company of New York.
10.2		Stock Option Plan of RBC Bearings Incorporated (f/k/a Roller Bearing Holding Company, Inc.), dated as of February 18, 1998 with form of agreement.
10.3		Form of Stock Transfer Restriction Agreement between RBC Bearings Incorporated (f/k/a Roller Bearing Holding Company, Inc.) and certain of its stockholders.
10.4		Amended and Restated 2001 Stock Option Plan of RBC Bearings Incorporated (f/k/a Roller Bearing Holding Company, Inc.), dated October 24, 2003.
10.5		Form of 2005 Long Term Equity Incentive Plan.
10.6		Agreement of Lease between Robear West Trenton Associates, L.P. and Roller Bearing Company of America, Inc., dated February 10, 1999, for West Trenton, New Jersey premises.
10.7		First Amendment to Office Lease, dated July 26, 2004, between Robear West Trenton Associates, L.P. and Roller Bearing Company of America, Inc.
10.8		Indenture of Lease dated March 31, 2004 between Roller Bearing Company of America, Inc., and Raymond Hunicke, LLC, a Connecticut limited liability company.
10.9		Executed counterpart of the Pledge and Security Agreement, dated as of September 1, 1994, between Roller Bearing Company of America, Inc., Heller Financial, Inc. and Mark Twain Bank.
10.10		Loan Agreement, dated as of September 1, 1994, between the South Carolina Job—Economic Development Authority and Roller Bearing Company of America, Inc. with respect to the Series 1994A Bonds.
10.11		Agreement between Bremen, Indiana Plant of SKF USA, Inc. and International Union Automobile, Aerospace and Agricultural Workers of America, U.A.W., Local 1368, expires October 29, 2005.
10.12		Trust Indenture, dated as of September 1, 1994, between the South Carolina Job—Economic Development Authority and Mark Twain Bank, as Trustee, with respect to the Series 1994A Bonds.
10.13		Loan Agreement, dated as of September 1, 1994, between the South Carolina Job—Economic Development Authority and Roller Bearing Company of America, Inc., with respect to the Series 1994B Bonds.
10.14		Trust Indenture, dated as of September 1, 1994, between the South Carolina Job—Economic Development Authority and Mark Twain Bank, as Trustee, with respect to the Series 1994B Bonds.

II-2

10.15		Collective Bargaining Agreement between Heim, the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, U.A.W., and Amalgamated Local 376, U.A.W., expires January 31, 2008.
10.16		Nice Union Agreement, between Nice Ball Bearings, Inc. and United Steelworkers of America, Local 6816-12, expires January 31, 2008.*
10.17		Collective Bargaining Agreement between Roller Bearing Company of America, Inc. and the International Union U.A.W. and its Local 502, expires June 30, 2007.
10.18		Collective Bargaining Agreement between Tyson Bearing Company, Inc. and the United Steelworkers of America, AFL-CIO, Local 7461-01, expires June 13, 2008.*
10.19		Employment Agreement, effective as of December 18, 2000, between the Company and Michael J. Hartnett, Ph.D.
10.20		Amended and Restated Promissory Note, dated as of December 15, 2000, for $500,000, made by Michael J. Hartnett, Ph.D. and payable to Roller Bearing Company of America, Inc.
10.21		Loan Agreement, dated as of April 1, 1999, by and between California Infrastructure and Economic Development Bank and Roller Bearing Company of America, Inc.
10.22		Indenture Of Trust, dated as of April 1, 1999, between California Infrastructure and Economic Development Bank and U.S. Bank Trust National Association, as Trustee.
10.23		Tax Regulatory Agreement, dated as of April 1, 1999, by and among California Infrastructure and Economic Development Bank, U.S. Bank Trust National Association, as Trustee, and Roller Bearing Company of America, Inc.
10.24		Lease Agreement, dated as of December 17, 1999, between Schaublin SA and RBC Schaublin SA.
10.25		Lease by and among ABCS Properties, LLC, Michael H. Short and Lynn C. Short and Bremen Bearings, Inc. dated August 31, 2001.
10.26		Fourth Amended and Restated Credit Agreement, dated June 29, 2004, by and among Roller Bearing Company of America, Inc., certain of its domestic subsidiaries, General Electric Capital Corporation, as agent and lender and GECC Capital Markets Group, Inc.
10.27		Security Agreement, dated May 30, 2002, by and among Roller Bearing Company of America, Inc., certain of its domestic subsidiaries, General Electric Capital Corporation, as agent and Lender.
10.28		Pledge Agreement, dated May 30, 2002, by and among Roller Bearing Company of America, Inc., certain of its domestic subsidiaries, General Electric Capital Corporation, as agent and Lender.
10.29		SCIL Credit Agreement, dated June 29, 2004, by and among Roller Bearing Company of America, Inc. and certain of its domestic subsidiaries, General Electric Capital Corporation, as SCIL agent and GECC Capital Markets Group as Lead Arranger.
10.30		Security Agreement, dated June 29, 2004, by and among Roller Bearing Company of America, Inc., certain of its domestic subsidiaries, General Electric Capital Corporation, as Agent for SCIL Lenders.
10.31		Pledge Agreement, dated June 29, 2004, by and among Roller Bearing Company of America, Inc., certain of its domestic subsidiaries, General Electric Capital Corporation, as Agent for SCIL Lenders.
10.32		Master Reaffirmation and Amendment to Loan Documents, dated June 29, 2004, by and among Roller Bearing Company of America, Inc., certain of its domestic subsidiaries, General Electric Capital Corporation, as agent and Lender.
10.33		Lease Agreement dated May 17, 2004 by and between Shadowmoss Properties, LLC, a South Carolina limited liability company and Roller Bearing Company of America, Inc.

II-3

10.34		Credit Agreement, dated December 8, 2003, between Credit Suisse and Schaublin SA.
10.35		Amendment No. 1 to Credit Agreement, dated November 8, 2004, between Credit Suisse and Schaublin SA.
21.2		Subsidiaries of the Registrant
23.1		Consent of Ernst & Young LLP.
23.2		Consent of Kirkland & Ellis LLP (included in Exhibit 5.1).*
24.1		Powers of Attorney (included on signature page).

*: To be filed by amendment.
(b): Financial Statement Schedules

Schedule II-Valuation and Qualifying Accounts

Allowance for Doubtful Accounts

The activity in the allowance for doubtful accounts consists of the following:

Fiscal Year Ended	Balance at Beginning of Year		Additions		Write-offs			Balance at End of Year
April 3, 2004	$	744	$	378	$	(352	)	$	770
March 29, 2003		621		123		—			744
March 30, 2002		257		364		—			621

Item 17. Undertakings

1.: The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
2.: Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification by the registrant against such liabilities, other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding, is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
3.: The undersigned registrant hereby undertakes that

(i) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(ii) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Oxford, Connecticut on May 11, 2005.

		RBC BEARINGS INCORPORATED
		By:	/s/ DR. MICHAEL J. HARTNETT
			Name: Dr. Michael J. Hartnett Title: Chief Executive Officer and Chairman

II-5

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Daniel A. Bergeron his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities (including his or her capacity as a director and/or officer of RBC Bearings Incorporated) to sign any or all amendments (including post-effective amendments) to this registration statement and any subsequent registration statement filed pursuant to Rule 462 (b) under the Securities Act, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act, this Registration Statement on Form S-1 has been signed by the following persons in the capacities indicated on May 11, 2005.

Signature		Title

/s/ DR. MICHAEL J. HARTNETT Dr. Michael J. Hartnett		Chief Executive Officer (Principal Executive Officer and Chairman)
/s/ DANIEL A. BERGERON Daniel A. Bergeron		Chief Financial Officer (Principal Financial and Accounting Officer)
Robert Anderson		Director
/s/ RICHARD R. CROWELL Richard R. Crowell		Director
/s/ WILLIAM P. KILLIAN William P. Killian		Director
/s/ MICHAEL STONE Michael Stone		Director
/s/ DR. AMIR FAGHRI Dr. Amir Faghri		Director

II-6

EXHIBIT INDEX

1.1		Form of Purchase Agreement.*
3.1		Form of Amended and Restated Certificate of Incorporation of RBC Bearings Incorporated dated , 2005.
3.3		Form of Bylaws of RBC Bearings Incorporated.
4.3		Form of stock certificate for common stock.*
5.1		Form of Opinion of Kirkland & Ellis LLP.
10.1		Indenture, dated as of June 15, 1997 between RBC Bearings Incorporated (f/k/a Roller Bearing Holding Company, Inc.) and the United States Trust Company of New York.
10.2		Stock Option Plan of RBC Bearings Incorporated (f/k/a Roller Bearing Holding Company, Inc.), dated as of February 18, 1998 with form of agreement.
10.3		Form of Stock Transfer Restriction Agreement between RBC Bearings Incorporated (f/k/a Roller Bearing Holding Company, Inc.) and certain of its stockholders.
10.4		Amended and Restated 2001 Stock Option Plan of RBC Bearings Incorporated (f/k/a Roller Bearing Holding Company, Inc.), dated October 24, 2003.
10.5		Form of 2005 Long Term Equity Incentive Plan.
10.6		Agreement of Lease between Robear West Trenton Associates, L.P. and Roller Bearing Company of America, Inc., dated February 10, 1999, for West Trenton, New Jersey premises.
10.7		First Amendment to Office Lease, dated July 26, 2004, between Robear West Trenton Associates, L.P. and Roller Bearing Company of America, Inc.
10.8		Indenture of Lease dated March 31, 2004 between Roller Bearing Company of America, Inc., and Raymond Hunicke, LLC, a Connecticut limited liability company.
10.9		Executed counterpart of the Pledge and Security Agreement, dated as of September 1, 1994, between Roller Bearing Company of America, Inc., Heller Financial, Inc. and Mark Twain Bank.
10.10		Loan Agreement, dated as of September 1, 1994, between the South Carolina Job—Economic Development Authority and Roller Bearing Company of America, Inc. with respect to the Series 1994A Bonds.
10.11		Agreement between Bremen, Indiana Plant of SKF USA, Inc. and International Union Automobile, Aerospace and Agricultural Workers of America, U.A.W., Local 1368, expires October 29, 2005.
10.12		Trust Indenture, dated as of September 1, 1994, between the South Carolina Job—Economic Development Authority and Mark Twain Bank, as Trustee, with respect to the Series 1994A Bonds.
10.13		Loan Agreement, dated as of September 1, 1994, between the South Carolina Job—Economic Development Authority and Roller Bearing Company of America, Inc., with respect to the Series 1994B Bonds.
10.14		Trust Indenture, dated as of September 1, 1994, between the South Carolina Job—Economic Development Authority and Mark Twain Bank, as Trustee, with respect to the Series 1994B Bonds.

10.15		Collective Bargaining Agreement between Heim, the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, U.A.W., and Amalgamated Local 376, U.A.W., expires January 31, 2008.
10.16		Nice Union Agreement, between Nice Ball Bearings, Inc. and United Steelworkers of America, Local 6816-12, expires January 31, 2008.*
10.17		Collective Bargaining Agreement between Roller Bearing Company of America, Inc. and the International Union U.A.W. and its Local 502, expires June 30, 2007.
10.18		Collective Bargaining Agreement between Tyson Bearing Company, Inc. and the United Steelworkers of America, AFL-CIO, Local 7461-01, expires June 13, 2008.*
10.19		Employment Agreement, effective as of December 18, 2000, between the Company and Michael J. Hartnett, Ph.D.
10.20		Amended and Restated Promissory Note, dated as of December 15, 2000, for $500,000, made by Michael J. Hartnett, Ph.D. and payable to Roller Bearing Company of America, Inc.
10.21		Loan Agreement, dated as of April 1, 1999, by and between California Infrastructure and Economic Development Bank and Roller Bearing Company of America, Inc.
10.22		Indenture Of Trust, dated as of April 1, 1999, between California Infrastructure and Economic Development Bank and U.S. Bank Trust National Association, as Trustee.
10.23		Tax Regulatory Agreement, dated as of April 1, 1999, by and among California Infrastructure and Economic Development Bank, U.S. Bank Trust National Association, as Trustee, and Roller Bearing Company of America, Inc.
10.24		Lease Agreement, dated as of December 17, 1999, between Schaublin SA and RBC Schaublin SA.
10.25		Lease by and among ABCS Properties, LLC, Michael H. Short and Lynn C. Short and Bremen Bearings, Inc. dated August 31, 2001.
10.26		Fourth Amended and Restated Credit Agreement, dated June 29, 2004, by and among Roller Bearing Company of America, Inc., certain of its domestic subsidiaries, General Electric Capital Corporation, as agent and lender and GECC Capital Markets Group, Inc.
10.27		Security Agreement, dated May 30, 2002, by and among Roller Bearing Company of America, Inc., certain of its domestic subsidiaries, General Electric Capital Corporation, as agent and Lender.
10.28		Pledge Agreement, dated May 30, 2002, by and among Roller Bearing Company of America, Inc., certain of its domestic subsidiaries, General Electric Capital Corporation, as agent and Lender.
10.29		SCIL Credit Agreement, dated June 29, 2004, by and among Roller Bearing Company of America, Inc. and certain of its domestic subsidiaries, General Electric Capital Corporation, as SCIL agent and GECC Capital Markets Group as Lead Arranger.
10.30		Security Agreement, dated June 29, 2004, by and among Roller Bearing Company of America, Inc., certain of its domestic subsidiaries, General Electric Capital Corporation, as Agent for SCIL Lenders.
10.31		Pledge Agreement, dated June 29, 2004, by and among Roller Bearing Company of America, Inc., certain of its domestic subsidiaries, General Electric Capital Corporation, as Agent for SCIL Lenders.
10.32		Master Reaffirmation and Amendment to Loan Documents, dated June 29, 2004, by and among Roller Bearing Company of America, Inc., certain of its domestic subsidiaries, General Electric Capital Corporation, as agent and Lender.

10.33		Lease Agreement dated May 17, 2004 by and between Shadowmoss Properties, LLC, a South Carolina limited liability company and Roller Bearing Company of America, Inc.
10.34		Credit Agreement, dated December 8, 2003, between Credit Suisse and Schaublin SA.
10.35		Amendment No. 1 to Credit Agreement, dated November 8, 2004, between Credit Suisse and Schaublin SA.
21.2		Subsidiaries of the Registrant
23.1		Consent of Ernst & Young LLP.
23.2		Consent of Kirkland & Ellis LLP (included in Exhibit 5.1).*
24.1		Powers of Attorney (included on signature page).

*: To be filed by amendment.

QuickLinks

Item 13. Other Expenses of Issuance and Distribution

Item 14. Indemnification of Directors and Officers

Item 15. Recent Sales of Unregistered Securities

Item 16. Exhibits and Financial Statement Schedules

Item 17. Undertakings

SIGNATURES
POWER OF ATTORNEY
EXHIBIT INDEX

Exhibit 3.1

FORM OF AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

RBC BEARINGS INCORPORATED

RBC BEARINGS INCORPORATED, a corporation organized and existing under the laws of the state of Delaware (the “Corporation”) hereby certifies that:

1. The name of the Corporation is RBC Bearings Incorporated. The Corporation was originally incorporated under the name Roller Bearing Holding Company, Inc.

2. The date of filing of the Corporation’s original Certificate of Incorporation was March 23, 1992.

3. The Amended and Restated Certificate of Incorporation of the Corporation as provided in Exhibit A hereto was duly adopted in accordance with the provisions of Section 245 of the General Corporation Law of the State of Delaware by the Board of Directors of the Corporation.

4. Pursuant to Section 245 of the Delaware General Corporation Law, approval of the stockholders of the Corporation has been obtained.

5. The Amended and Restated Certificate of Incorporation so adopted reads in full as set forth in Exhibit A attached hereto and is hereby incorporated by reference.

IN WITNESS WHEREOF, the undersigned has signed this certificate this day of , 2005, and hereby affirms and acknowledges under penalty of perjury that the filing of this Amended and Restated Certificate of Incorporation is the act and deed of RBC Bearings Incorporated.

	RBC BEARINGS INCORPORATED


	By
		Daniel A. Bergeron
		Vice President and Chief Financial Officer

EXHIBIT A

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OF
RBC BEARINGS INCORPORATED

ARTICLE ONE

The name of the Corporation is RBC Bearing Incorporated (the “Corporation”).

ARTICLE TWO

The address of the Corporation’s registered office in the state of Delaware is 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is Corporation Service Company.

ARTICLE THREE

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.

ARTICLE FOUR

Section 1. Authorized Shares. The total number of shares of capital stock which the Corporation has authority to issue is shares, consisting of:

(a) shares of Preferred Stock, par value $.01 per share (“Preferred Stock”); and

(b) shares of Common Stock, par value $.01 per share (“Common Stock”).

The Preferred Stock and the Common Stock shall have the rights, preferences and limitations set forth below.

Section 2. Preferred Stock. The Preferred Stock may be issued from time to time and in one or more series. The Board of Directors of the Corporation is authorized to determine or alter the powers, preferences and rights (including voting rights), and the qualifications, limitations and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock, and within the limitations or restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series of Preferred Stock, to increase or decrease (but not below the number of shares of any such series of Preferred Stock then outstanding) the number of shares of any such series of Preferred Stock, and to fix the number of shares of any series of Preferred Stock. In the event that the number of shares of any series of Preferred Stock shall be so decreased, the shares constituting such decrease shall resume the status which such shares had prior to the adoption of the resolution originally fixing the number of shares of such series of Preferred Stock subject to the requirements of applicable law.

Section 3. Common Stock.

(a) Dividends. Except as otherwise provided by the Delaware General Corporation Law or this Amended and Restated Certificate of Incorporation (this “Certificate of Incorporation”), the holders of Common Stock: (i) subject to the rights of holders of any series of Preferred Stock, shall share ratably, on a per share basis, in all dividends and other distributions payable in cash, securities or other property of the Corporation as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefor; and (ii) are subject to all the powers, rights, privileges, preferences and priorities of any series of Preferred Stock as provided herein or in any resolution or resolutions adopted by the Board of Directors pursuant to authority expressly vested in it by the provisions of Section 2 of this ARTICLE FOUR.

(b) Conversion Rights. The Common Stock shall not be convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same class of the Corporation’s capital stock.

(c) Preemptive Rights. No holder of Common Stock shall have any preemptive rights with respect to the Common Stock or any other securities of the Corporation, or to any obligations convertible (directly or indirectly) into securities of the Corporation whether now or hereafter authorized.

(d) Voting Rights. Except as otherwise provided by the Delaware General Corporation Law or this Certificate of Incorporation and subject to the rights of holders of any series of Preferred Stock, all of the voting power of the stockholders of the Corporation shall be vested in the holders of the Common Stock, and each holder of Common Stock shall have one vote for each share held by such holder on all matters voted upon by the stockholders of the Corporation.

(e) Liquidation Rights. In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, after payment or provision for payment of the Corporation’s debts and subject to the rights of the holders of shares of Preferred Stock upon such dissolution, liquidation or winding up, the remaining net assets of the Corporation shall be distributed among holders of shares of Common Stock ratably on a per share basis. A merger or consolidation of the Corporation with or into any other corporation or other entity, or a sale or conveyance of all or any part of the assets of the Corporation (which shall not in fact result in the liquidation of the Corporation and the distribution of assets to its stockholders) shall not be deemed to be a voluntary or involuntary liquidation or dissolution or winding up of the Corporation within the meaning of this Section 3(e).

(f) Registration or Transfer. The Corporation shall keep or cause to be kept at its principal office (or such other place as the Corporation reasonably designates) a register for the registration of Common Stock. Upon the surrender of any certificate representing shares of any class of Common Stock at such place, the Corporation shall, at the request of the registered holder of such certificate, execute and deliver a new certificate or certificates in exchange therefor representing in the aggregate the number of shares of such class represented by the surrendered certificate, and the Corporation forthwith shall cancel such surrendered certificate. Each such new certificate will be registered in such name and will represent such number of shares of such class as is requested by the holder of the surrendered certificate and shall be

substantially identical in form to the surrendered certificate. The issuance of new certificates shall be made without charge to the holders of the surrendered certificates for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such issuance.

(g) Replacement. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder will be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing one or more shares of any class of Common Stock, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation (provided that if the holder is a financial institution or other institutional investor, its own agreement will be satisfactory), or, in the case of any such mutilation upon surrender of such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of such class represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate.

(h) Notices. All notices referred to herein shall be in writing, shall be delivered personally or by first class mail, postage prepaid, and shall be deemed to have been given when so delivered or mailed to the Corporation at its principal executive offices and to any stockholder at such holder’s address as it appears in the stock records of the Corporation (unless otherwise specified in a written notice to the Corporation by such holder).

(i) Fractional Shares. In no event will holders of fractional shares be required to accept any consideration in exchange for such shares other than consideration which all holders of Common Stock are required to accept.

ARTICLE FIVE

The Corporation is to have perpetual existence.

ARTICLE SIX

Section 1. Number, Election and Term of Office. The manner of election and removal of such directors and the term such Directors shall hold office shall be designated in the Bylaws of the Corporation. Each Director shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal. Elections of Directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

ARTICLE SEVEN

In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter, amend or repeal the Bylaws of the Corporation.

ARTICLE EIGHT

Section 1. Limitation of Liability.

(a) To the fullest extent permitted by the Delaware General Corporation Law as it now exists or may hereafter be amended (but, in the case of any such amendment, only to the

extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), and except as otherwise provided in the Corporation’s Bylaws, no Director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages arising from a breach of fiduciary duty owed to the Corporation or its stockholders.

(b) Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a Director of the Corporation existing at the time of such repeal or modification.

Section 2. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved (including involvement as a witness) in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”), by reason of the fact that he or she is or was a Director or officer of the Corporation or, while a Director, officer or other employee of the Corporation, is or was serving at the request of the Corporation as a Director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as a Director or officer or in any other capacity while serving as a Director or officer, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including attorneys’ fees, judgments, fines, excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the indemnitee’s heirs, executors and administrators; provided, however, that, except as provided in Section 3 of this ARTICLE EIGHT with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section 2 of this ARTICLE EIGHT shall be a contract right and shall include the obligation of the Corporation to pay the expenses incurred in defending any such proceeding in advance of its final disposition (an “advance of expenses”); provided, however, that, if and to the extent that the Delaware General Corporation Law requires, an advance of expenses incurred by an indemnitee in his or her capacity as a Director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (an “undertaking”), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (a “final adjudication”) that such indemnitee is not entitled to be indemnified for such expenses under this Section 2 or otherwise. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same or lesser scope and effect as the foregoing indemnification of Directors and officers.

Section 3. Procedure for Indemnification. Any indemnification of a Director or officer of the Corporation or advance of expenses under Section 2 of this ARTICLE EIGHT

shall be made promptly, and in any event within forty-five days (or, in the case of an advance of expenses, twenty days), upon the written request of the Director or officer. If a determination by the Corporation that the Director or officer is entitled to indemnification pursuant to this ARTICLE EIGHT is required, and the Corporation fails to respond within sixty days to a written request for indemnity, the Corporation shall be deemed to have approved the request. If the Corporation denies a written request for indemnification or advance of expenses, in whole or in part, or if payment in full pursuant to such request is not made within forty-five days (or, in the case of an advance of expenses, twenty days), the right to indemnification or advances as granted by this ARTICLE EIGHT shall be enforceable by the Director or officer in any court of competent jurisdiction. Such person’s costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the Corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of expenses where the undertaking required pursuant to Section 2 of this ARTICLE EIGHT, if any, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. The procedure for indemnification of other employees and agents for whom indemnification is provided pursuant to Section 2 of this ARTICLE EIGHT shall be the same procedure set forth in this Section 3 for Directors or officers, unless otherwise set forth in the action of the Board of Directors providing indemnification for such employee or agent.

Section 4. Insurance. The Corporation may purchase and maintain insurance on its own behalf and on behalf of any person who is or was a Director, officer, employee or agent of the Corporation or was serving at the request of the Corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, against any expense, liability or loss asserted against him or her and incurred by him or her in any such capacity, whether or not the Corporation would have the power to indemnify such person against such expenses, liability or loss under the Delaware General Corporation Law.

Section 5. Service for Subsidiaries. Any person serving as a Director, officer, employee or agent of another corporation, partnership, limited liability company, joint venture or other enterprise, at least 50% of whose equity interests are owned by the Corporation (a “subsidiary” for this ARTICLE EIGHT) shall be conclusively presumed to be serving in such capacity at the request of the Corporation.

Section 6. Reliance. Persons who after the date of the adoption of this provision become or remain Directors or officers of the Corporation or who, while a Director, officer or

other employee of the Corporation, become or remain a Director, officer, employee or agent of a subsidiary, shall be conclusively presumed to have relied on the rights to indemnity, advance of expenses and other rights contained in this ARTICLE EIGHT in entering into or continuing such service. The rights to indemnification and to the advance of expenses conferred in this ARTICLE EIGHT shall apply to claims made against an indemnitee arising out of acts or omissions which occurred or occur both prior and subsequent to the adoption hereof.

Section 7. Non-Exclusivity of Rights. The rights to indemnification and to the advance of expenses conferred in this ARTICLE EIGHT shall not be exclusive of any other right which any person may have or hereafter acquire under this Restated Certificate or under any statute, by-law, agreement, vote of stockholders or disinterested Directors or otherwise.

Section 8. Merger or Consolidation. For purposes of this ARTICLE EIGHT, references to the “Corporation” shall include, in addition to the resulting Corporation, any constituent Corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its Directors, officers and employees or agents, so that any person who is or was a Director, officer, employee or agent of such constituent Corporation, or is or was serving at the request of such constituent Corporation as a Director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this ARTICLE EIGHT with respect to the resulting or surviving Corporation as he or she would have with respect to such constituent Corporation if its separate existence had continued.

Section 9. Savings Clause. If this ARTICLE EIGHT or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each person entitled to indemnification under Section 2 of this ARTICLE EIGHT as to all expense, liability and loss (including attorneys’ fees and related disbursements, judgments, fines, ERISA excise taxes and penalties, penalties and amounts paid or to be paid in settlement) actually and reasonably incurred or suffered by such person and for which indemnification is available to such person pursuant to this ARTICLE EIGHT to the full extent permitted by any applicable portion of this ARTICLE EIGHT that shall not have been invalidated and to the full extent permitted by applicable law.

ARTICLE NINE

Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside of the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.

ARTICLE TEN

For so long as any security of the Company is registered under Section 12 of the Securities Exchange Act of 1934: (i) the stockholders of the Corporation may not take any action by written consent in lieu of a meeting, and must take any actions at a duly called annual or special meeting of stockholders and the power of stockholders to consent in writing without a

meeting is specifically denied; and (ii) special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution adopted by the affirmative vote of the majority of the total number of directors then in office.

ARTICLE ELEVEN

Section 1. Certain Acknowledgments. In recognition and anticipation that: (i) the partners, principals, directors, officers, members, managers and/or employees of Whitney & Co., LLC (“Whitney”) may serve as directors and/or officers of the Corporation, (ii) Whitney may engage in the same or similar activities or related lines of business as those in which the Corporation, directly or indirectly, may engage and/or other business activities that overlap with or compete with those in which the Corporation, directly or indirectly, may engage, and (iii) that the Corporation and its subsidiaries may engage in material business transactions with Whitney and that the Corporation is expected to benefit therefrom, the provisions of this ARTICLE ELEVEN are set forth to regulate and define the conduct of certain affairs of the Corporation as they may involve Whitney and their respective directors, officers, members, managers and/or employees, and the powers, rights, duties and liabilities of the Corporation and its officers, directors and stockholders in connection therewith.

Section 2. Competition and Corporate Opportunities. Whitney shall not have any duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as the Corporation or any of its subsidiaries. In the event that Whitney acquires knowledge of a potential transaction or matter which may be a corporate opportunity for itself and the Corporation or any of its subsidiaries, neither the Corporation nor any of its subsidiaries shall have any expectancy in such corporate opportunity, and neither Whitney shall have any duty to communicate or offer such corporate opportunity to the Corporation or any of its subsidiaries and may pursue or acquire such corporate opportunity for itself or direct such corporate opportunity to another person.

Section 3. Allocation of Corporate Opportunities. In the event that a director or officer of the Corporation who is also a partner, principal, director, officer, member, manager and/or employee of Whitney acquires knowledge of a potential transaction or matter which may be a corporate opportunity for the Corporation or any of its subsidiaries and Whitney, neither the Corporation nor any of its subsidiaries shall have any expectancy in such corporate opportunity unless such corporate opportunity is expressly offered to such person solely in his or her capacity as a director or officer of the Corporation.

Section 4. Certain Matters Deemed Not Corporate Opportunities. In addition to and notwithstanding the foregoing provisions of this ARTICLE ELEVEN, a corporate opportunity shall not be deemed to belong to the Corporation if it is a business opportunity that the Corporation is not financially able or contractually permitted or legally able to undertake, or that is, from its nature, not in the line of the Corporation’s business or is of no practical advantage to it or that is one in which the Corporation has no interest or reasonable expectancy.

Section 5. Agreements and Transactions with Whitney. In the event that Whitney enters into an agreement or transaction with the Corporation or any of its subsidiaries, a director or officer of the Corporation who is also a partner, principal, director, officer, member, manager

and/or employee of Whitney, as applicable, shall have fully satisfied and fulfilled the fiduciary duty of such director or officer to the Corporation and its stockholders with respect to such agreement or transaction, if:

(a) The agreement or transaction was approved, after being made aware of the material facts of the relationship between each of the Corporation or subsidiary thereof and Whitney, and the material terms and facts of the agreement or transaction, by (i) an affirmative vote of a majority of the members of the Board of Directors of the Corporation who are not persons or entities with a material financial interest in the agreement or transaction (“Interested Persons”) or (ii) an affirmative vote of a majority of the members of a committee of the Board of Directors of the Corporation consisting of members who are not Interested Persons;

(b) The agreement or transaction was fair to the Corporation at the time the agreement or transaction was entered into by the Corporation; or

(c) The agreement or transaction was approved by an affirmative vote of a majority of the shares of the Corporation’s Common Stock entitled to vote, excluding Whitney, and any Interested Person; provided that if no Common Stock is then outstanding a majority of the voting power of the Corporation’s capital stock entitled to vote, excluding Whitney and any other Interested Person, as applicable.

Section 6. Amendment of this Article. Notwithstanding anything to the contrary elsewhere contained in this Certificate of Incorporation, the affirmative vote of the holders of at least 80% of the voting power of all shares of Common Stock then outstanding, voting together as a single class, shall be required to alter, amend or repeal, or to adopt any provision inconsistent with, this ARTICLE ELEVEN.

Section 7. Deemed Notice. Any person or entity purchasing or otherwise acquiring any interest in any shares of the Corporation shall be deemed to have notice or and to have consented to the provisions of this ARTICLE ELEVEN.

ARTICLE TWELVE

Notwithstanding any other provisions of this Certificate or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of the capital stock required by law or this Certificate, the affirmative vote of the holders of at least two-thirds (2/3) of the combined voting power of all of the then outstanding shares of the Corporation eligible to be cast in the election of directors shall be required to alter, amend or repeal ARTICLES EIGHT, TEN or FOURTEEN hereof, or this ARTICLE TWELVE, or any provision thereof or hereof.

ARTICLE THIRTEEN

The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.

ARTICLE FOURTEEN

The Corporation expressly elects to be governed by Section 203 of the Delaware General Corporation Law. Notwithstanding the terms of Section 203 of the Delaware General Corporation Law, Whitney and its affiliates shall not be deemed at any time and without regard to the percentage of voting stock of the Corporation owned by Whitney or any of its affiliates, as applicable, to be an “interested stockholder” as such term is defined in Section 203(c)(5) of the Delaware General Corporation Law.

ARTICLE FIFTEEN

Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or any creditor or stockholder thereof or on the application of a receiver or receivers appointed for the Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors, and/or the shareholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders, or class of stockholders, of the Corporation, as the case may be, and also on this Corporation.

* * * * * *

Exhibit 3.3

BYLAWS

RBC BEARINGS INCORPORATED

A Delaware Corporation
(Adopted as of [ ], 2005)

ARTICLE I

OFFICES

Section 1. Registered Office. The registered office of RBC Bearings Incorporated (the “Corporation”) in the State of Delaware shall be located at 2711 Centerville Road, Wilmington, Delaware 19801. The name of the Corporation’s registered agent at such address shall be Corporation Service Company. The registered office and/or registered agent of the Corporation may be changed from time to time by action of the Board of Directors.

Section 2. Other Offices. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1. Annual Meeting. An annual meeting of the stockholders shall be held each year within 150 days after the close of the immediately preceding fiscal year of the Corporation or at such other time specified by the Board of Directors for the purpose of electing Directors and conducting such other proper business as may come before the annual meeting. At the annual meeting, stockholders shall elect Directors and transact such other business as properly may be brought before the annual meeting pursuant to Section 11 of ARTICLE II hereof.

Section 2. Special Meetings. Special meetings of the stockholders may only be called in the manner provided in ARTICLE TEN of the Amended and Restated Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”).

Section 3. Place of Meetings. The Board of Directors may designate any place, either within or without the State of Delaware, as the place of meeting for any annual meeting or for any special meeting. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal executive office of the Corporation. If for any reason any annual meeting shall not be held during any year, the business thereof may be transacted at any special meeting of the stockholders.

Section 4. Notice. Whenever stockholders are required or permitted to take action at a meeting, written or printed notice stating the place, date, time and, in the case of special meetings, the purpose or purposes, of such meeting, shall be given to each stockholder entitled to vote at such meeting not less than 10 nor more than 60 days before the date of the meeting. All such notices shall be delivered, either personally or by mail, by or at the direction of the Board of Directors, the chairman of the board, the president or the secretary, and if mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the stockholder at his, her or its address as the same appears on the records of the Corporation. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened.

Section 5. Stockholders List. The officer having charge of the stock ledger of the Corporation shall make, at least 10 days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at such meeting arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

Section 6. Quorum. The holders of a majority of the outstanding shares of capital stock entitled to vote, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders, except as otherwise provided by the General Corporation Law of the State of Delaware or by the Certificate of Incorporation. If a quorum is not present, the holders of a majority of the shares present in person or represented by proxy at the meeting, and entitled to vote at the meeting, may adjourn the meeting to another time and/or place. When a specified item of business requires a vote by a class or series (if the Corporation shall then have outstanding shares of more than one class or series) voting as a class or series, the holders of a majority of the shares of such class or series shall constitute a quorum (as to such class or series) for the transaction of such item of business.

Section 7. Adjourned Meetings. When a meeting is adjourned to another time and place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

Section 8. Vote Required. When a quorum is present, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless (i) by express provisions of an

applicable law or of the Certificate of Incorporation a different vote is required, in which case such express provision shall govern and control the decision of such question, or (ii) the subject matter is the election of Directors, in which case Section 2 of ARTICLE III hereof shall govern and control the approval of such subject matter.

Section 9. Voting Rights. Except as otherwise provided by the General Corporation Law of the State of Delaware, the Certificate of Incorporation or these Bylaws, every stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of capital stock held by such stockholder.

Section 10. Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him or her by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally. Any proxy is suspended when the person executing the proxy is present at a meeting of stockholders and elects to vote, except that when such proxy is coupled with an interest and the fact of the interest appears on the face of the proxy, the agent named in the proxy shall have all voting and other rights referred to in the proxy, notwithstanding the presence of the person executing the proxy. At each meeting of the stockholders, and before any voting commences, all proxies filed at or before the meeting shall be submitted to and examined by the secretary or a person designated by the secretary, and no shares may be represented or voted under a proxy that has been found to be invalid or irregular.

Section 11. Business Brought Before an Annual Meeting. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) brought before the meeting by or at the direction of the Board of Directors or (iii) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the secretary of the Corporation. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 70 days’ notice or prior public announcement of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the date on which such notice of the date of the annual meeting was mailed or such public announcement was made. A stockholder’s notice to the secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting, (ii) the name and address, as they appear on the Corporation’s books, of the stockholder proposing such business, (iii) the class and number of shares of the Corporation which are beneficially owned by the stockholder and (iv) any material interest of the stockholder in such business. Notwithstanding anything in these Bylaws to the contrary, no business shall be

conducted at an annual meeting except in accordance with the procedures set forth in this section. The presiding officer of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of this section; if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. For purposes of this section, “public announcement” shall mean disclosure in a press release reported by Dow Jones News Service, Associated Press or a comparable national news service. Nothing in this section shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”).

ARTICLE III

DIRECTORS

Section 1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to such powers as are herein and in the Certificate of Incorporation expressly conferred upon it, the Board of Directors shall have and may exercise all the powers of the Corporation, subject to the provisions of the laws of Delaware, the Certificate of Incorporation and these Bylaws.

Section 2. Number, Election and Term of Office. The number of Directors which shall constitute the board shall initially be 7. Thereafter, the number of Directors shall be established from time to time by resolution of the board. The Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote in the election of directors. The Directors shall be elected in this manner at the annual meeting of the stockholders, except as provided in Section 4 of this Article III. Each Director elected shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided.

Section 3. Removal and Resignation. No Director may be removed from office without cause and without the affirmative vote of the holders of a majority of the voting power of the then outstanding shares of capital stock entitled to vote generally in the election of Directors voting together as a single class; provided, however, that if the holders of any class or series of capital stock are entitled by the provisions of the Certificate of Incorporation (it being understood that any references to the Certificate of Incorporation shall include any duly authorized certificate of designation) to elect one or more Directors, such Director or Directors so elected may be removed without cause only by the vote of the holders of a majority of the outstanding shares entitled to vote for such Director(s). Any Director may resign at any time upon written notice to the Corporation.

Section 4. Vacancies. Vacancies occurring on the Board of Directors for any reason may be filled by vote of a majority of the remaining members of the Board of Directors, even if less than a quorum, at any meeting of the Board of Directors. A Person so elected by the Board of Directors to fill a vacancy shall hold office until the next succeeding annual meeting of

stockholders of the Corporation and until his or her successor shall have been duly elected and qualified.

Section 5. Nominations.

(a) Only persons who are nominated in accordance with the procedures set forth in these Bylaws shall be eligible to serve as Directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the Corporation who was a stockholder of record at the time of giving of notice provided for in these Bylaws, who is entitled to vote generally in the election of Directors at the meeting and who shall have complied with the notice procedures set forth below in Section 5(b).

(b) In order for a stockholder to nominate a person for election to the Board of Directors of the Corporation at a meeting of stockholders, such stockholder shall have delivered timely notice of such stockholder’s intent to make such nomination in writing to the secretary of the Corporation. To be timely, a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Corporation (i) in the case of an annual meeting, not less than 60 nor more than 90 days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is changed by more than 30 days from such anniversary date, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure of the meeting was made, and (ii) in the case of a special meeting at which Directors are to be elected, not later than the close of business on the 10th day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure of the meeting was made. Such stockholder’s notice shall set forth (i) as to each person whom the stockholder proposes to nominate for election as a Director at such meeting all information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a Director if elected); (ii) as to the stockholder giving the notice (A) the name and address, as they appear on the Corporation’s books, of such stockholder and (B) the class and number of shares of the Corporation which are beneficially owned by such stockholder and also which are owned of record by such stockholder; and (iii) as to the beneficial owner, if any, on whose behalf the nomination is made, (A) the name and address of such person and (B) the class and number of shares of the Corporation which are beneficially owned by such person. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a Director shall furnish to the secretary of the Corporation that information required to be set forth in a stockholder’s notice of nomination which pertains to the nominee.

(c) No person shall be eligible to serve as a Director of the Corporation unless nominated in accordance with the procedures set forth in this section. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by this section, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded.

A stockholder seeking to nominate a person to serve as a Director must also comply with all applicable requirements of the Exchange Act, and the rules and regulations thereunder with respect to the matters set forth in this section.

Section 6. Annual Meetings. The annual meeting of the Board of Directors shall be held, without any notice other than this Section 6, immediately after, and at the same place as, the annual meeting of stockholders.

Section 7. Other Meetings and Notice. Regular meetings, other than the annual meeting, of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by resolution of the Board of Directors. Special meetings of the Board of Directors may be called by the chairman of the board, the president (if the president is a Director) or, upon the written request of at least two (2) Directors then in office, the secretary of the Corporation on at least 24 hours notice to each Director, either personally, by telephone, by mail or by telecopy.

Section 8. Chairman of the Board, Quorum, Required Vote and Adjournment. The Board of Directors shall elect, by the affirmative vote of a majority of the total number of Directors then in office, a chairman of the board, who shall preside at all meetings of the stockholders and Board of Directors at which he or she is present and shall have such powers and perform such duties as the Board of Directors may from time to time prescribe. If the chairman of the board is not present at a meeting of the stockholders or the Board of Directors, the president (if the president is a Director and is not also the chairman of the board) shall preside at such meeting, and, if the president is not present at such meeting, a majority of the Directors present at such meeting shall elect one of their members to so preside. A majority of the total number of Directors then in office shall constitute a quorum for the transaction of business. Unless by express provision of an applicable law, the Certificate of Incorporation or these Bylaws a different vote is required, the vote of a majority of Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

Section 9. Committees. The Board of Directors may, by resolution passed by a majority of the total number of Directors then in office, designate one or more committees, each committee to consist of one or more of the Directors of the Corporation, which to the extent provided in such resolution or these Bylaws shall have, and may exercise, the powers of the Board of Directors in the management and affairs of the Corporation, except as otherwise limited by law. The Board of Directors may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors upon request.

Section 10. Committee Rules. Each committee of the Board of Directors may fix its own rules of procedure and shall hold its meetings as provided by such rules, except as may

otherwise be provided by a resolution of the Board of Directors designating such committee. Unless otherwise provided in such a resolution, the presence of at least a majority of the members of the committee shall be necessary to constitute a quorum. Unless otherwise provided in such a resolution, in the event that a member and that member’s alternate, if alternates are designated by the Board of Directors, of such committee is or are absent or disqualified, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member.

Section 11. Communications Equipment. Members of the Board of Directors or any committee thereof may participate in and act at any meeting of such board or committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear and speak with each other, and participation in the meeting pursuant to this section shall constitute presence in person at the meeting.

Section 12. Waiver of Notice and Presumption of Assent. Any member of the Board of Directors or any committee thereof who is present at a meeting shall be conclusively presumed to have waived notice of such meeting except when such member attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Such member shall be conclusively presumed to have assented to any action taken unless his or her dissent shall be entered in the minutes of the meeting or unless his or her written dissent to such action shall be filed with the person acting as the secretary of the meeting before the adjournment thereof or shall be forwarded by registered mail to the secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action.

Section 13. Action by Written Consent. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of such board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee.

ARTICLE IV

OFFICERS

Section 1. Number. The officers of the Corporation shall be elected by the Board of Directors and shall consist of a chairman of the board, a chief executive officer, a president, one or more vice-presidents, a secretary, a chief financial officer and such other officers and assistant officers as may be deemed necessary or desirable by the Board of Directors. Any number of offices may be held by the same person, except that neither the chief executive officer nor the president shall also hold the office of secretary. In its discretion, the Board of Directors may choose not to fill any office for any period as it may deem advisable, except that the offices of president and secretary shall be filled as expeditiously as possible.

Section 2. Election and Term of Office. The officers of the Corporation shall be elected annually by the Board of Directors at its first meeting held after each annual meeting of stockholders or as soon thereafter as convenient. Vacancies may be filled or new offices created and filled at any meeting of the Board of Directors. Each officer shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided.

Section 3. Removal. Any officer or agent elected by the Board of Directors may be removed by the Board of Directors at its discretion, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.

Section 4. Vacancies. Any vacancy occurring in any office because of death, resignation, removal, disqualification or otherwise may be filled by the Board of Directors.

Section 5. Compensation. Compensation of all executive officers shall be approved by the Board of Directors, and no officer shall be prevented from receiving such compensation by virtue of his or her also being a Director of the Corporation; provided however, that compensation of all executive officers may be determined by a committee established for that purpose if so authorized by the Board of Directors.

Section 6. Chairman of the Board. The chairman of the Board of Directors shall preside at all meetings of the stockholders and of the Board of Directors and shall have such other powers and perform such other duties as may be prescribed to him or her by the Board of Directors or provided in these Bylaws.

Section 7. Chief Executive Officer. The chief executive officer shall have the powers and perform the duties incident to that position. Subject to the powers of the Board of Directors and the chairman of the board, the chief executive officer shall be in the general and active charge of the entire business and affairs of the Corporation, and shall be its chief policy making officer. The chief executive officer shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or provided in these Bylaws. The chief executive officer is authorized to execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. Whenever the president is unable to serve, by reason of sickness, absence or otherwise, the chief executive officer shall perform all the duties and responsibilities and exercise all the powers of the president.

Section 8. The President. The president of the Corporation shall, subject to the powers of the Board of Directors, the chairman of the board and the chief executive officer, have general charge of the business, affairs and property of the Corporation, and control over its officers, agents and employees. The president shall see that all orders and resolutions of the Board of Directors are carried into effect. The president is authorized to execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other

officer or agent of the Corporation. The president shall have such other powers and perform such other duties as may be prescribed by the chairman of the board, the chief executive officer, the Board of Directors or as may be provided in these Bylaws.

Section 9. Vice-Presidents. The vice-president, or if there shall be more than one, the vice-presidents in the order determined by the Board of Directors or the chairman of the board, shall, in the absence or disability of the president, act with all of the powers and be subject to all the restrictions of the president. The vice-presidents shall also perform such other duties and have such other powers as the Board of Directors, the chairman of the board, the chief executive officer, the president or these Bylaws may, from time to time, prescribe. The vice-presidents may also be designated as executive vice-presidents or senior vice-presidents, as the Board of Directors may from time to time prescribe.

Section 10. The Secretary and Assistant Secretaries. The secretary shall attend all meetings of the Board of Directors, all meetings of the committees thereof and all meetings of the stockholders and record all the proceedings of the meetings in a book or books to be kept for that purpose or shall ensure that his or her designee attends each such meeting to act in such capacity. Under the chairman of the Board of Directors’ supervision, the secretary shall give, or cause to be given, all notices required to be given by the Certificate of Incorporation, these Bylaws or by applicable law; shall have such powers and perform such duties as the Board of Directors, the chairman of the board, the chief executive officer, the president or these Bylaws may, from time to time, prescribe; and shall have custody of the corporate seal of the Corporation. The secretary, or an assistant secretary, shall have authority to affix the corporate seal to any instrument requiring it and when so affixed, it may be attested by his or her signature or by the signature of such assistant secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his or her signature. The assistant secretary, or if there be more than one, any of the assistant secretaries, shall in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the Board of Directors, the chairman of the board, the chief executive officer, the president, or secretary may, from time to time, prescribe.

Section 11. The Chief Financial Officer. The chief financial officer shall have the custody of the corporate funds and securities; shall keep full and accurate all books and accounts of the Corporation as shall be necessary or desirable in accordance with applicable law or generally accepted accounting principles; shall deposit all monies and other valuable effects in the name and to the credit of the Corporation as may be ordered by the chairman of the board or the Board of Directors; shall cause the funds of the Corporation to be disbursed when such disbursements have been duly authorized, taking proper vouchers for such disbursements; and shall render to the Board of Directors, at its regular meeting or when the Board of Directors so requires, an account of the Corporation; shall have such powers and perform such duties as the Board of Directors, the chairman of the board, the chief executive officer, the president or these Bylaws may, from time to time, prescribe. If required by the Board of Directors, the chief financial officer shall give the Corporation a bond (which shall be rendered every six years) in such sums and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of the office of chief financial officer and for the

restoration to the Corporation, in case of death, resignation, retirement or removal from office of all books, papers, vouchers, money and other property of whatever kind in the possession or under the control of the chief financial officer belonging to the Corporation.

Section 12. Other Officers, Assistant Officers and Agents. Officers, assistant officers and agents, if any, other than those whose duties are provided for in these Bylaws, shall have such authority and perform such duties as may from time to time be prescribed by resolution of the Board of Directors.

Section 13. Absence or Disability of Officers. In the case of the absence or disability of any officer of the Corporation and of any person hereby authorized to act in such officer’s place during such officer’s absence or disability, the Board of Directors may by resolution delegate the powers and duties of such officer to any other officer or to any Director, or to any other person selected by it.

ARTICLE V

CERTIFICATES OF STOCK

Section 1. Form. Every holder of stock in the Corporation shall be entitled to have a certificate, signed by, or in the name of the Corporation by the chairman of the board, the chief executive officer or the president and the secretary or an assistant secretary of the Corporation, certifying the number of shares owned by such holder in the Corporation. If such a certificate is countersigned (i) by a transfer agent or an assistant transfer agent other than the Corporation or its employee or (ii) by a registrar, other than the Corporation or its employee, the signature of any such chairman of the board, chief executive officer, president, secretary or assistant secretary may be facsimiles. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the Corporation whether because of death, resignation or otherwise before such certificate or certificates have been delivered by the Corporation, such certificate or certificates may nevertheless be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the Corporation. All certificates for shares shall be consecutively numbered or otherwise identified. The name of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the books of the Corporation. Shares of stock of the Corporation shall only be transferred on the books of the Corporation by the holder of record thereof or by such holder’s attorney duly authorized in writing, upon surrender to the Corporation of the certificate or certificates for such shares endorsed by the appropriate person or persons, with such evidence of the authenticity of such endorsement, transfer, authorization and other matters as the Corporation may reasonably require, and accompanied by all necessary stock transfer stamps. In that event, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate or certificates and record the transaction on its books. The Board of Directors may appoint a bank or trust company organized under the laws of the United States or any state thereof to act as its transfer agent or registrar, or both in connection with the transfer of any class or series of securities of the Corporation.

Section 2. Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates previously issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Corporation may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his or her legal representative, to give the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against the Corporation on account of the loss, theft or destruction of any such certificate or the issuance of such new certificate.

Section 3. Fixing a Record Date for Stockholder Meetings. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the next day preceding the day on which notice is first given. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

Section 4. Fixing a Record Date for Other Purposes. In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment or any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purposes of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

Section 5. Registered Stockholders. Prior to the surrender to the Corporation of the certificate or certificates for a share or shares of stock with a request to record the transfer of such share or shares, the Corporation may treat the registered owner as the person entitled to receive dividends, to vote, to receive notifications and otherwise to exercise all the rights and powers of an owner. The Corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof.

Section 6. Subscriptions for Stock. Unless otherwise provided for in the subscription agreement, subscriptions for shares shall be paid in full at such time, or in such installments and at such times, as shall be determined by the Board of Directors. Any call made by the Board of Directors for payment on subscriptions shall be uniform as to all shares of the same class or as to all shares of the same series. In case of default in the payment of any installment or call when

such payment is due, the Corporation may proceed to collect the amount due in the same manner as any debt due the Corporation.

ARTICLE VI

GENERAL PROVISIONS

Section 1. Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, in accordance with applicable law. Dividends may be paid in cash, in property or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or any other purpose and the Directors may modify or abolish any such reserve in the manner in which it was created.

Section 2. Checks, Drafts or Orders. All checks, drafts or other orders for the payment of money by or to the Corporation and all notes and other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, agent or agents of the Corporation, and in such manner, as shall be determined by resolution of the Board of Directors or a duly authorized committee thereof.

Section 3. Contracts. In addition to the powers otherwise granted to officers pursuant to ARTICLE IV hereof, the Board of Directors may authorize any officer or officers, or any agent or agents, of the Corporation to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances.

Section 4. Loans. Subject to compliance with applicable laws, the Corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the Corporation or of its subsidiaries, including any officer or employee who is a Director of the Corporation or its subsidiaries, whenever, in the judgment of the Directors, such loan, guaranty or assistance may reasonably be expected to benefit the Corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the Corporation. Nothing in this section shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the Corporation at common law or under any statute.

Section 5. Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.

Section 6. Corporate Seal. The Board of Directors may provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the

Corporation and the words “Corporate Seal, Delaware.” The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. No seal shall be required by virtue of this Section.

Section 7. Voting Securities Owned By Corporation. Voting securities in any other Corporation held by the Corporation shall be voted by the chief executive officer, the president or a vice-president, unless the Board of Directors specifically confers authority to vote with respect thereto, which authority may be general or confined to specific instances, upon some other person or officer. Any person authorized to vote securities shall have the power to appoint proxies, with general power of substitution.

Section 8. Inspection of Books and Records. The Board of Directors shall have power from time to time to determine to what extent and at what times and places and under what conditions and regulations the accounts and books of the Corporation, or any of them, shall be open to the inspection of the stockholders; and no stockholder shall have any right to inspect any account or book or document of the Corporation, except as conferred by the laws of the State of Delaware, unless and until authorized so to do by resolution of the Board of Directors or of the stockholders of the Corporation.

Section 9. Section Headings. Section headings in these Bylaws are for convenience of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein.

Section 10. Inconsistent Provisions. In the event that any provision of these Bylaws is or becomes inconsistent with any provision of the Certificate of Incorporation, the General Corporation Law of the State of Delaware or any other applicable law, the provision of these Bylaws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect.

ARTICLE VII

AMENDMENTS

In furtherance and not in limitation of the powers conferred by statute, the Board of Directors of the Corporation is expressly authorized to make, alter, amend, change, add to or repeal these Bylaws by the affirmative vote of a majority of the total number of Directors then in office. Any alteration or repeal of these Bylaws by the stockholders of the Corporation shall require the affirmative vote of a majority of the outstanding shares of the Corporation entitled to vote on such alteration or repeal; provided, however, that Section 11 of ARTICLE II and Sections 2, 3, 4 and 5 of ARTICLE III and this ARTICLE VII of these Bylaws shall not be altered, amended or repealed and no provision inconsistent therewith shall be adopted without the affirmative vote of the holders of at least two thirds (2/3) of the combined voting power of all of the then outstanding shares of the Corporation entitled to vote on such alteration or repeal.

Exhibit 5.1

Citigroup Center
153 East 53rd Street
New York, New York 10022-4611

212 446-4800

Facsimile: 212 446-4900

, 2005

RBC Bearings Incorporated

One Tribology Center

Oxford, CT 06478

Ladies and Gentlemen:

We are acting as special counsel to RBC Bearings Incorporated, a Delaware corporation (the “Company”), in connection with the proposed registration by the Company of shares of its Common Stock, par value $ per share (the “Common Stock”), including shares of its Common Stock to cover over-allotments, if any, pursuant to a Registration Statement on Form S-1, originally filed with the Securities and Exchange Commission (the “Commission”) on May , 2005 under the Securities Act of 1933 (the “Act”) (such Registration Statement, as amended or supplemented, is hereinafter referred to as the “Registration Statement”). The shares of Common Stock to be issued and sold by the Company pursuant to the Registration Statement are referred to herein as the “Firm Shares” and the shares of Common Stock to be sold by the selling stockholders identified in the Registration Statement are referred to herein as the “Secondary Shares.”

In that connection, we have examined originals, or copies certified or otherwise identified to our satisfaction, of such documents, corporate records and other instruments as we have deemed necessary for the purposes of this opinion, including (i) the Restated Certificate of Incorporation (the “Restated Charter”) of the Company in the form filed as Exhibit 3.1 to the Registration Statement to be filed with the Secretary of State of the State of Delaware prior to the sale of the shares of Common Stock registered pursuant to the Registration Statement (the “Shares”); (ii) the Bylaws (the “Bylaws”) of the Company in the form filed as Exhibit 3.2 to the Registration Statement; (iii) the form of purchase agreement attached as Exhibit 1.1 to the Registration Statement (the “Underwriting Agreement”); (iv) resolutions of the Board of Directors and stockholders of the Company with respect to this issuance and sale of the Firm Shares and the original issuance of the Secondary Shares (the “Resolutions”); and (v) the Registration Statement.

For purposes of this opinion, we have assumed the authenticity of all documents submitted to us as originals, the conformity to the originals of all documents submitted to us as copies and the authenticity of the originals of all documents submitted to us as copies. We have

Chicago

London

Los Angeles

San Francisco

Washington, D.C.

also assumed the legal capacity of all natural persons, the genuineness of the signatures of persons signing all documents in connection with which this opinion is rendered, the authority of such persons signing on behalf of the parties thereto and the due authorization, execution and delivery of all documents by the parties thereto. In rendering the opinion set forth below with respect to the Secondary Shares, we have assumed that the Company has received the entire amount of the consideration contemplated by the Resolutions of the Board of Directors of the Company authorizing the issuance of such shares of Common Stock. We have not independently established or verified any facts relevant to the opinions expressed herein, but have relied upon statements and representations of officers and other representatives of the Company and others as to factual matters.

Based upon and subject to the foregoing qualifications, assumptions and limitations and the further limitations set forth below, when (i) the Restated Charter is filed with the Secretary of State of the State of Delaware, (ii) the final Underwriting Agreement is duly executed and delivered by the parties thereto, and (iii) the Registration Statement becomes effective under the Act:

1. The Secondary Shares will be duly authorized and validly issued, fully paid and non-assessable; and

2. When the Firm Shares are registered by the Company’s transfer agent and delivered against payment of the agreed consideration therefore, all in accordance with the Underwriting Agreement and the Resolutions, the Firm Shares will be validly issued, fully paid and non-assessable.

Our opinions expressed above are subject to the qualifications that we express no opinion as to the applicability of, compliance with, or effect of any laws except the General Corporation Law of the State of Delaware.

We hereby consent to the filing of this opinion with the Commission as Exhibit 5.1 to the Registration Statement. We also consent to the reference to our firm under the heading “Legal Matters” in the Registration Statement. In giving this consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission.

This opinion is limited to the specific issues addressed herein, and no opinion may be inferred or implied beyond that expressly stated herein.

This opinion is furnished to you in connection with the filing of the Registration Statement.

	Sincerely,


	KIRKLAND & ELLIS LLP

Exhibit 10.1

ROLLER BEARING COMPANY OF AMERICA, INC.

Issuer

9 5/8% Senior Subordinated Notes Due 2007

INDENTURE

Dated as of June 15, 1997

UNITED STATES TRUST COMPANY OF NEW YORK,

Trustee

TABLE OF CONTENTS

ARTICLE 1

Definitions and Incorporation by Reference

SECTION 1.01.	Definitions
SECTION 1.02.	Other Definitions
SECTION 1.03.	Incorporation by Reference of Trust Indenture Act
SECTION 1.04.	Rules of Construction

ARTICLE 2

The Securities

SECTION 2.01.	Form and Dating
SECTION 2.02.	Execution and Authentication
SECTION 2.03.	Registrar and Paying Agent
SECTION 2.04.	Paying Agent To Hold Money in Trust
SECTION 2.05.	Securityholder Lists
SECTION 2.06.	Replacement Securities
SECTION 2.07.	Outstanding Securities
SECTION 2.08.	Temporary Securities
SECTION 2.09.	Cancelation
SECTION 2.10.	Defaulted Interest
SECTION 2.11.	CUSIP Numbers

ARTICLE 3

Redemption

SECTION 3.01.	Notices to Trustee
SECTION 3.02.	Selection of Securities To Be Redeemed
SECTION 3.03.	Notice of Redemption
SECTION 3.04.	Effect of Notice of Redemption
SECTION 3.05.	Deposit of Redemption Price
SECTION 3.06.	Securities Redeemed in Part

ARTICLE 4

Covenants

SECTION 4.01.	Payment of Securities
SECTION 4.02.	SEC Reports
SECTION 4.03.	Limitation on Indebtedness
SECTION 4.04.	Limitation on Restricted Payments
SECTION 4.05.	Limitation on Restrictions on Distributions from Restricted Subsidiaries
SECTION 4.06.	Limitation on Sales of Assets and Subsidiary Stock
SECTION 4.07.	Limitation on Affiliate Transactions
SECTION 4.08.	Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries
SECTION 4.09.	Change of Control
SECTION 4.10.	Future Guarantors
SECTION 4.11.	Existence
SECTION 4.12.	Compliance Certificate
SECTION 4.13.	Further Instruments and Acts

ARTICLE 5

Successor Company

SECTION 5.01.	When Company May Merge or Transfer Assets

ARTICLE 6

Defaults and Remedies

SECTION 6.01.	Events of Default
SECTION 6.02.	Acceleration
SECTION 6.03.	Other Remedies
SECTION 6.04.	Waiver of Past Defaults
SECTION 6.05.	Control by Majority
SECTION 6.06.	Limitation on Suits

SECTION 6.07.	Rights of Holders to Receive Payment
SECTION 6.08.	Collection Suit by Trustee
SECTION 6.09.	Trustee May File Proofs of Claim
SECTION 6.10.	Priorities
SECTION 6.11.	Undertaking for Costs
SECTION 6.12.	Waiver of Stay or Extension Laws

ARTICLE 7

Trustee

SECTION 7.01.	Duties of Trustee
SECTION 7.02.	Rights of Trustee
SECTION 7.03.	Individual Rights of Trustee
SECTION 7.04.	Trustee’s Disclaimer
SECTION 7.05.	Notice of Defaults
SECTION 7.06.	Reports by Trustee to Holders
SECTION 7.07.	Compensation and Indemnity
SECTION 7.08.	Replacement of Trustee
SECTION 7.09.	Successor Trustee by Merger
SECTION 7.10.	Eligibility; Disqualification
SECTION 7.11.	Preferential Collection of Claims Against Company

ARTICLE 8

Discharge of Indenture; Defeasance

SECTION 8.01.	Discharge of Liability on Securities; Defeasance
SECTION 8.02.	Conditions to Defeasance
SECTION 8.03.	Application of Trust Money
SECTION 8.04.	Repayment to Company
SECTION 8.05.	Indemnity for Government Obligations
SECTION 8.06.	Reinstatement

ARTICLE 9

Amendments

SECTION 9.01.	Without Consent of Holders
SECTION 9.02.	With Consent of Holders
SECTION 9.03.	Compliance with Trust Indenture
SECTION 9.04.	Revocation and Effect of Consents and Waivers
SECTION 9.05.	Notation on or Exchange of Securities
SECTION 9.06.	Trustee To Sign Amendments

ARTICLE 10

Subordination

SECTION 10.01.	Agreement To Subordinate
SECTION 10.02.	Liquidation, Dissolution, Bankruptcy
SECTION 10.03.	Default on Senior Indebtedness
SECTION 10.04.	Acceleration of Payment of Securities
SECTION 10.05.	When Distribution Must Be Paid Over
SECTION 10.06.	Subrogation
SECTION 10.07.	Relative Rights
SECTION 10.08.	Subordination May Not be Impaired by Company
SECTION 10.09.	Rights of Trustee and Paying Agent
SECTION 10.10.	Distribution or Notice to Representative
SECTION 10.11.	Article 10 Not To Prevent Events of Default or Limit Right to Accelerate.
SECTION 10.12.	Trust Moneys Not Subordinated
SECTION 10.13.	Trustee Entitled To Rely
SECTION 10.14.	Trustee To Effectuate Subordination
SECTION 10.15.	Trustee Not Fiduciary for Holders of Senior Indebtedness
SECTION 10.16.	Reliance by Holders of Senior Indebtedness on Subordination Provisions

ARTICLE 11

Subsidiary Guaranties

SECTION 11.01.	Guaranties
SECTION 11.02.	Limitation on Liability
SECTION 11.03.	Successors and Assigns
SECTION 11.04.	No Waiver
SECTION 11.05.	Modification
SECTION 11.06.	Release of Subsidiary Guarantor

ARTICLE 12

Subordination of Subsidiary Guaranties

SECTION 12.01.	Agreement To Subordinate
SECTION 12.02.	Liquidation, Dissolution, Bankruptcy
SECTION 12.03.	Default on Senior Indebtedness of Subsidiary Guarantor
SECTION 12.04.	Demand for Payment
SECTION 12.05.	When Distribution Must Be Paid Over
SECTION 12.06.	Subrogation
SECTION 12.07.	Relative Rights
SECTION 12.08.	Subordination May Not Be Impaired by Subsidiary Guarantor
SECTION 12.09.	Rights of Trustee and Paying Agent
SECTION 12.10.	Distribution or Notice to Representative
SECTION 12.11.	Article 12 Not To Prevent Defaults Under a Subsidiary Guaranty or Limit Right To Demand Payment
SECTION 12.12.	Trustee Entitled to Rely
SECTION 12.13.	Trustee To Effectuate Subordination
SECTION 12.14.	Trustee Not Fiduciary for Holders of Senior Indebtedness of Subsidiary Guarantor
SECTION 12.15.	Reliance by Holders of Senior Indebtedness on Subordination Provisions

ARTICLE 13

Miscellaneous

SECTION 13.01.	Trust Indenture Act Controls
SECTION 13.02.	Notices
SECTION 13.03.	Communication by Holders with Other Holders
SECTION 13.04.	Certificate and Opinion as to Conditions Precedent
SECTION 13.05.	Statements Required in Certificate or Opinion
SECTION 13.06.	When Securities Disregarded
SECTION 13.07.	Rules by Trustee, Paying Agent and Registrar
SECTION 13.08.	Legal Holidays
SECTION 13.09.	Governing Law
SECTION 13.10.	No Recourse Against Others
SECTION 13.11.	Successors
SECTION 13.12.	Multiple Originals
SECTION 13.13.	Table of Contents; Headings
Exhibit A - Form of Security
Rule 144A/Regulation S Appendix

CROSS-REFERENCE TABLE

TIA
Section		Indenture Section
310	(a) (1)	7.10
	(a) (2)	7.10
	(a) (3)	N.A.
	(a) (4)	N.A.
	(b)	7.08; 7.10
	(c)	N.A.
311	(a)	7.11
	(b)	7.11
	(c)	N.A.
312	(a)	2.05
	(b)	13.03
	(c)	13.03
313	(a)	7.06
	(b) (1)	N.A.
	(b) (2)	7.06
	(c)	13.02
	(d)	7.06
314	(a)	4.02; 4.10; 13.02
	(b)	N.A.
	(c) (1)	13.04
	(c) (2)	13.04
	(c) (3)	N.A.
	(d)	N.A.
	(e)	13.05
	(f)	4.10
315	(a)	7.01
	(b)	7.05; 13.02
	(c)	7.01
	(d)	7.01
	(e)	6.11
316	(a) (last sentence)	13.06
	(a) (1) (A)	6.05
	(a) (1) (B)	6.04
	(a) (2)	N.A.
	(b)	6.07
317	(a) (1)	6.08
	(a) (2)	6.09
	(b)	2.04
318	(a)	13.01

N.A. means Not Applicable.

Note: This Cross-Reference Table shall not, for any purpose, be deemed to be part of the Indenture.

INDENTURE dated as of June 15, 1997, among ROLLER BEARING COMPANY OF AMERICA, INC., a Delaware corporation (the “Company”), INDUSTRIAL TECTONICS BEARINGS CORPORATION, a Delaware corporation and a wholly owned subsidiary of the Company, RBC LINEAR PRECISION PRODUCTS, INC., a Delaware corporation and a wholly owned subsidiary of the Company, and RBC NICE BEARINGS, INC., a Delaware corporation and a wholly owned subsidiary of the Company, and UNITED STATES TRUST COMPANY OF NEW YORK, a New York trust company (the “Trustee”).

Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Company’s 9-5/8% Senior Subordinated Notes Due 2007 (the “Initial Securities”) and, if and when issued pursuant to a registered exchange for Initial Securities, the Company’s 9-5/8% Senior Subordinated Notes Due 2007 (the “Exchange Securities”) and, if and when issued pursuant to a private exchange for Initial Securities the Company’s 9-5/8% Senior Subordinated Notes Due 2007 (the “Private Exchange Securities” and, together with the Initial Securities and the Exchange Securities, the “Securities”):

ARTICLE 1

Definitions and Incorporation by Reference

SECTION 1.01. Definitions.

“Additional Assets” means (i) any property or assets (other than Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or (iii) Capital Stock constituting a minority interest in any Person that at such time is a

Restricted Subsidiary; provided, however, that any such Restricted Subsidiary described in clauses (ii) or (iii) above is primarily engaged in a Related Business.

“Affiliate” of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing. For purposes of Sections 4.04, 4.06 and 4.07 only, “Affiliate” shall also mean any beneficial owner of Capital Stock representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Capital Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof.

“Asset Disposition” means any sale, lease, transfer or other disposition (or series of related sales, leases, transfers or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a “disposition”), of (i) any shares of Capital Stock of a Restricted Subsidiary (other than directors’ qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary), (ii) all or substantially all the assets of any division or line of business of the Company or any Restricted Subsidiary or (iii) any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary (other than, in the case of (i), (ii) and (iii) above, (x) a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Wholly Owned Subsidiary, (y) for purposes of Section 4.06 only, a disposition that

constitutes a Restricted Payment permitted by Section 4.04 and (z) disposition of assets with a fair market value of less than $250,000).

“Attributable Debt” in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the Securities, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended).

“Average Life” means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by (ii) the sum of all such payments.

“Banks” has the meaning specified in the Credit Agreement.

“Bank Indebtedness” means all Obligations pursuant to the Credit Agreement.

“Board of Directors” means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board.

“Business Day” means each day which is not a Legal Holiday.

“Capital Lease Obligations” means an obligation that is required to be classified and accounted for as a capital lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the

Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty.

“Capital Stock” of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity.

“Change of Control” means the occurrence of any of the following events:

(i) (A) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause (i) such person shall be deemed to have “beneficial ownership” of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 35% of the total voting power of the Voting Stock of the Parent and (B) the Permitted Holders beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, in the aggregate less than 30% of the total voting power of the Voting Stock of the Parent and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors (for the purposes of this clause (i), such other person shall be deemed to beneficially own any Voting Stock of a specified Person held by another Person (the “parent entity”), if such other person is the beneficial owner (as defined at the beginning of this clause (i)), directly or indirectly, of more than 35% of the voting power of the Voting Stock of such parent entity and the Permitted Holders beneficially own (as defined in this clause), directly or

indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent entity and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of such parent entity);

(ii) during any period of two consecutive years following the first date on which Holdings becomes subject to the proxy rules under the Exchange Act, individuals who at the beginning of such period constituted the board of directors of the Parent (together with any new directors whose election by such board of directors or whose nomination for election by the shareholders of the Parent was approved by a vote of 66-2/3% of the directors of the Parent then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the board of directors of the Parent then in office;

(iii) the merger or consolidation of the Parent or the Company with or into another Person or the merger of another Person with or into the Parent or the Company, or the sale of all or substantially all the assets of the Company to another Person (other than, in each case, a Person that is controlled by the Permitted Holders), and, in the case of any such merger or consolidation, the securities of the Parent or the Company that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of the Voting Stock of the Parent or the Company are changed into or exchanged for cash, securities or property, unless pursuant to such transaction such securities are changed into or exchanged for, in addition to any other consideration, securities of the surviving Person or transferee that represent immediately after such transaction, at least a majority of the aggregate voting power of the Voting Stock of the surviving Person or transferee; or

(iv) the Parent ceases to own, directly or indirectly, all the Capital Stock of the Company other than as a result of the merger or consolidation of the Parent with the Company.

“Code” means the Internal Revenue Code of 1986, as amended.

“Company” means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor and, for purposes of any provision contained herein and required by the TIA, each other obligor on the indenture securities.

“Consolidated Coverage Ratio” as of any date of determination means the ratio of (i) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters prior to the date of such determination for which financial statements are available to (ii) Consolidated Interest Expense for such four fiscal quarters; provided, however, that (1) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period, (2) if the Company or any Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of such period or if any Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) on the date of the transaction giving rise to the need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated

Interest Expense for such period shall be calculated on a pro forma basis as if such discharge had occurred on the first day of such period and as if the Company or such Restricted Subsidiary has not earned the interest income actually earned during such period in respect of cash or Temporary Cash Investments used to repay, repurchase, defease or otherwise discharge such Indebtedness, (3) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Disposition for such period, or increased by an amount equal to the EBITDA (if negative), directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale), (4) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any person which becomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction requiring a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period and (5) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning

of such period) shall have made any Asset Disposition, any Investment or acquisition of assets that would have required an adjustment pursuant to clause (3) or (4) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition, Investment or acquisition occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Company. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest of such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months).

“Consolidated Debt Ratio” as of any date of determination means, the ratio of (i) consolidated Indebtedness of the Company as of the end of the most recent fiscal quarter for which financial statements are available to (ii) the aggregate amount of the EBITDA of the Company for the four most recent fiscal quarters for which financial statements are available, in each case with such pro forma adjustments to consolidated Indebtedness and EBITDA as are appropriate and consistent with the pro forma provisions set forth in the definition of Consolidated Coverage Ratio.

“Consolidated Interest Expense” means, for any period, the total interest expense of the Company and its consolidated Restricted Subsidiaries, plus, to the extent not included in such interest expense, and to the extent incurred by the Company or its Restricted Subsidiaries, without duplication, (i) interest expense attributable to capital leases and the interest expense attributable to leases constituting part of a Sale/Leaseback Transaction,

(ii) amortization of debt discount and debt issuance cost, (iii) capitalized interest, (iv) non-cash interest expenses, (v) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing, (vi) net costs associated with Hedging Obligations (including amortization of fees), (vii) Preferred Stock dividends in respect of all Preferred Stock held by Persons other than the Company or a Wholly Owned Subsidiary, (viii) interest incurred in connection with Investments in discontinued operations, (ix) interest accruing on any Indebtedness of any other Person to the extent such Indebtedness is Guaranteed by (or secured by the assets of) the Company or any Restricted Subsidiary and (x) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness Incurred by such plan or trust.

“Consolidated Net Income” means, for any period, the net income of the Company and its consolidated Subsidiaries; provided, however, that there shall not be included in such Consolidated Net Income:

(i) any net income of any Person (other than the Company) if such Person is not a Restricted Subsidiary, except that (A) subject to the exclusion contained in clause (iv) below, the Company’s equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person with respect to such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to a Restricted Subsidiary, to the limitations contained in clause (iii) below) and (B) the Company’s equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income;

(ii) any net income (or loss) of any Person acquired by the Company or a Subsidiary in a pooling of

interests transaction for any period prior to the date of such acquisition;

(iii) any net income of any Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that (A) subject to the exclusion contained in clause (iv) below, the Company’s equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Restricted Subsidiary with respect to such period to the Company or another Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to another Restricted Subsidiary, to the limitation contained in this clause) and (B) the Company’s equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income;

(iv) any gain or loss realized upon the sale or other disposition of any assets of the Company or its consolidated Subsidiaries (including pursuant to any sale-and-leaseback arrangement) which is not sold or otherwise disposed of in the ordinary course of business and any gain or loss realized upon the sale or other disposition of any Capital Stock of any Person;

(v) extraordinary gains or losses; and

(vi) the cumulative effect of a change in accounting principles. Notwithstanding the foregoing, for the purpose of Section 4.04 only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the extent such dividends, repayments or transfers increase the amount of

Restricted Payments permitted pursuant to such Section 4.04(a)(3)(D).

“Consolidated Net Worth” means the total of the amounts shown on the balance sheet of the Company and its consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP, as of the end of the most recent fiscal quarter of the Company prior to the taking of any action for the purpose of which the determination is being made for which financial statements are available, as (i) the par or stated value of all outstanding Capital Stock of the Company plus (ii) paid-in capital or capital surplus relating to such Capital Stock plus (iii) any retained earnings or earned surplus less (A) any accumulated deficit and (B) any amounts attributable to Disqualified Stock.

“Credit Agreement” means the Credit Agreement dated June 23, 1997, to be entered into by and among the Company, certain of its Subsidiaries, the lenders referred to therein and Credit Suisse First Boston, as Administrative Agent, together with the related documents thereto (including without limitation the term loans and revolving loans thereunder, any guarantees and security documents), as amended, extended, renewed, restated, supplemented or otherwise modified (in whole or in part, and without limitation as to amount, terms, conditions, covenants and other provisions) from time to time, and any agreement (and related document) governing Indebtedness incurred to refund or refinance, in whole or in part, the borrowings and commitments then outstanding or permitted to be outstanding under such Credit Agreement or a successor Credit Agreement, whether by the same or any other lender or group of lenders.

“Currency Agreement” means in respect of a Person any foreign exchange contract, currency swap agreement or other similar agreement designed to protect such Person against fluctuations in currency values.

“Default” means any event which is, or after notice or passage of time or both would be, an Event of Default.

“Designated Senior Indebtedness” means (i) the Bank Indebtedness and (ii) any other Senior Indebtedness of the Company which, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to, at least $25 million and is specifically designated by the Company in the instrument evidencing or governing such Senior Indebtedness as “Designated Senior Indebtedness” for purposes of this Indenture.

“Discount Debentures” means the 13% Senior Discount Debentures Due 2009 of Parent issued on the Issue Date in an aggregate principal amount at maturity of $74,882,000 and any other Indebtedness of Parent that Refinances such Debentures; provided, however, that such other Indebtedness does not require the payment of cash interest or the repayment of principal (or the repurchase of such Indebtedness) in an amount in excess of the amounts thereof provided for in such Debentures being Refinanced or at a time prior to the time such amounts would have been payable as provided for in such Debentures being Refinanced.

“Disqualified Stock” means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event (i) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to the first anniversary of the Stated Maturity of the Securities.

“EBITDA” for any period means the sum of Consolidated Net Income, plus Consolidated Interest Expense plus the following to the extent deducted in calculating such Consolidated Net Income: (a) all income tax expense of the Company and its consolidated Restricted Subsidiaries, (b) depreciation expense of the Company and its consolidated Restricted Subsidiaries, (c) amortization expense of the Company and its consolidated Restricted Subsidiaries

(excluding amortization expense attributable to a prepaid cash item that was paid in a prior period) and (d) all other non-cash charges of the Company and its consolidated Restricted Subsidiaries (excluding any such non-cash charge to the extent that it represents an accrual of or reserve for cash expenditures in any future period), in each case for such period. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization and non-cash charges of, a Restricted Subsidiary shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income of such Restricted Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Restricted Subsidiary or its stockholders.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“GAAP” means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth in (i) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (ii) statements and pronouncements of the Financial Accounting Standards Board, (iii) such other statements by such other entity as approved by a significant segment of the accounting profession and (iv) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC. An accounting term not otherwise defined in this Indenture will have the meaning assigned to it in accordance with GAAP. All ratios

and computations based on GAAP contained in this Indenture shall be computed in conformity with GAAP.

“Guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning. The term “Guarantor” shall mean any Person Guaranteeing any obligation.

“Guaranty Agreement” means a supplemental indenture, in a form satisfactory to the Trustee, pursuant to which a Subsidiary Guarantor guarantees the Company’s obligations with respect to the Securities on the terms provided for in this Indenture.

“Hedging Obligations” of any Person means the obligations of such Person pursuant to any Interest Rate Agreement or Currency Agreement.

“Holder” or “Securityholder” means the Person in whose name a Security is registered on the Registrar’s books.

“Incur” means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to

be Incurred by such Subsidiary at the time it becomes a Subsidiary. The term “Incurrence” when used as a noun shall have a correlative meaning. The accretion of principal of a non-interest bearing or other discount security shall not be deemed the Incurrence of Indebtedness.

“Indebtedness” means, with respect to any Person on any date of determination (without duplication):

(i) the principal of and premium (if any) in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable;

(ii) all Capital Lease Obligations of such Person and all Attributable Debt in respect of Sale/Leaseback Transactions entered into by such Person;

(iii) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business);

(iv) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker’s acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in clauses (i) through (iii) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the tenth Business Day following payment on the letter of credit);

(v) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary of such Person, the liquidation

preference with respect to, any Preferred Stock (but excluding, in each case, any accrued dividends);

(vi) all obligations of the type referred to in clauses (i) through (v) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee;

(vii) all obligations of the type referred to in clauses (i) through (vi) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured; and

(viii) to the extent not otherwise included in this definition, Hedging Obligations of such Person.

The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all Indebtedness and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date.

“Indenture” means this Indenture as amended or supplemented from time to time.

“Interest Rate Agreement” means in respect of a Person any interest rate swap agreement, interest rate cap agreement or other financial agreement or arrangement designed to protect such Person against fluctuations in interest rates.

“Investment” in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the lender) or other extensions of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of

any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. For purposes of the definition of “Unrestricted Subsidiary”, the definition of “Restricted Payment” and Section 4.04, (i) “Investment” shall include the portion (proportionate to the Company’s equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent “Investment” in an Unrestricted Subsidiary equal to an amount (if positive) equal to (x) the Company’s “Investment” in such Subsidiary at the time of such redesignation less (y) the portion (proportionate to the Company’s equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Board of Directors.

“Issue Date” means the date on which the Securities are originally issued.

“Joint Venture Affiliate” shall mean a Person that is partially owned, directly or indirectly, by the Company and no interest in which is owned, directly or indirectly (other than through such Person’s ownership of common stock of the Company), by any Person that is an Affiliate of the Company.

“Lien” means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof).

“Net Available Cash” from an Asset Disposition means cash payments received therefrom (including any cash

payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and proceeds from the sale or other disposition of any securities received as consideration, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to such properties or assets or received in any other noncash form), in each case net of (i) all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all Federal, state, provincial, foreign and local income, franchise, sales and other applicable taxes required to be accrued as a liability under GAAP, as a consequence of such Asset Disposition, (ii) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law, be repaid out of the proceeds from such Asset Disposition, (iii) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of their ownership interest in the Subsidiary or joint venture engaging in such Asset Disposition and (iv) the deduction of appropriate amounts provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property or other assets disposed in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition.

“Net Cash Proceeds”, with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys’ fees, accountants’ fees, underwriters’ or placement agents’ fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof.

“Obligations” means with respect to any Indebtedness all obligations for principal, premium, interest, penalties, fees, reimbursements and other amounts

payable pursuant to the documentation governing such Indebtedness.

“Officer” means the Chairman of the Board, the President, any Vice President, the Treasurer or the Secretary of the Company.

“Officers’ Certificate” means a certificate signed by two Officers.

“Opinion of Counsel” means a written opinion from legal counsel who is acceptable to the Trustee. The counsel, at the Company’s discretion, may be an employee of or counsel to the Company or the Trustee.

“Parent” means Roller Bearing Holding Company, Inc., a Delaware corporation, and any successor corporation.

“Permitted Holders” means each Person owning, on the Issue Date after giving effect to the recapitalization of the Parent occurring on such date, shares of Common Stock of the Parent or warrants to purchase such common stock and each Person controlled by any Permitted Holder (and, in the case of individuals, the estate and heirs of any Permitted Holder).

“Permitted Investment” means an Investment by the Company or any Restricted Subsidiary in (i) the Company, a Restricted Subsidiary or a Person that will, upon the making of such Investment, become a Restricted Subsidiary; provided, however, that the primary business of such Restricted Subsidiary is a Related Business; (ii) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; provided, however, that such Person’s primary business is a Related Business; (iii) Temporary Cash Investments; (iv) receivables owing to the Company or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such

concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; (v) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (vi) loans or advances to employees made in the ordinary course of business consistent with past practices of the Company or such Restricted Subsidiary; (vii) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments; and (viii) any Person to the extent such Investment represents the non-cash portion of the consideration received for an Asset Disposition as permitted pursuant to Section 4.06.

“Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

“Preferred Stock”, as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person.

“principal” of a Security means the principal of the Security plus the premium, if any, payable on the Security which is due or overdue or is to become due at the relevant time.

“Public Equity Offering” means an underwritten primary public offering of common stock of the Parent pursuant to an effective registration statement under the Securities Act.

“Public Market” means any time after (x) a Public Equity Offering has been consummated and (y) at least 15% of the total issued and outstanding common stock of the Parent has been distributed by means of an effective registration statement under the Securities Act or sales pursuant to Rule 144 under the Securities Act with gross proceeds to the Parent of not less than $25 million, resulting in the listing of the Parent’s common stock on a nationally recognized stock exchange or the inclusion of such stock on the Nasdaq Market’s National Market.

“Refinance” means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such indebtedness. “Refinanced” and “Refinancing” shall have correlative meanings.

“Refinancing Indebtedness” means Indebtedness that Refinances any Indebtedness of the Company or any Restricted Subsidiary existing on the Issue Date or Incurred in compliance with this Indenture, including Indebtedness that Refinances Refinancing Indebtedness; provided, however, that (i) such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced, (ii) such Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being Refinanced and (iii) such Refinancing Indebtedness has an aggregate principal amount (or if Incurred with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if Incurred with original issue discount, the aggregate accreted value) then outstanding or committed (plus fees and expenses, including any premium and defeasance costs) under the Indebtedness being Refinanced; provided further, however, that Refinancing Indebtedness shall not include (x) Indebtedness of a Subsidiary that Refinances Indebtedness of the Company or (y) Indebtedness of the Company or a Restricted Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary.

“Related Business” means any business related, ancillary or complementary to the businesses of the Company and the Restricted Subsidiaries on the Issue Date.

“Representative” means any trustee, agent or representative (if any) for an issue of Senior Indebtedness of the Company.

“Restricted Payment” with respect to any Person means (i) the declaration or payment of any dividends or any other distributions of any sort in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving such Person) or similar payment to the direct or indirect holders of its Capital Stock (other than dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) and dividends or distributions payable solely to the Company or a Restricted Subsidiary, and other than pro rata dividends or other distributions made by a Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or owners of an equivalent interest in the case of a Subsidiary that is an entity other than a corporation)), (ii) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company held by any Person or of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the Company (other than a Restricted Subsidiary), including the exercise of any option to exchange any Capital Stock (other than into Capital Stock of the Company that is not Disqualified Stock), (iii) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment of any Subordinated Obligations (other than the purchase, repurchase, or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition) or (iv) the making of any Investment in any Person; provided, however, that “Restricted Payments” will not include any Permitted Investment.

“Restricted Subsidiary” means any Subsidiary of the Company that is not an Unrestricted Subsidiary.

“Revolving Credit Facilities” means the revolving credit facility contained in the Credit Agreement and any other facility or financing arrangement that Refinances or replaces, in whole or in part, any such revolving credit facility.

“Sale/Leaseback Transaction” means an arrangement relating to property now owned or hereafter acquired whereby the Company or a Restricted Subsidiary transfers such property to a Person and the Company or a Restricted Subsidiary leases it from such Person.

“SEC” means the Securities and Exchange Commission.

“Secured Indebtedness” means any Indebtedness of the Company secured by a Lien.

“Securities” means the Securities issued under this Indenture.

“Senior Indebtedness” of any Person means all (i) Bank Indebtedness of or guaranteed by such Person, whether outstanding on the Issue Date or thereafter Incurred (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) and (ii) Indebtedness of such Person whether outstanding on the Issue Date or thereafter Incurred, including interest thereon (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), in respect of (A) Indebtedness for money borrowed, (B) Indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable and (C) Hedging Obligations, unless, in the case of (i) and (ii), in the instrument creating or evidencing the same or pursuant to which the same is

outstanding, it is provided that such obligations are subordinate in right of payment to the obligations under the Securities; provided, however, that Senior Indebtedness shall not include (1) any obligation of such Person to any subsidiary of such Person, (2) any liability for Federal, state, local or other taxes owed or owing by such Person, (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities), (4) any Indebtedness of such Person (and any accrued and unpaid interest in respect thereof) which is subordinate or junior by its terms to any other Indebtedness or other obligation of such Person or (5) that portion of any Indebtedness which at the time of Incurrence is Incurred in violation of this Indenture (but as to any such Indebtedness under the Credit Agreement, no such violation shall be deemed to exist if the Representative of the Lenders thereunder shall have received an officers’ certificate of the Company to the effect that the issuance of such Indebtedness does not violate such covenant and setting forth in reasonable detail the reasons therefor). If any Bank Indebtedness is disallowed, avoided or subordinated pursuant to the provisions of Section 548 of the U.S. Bankruptcy Code or any applicable state fraudulent conveyance law, such Bank Indebtedness will still constitute Senior Indebtedness.

“Senior Subordinated Indebtedness” means (i) with respect to the Company, the Securities and any other Indebtedness of the Company that specifically provides that such Indebtedness is to rank pari passu with the Securities in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligations of the Company which is not Senior Indebtedness of the Company and (ii) with respect to a Subsidiary Guarantor, its respective Subsidiary Guaranty of the Securities and any other indebtedness of such Person that specifically provides that such Indebtedness rank pari passu with such Guarantee in respect of payment and is not subordinated by its terms in respect of payment to any Indebtedness or other obligation of such Person which is not Senior Indebtedness of such Person.

“Significant Subsidiary” means any Restricted Subsidiary that would be a “Significant Subsidiary” of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC.

“Stated Maturity” means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred).

“Subordinated Obligation” means any Indebtedness of the Company or any Subsidiary Guarantor (whether outstanding on the Issue Date or thereafter Incurred) which is subordinate or junior in right of payment to, in the case of the Company, the Securities or, in the case of such Subsidiary Guarantor, its Subsidiary Guaranty, pursuant to a written agreement to that effect.

“Subsidiary” means, in respect of any Person, any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person, (ii) such Person and one or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such Person.

“Subsidiary Guarantor” means any subsidiary of the Company that Guarantees the Company’s obligations with respect to the Securities, which initially shall be Industrial Tectonics Bearings Corporation, RBC Linear Precision Products, Inc. and RBC Nice Bearings, Inc.

“Subsidiary Guaranty” means a Guarantee by a Subsidiary Guarantor of the Company’s obligations with respect to the Securities.

“Tax Sharing Agreement” means any tax sharing agreement between the Company and the Parent or any other Person with which the Company is required to, or is permitted to, file a consolidated tax return or with which the Company is or could be part of a consolidated group for tax purposes.

“Temporary Cash Investments” means any of the following: (i) any investment in direct obligations of the United States of America or any agency thereof or obligations guaranteed by the United States of America or any agency thereof, (ii) investments in time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $50,000,000 (or the foreign currency equivalent thereof) and has outstanding debt that is rated “A” (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by a registered broker dealer or mutual fund distributor, (iii) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (i) above entered into with a bank meeting the qualifications described in clause (ii) above, (iv) investments in commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of “P-1” (or higher) according to Moody’s Investors Service, Inc. or “A-1” (or higher) according to Standard and Poor’s Ratings Group, and

(v) investments in securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least “A” by Standard & Poor’s Ratings Group or “A” by Moody’s Investors Service, Inc.

“Term Loan Facilities” means the term loan facilities contained in the Credit Agreement and any other facility or financing arrangement that Refinances in whole or in part any such term loan facility.

“TIA” means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of this Indenture.

“Trustee” means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor.

“Trust Officer” means the Chairman of the Board, the President or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters.

“Uniform Commercial Code” means the New York Uniform Commercial Code as in effect from time to time.

“Unrestricted Subsidiary” means (i) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that either (A) the

Subsidiary to be so designated has total assets of $1,000 or less or (B) if such Subsidiary has assets greater than $1,000, such designation would be permitted under Section 4.04. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation (x) the Company could Incur $1.00 of additional Indebtedness under Section 4.03(a) and (y) no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the foregoing provisions.

“U.S. Government Obligations” means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer’s option.

“Voting Stock” of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, trustees or other governing board thereof.

“Wholly Owned Subsidiary” means a Restricted Subsidiary all the Capital Stock of which (other than directors’ qualifying shares) is owned by the Company or one or more Wholly Owned Subsidiaries.

SECTION 1.02. Other Definitions.

Term	Defined in Section
“Affiliate Transaction”	4.07
“Bankruptcy Law”	6.01
“Blockage Notice”	10.03
“covenant defeasance option”	8.01	(b)
“Custodian”	6.01
“Event of Default”	6.01
“legal defeasance option”	8.01	(b)
“Legal Holiday”	13.08
“Offer”	4.06	(b)
“Offer Amount”	4.06	(c)(2)
“Offer Period”	4.06	(c)(2)
“pay the Securities”	10.03
“Paying Agent”	2.03
“Payment Blockage Period”	10.03
“Purchase Date”	4.06	(c)(1)
“Registrar”	2.03
“Successor Company”	5.01

SECTION 1.03. Incorporation by Reference of Trust Indenture Act. This Indenture is subject to the mandatory provisions of the TIA which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings:

“Commission” means the SEC;

“indenture securities” means the Securities;

“indenture security holder” means a Securityholder;

“indenture to be qualified” means this Indenture;

“indenture trustee” or “institutional trustee” means the Trustee; and

“obligor” on the indenture securities means the Company and any other obligor on the indenture securities.

All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions.

SECTION 1.04. Rules of Construction. Unless the context otherwise requires:

(1) a term has the meaning assigned to it;

(2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

(3) “or” is not exclusive;

(4) “including” means including without limitation;

(5) words in the singular include the plural and words in the plural include the singular;

(6) unsecured Indebtedness shall not be deemed to be subordinate or junior to Secured Indebtedness merely by virtue of its nature as unsecured Indebtedness;

(7) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP;

(8) the principal amount of any Preferred Stock shall be (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock, whichever is greater; and

(9) all references to the date the Securities were originally issued shall refer to the date the Initial Securities were originally issued.

ARTICLE 2

The Securities

SECTION 2.01. Form and Dating. Provisions relating to the Initial Securities, the Private Exchange Securities and the Exchange Securities are set forth in the Rule 144A/Regulation S Appendix attached hereto (the “Appendix”) which is hereby incorporated in and expressly made part of this Indenture. The Initial Securities and the Trustee’s certificate of authentication shall be substantially in the form of Exhibit 1 to the Appendix which is hereby incorporated in and expressly made a part of this Indenture. The Exchange Securities, the Private Exchange Securities and the Trustee’s certificate of authentication shall be substantially in the form of Exhibit A, which is hereby incorporated in and expressly made a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). Each Security shall be dated the date of its authentication. The terms of the Securities set forth in the Appendix and Exhibit A are part of the terms of this Indenture.

SECTION 2.02. Execution and Authentication. Two Officers shall sign the Securities for the Company by manual or facsimile signature. The Company’s seal shall be impressed, affixed, imprinted or reproduced on the Securities and may be in facsimile form.

If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless.

A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture.

The Trustee shall authenticate and deliver Securities for original issue, in an aggregate principal amount of $110,000,000, upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company. Such order shall specify the amount of the Securities to be authenticated and the date on which the original issue of Securities is to be authenticated. The aggregate principal amount of Securities outstanding at any time may not exceed that amount except as provided in Section 2.07.

The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Securities. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands.

SECTION 2.03. Registrar and Paying Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the “Registrar”) and an office or agency where Securities may be presented for payment (the “Paying Agent”). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term “Paying Agent” includes any additional paying agent.

The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the

terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent.

The Company initially appoints the Trustee as Registrar and Paying Agent in connection with the Securities.

SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due date of the principal and interest on any Security, the Company shall deposit with the Paying Agent a sum sufficient to pay such principal and interest when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Securities and shall notify the Trustee of any default by the Company in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee.

SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date

as the Trustee may reasonably require of the names and addresses of Securityholders.

SECTION 2.06. Replacement Securities. If a mutilated Security is surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss which any of them may suffer if a Security is replaced. The Company and the Trustee may charge the Holder for their expenses in replacing a Security.

Every duly issued replacement Security shall be an additional obligation of the Company.

SECTION 2.07. Outstanding Securities. Securities outstanding at any time are all Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancelation and those described in this Section as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security.

If a Security is replaced pursuant to Section 2.06, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a bona fide purchaser.

If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest payable on that date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Securityholders on that date

pursuant to the terms of this Indenture, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them shall cease to accrue.

SECTION 2.08. Temporary Securities. Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Securities and deliver them in exchange for temporary Securities.

SECTION 2.09 Cancelation. The Company at any time may deliver Securities to the Trustee for cancelation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and destroy (subject to the record retention requirements of the Exchange Act) all Securities surrendered for registration of transfer, exchange, payment or cancelation and deliver a certificate of such destruction to the Company unless the Company directs the Trustee to deliver canceled Securities to the Company. The Company may not issue new Securities to replace Securities it has redeemed, paid or delivered to the Trustee for cancelation.

SECTION 2.10. Defaulted Interest. If the Company defaults in a payment of interest on the Securities, the Company shall pay defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Company may pay the defaulted interest to the persons who are Securityholders on a subsequent special record date. The Company shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail to each Securityholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid.

SECTION 2.11. CUSIP Numbers. The Company in issuing the Securities may use “CUSIP” numbers (if then generally in use) and, if so, the Trustee shall use “CUSIP” numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers.

ARTICLE 3

Redemption

SECTION 3.01. Notices to Trustee. If the Company elects to redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the Trustee in writing of the redemption date, the principal amount of Securities to be redeemed and the paragraph of the Securities pursuant to which the redemption will occur.

The Company shall give each notice to the Trustee provided for in this Section at least 60 days before the redemption date unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officers’ Certificate and an Opinion of Counsel from the Company to the effect that such redemption will comply with the conditions herein.

SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed pro rata or by lot or by a method that complies with applicable legal and securities exchange requirements, if any, and that the Trustee in its sole discretion shall deem to be fair and appropriate and in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. The Trustee shall make the selection from outstanding Securities not

previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000. Securities and portions of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of Securities to be redeemed.

SECTION 3.03. Notice of Redemption. At least 30 days but not more than 60 days before a date for redemption of Securities, the Company shall mail a notice of redemption by first-class mail to each Holder of Securities to be redeemed at such Holder’s registered address.

The notice shall identify the Securities to be redeemed and shall state:

(1) the redemption date;

(2) the redemption price;

(3) the name and address of the Paying Agent;

(4) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price;

(5) if fewer than all the outstanding Securities are to be redeemed, the identification and principal amounts of the particular Securities to be redeemed;

(6) that, unless the Company defaults in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest on Securities (or portion thereof) called for redemption ceases to accrue on and after the redemption date; and

(7) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Securities.

At the Company’s request, the Trustee shall give the notice of redemption in the Company’s name and at the Company’s expense. In such event, the Company shall provide the Trustee with the information required by this Section.

SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed, Securities called for redemption become due and payable on the redemption date and at the redemption price stated in the notice. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price stated in the notice, plus accrued interest to the redemption date. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder.

SECTION 3.05. Deposit of Redemption Price. Prior to the redemption date, the Company shall deposit with the Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest on all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption which have been delivered by the Company to the Trustee for cancelation.

SECTION 3.06. Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder (at the Company’s expense) a new Security equal in principal amount to the unredeemed portion of the Security surrendered.

ARTICLE 4

Covenants

SECTION 4.01. Payment of Securities. The Company shall promptly pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture.

The Company shall pay interest on overdue principal at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful.

SECTION 4.02. SEC Reports. The Company shall file with the Trustee and provide Securityholders, within 15 days after it files them with the SEC, copies of its annual report and the information, documents and other reports which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. Notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall continue to file with the SEC and provide the Trustee and Securityholders with such annual reports and such information, documents and other reports as are specified in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to such Sections, such information, documents and reports to be so filed and provided at the times specified for the filing of such information, documents and reports under such Sections. The Company also shall comply with the other provisions of TIA ss. 314(a).

SECTION 4.03. Limitation on Indebtedness. (a) The Company shall not, and shall not permit any

Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness except that the Company may Incur Indebtedness if, on the date of such Incurrence and after giving effect thereto, the Consolidated Coverage Ratio of the Company exceeds 2.0 to 1.0 if such Indebtedness is Incurred prior to June 15, 2000 or 2.25 to 1.0 if such Indebtedness is Incurred thereafter.

(b) Notwithstanding the foregoing paragraph (a), the Company and the Restricted Subsidiaries may Incur any or all of the following Indebtedness:

(1) Indebtedness of the Company or any Restricted Subsidiary Incurred pursuant to the Revolving Credit Facilities; provided, however, that, immediately after giving effect to any such Incurrence, the aggregate principal amount of all Indebtedness incurred under this clause (1) and then outstanding does not exceed the greater of (A) $54.0 million less the sum of all principal payments actually made from time to time after the Issue Date with respect to such Indebtedness pursuant to Section 4.06(a)(ii)(A) and (B) the sum of 50% of the book value of the consolidated inventory of the Company and its Restricted Subsidiaries and 85% of the book value of the consolidated accounts receivables of the Company and its Restricted Subsidiaries;

(2) Indebtedness of the Company or any Restricted Subsidiary Incurred pursuant to the Term Loan Facilities; provided, however, that after giving effect to any such Incurrence, the aggregate principal amount of all Indebtedness Incurred under this clause (2) and then outstanding does not exceed $16.0 million less the aggregate sum of all principal payments actually made from time to time after the Issue Date with respect to such Indebtedness (other than principal payments made from any permitted Refinancings thereof);

(3) Indebtedness of the Company or any Restricted Subsidiary owed to and held by a Wholly Owned Subsidiary; provided, however, that any subsequent issuance or transfer of any Capital Stock which results

in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company or another Wholly Owned Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the issuer thereof;

(4) the Securities;

(5) Indebtedness outstanding on the Issue Date (other than Indebtedness described in clause (1), (2), (3) or (4) of this Section 4.03(b));

(6) Refinancing Indebtedness in respect of Indebtedness Incurred pursuant to Section 4.03(a) or pursuant to clause (4) or (5) of this Section 4.03(b) or this clause (6);

(7) (i) Hedging Obligations consisting of Interest Rate Agreements directly related to Indebtedness permitted to be Incurred by the Company pursuant to this Indenture, (ii) surety bonds Incurred in the ordinary cause of business and (iii) self-insurance arrangements;

(8) Indebtedness consisting of the Subsidiary Guaranties and the Guarantees of Indebtedness Incurred pursuant to paragraph (a) or pursuant to clause (1), (2), (4), (5), (6) and (9) of this Section 4.03(b); and

(9) Indebtedness in an aggregate principal amount which, together with all other Indebtedness of the Company outstanding on the date of such Incurrence (other than Indebtedness permitted by clauses (1) through (8) of this Section 4.03(b) or Section 4.03(a)) does not exceed $10.0 million.

(c) Notwithstanding the foregoing, the Company shall not Incur any Indebtedness pursuant to Section 4.03(b) if the proceeds thereof are used, directly or indirectly, to Refinance any Subordinated Obligations unless such

Indebtedness shall be subordinated to the Securities to at least the same extent as such Subordinated Obligations.

(d) For purposes of determining compliance with this Section 4.03, (i) in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described herein, the Company, in its sole discretion, will classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of the above clauses and (ii) an item of Indebtedness may be divided and classified in more than one of the types of Indebtedness described herein.

(e) Notwithstanding Section 4.03(a) or 4.03(b), the Company shall not, and shall not permit any Subsidiary Guarantor to, Incur (i) any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness of the Company or such Subsidiary Guarantor, as applicable, unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness or (ii) any Secured Indebtedness that is not Senior Indebtedness of the Company or such Subsidiary Guarantor unless contemporaneously therewith effective provision is made to secure the Securities equally and ratably with such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien.

SECTION 4.04. Limitation on Restricted Payments. (a) The Company shall not, and shall not permit any Restricted Subsidiary, directly or indirectly, to make a Restricted Payment if at the time the Company or such Restricted Subsidiary makes such Restricted Payment:

(1) a Default shall have occurred and be continuing (or would result therefrom);

(2) the Company is not able to Incur an additional $1.00 of Indebtedness under Section 4.03(a); or

(3) the aggregate amount of such Restricted Payment and all other Restricted Payments since the Issue Date would exceed the sum of:

(A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the beginning of the fiscal quarter immediately following the fiscal quarter during which the Securities are originally issued to the end of the most recent fiscal quarter for which financial statements are available (or, in case such Consolidated Net Income shall be a deficit, minus 100% of such deficit);

(B) the aggregate Net Cash Proceeds received by the Company from the issuance or sale of its Capital Stock (other than Disqualified Stock) subsequent to the Issue Date (other than an issuance or sale to a Subsidiary of the Company and other than an issuance or sale to an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees);

(C) the amount by which Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Company’s balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to the Issue Date of any Indebtedness of the Company or any Restricted Subsidiary for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash, or the fair value of any other property, distributed by the Company upon such conversion or exchange); and

(D) an amount equal to the sum of (i) the net reduction in Investments in Unrestricted Subsidiaries resulting from dividends, repayments of loans or advances or other transfers of assets, in each case to the Company or any Restricted Subsidiary from Unrestricted Subsidiaries, and

(ii) the portion (proportionate to the Company’s equity interest in such Subsidiary) of the fair market value of the net assets of an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary; provided, however, that the foregoing sum shall not exceed, in the case of any Unrestricted Subsidiary, the amount of Investments previously made (and treated as a Restricted Payment) by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary.

(b) The provisions of Section 4.04(a) shall not prohibit:

(i) any Restricted Payment made out of the proceeds of the substantially concurrent sale of, or any acquisition of any Capital Stock of the Company made by exchange for, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Company or an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees); provided, however, that (A) such Restricted Payment shall be excluded in the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale shall be excluded from the calculation of amounts under clause (3)(B) of Section 4.04(a);

(ii) any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Obligations made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of the Company which is permitted to be Incurred pursuant to Section 4.03; provided, however, that such purchase, repurchase, redemption, defeasance or other acquisition or retirement for value shall be excluded in the calculation of the amount of Restricted Payments;

(iii) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would have complied with Section 4.04(a); provided, however, that at the time of payment of such dividend, no other Default shall have occurred and be continuing (or result therefrom); provided further, however, that such dividend shall be included in the calculation of the amount of Restricted Payments;

(iv) dividends to the Parent to be used for the repurchase or other acquisition of shares of, or options or warrants to purchase shares of, common stock of the Parent from employees, former employees, directors or former directors of the Parent or any of its Subsidiaries (or permitted transferees of such employees, former employees, directors or former directors), pursuant to the terms of the agreements (including employment agreements), plans (or amendments thereto) or other arrangements approved by the board of directors of the Parent under which such individuals purchase or sell or are granted the option to purchase or sell, shares of such common stock; provided, however, that the aggregate amount of such dividends shall not exceed $500,000 in any calendar year; provided further, however, that such dividends shall be excluded in the calculation of the amount of Restricted Payments;

(v) any payment by the Company to the Parent pursuant to the Tax Sharing Agreement; provided, however, that the amount of any such payment shall not exceed the amount of taxes that the Company would have been liable for on a stand-alone basis; provided further, however, that such payment shall be excluded in the calculation of the amount of Restricted Payments;

(vi) dividends to the Parent to the extent required to pay non-deferrable scheduled cash interest when due on the Discount Debentures and any additional cash interest (at a rate not to exceed 1/2 of 1% per annum) payable with respect to the Discount Debentures as a

result of Parent’s failure to comply with its obligations to register the Discount Debentures; provided, however, that (A) no Default shall have occurred and be continuing (or would result therefrom), (B) the Parent shall immediately apply any such dividend to make such cash interest payment and (C) except in the case of such additional interest, immediately after giving effect to any such dividend, the Company would be able to Incur an additional $1.00 of Indebtedness under Section 4.03(a); provided further, however, that such dividends shall be included in the calculation of the amount of Restricted Payments;

(vii) dividends to the Parent to the extent necessary to pay for general corporate and overhead expenses incurred by the Parent; provided, however, that such dividends shall not exceed $500,000 in any calendar year; provided further, however, that such dividends shall be excluded in the calculation of the amount of Restricted Payments;

(viii) a dividend to the Parent on the Issue Date of $57.7 million; provided, however, that such dividend shall be excluded in the calculation of the amount of Restricted Payments; and

(ix) a dividend or distribution by the Company to the Parent on December 15, 2002 to be used to fund the mandatory redemption on such date of Discount Debentures pursuant to the terms thereof; provided, however, that (a) the amount of such dividend or distribution may not exceed the lesser of (1) $34 million and (2) the amount which when added to other available funds of the Parent on such date are sufficient to satisfy the Parent’s obligation to make such mandatory redemption, (b) Parent applies such dividend to make such redemption on December 15, 2002, (c) on the date of payment of such dividend and after giving effect thereto, the Consolidated Debt Ratio does not exceed 3.0 to 1.0 and (d) that at the time of payment of such dividend, no other Default shall have

occurred and be continuing (or result therefrom); provided further, however, that such dividend shall be included in the calculation of the amount of Restricted Payments.

SECTION 4.05. Limitation on Restrictions on Distributions from Restricted Subsidiaries. The Company shall not, and shall not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (a) pay dividends or make any other distributions on its Capital Stock to the Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company, (b) make any loans or advances to the Company or (c) transfer any of its property or assets to the Company, except:

(i) any encumbrance or restriction pursuant to an agreement in effect at or entered into on the Issue Date, including the Credit Agreement;

(ii) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by such Restricted Subsidiary on or prior to the date on which such Restricted Subsidiary was acquired by the Company (other than Indebtedness Incurred as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company) and outstanding on such date;

(iii) any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (i) or (ii) of this Section 4.05 or this clause (iii) or contained in any amendment to an agreement referred to in clause (i) or (ii) of this Section 4.05 or this clause (iii); provided, however, that the encumbrances and restrictions with respect to

such Restricted Subsidiary contained in any such refinancing agreement or amendment are no less favorable to the Securityholders than encumbrances and restrictions with respect to such Restricted Subsidiary contained in such predecessor agreements;

(iv) any such encumbrance or restriction consisting of customary nonassignment provisions in leases governing leasehold interests solely to the extent such provisions restrict the transfer of the lease or the property leased thereunder;

(v) in the case of clause (c) above, restrictions contained in security agreements, mortgages or leases securing Indebtedness of a Restricted Subsidiary solely to the extent such restrictions restrict the transfer of the property subject to such security agreements or mortgages;

(vi) any restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition; and

(vii) any restriction imposed by applicable law.

SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, consummate any Asset Disposition unless (i) the Company or such Restricted Subsidiary receives consideration at the time of such Asset Disposition at least equal to the fair market value (including as to the value of all non-cash consideration), as determined in good faith by the Board of Directors, of the shares and assets subject to such Asset Disposition and at least 75% of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of cash or cash equivalents and (ii) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Restricted

Subsidiary, as the case may be) at the Company’s option to either (A) prepay, repay, redeem or purchase Senior Indebtedness or Indebtedness (other than any Disqualified Stock) of a Wholly Owned Subsidiary (in each case other than Indebtedness owed to the Company or an Affiliate of the Company) or (B) acquire Additional Assets, in each case, within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; provided, however, that in connection with any prepayment, repayment or purchase of such Indebtedness, the Company or such Restricted Subsidiary shall permanently retire such Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. To the extent of the balance of such Net Available Cash after application in accordance with clauses (A) and (B), the Company shall make an offer to the holders of the Securities (and to holders of other Senior Subordinated Indebtedness designated by the Company) to purchase Securities (and such other Senior Subordinated Indebtedness) pursuant to and subject to the conditions contained in this Indenture. Notwithstanding the foregoing provisions of this paragraph, the Company and the Restricted Subsidiaries shall not be required to apply any Net Available Cash in accordance with this paragraph except to the extent that the aggregate Net Available Cash from all Asset Dispositions which are not applied in accordance with this paragraph exceeds $10 million. Pending application of Net Available Cash pursuant to this covenant, such Net Available Cash shall be invested in Permitted Investments.

For the purposes of this Section 4.06, the following are deemed to be cash or cash equivalents: (x) the assumption of Indebtedness of the Company or any Restricted Subsidiary (other than Indebtedness Incurred in connection with or in anticipation of such Asset Disposition) and the release of the Company or such Restricted Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition, (y) securities received by the Company or any Restricted Subsidiary from the transferee that are promptly converted

by the Company or such Restricted Subsidiary into cash and (z) Temporary Cash Investments.

(b) In the event of an Asset Disposition that requires the purchase of Securities (and other Senior Subordinated Indebtedness) pursuant to Section 4.06(a), the Company shall be required to purchase Securities tendered pursuant to an offer by the Company for the Securities (and other Senior Subordinated Indebtedness) (the “Offer”) at a purchase price of 100% of their principal amount (without premium) plus accrued but unpaid interest (or, in respect of such other Senior Subordinated Indebtedness, such lesser price, if any, as may be provided for by the terms of such Senior Subordinated Indebtedness) in accordance with the procedures (including prorationing in the event of over- subscription) set forth in Section 4.06(c). The Company shall not be required to make an Offer to purchase Securities (and other Senior Subordinated Indebtedness) pursuant to this Section 4.06 if the Net Available Cash available therefor is less than $10 million (which lesser amount shall be carried forward for purposes of determining whether such an Offer is required with respect to the Net Available Cash from any subsequent Asset Disposition).

(c) (1) Promptly, and in any event within 10 days after the Company becomes obligated to make an Offer, the Company shall be obligated to deliver to the Trustee and send, by first-class mail to each Holder, a written notice stating that the Holder may elect to have his Securities purchased by the Company either in whole or in part (subject to prorating as hereinafter described in the event the Offer is oversubscribed) in integral multiples of $1,000 of principal amount, at the applicable purchase price. The notice shall specify a purchase date not less than 30 days nor more than 60 days after the date of such notice (the “Purchase Date”) and shall contain such information concerning the business of the Company which the Company in good faith believes will enable such Holders to make an informed decision (which at a minimum will include (i) the most recently filed Annual Report on Form 10-K (including audited consolidated financial statements) of the Company, the most recent subsequently filed Quarterly Report on Form

10-Q and any Current Report on Form 8-K of the Company filed subsequent to such Quarterly Report, other than Current Reports describing Asset Dispositions otherwise described in the offering materials (or corresponding successor reports), (ii) a description of material developments in the Company’s business subsequent to the date of the latest of such Reports, and (iii) if material, appropriate pro forma financial information) and all instructions and materials necessary to tender Securities pursuant to the Offer, together with the information contained in clause (3).

(2) Not later than the date upon which written notice of an Offer is delivered to the Trustee as provided below, the Company shall deliver to the Trustee an Officers’ Certificate as to (i) the amount of the Offer (the “Offer Amount”), (ii) the allocation of the Net Available Cash from the Asset Dispositions pursuant to which such Offer is being made and (iii) the compliance of such allocation with the provisions of Section 4.06(a). On such date, the Company shall also irrevocably deposit with the Trustee or with a paying agent (or, if the Company is acting as its own paying agent, segregate and hold in trust) in Temporary Cash Investments, maturing on the last day prior to the Purchase Date or on the Purchase Date if funds are immediately available by open of business, an amount equal to the Offer Amount to be held for payment in accordance with the provisions of this Section. Upon the expiration of the period for which the Offer remains open (the “Offer Period”), the Company shall deliver to the Trustee for cancelation the Securities or portions thereof which have been properly tendered to and are to be accepted by the Company. The Trustee shall, on the Purchase Date, mail or deliver payment to each tendering Holder in the amount of the purchase price. In the event that the aggregate purchase price of the Securities delivered by the Company to the Trustee is less than the Offer Amount applicable to the Securities, the Trustee shall deliver the excess to the Company immediately after the expiration of the Offer Period for application in accordance with this Section.

(3) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate

form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the Purchase Date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the Purchase Date, a telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. If at the expiration of the Offer Period the aggregate principal amount of Securities (and any other Senior Subordinated Indebtedness included in the Offer) surrendered by holders thereof exceeds the Offer Amount, the Company shall select the Securities and the other Senior Subordinated Indebtedness to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Securities and the other Senior Subordinated Indebtedness in denominations of $1,000, or integral multiples thereof, shall be purchased). Holders whose Securities are purchased only in part shall be issued new Securities and the other Senior Subordinated Indebtedness equal in principal amount to the unpurchased portion of the Securities surrendered.

(4) At the time the Company delivers Securities to the Trustee which are to be accepted for purchase, the Company shall also deliver an Officers’ Certificate stating that such Securities are to be accepted by the Company pursuant to and in accordance with the terms of this Section. A Security shall be deemed to have been accepted for purchase at the time the Trustee, directly or through an agent, mails or delivers payment therefor to the surrendering Holder.

(d) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to

have breached its obligations under this Section by virtue thereof.

SECTION 4.07. Limitation on Affiliate Transactions. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, enter into or permit to exist any transaction (including, without limitation, the purchase, sale, lease or exchange of any property, employee compensation arrangements or the rendering of any service) or enter into any agreement, loan, advance or Guarantee with any Affiliate (other than a Joint Venture Affiliate) of the Company (an “Affiliate Transaction”) unless the terms thereof (i) are no less favorable to the Company or such Restricted Subsidiary than those that could be obtained at the time of such transaction in arm’s-length dealings with a Person who is not such an Affiliate, (ii) if such Affiliate Transaction (or series of related Affiliate Transactions) involves an amount in excess of $2 million, (1) are set forth in writing and (2) have been approved by a majority of the members of the Board of Directors having no personal stake in such Affiliate Transaction (or series of related Affiliate Transactions) and (iii) if such Affiliate Transaction involves an amount in excess of $10 million, have been determined by a nationally recognized investment banking firm to be fair, from a financial standpoint, to the Company and its Restricted Subsidiaries.

(b) The provisions of Section 4.07(a) shall not prohibit (i) any Restricted Payment permitted to be paid pursuant to Section 4.04, (ii) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors, (iii) the grant of stock options or similar rights to employees and directors of the Company pursuant to plans approved by the Board of Directors, (iv) loans or advances to employees in the ordinary course of business in accordance with the past practices of the Company or its Restricted Subsidiaries, but in any event not to exceed $700,000 in the aggregate outstanding at any one time, (v) the payment of reasonable fees to directors of the Company and its Restricted

Subsidiaries who are not employees of the Company or its Restricted Subsidiaries, (vi) any Affiliate Transaction between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries and (vii) any Tax Sharing Agreement; provided, however, that the aggregate amount payable by the Company pursuant thereto shall not exceed the amount of taxes that the Company would have been liable for on a stand-alone basis.

SECTION 4.08. Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries. The Company shall not sell or otherwise dispose of any Capital Stock of a Restricted Subsidiary, and shall not permit any Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any of its Capital Stock except (i) to the Company or a Wholly Owned Subsidiary, (ii) if, immediately after giving effect to such issuance, sale or other disposition, neither the Company nor any of its Subsidiaries own any Capital Stock of such Restricted Subsidiary or (iii) if, immediately after giving effect to such issuance, sale or other disposition, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such Person remaining after giving effect thereto would have been permitted to be made under the covenant described in Section 4.04 if made on the date of such issuance, sale or other disposition.

SECTION 4.09. Change of Control. (a) Upon the occurrence of a Change of Control, each Holder shall have the right to require that the Company repurchase such Holder’s Securities at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest on the relevant interest payment date), in accordance with the terms contemplated in Section 4.09(b). In the event that at the time of such Change of Control the terms of the Senior Indebtedness of the Company restrict or prohibit the repurchase of Securities pursuant to this Section, then prior to the mailing of the notice to Holders provided for in Section 4.09(b) below but in any event within 30 days following any Change of Control, the Company

shall (i) repay in full all such Senior Indebtedness or offer to repay in full all such Senior Indebtedness and repay such Senior Indebtedness of each lender who has accepted such offer or (ii) obtain the requisite consent under the agreements governing such Senior Indebtedness to permit the repurchase of the Securities as provided for in Section 4.09(b).

(b) Within 30 days following any Change of Control, the Company shall mail a notice to each Holder with a copy to the Trustee stating:

(1) that a Change of Control has occurred and that such Holder has the right to require the Company to purchase such Holder’s Securities at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date);

(2) the circumstances and relevant facts regarding such Change of Control (including information with respect to pro forma historical income, cash flow and capitalization, each after giving effect to such Change of Control);

(3) the repurchase date (which, except as otherwise required by law, shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and

(4) the instructions determined by the Company, consistent with this Section, that a Holder must follow in order to have its Securities purchased.

(c) Holders electing to have a Security purchased will be required to surrender the Security, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the purchase date. Holders will be entitled to withdraw their election if the Trustee or the Company receives not

later than one Business Day prior to the purchase date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased.

(d) On the purchase date, all Securities purchased by the Company under this Section shall be delivered by the Trustee for cancelation, and the Company shall pay the purchase price plus accrued and unpaid interest, if any, to the Holders entitled thereto.

(e) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section by virtue thereof.

SECTION 4.10. Future Guarantors. In the event that, after the Issue Date, any Restricted Subsidiary Incurs any Indebtedness pursuant to clause (1), (2) or (8) of Section 4.03(b), the Company shall cause such Restricted Subsidiary to Guarantee the Securities pursuant to a Subsidiary Guaranty on the terms and conditions set forth in the Indenture and shall cause all Indebtedness of such Restricted Subsidiary owing to the Company or any other Subsidiary of the Company and not previously discharged to be converted into Capital Stock of such Restricted Subsidiary (other than Disqualified Stock).

SECTION 4.11. Existence. Subject to Article 5, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such right or franchise if the Board of Directors shall

determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders.

SECTION 4.12. Compliance Certificate. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company an Officers’ Certificate stating that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default and whether or not the signers know of any Default that occurred during such period. If they do, the certificate shall describe the Default, its status and what action the Company is taking or proposes to take with respect thereto. The Company also shall comply with TIA ss. 314(a)(4).

SECTION 4.13. Further Instruments and Acts. Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture.

ARTICLE 5

Successor Company

SECTION 5.01. When Company May Merge or Transfer Assets. (a) The Company shall not consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all its assets to, any Person, unless:

(i) the resulting, surviving or transferee Person (the “Successor Company”) shall be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form

satisfactory to the Trustee, all the obligations of the Company under the Securities and this Indenture;

(ii) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Subsidiary as a result of such transaction as having been Incurred by the Successor Company or such Subsidiary at the time of such transaction), no Default shall have occurred and be continuing;

(iii) immediately after giving effect to such transaction, the Successor Company would be able to Incur an additional $1.00 of Indebtedness pursuant to Section 4.03(a);

(iv) immediately after giving effect to such transaction, the Successor Company shall have Consolidated Net Worth in an amount that is not less than the Consolidated Net Worth of the Company immediately prior to such transaction; and

(v) the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with this Indenture;

provided, however, that clauses (iii) and (iv) shall not apply to a merger or consolidation involving only the Company and one or more Wholly Owned Subsidiaries.

The Successor Company shall be the successor to the Company and shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture, but the predecessor Company in the case of a conveyance, transfer or lease shall not be released from the obligation to pay the principal of and interest on the Securities.

(b) The Company shall not permit any Subsidiary Guarantor to consolidate with or merge with or into, or

convey, transfer or lease, in one transaction or series of transactions, all or substantially all of its assets to any Person unless: (i) the resulting, surviving or transferee Person (if not such Subsidiary) shall be a Person organized and existing under the laws of the jurisdiction under which such Subsidiary was organized or under the laws of the United States of America, or any State hereof or the District of Columbia, and such Person shall expressly assume, by executing a Guaranty Agreement, all the obligations of such Subsidiary, if any, under its Subsidiary Guaranty; (ii) immediately after giving effect to such transaction or transactions on a pro forma basis (and treating any Indebtedness which becomes an obligation of the resulting, surviving or transferee Person as a result of such transaction as having been issued by such Person at the time of such transaction), no Default shall have occurred and be continuing; and (iii) the Company delivers to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such amendment to this Indenture, if any, complies with this Indenture. The provisions of clauses (i) and (ii) above shall not apply to any one or more transactions which constitute an Asset Disposition if the Company has complied with the applicable provisions of Section 4.06.

ARTICLE 6

Defaults and Remedies

SECTION 6.01. Events of Default. An “Event of Default” occurs if:

(1) the Company defaults in any payment of interest on any Security when the same becomes due and payable, whether or not such payment shall be prohibited by Article 10, and such default continues for a period of 30 days;

(2) the Company (i) defaults in the payment of the principal of any Security when the same becomes due and

payable at its Stated Maturity, upon redemption, upon declaration or otherwise, whether or not such payment shall be prohibited by Article 10, or (ii) fails to redeem or purchase Securities when required pursuant to this Indenture or the Securities, whether or not such redemption or purchase shall be prohibited by Article 10;

(3) the Company fails to comply with Section 5.01;

(4) the Company fails to comply with Section 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09 or 4.10 (other than a failure to purchase Securities when required under Section 4.06 or 4.09) and such failure continues for 30 days after the notice specified below;

(5) the Company fails to comply with any of its agreements in the Securities or this Indenture (other than those referred to in clause (1), (2), (3) or (4) above) and such failure continues for 60 days after the notice specified below;

(6) Indebtedness of the Company or any Significant Subsidiary is not paid within any applicable grace period after final maturity or is accelerated by the holders thereof because of a default and the total amount of such Indebtedness unpaid or accelerated exceeds $5.0 million, or its foreign currency equivalent at the time;

(7) the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law:

(A) commences a voluntary case;

(B) consents to the entry of an order for relief against it in an involuntary case;

(D) makes a general assignment for the benefit of its creditors;

or takes any comparable action under any foreign laws relating to insolvency;

(8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(A) is for relief against the Company or any Significant Subsidiary in an involuntary case;

(B) appoints a Custodian of the Company or any Significant Subsidiary or for any substantial part of its property; or

or any similar relief is granted under any foreign laws and the order or decree remains unstayed and in effect for 60 days;

(9) any judgment or decree for the payment of money in excess of $5.0 million or its foreign currency equivalent at the time is entered against the Company or any Significant Subsidiary, remains outstanding for a period of 60 days following the entry of such judgment or decree and is not discharged, waived or the execution thereof stayed within 10 days after the notice specified below; or

(10) a Subsidiary Guaranty ceases to be in full force and effect (other than in accordance with the terms of such Subsidiary Guaranty) or a Subsidiary Guarantor denies or disaffirms its obligations under its Subsidiary Guaranty.

The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or

order of any court or any order, rule or regulation of any administrative or governmental body.

The term “Bankruptcy Law” means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. The term “Custodian” means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law.

A Default under clauses (4), (5), or (9) is not an Event of Default until the Trustee or the holders of at least 25% in principal amount of the outstanding Securities notify the Company of the Default and the Company does not cure such Default within the time specified after receipt of such notice. Such notice must specify the Default, demand that it be remedied and state that such notice is a “Notice of Default”.

The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers’ Certificate of any Event of Default under clause (6) or (10) and any event which with the giving of notice or the lapse of time would become an Event of Default under clause (4), (5) or (9), its status and what action the Company is taking or proposes to take with respect thereto.

SECTION 6.02. Acceleration. If an Event of Default (other than an Event of Default specified in Section 6.01(7) or (8) with respect to the Company) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the outstanding Securities by notice to the Company and the Trustee, may declare the principal of and accrued but unpaid interest on all the Securities to be due and payable. Upon such a declaration, such principal and interest shall be due and payable immediately; provided, however, that if upon such declaration there are any amounts outstanding under the Credit Agreement and the amounts thereunder have not been accelerated, such principal and interest shall be due and payable upon the earlier of the time such amounts are accelerated or five Business Days after receipt by the

Company and the Representative under the Credit Agreement of such declaration. If an Event of Default specified in Section 6.01(7) or (8) with respect to the Company occurs, the principal of and interest on all the Securities shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholders. The Holders of a majority in principal amount of the outstanding Securities by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto.

SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture.

The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative.

SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in principal amount of the outstanding Securities by notice to the Trustee may waive an existing Default and its consequences except (i) a Default in the payment of the principal of or interest on a Security or (ii) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Securityholder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right.

SECTION 6.05. Control by Majority. The Holders of a majority in principal amount of the outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to indemnification reasonably satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action.

SECTION 6.06. Limitation on Suits. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Securityholder may pursue any remedy with respect to this Indenture or the Securities unless:

(1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing;

(2) the Holders of at least 25% in principal amount of the outstanding Securities make a written request to the Trustee to pursue the remedy;

(3) such Holder or Holders offer to the Trustee reasonable security or indemnity against any loss, liability or expense;

(4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and

(5) the Holders of a majority in principal amount of the outstanding Securities do not give the Trustee a direction inconsistent with the request during such 60-day period.

A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder.

SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on the Securities held by such Holder, on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.07.

SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relative to the Company, its creditors or its property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07.

SECTION 6.10. Priorities. If the Trustee collects any money or property pursuant to this Article 6, it shall pay out the money or property in the following order:

FIRST: to the Trustee for amounts due under Section 7.07;

SECOND: to holders of Senior Indebtedness of the Company to the extent required by Article 10;

THIRD: to Securityholders for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and

FOURTH: to the Company.

The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section. At least 15 days before such record date, the Company shall mail to each Securityholder and the Trustee a notice that states the record date, the payment date and amount to be paid.

SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in principal amount of the outstanding Securities.

SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the extent it may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever

claim or take the benefit or advantage of, any stay or extension law or usury law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted.

ARTICLE 7

Trustee

SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person’s own affairs.

(b) Except during the continuance of an Event of Default:

(1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture.

(c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that:

(1) this paragraph does not limit the effect of paragraph (b) of this Section;

(2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and

(3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05.

(d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.

(e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company.

(f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

(g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

(h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the TIA.

SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document.

(b) Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers’ Certificate or Opinion of Counsel.

(c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.

(d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustee’s conduct does not constitute wilful misconduct or negligence.

(e) The Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.

SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11.

SECTION 7.04. Trustee’s Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities,

it shall not be accountable for the Company’s use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company in the Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee’s certificate of authentication.

SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the Default within 90 days after it occurs. Except in the case of a Default in payment of principal of or interest on any Security (including payments pursuant to the mandatory redemption provisions of such Security, if any), the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Securityholders.

SECTION 7.06. Reports by Trustee to Holders. As promptly as practicable after each February 1 beginning with the February 1 following the date of this Indenture, and in any event prior to March 1 in each year, the Trustee shall mail to each Securityholder a brief report dated as of February 1 that complies with TIA ss. 313(a). The Trustee also shall comply with TIA ss. 313(b).

A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof.

SECTION 7.07. Compensation and Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its services. The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable

compensation and expenses, disbursements and advances of the Trustee’s agents, counsel, accountants and experts. The Company shall indemnify the Trustee against any and all loss, liability or expense (including reasonable attorneys’ fees) incurred by it in connection with the administration of this trust and the performance of its duties hereunder. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee’s own wilful misconduct, negligence or bad faith.

To secure the Company’s payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Securities.

The Company’s payment obligations pursuant to this Section shall survive the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(7) or (8) with respect to the Company, the expenses are intended to constitute expenses of administration under the Bankruptcy Law.

SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time by so notifying the Company. The Holders of a majority in principal amount of the outstanding Securities may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if:

(1) the Trustee fails to comply with Section 7.10;

(2) the Trustee is adjudged bankrupt or insolvent;

(3) a receiver or other public officer takes charge of the Trustee or its property;

(4) the Trustee otherwise becomes incapable of acting; or

(5) the Trustee increases its fees by more than 15% in any twelve month period.

If the Trustee resigns, is removed by the Company or by the Holders of a majority in principal amount of the outstanding Securities and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee.

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07.

If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal amount of the outstanding Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee.

If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

Notwithstanding the replacement of the Trustee pursuant to this Section, the Company’s obligations under

Section 7.07 shall continue for the benefit of the retiring Trustee.

SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee.

In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have.

SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA ss. 310(a). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA ss. 310(b); provided, however, that there shall be excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA ss.310(b)(1) are met.

SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship listed in TIA

ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated.

ARTICLE 8

Discharge of Indenture; Defeasance

SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a) When (i) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.07) for cancelation or (ii) all outstanding Securities have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption pursuant to Article 3 hereof and the Company irrevocably deposits with the Trustee funds sufficient to pay at maturity or upon redemption all outstanding Securities, including interest thereon to maturity or such redemption date (other than Securities replaced pursuant to Section 2.07), and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Sections 8.01(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers’ Certificate and an Opinion of Counsel and at the cost and expense of the Company.

(b) Subject to Sections 8.01(c) and 8.02, the Company at any time may terminate (i) all its obligations under the Securities and this Indenture (“legal defeasance option”) or (ii) its obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09 and 4.10 and the operation of Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of Sections 6.01(7) and (8), with respect only to Significant Subsidiaries) and the limitations contained in Sections 5.01(a)(iii) and (iv) (“covenant defeasance option”). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option.

If the Company exercises its legal defeasance option, payment of the Securities may not be accelerated

because of an Event of Default with respect thereto. If the Company exercises its covenant defeasance option, payment of the Securities may not be accelerated because of an Event of Default specified in Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of Sections 6.01(7) and (8), with respect only to Significant Subsidiaries) or because of the failure of the Company to comply with Section 5.01(a)(iii) or (iv). If the Company exercises its legal defeasance option or its covenant defeasance option, each Subsidiary Guarantor, if any, shall be released from all its obligations with respect to its Subsidiary Guaranty.

Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations that the Company terminates.

(c) Notwithstanding clauses (a) and (b) above, the Company’s obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07 and 7.08 and in this Article 8 shall survive until the Securities have been paid in full. Thereafter, the Company’s obligations in Sections 7.07, 8.04 and 8.05 shall survive.

SECTION 8.02. Conditions to Defeasance. The Company may exercise its legal defeasance option or its covenant defeasance option only if:

(1) the Company irrevocably deposits in trust with the Trustee money or U.S. Government Obligations for the payment of principal of and interest on the Securities to maturity or redemption, as the case may be;

(2) the Company delivers to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal and interest when due on

all the Securities to maturity or redemption, as the case may be;

(3) 123 days pass after the deposit is made and during the 123-dayperiod no Default specified in Sections 6.01(7) or (8) with respect to the Company occurs which is continuing at the end of the period;

(4) the deposit does not constitute a default under any other agreement binding on the Company and is not prohibited by Article 10;

(5) the Company delivers to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940;

(6) in the case of the legal defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of this Indenture there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Securityholders will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred;

(7) in the case of the covenant defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Securityholders will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; and

(8) the Company delivers to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Securities as contemplated by this Article 8 have been complied with.

Before or after a deposit, the Company may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date in accordance with Article 3.

SECTION 8.03. Application of Trust Money. The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to this Article 8. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities. Money and securities so held in trust are not subject to Article 10.

SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent shall promptly turn over to the Company upon request any excess money or securities held by them at any time.

Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look to the Company for payment as general creditors.

SECTION 8.05. Indemnity for Government Obligations. The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations.

SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with this Article 8 by reason of

any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company’s obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article 8 until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article 8; provided, however, that, if the Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent.

ARTICLE 9

Amendments

SECTION 9.01. Without Consent of Holders. The Company and the Trustee may amend this Indenture or the Securities without notice to or consent of any Securityholder:

(1) to cure any ambiguity, omission, defect or inconsistency;

(2) to comply with Article 5;

(3) to provide for uncertificated Securities in addition to or in place of certificated Securities; provided, however, that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code;

(4) to make any change in Article 10 that would limit or terminate the benefits available to any holder of Senior Indebtedness (or Representatives therefor) under Article 10;

(5) to add Guarantees with respect to the Securities, including any Subsidiary Guaranties, or to secure the Securities;

(6) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the

Company;

(7) to comply with any requirements of the SEC in connection with qualifying, or maintaining the qualification of, this Indenture under the TIA; or

(8) to make any change that does not adversely affect the rights of any Securityholder.

An amendment under this Section may not make any change that adversely affects the rights under Article 10 or the definitions relating thereto of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change.

After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section.

SECTION 9.02. With Consent of Holders. The Company and the Trustee may amend this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders of at least a majority in principal amount of the Securities then outstanding (including consents obtained in connection with a tender offer or exchange for the Securities). However, without the consent of each Securityholder affected thereby, an amendment may not:

(1) reduce the principal amount of Securities whose Holders must consent to an amendment;

(2) reduce the rate of or extend the time for payment of interest on any Security;

(3) reduce the principal of or extend the Stated Maturity of any Security;

(4) reduce the amount payable upon the redemption of any Security or change the time at which any Security may be redeemed in accordance with Article 3;

(5) make any Security payable in money other than that stated in the Security;

(6) make any change in Article 10 that adversely affects the rights of any Securityholder under Article 10; or

(7) make any change in Section 6.04 or 6.07 or the second sentence of this Section.

In addition, without the consent of holders of at least 75% of the outstanding Securities, no amendment may release a Subsidiary Guarantor from its Subsidiary Guaranty or make any change in any Subsidiary Guaranty that would adversely affect the Securityholders.

It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof.

An amendment under this Section may not make any change that adversely affects the rights under Article 10 of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change.

therein, shall not impair or affect the validity of an amendment under this Section.

SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to this Indenture or the Securities shall comply with the TIA as then in effect.

SECTION 9.04. Revocation and Effect of Consents and Waivers. A consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder’s Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder’s Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Securityholder. An amendment or waiver becomes effective upon the execution of such amendment or waiver by the Trustee.

The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Securityholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date.

SECTION 9.05. Notation on or Exchange of Securities. If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or

the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment.

SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any amendment authorized pursuant to this Article 9 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers’ Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture.

ARTICLE 10

Subordination

SECTION 10.01. Agreement To Subordinate. The Company agrees, and each Securityholder by accepting a Security agrees, that the Indebtedness evidenced by the Securities is subordinated in right of payment, to the extent and in the manner provided in this Article 10, to the prior payment of all Senior Indebtedness of the Company and that the subordination is for the benefit of and enforceable by the holders of such Senior Indebtedness. The Securities shall in all respects rank pari passu with all other Senior Subordinated Indebtedness of the Company and only Indebtedness of the Company which is Senior Indebtedness shall rank senior to the Securities in accordance with the provisions set forth herein. All provisions of this Article 10 shall be subject to Section 10.12.

SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of the assets of the Company to creditors upon a total or partial liquidation

or a total or partial dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property:

(1) holders of Senior Indebtedness of the Company shall be entitled to receive payment in full of such Senior Indebtedness before Securityholders shall be entitled to receive any payment of principal of or interest on the Securities; and

(2) until such Senior Indebtedness is paid in full, any payment or distribution to which Securityholders would be entitled but for this Article 10 shall be made to holders of such Senior Indebtedness, except that Securityholders may receive shares of stock and any debt securities that are subordinated to such Senior Indebtedness to at least the same extent as the Securities.

SECTION 10.03. Default on Senior Indebtedness. The Company may not pay the principal of or interest on the Securities or make any deposit pursuant to Section 8.01 and may not repurchase, redeem or otherwise retire any Securities (collectively, “pay the Securities”) if (i) any Senior Indebtedness is not paid when due or (ii) any other default on Senior Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded or (y) such Senior Indebtedness has been paid in full; provided, however, that the Company may pay the Securities without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of such Senior Indebtedness. During the continuance of any default (other than a default described in clause (i) or (ii) of the preceding sentence) with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Company shall not pay the Securities for a period (a “Payment Blockage Period”)

commencing upon the receipt by the Company and the Trustee of written notice (a “Blockage Notice”) of such default from the Representative of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated (i) by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice, (ii) because the default giving rise to such Blockage Notice is no longer continuing or (iii) because such Designated Senior Indebtedness has been repaid in full). Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the first sentence of this Section), unless the holders of such Designated Senior Indebtedness or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the Securities after termination of such Payment Blockage Period. Not more than one Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period; provided, however, that if any Blockage Notice within such 360-day period is given by or on behalf of any holders of Designated Senior Indebtedness (other than the Bank Indebtedness), the Representative of the Bank Indebtedness may give one other Blockage Notice within such period; provided further, however, that in no event may the total number of days during which any Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate during any 360-consecutive-day period. For purposes of this Section, no default or event of default which existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Payment Blockage Period shall be, or be made, the basis of the commencement of a subsequent Payment Blockage Period by the Representative of such Designated Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such default or event of default shall have been cured or waived for a period of not less than 90 consecutive days.

SECTION 10.04. Acceleration of Payment of Securities. If payment of the Securities is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the holders of the Senior Indebtedness (or their Representatives) of the acceleration.

SECTION 10.05. When Distribution Must Be Paid Over. If a distribution is made to Securityholders that because of this Article 10 should not have been made to them, the Securityholders who receive the distribution shall hold it in trust for holders of Senior Indebtedness of the Company and pay it over to them as their interests may appear.

SECTION 10.06. Subrogation. After all Senior Indebtedness of the Company is paid in full and until the Securities are paid in full, Securityholders shall be subrogated to the rights of holders of such Senior Indebtedness to receive distributions applicable to such Senior Indebtedness. A distribution made under this Article 10 to holders of such Senior Indebtedness which otherwise would have been made to Securityholders is not, as between the Company and Securityholders, a payment by the Company on such Senior Indebtedness.

SECTION 10.07. Relative Rights. This Article 10 defines the relative rights of Securityholders and holders of Senior Indebtedness of the Company. Nothing in this Indenture shall:

(1) impair, as between the Company and Securityholders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Securities in accordance with their terms; or

(2) prevent the Trustee or any Securityholder from exercising its available remedies upon a Default, subject to the rights of holders of Senior Indebtedness of the Company to receive distributions otherwise payable to Securityholders.

SECTION 10.08. Subordination May Not Be Impaired by Company. No right of any holder of Senior Indebtedness of the Company to enforce the subordination of the Indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture.

SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding Section 10.03, the Trustee or Paying Agent may continue to make payments on the Securities and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of such payment, a Trust Officer of the Trustee receives notice satisfactory to it that payments may not be made under this Article 10. The Company, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness may give the notice; provided, however, that, if an issue of Senior Indebtedness of the Company has a Representative, only the Representative may give the notice.

The Trustee in its individual or any other capacity may hold Senior Indebtedness of the Company with the same rights it would have if it were not Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article 10 with respect to any Senior Indebtedness of the Company which may at any time be held by it, to the same extent as any other holder of such Senior Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 10 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07.

SECTION 10.10. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of the Company, the distribution may be made and the notice given to their Representative (if any).

SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit Right To Accelerate. The failure to

make a payment pursuant to the Securities by reason of any provision in this Article 10 shall not be construed as preventing the occurrence of a Default. Nothing in this Article 10 shall have any effect on the right of the Securityholders or the Trustee to accelerate the maturity of the Securities.

SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding anything contained herein to the contrary, payments from money or the proceeds of U.S. Government Obligations held in trust under Article 8 by the Trustee for the payment of principal of and interest on the Securities shall not be subordinated to the prior payment of any Senior Indebtedness or subject to the restrictions set forth in this Article 10, and none of the Securityholders shall be obligated to pay over any such amount to the Company or any holder of Senior Indebtedness of the Company or any other creditor of the Company.

SECTION 10.13. Trustee Entitled To Rely. Upon any payment or distribution pursuant to this Article 10, the Trustee and the Securityholders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 10.02 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Securityholders or (iii) upon the Representatives for the holders of Senior Indebtedness of the Company for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of such Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of the Company to participate in any payment or distribution pursuant to this Article 10, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to

which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article 10, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 10.

SECTION 10.14. Trustee To Effectuate Subordination. Each Securityholder by accepting a Security authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Securityholders and the holders of Senior Indebtedness of the Company as provided in this Article 10 and appoints the Trustee as attorney-in-fact for any and all such purposes.

SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Securityholders or the Company or any other Person, money or assets to which any holders of Senior Indebtedness of the Company shall be entitled by virtue of this Article 10 or otherwise.

SECTION 10.16. Reliance by Holders of Senior Indebtedness on Subordination Provisions. Each Securityholder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of the Company, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of such Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness.

ARTICLE 11

Subsidiary Guaranties

SECTION 11.01. Guaranties. Each Subsidiary Guarantor hereby unconditionally and irrevocably guarantees, jointly and severally, to each Holder and to the Trustee and its successors and assigns (a) the full and punctual payment of principal of and interest on the Securities when due, whether at maturity, by acceleration, by redemption or otherwise, and all other monetary obligations of the Company under this Indenture and the Securities and (b) the full and punctual performance within applicable grace periods of all other obligations of the Company under this Indenture and the Securities (all the foregoing being hereinafter collectively called the “Obligations”). Each Subsidiary Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice or further assent from such Subsidiary Guarantor and that such Subsidiary Guarantor will remain bound under this Article 11 notwithstanding any extension or renewal of any Obligation.

Each Subsidiary Guarantor waives presentation to, demand of, payment from and protest to the Company of any of the Obligations and also waives notice of protest for nonpayment. Each Subsidiary Guarantor waives notice of any default under the Securities or the Obligations. The obligations of each Subsidiary Guarantor hereunder shall not be affected by (a) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Company or any other Person under this Indenture, the Securities or any other agreement or otherwise; (b) any extension or renewal of any thereof; (c) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Securities or any other agreement; (d) the release of any security held by any Holder or the Trustee for the Obligations or any of them; (e) the failure of any Holder or the Trustee to exercise any right or remedy against any other guarantor of the Obligations; or (f) any change in the ownership of such Subsidiary Guarantor (except as provided in Section 11.06).

Each Subsidiary Guarantor further agrees that its Subsidiary Guaranty herein constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Obligations.

Each Subsidiary Guaranty is, to the extent and in the manner set forth in Article 12, subordinated and subject in right of payment to the prior payment in full of the principal of and premium, if any, and interest on all Senior Indebtedness of the Subsidiary Guarantor giving such Subsidiary Guaranty and each Subsidiary Guaranty is made subject to such provisions of this Indenture.

Except as expressly set forth in Sections 8.01(b), 11.02 and 11.06, the obligations of each Subsidiary Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Subsidiary Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any Holder or the Trustee to assert any claim or demand or to enforce any remedy under this Indenture, the Securities or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of such Subsidiary Guarantor or would otherwise operate as a discharge of such Subsidiary Guarantor as a matter of law or equity.

Each Subsidiary Guarantor further agrees that its Subsidiary Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on

any Obligation is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise.

In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee has at law or in equity against any Subsidiary Guarantor by virtue hereof, upon the failure of the Company to pay the principal of or interest on any Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Obligation, each Subsidiary Guarantor hereby promises to and will, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of (i) the unpaid amount of such Obligations, (ii) accrued and unpaid interest on such Obligations (but only to the extent not prohibited by law) and (iii) all other monetary Obligations of the Company to the Holders and the Trustee.

Each Subsidiary Guarantor agrees that it shall not be entitled to any right of subrogation in respect of any Obligations guaranteed hereby until payment in full of all Obligations and all obligations to which the Obligations are subordinated as provided in Article 12. Each Subsidiary Guarantor further agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Obligations Guaranteed hereby may be accelerated as provided in Article 6 for the purposes of such Subsidiary Guarantor’s Subsidiary Guaranty herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6, such Obligations (whether or not due and payable) shall forthwith become due and payable by such Subsidiary Guarantor for the purposes of this Section.

Each Subsidiary Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys’ fees) incurred by the Trustee or any Holder in enforcing any rights under this Section.

SECTION 11.02. Limitation on Liability. Any term or provision of this Indenture to the contrary notwithstanding, the maximum, aggregate amount of the Obligations guaranteed hereunder by any Subsidiary Guarantor shall not exceed the maximum amount that can be hereby guaranteed without rendering this Indenture, as it relates to such Subsidiary Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.

SECTION 11.03. Successors and Assigns. This Article 11 shall be binding upon each Subsidiary Guarantor and its successors and assigns and shall enure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Securities shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture.

SECTION 11.04. No Waiver. Neither a failure nor a delay on the part of either the Trustee or the Holders in exercising any right, power or privilege under this Article 11 shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article 11 at law, in equity, by statute or otherwise.

SECTION 11.05. Modification. No modification, amendment or waiver of any provision of this Article 11, nor the consent to any departure by any Subsidiary Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Subsidiary Guarantor in any case shall entitle such Subsidiary Guarantor to any other or further

notice or demand in the same, similar or other circumstances.

SECTION 11.06. Release of Subsidiary Guarantor. Upon the sale (including any sale pursuant to any exercise of remedies by a holder of Senior Indebtedness) or other disposition (including by way of consolidation or merger) of a Subsidiary Guarantor or the sale or disposition of all or substantially all the assets of such Subsidiary Guarantor (in each case other than to the Company or an Affiliate of the Company), such Subsidiary Guarantor shall be deemed released from all obligations under this Article 11 without any further action required on the part of the Trustee or any Holder. At the request of the Company, the Trustee shall execute and deliver an appropriate instrument evidencing such release.

ARTICLE 12

Subordination of Subsidiary Guaranties

SECTION 12.01. Agreement To Subordinate. Each Subsidiary Guarantor agrees, and each Securityholder by accepting a Security agrees, that the Obligations of such Subsidiary Guarantor are subordinated in right of payment, to the extent and in the manner provided in this Article 12, to the prior payment of all Senior Indebtedness of such Subsidiary Guarantor and that the subordination is for the benefit of and enforceable by the holders of such Senior Indebtedness. The Obligations of a Subsidiary Guarantor shall in all respects rank pari passu with all other Senior Subordinated Indebtedness of such Subsidiary Guarantor and only Senior Indebtedness of such Subsidiary Guarantor (including such Subsidiary Guarantor’s Guarantee of Senior Indebtedness of the Company) shall rank senior to the Obligations of such Subsidiary Guarantor in accordance with the provisions set forth herein.

SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of the assets of any Subsidiary Guarantor to creditors upon a total or

partial liquidation or a total or partial dissolution of such Subsidiary Guarantor or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to such Subsidiary Guarantor or its property:

(1) holders of Senior Indebtedness of such Subsidiary Guarantor shall be entitled to receive payment in full of such Senior Indebtedness in cash or cash equivalents before Securityholders shall be entitled to receive any payment pursuant to any Obligations of such Subsidiary Guarantor; and

(2) until the Senior Indebtedness of any Subsidiary Guarantor is paid in full in cash or cash equivalents, any payment or distribution to which Securityholders would be entitled but for this Article 12 shall be made to holders of such Senior Indebtedness as their interests may appear, except that Securityholders may receive shares of stock and any debt securities of such Subsidiary Guarantor that are subordinated to Senior Indebtedness, and to any debt securities received by holders of Senior Indebtedness, of such Subsidiary Guarantor to at least the same extent as the Obligations of such Subsidiary Guarantor are subordinated to Senior Indebtedness of such Subsidiary Guarantor.

SECTION 12.03. Default on Senior Indebtedness of Subsidiary Guarantor. No Subsidiary Guarantor may make any payment pursuant to any of its Obligations or repurchase, redeem or otherwise retire or defease any Securities or other Obligations (collectively, “pay its Subsidiary Guaranty”) if (i) any Senior Indebtedness of the Company is not paid when due or (ii) any other default on Senior Indebtedness of the Company occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded or (y) such Senior Indebtedness has been paid in full; provided, however, that any Subsidiary Guarantor may pay its Subsidiary Guaranty without regard to the foregoing if such

Subsidiary Guarantor and the Trustee receive written notice approving such payment from the Representatives of such Senior Indebtedness. No Subsidiary Guarantor may pay its Subsidiary Guaranty during the continuance of any Payment Blockage Period after receipt by the Company and the Trustee of a Payment Notice under Section 10.03. Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the first sentence of this Section), unless the holders of Senior Indebtedness giving such Payment Notice or the Representative of such holders shall have accelerated the maturity of such Senior Indebtedness, any Subsidiary Guarantor may resume payments pursuant to its Subsidiary Guaranty after termination of such Payment Blockage Period.

SECTION 12.04. Demand for Payment. If a demand for payment is made on a Subsidiary Guarantor pursuant to Article 11, the Trustee shall promptly notify the Company and the Company shall promptly notify the holders of the Senior Indebtedness (or their Representatives) of such demand.

SECTION 12.05. When Distribution Must Be Paid Over. If a distribution is made to Securityholders that because of this Article 12 should not have been made to them, the Securityholders who receive the distribution shall hold it in trust for holders of the relevant Senior Indebtedness and pay it over to them or their Representatives as their interests may appear.

SECTION 12.06. Subrogation. After all Senior Indebtedness of a Subsidiary Guarantor is paid in full and until the Securities are paid in full, Securityholders shall be subrogated to the rights of holders of such Senior Indebtedness to receive distributions applicable to Senior Indebtedness. A distribution made under this Article 12 to holders of such Senior Indebtedness which otherwise would have been made to Securityholders is not, as between the relevant Subsidiary Guarantor and Securityholders, a payment by such Subsidiary Guarantor on such Senior Indebtedness.

SECTION 12.07. Relative Rights. This Article 12 defines the relative rights of Securityholders and holders of Senior Indebtedness of a Subsidiary Guarantor. Nothing in this Indenture shall:

(1) impair, as between a Subsidiary Guarantor and Securityholders, the obligation of such Subsidiary Guarantor, which is absolute and unconditional, to pay the Obligations to the extent set forth in Article 11 or the relevant Subsidiary Guaranty; or

(2) prevent the Trustee or any Securityholder from exercising its available remedies upon a default by such Subsidiary Guarantor under the Obligations, subject to the rights of holders of Senior Indebtedness of such Subsidiary Guarantor to receive distributions otherwise payable to Securityholders.

SECTION 12.08. Subordination May Not Be Impaired by Subsidiary Guarantor. No right of any holder of Senior Indebtedness of any Subsidiary Guarantor to enforce the subordination of the Obligations of such Subsidiary Guarantor shall be impaired by any act or failure to act by such Subsidiary Guarantor or by its failure to comply with this Indenture.

SECTION 12.09. Rights of Trustee and Paying Agent. Notwithstanding Section 12.03, the Trustee or Paying Agent may continue to receive payments with respect to any Subsidiary Guaranty and shall not be charged with knowledge of the existence of facts that would prohibit receiving any such payments unless, not less than two Business Days prior to the date of such payment, a Trust Officer of the Trustee receives written notice satisfactory to it that payments may not be received under this Article 12. The Company, the relevant Subsidiary Guarantor, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness of any Subsidiary Guarantor may give the notice; provided, however, that, if an issue of Senior Indebtedness of any Subsidiary Guarantor has a Representative, only the Representative may give the notice.

The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have if it were not the Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article 12 with respect to any Senior Indebtedness of any Subsidiary Guarantor which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 12 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07.

SECTION 12.10. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of any Subsidiary Guarantor, the distribution may be made and the notice given to their Representative (if any).

SECTION 12.11. Article 12 Not To Prevent Defaults Under a Subsidiary Guaranty or Limit Right To Demand Payment. The failure to make a payment pursuant to a Subsidiary Guaranty by reason of any provision in this Article 12 shall not be construed as preventing the occurrence of a default under such Subsidiary Guaranty. Nothing in this Article 12 shall have any effect on the right of the Securityholders or the Trustee to make a demand for payment on any Subsidiary Guarantor pursuant to Article 11.

SECTION 12.12. Trustee Entitled To Rely. Upon any payment or distribution pursuant to this Article 12, the Trustee and the Securityholders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 12.02 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Securityholders or (iii) upon the Representatives for the holders of Senior Indebtedness of any Subsidiary Guarantor for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of such Senior

Indebtedness and other indebtedness of such Subsidiary Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 12. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of any Subsidiary Guarantor to participate in any payment or distribution pursuant to this Article 12, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness of such Subsidiary Guarantor held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article 12, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 12.

SECTION 12.13. Trustee To Effectuate Subordination. Each Securityholder by accepting a Security authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Securityholders and the holders of Senior Indebtedness of any Subsidiary Guarantor as provided in this Article 12 and appoints the Trustee as attorney-in-fact for any and all such purposes.

SECTION 12.14. Trustee Not Fiduciary for Holders of Senior Indebtedness of Subsidiary Guarantor. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of any Subsidiary Guarantor and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Securityholders or the Company or any other Person, money or assets to which any holders of such Senior Indebtedness shall be entitled by virtue of this Article 12 or otherwise.

SECTION 12.15. Reliance by Holders of Senior Indebtedness on Subordination Provisions. Each Securityholder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of any Subsidiary Guarantor, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness.

ARTICLE 13

Miscellaneous

SECTION 13.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control.

SECTION 13.02. Notices. Any notice or communication shall be in writing and delivered in person or mailed by first-class mail addressed as follows:

if to the Company or any Subsidiary Guarantor:

Roller Bearing Company of America, Inc.

60 Round Hill Road

P.O. Box 430

Fairfield, Connecticut 06430-0430

Facsimile No.: (203) 255-3862

Attention of President

if to the Trustee:

United States Trust Company of New York

114 West 47th Street

New York, New York 10036

Attention of Corporate Trust Department

The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.

Any notice or communication mailed to a Securityholder shall be mailed to the Securityholder at the Securityholder’s address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed.

Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.

SECTION 13.03. Communication by Holders with Other Holders. Securityholders may communicate pursuant to TIA ss. 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA ss. 312(c).

SECTION 13.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee:

(1) an Officers’ Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent,

100

if any, provided for in this Indenture relating to the proposed action have been complied with; and

(2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

SECTION 13.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include:

(1) a statement that the individual making such certificate or opinion has read such covenant or condition;

(2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with.

SECTION 13.06. When Securities Disregarded. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so

101

owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination.

SECTION 13.07. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar and the Paying Agent may make reasonable rules for their functions.

SECTION 13.08. Legal Holidays. A “Legal Holiday” is a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected.

SECTION 13.09. Governing Law. This Indenture and the Securities shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby.

SECTION 13.10. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities.

SECTION 13.11. Successors. All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors.

SECTION 13.12. Multiple Originals. The parties may sign any number of copies of this Indenture. Each

102

signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture.

SECTION 13.13. Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.

IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above.

ROLLER BEARING COMPANY OF AMERICA, INC.,

	By
		Name:
		Title:

INDUSTRIAL TECTONICS BEARINGS CORPORATION,

	By
		Name:
		Title:

RBC LINEAR PRECISION PRODUCTS, INC.,

	By
		Name:
		Title:

103

RBC NICE BEARINGS, INC.,

	By
		Name:
		Title:

UNITED STATES TRUST COMPANY OF NEW YORK,

	By
		Name:
		Title:

104

EXHIBIT A

[FORM OF FACE OF EXCHANGE SECURITY OR

PRIVATE EXCHANGE SECURITY]

*
**		CUSIP No. No.
$

9-5/8% Senior Subordinated Notes Due 2007

ROLLER BEARING COMPANY OF AMERICA, INC., a Delaware corporation, promises to pay to, or registered assigns, the principal sum of Dollars on June 15, 2007.

Interest Payment Dates: June 15 and December 15

Record Dates: June 1 and December 1

* If the Security is to be issued in global form add the Global Securities Legend from Exhibit 1 to Appendix A and the Attachment from such Exhibit 1 captioned “[TO BE ATTACHED TO GLOBAL SECURITIES]—SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY”.

** If the Security is a Private Exchange Security issued in a Private Exchange to an Initial Purchaser holding an unsold portion of its initial allotment, add the Restricted Securities Legend from Exhibit 1 to Appendix A and replace the Assignment Form included in this Exhibit A with the Assignment Form included in such Exhibit 1.

105

Additional provisions of this Security are set forth on the other side of this Security.

Dated:

		ROLLER BEARING COMPANY OF AMERICA, INC.

			by

					President


					Secretary
TRUSTEE’S CERTIFICATE OF AUTHENTICATION

UNITED STATES TRUST COMPANY OF NEW YORK,
	as Trustee, certifies that
	this is one of			[Seal]
	the Securities referred
	to in the Indenture.

by
Authorized Signatory

[FORM OF REVERSE SIDE OF EXCHANGE SECURITY

OR PRIVATE EXCHANGE SECURITY]

9-5/8% Senior Subordinated Note Due 2007

1. Interest

Roller Bearing Company of America, Inc., a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the “Company”), promises to pay interest on the principal amount of this Security at the rate per annum shown above; provided, however, that if a Registration Default (as defined in the Registration Rights Agreement) occurs, additional interest will accrue on this Security at a rate of 0.50% per annum from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured. The Company will pay interest semiannually on June 15 and December 15 of each year, commencing on December 15, 1997. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from June 23, 1997. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful.

2. Method of Payment

The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the June 1 or December 1 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in

money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by the holders thereof or, if no U.S. dollar account maintained by the payee with a bank in the United States is designated by any holder to the Trustee or the Paying Agent at least 30 days prior to the relevant due date for payment (or such other date as the Trustee may accept in its discretion), by mailing a check to the registered address of such holder.

3. Paying Agent and Registrar

Initially, United States Trust Company of New York, a New York trust company (“Trustee”), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar.

4. Indenture

The Company issued the Securities under an Indenture dated as of June 15, 1997 (“Indenture”), among the Company, the Subsidiary Guarantors and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the “Act”). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms.

by the Company and certain of its subsidiaries, (b) the payment of Restricted Payments (c) certain transactions with affiliates, (d) sales of assets, including capital stock of subsidiaries, (e) sales and issuances of capital stock by certain subsidiaries and (f) certain consolidations and mergers. The Indenture also will prohibit certain restrictions on distributions from subsidiaries. In addition, the Company may be obligated, under certain circumstances, to offer to repurchase Securities at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest to the date of repurchase.

5. Optional Redemption

Except as set forth in the following paragraph, the Securities may not be redeemed prior to June 15, 2002. On and after that date, the Company may redeem the Securities in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date):

if redeemed during the

12-month period beginning June 15

of the years set forth below:

		Percentage
2002		104.8125%
2003		103.2083
2004		101.6041
2005 and thereafter		100.0000

right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided, however, that at least $74.0 million aggregate principal amount of the Securities must remain outstanding after each such redemption.

6. Notice of Redemption

Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption.

7. Put Provisions

Upon a Change of Control, any Holder of Securities will have the right to cause the Company to repurchase all or any part of the Securities of such Holder at a repurchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued interest to the date of repurchase (subject to the right of holders of record on the relevant record date to receive interest due on the related interest payment date) as provided in, and subject to the terms of, the Indenture.

8. Subordination

The Securities are subordinated to Senior Indebtedness, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness must be paid before the Securities may be paid. The Company agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose.

9. Guarantees

The Company’s obligations with respect to the Securities are guaranteed, to the extent provided in the Indenture, by the Subsidiary Guarantors.

10. Denominations; Transfer; Exchange

The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed or 15 days before an interest payment date.

11. Persons Deemed Owners

The registered Holder of this Security may be treated as the owner of it for all purposes.

12. Unclaimed Money

If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment.

13. Discharge and Defeasance

Subject to certain conditions, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be.

14. Amendment, Waiver

Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority (or, in certain cases, 75%) in principal amount outstanding of the Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add guarantees with respect to the Securities or to secure the Securities, or to add additional covenants or surrender rights and powers conferred on the Company, or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to make any change that does not adversely affect the rights of any Securityholder.

15. Defaults and Remedies

Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Securities; (ii) default in payment of principal on the Securities at maturity, upon redemption pursuant to paragraph 5 of the Securities, upon acceleration or otherwise, or failure by the Company to redeem or purchase Securities when required; (iii) failure by the Company to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other Indebtedness of the Company if the amount accelerated (or so unpaid) exceeds $5 million; (v) certain events of bankruptcy or insolvency with respect to the Company and the Significant Subsidiaries; (vi) certain judgments or decrees for the payment of money in excess of $5 million; and (vii) certain events with respect to the guarantees of the Company’s obligations under the Securities by the Subsidiary Guarantors. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately or, in certain circumstances, after giving notice to the Representative under the Credit Agreement. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default.

Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of principal or interest) if it determines that withholding notice is in the interest of the Holders.

16. Trustee Dealings with the Company

Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates (including the Subsidiary Guarantors) and may otherwise deal with the Company or its Affiliates (including the Subsidiary Guarantors) with the same rights it would have if it were not Trustee.

17. No Recourse Against Others

Any past, present or future director, officer, employee or stockholder, as such, of the Company, any Subsidiary Guarantor or the Trustee shall not have any liability for any obligations of the Company or any Subsidiary Guarantor under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities.

18. Authentication

This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security.

19. Abbreviations

Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act).

20. CUSIP Numbers

Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

21. Holders’ Compliance with Registration Rights Agreement.

Each Holder of a Security, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Rights Agreement, including, without limitation, the obligations of the Holders with respect to a registration and the indemnification of the Company to the extent provided therein.

22. Governing Law.

THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

The Company will furnish to any Securityholder upon written request and without charge to the Securityholder a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to:

Roller Bearing Company of America, Inc.

60 Round Hill Road

P.O. Box 430

Fairfield, Connecticut 06430-0430

Attention of: Secretary

ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

(Print or type assignee’s name, address and zip code)

(Insert assignee’s soc. sec. or tax I.D. No.)

and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.

Date:

Your Signature:

Sign exactly as your name appears on the other side of this Security.

OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or 4.09 of the Indenture, check the box:

If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or 4.09 of the Indenture, state the amount in principal amount: $

Date:		Your Signature:

			(Sign exactly as
			your name appears
			on the other side
			of this Security.)
Signature Guarantee:
	(Signature must be guaranteed)

RULE 144A/REGULATION S APPENDIX

FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO
RULE 144A AND TO CERTAIN PERSONS IN OFFSHORE TRANSACTIONS IN
RELIANCE ON REGULATION S.

PROVISIONS RELATING TO INITIAL SECURITIES,
PRIVATE EXCHANGE SECURITIES
AND EXCHANGE SECURITIES

1. Definitions

1.1 Definitions

For the purposes of this Appendix the following terms shall have the meanings indicated below:

“Depositary” means The Depository Trust Company, its nominees and their respective successors.

“Exchange Securities” means the 9-5/8% Senior Subordinated Notes Due 2007 to be issued pursuant to this Indenture in connection with a Registered Exchange Offer pursuant to the Registration Rights Agreement.

“Initial Purchaser” means Credit Suisse First Boston Corporation.

“Initial Securities” means the 9-5/8% Senior Subordinated Notes Due 2007, issued under this Indenture on or about the date hereof.

“Private Exchange” means the offer by the Company, pursuant to the Registration Rights Agreement, to the Initial Purchaser to issue and deliver to the Initial Purchaser, in exchange for the Initial Securities held by the Initial Purchaser as part of its initial distribution, a like aggregate principal amount of Private Exchange Securities.

“Private Exchange Securities” means the 9-5/8% Senior Subordinated Notes Due 2007 to be issued pursuant to this Indenture to the Initial Purchasers in a Private Exchange.

“Purchase Agreement” means the Purchase Agreement dated June 17, 1997, among the Company, the Subsidiary Guarantors and the Initial Purchaser.

“QIB” means a “qualified institutional buyer” as defined in Rule 144A.

“Registered Exchange Offer” means the offer by the Company, pursuant to the Registration Rights Agreement, to certain Holders of Initial Securities, to issue and deliver to such Holders, in exchange for the Initial Securities, a like aggregate principal amount of Exchange Securities registered under the Securities Act.

“Registration Rights Agreement” means the Registration Rights Agreement dated June 17, 1997, among the Company, the Subsidiary Guarantors and the Initial Purchaser.

“Securities” means the Initial Securities, the Exchange Securities and the Private Exchange Securities, treated as a single class.

“Securities Act” means the Securities Act of 1933.

“Securities Custodian” means the custodian with respect to a Global Security (as appointed by the Depositary), or any successor person thereto and shall initially be the Trustee.

“Shelf Registration Statement” means the registration statement issued by the Company, in connection with the offer and sale of Initial Securities or Private Exchange Securities, pursuant to the Registration Rights Agreement.

“Transfer Restricted Securities” means Securities that bear or are required to bear the legend set forth in Section 2.3(b) hereto.

1.2 Other Definitions

Term		Defined in Section:
“Agent Members”		2.1(b)
“Global Security”		2.1(a)
“Regulation S”		2.1(a)
“Rule 144A”		2.1(a)

2. The Securities.

2.1 Form and Dating.

The Initial Securities are being offered and sold by the Company pursuant to the Purchase Agreement.

(a) Global Securities. Initial Securities offered and sold to a QIB in reliance on Rule 144A under the Securities Act (“Rule 144A”) or in reliance on Regulation S under the Securities Act (“Regulation S”), in each case as provided in the Purchase Agreement, shall be issued initially in the form of one or more permanent global Securities in definitive, fully registered form without interest coupons with the global securities legend and restricted securities legend set forth in Exhibit 1 hereto (each, a Global Security”), which shall be deposited on behalf of the purchasers of the Initial Securities represented thereby with the Trustee, at its New York office, as custodian for the Depositary (or with such other custodian as the Depositary may direct), and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided.

(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a Global Security deposited with or on behalf of the Depositary.

The Company shall execute and the Trustee shall, in accordance with this Section 2.1(b), authenticate and deliver initially one or more Global Securities that (a) shall be registered in the name of the Depositary for such Global Security or Global Securities or the nominee of such Depositary and (b) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary’s instructions or held by the Trustee as custodian for the Depositary.

Members of, or participants in, the Depositary (“Agent Members”) shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depositary or by the Trustee as the custodian of the Depositary or under such Global Security, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of such Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Security.

2.2 Authentication. The Trustee shall authenticate and deliver: (1) Initial Securities for original issue in an aggregate principal amount of $110,000,000 and (2) Exchange Securities or Private Exchange Securities for issue only in a Registered Exchange Offer or a Private Exchange, respectively, pursuant to the Registration Rights Agreement, for a like principal amount of Initial Securities, in each case upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company. Such order shall specify the amount of the Securities to be authenticated and the date on which the original issue of Securities is to be authenticated and whether the Securities are to be Initial Securities, Exchange Securities or Private Exchange Securities. The aggregate principal amount of Securities outstanding at any time may not exceed $110,000,000 except as provided in Section 2.07 of this Indenture.

2.3 Transfer and Exchange. (a) Transfer and Exchange of Global Securities. (i) The transfer and exchange of Global Securities or beneficial interests therein shall be effected through the Depositary, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depositary therefor. A transferor of a beneficial interest in a Global Security shall deliver to the Registrar a written order given in accordance with the Depositary’s procedures containing information regarding the participant account of the Depositary to be credited with a beneficial interest in the Global Security. The Registrar shall, in accordance with such instructions, instruct the Depositary to credit to the account of the Person specified in such instructions a beneficial interest in the Global Security and to debit the account of the Person making the transfer the beneficial interest in the Global Security being transferred.

(ii) Notwithstanding any other provisions of this Rule 144A/Regulation S Appendix (other than the provisions set forth in Section 2.4), a Global Security may not be transferred as a whole except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary.

(iii) In the event that a Global Security is exchanged for Securities in definitive registered form pursuant to Section 2.4 or Section 2.09 of the Indenture prior to the consummation of a Registered Exchange Offer or the effectiveness of a Shelf Registration Statement with respect to such Securities, such Securities may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.3 (including the certification requirements set forth on the reverse of the Initial Securities intended to ensure that such transfers comply with Rule 144A or Regulation S, as the case may be) and such other procedures as may from time to time be adopted by the Company.

(b) Legends.

(i) Except as permitted by the following paragraphs (ii), (iii) and (iv), each Security certificate evidencing the Global Securities (and all Securities issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form:

“THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE “SECURITIES ACT”), AND THIS SECURITY MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (i) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (iv) TO THE COMPANY OR (v) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (i) THROUGH (v) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A)ABOVE.

BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS

SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S.

(ii) Upon any sale or transfer of a Transfer Restricted Security represented by a Global Security pursuant to Rule 144 under the Securities Act, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a certificated Security that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Security, if the Holder certifies in writing to the Registrar that its request for such exchange was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Security).

(iii) After a transfer of any Initial Securities or Private Exchange Securities during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Securities or Private Exchange Securities, as the case may be, all requirements pertaining to legends on such Initial Security or such Private Exchange Security will cease to apply, the requirements requiring any such Initial Security or such Private Exchange Security issued to certain Holders to be issued in global form will cease to apply, and a certificated Initial Security or Private Exchange Security without legends will be available to the transferee of the Holder of such Initial Securities or Private Exchange Securities upon exchange of such transferring Holder’s certificated Initial Security or Private Exchange Security or directions to transfer such Holder’s interest in the Global Security, as applicable.

(iv) Upon the consummation of a Registered Exchange Offer with respect to the Initial Securities pursuant to which Holders of such Initial Securities are offered Exchange Securities in exchange for their Initial Securities, all requirements pertaining to such Initial Securities that Initial Securities issued to certain Holders be issued in global form will cease to apply and certificated Initial Securities with the Restricted Securities Legend set forth in Exhibit 1 hereto will be available to Holders of such Initial Securities that do not exchange their Initial Securities, and Exchange Securities in certificated or global form (without the legends set forth above) will be available to Holders that

exchange such Initial Securities in such Registered Exchange Offer.

(v) Upon the consummation of a Private Exchange with respect to the Initial Securities pursuant to which Holders of such Initial Securities are offered Private Exchange Securities in exchange for their Initial Securities, all requirements pertaining to such Initial Securities that Initial Securities issued to certain Holders be issued in global form will still apply, and Private Exchange Securities in global form with the Restricted Securities Legend set forth in Exhibit 1 hereto will be available to Holders that exchange such Initial Securities in such Private Exchange.

(e) Cancelation or Adjustment of Global Security. At such time as all beneficial interests in a Global Security have either been exchanged for certificated Securities, redeemed, repurchased or canceled, such Global Security shall be returned to the Depositary for cancelation or retained and canceled by the Trustee. At any time prior to such cancelation, if any beneficial interest in a Global Security is exchanged for certificated Securities, redeemed, repurchased or canceled, the principal amount of Securities represented by such Global Security shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Securities Custodian for such Global Security) with respect to such Global Security, by the Trustee or the Securities Custodian, to reflect such reduction.

(f) Obligations with Respect to Transfers and Exchanges of Securities.

(i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate certificated Securities and Global Securities at the Registrar’s or co-registrar’s request.

(ii) No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon

exchange or transfer pursuant to Sections 3.06, 4.09 and 9.05 of the Indenture).

(iii) The Registrar or co-registrar shall not be required to register the transfer of or exchange of (a) any certificated Security selected for redemption in whole or in part pursuant to Article 3 of this Indenture, except the unredeemed portion of any certificated Security being redeemed in part, or (b) any Security for a period beginning 15 Business Days before the mailing of a notice of an offer to repurchase or redeem Securities or 15 Business Days before an interest payment date.

(iv) Prior to the due presentation for registration of transfer of any Security, the Company, the Subsidiary Guarantors, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Subsidiary Guarantors, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary.

(v) All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange.

(g) No Obligation of the Trustee.

(i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Security, a member of or a participant in the Depositary or other Person with respect to the accuracy of the records of the Depositary or its nominee or of any participant or member thereof with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depositary) of any notice (including any notice of redemption) or the payment of any amount under or with respect to such Securities. All notices and communications to be given to the Holders and all

payments to be made to Holders under the Securities shall be given or made only to or upon the order of the registered Holders (which shall be the Depositary or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security shall be exercised only through the Depositary subject to the applicable rules and procedures of the Depositary. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depositary with respect to its members, participants and any beneficial owners.

(ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depositary participants, members or beneficial owners in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

2.4 Certificated Securities.

(a) A Global Security deposited with the Depositary or with the Trustee as custodian for the Depositary pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in the form of certificated Securities in an aggregate principal amount equal to the principal amount of such Global Security, in exchange for such Global Security, only if such transfer complies with Section 2.3 and (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Security or if at any time such Depositary ceases to be a “clearing agency” registered under the Exchange Act and a successor depositary is not appointed by the Company within 90 days, or (ii) an Event of Default has occurred and is continuing or (iii) the Company, in its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of certificated Securities under this Indenture.

(b) Any Global Security that is transferable to the beneficial owners thereof pursuant to this Section shall be surrendered by the Depositary to the Trustee located in the Borough of Manhattan, The City of New York, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Security, an equal aggregate principal amount of certificated Initial Securities of authorized denominations. Any portion of a Global Security transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of $1,000 principal amount and any integral multiple thereof and registered in such names as the Depositary shall direct. Any certificated Initial Security delivered in exchange for an interest in the Global Security shall, except as otherwise provided by Section 2.3(b), bear the Restricted Securities Legend set forth in Exhibit 1 hereto.

(c) In the event of the occurrence of any of the events specified in Section 2.4(a), the Company will promptly make available to the Trustee a reasonable supply of certificated Securities in definitive, fully registered form without interest coupons.

2.5 Proxies.

Subject to the provisions of Section 2.4(b), the registered Holder of a Global Security may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities.

	EXHIBIT 1
	to
	RULE 144A/REGULATION S APPENDIX

[FORM OF FACE OF INITIAL SECURITY]

[Global Securities Legend]

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

[Restricted Securities Legend]

THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE “SECURITIES ACT”), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (i) TO A PERSON WHOM

THE SELLER REASONABLY BELIEVES IS A QIB (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (iv) TO THE COMPANY OR (v) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (i) THROUGH (v) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.

CUSIP No.
$

9-5/8% Senior Subordinated Notes Due 2007

ROLLER BEARING COMPANY OF AMERICA, INC., a Delaware corporation, promises to pay to, or registered assigns, the principal sum of Dollars on June 15, 2007.

Interest Payment Dates: June 15 and December 15

Record Dates: June 1 and December 1

Additional provisions of this Security are set forth on the other side of this Security.

Dated:

		ROLLER BEARING COMPANY OF AMERICA, INC.

			by


					President

					Secretary
TRUSTEE’S CERTIFICATE OF AUTHENTICATION

UNITED STATES TRUST COMPANY OF NEW YORK,
	as Trustee, certifies that
	this is one of			[Seal]
	the Securities referred
	to in the Indenture.

by
Authorized Signatory

[FORM OF REVERSE SIDE OF INITIAL SECURITY]

9-5/8% Senior Subordinated Note Due 2007

1. Interest

2. Method of Payment

money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company will make all payments in respect of a certificated Security (including principal, premium and interest) by mailing a check to the registered address of each Holder thereof; provided, however, that payments on a certificated Security will be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).

3. Paying Agent and Registrar

4. Indenture

Securityholders are referred to the Indenture and the Act for a statement of those terms.

The Securities are general unsecured obligations of the Company limited to $110,000,000 aggregate principal amount (subject to Section 2.07 of the Indenture). The Indenture contains certain covenants which, among other things, limit (a) the incurrence of additional indebtedness by the Company and certain of its subsidiaries, (b) the payment of Restricted Payments (c) certain transactions with affiliates, (d) sales of assets, including capital stock of subsidiaries, (e) sales and issuances of capital stock by certain subsidiaries and (f) certain consolidations and mergers. The Indenture also will prohibit certain restrictions on distributions from subsidiaries. In addition, the Company may be obligated, under certain circumstances, to offer to repurchase Securities at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest to the date of repurchase.

5. Optional Redemption

redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date):

if redeemed during the 12-month

period beginning June 15 of the

years set forth below:

		Percentage
2002		104.8125%
2003		103.2083
2004		101.6041
2005 and thereafter		100.0000

In addition, at any time and from time to time prior to June 15, 2000, the Company may redeem in the aggregate up to $36.0 million principal amount of the Securities with the proceeds of one or more Public Equity Offerings following which there is a Public Market (provided that a portion of the net cash proceeds thereof equal to the amount required to redeem any such Securities is contributed to the equity capital of the Company), at a redemption price (expressed as a percentage of principal amount) of 109.625% plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided, however, that at least $74.0 million aggregate principal amount of the Securities must remain outstanding after each such redemption.

6. Notice of Redemption

on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption.

7. Put Provisions

8. Subordination

9. Guarantees

The Company’s obligations with respect to the Securities are guaranteed, to the extent provided in the Indenture, by the Subsidiary Guarantors.

10. Denominations; Transfer; Exchange

required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed or 15 days before an interest payment date.

11. Persons Deemed Owners

The registered Holder of this Security may be treated as the owner of it for all purposes.

12. Unclaimed Money

13. Discharge and Defeasance

14. Amendment, Waiver

written consent of the Holders of a majority in principal amount outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to add guarantees with respect to the Securities or to secure the Securities, or to add additional covenants or surrender rights and powers conferred on the Company, or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to make any change that does not adversely affect the rights of any Securityholder.

15. Defaults and Remedies

insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default.

16. Trustee Dealings with the Company

17. No Recourse Against Others

18. Authentication

This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security.

19. Abbreviations

20. CUSIP Numbers

21. Holders’ Compliance with Registration Rights Agreement.

22. Governing Law.

Roller Bearing Company of America, Inc.

60 Round Hill Road

P.O. Box 430

Fairfield, Connecticut 06430-0430

Attention of: Secretary

ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

(Print or type assignee’s name, address and zip code)

(Insert assignee’s soc. sec. or tax I.D. No.)

and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.

Date:

Your Signature:

Sign exactly as your name appears on the other side of this Security.

In connection with any transfer of any of the Securities evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Securities are being transferred in accordance with its terms:

CHECK ONE BOX BELOW

(1)	o	to the Company; or

(2)	o	pursuant to an effective registration statement under the Securities Act of 1933; or

(3)	o	inside the United States to a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or

(4)	o	outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933; or

(5)	o	pursuant to another available exemption from registration provided by Rule 144 under the Securities Act of 1933.

Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (4) or (5) is checked, the Trustee may require, prior to registering any such transfer of the Securities, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act.



		Signature
Signature Guarantee:


		Signature must be guaranteed
Signature

TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.

The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has

determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.

Dated:
	NOTICE:	To be executed by
		an executive officer

[TO BE ATTACHED TO GLOBAL SECURITIES]

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

The following increases or decreases in this Global Security have been made:

Date of Exchange	Amount of decrease in Principal Amount of this Global Security	Amount of increase in Principal Amount of this Global Security	Principal amount of this Global Security following such decrease or increase)	Signature of authorized officer of Trustee or Securities Custodian

OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or 4.09 of the Indenture, check the box: o

If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or 4.09 of the Indenture, state the amount in principal amount: $

Date:		Your Signature:
			(Sign exactly as your name
			appears on the other side of
			this Security.)


Signature Guarantee:
	(Signature must be guaranteed)

Exhibit 10.2

ROLLER BEARING HOLDING COMPANY, INC.

STOCK OPTION PLAN

1. Purpose. The Roller Bearing Holding Company, Inc. Stock Option Plan (the “Plan”) is intended to provide incentives which will attract and retain highly competent persons as officers and employees of Roller Bearing Holding Company, Inc. and its designated subsidiaries (the “Company”), as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities to acquire shares of Class A voting stock of the Company (“Common Shares”) pursuant to Options, as described herein.

2. Administration.

(a) The Plan will be administered by the Board of Directors of the Company (the “Board”) unless and until the Board delegates, or is required to delegate, administration to a Committee, as provided in Sections 2(b) or 2(c) below. The Board is authorized, subject to the provisions of the Plan, to establish such rules and regulations as it deems necessary or appropriate for the proper administration of the Plan and to make such determinations and interpretations and to take such action in connection with the Plan and any Options granted hereunder as it deems necessary or advisable. All determinations and interpretations made by the Board shall be binding and conclusive on all participants and their legal representatives. No member of the Board, and no employee of the Company shall be liable for any act or failure to act hereunder, by any other member or employee or by any agent to whom duties in connection with the administration of this Plan have been delegated or, except in circumstances involving his bad faith, gross negligence or fraud, for any act or failure to act by the member or employee.

(b) The Board may delegate all or any portion of administration of the Plan to a committee composed of not fewer than two (2) members of the Board (the “Committee”). If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board (and references in this Plan to the Board shall thereafter be to the Committee, as applicable), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may terminate all or any portion of the Committee’s authority under the Plan at any time and revest in the Board all or any portion of the administration of the Plan.

(c) The Board shall be required to delegate administration of the Plan to a Committee, all of whose members shall be “nonemployee directors,” effective on and after the date of the first registration of an equity security of the Company under Section 12 of the Securities Exchange Act of 1934 (the “Exchange Act”). Any “nonemployee director” shall otherwise comply with the requirements of Rule 16b-3 of the Exchange Act as in effect at the relevant time and, to the extent necessary, Internal Revenue Code Section 162(m).

3. Participants. Participants will consist of such officers and employees of the Company, and independent contractors providing consulting or advisory services to the Company (including members of the Board), as the Board, in its sole discretion, determines to be significantly responsible for the success and future growth and profitability of the Company and whom the Board may designate from time to time to receive Options under the Plan. Designation as a participant in any year shall not require the Board to designate such person to receive an Option in any other year or, once designated, to receive the same type or amount of Options as granted to the participant, or any other participant, in any year. The Board shall consider such factors as it deems pertinent in selecting participants and in determining the type and amount of their respective Options.

4. Shares Reserved under the Plan. Subject to adjustments as provided in Section 6, there is hereby reserved for issuance under the Plan an aggregate of 3,365,596 Common Shares, which may be authorized but unissued shares or shares held by the Company in its treasury. Any shares subject to any form of Option hereunder may thereafter be subject to new Options under this Plan if there is a lapse, expiration or termination of any such Options granted prior to issuance of the shares, or if shares are issued under Options and thereafter are reacquired by the Company pursuant to rights reserved by the Company upon issuance thereof.

5. Options. Options will consist of awards from the Company that will enable the holder to purchase a specific number of Common Shares, at set terms and at a fixed purchase price. Options may be “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code (“Incentive Stock Options”) or Options that do not constitute Incentive Stock Options (“Nonqualified Stock Options,” and together with Incentive Stock Options, “Options”). The Board will have the authority to grant to any participant one or more Incentive Stock Options, Nonqualified Stock Options, or both types of Options. Each Option shall be evidenced by a written option agreement in such form and shall be subject to such terms and conditions as the Board may approve from time to time, including without limitation the following:

(a) Exercise Price. Each Option granted hereunder shall have such per-share exercise price as the Board may determine at the date of grant; provided, however, that the per-share exercise price for Options shall not be less than 100% of the Fair Market Value of the Common Shares on the date the option is granted, as reasonably determined by the Board.

(b) Payment of Exercise Price. The option exercise price may be paid by check or, in the discretion of the Board, by the delivery (or certification of ownership) of Common Shares of the Company then owned by the participant; provided, however, that payment of the exercise price by delivery of Common Shares of the Company then owned by the participant may be made only if such payment does not result in a charge to earnings for financial accounting purposes as determined by the Board. In the discretion of the Board, if Common Shares are readily tradeable on a national securities exchange or other market system at the time of option exercise, payment may also be made by delivering a properly executed exercise notice to the Company together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the exercise price. To facilitate the foregoing, the Company may enter into agreements for coordinated procedures with one or more brokerage firms.

(c) Exercise Period. Options granted under the Plan shall be exercisable at such times and subject to such terms and conditions as shall be determined by the Board; provided, however, that Options shall not be exercisable more than 10 years after the date they are granted. All Options shall terminate at such earlier times and upon such conditions or circumstances as the Board shall in its sole discretion set forth in such option at the date of grant, including but not limited to limitations on exercisability following termination of the participant’s employment or consulting relationship.

(d) Limitations on Incentive Stock Options. Incentive Stock Options may be granted only to participants who are employees of the Company or one of its subsidiaries (within the meaning of Section 424(f) of the Internal Revenue Code) at the date of grant. The aggregate Fair Market Value (determined as of the time the option is granted) of the Common Shares with respect to which Incentive Stock Options are exercisable for the first time by a participant during any calendar year (under all option plans of the Company) shall not exceed $100,000. Incentive Stock Options may not be granted to any participant who, at the time of grant, owns stock possessing (after the application of the attribution rules of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company, unless the option price is fixed at not less than 110% of the Fair Market Value of the Common Shares on the date of grant and the exercise of such option is prohibited by its terms after the expiration of five years from the date of grant of such option.

(e) Redesignation as Nonqualified Stock Options. Options designated as Incentive Stock Options that fail to meet the requirements of Section 422 of the Internal Revenue Code shall be redesignated as nonqualified options for Federal income tax purposes automatically without further action by the Board on the date of such failure to continue to meet the requirements of Section 422 of the Code.

(f) Limitation of Rights in Shares. The recipient of an Option shall not be deemed for any purpose to be a shareholder of the Company with respect to any of the

shares subject thereto except to the extent that the Option shall have been exercised and, in addition, a certificate shall have been issued and delivered to the participant.

6. Adjustment Provisions.

(a) If the Company shall at any time change the number of issued Common Shares without new consideration to the Company by stock dividend, stock split, recapitalization, reorganization, exchange of shares, liquidation, combination or other change in corporate structure affecting the Common Shares, the total number of shares available for Options under this Plan shall be appropriately adjusted and the number of shares covered by each outstanding Option and the exercise price thereunder shall be adjusted so that the net value of such Option shall not be changed, all of the foregoing, including the appropriations of any such adjustment to be as determined by the Board, in its discretion. It is specifically understood that the provisions of this subsection (a) are intended to apply solely to capital events that are independent of, and unrelated to, any transaction involving the direct or indirect sale or issuance of securities of the Company for value (and irrespective of the adequacy of the consideration so paid).

(b) In the case of any sale of assets, merger, consolidation, combination or other corporate reorganization or restructuring of the Company with or into another corporation which results in the outstanding Common Shares being converted into or exchanged for different securities, cash or other property, or any combination thereof (an “Acquisition”), subject to the provisions of this Plan and any limitation applicable to the Option, any participant to whom an Option has been granted shall have the right thereafter and during the term of the Option, to receive upon exercise thereof the Acquisition Consideration (as defined below) receivable upon the Acquisition by a holder of the number of Common Shares that might have been obtained upon exercise of the Option or portion thereof, as the case may be, immediately prior to the Acquisition. The term “Acquisition Consideration” shall mean the kind and amount of securities, cash or other property or any combination thereof receivable in respect of one Common Share upon consummation of an Acquisition.

(c) Notwithstanding any other provision of this Plan, the Board may authorize the issuance, continuation or assumption of Options or provide for other equitable adjustments after changes in the Common Shares resulting from any other merger, consolidation, sale of assets, acquisition of property or stock, recapitalization, reorganization or similar occurrence upon such terms and conditions as it may deem equitable and appropriate.

(d) In the event that another corporation or business entity is being acquired by the Company, and the Company assumes outstanding employee stock options and/or the obligation to make future grants of options to employees of the acquired entity, the aggregate

number of Common Shares available for Options under this Plan shall be increased accordingly.

7. Nontransferability.

(a) Each Option granted under the Plan to a participant shall not be transferable by him otherwise than by will or the laws of descent and distribution, and shall be exercisable, during the participant’s lifetime, only by him. In the event of the death of a participant while the participant is rendering employment, consulting or advisory services to the Company, each Option theretofore granted to him shall be exercisable during such period after his death as the Board shall in its discretion set forth in such option at the date of grant (but not beyond the stated duration of the option) and then only:

(i) By the executor or administrator of the estate of the deceased participant or the person or persons to whom the deceased participant’s rights under the Option shall pass by will or the laws of descent and distribution; and

(ii) To the extent that the deceased participant was entitled to do so at the date of his death.

(b) Notwithstanding Section 7(a), in the discretion of the Board, Options granted hereunder may be transferred to members of the participant’s immediate family (which for purposes of this Plan shall be limited to the participant’s children, grandchildren and spouse), or to one or more trusts for the benefit of such family members, or to partnerships or limited liability companies in which such family members and/or trusts are the only partners or members, but only if the Option expressly so provides.

8. Other Provisions. Options granted under the Plan may also be subject to such other provisions (whether or not applicable to any other Options awarded under the Plan to the participant or to any other participant) as the Board determines appropriate, including without limitation, provisions for the installment purchase of Common Shares, provisions to assist the participant in financing the acquisition of Common Shares, provisions for the forfeiture of, or restrictions on resale or other disposition of, Common Shares acquired under any form of Option, provisions for the deferral of option gains, provisions for the acceleration of exercisability or vesting of Options in the event of a change of control of the Company, provisions for the payment of the value of Options to participants in the event of a change of control of the Company, provisions for the forfeiture of the Options, or provisions to comply with Federal and state securities laws, or understandings or conditions as to the participant’s employment in addition to those specifically provided for under the Plan.

9. Fair Market Value. For purposes of this Plan and any Options awarded hereunder, the Fair Market Value of Common Shares shall be the mean between the highest and lowest sale prices for the Company’s Common Shares as reported on the Nasdaq National Market (or such other consolidated transaction reporting system on which such Common Shares are primarily traded) on the date of calculation (or on the next preceding trading date if Common Shares were not traded on the date of calculation); provided, however, that if the Company’s Common Shares are not at any time readily tradeable on a national securities exchange or other market system, Fair Market Value shall mean the amount determined in good faith by the Board as the fair market value of the Common Shares of the Company.

10. Withholding. All payments or distributions made pursuant to the Plan shall be net of any amounts required to be withheld pursuant to applicable federal, state and local income and/or employment tax withholding requirements. If the Company proposes or is required to distribute Common Shares pursuant to the exercise of Options, it may require the recipient to remit to it an amount sufficient to satisfy such tax withholding requirements prior to the delivery of any certificates for such Common Shares. The Board may, in its discretion and subject to such rules as it may adopt, permit an optionee to pay all or a portion of the federal, state and local withholding taxes arising in connection with the exercise of an Option, by electing to have the Company withhold Common Shares having a Fair Market Value equal to the amount of taxes required to be withheld.

11. Tenure. A participant’s right, if any, to continue to serve the Company as an officer, employee, consultant, advisor, or otherwise, shall not be enlarged or otherwise affected by his designation as a participant under the Plan, nor shall this Plan in any way interfere with the right of the Company, subject to the terms of any separate agreement to the contrary, at any time to terminate such employment, consulting or advisory relationship, or to increase or decrease the compensation of the participant from the rate in existence at the time of the grant of an Option.

12. Duration, Amendment and Termination. No Option shall be granted after December 31, 2008; provided, however, that the terms and conditions applicable to any Option granted prior to such date may thereafter be amended or modified by mutual agreement between the Company and the participant or such other persons as may then have an interest therein. Also, by mutual agreement between the Company and a participant hereunder, under this Plan or under any other present or future plan of the Company, Options may be granted to such participant in substitution and exchange for, and in cancellation of, any Options previously granted such participant under this Plan, or any other present or future plan of the Company. The Board may amend the Plan from time to time or terminate the Plan at any time, subject to any requirement of stockholder approval required by applicable law, rule or regulation. However, no action authorized by this Section 12 shall reduce the amount of any outstanding Option or change the terms or conditions thereof without the participant’s consent.

13. Governing Law. This Plan and actions taken in connection herewith shall be governed and construed in accordance with the laws of the State of Delaware (regardless of the law that might otherwise govern under applicable Delaware principles of conflict of laws).

14. Approval. The Plan was adopted by the Board on February 18, 1998 and the shareholders of the Company on February 18, 1998.

ROLLER BEARING HOLDING COMPANY, INC.

NON-QUALIFIED STOCK OPTION

THIS OPTION is granted this day of , 199 , by Roller Bearing Holding Company, Inc. a corporation (“RBC”) to (the “Employee”);

WHEREAS, the Board of Directors of RBC is of the opinion that the interests of RBC and its subsidiaries (collectively, the “Company”) will be advanced by encouraging and enabling those officers and key employees of the Company, as well as independent contractors providing consulting or advisory services to the Company, upon whose judgment, initiative and efforts the Company is largely dependent for the successful conduct of the business of the Company to acquire or increase their proprietary interest in the Company, thus providing them with a more direct stake in its welfare and assuring a closer identification of their interests with those of the Company; and

WHEREAS, the Board believes that the acquisition of such an interest in the Company will stimulate the efforts of such officers, key employees and independent contractors;

NOW, THEREFORE, in consideration of the premises and of the services required under Section 2 in order to receive benefits hereunder, the Company hereby grants this option to the Employee on the terms hereinafter expressed:

1. Option Grant. The Company hereby grants to the Employee a non- qualified stock option to purchase a total of shares (the “Option Shares”) of

class A voting stock of RBC (“Common Shares”) at the option price of $514 per Common Share. This option is not intended to qualify as an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended.

2. Time of Exercise. This option may be exercised (in the manner provided in Section 3 hereof) in whole or in part, from time to time after the date hereof, subject to the following limitations:

(a) This option may be exercised (to the extent not previously exercised) to the maximum cumulative extent set forth below, i.e. depending upon the date of such exercise:

		Permitted Exercise (Stated
		as a Percentage of the Total
Date of Exercise		Option Shares)

[From and after the date hereof]		%

[From and after]		%

[From and after hereof]		%

[From and after hereof]		%

Notwithstanding the foregoing, this option may not be exercised for fractional Common Shares and this option may not be exercised for less than Common Shares at a time unless it is for the balance of the Option Shares available hereunder.

(b) Notwithstanding Section 2(a) hereof, in the event of the Employee’s termination of employment with the Company due to “Permanent Disability” (as defined below) or death, this option shall immediately become exercisable (to the extent not previously exercised) to the extent of 100% of the total Option Shares.

(c) This option shall terminate as to any then unexercised options (and shall then forever lapse) on the tenth anniversary of the date hereof, or, if earlier, upon the first to occur of any of the following:

(i) the effective date of the termination of the Employee’semployment by the Company for “cause,” which for purposes of this option shall have the same meaning as set forth in any separate employment agreement between the Employer and the Company or, in the absence of any such separate employment agreement, “cause” means termination because of

(1) any act of fraud, embezzlement, theft or commission of a crime involving moral turpitude by the Employee;

(2) any breach by the Employee of any material covenant, condition, or agreement in any employment agreement entered into with the Company;

(3) any good faith finding by the Company that the Employee repeatedly failed to perform the Employee’s required duties; provided that the Company shall have provided the Employee with notice of such failure to perform and shall have afforded the Employee a reasonable opportunity to cure (it being understood that compliance with the notice or cure provisions set forth in any written employment agreement with the Employee shall constitute reasonable actions on behalf of the Company); or

(4) any chemical dependency by the Employee (other than in connection with medicines prescribed for the Employee).

(ii) 90 days following the termination of the Employee’s employment by the Company for any reason other than death, Permanent Disability or “cause” (and, in any such case, then only to the extent the Employee could have exercised this option on the date of such termination); or

(iii) one year following the termination of the Employee’s employment due to death or Permanent Disability.

(d) For purposes of this option, the Employee’s employment will be deemed to have been terminated due to Permanent Disability if such termination is due to Employee’s inability to perform his or her stated duties with the Company, as confirmed by a physician acceptable to the Company specializing in the area of medicine that is the subject of such disability, by reason of illness, accident or other incapacity, for a period of more than 90 consecutive days or 180 days during any consecutive 360 day period.

(e) This option shall not be affected by leaves of absence approved in writing by the CEO of the Company or by any change of employment status so long as the Employee continues to be an employee of the Company. Nothing in this option shall confer on the Employee any right to continue in the employ of the Company or to interfere with the right of the Company, subject to the terms of any separate employment contract, if any, to the contrary, to terminate Employee’s employment at any time.

3. Exercise of Option.

(a) This option may be exercised only by appropriate notice in writing delivered to the Secretary of RBC at its corporate headquarters in Fairfield, Connecticut, and accompanied by:

(i) The full purchase price of the Option Shares purchased payable by a certified or cashier’s check made payable to the order of the Company;

(ii) An executed Stock Transfer Restriction Agreement (the “Stock Restriction Agreement”) between the Company and the Employee or his successor in interest, whether determined by will or the laws of descent and distribution or otherwise, in the form attached hereto as Exhibit A, as the same may be modified from time to time, in RBC’s discretion; and

(iii) Such other documents or representations (including without limitation representations as to the intention of the Employee or his successor, or other purchaser under Section 6, to acquire the Option Shares for investment) as the Company may reasonably request in order to comply with securities, tax or other laws then applicable to the exercise of the option.

(b) Payment of the option exercise price hereunder may, in the sole discretion of the Company, be made by delivering (or certifying as to ownership) certificates for Common Shares which have been held by Employee for at least six

months (or such longer period as RBC may deem necessary in order to avoid a charge to earnings for financial reporting purposes) which are equal in value (based on their Fair Market Value on the date of surrender) to such purchase price or the portion thereof so paid). In addition, in the event Option Shares are registered under the Securities Exchange Act of 1934, payment of the option exercise price hereunder may, in the sole discretion of RBC, also be made by delivering a properly executed exercise notice to RBC together with a copy of irrevocable instructions to a broker to promptly deliver to RBC the necessary amount of sale or loan proceeds to pay the exercise price. To facilitate the foregoing, RBC may enter into agreements for coordinated procedures with one or more brokerage firms.

(c) The exercise of this option is conditioned upon the Employee making arrangements satisfactory to the Company relating to any required withholding taxes attributable to such exercise. The Company may, in its sole discretion and subject to such rules and procedures as it may adopt, permit the Employee to satisfy any tax withholding obligation, in whole or in part, by electing to have the Company withhold Option Shares received in connection with the exercise of this option having a Fair Market Value equal to the amount required to be withheld.

4. Change of Control.

(a) In the event of a Change of Control, the Board may, in its sole discretion by providing at least 30-days prior written notice to the Employee (i) elect to cancel this option, unless theretofore (or concurrently with such Change of Control) exercised, on the effective date of the Change of Control, and/or (ii) accelerate the

exercisability of this option with respect to all or any portion of the Option Shares that were not theretofore exercisable by operation of Section 2 above, and/or (iii) require, in lieu of the exercise of this option, that the Employee be provided with a cash payment as set forth in Section 4(c) hereof.

(b) For purposes of this option, a “Change of Control” shall occur:

(i) upon the consummation of a sale, lease, exchange or other transfer or disposition by the Company of all or substantially all of the assets of the Company on a consolidated basis; provided, however, that the mortgage, pledge or hypothecation of all or substantially all of the assets of the Company on a consolidated basis, in connection with a bona fide financing shall not constitute a Change of Control; or

(ii) when any “person,” other than any shareholder having Voting Control as of June 23, 1997, (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 but excluding any Company sponsored employee benefit plan) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Securities Exchange Act of 1934 as in effect on date hereof), directly or indirectly, of Voting Control. For the purposes hereof “Voting Control” means owning more than 50% of the “voting power” of those of RBC’s (or, for purposes of (iii) below of a corporation with which RBC shall have merged or consolidated) securities that have the right to elect the Board of Directors of RBC or such other corporation and otherwise direct the governance of RBC or such other corporation; or

(iii) upon the consummation of a merger or consolidation in which any person (other than any shareholder having voting control as of June 23, 1997) will beneficially own immediately after the effective time of the merger or consolidation Voting Control of the surviving or new corporation; or

(c) Pursuant to Section 4(a)(iii) hereof, in the event of a Change of Control, the Company may, at its option, elect to pay in cash an amount equal to the excess, if any, of (i) the Fair Market Value of each Option Share on the date of exercise over (ii) the exercise price as provided herein, multiplied by the number of Option Shares for which the option is exercised, less any required withholding taxes. In the event of such election, the Company will make a payment to the Employee, his estate, the person to whom the option passes by will or by the laws of descent or distribution or the Employee’s legal representative or guardian, upon the effective date of the Change of Control and the Company shall have no further liability of any kind to Employee.

5. Transferability of Option.

(a) Except as provided in Sections 5(b), this option is not transferable by the Employee otherwise than by will or the laws of descent and distribution, and is exercisable, during the Employee’s lifetime, only by him or her.

(b) Subject to the prior written consent of the Company, this option may transferred, in whole or in part, only under the circumstances, and subject to the terms and conditions, set forth in Section 2.5 of the Stock Restriction Agreement.

6. Death of Employee. If the Employee dies while in the employ of the

Company, this option may be exercised in whole or in part and from time to time, in the manner described in Section 3 hereof, by his estate or the person to whom the option passes by will or the laws of descent and distribution, but only to the extent that the Employee could have exercised it on the date of his death, and only within a period of (a) twelve months next succeeding the Employee’s termination of employment due to death, or (b) ten years from the date hereof, whichever period is shorter.

7. Delivery of Certificates. If at any time during the term of this option the Company shall be advised by its counsel that Option Shares deliverable upon exercise of this option are required to be registered under the Federal Securities Act of 1933, as amended, or under applicable state securities laws, or that delivery of the Option Shares must be accompanied or preceded by a prospectus meeting the requirements of the Act or of any applicable state securities laws, delivery of Option Shares by the Company may be deferred until registration is effected or a prospectus is available or until an appropriate exemption from registration is secured. The Employee shall have no interest in the Option Shares covered by this option unless and until certificates for the Option Shares are issued following the exercise of this option.

8. Adjustment Provisions.

(a) If RBC shall at any time change the number of issued Common Shares without new consideration to RBC by stock dividend, stock split, recapitalization, reorganization, exchange of shares, liquidation, combination or other change in corporate structure affecting the Common Shares, the total number of shares available for options under this option shall be appropriately adjusted and the exercise price hereunder shall

be adjusted so that the net value of such option shall not be changed, all of the foregoing, including the appropriations of any such adjustment to be as determined by the Board, in its sole discretion. It is specifically understood that the provisions of this subsection (a) are intended to apply solely to capital events that are independent of, and unrelated to, any transaction involving the direct or indirect sale or issuance of securities of RBC for value (and irrespective of the adequacy of the consideration so paid).

(b) In the case of any sale of assets, merger, consolidation, combination or other corporate reorganization or restructuring of the Company with or into another corporation which results in the outstanding Common Shares being converted into or exchanged for different securities, cash or other property, or any combination thereof (an “Acquisition”), subject to the provisions of this option, the Employee shall have the right thereafter and during the term of the option, to receive upon exercise thereof the Acquisition Consideration (as defined below) receivable upon the Acquisition by a holder of the number of Common Shares that might have been obtained upon exercise of the option or portion thereof, as the case may be, immediately prior to the Acquisition. The term “Acquisition Consideration” shall mean the kind and amount of securities, cash or other property or any combination thereof receivable in respect of one Option Share upon consummation of an Acquisition.

9. Applicable Plan. This option is granted under and is subject to the terms and conditions of the Roller Bearing Holding Company, Inc. Stock Option Plan (the “Plan”) attached hereto as Exhibit B. Any capitalized terms not defined herein shall be subject to the definitions set forth in the Plan.

IN WITNESS WHEREOF, the Company has caused this option to be executed on the date first above written.

ROLLER BEARING HOLDING COMPANY, INC.


By:
Its: President

ACCEPTED:

Employee

		, 199

Exhibit 10.3

FORM OF STOCK TRANSFER RESTRICTION AGREEMENT

Stock Transfer Restriction Agreement, dated this day of , 1998 by and among Roller Bearing Holding Company, Inc., a Delaware corporation (“Holdings”), (the “Initial Party”), Dr. Michael J. Hartnett (“Hartnett”) and the Persons who by operation of Section 2.5 hereof become a party hereto (collectively with the Initial Party, the “Stockholders” and individually a “Stockholder”).

WHEREAS, the Initial Party is the owner of [ shares (the “Shares”) of Class A Voting Common Stock of Holdings, par value $.01 per share (“Class A Common Stock” and collectively with any other common stock of any class or series issued by Holdings, the “Common Stock”) and warrants to purchase shares of Class A Common Stock at $100.00 per share (the “Warrants”)];

WHEREAS, Holdings, Hartnett and the Stockholders desire to set forth their agreement regarding certain matters relating to the Stockholders’ ownership of the [Shares and the Warrants], as well as (i) any shares of capital stock or Derivative Securities that may be issued by Holdings and owned by any of the Stockholders and (ii) any shares of Common Stock that may be issued by Holdings to any of the Stockholders upon conversion, exchange or exercise of any [Warrants or other] Derivative Securities, in each case whether currently owned or hereinafter acquired, being collectively the “Securities”).

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth and other good and valuable consideration, the receipt and

sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:

1. DEFINITIONS

As used herein, the following terms shall have the meanings indicated:

1.1 “Affiliate” shall mean a Person controlled by, in control of, or under common control with, another Person. For purposes of this definition, “control” (including the correlative terms “controlled by”, “in control of” and “under common control with”), with respect to any Person, shall mean possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise.

1.2 “Derivative Securities” shall mean options, warrants (including the Warrants) and other rights to subscribe for, and securities convertible into or exchangeable or exercisable for, shares of Common Stock.

1.3 “Fair Market Value” shall mean as to any property on any date, the fair market value of such property on such date (without regard to any liabilities to which such property may be subject) as determined in good faith by the Board of Directors of Holdings, which determination shall, absent manifest error and except as otherwise set forth in Section 2.3, be binding on the Stockholders.

1.4 “Initial Public Offering” shall mean the first underwritten public offering of equity securities of Holdings pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Act”), for which Holdings received not less than $25

million in gross proceeds and following which there is a public market for the securities so offered.

1.5 “Outstanding Shares” shall mean, at any given time, the sum of (i) all outstanding shares of Common Stock and (ii) the aggregate number of shares of Common Stock issuable upon the exercise, conversion or exchange, as applicable, of outstanding Derivative Securities. Whenever in this Agreement reference is made to ownership of Outstanding Shares, such phrase shall mean ownership of the applicable underlying Common Stock and Derivative Securities in respect thereof.

1.6 “Permitted Transferee” shall mean, with respect to any Person, (a) if such Person is an individual, (i) a member of the Immediate Family of such Person, or (ii) a trust or other similar legal entity for the primary benefit of such Person and/or one or more members of his Immediate Family, or (iii) a partnership, limited partnership, limited liability company, corporation or other entity in which such Person and members of his Immediate Family possess 100% of the outstanding voting securities, (b) if such Person is a partnership or limited liability company, the general partners, limited partners or members thereof to whom securities of Holdings are Transferred on a pro rata basis in accordance with the terms of the underlying partnership agreement or limited liability company agreement and (c) if such Person is a corporation, any wholly owned subsidiary of such corporation or parent of such corporation that wholly owns such corporation. For purposes of this definition, “Immediate Family”, with respect to any individual, shall mean his brothers, sisters, spouse, children (including adopted children), parents, parents-in-law, grandchildren, great grandchildren and other lineal descendants and spouses of any of the foregoing.

1.7 “Person” shall mean any natural person, corporation, organization, partnership, association, joint-stock company, limited liability company, joint venture, trust or government, or any agency or political subdivision of any government.

1.8 “Transfer” shall mean any direct or indirect, voluntary or involuntary, sale assignment, gift, encumbrance or other direct or indirect transfer (whether outright or conditional) of any Securities or any interest therein.

1.9 Defined Terms

The following terms are defined elsewhere in this Agreement in the Sections and on the pages indicated:

Defined Term	Section	Page

Act	1.4	3
Affiliate	1.1	2
Board	2.3(c)(i)	9
Cause	2.3(b)(ii)	8
Class A Common Stock	Recitations	1
Common Stock	Recitations	1
Compelled Sale	2.4(a)	12
Compelled Sale Notice	2.4(b)	12
Compelled Sale Purchaser	2.4(a)	11
controlled by	1.1	2
Credit Restriction	2.3(c)(ii)	10
Derivative Securities	1.2	2
Fair Market Value	1.3	2
Hartnett	Introduction	1
Holdings	Introduction	1
Immediate Family	1.6(c)	4
in control of	1.1	2
Initial Party	Introduction	1
Initial Public Offering	1.4	3
Joinder Agreement	2.5(b)	14
Objecting Party	2.3(a)	6
Outstanding Shares	1.5	3
Permitted Transferee	1.6	3
Person	1.7	4

Defined Term	Section	Page

Proposed Transferors	2.4(a)	11
Repurchase Offer Notice	2.3(a)	6
Securities	Recitations	1
Shares	Recitations	1
Stockholder	Introduction	1
Stockholders	Introduction	1
Transfer	1.8	4
under common control with	1.1	2
Warrants	Recitations	1

2. TRANSFER RESTRICTIONS

2.1 Legends. None of the Securities, including shares of Common Stock underlying the Warrants, has been (or will have been at the time of issuance) registered under the Act. Certificates representing the Shares, the Warrants, and upon exercise of the Warrants, the shares of Common Stock issuable at such time, shall bear the following legend:

The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (“Act”), and may not be offered or sold except pursuant to (i) an effective registration statement under the Act or (ii) an exemption from registration under such Act (which, if requested by the issuer, shall be accompanied by an opinion of counsel to such effect reasonably satisfactory to the issuer).

2.2 Restrictions on Transfer of Securities. Except as otherwise provided for in this Article 2, no Stockholder shall Transfer any Securities without the prior written consent of Holdings.

2.3 Purchase on Death or Termination of Employment. Upon the death of the Initial Party or the termination of the employment of the Initial Party by Holdings or any subsidiary of Holdings (provided that the Initial Party is not, following such employment termination, an employee of Holdings or any subsidiary of Holdings) for any reason whatsoever, Holdings shall have the right (but not the obligation), exercisable upon notice given not more than one hundred and twenty (120) days following the date of such death or

termination of employment, to repurchase all, but not less than all, of the Securities (whether owned by the Initial Party or any Permitted Transferee of the Initial Party) at the Fair Market Value therefor as of the last day of the fiscal quarter immediately preceding such date of termination or death.

(a) If Holdings elects to exercise its rights to repurchase Securities under this Section 2.3, it shall deliver to each Stockholder (or the administrator of the estate of any deceased Stockholder) a notice of its election to so exercise (the “Repurchase Offer Notice”), which notice shall set forth Holdings’ determination of the Fair Market Value of the Securities. If, within five (5) business days following delivery of the Repurchase Offer Notice, the Initial Party (or the administrator of the Initial Party’s estate, the “Objecting Party”) delivers a notice to Holdings disputing Holdings’ determination of Fair Market Value, Holdings and the Objecting Party shall endeavor in good faith to agree upon a mutually acceptable determination of Fair Market Value of the Securities. Failure by the Objecting Party to object within such five (5) business day period shall be deemed to be acceptance of Holdings’ determination of Fair Market Value and a waiver of any right to object thereto. If, within ten (10) days following delivery of a notice disputing Holdings’ determination of Fair Market Value, Holdings and the Objecting Party are not able to agree upon the Fair Market Value of the Securities, Holdings shall retain a nationally recognized accounting, investment banking or other firm, reasonably acceptable to the Objecting Party, experienced in the valuation of assets similar to the Securities, to value the Securities. The determination of such expert shall be binding upon Holdings and the Stockholders and the expenses of retaining such expert shall be borne equally by Holdings and the Objecting Party, provided,

however, that, within ten (10) days following delivery of the determination of such expert to Holdings, Holdings shall have the right to withdraw its offer to repurchase the Securities and elect not to exercise its rights under this Section 2.3. If Holdings’ offer to repurchase the Securities is not withdrawn as provided above, the closing of the repurchase by Holdings of the Securities shall take place on the date specified in the Repurchase Offer Notice, which date shall not be earlier than ten (10), or later than ninety (90), days following delivery of the Repurchase Offer Notice, provided, however, that, if the Objecting Party shall have objected to Holdings’ determination of Fair Market Value of the Securities, the closing of the repurchase of the Securities shall take place on a date specified by Holdings that shall be not less than ten (10), nor more than sixty (60), days following the final determination of such Fair Market Value, and provided further, however, that, if the closing of the repurchase of Securities shall be deferred by operation of Section 2.3(c) hereof, the closing of the repurchase of Securities shall take place on a date specified by Holdings that shall be not less than ten (10), nor more than sixty (60), days following the date such deferral terminates.

(b) (i) Payment for the Securities repurchased by Holdings pursuant to this Section 2.3 shall be as follows:

(A) If the event giving rise to Holdings’ right torepurchase under this Section 2.3 shall be a termination of the Initial Party’s employment for Cause, payments shall be made in five equal annual payments on the first through the fifth anniversaries of the date of the closing of such repurchase (or such shorter period as Holdings may choose and set forth in the Repurchase Offer Notice) with interest thereon as set forth in Section 2.3(d) hereof; or

(B) If the event giving rise to Holdings’ right torepurchase under this Section 2.3 shall be anything other than a termination of the Initial Party’s employment for Cause, payments shall be made in three equal annual payments on the first, second and third anniversaries of the date of the closing of such repurchase (or such shorter period as Holdings may choose and setforth in the Repurchase Offer Notice) with interest thereon as set forth in Section 2.3(d) hereof;

provided, however, that Holdings shall have the right to prepay any such amounts, in whole or in part, at any time without penalty or premium.

(ii) As used herein “Cause” shall mean:

(A) any act of fraud, embezzlement, theft or commission of a crime involving moral turpitude by the Initial Party;

(B) any breach by the Initial Party of any material covenant, condition, or agreement in any employment agreement entered into with Holdings or any subsidiary of Holdings;

(C) any good faith finding by Holdings (or the subsidiary of Holdings that employed the Initial Party) that the Initial Party repeatedly failed to perform the Initial Party’s required duties; provided that Holdings (or such employing subsidiary) shall have provided the Initial Party with notice of such failure to performand have afforded the Initial Party a reasonable opportunity to cure (it being understood that compliance with the notice or cure provisions set forth in any written employment agreement with the Initial Party shall

constitute reasonable actions on behalf of Holdings (or such employing subsidiary)); or

(D) any chemical dependency by the Initial Party (other than in connection with medicines prescribed for the Initial Party).

(c) (i) Holdings’ obligation to close the repurchase of, or make any payments (including any payments of interest) for, the Securities repurchased pursuant to this Section 2.3 shall be qualified, as hereinafter provided, in the event of the existence of a Credit Restriction. In the event of a Credit Restriction, Holdings may, at its option, defer (without penalty or premium) the closing of the repurchase of the Securities or all or any portion of any payments otherwise due, until such time as such closing or payment, in the opinion of the Board of Directors of Holdings (the “Board”) is no longer subject to such Credit Restriction. The obligation to close the repurchase of, or make payments for, the Securities repurchased pursuant to this Section 2.3 shall be tolled during any period of deferral provided for above, and such repurchase shall be closed or such payments shall (re)commence following such deferral on the same schedule as provided in Section 2.3(b) hereof (but with all time frames for payments extended for the period of deferral, i.e. with no acceleration of payments in respect of payments that were due during such period of deferral); provided that interest on the purchase price for the Securities repurchased (or to be repurchased if the closing of the repurchase is deferred by reason of the Credit Restriction) pursuant to this Section 2.3 shall accrue during such period of deferral at the rate set forth in Section 2.3(d) hereof and shall be paid as set forth in said Section 2.3(d). If the closing of the repurchase was deferred by

reason of the Credit Restriction, interest shall accrue, as aforesaid, beginning on the 91st day following delivery of the Repurchase Offer Notice.

(ii) As used herein, a “Credit Restriction” shall be deemed to exist if any provision of any agreement with lenders to Holdings or holders of debt securities of Holdings (or lenders to, or holders of debt securities of, any subsidiary of Holdings), (A) restricts or limits Holdings’ right to effect such repurchase or make any such payment, (B) restricts or limits the right of Holdings’ subsidiaries to transfer (by way of dividend or otherwise) to Holdings the funds necessary to make such repurchase or payment, or (C) provides that the closing of such repurchase or making of any such payment would (x) restrict the right of Holdings or any of its subsidiaries to borrow any funds under such agreements, (y) result in a default thereunder or (z) otherwise result in an adverse affect on Holdings or any of its subsidiaries under such agreements, in each case as reasonably determined by the Board, whose determination shall be binding on the parties hereto.

(d) Interest on the unpaid portion of the purchase price for the Securities repurchased pursuant to this Section 2.3 shall accrue at a variable rate constituting the prime rate published by Holding’s primary bank lender (from time to time) from the date of the closing of such repurchase until payment therefor is made. Each payment by Holdings pursuant to this Section 2.3 shall include all accrued and unpaid interest to the date of such payment on the then unpaid portion of the purchase price for the Securities repurchased pursuant to this Section 2.3. Interest accrued during any period of deferral (pursuant to (c) above) shall be paid as follows:

(i) If the closing of the repurchase is deferred, such accrued interest shall be added to the purchase price for the Securities otherwise established hereunder, and shall be paid, together withaccrued interest thereon, as set forth in Section 2.3(b) hereof;

(ii) If the closing of the repurchase had previously taken place, but payments under Section 2.3(b) hereof are deferred, such accruedinterest shall effectively be capitalized over the remaining term of repayment set forth in Section 2.3(b) hereof, to be repaid, together with interest thereon, in the same fashion as the then balance of the original principal amount. (e) Notwithstanding anything else in this Agreement to the contrary,

Holdings shall have the right to assign, in whole or in part, to any other party its right to repurchase Securities under this Section 2.3.

2.4 Right to Compel Sale.

(a) If Hartnett and his Permitted Transferees (the “Proposed Transferors”), wish to sell all, and not less than all, of the Common Stock or Derivative Securities then owned by the Proposed Transferors on such date, to any bona fide independent third party other than an Affiliate or a Permitted Transferee of such Proposed Transferors (the “Compelled Sale Purchaser”), and if such Compelled Sale Purchaser requires, as a condition to acquiring such Common Stock or Derivative Securities upon terms acceptable to the Proposed Transferors, that the Stockholders sell to such Compelled Sale Purchaser all, and not less than all, of the Securities, then each Stockholder shall be obligated to join and fully cooperate in the sale together with the concurrent sale by the Proposed Transferors (a

“Compelled Sale”) of all of its respective Securities to the Compelled Sale Purchaser, subject to the following:

(i) The terms and conditions applicable to the sale of the Securities shall be identical to those applicable to the sale of the securities by the Proposed Transferors, including, without limitation,the amount and nature of consideration and the same representations, indemnities and the like required of the Proposed Transferors.

(ii) Notwithstanding the foregoing, any liability of any Stockholder in connection with such sale shall be (A) several and not joint and several, (B) shall be limited to the proceeds actuallyreceived by such Stockholder, and, (C) in any event except for any liability occasioned by the specific wrongdoing of any Person, the liability of the Proposed Transferors and the Stockholders shall be further limited to damages occasioned by the breach of the representations and warranties made by them (which, in the case of the Stockholders, shall only include representations and warranties as to their ownership of the Securities being sold and other matters specifically applicable to them and their Securities) and damages arising under any indemnity or escrow provisions that are limited to their proportion of the aggregate proceeds received by all of them.

(b) The Proposed Transferors shall notify each Stockholder in writing of a Compelled Sale (a “Compelled Sale Notice”), which Compelled Sale Notice shall set forth all of the material terms and conditions of the Compelled Sale, including, without limitation, the proposed amount and nature of consideration and all other material terms and conditions, including the date of the proposed Transfer and all applicable representations, indemnities and other contract provisions. Each Stockholder shall execute and deliver to the Proposed

Transferors within five (5) business days after delivery to such Stockholder for such execution, all documents required to be executed by such Stockholder in order to consummate such Compelled Sale, subject to the limitations on liability contained in Section 2.4(a)(ii) hereof. Further, and in any event, each Stockholder hereby appoints the Secretary of Holdings as its attorney-in-fact to execute any and all documents and instruments and take all actions reasonably necessary to Transfer the Securities owned by such Stockholder in order to effect the terms of this Section 2.4, which power of attorney may only be exercised if the Compelled Sale complies with all of the terms of this Section 2.4. It is understood and agreed that the appointment of the Secretary of Holdings as the attorney-in-fact of each Stockholder for the purposes set forth above is coupled with an interest and is irrevocable.

(c) Upon consummation of the sale of the Securities to the Compelled Sale Purchaser pursuant to the Compelled Sale, the Compelled Sale Purchaser shall (i) notify each Stockholder of such completion and shall furnish such evidence of said sale (including time of completion) and of the terms thereof as any of the Stockholders may reasonably request, and (ii) remit to each Proposed Transferor and each Stockholder the consideration for the total sales price of Common Stock and Derivative Securities of such party sold pursuant thereto, against delivery by such party of such evidences of ownership of such party’s Common Stock and Derivative Securities as may be requested by the Compelled Sale Purchaser, and the compliance by such party with any other conditions to closing generally applicable to all Proposed Transferors and Stockholders.

(d) If any Compelled Sale Offer is withdrawn, or terminated for any reason, prior to consummation, the Proposed Transferors shall, without prejudice to their (or any

other Proposed Transferor’s) rights hereunder to deliver a subsequent Compelled Sale Notice, return to each Stockholder all documentation which such Stockholder had previously delivered to the Proposed Transferor in connection with such Compelled Sale Offer.

2.5 Transfers to Permitted Transferees. (a) Notwithstanding anything contained in this Article 2 to the contrary, each Stockholder may Transfer any or all Common Stock or Derivative Securities owned by such Person to Permitted Transferees of the Initial Party.

(b) Any Transfer to a Permitted Transferee pursuant to Section 2.6(a) hereof, shall be conditioned in each such case upon any such Transferee first entering into a joinder agreement (a “Joinder Agreement”), in the form attached hereto as Exhibit A, pursuant to which such Transferee, and the Common Stock or Derivative Securities acquired, shall become subject to the terms and conditions of this Agreement, including those contained in Section 2.5(c) hereof.

(c) Upon any Transfer by a Stockholder and the execution of a Joinder Agreement, each Transferee, and the Securities acquired by it, shall be subject to all of the limitations and obligations set forth in this Article 2, and, except as set forth in clause (ii) below, shall obtain the benefits and rights of a Stockholder hereunder, with respect to the Securities so acquired, pursuant to this Article 2.

(d) In the event that a Stockholder Transfers any of its Securities hereunder, until notice thereof shall have been delivered by such Stockholder to Holdings and Hartnett (i) any notices to be given to such Transferees shall be deemed given if delivered to the Transferor Stockholder, (ii) a notice from any such Transferee shall be deemed delivered only if delivered by such Transferor Stockholder, (iii) Holdings and Hartnett shall be permitted to

rely upon any notice given by such Transferor Stockholder as containing the intentions of its Transferees, and (iv) where applicable, such Transferees shall share any rights contained in this Agreement as they shall deem appropriate, and as reflected by any notices provided by such Transferor Stockholder. If the Initial Party Transfers all of its Securities it may designate, by written notice to Holdings and all other stockholders, a successor Person to give and accept notices, on behalf of all Transferees of the Initial Party, as set forth herein.

2.6 Termination on Initial Public Offering. The restrictions on Transfer of Common Stock and Derivative Securities and the other rights, restrictions and obligations contained in this Article 2 shall terminate and be of no further force and effect following an Initial Public Offering.

2.7 Transfers Not in Compliance Void. Any purported Transfer of Securities owned by a Stockholder that is not in compliance with this Agreement shall be null and void and of no force and effect whatsoever. Accordingly, such Transfer shall not be reflected on the books of Holdings and Holdings will not recognize any such proposed transferee as the holder of any such Securities. 3. TERMINATION; AMENDMENT

3.1 Termination; Amendment.

(a) This Agreement may be terminated and the terms hereof amended at any time only by the execution of a written instrument signed on behalf of Holdings, Hartnett and either (i) the Initial Party or (ii) the Holders of not less than 67% of the aggregate Outstanding Shares held by the Stockholders.

(b) In the event of the termination of this Agreement, this Agreement shall forthwith become void and have no effect, without any liability on the part of any party hereto or any of their directors, officers, partners or stockholders.

4. MISCELLANEOUS

4.1 Notices.

Any notice, request, instruction, or other communication to be given hereunder by any party to another shall be in writing and shall be deemed to have given if delivered by hand or sent by telecopier (transmission confirmed), certified or registered mail (return receipt requested), postage prepaid, or by overnight express service, addressed to the respective party or parties: (i) if to a Stockholder or successor thereto, at the address for such party in the books and records of Holdings, (ii) if to Holdings at the following address:

		Roller Bearing Holding Company, Inc.
		60 Round Hill Road
		P.O. Box 430
		Fairfield, Connecticut 06430-0430
		Telecopier: 203-256-0775
		Attention: Chief Executive Officer

with a copy (which shall not constitute notice) to:		McDermott, Will & Emery
		50 Rockefeller Plaza
		New York, New York 10020
		Telecopier: 212-547-5444
		Attention: C. David Goldman, Esq.

and (iii) if to Hartnett:

		Dr. Michael J. Hartnett
		c/o Roller Bearing Company of America, Inc.
		60 Round Hill Road
		P.O. Box 430
		Fairfield, Connecticut 06430-0430
		Telecopier: 203-256-0775

with a copy (which shall not constitute notice) to:		McDermott, Will & Emery
		50 Rockefeller Plaza
		New York, New York 10020
		Telecopier: 212-547-5444
		Attention: C. David Goldman, Esq.

or to such other address or addresses as any party may designate to the others by like notice as set forth above. Any notice given hereunder shall be deemed given and received on the date of hand delivery or transmission by telecopier, three days after mailing by certified or registered mail or one day after delivery to an overnight express service for next day delivery, as the case may be.

4.2 Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the subject matter contemplated hereby.

4.3 Captions. The captions of the various Articles and Sections of this Agreement have been inserted only for convenience of reference and shall not be deemed to modify, explain, enlarge or restrict any provision of this Agreement or affect the construction hereof.

4.4 No Third Party Beneficiary. Nothing expressed or implied in this Agreement is intended, or shall be construed, to confer upon or give any person other than the parties hereto and their respective heirs, personal representatives, legal representatives, and successors, any rights or remedies under or by reason of this Agreement.

4.5 Remedies Cumulative. No remedy made available by any of the provisions of this Agreement is intended to be exclusive of any other remedy, and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity.

4.6 Governing Law; Submission to Jurisdiction. (a) THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE WITHOUT GIVING EFFECT TO THE RULES OF SAID STATE GOVERNING THE CONFLICTS OF LAWS.

(b) The parties hereto hereby agree that any action, proceeding or claim against it arising out of, or relating in any way to, this Agreement may be brought and enforced in the courts of the State of New York or of the United States of America for the Southern District of New York, and irrevocably submits to such jurisdiction for such purpose. The parties hereto hereby irrevocably waive any objection to such jurisdiction or inconvenient forum. Any such process or summons to be served upon any of the parties hereto (at the option of the party bringing such action, proceeding or claim) may be served by transmitting a copy thereof, by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 4.1 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the party so served in any action, proceeding or claim. Nothing herein shall affect the right of any party hereto to serve process

in any other manner permitted by law or to commence legal proceedings or otherwise proceed against any other party in any other jurisdiction.

4.7 Assignment. Except as otherwise set forth in this Agreement, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns.

4.8 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be considered one and the same agreement and shall become effective when a counterpart has been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart.

IN WITNESS WHEREOF, the parties hereto have executed this Stockholders’ Agreement as of the date set forth above.

		ROLLER BEARING HOLDING COMPANY, INC.

		By:
			Name:

			Title:


		Dr. Michael J. Hartnett

Exhibit 10.4

ROLLER BEARING HOLDING COMPANY, INC.

AMENDED AND RESTATED 2001 STOCK OPTION PLAN

1. Purpose. The Roller Bearing Holding Company, Inc. Amended and Restated 2001 Stock Option Plan (the “Plan”) is intended to provide incentives which will attract and retain highly competent persons as officers and management-level employees of Roller Bearing Holding Company, Inc. and its subsidiaries (the “Company”), as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities to acquire shares of Class A Common Stock of the Company (“Common Shares”) pursuant to Options, as described herein.

2. Administration.

(a) Subject to its express terms, the Plan will be administered by the Board of Directors of the Company (the “Board”) unless and until the Board delegates, or is required to delegate, administration pursuant to the terms of the Plan. The Board is authorized, subject to the provisions of the Plan, to establish such rules and regulations as it deems necessary or appropriate for the proper administration of the Plan and to make such determinations and interpretations and to take such action in connection with the Plan and any Options granted hereunder as it deems necessary or advisable. All determinations and interpretations made by the Board shall be binding and conclusive on all participants and their legal representatives. No member of the Board, and no employee of the Company shall be liable for any act or failure to act hereunder, by any other member or employee or by any agent to whom duties in connection with the administration of this Plan have been delegated or, except in circumstances involving his bad faith, gross negligence or fraud, for any act or failure to act by the member or employee.

(b) The Board may delegate all or any portion of its administration of the Plan to a committee composed of not fewer than two (2) members of the Board (the “Committee”). If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board (and references in this Plan to the Board shall thereafter be to the Committee, as applicable), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may terminate all or any portion of the Committee’s authority under the Plan at any time and revest in the Board all or any portion of the administration of the Plan.

3. Participants. Participants will consist of such officers and management-level employees of the Company, and independent contractors providing consulting or advisory services to the Company (including members of the Board), as the Chief Executive Officer of the Company (the “CEO”), in his sole discretion, determines to be significantly responsible for the success and future growth and profitability of the Company and whom the CEO may designate from time to time to receive Options under the Plan (including, without limitation, the CEO himself). Designation as a participant in any year shall not require the CEO to designate such person to receive an Option in any other year or, once designated, to receive the same type or

amount of Options as granted to the participant, or any other participant, in any year. The CEO shall consider such factors as he deems pertinent in selecting participants and in determining the type and amount of their respective Options.

4. Shares Reserved under the Plan. Subject to adjustments as provided in Section 6, there is hereby reserved for issuance under the Plan an aggregate of 403,421 Common Shares, which may be authorized but unissued shares or shares held by the Company in its treasury. Any shares subject to any form of Option hereunder may thereafter be subject to new Options under this Plan if there is a lapse, expiration or termination of any such Options granted prior to issuance of the shares, or if shares are issued under Options and thereafter are reacquired by the Company pursuant to rights reserved by the Company upon issuance thereof.

5. Options. Options will consist of awards from the Company that will enable the holder to purchase a specific number of Common Shares, at set terms and at a fixed purchase price. Options may be “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code (“Incentive Stock Options”) or Options that do not constitute Incentive Stock Options (“Nonqualified Stock Options,” and together with Incentive Stock Options, “Options”). The CEO will have the authority to grant to any participant one or more Incentive Stock Options, Nonqualified Stock Options, or both types of Options. Each Option shall be evidenced by a written option agreement in such form and shall be subject to such terms and conditions as the CEO may approve from time to time, including without limitation the following:

(a) Exercise Price. Each Option granted hereunder shall have such per-share exercise price as the CEO may determine at the date of grant; provided, however, that the per share exercise price for the Options shall not be less than 100% of the Fair Market Value of the Common Shares on the date the option is granted, as reasonably determined by the Board, except that Options to acquire 1200 shares of Common Stock at a price per share of $8.00 may be granted to each of Richard R. Crowell, Kurt B. Larsen, Robert Anderson and William P. Killian.

(b) Payment of Exercise Price. The option exercise price may be paid by check or, in the discretion of the Board, by the delivery (or certification of ownership) of Common Shares of the Company then owned by the participant; provided, however, that payment of the exercise price by delivery of Common Shares of the Company then owned by the participant may be made only if such payment does not result in a charge to earnings for financial accounting purposes as determined by the Board. In the discretion of the Board, if Common Shares are readily tradeable on a national securities exchange or other market system at the time of option exercise, payment may also be made by delivering a properly executed exercise notice to the Company together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the exercise price. To facilitate the foregoing, the Company may enter into agreements for coordinated procedures with one or more brokerage firms.

(c) Exercise Period. Options granted under the Plan shall be exercisable at such times and subject to such terms and conditions as shall be determined by the CEO; provided, however, that Options shall not be exercisable more than 10 years after the date they

are granted. All Options shall terminate at such earlier times and upon such conditions or circumstances as the CEO shall in his sole discretion set forth in such option at the date of grant, including but not limited to limitations on exercisability following termination of the participant’s employment or consulting relationship.

(d) Limitations on Incentive Stock Options. Incentive Stock Options may be granted only to participants who are employees of the Company or one of its subsidiaries (within the meaning of Section 424(f) of the Internal Revenue Code) at the date of grant. The aggregate Fair Market Value (determined as of the time the option is granted) of the Common Shares with respect to which Incentive Stock Options are exercisable for the first time by a participant during any calendar year (under all option plans of the Company) shall not exceed $100,000. Incentive Stock Options may not be granted to any participant who, at the time of grant, owns stock possessing (after the application of the attribution rules of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company, unless the option price is fixed at not less than 110% of the Fair Market Value of the Common Shares on the date of grant and the exercise of such option is prohibited by its terms after the expiration of five years from the date of grant of such option.

(e) Redesignation as Nonqualified Stock Options. Options designated as Incentive Stock Options that fail to meet the requirements of Section 422 of the Internal Revenue Code shall be redesignated as nonqualified options for Federal income tax purposes automatically without further action by the Board or the CEO on the date of such failure to continue to meet the requirements of Section 422 of the Code.

(f) Limitation of Rights in Shares. The recipient of an Option shall not be deemed for any purpose to be a shareholder of the Company with respect to any of the shares subject thereto except to the extent that the Option shall have been exercised and, in addition, a certificate shall have been issued and delivered to the participant.

6. Adjustment Provisions.

(a) If the Company shall at any time change the number of issued Common Shares without new consideration to the Company by stock dividend, stock split, recapitalization, reorganization, exchange of shares, liquidation, combination or other change in corporate structure affecting the Common Shares, the total number of shares available for Options under this Plan shall be appropriately adjusted and the number of shares covered by each outstanding Option and the exercise price thereunder shall be adjusted so that the net value of such Option shall not be changed, all of the foregoing, including the appropriations of any such adjustment to be as determined by the Board, in its discretion. It is specifically understood that the provisions of this subsection (a) are intended to apply solely to capital events that are independent of, and unrelated to, any transaction involving the direct or indirect sale or issuance of securities of the Company for value (and irrespective of the adequacy of the consideration so paid).

(b) In the case of any sale of assets, merger, consolidation, combination or other corporate reorganization or restructuring of the Company with or into another corporation

which results in the outstanding Common Shares being converted into or exchanged for different securities, cash or other property, or any combination thereof (an “Acquisition”), subject to the provisions of this Plan and any limitation applicable to the Option, any participant to whom an Option has been granted shall have the right thereafter and during the term of the Option, to receive upon exercise thereof the Acquisition Consideration (as defined below) receivable upon the Acquisition by a holder of the number of Common Shares that might have been obtained upon exercise of the Option or portion thereof, as the case may be, immediately prior to the Acquisition. The term “Acquisition Consideration” shall mean the kind and amount of securities, cash or other property or any combination thereof receivable in respect of one Common Share upon consummation of an Acquisition.

(c) Notwithstanding any other provision of this Plan, the Board may authorize the issuance, continuation or assumption of Options or provide for other equitable adjustments after changes in the Common Shares resulting from any other merger, consolidation, sale of assets, acquisition of property or stock, recapitalization, reorganization or similar occurrence upon such terms and conditions as it may deem equitable and appropriate.

(d) In the event that another corporation or business entity is being acquired by the Company, and the Company assumes outstanding employee stock options and/or the obligation to make future grants of options to employees of the acquired entity, the aggregate number of Common Shares available for Options under this Plan shall be increased accordingly.

7. Nontransferability.

(a) Each Option granted under the Plan to a participant shall not be transferable by him otherwise than by will or the laws of descent and distribution, and shall be exercisable, during the participant’s lifetime, only by him. In the event of the death of a participant while the participant is rendering employment, consulting or advisory services to the Company, each Option theretofore granted to him shall be exercisable during such period after his death as the Board shall in its discretion set forth in such option at the date of grant (but not beyond the stated duration of the option) and then only:

(i) By the executor or administrator of the estate of the deceased participant or the person or persons to whom the deceased participant’s rights under the Option shall pass by will or the laws of descent and distribution; and

(ii) To the extent that the deceased participant was entitled to do so at the date of his death.

(b) Notwithstanding Section 7(a), Nonqualified Stock Options granted hereunder may be transferred to members of the participant’s immediate family (which for purposes of this Plan shall be limited to the participant’s children, grandchildren and spouse), or to one or more trusts for the benefit of such family members, or to partnerships or limited liability companies in which such family members and/or trusts are the only partners or members, but only if the Option expressly so provides, or as otherwise approved by the CEO or the Board in their discretion.

8. Other Provisions. Options granted under the Plan may also be subject to such other provisions (whether or not applicable to any other Options awarded under the Plan to the participant or to any other participant) as the Board or the CEO determines appropriate, including without limitation, provisions for the installment purchase of Common Shares, provisions to assist the participant in financing the acquisition of Common Shares, provisions for the forfeiture of, or restrictions on resale or other disposition of, Common Shares acquired under any form of Option, provisions for the deferral of option gains, provisions for the acceleration of exercisability or vesting of Options in the event of a change of control of the Company, provisions for the payment of the value of Options to participants in the event of a change of control of the Company, provisions for the forfeiture of the Options, or provisions to comply with Federal and state securities laws, or understandings or conditions as to the participant’s employment in addition to those specifically provided for under the Plan.

9. Fair Market Value. For purposes of this Plan and any Options awarded hereunder, the Fair Market Value of Common Shares shall be the mean between the highest and lowest sale prices for the Company’s Common Shares as reported on the Nasdaq National Market (or such other consolidated transaction reporting system on which such Common Shares are primarily traded) on the date of calculation (or on the next preceding trading date if Common Shares were not traded on the date of calculation); provided, however, that if the Company’s Common Shares are not at any time readily tradeable on a national securities exchange or other market system, Fair Market Value shall mean the amount determined in good faith by the Board as the fair market value of the Common Shares of the Company.

10. Withholding. All payments or distributions made pursuant to the Plan shall be net of any amounts required to be withheld pursuant to applicable federal, state and local income and/or employment tax withholding requirements. If the Company proposes or is required to distribute Common Shares pursuant to the exercise of Options, it may require the recipient to remit to it an amount sufficient to satisfy such tax withholding requirements prior to the delivery of any certificates for such Common Shares. The Board may, in its discretion and subject to such rules as it may adopt, permit an optionee to pay all or a portion of the federal, state and local withholding taxes arising in connection with the exercise of an Option, by electing to have the Company withhold Common Shares having a Fair Market Value that is not in excess of the amount of taxes required to be withheld.

11. Tenure. A participant’s right, if any, to continue to serve the Company as an officer, employee, consultant, advisor, or otherwise, shall not be enlarged or otherwise affected by his designation as a participant under the Plan, nor shall this Plan in any way interfere with the right of the Company, subject to the terms of any separate agreement to the contrary, at any time to terminate such employment, consulting or advisory relationship, or to increase or decrease the compensation of the participant from the rate in existence at the time of the grant of an Option.

12. Duration, Amendment and Termination. No Option shall be granted after July 31, 2011; provided, however, that the terms and conditions applicable to any Option granted prior to such date may thereafter be amended or modified by mutual agreement between the Company and the participant or such other persons as may then have an interest therein.

Also, by mutual agreement between the Company and a participant hereunder, under this Plan or under any other present or future plan of the Company, Options may be granted to such participant in substitution and exchange for, and in cancellation of, any Options previously granted such participant under this Plan, or any other present or future plan of the Company. The Board may amend the Plan from time to time or terminate the Plan at any time, subject to any requirement of stockholder approval required by applicable law, rule or regulation. However, no action authorized by this Section 12 shall reduce the amount of any outstanding Option or change the terms or conditions thereof without the participant’s consent.

13. Governing Law. This Plan and actions taken in connection herewith shall be governed and construed in accordance with the laws of the State of Delaware (regardless of the law that might otherwise govern under applicable Delaware principles of conflict of laws).

14. Approval. The Plan was adopted by the Board on October 24, 2003.

EXHIBIT 10.5

FORM OF RBC 2005 LONG-TERM EQUITY INCENTIVE PLAN

1. Purpose.

This plan shall be known as the RBC 2005 Long-Term Equity Incentive Plan (the “Plan”). The purpose of the Plan shall be to promote the long-term growth and profitability of RBC Bearings Incorporated (the “Company”) and its Subsidiaries by (i) providing certain directors, officers and employees of, and certain other individuals who perform services for, or to whom an offer of employment has been extended by, the Company and its Subsidiaries with incentives to maximize stockholder value and otherwise contribute to the success of the Company and (ii) enabling the Company to attract, retain and reward the best available persons for positions of responsibility. Grants (“Grants”) of incentive or non-qualified stock options, stock appreciation rights (“SARs”), either alone or in tandem with options, restricted stock, performance awards or any combination of the foregoing may be made under the Plan. This Plan supercedes any prior plans, and any Grant hereunder supercedes any prior written agreement pursuant to which such Grant is made.

2. Definitions.

(a) “Award Agreement” means any written agreement between the Company and any person pursuant to which the Company makes any Grant under the Plan.

(b) “Board of Directors” and “Board” mean the board of directors of the Company.

(c) “Cause” means, unless otherwise defined in any Award Agreement, the occurrence of one or more of the following events:

(i) conviction of a felony or any crime or offense lesser than a felony involving the property of the Company or a Subsidiary or commission of an act involving fraud or dishonesty; or, in the case of any of the foregoing, a plea of nolo contendere with respect thereto;

(ii) conduct that has caused demonstrable and serious injury to the Company or a Subsidiary, reputational, monetary or otherwise;

(iii) willful refusal to perform or substantial disregard of duties properly assigned, as determined by the Company;

(iv) willful misrepresentation or material non-disclosure to the Board;

(v) engaging willfully in misconduct in connection with the performance of any of one’s duties, including, without limitation, the misappropriation of funds or securing or

attempting to secure personally any profit in connection with any transaction entered into on behalf of the Company or its Subsidiaries or affiliates;

(vi) willful breach of duty of loyalty to the Company or, if applicable, a Subsidiary or any other active disloyalty to the Company or, if applicable, any Subsidiary, including, without limitation, willfully aiding a competitor or, without duplication of clause (vii), improperly disclosing confidential information;

(vii) willful breach of any confidentiality or non-disclosure agreement with the Company or any Subsidiary; or

(viii) material violation of any code or standard of behavior generally applicable to employees (or executive employees, in the case of an executive of the Company or any Subsidiary) of the Company or any Subsidiary.

(d) “Change in Control” means, unless otherwise defined in any Award Agreement,

(i) if any “person” or “group” as those terms are used in Sections 13(d) and 14(d) of the Exchange Act or any successors thereto, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act or any successor thereto), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities, provided, that the acquisition of additional securities by any person or group that owns 50% or more of the voting power prior to such acquisition of additional securities shall not be a Change of Control; or

(ii) during any twelve-month period, individuals who at the beginning of such period constitute the Board and any new directors whose election by the Board or nomination for election by the Company’s stockholders was approved by at least a majority of the directors then still in office who either were directors at the beginning of the period or whose election was previously so approved, cease for any reason to constitute a majority thereof; or

(iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation (A) which would result in all or a portion of the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (B) by which the corporate existence of the Company is not affected and following which the Company’s chief executive officer and directors retain their positions with the Company (and constitute at least a majority of the Board); or

(iv) the stockholders of the Company approve an agreement for the sale or disposition by the Company of all or substantially all the Company’s assets.

(e) “Code” means the Internal Revenue Code of 1986, as amended.

2 (f) “Committee” means the Compensation Committee of the Board, which shall consist solely of two or more outside directors.

(g) “Common Stock” means the common stock, par value $ per share, of the Company, and any other shares into which such stock may be changed by reason of a recapitalization, reorganization, merger, consolidation or any other change in the corporate structure or capital stock of the Company.

(h) “Disability” means a disability that would entitle an eligible participant to payment of monthly disability payments under any Company disability plan or as otherwise determined by the Committee; provided that in any instance where a grant to a participant is treated as “deferred compensation” within the meaning of Section 409A of the Code, “Retirement” shall be interpreted consistently with the meaning of Section 409A(a)(2)(A)(i) of the Code and guidance issued thereunder.

(i) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(j) “Fair Market Value” of a share of Common Stock of the Company means, as of the date in question, the officially-quoted closing selling price of the stock (or if no selling price is quoted, the bid price) on the principal securities exchange or market on which the Common Stock is then listed for trading (including, for this purpose, the New York Stock Exchange or the Nasdaq National Market) (the “Market”) for the applicable trading day or, if the Common Stock is not then listed or quoted in the Market, the Fair Market Value shall be the fair value of the Common Stock determined in good faith by the Board using any reasonable method; provided, however, that when shares received upon exercise of an option are immediately sold in the open market, the net sale price received may be used to determine the Fair Market Value of any shares used to pay the exercise price or applicable withholding taxes and to compute the withholding taxes.

(k) “Incentive Stock Option” means an option conforming to the requirements of Section 422 of the Code and/or any successor thereto.

(l) “Initial Public Offering” means an underwritten initial public offering and sale of any shares of Common Stock pursuant to an effective registration statement under the Securities Act.

(m) “Non-Employee Director” has the meaning given to such term in Rule 16b-3 under the Exchange Act and/or any successor thereto.

(n) “Non-qualified Stock Option” means any stock option other than an Incentive Stock Option.

(o) “Other Securities” mean securities of the Company other than Common Stock, which may include, without limitation, debentures, unbundled stock units or components thereof, preferred stock, warrants and securities convertible into or exchangeable for Common Stock or other property.

3 (p) “Retirement” means retirement as defined under any Company pension plan or retirement program or termination of one’s employment on retirement with the approval of the Committee; provided that in any instance where a grant to a participant is treated as “deferred compensation” within the meaning of Section 409A of the Code, “Disability” shall be interpreted consistently with the meaning of Section 409A of the Code and guidance issued thereunder..

(q) “Subsidiary” means a corporation or other entity of which outstanding shares or ownership interests representing 50% or more of the combined voting power of such corporation or other entity entitled to elect the management thereof, or such lesser percentage as may be approved by the Committee, are owned directly or indirectly by the Company.

3. Administration.

The Plan shall be administered by the Committee; provided that the Board may, in its discretion, at any time and from time to time, resolve to administer the Plan, in which case the term “Committee” shall be deemed to mean the Board for all purposes herein. Subject to the provisions of the Plan, the Committee shall be authorized to (i) select persons to participate in the Plan, (ii) determine the form and substance of Grants made under the Plan to each participant, and the conditions and restrictions, if any, subject to which such Grants will be made, (iii) certify that the conditions and restrictions applicable to any Grant have been met, (iv) modify the terms of Grants made under the Plan in accordance with the provisions of Sections 16 and 17 hereof, (v) interpret the Plan and Grants made thereunder, (vi) make any adjustments necessary or desirable in connection with Grants made under the Plan to eligible participants located outside the United States and (vii) adopt, amend, or rescind such rules and regulations, and make such other determinations, for carrying out the Plan as it may deem appropriate. Decisions of the Committee on all matters relating to the Plan shall be in the Committee’s sole discretion and shall be conclusive and binding on all parties. The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with applicable federal and state laws and rules and regulations promulgated pursuant thereto. No member of the Committee and no officer of the Company shall be liable for any action taken or omitted to be taken by such member, by any other member of the Committee or by any officer of the Company in connection with the performance of duties under the Plan, except for such person’s own willful misconduct or as expressly provided by statute.

The expenses of the Plan shall be borne by the Company. The Company shall not be required to establish any special or separate fund or make any other segregation of assets to assume the obligations pursuant to any Grant made under the Plan, and rights to any payment in connection with such Grants shall be no greater than the rights of the Company’s general creditors.

4. Shares Available for the Plan.

Subject to adjustments as provided in Section 15, an aggregate of
shares of Common Stock, which represents the number of shares equal to six percent (6%) of the number of shares of Common Stock outstanding immediately following the consummation of the Company’s Initial Public Offering (the “Shares”), may be issued pursuant to the Plan. Such Shares may be in whole or in part authorized and unissued or held by the Company as

treasury shares. If any Grant under the Plan expires or terminates unexercised, becomes unexercisable or is forfeited as to any Shares, or is tendered or withheld as to any Shares in payment of the exercise price of the Grant or taxes payable with respect to the Grant or the vesting or exercise thereof, then such unpurchased, forfeited, tendered or withheld Shares may thereafter be available for further Grants under the Plan as the Committee shall determine.

Without limiting the generality of the foregoing provisions of this Section 4 or the generality of the provisions of Sections 3, 6 or 17 or any other section of this Plan, the Committee may, at any time or from time to time, and on such terms and conditions (that are consistent with and not in contravention of the other provisions of this Plan) as the Committee may, in its sole discretion, determine, enter into agreements (or take other actions with respect to the Grants) for new Grants containing terms (including exercise prices) more (or less) favorable than the outstanding Grants.

5. Participation.

Participation in the Plan shall be limited to those directors (including Non-Employee Directors), officers (including non-employee officers) and employees of, and other individuals performing services for, or to whom an offer of employment has been extended by, the Company and its Subsidiaries selected by the Committee (including participants located outside the United States). Nothing in the Plan or in any Grant thereunder shall confer any right on a participant to continue in the employ as a director or officer of, or in any other capacity or in the performance of services for, the Company or shall interfere in any way with the right of the Company to terminate the employment or performance of services or to reduce the compensation or responsibilities of a participant at any time. By accepting any Grant under the Plan, each participant and each person claiming under or through him or her shall be conclusively deemed to have indicated his or her acceptance and ratification of, and consent to, any action taken under the Plan by the Company, the Board or the Committee.

Incentive Stock Options or Non-qualified Stock Options, SARs alone or in tandem with options, restricted stock awards, performance awards or any combination thereof may be granted to such persons and for such number of Shares as the Committee shall determine (such individuals to whom Grants are made being sometimes herein called “optionees” or “grantees,” as the case may be). Determinations made by the Committee under the Plan need not be uniform and may be made selectively among eligible individuals under the Plan, whether or not such individuals are similarly situated. A Grant of any type made hereunder in any one year to an eligible participant shall neither guarantee nor preclude a further Grant of that or any other type to such participant in that year or subsequent years.

6. Incentive and Non-qualified Options and SARs.

The Committee may from time to time grant to eligible participants Incentive Stock Options, Non-qualified Stock Options, or any combination thereof; provided that the Committee may grant Incentive Stock Options only to eligible employees of the Company or its subsidiaries (as defined for this purpose in Section 424(f) of the Code or any successor thereto). In any one calendar year, the Committee shall not grant to any one participant options or SARs to purchase or receive the economic equivalent of a number of shares of Common Stock in excess of 10% of the total number

of Shares authorized under the Plan pursuant to Section 4. The options granted shall take such form as the Committee shall determine, subject to the following terms and conditions.

It is the Company’s intent that Non-qualified Stock Options granted under the Plan not be classified as Incentive Stock Options, that Incentive Stock Options be consistent with and contain or be deemed to contain all provisions required under Section 422 of the Code or any successor thereto, that neither any Non-qualified Stock Option nor any Incentive Stock Option be treated as a payment of deferred compensation for the purposes of Section 409A of the Code and any successor thereto, and that any ambiguities in construction be interpreted in order to effectuate such intent. If an Incentive Stock Option granted under the Plan does not qualify as such for any reason, then to the extent of such non-qualification, the stock option represented thereby shall be regarded as a Non-qualified Stock Option duly granted under the Plan, provided that such stock option otherwise meets the Plan’s requirements for Non-qualified Stock Options.

(a) Price. The price per Share deliverable upon the exercise of each option (“exercise price”) shall not be less than 100% of the Fair Market Value of a share of Common Stock as of the date of Grant of the option, and in the case of the Grant of any Incentive Stock Option to an employee who, at the time of the Grant, owns more than 10% of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries, the exercise price may not be less than 110% of the Fair Market Value of a share of Common Stock as of the date of Grant of the option, in each case unless otherwise permitted by Section 422 of the Code or any successor thereto.

(b) Payment. Options may be exercised, in whole or in part, upon payment of the exercise price of the Shares to be acquired. Unless otherwise determined by the Committee, payment shall be made (i) in cash (including check, bank draft, money order or wire transfer of immediately available funds), (ii) by delivery of outstanding shares of Common Stock with a Fair Market Value on the date of exercise equal to the aggregate exercise price payable with respect to the options’ exercise, (iii) by simultaneous sale through a broker reasonably acceptable to the Committee of Shares acquired on exercise, as permitted under Regulation T of the Federal Reserve Board, (iv) by authorizing the Company to withhold from issuance a number of Shares issuable upon exercise of the options which, when multiplied by the Fair Market Value of a share of Common Stock on the date of exercise, is equal to the aggregate exercise price payable with respect to the options so exercised or (v) by any combination of the foregoing.

In the event a grantee elects to pay the exercise price payable with respect to an option pursuant to clause (ii) above, (A) only a whole number of share(s) of Common Stock (and not fractional shares of Common Stock) may be tendered in payment, (B) such grantee must present evidence acceptable to the Company that he or she has owned any such shares of Common Stock tendered in payment of the exercise price (and that such tendered shares of Common Stock have not been subject to any substantial risk of forfeiture) for at least six months prior to the date of exercise, and (C) Common Stock must be delivered to the Company. Delivery for this purpose may, at the election of the grantee, be made either by (A) physical delivery of the certificate(s) for all such shares of Common Stock tendered in payment of the price, accompanied by duly executed instruments of transfer in a form acceptable to the Company, or (B) direction to the grantee’s broker to transfer, by book entry, of such shares of Common Stock from a brokerage account of the grantee to a brokerage account specified by the Company. When payment of the exercise price is made by delivery of

Common Stock, the difference, if any, between the aggregate exercise price payable with respect to the option being exercised and the Fair Market Value of the shares of Common Stock tendered in payment (plus any applicable taxes) shall be paid in cash. No grantee may tender shares of Common Stock having a Fair Market Value exceeding the aggregate exercise price payable with respect to the option being exercised (plus any applicable taxes).

In the event a grantee elects to pay the exercise price payable with respect to an option pursuant to clause (iv) above, only a whole number of Shares (and not fractional Shares) may be withheld in payment. When payment of the exercise price is made by withholding of Shares, the difference, if any, between the aggregate exercise price payable with respect to the option being exercised and the Fair Market Value of the Shares withheld in payment (plus any applicable taxes) shall be paid in cash. No grantee may authorize the withholding of Shares having a Fair Market Value exceeding the aggregate exercise price payable with respect to the option being exercised (plus any applicable taxes). Any withheld Shares shall no longer be issuable under such option.

(c) Terms of Options; Vesting. The term during which each option may be exercised shall be determined by the Committee, but if required by the Code and except as otherwise provided herein, no option shall be exercisable in whole or in part more than ten years from the date it is granted, and no Incentive Stock Option granted to an employee who at the time of the Grant owns more than 10% of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries shall be exercisable more than five years from the date it is granted. All rights to purchase Shares pursuant to an option shall, unless sooner terminated, expire at the date designated by the Committee. The Committee shall determine the date on which each option shall become exercisable and may provide that an option shall become exercisable in installments. The Shares constituting each installment may be purchased in whole or in part at any time after such installment becomes exercisable, subject to such minimum exercise requirements as may be designated by the Committee. Prior to the exercise of an option and delivery of the Shares represented thereby, the optionee shall have no rights as a stockholder with respect to any Shares covered by such outstanding option (including any dividend or voting rights).

(d) Limitations on Grants. If required by the Code, the aggregate Fair Market Value (determined as of the Grant date) of Shares for which an Incentive Stock Option is exercisable for the first time during any calendar year under all equity incentive plans of the Company and its Subsidiaries (as defined in Section 422 of the Code or any successor thereto) may not exceed $100,000.

(e) Termination; Forfeiture.

(i) Death or Disability. Unless otherwise provided in any Award Agreement, if a participant ceases to be a director, officer or employee of, or to perform other services for, the Company and any Subsidiary due to death or Disability, (A) all of the participant’s options and SARs that were exercisable on the date of death or Disability shall remain exercisable for, and shall otherwise terminate at the end of, a period of one year after the date of death or Disability, but in no event after the expiration date of the options and SARs and (B) all of the participant’s options and SARs that were not exercisable on the date of death or Disability shall be forfeited immediately upon such death or Disability; provided, however, that the Committee may

7 determine to additionally vest such options and SARs, in whole or in part, in its discretion. Notwithstanding the foregoing, if the Disability giving rise to the termination of employment is not within the meaning of Section 22(e)(3) of the Code or any successor thereto, Incentive Stock Options not exercised by such participant within one year after the date of termination of employment will cease to qualify as Incentive Stock Options and will be treated as Non-qualified Stock Options under the Plan if required to be so treated under the Code.

(ii) Retirement. Unless otherwise provided in any Award Agreement, if a participant ceases to be a director, officer or employee of, or to perform other services for, the Company and any Subsidiary upon the occurrence of his or her Retirement, (A) all of the participant’s options and SARs that were exercisable on the date of Retirement shall remain exercisable for, and shall otherwise terminate at the end of, a period of 90 days after the date of Retirement, but in no event after the expiration date of the options or SARs; provided that the participant does not engage in Competition during such 90-day period unless he or she receives written consent to do so from the Board or the Committee, and (B) all of the participant’s options and SARs that were not exercisable on the date of Retirement shall be forfeited immediately upon such Retirement; provided, however, that such options and SARs, may become fully vested and exercisable in the discretion of the Committee. Notwithstanding the foregoing, Incentive Stock Options not exercised by such participant within 90 days after Retirement will cease to qualify as Incentive Stock Options and will be treated as Non-qualified Stock Options under the Plan if required to be so treated under the Code.

(iii) Discharge for Cause. Unless determined by the Committee, if a participant ceases to be a director, officer or employee of, or to perform other services for, the Company or a Subsidiary due to Cause, or if a participant does not become a director, officer or employee of, or does not begin performing other services for, the Company or a Subsidiary for any reason, all of the participant’s options and SARs shall expire and be forfeited immediately upon such cessation or non-commencement, whether or not then exercisable.

(iv) Other Termination. If a participant ceases to be a director, officer or employee of, or to otherwise perform services for, the Company or a Subsidiary for any reason other than death, Disability, Retirement or Cause, (A) all of the participant’s options and SARs that were exercisable on the date of such cessation shall remain exercisable for, and shall otherwise terminate at the end of, a period of 30 days after the date of such cessation, but in no event after the expiration date of the options or SARs; provided that the participant does not engage in Competition during such 30-day period unless he or she receives written consent to do so from the Board or the Committee, and (B) all of the participant’s options and SARs that were not exercisable on the date of such cessation shall be forfeited immediately upon such cessation.

(v) Change of Control. If there is a Change in Control of the Company or similar event, the Committee may, in its discretion, provide for the vesting of a participant’s options and SARs on such terms and conditions as it deems appropriate in such participant’s Award Agreement.

8

7. Stock Appreciation Rights.

Provided that the Company’s stock is traded on an established securities market, the Committee shall have the authority to grant SARs under this Plan, subject to such terms and conditions specified in this paragraph 7 and any additional terms and conditions as the Committee may specify.

No SAR may be issued unless (a) the exercise price of the SAR may never be less than the Fair Market Value of the underlying Shares on the date of grant and (b) the SAR does not include any feature for the deferral of compensation income other than the deferral of recognition of income until the exercise of the SAR.

No SAR may be exercised unless the Fair Market Value of a share of Common Stock of the Company on the date of exercise exceeds the exercise price of the SAR. Prior to the exercise of the SAR and delivery of the Shares represented thereby, the participant shall have no rights as a stockholder with respect to Shares covered by such outstanding SAR (including any dividend or voting rights).

Upon the exercise of an SAR, the participant shall be entitled to a distribution in an amount equal to the difference between the Fair Market Value of a share of Common Stock on the date of exercise and the exercise price of the SAR, multiplied by the number of Shares as to which the SAR is exercised. Such distribution shall be made in Shares having a Fair Market Value equal to such amount.

All SARs will be exercised automatically on the last day prior to the expiration date of the SAR so long as the Fair Market Value of a share of Common Stock on that date exceeds the exercise price of the SAR or any related option, as applicable.

The provisions of Subsections 6(c) shall apply to all SARs except to the extent that the Award Agreement pursuant to which such Grant is made expressly provides otherwise.

It is the Company’s intent that no SAR shall be treated as a payment of deferred compensation for purposes of Section 409A of the Code and that any ambiguities in construction be interpreted in order to effectuate such intent.

8. Restricted Stock.

The Committee may at any time and from time to time grant Shares of restricted stock under the Plan to such participants and in such amounts as it determines. Each Grant of restricted stock shall specify the applicable restrictions on such Shares, the duration of such restrictions, and the time or times at which such restrictions shall lapse with respect to all or a specified number of Shares that are part of the Grant.

The participant will be required to pay the Company the aggregate par value of any Shares of restricted stock (or such larger amount as the Board may determine to constitute capital under Section 154 of the Delaware General Corporation Law, as amended, or any successor thereto) within 15 days of the date of Grant, unless such Shares of restricted stock are treasury shares. Unless

otherwise determined by the Committee, certificates representing Shares of restricted stock granted under the Plan will be held in escrow by the Company on the participant’s behalf during any period of restriction thereon and will bear an appropriate legend specifying the applicable restrictions thereon, and the participant will be required to execute a blank stock power therefor. Except as otherwise provided by the Committee, during such period of restriction the participant shall have all of the rights of a holder of Common Stock, including but not limited to the rights to receive dividends and to vote, and any stock or other securities received as a distribution with respect to such participant’s restricted stock shall be subject to the same restrictions as then in effect for the restricted stock.

Unless otherwise provided in any Award Agreement, at such time as a participant ceases to be a director, officer or employee of, or to otherwise perform services for, the Company and its Subsidiaries due to death, Disability or Retirement during any period of restriction, all Shares of restricted stock granted to such participant on which the restrictions have not lapsed shall be immediately forfeited to the Company. If there is a Change in Control of the Company or similar event, the Committee may, in its discretion, provide for the lapsing of restrictions on a participant’s Shares of restricted stock on such terms and conditions as it deems appropriate in such participant’s Award Agreement. At such time as a participant ceases to be, or in the event a participant does not become, a director, officer or employee of, or otherwise perform services for, the Company or its Subsidiaries for any other reason, all Shares of restricted stock granted to such participant on which the restrictions have not lapsed shall be immediately forfeited to the Company. The provisions of Subsections 6(c) and (e) shall apply to Restricted Stock except to the extent that the Award Agreement in relation thereto expressly provides otherwise.

It is the Company’s intent that Restricted Stock shall not be treated as a payment of deferred compensation for purposes of Section 409A of the Code and that any ambiguities in construction be interpreted in order to effectuate such intent.

9. Performance Awards.

Performance awards may be granted to participants at any time and from time to time as determined by the Committee. The Committee shall have complete discretion in determining the size and composition of performance awards granted to a participant. The period over which performance is to be measured (a “performance cycle”) shall commence on the date specified by the Committee and shall end on the last day of a fiscal year specified by the Committee. A performance award shall be paid no later than the fifteenth day of the third month following the completion of a performance cycle (or following the elapsed portion of the performance cycle, in the circumstances described in the last paragraph of this Section 9). Performance awards may include (i) specific dollar-value target awards (ii) performance units, the value of each such unit being determined by the Committee at the time of issuance, and/or (iii) performance Shares, the value of each such Share being equal to the Fair Market Value of a share of Common Stock. In any one calendar year, the Committee shall not grant to any one participant performance awards in excess of 10% of the total number of Shares authorized under the Plan pursuant to Section 4.

The value of each performance award may be fixed or it may be permitted to fluctuate based on a performance factor (e.g., return on equity) selected by the Committee. It is the

Company’s intent that no performance award be treated as the payment of deferred compensation for purposes of Section 409A of the Code and that any ambiguities in construction be interpreted in order to effectuate such intent.

The Committee shall establish performance goals and objectives for each performance cycle on the basis of such criteria and objectives as the Committee may select from time to time, including, without limitation, the performance of the participant, the Company, one or more of its Subsidiaries or divisions or any combination of the foregoing. During any performance cycle, the Committee shall have the authority to adjust the performance goals and objectives for such cycle for such reasons as it deems equitable.

The Committee shall determine the portion of each performance award that is earned by a participant on the basis of the Company’s performance over the performance cycle in relation to the performance goals for such cycle. The earned portion of a performance award may be paid out in Shares, cash, Other Securities, or any combination thereof, as the Committee may determine.

A participant must be a director, officer or employee of, or otherwise perform services for, the Company or its Subsidiaries at the end of the performance cycle in order to be entitled to payment of a performance award issued in respect of such cycle; provided, however, that except as otherwise determined by the Committee, if a participant ceases to be a director, officer or employee of, or to otherwise perform services for, the Company and its Subsidiaries upon his or her death, Retirement, or Disability prior to the end of the performance cycle, the Committee may provide in a Grant that the participant may earn a proportionate portion of the performance award based upon the elapsed portion of the performance cycle and the Company’s performance over that portion of such cycle.

10. Withholding Taxes.

(a) Participant Election. Unless otherwise determined by the Committee, a participant may elect to deliver shares of Common Stock (or have the Company withhold shares acquired upon exercise of an option or SAR or deliverable upon grant or vesting of restricted stock, as the case may be) to satisfy, in whole or in part, the amount the Company is required to withhold for taxes in connection with the exercise of an option or SAR or the delivery of restricted stock upon grant or vesting, as the case may be. Such election must be made on or before the date the amount of tax to be withheld is determined. Once made, the election shall be irrevocable. The fair market value of the shares to be withheld or delivered will be the Fair Market Value as of the date the amount of tax to be withheld is determined. In the event a participant elects to deliver or have the Company withhold shares of Common Stock pursuant to this Section 10(a), such delivery or withholding must be made subject to the conditions and pursuant to the procedures set forth in Section 6(b) with respect to the delivery or withholding of Common Stock in payment of the exercise price of options.

(b) Company Requirement. The Company may require, as a condition to any Grant or exercise under the Plan or to the delivery of certificates for Shares issued hereunder, that the grantee make provision for the payment to the Company, either pursuant to Section 10(a) or this Section 10(b), of federal, state or local taxes of any kind required by law to be withheld with respect

11 to any Grant or delivery of Shares. The Company, to the extent permitted or required by law, shall have the right to deduct from any payment of any kind (including salary or bonus) otherwise due to a grantee, an amount equal to any federal, state or local taxes of any kind required by law to be withheld with respect to any grant or delivery of Shares under the Plan.

11. Written Agreement.

Each employee to whom a Grant is made under the Plan shall enter into an Award Agreement with the Company that shall contain such provisions consistent with the provisions of the Plan, as may be approved by the Committee.

12. Transferability.

Unless the Committee determines otherwise, no option, SAR, performance award or restricted stock granted under the Plan shall be transferable by a participant other than by will or the laws of descent and distribution; provided that, in the case of Shares of restricted stock granted under the Plan, such Shares of restricted stock shall be freely transferable following the time at which such restrictions shall have lapsed with respect to such Shares. Unless the Committee determines otherwise, an option, SAR or performance award may be exercised only by the optionee or grantee thereof; by his or her executor or administrator, the executor or administrator of the estate of any of the foregoing, or any person to whom the option, SAR or performance award is transferred by will or the laws of descent and distribution; or by his or her guardian or legal representative; or the guardian or legal representative of any of the foregoing; provided that Incentive Stock Options may be exercised by any guardian or legal representative only if permitted by the Code and any regulations thereunder. All provisions of this Plan and any Award Agreement referred to in Section 11 shall in any event continue to apply to any option, SAR, performance award or restricted stock granted under the Plan and transferred as permitted by this Section 12, and any transferee of any such option, SAR, performance award or restricted stock shall be bound by all provisions of this Plan and any agreement referred to in Section 11 as and to the same extent as the applicable original grantee.

13. Listing, Registration and Qualification.

If the Committee determines that the listing, registration or qualification upon any securities exchange or under any law of Shares subject to any option, SAR, performance award or restricted stock Grant is necessary or desirable as a condition of, or in connection with, the granting of same or the issue or purchase of Shares thereunder, no such option or SAR may be exercised in whole or in part, no such performance award may be paid out, and no Shares may be issued, unless such listing, registration or qualification is effected free of any conditions not acceptable to the Committee.

14. Transfer of Employee.

The transfer of an employee from the Company to a Subsidiary, from a Subsidiary to the Company, or from one Subsidiary to another shall not be considered a termination of employment; nor shall it be considered a termination of employment if an employee is placed on

military or sick leave or such other leave of absence which is considered by the Committee as continuing intact the employment relationship.

15. Adjustments.

In the event of a reorganization, recapitalization, spin-off or other extraordinary distribution, stock split, stock dividend, combination of shares, merger, consolidation, distribution of assets, spin-off or other extraordinary distribution, or any other change in the corporate structure or shares of the Company, the Committee shall make such adjustment as it deems appropriate in the number and kind of Shares or other property available for issuance under the Plan (including, without limitation, the total number of Shares available for issuance under the Plan pursuant to Section 4), in the number and kind of options, SARs, Shares or other property covered by Grants previously made under the Plan, and in the exercise price of outstanding options and SARs. Any such adjustment shall be final, conclusive and binding for all purposes of the Plan. In the event of any merger, consolidation or other reorganization in which the Company is not the surviving or continuing corporation or in which a Change in Control is to occur, all of the Company’s obligations regarding options, SARs, performance awards, and restricted stock that were granted hereunder and that are outstanding on the date of such event shall, on such terms as may be approved by the Committee prior to such event, be (a) assumed by the surviving or continuing corporation; or (b) canceled in exchange for cash, securities of the acquiror or other property; provided that, in the case of clause (b), (i) such merger, consolidation, other reorganization or Change in Control constitutes a “change in ownership or control” of the Company or a “change in the ownership of a substantial portion” of the Company’s assets within the meaning of Section 409A(a)(2)(A)(v) of the Code and the guidance issued thereunder or (ii) the payment of cash, securities or other property is not treated as a payment of “deferred compensation” under Section 409A of the Code.

Without limitation of the foregoing, in connection with any transaction described in of the last sentence of the preceding paragraph, the Committee may, in its discretion, (i) cancel any or all outstanding options under the Plan in consideration for payment to the holders thereof of an amount equal to the portion of the consideration that would have been payable to such holders pursuant to such transaction if their options had been fully exercised immediately prior to such transaction, less the aggregate exercise price that would have been payable therefor, or (ii) if the amount that would have been payable to the option holders pursuant to such transaction if their options had been fully exercised immediately prior thereto would be equal to or less than the aggregate exercise price that would have been payable therefor, cancel any or all such options for no consideration or payment of any kind. Payment of any amount payable pursuant to the preceding sentence may be made in cash or, in the event that the consideration to be received in such transaction includes securities or other property, in cash, securities of the acquiror or other property in the Committee’s discretion.

16. Amendment and Termination of the Plan.

Except as otherwise provided in an Award Agreement, the Board of Directors, without approval of the stockholders, may amend or terminate the Plan, except that no amendment shall become effective without prior approval of the stockholders of the Company if stockholder approval would be required by applicable law or regulations, including if required for continued

compliance with the performance-based compensation exception of Section 162(m) of the Code or any successor thereto, under the provisions of Section 409A of the Code or any successor thereto, under the provisions of Section 422 of the Code or any successor thereto, or by any listing requirement of the principal stock exchange on which the Common Stock is then listed.

17. Amendment or Substitution of Grants under the Plan.

The terms of any outstanding Grant under the Plan may be amended from time to time by the Committee in its discretion in any manner that it deems appropriate including, but not limited to, acceleration of the date of exercise of any Grant and/or payments thereunder or of the date of lapse of restrictions on Shares (but, in the case of a Grant that is or would be treated as “deferred compensation” for purposes of Section 409A of the Code, only to the extent permitted by guidance issued under Section 409A of the Code); provided that, except as otherwise provided in Section 16 or in an Award Agreement, no such amendment shall adversely affect in a material manner any right of a participant under the Grant without his or her written consent, and further provided that the Committee shall not reduce the exercise price of any options or SARs awarded under the Plan. The Committee may, in its discretion, permit holders of Grants under the Plan to surrender outstanding Grants in order to exercise or realize rights under other Grants, or in exchange for new Grants, or require holders of Grants to surrender outstanding Grants as a condition precedent to the receipt of new Grants under the Plan, but only if such surrender, exercise, realization, exchange or Grant (a) is not treated as a payment of, and does not cause a Grant to be treated as, deferred compensation for the purposes of Section 409A of the Code or (b) is permitted under guidance issued pursuant to Section 409A of the Code.

18. Commencement Date; Termination Date.

The date of commencement of the Plan shall be , 2005, subject to approval by the shareholders of the Company. If required by the Code, the Plan will also be subject to reapproval by the shareholders of the Company prior to , 2010.

Unless previously terminated upon the adoption of a resolution of the Board terminating the Plan, the Plan shall terminate at the close of business on , 2015. Subject to the provisions of an Award Agreement, which may be more restrictive, no termination of the Plan shall materially and adversely affect any of the rights or obligations of any person, without his or her written consent, under any Grant of options or other incentives theretofore granted under the Plan.

19. Severability.

Whenever possible, each provision of the Plan shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of the Plan is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of the Plan.

20. Governing Law.

The Plan shall be governed by the corporate laws of the State of Delaware, without giving effect to any choice of law provisions that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction.

21. Compliance Amendments.

Except as otherwise provided in an Award Agreement, notwithstanding any of the foregoing provisions of the Plan, and in addition to the powers of amendment set forth in Sections 16 and 17 hereof, the provisions hereof and the provisions of any award made hereunder may be amended unilaterally by the Company from time to time to the extent necessary (and only to the extent necessary) to prevent the implementation, application or existence (as the case may be) of any such provision from (i) requiring the inclusion of any compensation deferred pursuant to the provisions of the Plan (or an award thereunder) in a participant’s gross income pursuant to Section 409A of the Code, and the regulations issued thereunder from time to time and/or (ii) inadvertently causing any award hereunder to be treated as providing for the deferral of compensation pursuant to such Code section and regulations.

Exhibit 10.6

AGREEMENT OF LEASE

BETWEEN

ROBEAR WEST TRENTON ASSOCIATES, L.P.

AS LANDLORD

AND

ROLLER BEARING COMPANY OF AMERICA, INC.

AS TENANT

LEASE

LEASE made this 10 day of February, 1999 by and between ROBEAR WEST TRENTON ASSOCIATES, L.P., a Pennsylvania limited partnership (hereinafter called “Landlord”), and ROLLER BEARING COMPANY OF AMERICA, INC. a Delaware corporation (hereinafter called “Tenant”).

FUNDAMENTAL LEASE PROVISIONS

1. “Term”: ten (10) years commencing on the Commencement Date and ending on the day immediately preceding the tenth (10^th) anniversary of the Commencement Date (the “Expiration Date”).

2. “Demised Premises”: 93,015 rentable square feet (“Tenant’s GLA”), comprised of 79,108 square feet of industrial space and 13,907 square feet of office space, in the building located at the corner of Silvia Street and Sullivan Way (the “Building”), located in the Township of Ewing, County of Mercer, State of New Jersey, which Demised Premises are shown cross-hatched on the Plan attached hereto as Exhibit “A” (the “Site Plan”). The Building and the land on which the Building is located are hereinafter referred to as the “Property”. The square footage of the Demised Premises shall, for all purposes under this Lease, be deemed to be the square footage set forth above, subject to adjustment in accordance with Section 37 of this Lease.

3. “Landlord’s GLA”: the rentable square footage of the Building, which is currently 156,192 square feet. The rentable square footage of the Building shall, for all purposes under this Lease, be deemed to be the square footage set forth above.

4. “Tenant’s Fraction”: Currently 59.55%, which is Tenant’s GLA divided by Landlord’s GLA. Tenant’s Fraction shall be reduced proportionately upon Landlord’s recapture of the First Recapture Space and the Second Recapture Space (each, as hereinafter defined) in accordance with Section 37 of the Lease.

5. “Expense Stop”: N/A

6. “Commencement Date”: the date that Landlord acquires fee simple title to the Property, which is currently estimated to be February , 1999. Upon determination of the Commencement Date, Landlord and Tenant shall execute a Commencement Date Memorandum in the form attached hereto as Exhibit “D.”

7. “Notice Addresses”:

Landlord: c/o Preferred Real Estate Investments, Inc.

555 North Lane

Suite 6101

Conshohocken, PA 19428

Attention: Michael G. O’Neill

Tenant: Roller Bearing Company of America, Inc.

Sullivan Way, P. O. Box 77430

West Trenton, NJ 08628

Attn: Mr. George Sabochik

With a copy to:

Roller Bearing Company of America, Inc.

60 Round Hill Road

PO Box 430

Fairfield, CT 06430-0430

Attn: Mr. Michael Gostomski

8. “Tenant’s Contact”: N/A

9. “Permitted Use”: Manufacturing, including the manufacturing of roller bearings and other similar products, together with general office use and other uses incidental thereto and no other use.

10. “Annual Base Rent”:

Year/Period	Annual rent		Monthly Installment		Rent/Sq. Ft.
Lease Years 1-5*	$	328,342.95	$	27,361.91	$	3.53
Lease Years 6-10*	$	372,060.00	$	31,005.00	$	4.00

• Such Annual Base Rents are subject to adjustment in accordance with Section 37 of the Lease.

11. “Security Deposit”: NONE.

12. “Property Manager”:

Equivest Management, Inc.

215 South Broad Street, Suite 600

Philadelphia, PA 19107

Attn: Phil Rosen

13. “Tenant’s Broker”: N/A

List of Exhibits

Exhibit “A”	-	Site Plan
Exhibit “B”	-	(Intentionally Omitted)
Exhibit “B-1”	-	(Intentionally Omitted)
Exhibit “C”	-	Rules and Regulations
Exhibit “D”	-	Commencement Date Agreement

WITNESSETH, THAT:

1. DEMISED PREMISES. Landlord, for the Term and subject to the provisions and conditions hereof, leases to Tenant and Tenant accepts from Landlord, the Demised Premises.

2. TERM. Tenant shall use and occupy the Demised Premises for the Term, unless sooner terminated as herein provided. The first lease year of the Term shall commence on the Commencement Date and shall end on (i) the day immediately preceding the first anniversary of the Commencement Date, if the Commencement Date is the first day of the month, or (ii) the last day of the month in which the first anniversary of the Commencement Date occurs, if the Commencement Date is any day other than the first day of a calendar month. Each lease year after the first lease year shall be a consecutive twelve (12) month period commencing on the first day of the calendar month immediately following the preceding lease year, except that the last lease year shall be the period from the first day of Tenant’s partial lease year occurring at the end of the Term until the Expiration Date.

3. MINIMUM RENT.

(a) During the Term of this Lease, Tenant shall pay to Landlord the Annual Base Rent in the amount set forth in Section 10 of the Fundamental Lease Provisions (subject to adjustment in accordance with Section 37 hereof). Such Base Rent shall be payable in equal monthly installments in advance on the first day of each calendar month.

(b) The term “rent” as used in this Lease shall mean the Annual Base Rent, Taxes, Operating Expenses and any other additional rent or other sums payable by Tenant to Landlord under this Lease, all of which shall be deemed rent for purposes of Landlord’s rights and remedies with respect thereto.

(c) The first installment of rent shall be payable on the Commencement Date. If the Term begins on a day other than the first day of a month, rent from such day until the first day of the following month shall be prorated at the rate of one-thirtieth of the monthly rental for each day of such partial month, and the installment of rent paid on the Commencement Date shall be applied to the rent due for the first full calendar month of the Term hereof. If the Term begins on any day other than the first day of a month, any rent paid by Tenant to General Sullivan Group under the Existing Lease (as hereinafter defined) attributable to the period from the Commencement Date through the last day of the month in which the Commencement Date occurs shall be applied against the first rents payable hereunder

(d) All rent and other sums due to Landlord hereunder shall be payable to Landlord’s Property Manager at the address specified in Section 12 of the Fundamental Lease Provisions, or to such other party or at such other address as Landlord may designate from time to time, by written notice to Tenant, without demand and without deduction, set-off or counterclaim (except to the extent demand or notice shall be expressly provided for herein).

(e) If Landlord, at any time or times, shall accept said rent or any other sum due to it hereunder after the same shall become due and payable, such acceptance shall not excuse delay upon subsequent occasions, or constitute or be construed as, a waiver of any of Landlord’s rights hereunder.

4. TAXES AND OPERATING COSTS:

(a) Definitions. As used herein, the following terms shall be defined as hereinafter set forth.

(i) “Taxes” shall mean all real estate taxes and assessments, general and special, ordinary or extraordinary, foreseen or unforeseen, imposed upon the Property or with respect to the ownership thereof. If, due to a future change in the method of taxation, any franchise, income, profit or other tax, however designated, shall be levied or imposed in substitution in whole or in part for (or in lieu of) any tax which would otherwise be included within the term “Taxes” as defined herein, then the same shall be included in the term “Taxes.”

(ii) (A) ”Operating Expenses” shall mean, except as hereinafter limited, Landlord’s actual out-of-pocket expenses in respect of the operation, maintenance and management of the Property and shall include, without limitation: (1) wages and salaries (and taxes imposed upon employers) with respect to those employed by Landlord for rendering service in the normal operation, cleaning, maintenance, repair and replacement of the Property; (2) costs for the operation, maintenance, repair and replacement of the Property, including payments to contractors; (3) the cost of steam, electricity, water and sewer and other utilities (except for electricity, which is separately charged by Landlord as herein provided) chargeable to the operation and maintenance of the Property; (4) cost of insurance for the Property including fire and extended coverage, elevator, boiler, sprinkler leakage, water damage, public liability and property damage, environmental, plate glass, and rent protection, but excluding any charge for increased premiums due to acts or omissions of other occupants of the Building or because of extra risk; (5) supplies; (6) legal and accounting expenses directly related to the operation and management of the Property; (7) Taxes; (8) reasonable management expense; and (9) all other costs and expenses incurred by or on behalf of Landlord in connection with the repair, replacement, operation, maintenance, securing, insuring and policing the Property.

The term “Operating Expenses” shall not include: (1) the cost of any repair or replacement item which, by standard accounting practice, should be capitalized, except that any capital expenses shall be amortized by Landlord over the useful life of such expense and only the annual amortized portion of such expense together with an interest factor equal to the Prime Rate of interest as published from time to time in The Wall Street Journal plus two percent (2%) shall be included in annual Operating Expenses; (2) any charge for depreciation, interest on encumbrances or ground rents paid or incurred by Landlord; (3) any charge for Landlord’s income tax, excess profit taxes, franchise taxes or similar taxes on Landlord’s business; (4) commissions; (5) costs actually reimbursed by insurance proceeds; (6) cost of excess insurance premiums attributable to the acts of other tenants in the Building; (7) fees and expenses paid to Landlord or an affiliate of Landlord for services to the extent that such fees and expenses are above a reasonably competitive rate; and (8) legal fees incurred in connection with the negotiation and preparation of tenant leases and enforcement of tenant leases.

(B) In determining Operating Expenses for any year, if less than ninety-five percent (95%) of the Building rentable area shall have been occupied by tenants at any time during such year, Operating Expenses shall be deemed for such year to be an amount equal to the like expenses which Landlord reasonably determines would normally be incurred had such occupancy been ninety-five percent (95%) throughout such year.

(b) Payment of Operating Expenses.

(i) For and with respect to each calendar year of the Term (including any renewals or extensions thereof), there shall accrue, as additional rent, an amount equal to the product obtained by multiplying Tenant’s Fraction by the amount of the Operating Expenses for such year (appropriately prorated for any partial calendar year included within the beginning and end of the Term).

(ii) Landlord shall furnish to Tenant as soon as reasonably possible after the beginning of each calendar year of the Term;

(A) A statement (the “Expense Statement”) setting forth (1) Operating Expenses for the previous calendar year, and (2) Tenant’s Fraction of the Operating Expenses for the previous calendar year; and

(B) A statement of Landlord’s good faith estimate of Operating Expenses, and the amount of Tenant’s Fraction thereof (the “Estimated Share”), for the current calendar year.

(iii) Within fifteen (15) days after Tenant receives the Expense Statement, Tenant shall pay to Landlord the difference, if positive, between the Tenant’s Fraction of Operating Expenses for such previous year and the actual payments made by Tenant during such calendar year, or if the actual payments exceed Tenant’s Fraction of Operating Expenses for such previous year, Tenant shall receive a credit against the next payments of Operating Expenses falling due. Unless Tenant shall give notice to Landlord within ninety (90) days after any Expense Statement is furnished that Tenant disputes said statement, specifying in detail the basis for such dispute, each Expense Statement furnished to Tenant by Landlord under this Section shall be conclusively binding upon Tenant as to the Operating Expenses due from Tenant for the period represented thereby; provided, however, that additional amounts due may be required to be paid by any supplemental statement furnished by Landlord, subject to Tenant’s right to contest within the time periods prescribed by this subparagraph. Pending resolution of any dispute, Tenant shall pay the additional rent in accordance with the Expense Statement furnished by Landlord. Tenant shall have the right, within such ninety (90) day period following the delivery of such Expense Statement, to audit and/or review the books and records of Landlord through a reputable certified public accounting firm at Tenant’s sole cost and expense, provided, however, that Landlord may condition such audit or review upon Tenant and such accounting firm signing a confidentiality agreement in form and substance satisfactory to Landlord. Such audit shall be conducted at the office of Landlord’s Property Manager or such other office where the books and records relating to the Building are available during business hours. If, as a result of such audit or review, it is determined that there is an error in any Expense Statement relating to Operating Expenses, the Expense Statement shall be adjusted accordingly and (i) any overpayments by Tenant during the preceding calendar year shall be credited against the next payment(s) of Operating Expenses falling due, and (ii) any deficiency shall be paid by Tenant together with the next payment of Operating Expenses falling due.

(iv) Together with the next installment of Base Rent due after delivery of the foregoing statements to Tenant, Tenant shall pay to Landlord, on account of its share of Operating Expenses, the difference between (A) one-twelfth (1/12) of the new Estimated Share multiplied by the number of full or partial calendar months elapsed during the current calendar year up to and including the month payment is made less (B) the sum of the Operating

Expenses previously paid to Landlord by Tenant on account of such period, plus any amounts due from Tenant to Landlord on account of Operating Expenses for prior periods of time.

(v) On the first day of each month up to the time Tenant shall receive a new and statement of Tenant’s Estimated Share, Tenant shall pay to Landlord, on account of its share of Operating Expenses, one-twelfth of the then current Estimated Share. Any payment due from Tenant to Landlord on account of Operating Expenses not yet determined as of the expiration of the Term shall be made within twenty (20) days after submission to Tenant of the applicable Expense Statement, subject to Tenant’s right to contest within the time periods prescribed by subparagraph (iii) above.

(c) Notwithstanding anything herein to the contrary, Tenant shall be responsible for 100% of all repair and replacement costs (as opposed to general maintenance) incurred by Landlord with respect to Tenant’s parking area as delineated on Exhibit A-1 attached hereto and made a part hereof.

5. UTILITIES SEPARATELY CHARGED TO DEMISED PREMISES. Tenant shall be responsible for all utilities (including gas and electric) which are consumed within the Demised Premises. Landlord agrees to install a submeter to measure Tenant’s electricity consumption in all or a portion of the Demised Premises. Tenant shall pay for its consumption of electricity (i) based on its metered usage with respect to the portion of the Demised Premises covered by such submeter, and (ii) with respect to the balance of the Demised Premises, based on Tenant’s pro-rata share as determined by Landlord in Landlord’s reasonable judgment. With respect to utilities other than electric, if a separate meter is installed, Tenant shall pay for the consumption of such utilities based on its metered usage. If no meter is installed, Tenant shall pay a pro-rata share of any utility charges covering the Demised Premises and other areas of the Building, which pro-rata share shall be based on the percentage which the Tenant’s GLA bears to the square footage of the areas of the Building serviced by such utility. Tenant shall pay utility bills within ten (10) days after the receipt. Landlord shall have the right, to be exercised by written notice to Tenant, to direct Tenant to contract directly with the utility provider supplying electricity and/or gas service to the Building, in which event Tenant shall pay all charges therefor directly to the utility provider. Landlord shall at all times have the exclusive right to select the provider or providers of utility service to the Demised Premises and the Property, and Landlord shall have the right of access to the Demised Premises from time to time to install or remove utility facilities.

6. SECURITY DEPOSIT. INTENTIONALLY OMITTED.

7. SERVICES. Landlord agrees that it shall:

(a) Provide passenger elevator service to the Demised Premises during all days with one (1) elevator subject to call at all times. Notwithstanding the foregoing, no elevator service will be provided if the Building does not have a passenger elevator or if the Demised Premises is located on the first floor of the Building.

(b) Provide water for drinking, lavatory and toilet purposes drawn through fixtures installed by Landlord; and

(c) Furnish the Demised Premises with electric for heating, hot and chilled water, and air conditioning (which air conditioning shall be with respect to the office portion of the Demised Premises only). Tenant acknowledges that Tenant shall be responsible for

supplying and maintaining, at its sole cost and expense, any and all additional heating, ventilating and air conditioning equipment required by Tenant which is not in the Demised Premises as of the date hereof.

(d) Operate, maintain and repair the Building (other than individual tenant spaces) and the roof, structure and common areas thereof, in good order and repair and in accordance with all laws.

It is understood that Landlord does not warrant that any of the services referred to in this Section 7 will be free from interruption from causes beyond the reasonable control of Landlord. No interruption of service shall ever be deemed an eviction or disturbance of Tenant’s use and possession of the Demised Premises or any part thereof or permit Tenant to abate rent or otherwise relieve Tenant from performance of Tenant’s obligations under this Lease.

8. CARE OF DEMISED PREMISES. Tenant agrees, on behalf of itself, its employees and agents that it shall:

(a) Comply at all times with any and all federal, state and local statutes, regulations, ordinances, and other requirements of any of the constituted public authorities relating to its use and occupancy of the Demised Premises.

(b) Give Landlord access to the Demised Premises at all reasonable times, without charge or diminution of rent, to enable Landlord (i) upon reasonable notice (except in the event of emergency), to examine the same and to make such repairs, additions and alterations as Landlord may be permitted to make hereunder or as Landlord may deem advisable for the preservation of the integrity, safety and good order of the Building or any part thereof; and (ii) upon reasonable notice, to show the Demised Premises to prospective mortgagees and purchasers (including, without limitation, their respective appraisers, engineers and inspectors) and, during the six (6) months prior to expiration of the Term, to prospective tenants. Landlord agrees that it shall not unreasonably interfere with the conduct of Tenant’s business operations in the Demised Premises in exercising Landlord’s rights under this subparagraph;

(c) Maintain, repair and replace the interior of the Demised Premises in good order and repair as and when needed, including, without limitation, any heating, ventilating and air conditioning systems installed by Tenant servicing the Demised Premises, and replace all glass broken by Tenant, its agents, employees or invitees with glass of the same quality as that broken, except for glass broken by fire and extended coverage-type risks, and commit no waste in the Demised Premises;

(d) Upon the expiration or earlier termination of this Lease, remove Tenant’s goods and effects and those of any other person claiming under Tenant, and quit and deliver up the Demised Premises to Landlord peaceably and quietly in as good order and condition as existed at the inception of the Term, reasonable use and wear thereof, damage from fire and extended coverage type risks, and repairs which are Landlord’s obligation excepted. Goods and effects not removed by Tenant at the termination of this Lease, however terminated, shall be considered abandoned and Landlord may dispose of and/or store the same as it deems expedient, the cost thereof to be charged to Tenant;

(e) Not place signs on the exterior of the Demised Premises except on doors and then only of a type and with lettering and text approved by Landlord. Notwithstanding the

foregoing, Tenant shall be entitled to maintain its existing signs at the Demised Premises, which right shall include the right to replace such signage with similar signage approved by Landlord, which approval shall not be unreasonably withheld.

(f) Not overload, damage or deface the Demised Premises or do any act which might make void or voidable any insurance on the Demised Premises or the Building or which may render an increased or extra premium payable for insurance (and without prejudice to any right or remedy of Landlord regarding this subparagraph, Landlord shall have the right to collect from Tenant, upon demand, any such increase or extra premium). Tenant shall maintain at its own sole cost adequate insurance coverage for all of its equipment, furniture, supplies and fixtures and provide Landlord with certificates evidencing such coverage;

(g) Not make any alteration of or addition to the Demised Premises which impairs the structural integrity of the Building or adversely affects any heating, ventilating, air conditioning, electric, sanitary, elevator or other systems serving the Demised Premises or any other portion of the Building, in each case without the prior written approval of Landlord;

(h) Not install any equipment of any kind whatsoever which might necessitate any changes, replacements or additions to any of the heating, ventilating, air-conditioning, electric, sanitary, elevator or other systems serving the Demised Premises or any other portion of the Building, or to any of the services required of Landlord under this Lease, without the prior written approval of Landlord, and in the event such consent is granted, such replacements, changes or additions shall be paid for by Tenant at Tenant’s sole cost and expense. At the expiration or earlier termination of this Lease, Tenant shall pay Landlord’s cost of restoring such systems to their condition prior to such replacements, changes or additions; and

(i) Observe the rules and regulations annexed hereto as Exhibit “C,” as Landlord may from time to time amend the same, for the general safety, comfort and convenience of Landlord, occupants and tenants of the Building.

9. SUBLETTING AND ASSIGNING. Tenant shall not assign, mortgage or encumber this Lease or sublet all or any portion of the Demised Premises, whether voluntarily or by operation of law, without first obtaining Landlord’s prior written consent thereto, which consent shall not be unreasonably be withheld. A transfer or sale by Tenant of a majority of the voting shares, partnership interests or other controlling interests in Tenant shall constitute an assignment of this Lease by Tenant and shall require Landlord’s prior written consent, which consent shall not be unreasonably withheld. If such consent is given, it will not release Tenant from its obligations hereunder and will not be deemed a consent to any further subletting or assignment. If Landlord consents to any such subletting or assignment, it shall nevertheless be a condition to the effectiveness thereof that a fully executed copy of the sublease or assignment, in form and substance satisfactory to Landlord, be furnished to Landlord and that any assignee assume in writing all obligations of Tenant hereunder. If Landlord consents to any assignment or subletting, Tenant shall pay to Landlord, as additional rent hereunder, 100% of any subrents, other sums or other economic consideration received by Tenant on account of such assignment or subletting (after deducting Tenant’s reasonable costs incurred in connection with such assignment or subletting) which exceed the monthly rent payable by Tenant hereunder. The acceptance of rental from any other person shall not be deemed a waiver by Landlord of any provision hereunder.

10. CONDITION TO LEASE. Tenant acknowledges that as of the date hereof, Landlord has not yet acquired fee simple title to the Property and that this Lease, and all of the

terms, provisions and obligations set forth herein, are expressly conditioned upon Landlord acquiring fee simple title to the Property.

11. FIRE OR CASUALTY. In case of damage to the Demised Premises or the Building by fire or other casualty, Tenant shall give immediate notice thereof to Landlord. Landlord shall thereupon cause the damage to be repaired with reasonable speed, subject to delays, which may arise by reason of adjustment of loss under insurance policies and for delays beyond the reasonable control of Landlord. To the extent and for the time that the Demised Premises or portions thereof are thereby rendered untenantable, the rent shall proportionately abate. Provided that there are sufficient insurance proceeds available to fully repair such damage, Landlord agrees to repair such damage unless any mortgagee, having the right to do so, shall direct that the insurance proceeds are to be applied to reduce the mortgage debt rather than to the repair of such damage (provided, however, that, Landlord agrees to request that the mortgagee apply such insurance proceeds to the repair of such damage and to use reasonable efforts to cause such insurance proceeds to be so applied, unless such mortgagee shall have succeeded to Landlord’s interest in the Property by foreclosure or otherwise, in which event this parenthetical shall not apply). Landlord shall provide written notice to Tenant within sixty (60) days after Landlord is notified of the casualty as to whether the damage will be repaired in accordance with the foregoing provisions. If Landlord is not required to repair such damage hereunder and Landlord’s notice provides that Landlord will not repair the damage, then either Landlord or Tenant shall have the right to terminate this Lease exercisable by written notice to the other party within thirty (30) days thereafter. In such event the Lease shall terminate as of the date specified in Landlord’s or Tenant’s notice (which shall not be more than ninety (90) days thereafter), and the rent (taking into account any abatement as aforesaid) shall be adjusted to the termination date. e. If Landlord is required to repair or rebuild the Demised Premises (specifically excluding, however, Tenant’s furniture, trade fixtures, equipment and personal property, which shall be Tenant’s responsibility) or elects to repair or rebuild in accordance with the last sentence of this Section, and such restoration is not completed within two hundred seventy days following the date of the casualty (subject, however, to delays caused by force majeure), then (unless such casualty shall have been caused by Tenant’s gross negligence or willful misconduct, in which event Tenant shall not have any right to terminate pursuant to this sentence) Tenant shall have the right to terminate this Lease by providing written notice thereof to Landlord within thirty (30) days after the expiration of such twelve month period. Thereafter, Tenant shall promptly vacate the Demised Premises. Notwithstanding the foregoing, in the event that any casualty shall occur during the final forty-five (45) months of the Term or any renewal thereof and the cost of repairing said damage exceeds $250,000, then Landlord shall have the right to condition its obligation to repair, such damage (subject, nevertheless, to the conditions set forth in the third sentence of this Section 11) on: (i) Tenant waiving its right to terminate the Lease pursuant to Section 38 hereof, and (ii) Tenant extending the term of this Lease so that the remaining term shall be at least five (5) years under the same terms and conditions set forth herein, except that the rental rate for the extended portion of the term shall be the “fair market rent” as determined in accordance with Section 36 hereof. Tenant shall provide Landlord with written notice as to whether Tenant agrees to waive its right to terminate and to extend the term as aforesaid within 30 days after receipt of Landlord’s notice. If Tenant elects not to waive its right to terminate and to extend the term as aforesaid or fails to so advise Landlord within such thirty (30) day period (in which event Tenant shall be deemed to have elected not to waive its right to terminate and extend the term), then Landlord shall have the right, at its election by providing written notice to Tenant, to terminate this Lease (regardless of whether or not Landlord intends to rebuild) or to continue to recognize the Lease, in which latter event Landlord shall be required to repair or rebuild in accordance with the foregoing provisions of this Section.

12. LIABILITY. Tenant agrees that Landlord and its building manager and their officers, employees and agents shall not be liable to Tenant, and Tenant hereby releases said parties, for any personal injury or damage to or loss of personal property in the Demised Premises from any cause whatsoever unless such damage, loss or injury is the result of (i) the negligence or willful misconduct of Landlord, its building manager, or their officers, employees or agents or (ii) the failure by Landlord to fully perform its obligations under this Lease, provided, however, that Landlord and its building manager and their officers or employees shall not be liable to Tenant for any such damage or loss whether or not the result of their negligence or Landlord’s failure to perform its obligations hereunder to the extent Tenant would be covered by insurance that Tenant is required to carry hereunder. Tenant shall and does hereby indemnify and hold Landlord harmless of and from all loss or liability incurred by Landlord (including, without limitation, reasonable attorney’s fees) in connection with any failure of Tenant to fully perform its obligations under this Lease and in connection with any personal injury or damage of any type or nature occurring in or resulting out of Tenant’s use of the Demised Premises, unless due to Landlord’s negligence or willful misconduct or its failure to perform its obligations under this lease. Landlord shall and does hereby indemnify and hold Tenant harmless of and from all loss or liability incurred by Tenant (including without limitation, reasonable attorneys’ fees) in connection with (i) the negligence or willful misconduct of Landlord or (ii) Landlord’s failure to perform its obligations under this lease.

13. EMINENT DOMAIN. If (i) the whole or a substantial part of the Building or the Property shall be taken or condemned for a public or quasi-public use under any statute or by right of eminent domain or private purchase in lieu thereof by any competent authority, or (ii) the whole or a substantial part of the Demised Premises shall be taken or condemned for a public or quasi-public use under an statute or by right of eminent domain or private purchase in lieu thereof by any competent authority and the balance of the Demised Premises shall no longer be suitable for Tenant’s use, then this Lease shall terminate effective as of the date that the right to possession shall vest in the condemning authority (as set forth in the original notice of condemnation from the condemning authority) and neither party shall have any further rights liabilities or obligations hereunder accruing from and after the effective date of termination. Tenant shall have no claim against Landlord and shall not have any claim or right to any portion of the amount that may be awarded as damages or paid as a result of any such condemnation or purchase; and all right of the Tenant to damages therefore are hereby assigned by Tenant to Landlord. The foregoing shall not, however, deprive Tenant of any separate award for moving expenses or for any other award which would not reduce the award payable to Landlord.

14. INSOLVENCY. (a) The appointment of a receiver or trustee to take possession of all or a portion of the assets of Tenant, or (b) an assignment by Tenant for the benefit of creditors, or (c) the institution by or against Tenant of any proceedings for bankruptcy or reorganization under any state or federal law (unless in the case of involuntary proceedings, the same shall be dismissed within thirty (30) days after institution), or (d) any execution issued against Tenant which is not stayed or discharged within fifteen (15) days after issuance of any execution sale of the assets of Tenant, shall constitute a breach of this Lease by Tenant. Landlord in the event of such a breach, shall have, without need of further notice, the rights enumerated in Section 15 herein.

15. DEFAULT.

(a) If Tenant shall fail to pay rent or any other sum payable to Landlord hereunder when due and such failure continues for five (5) days after written notice from Landlord (provided that Landlord shall not be required to provide written notice more than two times during any twelve month period), or if Tenant shall fail to perform or observe any of the other covenants, terms or conditions contained in this Lease and such failure continues for fifteen (15) days after written notice from Landlord (or such longer period as is reasonably

required to correct any such non-monetary default, provided Tenant promptly commences and diligently continues to effectuate a cure), or if any of the events specified in Section 14 occur, then and in any of said cases (notwithstanding any former breach of covenant or waiver thereof in a former instance), Landlord, in addition to all other rights and remedies available to it by law or equity or by any other provisions hereof, may at any time thereafter:

(i) upon three (3) days notice to Tenant, declare to be immediately due and payable, a sum equal to the Accelerated Rent Component (as hereinafter defined), and Tenant shall remain liable to Landlord as hereinafter provided; and/or

(ii) whether or not Landlord has elected to recover the Accelerated Rent Component, terminate this Lease on at least five (5) days notice to Tenant and, on the date specified in said notice, this Lease and the Term hereby demised and all rights of Tenant hereunder shall expire and terminate and Tenant shall thereupon quit and surrender possession of the Demised Premises to Landlord in the condition elsewhere herein required and Tenant shall remain liable to Landlord as hereinafter provided.

(b) For purposes herein, the Accelerated Rent Component shall mean the aggregate of:

(i) all rent and other charges, payments, costs and expenses due from Tenant to Landlord and in arrears at the time of the election of Landlord to recover the Accelerated Rent Component;

(ii) the Annual Base Rent reserved for the then entire unexpired balance of the Term (provided, however, that for purposes of this Section, the Annual Base Rent reserved for the balance of the term shall be calculated as if Tenant had elected to terminate the Lease pursuant to Section 38 hereof effective as of the date which is the later of (A) nine (9) months after the date of default, and (B) the first day of the eighth (8^th) lease year, and the applicable Early Termination Fee shall be deemed to be the Annual Base Rent payable for the period commencing on the effective date of termination through the Expiration Date), plus all other charges, payments, costs and expenses herein agreed to be paid by Tenant up to the end of the Term which shall be capable of precise determination at the time of Landlord’s election to recover the Accelerated Rent Component; and

(iii) Landlord’s good faith estimate of all charges, payments, costs and expenses herein agreed to be paid by Tenant up to the end of the Term which shall not be capable of precise determination as aforesaid (and for such purposes no estimate of any component of the additional rent to accrue pursuant to the provisions of Section 4 and Section 5 hereof shall be less than the amount which would be due if each such component continued at the highest monthly rate or amount in effect during the twelve (12) months immediately preceding the default).

(c) In any case in which this Lease shall have been terminated, or in any case in which Landlord shall have elected to recover the Accelerated Rent Component and any portion of such sum shall remain unpaid, Landlord may without further notice, enter upon and repossess the Demised Premises, by force, summary proceedings, ejectment or otherwise, and may dispossess Tenant and remove Tenant and all other persons and property from the Demised Premises and may have, hold and enjoy the Demised Premises and the rents and profits therefrom. Landlord may, in its own name, as agent for Tenant, if this Lease has not been terminated, or in its own behalf, if this Lease has been terminated, relet the Demised Premises or any part thereof for such term or terms (which may be greater or less than the

period which would otherwise have constituted the balance of the Term) and on such terms (which may include concessions of free rent) as Landlord in its sole discretion may determine. Landlord may, in connection with any such reletting, cause the Demised Premises to be decorated, altered, divided, consolidated with other space or otherwise changed or prepared for reletting. No reletting shall be deemed a surrender and acceptance of the Demised Premises.

(d) In the event Landlord shall, after default or breach by Tenant, recover the Accelerated Rent Component from Tenant and Landlord subsequently relets the Demised Premises, and it shall be determined that a credit is due Tenant because there are net proceeds of reletting (after deducting Landlord’s costs of reletting pursuant to subparagraph (c) as aforesaid), then Landlord shall refund such excess proceeds to Tenant on a monthly basis, without interest (which refund shall in no event exceed the amount of the Accelerated Rent Component paid to Landlord by Tenant) promptly after such determination.

(e) Landlord agrees to use reasonable efforts to relet the Demised Premises subsequent to any termination of the Lease or retaking of possession by Landlord pursuant to the provisions of this Section; provided, however, that the foregoing shall not require Landlord to lease the Demised Premises over other unoccupied space on the Property.

(f) As an additional and cumulative remedy of Landlord in the event of termination of this Lease by Landlord following any breach or default by Tenant, Landlord, at its option, shall be entitled to recover damages for such breach in an amount equal to the Accelerated Rent Component (determined from and after the date of Landlord’s election under this subsection (f)) less the fair rental value of the Demised Premises for the remainder of the term of this Lease (taken without regard to the early termination) and such damages shall be payable by Tenant upon demand. Nothing contained in this Lease shall limit or prejudice the right of Landlord to prove and obtain as damages incident to a termination of this Lease, in any bankruptcy reorganization or other court proceedings, the maximum amount allowed by any statute or rule of law in effect with such damages are to be proved.

(g) Tenant hereby waives all errors and defects of a procedural nature in any proceedings brought against it by Landlord under this Lease. Tenant further waives the right to any notices to quit as may be specified by applicable law, and agrees that five (5) days notice shall be sufficient in any case where a longer period may be statutorily specified.

(h) If rent or any other sum due from Tenant to Landlord shall be overdue for more than five (5) days after the due date therefor, it shall thereafter bear interest at the rate of twelve percent (12%) per annum (or, if lower, the highest legal rate) until paid.

16. SUBORDINATION. This Lease is and shall be subject and subordinate to all the terms and conditions of all underlying mortgages and to all ground or underlying leases of the entire Building which may now or hereafter encumber the Building and/or the Property and to all renewals, modifications, consolidations, replacements and extensions thereof., provided that the holder of any such mortgage shall have provided to Tenant a nondisturbance agreement which shall provide, inter alia, that (a) Tenant’s rights under this Lease shall not be extinguished by any foreclosure or other enforcement proceedings so long as Tenant is not in default under this Lease (b) subject to the foregoing, the Tenant’s rights under this Lease are subordinate to the rights of the holder of such mortgagee, and (c) Tenant shall attorn to the holder of such mortgage. Tenant shall execute, within five (5) days after request, any certificate that Landlord may reasonably require acknowledging such subordination provided the same incorporates the foregoing provisions. If Landlord has attached to this Lease, or

subsequently delivers to Tenant, a form of subordination agreement (which includes the foregoing provisions) required by Landlord’s lender, Tenant shall execute and return the same to Landlord within five (5) days after receipt thereof by Tenant.

17. NOTICES. All bills, statements, notices or communications which Landlord may desire or be required to give to Tenant shall be deemed sufficiently given or rendered if in writing and either delivered to an officer of Tenant or sent by registered, certified mail or a nationally recognized overnight delivery service addressed to Tenant at the Building, or to such other place designated by Tenant in writing to Landlord, and the time of the giving of such notice or communication. Any notice by Tenant to Landlord must be served by registered or certified mail or a nationally recognized overnight delivery service, addressed to Landlord at Landlord’s notice address set forth in Section 7 of the Fundamental Lease Provisions, and copies of the same shall also be sent to the Property Manager. All notices and demands shall be deemed given or served upon the date of receipt, if delivered personally, or three (3) business days after the date deposited with the United States Postal Service, or one (1) business day delivered after the date delivered to the overnight delivery service.

18. HOLDING-OVER. Should Tenant continue to occupy the Demised Premises after the expiration of the Term, including any renewal or renewals thereof, or after a forfeiture incurred, such tenancy shall (without limitation of any of Landlord’s rights or remedies therefor) be one at sufferance at a minimum monthly rental equal to twice the rent payable for the last month of the Term.

19. MISCELLANEOUS.

(a) Tenant represents and warrants that it has not employed any broker or agent as its representative in the negotiation for or the obtaining of this Lease other than Tenant’s Broker set forth in Section 13 of the Fundamental Lease Provisions, and Tenant agrees to indemnify and hold Landlord harmless from any and all cost or liability for compensation claimed by any broker or agent with whom it has dealt.

(b) The word “Tenant” as used in this Lease shall be construed to mean tenants in all cases where there is more than one tenant, and the necessary grammatical changes required to make the provisions hereof apply to corporations, partnerships or individuals, men or women, shall in all cases be assumed as though in each case fully expressed. This Lease shall not inure to the benefit of any assignee, heir, legal representative, transferee or successor of Tenant except upon the express written consent or election of Landlord. Subject to the foregoing limitation, each provision hereof shall extend to and shall, as the case may require, bind and inure to the benefit of Tenant and its heirs, legal representatives, successors and assigns.

(c) The term “Landlord” as used in this Lease means the fee owner of the Building or, if different, the party holding and exercising the right, as against all others (except tenants of the Building) to possession of the entire Building. In the event of the voluntary transfer of such ownership or right to a successor-in-interest of Landlord, Landlord shall be freed and relieved of all liability and obligation hereunder which shall thereafter accrue (and, as to any unapplied portion of Tenant’s security deposit, Landlord shall be relieved of all liability therefor upon transfer of such portion to its successor in interest) and Tenant shall look solely to such successor in interest for the performance of the covenants and obligations of the Landlord hereunder (either in terms of ownership or possessory rights). The successor in interest shall not (i) be liable for any previous act or omission of a prior landlord; (ii) be subject to any rental

offsets or defenses against a prior landlord; (iii) be bound by any payment by Tenant of rent in advance in excess of one (1) month’s rent; or (iv) be liable for any security not actually received by it. Subject to the foregoing, the provisions hereof shall be binding upon and inure to the benefit of the successors and assigns of Landlord. Notwithstanding anything to the contrary contained in this Lease, it is expressly understood and agreed by Tenant that none of Landlord’s covenants, undertakings or agreements are made or intended as personal covenants, undertakings or agreements by Landlord or its partners, shareholders or trustees, or any of their respective partners, shareholders or trustees, and any liability for damage or breach or nonperformance by Landlord, or for Landlord’s negligence, shall be collectible only out of Landlord’s interest in the Building (or to the extent of any sales proceeds received by Landlord on account of the sale of the Property so long as such breach by Landlord accrued prior to the date of the transfer of Landlord’s interest in the Property and Tenant shall have provided written notice thereof to Landlord prior to the transfer of Landlord’s interest in the Property, time being of the essence) and no personal liability is assumed by, nor at any time may be asserted against, Landlord or its partners, shareholders or trustees or any of its or their partners, shareholders, trustees, officers, agents, employees, legal representatives, successors or assigns, if any; all such liability, if any, being expressly waived and released by Tenant.

(d) Time is of the essence of this Lease and all of its provisions

(e) If Landlord is delayed or prevented from performing any of its obligations under this Lease by reason of causes beyond Landlord’s control, the period of such delay or prevention shall be deemed added to the time herein provided for the performance of any such obligation by Landlord.

20. CONDITION OF DEMISED PREMISES. Tenant acknowledges that Tenant is currently occupying the Demised Premises and accepts the Demised Premises in its “AS IS” condition. Landlord shall not be obligated to make any improvements to the Demised Premises to prepare the same for Tenant’s occupancy. Landlord represents that, to Landlord’s actual knowledge: (a) except as disclosed in that certain Phase I Environmental Site Assessment dated September, 1998 prepared by RT Environmental Services, Inc. for Tenant’s affiliate, Preferred Real Estate Investments, Inc. (the “Environmental Report”), Landlord is not aware of the presence or release of hazardous materials or substances in, at or under the Property in violation of any Environmental Statute, (b) the Property is not in violation of any applicable laws or ordinances, and (c) the Building does not contain any structural defects. Notwithstanding the foregoing, Landlord shall have no liability hereunder on account of any conditions or violations caused by Tenant or as to which Tenant has actual knowledge as of the date hereof. Tenant expressly acknowledges that Tenant is aware that the Property is the subject of ongoing environmental remediation pursuant to a remediation agreement between General Sullivan Group, Inc. and the New Jersey Department of Environmental Protection, as more fully described in the Environmental Report. Except as expressly set forth herein, Landlord makes no representations or warranties as to the condition of the Demised Premises.

21. WAIVER OF SUBROGATION. Each party hereto hereby waives any and every claim which arises or which may arise in its favor against the other party hereto during the Term, including any extension or renewal thereof, for any and all loss of, or damage to, any of its property located within or upon or constituting a part of the Building, to the extent that such loss or damage is covered under an insurance policy or policies and to the extent such policy or policies contain provisions permitting such waivers of claims. Each party agrees to request its insurers to issue policies containing such provisions and if any extra premium is payable

therefor, the party which would benefit from the provision shall have the option to pay such additional premium in order to obtain such benefit.

22. RENT TAX. If, during the Term, including any renewal or extension thereof, any tax is imposed upon the privilege of renting or occupying the Demised Premises or upon the amount of rentals collected therefor, Tenant will pay each month, as additional rent, a sum equal to such tax or charge that is imposed for such month, but nothing herein shall be taken to require Tenant to pay any income, estate, inheritance or franchise tax imposed upon Landlord.

23. PRIOR AGREEMENT, AMENDMENTS. Neither party hereto has made any representations or promises except as contained herein or in some further writing signed by the party making such representation or promise. No other agreement hereinafter made shall be effective to change, modify, discharge or effect an abandonment of this Lease, in whole or in part, unless such agreement is in writing and signed by the party against whom enforcement of the change, modification, discharge or abandonment is sought. Tenant agrees to execute any amendment to this Lease required by a mortgagee of the Building, which amendment does not materially adversely affect Tenant’s rights or obligation hereunder.

24. CAPTIONS. The captions of the paragraphs in this Lease are inserted and included solely for convenience and shall not be considered or given any effect in construing the provisions hereof.

25. MECHANIC’S LIEN. Tenant shall, within ten (10) days after notice from Landlord, discharge any mechanic’s lien for materials or labor claimed to have been furnished to the Demised Premises on Tenant’s behalf (except for work contracted for by Landlord) and shall indemnify and hold harmless Landlord from any loss incurred in connection therewith.

26. RIGHT TO CURE. Landlord may (but shall not be obligated), on five (5) days notice to Tenant (except that no notice need be given in case of emergency) cure on behalf of Tenant any default hereunder by Tenant, and the cost of such cure (including any attorney’s fees incurred) shall be deemed additional rent payable upon demand. If Landlord shall, following the giving of written notice and the expiration of a reasonable period for cure, fail to perform any one or more of its obligations under this Lease, Tenant may (but shall not be obligated), on five (5) days additional notice (except that no additional notice need be given in the event of emergency) to Landlord, take all reasonable action as may be necessary to correct or cure the failure of performance by Landlord, and Tenant’s reasonable out-of-pocket expenditures in so doing shall be payable from Landlord to Tenant.

27. INSURANCE. Tenant shall at all times during the Term, including any renewal or extension thereof, maintain in full force and effect with respect to the Demised Premises and Tenant’s use thereof, (i) comprehensive public liability insurance, covering injury to person and property in amounts at least equal to Five Million Dollars ($5,000,000) per occurrence and annual aggregate limit for bodily injury and One Million Dollars ($1,000,000) per occurrence and annual aggregate limit for property damage, with increases in such limits as Landlord may from time to time reasonably request (“Liability Insurance”), and (ii) all-risk or fire and extended coverage insurance upon Tenant’s personal property and leasehold improvements in the Demised Premises for the full replacement value of such personal property and leasehold improvements. Such Liability Insurance policies shall name Landlord and at Landlord’s request any mortgagee of all or any portion of the Property as additional insureds. Tenant shall lodge with Landlord duplicate originals or certificates of such Liability Insurance at or prior to the Commencement Date, together with evidence of paid-up premiums, and shall lodge with

Landlord renewals thereof at least fifteen (15) days prior to expiration. All such policies or certificates shall provide that such Liability Insurance coverage may not be cancelled or materially amended unless Landlord and any mortgagee designated by Landlord as aforesaid are given at least thirty (30) days prior written notice of the same.

28. ESTOPPEL STATEMENT. Tenant shall from time to time, within five (5) days after request by Landlord, execute, acknowledge and deliver to Landlord a statement certifying that this Lease is unmodified and in full force and effect (or that the same is in full force and effect as modified, listing any instruments or modifications), the dates to which rent and other charges have been paid, and whether or not, to the best of Tenant’s knowledge, Landlord is in default or whether Tenant has any claims or demands against Landlord (and, if so, the default, claim and/or demand shall be specified), and such other information reasonably requested by Landlord.

29. ENVIRONMENTAL MATTERS.

(a) Tenant shall conduct, and cause to be conducted, all operations and activity at the Demised Premises in compliance with, and shall in all other respects applicable to the Demised Premises comply with, all applicable present and future federal, state, municipal and other governmental statutes, ordinances, regulations, orders, directives and other requirements, and all present and future requirements of common law, concerning the environment (hereinafter collectively called “Environmental Statutes”) including, without limitation, (i) those relating to the generation, use, handling, treatment, storage, transportation, release, emission, disposal, remediation or presence of any material, substance, liquid, effluent or product, including, without limitation, hazardous substances, hazardous waste or hazardous materials, (ii) those concerning conditions at, below or above the surface of the ground and (iii) those concerning conditions in, at or outside the Building.

(b) Tenant, in a timely manner, shall obtain and maintain in full force and effect all permits, licenses and approvals, and shall make and file all notifications and registrations as required by Environmental Statutes. Tenant shall at all times comply with the terms and conditions of any such permits, licenses, approvals, notifications and registrations.

(c) Tenant shall provide to Landlord copies of the following, forthwith after each shall have been submitted, prepared or received by Tenant or any occupant of the Demised Premises: (i) all applications and associated materials submitted to any governmental agency relating to any Environmental Statute; (ii) all notifications, registrations, reports and other documents, and supporting information, prepared, submitted or maintained in connection with any Environmental Statute; (iii) all permits, licenses, approvals, and amendments or modifications thereof, obtained under any Environmental Statute; and (v) any correspondence, notice of violation, summons, order, complaint, or other document received by Tenant or any occupant of the Demised Premises pertaining to compliance with or liability under any Environmental Statute.

(d) Tenant shall not cause or suffer or permit to occur in, on or under the Demised Premises any generation, use, manufacturing, refining, transportation, emission, release, treatment, storage, disposal, presence or handling of hazardous substances, hazardous wastes or hazardous materials (as such terms are now or hereafter defined under any Environmental Statute) or any other material, substance, liquid, effluent or product now or hereafter regulated by any Environmental Statute (all of the foregoing herein collectively called “Hazardous Substances”), except that materials (other than asbestos or polychlorinated biphenyls), that are or contain hazardous substances may be used, generated, handled or stored on the Demised Premises, provided such is incident to and reasonably necessary for the operation of Tenant’s business within the Demised Premises and is in compliance with all Environmental Statutes and all other applicable governmental requirements. Should any release of any hazardous substance occur at the Demised Premises in violation of any Environmental Statute, Tenant shall immediately contain, remove and dispose of, such hazardous substances and any material that was contaminated by the release and to remedy and mitigate all threats to human health or the environment relating to such release as required by all applicable Environmental Statutes. When conducting any such measures the Tenant shall comply with all Environmental Statutes.

(e) Tenant hereby agrees to indemnify and to hold harmless Landlord of, from and against any and all expense, loss or liability suffered by Landlord by reason of Tenant’s breach of any of the provisions of this Section, including, but not limited to, (i) any and all expenses that Landlord may incur in complying with any Environmental Statutes, (ii) any and all costs that Landlord may incur in studying, assessing, containing, removing, remedying, mitigating, or otherwise responding to, the release of any hazardous substance or waste at or from the Demised Premises, (iii) any and all costs for which Landlord may be liable to any governmental agency for studying, assessing, containing, removing, remedying, mitigating, or otherwise responding to, the release of a hazardous substance or waste at or from the Demised Premises, (iv) any and all fines or penalties assessed, or threatened to be assessed, upon Landlord by reason of a failure of Tenant to comply with any obligations, covenants or conditions set forth in this Article, and (v) any and all legal fees and costs incurred by Landlord in connection with any of the foregoing, which indemnity shall survive the expiration or earlier termination of this Lease. Notwithstanding the foregoing, Tenant’s indemnification obligations under this Section shall not apply in respect of any release of Hazardous Substances or violation of Environmental Statutes caused by parties other than Tenant, its agents, employees, invitees or licensees.

(f) Landlord hereby agrees to indemnify and hold harmless Tenant of from and against any and all expense, loss or liability suffered by Tenant on account of any release of Hazardous Substances or violation of Environmental Statutes caused by Landlord, its agents, or employees Notwithstanding the foregoing, Landlord’s indemnification obligations under this Section shall not apply in respect of any release of Hazardous Substances or violation of Environmental Statutes caused by other parties (including, without limitation, other tenants of the Building) other than Landlord, its agents or employees.

30. DELIVERY FOR EXAMINATION. DELIVERY OF THE LEASE TO TENANT SHALL NOT BIND LANDLORD IN ANY MANNER, AND NO LEASE OR OBLIGATIONS OF LANDLORD SHALL ARISE UNTIL THIS INSTRUMENT IS SIGNED BY BOTH LANDLORD AND TENANT.

31. SECURITY INTEREST. INTENTIONALLY OMITTED.

32. FINANCIAL STATEMENTS. If requested by Landlord’s lender (but no more than twice during any twelve month period) Tenant shall provide to Landlord’s lender within five days of written notice from Landlord a copy of Tenant’s and Guarantor’s (if any) complete annual financial statements for the most recently completed fiscal year.

33. QUIET ENJOYMENT. Tenant, upon paying the rent, and observing and keeping all covenants, agreements and conditions of this Lease on its part to be kept, shall quietly have and enjoy the Demised Premises during the term of this Lease without hindrance or molestation by anyone claiming by or through Landlord, subject, however, to the exceptions, reservations and conditions of this Lease.

34. SEVERABILITY. If any provision contained in this Lease shall, to any extent, be invalid or unenforceable, the remainder of this Lease (and the application of such provision to the persons or circumstances, if any, other than those as to which it is invalid or unenforceable) shall not be affected thereby, and each and every provision of this Lease shall be valid and enforceable to the fullest extent permitted by law.

35. GOVERNING LAW. This Lease shall be governed by and construed in accordance with the laws of the State in which the Property is located.

36. RENEWAL OPTIONS. Tenant shall have the option to extend the Term for one (1) extension period (the “Extension Period”) of five (5) years, upon the following terms and conditions:

(a) The Extension Period shall be for a five (5) year period commencing on the day immediately following the expiration date of the initial Term of this Lease and expiring at midnight on the day immediately preceding the fifth (5^th) anniversary thereof.

(b) Tenant must exercise the Extension Period, if at all, upon at least nine (9) months’ written notice to Landlord prior to the expiration date of the initial Term of this Lease, time being of the essence.

(c) The Extension Period shall be on the same terms and conditions contained in this Lease, except that (i) the Annual Base Rent shall be the “Fair Market Rent” (as hereinafter defined) of the Demised Premises for the Extension Period, and (ii) Tenant shall receive no inducements, allowances or periods of rent abatement with respect to such Extension Period, and (iii) the provisions of Section 38 shall no longer apply.

(d) As used herein, the term “Fair Market Rent” shall mean and equal the product of (i) the rentable area then included in the Demised Premises and (ii) the market rental (expressed in dollars per square foot) for comparable space, and for a comparable term, in the Building and in other comparable buildings in the West Trenton, New Jersey market as determined by Landlord in Landlord’s reasonable judgment (subject to subparagraphs (i) – (iii) below, taking into account the size and location of the Demised Premises in the Building.

(i) At Tenant’s request, such request to be given in writing and no later than twelve (12) months prior to the Expiration Date, Landlord shall confer with Tenant as to Landlord’s proposed “Fair Market Rent” for the Demised Premises and shall in any event, within fifteen (15) days thereafter, notify Tenant in writing (“Landlord’s Notice”) of such proposed rental rate. Tenant shall thereupon have the following options: (i) to accept such proposed “Fair Market” rental rate and exercise its renewal option not later than the date set forth in

subparagraph (b) above, (ii) to decline to exercise its renewal option, or (iii) to notify Landlord in writing that Tenant objects to the proposed rental rate, which notification must be given within fifteen (15) days after Tenant’s receipt of Landlord’s Notice. If Tenant objects to Landlord’s proposed “Fair Market Rent” in accordance with clause (iii) above, Landlord and Tenant shall attempt to negotiate a mutually acceptable rental rate within ten (10) days following notification by Tenant, and if such negotiations have not been concluded within such ten (10) day period, either party may require determination of the Fair Market Rent for the Extension Period by giving written notice to the other no later than five days after the expiration of such 10-day period, which notice shall designate a real estate broker selected by the initiating party experienced in office and warehouse leasing in the West Trenton, New Jersey area. Within five (5) business days after receipt of such notice, the other party to this Lease shall select a real estate broker meeting the aforesaid requirements and give written notice of such selection to the initiating party. If the two real estate brokers fail to agree upon the Fair Market Rent within ten days after selection of the second broker, the two brokers shall select a third broker experienced in office and warehouse leasing in West Trenton, New Jersey. Each of the three brokers shall determine the Fair Market Rent within ten (10) days after the appointment of the third broker. The Fair Market Rent applicable to the Extension Term shall equal the arithmetic average of such three determinations; provided, however, that if one broker’s determination deviates more than five percent (5%) from the median of the three determinations, the Fair Market Rent shall be an amount equal to the average of the other two determinations. The determination of Fair Market Rent shall be final, binding and conclusive on Landlord and Tenant. Upon receipt of any such determination, Tenant shall have the right, but shall not be obligated, for a period of ten (10) days, to exercise the Extension Period at the Fair Market Rent so determined. If Tenant does not so exercise its right within such ten (10) day period, then, notwithstanding anything herein to the contrary, such right shall be extinguished absolutely and Tenant shall have no further right to extend the Term pursuant to this Section 36.

(ii) Landlord shall pay the costs and fees of Landlord’s broker in connection with any determination hereunder, and Tenant shall pay the costs of Tenant’s broker in connection with such determination. The costs and fees of any third-party broker selected pursuant to subparagraph (I) above shall be paid one-half by Landlord and one-half by Tenant.

(iii) Tenant acknowledges that time is of the essence with respect to the provisions of this Section 36. By way of example and not by limitation, if Tenant fails to timely (a) request Landlord’s determination of the Fair Market Rent, (b) object to Landlord’s determination of Fair Market Rent, or (c) require a determination of Fair Market Rent, each within the time periods set forth above, then the Fair Market Rent for the Extension Period shall be determined by Landlord in accordance with the first sentence of subparagraph (d) above.

(e) Except for the Extension Period set forth above, there shall be no further privilege of renewal.

37. LANDLORD’S RECAPTURE.

(a) Provided that Tenant is not in default of its obligations hereunder, on or prior to the expiration of the first lease year Landlord shall recapture that portion of the Demised Premises consisting of approximately 2,500 square feet and designated as the “First Recapture Space” on Exhibit “A” attached hereto. Landlord shall notify Tenant in writing at least thirty (30)

days prior to the date upon which Landlord intends to recapture the First Recapture Space (the “First Recapture Date”). Effective as of the First Recapture Date, this Lease and Tenant’s right to possession shall terminate with respect to the First Recapture Space only, and Tenant shall vacate the First Recapture Space on or before the First Recapture Date. If Tenant fails to vacate the First Recapture Space on or before the First Recapture Date, Tenant shall be deemed a holdover tenant with respect to the First Recapture Space and be subject to the provisions of Section 18 hereof with respect thereto. Upon the later of (i) the First Recapture Date, or (ii) the date that Tenant vacates the First Recapture Space, the Annual Base Rent, Tenant’s GLA and Tenant’s Fraction shall be proportionately reduced.

(b) provided that Tenant is not in default, on or prior to the expiration of the second lease year Landlord shall recapture that portion of the Demised Premises consisting of approximately 2,500 square feet and designated as the “Second Recapture Space” on Exhibit “A” attached hereto. Landlord shall notify Tenant in writing at lease thirty (30) days prior to the date upon which Landlord intends to recapture the Second Recapture Space (the “Second Recapture Date”). Effective as of the Second Recapture Date, this Lease and Tenant’s right to possession shall terminate with respect to the Second Recapture Space only, and Tenant shall vacate the Second Recapture Space on or before the Second Recapture Date. If Tenant fails to vacate the Second Recapture Space on or before the Second Recapture Date, Tenant shall be deemed a holdover tenant with respect to the Second Recapture Space and be subject to the provisions of Section 18 hereof with respect thereto. Upon the later of (i) the Second Recapture Date, or (ii) the date that Tenant vacates the Second Recapture Space, the Annual Base Rent, Tenant’s GLA and Tenant’s Fraction shall be proportionately reduced.

38. EARLY TERMINATION. Tenant shall have the right to terminate this Lease at any time after the expiration of the seventh (7^th) lease year of the Term and prior to the expiration of the initial term (but not during any Extension Period) provided: (a) Tenant shall have delivered written notice (“Tenant’s Termination Notice”) to Landlord not more than 270 days and not less than 180 days prior to the effective date of termination (the “Early Termination Date”), time being of the essence, and (b) Tenant shall have (i) paid to Landlord by cash or certified check, at the time Tenant delivers Tenant’s Termination Notice, a termination fee (the “Termination Fee”) equal to the product obtained by multiplying (A) two-thirds (2/3) by (B) the Annual Base Rent which otherwise would have been payable by Tenant during the balance of the Term subsequent to the Early Termination Date (at the rental rate set forth in Section 10 of the Fundamental Lease Provisions), or (ii) delivered to Landlord, at the time Tenant delivers Tenant’s Termination Notice, an unconditional and irrevocable letter of credit in the amount of the Termination Fee, which letter of credit shall be in all respects satisfactory to Landlord, in its reasonable judgment. In the event that Tenant pays the Termination Fee to Landlord by cash or certified check, Landlord shall deposit the Termination Fee in an interest-bearing account and on the Early Termination Date, provided that tenant is not in default beyond the expiration of all applicable notice and cure periods hereunder, Landlord shall pay to Tenant all interest earned thereon from the date of deposit through the Early Termination Date By way of example, the Early Termination Date is the first day of the eighth (8^th) lease year (i.e., with 36 months remaining on the initial lease term), the Early Termination Fee shall equal twenty-four (24) months’ Base Rent. If the Early Termination Date is the first day of the ninth (9^th) lease year (i.e., with 24 months remaining on the initial lease term), the Early Termination Fee shall equal sixteen (16) months’ Base Rent. Tenant acknowledges that the Early Termination Fee is separate and independent consideration for Tenant’s’ right to terminate the Lease in accordance with the provisions of this Section 38 and, as such, will not be applied against the rent payable by Tenant hereunder for the period from and after the date of Tenant’s Termination Notice through the Early Termination Date. This Lease shall terminate on the Early Termination

Date and neither party shall have any further rights, liabilities or obligations hereunder (provided, however, that nothing herein shall relieve any party from performing any outstanding obligations which accrued prior to the Early Termination Date).

39. TENANT INDUCEMENT. As an inducement for Tenant to enter into this Lease, provided that the Commencement Date shall have occurred and Tenant shall have commenced paying rent hereunder, Landlord shall pay to Tenant on the Commencement Date a one-time payment equal to the sum of One Hundred Thousand Dollars ($100,000.00) (the “Tenant Inducement Payment”). Notwithstanding the foregoing, in the event that Tenant shall default in the performance of any its obligations hereunder during the first lease year and such default shall result in the termination of the Lease pursuant to Section 15 hereof, the Tenant Inducement Payment shall be recoverable by Landlord and, in such event, the same shall become immediately due and payable to Landlord as additional rent hereunder.

40. TERMINATION OF EXISTING LEASE. Effective as of the Commencement Date, that certain Lease (the “Existing Lease”) dated July 11, 1995 by and between General Sullivan Group, Inc. (to be assigned to Landlord at closing) and Tenant is hereby terminated and shall be of no further force and effect.

IN WITNESS WHEREOF, the parties hereto have executed this Lease or caused this Lease to be executed by their duly authorized representatives the day and year first above written.

LANDLORD:

ROBEAR WEST TRENTON ASSOCIATES, L.P.

BY:	ROBEAR ASSOCIATES, INC.


BY:

			DATE:	/ /

TENANT:

ROLLER BEARING COMPANY OF AMERICA, INC.

BY:	/s/ [ILLEGIBLE]

		DATE:		2/10/99

EXHIBIT “A”

DEMISED PREMISES

LEASE AREA PLAN ROLLER BEARING SECOND FLOOR GENERAL SULLIVAN GROUP WEST TRENTON, NEW JERSEY

LEASE AREA PLAN ROLLER BEARING GROUND FLOOR GENERAL SULLIVAN GROUP WEST TRENTON, NEW JERSEY

EXHIBIT “B”

INTENTIONALLY OMITTED

EXHIBIT “C”

BUILDING RULES AND REGULATIONS

1. The sidewalks, entryways, passages, corridors, stairways and elevators shall not be obstructed by any of the tenants, their employees or agents, or used by them for purposes other than ingress or egress to and from their respective suites. All safes or other heavy articles shall be carried up or into the leased premises only at such times and in such manner as shall be prescribed by the Landlord and the Landlord shall in all cases have the right to specify a maximum weight and proper position or location of any such safe or other heavy article. The Tenant shall pay any damage done to the Building by taking in or removing any safe or from overloading any floor in any way. The Tenant shall pay for the cost of repairing or restoring any part of the Building, which shall be defaced or injured by a tenant, its agents or employees.

2. Each Tenant will refer all contractors, contractor’s representatives and installation technicians rendering any service on or to the leased premises for the tenant to Landlord for Landlord’s approval and supervision before performance of any contractual service. This provision shall apply to all work performed in the Building, including installation of telephones, telegraph equipment, electrical devices and attachments and installations of any nature affecting floors, walls, woodwork, trim, windows, ceilings, equipment or any other physical portion of the Building.

3. No, sign, advertisement or notice shall be inscribed, painted or affixed on any part of the inside or outside of the Building unless of such color, size and style and in such place upon or in the Building as shall first be designated by Landlord; there shall be no obligation or duty on Landlord to allow any sign, advertisement or notice to be inscribed, painted or affixed on any part of the inside or outside of the Building except as specified in a tenant’s lease. Signs on or adjacent to doors shall be in color, size and style approved by Landlord, the cost to be paid by the tenants. Landlord will provide a directory in a conspicuous place, with the names of tenants, Landlord will make any necessary revision in this within a reasonable time after notice from the tenant of an error or of a change making revision necessary. No furniture shall be placed in front of the Building or in any lobby or corridor without written consent of Landlord.

4. No tenant shall do or permit anything to be done in its leased premises, or bring to keep anything therein, which will in any way increase the rate of fire insurance on the Building, or on property kept therein, or obstruct or interfere with the rights of other tenants, or in any way injure or annoy them, or conflict with the laws relating to fire prevention and safety, or with any regulations of the fire department, or with any rules or ordinances of any Board of Health or other governing bodies having jurisdiction over the Building.

5. The janitor of the Building may at all times keep a pass-key, and he and other agents of the Landlord shall at all times, be allowed admittance to the leased premises for purposes permitted in Tenant’s lease.

6. No additional locks shall be placed upon any doors without the written consent of the Landlord. All necessary keys shall be furnished by the Landlord, and the same shall be surrendered upon the termination of this Lease, and the Tenant shall then give the Landlord or his agents explanation of the combination of all locks upon the doors of vaults.

7. The water closets and other water fixtures shall not be used for any purpose other than those for which they were constructed, and any damage resulting to them from misuse or abuse by a tenant or its agents, employees or invitees, shall be borne by the Tenant.

8. No person shall disturb the occupants of the Building by the use of any musical instruments; the making or transmittal of noises which are audible outside the leased premises, or any unreasonable use. No dogs or other animals or pets of any kind will be allowed in the Building.

9. No bicycles or similar vehicles will be allowed in the Building.

10. Nothing shall be thrown out the windows of the Building or down the stairways or other passages.

11. Tenants shall not be permitted to use or to keep in the Building any kerosene, camphene, burning fluid or other illuminating materials.

12. If any tenant desires telegraphic, telephonic or other electric connections, Landlord or its agents will direct the electricians as to what and how the wires may be introduced, and without such directions no boring or cutting for wires will be permitted.

13. If a tenant desires shades, they must be of such shape, color, materials and make as shall be prescribed by Landlord. No outside awning shall be permitted.

14. No portion of the Building shall be used for the purposes of lodging rooms or for any immoral or unlawful purposes.

15. No tenant shall store anything outside the Building or in any common areas in the Building.

Exhibit “D”

COMMENCEMENT DATE AGREEMENT

THIS AGREEMENT, made as of this 10 day of February, 1999, between ROBEAR ASSOCIATES, L.P. (herein called “Landlord”) and ROLLER BEARING COMPANY OF AMERICA, INC. (herein collectively called “Tenant”).

W I T N E S S E T H:

WHEREAS, by that certain lease dated , 1998 (herein called the “Lease”), Landlord leased to Tenant certain premises (the “Premises”) located in the Township of , County, Pennsylvania; and

WHEREAS, Tenant is in possession of the Premises and the term of the Lease has commenced; and

WHEREAS, Landlord and Tenant agreed to enter into an agreement setting forth certain information in respect of the Premises and the Lease;

NOW, THEREFORE, Landlord and Tenant agree as follows:

The term of the Lease commenced on, and the Commencement Date (as such term is defined in the Lease) was, , 19 and the term of the Lease shall expire on , unless the Tenant exercises the option referred to in Paragraph 2 below.

The Tenant has the right to extend the term of the Lease for one (1) five-year period, as described and on the terms set forth in Section 2 of the Lease. If Tenant properly exercises such option, such option term shall commence on , and shall expire on , .

Landlord has measured the size of the Premises and has determined that the same contains square feet. Accordingly, the minimum rent payable during the term is as follows, and Tenant’s proportionate share for the purpose of determining Tenant’s share of operating expenses, real estate taxes and any other item for which Tenant is responsible to reimburse Landlord for a pro rata share is %:

Year/Period	Annual Rent	Monthly Installment	Rent/Sq.Ft.

Exhibit 10.7

FIRST AMENDMENT TO OFFICE LEASE

THIS FIRST AMENDMENT TO OFFICE LEASE dated this 26^th day of July 2004 by and between ROBEAR WEST TRENTON ASSOCIATES, L.P. (hereinafter called “Landlord”) and ROLLER BEARING COMPANY OF AMERICA, INC. (hereinafter called “Tenant”).

BACKGROUND

A. Landlord and Tenant are the parties to a certain Office Lease dated January 10, 1999 (the “Lease”) pursuant to which Landlord leases to Tenant and Tenant leases from Landlord approximately 93,015 rentable square feet (the “Demised Premises”) at the building located at the corner of Silvia Street and Sullivan Way, in the Township of Ewing, County of Mercer, State of New Jersey (the “Building”).

B. Tenant desires to Tenant now desires to terminate the Lease only as it relates to a portion of the original Demised Premises consisting of approximately 7,300 rentable square feet of floor area described as the “Surrender Space” on Exhibit “A-1” attached hereto and made a part hereof (the “Surrender Space”) so that the Demised Premises shall thereafter consist of approximately 85,715 rentable square feet of floor area described as the “Reconfigured Premises” on Exhibit “A-1” (the “Reconfigured Premises”), and Landlord desires to terminate the Lease only as it relates to the Surrender Space upon the terms and conditions set forth herein.

C. Landlord and Tenant desire to reduce the Demised Premises as set forth in the terms provided herein.

NOW, THEREFORE, in consideration of the Reconfigured Premises herein continued and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant, intending to be legally bound hereby agree as follows:

1. CAPITALIZED TERMS. Except otherwise defined herein, capitalized terms used herein shall have the same meanings assigned to such terms under the Lease.

2. SURRENDER SPACE. Upon the terms and conditions set forth herein, Landlord and Tenant hereby terminate the Lease only as it relates to the Surrender Space effective as of the date that the Landlord has re-leased the Surrender Space and Landlord is collecting the Annual Base Rent on such space (the “Surrender Space Termination Date”). In furtherance of the foregoing:

A. On the Surrender Space Termination Date: (i) this Lease shall terminate as it relates only to the Surrender Space as if the Surrender Space Termination Date was the date originally stipulated for the expiration of the Term as it relates to the Surrender Space; (ii) Tenant shall surrender vacant possession of the Surrender Space in broom-clean condition; and (iii) except for those provisions which survive the expiration or earlier termination of the Lease, the Lease shall be of no further force and effect as it relates to the Surrender Space; provided, however, that nothing

herein shall relieve Tenant of any obligations which accrue hereunder prior to the Surrender Space Termination Date.

B. Effective on the Surrender Space Termination Date: (i) the description of the “Demised Premises” set forth on Exhibit “A” attached to the Lease is hereby amended and replaced with the description of the “Reconfigured Premises” set forth on Exhibit “A-1” attached hereto; (ii) the first sentence of Section 2 of the Fundamental Lease Provisions) of the Lease is hereby amended by replacing “Ninety-Three Thousand Fifteen rentable square feet (93,015 rsf)” with Eighty-Five Thousand Seven Hundred Fifteen rentable square feet (85,715 rsf)”; (iii) Section 4 of the Fundamental Lease Provisions) of the Lease is hereby amended by replacing “Fifty-Nine and Fifty-Five hundredths percent (59.55%)” with “Fifty-Four and Eight-Eight hundredths percent (54.88%)”; and (iv) Tenant’s obligation to pay Annual Base Rent shall be adjusted to reflect the reduced rentable square footage of the Reconfigured Premises (which is more specifically set forth in Section 3 hereinbelow) and all other figures and provisions in the Lease affected by the reduction of such square footage shall be adjusted and amended accordingly.

C. In the event Tenant shall hold possession of the Surrender Space after the Surrender Space Termination Date (time being of the essence), then Landlord shall have any and all rights and remedies as set forth in the Lease including, but not limited to, those rights and remedies set forth in Section 18 of the Lease. Further, in the event Tenant shall hold possession of the Surrender Space after the Surrender Space Termination Date (time being of the essence), Tenant hereby agrees to indemnify and hold Landlord harmless from and against any and all claims, damages (including actual and consequential damages) and expenses (including reasonable attorneys’ fees) resulting from a failure to deliver the Surrender Space to a new tenant or occupant for said space in accordance with the terms and conditions of a lease with said new tenant or occupant including, but not limited to, any damages incurred by Landlord resulting from the termination of the lease with said new tenant or occupant.

3. ANNUAL BASE RENT. Commencing on the day following the Surrender Space Termination Date, Section 10 of the Fundamental Lease Provisions of the Lease is hereby amended and replaced with the following:

PERIOD	ANNUAL BASE RENT		MONTHLY INSTALLMENT		$/RSF NNN
03/01/04 – 02/28/05	$	342,860.00	$	28,571.00	$	4.00
03/01/05 – 02/28/06	$	342,860.00	$	28,571.00	$	4.00
03/01/06 – 02/28/07	$	342,860.00	$	28,571.00	$	4.00
03/01/07 – 02/29/08	$	342,860.00	$	28,571.00	$	4.00
03/01/08 – 02/28/09	$	342,860.00	$	28,571.00	$	4.00

4. TENANT IMPROVEMENTS.

A. Except for the Scope of Work attached hereto as Exhibit “B” (“Landlord’s Work”), Landlord shall have no obligation to perform any improvements to either the Reconfigured Premises or to the Surrender Space. Notwithstanding anything to the contrary set forth in the Lease (as amended hereby), with the exception only of the Landlord’s Work as specifically described herein, Landlord

shall have no obligation to construct any buildings, improvements or alterations, or to extend or provide any services on or to the Reconfigured Premises or to or for the benefit of Tenant, or to make any repairs or replacements to the Reconfigured Premises; and Landlord makes no warranty concerning the Reconfigured Premises or the Landlord’s Work, including without limitation any warranties of merchantability, habitability, fitness or any other condition thereof for any particular purpose.

B. All work described in this Scope of Work shall be furnished, installed and shall be performed by Landlord, utilizing a general contractor selected by Landlord.

C. In the event Tenant requests that Landlord perform any work to the Reconfigured Premises other than as specifically set forth herein, said work shall be considered a “Tenant Change Order” and Tenant shall pay any increase in the cost of constructing the Landlord’s Work (including, without limitation, additional architect’s fees) resulting from such Tenant Change Order. In constructing the Landlord’s Work, Landlord reserves the right to: (i) make substitutions of material of equivalent grade and quality when and if any specified material shall not be readily and reasonably available, and (ii) make changes necessitated by conditions met during the course of construction; provided, however, that Tenant’s approval of any substantial change shall first be obtained, which approval shall not be unreasonably withheld, conditioned or delayed. Tenant Change Orders shall not be permitted without the prior written approval of Landlord, which approval shall not be unreasonably withheld, conditioned or delayed by Landlord so long as the Tenant Change Order does not delay the construction of the Landlord’s Work. If Landlord approves any Tenant Change Order then, notwithstanding anything to the contrary contained herein, Tenant shall pay any increase in the cost of constructing the Landlord’s Work resulting from such Tenant Change Order within thirty (30) days after receipt of Landlord’s invoice therefor. As a condition to Landlord’s approval of any Tenant Change Order, Landlord may require that, prior to Landlord’s commencement of any work related to such Tenant Change Order, Tenant shall pay to Landlord one hundred percent (100%) of the amount estimated by Landlord to become due to Landlord with respect to such Tenant Change Order, which prepaid amount shall be applied against the last of the costs incurred by Landlord with respect to such Tenant Change Order.

5. OTHER MODIFICATIONS. Except as expressly amended hereby, the Lease shall remain in full force and effect unmodified. Tenant expressly acknowledges that the provisions of Section 15 of the Lease (relating to Default) remains in full force and effect.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the date set forth above.

	LANDLORD:

	ROBEAR WEST TRENTON ASSOCIATES, L.P.
	a Pennsylvania Limited Partnership

WITNESS:	By:	ROBEAR, INC.
		its General Partner


/s/ [ILLEGIBLE]	By:	/s/ Alan S. Werther
			Name: ALAN S. WERTHER
			Title: VICE PRESIDENT


ATTEST:	TENANT:

	ROLER BEARING COMPANY OF AMERICA, INC.


/s/ [ILLEGIBLE]	By:	/s/ Robert W. Crawford
			Name: Robert W. Crawford
			Title: Director

EXHIBIT “A”

SURRENDER SPACE

RECONFIGURED PREMISES

Exhibit “A-1”

Exhibit 10.8

INDENTURE OF LEASE made as of March 30, 2004 by and between RAYMOND HUNICKE, LLC, a Connecticut limited liability company (hereinafter “Lessor”) and ROLLER BEARING COMPANY OF AMERICA, INC., a Delaware corporation (hereinafter “Lessee”).

WITNESSETH:

In consideration of the mutual promises, covenants and agreements herein contained and in consideration of the rents hereinafter reserved, Lessor does hereby let to Lessee, and Lessee does hereby take and lease from Lessor the demised premises hereinafter described for commercial use upon all of the terms, promises, covenants and agreements hereinafter set forth.

1. Description of Demised Premises.

1.1 The premises subject to this lease are real property and a commercial building located thereon containing approximately 41,395 square feet, situated at 102 Willenbrock Road, Oxford, CT, all as more particularly described in Exhibit A attached hereto and made a part hereof.

1.2 The premises referred to in paragraph 1.1 hereof, together with any land improvements such as grading and paving, are referred to hereafter as the “Demised Premises”.

2. Term.

2.1 The initial term of this lease (the “Initial Term”) shall commence on July 1, 2004 (the “Commencement Date”). Lessor shall deliver the Demised Premises to Lessee on the Commencement Date totally vacant, with all building systems in good working order and the roof in watertight condition. The Initial Term shall continue for a period of ten (10) years and three (3) months thereafter (ending September 30, 2014), at a rental as computed under the terms this lease. Notwithstanding anything to the contrary herein, if Lessor fails to deliver the Demised Premises on the Commencement Date to Lessee totally vacant, with all building systems in good working order and the roof in watertight condition, Lessee shall have the right to terminate this lease by providing written notice to Lessor, effective on the date of Lessee’s termination notice.

2.2 Notwithstanding anything to the contrary herein, during the first three (3) months of the Lease Term, Lessee shall not be required to pay the Fixed Annual Rental as defined in Section 3.1 hereof, but shall be required to pay, as additional rent, all utilities, taxes, insurance premiums and expenses set forth in this lease.

2.3 Lessee shall have two (2), five (5)-year options to extend this lease upon the same terms and conditions as are set forth herein except as to rent which shall be as set forth in Section 3.5. Lessee shall exercise the options herein granted by notice in writing to Lessor given no later than one hundred eighty (180) days prior to the expiration of the lease term or option period then expiring. The “Term” shall mean the Initial Term as may be extended by the foregoing option periods, unless sooner terminated pursuant to the terms hereof.

3. Rent.

3.1 Lessee shall pay to Lessor, at Lessor’s address shown in Article 37, or at such other address as Lessor may from time to time designate in writing to Lessee, a fixed annual rental (the “Fixed Annual Rental”) in accordance with the Rental Schedule set forth below (the “Rental Schedule”), payable in equal consecutive monthly installments of one-twelfth (1/12) of said Fixed Annual Rental. Each such monthly installment shall be due and payable in advance on the first day of each calendar

month during the Term of this Lease. Lessee shall, upon the execution of this Lease, pay to Lessor the rental for the first month of the Lease.

3.2 The Rental Schedule is set forth below:

Period	Fixed Annual Rental		Monthly
October 1, 2004 – September 30, 2014	$	217,320.00	$	18,110.00

3.3 Lessee has deposited with Lessor as security for Lessee’s performance under this Lease an amount equal to one month’s Fixed Annual Rental hereunder (the “Security Deposit”), such sum to be held by Lessor until the expiration of the Term unless otherwise used by Lessor to cure Lessee defaults under this lease in accordance with Article 30 below. The Security Deposit shall not bear interest. If Lessee shall not be in default under this lease beyond the expiration of any notice and cure period on the last day of the Term, Lessor shall return to Lessee the balance of the Security Deposit within fifteen (15) days. In the event of a sale of the Demised Premises, Lessor shall transfer the Security Deposit to the buyer provided the buyer accepts such transfer, or return the Security Deposit to Lessee, and in either case Lessor shall thereupon be released from all liability for the return of the Security Deposit. Lessor shall notify Lessee of such transfer in writing, in which case Lessee shall look solely to the buyer for the return of the Security Deposit.

3.4 Lessee has deposited with Lessor the first month’s Fixed Annual Rental monthly payment.

3.5 Fixed Annual Rental for each option period shall be the greater of the rental being paid for the Lease Term (or Option Term) immediately preceding or adjusted as of the first day of the option period based upon the consumer price index (“CPI”) then in effect compared to the CPI in effect as of the initial date of this Lease (or the initial date of the first option period), subject however, to a maximum annual CPI increase of five percent (5%) for the first option period or for the second option period. The CPI used shall be the Wage Earners and Clerical Workers Index, all items, U.S.

4. Taxes and Assessments.

4.1 Lessee shall, as additional rent, pay and discharge punctually, as and when the same shall become due and payable without penalty, all assessments, water rents, rates and charges, sewer rents and charges, and other governmental impositions and charges of every kind and nature whatsoever, special and several, extraordinary as well as ordinary, and each and every installment thereof, which shall or may during the Term be charged, laid, levied, assessed, imposed, become due and payable, or become liens upon the Demised Premises or any part thereof and all improvements thereon, or any appurtenances or equipment owned by Lessee or any sublessee thereon or therein or any part thereof, under or by virtue of all present or future Legal Requirements (collectively, “Taxes”). “Legal Requirements” shall mean all laws, ordinances, requirements, orders, directions, rules or regulations of the federal, state, county and city governments and of all other governmental authorities whatsoever. Nothing herein contained, however, shall require Lessee to pay any municipal, state or federal income taxes assessed against Lessor or any municipal, state or federal capital, estate, succession, inheritance or transfer taxes of Lessor. Lessee shall upon submission of a billing therefor with a copy of the applicable Tax bill(s) attached, pay to Lessor within thirty (30) days of receipt of such billing any Taxes that are not billed directly to Lessee. Lessee shall have the right to apply for the conversion of any assessment for local improvements in order to cause the same to be payable in annual installments and Lessee shall pay the assessment in installments if permitted to do so by the taxing authority. Lessee shall, within ten (10) days after the time above provided for the payment by Lessee of any tax, assessment, water, rent, rate and charge, sewer rent, and

other governmental imposition and charge, produce and have available to Lessor for inspection official receipts and other satisfactory evidence of such payment at the Lessee’s principal office during Lessee’s normal business hours, subject to Lessee’s reasonable confidentiality requirements.

4.2 Except as otherwise provided in paragraph 4.1, all Taxes that shall become payable during each of the calendar or fiscal years, as the case may be, in which the Term commences and in which the Term terminates, shall be apportioned and Lessee shall pay a share of same in accordance with the portions of each such year during which the Term shall be in effect.

4.3 Lessee shall have the right to contest or review by legal proceedings, or in such other manner as it may deem suitable (which, if instituted, Lessee shall conduct promptly at its own expense, and free of any expense to Lessor, and if necessary, in the name of Lessor) any Tax. Nevertheless, Lessee shall promptly pay all Taxes if at any time the Demised Premises or any part thereof shall be in danger of being forfeited or lost. The full amount recovered as a result of such review or proceedings shall belong solely to Lessee.

4.4 Lessee shall be liable for and shall pay or cause to be paid before delinquency all taxes levied or assessed against trade fixtures, equipment, furnishings, merchandise and other personal property of whatsoever kind and to whomsoever belonging situate or installed in or upon the Demised Premises whether or not affixed to the realty, provided however, Lessee shall have the same power of contest or review of the same as is accorded in paragraph 4.3.

5. Quiet Enjoyment.

5.1 Lessor covenants with Lessee that it has good right to lease the Demised Premises in the manner aforesaid, that the Demised Premises are free and clear of all encumbrances except as specified in Exhibit A, and that it will suffer and permit the Lessee (it keeping all the covenants on its part, as hereinafter contained) to occupy, possess, and enjoy said premises during the Term aforesaid, without hindrance or molestation from it or any person claiming by, from or under it.

6. Fire and Extended Coverage Insurance.

6.1 During the Term of this lease Lessee shall keep all present and future buildings, improvements and fixtures on, in, or appurtenant to the Demised Premises and all improvements thereon adequately insured against loss or damage by fire, the perils including in Extended Coverage, vandalism and malicious mischief, explosion by boiler and other causes, rent insurance, flood and war risk insurance if the same becomes available at reasonable rates during the Term of this lease. Each policy of insurance shall name Lessor and Lessee and People’s Bank as insureds, as their respective interests may appear under this Lease, and shall be placed with companies qualified to do business in the state of Connecticut. Each policy shall be in an amount equal to the full replacement value of the property so insured. Lessee shall at Lessor’s request furnish Lessor with certificates of all of the foregoing policies. Such policies shall be endorsed from time to time to show the interest of any mortgagee of the Demised Premises. Lessee shall insure that each such policy shall provide that the same may not be cancelled or reduced without thirty (30) days’ written notice to Lessor and any mortgagee of the Demised Premises whose name and address have been given to Lessee in writing.

7. Public Liability Insurance.

7.1 It is further agreed that Lessee shall, at its own expense, during the entire Term of this lease, carry owner’s and lessee’s general liability and property damage insurance covering the Demised Premises and Improvements thereon with limits of $2,000,000 for personal injury and

$1,000,000 for property damage, the policies for the same to be written in standard forms; and Lessee shall name Lessor as a named insured therein and deliver certificates of said policies to Lessor, but if such policies in such amounts may not be commercially reasonably available, Lessee shall use reasonable diligence to procure such insurance coverage as shall nearly approximate such coverage. Lessee covenants and agrees to assume exclusive control of the Demised Premises, and all tort liabilities incident to the control or leasing thereof, to defend and to save Lessor harmless from all claims or damage arising on account of any injury or damage to any person or property on said premises or otherwise resulting from the use and maintenance and occupancy of the premises or anything on said premises or facility kept or used thereon.

8. Utilities.

8.1 Lessee shall pay all electricity, water, gas, fuel, and all other utilities consumed at the Demised Premises during the Term. Lessor represents and warrants that all necessary utilities, including without limitation water, sewer, gas, electricity, and heat are available and separately metered to the Demised Premises.

9. Compliance with Laws and Ordinances.

9.1 Lessee further covenants to comply with and to conform to all Legal Requirements and Insurance Underwriting requirements applicable to the Demised Premises. Lessee agrees to save Lessor harmless from all fines, penalties or costs for violation of or noncompliance with the same, except as such is the result of a condition pre-existing the Commencement Date. Lessee may contest by due legal proceedings any Legal Requirement in good faith and may defer compliance during the period of such contest to the extent permitted under such Legal Requirements.

10. Assignment - Sublease.

10.1 Lessee may not, without the written consent of Lessor (not to be unreasonably withheld, conditioned or delayed), assign this lease or sublease all or any part of the Demised Premises. Any such assignment or sublease approved by Lessor shall not release Lessee from liability hereunder and Lessee shall remain jointly and severally liable with such assignee or sublessee for performance under this Lease unless expressly waived in writing by Lessor. Notwithstanding anything to the contrary herein, Lessee may, without the prior notice to or consent of Lessor, assign this lease or sublease all or any part of the Demised Premises to: (i) an entity controlled by, controlling or under common control with Lessee, or in which Lessee owns a legitimate, substantial and material interest for a legitimate purpose; or (ii) an entity acquiring or succeeding to substantially all of the business, or substantially all of a business unit, of Lessee, by merger, spin-off, reorganization, consolidation, acquisition (of assets or equity) or otherwise. For this purpose “control” shall mean the possession of the power to direct or cause the direction of the management and policies of such entity through the ownership of a sufficient percentage of voting securities.

11. Default.

11.1 Lessee shall be in default under this lease if:

(a) Lessee shall be in default in the payment of any rent or additional rent for a period of fifteen (15) days after receipt of written notice thereof from Lessee specifying the default; or

(b) Lessee shall be in default in the performance of any other term, covenant or condition of this lease and such default has not been cured within thirty (30) days after notice by Lessor to

Lessee specifying such default and requiring it to be remedied, or where such default cannot reasonably be remedied within such period of thirty (30) days, if Lessee shall not have, in good faith, commenced the remedying thereof within such period of time and shall not be proceeding with due diligence to remedy it; or

(c) Lessee becomes insolvent, files for bankruptcy (or is involuntarily placed in bankruptcy) under the laws of the United States, makes an assignment of all its assets for the benefit of creditors or is placed in receivership and said receiver, insolvency or bankruptcy proceedings has not been discharged ninety (90) days after such proceedings are instituted.

11.2 Subject to the provisions of paragraph 11.1, if Lessee shall be in default under this Lease, Lessor, at its option, may terminate this lease without further notice to Lessee, and upon such termination, Lessee shall quit and surrender the Demised Premises to Lessor, but such termination shall not affect Lessor’s rights to recover damages or exercise any other rights as hereinafter provided.

11.3 Upon termination of this lease as aforesaid, Lessor may (i) re-enter and resume possession of the Demised Premises and remove all persons and property therefrom either by summary process proceedings or by a suitable action or proceeding, at law or in equity, or by force or any other legal means, without being liable for any damages therefor and (ii) Lessor may relet the whole or any part of the Demised Premises on behalf of Lessee for a period equal to, greater or less than the remainder of the then Term of this Lease, at such rental and upon such terms and conditions as Lessor shall deem reasonable, provided however, that Lessor shall make a bona fide effort to obtain fair market rental, to any lessee it may deem suitable and for any use and purpose it may deem appropriate. Lessor shall not be liable, providing it is acting in good faith, in any respect for the failure to relet the Demised Premises, or, in the event of such reletting, for failure to collect the rent thereunder and any sums received by Lessor on a reletting in excess of the rent reserved in this lease, shall belong to Lessor.

11.4 Upon the termination of this lease as aforesaid, Lessor shall forthwith be entitled to recover from Lessee all damages sustained by Lessor as a result of Lessee’s default, including, but not limited to, the following items:

(a) If the annual rent provided for in paragraph 3.1, 4.1, 4.2, 4.3 and 4.4 exceed the net sum received by Lessor on any reletting, the amount of such excess as and when same become due and payable.

(b) All expenses of operating the Demised Premises while they are vacant; all expenses, including reasonable attorneys’ fees, incurred by Lessor in recovering possession of the Demised Premises and reletting the same; and all costs of performing any work to be done by Lessee under this lease.

(c) Broker’s commission at the then established rate incurred in good faith by Lessor, but limited to the unexpired term only.

11.5 Lessor and Lessee hereby expressly waive their right to a trial by jury in any action brought by either party.

11.6 If Lessor shall neglect or fail to perform or observe any of the covenants on the part of Lessor herein contained, and such default shall continue more than thirty (30) days, without Lessor having commenced the remedy of said default, after written notice of such default is duly given by Lessee, or if Lessor shall fail to continue to conclusion the action necessary to remedy said default with diligence and dispatch, then Lessee may either itself cause such default to be made good and deduct the

cost and expense thereof from the next succeeding installments of rent, it being understood and agreed that the exercise of said right by Lessee or the exercise by Lessee of a right or option under any other provision of this lease shall not preclude or limit the right of the lessee to exercise any other option or any other rights that it may have under this lease or by law.

11.7 Upon the correction of any default, this lease shall be deemed to be in full force and effect.

11.8 If any party brings an action or proceeding involving the Demised Premises to enforce the terms hereof or to declare rights hereunder, the Prevailing Party (as defined below) in any such proceeding, action, or appeal therefrom, shall be entitled to reasonable attorneys’ fees. Such fees may be awarded in the same suit or recovered in a separate suit, whether or not such action or proceeding is pursued to decision or judgment. The term “Prevailing Party” shall include, without limitation, a party who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment or the abandonment by the other party of its claims or defense. The attorneys’ fees award shall not be computed in accordance with any court fee schedule but shall be such as to fully reimburse all attorneys’ fees reasonably incurred.

12. Termination.

12.1 At the expiration or sooner termination of this lease, Lessee shall quit and surrender the Demised Premises, and the improvements on said premises (excluding Lessee’s Property (as defined below)) shall belong absolutely to Lessor and Lessee shall promptly remove all of Lessee’s Property. “Lessee’s Property” shall mean all of Lessee’s trade fixtures, furniture, equipment and supplies, including without limitation racking, moveable partitions, panels, generators and computers provided or installed by or for the benefit of Lessee. At Lessor’s option, however, Lessee at its cost shall remove all improvements on the Demised Premises made by Lessee and return the Demised Premises to substantially the condition existing at the commencement of this lease, reasonable wear and tear excepted and subject to Articles 23 and 24 below, and except that Lessee need not remove such improvements to the Demised Premises as have been previously reviewed by and approved by Lessor. Improvements made by Lessee to create office space within the Demised Premises and changes made to the HVAC systems to accommodate Lessee’s improvements will become the property of Lessor on the termination of this lease. Lessee shall have the right to remove Lessee’s Property at any time during the Term.

13. Subordination.

13.1 Lessor shall be under no obligation to subordinate its fee interest in favor of any leasehold mortgage or otherwise except at Lessor’s sole discretion. Lessee is aware of the mortgage on the property in the original face amount of $1,700,000.00. Prior to the Commencement Date, at Lessor’s cost Lessor shall cause the current mortgagee to enter into a recordable subordination and non-disturbance agreement among the mortgagee, Lessor and Lessee which states, among other things, that so long as Lessee is not in default hereunder beyond the expiration of any applicable notice and cure period, it will not disturb Lessee of its rights under this lease and will not join Lessee as a defendant in any proceeding that may be instituted to foreclose or enforce the mortgage. Lessee shall have the right to terminate this lease if Lessor defaults under this Section 13.1; time is of the essence hereunder.

13.2 Lessee agrees upon the written request of Lessor to subordinate all of its leasehold rights under this lease to the right of any institutional or private first mortgage lender upon such terms as such lender may reasonably request provided that such lender agrees in a recordable writing entered into among lender, Lessor and Lessee that, so long as Lessee is not in default hereunder beyond the expiration of any applicable notice and cure period, it will not disturb Lessee of its rights under this

lease and will not join Lessee as a defendant in any proceeding that may be instituted to foreclose or enforce the mortgage.

14. Annual Rent to be Net to Lessor.

14.1 It is the intention of the parties hereto that the annual rent payable to Lessor pursuant to paragraph 3 hereof shall be net to Lessor so that this lease shall yield to Lessor said annual rent specified in said paragraph 3 during the Term of this lease, and, to the extent specifically set forth herein, that all costs, expenses and obligations relating to the Demised Premises shall be paid by Lessee.

15. Liability of Lessor.

15.1 Lessor, its agents, servants and employees, shall not be liable for any loss, damage, injury or other casualty of whatsoever kind and nature or by whomsoever caused, to the person or property of anyone (including Lessee) in, on or off the Demised Premises arising out of or resulting from Lessee’s use, possession, improvement or operation thereof, or from the installation, existence, use, maintenance, condition, repair, alteration or removal of any equipment thereon, except if due in whole or in part to intentional, reckless or negligent acts on the part of Lessor, its agents, servants, contractors or employees and Lessee does not receive insurance proceeds for such loss, damage, injury or other casualty from insurance then carried by Lessee pursuant to the terms of paragraph 7 hereof. Lessee hereby agrees to indemnify and hold Lessor, its agents, servants and employees, harmless from and against all claims for loss, damage, injury or other casualty arising from the use, possession, improvement or operation of the Demised Premises by Lessee except as aforesaid. Lessor shall indemnify and hold harmless Lessee, its agents, servants and employees, from and against all claims for loss, damage, injury or other casualty arising from the intentional, reckless or negligent acts on the part of Lessor, its agents, servants, contractors or employees. Notwithstanding anything to the contrary herein, to the full extent permitted by law, each party waives, and the other shall not be liable to the waiving party for, any claim against the other party or the other party’s agents, invitees, employees or contractors, for loss of business opportunity, loss of profits, loss of income, economic loss or other special or consequential losses or damages or punitive damages.

16. Waiver.

16.1 No receipt of monies by Lessor from Lessee after the termination or cancellation of this lease shall reinstate, continue or extend the Term of this lease, or affect any notice theretofore given to Lessee, or operate as a waiver of the right of Lessor to enforce the payment of the fixed or additional rent or rents then due or thereafter falling due, or operate as a waiver of the right of Lessor to recover possession of the Demised Premises by proper suit, action, proceeding or remedy; it being agreed that after the service of notice to terminate or cancel this lease, or the commencement of suit, action or summary process proceedings or any other remedy, or after a final order or judgment for the possession of the Demised Premises, Lessor may demand, receive and collect any monies due or thereafter falling due, without in any manner affecting such notice, proceedings, suit, action, order or judgment; and any and all such monies collected shall be deemed to be payment on account of the use and occupancy of the Demised Premises or, at the election of Lessor, on account of Lessee’s liability hereunder.

16.2 The receipt by Lessor of rent with knowledge of the breach of any of the terms, covenants, conditions and agreements of this lease on the part of Lessee shall not be deemed a waiver of such breach and Lessor may accept such payment without prejudice to Lessor’s right to pursue any remedy in this lease provided. No payment by Lessee or receipt by Lessor of a lesser amount than the fixed monthly rent herein stipulated shall be deemed to be other than on account of said stipulated rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment of

rent be deemed an accord and satisfaction and Lessor may accept such check or payment without prejudice to Lessor’s right to receive the balance thereof, provided, however, that if Lessee is the Lessor’s creditor and Lessee holds an assignment of the rents due hereunder as security, nothing herein shall be deemed to limit or affect Lessee’s rights under such assignment.

16.3 A waiver by either party of any breach by the other of any of the terms, covenants, conditions and agreements of this lease shall be limited to the particular instance and shall not operate or be deemed as a waiver of any future breaches of said terms, covenants, conditions and agreements of this lease; and the failure of either party to enforce any agreement, condition, covenant or term, by reason of its breach by the other party, after notice had, shall not be deemed to void or affect the right of the non-defaulting party to enforce the same agreement, condition, covenant or term on the occasion of such subsequent breach or default.

16.4 No provision of this lease shall be deemed to have been waived by either party unless such waiver shall be in writing signed by the waiving party.

17. Waiver of Subrogation.

17.1 Lessee will obtain, if available, for the benefit of Lessor, a waiver of the right of subrogation on all policies required to be maintained by Lessee pursuant to Paragraphs 6 and 7 of this lease.

18. Improvements and Alterations.

18.1 Lessor acknowledges that Lessee intends to make substantial alterations and improvements to the Demised Premises. Lessee agrees that it will, prior to making any such improvements or alterations, provide Lessor with plans and specifications detailing the nature and extent of same for Lessor’s approval, which approval will not be unreasonably withheld, conditioned or delayed. In the event that Lessor disapproves, Lessor shall provide Lessee in writing with its reasons for such disapproval and the parties thereafter agree to attempt to resolve any difference by good faith negotiation. All such repairs, improvements and alterations shall be at the sole expense of Lessee and shall fully comply with all Legal Requirements. If Lessee fails to perform the work substantially in accord with the approved plans, such failure shall be a default hereunder and Lessor may complete said improvements and charge Lessee the costs of doing so, or, if reasonable, remove the same with the intent of returning the Demised Premises to their original condition with a charge to Lessee of doing so.

19. Lessee’s Obligation to Discharge Mechanic’s Lien.

19.1 If, as a result of Lessee performing its obligations hereunder or in the making of any improvements, repairs, replacements, alterations, installations, and/or changes in or upon the Demised Premises as permitted hereunder, any mechanic’s or other lien or order for the payment of money shall be filed against the Demised Premises by reason of, or arising out of any labor or material furnished or alleged to have been furnished or to be furnished to, or for, Lessee at the Demised Premises or for or by reason of any change, alteration or addition by Lessee, or the cost or expense thereof, or any contract relating thereto, or against Lessor as fee owner thereof by reason of such work or contract of Lessee, Lessee shall cause the same to be cancelled and discharged of record, by bond or otherwise, at the election and expense of Lessee, within thirty (30) days after having been requested in writing so to do by Lessor, and shall also defend, on behalf of Lessor, at Lessee’s sole cost and expense, any action, suit or proceeding which may be brought thereon or for the enforcement of such lien, liens, or orders, and Lessee will pay any damages and discharge any judgment entered therein and save Lessor harmless from and indemnify it against any claim, damage or costs, including reasonable attorneys’ fees, resulting therefrom.

20. Certificates.

20.1 Each party agrees from time to time upon no less than fifteen (15) days’ prior written request of the other to execute, acknowledge and deliver to the other a statement in writing certifying that this lease is unmodified and in full force and effect (or if there has been any modification, that the same is in full force and effect as modified and stating the modifications) and the dates to which the rent has been paid and whether, to its knowledge, there exists any uncured default by the other party, and if so, the nature of such default. Any such statement delivered pursuant to this paragraph may be relied upon by any prospective purchaser or mortgagee of Lessor’s or Lessee’s interest in the Demised Premises, by the holder of any mortgage of Lessor’s or Lessee’s interest in the Demised Premises or by any sublessee of Lessee.

21. Holding Over.

21.1 In the event Lessee shall continue in occupancy of the Demised Premises after the expiration of the Term of this lease or any renewal thereof, such occupancy shall not be deemed to extend or renew the Term of this lease, but such occupancy shall continue as a tenancy from month to month upon the terms, covenants, conditions and provisions herein contained, and at a Fixed Annual Rental 25% greater than that in effect during the last year of the term of this lease or any renewal thereof, prorated and payable for the period of such occupancy.

22. Conveyance by Lessor and Limit of Liability.

22.1 Lessor shall be entitled to convey and otherwise dispose of the Demised Premises and shall be entirely free and released of all covenants and obligations of Lessor after the Demised Premises are so conveyed, provided the transferee assumes in writing all covenants and obligations of Lessor. Lessor shall not be subject to any liability resulting from any act or omission or event occurring after such conveyance. The purchaser, or any person who takes title to the Demised Premises from Lessor or any person who subsequently holds title to the Demised Premises, shall be deemed to have assumed and agreed to carry out any and all covenants on Lessor’s part to be performed under this lease. No further agreement will be required between Lessor and Lessee and any person holding title subsequent to Lessor in connection with the assumption of the obligations of Lessor hereunder. Lessee shall owe the same duties to any successor owner that Lessee owes to Lessor. Lessor agrees to provide the security deposit to any successor owner.

23. Fire and Other Casualty.

23.1 In the event of damage to or destruction of any improvements comprising part of the Demised Premises by fire or other casualty before the expiration of this lease, Lessee shall restore, rebuild or reconstruct the improvements to a condition substantially equivalent to their condition prior to such damage or destruction and Lessee shall be entitled to all insurance proceeds payable because of such damage or destruction unless the first mortgagee of Lessee’s leasehold interest refuses to make such proceeds available, in which event the lease shall terminate and the Lessee shall have no further obligations hereunder.

24. Eminent Domain.

24.1 In the event the whole of the Demised Premises shall be taken under the power of eminent domain, this lease shall thereupon terminate as of the date possession shall be so taken.

24.2 In the event that at any time during the Term, proceedings in eminent domain

shall have been instituted with respect to less than the whole of the Demised Premises, and if such proceedings in eminent domain and/or any action consequent thereon, in Lessee’s judgment, which judgment, however, shall not be unreasonably or arbitrarily exercised, renders the Demised Premises unusable for Lessee’s operations as previously conducted thereon, Lessee shall have the right upon notice to Lessor, with respect thereto (rendered within sixty (60) days after Lessee shall have ascertained or been duly notified by Lessor (whichever shall first occur) of the existence of such proceedings in eminent domain) to terminate this lease effective as of the date possession shall be taken by or under the condemner.

24.3 In the event this lease shall be terminated, as provided in the preceding Paragraphs 24.1 or 24.2, the Demised Premises shall belong absolutely to Lessor, and Lessee shall promptly remove all of Lessee’s Property and each party hereto shall thereupon be released from every obligation hereunder to the other, except:

(a) With respect to any covenants the breach of which occurred prior to the lease termination date.

(b) The obligation of Lessor to refund to Lessee any rent paid to Lessor, and to reimburse Lessee in the amount of any taxes (as respects the Demised Premises), in respect of any period subsequent to termination date.

24.4 In the event a portion of the Demised Premises shall be taken under the power of eminent domain, and Lessee shall elect not to terminate the lease, as provided in Paragraph 24.2 hereof, Lessor shall diligently attempt to restore the building located on the Demised Premises to an architectural unit, and the Fixed Annual Rental and all additional rent payable by Lessee hereunder shall be equitably reduced (effective as of the date possession shall be taken by the condemner under the power of eminent domain). If the parties shall be unable to agree upon such reduction, if any, then either party may refer the disputed matter to arbitration and determination thereby, as hereinafter provided.

25. Use of Premises.

25.1 Lessee shall have the right to use the Demised Premises only for the following purposes: corporate offices; laboratory testing and manufacturing of Tenant’s products; and uses incidental to the foregoing. It shall be Lessee’s sole obligation to obtain all licenses, permits and franchises required by it for its use of the Demised Premises other than the current Certificate of Occupancy to be provided by Lessor prior to the Commencement Date, and no failure to obtain the same, nor any revocation thereof by any governmental authority of any such licenses, permits or franchises heretofore or hereafter granted by any such governmental authority shall in any manner affect this lease or diminish the amount of rent or any other payments or charges payable by Lessee hereunder.

26. Repairs.

26.1 Lessee shall, at its sole cost and expense, take good care of the Demised Premises and all improvements thereon or hereafter erected thereon and keep and maintain the interior and exterior of the same, structural and nonstructural, in good, safe and substantial order and condition (reasonable wear and tear excepted), shall not do or suffer any waste with respect thereto and Lessee shall, at its sole cost and expense, make all necessary repairs to the Demised Premises and shall keep the grounds and land improvements in good order and condition. If any of the foregoing repairs or maintenance is due to the negligence or willful misconduct of Lessor or its agents, employees, contractors or invitees, Lessor shall reimburse Lessee for such costs incurred within thirty (30) days after invoice. All of such repairs are to be substantially equal in quality to the original work. In the event that Lessor shall be of the opinion that

Lessee is not complying with the provisions of this paragraph, it shall so notify Lessee in writing specifying the fault or defect with respect to which non-compliance is claimed and Lessee shall promptly remedy the same. In the event that Lessee shall be of the opinion that the provisions of this paragraph are being complied with respect to the alleged fault or defect, the issue shall be submitted to arbitration as herein provided.

26.2 All work done by Lessee in connection with any repairs or in connection with alterations, installations and changes in the Demised Premises shall be in compliance with applicable Legal Requirements and Insurance Underwriting requirements.

27. Access to Premises.

27.1 Lessee shall permit Lessor or Lessor’s agents to enter the Demised Premises at all reasonable hours, for the purpose of inspecting the same, or of making repairs or performing any other work on the Demised Premises required or permitted to be made by Lessor pursuant to this lease.

27.2 Lessee shall also permit Lessor or Lessor’s agents to enter the Demised Premises at all reasonable hours for the purpose of showing the Demised Premises to prospective mortgagees or to persons wishing to purchase the same and, within five (5) months prior to the expiration of the term of this lease, to persons wishing to hire the Demised Premises; and Lessee shall, within five (5) months prior to the expiration of the term of this lease, permit the usual notices of “To Let” and “For Sale” to be placed upon the Demised Premises and to remain thereon without molestation.

27.3 Notwithstanding the foregoing, except in emergencies hereunder, all entries by Lessor shall be: (i) at reasonable times and after at least twenty-four (24) hours’ prior oral or written notice to Lessee; (ii) conducted so as not to unduly interfere with Lessee’s use and occupancy of the Demised Premises; and (iii) subject to Lessee’s reasonable security and confidentiality requirements from time to time (including the accompaniment of a Lessee representative if necessary in Lessee’s sole discretion)

28. Environmental Indemnity.

28.1 Lessee shall not use or allow the Demised Premises to be used for the release, storage, use, treatment, disposal or other handling of any hazardous substances, except in compliance with applicable Legal Requirements. Lessee shall comply with all Legal Requirements governing the release, discharge, emission, or disposal of any hazardous substances on the Demised Premises. Lessee covenants and agrees to indemnify, defend and hold Lessor harmless from and against any and all liens, claims, demands, judgments, damages, penalties, fines, costs, loss or expenses (including reasonable attorney, consultant and expert fees) that arise as a result of the presence, suspected presence or discharge of toxic or hazardous substances from, on or in the Demised Premises caused by the actions of Lessee, its agents or employees and first occurring during Lessee’s possession of the Demised Premises. Without limiting the generality of the foregoing, this indemnification by Lessee shall include reasonable costs incurred in connection with any site investigation or any remedial, removal or restoration work required to return the property to a salable condition resulting from the events indemnified against. In any event, as of the Commencement Date, Lessor has no knowledge of any toxic or hazardous substances on or in the Demised Premises.

28.2 Lessor shall indemnify, defend and hold Lessee harmless from and against any and all liens, claims, demands, judgments, damages, penalties, fines, costs, loss or expenses (including reasonable attorney, consultant and expert fees) that arise as a result of the presence, suspected presence or discharge of toxic or hazardous substances or materials at any time: (i) from, on, around or in the

Demised Premises, except to the extent caused by the actions of Lessee, its agents or employees during Lessee’s possession of the Demised Premises; or (ii) due to the act or omission of Lessor or its agents, employees, invitees or contractors. Without limiting the generality of the foregoing, this indemnification by Lessor shall include reasonable costs incurred in connection with any site investigation of any remedial, removal or restoration work resulting from the events indemnified against.

28.3 Lessor represents and warrants that there are, or will be, no underground or above ground storage tanks at the Demised Premises on the Commencement Date and the removal of all such tanks was conducted in accordance with all applicable Legal Requirements.

29. Option to Purchase.

29.1 In consideration of and as a material inducement to Lessee to enter into this Lease, Lessor hereby grants to Lessee the option to purchase the Demised Premises (the “Option”) on and subject to the following terms and conditions:

(a) Term. The term of this Option shall commence 180 days prior to the expiration of the Initial Term and continue during each of the 5 year renewal terms hereunder provided that this Lease is still in full force and effect and has not been earlier terminated.

(b) Purchase Price of the Demised Premises. The full purchase price of the Demised Premises shall be two million dollars ($2,000,000.00) provided the option to purchase is exercised within 180 days prior to the expiration of the Initial Term. The full purchase price of the Demised Premises if the option to purchase is exercised after the expiration of the Initial Term shall be the Fair Market Value of the Demised Premises as determined by three real estate appraisers, one chosen by Lessor, one chosen by Lessee and the third chosen by the other two appraisers. The cost of the appraisal shall be equally borne by Lessor and Lessee.

(c) Exercise of Option. Lessee may exercise the Option by giving Lessor written notice thereof anytime prior to the expiration of the term of this Option.

(d) Closing and Possession. The closing of the sale of the Demised Premises shall occur at a time and place designated by Lessee within one hundred twenty (120) days after the date of Lessee’s notice that it is exercising the Option.

(e) Condition of Title. Lessor shall convey title to the Demised Premises by general warranty deed, free and clear of all liens, encumbrances, mortgages, easements, conditions, reservations and restrictions except those matters shown on Exhibit A attached hereto and except for easements for utilities or restrictions on use none of which render title unmarketable under the standards of title of the Connecticut Bar Association.

30. Curing Lessee’s Defaults.

30.1 If Lessee shall be in default under this lease beyond the expiration of any applicable notice and cure period as set forth in Section 11.1 above, then Lessor may, but shall not be obligated so to do, upon ten (10) days’ written notice to Lessee (or such shorter period as shall be necessitated by the nature of the default, or without notice if the default shall constitute an emergency) pay or perform the same for the account of Lessee without waiving the performance of or releasing Lessee from any of its agreements, obligations or covenants to be paid or performed by it hereunder. Any amount paid, or any expense or liability incurred, including reasonable attorneys’ fees, by Lessor for the account of Lessee as aforesaid, shall be deemed to be additional rent which shall be paid by Lessee,

together with interest at the rate of nine percent (9%), upon submission of a bill therefor by Lessor. Any dispute as to the amount due to the Lessor by reason of the foregoing provisions of this paragraph shall be subject to arbitration.

31. Arbitration.

31.1 Any dispute, controversy, question or claim specifically made arbitrable by the terms of this instrument shall be settled by arbitration in Connecticut at a location in New Haven County pursuant to the laws of the State of Connecticut in effect upon the date of such arbitration and the Arbitration Rules of the American Arbitration Association in effect when any such arbitration shall be initiated.

32. Entire Agreement.

32.1 This instrument contains the entire and only agreement between the parties and no oral statements or representations or prior written matter not contained in this instrument shall have any force or effect. This lease may only be changed, modified or discharged by an agreement in writing executed by the parties hereto.

33. Lessor’s Cooperation.

33.1 Lessor covenants and agrees to reasonably cooperate with and assist Lessee (at the sole cost and expense of Lessee) upon request therefor by Lessee in such cases where the joinder or act of the fee titleholder of the Demised Premises shall be necessary or expedient in all legislative, quasi-legislative, judicial, quasi-judicial and/or administrative proceedings for the commercial use or operation of the Demised Premises and improvements thereon permitted under this lease, including without limitation in connection with a tax contest as set forth in Section 4.3 above.

34. Partial Invalidity.

34.1 If any term, covenant, condition or provision of this lease or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, covenant, condition and provision of this lease shall be valid and be enforced to the fullest extent permitted by law.

35. Short Form Lease.

35.1 Together with execution of this Lease, the parties shall execute a notice of lease suitable for recording containing information required by Section 47-19 of the Connecticut General Statutes (Rev. 1958) but specifically excepting the rental provisions hereof. Landlord shall promptly record the notice of lease on the Oxford land records and provide Tenant with the recording information.

36. Marginal Notes.

36.1 The marginal notes used as headings for the various subject matters covered in this lease are used only as a matter of convenience as an aid to finding the subject matters and are not to be construed as part of this lease and shall not in any way limit or amplify the terms or provisions hereof.

37. Notices.

37.1 All notices, requests, demands, approvals, consents, and other communications authorized or required hereunder shall be in writing and shall be given by mailing the same by certified mail or registered mail, return receipt requested, postage prepaid, or by a nationally-recognized overnight courier with return receipt, to the respective party for whom intended at the address set forth below or such other address as such party may hereafter designate by notice to the other party similarly given. Receipt of any notice shall be evidenced by the date of receipt or rejection on the return receipt. Notices to either party may be given by the attorney for the other party acting on behalf of such other party.

Lessor: Raymond L. Hunicke, LLC

8 Southbury Road

Roxbury, CT 06783-1723

Lessee: Roller Bearing Company of America, Inc.

Attn: Robert W. Crawford

60 Round Hill Road

Fairfield, CT 06824

38. Construction.

38.1 This lease is made and executed in and is to be construed under the laws of the State of Connecticut.

39. Successors and Assigns.

39.1 Except as otherwise provided herein, the agreements, conditions, covenants and terms herein contained shall, in every case, apply to, be binding upon, and inure to the benefit of the respective parties hereto and their respective heirs, administrators, executors, successors and assigns, with the same force and effect as if specifically mentioned in each instance where a party hereto is named.

40. Brokers.

40.1 Each of Lessor and Lessee represents and warrants to the other that it has dealt with no real estate broker in connection with this lease other than R. Calabrese Agency, LLC of Waterbury, Connecticut (the “Broker”), and that no other broker is entitled to any commission on account of this lease. Lessor is solely responsible for paying the commission of the Broker in accordance with a separate agreement. Lessee shall defend, hold harmless and indemnify Lessor from any loss, cost, damage or expense, including reasonable attorneys’ fees, arising from the breach by Lessee of any representation or covenant in this Section. Lessor shall defend, hold harmless and indemnify Lessee from any loss, cost, damage or expense, including reasonable attorneys’ fees, arising from the breach by Lessor of any representation or covenant in this Section, including any claims by the Broker in connection with this lease.

41. Force Majeure.

41.1 Except as otherwise specified herein, whenever a party hereto is required by the provisions of this lease to perform an obligation and such party is prevented beyond its reasonable control from doing so by reason of an Unavoidable Delay (as defined below), such party shall be temporarily relieved of its obligation to perform the obligation provided such party notifies the other party of the specific delay and exercises due diligence to remove or overcome it. “Unavoidable Delays” shall mean any and all delays beyond a party’s reasonable control, including without limitation, delays caused by the other party, governmental restrictions, governmental regulations and controls, order of civil, military or

naval authority, governmental preemption, strikes, labor disputes, lock-outs, acts of God, fire, earthquake, floods, explosions, extreme weather conditions, enemy action, and civil commotion, riot or insurrection, but expressly excluding insufficiency of funds and casualty and condemnation covered under Articles 23 and 24 above.

42. Counterparts.

42.1 This lease may be executed in any number of counterparts, each of which upon execution and delivery shall be considered an original for all purposes; provided, however, all such counterparts shall, together, upon execution and delivery, constitute one and the same instrument.

43. Right of First Refusal.

43.1 Prior to entering into a contract for the sale or transfer of: (i) the Demised Premises; or (ii) the approximately 2.9-acre parcel adjacent to the Demised Premises, provided such parcel is owned by Lessor and not subject to a binding contract of sale on the date hereof (in either case, the “ROFR Property”), Lessor shall send Lessee a notice describing the consideration, closing date, and all other material business terms of such proposal (the “First Refusal Notice”) and offering to sell the Demised Premises to Lessee upon the business terms set forth in the First Refusal Notice.

43.2 Lessee shall have a period of thirty (30) days after receipt of the First Refusal Notice to give Lessor notice that Lessee either accepts or rejects Lessor’s offer. A First Refusal Notice may only be accepted in whole, not in part. Failure of Lessee to accept Lessor’s offer within such period shall be deemed rejection of Lessor’s offer.

43.3 If Lessee rejects, or is deemed to have rejected, Lessor’s offer, Lessor shall be free to sell or transfer the ROFR Property to the proposed purchaser upon substantially the terms and conditions set forth in the First Refusal Notice, with no further obligation to Lessee under this Section with respect to the ROFR Property, unless either of the following conditions shall apply: (i) within ninety (90) days after the rejection or deemed rejection of the First Refusal Notice, Lessor has not entered into a contract for the sale or transfer of the ROFR Property with the proposed purchaser on such terms; or (ii) Lessor does not enter into a contract for the sale or transfer of the ROFR Property with the proposed purchaser upon such terms, and either Lessor or a prospective purchaser other than the above-referenced purchaser submits a written proposal for the sale or transfer of the ROFR Property, the material economic terms of which offer are more favorable to such other purchaser, in comparison with the material economic terms of the First Refusal Notice, by more than five percent (5%). If either of clause (i) or (ii) preceding shall apply, Lessor shall again offer the ROFR Property to Lessee under this Paragraph 30 (which offer shall, if clause (ii) applies, be on the terms of the triggering proposal).

43.4 If Lessee accepts Lessor’s offer, the ROFR Property shall be conveyed to Lessee upon the business terms set forth in the First Refusal Notice. The closing shall take place on or before one hundred twenty (120) days following the acceptance of such offer, but in no event earlier than the closing date specified in the First Refusal Notice.

43.5 At the closing, Lessor shall convey title to the ROFR Property by general warranty deed, free and clear of all liens, encumbrances, mortgages, easements, conditions, reservations and restrictions except those matters shown on Exhibit A attached hereto and except for easements for utilities or restrictions on use none of which render title unmarketable under the standards of title of the Connecticut Bar Association.

44. Lessor Representations and Warranties; Title Matters.

44.1 Lessor represents and warrants as a condition of this Lease that: (i) it possesses good marketable fee title to the Demised Premises, subject only to matters described in Section 31.2; (ii) it is authorized to make this lease for the Term; (iii) the certificate of occupancy for the Demised Premises allows, or no later than the Commencement Date will allow, Lessee to use and enjoy the Demised Premises for the purposes set forth in this lease; and (iv) the Demised Premises and the uses thereof for the purposes specified in this lease are, or on the Commencement Date will be, in compliance with all Legal Requirements.

44.2 Lessor has delivered to Lessee a copy of Lessor’s title insurance policy for the Demised Premises and represents and warrants that the policy is a true and complete copy of the original; that there have been no changes as of the date of this lease to any matters set forth in such policy, and that on the date of this lease, the policy is, and will continue during the Term to be, in full force and effect. A list of all encumbrances, restrictions, agreements, covenants, declarations, lis pendens, mechanics’ liens, and other matters affecting title, whether of record or known by Lessor on the date hereof to exist, are listed on Exhibit A attached hereto and made a part hereof.

45. Authority.

45.1 Each of Landlord and Tenant represents and warrants to the other that the individual executing this lease on such party’s behalf is authorized to do so.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties hereto have set their names and seals on the day and year first above written.

	RAYMOND L. HUNICKE, LLC

	By:
	Name:
	Title:			Member
	Date:

	ROLLER BEARING COMPANY OF AMERICA, INC.

	By:
	Name:
	Title:
	Date:

STATE OF CONNECTICUT )

) ss: Watertown

COUNTY OF LITCHFIELD )

On this the day of March, 2004, before me the undersigned officer, personally appeared, who acknowledged himself to be a member of Raymond L. Hunicke, LLC, a limited liability company, and that he as such member, being authorized so to do, executed the foregoing instrument for purpose therein contained, by signing the name of the corporation by himself as such officer.

IN WITNESS WHEREOF, I hereunto set my hand.


	Commissioner of the Superior Court

STATE OF CONNECTICUT )

) ss: Watertown

COUNTY OF LITCHFIELD )

On this the day of March, 2004, before me the undersigned officer, personally appeared, who acknowledged himself to be a of Roller Bearing Company of America, Inc., a Delaware corporation, and that he as such , being authorized so to do, executed the foregoing instrument for purpose therein contained, by signing the name of the corporation by himself as such officer.

IN WITNESS WHEREOF, I hereunto set my hand.


	Commissioner of the Superior Court

EXHIBIT A

[LEGAL DESCRIPTION OF DEMISED PREMISES, INCLUDING ALL ENCUMBRANCES]

Exhibit 10.9

PLEDGE AND SECURITY AGREEMENT

This Pledge and Security Agreement, dated as of September 1, 1994 (the “Agreement”), is made by and among Roller Bearing Company of America, Inc., a Delaware corporation (the “Company”), Heller Financial, Inc., a Delaware corporation (“Heller”), and Mark Twain Bank, St. Louis, Missouri, a Missouri banking corporation (the “Trustee”), as Trustee under two Trust Indentures, each dated as of September 1, 1994 (collectively, the “Indentures”), and each between the South Carolina Jobs-Economic Development Authority (the “Issuer”) and the Trustee.

RECITALS

A. The Company and Heller have entered into a Letter of Credit Agreement, dated as of September 1, 1994 (the “Letter of Credit Agreement”), pursuant to which Heller has agreed to issue the Letter of Credit (as defined in the Letter of Credit Agreement) in favor of the Trustee for the account of the Company.

B. It is a condition precedent under the Letter of Credit Agreement to the obligation of Heller to issue the Letter of Credit that the Company and the Trustee shall have executed and delivered this Agreement.

AGREEMENT

The Company and the Trustee each agree with Heller as follows:

Section 1. Defined Terms. Capitalized terms not defined herein shall have the meanings ascribed to such terms in the Letter of Credit Agreement or, if not inconsistent with the Letter of Credit Agreement, the Indentures.

Section 2. Pledge. The Company hereby pledges, assigns, transfers, hypothecates and delivers to Heller all of its right, title and interest in, and grants to Heller a first-priority Lien upon, (i) the Pledged Bonds as the same may from time to time be delivered to or held by the Trustee as collateral agent for Heller pursuant to Section 307(d) of the Indentures, and (ii) all proceeds of the Pledged Bonds (collectively, the “Collateral”), all as collateral security for the prompt and complete payment when due of all amounts payable by the Company to Heller, and the prompt and complete performance of all other obligations of the Company to Heller, whether now existing or hereafter arising, under or in respect of the Letter of Credit Agreement, the Letter of Credit, this Agreement and the Bond Documents (collectively, the “Liabilities”). The Company hereby agrees that the Trustee shall act as the agent and bailee of Heller for the purpose of perfecting the Lien of this Agreement and of holding the Collateral for the benefit of Heller pursuant to the Indentures.

Section 3. Payments on Collateral. If, while this Agreement is in effect, the Company shall become entitled to receive or shall receive any interest or other payment in respect of the Collateral, the Company agrees to accept the same as Heller’s agent, to hold the

same in trust on behalf of Heller and to deliver the same forthwith to Heller. The Company instructs and authorizes the Trustee to hold and receive on Heller’s behalf and to deliver forthwith to Heller any payment received by it in respect of the Collateral (including the proceeds of any remarketing of the Pledged Bonds). All such payments in respect of the Collateral that are paid to Heller shall be credited against the Liabilities as Heller may determine.

Section 4. Release of Pledged Bonds. Heller agrees to release from the Lien of this Agreement Pledged Bonds if and only if Heller has given notice to the Trustee of the reinstatement of the Letter of Credit in an amount equal to the Original Purchase Price of the Pledged Bonds so released.

Section 5. Representations and Warranties. The Company represents and warrants that: (a) on the date of delivery of the Pledged Bonds to or for the benefit of Heller, to the Company’s knowledge, no other Person shall have any right, title or interest in and to the Pledged Bonds; (b) the Company has, and on the date of delivery to or for the benefit of Heller of any of the Pledged Bonds will have, full power, authority and legal right to pledge all of its right, title and interest in and to the Pledged Bonds pursuant to this Agreement; and (c) the pledge, assignment and delivery of the Pledged Bonds pursuant to this Agreement will create a valid first Lien on, and a perfected first-priority security interest in, all right, title and interest of the Company in and to the Collateral, subject to no prior Lien on the Property or assets of the Company that would include the Pledged Bonds. The Company makes each of the representations and warranties in the Credit Agreement and the Bond Documents, to the extent material, to and for the benefit of Heller as if the same were set forth in full herein. Unless the Company shall have previously advised Heller in writing that one or more of the above statements is no longer true, the Company shall be deemed to have represented and warranted to Heller on the date of each Liquidity Drawing under the Letter of Credit that the statements contained herein are true and correct.

Section 6. Rights of Heller. Heller shall not be liable for any failure to collect or realize upon all or any part of the Liabilities or any collateral security (including the Collateral) or guaranty for the Liabilities, or for any delay in so doing, and Heller shall be under no obligation to take any action whatsoever with regard to the Liabilities or any such collateral security or guaranty. If an Event of Default under the Letter of Credit Agreement has occurred and is continuing, Heller may, without notice, exercise all rights, privileges or options pertaining to any Pledged Bonds as if it were the absolute owner of such Pledged Bonds, upon such terms and conditions as it may determine, all without liability except to account for Property actually received by it, but Heller shall have no duty to exercise any of those rights, privileges or options, and shall not be responsible for any failure to do so or delay in so doing.

Section 7. Remedies. In the event that any portion of the Liabilities has been declared due and payable, to the fullest extent permitted by applicable law Heller may, without demand of performance or other demand, advertisement or notice of any kind (except the notice specified below of the time and place of public or private sale) to or upon the Company or any other Person (all and each of which demands, advertisements or notices are hereby expressly waived), in its sole discretion (a) exercise any or all of its rights and remedies under the Letter of Credit Agreement, the Letter of Credit, this Agreement, the Credit Documents, the Bond

Documents and any other instruments and agreements securing, evidencing or relating to the Liabilities or under applicable law (including all of the rights and remedies of a secured creditor under the Illinois Uniform Commercial Code or the commercial code of any other applicable jurisdiction), (b) forthwith collect, receive, appropriate and realize upon all or any part of the Collateral, (c) forthwith sell, assign, give an option or options to purchase, contract to sell or otherwise dispose of and deliver all or any part of the Collateral in one or more parcels at public or private sale or sales, at any exchange, broker’s board or at any of Heller’s offices or elsewhere, in a commercially reasonable manner (subject to the provisions of Section 9 hereof), upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk, with the right to Heller upon any such sale or sales, public or private, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in the Company, which right or equity is hereby expressly waived and released, or (d) take all or any combination of the foregoing actions. After deducting all reasonable costs and expenses of every kind incurred in taking any of the foregoing actions, or incidental to the care, safekeeping or otherwise of any and all of the Collateral, or in any way relating to the rights of Heller hereunder, including reasonable attorneys’ fees and legal expenses, after payment of all of the Liabilities in such order as Heller may elect (the Company remaining liable for any deficiency remaining unpaid after such application) and after payment by Heller of any other amount required or permitted by any provision of law, Heller shall pay to the Company the surplus, if any, of any amounts realized by Heller under this Section 7. To the fullest extent permitted by applicable law, the Company agrees that Heller need not give more than 10 days’ notice of the time and place of any public sale or of the time after which a private sale or other intended disposition is to take place, and that such notice is reasonable notification of such matters. To the fullest extent permitted by applicable law, no notification need be given to the Company if it has signed after default a statement renouncing or modifying any right to notification of sale or other intended disposition. To the fullest extent permitted by applicable law, the Company further agrees to waive and agrees not to assert any rights or privileges that it may acquire under Section 9-112 of the Illinois Uniform Commercial Code (or the equivalent section of the Uniform Commercial Code of any other applicable jurisdiction), and the Company shall be liable for the deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay all amounts to which Heller is entitled, including the fees and costs of any attorneys employed by Heller to collect such deficiency.

Section 8. No Disposition. The Company agrees that it will not sell, assign, transfer, exchange or otherwise dispose of, or grant any option with respect to, the Collateral, and that it will not create, incur or permit to exist any Lien with respect to all or any part of the Collateral, except for the Lien of this Agreement.

Section 9. Sale of Collateral. (a) The Company recognizes that Heller may be unable to effect a public sale of any or all of the Pledged Bonds by reason of certain prohibitions contained in the Securities Act of 1933 and applicable state securities laws, but may be compelled to resort to one or more private sales to a restricted group of purchasers that will be obligated to agree, among other things, to acquire such securities for their own account for investment and not with a view to distribution or resale in a manner that would violate Federal or state securities laws. The Company acknowledges and agrees that any such private sale may result in prices and other terms less favorable to the seller than if such sale were a public sale,

and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. Heller shall be under no obligation to delay a sale of any of the Pledged Bonds for the period of time necessary to permit the Issuer to register such securities for public sale under the Securities Act of 1933 or under applicable state securities laws, even if the Issuer would agree to do so.

(b) The Company further agrees to do or cause to be done all such other acts and things as may be necessary to make such sale or sales of all or any part of the Pledged Bonds valid and binding and in compliance with any and all applicable laws, rules, regulations, orders or decrees, all at the Company’s expense. The Company further agrees that a breach of any of the covenants contained in this Section 9 will cause irreparable injury to Heller for which Heller would have no adequate remedy at law in respect of such breach, and, as a consequence, agrees that each and every covenant contained in this Section 9 shall be specifically enforceable against the Company, and the Company waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred under the Letter of Credit Agreement.

Section 10. Further Assurances. The Company agrees that at any time and from time to time upon the written request of Heller, the Company will execute and deliver such further documents and do such further acts and things as Heller may reasonably request in order to effect the purposes of this Agreement.

Section 11. Collateral Agency Agreement. (a) Heller hereby appoints the Trustee as agent and bailee for Heller on the terms and conditions of this Section 11, and the Trustee hereby accepts such appointment and agrees with Heller to act as agent without compensation separate from that provided to the Trustee pursuant to the Indentures.

(b) The duties of the Trustee as agent under this Agreement shall he as follows:

(i) the Trustee shall hold in trust for Heller all Pledged Bonds purchased by the Trustee with drawings under the Letter Credit pursuant to Section 301 or 302 of the Indentures, all proceeds thereof and all other amounts held by the Trustee and payable to Heller pursuant to the Indentures (collectively, the “Indenture Collateral”); and

(ii) upon the remarketing of Pledged Bonds, the Trustee shall deliver to Heller the proceeds of such remarketing and all other amounts received by the Trustee and payable to Heller pursuant to the Indentures.

(c) The Trustee shall not pledge, hypothecate, transfer or release all or any part of the Collateral to any other Person or in any manner not in accordance with this Section 11 without the prior written consent of Heller.

(d) The Trustee shall transfer the benefits or obligations of this Agreement or the Indentures only with the prior written consent of Heller and only if any such transferee shall

have agreed in writing to be bound by the terms and conditions of this Section 11 and the Indentures.

(e) Neither the Trustee nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Section 11 (except for its or such Person’s own negligence or willful misconduct). The Trustee undertakes to perform only such duties as are expressly set forth herein. The Trustee may rely, and shall be protected in acting or refraining from acting, upon any written notice, instruction or request furnished to it hereunder and believed by it to be genuine and to have been signed or presented by the proper party. The Trustee may consult with counsel of its own choice and shall have full and complete authorization and protection for any action taken or suffered by it hereunder in good faith and in accordance with the opinion of such counsel. Notwithstanding any provision to the contrary contained herein, the Trustee shall not be relieved of liability arising in connection with its own negligence or willful misconduct.

Section 12. Notices. Unless otherwise specifically provided herein, any notice or other communication required or permitted to be given hereunder shall be in writing addressed to the respective party as set forth below, and may be personally served, telecopied or sent by overnight courier service or United States mail, and shall be deemed to have been given: (a) if delivered in person, when delivered; (b) if delivered by telecopy, on the date of transmission if transmitted on a Business Day before 4:00 p.m. (Chicago, Illinois time) or, if not, on the next succeeding Business Day; (c) if delivered by overnight courier, two days after delivery to such courier properly addressed; or (d) if by United States mail, four Business Days after deposit in the United States mail, with postage prepaid and properly addressed. Notices hereunder shall he effective when received and shall be addressed:

Party		Address

Company:		Roller Bearing Company of America, Inc.
		140 Terry Drive
		Newtown, Pennsylvania 18940
		Attention: Executive Vice President
		Telephone: (215) 579-4300
		Telecopier: (215) 579-4318

With a copy to:		Gibson, Dunn & Crutcher
		2029 Century Park east, Suite 4000
		Los Angeles, California 90067
		Attention: Bruce D. Meyer, Esq.
		Telephone: (310) 552-8686
		Telecopier: (310) 277-5827

Heller:		Heller Financial, Inc.
		500 West Monroe Street
		12th Floor
		Chicago, Illinois 60661
		Attention: Portfolio Manager, Portfolio
		Organization, Corporate Finance Group
		Telephone: (312) 441-7500
		Telecopier: (312) 441-7367

With a copy to:		Heller Financial, Inc.
		500 West Monroe Street
		12th Floor
		Chicago, Illinois 60661
		Attention: Legal Department, Portfolio
		Organization, Corporate Finance Group
		Telephone: (312) 441-7500
		Telecopier: (312) 441-7367

Trustee:		Mark Twain Bank
		8820 Ladue Road
		St. Louis, Missouri 63124
		Attention: Corporate Trust Division
		Telephone: (314) 889-0753
		Telecopier: (314) 889-0736

Section 13. Amendments and Waiver. No amendment or waiver of any provision of this Agreement or consent to any departure by the Company or the Trustee from any such provision shall in any event be effective unless the same shall be in writing and signed by Heller. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

Section 14. No Waiver; Remedies. No failure on the part of Heller to exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver of such right, and no single or partial exercise of any right under this Agreement shall preclude any further exercise of such right or the exercise of any other right. The remedies provided in this Agreement are cumulative and not exclusive of any remedies provided by law.

Section 15. Severability. Any provision of this Agreement that is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without invalidating the remaining provisions of this Agreement or affecting the validity, enforceability or legality of such provision in any other jurisdiction.

Section 16. Governing Law. This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Illinois without giving application to the choice-of-law principles thereof.

Section 17. Headings. Section headings in this Agreement are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

Section 18. Counterparts. This Agreement may be signed in any number of counterpart copies, and all such copies shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first above written.

	HELLER FINANCIAL, INC.


	By:	/s/ Karen L. Finnerty
		Assistant Vice President


	ROLLER BEARING COMPANY OF
	AMERICA, INC.


	By:	/s/ [ILLEGIBLE]
		CFO and Treasurer


	MARK TWAIN BANK,
	as Trustee

	By:	/s/ [ILLEGIBLE]
		Vice President

Exhibit 10.10

CONFIDENTIAL

LOAN AGREEMENT

between

SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY

and

ROLLER BEARING COMPANY OF AMERICA, INC.

Relating to

$7,700,000

Variable Rate Demand

Industrial Development Revenue Bonds

(Roller Bearing Company of America, Inc. Project)

Series 1994A

DATED AS OF SEPTEMBER 1, 1994

TABLE OF CONTENTS

(This Table of Contents is for convenience of reference only and is not intended to define, limit or describe the scope or intent of any provisions of this Loan Agreement).

ARTICLE I	DEFINITIONS, CONSTRUCTION AND CERTAIN GENERAL PROVISIONS
Section 1.1.		Definitions
Section 1.2.		Rules of Interpretation
ARTICLE II	REPRESENTATIONS
Section 2.1.		Representations by the Issuer
Section 2.2.		Representations and Warranties by the Borrower
Section 2.3.		General Tax Representations, Warranties and Covenants of Borrower
Section 2.4.		Manufacturing Facilities
Section 2.5.		Actions Under Section 144(a)(4) of the Code
Section 2.6.		Tax Exemption
ARTICLE III	THE LOAN; ISSUANCE OF THE BONDS
Section 3.1.		Amount and Source of the Loan
Section 3.2.		Possession and Use of the Project
Section 3.3.		Termination of Prior Liens
Section 3.4.		Disbursements from the Project Fund and the Cost of Issuance Fund
Section 3.5.		Investment of Fund Moneys
Section 3.6.		Loan Payments
Section 3.7.		Additional Payments

Section 3.8.		Obligations Unconditional
Section 3.9.		Credit Facility
Section 3.10.		Alternate Credit Facility
Section 3.11.		Issuance of Bonds
Section 3.12.		Borrower Required to Pay Costs in Event Project Fund Insufficient
Section 3.13.		Completion Date
ARTICLE IV	OPERATION OF THE PROJECT
Section 4.1.		Operation of the Project
Section 4.2.		Environmental Compliance
Section 4.3.		Payment of Project Costs
Section 4.4.		Deficiency of Project Fund
ARTICLE V	MAINTENANCE; MODIFICATIONS; INSURANCE; LEASE OR ASSIGNMENT OF PROJECT; LOSS OR DAMAGE TO PROJECT
Section 5.1.		Maintenance of Project by Borrower
Section 5.2.		Sale or Lease of Project; Assignment of Loan Agreement by Borrower
Section 5.3.		Taxes, Assessments and Other Charges
Section 5.4.		Use of Project
Section 5.5.		Insurance Required
Section 5.6.		Damage, Destruction, Condemnation or Loss of Title
Section 5.7.		Remodeling and Improvements
Section 5.8.		Equipment

iii

ARTICLE VI				PARTICULAR COVENANTS
Section 6.1.					Access to the Project and Inspection; Operation of the Project
Section 6.2.					Financial Statements
Section 6.3.					Indemnification
Section 6.4.					Further Assurances and Corrective Instruments
Section 6.5.					Litigation Notice
Section 6.6.					Annual Certificate
ARTICLE VII			ASSIGNMENT OF ISSUER’S RIGHTS UNDER LOAN AGREEMENT
Section 7.1.					Assignment by the Issuer
Section 7.2.					Restriction on Transfer of Issuer’s Rights
Section 7.3.					Credit Enhancer’s Remedial Rights
ARTICLE VIII		EVENTS OF DEFAULT AND REMEDIES
Section 8.1.					Events of Default Defined
Section 8.2.					Remedies on Default
Section 8.3.					No Remedy Exclusive
Section 8.4.					Agreement to Pay Attorneys’ Fees and Expenses
Section 8.5.					Issuer and Borrower to Give Notice of Default
Section 8.6.					Performance Of Borrower’s Obligations
Section 8.7.					Remedial Rights Assigned to the Trustee
Section 8.8.					Credit Enhancer to Direct Trustee
ARTICLE IX	PREPAYMENT AND ACCELERATION OF LOAN PAYMENTS
Section 9.1.					Prepayment at the Option of the Borrower
Section 9.2.					Optional Prepayment Upon Certain Events

Section 9.3.		Mandatory Prepayment Upon Determination of Taxability
Section 9.4.		Mandatory Prepayment Upon Certain Defaults
Section 9.5.		Mandatory Prepayment From Amounts Remaining in Project Fund
Section 9.6.		Right to Prepay at Any Time
Section 9.7.		Notice of Prepayment
Section 9.8.		Precedence of this Article
ARTICLE X	MISCELLANEOUS
Section 10.1.		Authorized Representatives
Section 10.2.		Term of Loan Agreement
Section 10.3.		Notices
Section 10.4.		Performance Date Not a Business Day
Section 10.5.		Binding Effect
Section 10.6.		Amendments, Changes and Modifications
Section 10.7.		Execution in Counterparts
Section 10.8.		No Pecuniary Liability
Section 10.9.		Extent of Covenants of the Issuer; No Personal or Pecuniary Liability
Section 10.10.		Net Loan
Section 10.11.		Security Interests
Section 10.12.		Complete Agreement
Section 10.13.		Severability
Section 10.14.		Governing Law
Section 10.15.		Not a Limitation
Section 10.16.		Consent to Jurisdiction; Service of Process

EXHIBIT A
EXHIBIT B
EXHIBIT C

LOAN AGREEMENT

THIS LOAN AGREEMENT, dated as of September 1, 1994 (this “Agreement” or “Loan Agreement”), between the SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY, a body corporate and politic and an agency of the State of South Carolina (the “Issuer”), and ROLLER BEARING COMPANY OF AMERICA, INC., a Delaware corporation (the “Borrower”);

WITNESSETH:

WHEREAS, the Issuer, acting by and through its Board of Directors, is authorized and empowered under and pursuant to the provisions of Title 41, Chapter 43, Code of Laws of South Carolina 1976, as amended (the “Act”), to acquire and cause to be acquired properties that are projects under the Act through which the industrial, commercial, agricultural and recreational development of the State of South Carolina (the “State”) will be promoted and trade developed by inducing business enterprises to locate in and remain in the State and thus provide maximum opportunities for the creation and retention of jobs and improvement of the standard of living of the citizens of the State; and

WHEREAS, the Issuer is further authorized by Section 41-43-100 of the Act to issue revenue bonds payable by the Issuer solely from revenues and receipts from any financing agreement between the Issuer and any business enterprise with respect to such project and secured by a pledge of said revenues and receipts and by an assignment of such financing agreement; and

WHEREAS, pursuant to the Act, the Issuer is authorized to issue its Variable Rate Demand Industrial Development Revenue Bonds (Roller Bearing Company of America, Inc. Project) Series 1994A in the principal amount of $7,700,000 (the “Bonds”) for the purpose of providing funds to construct or purchase certain buildings, fixtures, machinery and equipment (the “Project”) to constitute an approximately 60,000 square foot expansion of an existing facility for the manufacture of roller bearings in Darlington County, South Carolina which is owned and operated by the Borrower; and

WHEREAS, the proceeds from the sale of the Bonds will be loaned to the Borrower pursuant to the provisions of this Loan Agreement to enable the Borrower to construct and purchase the Project; and

WHEREAS, the amount necessary to finance the costs of such construct and purchase will require the issuance, sale and delivery of the Bonds, as hereinafter provided; and

WHEREAS, to secure the payment of the principal of and interest on the Bonds and the purchase price of Bonds tendered by the Owners thereof as provided in the Trust Indenture of even date herewith (the “Indenture”) between the Issuer and Mark Twain Bank, as Trustee (the “Trustee”), the Borrower has caused the Credit Enhancer (as defined in the Indenture) to issue its Credit Facility (as defined in the Indenture) to the Trustee; and

WHEREAS, pursuant to the foregoing, the Issuer desires to loan the proceeds of the Bonds to the Borrower and the Borrower desires to borrow the proceeds of the Bonds from the Issuer, to be repaid by the Borrower and upon the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and the mutual representations, covenants and agreements herein contained, the Issuer and the Borrower do hereby represent, covenant and agree as follows:

ARTICLE I

DEFINITIONS, CONSTRUCTION AND CERTAIN GENERAL PROVISIONS

Section 1.1. Definitions. All words and terms defined in Section 101 of the Indenture shall have the same meaning in this Loan Agreement unless otherwise defined herein. In addition to words and terms defined in the Indenture or defined elsewhere in this Loan Agreement, the following words and terms shall have the following meanings, unless some other meaning is plainly intended:

“Additional Payments” means the Additional Payments described in Section 3.7 hereof.

“Borrower Documents” means this Loan Agreement, the Tax Agreement and the Collateral Documents.

“Completion Date” means the date of completion of the Project and any additions or improvements to the Project.

“Default” means any event or condition which constitutes, or with the giving of any requisite notice or upon the passage of any requisite time period or upon the occurrence of both would constitute, an Event of Default under this Agreement or the Indenture.

“Event of Default” means any Event of Default as defined in Section 8.1 hereof.

“Full Insurable Value” means the actual replacement cost of the Project without deduction for physical depreciation and exclusive of land, excavations, footings, foundations and parking lots.

“Loan Payment Date” means an Interest Payment Date, Principal Payment Date or any other date on which the principal of and interest on the Bonds is payable.

“Loan Payments” means the Loan Payments described in Section 3.6 hereof.

“Loan Term” means the period from the effective date of this Loan Agreement until the expiration hereof pursuant to Section 10.2 of this Loan Agreement.

“Net Proceeds” means, when used with respect to any insurance or condemnation award with respect to the Project, the title insurance or condemnation award with respect to which that term is used remaining after the payment of all expenses (including attorneys’ fees and any expenses of the Issuer or the Trustee) incurred in the collection of such gross proceeds. As used in this definition the word “condemnation” shall have the meaning given to it in Section 5.6 hereof.

“Permitted Encumbrances” shall have the meaning assigned to such term in the Credit Agreement (as defined in the Letter of Credit Agreement).

“Project” means the manufacturing facilities generally described in Exhibit A hereto, as provided for in this Loan Agreement.

“Series 1994B Bonds” means the Issuer’s $3,000,000 original principal amount Variable Rate Demand Industrial Development Revenue Bonds (Roller Bearing Company of America, Inc. Project) Series 1994B.

“Series 1994B Loan Agreement” means the Loan Agreement dated of even date herewith between the Issuer and the Borrower, delivered with respect to the Series 1994B Bonds, as amended, restated or supplemented.

“Unassigned Issuer’s Rights” means the Issuer’s rights to reimbursement and payment of its costs and expenses and rebatable arbitrage under Sections 3.7(c) and (e), 8.4 and 8.6 hereof, its rights of access under Section 6.1 hereof, its rights to indemnification under Sections 4.5 and (6.3) hereof, its rights to exemption from liability under Sections 10.8 and 10.9 hereof, its rights to receive notices, reports and other statements and its rights to consent to certain matters.

Section 1.2. Rules of Interpretation. (a) Words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders.

(b) Unless the context shall otherwise indicate words importing the singular number shall include the plural and vice versa, and words importing person shall include firms, partnerships, associations, joint stock companies, joint ventures, trusts, unincorporated organizations, limited liability companies and corporations, including governmental entities, as well as natural persons.

(c) The words “herein”, “hereby”, “hereunder”, “hereof”, “hereto”, “hereinbefore”, “hereinafter” and other equivalent words refer to this Loan Agreement and not solely to the particular article, section, paragraph or subparagraph hereof in which such word is used.

(d) Reference herein to a particular article or a particular section shall be construed to be a reference to the specified article or section hereof unless the context or use clearly indicates another or different meaning or intent. Reference herein to a schedule or an exhibit shall be construed to be a reference to the specified schedule or exhibit hereto unless the context or use clearly indicates another or different meaning or intent.

(e) Wherever an item or items are listed after the word “including”, such listing is not intended to be a listing that excludes items not listed.

(f) The table of contents, captions and headings in this Loan Agreement are for convenience only and in no way define, limit or describe the scope or intent of any provisions or sections of this Loan Agreement.

[End of Article I}

ARTICLE II

REPRESENTATIONS

Section 2.1. Representations by the Issuer. The Issuer makes the following representations as the basis for the undertakings on its part herein contained:

(a) The Issuer is a body politic and corporate and an agency of the State.

(b) The Issuer has lawful power and authority under the Act, acting through its Board of Directors, to enter into the transactions contemplated by this Loan Agreement and to carry out its obligations hereunder. By proper action of the Board of Directors, the Issuer has been duly authorized to execute and deliver this Loan Agreement, acting by and through its duly authorized officers.

(d) To finance the costs of constructing and purchasing the Project, the Issuer proposes to issue the Bonds in the aggregate principal amount of $7,700,000. The Bonds will bear interest at the rates and be scheduled to mature as set forth in Article II of the Indenture and will be subject to purchase from the Owners thereof in accordance with the provisions of Article III of the Indenture and redemption prior to maturity in accordance with the provisions of Article IV of the Indenture. The Bonds are to be issued under and secured by the Indenture, pursuant to which the payments, revenues and receipts derived by the Issuer pursuant to this Loan Agreement, other than Unassigned Issuer’s Rights, will be pledged and assigned to the Trustee as security for payment of the principal of, premium, if any, and interest on the Bonds.

(e) To the best of its knowledge, no member of the governing body of the Issuer or any other officer of the Issuer has any significant or conflicting interest, financial, employment or otherwise, in the Borrower, the Project or in the transactions contemplated hereby.

Section 2.2. Representations and Warranties by the Borrower. The Borrower represents and warrants as follows:

(a) The Borrower is a corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware, has the power and authority to own its properties and carry on its business as now being conducted, and is duly qualified to do such business, and is in good standing, wherever such qualification is required, including the State.

(b) The Borrower has the power and authority to execute and deliver the Borrower Documents, and to carry out the transactions contemplated hereby and thereby, and has duly authorized the execution, delivery and performance of each of the foregoing.

(c) Neither the execution nor delivery of the Borrower Documents, nor the consummation of the transactions contemplated hereby or thereby, nor the fulfillment of or compliance with the terms and conditions hereof or thereof, conflicts with or results in a breach of or will constitute a default under any of the terms, conditions or provisions or any legal restriction of any agreement or instrument to which the Borrower is now a party or by which it is bound, or constitutes a default under any of the

foregoing or violates any judgment, order, writ, injunction, decree, law, rule or regulation to which it is subject.

(d) The Borrower is knowledgeable in the operation of manufacturing facilities of the magnitude and nature of the Project.

(e) The Borrower is not presently under any cease or desist order or other orders of a similar nature, temporary or permanent, of any federal or state authority which would have the effect of preventing or hindering performance of its duties hereunder, nor are there any proceedings presently in progress or to its knowledge contemplated which would, if successful, lead to the issuance of any such order.

(f) To the best of its knowledge, the Borrower has made, and will during the term of this Agreement make, all filings which it is obligated to make with, and has obtained, and will during the term of this Agreement obtain, all approvals and consents which it is obligated to obtain from all federal, state and local regulatory agencies having jurisdiction to the extent, if any, required by applicable laws and regulations to be made or to be obtained in connection with the Project, the execution and delivery by the Borrower of the Borrower Documents, the transaction contemplated thereunder, and the performance by the Borrower of its obligations thereunder.

(g) To the best of the Borrower’s knowledge, except to the extent disclosed to the Credit Enhancer, the operation and maintenance of the Project does not conflict with any zoning, building, safety, health or environmental quality or other law, ordinance, order, rule or regulation applicable thereto.

(h) The Borrower will keep and perform faithfully all of its duties, obligations, covenants and undertakings contained herein and in the Borrower Documents.

(i) The Borrower will execute and deliver such additional instruments and perform such additional acts as may be necessary, in the opinion of the Issuer, to carry out the intent hereof and of the Borrower Documents or to perfect or give further assurances of any of the rights granted or provided for herein or in the Borrower Documents.

(j) The Borrower agrees that during the Loan Term it will maintain its existence, will not dissolve (other than a technical dissolution under State law so long as the Borrower is immediately reconstituted) or otherwise dispose of all or substantially all of its assets; provided that the Borrower may, without violating the agreement contained in this paragraph, merge or consolidate with another legal entity or sell or otherwise transfer to another legal entity all or substantially all of its assets as an entirety and thereafter dissolve, provided (i) that such merger, consolidation or transfer will not affect the excludability of the interest on the Bonds from gross income for federal income tax purposes; (ii) that if the successor or transferee legal entity is not the Borrower, then such legal entity shall be a legal entity organized and existing under the laws of one of the States of the United States of America and shall be qualified to do business in the State; (iii) such successor or transferee entity shall assume all of the obligations of the Borrower under the Borrower Documents in which event the Borrower shall be released from its obligations under the Borrower Documents; and (iv) the Credit Enhancer consents thereto in writing.

(k) The Borrower will advise the Issuer, the Credit Enhancer and the Trustee promptly in writing of the occurrence of any Default hereunder or any event which, with the passage of time or service of notice, or both, would constitute an Event of Default hereunder, specifying the nature and period of existence of such event and the actions being taken or proposed to be taken with respect thereto.

(l) Any certificate signed by an Authorized Borrower Representative and delivered pursuant to this Loan Agreement or the Indenture shall be deemed a representation and warranty of the Borrower as to the statement made therein.

(m) Concurrently with the execution of this Loan Agreement, the Borrower will cause to be delivered to the Trustee, on behalf of the Issuer, the Credit Facility and the Credit Facility shall be in full force and effect and shall secure the payment of the principal and purchase price of, and interest on, the Bonds.

(n) The Project is located wholly within Darlington County, South Carolina.

(o) There is not now pending or, to the knowledge of the Borrower, threatened, any suit, action or proceeding against or affecting the Borrower by or before any court, arbitrator, administrator, administrative agency or other governmental authority which, if decided adversely to the Borrower, would materially and adversely affect the validity of any of the transactions contemplated by this Loan Agreement or the Indenture, or impair the ability of the Borrower to perform its obligations under this Loan Agreement or the Indenture, or as contemplated hereby or thereby, nor, to the knowledge of the Borrower, is there any basis therefor.

Section 2.3. General Tax Representations, Warranties and Covenants of Borrower. The Borrower further represents, warrants and covenants as follows:

(a) No proceeds of the Bonds will be used, directly or indirectly, for the acquisition of land (or an interest therein) to be used for farming purposes and less than 25% of the proceeds of the Bonds will be used (directly or indirectly) for the acquisition of land (or an interest therein) within the meaning of Section 147(c) of the Code.

(b) Ninety-five percent (95%) or more of the expenditures for costs of the Project made from proceeds of the Bonds are, for federal income tax purposes, for land or depreciable property chargeable to the capital account of the Project or would be so chargeable either with a proper election by the Borrower under the Code or but for a proper election to deduct any such costs.

(c) Acquisition and construction of the Project, and each of the components thereof, occurred subsequent to April 28, 1994, and no obligation relating to the acquisition and construction of the Project (to be financed with proceeds of the sale of the Bonds) was paid or incurred prior to such date. The Project is expected to be placed in service on or about August 1, 1997.

(d) The Project is of the type authorized and permitted by the Act, and the Project is substantially the same in all material respects to that described in the notice of public hearing published in The Darlington News and Post on June 1, 1994.

(e) During the period commencing 15 days before the date of sale of the Bonds, neither the Borrower or any other “principal user” of the Project or any “related person” (or group of “related

persons” which includes the Borrower) has guaranteed, arranged, participated in, assisted with, borrowed the proceeds of, or leased facilities financed by, obligations issued under Section 144(a) of the Code by any state or local governmental unit or any constituted authority empowered to issue obligations by or on behalf of any state or local governmental unit other than the Issuer (“principal user” and “related person” as those terms are used in Section 144(a) of the Code).

(f) During the period commencing on the date of sale of the Bonds and ending 15 days thereafter, there will be no obligations issued under Section 144(a) of the Code which are guaranteed by the Borrower or any other “principal user” of the Project or any “related person” (or group of “related persons” which includes the Borrower) or which are issued with the assistance or participation of, or by arrangement with, the Borrower or any other “principal user” of the Project or any “related person” (or group of “related persons” which includes the Borrower) without the written opinion of Sinkler & Boyd, P.A., to the effect that the issuance of such obligations will not adversely affect the exclusion from gross income of the interest paid on the Bonds for purposes of federal income taxation; other than the Borrower or any other “principal user” of the Project or any “related person” (or group of “related persons” including the Borrower), no person has (i) guaranteed, arranged, participated in, assisted with the issuance of, or paid any portion of the cost of the issuance of, any of the Bonds, and (ii) provided any property or any franchise, trademark or trade name (within the meaning of Section 1253 of the Code) which is to be used in connection with the Project (“principal user” and “related person” as those terms are used in Section 144(a) of the Code).

(g) The Bonds are not being issued as part of an issue the interest of which is excludable from gross income for purposes of federal income taxation under any other provision of law other than Section 144(a) of the Code.

(h) The issuance of the Bonds is not part of an issuance of tax-exempt bonds which (1) will be sold (A) at substantially the same time or (B) pursuant to the same plan of financing, and (2) are reasonably expected to be paid from substantially the same source of funds, determined without regard to guarantees from unrelated parties.

(i) For each “test-period beneficiary” (as defined in Section 144(a)(10)(D) of the Code) of the Project, the sum of (i) the aggregate authorized face amount of the Bonds allocated in accordance with Section 144(a)(10)(C) of the Code to such beneficiary and (ii) the aggregate outstanding principal amount of any other tax-exempt obligation described in Section 144(a)(10)(B)(ii) of the Code, wherever and whenever issued, allocated to such beneficiary does not and will not exceed $40,000,000.

(j) There are no other issues of private activity bonds, as defined in Section 141 of the Code, the proceeds of which have been or will be used with respect to the “facilities,” as defined in Section 144(a)(4)(B) of the Code, located within the jurisdiction of the Issuer, the “principal user” of which is the Borrower or a “related person” thereto (“principal user” and “related person” being used in this Agreement as those terms are used in Section 144(a) of the Code).

(k) The Borrower will assist the Issuer in filing all appropriate returns, reports and attachments to income tax returns as of now or hereafter required by the provisions of the Code, including without limitation the Information Return for Private Activity Bond Issues (Form 8038) required under the Code.

(l) The weighted average maturity of the Bonds, calculated in accordance with the requirements of Section 147(b) of the Code, is not more than 23 years, which is less than one hundred twenty percent (120%) of the remaining average reasonably expected economic life of the Project, calculated in accordance with the requirements of Section 147(b) of the Code.

(m) No proceeds of the Bonds shall be invested in federally insured deposits or accounts except as part of a bona fide debt service fund or a reasonably required reserve fund.

(n) The Borrower has not and will not sell, transfer or otherwise dispose of the Project except as provided in this Loan Agreement.

(o) During the term of this Agreement, the operation and maintenance of the Project will not conflict in any material respect with any zoning, building, safety, health or environmental quality or other law, ordinance, rule, or regulation applicable thereto. To the extent of any conflict, the Borrower will use its best efforts to bring the zoning of the Project into compliance with the intended uses of the Project.

(p) The Borrower hereby represents and warrants that (i) the representations and warranties of the Borrower set forth in the Tax Agreement are true and correct as of the of delivery of this Loan Agreement and (ii) the Borrower expects to comply with the covenants and agreements set forth in the Tax Agreement.

Section 2.4. Manufacturing Facilities. The Borrower represents, warrants and covenants that the Project will be operated as a “manufacturing facility” within the definition of Section 144(a)(12)(C) of the Code, which shall include facilities which are directly related and ancillary thereto within the meaning of the Code (the “Related and Ancillary Facilities”), provided that (i) such Related and Ancillary Facilities shall be located on the same site as the manufacturing facility, and (ii) not more than 25% of the net proceeds of the Bonds may be used to provide the Related and Ancillary Facilities. In addition, no more than a de minimis amount (within the meaning of the Code) of the functions to be performed at any office space comprising the Project is not directly related to the day-to-day operations at the manufacturing facility.

Section 2.5 Actions Under Section 144(a)(4) of the Code. The Issuer is issuing the Bonds pursuant to an election made by it, at the Borrower’s request, under Section 144(a)(4) of the Code. In connection with that election, the Borrower represents and covenants that:

(a) The sum of (i) the principal amount of the Bonds, (ii) the outstanding face amount of prior issues, if any, described in Section 144(a)(2) of the Code and (iii) the aggregate amount of capital expenditures with respect to “facilities” as defined in Section 144(a)(4)(B) of the Code, other than those financed or to be financed out of proceeds of the Bonds or any such prior issues or those mentioned in Section 144(a)(4)(C) of the Code (“Capital Expenditures”), made during the three-year period preceding the Issue Date, does not exceed $10,000,000.

(b) During the three-year period following the Issue Date, the Borrower does not intend to make or cause or permit to be made any capital expenditures in an amount which would cause the interest on the Bonds to be included in the gross income of the Owners for federal income tax purposes.

(c) It will maintain records, listing by month, day, year and amount each capital expenditure made since the Issue Date through and including the third anniversary of the date of original delivery of the Bonds and upon any Determination of Taxability will furnish those records to the Trustee.

(d) In the event, on account of a lease, sublease, management contract or other agreement relating to the Project, or any portion thereof, permitted by the terms hereof, any person other than the Borrower becomes a “principal user” of the Project (within the meaning of Section 144(a) of the Code), the Borrower shall promptly advise the Trustee of the identity of such person and furnish to the Trustee a copy of such lease, sublease, management contract or other agreement. In connection with any such lease, sublease, management contract or other agreement, the Borrower will require by covenant that any lessee, sublessee, manager or user who is a “principal user” of the Project and any “related person” (within the meaning of Section 144(a) of the Code) thereto shall comply with the covenants set forth in subsections (b) and (c) of this Section as if those covenants were made herein by such lessee, sublessee, manager, user or “related person” thereto.

Section 2.6. Tax Exemption. The Borrower hereby covenants, represents and agrees as follows:

(a) that it will not direct the Trustee to make any investment or use of the proceeds of any of the Bonds, which would cause any of the Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Code and the Tax Regulations thereunder as the same may be applicable to the Bonds at the time of such action, investment or use and that it shall take and cause the Issuer and Trustee to take all actions required to comply with the provisions of Section 148 of the Code;

(b) that it will at all times do and perform all acts and things necessary or desirable and within its reasonable control in order to assure that interest paid on the Bonds shall, for the purposes of federal income taxation, not be includable in the gross income of the Bondowners, except in the event that the Bondowner is a “substantial user” of the Project or a “related person” (such terms within the meaning of Section 147(a) of the Code);

(c) that it shall not take or omit to take, or permit to be taken on its behalf, any actions which, if taken or omitted, would adversely affect the excludability from the gross income of the Bondowners of interest paid on the Bonds for federal income tax purposes, whether currently in effect or enacted subsequent to the date of original delivery of the Bonds;

(d) in the event that, in accordance with Section 148(f) of the Code, any rebate of earnings or profits on investment of any amounts constituting gross proceeds of the Bonds shall be required to be made to the United States of America in order to preserve the tax-exempt status of interest on the Bonds, it shall make all rebatable arbitrage payments or cause them to be made in installments at least once every five years as required by Section 148(f)(3) of the Code and the provisions of the Tax Agreement; it being understood that in no event shall the Issuer or the Trustee have any responsibility or liability for the payment of any rebatable arbitrage, except as specifically provided in the Tax Agreement and the Indenture, and that all responsibility and liability therefor shall be vested in the Borrower; and

(e) to take such action or actions as may be necessary in the opinion of Bond Counsel to preserve or perfect the exclusion of interest on the Bond from gross income for federal income tax purposes.

[End of Article II]

ARTICLE III

THE LOAN; ISSUANCE OF THE BONDS

Section 3.1. Amount and Source of the Loan. The Issuer agrees to lend to the Borrower, upon the terms and conditions herein and in the Indenture specified, the net proceeds received by the Issuer from the sale of the Bonds (the “Loan”), and to cause such proceeds to be deposited in accordance with the Indenture.

Section 3.2. Possession and Use of the Project. The Issuer acknowledges that as between the Issuer and the Borrower the Borrower shall be the sole legal owner of the Project, and shall be entitled to sole and exclusive possession of the Project.

Section 3.3. Termination of Prior Liens. Concurrently with the execution of this Loan Agreement the Borrower shall make provisions for termination of all liens and security interests incurred with respect to the Project except for Permitted Encumbrances.

Section 3.4. Disbursements from the Project Fund and the Cost of Issuance Fund.

(a) The Issuer has, in the Indenture, authorized and directed the Trustee, provided no Event of Default has occurred and is continuing, to make disbursements from the Project Fund and the Cost of Issuance Fund, to reimburse the Borrower or any person designated by the Borrower for the following:

(i) Costs incurred directly or indirectly for or in connection with the acquisition, construction, improvement, installation or equipping of the Project including, but not limited to, those for preliminary planning and studies, architectural, legal, engineering and supervisory services, labor, services, materials, fixtures, and equipment;

(ii) Premiums attributable to all insurance required to be taken out with respect to the Project, the premium on each surety bond, if any, required with respect to work on the Project, and taxes, assessments and other charges in respect of the Project, that may become due and payable;

(iii) Costs incurred directly or indirectly in seeking to enforce any remedy against any contractor, subcontractor, materialman or other agent in respect of any default under any contract relating to theProject;

(iv) Financing, legal, accounting, printing and engraving fees, charges and expenses, and all other such fees, charges and expenses incurred in connection with the authorization, sale, issuance and delivery of the Bonds and the preparation and delivery of this Loan Agreement and related documents as long as such disbursements do not exceed two percent (2%) of the proceeds of the Bonds pursuant to Section 147(g) of the Code;

(v) Any other incidental and necessary costs, expenses, fees and charges relating to the acquisition, construction, improvement, installation or equipping of the Project; title charges, surveys, commitment fees, appraisal fees and recording fees; and

(vi) The fees and expenses of the Trustee, Registrar, Tender Agent and Paying Agent properly incurred in connection with the execution and delivery of the Indenture and of the Credit Enhancer properly incurred in connection with the issuance of the Credit Facility and the execution and delivery of the Letter of Credit Agreement.

(b) Nothing contained herein permits or shall be construed to permit the expenditure of any moneys in the Project Fund or the Cost of Issuance Fund for, or in reimbursement of payments made for, the acquisition of motor vehicles, costs of issuance of the Bonds to the extent such costs of issuance exceed 2% of the net proceeds of the Bonds allocable to the Project within the meaning of Section 147(g) of the Code, raw materials, small tools, supplies, inventory or accounts receivable, or for provision of working capital, and no such expenditure shall be made from the Project Fund or the Cost of Issuance Fund.

(c) All moneys in the Project Fund (including moneys earned thereon by investment thereof) remaining after the completion of the acquisition, construction, installation, equipment and improvement of the Project and payment, or provision for payment, in full of the costs provided for in the preceding subsections of this Section, then due and payable, shall as soon as practicable be paid into the Revenue Fund to be used (i) for the redemption of the Bonds, or a portion thereof, at the earliest possible date; provided that amounts approved by the Borrower shall be retained by the Trustee in the Project Fund for payment of such costs not then due and payable, or (ii) to acquire, construct, install, improve and equip such additional real and personal property in connection with the Project as are designated by an Authorized Borrower Representative, the acquisition, construction, installation, improvement and equipping of which will be such as is permitted under both the Act and the Code, or (iii) for a combination of any or all of the foregoing as is provided in such direction.

(d) Disbursements from the Project Fund for the items described in this Section shall be in the amount of such items, but, for the purpose of determining the amount of any such item which involves any contract providing for the retention of a portion of the contract price, there shall initially be deducted from such item the amount of any such retention, and, when such retention becomes due and payable, such retention shall be added to the item. All disbursements from the Project Fund for the items described in this Section shall be made only upon the written order of an Authorized Borrower Representative and the following conditions shall have been satisfied with respect to such disbursement:

(A) There shall have been delivered to the Trustee and the Credit Enhancer a certificate of an Authorized Borrower Representative in the form of Exhibit B attached hereto certifying, with respect to such disbursement, to the Credit Enhancer and the Trustee (1) the specific items, amounts and payees thereof, (2) that none of the items for which the disbursement is proposed to be made formed the basis for any disbursement theretofore made from the Project Fund, (3) that each item for which the disbursement is proposed to be made is or was properly chargeable as a capital expenditure in connection with the Project, (4) that the Borrower has received from each payee appropriate waivers of any mechanics or other liens (or thereby provided indemnification in lieu thereof) and, upon the written request of the Trustee or the Credit Enhancer, copies of such waivers and evidence of any such indemnification will be included with the certificate, (5) that the items requested qualify for such disbursement under the provisions of subsections (i) through (iii) of Section 3.4(c), (6) that all construction on the Project thereto performed is substantially in accordance with any plans and specifications for such construction and all applicable laws, rules, codes and regulations

and (7) that payment of such disbursement will not result in less than substantially all (at least ninety-five percent (95%)) of thenet proceeds of the Bonds (taking into account investment income with respect thereto) being used to provide land or property subject to the allowance for depreciation under Section 167 of the Code, constituting the Project;

(B) There shall be in existence no Event of Default or situation which, upon the giving of notice or the passage of time or both would become an Event of Default; and

(e) The final disbursement from the Project Fund for the items described in this Section shall include all amounts theretofore withheld as retainages as hereinbefore set forth in this Section. The Credit Enhancer shall have no obligation to cause its approval to be given to the written order of an Authorized Borrower Representative for such final disbursement until the conditions described in subsections (A) and (B) of Section 3.4(d) shall have been satisfied with respect to such final disbursement.

(f) Should the Borrower be unable to request final disbursement from the Project Fund as described above prior to a date which is three (3) years from the Bond Issuance Date, such funds remaining in the Project Fund shall be considered to be moneys remaining in the Project Fund after completion of the Project and shall be paid into the Revenue Fund and expended as described in Section 3.4(c) unless the Borrower delivers to the Trustee an opinion of Bond Counsel that such treatment is not necessary to retain the tax-exempt status of the Bonds.

(g) All disbursements from the Cost of Issuance Fund for the items described above shall be made only upon the written order of an Authorized Borrower Representative in substantially the form attached hereto as Exhibit B.

Section 3.5. Investment of Fund Moneys. Any moneys held as part of the Funds under the Indenture shall be invested or reinvested by the Trustee as provided in the Indenture. The Issuer and the Borrower each hereby covenants that it shall cause that investment and reinvestment and the use of the proceeds of the Bonds to be restricted in such manner and to such extent, if any, as may be necessary, after taking into account reasonable expectations at the time of delivery of and payment for the Bonds, so that the Bonds will not constitute arbitrage bonds under Section 148 of the Code.

Section 3.6. Loan Payments. The Borrower shall pay the following amounts to the Trustee, all as “Loan Payments” under this Loan Agreement:

(a) The Borrower covenants and agrees during the Loan Term to make Loan Payments to the Trustee at its Principal Office, for the account of the Issuer, for deposit in the Revenue Fund, in federal or other immediately available funds, during normal business hours on or before 10:00 A.M., Trustee’s local time, on each Loan Payment Date, the amount of such payment being as follows:

(i) the amount of the principal, if any, of the Bonds due and payable on such Loan Payment Date, whether at stated maturity, by redemption prior to maturity or acceleration or otherwise;

(ii) the amount of interest on the Bonds due and payable on such Loan Payment Date;

(iii) the amount of redemption premium, if any, on the Bonds due and payable on such Loan Payment Date; and

(iv) the purchase price of any Bonds required to be purchased on such Loan Payment Date pursuant to Article III of the Indenture.

(b) The amounts received by the Trustee under the Credit Facility shall be credited against the Loan Payment due on the applicable Loan Payment Date. Any Loan Payment made by the Borrower and held by the Trustee in such event shall be delivered to the Credit Enhancer in reimbursement of the amounts so received by the Trustee under the Credit Facility, and any excess shall be returned to the Borrower as an overpayment.

(c) Except for such interest of the Borrower as may hereafter arise pursuant to Section 510 of the Indenture, the Borrower and the Issuer each acknowledge that neither the Borrower nor the Issuer has any interest in the Revenue Fund or the Debt Service Fund and any moneys deposited therein shall be in the custody of and held by the Trustee in trust for the benefit of the Bondowners and the Credit Enhancer.

Section 3.7. Additional Payments. The Borrower shall pay the following amounts to the following persons, all as “Additional Payments” under this Loan Agreement:

(a) To the Trustee, when due, all reasonable fees and charges for its services rendered under the Indenture, this Loan Agreement and the Borrower Documents, and all reasonable expenses (including without limitation reasonable fees and charges of the Paying Agent, the Bond Registrar, counsel, accountant, engineer or other person) incurred in the performance of the duties of the Trustee under the Indenture, this Loan Agreement and the other Borrower Documents, for which the Trustee and other persons are entitled to repayment or reimbursement;

(b) To the Trustee, upon demand, an amount necessary to pay rebatable arbitrage in accordance with the Tax Agreement and the Indenture.

(c) To the Issuer, upon demand, its regular administrative and issuance fees and charges, if any, and all expenses (including without limitation attorney’s fees) incurred by the Issuer in relation to the transactions contemplated by this Loan Agreement and the Indenture, which are not otherwise to be paid by the Borrower under this Loan Agreement or the Indenture;

(d) To the appropriate Person, all taxes, assessments and charges required to be paid pursuant to Section 5.3 hereof;

(e) To the appropriate Person, such payments as are required (i) as payment for or reimbursement of any and all reasonable costs, expenses and liabilities incurred by the Issuer, the Credit Enhancer or the Trustee or any of them in satisfaction of any obligations of the Borrower hereunder and under the other Borrower Documents that the Borrower does not perform, or incurred in the defense of any action or proceeding with respect to the Project, this Loan Agreement, the Indenture or the other Borrower Documents, or (ii) as reimbursement for expenses paid, or as prepayment of expenses to be paid, by the Issuer or the Trustee that are incurred as a result of a request by the Borrower or for which the Borrower is liable under this Loan Agreement;

(f) To the appropriate Person, any other amounts required to be paid by the Borrower under this Loan Agreement; and

(g) All Costs of Issuance and fees, charges and expenses, including agent and counsel fees, incurred in connection with the issuance of the Bonds, as and when the same become due.

Any past due Additional Payments shall continue as an obligation of the Borrower until they are paid and shall bear interest (except as may be otherwise provided in the Collateral Documents with respect to obligations owed to the Credit Enhancer) at the base rate of interest announced from time to time by the Trustee for variable rate commercial loans plus two percent (2%) during the period such Additional Payments remain unpaid.

Section 3.8. Obligations Unconditional. The obligations of the Borrower to make Loan Payments and Additional Payments on or before the date the same become due, and to perform all of its other obligations, covenants and agreements hereunder shall be absolute and unconditional, and the Borrower shall make such payments and perform such obligations without abatement, diminution or deduction regardless of any cause or circumstances whatsoever including, without limitation, any defense, set-off, recoupment or counterclaim which the Borrower may have or assert against the Issuer, the Trustee or any other Person.

Section 3.9. Credit Facility. Concurrently with the issuance of the Bonds, the Borrower shall cause the Credit Facility to be delivered to the Trustee to induce the purchase of the Bonds by the original purchasers thereof. The Borrower shall cause the Credit Facility or an Alternate Credit Facility to be continuously maintained until all of the Bonds have been fully paid or their payment provided for in accordance with Article XII of the Indenture.

Section 3.10. Alternate Credit Facility. The Borrower may (without penalty or premium) provide and the Trustee shall accept any Alternate Credit Facility, provided that any Alternate Credit Facility shall meet the requirements of Section 706 of the Indenture and an opinion of counsel acceptable to the Trustee has been delivered to the Trustee to substantially the same effect as the opinion of counsel to the Credit Enhancer delivered in connection with the issuance of the initial Credit Facility and, in addition, to the effect that the exemption of the Bonds (or any securities evidenced thereby) from the registration requirements of the Securities Act of 1933, as amended, shall not be impaired by the substitution of such Alternate Letter of Credit or that the applicable registration or qualification requirements of such Act have been satisfied.

Section 3.11. Issuance of Bonds. In order to provide funds for the construction and purchase of the Project, the Issuer agrees that it will issue, sell and deliver the Bonds to the original purchasers thereof. The proceeds of the sale of the Bonds shall be paid over to the Trustee for the account of the Issuer in accordance with the Indenture.

Section 3.12. Borrower Required to Pay Costs in Event Project Fund Insufficient. In the event that money in the Project Fund is not sufficient to pay all costs of providing the Project, or providing improvements or additions to the Project as contemplated in connection with the Bonds, the Borrower shall, nonetheless, complete such improvements or additions and shall pay all costs of such completion in full from its own funds. The Borrower shall not be entitled to any reimbursement for such completion costs from the Issuer, the Credit Enhancer or any Trustee, Registrar or Paying Agent, nor shall it be entitled to any abatement, diminution or postponement of Loan Payments.

Section 3.13. Completion Date. The Completion Date of the Project and all additions or improvements to the Project shall be evidenced to the Issuer, the Credit Enhancer and the Trustee by a certificate signed by an Authorized Borrower Representative substantially in the form attached hereto as Exhibit C, stating:

(a) the date on which the Project and the final additions or improvements to the Project were substantially complete,

(b) that all other facilities necessary in connection with such additions or improvements have been acquired, constructed, improved, installed and equipped,

(c) that the Project and any such additions and improvements have been completed in such a manner as to conform in all material respects with all applicable zoning, planning, building, environmental and other similar governmental regulations,

(d) that all costs of the Project or any such additions or improvements then due and payable have been paid, and

(e) the amounts which the Trustee should retain in the Project Fund for the payment of costs not yet due or the liability for which the Borrower is contesting or which otherwise should be retained and the reasons such amounts should be retained.

An Authorized Borrower Representative shall include with such certificate a statement specifically describing all items of real property, personal property and fixtures acquired and installed as part of the Project.

[End of Article III]

ARTICLE IV

OPERATION OF THE PROJECT

Section 4.1. Operation of the Project. The Borrower represents, warrants, covenants and agrees that it has obtained or shall obtain all necessary or required permits, licenses, consents and approvals that are material for the operation and maintenance of the Project and shall comply in all material respects with all lawful requirements of any governmental body regarding the use or condition of the Project, whether existing or later enacted, foreseen or unforeseen or whether involving any change in governmental policy or requiring structural or other changes to the Project and irrespective of the cost of so complying.

Neither the Issuer, the Trustee or the Credit Enhancer, nor their respective successors or assigns are the agents or representatives of the Borrower, and the Borrower is not the agent of the Issuer, the Trustee or the Credit Enhancer, and this Loan Agreement shall not be construed to make any of the Issuer, the Trustee or the Credit Enhancer liable to materialmen, contractors, subcontractors, craftsmen, laborers or others for goods or services delivered by them in connection with the Project, or for debts or claims accruing to the aforesaid parties against the Borrower. This Loan Agreement shall not create any contractual relation either expressed or implied between the Issuer, the Trustee or the Credit Enhancer and any materialmen, contractors, subcontractors, craftsmen, laborers or any other person supplying any work, labor or materials in connection with the Project.

Section 4.2. Environmental Compliance. The Borrower will comply in all material respects with the environmental provisions of the Credit Documents, the provisions of which (including relevant definitions) are incorporated herein by this reference and constitute a part of this Agreement.

Section 4.3. Payment of Project Costs. The proceeds from the sale of the Bonds shall be paid by the Trustee from the Project Fund in accordance with Section 3.4 of this Agreement to provide for the payment of the Project costs.

Section 4.4. Deficiency of Project Fund. The Issuer makes no warranty, either express or implied, that the amounts in the Project Fund shall be sufficient to fully provide for the costs of the Project. The Borrower shall not be entitled to any reimbursement for the payment of any such deficiency by the Issuer, the Trustee, the Credit Enhancer or any Bondowner, nor shall it be entitled to any diminution of any amounts otherwise payable under this Loan Agreement.

[End of Article IV]

ARTICLE V

MAINTENANCE; MODIFICATIONS; INSURANCE;

LEASE OR ASSIGNMENT OF PROJECT;

LOSS OR DAMAGE TO PROJECT

Section 5.1. Maintenance of Project by Borrower. The Borrower agrees that, subject to the provisions of Sections 5.7 and 5.8 hereof, during the term of this Agreement it will keep and maintain the Project in good condition, repair and working order, ordinary wear and tear excepted, at its own cost, and will make or cause to be made from time to time all necessary repairs thereto (including external and structural repairs) and renewals and replacements thereto.

Section 5.2. Sale or Lease of Project; Assignment of Loan Agreement by Borrower. Subject to Section 2.2(j) hereof, and upon the written consent of the Credit Enhancer and the delivery of an Opinion of Bond Counsel to the Trustee and the Credit Enhancer that such action is permitted by the Borrower Documents and the Act, and shall not adversely affect the exclusion from gross income for federal income tax purposes of the interest on the Bonds, the Borrower may assign, mortgage, pledge, sell, lease, grant a security interest in, or in any other manner transfer, convey or dispose of the Project or any interest therein or part thereof or assign any of its right, title and interest in, to and under this Loan Agreement in accordance with the Borrower Documents; provided that no such assignment with respect to this Loan Agreement shall be made unless a corresponding assignment is made with respect to the Series 1994B Loan Agreement.

Section 5.3. Taxes, Assessments and Other Charges. The Borrower shall pay all taxes, assessments and charges of any kind whatsoever that may at any time be lawfully assessed or levied against or with respect to the Project (including any tax upon or with respect to the income or profits of the Issuer from the Project that, if not paid, would become a charge on the payments to be made under this Loan Agreement prior to or on a parity with the charge thereon created by the Indenture and including ad valorem, sales and excise taxes, assessments and charges upon the Borrower’s interest in the Project), all utility and other charges incurred in the operation, maintenance, use, occupancy and upkeep of the Project and all assessments and charges lawfully made by any governmental body for public improvements that may be secured by lien on the Project.

Section 5.4. Use of Project. The Issuer will not take or cause the Trustee to take any action (other than as provided herein or in the Indenture) to interfere with the Borrower’s interest in the Project or to interfere with possession, custody, use and enjoyment of the Project.

Section 5.5. Insurance Required. The Borrower shall cause the Project to be kept continuously insured against such risks as are customarily insured against by companies conducting activities similar to those of the Borrower in connection with the Project, and shall pay as the same become due all premiums in respect thereof, all as provided in the Credit Documents.

Section 5.6. Damage, Destruction, Condemnation or Loss of Title. For as long as Heller Financial, Inc. is the Credit Enhancer, all Net Proceeds shall be applied in accordance with the terms and provisions of the Credit Agreement and other Credit Documents; provided (i) in addition to the

requirements set forth in the Credit Agreement and other Credit Documents, as a condition to the use of such Net Proceeds for repair, reconstruction, restoration, replacement and re-equipping of the Project, there shall be delivered to the Trustee and the Credit Enhancer an Opinion of Bond Counsel that such action shall not adversely affect the exclusion from gross income for federal income tax purposes of the interest on the Bonds and, upon completion of such action, any remaining balance not required for such repair, reconstruction, restoration, replacement and re-equipping shall be deposited in the Revenue Fund and applied in accordance with the provisions of the Indenture and (ii) in the event the Net Proceeds are not used for such repair, reconstruction, restoration, replacement and re-equipping, such Net Proceeds shall be used for redemption of Bonds as set forth in Section 5.6(b) below.

The Borrower hereby agrees to apply the Net Proceeds of any award, compensation, settlement, damages, compromise, voluntary conveyance or insurance proceeds payable in connection with the pending or threatened condemnation or taking, or sale under threat of condemnation or taking, of the Project or a portion thereof for any public or quasipublic use (hereinafter referred to as a “condemnation”) or in connection with a deficiency or nonexistence of the Borrower’s title thereto or the lien or priority of the documents securing the Borrower’s obligations under the Letter of Credit Agreement to the Credit Enhancer (hereinafter referred to as a “loss of title”). The Issuer and the Trustee shall cooperate with the Borrower in the handling and conduct of any prospective or pending condemnation proceedings with respect to the Project or any portion thereof.

The Borrower shall notify the Issuer, the Credit Enhancer and the Trustee immediately in the case of damage to or destruction of the Project or any portion thereof resulting from fire or other casualty (hereinafter referred to as a “casualty loss”) or of a condemnation or loss of title.

In the event of a casualty loss, a condemnation or a loss of title for which the Net Proceeds do not exceed $1,000,000, the Borrower shall, but only with the prior written consent of the Credit Enhancer, which consent may not be unreasonably withheld, forthwith repair, reconstruct, restore, replace and improve the Project to substantially the same or an improved condition or utility value as existed prior to such casualty loss or forthwith make such replacements of or repairs or improvements to the Project or portions thereof made necessary by such condemnation or loss of title. Such Net Proceeds shall be paid directly to the Borrower and applied to the extent necessary to the payment of the costs of such repair, reconstruction, restoration, replacement and improvement. Any remaining balance not required for such purpose shall be paid to the Trustee for deposit in the Revenue Fund to be used to redeem Bonds on the earliest date for which notice of redemption can be given in accordance with Article IV of the Indenture.

If such Net Proceeds exceed $1,000,000, or if such Net Proceeds do not exceed such amount and the Credit Enhancer does not consent in writing to the action described in the immediately preceding paragraph, such Net Proceeds shall be paid to the Trustee for disbursement as hereinafter described and the Borrower shall, with the prior written consent of the Credit Enhancer, elect one of the following options by written notice delivered to the Trustee, the Credit Enhancer and the Issuer within 30 days after the determination of the amount of such Net Proceeds or 90 days after the occurrence of such casualty loss, condemnation or loss of title, whichever occurs first:

(a) Option A - Repairs and Improvements. Upon delivery of an Opinion of Bond Counsel to the Trustee and the Credit Enhancer that such action shall not adversely affect the exclusion from gross income for federal income tax purposes of the interest on the Bonds, the Borrower may elect to use such Net Proceeds to repair, reconstruct, restore, replace and re-equip the Project and, in such event, such Net Proceeds shall be deposited in a separate account to be established by the Trustee and, so long as no Event of Default exists, shall be disbursed from time to time by the Trustee upon the request of the Borrower in such manner as may be agreed to by the Credit Enhancer and the Trustee. Upon the completion of such use, any remaining balance not required for such repair, reconstruction, restoration, replacement and re-equipping shall be deposited in the Revenue Fund and applied in accordance with the provisions of the Indenture.

(b) Option B - Redemption of Bonds. The Borrower may elect to have such Net Proceeds deposited in the Revenue Fund; provided either (i) the Borrower elects to prepay all Loan Payments pursuant to Section 9.2 hereof and cause all the Bonds to be redeemed (without premium or penalty) in accordance with Section 402(d) of the Indenture at the earliest practical date, or (ii) the Borrower elects to prepay Loan Payments pursuant to Section 9.2 hereof and cause part of the Bonds to be redeemed (without premium or penalty) pursuant to Section 402(d) of the Indenture and the property suffering such casualty loss, condemnation or loss of title was not essential to the use of the Project in a manner that will result in any of the representations or warranties respecting the Project and the use of the proceeds of the Bonds being false, untrue, misleading or breached and provided further that an expert appraiser retained by the Borrower and reasonably acceptable to the Trustee delivers to the Trustee its written opinion, appraisal or certificate showing that the ratio of the fair market value at a foreclosure sale of the Project immediately prior to the occurrence or discovery of such casualty loss, condemnation or loss of title to the principal amount of the Bonds then Outstanding is no greater than the ratio of the then current market value at a foreclosure sale of the Project to the principal amount of the Bonds to be Outstanding after the application of such Net Proceeds and any other moneys deposited in the Revenue Fund by the Borrower for the redemption of Bonds.

In the event such Net Proceeds do not exceed $1,000,000 and the Credit Enhancer consents in writing to the action described in the third paragraph of this Section or the Borrower shall elect Option A, (i) the Borrower shall complete the repair, reconstruction, restoration, replacement and re-equipping of the Project free from all liens other than Permitted Encumbrances, whether or not such Net Proceeds are sufficient to pay for the same; (ii) the Borrower shall not be entitled to any reimbursement from the Issuer, the Trustee, the Credit Enhancer or the Bondowners or any abatement or diminution of its obligations hereunder by reason of any payments made by the Borrower for such purpose in excess of the Net Proceeds; and (iii) all such repairs, reconstructions, restorations, replacements and re-equipping shall be a part of the Project and shall be subjected to the lien and security interest of the Credit Documents and the Borrower shall take any actions which the Credit Enhancer reasonably deems necessary or appropriate to so subject them to the Credit Documents.

Notwithstanding anything herein to the contrary, if Heller Financial, Inc. is no longer the Credit Enhancer, the Borrower shall have no obligation to repair, reconstruct, restore, replace or re-equip the Project (unless such Net Proceeds are made available to the Borrower for such purpose).

Section 5.7. Remodeling and Improvements. The Borrower may remodel the Project or make substitutions, additions, modifications or improvements thereto from time to time as it, in its discretion, deems desirable, provided that (i) any such remodeling, substitutions, additions, modifications or improvements do not materially alter the character of the Project as an enterprise permitted by the Act and (ii) the same will not adversely affect the exclusion from gross income for federal taxation purposes of interest on the Bonds, as provided in an Opinion of Bond Counsel addressed to the Issuer, the Trustee and the Credit Enhancer. The cost of such remodeling, substitutions, additions, modifications or improvements shall be paid by the Borrower.

Section 5.8. Equipment. The Borrower may from time to time substitute machinery and equipment for any part of the Project, provided that (i) any such substitutions do not materially alter the character of the Project as an enterprise permitted by the Act and (ii) the same will not adversely affect the exclusion from gross income for federal taxation purposes of interest on the Bonds, as provided in an Opinion of Bond Counsel addressed to the Issuer, the Trustee and the Credit Enhancer. Any such substituted machinery and equipment shall become a part of the Project and be included under the terms of this Agreement.

Provided that the same will not adversely affect the exclusion from gross income for federal taxation purposes of interest on the Bonds, as provided in an Opinion of Bond Counsel addressed to the Issuer, the Trustee and the Credit Enhancer, the Borrower may also sell, scrap, trade-in or otherwise dispose of, any machinery or equipment which is a part of the Project, without substitution therefor so long as the removal of the machinery or equipment to be purchased or otherwise disposed of will not materially alter the character of the Project as an enterprise permitted by the Act.

[End of Article V]

ARTICLE VI

PARTICULAR COVENANTS

Section 6.1. Access to the Project and Inspection; Operation of the Project. The duly authorized agents of the Issuer, the Credit Enhancer and the Trustee shall have the right, at all reasonable times upon the furnishing of reasonable notice under the circumstances, to enter upon the Project and to examine and inspect the Project, subject to any secrecy regulation or agreement or national security law or regulation of the government of the United States of America. The Borrower will execute, acknowledge and deliver all such further documents and do all such other acts and things as may be necessary to grant to the Issuer, the Credit Enhancer and the Trustee such right of entry. The duly authorized agents of the Issuer, the Credit Enhancer and the Trustee shall also be permitted, at all reasonable times upon reasonable notice under the circumstances, to examine the books and records of the Borrower with respect to the Project and the obligations of the Borrower hereunder.

Section 6.2. Financial Statements. The Borrower shall furnish the Credit Enhancer and the Trustee with copies of its audited financial statements for each of its fiscal years within 120 days after the end of the preceding fiscal year accompanied by a certificate of the Authorized Borrower Representative stating (i) that the information contained in such statements is materially true and correct, and (ii) that, to the best of his knowledge after reasonable investigation, no Default exists, and if there is such a Default, specifying the nature and period of existence thereof and what action, if any, the Borrower is taking or proposes to take with respect thereto.

Section 6.3. Indemnification. (a) The Borrower releases the Issuer and the Trustee from, agrees that the Issuer and the Trustee shall not be liable for, and indemnifies the Issuer and the Trustee against, all liabilities, losses, damages (including reasonable attorneys’ fees), causes of action, suits, claims, costs and expenses, demands and judgments of any nature imposed upon or asserted against the Issuer or the Trustee, on account of: (i) any loss or damage to property or injury to or death of or loss by any Person that may he occasioned by any cause whatsoever pertaining to the construction, maintenance, operation and use of the Project; (ii) any breach or default on the part of the Borrower in the performance of any covenant or agreement of the Borrower under this Loan Agreement, the Borrower Documents or any related document, or arising from any act or failure to act by the Borrower, or any of its agents, contractors, servants, employees or licensees; (iii) violation by the Borrower or any Affiliate of any law, ordinance or regulation affecting the ownership, occupancy or use of the Project; (iv) the authorization, issuance and sale of the Bonds, and the provision of any information furnished by the Borrower in connection therewith concerning the Project or the Borrower or arising from (1) any errors or omissions of any nature whatsoever such that the Bonds, when delivered to the Bondowners, are not validly issued and binding obligations of the Issuer, or (2) any fraud or misrepresentations or omissions contained in the proceedings of the Issuer or the Trustee with respect to, or as a result of, materials furnished in writing by the Borrower relating to the issuance of the Bonds which, if known to the original purchaser of the Bonds, would reasonably be a material factor in its decision to purchase the Bonds; (v) failure to pay rebatable arbitrage pursuant to Section 3.7(b) hereof; and (vi) any claim or action or proceeding with respect to the matters set forth in subsections (i), (ii), (iii), (iv) and (v) above brought thereon; provided, however, that the Borrower does not hereby release the Issuer or the Trustee from, or agree that either of them shall not be liable for, or indemnify either of them against any liabilities, losses, damages

(including attorneys’ fees), causes of action, suits, claims, costs and expenses, demands and judgments of any nature imposed upon or asserted against either of them on account of, with respect to the Issuer, its willful misconduct, or, with respect to the Trustee, its negligence or willful misconduct.

(b) The Borrower agrees to indemnify the Trustee for and to hold it harmless against all liabilities, claims, costs and expenses incurred without negligence or willful misconduct on the part of the Trustee, on account of any action taken or omitted to be taken by the Trustee in accordance with the terms of this Loan Agreement, the Bonds or the Indenture or any action taken at the request of or with the consent of the Borrower, including the costs and expenses of the Trustee in defending itself against any such claim, action or proceeding brought in connection with the exercise or performance of any of its powers or duties under this Loan Agreement, the Bonds or the Indenture.

(c) In case any action or proceeding is brought against the Issuer or the Trustee in respect of which indemnity may be sought hereunder, the party seeking indemnity promptly shall give notice of that action or proceeding to the Borrower, and the Borrower upon receipt of that notice shall have the obligation and the right to assume the defense of the action or proceeding; provided, that failure of a party to give that notice shall not relieve the Borrower from any of its obligations under this Section unless that failure prejudices the defense of the action or proceeding by the Borrower. At its own expense, an indemnified party may employ separate legal counsel and participate in (but not control) the defense. The Borrower shall not be liable for any settlement without its consent.

(d) The indemnification set forth above is intended to and shall include the indemnification of all affected officials, directors, officers, staff and employees of the Issuer, and the Trustee, respectively. That indemnification is intended to and shall be enforceable by the Issuer to the full extent permitted by law.

Section 6.4. Further Assurances and Corrective Instruments. Subject to the Indenture, the Issuer and the Borrower from time to time will execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, Supplemental Loan Agreements and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the Project and for carrying out the intention or facilitating the performance of this Loan Agreement.

Section 6.5. Litigation Notice. The Borrower shall give the Trustee and the Credit Enhancer prompt notice of any action, suit or proceeding by it or against it at law or in equity, or before any governmental instrumentality or agency, or of any of the same which may be threatened, which, if adversely determined, would materially impair the right of the Borrower to carry on the business which is contemplated in connection with the Project, or would materially and adversely affect its business, operations, properties, assets or condition. Within five Business Days after the filing against the Borrower, and prior to the filing by the Borrower, of a petition in bankruptcy, the Borrower shall notify the Trustee and the Credit Enhancer in writing as to such occurrence.

Section 6.6. Annual Certificate. The Borrower will furnish to the Issuer, the Trustee and the Credit Enhancer, on or before September 1 of each year, a certificate, signed by an Authorized Borrower Representative, stating that the Borrower has made a review of its activities with respect to the Project during the preceding calendar year for the purpose of determining whether or not the Borrower has

complied with all of the terms, provisions and conditions of the Borrower Documents and that the Borrower has, to the best of its knowledge, kept, observed, performed and fulfilled each and every covenant, provision and condition of the Borrower Documents on its part to be performed and is not in default, in the performance or observance of any of the terms, covenants, provisions or conditions hereof. If the Borrower shall be in default such certificate shall specify all such defaults and the nature thereof.

[End of Article VI]

ARTICLE VII

ASSIGNMENT OF ISSUER’S RIGHTS UNDER LOAN AGREEMENT

Section 7.1. Assignment by the Issuer. The Issuer, by means of the Indenture and as security for the payment of the principal of, purchase price of, and redemption premium, if any, and interest on the Bonds, and the obligations payable to the Credit Enhancer under the Letter of Credit Agreement, will assign, pledge and grant a security interest in certain of its rights, title and interests in, to and under this Loan Agreement, including Loan Payments and Additional Payments and other revenues, moneys and receipts received by it pursuant to this Loan Agreement, to the Trustee (reserving its Unassigned Issuer’s Rights).

Section 7.2. Restriction on Transfer of Issuer’s Rights. The Issuer will not sell, assign, transfer or convey its interests in this Loan Agreement except pursuant to the Indenture.

Section 7.3. Credit Enhancer’s Remedial Rights. The Issuer and the Borrower hereby acknowledge and agree that should the Credit Enhancer exercise certain of its remedial rights under the Credit Documents, the Credit Enhancer (or an affiliate or designee thereof) may become successor in interest to the Borrower hereunder. No such exercise of the Credit Enhancer’s rights under the Credit Documents, or succession of the Credit Enhancer (or an affiliate or designee thereof) to the interest of the Borrower hereunder, shall require, as a condition precedent, either (i) the further consent of the Issuer, the Trustee or the Bondowners, or (ii) the acceleration of the Bonds (unless the Credit Enhancer elects such in its sole discretion).

[End of Article VII]

ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES

Section 8.1. Events of Default Defined. The term “Event of Default” shall mean any one or more of the following events:

(a) Failure by the Borrower to make timely payment of any Loan Payment or any Additional Payment when due.

(b) Failure by the Borrower to observe and perform any covenant, condition or agreement on the part of the Borrower under this Loan Agreement or the Indenture, other than as referred to in the preceding subparagraph (a) of this Section, for a period of 60 days after written notice of such default has been given to the Borrower and the Credit Enhancer by the Trustee during which time such default is neither cured by the Borrower or the Credit Enhancer nor waived in writing by the Credit Enhancer and the Trustee, provided that, if the failure stated in the notice cannot be corrected within said 60-day period, the Credit Enhancer and the Trustee may consent in writing to an extension of such time prior to its expiration and the Credit Enhancer and the Trustee will not unreasonably withhold their consent to such an extension if corrective action is instituted by the Borrower or the Credit Enhancer within the 60-day period and diligently pursued to completion and if such consent, in their judgment, does not materially adversely affect the interests of the Bondowners.

(c) Any representation or warranty by the Borrower herein or in any certificate or other instrument delivered under or pursuant to this Loan Agreement or the Indenture or in connection with the financing of the Project shall prove to have been false, incorrect, misleading or breached in any material respect on the date when made, unless waived in writing by the Issuer, the Credit Enhancer and the Trustee or cured by the Borrower or the Credit Enhancer within 30 days after the discovery thereof and notice has been given to the Borrower and the Credit Enhancer.

(d) The occurrence of an Act of Bankruptcy with respect to the Borrower.

(e) The occurrence of an Event of Default as defined in the Indenture.

(f) The occurrence of an Event of Default as defined in the Series 1994B Loan Agreement.

Section 8.2. Remedies on Default. Subject to the provisions of Section 8.8 hereof, whenever any Event of Default shall have occurred and be continuing, the Trustee, as the assignee of the Issuer, may take any one or more of the following remedial steps; provided that if the principal of all Bonds then Outstanding and the interest accrued thereon shall have been declared immediately due and payable pursuant to the provisions of Section 802 of the Indenture, all Loan Payments for the remainder of the Loan Term shall become immediately due and payable without any further act or action on the part of the Issuer or the Trustee and the Trustee may immediately proceed (subject to the provisions of Section 8.8 hereof) to take any one or more of the remedial steps set forth in subparagraph (b) of this Section:

(a) By written notice to the Borrower (with a copy to the Credit Enhancer) declare all Loan Payments to be immediately due and payable, together with interest on overdue payments of principal and redemption premium, if any, and, to the extent permitted by law, interest, at the rate or rates of interest specified in the respective Bonds, without presentment, demand or protest, all of which are expressly waived.

(b) Take whatever other action at law or in equity, including causing the appointment of a receiver or receivers for the Borrower and/or its assets, taking all actions necessary and appropriate to exercise or to cause the exercise the rights and powers set forth herein or in the Indenture, as may appear necessary or desirable to collect the amounts payable pursuant to this Loan Agreement then due and thereafter to become due or to enforce the performance and observance of any obligation, agreement or covenant of the Borrower under this Loan Agreement or the Indenture.

In the enforcement of the remedies provided in this Section, the Trustee may treat all expenses of enforcement, including reasonable legal, accounting and advertising fees and expenses, as Additional Payments then due and payable by the Borrower.

Any amount collected pursuant to action taken under this Section (other than payments on the Credit Facility) shall be paid to the Trustee and applied, first, to the payment of any costs, expenses and fees incurred by the Issuer or the Trustee as a result of taking such action and, next, any balance shall be used to satisfy any Loan Payments then due by payment into the Revenue Fund and applied in accordance with the Indenture and, then, to satisfy any other Additional Payments then due or to cure any other Event of Default.

Notwithstanding the foregoing, the Trustee shall not be obligated to take any remedial action described in (b) above that in its opinion will or might cause it to expend time or money or otherwise incur liability, unless and until indemnity satisfactory to it has been furnished to the Trustee at no cost or expense to the Trustee.

The provisions of this Section are subject to the limitation that the annulment of a declaration that the Bonds are immediately due and payable shall automatically constitute an annulment of any corresponding declaration made pursuant to subparagraph (a) of this Section and a waiver and rescission of the consequences of such declaration and of the Event of Default with respect to which such declaration has been made, provided that no such waiver or rescission shall extend to or affect any other or subsequent Default or impair any right consequent thereon. In the event any covenant, condition or agreement contained in this Loan Agreement shall be breached or any Event of Default shall have occurred and such breach or Event of Default shall thereafter be waived by the Trustee, such waiver shall be limited to such particular breach or Event of Default.

Section 8.3. No Remedy Exclusive. Subject to the provisions of Section 8.8 hereof, no remedy herein conferred or reserved is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Loan Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon Default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to

time and as often as may be deemed expedient. In order to entitle the Trustee to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice, other than such notice as may be herein expressly required.

Section 8.4. Agreement to Pay Attorneys’ Fees and Expenses. Subject to the provisions of Section 3.7 hereof, in connection with any Event of Default by the Borrower, if the Issuer or the Trustee employs attorneys or incurs other expenses for the collection of amounts payable hereunder or the enforcement of the performance or observance of any covenants or agreements on the part of the Borrower herein contained, the Borrower agrees that it will, on demand therefor, pay to the Issuer and the Trustee the reasonable fees of such attorneys and such other reasonable expenses so incurred by the Issuer and the Trustee.

Section 8.5. Issuer and Borrower to Give Notice of Default. The Issuer, the Trustee and the Borrower shall each, at the expense of the Borrower, promptly give to the Credit Enhancer and the other listed parties written notice of any Default of which the Issuer, the Trustee or the Borrower, as the case may be, shall have actual knowledge or written notice, but the Issuer shall not be liable for failing to give such notice.

Section 8.6. Performance Of Borrower’s Obligations. If the Borrower shall fail to keep or perform any of its obligations as provided in this Loan Agreement in respect of (a) maintenance of insurance, (b) payments of taxes, assessments and other charges, (c) repairs and maintenance of the Project, (d) compliance with legal or insurance requirements, and (e) keeping the Project free of all liens other than Permitted Encumbrances, or in the making of any other payment or performance of any other obligation, then the Issuer, the Credit Enhancer or the Trustee, may (but shall not be obligated so to do) upon the continuance of such failure on the Borrower’s part for 5 days after notice of such failure is given to the Borrower and the other listed parties by the Issuer, the Credit Enhancer or the Trustee, and without waiving or releasing the Borrower from any obligation hereunder, as an additional but not exclusive remedy, make any such payment or perform any such obligation, and all sums so paid by the Issuer, the Credit Enhancer or the Trustee and all necessary incidental costs and expenses incurred by the Issuer, the Credit Enhancer or the Trustee in performing such obligations shall be deemed to be Additional Payments or payments due under the Collateral Documents, as applicable, and shall be paid to the Issuer, the Credit Enhancer or the Trustee on demand.

Section 8.7. Remedial Rights Assigned to the Trustee. Upon the execution and delivery of the Indenture, the Issuer will thereby have assigned to the Trustee all rights and remedies conferred upon or reserved to the Issuer by this Loan Agreement, reserving only the Unassigned Issuer’s Rights. Subject to the provisions of Section 8.8 hereof, the Trustee shall have the exclusive right to exercise such rights and remedies conferred upon or reserved to the Issuer by this Loan Agreement in the same manner and to the same extent, but under the limitations and conditions imposed thereby and hereby. The Trustee, the Credit Enhancer and the Bondowners shall be deemed third party creditor beneficiaries of all representations, warranties, covenants and agreements contained herein.

same relates to a default described in subparagraphs (a), (b), (c) or (e)(i) of Section 801 of the Series 1994B Indenture, shall have occurred and be continuing, the Issuer shall (subject to the requirements of Section 901(1) of the Indenture) exercise the remedies provided for hereunder only if and as directed in writing by the Credit Enhancer and shall not waive any Event of Default without the prior written consent of the Credit Enhancer; provided that such direction shall not be otherwise than in accordance with the provisions of law and of the Indenture.

[End of Article VIII]

ARTICLE IX

PREPAYMENT AND ACCELERATION OF LOAN PAYMENTS

Section 9.l. Prepayment at the Option of the Borrower. Upon the exercise by the Borrower, with the prior written consent of the Credit Enhancer, of its option to cause the Bonds or any portion thereof to be redeemed pursuant to Section 401 of the Indenture, the Borrower shall prepay Loan Payments in whole or in part at the times and at the prepayment prices sufficient to redeem all or a corresponding portion of the Bonds then Outstanding in accordance with said Section. At the written direction of the Borrower such prepayments shall be applied to the redemption of the Bonds in whole or in part in accordance with said Section.

Section 9.2. Optional Prepayment Upon Certain Events. Upon the occurrence of any of the conditions or events set forth in Section 402(d) of the Indenture, the Borrower shall have the option, with the prior written consent of the Credit Enhancer, to prepay Loan Payments, in whole or in part at any time, at the time and at the prepayment price sufficient to redeem all or a corresponding portion of the Bonds then Outstanding in accordance with said Section.

Section 9.3. Mandatory Prepayment Upon Determination of Taxability. Upon the occurrence of a Determination of Taxability, the Borrower shall prepay Loan Payments in whole at the time and at the prepayment price sufficient to redeem all of the Bonds then Outstanding in accordance with Section 402(a) of the Indenture. The Borrower will promptly notify the Issuer, the Credit Enhancer and the Trustee in writing of the occurrence and existence of any event or condition which could result in mandatory prepayment under this Section.

Section 9.4. Mandatory Prepayment Upon Certain Defaults. Upon the occurrence of any event set forth in Section 402(c) of the Indenture, the Borrower shall prepay Loan Payments in whole at the time and at the prepayment price sufficient to redeem all of the Bonds then Outstanding in accordance with said Section.

Section 9.5. Mandatory Prepayment From Amounts Remaining in Project Fund. Redemption of Bonds with proceeds derived under Section 3.4(c) hereof shall be deemed a prepayment of the Loan Payments in the same amount as the amount of Bonds redeemed. The Borrower shall pay or cause to be paid to the Trustee from Available Moneys, at the time of a transfer from the Project Fund to the Revenue Fund, such amount as is necessary to cause the transferred amount to equal an Authorized Denomination.

Section 9.6. Right to Prepay at Any Time. The Borrower shall have the option at any time to prepay all of the Loan Payments, Additional Payments and other amounts it is required to pay hereunder by paying to the Trustee all such sums as are sufficient to satisfy and discharge the Indenture and paying or making provision for the payment of all other sums payable hereunder.

shall be not less than 45 days from the date the notice is received by the Trustee, and which shall contain the written consent of the Credit Enhancer. In the Indenture, the Issuer has directed the Trustee to forthwith take all steps (other than the payment of the money required to redeem the Bonds) necessary under the applicable provisions of the Indenture to effect any redemption of the then Outstanding Bonds, in whole, or inpart, pursuant to Section 402 of the Indenture.

Section 9.8. Precedence of this Article. The rights, options and obligations of the Borrower set forth in this Article may be exercised or shall be fulfilled, as the case may be, whether or not a Default exists hereunder, provided that such Default will not result in nonfulfillment of any condition to the exercise of any such right or option and provided further that no amounts payable pursuant to this Loan Agreement shall be prepaid in part during the continuance of an Event of Default described in subparagraph (a) of Section 8.1 hereof.

[End of Article IX]

ARTICLE X

MISCELLANEOUS

Section 10.1. Authorized Representatives. Whenever under this Loan Agreement the approval of the Issuer is required or the Issuer is required or permitted to take some action, such approval shall be given or such action shall be taken by an Authorized Issuer Representative, and the Borrower, the Credit Enhancer and the Trustee shall be authorized to act on any such approval or action. Any approval shall not be unreasonably withheld or delayed.

Whenever under this Loan Agreement the approval of the Borrower is required or the Borrower is required or permitted to take some action, such approval shall be given or such action shall be taken by an Authorized Borrower Representative, and the Issuer, the Credit Enhancer and the Trustee shall be authorized to act on any such approval or action.

Whenever under this Loan Agreement the approval of the Credit Enhancer is required or the Credit Enhancer is required or permitted to take some action, such approval shall be given or such action shall be taken by an authorized Credit Enhancer representative, and the Issuer, the Borrower and the Trustee shall be authorized to act on any such approval or action.

Section 10.2. Term of Loan Agreement. This Loan Agreement shall be effective from and after its execution and delivery and shall continue in full force and effect until the Bonds are deemed to be paid within the meaning of Article XII of the Indenture and provision has been made for paying all other sums payable by the Borrower to the Issuer, the Trustee, the Credit Enhancer and the Paying Agent to the date of the retirement of the Bonds. All agreements, covenants, representations and certifications by the Borrower as to all matters affecting the status of the interest on the Bonds and the indemnifications provided by Section 6.3 hereof shall survive the termination of this Loan Agreement for 12 months unless a claim has been made and then such indemnification shall continue with regard to that claim only.

Section 10.3. Notices. Except as otherwise provided herein, it shall be sufficient service of any notice, request, complaint, demand or other paper required by this Agreement to be given to or filed if the same shall be duly mailed by first-class mail, postage pre-paid, certified or registered mail, or sent by telegram, telecopy or telex or other similar communication, confirmed in writing by first-class mail, postage pre-paid, certified or registered mail, or sent by telegram, telecopy or telex or other similar communication, on the same day, addressed as specified in Section 1302 of the Indenture. All notices given by first-class mail, certified or registered mail, postage prepaid, as aforesaid shall be deemed duly given as of the third day after they are so mailed; all notices given by telegram, telecopy or telex or other similar communication shall be deemed duly given as of the date the same are transmitted by such means to the recipient thereof; provided, however, that any notice deemed to be given on a date that is not a Business Day in the jurisdiction in which such notice is delivered to the addressee thereof, shall not be deemed duly given until the next succeeding Business Day; provided, further, that notices to the Trustee shall be deemed given as of the date they are received by the Trustee. A duplicate copy of each notice, certificate or other communication given hereunder by either the Issuer or the Trustee to the other shall also be given to the Borrower, the Remarketing Agent and the Credit Enhancer. In the event of notice to any party other than the Issuer or the Trustee, a copy of the notice shall be provided to the Borrower,

the Remarketing Agent and the Credit Enhancer. In addition, the Trustee shall send to the Credit Enhancer, the Borrower, the Tender Agent and the Remarketing Agent a copy of each notice sent to the Bondowners. The Issuer, the Trustee, the Tender Agent, the Borrower, the Credit Enhancer and the Remarketing Agent may from time to time designate, by notice given under the terms of the Indenture to the others of such parties, such other address to which subsequent notices, certificates or other communications shall be sent.

Section 10.4. Performance Date Not a Business Day. If the last day for performance of any act or the exercising of any right, as provided in this Loan Agreement, shall not be a Business Day, such payment may be made or act performed or right exercised on the next succeeding Business Day.

Section 10.5. Binding Effect. This Loan Agreement shall inure to the benefit of and shall be binding upon the Issuer, the Borrower and their respective successors and assigns, subject to the provisions contained in Section 5.2 hereof. The Issuer and the Borrower acknowledge that the Credit Enhancer is a third-party beneficiary of those provisions herein which relate to the making of payments or giving of notice to or consents by or following the directions of or the performance of other acts to benefit it and all such provisions shall be enforceable by the Credit Enhancer.

Section 10.6. Amendments, Changes and Modifications. Except as otherwise provided in this Loan Agreement or in the Indenture, subsequent to the issuance of Bonds and prior to all of the Bonds being deemed to be paid in accordance with Article XII of the Indenture and provision being made for the payment of all sums payable under the Indenture in accordance with Article XII thereof, this Loan Agreement may not be effectively amended, changed, modified, altered or terminated without the prior concurring written consent of the Trustee and the Credit Enhancer, given in accordance with the Indenture.

Section 10.7. Execution in Counterparts. This Loan Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Section 10.8. No Pecuniary Liability. No provision, representation, covenant or agreement contained in this Loan Agreement or in the Indenture, the Bonds, or any obligation herein or therein imposed upon the Issuer, or the breach thereof, shall constitute or give rise to or impose upon the Issuer a pecuniary liability (except to the extent of any loan repayments, revenues and receipts derived by the Issuer pursuant to this Loan Agreement). No provision hereof shall be construed to impose a charge against the general credit of the Issuer or the State or the taxing powers of the State within the meaning of any constitutional provision or statutory limitation, or any personal or pecuniary liability upon any director, official or employee of the Issuer.

reason of the issuance thereof or by reason of the covenants, obligations or agreements of the Issuer contained in this Loan Agreement or in the Indenture. No provision, covenant or agreement contained in this Loan Agreement, the Indenture or the Bonds, or any obligation herein or therein imposed upon the Issuer, or the breach thereof, shall constitute or give rise to or impose upon the Issuer a pecuniary liability or a charge.

Section 10.10. Net Loan. The parties hereto agree (a) that the payments of Loan Payments are designed to provide the Issuer and the Trustee with moneys adequate in amount to pay all principal of, purchase price of, and redemption premium, if any, and interest accruing on the Bonds as the same become due and payable, (b) that to the extent that the payments of Loan Payments are not sufficient to provide the Issuer and the Trustee with funds sufficient for the purposes aforesaid, subject to the provisions of Section 3.8 hereof, the Borrower shall be obligated to pay, and it does hereby covenant and agree to pay, upon demand therefor, as Additional Payments, such further moneys, in cash, as may from time to time be required for such purposes, and (c) that if after the principal of, and redemption premium, if any, and interest on the Bonds and all costs incident to the payment of the Bonds have been paid in full the Trustee or the Issuer holds unexpended funds received in accordance with the terms hereof, such unexpended funds shall, after payment therefrom of all sums then due and owing by the Borrower under the terms of this Loan Agreement, be distributed in accordance with the Indenture.

Section 10.11. Security Interests. The Issuer and the Borrower agree to enter into all instruments (including financing statements and statements of continuation) necessary for perfection of and continuance of the perfection of the security interests of the Issuer and the Trustee in the Project. The Trustee shall file or cause to be filed all such instruments required to be so filed and shall continue or cause to be continued the liens of such instruments for so long as the Bonds shall be Outstanding.

Section 10.12. Complete Agreement. The Issuer and the Borrower understand that oral agreements or commitments to loan money, extend credit or to forbear from enforcing repayment of a debt including promises to extend or renew such debt are not enforceable. To protect the Issuer and the Borrower from misunderstanding or disappointment, any agreements the Issuer and the Borrower reach covering such matters are contained in this Loan Agreement, which is the complete and exclusive statement of the agreement between the Issuer and the Borrower, except as the Issuer and the Borrower may later agree in writing (subject to the provisions of Article XI of the Indenture) to modify this Agreement.

Section 10.13. Severability. If any provision of this Loan Agreement, or any covenant, stipulation, obligation, agreement, act or action, or part thereof made, assumed, entered into or taken thereunder, or any application of such provision, is for any reason held to be illegal or invalid, such illegality or invalidity shall not affect any other provision of this Loan Agreement or any other covenant, stipulation, obligation, agreement, act or action, or part thereof, made, assumed, entered into, or taken, each of which shall be construed and enforced as if such illegal or invalid portion were not contained herein. Such illegality or invalidity of any application thereof shall not affect any legal and valid application thereof, and each such provision, covenant, stipulation, obligation, agreement, act or action, or part thereof, shall be deemed to be effective, operative, made, entered into or taken in the manner and to the full extent permitted by law.

Section 10.14. Governing Law. This Loan Agreement shall be governed by and construed in accordance with the laws of the State of South Carolina.

Section 10.15. Not a Limitation. Nothing in this Loan Agreement contained is intended to be (and nothing herein shall be construed to be) a limitation on the obligations of the Borrower to the Credit Enhancer under the Credit Documents.

Section 10.16. Consent to Jurisdiction: Service of Process.

(a) The Borrower hereby agrees and consents that any action or proceeding arising out of or brought to enforce the provisions of this Loan Agreement or any of the other Borrower Documents may be brought in any appropriate court in the State or in any other court having jurisdiction over the subject matter, all at the sole election of the Issuer or the Trustee, and by the execution of this Loan Agreement, the Borrower irrevocably consents to the jurisdiction of each such court.

(b) If for any reason the Borrower should become not qualified to do business in the State, the Borrower hereby agrees to designate and appoint, without power of revocation, an agent for service of process within the State, as the agent for the Borrower upon whom may be served all process, pleadings, notice, or other papers, which may be served upon the Borrower as a result of any of the Borrower’s obligations hereunder.

(c) The Borrower covenants that throughout the period during which any of the Bonds remain outstanding, if a new agent for service or process within the State is designated pursuant to the terms of subsection (b) of this section, the Borrower will immediately file with the Issuer, the name and address of such new agent and the date on which its appointment is to become effective.

IN WITNESS WHEREOF, the Issuer and the Borrower have caused this Loan Agreement to be executed in their respective names.

		SOUTH CAROLINA JOBS-ECONOMIC
		DEVELOPMENT AUTHORITY

		By:		/s/ Robert L. Mobley
				Chairman, Board of Directors

[SEAL]

ATTEST:


By:	/s/ [ILLEGIBLE]
	Executive Director

		ROLLER BEARING COMPANY OF AMERICA, INC.


		By:	/s/ [ILLEGIBLE]
			Its CFO and Treasurer

[SEAL]

EXHIBIT A

DESCRIPTION OF PROJECT

Buildings, fixtures, machinery and equipment to constitute an approximately 60,000 square foot expansion of an existing facility for the manufacture of roller bearings in Darlington County, South Carolina.

A-1

EXHIBIT B

Request No.

Date:

WRITTEN REQUEST FOR DISBURSEMENT FROM

SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY

FUND

(ROLLER BEARING OF AMERICA, INC. PROJECT)

Series 1994A

To: Mark Twain Bank

Attention: Corporate Trust Department

as Trustee under the Trust Indenture, dated as of September 1, 1994, between the South Carolina Jobs-Economic Development Authority, and said Trustee

Pursuant to Section 3.4 of the Loan Agreement, dated as of September 1, 1994 (the “Loan Agreement”), between the South Carolina Jobs-Economic Development Authority and Roller Bearing Company of America, Inc. (the “Borrower”), the Borrower hereby requests payment from the Fund in accordance with this request and said Section 3.4 and hereby states and certifies as follows:

1. The date and number of this request are as set forth above.

2. All terms in this request shall have and are used with the meanings specified in the Loan Agreement.

3. The names of the persons, firms or corporations to whom the payments requested hereby are due, the amounts to be paid and the description of the obligation requested to be paid hereby are as set forth on Attachment I hereto.

4. The conditions to disbursement set forth in Section 3.4(d) of the Loan Agreement have been met and satisfied with respect to this request.

5. With respect to this request, the Borrower hereby certifies as to those items set forth in (2) through (7), inclusive, of Section 3.4(d)(A) of the Loan Agreement.

		ROLLER BEARING COMPANY OF AMERICA, INC.


		By:
			Authorized Borrower Representative
Consented to this day of , 199 .

HELLER FINANCIAL, INC.


By:
	Authorized Signatory

ATTACHMENT I

TO WRITTEN REQUEST FOR DISBURSEMENT FROM

SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY

FUND

(ROLLER BEARING COMPANY OF AMERICA, INC. PROJECT)

Series 1994A

REQUEST NO.

DATED , 19 .

SCHEDULE OF PAYMENTS REQUESTED

Payee	Amount	General classification and description of the obligation to be paid

EXHIBIT C

COMPLETION CERTIFICATE

To: Mark Twain Bank, Trustee

and

South Carolina Jobs-Economic Development Authority, Issuer

and

Heller Financial Inc., Credit Enhancer

From: Authorized Borrower Representative

Subject: $7,700,000 South Carolina Jobs-Economic Development Authority Variable

Rate Demand Industrial Development Revenue Bonds Roller Bearing

Company of America, Inc. Project) Series 1994A

The undersigned hereby certifies in connection with the Project, financed with the proceeds of the above-described Bonds issued by the South Carolina Jobs-Economic Development Authority (the “Issuer”) pursuant to the Trust Indenture dated as of September 1, 1994 (the “Indenture”) between the Issuer and (the “Trustee”), the proceeds of which have been loaned to Roller Bearing Company of America, Inc. (the “Borrower”) pursuant to the Loan Agreement between the Borrower and the Issuer dated as of September 1, 1994 (the “Loan Agreement”) (words capitalized herein have the meaning ascribed to them in the Loan Agreement):

1. The acquisition, improvement, construction, installation and equipping of the Project was substantially completed as of ,19 the “Completion Date”).

2. All other facilities necessary in connection with the Project have been acquired, constructed, improved, installed and equipped.

3. The Project has been completed in such manner as to conform with all applicable zoning, planning, building, environmental, food handling and other similar governmental regulations.

4. All costs of the Project have been paid in full except for those not yet due and payable or being contested, which are described below and for which money for payment thereof is being held and should be retained in the Project Fund:

(a) Costs of the Project not yet due and payable:

Description		Amount

C-1

(b) Payments being contested:

Description		Amount

5. The money in the Project Fund in excess of the total set forth in 4(a) and (b) above represents the surplus proceeds of the Bonds and the Trustee under the Indenture is hereby authorized and directed to deposit such money to the Revenue Fund to be used to redeem the principal amount of outstanding Revenue Bonds at the earliest possible time. Accompanying this Certificate (or otherwise to be made available to the Trustee as follows: ) are Available Moneys sufficient to cause the amount to be deposited to equal an Authorized Denomination.

6. Attached hereto is a statement of the Authorized Borrower Representative listing and specifically describing all items of personal property and fixtures acquired and installed as part of the Project.

This certificate is given without prejudice to any rights against third parties which exist at the date hereof or which may subsequently come into being.

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


	By:
		Authorized Borrower Representative
Date: , 19

C-2

Exhibit 10.11

AGREEMENT

Between

BREMEN BEARINGS OF RBC USA, INC.

PLYMOUTH, INDIANA PLANT

And

INTERNATIONAL UNION, UNITED

AUTOMOBILE, AEROSPACE AND

AGRICULTURAL IMPLEMENT WORKERS OF AMERICA,

THE

U. A.W.

And Its

Local 1368

Effective August 10, 2002

INDEX

Article

I	Agreement

II	Union Recognition

III	Agency Shop and Check-Off

IV	Cooperative Union Management

V	Rights and Functions of Management

VI	Strikes and Lockouts

VII	Production Standards and Incentive Pay

VIII	Job Evaluation Plan

IX	Hours of Work and Overtime Pay

X	Vacations and Vacation Pay

XI	Holidays

XII	Seniority

XIII	Settlement of Differences

XIV	Wages and Rates of Pay

XV	Insurance Benefits and Pensions

XVI	Jury Duty, Bereavement and Military Reserve Pay

XVII	Safety and Health

XVIII	Plant Rules

XIX	Leave of Absence

XX	Amendments and Modifications

XXI	Termination and Notice

	Appendix “A” Rates of Pay Tier I Employees

	Appendix “B” Rates of Pay Tier II Employees

	Appendix “C” Labor Units & Grade

	Appendix “D” Statement of Cooperation – Alcohol and Drug Abuse

Article I

AGREEMENT

Section 1.

This agreement, dated the 10th of August, 2002, is entered into between Bremen Bearings, RBC, INC. of Plymouth, Indiana plant, (hereinafter called the “Company”) and the INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA (UAW) and its Local 1368 (hereinafter called the “Union”), effective the 10^th of August, 2002.

Section 2.

In consideration of this Agreement, the parties agree that it is the intent and purpose of the parties hereto that this Agreement is the complete Agreement covering rates of pay, hours of work and working conditions to be observed between the parties, and to provide orderly relationships between the Company and the Union, and to secure prompt disposition of difference between the parties pertaining to the compliance with or application of this agreement.

Section 3.

In recognition of its responsibility as the exclusive agent of the employees, the Union agrees that it will actively cooperate in discouraging absenteeism and tardiness, and that it will actively support proper Company efforts to eliminate waste, improve quality, prevent accidents, and strengthen good will between the Company, the employees, the customers, the Union, and the public. The Union also confirms that it subscribes to the concept of a fair day’s work for a fair day’s pay.

Section 4.

The rights provided in this Agreement shall apply only to employees who have completed their 90-day probationary period, provided, however, that the probationary period may be extended an additional 30 days by mutual agreement of the Company and the Union. Employees who have not completed their probationary period shall have no rights under Article XIII, Sec. 1, Step 3 of this Agreement.

Article II

Union Recognition

Section 1.

The Company recognizes the Union as the sole collective bargaining agency with respect to rates of pay, hours of work, and conditions of employment for employees engaged on jobs in Bremen Bearings, at its Plymouth, Indiana plant.

Section 2.

The term “employee” as used in this Agreement, shall apply to all production and maintenance workers engaged on jobs at the Plymouth, Indiana plant who are on an hourly or incentive basis, but excludes watchmen, salaried employees and supervisory employees with authority to hire, promote, discharge, discipline or otherwise effect changes in the status of employees or effectively to recommend such action.

Article III

Agency Shop and Check-off

Section 1.

Each employee who on the effective date of this Agreement is a member of the Union in good standing and each employee who becomes a member after that date shall, as a condition of employment, maintain his membership in the Union.

Each employee hired on or after August 12, 1972, shall as a condition of employment, beginning on the 30^th day following the beginning of such employment acquire and maintain membership in the union.

Section 2.

The Company, for those employees who have heretofore, or hereafter by written authorization so directed, shall deduct from the first pay of each month the proper Union dues for the previous month, an initiation fee for new members, the assessments and promptly remit same to the International Secretary-Treasurer of the Union. Changes in dues and assessments will be made only as authorized in writing by the International Secretary-Treasurer of the Union to the Company

Section 3.

If an employee is on vacation the week that Union dues are withheld, the Company agrees to provide the Union with the names along with the hourly rate that they were paid.

Article IV

Cooperative Union Management

Section 1.

The Company and the Union agree that they will not discriminate in the hiring of employees, or in their training, upgrading, downgrading, promotion, transfer, layoff, discipline, discharge or otherwise because of race, creed, color or national origin, age, union affiliations, sex, marital status or non-disqualifying disability.

Section 2.

The Company and the Union recognize the advisability of making every effort to constantly improve relationships between the Company, the Union and all employees. To this end, a committee composed of two members of the Union and two members of management shall meet for one hour at least once a month on Company time to discuss problems and/or grievances which may cause a disruption in relationships or to suggest means of improving relationships. The General Manager and the International Representative may attend these meetings. The purpose of these meetings is to prevent, where possible, the use of the Arbitration Clause of this Agreement, as such is both costly to the parties and further, bilateral good faith collective bargaining is ineffective when a third party is called for the purposes of determining the intent of the Agreement.

Section 3.

a) It is the duty of every employee to apply himself diligently to his work during all of his working hours and to this end the Union will support the Company’s efforts to curb absenteeism and the practices which curtail production; to eliminate waste and inefficiency; to improve the quality of workmanship; to prevent accidents, and to promote good will between the Company and the employees.

b) The Union will cooperate wholeheartedly with the Company in a concerted drive for better quality and quantity of production. It should be the responsibility of each employee to see that the work performed is up to required standards and that no defective work is concealed.

Article V

Rights and Functions of Management

Section 1.

The control of all matters relative to the management and operation of the plant and the operation of the Company’s business are vested exclusively in the Company and shall constitute a management right, except as these matters may be expressly limited by the terms of this Agreement. The Company and the Union in the exercise of their rights shall observe the provisions of this Agreement.

Section 2.

The violation by either party of any provision of this Agreement shall not render the Agreement inoperative, and the sole and exclusive method of remedying any dispute which may arise hereunder shall be Article XIII, Settlement of Differences.

Section 3.

While it is understood that the Company may experiment with equipment, it is not the intent of the Company to replace any bargaining unit employee with a salaried employee through the exercise of this right. Salaried employees may perform such work under their jurisdiction as instructing, experimenting, or relieving impediments in production, but no bargaining unit employee shall lose a work opportunity as a result.

Section 4.

When work which the bargaining unit normally performs is to be subcontracted, it will be done on the basis of time or money or special equipment or expertise.

When work is contracted out, the Company will inform the Union and explain the necessity prior to the subcontracting.

Section 5.

The Company may utilize temporary employees to do the work of those on leaves of absences, vacations, and other absences, and for unpredicted customer demands, to keep the operations running smoothly, but the Company can only use temporary employees when there are no regular employees available who will fill the need in the department on the shift. A temporary employee shall not work in excess of 90 days per year per employee, unless the temporary employee is filling in for a regular employee on medical leave, in which case the temporary employee may work for the duration of the medical leave. The temporary employee will be paid at the second tier rate and will not be eligible for benefits. Temporary employees will be utilized only in positions of labor grades 1, 2, 3, 4, 5.

Article VI

Strikes and Lockouts

Section 1.

During the existence of this Agreement, the Union agrees that neither it nor any employee shall engage in any strikes, sympathy strikes, work stoppages, or slowing down of work, or any other interference with the normal production of the plant, or shipments from the plant products produced therein, or shipments of necessary materials to the plant. Any violation of this Section by any employee shall be cause for dismissal or suspension.

In the event there is an interruption of production because of a concerted action, the Union, through the International Representative and Local president, shall immediately direct cessation of such interruption.

Section 2.

The Company, for itself, its supervisors and authorized representatives, agrees that during the term of this Agreement there shall be no lockouts in the Company’s plant.

Article VII

Production Standards and Incentive Pay

Section 1.

It is understood that the Company may make, at any time; motion, time or methods studies required for the efficient operation of its business, and may establish standards and levels of performance, and may audit its standards when it deems this to be necessary in the interest of its business. During the start-up and development period for equipment the employee operating machine will be paid his/her average earned rate based on earnings during the prior week for a period not to exceed eight weeks. Thereafter, the employee will be paid average hourly earnings up to 120% of his/her base wage until the equipment is rated. The Company has a right to assign any employee to operate a machine during the first eight weeks of the start-up and development period for the equipment. Thereafter, departmental seniority will be used to determine the operator of this equipment until the equipment is rated. The Company will make reasonable efforts to establish a rate for new equipment within 120 days after the equipment has been released for consistent production.

Section 2.

Once a production standard has been established, the equity of such a standard may be challenged under the procedure set forth in Article XIII, Settlement of Differences. Should the Union dispute the equity or fairness of a production standard, the Company will review with a proper Union steward, upon his request, the data relating to the production standard.

Section 3.

A production standard may be changed whenever a substantial and continuing change in material, method, specifications, or equipment, or an accumulation of such changes, or an obvious clerical or mechanical error has occurred, that has a substantial effect on the productivity of the job.

Section 4.

It is recognized that the Company has the right to institute incentive standards, with the understanding that such incentive standards shall be set in such a manner so that qualified operators working at a normal pace can produce work at 100% of standard. Incentive jobs include:

Assembly

Incentive pay for second tier employees hired after 8/10/02 is capped at 140% of standard plus ½% for each 1% above 140% of standard.

The Company guarantees that the incentive standard for the assembly job shall be paid off of the base rate for the assembly department.

Section 5.

When an employee performs any work that does not meet the required specifications, he shall not receive any pay or credit for the work except for his guaranteed base rate on a weekly basis. However, when the cause for rework is beyond the operator’s control, this provision will not apply.

Section 6.

The Company and the Union will discuss and implement a performance incentive program that is acceptable to both parties.

Article VIII

Job Evaluation Plan

Section 1.

Jobs shall be classified in their appropriate work grades by the Company, using the National Metal Trades Association’s Job Evaluation Plan. Job descriptions, labor grades, and rates of pay have been prepared and are in effect for all present jobs. When conditions warrant such action, the Company will establish new job classifications, change or add to and remove jobs or job descriptions. When new jobs are established, or changes or additions made to existing jobs, new job descriptions will be drawn and evaluated by the Company in accordance with the NMTA Job Evaluation Plan. Union must be furnished a current copy of the NMTA Job Evaluation Plan being used by the Company. Where an incentive and non-incentive job are combined, the remaining job will be an incentive job if the preponderance (over 50%) of the job functions are functions of the incentive job. Otherwise, the job will be deemed a non-incentive job.

Section 2.

All job rates of pay in effect at the time of this Agreement are effective and properly evaluated and shall not be the subject to process under the grievance procedure section of this contract. Any new or changed job or job rate may be subject to processing under Article XIII, Settlement of Differences. Such processing shall be confined to the result of the application of the NMTA Job Evaluation Plan. The Plan itself shall not be subject to processing under Article XIII, Settlement of Differences, nor shall it be, in any manner or detail, subject to arbitration under this agreement.

Section 3.

The following method will be used in determining the work grade to be assigned to a job: The job will be analyzed and reviewed by the Company’s Job Analyst who will write up the description of the general details considered necessary to describe the principal functions of the job identified, which description shall not be construed as a detailed description of all of the work requirements that may be inherent in any given job. A copy of all job descriptions shall be made available to the Union for their inspection and review.

Article IX

Hours of Work and Overtime Pay

Section 1.

This Article is intended only to provide a basis for calculating overtime. It shall not be construed by the Union or any of its members as limiting or guaranteeing the number of hours to be worked by an individual employee or group of employees per day or per week.

Section 2. Work Week

A normal work week shall consist of five consecutive eight hour days from Monday through Friday except where off standard work weeks are established, in which event the work week shall consist of five consecutive days followed by two days of rest.

Section 3.

A day shall be defined as a consecutive 24-hour period beginning with the starting time of an employee’s shift. Eight continuous hours of work, interrupted by regularly scheduled lunch periods shall constitute a day’s work.

Section 4.

Employees on temporary transfer to another department will work the hours as scheduled in that department during the transfer. If they receive less than 16 hours notice of a temporary transfer, they shall have the option of working either the hours scheduled in their own department or those scheduled in the department to which the temporary move was made.

Section 5.

Except where an off-standard workweek is established, the standard three and four shift schedules listed below shall be the hours of work, unless by agreement between the Union and the Company they are altered.

Company Shifts:		7:00 a.m. to 3:00 p.m.
		3:00 p.m. to 11:00 p.m.
		11:00 p.m. to 7:00 a.m.

Four Shift operation:

WORKDAY	A	B	C	D

Sunday	Off	Off	Sat. 11:00 p.m.	3-11
			Sun. 7:00 a.m.

Monday	7-3	Off	Sun. 11:00 p.m.	3-11
			Mon. 7:00 a.m.

Tuesday	7-3	3-11	Mon. 11:00 p.m.	Off
			Tues. 7:00 a.m.

Wednesday	7-3	3-11	Tues. 11:00 p.m.	Off
			Wed. 7:00 a.m.

Thursday	7-3	3-11	Off	Wed. 11:00 p.m.
				Thurs. 7:00 a.m.

Friday	7-3	3-11	Off	Thurs. 11:00 p.m.
				Fri. 7:00 a.m.

Saturday	Off	3-11	Fri. 11:00 p.m.	7-3
			Sat. 7:00 a.m.

When a department is placed on a 4-shift operation, all employees in the affected department will be assigned to that schedule only. The holiday schedule for the 4-shift operation shall be determined by the Company and union and posted by the beginning (January) of each year.

It is understood that the Company will not resort to a four-shift basis because of lack of available equipment due to disrepair. Employees working on the B shift shall be paid at time and 1/8 for hours worked on Saturday. Employees working on the C and D shift shall be paid at time and 1/8 for hours worked on Saturday and time and ¼ for hours worked on Sunday.

Employees on the B shift will be paid the second shift premium and employees on the C and D shifts will be paid the third shift premium. In order to ensure cross training and ensure new equipment/processes, the Company has the right to schedule employees to work shifts other than their regularly scheduled shift for a period not to exceed 4 weeks for training purposes.

Section 6. Division of Overtime and Overtime Pay.

All overtime shall be distributed as equally as practicable within the department, classification and shift. Overtime scheduling shall be compulsory for 50 hours and where scheduled absences and vacations must be covered. In the case of scheduled vacations and scheduled absences, employees will be polled by seniority to fill in. If there are no volunteers, the least senior employees in the classification may be assigned. On a daily basis, notification for scheduled overtime will be at least two (2) hours prior to the end of the shift. Notification for sixth and seventh day overtime will be posted as follows:

1^st shift	3 p.m.	Wednesday

2^nd shift	11 p.m.	Wednesday

3^rd shift	11 p.m.	Wednesday

A. Except as provided in B, below, time and one-half shall be paid for all hours or parts of hours worked:

(1) In excess of eight (8) hours in any one workday.

(2) In excess of forty (40) hours in any one workweek.

(3) On Saturday, except for off standard work weeks.

(4) On the sixth day of their scheduled workweek for employees on off standard work weeks.

B. Double time shall be paid for all hours or parts of hours worked:

(1) On Sundays, except for off standard work weeks.

(2) On the seventh day of their scheduled work week for employees on off-standard work weeks.

C. Overtime rates and premium rates shall not be paid to employees on more than one overtime or premium basis whether hourly, daily, or weekly.

D. Company liability with respect to mis-scheduling of overtime shall be limited to a make-up turn. In the event that an employee is bypassed for a make-up turn the Company will be liable for payment. An employee who is not notified for an overtime turn within contractual limits shall not be charged with a turn. An employee scheduled to work on his/her 6^th or 7^th day shall have a 24-hour notice of cancellation of such work except in emergencies. If notice is not given, the employee scheduled will receive 4 hours pay at the appropriate rate.

E. If a holiday falls on Friday or Monday and overtime is scheduled on the succeeding or preceding Saturday, it will be on a voluntary basis.

F. Where a work opportunity is lost, the Company shall be liable for four hours at a time and one half for work performed by salaried non-bargaining unit employees normally performed by bargaining unit employees.

Section 7. Call in Pay

Employees called into work within a twenty-four (24) hour period from the starting time of their shift shall be guaranteed a minimum of four (4) hours at their regularly assigned rate. This is provided that they report in within a reasonable amount of time from the call out.

Section 8. Report in Pay.

Employees who report for work as scheduled or who report for work upon notification to report shall, regardless of whether or not work is available for them be guaranteed a report in pay of no less than four (4) hours at their regularly assigned personal rate.

Employees will not be paid under this section if:

(1) They are unfit to work;

(2) Work is unavailable as a result of causes beyond the control of management;

(3) They are notified not to report for work within 24 hours notice;

(4) They refuse to perform work available within their department unless such work is not available or they refuse to perform other work for which they are qualified.

Article X

Vacations and Vacation Pay

Section 1.

The vacation year shall begin on January 1 and end on December 31. The period for taking vacation time off shall begin with the first full week in January and end with the last full week in December, with the understanding that this period shall not detract from the Company’s right to establish a vacation shutdown period. Plant shutdown shall be posted by the end of the last full month of the year. The vacation shutdown shall not be more than two weeks per year.

Section 2.

Each employee who is actively on the payroll on December 31, or the Sunday closest to December 31, shall be entitled to his full vacation benefits notwithstanding the fact that his services may have been terminated for any reason in the ensuing year prior to the receipt of vacation pay.

Section 3.

Employees who were not on the active payroll on December 31 or the Sunday closest to December 31, but who become active thereafter as a result of recall or return from a leave of absence will receive vacation pay on a prorated basis computed at one-twelfth (1/12^th) of his benefit for each full month of service in the current vacation year. Employees recalled on or before the 15^th of any month shall be given credit for the full month.

Employees whose benefits are computed under this Section 3 shall forfeit such benefits if:

(a) They are discharged; or

(b) They resign without giving five (5) days written notice to the Company.

Section 4.

Effective July 17, 1999, vacation benefits for eligible first tier (hired on or before August 10, 2002) full time employees shall be as follows:

Accredited Service Prior to December 31 of Vacation Year	Vacation Time	Vacation Pay Hours
1 year to 2 years	1 week and 1 day	68
2 years to 10 years	2 weeks and 1 day	108
10 years to 15 years	3 weeks and 1 day	148
15 years to 20 years	3 weeks and 4 days	172
20 years and over	4 weeks and 1 day	188

A first tier (hired on or before 8/10/02) employee will receive vacation pay at his/her average hourly earnings over either the first or second of the two preceding six month periods (January 1 thru June 30 or July 1 thru December 31), beginning January 1, 2000.

A second tier (hired on or after August 10, 2002) will receive vacation time and pay at his/her straight time base hourly rate as follows:

Accredited Service Prior to December 31 of Vacation Year	Vacation Time	Vacation Pay Hours
1 year to 3 years	1 week	40
3 years to 10 years	2 weeks	80
10 years and over	3 weeks	120

Section 5.

Vacations are planned absences. With the exception of prior approval by Human Resources, at least one-half of employees’ vacation must be taken in one-week increments and requested in writing for the calendar year by January 31^st. Vacation requests after January 31^st must be applied for two weeks in advance in writing. A maximum of four single days may be taken for absences provided that one-hour prior notification to the beginning of their shift has been given. All vacation will be approved or denied by Human Resources based on the following criteria:

(a) No more than 20% of a department will be allowed to take vacation unless specifically identified as a department or plant shutdown;

(b) Peak performance times or customer demands;

(d) Article XIX Leave of Absence.

Article XI

HOLIDAYS

Section 1.

The following days are those to which the provisions of this Article apply:

Day Before New Year’s Day		New Year’s Day
Good Friday		Memorial Day
Independence Day		Labor Day
Thanksgiving Day		Day after Thanksgiving
Day before Christmas		Christmas

All employees with ninety (90) days continuous full time employment shall be eligible to receive holiday pay provided they are on a working status at the time of the holiday, and work the scheduled hours on the working days before and after the holiday or the day in which the holiday is celebrated. Employees on leave of absence, layoff or otherwise unavailable or ineligible to work the day before or after the holiday are not eligible for holiday pay. No more than 8 hours will be scheduled on those days and the Company will be liable for the hours scheduled if it does not provide the work.

Section 2. Holiday Pay

A. Any work performed on a holiday shall be on a voluntary basis and the employees shall be paid double time for all hours worked on a holiday in addition to the regular holiday pay.

B. If a holiday falls during a paid vacation, the employee will receive an extra day off with pay or may be paid in lieu of the holiday.

C. Pay for the above-mentioned holidays shall be on a one-pay basis only. There shall be no pyramiding of overtime pay for holidays. Regular holiday pay shall be on the basis of eight (8) hours at the employee’s personal base rate.

Article XII

Seniority

Section 1.

The Company hereby recognizes the principle of seniority, and all seniority provisions shall operate on a departmental basis in accordance with the procedures hereinafter listed in this Article. Seniority shall accumulate from the original date of employment for every employee covered in this Agreement and said seniority rights shall cease upon the occurrence of any of the following acts or conditions.

(1) A voluntary resignation or quit.

(2) A discharge for cause.

(3) A layoff of more than 30 months or a leave of absence of more than one (1) year’s duration, however, in the case of a medical leave such leave may be extended by mutual agreement.

(4) Failure to report for work within five (5) working days from the date of recall from lay-off or leave of absence.

(5) Three working days of no call, no show.

(6) When an employee with less than one (1) year’s service is laid off, such employee shall have recall rights not to exceed one (1) year.

(7) The Company will inform the Union President and the employee three days prior to the event of a layoff and/or recall to and from the street. An employee who is initially bumped will also be notified three (3) days in advance.

All employees with less than ninety (90) days of continuous service shall be considered probationary employees, provided the probationary period can be extended an additional 30 days by mutual agreement of the Company and the Union. After completion of the probationary period, the employee’s record of continuous service will date back to the original date of his employment.

Section 2.

A. Seniority shall at all times be recognized for the purposes of upgrading and layoff and recall provided the employee possesses the necessary skill and ability to perform the job in question.

B. The lead position committee for the specific department will review all bidders for leader positions. Bidders will be selected by the lead position committee based on their skill, knowledge, and abilities. If all bidders are equally qualified, then seniority shall prevail. These criteria will apply to any newly created lead positions. The lead position committee will be made up of two (2) union representatives and two (2) management representatives. The shop committee will determine the (2) union representatives. The person selected for the lead position shall be by majority vote of the committee.

Section 3. Job Openings and Upgrading Procedure

When the Company declares a job open there shall be shift preferences right, which will operate within the department and classification, involved before the open job is posted.

(1) If no employee in the plant has recall rights to the open job, it will be posted plant wide so that any employee previously qualified on the job may bid before an employee laid off from the Company who has rights to that job is recalled. If no person on layoff fills the open job, it will be posted plant wide so that any employee will have the chance to bid before hiring from outside. This is not applicable to grades 10, 11, and 12.

(2) In the event a junior worker in a department is transferred to another shift and the transfer exceeds forty-five (45) days, a bid for a shift preference must be posted when the vacancy is filled. If the transfer does not exceed forty-five (45) days, the employee that was transferred will have to return to the shift.

When a job is posted for bid, it shall remain on the bulletin board for a period of four (4) working days including Saturdays and Sundays if a four shift operation is instituted. Employees will also have the right to designate in advance with the Company personnel office, their desire to upgrade to specific jobs.

A. Any successful applicant for a job who moves into a new department shall take all his seniority into that department upon demonstrating sufficient skill and ability to perform the job equal to the department average, not to exceed a period of ninety (90) continuous days of work within the new department. In the event of work force reduction, probationary employees will be considered as without rights and will be laid off prior to other employees in the department. With respect to those employees who have less than ninety (90) days in a department and are not probationary employees, Company seniority will determine which employee will be affected in case of layoff.

B. Any employee who fails to meet job requirements on any job where he/she is a successful bidder shall be returned to his/her former job, department, and shift.

C. After any upgrading or award of a bid, an employee will be restricted from bidding again for another job for a period of nine (9) months. The restriction will be waived in the event that an opening occurs in maintenance or in the tool room for L.G. six and above. If after bidding on a posted job an employee is disqualified by the Company, he/she may bid on another posted job at any time, provided all means for filling that job have been exhausted in conformance with Article XII of the Agreement. After an employee has bid on a job he/she may disqualify him/herself on that job at any time prior to the passage of twenty (20) consecutive working days or the Company may disqualify him/her in a ninety (90) day period.

After an employee has been disqualified from a job by the Company, he may bid on that job again after a one-year period; however, if he is again disqualified from the job he/she will not be permitted to bid on it in the future. This restriction may be removed if employee has successfully demonstrated improved skills.

D. Downward moves will only be permitted once a suitable replacement has been found, for up to a maximum of one hundred twenty (120) days.

E. Consistent with the terms of this contract, an employee will have the right to move laterally on an open job.

F. The following will prevail for employees who are successful bidders on open jobs but circumstances prevent them from moving:

1. If after two (2) weeks from date of bidding the employee is still within department, he/she will receive make up pay equal to his present step in the Labor Grade in which he was the successful bidder. Seniority will commence in the new department at this time.

Note: Incentive earnings for assembly will not be calculated on the make up pay; overtime will not be paid on make up pay, but will be paid on hours worked at straight time.

2. Successful bidders shall not be detained for any time in excess of six (6) weeks from their bidding date unless approved by the employee.

3. At the time of the actual transfer the employee will automatically be placed at a rate on the progression rate scale per company policy. Ninety (90) day Company qualification will begin upon actual transfer to position.

G. If an opening occurs within 120 days of the award of the bid, the next eligible bidder will fill the position. If there are no eligible bidders, the job will be reposted before the Company may hire from the outside.

Section 4. Lay Off and Recall

When an employee is laid off from his/her department and job classification he shall have the option of retrograding in compliance with (B) below or he/she may displace the least senior employee in his labor grade in his unit. If his seniority precludes the displacement of any employee in his labor grade, he may bump the least senior employee on a lower base rate job within the unit.

A. When a move has been effectuated under the seniority provisions of the contract, the affected employee will be allowed to exercise a shift preference so long as it is consistent with his seniority.

B. In the event of a lay-off, the affected employee will be given the opportunity, seniority permitting, to retrograde into any job previously qualified on while in the employee of the Company. Retrograde may mean upward, downward or lateral movement.

C. After an employee has exhausted all seniority moves under the provisions of the contract he will be given the opportunity to bump a less senior employee in labor grade 6 and below, provided he can perform that job proficiently within a three (3) week period.

D. After an employee has exhausted all seniority moves under the provisions of the contract, he will be recalled to any job by seniority in Labor Grade 9 or below provided he hasn’t waived his rights to that job and he will be given up to three weeks to demonstrate proficiency on the job. This section is not applicable to maintenance and tool room jobs.

E. When an employee is laid off, he/she will be asked whether he/she will accept recall to any job or just his/her own. If the employee waives recall to other jobs, he will be recalled only to his own job. If the employee accepts recall to jobs other than his own, he may not refuse those jobs when offered. An employee, on layoff, may revise his/her status concerning the job or jobs to which he/she’ll return by notifying the Company in writing. Such notification may be made no more than twice a year during any given layoff. Recall rights are for 30 months.

F. If an employee is recalled by the Company and subsequently disqualifies himself or is disqualified by the Company, his subsequent placement will be in accordance with Section 4, A, B, C, and D in the event of work force reduction, probationary employees will be considered as without seniority rights and will be laid off prior to any other employees in the department.

G. When an employee is laid off from his/her job and replaces an employee with less seniority in another job, said employee will have the option of going back to his/her original job or stay on present job after 90 days.

H. When an employee with less than one (1) year’s service is laid off, such employee shall have recall rights not to exceed (1) year.

Section 5.

This Article does not limit or guarantee the number of hours to be worked by any department or any employee. In the event of a curtailed workweek the days worked shall be consecutive beginning on Monday except for off-standard work schedules. If curtailment is necessary beyond four (4) weeks, the Union may discuss alternatives with the Company.

Section 6.

Bulletin Boards shall be provided for all seniority lists and other Union purposes as well. It is understood that the Union officers shall submit any document to be posted on the bulletin boards to the appropriate representative of management for his approval prior to posting.

Section 7.

It is understood that the following Union officers shall have top seniority during their respective terms of office:

1. President

2. Vice President

3. Financial Secretary

4. Recording Secretary

5. Bargaining Committee Members

This seniority shall be for the purpose of layoff and recall only. The four top Union officers shall be assigned to the first shift.

Section 8.

The committeeman on each shift shall hold top seniority on his respective shift for the purpose of layoff and recall only. This seniority shall not take precedence over the officers as listed in Section 7. This provision protects Union officers from the vagaries of bumping/layoff during the terms of office. Therefore they are to remain on the shift to which they are assigned until the abolition of that shift or upon voluntary removal to another shift. On the other hand, this provision in no way permits a Union officer to use his privileges for purposes of vacation or promotion preference, etc. To allow the bumping of Union committeemen or officers without respect to shift retention, it is technically possible to have them all confined to one shift while the other shifts have no representation. This was never the intention, since such an eventuality would leave Company-Union contracts in an unworkable state.

Section 9.

It is understood that any employee promoted from the bargaining unit will have 60 days to return with his accumulated seniority except for 30 days. If the employee does not return to the bargaining unit in that time, he will lose all his seniority and may return thereafter only as a new employee. Any return to the bargaining unit must be to a posted job. If there is not posted job, the affected employee may bump the least senior employee whose job he can perform. The job in question must be labor grade 7 and below.

Section 10.

Employees applying for jobs in Labor Grade 8 and above shall be required to pass a job test in connection with job openings in such labor grades. The following procedure will apply:

A. The Company will reimburse 100% of tuition for any required courses providing completion of course with a grade “C” or at least a 72%.

B. Testing will be administered and evaluated by an independent agency.

C. Openings will be filled from within on a seniority basis providing applicants pass the test with a grade “C” or at least a 72%. If no one qualifies, the Company may seek outside applicants. A joint Union-Company trades committee will be established to oversee the program.

D. It is the policy of the Company to encourage its employees to prepare themselves voluntarily for increased responsibility by studying accredited semi-technical, and professional subjects related to the Company’s business. To aid the employee, the Company has instituted a Tuition Refund Plan by which 75% of the tuition paid by each employee will be refunded on approved and satisfactorily completed subjects.

E. If an opening occurs in the Tool room and it cannot be filled with a qualified employee either in or out of the plant, the Company may establish a training program to fill the job.

Section 11.

Shift preference may be exercised twice per year, and an employee must stay on the shift for six months after exercising this right. It is the obligation of the employee to notify the Company two weeks in advance if he wishes a shift preference, and transfers will occur only on a Monday, unless otherwise agreed to. In exercising the shift preference, the employee will bump the last senior employee in the same job on the shift he desires to transfer to provided his seniority is greater. The displaced employee will then bump the least senior employee in the same job on the next shift of priority, provided his seniority is greater.

Article XIII

Settlement of Differences

Section 1.

A grievance shall be defined as any dispute which arises between the Company and the Union over the compliance with or application of this Agreement as it pertains to any bargaining unit employee, and all such differences shall be settled in the following manner.

Step I. The employee shall first attempt to resolve any grievance dispute with his/her immediate supervisor. The employee may request to have his/her committee-person present when he/she talks with the supervisor. If the dispute is not settled in accordance with an oral discussion between the supervisor, the employee and/or the committeeman, then the dispute must be reduced to written grievance and submitted to the Supervisor or his/her designee within five (5) working days from the date of the initial discussion with the supervisor. The supervisor will provide written response within (5) working days upon receipt of the written grievance. If the dispute still remains unsettled, it will be submitted to Step II.

Step II. Within five (5) working days from the date of receipt of a written grievance by the Human Resources Manager, it shall be heard by the Step II committee. The Step II Committee shall consist of two representatives of management and two representatives of the local Union and the Grievant. If the parties cannot conduct a Step II hearing within five (5) working days from the date of receipt of the written grievance, the parties, by mutual agreement, may extend the time limit. If the grievance in Step II is not heard within the five (5) working days time limit or the extended time agreed upon by the parties, it will be placed immediately on the Third Step Agenda. If the dispute still remains unsettled after the Step II hearing, it will be placed on a Third Step Agenda within five (5) working days following the hearing in Step II.

Step III. The Union must schedule the Step III meeting within five (5) working days. If the grievance in Step III is not scheduled within the five (5) working day limit or extended by mutual agreement it will be dropped by the Union. The Step III committee shall hear all cases which have been unresolved in Step II. The Step III committee shall consist of two representatives of management and the President, Vice President, Financial Secretary and Recording Secretary of the local Union. In addition, the General Manger and a representative of the International Union may sit in on any third step hearing. The Company shall present its Step III response within five (5) working days of the third step hearing. In the event that the dispute is not resolved in the third step, the Union may file the said difference for arbitration within ten (10) working days after the date of the third step response. If the union does not request arbitration within the ten (10) working day period, the grievance shall be dropped by the Union. But the said ten (10) working days may be waived by mutual agreement in writing between the Union and the Company so as to further discuss the subject of the dispute under the cooperative management clause of this Agreement.

The parties by mutual agreement may submit any grievance to non-binding mediation before a mediator assigned by the Federal Mediation and Conciliation Service without waving the right of the Company or the Union to submit the grievance to binding arbitration in the event non-binding mediation does not resolve the grievance.

Section 2.

If a grievance hereunder is referred to arbitration, the parties will use the arbitration procedures of the Federal Mediation and Conciliation Service. The parties will alternate as to which party will strike its first name in an arbitration panel. If a grievance is submitted to arbitration, the decision of the arbitrator shall be final and binding on both parties and any costs with respect to said arbitration shall be borne equally between the parties. The cost of the court reporter and transcript shall borne by the requesting party(ies).

Section 3.

No issue in dispute under this Labor Agreement shall be arbitrable unless the said issue involves the meaning, application of, or compliance with a specific provision of this Agreement or the intent thereof and unless the grievance has been timely filed. The arbitrator shall not add to, subtract from, or modify any of the provisions of this Agreement, and shall not reverse management’s decision in cases involving discipline or discharge except when, in the judgment of the arbitrator, management has acted without just cause. The arbitrator’s award shall in no case be retroactive beyond 30 days prior to the filing of the written grievance which constituted the issue in question.

Section 4.

All grievances must be filed within five (5) working days from the date of its known occurrence. In no case, however, shall the Company’s liability for retroactive pay exceed a period of thirty (30) days prior to the date on which the grievance is filed. Grievances not so filed shall be deemed to have been waived and shall not be raised thereafter. Grievances resolved in either Step I, II, or III above shall be considered satisfactorily settled, closed on the record, and shall not be reopened.

Section 5.

Grievances that shall arise between the Union and the Company concerning employee discipline shall have priority over all other cases under this Article XIII of the Labor Agreement.

Article XIV

Wages and Rates of Pay

Section 1.

Wage rates for Tier I employees are listed in Appendix A.

Tier I rates apply to employees hired before August 10, 2002.

Wage rates for Tier II employees are listed in Appendix B.

Tier II rates apply to employees hired August 10, 2002 and after.

Section 2.

New employees without previous experience will be hired at the appropriate rate as shown on the progression rate scales outlined in Appendix “B” of this Agreement.

The first step of the four steps on the Progression Scale will not apply to employees bidding to another labor grade.

The four-step Progression Scale will only apply to new employees hired after July 22, 1978

Section 3.

Employees who have some experience will be placed at a rate on the progression rate scale commensurate with their experience and ability to perform the job between the minimum hiring rate for the labor grade up to and including the full job rate if the employee is fully qualified. In no case shall any employee receive less than his present rate when he is accepted for training on another job provided the move is lateral or up.

Section 4.

Any employee on a progression rate shall be reviewed periodically and appropriate adjustments shall be made on the basis of the review period until the employee reaches the full rate of the job. Employees in all labor grades shall be reviewed a minimum of every thirty- (30) days and progressive adjustments will be granted provided the employee demonstrates appropriate progression in skill, ability and performance on the job.

Section 5.

Employees working on a scheduled second shift shall be paid a night shift premium of $.25 per hour. Employees working on a scheduled third shift shall be paid a night shift premium of $0.27 per hour. Employees assigned to one shift shall not receive a premium applicable to another shift for any reason.

Section 6.

Any employee on transfer to another job shall be paid the rate of his/her job or the rate of the job to which he/she is transferred, whichever is higher. An incentive employee will be paid five (5) labor grades higher than his/her base rate in those cases where the job to which he/she is transferred causes a loss of earnings. Temporary transfers will not exceed ninety (90) days in a year unless otherwise agreed to. If a transfer exceeds ninety (90) days, the job will be posted. The Company may temporarily transfer an incentive employee to another job based on skill and ability in cases of absence and vacation and to expedite work. If the transferred employee is the non-junior employee, the employee will be paid average hourly earnings up to 120% of base rate. If the transfer exceeds 30 continuous days, then the employee will be paid average his/her hourly earnings thereafter. In addition, the Company may temporarily transfer an employee to another department to train another employee, in which case the transferred employee will be paid average earned rate from the last full week worked.

Section 7.

Effective immediately, employees operating on machine-controlled incentive standards who are training new operators will be paid three (3) labor grades higher than their present classifications. Training will be conducted in accordance with the Company’s Training Plan. Training time will be considered as time spent with a new operator. When assembly operators train other employees they will be paid the top step of labor grade 4.

Article XV

Insurance, Benefits, Pensions and 401(k) Plan

Section 1.

Pension, 401(k) plan, health, and dental insurance benefits are set forth in documents that are separate and apart from this contract booklet.

Section 2.

First tier employees (hired before 8/10/2002) coverage will pay $14.00 per week in health insurance premium payments during the first year of this contract (8/10/2002 – 6/30/2003); $14.00 per week during the second year of this contract (7/1/2003 – 6/30/2004) plus 50% of any premium increase up to a maximum of $10.00.

Second tier employees (hired after 8/10/2002) coverage will pay $20.00 per week in health insurance premium payments during the first year of this contract (8/10/2002 – 6/30/2003); $20.00 per week during the second year of this contract (7/1/2003 – 6/30/2004) plus 50% of any premium increase up to a maximum of $10.00.

First tier employees (hired on or before 8/10/2002) who elect dental coverage will pay $2.00 per week in premium payments during the first year of this contract (8/10/02002 – 6/30/2003); $2.25 per week during the second year of this contract (7/1/2003 – 6/30/2004).

Second tier employees (hired on or before 8/10/2002) who elect dental coverage will pay $5.00 per week in premium payments during the first year of this contract (8/10/2002 – 6/30/2003); $6.00 per week during the second year of this contract (7/1/2003 – 6/30/2004).

Section 3.

All Employees who are covered under their spouse’s medical insurance policy and who opt out of coverage under the Company’s medical insurance policy will be paid $100.00 monthly for single (spouse covered under separate policy provided by spouse’s employer) and $200.00 monthly for family coverage. Employees who opt out of coverage under the Company’s policy must provide evidence of medical insurance under another insurance policy.

Section 4.

With respect to pension service credits, all active employment time accrued prior to the acquisition of the Bremen Bearing Company by RBC, Inc. shall be counted as years of service for pension eligibility purposes.

Section 5.

The Company will pay the cost of Medicare supplemental insurance premiums, up to $100.00 monthly for employees retiring during the term of this agreement.

Section 6.

The pension payment for employees (hired before 8/10/2002) shall be $28.75 per month per year of service for employees who retire after June 30, 2002. The payment shall increase another $.25 (from 28.75 to 29.00) per month per month per year of service for employees who retire after June 30 2003.

Effective January 1, 2003, all second tier bargaining unit employees with six full months of service shall be eligible to participate in the (401)k plan provided by RBC Corporation (hereafter the “RBC 401k Plan”) subject to all the terms and conditions of that plan. The RBC 401k plan may be changed from time to time, consistent with corporate-wide changes made to the RBC 401(k) plan, without further consultation or bargaining with the Union, provided that the Union is given notice of such changes at least four (4) weeks in advance of such changes. The employee may contribute 1% to 15% of his/her salary pretax. The Company will make a 50% matching contribution of the pretax amount of the employee’s contribution up to a maximum of 5%. The employee’s contribution shall be 100% vested immediately, and the Company’s contributions shall be vested 100% after three (3) vesting years.

Section 7.

Weekly accident and health benefit will be $240 from Aug 10, 2002 to July 31, 2003; $250 from Aug. 1, 2003 to July 31, 2004.

Section 8.

The amount of group life and accidental death and dismemberment insurance for active first tier employees (hired before 8/10/02) will be $10,000. Second tier life insurance will be $8,000. Life and accidental death and dismemberment insurance for active employees age 66 or over will be $6,500. Life insurance is continued upon retirement under the Pension Plan but is reduced to $1,800 upon attainment of age 66, $1,600 upon attainment of age 67, and $1,500 upon attainment of age 68 and thereafter.

Section 9. Payroll deductions

The Company agrees to make weekly payroll deductions to up to three accounts. The Company assumes no obligation other than three deductions per employee, per payroll period.

Section 10. Eye Exam

Approved safety glasses must be worn by all employees in the manufacturing operation. The Company will provide safety glasses as described below.

The Company will provide annual eye exams for the employees in jobs where accurate vision is a requirement, such as Inspectors. Eye exams will also be provided where the employee is not covered under the Company provided or another insurance policy.

The Company will schedule annual visual exams as follows:

• Full exams when an employee starts in Inspection and every two years thereafter,

• Progressive exams the year between full exams

The Company will pay for the following:

• One pair of approved safety glasses (frames and lenses), every 24 months for employees requiring prescription glasses.

• Replacement lenses every 12 months if eye exam warrants the corrected lenses.

Non-prescription safety glasses are issued to employees by the supervisor. Damaged glasses should be returned to the supervisor to receive a replacement.

Section 11. Miscellaneous

The Company will supply coveralls for use by the maintenance department.

Article XVI

Jury Duty, Bereavement and Military Reserve Pay

Section 1. Jury Duty Pay.

Any employee who is called for Jury Duty service shall be excused from work for the days on which he serves. He shall receive for each such day of jury service on which he otherwise would have worked, the difference between eight (8) hours of pay at his/her assigned base rate and the payment he/she receives for jury service. The employee will present proof of service and the amount of pay received therefore.

Section 2. Bereavement Pay.

Employees will be paid by the Company for time lost due to death in the immediate family. Such pay to be no more than their assigned rate for a period not in access of three (3) work days. Immediate family includes mother, father of employee, husband or wife, children, brother or sister, mother-in-law, father-in-law, grandchildren, stepchildren, stepparents, grandparents, son-in-law and daughter-in-law. The three days allowed must be taken. In other words, no pay can be taken in lieu of the time allowed off. If a person decides they only want one or two days off and wishes to work, this is his/her option. The days off must be consecutive and only at the time of the funeral. The employee cannot take one day at the time of the funeral and two days two months later for the same bereavement. In case the three days include Saturday and Sunday, the employee will not lose two paid days, but will take two additional days for Saturday and Sunday. For example, the employee would take off Friday, Monday and Tuesday with pay. If the bereavement occurs during the employee’s vacation, the three days allowed should be taken immediately after the termination of the vacation time. The vacation time does not count against the three days allowed. If a holiday falls on one of the three days allowed, an extra day can be taken with pay.

Employees will be allowed one day off with no pay due to the death of a spouse’s grandparents.

Section 3. Military Reserve Training Pay

An active employee who is required to attend Military Reserve Training Encampment will receive the difference in pay between his assigned base rate and payment received for his military service. Payment hereunder shall be based on proof of service and shall not exceed a period of eighty (80) hours.

Article XVII

Safety and Health

Section 1.

The Company as prescribed under the Laws of the State of Indiana and the United States shall provide heating, lighting, toilet, locker, and sanitary facilities and all protective devices necessary to protect the health of employees. The Union will at all times cooperate with and assist the Company in maintaining and improving safety and health conditions in the plant.

Section 2.

The Company will make every effort to avoid scheduling only one employee per shift.

Section 3.

The Company has the right to conduct Drug & Alcohol testing for cause and reasonable suspicion in accordance with the Company’s drug and alcohol policy, attached as Appendix D. Positive test results will result in disciplinary action up to and including termination.

Article XVIII

Plant Rules & Disciplinary Action

Section 1.

The Company shall have the right to issue rules and reasonable regulations from time to time governing the conduct of employees in the workforce, and it is the duty of each employee to familiarize himself/herself with such rules and regulations and to comply herewith. This does not constitute acceptance by the Union of any specific rules not in compliance with the provisions of this Agreement.

The union reserves the right to grieve the rule.

Section 2.

Disciplinary action will be conducted as follows:

Step 1.		Verbal warning		Step 3. Suspension 1-5 days
Step 2.		Written warning		Step 4. Termination

Steps may be skipped due to the seriousness of the event up to an including immediate termination. All steps will be documented and remain in employee’s file. However, actions will become inactive as follows (providing no other disciplinary action is taken):

Step 1		6 months		Step 3		12 months
Step 2		12 months		Step 4		Will not be removed

Management has the right to administer disciplinary action in accordance with company policy.

Article XIX

Leave of Absence

Section 1.

A. Employees who are to be absent for more than five working days for personal illness or physical disability and who have acquired one (1) year of service with the Company, will be granted a leave of absence up to one (1) year. Employees with sixty days seniority, but less than once (1) year of service will be granted a leave of absence for the period equal to their length of service. Leaves of absence will only be granted upon written request and when accompanied by a physicians statement justifying the reason. Such leaves will be granted without pay except seniority will accumulate for the duration of the leave.

Requests for personal leaves of unusual reasons may be made through the Human Resources Manager. Such leaves, if granted, shall not be in excess of two weeks. Paid time available, such as vacation, may be used at the employee’s request.

B. Employees applying for a medical leave of absence or returning from a leave of absence may be subject to a medical examination and approval by a Company appointed physician.

C. An employee with a physician’s statement must renew medical certification every thirty–(30) days.

D. Family Medical Leave Act

Time off for medical leaves of absences will run concurrently with Family Medical Leave (FML) if the employee is eligible under the provisions of Family Medical Leave Act (FMLA). The Company will administer FML with a 12-month rolling period. Paid time available, such as vacation, may be used at the employee’s request. Required documentation must be completed as required by the Act.

Section 2.

Any employee who is elected or appointed to a position with the International Union (UAW) will be granted a leave of absence for the duration of his assignment upon written request by the International Union. Seniority will accumulate during such leave but without pay or other benefits except for pension purposes.

Section 3.

A. Failure to report to work within five days after the expiration of a leave of absence or extension thereof shall constitute a voluntary resignation

B. Employees returning to work after a leave of absence will be placed on the same job held at the beginning of the leave based on their seniority and provided they are able to perform the full job requirements.

Section 4.

A. Any employee who has been granted a leave of absence and who while on leave of absence, seeks or accepts other employment or who engages in any business or occupation shall be considered as having voluntarily quit. Exceptions to this Section may be made by mutual agreement.

Section 5. Other Leave of Absences

Other leave of absences include illness or injury of a family member that may be eligible under FMLA, military duty, jury duty, bereavement, and personal leave. Proper documentation and approval is needed as required by the Company. Paid time available, such as vacation, may be used at the employee’s request.

Section 6. Payment of Insurance Premiums during Leave of Absences

Employees will be required to pay their share of insurance premiums, and may elect to pay them in two different ways.

1. Employee may elect to pay by the 25^th of the month while they are out on leave of absence; or

2. Employee may designate payment upon return to work on a basis of 1.5 times regular weekly premium until the premiums are recouped.

Article XX

Amendments and Modifications

Section 1.

Neither party shall be obligated to negotiate further on any matter during such term. This Agreement may, however, be modified by mutual agreement of the parties, provided that all such modifications are in writing and properly executed. This Agreement supersedes and voids all prior agreements, if any, written or oral, or established by custom, practice, or precedent. In the event of the provisions of this Agreement shall become invalid or unenforceable by reason of any federal or state law or executive order now existing or hereafter enacted, such invalidity or unenforceability shall not have any effect on the remaining provisions of this Agreement.

Section 2.

No amendments or modifications of this Agreement shall be valid except when committed to writing and signed by the authorized representatives of both parties. The authorized representatives of the Union shall include the duly authorized representatives of the International Union and the duly authorized representatives of the Local Union No. 1368.

Article XXI

Termination and Notice

Section 1.

This agreement between the parties shall remain in force for the period commencing on August 10, 2002 and ending 12:00 midnight on August 9, 2004. It shall automatically renew itself from year to year thereafter unless written notices of the desire to terminate or amend any portion of any of the terms hereof is given by either party to the other, at least sixty (60) days prior to August 9, 2004, or in the event this Agreement is renewed such notice shall then be given at least sixty (60) days prior to any subsequent annual expiration date.

If notice of the desire to terminate or amend shall be given, as provided in the preceding paragraph, negotiations for the new or amended Agreement shall being not later than ten (10) days subsequent to such notice, and shall continue until agreement has been reached; and during such negotiations this Agreement shall remain in full force and effective provided, however, that if negotiations continue beyond the terminal date of this Agreement, either party then terminate this Agreement upon ten (10) days written notice to the other party.

Appendix “A”

Rates of Pay Effective		8/10/2002
Employees Hired Before August 10, 2002

Labor	Training	Training	Training	Training
Position	Level 1	Level 2	Level 3	Level 4

Assembly LG 1			12.82	12.97
Inspection LG 2		12.85	12.95	13.10
Shift Helper/Sorter LG 3	12.96	13.06	13.16	13.31
Shipping/Receiving LG 4	13.07	13.17	13.27	13.42
Assembly Leader LG 6	13.32	13.42	13.52	13.67
Quality Assurance LG 6	13.32	13.42	13.52	13.67
Production Attendant LG6	13.32	13.42	13.52	13.67
Quality Assurance Lead LG 8	17.42	17.55	17.68	17.87
Shipping Lead LG 8	17.42	17.55	17.68	17.87
Cell Operator LG 8	17.42	17.55	17.68	17.87
Storeroom Lead LG 9	17.51	17.64	17.77	17.97
Maintenance Apprentice LG 10	17.63	17.76	17.89	18.08
Maintenance LG 10	17.63	17.76	17.89	18.08
Tool Room LG 12	17.84	17.97	18.10	18.29
Skilled Trades Master Mechanic				20.65
Team Leader	20.53	20.68	20.83	21.05

Appendix “A”

Rates of Pay Effective		8/10/2003
Employees Hired Before August 10, 2002

Labor	Training	Training	Training	Training
Position	Level 1	Level 2	Level 3	Level 4

Assembly LG 1			13.17	13.32
Inspection LG 2		13.20	13.30	13.45
Shift Helper/Sorter LG 3	13.31	13.41	13.51	13.66
Shipping/Receiving LG 4	13.42	13.52	13.62	13.77
Assembly Leader LG 6	13.67	13.77	13.87	14.02
Quality Assurance LG 6	13.67	13.77	13.87	14.02
Production Attendant LG 6	13.67	13.77	13.87	14.02
Quality Assurance Lead LG 8	17.77	17.90	18.03	18.22
Shipping Lead LG 8	17.77	17.90	18.03	18.22
Cell Operator LG 8	17.77	17.90	18.03	18.22
Storeroom Lead LG 9	17.86	17.99	18.12	18.32
Maintenance Apprentice LG 10	17.98	18.11	18.24	18.43
Maintenance LG 10	17.98	18.11	18.24	18.43
Tool Room LG 12	18.19	18.32	18.45	18.64
Skilled Trades Master Mechanic				21.00
Team Leader	20.88	21.03	21.18	21.40

Appendix “B”

Rates of Pay Effective		8/10/2002
Employees Hired After August 10, 2002

Labor	Training	Training	Training	Training
Position	Level 1	Level 2	Level 3	Level 4

Assembly LG 1			9.82	9.97
Inspection LG 2		9.85	9.95	10.10
Shift Helper/Sorter LG 3	9.96	10.06	10.16	10.31
Shipping/Receiving LG 4	10.07	10.17	10.27	10.42
Assembly Leader LG 6	10.32	10.42	10.52	10.67
Quality Assurance LG 6	10.32	10.42	10.52	10.67
Production Attendant LG 6	10.32	10.42	10.52	10.67
Quality Assurance Lead LG 8	13.52	13.65	13.78	13.97
Shipping Lead LG 8	13.52	13.65	13.78	13.97
Cell Operator LG 8	13.52	13.65	13.78	13.97
Storeroom Lead LG 9	13.61	13.74	13.87	14.07
Maintenance Apprentice LG 10	13.73	13.86	13.99	14.18
Maintenance LG 10	13.73	13.86	13.99	14.18
Tool Room LG 12	13.94	14.07	14.20	14.39
Skilled Trades Master Mechanic				17.65
Team Leader

Appendix “B”

Rates of Pay Effective		8/10/2003
Employees Hired After August 10, 2002

Labor	Training	Training	Training	Training
Position	Level 1	Level 2	Level 3	Level 4

Assembly LG 1			10.17	10.32
Inspection LG 2		10.20	10.30	10.45
Shift Helper/Sorter LG 3	10.31	10.41	10.51	10.66
Shipping/Receiving LG 4	10.42	10.52	10.62	10.77
Assembly Leader LG 6	10.67	10.77	10.87	11.02
Quality Assurance LG 6	10.67	10.77	10.87	11.02
Production Attendant LG 6	10.67	10.77	10.87	11.02
Quality Assurance Lead LG 8	13.87	14.00	14.13	14.32
Shipping Lead LG 8	13.87	14.00	14.13	14.32
Cell Operator LG 8	13.87	14.00	14.13	14.32
Storeroom Lead LG 9	13.96	14.09	14.22	14.42
Maintenance Apprentice LG 10	14.08	14.21	14.34	14.53
Maintenance LG 10	14.08	14.21	14.34	14.53
Tool Room LG 12	14.29	14.42	14.55	14.74
Skilled Trades Master Mechanic
Team Leader

APPENDIX “D”

STATEMENT OF COOPERATION

ALCOHOL AND DRUG ABUSE

Both the Company and Union express their collective determination to deal effectively and constructively with the problem of alcohol and drug abuse among the Bargaining Unit employees. The Company and Union recognize that excessive use of alcohol or drugs by employees impairs their ability to function in an effective and safe manner and contributes to increased absenteeism, tardiness, and potential safety problems. Further, that use of either on the premises or reporting to work in an intoxicated state is in violation of the plant work and safety rules. Both the Company and Union agree that a joint effort by both parties will be extended to help Bargaining Unit employees afflicted and develop a system for early identification and detection. Thereafter, arrangements will be made to refer afflicted employees for proper treatment and appropriate follow-ups.

Both the Company and Union agree that neither the Management nor Union officials are always able to provide the level of motivation required by an employee affiliated by either alcohol or drug dependency.

As a result, both parties recognize that mutual cooperation is necessary to encourage each afflicted employee to recognize his or her problem and seek professional treatment. And further to adopt the personal conviction to respond to treatment and to maintain a resolve to avoid future alcohol and drug abuse after completing a recognized program of treatment.

Both the Company and Union agree to implement the program stated above with the Alcohol and Drug Abuse Committee, and will work cooperatively outside of the grievance procedure of the contract on these problems. The responsibilities of this Committee will be as follows.

1. To assure any afflicted employee that discussions that take place will be held in the strictest of confidence.

2. To communicate to all employees that they may consult on a confidential basis with plant medical personnel, or an outside qualified facility or agency, concerning their problem without fear or disciplinary action being based on such a discussion or program of treatment being initiated.

3. To attend such meetings and seminars to evaluate and determine the appropriateness of programs or treatment offered by various community agencies, as well as establish programs for educational and informational use by both Union members and Management at a plant level.

Both the Company and Union agree that nothing contained herein is to be construed or constitute any waiver of the Management’s right to maintain or invoke discipline in such cases of misconduct which may result from, or be associated with, the use of alcohol or drugs at Union reserves the right to exercise its rights to process any grievances concerning such matters as may be permitted in accordance with the contract.

During the following initiation of a program of treatment, an afflicted employee shall not receive nor expect any special privileges or exemptions from all of the conditions required of employees of the Company.

Both the Company and Union will encourage employees with either of the problems described above to voluntarily participate without the necessity of disciplinary action being taken.

When a leave of absence is necessary so that an afflicted employee may undergo treatment for either alcoholism or drug dependency from a recognized program, provided the employee has voluntarily submitted for such treatment, they will be granted such a leave of absence and will be eligible to receive the benefits provided in accordance with the contract during said leave. An employee may be granted only one such leave under these provisions, except that an additional leave may be granted only with prior approval of the Alcohol and Drug Abuse Committee.

The Alcohol and Drug Abuse Committee shall consist of two (2) members from the Management and two (2) members appointed by the Union and, should the performance of their duties require that time be spent during regularly scheduled working hours, the Union Committee Member will be paid his/her regular rate of pay up to a maximum of four (4) hours per month. Any time spent at furthering the objectives of this program or attending seminars offered by various community agencies with respect to alcoholism or drug abuse outside the Committee Member’s regularly scheduled working hours shall not be compensated.

Prior to attending any outside community or professional programs which will necessitate the absence of the Union committee member during his/her regularly scheduled hours, permission to do so must be obtained from the Human Resources Manager.

8/10/02

Alcohol & Drug Policy

POLICY STATEMENT

It is the policy of our Company to create a drug-free, alcohol-free workplace in accordance with the statement of cooperation for Alcohol and Drug Abuse. The use of controlled substances and/or alcohol in the workplace or working under the influences of alcohol or controlled substances is inconsistent with the behavior expected of employees, subjects all employees and visitors to our facilities to unacceptable safety risks, and undermines the Company’s ability to operate effectively and efficiently. The manufacture, distribution, possession, sale, or use of a controlled substance or alcohol in the workplace or while engaged in company business off our premises is strictly prohibited and will lead to disciplinary action up to and including termination. Use of drugs or alcohol is also prohibited during nonworking time to the extend that it impairs an employee’s ability to perform on the job.

PROCEDURE

1. Employees will be required to submit to a drug/alcohol test under the following circumstances:

A. Post Accident Testing: An employee shall be tested for the use of controlled substances, as soon as possible, after a reportable accident occurring while on Bremen Bearings, Inc. time or business or on any work site. A “reportable accident” means an accident resulting in property damage or resulting in any person, as a result of the accident, receiving medical treatment away from the scene of the accident.

B. Whenever there is a reasonable cause to believe that an employee’s ability to perform his/her job is impaired due to the use of drugs/alcohol, as indicated hereafter.

2. Any employee whose drug/alcohol test result is positive will be subject to three day suspension pending investigation.

3. Refusing to take a drug/alcohol test or any behavior intended to interfere with the valid results of that test will be considered as a positive test and a violation of this drug/alcohol policy warranting disciplinary action up to and including discharge.

4. After notification of a positive test, the employee will have 24 hours to decide if he/she elects to have the same sample re-tested by a different laboratory at his/her own expense.

5. Employees taking medication must report such use to their immediate supervisor if the medication is likely to interfere with the employee’s ability to function safely on that job. The employee may be removed from his/her job or reassigned to another job until return to that position is deemed appropriate. The unauthorized use of prescription drugs that were prescribed for another person will be considered a violation of this drug policy.

REASONABLE CAUSE TESTING

The Company shall have reasonable cause for drug/alcohol testing if an employee is having work performance problems or displaying behavior described below (not all inclusive):

• Abnormally dilated or constricted pupils

• Glazed stare - redness of eyes

• Flushed face

• Changing or slurring of speech

• Constant sniffing

• Needle marks (Not applicable if a diabetic)

• Change in behavior

• Forgetfulness or poor concentration

• Constant fatigue or hyperactivity

• Smell of alcohol

• Difficulty walking

• Slowed reactions

Except for smell of alcohol and needle marks, an employee must show two or more indications to establish probably cause.

If a supervisor observes an employee engaging in such behavior affecting an employee’s job performance, the supervisor will advise the Human Resources Manager or designee and a union representative of the behavior. The Human Resources representative and the union representative will talk with and observe the employee to determine if the employee is likely to be under the influence of alcohol and/or drugs.

If the human resources representation and the union representation determine that it is likely the employee is under the influence of alcohol or drugs, the employee will be required to submit to a breath-alcohol test and/or urine drug test. If the employee tests positive or refuses to be tested, he/she will be subject to discipline, up to and including, discharge. If the human resources representative concludes that it is likely the employee is under the influence of alcohol and drugs and the union representation disagrees, the employee will be given an opportunity to voluntarily submit to testing to exonerate him/herself. If the employee declines, the Company may take such disciplinary action it deems appropriate up to and including discharge, subject to the employee’s right to grieve the disciplinary action.

If an employee requests assistance prior to any demand that the employee submit to post accident or probable cause drug/alcohol testing, the Human Resources Manager or Administrator will arrange for assessment by an appropriate substance abuse professional (SAP). If the SAP determines that treatment would be appropriate, the employee will be offered an opportunity to participate in a drug/alcohol rehabilitation program with or without a leave of absence as deemed appropriate by the Alcohol and Drug Awareness Committee.

DEFINITIONS

1. Alcohol use means the consumption of any beverage, mixture, or preparation, including any medication containing alcohol which, when consumed, causes an alcohol concentration in excess of those established by the State of Indiana for driving while intoxicated.

2. Controlled Substance use means a positive test at the established government standards as defined by HCFA/DOT 49 CFR Part 40 for any of the following substances.

• Marijuana

• Cocaine

• Opiates

• Amphetamines

• Phencyclidine (PCP)

6/28/99

Disciplinary Action Policy

POLICY STATEMENT

It is the intent of management to promote safety, quality, productivity, and good human relations by following an improvement plan to provide fair and equal treatment to all employees and to promote understanding of acceptable conduct and encourage corrective improvement in behavior where required.

PROCEDURE

This procedure is for disciplinary action related to work performance and conduct-related problems. Union employees have the right to union representation at all levels of discipline.

The progressive discipline process for absenteeism is separate from this system in accordance with the attendance policy.

The disciplinary action steps are initiated by the employee’s supervisor and/or management representative and may be built on a combination of different types of violations.

Step 1. Verbal

Counsel the employee and issue a verbal warning. Attempt to determine and resolve the cause of the problem. At the same time, state specifically that the employee is receiving a formal verbal warning. Place a discipline document in the employee’s file describing the incident and the discussion. Verbal warnings will be active for a six (6) month period before becoming inactive.

Step 2. Written

Hold a meeting with the employee, at which time you explain the nature of the offense and warn the employee that any further misconduct could lead to a suspension, or discharge. Issue a written warning of the offense. Written warnings will be active for a twelve (12) month period before becoming inactive in employee’s file.

Step 3. Suspension

Hold a meeting with the employee, at which time you explain the nature of the offense and warn the employee that any repetition could lead to discharge. Issue a written document of the offense, including a reference to the prior offense(s). A one (1) to five (5) day suspension (without pay) may occur as part of this step and will be active for a twelve (12) month period before becoming inactive.

Step 4. Discharge

A further instance of misconduct within twelve (12) months of suspension may result in discharge.

IMMEDIATE SUSPENSION AND/OR DISCHARGE may take place at any time, without regard to the preceding steps, if the employee commits an offense for which immediate suspension and/or discharge is specified as a penalty or if, in the judgment of Management, the employee’s continued presence would be contrary to the best interests of the Company or any of its employees. Immediate discharge may be justified for these types of offenses:

• Theft of company property or that of other employees

• Insubordination or refusing to follow instructions

• Violation of the Company’s Substance Abuse Policy

• Deliberate destruction of company property

• Deliberate injury to another person

• Violating a confidence; unauthorized release of confidential information

• Violation of the Company’s harassment policy

• Threatening another employee with physical harm

• Deliberately endangering another employee

• Any other violation of the plant rules which, in the judgment of Management, seriously threaten the welfare of the Company or any employee

Distribution of documentation of disciplinary action steps to include:

Human Resources Manager- original to be placed in employee’s file

Employee

Union Office

ATTENDANCE POLICY		BREMEN BEARINGS
8/10/02		Effective 8/10/02

It is the Company’s philosophy that employees should be responsible for their attendance and absenteeism from work. Effective August 10, 2002, an absenteeism policy will become effective utilizing a point system that tracks both full and partial day absences on a 12-month rolling calendar.

All absences will be documented; however, points will not be assessed for the following: Approved leave of absences (Medical, FMLA, Workers’ Compensation, Bereavement, Military, Jury Duty, Personal Leaves, Union), Snow Emergency Days, Disciplinary Suspensions, Holidays, Vacations, time when employee is sent home by the Company due to no work, and if employee goes home because no work is available in his/her department.

Points will be assessed as follows:

•	One point (1)	Each full day absent (more than 4 hours)
•	One/half point (1/2)	Partial day absent (less than 4 hours
		(tardy in excess of 6 minutes. leave/return, leave early)
•	One/half point (1/2)	Failure to call in to supervisor or call in voice mail at least 60 minutes before beginning of shift or notify supervisor previously with a written notification (form)
•	8 points	3 consecutive days no call-no show

Each period of illness involving consecutive days will be assessed one (1) point, provided proper medical documentation is presented upon return to work.

The following corrective action will be taken in any 12 consecutive month period in which an employee has accumulated the following points for unexcused absences:

2 points	—	Verbal warning
4 points	—	Written warning
6 points	—	3-day Suspension without pay
8 points	—	Termination

The Company will recognize and reward employees who have 6 months of perfect attendance with a $100.00 payment.

Training Plan

6/28/99

Training employees on jobs is the responsibility of the supervisor in the department; however, the use of experienced operators as instructors is critical to the success and effectiveness of the training process. The Company will utilize the following outline to ensure effective training.

1. Supervisor assigns the trainee to an operator who will review the following with the employee:

• Work instructions

• Personal protective equipment required

• Safety measures

• Quality and inspection requirements

• Forms and reports to be completed

• Equipment operation

• Product characteristics of good and bad quality

• Incentive criteria (if applicable)

• Other information and skills needed for success of training

2. The supervisor and/or trainer will review training status with trainee a minimum of once every week to identify progression and areas that need special attention.

3. Training criteria will be established for each job through a coordinated effort of supervisors and operators.

4. A time-line will be identified and established to monitor normal training time.

A training committee will be established to establish training criteria and time lines as well as training techniques and methods. The committee will consist of 2 supervisors, 2 operators, and a member of the bargaining committee.

Human Resources and the Plant Manager will monitor the program to ensure completeness and effectiveness.

It is agreed that the foregoing language represents the terms and conditions of a new labor agreement between the Bremen Bearings of RBC, USA, and Local 1368 of the U.A.W.

For the Union		For the Company














Agreed to this 10^th day of August, 2002.

Exhibit 10.12

CONFIDENTIAL

SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY

and

MARK TWAIN BANK,

as Trustee

TRUST INDENTURE

Dated as of September 1, 1994

Relating to

$7,700,000

Variable Rate Demand

Industrial Development Revenue Bonds

(Roller Bearing Company of America, Inc. Project)

Series 1994A

TABLE OF CONTENTS

ARTICLE I	DEFINITIONS; RULES OF CONSTRUCTION

Section 101.	Definitions of Words and Terms
Section 102.	Rules of Interpretation

ARTICLE II	THE BONDS

Section 201.	Authorization, Issuance and Terms of Bonds
Section 202.	Nature of Obligations
Section 203.	Interest Rates and Interest Payment Provisions
Section 204.	Changes in Interest Modes
Section 205.	Execution, Authentication and Delivery of Bonds
Section 206.	Registration, Transfer and Exchange of Bonds
Section 207.	Temporary Bonds
Section 208.	Mutilated, Lost, Stolen, Destroyed or Undelivered Bonds .
Section 209.	Cancellation and Destruction of Bonds Upon Payment
Section 210.	Limitation on Transfer and Exchange

ARTICLE III	TENDER AND PURCHASE OF BONDS

Section 301.	Optional Tender of Bonds During Weekly Mode or Monthly Mode
Section 302.	Mandatory Tender of Bonds
Section 303.	Irrevocability of Elections; Return of Improperly Completed Documents
Section 304.	Notice of Principal Amount of Bonds Tendered
Section 305.	Remarketing of Tendered Bonds
Section 306.	Notice of Principal Amount of Bonds Remarketed
Section 307.	Purchase of Tendered Bonds
Section 308.	Remarketing of Pledged Bonds
Section 309.	Purchase Fund
Section 310.	No Purchases or Sales After Certain Defaults
Section 311.	Remarketing Agent
Section 312.	Qualifications of Remarketing Agent

ARTICLE IV	REDEMPTION OF BONDS

Section 401.	Optional Redemption
Section 402.	Mandatory and Extraordinary Redemption
Section 403.	Selection of Bonds to be Redeemed
Section 404.	Notice of Redemption of Bonds in Weekly or Monthly Mode .
Section 405.	Notice of Redemption of Bonds in Semiannual, Annual or Multiyear Mode 36
Section 406.	Effect of Call for Redemption

ARTICLE V	REVENUES AND FUNDS

Section 501.	Creation of Funds and Accounts
Section 502.	Initial Deposits
Section 503.	Project Fund
Section 504.	Costs of Issuance Fund
Section 505.	Revenue Fund
Section 506.	Debt Service Fund
Section 507.	General Fund
Section 508.	Payments Under Credit Facility
Section 509.	Deposits into and Application of Moneys in the Rebate Fund
Section 510.	Final Balances
Section 511.	Non-Presentment of Bonds

ARTICLE VI	DEPOSITARIES OF MONEYS, SECURITY FOR DEPOSITS

Section 601.	Moneys to be Held in Trust
Section 602.	Investment of Moneys
Section 603.	Manner of Investment
Section 604.	Record Keeping

ARTICLE VII	PARTICULAR COVENANTS AND PROVISIONS

Section 701.	Issuer to Issue Bonds and Execute Indenture
Section 702.	Performance of Covenants
Section 703.	Instruments of Further Assurance
Section 704.	Credit Facility
Section 705.	Enforcement of Credit Facility
Section 706.	Alternate Credit Facility
Section 707.	General Limitation on Issuer Obligations
Section 708.	Recording and Filing
Section 709.	Possession and Inspection of Books and Documents
Section 710.	Rights and Duties Under Agreement and Credit Facility
Section 711.	Tax Covenants

ARTICLE VIII	DEFAULT AND REMEDIES

Section 801.	Events of Default
Section 802.	Acceleration; Mandatory Purchase
Section 803.	Surrender of Possession of Trust Estate; Rights and Duties of Trustee in Possession
Section 804.	Appointment of Receivers in Event of Default
Section 805.	Exercise of Remedies by the Trustee
Section 806.	Limitation on Exercise of Remedies by Bondowners
Section 807.	Right of Bondowners to Direct Proceedings
Section 808.	Application of Moneys in Event of Default
Section 809.	Remedies Cumulative
Section 810.	Delay or Omission Not Waiver
Section 811.	Effect of Discontinuance of Proceedings
Section 812.	Waivers of Events of Default

Section 813.	Pledged Bonds

ARTICLE IX	THE TRUSTEE

Section 901.	Acceptance of Trusts
Section 902.	Fees, Charges and Expenses of the Trustee
Section 903.	Notice to the Bondowners if Default Occurs
Section 904.	Intervention by the Trustee
Section 905.	Successor Trustee Upon Merger, Consolidation or Sale
Section 906.	Trustee Required; Eligibility
Section 907.	Resignation of Trustee
Section 908.	Removal of Trustee
Section 909.	Appointment of Successor Trustee
Section 910.	Vesting of Trusts in Successor Trustee
Section 911.	Trust Estate May be Vested in Co-Trustee
Section 912.	Accounting
Section 913.	Paying Agents; Bond Registrar; Appointment and Acceptance of Duties; Removal
Section 914.	The Tender Agent
Section 915.	Notice to Rating Agency
Section 916.	Right of Trustee to Pay Taxes and Other Charges

ARTICLE X	SUPPLEMENTAL INDENTURES

Section 1001.	Supplemental Indentures Not Requiring Consent of Bondowners
Section 1002.	Supplemental Indentures Requiring Consent of Bondowners .
Section 1003.	Borrower’s Consent to Supplemental Indentures
Section 1004.	Opinion of Bond Counsel

ARTICLE XI	AMENDMENT OF AGREEMENT AND CREDIT FACILITY

Section 1101.	Amendments, Changes or Modifications to the Agreement and Credit Facility Not Requiring Consent of Bondowners
Section 1102.	Amendments, Changes or Modifications to the Agreement and Credit Facility Requiring Consent of Bondowners
Section 1103.	Opinion of Bond Counsel

ARTICLE XII	SATISFACTION AND DISCHARGE OF INDENTURE

Section 1201.	Defeasance
Section 1202.	Satisfaction and Discharge of the Indenture
Section 1203.	When Refunding is Not Permitted

ARTICLE XIII	MISCELLANEOUS PROVISIONS

Section 1301.	Consents and Other Instruments by Bondowners
Section 1302.	Notices
Section 1303.	Limitation of Rights Under the Indenture
Section 1304.	Suspension of Mail Service
Section 1305.	Business Days

iii

Section 1306.	Immunity of Officers, Employees and Members of Issuer
Section 1307.	Credit Enhancer’s Remedial Rights
Section 1308.	Severability
Section 1309.	Complete Agreement
Section 1310.	Execution in Counterparts
Section 1311.	Governing Law

Exhibit A - Bond Form
Exhibit B - Investment Securities Collateral Requirement
Exhibit C - [Reserved.]
Exhibit D - Notice of Election to Tender/Retain Bonds
Exhibit E - Rate Adjustment Notice
Exhibit F - Interest Mode Adjustment Notice
Exhibit G - Notice of Alternate Credit Facility
Exhibit H - Rep0.resentation Letter

TRUST INDENTURE

THIS TRUST INDENTURE (the “Indenture”), made and entered into as of September 1, 1994, by and between the SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY, a body corporate and politic and an agency of the State of South Carolina (the “Issuer”), and Mark Twain Bank, a Missouri banking corporation duly organized and existing and authorized to accept and execute trusts of the character herein set out under the laws of the State of Missouri, and having its principal corporate trust office located in St. Louis, Missouri, as Trustee (the “Trustee”);

WITNESSETH:

WHEREAS, the Issuer acting by and through its Board of Directors, is authorized and empowered under and pursuant to the provisions of Tide 41, Chapter 43, Code of Laws of South Carolina 1976, as amended (the “Act”), to acquire and cause to be acquired properties that are projects under the Act through which the industrial, commercial, agricultural and recreational development of the State of South Carolina (the “State”) will be promoted and trade developed by inducing business enterprises to locate in and remain in the State and thus provide maximum opportunities for the creation and retention of jobs and improvement of the standard of living of the citizens of the State; and

WHEREAS, the Issuer is further authorized by Section 41A3-100 of the Act to issue revenue bonds payable by the Issuer solely from revenues and receipts from any financing agreement between the Issuer and any business enterprise with respect to such project and secured by a pledge of said revenues and receipts and by an assignment of such financing agreement; and

WHEREAS, pursuant to the Act, the Authority is authorized to issue its Variable Rate Demand Industrial Development Revenue Bonds (Roller Bearing Company of America, Inc. Project) Series 1994A in the original aggregate principal amount of $7,700,000 (the “Bonds”), for the purpose of providing funds to construct or purchase certain buildings, fixtures, machinery and equipment (“the Project”) to constitute an approximately 60,000 square foot expansion of an existing facility for the manufacture of roller bearings in Darlington County, South Carolina which is owned and operated by Roller Bearing Company of America, Inc., a Delaware corporation (the “Borrower”); and

WHEREAS, the Borrower intends to construct and purchase the Project; and

WHEREAS, the Borrower has requested that the Issuer issue the Bonds in order to finance the construction and purchase of the Project; and

WHEREAS, the Board of Directors of the Issuer passed and approved a Resolution on August 24, 1994, authorizing the Issuer to issue the Bonds pursuant to this Indenture for the above purposes; and

WHEREAS, pursuant to such Resolution, the Issuer is authorized (i) to execute and deliver this Indenture for the purpose of issuing and securing the Bonds as hereinafter provided, and (ii) to enter into a Loan Agreement of even date herewith (the “Agreement”), between the Issuer and the Borrower, under which the Issuer will loan the proceeds of the Bonds to the Borrower in accordance with the provisions of the Agreement to finance a portion of the costs of the Project, in consideration of payments to be made by the Borrower to the Trustee which are to be sufficient

to pay the principal of, redemption premium, if any, and interest on the Bonds as the same become due; and

WHEREAS, Heller Financial, Inc., a Delaware corporation (the “Credit Enhancer”), has agreed to execute and deliver an irrevocable direct-pay letter of credit (the “Credit Facility”) in order to secure the timely payment of the principal of and interest on the Bonds; and

WHEREAS, all things necessary to make the Bonds, when authenticated by the Trustee and issued as in this Indenture provided, the valid, legal and binding obligations of the Issuer, and to constitute this Indenture a valid, legal and binding pledge and assignment of the property, rights, interests and revenues herein made for the security of the payment of the principal of, redemption premium, if any, and interest on the Bonds issued hereunder, have been done and performed, and the execution and delivery of this Indenture and the execution and issuance of the Bonds, subject to the terms hereof, have in all respects been duly authorized and approved by the Issuer; and

WHEREAS, THE BONDS AND THE PREMIUM, IF ANY, AND INTEREST THEREON (INCLUDING ANY AMOUNTS PAYABLE IN CONNECTION WITH ANY PREPAYMENT OR PURCHASE OF THE BONDS) ARE LIMITED OBLIGATIONS OF THE ISSUER; THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE BONDS (INCLUDING ANY AMOUNTS PAYABLE IN CONNECTION WITH ANY PURCHASE OF THE BONDS) ARE PAYABLE SOLELY FROM THE REVENUES OR MONEYS TO BE RECEIVED IN CONNECTION WITH THE FINANCING OF THE PROJECT OR FROM ANY OTHER MONEYS MADE AVAILABLE TO THE ISSUER FOR SUCH PURPOSE; NEITHER THE BONDS NOR THE INTEREST THEREON (INCLUDING ANY AMOUNTS PAYABLE IN CONNECTION WITH ANY PURCHASE OF THE BONDS) SHALL EVER CONSTITUTE AN INDEBTEDNESS OR A CHARGE AGAINST THE GENERAL CREDIT OF THE STATE, THE ISSUER, OR ANY OTHER PUBLIC BODY, OR OF THE TAXING POWERS OF THE STATE WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION AND SHALL NEVER CONSTITUTE OR GIVE RISE TO ANY PECUNIARY LIABILITY OF THE STATE, THE ISSUER, OR ANY OTHER PUBLIC BODY; THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS TO WHICH THE FAITH OR CREDIT OF THE STATE, THE ISSUER, OR ANY OTHER PUBLIC BODY, OR TAXING POWER OF THE STATE, IS PLEDGED;

NOW THEREFORE, THIS INDENTURE WITNESSETH:

GRANTING CLAUSES

That the Issuer, in consideration of the premises, the acceptance by the Trustee of the trusts hereby created, the purchase and acceptance of the Bonds by the Owners thereof, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to secure the payment of the principal of, redemption premium, if any, and interest on the Bonds according to their tenor and effect, to secure all obligations owed by the Borrower to the Credit Enhancer under the Letter of Credit Agreement, and to secure the performance and observance by the Issuer of all the covenants, agreements and conditions herein and in the Bonds contained, does hereby transfer, pledge and assign, without recourse, to the Trustee and its successors and assigns in trust forever, and does hereby grant a security interest unto the Trustee and its successors in trust and its assigns, in and to all and singular the property described in paragraphs (a) and (b) below (said property being herein referred to as the “Trust Estate”), to wit:

(a) All right, tide and interest of the Issuer (including, but not limited to, the right to enforce any of the terms thereof) in, to and under all Revenues (as hereinafter defined) derived by the Issuer under and pursuant to and subject to the provisions of the Agreement (but excluding the Unassigned Issuer’s Rights as defined in the Agreement and any payments made by the Borrower to meet the rebate requirements of Section 148(f) of the Code) and the Credit Facility; and

(b) All other moneys and securities from time to time held by the Trustee under the terms of this Indenture (excluding rebatable arbitrage, whether or not held in the Rebate Fund, and amounts held in the Purchase Fund (as hereinafter defined)), and any and all other property (real, personal or mixed) of every kind and nature from time to time hereafter, by delivery or by writing of any kind, pledged, assigned or transferred as and for additional security hereunder by the Issuer, or by anyone in its behalf or with its written consent, to the Trustee, which is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof.

TO HAVE AND TO HOLD, all and singular, the Trust Estate with all rights and privileges hereby transferred, pledged, assigned and/or granted or agreed or intended so to be, to the Trustee and its successors and assigns in trust forever;

IN TRUST NEVERTHELESS, upon the terms and conditions herein set forth for the equal and proportionate benefit, security and protection of all present and future Owners of the Bonds Outstanding, without preference, priority or distinction as to participation in the lien, benefit and protection hereof of one Bond over or from the others, except as herein otherwise expressly provided and on a subordinate basis thereto, to secure the obligations of the Borrower to the Credit Enhancer;

PROVIDED, NEVERTHELESS, and these presents are upon the express condition, that if the Issuer or its successors or assigns shall well and truly pay or cause to be paid the principal of and premium, if any, on such Bonds with interest, according to the provisions set forth in the Bonds, or shall provide for the payment or redemption of such Bonds by depositing or causing to be deposited with the Trustee the entire amount of funds or securities requisite for payment or redemption thereof when and as authorized by the provisions of Article XII hereof (it being understood that any payment with respect to the principal of or interest on Bonds by the Borrower or any purchase of Bonds pursuant to Article III hereof shall not be deemed payment or provision for payment of principal of or interest on Bonds, except Bonds purchased and cancelled by the Trustee, all such uncancelled Bonds to remain Outstanding hereunder and principal of and interest thereon payable to the Owners thereof, whether such Owners be the Credit Enhancer or persons to whom Bonds are remarketed), and shall also pay or cause to be paid all other sums payable hereunder by the Issuer and if all amounts due and owing to the Credit Enhancer under the Letter of Credit Agreement shall have been paid in full, then these presents and the estate and rights hereby granted shall cease, terminate and become void, and thereupon the Trustee, on payment of its lawful charges and disbursements then unpaid, on demand of the Issuer and upon the payment by the Issuer of the cost and expenses thereof, shall duly execute, acknowledge and deliver to the Issuer such instruments of satisfaction or release as may be necessary or proper to discharge this Indenture of record, and if necessary shall grant, reassign and deliver to the Issuer, with a copy to the Credit Enhancer and the Borrower, all and singular the property, rights, privileges and interests by it hereby granted, conveyed and assigned, and all substitutes therefor, or any part thereof, not

previously disposed of or released as herein provided; otherwise this Indenture shall be and remain in full force;

THIS INDENTURE FURTHER WITNESSETH, and it is hereby expressly declared, covenanted and agreed by and between the parties hereto, that all Bonds issued and secured hereunder are to be issued, authenticated and delivered and that all the Trust Estate is to be held and applied under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes as hereinafter expressed, and the Issuer does hereby agree and covenant with the Trustee, for the benefit of the respective Owners from time to time of the Bonds and the Credit Enhancer, as follows:

ARTICLE I

DEFINITIONS; RULES OF CONSTRUCTION

Section 101. Definitions of Words and Terms. In addition to words and terms elsewhere defined herein and therein, the following words and terms as used in this Indenture and in the Agreement shall have the following meanings, unless some other meaning is plainly intended:

“Accounts” means the accounts created pursuant to Section 501 hereof.

“Act” means Tide 41, Chapter 43, Code of Laws of South Carolina 1976, as amended.

“Act of Bankruptcy” means, as to the Borrower, any of the following: (a) the commencement by the Borrower of a voluntary case under the federal bankruptcy laws, as now in effect or hereafter amended, or any other applicable federal or state bankruptcy, insolvency or similar laws; (b) the filing of a petition with a court having jurisdiction over the Borrower to commence an involuntary case against the Borrower under the federal bankruptcy laws, as now in effect or hereafter amended, or any other applicable federal or state bankruptcy, insolvency or similar laws, and such petition is not discharged within 60 days of the filing thereof; (c) the Borrower shall admit in writing its inability to pay its debts generally as they become due; (d) a receiver, trustee or liquidator of the Borrower shall be appointed in any proceeding brought against the Borrower; (e) assignment by the Borrower of all or substantially all of its assets for the benefit of its creditors; or (f) the entry by the Borrower into an agreement of composition with its creditors, and, as to the Issuer, the commencement by the Issuer of a voluntary case under the federal bankruptcy laws, as now in effect or hereafter amended, or any other applicable federal or state bankruptcy, insolvency or similar laws.

“Affiliated Party” or “Affiliate” means any Related Person as to a particular Person, and any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. “Control”, when used with respect to a particular Person, means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies of such Person whether through the ownership of voting stock, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Agreement” or “Loan Agreement” means the Loan Agreement, including the Exhibits attached thereto, dated as of the date of this Indenture, between the Issuer and the Borrower, with

respect to the Bonds, as such Agreement may be from time to time amended, restated or supplemented in accordance with the provisions of Section 10.6 of the Agreement and Article XI hereof.

“Alternate Credit Facility” means any alternate credit facility designated and qualified as such and provided pursuant to Section 706 hereof no later than the twenty-fifth (25th) day prior to the then applicable Termination Date.

“Alternate Credit Facility Date” means a Business Day on or prior to the Termination Date on which the Borrower has complied with all requirements of this Indenture, including Section 706 regarding the substitution of an Alternate Credit Facility for the Credit Facility then in effect.

“Annual Mode” means an Interest Mode during which the interest rate on the Bonds is determined at twelve month intervals, as provided in Section 203(e) hereof.

“Authorized Borrower Representative” means either the Chief Financial Officer or the Vice President of the Borrower, or such other official of the Borrower at the time designated to act on behalf of the Borrower as evidenced by written certificate furnished to the Issuer, the Credit Enhancer and the Trustee containing the specimen signature of such person and signed on behalf of the Borrower by its Chief Executive Office or its Chief Financial Officer. Such certificate may designate an alternate or alternates, each of whom shall be entitled to perform all duties of and exercise all powers of an Authorized Borrower Representative.

“Authorized Denominations” means (i) in the case of Bonds in a Weekly Mode or Monthly Mode, $100,000 and any integral multiple of $5,000 in excess thereof; (ii) in the case of Bonds in a Semiannual Mode, Annual Mode or Multiyear Mode, $5,000 or any integral multiple thereof, provided that if the Credit Facility is not exempt from registration under the Securities Act of 1933, as amended, and has not been registered thereunder then the Authorized Denomination shall be $100,000 and any integral multiple of $5,000 in excess thereof; or (iii) in the case of a Bond which is a Pledged Bond, $100,000 or any integral multiple of $5,000 in excess thereof.

“Authorized Issuer Representative” means the Chairman of the Board of Directors or the Executive Director of the Issuer, or such other person at the time designated to act on behalf of the Issuer as evidenced by written certificate furnished to the Borrower, the Credit Enhancer and the Trustee containing the specimen signature of such person and signed on behalf of the Issuer by its Executive Director. Such certificate may designate an alternate or alternates, each of whom shall be entitled to perform all duties of and exercise all powers of an Authorized Issuer Representative.

“Available Moneys” means (i) proceeds from the initial sale of the Bonds by the Issuer that have not been commingled with other funds that do not constitute Available Moneys and proceeds from the investment thereof; (ii) moneys that have been paid to the Trustee pursuant to payments on the Credit Facility and that have been held in the Credit Facility Account and not commingled with other funds that do not constitute Available Moneys, and proceeds from the investment thereof; and (iii) moneys with respect to which the Trustee has received an unqualified opinion of nationally recognized counsel expert on bankruptcy matters to the effect that payment of such proceeds to the Owners would not constitute a voidable preference under Section 547 of the United States Bankruptcy Code which could be recovered under Section 550(a) of the Bankruptcy Code

in the event of the filing of a petition thereunder by or against the Issuer, the Borrower or any Affiliated Party of the Borrower.

“Available Moneys Account” means the account by that name in the Revenue Fund created pursuant to Section 501 hereof.

“Bond” or “Bonds” means any bond or bonds authenticated and delivered under and pursuant to this Indenture.

“Bond Counsel” means any attorney or firm of attorneys designated by the Issuer and reasonably acceptable to the Borrower, the Trustee and the Credit Enhancer having a national reputation for skill in connection with the authorization and issuance of municipal obligations in the State and under Sections 103 and 141-150 of the Code.

“Bond Issuance Date” means the date of initial issuance and delivery of the Bonds.

“Bond Pledge Agreement” means the Pledge and Security Agreement dated as of September 1, 1994, by and among the Borrower, the Trustee and the Credit Enhancer, as amended, restated and supplemented from time to time.

“Bond Register” means the registration books of the Issuer kept by the Trustee to evidence the registration and transfer of Bonds.

“Bond Registrar” means the Trustee when acting as such.

“Bondowner” or “Owner” or “Registered Owner” means the person in whose name a Bond is registered on the Bond Register.

“Borrower” means Roller Bearing Company of America, Inc., a Delaware corporation, and any successor or assign thereto permitted under the Agreement.

“Borrower Bonds” means (i) Bonds owned or held by the Borrower or any Affiliate of the Borrower, or by the Trustee or the Tender Agent, or the agent of either of them, for the account of the Borrower or any Affiliate of the Borrower, including, but not limited to, Pledged Bonds, or (ii) Bonds which the Borrower has notified the Trustee, or which the Trustee knows, were purchased by another Person for the account of the Borrower or any Affiliate of the Borrower, including, but not limited to, Pledged Bonds.

“Business Day” means a day which is not (a) a Saturday, Sunday or any other day on which banking institutions in New York, New York, or the city or cities in which the principal corporate trust office of the Trustee, and the principal office of the Tender Agent, the Remarketing Agent or the Credit Enhancer is located, are required or authorized to close or (b) a day on which the New York Stock Exchange is closed.

“Code” means the Internal Revenue Code of 1986, as amended from time to time. References to the Code and Sections of the Code include relevant applicable regulations, temporary

regulations and proposed regulations thereunder, and any successor provisions to those Sections, regulations, temporary regulations or proposed regulations.

“Collateral Documents” means the Letter of Credit Agreement, the Bond Pledge Agreement and any other document securing the obligations of the Borrower to the Credit Enhancer in connection with the Letter of Credit Agreement, in each case as the same may be amended, restated or supplemented from time to time.

“Costs of Issuance Fund” means the fund by that name created in Section 501 hereof.

“Credit Enhancer” means initially Heller Financial, Inc., a Delaware corporation, and any provider or providers of an Alternate Credit Facility.

“Credit Documents” means the documents described by said term in the Letter of Credit Agreement, in each case as the same may be amended, restated or supplemented from time to time.

“Credit Facility” means the letter of credit initially issued by Heller Financial, Inc. and any Alternate Credit Facility issued by the Credit Enhancer in addition to or in substitution therefor, as the same may be amended, restated, supplemented, extended or renewed from time to time in accordance with the Agreement and this Indenture.

“Credit Facility Account” means the account by that name created in Section 501(c) of this Indenture.

“Debt Service Fund” means the fund by that name created in Section 501 hereof.

“Default” means any event or condition which constitutes, or with the giving of any requisite notice or upon the passage of any requisite time period or upon the occurrence of both, would constitute, an Event of Default under the Agreement or this Indenture.

“Determination of Taxability” means (i) a determination by the Commissioner or any District Director of the Internal Revenue Service, (ii) a private ruling or Technical Advice Memorandum issued by the National Office of the Internal Revenue Service in which the Borrower was afforded the opportunity to participate, (iii) a determination by any court of competent jurisdiction, or (iv) receipt by the Trustee, at the request of the Borrower, the Credit Enhancer or any Bondowner, of an Opinion of Bond Counsel that the interest on the Bonds is includable in gross income for federal income tax purposes of the Owners thereof or any former Owner thereof, other than an Owner who is a “substantial user” (as such term is defined in Section 147(a) of the Code) of the Project or a Related Person; provided, however, that no such Determination of Taxability under clause (i) or (iii) shall be deemed to have occurred if the Borrower has been afforded the opportunity to contest such determination, has elected to contest such determination in good faith and is proceeding with all applicable dispatch to prosecute such contest until the earliest of (a) a final determination from which no appeal may be taken with respect to such determination, (b) abandonment of such appeal by the Borrower, or (c) one year from the date of initial determination.

“Event of Default” means any event or occurrence as defined in Section 801 hereof.

“Financial Institution” means any qualified institutional buyer, as that term is defined from time to time in 17 C.F.R. ss.230.144A(a)(i) (“Rule 144A”).

“Funds” means the funds created pursuant to Article V hereof.

“General Fund” means the fund by that name created in Section 501 hereof.

“Government Securities” means direct obligations of, or obligations the payment of the principal of and interest on which are unconditionally guaranteed by, the United States of America.

“Immediate Notice” means notice by telephone, telegram, telex, telecopier or other telecommunication device to such phone numbers or addresses as are specified in Section 1302 hereof or such other phone number or address as the addressee shall have directed in writing, promptly followed by written notice by first-class mail postage prepaid to such addresses.

“Indenture” means this Trust Indenture as originally executed by the Issuer and the Trustee, as from time to time amended and supplemented by Supplemental Indentures in accordance with the provisions of Article X of this Indenture.

“Interest Mode” means a period of time relating to the frequency with which the interest rate on the Bonds is determined pursuant to Section 203 hereof, which Interest Mode may be a Weekly Mode, a Monthly Mode, a Semiannual Mode, an Annual Mode or a Multiyear Mode. Pledged Bonds bear interest at the Pledged Bond Rate and are not subject to such Interest Mode descriptions.

“Interest Mode Adjustment Date” means a date on which the Interest Mode of the Bonds is changed from one Interest Mode to a different Interest Mode, and such date shall be an Interest Payment Date.

“Interest Mode Adjustment Notice” means the notice of a new Interest Mode with respect to any Bonds in accordance with Section 204 hereof in substantially the form of Exhibit F attached hereto.

“Interest Payment Date” means the date on which an interest installment is required to be paid on the Bonds to the Owners thereof, (i) with respect to all Bonds other than Pledged Bonds, (1) as to the first Interest Period, October 3, 1994; (2) as to any Weekly Mode or Monthly Mode, the first Business Day of each month; (3) as to any Semiannual Mode, Annual Mode or Multiyear Mode, each March 1 and September 1, commencing with the first such March 1 or September 1 following the Interest Mode Adjustment Date, or the next succeeding Business Day thereafter if any such March 1 or September 1 is not a Business Day; and (4) an Interest Mode Adjustment Date; and (ii) with respect to Pledged Bonds, the first Business Day of each calendar month and the date of sale of Pledged Bonds.

“Interest Period” means, with respect to the Bonds in any Interest Mode, the period from and including each Interest Payment Date for such Interest Mode to and including the day immediately preceding the following Interest Payment Date for such Interest Mode, except that the first Interest Period shall be the period from and including the date of original delivery of the Bonds to and including the day immediately preceding the first Interest Payment Date for the Bonds.

“Investment Securities” means any of the following securities purchased in accordance with Section 602 hereof, if and to the extent the same are at the time legal for investment of the funds being invested:

(a) Government Securities;

(b) deposits which are fully insured by the Federal Deposit Insurance Corporation (“FDIC”) in one or more of the following institutions: banks with a rating of A-1 or higher (including without limitation, the Trustee or any bank affiliated with the Trustee) organized under the laws of the United States of America or any state thereof;

(c) federal funds, unsecured certificates of deposit, time deposits and bankers acceptances (having maturities of not more than 365 days) of any bank, the short-term obligations of which are in the highest short-term rating category of the Rating Agency (if the Bonds are rated by Standard & Poor’s, such category is A-I +);

(d) any shares in money market mutual funds provided such money market funds are rated AAAm or AAAmG by the Rating Agency; and

(e) repurchase agreements with (A) any institution described in clause (b) above or (B) any other entity that is under the jurisdiction of the Bankruptcy Code, provided that, with respect to a repurchase agreement with such other entity, the terms of such repurchase agreement shall be less than one year, shall be with respect to Government Securities which meet the Investment Securities Collateral Requirement and shall mature at least 30 days before the time or times that such investments shall be needed for the purposes for which they were deposited.

“Investment Securities Collateral Requirement” means Government Securities which meet the requirements set forth in Exhibit B attached hereto and incorporated herein by this reference.

“Investor’s Representation Letter” means the Investor’s Representation Letter in substantially the form attached to this Indenture as Exhibit H.

“Issuer” means the South Carolina Jobs-Economic Development Authority, a body corporate and politic and an agency of the State, or any body, agency or instrumentality of the State succeeding to or charged with the powers, duties and functions of the Issuer.

“Letter of Credit Agreement” means the Letter of Credit Agreement dated as of the date of this Indenture, between the Borrower and the initial Credit Enhancer, and any similar agreement between the Borrower and the Credit Enhancer with respect to the issuance of an Alternate Credit Facility.

“Loan Payment Date” means the day established for a Loan Payment under the Agreement.

“Loan Term” means the period from the date of initial delivery and authentication of the Bonds until such time as the Bonds are no longer Outstanding and all other amounts payable by the Borrower under the Agreement and the Letter of Credit Agreement shall have been paid.

“Mandatory Purchase Date” means each date designated by the Credit Enhancer for purchase of the Bonds in accordance with the provisions of Section 302(d) of this Indenture.

“Maximum Rate” means the lesser of (i) 15% per annum or (ii) the rate utilized in the Credit Facility for purposes of computing the interest component thereof.

“Monthly Mode” means an Interest Mode during which the interest rate on the Bonds is determined in monthly intervals as set forth in Section 203(d) hereof.

“Moody’s” means Moody’s Investors Service, a corporation organized and existing under the laws of the State of Delaware, and its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Issuer, with the prior written approval of the Credit Enhancer and the Borrower, by notice to the Trustee.

“Multiyear Mode” means an Interest Mode during which the interest rate on the Bonds is determined at intervals of integral (greater than one) multiples of twelve months, as provided in Section 203(e) hereof.

“New York Time” means the time on any given day in the City of New York, New York, whether such time be Eastern Standard Time or Eastern Daylight Savings Time.

“1933 Act” means the Securities Act of 1933, as amended.

“Nonpurpose Investments” means any investment property (as defined in Section 148(b) of the Code) which is acquired with the gross proceeds of the Bonds and which is not acquired to carry out the governmental purpose of the Bonds.

“Notice of Election to Tender/Retain Bonds” means the Notice of Election to Tender/Retain Bonds in substantially the form attached hereto as Exhibit D delivered by a Bondowner to the Tender Agent (i) pursuant to Section 301 hereof which contains a demand for the purchase of Bonds on the Tender Date, or (ii) following receipt of a notice of a mandatory tender of Bonds as specified in Section 302 hereof which contains an election to retain Bonds. “Notice of Election to Tender Bonds” shall refer to those provisions of the Notice of Election to Tender/Retain Bonds which relate to the election to tender Bonds as hereinafter provided. “Notice of Election to Retain Bonds” shall refer to those provisions of the Notice of Election to Tender/Retain Bonds which relate to the election to retain Bonds.

“Opinion of Bond Counsel” means a written opinion of Bond Counsel addressed to the Trustee, for the benefit of the Owners of the Bonds, and the Credit Enhancer.

“Opinion of Counsel” means a written opinion of an attorney or firm of attorneys addressed to the Trustee, for the benefit of the Owners of the Bonds and the Credit Enhancer, who may (except as otherwise expressly provided in this Indenture) be counsel to the Issuer, the Borrower, the Owners of the Bonds, the Credit Enhancer or the Trustee, and who is acceptable to the Trustee and the Credit Enhancer.

“Outstanding when used with reference to Bonds, means, as of a particular date, all Bonds theretofore authenticated and delivered under this Indenture except:

(a) Bonds theretofore cancelled by the Trustee or delivered to the Trustee for cancellation pursuant to Section 209 hereof;

(b) Bonds which are deemed to have been paid in accordance with Article XII hereof;

(c) Bonds in exchange for or in lieu of which other Bonds have been authenticated and delivered pursuant to Article II of this Indenture;

(d) Undelivered Bonds; and

(e) For purposes of any consent or other action to be taken by the Owner of a specified percentage of Bonds under this Indenture or the Agreement, Bonds owned or held for the account of the Issuer or Borrower Bonds. Notwithstanding the foregoing, Bonds so owned which have been pledged in good faith shall not be disregarded as aforesaid if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Bonds and that the pledgee is not the Issuer, the Borrower or any Affiliated Party.

“Paying Agent” means the Tender Agent as to all Tendered Bonds, the Trustee as to all other Bonds, and any other bank or trust institution organized under the laws of any state of the United States of America or any national banking association designated by this Indenture or any Supplemental Indenture as paying agent for the Bonds at which the principal of, and redemption premium, if any, and interest on, such Bonds shall be payable.

“Person” means an individual, a corporation, a partnership, an association, a joint stock company, a joint venture, a trust, an unincorporated organization, a limited liability company, or a government or any agency or political subdivision thereof.

“Placement Date” means any date on which a Pledged Bond is purchased from the Borrower by a Person designated by the Remarketing Agent pursuant to the Remarketing Agreement or is sold by the Borrower.

“Plant” means the facility, including machinery and equipment, for the manufacture of roller bearings in Darlington County, South Carolina, operated by the Borrower.

“Pledged Bonds” means any Bonds purchased by the Borrower with payments made on the Credit Facility, which Bonds are registered in the name of the Borrower and held by the Trustee on behalf of the Credit Enhancer pursuant to the terms of the Bond Pledge Agreement, until such time as such Bonds are sold by the Borrower or by the Remarketing Agent.

“Pledged Bond Rate” means the rate of interest per annum payable with respect to each Pledged Bond, which shall be equal to the Interest Rate set forth in Section 2.9 of the Letter of Credit Agreement.

“Preliminary Rate” means Preliminary Rate as defined in Section 203(e) hereof.

“Principal Office” means, with respect to the Trustee and the Tender Agent, its principal corporate trust office, initially 8820 Ladue Road, St. Louis, Missouri 63124, Attention: Corporate Trust Division.

“Principal Payment Date” means the maturity date or redemption date (including as a result of acceleration) of any Bond.

“Project” means the buildings, fixtures, machinery and equipment described in Exhibit A to the Agreement, and all additions, modifications, improvements, replacements and substitutions made to the Project pursuant to the Agreement, as they may at any time exist.

“Project Fund” means the fund by that name created by Section 501 hereof.

“Project Purposes” means the costs of acquiring, constructing, installing and equipping the Project.

“Purchase Fund” means the fund by that name created by Section 501 hereof.

“Rate Adjustment Date” means the date as of which the interest rate determined for an Interest Mode shall be effective, which (i) during a Weekly Mode shall be Thursday of each week (whether or not a Business Day); (ii) during a Monthly Mode shall be the first calendar day of each month; (iii) during a Semiannual Mode shall be the first calendar day of such Semiannual Mode which shall be March 1 or September 1 and the first day following each six-month period thereafter; and, (iv) during an Annual Mode or a Multiyear Mode shall be the first calendar day of such Annual Mode or Multiyear Mode, which shall be September 1, and thereafter the first calendar day following the completion of the then current Annual Mode or Multiyear Mode. The initial Rate Adjustment Date is September 15, 1994.

“Rate Adjustment Notice” means the Rate Adjustment Notice in substantially the form of Exhibit E hereto to be mailed by the Trustee in accordance with Section 203(e) hereof.

“Rate Determination Date” means no later than 4:00 P.M., New York Time, on the Business Day immediately preceding a Rate Adjustment Date for a Weekly or a Monthly Mode, and on the third (3rd) Business Day immediately preceding a Rate Adjustment Date for a Semiannual Mode, Annual Mode or Multiyear Mode.

“Rate Period” means the period from a Rate Adjustment Date to, but not including, the next Rate Adjustment Date.

“Rating Agency” means (collectively, as required) Moody’s, if the Bonds are then rated by Moody’s, Standard & Poor’s, if the Bonds are then rated by Standard & Poor’s, and any other national rating service which has outstanding credit rating on the Bonds.

“Rebate Fund” means the fund by that name created in Section 501 hereof.

“Record Date” means, with respect to Bonds in a Semiannual Mode, an Annual Mode or a Multiyear Mode, the fifteenth calendar day, whether or not a Business Day, of the month preceding

such Interest Payment Date, and, with respect to Bonds in a Weekly Mode or Monthly Mode, the fifth calendar day, whether or not a Business Day, immediately preceding such Interest Payment Date.

“Related Documents” means the Collateral Documents and the Credit Documents.

“Related Person” means a “related person” within the meaning of Section 147 (a) of the Code.

“Remarketing Agent” means the remarketing agent at the time serving as such under the Remarketing Agreement and designated as the Remarketing Agent for purposes of this Indenture. The initial Remarketing Agent is Stem Brothers & Co., St. Louis, Missouri.

“Remarketing Agreement” means the Remarketing Agreement dated as of September 1,1994, between the Borrower and the Remarketing Agent or, if such Remarketing Agreement shall be terminated, such other agreement, approved by the Credit Enhancer, which may from time to time be entered into with any Remarketing Agent with respect to the remarketing or placement of the Bonds.

“Remarketing Proceeds” means proceeds from the resale by the Remarketing Agent of Bonds delivered for purchase pursuant to Section 301 or 302 hereof that have not been commingled with other funds which do not constitute Remarketing Proceeds, and proceeds from the investment thereof; provided that Remarketing Proceeds cannot include any moneys provided by the Borrower, the Issuer, any guarantor of the Bonds (excluding the issuer of the Credit Facility, but only with respect to moneys provided pursuant to the Credit Facility), any Affiliated Party of the foregoing, or any Person which is an “insider” of the Borrower or any such guarantor within the meaning of Title 11 of the United States Code, as amended.

“Resolution” means the resolution of the Board of Directors of the Issuer authorizing the execution and delivery of the Agreement, this Indenture and the issuance of the Bonds.

“Revenue Fund” means the fund by that name created in Section 501 hereof.

“Revenues” means the amounts pledged hereunder to the payment of principal of, and premium, if any, and interest on the Bonds, consisting of the following: (i) all income, revenues, proceeds and other amounts, to which the Issuer is entitled, derived from the Borrower (except the Unassigned Issuer’s Rights as defined in the Agreement), including all scheduled payments under the Agreement, payments received on the Credit Facility and all receipts of the Trustee credited under the provisions of this Indenture against said amounts payable, and (ii) moneys held in the Funds and Accounts, together with investment earnings thereon, other than moneys in the Rebate Fund and rebatable arbitrage not deposited therein and funds held for the payment of specific Bonds pursuant to Section 510 hereof or amounts held in the Purchase Fund.

“Series 1994B Indenture” means the Indenture of Trust dated as of September 1, 1994 between the Issuer and the Trustee, delivered with respect to the Series 1994B Bonds.

“Semiannual Mode” means an Interest Mode during which the interest rate on the Bonds is determined at six-month intervals as set forth in Section 203(e) hereof.

“Standard & Poor’s” means Standard & Poor’s Ratings Group, A Division of McGraw-Hill, Inc., a corporation organized and existing under the laws of the State of New York, and its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, Standard & Poor’s shall be deemed to refer to any other nationally recognized securities rating agency designated by the Issuer, with the prior written approval of the Credit Enhancer, by notice to the Trustee and the Borrower.

“State” means the State of South Carolina.

“Supplemental Indenture” means any indenture supplemental or amendatory to this Indenture entered into by the Issuer and the Trustee pursuant to Article X of this Indenture.

“Tax Agreement” means the Tax Agreement dated of even date herewith between the Borrower and the Issuer, delivered with respect to the Bonds, as the same may be amended, restated or supplemented from time to time.

“Tender Agent” means initially the Trustee, and any successor tender agent appointed pursuant to Section 914 hereof. The Tender Agent shall act as Paying Agent as to Tendered Bonds.

“Tender Date” means (a) each date designated by a Bondowner for purchase of any Bonds in accordance with the provisions of Section 301 hereof, and (b) each date on which Bonds are required to be tendered in accordance with the provisions of Section 302 hereof, including any Mandatory Purchase Date, whether or not such Bonds are actually tendered.

“Tender Price” means 100% of the principal amount of any Bond tendered pursuant to the provisions of Section 301 or Section 302 of this Indenture plus interest accrued and unpaid thereon to, but not including, the Tender Date.

“Tendered Bonds” means (a) any Bonds tendered by a Bondowner for purchase pursuant to Section 301 hereof, and (b) any Bonds required to be tendered for purchase pursuant to Section 302 hereof, unless a proper waiver has been made by the Owner of such Bonds, in each case whether or not such Bonds are actually tendered.

“Termination Date” means (i) if the Credit Facility is not a letter of credit, the maturity or expiration date of the Credit Facility or, if such day is not a Business Day, the next preceding Business Day or (ii) if the Credit Facility is a letter of credit, the last Interest Payment Date which is at least five (5) days preceding the date on which the Credit Facility is to expire pursuant to its terms, in each case including any extension of such maturity or expiration date.

“Trust Estate” means the Trust Estate described in the granting clauses of this Indenture.

“Trustee” means Mark Twain Bank, a banking corporation duly organized and existing under the laws of the State of Missouri, and its successor or successors and any other association or corporation which at any time may be substituted in its place pursuant to and at the time serving as trustee under this Indenture.

“Unavailable Moneys Account” means the account by that name in the Revenue Fund created pursuant to Section 501 of this Indenture.

“Undelivered Bonds” means Bonds which are deemed to have been tendered to the Trustee or Tender Agent, as applicable, for purchase pursuant to Section 301 or 302 hereof but which have not been surrendered to the Trustee or Tender Agent, as applicable.

“Weekly Mode” means an Interest Mode during which the interest rate on the Bonds is determined in weekly intervals as set forth in Section 203(c) hereof.

“Written Request” with reference to the Issuer means a request in writing signed by an Authorized Issuer Representative and with reference to the Borrower means a request in writing signed by an Authorized Borrower Representative.

Section 102. Rules of Interpretation.

For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:

(a) Words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders.

(b) Words importing the singular number shall include the plural and vice versa and words importing person shall include firm’s, associations and corporations, including public bodies, as well as natural persons.

(d) Terms used in an accounting context and not otherwise defined shall have the meaning ascribed to them by generally accepted principles of accounting.

(e) Notwithstanding anything herein, in the Series 1994B Indenture or in the Borrower Documents to the contrary, each of the “Borrower”, the Credit Enhancer”, the “Paying Agent(s)”, the “Remarketing Agent”, the “Tender Agent” and the “Trustee” (including, for such purpose, each co-trustee) shall, as between the documents relating to the Bonds and the Series 1994B Bonds, be one and the same Person.

[End of Article I]

ARTICLE II

THE BONDS

Section 201. Authorization. Issuance and Terms of Bonds.

(a) Authorized Amount of Bonds. No Bonds may be issued under the provisions of this Indenture except in accordance with this Article. The total aggregate principal amount of the Bonds that may be issued hereunder and at any time Outstanding is hereby expressly limited to $7,700,000.

(b) Title of Bonds. The Bonds authorized to be issued under this Indenture shall be designated “Variable Rate Demand Industrial development Revenue Bonds (Roller Bearing Company of America, Inc. Project) Series 1994A”.

(c) Form of Bonds. The Bonds shall be substantially in the form set forth in Exhibit A attached hereto, with such appropriate variations, omissions and insertions as are permitted or required by this Indenture, and may have endorsed thereon such legends or text as may be necessary or appropriate to conform to any applicable rules and regulations of any governmental authority or any usage or requirement of law with respect thereto.

(d) Denominations. The Bonds shall be issuable as fully registered Bonds without coupons in Authorized Denominations only.

(e) Numbering. Unless the Issuer shall otherwise direct, the Bonds shall be numbered from R-1 upward.

(f) Dating. The Bonds shall be dated as of the Bond Issuance Date, be issuable in Authorized Denominations, and bear interest from the most recent Interest Payment Date to which interest has been paid or for which due provision has been made or if no Interest Payment Date has occurred therefor, the dated date thereof.

(g) Maturity. The Bonds shall mature on September 1, 2017, subject to optional and mandatory redemption as provided in Article IV hereof.

(h) Tender and Purchase of Bonds. The Bonds are subject to optional and mandatory tender for purchase as provided in Article III hereof.

(i) Method and Place of Payment. Except as provided herein, the principal of, and redemption premium, if any, and interest on the Bonds shall be payable in any coin or currency of the United States of America which, at the respective dates of payment thereof, is legal tender for the payment of public and private debts, and such principal and premium, if any, shall be payable at the Principal Office of the Trustee or at the office of any alternate Paying Agent, and, with respect to the Tender Price, at the Principal Office of the Tender Agent, upon presentation and surrender of such Bonds. Payment of interest on any Bond shall be made by check or draft of the Trustee mailed to the person in whose name such Bond is registered on the Bond Register as of the close of business of the Trustee on the Record Date for such Interest Payment Date, except that

interest not duly paid or provided for when due shall be payable to the person in whose name such Bond is registered at the close of business on the Business Day immediately preceding the date of payment of such defaulted interest. In the case of an interest payment to any Owner of $1,000,000 or more in aggregate principal amount of Bonds as of the commencement of business of the Trustee on the Record Date for a particular Interest Payment Date or in the case of the purchase from an Owner of $1,000,000 or more in aggregate principal amount of Bonds on the Tender Date, payment of interest or the Tender Price, as applicable, shall be made by wire transfer to such Owner upon written notice to the Trustee from such Owner containing the wire transfer address (which shall be in the continental United States) to which such Owner wishes to have such wire directed and, with regard to interest payments, such written notice is given by such Owner to the Trustee not less than fifteen (15) days prior to such Record Date and regarding payment of the Tender Price, which written notice accompanies such Owner’s Notice of Election to Tender Bonds.

Section 202. Nature of Obligations.

(a) The Bonds and the interest thereon shall be limited obligations of the Issuer payable solely from Bond proceeds, the Revenues and other moneys pledged thereto and held by the Trustee as provided herein, and are secured by a transfer, pledge and assignment of and a grant of a security interest in the Trust Estate to the Trustee and in favor of the Owners of the Bonds, as provided in this Indenture.

(b) The Bonds and the interest thereon do not constitute a debt or general obligation of the Issuer, the State, or any political subdivision thereof, and do not constitute an indebtedness or a charge against the general credit of the State or the Issuer within the meaning of any constitutional or statutory limitation or restriction. The Bonds are not payable in any manner by taxation.

(c) No recourse shall be had for the payment of the principal of, or premium, if any, or interest on, any of the Bonds or for any claim based thereon or upon any obligation, provision, covenant or agreement contained in this Indenture contained, against any past, present or future director, trustee, officer, official, employee or agent of the Issuer, or any director, trustee, officer, official, employee or agent of any successor to the Issuer, as such, either directly or through the Issuer or any successor to the Issuer, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such director, trustee, officer, official, employee or agent as such is hereby expressly waived and released as a condition of and in consideration for the execution of this Indenture and the issuance of any of the Bonds. Neither the officers of the Issuer nor any person executing the Bonds shall be personally liable on the Bonds by reason of the issuance thereof.

Section 203. Interest Rates and Interest Payment Provisions.

(a) Calculation of Interest. Subject to the provisions of Section 802 (a) hereof, the Bonds shall bear interest from and including the date thereof until payment of the principal or redemption price thereof shall have been made or provided for in accordance with the provisions hereof, whether at maturity, upon redemption or otherwise. Anything herein to the contrary notwithstanding, in no event shall the interest rate borne by the Bonds, other than Pledged Bonds, at any time exceed the Maximum Rate. Subject to such limitation, the interest rates on the Bonds

shall be determined as provided in this Section. Interest accrued on the Bonds during each Interest Period shall be paid on the next succeeding Interest Payment Date and, while the Bonds are in a Weekly Mode or a Monthly Mode, shall be computed on the basis of a year of 365 or 366 days, as appropriate, for the actual number of days elapsed and, while the Bonds are in a Semiannual Mode, an Annual Mode or a Multiyear Mode, shall be computed on the basis of a year of 360 days and twelve 30-day months. The Trustee shall calculate the amount of interest to be paid on each Interest Payment Date, and the Remarketing Agent shall confirm such interest amount calculation, and the Trustee shall notify the Borrower and the Credit Enhancer of such amount by 10:00 a.m., New York Time, on the Business Day next preceding each Interest Payment Date.

(b) Standard for Determination of Interest Rate. The Remarketing Agent shall determine the interest rate for the Rate Period commencing with each Rate Adjustment Date to be the lowest rate which, in the best judgment of the Remarketing Agent, on the Rate Determination Date, would result in the market value of such Bonds on the Rate Adjustment Date being equal to 100% of their principal amount. In determining such interest rate, the Remarketing Agent shall have due regard for general financial conditions and such other conditions as, in the judgment of the Remarketing Agent, have a bearing on the interest rate on the Bonds, including then prevailing market conditions, the yields at which comparable securities are then being sold and the tender provisions applicable thereto during the forthcoming Rate Period. Each determination of the interest rate for the Bonds, as provided herein, shall be conclusive and binding upon the Bondowners, the Issuer, the Borrower, the Tender Agent, the Remarketing Agent, the Credit Enhancer and the Trustee. Upon request, the Remarketing Agent shall give the Issuer, the Trustee, the Credit Enhancer, the Borrower, the Tender Agent or any Bondowner Immediate Notice of the interest rate on the Bonds at any time.

(c) Weekly Mode. The interest rate for Bonds in a Weekly Mode shall be determined in the following manner. On each Rate Determination Date, the Remarketing Agent shall determine the interest rate which such Bonds shall bear during the Rate Period following such Rate Determination Date. The interest rate so determined shall be effective on the Rate Adjustment Date. Promptly after each Rate Determination Date, the Remarketing Agent shall give written notice of the interest rate so set to the Trustee, the Credit Enhancer and the Borrower. On each Interest Payment Date the Trustee shall mail to each Bondowner a written statement showing the interest rates for such Bonds during the preceding Interest Period.

(d) Monthly Mode. The interest rate for any Bonds in a Monthly Mode shall be determined in the following manner. On each Rate Determination Date, the Remarketing Agent shall determine the interest rate which such Bonds shall bear during the Rate Period following such Rate Determination Date. The interest rate so determined shall be effective on the Rate Adjustment Date. Promptly after each Rate Determination Date, the Remarketing Agent shall give written notice of the interest rate so set to the Borrower, the Credit Enhancer and the Trustee. On each Interest Payment Date the Trustee shall mail to each Bondowner a written statement showing the interest rates for such Bonds during the preceding Interest Period.

(e) Semiannual Mode. Annual Mode or Multiyear Mode. The interest rate for Bonds in a Semiannual Mode, an Annual Mode or a Multiyear Mode shall be determined in the following manner. Not less than 30 days nor more than 35 days before each Rate Adjustment Date, the Remarketing Agent shall determine the interest rate (the “Preliminary Rate”) which the Bonds would

bear if such day were a Rate Determination Date. The Remarketing Agent shall give Immediate Notice of the Preliminary Rate to the Borrower, the Credit Enhancer and the Trustee. The Trustee shall thereupon mail, not less than 25 days prior to the Rate Adjustment Date, to each Bondowner a Rate Adjustment Notice in substantially the form attached hereto as Exhibit E. On the Rate Determination Date the Remarketing Agent shall determine the interest rate which each of such Bonds shall bear for each such Rate Period, which rate may be less than, equal to or greater than the Preliminary Rate. By Immediate Notice on such Rate Determination Date the Remarketing Agent shall give written notice of the interest rate so set to the Borrower, the Credit Enhancer, the Tender Agent and the Trustee, and the Trustee shall mail to all Bondowners written notice of the interest rate so determined.

(f) Alternative Rate Calculation. If for any reason the interest rate for the Bonds is not or cannot be established as provided in the preceding paragraphs, or is held invalid or unenforceable by a court of law, all Bonds shall immediately convert to a Weekly Mode, anything in this Indenture to the contrary notwithstanding, and the interest rate shall be a rate equal to the lesser of (i) 85% of the 90-day U.S. Treasury Bill rate, determined on the basis of the average per annum rate at which 90-day U.S. Treasury Bills have been sold on a bond-equivalent basis at the most recent U.S. Treasury auction preceding the Rate Determination Date, or (ii) the Maximum Rate.

Pledged Bonds. Notwithstanding the above provisions of this Section 203 the Pledged Bonds shall bear interest at the Pledged Bond Rate during the period that such Bonds are Pledged Bonds. The Credit Enhancer shall use its best efforts to notify the Trustee on the Business Day preceding each Interest Payment Date in respect of such a period of the Pledged Bond Rate in effect from time to time during such period. The Credit Facility shall not be drawn on to pay any Pledged Bond.

Section 204. Changes in Interest Modes.

(a) The Bonds shall initially be in a Weekly Mode. The Interest Mode for the Bonds may be changed from time to time at the option of the Borrower, with the prior written consent of the Credit Enhancer exercised as provided in this Section to another Interest Mode selected by the Borrower, on an Interest Payment Date on which the Bonds are subject to redemption pursuant to Section 401 hereof at a redemption price equal to the principal amount thereof, plus accrued interest, without premium. The Borrower may exercise such option at any time by giving written notice not more than 60 nor less than 45 days prior to the Interest Mode Adjustment Date, to the Issuer, the Trustee, the Tender Agent, the Remarketing Agent and the Credit Enhancer stating its election to convert the Interest Mode for the Bonds to another Interest Mode, which notice shall specify the new Interest Mode and the Interest Mode Adjustment Date. Such Interest Mode Adjustment Date shall be a Rate Adjustment Date for the Bonds in such new Interest Mode. Upon the exercise of such option by the Borrower and upon the Trustee’s receipt of the prior written consent of the Credit Enhancer to the exercise of such option, the Trustee shall mail, not less than thirty (30) days prior to the Interest Mode Adjustment Date, an Interest Mode Adjustment Notice to each Owner of Bonds, and, in the event of a conversion to a Weekly Mode or a Monthly Mode from any other Interest Mode, a Notice of Election to Tender/Retain Bonds in substantially the form attached hereto as Exhibit D.

(b) No change in the Interest Mode shall occur unless (i) the Trustee shall have received, prior to sending the Interest Mode Adjustment Notice, an Opinion of Bond Counsel stating that the change in the Interest Mode is authorized and permitted by this Indenture and the Act and will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes and such Opinion of Bond Counsel is confirmed as of the Interest Mode Adjustment Date, and (ii) the Credit Enhancer shall have given its prior written consent to the change in the Interest Mode and shall have fully and timely made any payment due under the Credit Facility made in connection with the related Interest Mode Adjustment Date pursuant to Section 508 hereof. Further, no change from a Weekly Mode to any other Interest Mode may occur unless a corresponding change in Interest Mode with respect to the Series 1994B Bonds is made on the same date.

Section 205. Execution, Authentication and Delivery of Bonds.

(a) The Bonds shall be executed on behalf of the Issuer by the manual or facsimile signature of the chairman of the Board of Directors of the Issuer and attested by the manual or facsimile signature of its Executive Director, Secretary or Assistant Secretary, and shall have the corporate seal of the Issuer affixed thereto or imprinted thereon. In case any officer whose signature or facsimile thereof appears on any Bonds shall cease to be such officer before the delivery of such Bonds, such signature or facsimile thereof shall nevertheless be valid and sufficient for all purposes, the same as if such person had remained in office until delivery. Any Bond may be signed by such persons who at the actual time of the execution of such Bond shall be the proper officers to sign such Bond although at the date of such Bond such persons may not have been such officers.

(b) The Bonds shall have endorsed thereon a Certificate of Authentication substantially in the form set forth in Exhibit A hereto, which shall be manually executed by the Trustee. No Bond shall be entitled to any security or benefit under this Indenture or shall be valid or obligatory for any purpose unless and until such Certificate of Authentication shall have been duly executed by the Trustee. Such executed Certificate of Authentication upon any Bond shall be conclusive evidence that such Bond has been duly authenticated and delivered under this Indenture. The Certificate of Authentication on any Bond shall be deemed to have been duly executed if signed by any authorized officer or employee of the Trustee, but it shall not be necessary that the same officer or employee sign the Certificate of Authentication on all of the Bonds that may be issued hereunder at any one time.

(c) Prior to or simultaneously with the authentication and delivery of the Bonds by the Trustee there shall be filed with the Trustee the following:

(1) A copy of the Resolution, certified by the Executive Director of the Issuer.

(2) An original executed counterpart of this Indenture, the Agreement and the Credit Facility.

(3) An Opinion of Bond Counsel, dated the date of initial delivery of the Bonds, to the effect that the Bonds are valid and binding special limited obligations of the Issuer and that interest on the Bonds is excludable from gross income pursuant to the Code and is exempt from income taxation in the State of South Carolina.

(4) A request and authorization to the Trustee on behalf of the Issuer, executed by an Authorized Issuer Representative, to authenticate the Bonds and deliver said Bonds to the purchasers therein identified upon payment to the Trustee, for the account of the Issuer, of the purchase price thereof. The Trustee shall be entitled to rely conclusively upon such request and authorization as to the names of the purchasers and the amount of such purchase price.

(5) Evidence satisfactory to the Issuer, the Credit Enhancer and the Trustee that the Bonds have been purchased by “qualified institutional buyers” as defined in Rule 144A of the 1933 Act.

(6) Such other certificates, statements, receipts, documents and Opinions of Counsel as the Trustee shall reasonably require for the delivery of the Bonds.

(d) When the documents mentioned in paragraph (c) of this Section shall have been filed with the Trustee, and when the Bonds shall have been executed and authenticated as required by this Indenture, the Trustee shall deliver the Bonds to or upon the order of the purchasers thereof, but only upon payment to the Trustee of the purchase price of the Bonds. The proceeds of the sale of the Bonds, including premium thereon, if any, shall be immediately paid over to the Trustee, and the Trustee shall deposit and apply such proceeds as set forth in Section 502 hereof.

Section 206. Registration, Transfer and Exchange of Bonds.

(a) The Trustee is hereby appointed Bond Registrar and as such shall keep the Bond Register at its principal corporate trust office. No later than the second Business Day following each Record Date, the Trustee shall send a copy of the Bond Register to the Tender Agent by first-class mail.

(b) Any Bond may be transferred only upon the Bond Register upon surrender thereof to the Trustee duly endorsed for transfer or accompanied by an assignment duly executed by the registered Owner or such Owner’s attorney or legal representative in such form as shall be satisfactory to the Trustee. Subject to Section 210 hereof, upon any such transfer, the Issuer shall execute and the Trustee shall authenticate and deliver in exchange for such Bond a new Bond or Bonds, registered in the name of the transferee, of any Authorized Denomination.

(c) Any Bonds, upon surrender thereof at the principal corporate trust office of the Trustee, together with an assignment duly executed by the Owner or such Owner’s attorney or legal representative in such form as shall be satisfactory to the Trustee, may, at the option of the Owner thereof, be exchanged for an equal aggregate principal amount of the Bonds, of any Authorized Denomination.

(d) In all cases in which Bonds shall be exchanged or transferred hereunder, the Issuer shall execute and the Trustee shall authenticate and deliver at the earliest practicable time Bonds in accordance with the provisions of this Indenture. All Bonds surrendered in any such exchange or transfer shall forthwith be cancelled by the Trustee.

(e) The Issuer or the Trustee may make a charge against each Bondowner requesting a transfer or exchange of Bonds for every such transfer or exchange of Bonds sufficient to reimburse it for any tax or other governmental charge required to be paid with respect to such transfer or exchange, the cost of printing, if any, each new Bond issued upon any transfer or exchange and the reasonable expenses of the Issuer and the Trustee in connection therewith, and such charge shall be paid before any such new Bond shall be delivered.

(f) At reasonable times and under reasonable regulations established by the Trustee, the Bond Register may be inspected and copied by the Borrower, the Issuer, the Credit Enhancer or the Owners (or a designated representative thereof) of 10% or more in aggregate principal amount of Bonds then Outstanding, such ownership and the authority of any such designated representative to be evidenced to the satisfaction of the Trustee.

(g) The person in whose name any Bond shall be registered on the Bond Register shall be deemed and regarded as the absolute Owner of such Bond for all purposes, and payment of or on account of the principal of and redemption premium, if any, and interest on any such Bond shall be made only to or upon the order of the registered Owner thereof or such Owner’s attorney or legal representative (except that any such payments on Pledged Bonds shall be made to the Credit Enhancer). All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond, including the interest thereon, to the extent of the sum or sums so paid.

Section 207. Temporary Bonds.

(a) Until definitive Bonds are ready for delivery, the Issuer may execute and, upon request of the Issuer, the Trustee shall authenticate and deliver in lieu of definitive Bonds, but subject to the same limitations and conditions as definitive Bonds, temporary printed, engraved, lithographed or typewritten Bonds.

(b) If temporary Bonds shall be issued, the Issuer shall cause the definitive Bonds to be prepared and to be executed and delivered to the Trustee, and the Trustee, upon presentation to it at its principal corporate trust office of any temporary Bond shall cancel the same and authenticate and deliver in exchange therefor, without charge to the Owner thereof, a definitive Bond or Bonds in the same aggregate amount as the temporary Bond surrendered in Authorized Denominations. Until so exchanged the temporary Bonds shall in all respects be entitled to the same benefit and security of this Indenture as the definitive Bonds to be issued and authenticated hereunder.

Section 208. Mutilated, Lost, Stolen, Destroyed or Undelivered Bonds. In the event any Bond shall become mutilated, or be lost, stolen or destroyed, the Issuer shall execute and the Trustee shall authenticate and deliver a new Bond of like date and tenor as the Bond mutilated, lost, stolen or destroyed; provided that, in the case of any mutilated Bond, such mutilated Bond shall first be surrendered to the Trustee, and in the case of any lost, stolen or destroyed Bond, there shall be first furnished to the Issuer and the Trustee evidence of such loss, theft or destruction satisfactory to the Issuer and the Trustee, together with indemnity satisfactory to them, the Borrower and the Credit Enhancer. In the event any such Bond shall have matured or been called for redemption, instead of issuing a substitute Bond the Issuer may pay or authorize the payment of the same without surrender thereof. Upon the issuance of any substitute Bond, the Issuer and

the Trustee may require the payment of an amount by the Bondowner sufficient to reimburse the Issuer and the Trustee for any tax or other governmental charge that may be imposed in relation thereto and any other reasonable fees and expenses incurred in connection therewith.

In the event that there are Undelivered Bonds, the Trustee shall authenticate and deliver, with such delivery to occur at the Principal Office of the Trustee to the new Owner or Owners thereof a new Bond or Bonds of like amount in Authorized Denominations registered in the name of the new Owner or Owners thereof. It shall be the duty of the Trustee to hold the moneys received from the remarketing of a replacement Bond issued in place of an Undelivered Bond, without liability for interest thereon, for the benefit of the former Bondowner, who shall thereafter be restricted exclusively to such moneys for any claim of whatever nature under this Indenture or with respect to the Undelivered Bond and so long as the moneys held by the Trustee equal the full amount due on such Bond on the tender date, whether from such remarketing or payment on the Credit Facility, such Bond shall thereafter no longer be secured by this Indenture or the Credit Facility (except for such moneys so held). Such moneys shall be held by the Trustee in the Purchase Fund, along with any other monies deposited in such Fund pursuant to said Section, and no moneys held in the Purchase Fund shall be invested.

Section 209. Cancellation and Destruction of Bonds Upon Payment. All Bonds which have been paid or redeemed or which the Trustee has purchased or which have otherwise been surrendered to the Trustee under this Indenture, either at or before maturity, shall be cancelled and destroyed by the Trustee immediately upon the payment, redemption or purchase of such Bonds and the surrender thereof to the Trustee. The Trustee shall execute a certificate in triplicate describing the Bonds so cancelled and destroyed, and shall file executed counterparts of such certificate with the Issuer, the Borrower and the Credit Enhancer. Bonds at any time held by the Issuer shall be surrendered to the Trustee for cancellation in accordance with the provisions of this Section.

Section 210. Limitation on Transfer and Exchange. The Bonds have not been registered or qualified under the 1933 Act or the securities laws of any state. Notwithstanding Section 206 hereof, so long as the Credit Facility secures the Bonds, no transfer of any Bond shall be made unless such transfer is made in a transaction which does not require registration or qualification under the 1933 Act or under any applicable state securities laws. The Trustee shall not register any transfer or exchange of a Bond unless (i) such Bondholder’s prospective transferee delivers to the Trustee an investment letter substantially in the form set forth as Exhibit H to this Indenture; or (ii) an opinion of counsel in form and substance reasonably satisfactory to the Trustee and the Credit Enhancer that such transfer or exchange is made in accordance with an applicable exemption from the 1933 Act and applicable state securities laws and such opinion is addressed to and delivered to the Trustee, the Borrower and the Credit Enhancer; or (iii) such transferee is an Eligible Transferee (as defined below) and the Remarketing Agent has delivered a certificate stating that such transfer complies with the exemption from registration provided by Rule 144A under the 1933 Act and any applicable state securities laws. As used in this Section, an “Eligible Transferee” is an entity that appears on a list provided by the Remarketing Agent and which has delivered an investment letter to the Trustee substantially in the form set forth as Exhibit H to this Indenture, provided, however, that such list and investment letter are dated as of a date within the preceding twelve months. Any such holder desiring to effect such transfer shall, and does hereby, agree to indemnify the Trustee, the Borrower and the Credit Enhancer against any liability, cost or expense (including attorneys’ fees) that may result if the transfer is not so exempt, or is not made in

accordance with such federal and state laws. The provisions of this paragraph shall not be applicable in the event that the Issuer, the Trustee, the Borrower and the Credit Enhancer shall have received an opinion of counsel in form and substance satisfactory to the Issuer, the Trustee and the Credit Enhancer that the Bonds and the Credit Facility are exempt from registration under the 1933 Act and any applicable state securities laws.

[End of Article II]

ARTICLE III

TENDER AND PURCHASE OF BONDS

Section 301. Optional Tender of Bonds During Weekly Mode or Monthly Mode.

(a) General. While the Bonds are in a Weekly Mode or Monthly Mode, the Owner of any Bond shall have the right to have such Bond purchased in whole or in part (which portion shall be in a principal amount equal to an Authorized Denomination) on the dates specified in paragraph (b) below at the Tender Price. An Owner’s exercise of the option to have such Bond purchased is irrevocable and binding on such Owner and cannot be withdrawn. If any Owner of Bonds shall fail to deliver the Bonds described in such Owner’s Notice of Election to Tender Bonds in accordance with this Section 301 such Bonds shall constitute Undelivered Bonds. Replacement Bonds shall be executed, authenticated and delivered in the place of such Undelivered Bonds as provided in Section 208 hereof and such replacement Bonds may be offered and sold by the Remarketing Agent in accordance with this Indenture and the Remarketing Agreement.

(b) Notice of Tender by Bondowners. Any Bond, or portion thereof, shall be purchased on the Tender Date by the Tender Agent on the demand of the Owner thereof, at the Tender Price, upon delivery to the Tender Agent on a Business Day at its Principal Office of an irrevocable written notice in the form of the Notice of Election to Tender Bonds which states (A) the principal amount and number of such Bond (and the portion of such Bond to be purchased if less than the full principal amount is to be purchased), the name and the address of such Owner and the taxpayer identification number, if any, of such Owner and (B) that such Bond, or portion thereof, is to be purchased on a day (which shall be the Tender Date), which day will be a Business Day which is at least seven (7) calendar days after the receipt by the Tender Agent of such Notice of Election to Tender Bonds. Such Notice of Election to Tender Bonds shall be deemed received on a Business Day if received by the Tender Agent no later than 3:00 p.m., New York Time, on such Business Day. Any Notice of Election to Tender Bonds received by the Tender Agent after 3:00 p.m., New York Time, shall be deemed received on the next succeeding Business Day.

Any Owner of Bonds who has demanded purchase of its Bond, or portion thereof, as described in this Section 301 shall deliver such Bond (with an appropriate transfer of registration form executed in blank, together with a signature guaranty) (together with, in the case of any Bond with a specified Tender Date prior to an Interest Payment Date and after the related Record Date, a due-bill check in form satisfactory to the Tender Agent for interest due on such Bond on such Interest Payment Date) to the Tender Agent at its Principal Office prior to 10:30 A.M., New York Time, on the Tender Date specified in the aforesaid written notice.

(c) Failure to Give Notice. Failure by the Tender Agent to redeliver a Notice of Election to Tender Bonds or a Tendered Bond as provided in Section 303 hereof shall not extend the period for making elections, in any way change the rights of the Owners of Bonds to elect to have their Bonds purchased pursuant to this Section or in any way change the conditions which must be satisfied in order for such election to be effective or for payment of the purchase price to be made after an effective election.

Section 302. Mandatory Tender of Bonds.

(a) On Termination Date or Interest Mode Adjustment Date. All Bonds are required to be tendered to the Tender Agent for purchase on the Termination Date or an Interest Mode Adjustment Date; provided, however, that there shall not be so tendered on the Termination Date or the Interest Mode Adjustment Date, as applicable, any Bonds, or portion thereof, which will be in Authorized Denominations with respect to which the Owners thereof have delivered to the Tender Agent by hand or by mail at its Principal Office a properly completed Notice of Election to Retain Bonds, together with a signature guaranty, on or prior to the fifth Business Day next preceding the Termination Date or the Interest Mode Adjustment Date, as applicable, subject to the provisions of Section 204(b) hereof (with respect to the Interest Mode Adjustment Date) and Section 302(f) hereof (with respect to the Termination Date). Any Bondowner required to tender Bonds under this subsection (a) shall tender its Bonds to the Tender Agent for purchase at its Principal Office prior to 10:30 A.M., New York Time, on the Termination Date or the Interest Mode Adjustment Date, as applicable. The failure to tender Bonds on any such date is the equivalent of a tender, and such Bonds shall be converted to Undelivered Bonds and replacement Bonds shall be executed, authenticated and delivered in the place of such Undelivered Bonds as provided in Section 208 hereof and such replacement Bonds may be offered and sold by the Remarketing Agent in accordance with this Indenture and the Remarketing Agreement, subject to the provisions of Section 204(b) and Section 302(f) hereof, as applicable.

(b) On Alternate Credit Facility Date. While the Bonds are in an Interest Mode other than a Multiyear Mode, all Bonds are required to be tendered to the Tender Agent for purchase on an Alternate Credit Facility Date; provided, however, that there shall not be so tendered on the Alternate Credit Facility Date any Bonds or portion thereof which will be in Authorized Denominations with respect to which the Owners thereof have delivered to the Tender Agent by hand or by mail at its Principal Office a properly completed Notice of Election to Retain Bonds, together with a signature guaranty, on or prior to the fifth Business Day next preceding the Alternate Credit Facility Date. Any Bondowner required to tender Bonds under this subsection (b) shall tender its Bonds to the Tender Agent for purchase at its Principal Office prior to 10:30 A.M., New York Time, on the Alternate Credit Facility Date. The failure to tender Bonds on any such date is the equivalent of a tender and such Bonds shall be converted to Undelivered Bonds and replacement Bonds shall be executed, authenticated and delivered in the place of such Undelivered Bonds as provided in Section 208 hereof and such Replacement Bonds may be offered and sold by the Remarketing Agent in accordance with this Indenture and the Remarketing Agreement.

(c) On Rate Adjustment Date During Semiannual Mode. Annual Mode and Multiyear Mode. While the Bonds are in a Semiannual Mode, Annual Mode or Multiyear Mode, all Bonds are required to be tendered to the Tender Agent for purchase on each Rate Adjustment Date; provided, however, that there shall not be so tendered on any Rate Adjustment Date any Bonds or portion thereof which will be in Authorized Denominations with respect to which the Owners thereof have delivered to the Tender Agent by hand or by mail at its Principal Office a properly completed Notice of Election to Retain Bonds, together with a signature guaranty, on or prior to the fifth Business Day next preceding such Rate Adjustment Date. Any Bondowner required to tender Bonds under this subsection (c) shall tender Bonds to the Tender Agent for purchase at its Principal Office prior to 10:30 A.M., New York Time, on the Rate Adjustment Date. The failure to tender its Bonds on any such date is the equivalent of a tender and such Bonds shall be converted to Undelivered Bonds

and Replacement Bonds shall be executed, authenticated and delivered in the place of such Undelivered Bonds as provided in Section 208 hereof and such Replacement Bonds may be offered and sold by the Remarketing Agent in accordance with this Indenture and the Remarketing Agreement.

(d) Mandatory Tender in Lieu of Acceleration on Default. Additionally, all Bonds shall be subject to mandatory tender for purchase on the Mandatory Purchase Date from the Bondowners by the Trustee for the account of the Credit Enhancer, as set forth in Section 802(b) hereof in lieu of acceleration of the Bonds as set forth in Section 802(a) hereof, and mandatory redemption of Bonds as set forth in Section 402(c) and upon the occurrence of an Event of Default under Section 801(e) hereof. Upon receipt of notice from the Credit Enhancer directing the Trustee to purchase the Bonds and the establishment by the Trustee of the Mandatory Purchase Date, which shall be a Business Day which is at least three (3) and no more than ten (10) calendar days after the receipt by the Trustee of such notice, the Trustee shall immediately request a payment under the Credit Facility pursuant to Section 508 hereof in the amount required by Section 802(b) to be received no later than 3:00 o’clock P.M., New York Time, on the Mandatory Purchase Date, and shall also send notice to the Bondowners of the mandatory purchase. On the Mandatory Purchase Date, the Tender Agent shall pay to the Bondowners the purchase price for the Bonds, which shall be an amount equal to 100% of the principal amount of any Bond tendered or deemed tendered plus accrued and unpaid interest thereon to the Mandatory Purchase Date. Any Bondowner required to tender Bonds under this subsection (d) shall tender its Bonds to the Tender Agent for purchase at its Principal Office prior to 10:30 o’clock A.M., New York Time, on the Mandatory Purchase Date. The failure to tender Bonds on any such date is the equivalent of a tender and such Bonds shall be converted to Undelivered Bonds and replacement Bonds shall be executed, authenticated and delivered in the place of such Undelivered Bonds as provided in Section 208 hereof.

(e) Notice of Mandatory Tender. The Trustee shall give notice to Bondowners of the mandatory tender for purchase of Bonds (i) on an Interest Mode Adjustment Date in accordance with Section 204 hereof, (ii) on an Alternate Credit Facility Date in accordance with Section 706 hereof, (iii) if the Bonds are in a Multiyear Mode, Annual Mode or Semiannual Mode, on a Rate Adjustment Date in accordance with Section 203(e) hereof, (iv) on the Termination Date not less than 25 or more than 60 calendar days prior to such Termination Date and (v) on the Mandatory Purchase Date in accordance with Section 302(d) hereof.

(f) Failure to Give Notice. Failure by the Trustee to give any notice as provided in paragraph (e) of this Section, any defect therein or any failure by any Bondowner to receive any such notice shall not in any way change such Owner’s obligation to tender the Bonds for purchase on any mandatory Tender Date.

(g) No Remarketing. No Bond purchased on the Termination Date pursuant to Section 302(a) shall be remarketed on any date on or prior to the delivery of an Alternate Credit Facility. All Bonds transferred hereunder shall be in compliance with the provisions of Section 210 hereof.

Section 303. Irrevocability of Elections: Return of Improperly Completed Documents. The Tender Agent, to whom a Notice of Election to Tender Bonds or a Notice of Election to Retain Bonds has been delivered, shall determine whether such Notice has been properly completed and such determination shall be binding on the Owner of such Bond. Any election by a Bondowner to

exercise the option to have its Bond or Bonds purchased, or any election by a Bondowner to retain its Bond or Bonds upon any mandatory Tender Date, shall be irrevocable upon delivery to the Tender Agent of the Notice of Election to Tender Bonds (together with, if required at the time of delivery of such notice, the Tendered Bonds) or of the Notice of Election to Retain Bonds, as the case may be. The Tender Agent shall promptly return any incomplete or improperly completed Notice of Election to Tender Bonds (together with, if required, the Tendered Bonds) or Notice of Election to Retain Bonds to the Person or Persons submitting such documents.

Section 304. Notice of Principal Amount of Bonds Tendered. Promptly upon its receipt of any Notice of Election to Tender Bonds pursuant to Section 301 hereof, the Tender Agent shall (i) verify the information contained in such Notice against the Bondholder list provided to the Tender Agent by the Trustee, which list shall be delivered by the Trustee to the Tender Agent no later than the second Business Day prior to each Tender Date, (ii) verify that both the Tendered Bonds and the Bonds retained by the Owner are in Authorized Denominations, and (iii) give Immediate Notice to the Trustee, the Remarketing Agent, the Credit Enhancer and the Borrower of its receipt of such Notice and specifying the total principal amount of Bonds to be tendered for purchase on the applicable Tender Date. Promptly after the requisite time by which Notices of Election to Retain Bonds are required to be delivered pursuant to Section 302 hereof, the Tender Agent shall give Immediate Notice to the Trustee, the Remarketing Agent, the Credit Enhancer and the Borrower of its receipt of such Notices and specifying the total principal amount of Bonds required to be tendered for purchase on the applicable Tender Date and the aggregate Tender Price therefor. The written portion of such Immediate Notice given by the Tender Agent shall include copies of such Notices of Election to Tender Bonds or Notices of Election to Retain Bonds.

Section 305. Remarketing of Tendered Bonds. Pursuant to the terms hereof and of the Remarketing Agreement, and upon receipt of notice from the Tender Agent, specifying the principal amount of Tendered Bonds, as provided in Section 304 hereof, the Remarketing Agent shall exercise its best efforts to sell all of such Tendered Bonds as provided in the Remarketing Agreement subject to the provision of Section 210 hereof; provided, however, that the Remarketing Agent shall not remarket any Bonds at a price below par plus accrued interest thereon. The Remarketing Agent shall transfer, by wire transfer in immediately available funds, an amount equal to the proceeds derived from such sale of Tendered Bonds to the Tender Agent at or before 10:00 A.M., New York Time, on the Tender Date. The Tender Agent shall immediately notify the Trustee in writing of any amount received by the Tender Agent from the Remarketing Agent The Trustee shall transfer from the Purchase Fund from the proceeds received from the Credit Facility, by wire transfer in immediately available funds to the Tender Agent at or before 4:00 P.M., New York Time, on the Tender Date, any additional-amount needed by the Tender Agent to pay the full Tender Price on the Tender Date. The Trustee shall, on the Tender Date, remit to the Credit Enhancer the remainder of the funds in the Purchase Fund (other than any funds being held for the benefit of former Owners of Undelivered Bonds) which were not transferred to the Tender Agent on such Tender Date including all investment earnings thereon as soon thereafter as available. The Tender Agent shall, on the Tender Date, remit to the Credit Enhancer the amount (if any) by which the sum of the amounts transferred to the Tender Agent by the Remarketing Agent and the amounts transferred to the Tender Agent by the Trustee exceed the Tender Price of the Tendered Bonds to the extent such funds are owed to the Credit Enhancer; and if no funds are owed to the Credit Enhancer, such amount shall be remitted to the Borrower.

Section 306. Notice of Principal Amount of Bonds Remarketed.

(a) Prior to 10:00 A.M., New York Time, on the second Business Day immediately preceding the Tender Date, or such later time as shall be agreed to by the Tender Agent and the Credit Enhancer, the Remarketing Agent shall give Immediate Notice to the Trustee, the Tender Agent, the Credit Enhancer and the Borrower specifying the new interest rate, if any, to become effective as of such Tender Date (if such Tender Date is a Rate Adjustment Date) and the aggregate principal amount of Tendered Bonds which (i) have been remarketed other than to the Issuer, the Borrower or any Affiliated Party of the Borrower and the Tender Price therefor, (ii) have not been remarketed and the Tender Price therefor, (iii) have been remarketed to the Issuer, the Borrower or any Affiliated Party of the Borrower, and (iv) the amount of money, if any, to be paid over to the Tender Agent by the Remarketing Agent on the Tender Date, which amount shall be equal to the proceeds of the sale of the Tendered Bonds so remarketed (other than the remarketing of Tendered Bonds to the Issuer, the Borrower or any Affiliated Party of the Borrower). Proceeds of the sale of Tendered Bonds to the Issuer, the Borrower or any Affiliated Party of the Borrower shall be deposited and applied in accordance with Section 505(d) hereof. Concurrently with the notice described in the second preceding sentence, the Remarketing Agent shall also give the Trustee (with a copy to the Tender Agent) instructions as to the registration and delivery, with such delivery to occur at the Principal Office of the Tender Agent, to the Remarketing Agent of any Tendered Bonds for whose purchase the Remarketing Agent will make a deposit of funds with the Tender Agent on the Tender Date.

(b) Prior to 10:00 a.m., New York Time on the Business Day immediately preceding the Tender Date, the Tender Agent shall give Immediate Notice to the Trustee, the Borrower and the Credit Enhancer specifying the amount of proceeds from the remarketing of tendered Bonds on deposit with the Tender Agent. The Trustee shall make a demand for payment on the Credit Facility in accordance with Section 508(b) hereof in an amount equal to the Tender Price of all Tendered Bonds less the proceeds of the remarketing of Tendered Bonds then on deposit with the Tender Agent. The Trustee shall cause the proceeds of the payment under the Credit Facility to be delivered to the Tender Agent for purchase of Tendered Bonds as described in Section 307 hereof.

Section 307. Purchase of Tendered Bonds.

(a) Tendered Bonds shall be purchased from the Owners thereof on the Tender Date at the Tender Price which shall be payable solely from the following sources in the order of priority listed:

(1) Remarketing Proceeds;

(2) proceeds of a payment under the Credit Facility to purchase such Tendered Bonds;

(3) Available Moneys from any other source; and

(4) moneys from any other source.

(b) On each Tender Date, all Bonds purchased out of Remarketing Proceeds shall be delivered and registered as directed by the Remarketing Agent pursuant to Section 306(a) hereof.

(c) The Tender Agent shall pay the Tender Price for each Tendered Bond prior to the Tender Agent’s close of business on the Tender Date only after receipt of such Bond, properly endorsed in blank, together with a signature guaranty (together with, in the case of any Bond with a specified Tender Date prior to an Interest Payment Date and after the related Record Date, a due-bill check in form satisfactory to the Tender Agent for interest due on such Bond on such Interest Payment Date). Payment of the Tender Price of any Bond tendered for purchase shall be made: (1) by check or draft mailed to the Owner thereof at the Owner’s address as it appears on the Bond Register or at such other address as is furnished to the Tender Agent in writing by such Owner; or (2) in the case of the purchase from an Owner of $1,000,000 or more in aggregate principal amount of Bonds, by wire transfer to such Owner upon written notice from such Owner containing the wire transfer address (which shall be in the continental United States) to which such Owner wishes to have such wire directed which written notice accompanies such Owner’s Notice of Election to Tender Bonds.

(d) The Trustee shall take the following actions with respect to Tendered Bonds: (1) with respect to Bonds which have been remarketed and for which the Tender Agent has received payment, on the written advice of the Remarketing Agent, authenticate said Bonds in the names of the purchasers thereof and in the appropriate denominations, and deliver said Bonds to the Remarketing Agent upon the Tender Agents receipt of payment therefor; (2) with respect to Tendered Bonds which have not been remarketed and which are to be purchased by the Borrower and pledged to the Credit Enhancer pursuant to the Bond Pledge Agreement, register said Bonds as owned by the Borrower and pledged to the Credit Enhancer and hold such Bonds as agent and bailee for the Credit Enhancer in accordance with the terms of the Bond Pledge Agreement; and (3) with respect to all Bonds which have been physically tendered, cancel such certificates. Tendered Bonds which have been purchased by the Trustee on behalf of the Borrower shall be registered in the name of the Borrower subject to the security interest of the Credit Enhancer, and held on behalf of the Credit Enhancer.

(e) Notwithstanding anything in this Indenture to the contrary, the Tender Agent shall pay the Tender Price with respect to an Undelivered Bond only upon the actual receipt of such Bond, and such Tender Price shall be equal to the par amount of such Bond plus accrued interest to the Tender Date. An Undelivered Bond shall not be considered Outstanding pursuant to this Indenture and shall not be secured by the Credit Facility.

Section 308. Remarketing of Pledged Bonds. When a purchaser for Pledged Bonds is found, the Remarketing Agent will (a) give Immediate Notice prior to 10:00 A.M., New York Time, on the second Business Day next preceding the Placement Date, or such earlier or later time as shall be agreed to by the Credit Enhancer, the Trustee and the Borrower, to the Credit Enhancer, the Borrower and the Trustee specifying the principal amount of Pledged Bonds to be purchased, the purchase price thereof and the Placement Date on which such purchase is to occur and (b) instruct the purchasers thereof to deliver an amount (in immediately available funds) equal to the purchase price of such Pledged Bonds to the Trustee by 10:30 A.M., New York Time, on the Placement Date for the same day transfer to the Credit Enhancer. No Pledged Bonds shall be released to new Owners unless the Trustee and the Tender Agent have received written notice from the Credit

Enhancer that the Credit Facility has been reinstated by an amount equal to the principal of and interest portion of such Pledged Bonds and that the Credit Enhancer has been reimbursed for the amount of the draw to purchase such Pledged Bonds. The Pledged Bonds shall be purchased, subject to the provisions of Section 210 hereof, from the Borrower on the Placement Date at a purchase price equal to the principal amount thereof. In addition, until the purchase price therefor is received by the Credit Enhancer, Bonds shall not be delivered to the purchaser of Pledged Bonds and such Pledged Bonds to be so purchased shall remain Pledged Bonds.

Section 309. Purchase Fund.

(a) The Purchase Fund has not been pledged or assigned under this Indenture and is not subject to the lien created by this Indenture. Upon receipt by the Tender Agent of the proceeds of a remarketing of Tendered Bonds (other than Bonds remarketed to the Issuer, the Borrower or an Affiliated Party of the Borrower, which will be placed in a separate trust account in the Purchase Fund), the Tender Agent shall deposit such funds in a segregated escrow account maintained by the Tender Agent and designated “Undelivered Bond Account” which funds shall not be invested, and the Tender Agent shall not be liable to the Issuer or the Borrower for any interest thereon, and any moneys shall be held and applied as provided herein. The Trustee shall deposit moneys received from the Credit Enhancer pursuant to a payment on the Credit Facility in accordance with Section 508(b)(4) or (5) hereof in the Purchase Fund for application to the Tender Price of the Tendered Bonds. Upon receipt by the Trustee of the proceeds of the placement of Pledged Bonds on a Placement Date, the Trustee shall deposit such moneys in the Purchase Fund for payment to the Credit Enhancer to the extent such Pledged Bonds were purchased out of funds provided by the Credit Facility and not reimbursed to the Credit Enhancer by the Borrower and, thereafter, to the Borrower. Moneys from the remarketing of Tendered Bonds to the Issuer, the Borrower or an Affiliated Party of the Borrower, shall be applied solely to the purchase price of Pledged Bonds.

(b) On any Tender Date or Placement Date, the Trustee shall transfer on the Bond Register ownership of all of the Tendered Bonds to the names of the respective purchasers thereof. From and after such date, the principal of, redemption premium, if any, and interest on such Bonds shall be payable solely to such purchasers, their transferees or the successors thereto. The Owners of Tendered Bonds immediately prior to a Tender Date with respect to which a Notice of Election to Tender Bonds has been given pursuant to Section 301 hereof or a Notice of Election to Retain Bonds has not been given pursuant to Section 302 hereof shall be entitled solely to payment of the Tender Price for such Bonds upon delivery thereof to the Tender Agent as herein provided and shall not be entitled to the payment of any principal, redemption premium, if any, or interest thereon thereafter.

Section 310. No Sales After Certain Defaults. Notwithstanding any provision of this Indenture to the contrary, there shall be no sales of Bonds pursuant to this Article III if there shall have occurred and be continuing an Event of Default described in Section 801 (a), (b), (c), (e) or (g) (except, with respect to paragraph (g), a default under Section 801(d) or (f) of the Series 1994B Indenture) hereof The Trustee shall give Immediate Notice to the Paying Agent, the Remarketing Agent, the Tender Agent, the Credit Enhancer, the Borrower and the Bondowners of (i) the occurrence and continuation of any of the events set forth in the preceding sentence and that such event results in no purchase or sales of Bonds being permitted pursuant to this Article III

and (ii) the curing of any of such events and that in consequence purchases and sales are again permitted pursuant to this Article III.

Section 311. Remarketing Agent. The Issuer, upon instructions from the Borrower, with the written consent of the Credit Enhancer, or upon instructions from the Credit Enhancer if an event of default under the Letter of Credit Agreement exists, shall appoint the Remarketing Agent for the Bonds, subject to the conditions set forth in Section 312 hereof. The Issuer hereby appoints Stern Brothers & Co. as the initial Remarketing Agent. The Remarketing Agent shall designate to the Trustee its principal office and signify its acceptance of the duties and obligations imposed upon it hereunder by a written instrument of acceptance or a remarketing agent agreement delivered to the Issuer, the Borrower and the Credit Enhancer under which the Remarketing Agent will also agree to keep such books and records as shall be consistent with prudent industry practice and to make such books and records available for inspection by the Issuer, the Trustee, the Tender Agent, the Borrower and the Credit Enhancer at all reasonable times. The Borrower and the Remarketing Agent shall enter into a Remarketing Agreement the terms of which shall be subject to the written approval of the Credit Enhancer.

Section 312. Qualifications of Remarketing Agent. The Remarketing Agent shall be a member of the National Association of Securities Dealers, Inc. and shall meet such capitalization and/or credit requirements as are acceptable to the Rating Agency, and authorized by law to perform all the duties imposed upon it by this Indenture. The Remarketing Agent may at any time resign and be discharged of the duties and obligations created by this Indenture by giving at least 30 days’ written notice to the Issuer, the Borrower, the Tender Agent, the Trustee and the Credit Enhancer. The Remarketing Agent may be removed at any time, without cause, upon at least 30 days’ written notice to the Remarketing Agent, at the direction of the Credit Enhancer or the Borrower by an instrument signed by an Authorized Borrower Representative, with the written consent of the Credit Enhancer, filed with the Trustee, the Credit Enhancer, the Tender Agent, the Issuer and the Remarketing Agent. In no event shall the resignation or removal of the Remarketing Agent be effective until a qualified successor has accepted appointment as such.

In the event of the resignation or removal of the Remarketing Agent, the Remarketing Agent shall pay over, assign and deliver any moneys and Bonds held by it in such capacity to its successor. In the event that the Issuer shall fail to appoint a replacement Remarketing Agent hereunder, the Credit Enhancer with the written consent of the Borrower, or the Borrower with the written consent of the Credit Enhancer, may do so.

[End of Article III]

ARTICLE IV

REDEMPTION OF BONDS

Section 401. Optional Redemption.

(a) Optional Redemption of Bonds Not in Multiyear Mode. Bonds (other than Bonds in a Multiyear Mode) shall be subject to redemption and payment prior to maturity, at the option of the Issuer upon instructions from the Borrower with the prior written consent of the Credit Enhancer, on any Interest Payment Date, in whole or in part in Authorized Denominations, at the principal amount thereof plus accrued interest to the redemption date, first, from proceeds of a payment under the Credit Facility and, second, from other Available Moneys.

(b) Optional Redemption of Bonds in Multiyear Mode. The Bonds in a Multiyear Mode shall be subject to redemption and payment prior to maturity, at the option of the Issuer upon instructions from the Borrower with the prior written consent of the Credit Enhancer, on any Interest Payment Date, in whole or in part in Authorized Denominations, at the redemption prices (expressed as percentages of the principal amount) set forth below, plus accrued interest to the redemption date, first, from proceeds of a payment under the Credit Facility and, second, from other Available Moneys as follows:

OPTIONAL REDEMPTION IN MULTIYEAR MODE

Length of Multiyear Mode (In Years)*	Redemption Prices as a Percentage of Principal Amounts	Call Protection Period*

Greater than 10	102% after 7 years	7 years
	declining 1/2% per 12
	months to 100%

Less than or equal	102% after 4 years	4 years
to 10 and greater	declining 1/2% per 12
than 7	months to 100%

Less than or equal	102% after 3 years	3 years
to 7 and greater	declining 1% per 12
than 5	months to 100%

Less than or equal	101% after 2 years	2 years
to 5 and greater	declining 1/2% per 6
than 2	months to 100%

Less than or equal	100 1/2% after 1 year	1 year
to 2 and greater	declining 1/2% per 6
than 1	months to 100%

*Measured from and including the first day of such Rate Period.

(c) Any provision herein to the contrary notwithstanding, no notice of the redemption of Bonds pursuant to this Section 401 shall be given unless sufficient Available Moneys are available and have been irrevocably deposited into the Available Moneys Account or the Credit Facility Account of the Revenue Fund with the Trustee, or if the Credit Enhancer commits to make a payment under the Credit Facility to the Trustee pursuant to Section 508(b)(3) hereof.

Section 402. Mandatory and Extraordinary Redemption.

(a) Redemption Upon Determination of Taxability. The Bonds shall be subject to mandatory redemption by the Issuer in whole on the earliest practicable date for which notice can be given, if a Determination of Taxability occurs, first, from proceeds of a payment under the Credit Facility, and, second, from other Available Moneys at the principal amount thereof, without premium, plus accrued interest to the redemption date.

(b) [Reserved.]

(c) Redemption Upon Letter of Credit Agreement Default. The Bonds shall be subject to immediate mandatory redemption by the Issuer in whole in the event the Trustee shall receive from the Credit Enhancer written notice of the occurrence of an event of default under the Letter of Credit Agreement and direction to accelerate the Bonds and irrevocable instructions to obtain a payment under the Credit Facility in accordance with the terms of the Credit Facility, first, from proceeds of a payment under the Credit Facility and, second, from other Available Moneys at the principal amount thereof, without premium, plus accrued interest to the date of redemption, and the Bonds shall cease to bear interest on such date as is established by the Trustee, which shall be a Business Day that is at least three and no more than ten calendar days after receipt by the Trustee of said notice; provided that pursuant to Section 802(b) hereof the Credit Enhancer may direct the purchase of Bonds in such event in lieu of mandatory redemption. The receipt of such notice shall be conclusive and binding upon the Trustee, the Issuer and the Bondholders as to the occurrence of a default under the Letter of Credit Agreement.

(d) Redemption in Event of Condemnation. Deficiency of Title, Fire or Other Casualty. The Bonds shall be subject to redemption by the Issuer, at the option of and upon instructions from the Borrower with the prior written consent of the Credit Enhancer, in whole or in part at any time on the earliest practicable date for which notice can be given, upon the occurrence of a condemnation, loss of title or casualty loss to the Project, first, from proceeds of a payment under the Credit Facility, and second, from other Available Moneys at the principal amount thereof, without premium, plus accrued interest to the redemption date.

(e) [Reserved.]

(f) Redemption from Excess Moneys in Project Fund. The Bonds are subject to mandatory redemption in part on the earliest practicable date after the Completion Date for the Project as certified by the Borrower in accordance with the Agreement, to the extent of excess moneys remaining in the Project Fund, at the principal amount thereof, without premium, plus accrued interest to the redemption date. If the amount of moneys remaining in the Project Fund is not sufficient to redeem an Authorized Denomination of Bonds, the Borrower shall arrange for the deposit with the Trustee of sufficient Available Moneys to effect the redemption of a minimum Authorized Denomination of Bonds.

Section 403. Selection of Bonds to be Redeemed.

(a) Bonds shall be redeemed pursuant to Sections 401 and 402 only in Authorized Denominations. When less than all of the Outstanding Bonds are to be redeemed and paid prior to maturity pursuant to Section 401 or 402 hereof, such Bonds or portions of Bonds to be redeemed shall be selected by the Trustee by lot in Authorized Denominations in such equitable manner as it may determine; provided that Bonds shall be redeemed in the following order of priority: (1) Pledged Bonds; (2) Tendered Bonds that cannot be remarketed; and (3) any other Bonds.

(b) In the case of a partial redemption of Bonds when Bonds of denominations greater than the applicable Authorized Denominations are then Outstanding, then for all purposes in connection with such redemption each unit of face value of the applicable Authorized Denomination shall be treated as though it was a separate Bond of the applicable Authorized Denomination. If one or more, but not all, of the units of principal amount of the applicable Authorized Denomination represented by any Bond are selected for redemption, then upon notice of intention to redeem such unit or units, the Owner of such Bond or such Owner’s attorney or legal representative shall forthwith present and surrender such Bond to the Trustee (i) for payment of the redemption price (including the redemption premium, if any, and interest to the date fixed for redemption) of the unit or units of principal amount called for redemption, and (ii) for exchange, without charge to the Owner thereof, for a new Bond or Bonds of the aggregate principal amount of the unredeemed portion of the principal amount of such Bond. If the Owner of any such Bond of a denomination greater than the applicable Authorized Denominations shall fail to present such Bond to the Trustee for payment and exchange as aforesaid, said Bond shall, nevertheless, become due and payable on the redemption date to the extent of the unit or units of principal amount called for redemption and shall cease to accrue interest on such amount.

(c) No Bond may be redeemed in part if the principal amount thereof to remain outstanding following such partial redemption is not itself an Authorized Denomination.

Section 404. Notice of Redemption of Bonds in Weekly or Monthly Mode. Notice of the call of Bonds in the Weekly Mode or the Monthly Mode for any redemption identifying the Bonds or portions thereof to be redeemed shall be given by the Trustee, in the name of the Issuer, to the Remarketing Agent, the Credit Enhancer, the Borrower and the Owner of each Bond to be redeemed at the address shown on the Bond Register by mailing a copy of the redemption notice by first-class mail, postage prepaid, at least 15 days and not more than 30 days prior to the redemption date; provided, however, that failure to give such notice by mailing as aforesaid to any Bondowner or any defect therein as to any particular Bond shall not affect the validity of any proceedings for the redemption of any other Bonds; and provided further that no such prior notice of redemption is required for a redemption pursuant to Section 402(c) hereof. As provided in Section 405 hereof, any notice of redemption shall state the date and place of redemption, the numbers of the Bonds or portions of Bonds to be redeemed (and in the case of the redemption of a portion of any Bond the principal amount thereof being redeemed), the redemption prices and that interest will cease to accrue from and after the redemption date. Following each redemption of Bonds, the Trustee shall mail by first-class mail to the Borrower and the Credit Enhancer a notice of the principal amount of Bonds redeemed.

Section 405. Notice of redemption of Bonds in Semiannual, Annual or Multiyear Mode.

(a) Unless waived by any Owner of Bonds to be redeemed, official notice of any redemption of Bonds in a Semiannual, Annual or Multiyear Mode shall be given by the Trustee on behalf of the Issuer by mailing a copy of an official redemption notice by first class mail, postage prepaid, at least 15 days and not more than 30 days prior to the redemption date to the Remarketing Agent, the Credit Enhancer and the Owner of the Bond or Bonds to be redeemed at the address shown on the Bond Register or at such other address as is furnished in writing by such Owner to the Trustee; provided, however, that failure to give such notice by mailing as aforesaid to any Bondowner or any defect therein as to any particular Bond shall not affect the validity of any proceedings for the redemption of any other Bonds; and provided further that no such prior notice of redemption is required for a redemption pursuant to Section 402(c) hereof. The Trustee shall not give the notice described above with respect to redemption of the Bonds pursuant to Section 401 (a) or (b) or Section 402(d) hereof without the prior written consent of the Credit Enhancer.

(b) All official notices of redemption pursuant to this Section and Section 404 hereof shall be dated and shall state:

(1) the redemption date,

(2) the redemption price,

(3) if less than all outstanding Bonds are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the Bonds to be redeemed,

(4) that on the redemption date the redemption price will become due and payable upon each such Bond or portion thereof called for redemption, and that interest thereon shall cease to accrue from and after said date, and

(5) the place where such Bonds are to be surrendered for payment of the redemption price, which place of payment shall be the Principal Office of the Trustee.

(c) In addition to the foregoing notice, further notice pursuant to this Section and Section 404 hereof shall be given by the Trustee on behalf of the Issuer as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed.

(1) Each further notice of redemption given hereunder shall contain the information required above for an official notice of redemption plus (i) the CUSIP numbers of all Bonds being redeemed; (ii) the date of issue of the Bonds as originally issued; (ill) the rate of interest borne by each Bond being redeemed; (iv) the maturity date of each Bond being redeemed; and (v) any other descriptive information needed to identify accurately the Bonds being redeemed.

(2) Each further notice of redemption shall be sent at least 35 days before the redemption date by registered or certified mail or overnight delivery service to Depository Trust Company, Midwest Securities Trust Company, Pacific Securities Depository Trust Company and Philadelphia Depository Trust Company and to one or more national information services that disseminate notices of redemption of obligations such as the Bonds.

(d) With respect to all Bonds redeemed pursuant to this Indenture, upon the payment of the redemption price of Bonds being redeemed, each check or other transfer of funds issued for such purpose shall bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer.

(e) With respect to all Bonds redeemed pursuant to this Indenture, following each redemption of Bonds, the Trustee shall mail by first-class mail to the Credit Enhancer and the Borrower a notice of the principal amount of Bonds redeemed.

Section 406. Effect of Call for Redemption. On or prior to the date fixed for redemption, Available Moneys available solely for such redemption in accordance with the requirements of Sections 401 and 402 hereof shall be deposited with the Trustee to pay the principal of the Bonds called for redemption and accrued interest thereon to the redemption date and the redemption premium, if any, thereon. Upon the happening of the above conditions, and notice having been given as provided in Section 404 or 405 hereof, as applicable, the Bonds or the portions of the principal amount of Bonds thus called for redemption shall cease to bear interest on the specified redemption date, provided moneys (which must be Available Moneys when required by Section 401 or 402 hereof) sufficient for the payment of the redemption price of the Bonds called for redemption are on deposit at the place of payment at the time fixed for such redemption, and shall no longer be entitled to the protection, benefit or security of this Indenture and shall not be deemed to be Outstanding under the provisions of this Indenture.

[End of Article IV]

ARTICLE V

REVENUES AND FUNDS

Section 501. Creation of Funds and Accounts. The following Funds and Accounts of the Issuer are hereby created and established with the Trustee:

(a) the Project Fund;

(b) the Costs of Issuance Fund;

(c) the Revenue Fund, consisting of the Unavailable Moneys Account, the Available Moneys Account and the Credit Facility Account;

(d) the Debt Service Fund, consisting 9f the Interest Account, the Principal Account and the Redemption Account;

(e) the General Fund;

(f) the Purchase Fund and the Undelivered Bond Account therein; and

(g) the Rebate Fund.

Each Fund and Account shall be maintained by the Trustee as a separate and distinct trust fund or account to be held, managed, invested, disbursed and administered as provided in this Indenture. All moneys deposited in the Funds and Accounts shall be used solely for the purposes set forth in this Indenture. The Trustee shall keep and maintain adequate records pertaining to each Fund and Account and all disbursements therefrom.

Section 502. Initial Deposits. On the Bond Issuance Date, as shall be more fully specified in a written request from the Issuer, the Trustee shall deposit $7,546,000 from the proceeds received from the sale of the Bonds into the Project Fund and $154,000 to the Costs of Issuance Fund.

Section 503. Project Fund.

(i) Moneys in the Project Fund shall be disbursed in accordance with the provisions of the Agreement for Project Purposes as provided in the Agreement.

(ii) The Trustee shall cause to be kept and maintained adequate records pertaining to the Project Fund and all disbursements from suchFund. If requested by the Issuer, the Credit Enhancer or the Borrower, the Trustee shall file copies of the records pertaining to the Project Fundand all disbursements from such fund with the Issuer, the Credit Enhancer and the Borrow.

Section 504. Costs of Issuance Fund. The Trustee shall deposit into the Costs of Issuance Fund the amount required by Section 502. Moneys in the Costs of Issuance Fund shall be disbursed

from time to time for the payment of the costs of issuing the Bonds upon the direction of the Borrower as evidenced by a requisition in the form of Exhibit B to the Agreement executed by an Authorized Borrower Representative and approved by the Credit Enhancer. Moneys in the Costs of Issuance Fund shall be expended no later than 180 days after the Bond Issuance Date. Any moneys remaining therein on such date shall be transferred to the General Fund and the Costs of Issuance Fund shall be closed.

Section 505. Revenue Fund.

(a) The Trustee shall deposit into the Revenue Fund all Revenues (except as otherwise provided in Section 509 hereof) and any other amounts received by the Trustee which are subject to the lien and pledge of this Indenture, to the extent not required to be deposited in other Funds and Accounts in accordance with the terms of this Indenture. The Trustee shall first apply those moneys on deposit in the Credit Facility Account which represent payments received with respect to the Credit Facility and any earnings thereon and then, if needed, investment earnings on Funds and Accounts (to the extent such moneys constitute Available Moneys) on each Interest Payment Date and Principal Payment Date on the Bonds, in the order of priority and for the purposes as follows:

(1) First, to the Interest Account of the Debt Service Fund, an amount sufficient to pay the interest becoming due and payable on the Bonds on such date;

(2) Second, to the Principal Account of the Debt Service Fund, an amount sufficient to pay the principal of the Bonds maturing on such date, if any; and

(3) Third, to the Redemption Account of the Debt Service Fund, the balance of such moneys.

(b) Moneys in the Credit Facility Account remaining after the transfers made pursuant to paragraph (a) above shall be returned to the Credit Enhancer as a reimbursement of the amounts paid under the Credit Facility.

(c) The Trustee shall deposit into the Unavailable Moneys Account principal, interest and premium payments made by the Borrower pursuant to Section 3.6(a)(i), (ii), (iii) and (iv) of the Loan Agreement. Upon the Credit Enhancer’s payment to the Trustee under the Credit Facility pursuant to a request under Section 508(b)(1), (2) or (3) hereof, the Trustee shall transfer to the Credit Enhancer the amount on deposit in the Unavailable Moneys Account. In the event of an Event of Default described in paragraphs (a), (b), (c), (e) or (g) (except with respect to paragraph (g), a default under Section 801(d) or (f) of the Series 1994B Indenture) of Section 801 hereof, any moneys on deposit in the Unavailable Moneys Account which constitute Available Moneys shall be transferred to the Available Moneys Account and applied in accordance with this Indenture.

(d) The Trustee shall also deposit into the Unavailable Moneys Account moneys to be applied to the purchase of Bonds pursuant to Section 307 hereof or the redemption of Bonds, as provided in this Section, pursuant to Sections 401 and 402. When moneys deposited pursuant to the preceding sentence shall become Available Moneys, such Available Moneys shall be transferred to the Available Moneys Account. Moneys on deposit in the Available Moneys Account to be

applied to the payment of the Bonds at maturity shall be transferred to the Principal Account on the maturity date to pay the principal of the Bonds and to the Interest Account to pay accrued interest. Moneys on deposit in the Available Moneys Account to be applied to the redemption of Bonds pursuant to Sections 401 and 402 shall be transferred to the Redemption Account on the date fixed for such redemption to the extent necessary to pay the premium, if any, on and principal of the Bonds as the same shall become due and payable by such redemption and to the Interest Account to pay accrued interest. Available Moneys on deposit in the Available Moneys Account, to be applied to the purchase of Bonds pursuant to Section 307, shall be transferred to the Purchase Fund on the Tender Date to the extent necessary to pay the Tender Price of the Bonds as the same shall become due and payable on such Tender Date. Any moneys remaining in the Available Moneys Account following the redemption or purchase of Bonds with respect to which such deposit was made shall first be applied to pay the Credit Enhancer any amounts due and payable under the Letter of Credit Agreement and thereafter shall be transferred to the General Fund.

Section 506. Debt Service Fund.

(a) The Trustee shall deposit into the Interest Account the amounts required by Section 505 of this Indenture. Moneys on deposit in the Interest Account shall be applied solely to pay the interest on the Bonds as the same becomes due and payable. On each date fixed for redemption of the Bonds and on each scheduled Interest Payment Date on the Bonds, the Trustee shall remit to the respective Bondowners of such Bonds an amount from the Interest Account sufficient to pay the interest on the Bonds becoming due and payable on such date.

(b) The Trustee shall deposit into the Principal Account the amounts required by Section 505 of this Indenture. Moneys on deposit in the Principal Account shall be applied solely to pay the principal of the Bonds as the same becomes due and payable at maturity. On each Principal Payment Date of the Bonds, the Trustee shall set aside and hold in trust an amount from the Principal Account sufficient to pay the principal of the Bonds becoming due and payable on such date.

(c) The Trustee shall deposit into the Redemption Account the amounts required by Section 505 of this Indenture. Moneys on deposit in the Redemption Account shall be applied solely to pay the principal and premium, if any, on the Bonds as the same become due and payable by redemption. On each date fixed for such redemption, the Trustee shall set aside and hold in trust an amount from the Redemption Account sufficient to pay the principal of and premium, if any, on the Bonds becoming due and payable on such date.

Section 507. General Fund. The Trustee shall deposit into the General Fund the amounts required by Sections 504 and 505, and all moneys deposited by the Borrower with the Trustee as payment of the fees and expenses of the Trustee, any Paying Agent, the Issuer and the Remarketing Agent. The Trustee shall apply moneys on deposit in the General Fund solely for the following purposes, in the following order of priority and in accordance with the following conditions:

the amount indicated thereon is justly due and owing and has not been the subject of another written request which has been paid;

(b) to the Trustee for the reasonable cost of extraordinary expenses incurred and extraordinary services rendered if said extraordinary expenses and extraordinary services are necessary and reasonable and are not occasioned by the negligence or willful misconduct of the Trustee;

(d) to the Credit Enhancer, an amount equal to any amounts due and payable under the Letter of Credit Agreement.

Section 508. Payments Under Credit Facility.

(a) The Credit Facility shall be held by the Trustee. Payments on the Credit Facility shall be made or requested in accordance with its terms consistent with the provisions of this Indenture and the Agreement. Payments on the Credit Facility (other than pursuant to subparagraphs (b)(4) and (5) of this Section, which amount will be deposited into the Purchase Fund) shall be deposited in the Credit Facility Account and applied by the Trustee in accordance with Section 505.

(b) The Trustee shall request payments under the Credit Facility, in accordance with and to the extent, if any, required by the terms thereof, in the amounts and at such time as may be necessary to make timely payments of the principal of and interest, but not premium, on the Bonds required to be made from the Debt Service Fund. In accordance with the preceding sentence, the Trustee shall request payments under the Credit Facility by presenting a conforming request to the Credit Enhancer (to the extent, if any, required by the terms of the Credit Facility) two (2) Business Days prior to the applicable Interest Payment Date, Principal Payment Date or redemption date referenced in subsections (1), (2) and (3) herein, and prior to 11:00 A.M., New York Time, on the applicable Tender Date referenced in subsections (4) and (5) herein, in order for moneys to be received in the amounts and at the times as follows:

(1) No later than 3:30 P.M., New York Time, one (1) Business Day prior to each Interest Payment Date, an amount equal to interest due on the Bonds on such Interest Payment Date;

(2) No later than 3:30 P.M., New York Time, one (1) Business Day prior to each Principal Payment Date, an amount equal to the full principal amount of the Bonds coming due on such Principal Payment Date because of the maturity of the Bonds;

(3) No later than 3:30 P.M., New York Time, one (1) Business Day prior to each date fixed for (A) the mandatory redemption of the Bonds pursuant to Section 402 hereof, other than as provided in Section 508(b)(2) hereof, or (B) the optional redemption of the Bonds pursuant to Section 401 hereof, in each case an amount which, when added to any Available Moneys (other than payments under the Credit Facility) in excess of the amount of the applicable redemption premium and then available for such purpose, will be equal

to the full principal amount plus accrued interest on the Bonds to be redeemed (other than the amount owing as a redemption premium, if any);

(4) No later than 3:00 P.M., New York Time, on the Tender Date for any Bonds in accordance with Section 301 hereof, an amount which, when added to any other Remarketing Proceeds available for such purpose in the Purchase Fund, is equal to the Tender Price of Bonds for which Notices of Election to Tender Bonds have been timely received; and

(5) No later than 3:00 P.M., New York Time, on the Tender Date for any Bonds in accordance with Section 302 hereof, an amount which, when added to any other Remarketing Proceeds then available for such purpose in the Purchase Fund, is equal to the Tender Price of all of the Bonds required to be tendered on such date pursuant to Section 302 and for which no Notices of Election to Retain Bonds have been received.

(6) Notwithstanding the provisions of this Section 508, pursuant to Section 802 hereof, the Trustee shall immediately demand payment under the Credit Facility upon any acceleration of the maturity of the Bonds, orupon any direction by the Credit Enhancer to the Trustee to purchase the Bonds for the Credit Enhancer’s own account.

(c) No payments shall be made under the Credit Facility for the payment of the principal of and interest on the Borrower Bonds.

(d) The Borrower shall be permitted to provide the Trustee with an Alternate Credit Facility in accordance with the requirements of Section 706 hereof and Section 3.10 of the Agreement.

Section 509. Deposits into and Application of Moneys in the Rebate Fund.

(a) There shall be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to the Tax Agreement. Subject to the payment provisions provided in subsection (b) below, all amounts on deposit at any time in the Rebate Fund shall be held by the Trustee in trust, to the extent required to pay rebatable arbitrage to the United States of America, and neither the Borrower, the Issuer, the Credit Enhancer nor the Owner of any Bonds shall have any rights in or claim to such money. All amounts held in the Rebate Fund shall be governed by this Section and by the Tax Agreement (which is incorporated herein by reference). The Issuer, the Credit Enhancer and the Trustee shall be entitled to rely on the rebate calculations made by the Borrower pursuant to the Tax Agreement and neither the Issuer, the Credit Enhancer nor the Trustee shall be responsible for any loss or damage resulting from any good faith action taken or omitted to be taken by the Issuer or the Trustee in reliance upon such calculations.

(b) Pursuant to the Tax Agreement, the Trustee shall remit all rebate installments and a final rebate payment to the United States. The Trustee shall have no obligation to pay any amounts required to be rebated pursuant to this Section and the Tax Agreement, other than from moneys held in the Funds and Accounts created under this Indenture or from other moneys provided to it by the Borrower or, at the discretion of the Credit Enhancer, by the Credit Enhancer. Any moneys remaining in the Rebate Fund after redemption and payment of all of the Bonds and

payment and satisfaction of any rebatable arbitrage shall be withdrawn and paid first, to the Credit Enhancer to the extent of any amounts remaining unpaid under any of the Collateral Documents and, second, to the Borrower.

(c) Notwithstanding any other provision of this Indenture, including in particular Article XII hereof, the obligation to pay rebatable arbitrage to the United States and to comply with all other requirements of this Section and the Tax Agreement shall survive the defeasance or payment in full of the Bonds.

(d) The Trustee shall provide an annual certification to the Credit Enhancer as to the Borrower’s compliance with the provisions of this Section.

Section 510. Final Balances. Upon the deposit with the Trustee of moneys sufficient to pay all principal of, premium, if any, and interest on the Bonds, and upon satisfaction of all claims against the Issuer hereunder, including all fees, charges and expenses of the Trustee, the Issuer, the Remarketing Agent and any Paying Agent which are properly due and payable hereunder, or upon the making of adequate provisions for the payment of such amounts as permitted hereby, all moneys remaining in all Funds and Accounts, except moneys necessary to pay principal of, premium, if any, and interest on the Bonds, which moneys shall be held by the Trustee and (after 5 years) paid to the Credit Enhancer or the Borrower, as appropriate, pursuant to Section 511 hereof, and except moneys, if any, set aside pursuant to Section 509 hereof, shall be remitted first, to the Credit Enhancer to the extent of any amounts remaining unpaid under any of the Collateral Documents and, second, to the Borrower.

Section 511. Non-Presentment of Bonds. In the event any Bond shall not be presented for payment when the principal thereof becomes due, either (i) at maturity or at the date fixed for redemption thereof, or (ii) on the Tender Date therefor, if moneys sufficient to pay such Bond shall have been deposited in the Debt Service Fund or, with respect to Bonds becoming due pursuant to clause (ii), the Purchase Fund or the Undelivered Bond Account held by the Tender Agent in accordance with Section 309 hereof, all liability of the Issuer to the holder thereof for the payment of such Bond shall forthwith cease, terminate and be completely discharged, and thereupon it shall be the duty of the Trustee or the Tender Agent as applicable to hold such moneys, without liability for interest thereon, for the benefit of the holder of such Bond who shall thereafter be restricted exclusively to such moneys, for any claim of whatever nature of such holder under this Indenture or on, or with respect to, said Bond.

Any moneys so deposited with and held by the Trustee not so applied to the payment of Bonds within five (5) years after the date on which the same shall have become due shall be paid by the Trustee or the Tender Agent first, to the Credit Enhancer to the extent of any amounts remaining unpaid under any of the Collateral Documents and second, to the Borrower, free from the trusts created by this Indenture. Thereafter, Bondowners shall be entitled to look only to the Borrower for payment, and then only to the extent of the amount so repaid to the Credit Enhancer or to the Borrower by the Trustee or the Tender Agent. The Credit Enhancer and the Borrower shall not be liable for any interest on the sums paid to it pursuant to this Section and shall not be regarded as a trustee of such money.

[End of Article V]

ARTICLE VI

DEPOSITARIES OF MONEYS, SECURITY FOR DEPOSITS AND INVESTMENT OF FUNDS

Section 601. Moneys to be Held in Trust. All moneys deposited with or paid to the Trustee for the account of any Fund or Account under any provision of this Indenture, and all moneys deposited with or paid to any Paying Agent under any provision of this Indenture shall be held by the Trustee or Paying Agent in trust and shall be applied only in accordance with the provisions of this Indenture and, until used or applied as herein provided, shall constitute part of the Trust Estate (except for the Purchase Fund, the Rebate Fund and the rebatable arbitrage not deposited therein) and be subject to the lien, terms and provisions hereof and shall not be commingled with any other funds of the Issuer, the Credit Enhancer or the Borrower except as provided under Section 602 for investment purposes. Neither the Trustee nor any Paying Agent shall be under any liability for interest on any moneys received hereunder except such as may be agreed upon.

Section 602. Investment of Moneys.

(a) Moneys in all Funds and Accounts (except the Purchase Fund) shall be continuously invested and reinvested by the Trustee at the written direction of the Borrower (with the written consent of the Credit Enhancer) as provided in this Section 602. Moneys in the Purchase Fund shall not be invested. Moneys on deposit in all Funds and Accounts may be invested only in Investment Securities; provided that (1) amounts received under the Credit Facility shall be invested and reinvested by the Trustee only in Government Securities maturing on the earlier of 30 days after the date on which such obligations are acquired or such time or times as said money shall be needed for the purposes for which they were deposited and (2) Available Moneys (other than payments under the Credit Facility) to be applied in accordance with Section 505(d) shall be invested and reinvested by the Trustee only in Government Securities maturing on the earlier of 30 days after the date on which such obligations are acquired or such time or times as said money shall be needed for the purposes for which they were deposited; and provided, further, that the Borrower’s direction to so invest shall be received by 12:00 noon, New York Time, on the day prior to any such investment. All such investments shall mature not later, nor, to the extent reasonably practicable subject to the restrictions above, earlier, than the date such moneys or investment proceeds are required for the purposes of the respective Funds and Accounts.

(b) All investments shall constitute a part of the Fund or Account from which the moneys used to acquire such investments have come. The Trustee shall sell and reduce to cash a sufficient amount of investments in a Fund or Account whenever the cash balance therein is insufficient to pay the amounts then required to be paid therefrom. The Trustee may transfer investments from any Fund or Account to any other Fund or Account in lieu of cash when required or permitted by the provisions of this Indenture.

Section 603. Manner of Investment. All investments in Nonpurpose Investments made pursuant to this Article shall be made at the fair market value of such Nonpurpose Investments in accordance with Treasury Regulation Section 1.148-5(d)(6), and all sales of Nonpurpose Investments shall be at the fair market value of such Nonpurpose Investments.

Section 604. Record Keeping The Trustee shall maintain records designed to show compliance with the provisions of this Article and with the provisions of Article V for at least six (6) years after the payment of the Bonds.

[End of Article VI]

ARTICLE VII

PARTICULAR COVENANTS AND PROVISIONS

Section 701. Issuer to Issue Bonds and Execute Indenture. The Issuer covenants that it is duly authorized under the Act to execute and deliver this Indenture, to issue the Bonds and to pledge and assign the Trust Estate in the manner and to the extent herein set forth; that all action on its part for the execution and delivery of this Indenture and the issuance of the Bonds has been duly and effectively taken; and that the Bonds in the hands of the Owners thereof are and will be valid and enforceable obligations of the Issuer according to the import thereof.

Section 702. Performance of Covenants. The Issuer covenants that it will faithfully perform, or cause to be performed, at all times any and all covenants, undertakings, stipulations and provisions contained in this Indenture, in the Bonds and in all proceedings pertaining thereto.

Section 703. Instruments of Further Assurance. The Issuer covenants that it will do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, such Supplemental Indentures and such further acts, instruments, financing statements and other documents as the Trustee may reasonably require for the better assuring, transferring, pledging and assigning to the Trustee, and granting a security interest unto the Trustee in and to the Trust Estate and the other property and revenues herein described. The Agreement and all other documents, instruments or policies of insurance required by the Trustee shall be delivered to and held by the Trustee.

Section 704. Credit Facility. The Trustee shall hold and maintain the Credit Facility for the benefit of the Bondowners until the Credit Facility terminates or expires in accordance with its terms. The Trustee shall diligently enforce all terms, covenants and conditions of the Credit Facility. If at any time during the term of the Credit Facility any successor Trustee shall be appointed and qualified under this Indenture, the resigning or removed Trustee shall request that the Credit Enhancer transfer the Credit Facility to the successor Trustee, to the extent such action is necessary, and shall comply with the applicable provisions of the Credit Facility. If the resigning or removed Trustee fails to make this request, the successor Trustee shall do so before accepting appointment. On the Termination Date the Trustee shall immediately surrender the Credit Facility then in effect to the Credit Enhancer unless an event of default thereunder shall have occurred and is continuing.

Section 705. Enforcement of Credit Facility. The Trustee, for the benefit of the Owners of Bonds, subject to the provisions of Section 901(1) hereof, shall diligently enforce and take all reasonable steps, actions and proceedings necessary for the enforcement of all terms, covenants and provisions of the Credit Facility as contemplated herein and therein. The Trustee shall not consent to or permit any amendment or modification of the Credit Facility which would materially adversely affect the rights or interests of the Owners of Bonds.

Any provisions herein requiring notice to or from the Credit Enhancer or the consent of the Credit Enhancer prior to any action by the Trustee or the Issuer shall have no force or effect (1) following the later of (i) the Termination Date and (ii) the repayment of all amounts owed to the Credit Enhancer pursuant to the Collateral Documents or (2) during any period an event of default

under the Credit Facility shall have occurred and is continuing, except with respect to all rights accruing to the Credit Enhancer with respect to unreimbursed draws on the Credit Facility.

Section 706. Alternate Credit Facility. An Alternate Credit Facility, in substitution for the Credit Facility then in effect, may be provided prior to any Termination Date if the Borrower shall give written notice not more than 60 nor less than 30 calendar days prior to the Alternate Credit Facility Date to the Issuer, the Trustee, the Tender Agent, the Remarketing Agent, the Rating Agency and the Credit Enhancer stating its election to provide an Alternate Credit Facility. Any such Alternate Credit Facility must be either (a) an irrevocable direct pay letter of credit, or (b) bond insurance contract, in both cases constituting an unconditional and irrevocable commitment to pay principal of and interest on the Bonds. If the Bonds are in any Interest Mode other than a Multiyear Mode, the Alternate Credit Facility Date must be a Rate Adjustment Date.

(a) Upon the exercise of such option by the Borrower, in the event the Bonds are in any Interest Mode other than a Multiyear Mode, the Trustee shall send to the Bondowners a Notice of Alternate Credit Facility in substantially the form of Exhibit G not later than 20 calendar days prior to the Alternate Credit Facility Date. The Trustee shall not accept such Alternate Credit Facility unless the Trustee shall have received, (1) prior to sending the Notice of Alternate Credit Facility (i) an Opinion of Bond Counsel stating that the delivery of such Alternate Credit Facility to the Trustee is authorized under this Indenture and the Act, complies with the terms hereof and will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes, and (ii) a certificate from an Authorized Borrower Representative and a written acknowledgment by the Credit Enhancer stating that all amounts owing to the Credit Enhancer under the Collateral Documents have been paid and that there are no Pledged Bonds outstanding, and (2) on or before the Alternate Credit Facility Date a supplemental opinion of Bond Counsel stating that the delivery of the Alternate Credit Facility is authorized under this Indenture and the Act, complies with the terms hereof and will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes.

(b) Upon the exercise of such option by the Borrower, in the event the Bonds are in a Multiyear Mode, the Trustee shall send to the Bondowners a Notice of Alternate Credit Facility in substantially the form of Exhibit G not later than 20 calendar days prior to the Alternate Credit Facility Date. The Trustee shall not accept such Alternate Credit Facility unless the Trustee shall have received, (1) prior to sending the Notice of Alternate Credit Facility (i) an Opinion of Bond Counsel stating that the delivery of such Alternate Credit Facility to the Trustee is authorized under this Indenture and the Act, complies with the terms hereof and will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes, (ii) written evidence from the Rating Agency that the Bonds will be rated no lower than the then existing ratings on the Bonds by the Rating Agency, and (iii) a certificate from an Authorized Borrower Representative and a written acknowledgment by the Credit Enhancer stating that all amounts owing to the Credit Enhancer under the Collateral Documents have been paid and that there are no Pledged Bonds outstanding, and (2) on or before the Alternate Credit Facility Date a supplemental opinion of Bond Counsel stating that the delivery of the Alternate Credit Facility is authorized under this Indenture and the Act, complies with the terms hereof and will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes.

Section 707. General Limitation on Issuer Obligations. ANY OTHER TERM OR PROVISION OF THIS INDENTURE OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION WITH THE TRANSACTION WHICH IS THE SUBJECT HEREOF TO THE CONTRARY NOTWITHSTANDING, THE ISSUER SHALL NOT BE REQUIRED TO TAKE OR OMIT TO TAKE, OR REQUIRE ANY OTHER PERSON OR ENTITY TO TAKE OR OMIT TO TAKE, ANY ACTION WHICH WOULD CAUSE IT OR ANY PERSON OR ENTITY TO BE, OR RESULT IN IT OR ANY PERSON OR ENTITY BEING, IN VIOLATION OF ANY LAW OF THE STATE.

Section 708. Recording and Filing. Subject to Section 901(c) hereof, the Trustee shall use its best efforts to keep and file or cause to be kept and filed all financing statements related to this Indenture and all supplements hereto, the Agreement and all supplements thereto, the Credit Facility and all supplements thereto and such other documents as may be necessary to be kept and filed in such manner and in such places as may be required by law in order to preserve and protect fully the security of the Owners and the rights of the Trustee hereunder. In carrying out its duties under this Section, the Trustee shall be entitled to rely on an opinion of its counsel specifying what actions are required to comply with this Section.

Section 709. Possession and Inspection of Books and Documents. The Issuer and the Trustee covenant and agree that all books and documents in their possession relating to the Agreement and the Credit Facility and to the distribution of proceeds thereof shall at all times be open to inspection by such accountants or other agencies or persons as the Credit Enhancer or the Borrower may from time to time designate.

Section 710. Rights and Duties Under Agreement and Credit Facility. The Trustee hereby acknowledges and agrees to the terms, conditions, appointments and agencies of the Agreement and the Credit Facility as they relate to it and its participation in the transactions contemplated hereby and thereby. Subject to the provisions of Section 901(1) hereof, the Trustee shall perform all obligations and duties of the Issuer under the Agreement (and the Issuer hereby appoints the Trustee as the Issuer’s agent and attorney-in-fact for all such purposes). The Trustee, as assignee hereunder, in its name or to the extent permitted by law, in the name of the Issuer, may enforce all rights of the Issuer (but only with the prior written consent of the Credit Enhancer unless the Credit Enhancer is in default under the Credit Facility) and all obligations of the Credit Enhancer and the Borrower under the Agreement and the Credit Facility (and waive the same with the consent of the Credit Enhancer, except for rights expressly granted to the Borrower) on behalf of the Bondowners whether or not the Issuer is in default hereunder.

Section 711. Tax Covenants.

(a) The Issuer shall not use or knowingly permit the use of any proceeds of the Bonds or any other funds of the Issuer, and the Trustee shall not use or permit the use of any proceeds of the Bonds or any other funds of the Issuer held by the Trustee, directly or indirectly, to acquire any securities or obligations, and shall not use or permit the use of any amounts received by the Issuer or Trustee with respect to the Agreement in any manner, and shall not take or permit to be taken any other action or actions, which would cause any Bond to be an “arbitrage bond” within the meaning of Section 148(a), or “federally guaranteed” within the meaning of Section 149(b), of the Code. If at any time the Issuer is of the opinion that for purposes of this subsection (a) it is necessary to restrict or limit the yield on or change in any way the investment of any moneys held

by the Trustee under this Indenture, the Trustee shall take such action as may be necessary in accordance with such instructions. The Issuer and the Trustee shall be deemed in compliance with this Section to the extent they follow the Tax Agreement or an Opinion of Bond Counsel with respect to the investment of funds hereunder.

(B) The Trustee and the Issuer will not take any action or omit to take any action or permit any action which is within its control to be taken or omitted which would to its knowledge impair the exclusion of interest on the Bonds from gross income for federal income tax purposes or the applicable exemptions from taxation in the State.

(c) The Issuer and the Trustee shall at all times do and perform all acts and things permitted by law and this Indenture which are necessary or desirable in order to assure that interest paid on the Bonds will be excludable from gross income for federal income tax purposes and to preserve the applicable exemptions from taxation in the State and shall take no action that would result in such interest not being excludable from gross income for federal income tax purposes.

[End of Article VII]

ARTICLE VIII

DEFAULT AND REMEDIES

Section 801. Events of Default. If any one or more of the following events occur, it is hereby defined as and declared to be and to constitute an “Event of Default”:

(a) default in the due and punctual payment of any interest on any Bond;

(b) default in the due and punctual payment of the principal of or redemption premium, if any, on any Bond, whether at the stated maturity or accelerated maturity thereof, or upon proceedings for redemption thereof or otherwise;

(c) default in the payment of the Tender Price of any Tendered Bond (the substance of which must be communicated by Immediate Notice by the Trustee to the Credit Enhancer, the Borrower and the Issuer);

(d) the occurrence of an event of default under Article VIII of the Agreement;

(e) the occurrence of either or both of the following:

(i) the Trustee has received written notice from the Credit Enhancer, within the period provided for in the Credit Facility, that the Credit Enhancer will not reinstate the interest portion of the Credit Facility; or

(ii) the Trustee’s receipt of written notice from the Credit Enhancer that an “Event of Default” has occurred under the Letter of Credit Agreement together with a direction from the Credit Enhancer to the Trustee requiring either (A) the acceleration of the Bonds pursuant to Section 802(a) or (B) the mandatory purchase of the Bonds pursuant to Section 802(b) hereof;

(f) default in the performance or observance of any other of the covenants, agreements or conditions on the part of the Issuer in this Indenture or in the Bonds contained, and the continuance thereof for a period of thirty (30) days after written notice thereof shall have been given to the Issuer, the Credit Enhancer and the Borrower by the Trustee, or to the Trustee, the Issuer, the Credit Enhancer and the Borrower by the Owners of not less than twenty-five percent (25%) in aggregate principal amount of Bonds then Outstanding; provided, however, if any default shall be such that it cannot be corrected within such 30-day period, it shall not constitute an Event of Default if corrective action is instituted by the Issuer or the Borrower within such period and diligently pursued until the default is corrected; or

(g) the occurrence of an event of default pursuant to Article VIII of the Series 1994B Trust Indenture.

(h) The Trustee shall give Immediate Notice of any Event of Default to the Issuer, the Borrower and the Credit Enhancer as promptly as practicable after the occurrence of an Event of Default becomes known to the Trustee.

Section 802. Acceleration: Mandatory Purchase.

(a) If an Event of Default described in paragraph (a), (b), (c), (e)(i) or (g) (except, with respect to paragraph (g), a default under Section 801(d), (e)(ii) or (f) of the Series 1994B Indenture) of Section 801 hereof shall have occurred and be continuing, the Trustee shall, by notice in writing delivered to the Issuer, the Borrower and the Credit Enhancer, declare the principal of all Bonds then Outstanding and the interest accrued thereon immediately due and payable, and the Bonds shall cease to bear interest on such date; subject, however, to subparagraph (b) hereof. The principal and interest shall thereupon become due and payable on a date established by the Trustee, which date shall not be more than ten (10) calendar days after such acceleration.

If an Event of Default described in paragraph (e)(ii) or (g) (but, with respect to paragraph (g), only with respect to a default under Section 801(e)(ii) of the Series 1994B Indenture) of Section 801 hereof shall have occurred and be continuing, the Trustee shall, by notice in writing delivered to the Issuer, the Borrower and the Credit Enhancer, declare the principal of all Bonds then Outstanding and the interest accrued thereon due and payable on such date as the Trustee shall establish pursuant to Section 402(c) hereof, and the Bonds shall cease to bear interest on such date; subject, however, to subparagraph (b) hereof.

If an Event of Default described in paragraph (d), (f) or (g) (but, with respect to paragraph (g), only with respect to a default under Section 801(d) or (f) of the Series 1994B Indenture) of Section 801 hereof, shall have occurred and be continuing, the Trustee, and may upon the written request of the Owners of not less than 25% in aggregate principal amount of the Bonds then Outstanding shall, but only with the prior written consent of the Credit Enhancer (unless the Credit Enhancer is in default under the Credit Facility in which case no such consent shall be required), by notice in writing delivered to the Issuer, the Borrower and the Credit Enhancer declare the principal of all Bonds then Outstanding and the interest accrued thereon immediately due and payable, and such principal and interest shall thereupon become and be immediately due and payable.

Upon any acceleration of the maturity of the Bonds hereunder, the Trustee shall immediately demand payment under the Credit Facility to the extent permitted by the terms thereof and pursue the remedies of the Trustee thereunder.

If, at any time after such declaration, but before the Bonds shall have matured by their terms, all overdue installments of principal of and interest on the Bonds, together with the reasonable and proper expenses of the Trustee, and all other sums then payable by the Issuer under this Indenture shall either be paid or provision satisfactory to the Trustee shall be made for such payment, then and in every such case the Trustee shall, but only with the approval of the Credit Enhancer and the Owners of not less than a majority in aggregate principal amount of the Bonds Outstanding, and upon the reinstatement of the Credit Facility, rescind such declaration and annul such default in its entirety. In such event, the Trustee shall rescind any declaration of acceleration of the Loan Payments as provided in Section 8.2 of the Agreement.

In case of any rescission, then and in every such case the Issuer, the Trustee and the Bondowners shall be restored to their former positions, rights and obligations hereunder, respectively, but no such rescission shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.

(b) Mandatory Purchase. Upon the occurrence and continuance of an Event of Default under paragraph (e)(ii) or (g) (but, with respect to paragraph (g), only with respect to a default under Section 801(e)(ii) of the Series 1994B Indenture) of Section 801 hereof, as provided in Section 302(d) hereof the Credit Enhancer in its notice to the Trustee may direct the Trustee to purchase the Bonds for the Credit Enhancer’s own account, rather than to accelerate the Bonds as provided in Section 802(a) hereof. In such case, the Trustee shall draw upon the Credit Facility in accordance with the provisions of Section 302(d) hereof to pay the purchase price for the Bonds, which shall be an amount equal to the principal of all Outstanding Bonds and accrued interest thereon to the Mandatory Purchase Date, and upon receipt of the proceeds of such draw, shall immediately purchase the Bonds in accordance with Section 302 hereof.

Section 803. Surrender of Possession of Trust Estate: Rights and Duties of Trustee in Possession. If an Event of Default shall have occurred and be continuing, the Issuer, upon demand of the Trustee, shall forthwith surrender the possession of, and it shall be lawful for the Trustee, by such officer or agent as it may appoint, to take possession of all or any part of the Trust Estate, together with the books, papers and accounts of the Issuer pertaining thereto, and including the rights and the position of the Issuer under the Agreement and to hold and manage the same and to collect, receive and sequester the payments, revenues and receipts derived under the Agreement, and out of the same and any moneys received from any receiver of any part thereof pay and set up proper reserves for the payment of all proper costs and expenses of so taking, holding and managing the same, including (i) reasonable compensation to the Trustee, its agents and counsel, (ii) any reasonable charges of the Trustee hereunder, and (iii) any taxes and assessments, and other charges, prior to the lien of this Indenture which the Trustee may deem it wise to pay, and the Trustee shall apply the remainder of the moneys so received in accordance with Section 808. Whenever all that is due upon the Bonds shall have been paid and all defaults made good and all payments pursuant to Section 509 hereof have been made, the Trustee shall surrender possession of the Trust Estate to the Issuer, its successors or assigns, the same right of entry, however, to exist upon any subsequent Event of Default, subject to the provisions of Article V hereof. While the Credit Facility is in force and effect, if no Bonds are outstanding, the Trustee and the Issuer have been fully recompensed for all their costs and expenses, the Credit Enhancer is not in default under the Credit Facility, and any amounts remain unreimbursed with respect thereto, the Issuer shall thereafter transfer possession of the Trust Estate to the Credit Enhancer.

While in possession of the Trust Estate, the Trustee shall render annually (or more often if requested in writing) to the Issuer, the Borrower and the Credit Enhancer a summarized statement of receipts and expenditures in connection therewith.

Section 804. Appointment of Receivers in Event of Default. If an Event of Default shall have occurred and be continuing, and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and of the Bondowners under this Indenture, the Trustee shall be entitled, with the approval of the Credit Enhancer if the Credit Enhancer is not in

default under the Credit Facility, as a matter of right, to the appointment of a receiver or receivers of the Trust Estate and of the earnings, income, products and profits thereof, pending such proceedings, with such powers as the court making such appointment shall confer.

Section 805. Exercise of Remedies by the Trustee. If an Event of Default shall have occurred and be continuing, the Trustee may, with the approval of the Credit Enhancer if the Credit Enhancer is not in default under the Credit Facility, pursue any available remedy at law or equity by suit, action, mandamus or other proceeding to enforce the payment of the principal of and redemption premium, if any, and interest on the Bonds then Outstanding, and to enforce and compel the performance of the duties and obligations of the Issuer as herein set forth.

If an Event of Default shall have occurred and be continuing, and if requested so to do by the Credit Enhancer or by the Owners of not less than 25% in aggregate principal amount of the Bonds then Outstanding and indemnified as provided in paragraph (1) of Section 901, with the approval of the Credit Enhancer if the Credit Enhancer is not in default under the Credit Facility, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred by this Article as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Bondowners.

All rights of action under this Indenture or under any of the Bonds may be enforced by the Trustee without the possession of any of the Bonds or the production thereof in any trial or other proceedings relating thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its name as Trustee without the necessity of joining as plaintiffs or defendants any Bondowner, and any recovery or judgment shall, subject to Section 808, be for the equal benefit of all the Owners of the Outstanding Bonds.

Section 806. Limitation on Exercise of Remedies by Bondowners. No Bondowner shall have any right to institute any suit, action or proceeding in equity or at law for the enforcement of this Indenture or for the execution of any trust hereunder or for the appointment of a receiver or any other remedy hereunder, unless:

(1) a default has occurred of which the Trustee has notice or is deemed to have notice as provided in subparagraph (h} of Section 901, and

(2) such default shall have become an Event of Default, and

(3) the Owners of not less than 25% in aggregate principal amount of the Bonds then Outstanding or the Credit Enhancer (with respect to an Event of Default described in paragraph (e) or (g} (but, with respect to paragraph (g), only with respect to a default under Section 801(e) of the Series 1994B Indenture) of Section 801 hereof shall have made written request to the Trustee, shall have offered it reasonable opportunity either to proceed to exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its own name, and shall have provided to the Trustee indemnity as provided in subparagraph (1) of Section 901, and

(4) the Trustee shall thereafter fail or refuse to exercise the powers herein granted or to institute such action, suit or proceeding in its own name, and

(5) the Credit Enhancer shall have consented thereto if the Credit Enhancer is not in default under the Credit Facility;

and such notification, request and indemnity are hereby declared in every case, at the option of the Trustee (with the exception of any duty to make demand on, and proceed under, the Credit Facility, cause an acceleration of the Bonds or make payments when due), to be conditions precedent to the execution of the powers and trusts of this Indenture, and to any action or cause of action for the enforcement of this Indenture, or for the appointment of a receiver or for any other remedy hereunder, it being understood and intended that no one or more Bondowners shall have any right in any manner whatsoever to affect, disturb or prejudice this Indenture by such Bondowners action or to enforce any right hereunder except in the manner herein provided, and that all proceedings at law or in equity shall be instituted, had and maintained in the manner herein provided and for the equal benefit of the Owners of all Bonds then Outstanding. Nothing in this Indenture, however, shall affect or impair the right of any Bondowner to payment of the principal of, and redemption premium, if any, and interest on any Bond at and after its maturity or the obligation of the Issuer to pay the principal of, and redemption premium, if any, and interest on each of the Bonds to the respective Owners thereof at the time and place, from the source and in the manner herein and in such Bond expressed.

Section 807. Right of Bondowners to Direct Proceedings. Any other provision herein to the contrary notwithstanding, the Owners of a majority in aggregate principal amount of the Bonds then Outstanding shall have the right, at any time, with the approval of the Credit Enhancer if the Credit Enhancer is not in default under the Credit Facility, by an instrument or instruments in writing executed and delivered to the Trustee, to direct the time, method and place of conducting all proceedings to be taken in connection with the enforcement of this Indenture, or for the appointment of a receiver or any other proceedings hereunder; provided that the Trustee shall have been provided indemnity satisfactory to it in accordance with Section 901(1) hereof and provided that such direction shall not be otherwise than in accordance with the provisions of law and of this Indenture, and provided, further, that the Trustee shall have the right to decline to follow any such direction if the Trustee in good faith shall determine that the proceeding so directed would involve it in personal liability.

Section 808. Application of Moneys in Event of Default. Upon an Event of Default all moneys held or received by the Trustee pursuant to this Indenture, the Agreement or the Credit Facility or pursuant to any right given or action taken under this Article shall, after payment of the reasonable costs and expenses of the proceedings resulting in the collection of such moneys, be deposited in the Debt Service Fund (provided, however, Available Moneys shall be used only for payment of principal or interest on the Bonds) and all moneys so deposited in the Debt Service Fund shall be applied as follows:

(a) If the principal of all the Bonds shall not have become or shall not have been declared due and payable, all such moneys shall be applied:

First — To the payment to the persons entitled thereto of all installments of interest then due and payable on the Bonds, other than the Borrower Bonds, in the order in which such installments of interest became due and payable, with interest thereon at the rate or rates specified in the respective Bonds to the extent permitted by law, and, if the amount

available shall not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the persons entitled thereto, without any discrimination or privilege;

Second — To the payment to the persons entitled thereto of the unpaid principal of and redemption premium, if any, on any of the Bonds, other than Borrower Bonds, that shall have become due and payable (other than Bonds called for redemption for the payment of which moneys or securities are held pursuant to this Indenture), in the order of their due date, with interest on such principal and redemption premium, if any, at the rate or rates specified in the respective Bonds from the respective dates upon which they became due and payable, and, if the amount available shall not be sufficient to pay in full such principal and redemption premium, if any, due on any particular date, together with such interest, then to the payment ratably, according to the amounts of principal and redemption premium, if any, due on such date, to the persons entitled thereto without any discrimination or privilege;

Third — To the payment to the Credit Enhancer, the unpaid principal and interest due on the Pledged Bonds;

Fourth — To the payment of the reasonable expenses, liabilities and advances incurred or made by the Trustee;

Fifth — To the Credit Enhancer any amounts due and owing under the Collateral Documents;

Sixth — To pay principal and interest on the Borrower Bonds; and

Seventh — To the Borrower.

(b) If the principal of all the Bonds shall have become due or shall have been declared due and payable, all such moneys shall be applied to the payment of the principal, redemption premium, if any, and interest then due and unpaid on all of the Bonds, with interest on such principal and redemption premium, if any, and, to the extent permitted by law, on such interest, at the rate or rates specified in the respective Bonds, without preference or priority of principal, redemption premium or interest over principal, redemption premium or interest or of any installment of interest over any other installment of interest or of any Bond over any other Bond, ratably, according to the amounts due respectively for principal, redemption premium, if any, and interest, to the persons entitled thereto, without any discrimination or privilege; provided however principal of and interest on Borrower Bonds shall only be paid after the amounts due the Credit Enhancer under the Related Documents shall have been paid in full.

(c) If the principal of all the Bonds shall have been declared due and payable, and if such declaration shall thereafter have been rescinded and annulled under this Article then, subject to paragraph (b) of this Section, in the event that the principal of all the Bonds shall later become due or be declared due and payable, the moneys shall be applied in accordance with paragraph (a) of this Section.

Whenever moneys are to be applied pursuant to this Section, such moneys shall be applied at such times and from time to time as the Trustee shall determine, having due regard to the amount of such moneys available and which may become available for such application in the future.

Whenever all of the Bonds and interest thereon have been paid under this Section, and all expenses and charges of the Trustee have been paid, any balance remaining in the Funds shall be paid first to the Credit Enhancer and second to the Borrower as provided in Section 510.

Section 809. Remedies Cumulative. No remedy conferred by this Indenture upon or reserved to the Trustee, to the Credit Enhancer or to the Bondowners is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given to the Trustee, to the Credit Enhancer or to the Bondowners hereunder or now or hereafter existing at law or in equity or by statute.

Section 810. Delay or Omission Not Waiver. No delay or omission to exercise any right, power or remedy accruing upon any Event of Default shall impair any such right, power or remedy or shall be construed to be a waiver of any such Event of Default or acquiescence therein, and every such right, power or remedy may be exercised from time to time and as often as may be deemed expedient.

Section 811. Effect of Discontinuance of Proceeding. In case the Trustee shall have proceeded to enforce any right under this Indenture by the appointment of a receiver, by entry, or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely, then and in every such case the Issuer, the Borrower, the Trustee, the Credit Enhancer and the Bondowners shall, with the written consent of the Credit Enhancer, be restored to their former positions and rights hereunder, and all rights, remedies and powers of the Trustee shall continue as if no such proceedings had been taken.

Section 812. Waivers of Events of Default. The Trustee shall waive any Event of Default and its consequences and rescind any declaration of maturity of principal upon the written request of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding; provided that there shall not be waived without the written consent of the Owners of all the Bonds Outstanding (a) any Event of Default in the payment of the principal of any Outstanding Bonds at their maturity, upon the redemption (including as a result of acceleration) or tender thereof, (b) any Event of Default under Section 801(e) or (g) hereof (but, with respect to paragraph (g), only with respect to a default under Section 801(e) of the Series 1994B Indenture) unless the Credit Enhancer shall have given written notice to the Trustee that the Credit Facility has been reinstated in full, or (c) any Event of Default in the payment when due of the interest on any such Bonds unless, prior to such waiver or rescission, all arrears of interest, with interest (to the extent permitted by law) at the rate borne by the Bonds on overdue installments of interest in respect of which such default shall have occurred, or all arrears of payments of principal when due, as the case may be, and all expenses of the Trustee in connection with such Event of Default shall have been paid or provided for; provided further that there shall not be waived without the written consent of the Credit Enhancer any Event of Default under Section 801(e)(ii) or (g) hereof (but, with respect to paragraph (g), only with respect to a default under Section 801(e)(ii) of the Series 1994B Indenture); and provided further that no Event of Default shall be waived without the

written consent of the Credit Enhancer if it has honored all its obligations under the Credit Facility. In case of any such waiver or rescission, or in case any proceeding taken by the Trustee on account of any such Event of Default shall have been discontinued or abandoned or determined adversely, then and in every such case the Issuer, the Borrower, the Trustee, the Bondowners and the Credit Enhancer shall be restored to their former positions, rights and obligations hereunder, respectively, but no such waiver or rescission shall extend to any subsequent or other default, or impair any right consequent thereon.

Section 813. Pledged Bonds. For the purposes of this Article VIII. Pledged Bonds shall not be deemed Outstanding under this Indenture until the payment in full of the principal of and interest on all other Bonds or the provision for the payment thereof shall have been duly made. In the event any vote or consent of the Bondowners is required hereunder, all Pledged Bonds shall be deemed Outstanding for such purpose hereunder and the Credit Enhancer shall be deemed the Owner thereof for purposes of voting or consenting thereto.

[End of Article VIII]

ARTICLE IX

THE TRUSTEE

Section 901. Acceptance of Trusts. The Trustee hereby accepts the trusts imposed upon it by this Indenture, and agrees to perform said trusts, but only upon and subject to the following express terms and conditions:

(a) The Trustee, prior to the occurrence of an Event of Default and after the curing of all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee. Subject to the limitations on liability of the Trustee contained in Section 901(1), in case an Event of Default shall have occurred of which the Trustee is deemed hereunder to have knowledge (and which has not been cured or waived), the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and shall use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s affairs.

(b) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or through agents, attorneys or receivers. The Trustee shall be entitled to act upon the opinion or advice of counsel in the exercise of reasonable care, who may be counsel to the Issuer, the Credit Enhancer or the Borrower, concerning all matters of trusts hereof and the duties hereunder, and may in all cases pay such reasonable compensation to all such agents, attorneys and receivers as may reasonably be employed in connection with the trusts hereof. The Trustee shall not be responsible for any loss or damage resulting from any action or nonaction by it taken or omitted to be taken in good faith in reliance upon such opinion or advice of counsel.

(c) The Trustee shall not be responsible for any recital herein or in the Bonds (except with respect to the Certificate of Authentication of the Trustee endorsed on the Bonds), or for the recording or rerecording, filing or refiling of this Indenture or any security agreements or financing statements in connection therewith (except with respect to the filing of continuation statements), or for insuring the Project or collecting any insurance moneys or taxes, or for the validity of the execution by the Issuer of this Indenture or of any Supplemental Indentures or instruments of further assurance, or for the sufficiency of the security for the Bonds. The Trustee shall not be responsible or liable for any loss suffered in connection with any investment of funds made by it in accordance with Article VI hereof.

(d) The Trustee shall not be accountable for the use of any Bonds authenticated and delivered hereunder. The Trustee, in its individual or any other capacity, may become the Owner or pledgee of Bonds with the same rights which it would have if it were not Trustee.

(e) The Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, affidavit, letter, telegram or other paper or document provided for under this Indenture believed by it to be genuine and correct and to have been signed, presented or sent by the proper person or persons. Any action taken by the Trustee pursuant to and in accordance with this Indenture upon the request or authority or consent of any person who, at the time of making such

request or giving such authority or consent is the Owner of any Bond, shall be conclusive and binding upon all future Owners of the same Bond and upon Bonds issued in exchange therefor or upon transfer or in place thereof.

(f) As to the existence or nonexistence of any fact or as to the sufficiency or validity of any instrument, paper or proceeding, or whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be provided or established prior to taking, suffering or omitting any action hereunder, the Trustee shall be entitled to rely upon a certificate signed by an Authorized Issuer Representative as sufficient evidence of the facts therein contained.

(g) The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty, and the Trustee shall not be answerable for other than its negligence or willful misconduct.

(h) The Trustee shall not be required to take notice or be deemed to have notice of any Default hereunder except an Event of Default under Section 801(a), (b), (c), (e) or (g) hereof (but, with respect to paragraph (g), only with respect to a default under Section 801(a), (b), (c) or (e) of the Series 1994B Indenture), or failure by the Issuer to cause to be made any of the payments to the Trustee required to be made in Article V hereof, unless the Trustee shall be specifically notified in writing of such Default by the Issuer, the Credit Enhancer or the Owners of at least 25% in aggregate principal amount of all Bonds then Outstanding. All notices or other instruments required by this Indenture to be delivered to the Trustee shall be delivered at the Principal Office of the Trustee, and, in the absence of such notice so delivered, the Trustee may conclusively assume there is no Default except as aforesaid. The Trustee shall notify the Credit Enhancer and the Borrower of any Default known to the Trustee that has not yet become a matured Event of Default.

(i) At any and all reasonable times the Trustee and its duly authorized agents, attorneys, experts, engineers, accountants and representatives shall have the right, but shall not be required, to inspect the Project, including all books, papers and records of the Issuer pertaining to the Project, the loan made pursuant to the Agreement and the Bonds, and to take such memoranda from and in regard thereto as may be desired.

(j) The Trustee shall not be required to give any bond or surety in respect of the execution of its trusts and powers hereunder or otherwise in respect of the Project.

(k) The Trustee shall have the right, but shall not be required, to demand, in respect of the authentication of any Bonds, the withdrawal of any cash, the release of any property, or any action whatsoever within the purview of this Indenture, any showings, certificates, opinions, appraisals or other information, or corporate or partnership action or evidence thereof, in addition to that by the terms hereof required, as a condition of such action by the Trustee as are deemed desirable for the purpose of establishing the right of the Issuer to the authentication of any Bonds, the withdrawal of any cash, the release of any property or the taking of any other action by the Trustee.

(l) Before taking any action under this Indenture, the Trustee may require that satisfactory indemnity be furnished to it for the reimbursement of all costs and expenses to which it may be put and to protect it against all liability, except liability which is adjudicated to have

resulted from its negligence or willful misconduct by reason of any action so taken. Notwithstanding the foregoing, the Trustee shall be required, without indemnity, to make drawings on the Credit Facility, to pay the principal and purchase price of, and premium, if any and interest on the Bonds from moneys available in the Funds and Accounts hereunder, to accelerate the maturity of the Bonds pursuant to Section 802(a) or to call the Bonds for mandatory purchase pursuant to Section 802(b) and, upon the acceleration of the maturity of the Bonds or the mandatory purchase of the Bonds, to immediately demand payment under the Credit Facility to the extent permitted by the terms thereof and pursue the remedies of the Trustee thereunder.

(in) All moneys received by the Trustee shall, until used, applied or invested as herein provided, be held in trust for the purposes for which they were received but need not be segregated from other funds, except to the extent required by law or this Indenture. The Trustee shall be under no liability for interest on any moneys received hereunder, except such as may be agreed upon.

(n) Notwithstanding the effective date of this Indenture or anything to the contrary in this Indenture, the Trustee shall have no liability or responsibility for any act or event relating to this Indenture which occurs prior to the date the Trustee formally executes this Indenture and commences acting as Trustee hereunder.

(o) No provision of this Indenture shall be deemed to require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of its rights or powers, if the Trustee shall have reasonable grounds for believing that repayment of such funds or, in the alternative, adequate indemnity against such risk or liability is not reasonably assured to it.

(p) The Trustee has no obligation or liability to the Bondowners for the payment of interest or premium, if any, on or principal of the Bonds, but rather the Trustee’s sole obligations are to administer, for the benefit of the Issuer, the Credit Enhancer, the Borrower and the Bondowners, the Funds established hereunder.

(q) In the event the Trustee shall receive inconsistent or conflicting requests and indemnity from two or more groups of Bondowners, each representing less than a majority of the aggregate principal amount of the Bonds then outstanding, the Trustee, in its sole discretion, may determine what action, if any, shall be taken; provided, that, the Trustee shall follow the direction of the Credit Enhancer if the Credit Enhancer is not in default under the Credit Facility.

(r) Except for information provided by the Trustee concerning the Trustee, the Trustee shall have no responsibility with respect to any information in any offering memorandum or other disclosure material distributed with respect to the Bonds. The Trustee shall have no responsibility for compliance with securities laws in connection with issuance of the Bonds.

(s) The Trustee’s immunities and protections from liability, and its right to payment of compensation and indemnification in connection with performance of its duties and obligations under the Indenture and the Agreement, shall survive the Trustee’s resignation or removal, or the final payment of the Bonds.

(t) In acting or omitting to act pursuant to the provisions of the Agreement, the Trustee shall be entitled to all of the rights, protections and immunities accorded to the Trustee under the terms of this Indenture, including but not limited to those set out in this Article IX.

(u) Notwithstanding anything otherwise provided in this Indenture, and without regard to whether or not an Event of Default may have occurred and be continuing, the Trustee may notify the Credit Enhancer and the Bondowners of environmental hazards that the Trustee in its reasonable judgment has reason to believe exist with respect to the Project, and the Trustee has the right to take no further action and in such event no fiduciary duty exists which imposes any obligation for further action with respect to the Project; provided, that if the Trustee is directed by the Owners of a majority in aggregate principal amount of Bonds then Outstanding (with the written consent of the Credit Enhancer) or the Credit Enhancer to take further action, the Trustee may (i) take such further action upon being furnished with indemnity and security satisfactory to it for all reasonable costs, expenses, reimbursable fees, liabilities and losses, including, without limitation, losses and liabilities in connection with hazardous substances and environmental contamination, and the clean up thereof, and reasonable attorney’s fees and expenses, or (ii) elect not to proceed in accordance with the directions of the Bondowners or the Credit Enhancer without incurring any liability to the Bondowners or the Credit Enhancer if in the sole opinion of the Trustee such direction may result in environmental or other liability to the Trustee, the Credit Enhancer or the Bondowners, and the Trustee may rely upon an opinion of its counsel in determining whether any such action directed by Bondowners may result in such liability.

Section 902. Fees. Charges and Expenses of the Trustee. The Trustee shall be entitled to payment of and/or reimbursement for reasonable fees for its ordinary services rendered hereunder and all advances, agent and counsel fees and other ordinary expenses reasonably and necessarily made or incurred by the Trustee in connection with such ordinary services and, in the event that it should become necessary that the Trustee perform extraordinary services, it shall be entitled to reasonable extra compensation therefor and to reimbursement for reasonable and necessary extraordinary expenses in connection therewith; provided that if such extraordinary services or extraordinary expenses are occasioned by the neglect or willful misconduct of the Trustee it shall not be entitled to compensation or reimbursement therefor. The Trustee shall be entitled to payment and reimbursement for the reasonable fees and charges of the Trustee as Paying Agent for the Bonds and as Bond Registrar. Pursuant to the provisions of Section 3.7 of the Agreement, the Borrower has agreed to pay to the Trustee all reasonable fees, charges and expenses of the Trustee under this Indenture. The Trustee agrees that the Issuer shall have no liability for any fees, charges, advances, costs. and expenses of the Trustee, and the Trustee agrees to look only to the Borrower for the payment of all fees, charges and expenses of the Trustee as provided in the Agreement. Upon the occurrence of an Event of Default and during its continuance, the Trustee shall have a lien with right of payment prior to payment on account of principal of, redemption premium, if any, or interest on any Bond, upon all moneys in its possession under any provisions hereof for the foregoing advances, fees, costs and expenses incurred, other than moneys received under the Credit Facility, or deposit in the Purchase Fund or Rebate Fund, and which constitute Available Moneys for the payment of redemption premium.

Section 903. Notice to the Bondowners if Default Occurs. If a Default occurs of which the Trustee is by Section 901(h) hereof required to take notice or if notice of Default be given as in said Section provided, then the Trustee shall give written notice thereof by mail, within 30 days of the receipt of notice by the Trustee of such Default, to the Borrower, the Credit Enhancer and to the Owners of all Bonds then Outstanding as shown by the Bond Register in the same manner as required by Section 1302 hereof; provided that the Trustee shall further give prompt notice of such Default to the Issuer and the Credit Enhancer by such means as is practicable under the circumstances.

Section 904. Intervention by the Trustee. In any judicial proceeding to which the Issuer is party and which, in the opinion of the Trustee and its counsel, has a substantial bearing on the interests of Owners of the Bonds or the Credit Enhancer, the Trustee may intervene on behalf of Bondowners and the Credit Enhancer and shall do so if requested in writing by the Credit Enhancer or the Owners of at least 25% in the aggregate principal amount of Bonds then Outstanding (with the written consent of the Credit Enhancer), and if provided with indemnity satisfactory to it.

Section 905. Successor Trustee Upon Merger, Consolidation or Sale. Any corporation or association with or into which the Trustee may be merged or converted or with or into which it may be consolidated, or to which the Trustee may sell or transfer its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any merger, conversion, sale, consolidation or transfer to which it is a party, shall be and become successor Trustee hereunder and shall be vested with all the trusts, powers, rights, obligations, duties, remedies, immunities and privileges hereunder as was its predecessor, without the execution or filing of any instrument or any further act on the part of any of the parties hereto.

Section 906. Trustee Required; Eligibility. (a) There shall at all times be a Trustee hereunder which shall be a trust institution or bank duly organized under the laws of the United States of America or any state or territory thereof, in good standing and qualified to accept such trust having a combined capital stock, surplus and undivided profits of not less than $50,000,000. If such institution publishes reports of condition at least annually pursuant to law or regulation, then for the purposes of this Section the capital, surplus and undivided profits of such institution shall be deemed to be its capital, surplus and undivided profits as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner provided in Section 907. No resignation or removal of the Trustee and no appointment of a successor Trustee shall become effective until the successor Trustee has accepted its appointment under Section 909.

(b) Notwithstanding anything herein, in the Series 1994B Indenture or in the Borrower Documents to the contrary, each of the “Borrower”, the “Credit Enhancer”, the “Paying Agent(s)”, the “Remarketing Agent”, the “Tender Agent” and the “Trustee” (including for such purpose each co-trustee) shall, as between the documents relating to the Bonds and the Series 1994B Bonds be one and the same Person. In this regard:

(i) the Trustee, including any successor Trustee, shall at all times hereunder also serve as Trustee pursuant to the Series 1994B Indenture;

(ii) the Trustee agrees to resign hereunder contemporaneously with any resignation under the Series 1994B Indenture; and

(iii) any removal of the Trustee pursuant to the Series 1994B Indenture shall result in the contemporaneous removal of the Trustee hereunder.

Section 907. Resignation of Trustee. The Trustee and any successor Trustee may at any time resign from the trusts hereby created by giving 30 days’ written notice to the Credit Enhancer, the Remarketing Agent, the Issuer, the Borrower and the Bondowners, and such resignation shall take effect at the end of such 30 days, or upon the earlier appointment of a successor Trustee by the Issuer or by the Owners of a majority in aggregate principal amount of the Bonds then outstanding in accordance with Section 908 hereof; provided, however, that in no event shall the resignation of a Trustee or successor Trustee become effective until such time as a successor Trustee has been appointed and has accepted appointment.

Section 908. Removal of Trustee. The Trustee may be removed for cause at any time or without cause upon thirty days written notice by an instrument or concurrent instruments in writing delivered to the Trustee and the Issuer and signed by the Borrower (with the consent of the Credit Enhancer), the Credit Enhancer or the Owners of a majority in aggregate principal amount of Bonds then Outstanding (with the consent of the Credit Enhancer); provided, however, that any such removal shall not be effective until such time as a successor Trustee has been appointed and has accepted such appointment. The Issuer, the Borrower, the Credit Enhancer or any Bondowner may at any time petition any court of competent jurisdiction for the removal for cause of the Trustee.

Section 909. Appointment of Successor Trustee. In case the Trustee hereunder shall resign or be removed, or shall otherwise become incapable of acting hereunder, or in case it shall be taken under the control of any public officer or officers or of a receiver appointed by a court, a successor Trustee, approved in writing by the Credit Enhancer and the Borrower, may be appointed by the Owners of a majority in aggregate principal amount of Bonds then Outstanding, by an instrument or concurrent instruments in writing; provided, nevertheless, that in case of such vacancy the Issuer, by an instrument executed and signed by the Chairman of the Board of Directors of the Issuer and attested by its Executive Director under its seal, may appoint a temporary Trustee, approved by the Credit Enhancer, to fill such vacancy; or if such vacancy has continued for 60 days, the Credit Enhancer and the Borrower may appoint such temporary Trustee, until a successor Trustee shall be appointed by the Bondowners in the manner above provided; and any such temporary Trustee so appointed by the Issuer or the Credit Enhancer shall immediately and without further acts be superseded by the successor Trustee so appointed by such Bondowners. Any successor Trustee or temporary Trustees must have the qualifications provided for in Section 906.

Section 910. Vesting of Trusts in Successor Trustee. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to its predecessor and also to the Issuer, the Credit Enhancer and the Borrower an instrument in writing accepting such appointment hereunder, and thereupon such successor shall become fully vested with all the trusts, powers, rights, obligations, duties, remedies, immunities and privileges of its predecessor; but such predecessor shall, nevertheless, on the written request of the Issuer, the Credit Enhancer or its successor, execute and deliver an instrument transferring to such successor Trustee all the trusts, powers, rights, obligations, duties, remedies, immunities and privileges of such predecessor hereunder; and every

predecessor Trustee shall deliver all securities and moneys and documents held by it as Trustee hereunder to its successor. Should any instrument in writing from the Issuer be required by any successor Trustee for more fully and certainly vesting in such successor the trusts, powers, rights, obligations, duties, remedies, immunities and privileges hereby vested in the predecessor, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Issuer.

Section 911. Trust Estate May be Vested in Co-Trustee. It is the purpose of this Indenture that there shall be no violation of any law of any jurisdiction (including particularly the State) denying or restricting the right of banking corporations or associations to transact business as trustee in such jurisdiction. It is recognized that in case of litigation under this Indenture or the Agreement, and in particular in case of the enforcement with respect to any default, or in case the Trustee deems that by reason of any present or future law of any jurisdiction it may not exercise any of the powers, rights or remedies herein granted to the Trustee, or take any other action which may be desirable or necessary in connection therewith, it may be necessary or desirable that the Trustee appoint an individual or institution as a co-trustee or separate trustee, and the Trustee is hereby authorized to appoint such co-trustee or separate trustee, with the written consent of the Issuer and the Credit Enhancer.

In the event that the Trustee appoints an additional individual or institution as co-trustee or separate trustee, each and every remedy, power, right, claim, demand, cause of action, immunity, title, interest and lien expressed or intended by this Indenture to be exercised by the Trustee with respect thereto shall be exercisable by such co-trustee or separate trustee but only to the extent necessary to enable such co-trustee or separate trustee to exercise such powers, rights and remedies, and every covenant and obligation necessary to the exercise thereof by such co-trustee or separate trustee shall run to and be enforceable by either of them.

Should any deed, conveyance or instrument in writing from the Issuer be required by the co-trustee or separate trustee so appointed by the Trustee for more fully and certainly vesting in and confirming to him or it such properties, rights, powers, trusts, duties and obligations, any and all such deeds, conveyances and instruments in writing shall, on request, be executed, acknowledged and delivered by the Issuer.

In case any co-trustee or separate trustee shall die, become incapable of acting, resign or be removed, all the properties, rights, powers, trusts, duties and obligations of such co-trustee or separate trustee, so far as permitted by law, shall vest in and be exercised by the Trustee until the appointment of a successor to such co-trustee or separate trustee.

Section 912. Accounting. The Trustee shall render a monthly accounting, for each calendar month, to the Borrower, to the Credit Enhancer and to any Bondowner requesting the same at the cost of such Bondowner, and an annual (or more often if requested) accounting, for each calendar year ended December 31, to the Issuer showing in reasonable detail all financial transactions relating to the Trust Estate during the accounting period and the balance in any funds or accounts created by this Indenture as of the beginning and close of such accounting period.

Section 913. Paying Agents; Bond Registrar; Appointment and Acceptance of Duties; Removal. The Trustee is hereby designated and agrees to act as Paying Agent and as Bond

Registrar for and in respect of the Bonds. The Tender Agent shall be the Paying Agent with respect to Tendered Bonds.

Section 914. The Tender Agent.

(a) The Trustee is hereby appointed as the initial Tender Agent for the Bonds and with respect to Tendered Bonds, the Paying Agent, and hereby agrees to carry out its responsibilities described herein. If the Tender Agent is other than the Trustee, the Tender Agent shall signify its acceptance of the duties and obligations imposed upon it hereunder by a written instrument of acceptance delivered to the Issuer, the Credit Enhancer, the Borrower, the Trustee and the Remarketing Agent, under which the Tender Agent will agree to particularly:

(1) hold all Bonds delivered to it for purchase hereunder as agent and bailee of, and in escrow for the benefit of, the respective Owners which have so delivered such Bonds; until moneys representing the Purchase Price of such Bonds shall have been delivered to or for the account of or to the order of such Owners; and

(2) keep such books and records as shall be consistent with prudent industry practice, and make such books and records available for inspection by the other parties.

The parties hereto shall each cooperate to cause the necessary arrangements to be made and to be thereafter continued whereby funds from the sources specified herein will be made available for the purchase of Bonds presented at the Principal Office of the Tender Agent, and to otherwise enable the Tender Agent to carry out its duties hereunder.

The Tender Agent, the Trustee and the Remarketing Agent shall cooperate to the extent necessary to permit the preparation, execution, issuance, authentication and delivery by the Tender Agent of replacement Bonds in connection with the tender and remarketing of Bonds hereunder.

The Issuer, the Trustee and the Borrower acknowledge that, in carrying out its responsibilities hereunder, the Tender Agent shall be acting solely for the benefit of and as agent for the Owners from time to time of the Bonds. No delivery of the Bonds to the Tender Agent or any agent of the Tender Agent or purchase of Bonds by the Tender Agent shall constitute a redemption of the Bonds or any extinguishment of the debt evidenced thereby.

(b) The Tender Agent shall be a commercial bank or trust company, duly organized under the laws of the United States of America or any state or territory thereof having a combined capital stock, surplus and undivided profits of at least $20,000,000 and authorized by law to perform all of the duties imposed upon it by this Indenture. The Tender Agent may resign and be discharged of the duties and obligation created by this Indenture by giving at least thirty (30) days’ notice by mail to the Trustee, the Borrower, the Remarketing Agent, and the Credit Enhancer; provided, however, that such resignation shall not take effect unless and until a successor Tender Agent shall be appointed by the Trustee with the consent of the Credit Enhancer. The Trustee shall use its best efforts to appoint a successor Tender Agent during such thirty (30) day period and in the event a successor Tender Agent has not taken office prior to the expiration of such thirty (30) day period, the Tender Agent may petition a court of applicable jurisdiction to appoint a successor Tender Agent. The Tender Agent may be removed at any time by an instrument signed by the

Borrower, with the written consent of the Credit Enhancer, or the Credit Enhancer, and filed with the Borrower, the Credit Enhancer, the Issuer, the Tender Agent, the Remarketing Agent and the Trustee; provided, however, that such removal shall not take effect unless and until a successor Tender Agent shall be appointed by the Trustee with the approval of the Borrower and the Credit Enhancer, or by the Borrower and the Credit Enhancer if the Trustee has not made such appointment within thirty (30) days from such filing. In the event of the resignation or removal of the Tender Agent, the Tender Agent shall deliver any moneys and Bonds held by it to its successor, and if there be no successor, to the Trustee.

(c) Tender Agent shall be appointed by the Trustee with the approval of the Borrower and the Credit Enhancer, or by the Borrower and the Credit Enhancer if the Trustee has not made such appointment within thirty (30) days from such filing. In the event of the resignation or removal of the Tender Agent, the Tender Agent shall deliver any moneys and Bonds held by it to its successor, and if there be no successor, to the Trustee.

(d) In accordance with Section 906(b) hereof:

(i) the Tender Agent, including any successor Tender Agent, shall at all times hereunder also serve as Tender Agent pursuant to the Series 1994B Indenture;

(ii) the Tender Agent agrees to resign hereunder contemporaneously with any resignation under the Series 1994B Indenture; and

(iii) any removal of the Tender Agent pursuant to the Series 1994B Indenture shall result in the contemporaneous removal of the Tender Agent hereunder.

Section 915. Notice to Rating Agency. The Trustee shall notify the Rating Agency (until such time as the Rating Agency no longer maintains a rating on the Bonds) as soon as practicable (i) after the Trustee becomes aware of (1) any expiration, termination or renewal of the Credit Facility, (2) any redemption or purchase of all of the Bonds, (3) any change in the Credit Facility, the Agreement or this Indenture, or (4) the interest portion of the Credit Facility will not be reinstated, or (ii) if (1) the Trustee resigns or is removed or a new Trustee is appointed, (2) the Remarketing Agent resigns or is removed or a new Remarketing Agent is appointed, (iii) an Alternate Credit Facility is provided, (iv) there is a mandatory tender of all Bonds, (v) there is a call for the redemption of all Bonds, or (vi) there is a change in the Interest Mode pursuant to Section 204 hereof.

Section 916. Right of Trustee to Pay Taxes and Other Charges. In case any tax, assessment or governmental or other charge upon, or insurance premium with respect to, any part of the Project is not paid as required herein or in the Agreement, or in case any amount required to be rebated to the United States pursuant to the provisions of Section 148(f) of the Code is not paid when due, the Trustee may pay such tax, assessment or governmental charge, insurance premium, or rebate amount, without prejudice, however, to any rights of the Trustee or the Bondowners hereunder arising in consequence of such failure; and any amount at any time so paid under this Section, with interest thereon from the date of payment at a rate per annum equal to the Trustee’s base rate for variable rate commercial loans in effect at the time plus two percent (2%), shall

become an additional obligation secured by this Indenture, and the same shall be given a preference in payment over any payment of principal of, premium, if any, or interest on the Bonds, and shall be paid out of the proceeds of rents, revenues and receipts collected from the Project, not including payments on the Credit Facility, if not otherwise caused to be paid; but the Trustee shall be under no obligation to make any such payment unless it shall have been requested to do so by the Credit Enhancer or the Owners of at least twenty-five percent (25%) of the aggregate principal amount of Bonds then Outstanding and shall have been provided adequate funds for the purpose of such payment.

[End of Article IX]

ARTICLE X

SUPPLEMENTAL INDENTURES

Section 1001. Supplemental Indentures Not Requiring Consent of Bondowners. The Issuer and the Trustee may from time to time, with the prior written consent of the Credit Enhancer and the Borrower, if required pursuant to Section 1003 hereof, but without the consent of or notice to any of the Bondowners or the owners of the Series 1994B Bonds, enter into such Supplemental Indenture or Supplemental Indentures as shall not be inconsistent with the terms and provisions hereof, so long as such Supplemental Indenture or Supplemental Indentures does not cause the then-current rating on the Bonds to be lowered, for any one or more of the following purposes:

(a) To cure any ambiguity, formal defect or omission in this Indenture or to make any other change not materially prejudicial to the Bondowners or the owners of the Series 1994B Bonds;

(b) To grant to or confer upon the Trustee for the benefit of the Bondowners any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Bondowners or the Trustee or either of them;

(d) To modify, amend or supplement this Indenture or any indenture supplemental thereto in such manner as to permit the qualification of the Indenture under the Trust Indenture Act of 1939, as then amended, or any similar federal statute hereafter in effect or to permit the qualification of the Bonds for sale under the securities laws of any state of the United States;

(e) To evidence the appointment of a separate trustee or the succession of a new trustee hereunder;

(f) To make any other change which will become effective on a date on which the Bonds are subject to mandatory tender pursuant to Section 302 hereof, provided the substance of such change is described in the Trustee’s notice to Bondowners in connection with an election to retain Bonds;

(g) To make any other change which, in the sole judgment of the Trustee, does not materially adversely affect the interests of the Bondowners or the owners of the Series 1994B Bonds; it being understood that in exercising such judgment the Trustee may rely on the opinion of such counsel as it may select;

(h) To more precisely identify the Project or to substitute or add additional property thereto; and

(i) To conform this Indenture to the Code or other or future applicable federal law concerning tax-exempt obligations;

provided that, in the event a Supplemental Indenture is entered into with respect to any of the matters referred to in (a) through (b) above, a corresponding supplemental indenture, if appropriate under the circumstances, shall be entered into with respect to the Series 1994B Indenture.

Section 1002. Supplemental Indentures Requiring Consent of Bondowners. Exclusive of Supplemental Indentures covered by Section 1001 hereof and subject to the terms and provisions contained in this Section, and not otherwise, the Owners (within the meaning of this Indenture and the Series 1994B Indenture) of not less than 51% in aggregate principal amount of the Bonds and the Series 1994B Bonds then outstanding shall have the right from time to time, with the prior written consent of the Credit Enhancer and, if required pursuant to Section 1003 hereof, the Borrower, anything contained in this Indenture to the contrary notwithstanding, to consent to and approve the execution by the Issuer and the Trustee of such other Supplemental Indenture or Supplemental Indentures as shall be deemed necessary and desirable by the Issuer for the purpose of modifying, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Indenture or in any Supplemental Indenture (including any consents that may be given in connection with an exchange or tender offer); provided, however, that nothing in this Section contained shall permit or be construed as permitting without the consent of the Owners (within the meaning of this Indenture and the Series 1994B Indenture) of 100% of the Bonds and the Series 1994B Bonds then outstanding, the Issuer, the Trustee and the Credit Enhancer, (a) an extension of the maturity of the principal of or the scheduled date of payment of interest on any Bond issued hereunder, or (b) a reduction in the principal amount, redemption premium or any interest payable on any Bond, or (c) a privilege or priority of any Bond or Bonds over any other Bond or Bonds, or (d) a reduction in the aggregate principal amount of Bonds the Owners of which are required for consent to any such Supplemental Indenture, or (e) any modification of the redemption or tender features of the Bonds, or (f) any change which results in the lowering of the then-current rating on the Bonds; and provided, further, that in the event a Supplemental Indenture is entered into in accordance with this Section, a corresponding supplemental indenture, if appropriate under the circumstances, shall be entered into with respect to the Series 1994B Indenture.

If at any time the Issuer shall request the Trustee to enter into any such Supplemental Indenture for any of the purposes of this Section, the Trustee shall cause notice of the proposed execution of such Supplemental Indenture to be mailed to each Bondowner, each owner of Series 1994B Bonds and the Credit Enhancer (and a copy of such proposed Supplemental Indenture shall be mailed with such notice to the Credit Enhancer. Such notice shall briefly set forth the nature of the proposed Supplemental Indenture and shall state that copies thereof are on file at the Principal Office of the Trustee for inspection by all Bondowners and owners of the Series 1994B Bonds and a copy of such proposed supplemental Indenture shall be mailed with such notice to the Credit Enhancer. If within 60 days or such longer period as shall be prescribed by the Issuer following the mailing of such notice, the Credit Enhancer and the Owners (within the meaning of this Indenture and the Series 1994B Indenture) of not less than fifty-one percent (51%) in aggregate principal amount of the Bonds and the Series 1994B Bonds then outstanding at the time of the execution of any such Supplemental Indenture shall have consented to and approved the execution thereof as herein provided, no Owner of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the Issuer

from executing the same or from taking any action pursuant to the provisions thereof. Upon the execution of any such Supplemental Indenture as in this Section permitted and provided, this Indenture shall be and be deemed to be modified and amended in accordance therewith.

Section 1003. Borrower’s Consent to Supplemental Indentures. Anything herein to the contrary notwithstanding, a Supplemental Indenture under this Article which affects any rights or obligations of the Borrower shall not become effective unless and until the Borrower shall have consented in writing to the execution and delivery of such Supplemental Indenture. In this regard, the Trustee shall cause notice of the proposed execution and delivery of any such Supplemental Indenture together with a copy of the proposed Supplemental Indenture to be mailed to the Borrower at least 15 days prior to the proposed date of execution and delivery of any such Supplemental Indenture. Under no circumstances shall a failure by the Borrower to respond to such notice be construed as a consent for these purposes.

Section 1004. Opinion of Bond Counsel. Notwithstanding anything to the contrary in Sections 1001 or 1002, before the Issuer or the Trustee enter into any supplemental indenture pursuant to Section 1001 or 1002. there shall have been delivered to the Issuer, the Trustee, the Borrower and the Credit Enhancer an Opinion of Bond Counsel stating that such supplemental indenture is authorized or permitted by this Indenture and the Act, complies with their respective terms, will, upon the execution and delivery thereof, be valid and binding upon the Issuer in accordance with its terms and will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes.

[End of Article X]

ARTICLE XI

AMENDMENT OF AGREEMENT AND CREDIT FACILITY

Section 1101. Amendments, Changes or Modifications to the Agreement and Credit Facility Not Requiring Consent of Bondowners. So long as such does not cause the then-current rating on the Bonds to be lowered, the Trustee, with the prior written consent of the Credit Enhancer, may, without the consent of or notice to the Bondowners or the owners of the Series 1994B Bonds, consent to any amendment, change or modification of the Agreement and the Credit Facility, as may be required (i) by the provisions of such documents and this Indenture, (ii) for the purpose of curing any ambiguity or formal defect or omission in such documents, or in connection with any other change therein which, in the judgment of the Trustee, is not to the material prejudice of the Trustee or the Bondowners or the owners of the Series 1994B Bonds, (iii) so as to more precisely identify the Project or substitute or add additional property thereto, (iv) to conform the Agreement or the Credit Facility to the Code or other or future applicable Federal law concerning tax-exempt obligations or (v) in connection with any other change therein which, in the sole judgment of the Trustee, does not materially adversely affect the interests of the Bondowners or the owners of the Series 1994B Bonds; provided that, in the event a Supplemental Indenture is entered into with respect to any of the matters referred to in (i) through (iii) and (v) above, a corresponding Supplemental Indenture, if appropriate under the circumstances, shall be entered into with respect to the Series 1994B Indenture. In exercising such judgment, the Trustee may rely on the opinions of such counsel as it may select.

Section 1102. Amendments, Changes or Modifications to the Agreement and Credit Facility Requiring Consent of Bondowners. except as provided for in Section 1101 hereof, the Trustee shall not consent to any amendment, change or modification of the Agreement or the Credit Facility without the mailing of notice and the obtaining of the written approval or consent of the Credit Enhancer and the Owners (within the meaning of this Indenture and the Series 1994B Indenture) of not less than fifty-one percent (51%) in aggregate principal amount of the Bonds and the Series 1994B Bonds at the time outstanding given and obtained as provided in Section 1002 hereof (including any consents that may be given in connection with an exchange or tender offer); provided, however, that no such amendment, change or modification to such documents shall be entered into which permits, without the consent of the Owners (within the meaning of this Indenture and the Series 1994B Indenture) of 100% of the Bonds and the Series 1994B Bonds then outstanding, the Issuer, the Trustee and the Credit Enhancer, (a) a reduction of the maturity or expiration date of the Credit Facility, or (b) a change in the timing of payments under or the amounts required to be paid under the Credit Facility, or (c) a lowering of the then- current credit rating on the Bonds; and provided, further, that in the event a Supplemental Indenture is entered into in accordance with this Section, a corresponding supplemental indenture, if appropriate under the circumstances, shall be entered into with respect to the Series 1994B Indenture. If at any time the Issuer, the Credit Enhancer and the Borrower shall request the consent of the Trustee to any such proposed amendment, change or modification to such documents, the Trustee shall cause notice of such proposed amendment, change or modification to such documents to be given in the same manner as provided by Section 1002 hereof with respect to Supplemental Indentures and the corresponding supplemental indentures with respect to the Series 1994B Bonds. Such notice shall briefly set forth the nature of such proposed amendment, change or modification to such documents and shall state that copies of the same are on file at the Principal Office of the Trustee for

inspection by all Bondowners and a copy of such proposed amendment, change or modification to such document shall be mailed with such notice to the Credit Enhancer.

Section 1103. Opinion of Bond Counsel. Anything to the contrary in Sections 1101 or 1102 notwithstanding, before the Trustee shall consent to any amendment of the Agreement or the Credit Facility there shall have been delivered to the Trustee, the Borrower and the Credit Enhancer an Opinion of Bond Counsel stating that such amendment is authorized or permitted by this Indenture and the Act, complies with their respective terms, will, upon the execution and delivery thereof, be valid and binding upon the Issuer (if the Issuer is a party thereto) in accordance with its terms and will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes.

[End of Article XI]

ARTICLE XII

SATISFACTION AND DISCHARGE OF INDENTURE

Section 1201. Defeasance. If the Bonds are in an Interest Mode other than a Weekly Mode or Monthly Mode and if the Issuer shall pay or provide for the payment (other than by the Credit Enhancer) of any Bond or Bonds Outstanding in any one or more of the following ways:

(a) by paying or causing to be paid, from Available Moneys, the principal of (including redemption premium, if any) and interest on such Bonds, as and when the same become due and payable;

(b) by depositing with the Trustee, in trust and irrevocably setting aside exclusively for such payment, at or before maturity, Available Moneys in an amount sufficient to pay or redeem (when redeemable) Bonds (including the payment of redemption premium, if any, and interest payable on such Bonds to the maturity or redemption date thereof), provided that such moneys, if invested, shall be invested in Government Securities which are not subject to redemption and payment prior to maturity except at the option of the holder thereof (“Non-Callable Government Securities”) in an amount and with maturities, without consideration of any income or increment to accrue thereon, sufficient to pay or redeem (when redeemable) and discharge the indebtedness on such Bonds at or before their respective maturity dates, to pay the interest thereon as it comes due;

then such Bond or Bonds shall be deemed to be paid within the meaning of this Article and shall cease to be entitled to any lien, benefit or security under this Indenture, except for the purposes of any such payment from such moneys or Government Securities and except for the purposes of registration, transfer and exchange of such Bonds. If all the Bonds are not to be redeemed within 30 days, the Trustee shall mail, as soon as practicable, in the manner prescribed by Article IV hereof, a notice to the owners of such Bonds that the deposit required by (b) or (d) above has been made with the Trustee and that said Bonds are deemed to have been paid in accordance with this Article and stating the maturity or redemption date upon which moneys are to be available for the payment of the principal of or redemption price, if applicable, on said Bonds as specified in (1)) or (d) above.

Notwithstanding the foregoing, in the case of the Bonds which by their terms may be redeemed prior to the stated maturities thereof, no deposit under clauses (b) or (d) of the immediately preceding paragraph shall be deemed a payment of such Bonds as aforesaid until, as to all such Bonds which are to be redeemed prior to their respective stated maturities and as to

Bonds subject to interest rate adjustment prior to maturity which shall be redeemed prior to the next Interest Adjustment Date, proper notice of such redemption shall have been given in accordance with Article IV of this Indenture or irrevocable instructions shall have been given to the Trustee to give such notice at the time when such notice may be given pursuant to the provisions of this Indenture.

Notwithstanding any provisions of any other Section of this Indenture which may be contrary to the provisions of this Section, all Available Moneys or Non-Callable Government Securities or other investments acceptable to the Credit Enhancer set aside and held in trust pursuant to the provisions of this Section for the payment of Bonds (including redemption premium thereon, if any, and interest) shall be applied to and used solely for the payment of the particular Bonds (including redemption premium thereon, if any, and interest) with respect to which such Available Moneys and Non-Callable Government Securities or other investments acceptable to the Credit Enhancer have been so set aside in trust.

The Issuer may at any time surrender to the Trustee for cancellation by it any Bond previously authenticated and delivered which the Issuer may have acquired in any manner whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired.

Section 1202. Satisfaction and Discharge of the Indenture. If the Issuer shall pay the principal of, redemption premium, if any, and interest on all of the Bonds Outstanding in accordance with their terms, or shall provide for such payment as provided in Section 1201 hereof, and if the Issuer shall also pay or cause to be paid all other sums payable hereunder by the Issuer, then and in that case this Indenture and the estate and rights granted hereunder shall cease, terminate and become null and void, and thereupon the Trustee shall, upon Written Request of the Issuer, and an Opinion of Counsel, each stating that in the opinion of the signers all conditions precedent to the satisfaction and discharge of this Indenture have been complied with, forthwith execute proper instruments acknowledging satisfaction of and discharging this Indenture and the lien hereof; provided that, with respect to Bonds for which payment has been provided at the time but which has not in fact been paid, the liability of the Issuer in respect of such Bonds shall continue provided that the Owners thereof shall thereafter be entitled to payment only out of the moneys or Government Securities deposited with the Trustee as provided in this Article. The satisfaction and discharge of this Indenture shall be without prejudice to the rights of the Trustee to charge and be reimbursed by the Issuer and the Borrower for any expenditures which it may thereafter incur in connection herewith.

Notwithstanding the release and discharge of the lien of this Indenture as provided above, those provisions of this Indenture relating to the maturity of the Bonds, interest payments and dates thereof, tender and purchase provisions, exchange and transfer of Bonds, replacement of mutilated, destroyed, lost, stolen or Undelivered Bonds, the safekeeping and cancellation of Bonds, nonpresentment of Bonds, the holding of moneys in trust, redemption of Bonds and the duties of the Trustee, the Bond Registrar, the Paying Agent and the Remarketing Agent in connection with all of the foregoing, remain in effect and shall be binding upon the Trustee and the Bondowners.

The Issuer is hereby authorized to accept a certificate by the Trustee that the whole amount of the principal, redemption premium, if any, and interest so due and payable upon all of the Bonds

then Outstanding has been paid or such payment provided for in accordance with Section 1201 hereof as evidence of satisfaction of this Indenture, and upon receipt thereof shall cancel and erase the inscription of this Indenture from its records.

All moneys, funds, securities or other property remaining on deposit in all Funds or Accounts established under this Indenture (other than said moneys or Government Securities or other investments deposited in trust as above provided) shall, upon the full satisfaction of this Indenture, forthwith be transferred, paid over and distributed to the Credit Enhancer and the Borrower in the manner provided in Section 510 hereof.

If there is a release and discharge of the lien of this Indenture as provided above, the Trustee shall so notify the Rating Agency.

Section 1203. When Refunding is Not Permitted. None of the Bonds Outstanding hereunder may be refunded nor may this Indenture be discharged if under any circumstances the interest on the Bonds is thereby made subject to federal income taxation. In determining the foregoing, the Trustee may rely upon an Opinion of Bond Counsel (which opinion may be based upon a ruling or rulings of the Internal Revenue Service) to the effect that the interest on the Bonds proposed to be refunded will not be subject to federal income taxation, notwithstanding the satisfaction and discharge of this Indenture.

[End of Article XII]

ARTICLE XIII

MISCELLANEOUS PROVISIONS

Section 1301. Consents and Other Instruments by Bondowners. Any consent, request, direction, approval, objection or other instrument required by this Indenture to be signed and executed by the Bondowners may be in any number of concurrent writings of similar tenor and may be signed or executed by such Bondowners in person or by agent appointed in writing. Proof of the execution of any such instrument or of the writing appointing any such agent and of the ownership of Bonds, if made in the following manner, shall be sufficient for any of the purposes of this Indenture except for the assignment of the ownership of any Bond which proof shall be made by signature guaranty, and shall be conclusive in favor of the Trustee with regard to any action taken, suffered or omitted under any such instrument, namely:

(a) The fact and date of the execution by any person of any such instrument may be proved by the certificate of any officer in any jurisdiction who by law has power to take acknowledgments within such jurisdiction that the person signing such instrument acknowledged before him the execution thereof, or by affidavit of any witness to such execution.

(b) The fact of ownership of Bonds and the amount or amounts, numbers and other identification of such Bonds, and the date of holding the same shall be proved by the Bond Register.

In determining whether the Owners of the requisite principal amount of Bonds Outstanding have given any request, demand, authorization, direction, notice, consent or waiver under this Indenture, Bonds owned by, or held by or for the account of, the Issuer, the Borrower or any Affiliated Party of the Borrower shall be disregarded and deemed not to be Outstanding under this Indenture, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Bonds which the Trustee knows to be so owned shall be so disregarded. Notwithstanding the foregoing, Bonds (including Pledged Bonds) so owned which have been pledged in good faith shall not be disregarded if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Bonds and that the pledgee is not the Issuer, the Borrower or any Affiliated Party of the Borrower.

Section 1302. Notices. Except as otherwise provided herein, it shall be sufficient service of any notice, request, complaint, demand or other paper required by this Indenture to be given to or filed with the Issuer, the Trustee, the Credit Enhancer, the Remarketing Agent, the Borrower or the Bondowners if the same shall be duly mailed by first-class mail, postage pre-paid, certified or registered mail, or sent by telegram, telecopy or telex or other similar communication, or when given by telephone, confirmed in writing by first-class mail, postage pre-paid, certified or registered mail, or sent by telegram, telecopy or telex or other similar communication, on the same day, addressed:

(a) To the Issuer at:

South Carolina Jobs-Economic Development Authority

1201 Main Street, Suite 1750

Columbia, South Carolina 29201

Attention: Executive Director

Telephone: (803) 737-0079

Telecopier: (803) 737-0016

(b) To the Trustee and Tender Agent at:

Mark Twain Bank

8820 Ladue Road

St. Louis, Missouri 63124

Attention: Corporate Trust Division

Telephone: (314) 889-0753

Telecopier: (314) 889-0736

Heller Financial, Inc.

500 West Monroe Street, 12th Floor

Chicago, Illinois 60661

Attention: Portfolio Manager, Portfolio Organization, Corporate Finance Group

Telephone: (312) 441-7500

Telecopier: (312) 441-7367

With a copy to Legal Department, Portfolio Organization, Corporate Finance Group

(d) To the Remarketing Agent at:

Stern Brothers & Co.

8000 Maryland Avenue, Suite 1020

St. Louis, Missouri 63105

Attention: Mr. Terrence M. Finn

Telephone: (314) 727-5519

Telecopier: (314) 727-7313

(e) To the Borrower at:

Roller Bearing Company of America, Inc.

140 Terry Drive

Newtown, Pennsylvania 18940

Attention: Chief Financial Officer

Telephone: (215) 579-4300

Telecopier: (215) 579-4318

With a copy to:

Gibson, Dunn & Crutcher

2029 Century Park East, Suite 4000

Los Angeles, California 90067

Attention: Bruce D. Meyer

Telephone: (310) 552-8686

Telecopier: (310) 277-5827

(f) To the Bondowners:

Addressed to each of the Owners of all Bonds at the time Outstanding, as shown by the Bond Register.

(g) Initially, to the Rating Agency at:

Standard & Poor’s Ratings Group

25 Broadway

New York, New York 10004

Attention: LOC Rating Surveillance

Telephone: (212) 208-1846

Telecopier: (212) 208-0031

All notices given by first-class mail, certified or registered mail, postage prepaid, as aforesaid shall be deemed duly given as of the third day after the same are so mailed; provided that notices shall be deemed given as of the date they are sent by telecopy or otherwise received. A duplicate copy of each notice, certificate or other communication given hereunder by either the Issuer or the Trustee to the other shall also be given to the Borrower, the Remarketing Agent and the Credit Enhancer. In the event of notice to any party other than the Issuer or the Trustee, a copy of the notice shall be provided to the Borrower, the Remarketing Agent and the Credit Enhancer. In addition, the Trustee shall send to the Credit Enhancer, the Borrower, the Tender Agent and the Remarketing Agent a copy of each notice sent to the Bondowners. The Issuer, the Trustee, the Tender Agent, the Borrower, the Credit Enhancer and the Remarketing Agent may from time to time designate, by notice given hereunder to the others of such parties, such other address to which subsequent notices, certificates or other communications shall be sent.

Section 1303. Limitation of Rights Under the Indenture. With the exception of rights herein expressly conferred and as otherwise provided in this Section, nothing expressed or mentioned in or to be implied from this Indenture or the Bonds is intended or shall be construed to give any person other than the parties hereto, the Borrower, the Credit Enhancer and the Owners of the Bonds, any right, remedy or claim under or in respect to this Indenture. This Indenture and all of the covenants, conditions and provisions hereof are, except as otherwise provided in this Section, intended to be and are for the sole and exclusive benefit of the parties hereto, the Borrower, the Credit Enhancer and the Owners of the Bonds as herein provided.

The Trustee and the Issuer acknowledge and agree that each of the Borrower, the Credit Enhancer, the Remarketing Agent and the Tender Agent is a third-party beneficiary of those provisions herein which relate to the making of payments or giving of notice to or consents by or following the directions of or the performance of other acts to benefit it, and all such provisions shall be enforceable by such parties, and in addition acknowledge and agree that the Credit Enhancer shall for all purposes hereunder be treated as the Owner of Pledged Bonds.

Section 1304. Suspension of Mail Service. If, because of the temporary or permanent suspension of mail service or for any other reason, it is impossible or impractical to mail any notice in the manner herein provided, then such delivery of notice in lieu thereof as shall be made with the approval of the Trustee shall constitute a sufficient notice.

Section 1305. Business Days. If any date for the payment of principal of, redemption premium, if any, or interest on the Bonds or the taking of any other action hereunder is not a Business Day, then such payment shall be due, or such action shall be taken, on the first Business Day thereafter with the same force and effect as if made on the date fixed for payment or performance.

Section 1306. Immunity of Officers,. Employees and Members of Issuer. No recourse shall be had for the payment of the principal of or redemption premium, if any, or interest on any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement in this Indenture contained against any past, present or future officer, member, employee or agent of the Issuer, or of any successor body, as such, either directly or through the Issuer or any successor body, under any rule of law or equity, statute or constitution, or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such officers, members, employees or agents as such is hereby expressly waived and released as a condition of and consideration for the execution of this Indenture and the issuance of such Bonds.

Section 1307. Credit Enhancer’s Remedial Rights. The Issuer and the Trustee on behalf of the Bondowners hereby acknowledge and agree that should the Credit Enhancer exercise certain of its remedial rights under the Credit Documents, the Credit Enhancer (or an Affiliate or designee thereof) may become successor in interest to the Borrower under the Agreement. No such exercise of the Credit Enhancer’s rights under the Credit Documents, or succession of the Credit Enhancer (or an affiliate or designee thereof) to the interest of the Borrower under the Agreement, shall require, as a condition precedent, either (i) the further consent of the Issuer, the Trustee or the Bondowners, or (ii) the acceleration of the Bonds (unless the Credit Enhancer elects such in its sole discretion).

Section 1308. Severability. If any provision of this Indenture shall be held or deemed to be invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions or in all jurisdictions, or in all cases because it conflicts with any other provision or provisions hereof or any constitution or statute or rule of public policy, or for any other reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstances, or of rendering any other provision or provisions herein contained invalid, inoperative or unenforceable to any extent whatever. The invalidity of any one or more phrases, sentences, clauses or Sections in this Indenture contained shall not affect the remaining portions of this Indenture, or any part thereof.

Section 1309. Complete Agreement. The Issuer and the Trustee understand that oral agreements or commitments to loan money, extend credit or to forbear from enforcing repayment of a debt including promises to extend or renew such debt are not enforceable. To protect the Issuer and the Trustee from misunderstanding or disappointment, any agreements the Issuer and the Trustee reach covering such matters are contained in this Indenture, which is the complete and exclusive statement of the agreement between the Issuer and the Trustee, except as the Issuer and the Trustee may later agree in writing (subject to the provisions of Article X of this Indenture) to modify this Indenture.

Section 1310. Execution in Counterparts. This Indenture may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Section 1311. Governing Law. This Indenture shall be governed exclusively by and construed in accordance with the applicable laws of the State of South Carolina.

[End of Article XIII]

IN WITNESS WHEREOF, the South Carolina Jobs-Economic Development Authority has caused these presents to be signed in its name and behalf and its corporate seal to be hereunto affixed and attested by its duly authorized officers, and to evidence its acceptance of the trusts hereby created, the Trustee, has caused these presents to be signed in its name and behalf and its corporate seal to be hereunto affixed and attested by its duly authorized officers, all as of the day and year first above written.

	SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT
	AUTHORITY


	By		/s/ Robert L. Mobley
			Chairman, Board of Directors
[SEAL]

ATTEST:


/s/ [ILLEGIBLE]
Executive Director

	MARK TWAIN BANK as Trustee By


[SEAL]	By	/s/ [ILLEGIBLE]
		Vice President


ATTEST:


/s/ [ILLEGIBLE]
Assistant Secretary

EXHIBIT A

BOND FORM

(Form of Face of Bond)

REGISTERED

REGISTERED NO. R-

UNITED STATES OF AMERICA

State of South Carolina

SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY

VARIABLE RATE DEMAND

INDUSTRIAL DEVELOPMENT REVENUE BOND

(Roller Bearing Company of America, Inc. Project)

Series 1994A

Interest Rate:	Maturity Date:	Dated Date:	CUSIP:

	September 1, 2017

Registered Owner:

Principal Amount:

Dollars

THIS BOND AND THE RELATED CREDIT FACILITY INITIALLY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “SECURITIES ACT”) OR THE SECURITIES LAWS OF ANY STATE. ACCORDINGLY, BONDS THAT ARE SUBJECT TO THE BENEFITS OF THE CREDIT FACILITY MAY BE SOLD, REMARKETED, OR OTHERWISE TRANSFERRED ONLY IN TRANSACTIONS IN WHICH THE BONDS AND THE RELATED CREDIT FACILITY ARE REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES STATUTES OR IN TRANSACTIONS IN WHICH THE BONDS AND THE RELATED CREDIT FACILITY ARE EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE ISSUER AND THE CREDIT ENHANCER HAVE NO OBLIGATION TO CAUSE THE BONDS OR THE CREDIT FACILITY TO BE REGISTERED UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS OR TO COMPLY WITH ANY EXEMPTION THAT MAY BE AVAILABLE UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, INCLUDING, WITHOUT LIMITATION, RULE 144A UNDER THE SECURITIES ACT. THE TRANSFER RESTRICTIONS DESCRIBED HEREIN DO NOT PRECLUDE THE REGISTERED OWNER OF THIS BOND FROM TENDERING THIS BOND TO THE TENDER AGENT AS DESCRIBED HEREIN. THE HOLDER HEREOF AGREES THAT ANY TRANSFER OF THIS BOND WILL BE IN ACCORDANCE WITH THE INDENTURE (AS DESCRIBED HEREIN).

THIS BOND IS SUBJECT TO MANDATORY TENDER FOR PURCHASE AT THE TIME AND IN THE MANNER HEREINAFTER DESCRIBED, AND MUST BE SO TENDERED OR WILL BE

A-1

DEEMED TO HAVE BEEN SO TENDERED UNDER CERTAIN CIRCUMSTANCES DESCRIBED HEREIN.

The South Carolina Jobs-Economic Development Authority (the “Issuer”), a body politic and corporate and an agency of the State of South Carolina, for value received hereby acknowledges itself obligated to, and promises to pay, the Registered Owner identified above, or registered assigns, but only out of the sources pledged for that purpose as hereinafter provided, and not otherwise, on the Maturity Date set forth above or on prior redemption of the Principal Amount above and interest thereon from the most recent Interest Payment Date (as hereinafter defined) to which interest has been paid or for which due provision has been made or, if no interest has been paid, from the Dated Date set forth above, at the rate of interest per annum determined as set forth herein, until the Issuer’s obligation with respect to payment of said Principal Amount is discharged.

Principal of, redemption premium, if any, and interest on this Bond are payable in any coin or currency of the United States of America which, at the respective dates of payment thereof, is legal tender for the payment of public and private debts, and such principal and premium, if any, on this Bond shall be payable at the Principal Office of Mark Twain Bank, St. Louis, Missouri, as trustee (the “Trustee”), and, with respect to Tender Price, at the Principal Office of Mark Twain Bank, St. Louis, Missouri, as tender agent (the “Tender Agent”) upon presentation and surrender of this Bond. Payment of interest on this Bond will be made by check or draft of the Trustee mailed to the person in whose name this Bond is registered on the Bond Register as of the close of business of the Trustee on the Record Date for such Interest Payment Date, except that interest not duly paid or provided for when due will be payable to the person in whose name this Bond is registered at the dose of business on the Business Day immediately preceding the date of payment of such defaulted interest as provided for in the hereinafter referred to Indenture. In the case of an interest payment to any Owner of $1,000,000 or more in aggregate principal amount of Bonds as of the commencement of business of the Trustee on the Record Date for a particular Interest Payment Date or in the case of the purchase from an Owner of $1,000,000 or more in aggregate principal amount of Bonds on the Tender Date, payment of interest or the Tender Price, as applicable, will be made by wire transfer to such Owner upon written notice to the Trustee from such Owner containing the wire transfer address (which shall be in the continental United States) to which such Owner wishes to have such wire directed and, with regard to interest payments, such written notice is given by such Owner to the Trustee not less than fifteen (15) days prior to such Record Date and regarding payment of the Tender Price, which written notice accompanies such Owner’s Notice of Election to Tender Bonds.

The Bonds and the interest thereon are limited obligations of the Issuer payable solely out of the Revenues and other moneys pledged thereto and held by the Trustee as provided in the Indenture and are secured by a transfer, pledge and assignment of and a grant of a security interest in the Trust Estate to the Trustee and in favor of the Owners of the Bonds, as provided in the Indenture. THE BONDS AND THE PREMIUM, IF ANY, AND INTEREST THEREON (INCLUDING ANY AMOUNTS PAYABLE IN CONNECTION WITH ANY PREPAYMENT OR PURCHASE OF THE BONDS) ARE LIMITED OBLIGATIONS OF THE ISSUER; THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE BONDS (INCLUDING ANY AMOUNTS PAYABLE IN CONNECTION WITH ANY PURCHASE OF THE BONDS) ARE PAYABLE SOLELY FROM THE REVENUES OR MONEYS TO BE RECEIVED IN CONNECTION WITH THE FINANCING OF THE PROJECT OR FROM ANY OTHER MONEYS MADE AVAILABLE TO THE ISSUER FOR SUCH PURPOSE; NEITHER THE BONDS NOR

A-2

THE INTEREST THEREON (INCLUDING ANY AMOUNTS PAYABLE IN CONNECTION WITH ANY PURCHASE OF THE BONDS) SHALL EVER CONSTITUTE AN INDEBTEDNESS OR A CHARGE AGAINST THE GENERAL CREDIT OF THE STATE, THE ISSUER, OR ANY POLITICAL SUBDIVISION OF THE STATE, OR OF THE TAXING POWERS OF THE STATE WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION AND SHALL NEVER CONSTITUTE OR GIVE RISE TO ANY PECUNIARY LIABILITY OF THE STATE, THE ISSUER, OR ANY POLITICAL SUBDIVISION OF THE STATE, THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS TO WHICH THE FAITH OR CREDIT OF THE STATE, THE ISSUER, OR ANY POLITICAL SUBDIVISION OF THE STATE, OR TAXING POWER OF THE STATE, IS PLEDGED.

No recourse shall be had for the payment of the principal of, premium, if any or interest on, any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement in the Indenture contained, against any past, present or future director, trustee, officer, official, employee or agent of the Issuer, or any director, trustee, officer, official, employee or agent of any successor to the Issuer, as such, either directly or through the Issuer or any successor to the Issuer, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any director, trustee, officer, official, employee or agent, as such, is hereby expressly waived and released as a condition of and consideration for the execution of the Indenture and the issuance of any of the Bonds.

Capitalized terms used herein shall have the meanings set forth in the Trust Indenture, dated as of September 1, 1994 (the “Indenture”), by and between the Issuer and the Trustee with respect to the Bonds unless otherwise defined herein.

ADDITIONAL PROVISIONS OF THIS BOND ARE SET FORTH ON THE REVERSE HEREOF.

This Bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Indenture until the Certificate of Authentication hereon shall have been manually signed by an authorized officer of the Trustee.

IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions and things required to exist, to happen and to be performed precedent to and in the issuance of this Bond have existed, have happened and have been performed in due form, time and manner as required by law.

A-3

IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed and attested by the printed facsimile signatures of its duly authorized officers, and its corporate seal to be printed hereon, all as of the Dated Date shown above.

[SEAL]		SOUTH CAROLINA JOBS-ECONOMIC
		DEVELOPMENT AUTHORITY


		By	(Facsimile Signature)
			Chairman, Board of Directors

ATTEST:

By	(Facsimile Signature)
	Executive Director

AUTHENTICATION CERTIFICATE

The undersigned hereby certifies that this is one of the Bonds described in the within-mentioned Indenture.

Date of Authentication:

	MARK TWAIN BANK, as Trustee

	By
		Authorized Signatory

A-4

(Form of Reverse of Bond)

CERTAIN DEFINITIONS

Unless otherwise defined herein, capitalized words and terms used in this Bond shall have the meanings ascribed to such terms in the Indenture. In addition, the following words and terms as used in this Bond shall have the following meanings:

“Agreement” means the Loan Agreement, including the Exhibits attached thereto, dated as of the date of the Indenture, between the Issuer and the Borrower, with respect to the Bonds, as such Agreement may be from time to time amended, restated or supplemented in accordance with the provisions of the Agreement and the Indenture.

“Alternate Credit Facility” means any alternate credit facility designated and qualified as such and provided in accordance with the Indenture.

“Alternate Credit Facility Date” means a Business Day on or prior to the Termination Date on which the Borrower has complied with all requirements of the Indenture regarding the substitution of an Alternate Credit Facility for the Credit Facility then in effect.

“Annual Mode” means an Interest Mode during which the interest rate on the Bonds is determined at twelve month intervals, as provided in the Indenture.

“Authorized Denominations” means (i) in the case of Bonds in a Weekly Mode or Monthly Mode, $100,000 and any integral multiple of $5,000 in excess thereof; (ii) in the case of Bonds in a Semiannual Mode, Annual Mode or Multiyear Mode, $5,000 or any integral multiple thereof, provided that if the Credit Facility is not exempt from registration under the Securities Act of 1933 and has not been registered thereunder, as amended, then the Authorized Denomination shall be $100,000 and any integral multiple of $5,000 in excess thereof; or (iii) in the case of a Bond which is a Pledged Bond, $100,000 or any integral multiple of $5,000 in excess thereof.

“Bond Registrar” means the Trustee, when acting as such.

“Business Day” means any day which is not (i) a Saturday, a Sunday or any other day on which banking institutions in the City of New York, New York or the city in which the principal corporate trust office of the Trustee, and the principal office of the Remarketing Agent, the Tender Agent or the Credit Enhancer is located, are required or authorized to close or (ii) a day on which the New York Stock Exchange is closed.

“Credit Facility” means the letter of credit initially issued by Heller Financial, Inc. or any Alternate Credit Facility issued by the Credit Enhancer in substitution therefor in accordance with the Indenture, as the same may be amended, supplemented, extended or renewed from time to time in accordance with the Loan Agreement and the Indenture.

“Financial Institution” means any qualified institutional buyer, as that term is defined from time to time in 17 C.F.R. ss.230.144A(a)(i) (“Rule 144A”).

A-5

“Immediate Notice” means notice by telephone, telegram, telex, telecopier or other telecommunication device to such phone numbers or addresses as are specified in the Indenture or such other phone number or address as the addressee shall have directed in writing, promptly followed by written notice by first-class mail postage prepaid to such addresses.

“Interest Mode” means a period of time relating to the frequency with which the interest rate on the Bonds is determined pursuant to the Indenture, which Interest Mode may be a Weekly Mode, a Monthly Mode, a Semiannual Mode, an Annual Mode or a Multiyear Mode.

“Interest Mode Adjustment Notice” means the notice of a new Interest Mode with respect to any Bonds in accordance with the Indenture.

“Interest Payment Date” means the date on which an interest installment is required to be paid on the Bonds to the Owners thereof, (i) with respect to all Bonds other than Pledged Bonds, (1) as to the first Interest Period, October 3, 1994; (2) as to any Weekly Mode or Monthly Mode, the first Business Day of each month; (3) as to any Semiannual Mode, Annual Mode or Multiyear Mode, each September 1, and March 1, commencing with the first such September 1, or March 1 following the Interest Mode Adjustment Date, or the next succeeding Business Day thereafter if any such September 1, or March 1, is not a Business Day; and (4) an Interest Mode Adjustment Date; and (ii) with respect to Pledged Bonds, the first Business Day of each calendar month and the date of sale of Pledged Bonds.

“Mandatory Purchase Date” means each date designated by the Credit Enhancer for purchase of the Bonds in accordance with the Indenture.

“Maximum Rate” means the lesser of (i) 15% per annum or (ii) the rate utilized in the Credit Facility for purposes of computing the interest component thereof.

“Monthly Mode” means an Interest Mode during which the interest rate on the Bonds is determined in monthly intervals as set forth in the Indenture.

“Notice of Election to Tender/Retain Bonds” means the Notice of Election to Tender/Retain Bonds in substantially the form attached to the Indenture delivered by a Bondowner to the Tender

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Agent (i) which contain a demand for the purchase of Bonds on the Tender Date, or (ii) following receipt of a notice of a mandatory tender of Bonds which contain an election to retain Bonds. “Notice of Election to Tender Bonds” shall refer to those provisions of the Notice of Election to Tender/Retain Bonds which relate to the election to tender Bonds as provided in the Indenture. “Notice of Election to Retain Bonds” shall refer to those provisions of the Notice of Election to Tender/Retain Bonds which relate to the election to retain Bonds.

“Rate Adjustment Date” means the date as of which the interest rate determined for an Interest Mode shall be effective, which (i) during a Weekly Mode shall be Thursday of each week (whether or not a Business Day); (ii) during a Monthly Mode shall be the first calendar day of each month; (iii) during a Semiannual Mode shall be the first calendar day of such Semiannual Mode which shall be September 1 or March 1 and the first day following each six-month period thereafter; and, (iv) during an Annual Mode or a Multiyear Mode shall be the first calendar day of such Annual Mode or Multiyear Mode, which shall be September 1, and thereafter the first calendar day following the completion of the then current Annual Mode or Multiyear Mode. The initial Rate Adjustment Date is September 15, 1994.

“Rate Adjustment Notice” means the Rate Adjustment Notice to be mailed by the Trustee in the form and in accordance with the Indenture.

“Rate Determination Date” means no later than 4:00 p.m., New York Time, on the Business Day immediately preceding a Rate Adjustment Date for a Weekly or a Monthly Mode, and on the third (3rd) Business Day immediately preceding a Rate Adjustment Date for a Semiannual Mode, Annual Mode or Multiyear Mode.

“Rate Period” means the period from a Rate Adjustment Date to, but not including, the next Rate Adjustment Date.

“Record Date” means, with respect to Bonds in a Semiannual Mode, an Annual Mode or a Multiyear Mode, the fifteenth calendar day, whether or not a Business Day of the month, preceding such Interest Payment Date, and, with respect to Bonds in a Weekly Mode or Monthly Mode, the fifth calendar day immediately preceding such Interest Payment Date.

“Semiannual Mode” means an Interest Mode during which the interest rate on the Bonds is determined at six-month intervals as set forth in the Indenture.

“Tender Agent” means initially the Trustee and any successor tender agent appointed pursuant to the Indenture. The Tender Agent shall act as Paying Agent as to Tendered Bonds.

“Tender Date” means (a) each date designated by a Bondowner for purchase of any Bonds in accordance with the provisions of the Indenture, and (b) each date on which Bonds are required to be tendered in accordance with the provisions of the Indenture, including any Mandatory Purchase Date, whether or not such Bonds are actually tendered.

“Tender Price” means 100% of the principal amount of any Bond tendered pursuant to the provisions of the Indenture plus interest accrued and unpaid thereon to, but not including, the Tender Date.

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“Tendered Bonds” means (a) any Bonds tendered by a Bondowner for purchase pursuant to the optional redemption provisions of the Indenture, and (b) any Bonds required to be tendered for purchase pursuant to the mandatory tender provisions of the Indenture, in each case whether or not such Bonds are actually tendered.

“Termination Date” means (i) if the Credit Facility is not a letter of credit, the maturity or expiration date of the Credit Facility or (ii) if the Credit Facility is a letter of credit, the Interest Payment Date which is at least five (5) days preceding the date on which the Credit Facility is to expire pursuant to its terms, in each case including any extension of such maturity or expiration date.

“Weekly Mode” means an Interest Mode during which the interest rate on the Bonds is determined in weekly intervals as set forth in the Indenture.

GENERAL PROVISIONS

This Bond is one of a series of Bonds of the Issuer limited in aggregate original principal amount to $7,700,000 and designated as Variable Rate Demand Industrial Development Revenue Bonds (Roller Bearing Company of America, Inc. Project) Series 1994A (the “Bonds”). All of the Bonds are issued under a Trust Indenture dated as of September 1, 1994 (the “Indenture”), between the Issuer and the Trustee, to provide funds to make a loan (the “Loan”) to Roller Bearing Company of America, Inc., a Delaware corporation (the “Borrower”), under a Loan Agreement dated as of September 1, 1994 (the “Agreement”), between the Issuer and the Borrower. The Loan shall provide funds to finance the Project (as defined in the Agreement) and to pay certain costs of issuance, all by the authority of and in full compliance with the provisions, restrictions and limitations of the Constitution and statutes of the State of South Carolina, including particularly Title 41, Chapter 43, Code of Laws of South Carolina 1976, as amended, and pursuant to proceedings duly had by the Issuer.

Concurrently with the original issuance herewith, the Issuer has delivered its $3,000,000 aggregate original principal amount Variable Rate Demand Industrial Development Revenue Bonds (Roller Bearing Company of America, Inc. Project) Series 1994B (the “Series 1994B Bonds”).

TO INITIALLY SECURE THE PAYMENT OF THE PRINCIPAL OF AND INTEREST ON THE BONDS, THE BORROWER HAS CAUSED HELLER FINANCIAL, INC. A DELAWARE CORPORATION (THE “CREDIT ENHANCER”), TO DELIVER AN IRREVOCABLE TRANSFERABLE DIRECT-PAY LETTER OF CREDIT (THE “CREDIT FACILITY”) TO THE TRUSTEE. SUBJECT TO CERTAIN CONDITIONS, THE CREDIT FACILITY MAY BE REPLACED BY AN ALTERNATE CREDIT FACILITY. UNDER THE CREDIT FACILITY, THE CREDIT ENHANCER IS OBLIGATED TO PAY AMOUNTS SUFFICIENT FOR THE PAYMENT OF (A) THE PRINCIPAL OF THE BONDS OR THE PORTION OF THE TENDER PRICE CORRESPONDING TO THE PRINCIPAL OF THE BONDS, AND (B) ACCRUED INTEREST ON THE BONDS OR THE PORTION OF THE TENDER PRICE OF THE BONDS CORRESPONDING TO ACCRUED INTEREST THEREON. THE CREDIT FACILITY IS SCHEDULED TO TERMINATE ON SEPTEMBER 15, 1999, UNLESS EXTENDED OR TERMINATED EARLIER PURSUANT TO ITS TERMS.

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Counterparts or copies of the Indenture and the other documents referred to herein are on file at the Principal Office of the Trustee in St. Louis, Missouri, and reference is hereby made thereto and to the documents referred to therein for the provisions thereof, including the provisions with respect to the rights, obligations, duties and immunities of the Issuer, the Trustee, the Credit Enhancer, the Borrower and the Registered Owners of the Bonds under such documents, to all of which the Registered Owner hereof, by acceptance of this Bond, assents. The Registered Owner of this Bond shall have no right to enforce the provisions of the Indenture or to institute, appear in or defend any suit or other proceedings with respect thereto, except as provided in the Indenture. The Indenture and other documents referred to therein may be modified or amended to the extent permitted by and as provided therein. Upon the occurrence of certain Events of Default (as defined in the Indenture), all Bonds may be declared immediately due and payable as provided in the Indenture. Interest on the Bonds shall cease to accrue on the date of such declaration. Subject to the limitations provided for in the Indenture, this Bond may be exchanged for a like aggregate principal amount of Bonds in Authorized Denominations. Bonds are transferable by the Registered Owner thereof in person or by such Owner’s attorney duly authorized in writing at the Principal Office of the Bond Registrar, but only in the manner and subject to the limitations provided for in the Indenture and upon surrender and cancellation of this Bond. Such limitations include a requirement that Bonds that are subject to the benefits of the Credit Facility may be sold, remarketed or otherwise transferred only in transactions in which the Bonds and the related Credit Facility are registered under the Securities Act and any applicable state securities statutes or in transactions in which the Bonds and the related Credit Facility are exempt from the registration requirements of the Securities Act and any applicable state securities laws, and any Bondowner desiring to effect such transfer is required to indemnify the Issuer, the Trustee and the Credit Enhancer against any liability, cost or expense (including attorneys’ fees) that may result if the transfer is not so exempt, or is not made in accordance with such federal and state laws. Upon such transfer a new Bond or Bonds in Authorized Denominations for the same aggregate principal amount will be issued to the transferee in exchange. The Bond Registrar may require a Registered Owner, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture in connection with the exchange or transfer. The Issuer, the Tender Agent and the Trustee may treat the Registered Owner of this Bond as the absolute Owner for the purpose of receiving payment as herein provided and for all other purposes and none of them shall be affected by any notice to the contrary.

INTEREST RATE PROVISIONS

(a) Generally. The interest rate on the Bonds shall be separately determined by Stern Brothers & Co., St. Louis, Missouri, or any successor or assign (the “Remarketing Agent”), as provided in the Indenture and as summarized below. In no event shall the interest rate borne by the Bonds at any time exceed the Maximum Rate. Interest accrued on the Bonds during each Interest Period shall be paid on the next succeeding Interest Payment Date and, while the Bonds are in a Weekly Mode or a Monthly Mode, shall be computed on the basis of a year of 365 or 366 days, as appropriate, for the actual number of days elapsed and, while the Bonds are in a Semiannual Mode, an Annual Mode or a Multiyear Mode, shall be computed on the basis of a year of 360 days and twelve 30-day months. Each determination of the interest rate for the Bonds, as provided in the Indenture, shall be conclusive and binding upon the Bondowners, the Issuer, the Borrower, the Tender Agent, the Remarketing Agent, the Credit Enhancer and the Trustee. Upon request, the Remarketing Agent shall give the Issuer, the Trustee, the Tender Agent, the Credit

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Enhancer, the Borrower or any Bondowner Immediate Notice of the interest rate on the Bonds at any time.

(b) Weekly Mode. The interest rate for Bonds in a Weekly Mode shall be determined in the following manner. On each Rate Determination Date, the Remarketing Agent shall determine the interest rate which such Bonds shall bear during the Rate Period following such Rate Determination Date. The interest rate so determined shall be effective on the Rate Adjustment Date. Promptly after each Rate Adjustment Date, the Remarketing Agent shall give written notice of the interest rate so set to the Trustee, the Credit Enhancer and the Borrower. On each Interest Payment Date the Trustee shall mail to each Bondowner a written statement showing the interest rates for such Bonds during the preceding Interest Period.

(c) Monthly Mode. The interest rate for any Bonds in a Monthly Mode shall be determined in the following manner. On each Rate Determination Date, the Remarketing Agent shall determine the interest rate which such Bonds shall bear during the Rate Period following such Rate Determination Date. The interest rate so determined shall be effective on the Rate Adjustment Date. Promptly after each Rate Determination Date, the Remarketing Agent shall give written notice of the interest rate so set to the Borrower, the Credit Enhancer and the Trustee. On each Interest Payment Date the Trustee shall mail to each Bondowner a written statement showing the interest rates during the preceding Interest Period.

(d) Semiannual Mode, Annual Mode or Multiyear Mode. The interest rate for Bonds in a Semiannual Mode, an Annual Mode or a Multiyear Mode shall be determined in the following manner. Not less than 30 days nor more than 35 days before each Rate Adjustment Date, the Remarketing Agent shall determine the interest rate (the “Preliminary Rate”) which the Bonds would bear if such day were a Rate Determination Date. The Remarketing Agent shall give Immediate Notice of the Preliminary Rate to the Borrower, the Credit Enhancer and the Trustee. The Trustee shall thereupon mail, not less than 25 days prior to the Rate Adjustment Date, to each Bondowner a Rate Adjustment Notice. On the Rate Determination Date the Remarketing Agent shall determine the interest rate which each of such Bonds shall bear for each such Rate Period, which rate may be less than, equal to, or greater than the Preliminary Rate. By Immediate Notice on such Rate Determination Date, the Remarketing Agent shall give written notice of the interest rate so set to the Borrower, the Credit Enhancer, the Tender Agent and the Trustee, and the Trustee shall mail to all Bondowners written notice of the interest rate so determined.

(e) Interest Modes. The Bonds shall initially be in a Weekly Mode. The Interest Mode for the Bonds may be changed from time to time at the option of the Borrower, with the prior written consent of the Credit Enhancer exercised as provided in the Indenture, to another Interest Mode on an Interest Payment Date on which the Bonds are subject to optional redemption pursuant to the Indenture at a redemption price equal to the principal amount thereof, plus accrued interest, without premium, as selected by the Borrower. The Borrower may exercise such option at any time by giving written notice not more than 60 nor less than 45 days prior to the Interest Mode Adjustment Date to the Issuer, the Trustee, the Remarketing Agent, the Tender Agent and the Credit Enhancer stating its election to convert the Interest Mode for the Bonds to another Interest Mode, which notice shall specify the new Interest Mode and the Interest Mode Adjustment Date. Such Interest Mode Adjustment Date shall be a Rate Adjustment Date for the Bonds in such new Interest Mode. Upon the exercise of such option by the Borrower and upon the Trustee’s receipt of the

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prior written consent of the Credit Enhancer to the exercise of such option, not less than 30 days prior to the Interest Mode Adjustment Date, the Trustee shall mail an Interest Mode Adjustment Notice to each Owner of Bonds, and, in the event of a conversion to a Weekly Mode or a Monthly Mode from any other Interest Mode, a Notice of Election to Tender Bonds in substantially the form as provided in the Indenture.

REDEMPTION PROVISIONS

The Bonds are subject to redemption prior to maturity as provided in the Indenture which redemption provisions are summarized as follows:

Optional Redemption. Bonds (other than any Bonds in a Multiyear Mode) are subject to redemption prior to maturity at the option of the Issuer upon instructions from the Borrower with the prior written consent of the Credit Enhancer, in whole or in part in Authorized Denominations, on any Interest Payment Date at 100% of the principal amount thereof plus accrued interest to the redemption date, first, from proceeds of a payment under the Credit Facility and, second, from other Available Moneys. Bonds in a Multiyear Mode are subject to redemption prior to maturity at the option of the Issuer upon instructions from the Borrower with the prior written consent of the Credit Enhancer, in whole or in part in Authorized Denominations, on any Interest Payment Date at the redemption prices set forth below plus accrued interest to the redemption date, first, from proceeds of a payment under the Credit Facility and, second, from other Available Moneys:

OPTIONAL REDEMPTION IN MULTIYEAR MODE

Length of	Redemption Prices
Multiyear Mode	as a Percentage of	Call Protection
(In Years)*	Principal Amounts	Period*

Greater than 10	102% after 7 years	7 years
	declining 1/2% per 12
	months to 100%

Less than or equal	102% after 4 years	4 years
to 10 and greater	declining 1/2% per 12
than 7	months to 100%

Less than or equal	102% after 3 years	3 years
to 7 and greater	declining 1% per 12
than 5	months to 100%

Less than or equal	101% after 2 years	2 years
to 5 and greater	declining 1/2% per 6
than 2	months to 100%

Less than or equal	100 1/2% after 1 year	1 year
to 2 and greater	declining 1/2% per 6
than 1	months to 100%

* Measured from and including the first day of such Rate Period.

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Mandatory Redemption. The Bonds are also subject to mandatory redemption by the Issuer in each case, first, from proceeds of a payment under the Credit Facility and, second, from other Available Moneys at 100% of the principal amount thereof, without premium, plus accrued interest to the date of redemption (i) in whole on the earliest practicable date for which notice can be given, if a Determination of Taxability occurs with respect to the Bonds, (ii) immediately in whole, in the event the Trustee shall receive notice from the Credit Enhancer of the occurrence of a default under the Letter of Credit Agreement and irrevocable instructions to draw on the Credit Facility, such notice being conclusive and binding as to the occurrence of a default under the Letter of Credit Agreement, and (iii) in part on the earliest practicable date for which notice can be given, from proceeds of the Bonds remaining in the Project Fund on the Completion Date. In addition, the Bonds shall be subject to redemption by the Issuer, at the option and upon instructions from the Borrower with the prior written consent of the Credit Enhancer, in whole or in part at any time on the earliest practicable date for which notice can be given, upon the occurrence of a condemnation, loss of tide or casualty loss to the Project at 100% of the principal amount thereof, without premium, plus accrued interest to the date of redemption.

The Trustee shall select Bonds for redemption as provided in the Indenture. The Trustee shall cause notice of any such redemption to be given as provided in the Indenture to the Registered Owner of the Bonds designated for redemption in whole or in part, at its address as shown on the Bond Register by mailing a copy of the redemption notice by first-class mail, postage prepaid, at least 15 and not more than 30 days prior to the redemption date. The failure of the Trustee to give notice to any Bondowner or any defect of such notice shall not affect the validity of the redemption of any other Bonds and provided further that no such prior notice of redemption is required for a mandatory redemption because of a default under the Letter of Credit Agreement. On the date fixed for redemption by notice given as provided in the Indenture, the Bonds so called for redemption shall become and be due and payable at the redemption price provided for redemption of such Bonds on such date.

TENDER PROVISIONS

Optional Tender. While the Bonds are in a Weekly Mode or Monthly Mode, any Bond or portion thereof shall be purchased on the Tender Date by the Tender Agent on the demand of the Owner thereof, at the Tender Price, upon delivery to the Tender Agent on a Business Day at its Principal Office of an irrevocable written notice in the form of the Notice of Election to Tender Bonds which states (A) the principal amount and number of such Bond (and the portion of such Bond to be purchased if less than the full principal amount is to be purchased), the name and the address of such Owner and the taxpayer identification number, if any, of such Owner and (B) that such Bond, or portion thereof, is to be purchased on a day (which shall be the Tender Date), which day will be a Business Day which is at least seven (7) calendar days after the receipt by the Tender Agent of such Notice of Election to Tender Bonds. Such Notice of Election to Tender Bonds shall be deemed received on a Business Day if received by the Tender Agent no later than 3:00 p.m., New York Time, on such Business Day. Any Notice of Election to Tender Bonds received by the Tender Agent after 3:00 p.m., New York Time, shall be deemed received on the next succeeding Business Day.

Any Owner of Bonds who has demanded purchase of its Bond or portion thereof as described above shall deliver such Bond (with an appropriate transfer of registration form executed

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in blank, together with a signature guaranty) (together with, in the case of any Bond with a specified Tender Date prior to an Interest Payment Date and after the related Record Date, a due-bill check in form satisfactory to the Tender Agent for interest due on such Bond on such Interest Payment Date) to the Tender Agent at its Principal Office prior to 10:30 a.m., New York Time, on the Tender Date specified in the aforesaid written notice.

Mandatory Tender.

(1) On Termination Date or Interest Mode Adjustment Date. All Bonds are required to be tendered to the Tender Agent for purchase on the Termination Date or an Interest Mode Adjustment Date; provided, however, that if the credit enhancement requirements of the Indenture are met, there shall not be so tendered on the Termination Date or the Interest Mode Adjustment Date, as applicable, any Bonds or portion thereof which will be in Authorized Denominations with respect to which the Owners thereof have delivered to the Tender Agent by hand or by mail at its Principal Office a properly completed Notice of Election to Retain Bonds, together with a signature guaranty, on or prior to the fifth Business Day next preceding the Termination Date or the Interest Mode Adjustment Date, as applicable. Any Bondowner required to tender Bonds under this subsection (1) shall tender its Bonds to the Tender Agent for purchase at its Principal Office prior to 10:30 a.m., New York Time, on the Termination Date or the Interest Mode Adjustment Date, as applicable. The failure to tender Bonds on any such date is the equivalent of a tender and such Bonds shall be converted to Undelivered Bonds and replacement Bonds shall be executed, authenticated and delivered in the place of such Undelivered Bonds and such replacement Bonds may be offered and sold by the Remarketing Agent in accordance with the Indenture and Remarketing Agreement if the credit enhancement requirements of the Indenture are met.

(2) On Alternate Credit Facility Date. While the Bonds are in an Interest Mode other than a Multiyear Mode, all Bonds are required to be tendered to the Tender Agent for purchase on an Alternate Credit Facility Date; provided, however, that there shall not be so tendered on the Alternate Credit Facility Date any Bonds or portion thereof which will be in Authorized Denominations with respect to which the Owners thereof have delivered to the Tender Agent by hand or by mail at its Principal Office a properly completed Notice of Election to Retain Bonds, together with a signature guaranty, on or prior to the fifth Business Day next preceding the Alternate Credit Facility Date. Any Bondowner required to tender Bonds under this subsection (2) shall tender its Bonds to the Tender Agent forpurchase at its Principal Office prior to 10:30 a.m., New York Time, on the Alternate Credit Facility Date. The failure to tender its Bonds on any such date is the equivalent of a tender and such Bonds shall be converted to Undelivered Bonds and replacement Bonds shall be executed, authenticated and delivered in the place of such Undelivered Bonds and such replacement Bonds may be offered and sold by the Remarketing Agent in accordance with the Indenture and Remarketing Agreement if the credit enhancement requirements of the Indenture are met.

(3) On Rate Adjustment Date During Semiannual Mode. Annual Mode and Multiyear Mode. While the Bonds are in a Semiannual Mode, Annual Mode or Multiyear Mode, all Bonds are required to be tendered to the Tender Agent for purchase on a Rate

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Adjustment Date; provided, however, that there shall not be so tendered on the Rate Adjustment Date any Bonds or portions thereof which will be in Authorized Denominations with respect to which the Owners thereof have delivered to the Tender Agent by hand or by mail at its Principal Office a properly completed Notice of Election to Retain Bonds, together with a signature guaranty, on or prior to the fifth Business Day next preceding a Rate Adjustment Date. Any Bondowner required to tender Bonds under this subsection (3) shall tender its Bonds to the Tender Agent for purchase at its Principal Office prior to 10:30 a.m., New York Time, on the Rate Adjustment Date. The failure to tender its Bonds on any such date is the equivalent of a tender and such Bonds shall be converted to UndeliveredBonds and replacement Bonds shall be executed, authenticated and delivered in the place of such Undelivered Bonds as provided in the Indenture andsuch replacement Bonds may be offered and sold by the Remarketing Agent in accordance with the Indenture and Remarketing Agreement if the creditenhancement requirements of the Indenture are met.

(4) Mandatory Tender in Lieu of Acceleration on Default. Additionally, all Bonds are subject to mandatory tender for purchase on the Mandatory Purchase Date from the Bondowners by the Trustee for the account of the Credit Enhancer in lieu of acceleration of the Bonds and mandatory redemption, upon the occurrence of an event of default under the Letter of Credit Agreement and notice from the Credit Enhancer requiring the mandatory purchase of the Bonds. Upon receipt of notice from the Credit Enhancer directing the Trustee to purchase the Bonds and setting the Mandatory Purchase Date, which shall be a Business Day which is at least three (3) and no more than ten (10) calendar days after the receiptby the Trustee of such notice, the Trustee shall immediately request a payment under the Credit Facility to be received no later than 3:00 P.M., New York Time, on the Mandatory Purchase Date, and shall also send notice to the Bondowners of the mandatory purchase. On the Mandatory Purchase Date, the Tender Agent shall pay to the Bondowners the purchase price for the Bonds, which shall be an amount equal to 100% of the principal amount of any Bond tendered or deemed tendered plus accrued and unpaid interest thereon to the Mandatory Purchase Date. Any Bondowner required to tender Bonds under this subsection (4) shall tender its Bonds to the Tender Agentfor purchase at its Principal Office prior to 10:30 A.M., New York Time, on the Mandatory Purchase Date. The failure to tender its Bonds on any such date is the equivalent of a tender and such Bonds shall be converted to Undelivered Bonds and replacement Bonds shall be executed, authenticated and delivered in the place of such Undelivered Bonds if the credit enhancement requirements of the Indenture are met.

Notice of Mandatory Tender. The Trustee shall give notice to Bondowners of the mandatory tender for Bonds on an Interest Mode Adjustment Date, on an Alternate Credit Facility Date, if the Bonds are in a Multiyear Mode, Annual Mode or Semiannual Mode on a Rate Adjustment Date, on the Termination Date and on the Mandatory Purchase Date in accordance with the provisions of the Indenture.

Failure to Give Notice. Failure by the Trustee to give any notice regarding a mandatory tender as provided in the Indenture, any defect therein or any failure by any Bondowner to receive any such notice shall not in any way change such Owner’s obligation to tender the Bonds for purchase on any mandatory Tender Date.

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Irrevocability of Election. Any election by a Bondowner to exercise the option to have its Bond or Bonds purchased, or any election by a Bondowner to retain its Bond or Bonds upon any mandatory Tender Date, shall be irrevocable upon delivery to the Tender Agent of the Notice of Election to Tender Bonds (together with, if required at the time of delivery of such notice, the Tendered Bonds) or of the Notice of Election to Retain Bonds, as the case may be. If any Owner of Bonds falls to deliver the Bonds described in such Owner’s Notice of Election to Tender Bonds, such Bonds shall be converted to Undelivered Bonds. Replacement Bonds shall be executed, authenticated and delivered in place of such Undelivered Bonds as provided in the Indenture and such replacement Bonds may be offered and sold by the Remarketing Agent in accordance with the Indenture and Remarketing Agreement if the credit enhancement requirements of the Indenture are met.

Purchase of Tendered Bonds. Tendered Bonds shall be purchased from the Owners thereof on the Tender Date at the Tender Price which shall be payable solely from the following sources in the order of priority listed: (1) proceeds of the remarketing of such Tendered Bonds pursuant to the Remarketing Agreement and the Indenture which constitute Available Moneys; and (2) proceeds of a payment under the Credit Facility to purchase such Tendered Bonds.

Notwithstanding any provision of the Indenture to the contrary, there shall be no purchases (other than a mandatory tender on the Termination Date or a mandatory purchase on the Mandatory Purchase Date) or sales of Bonds pursuant to the provisions of the Indenture relating to the tender of Bonds if there shall have occurred and be continuing certain Events of Default under the Indenture.

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(FORM OF ASSIGNMENT

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto

&nbs p;

(Please Print or Typewrite Name, Address and Social Security Number or Taxpayer Identification Number of Transferee) the within Bond and all rights therein, and hereby irrevocably constitutes and appoints Attorney to transfer the within Bond on the books kept for registration thereof, with full power of substitution in the premises.

Dated:

			NOTICE: The signature to this Assignment
			must correspond with the name as it
			appears upon the face of the within Bond
			in every particular, without alteration
			or enlargement or any change whatever.
			Signature Guaranteed By:

			NOTICE: Signature(s) must be guaranteed
			by an eligible guarantor institution as
			defined by SEC Rule l7Ad-15 (17 CFR
			240.l7Ad-15).

			By
			Title

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The following abbreviations, when used in the inscription on the face of the within Bond, shall be construed as though they were written out in full according to applicable laws or regulations.

TEN COM		as tenants in common
TEN ENT		as tenants by the entireties
JT TEN		as joint tenants with right of survivorship and not as tenants
		in common

UNIF TRANS MIN ACT
	(Cust)

Custodian
	(Minor)

	under Uniform Transfers to Minors Act

	(State)

Additional abbreviations may also be used though not in the above list.

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LEGAL OPINION

I, the undersigned, Executive Director of the South Carolina Jobs-Economic Development Authority, hereby certify that the following is a true and correct copy of the approving legal opinion of Sinkler & Boyd, P.A., on the within Bond and the series of which said Bond is a part, except that it omits the date of such opinion; that said legal opinion was manually executed and was dated and issued as of the date of delivery of and payment for such Bonds, and is on file with , the Trustee.

	facsimile
	Executive Director
	South Carolina Jobs-Economic Development
	Authority

(Legal Opinion)

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EXHIBIT B

INVESTMENT SECURITIES COLLATERAL REQUIREMENT

Collateral securing Investment Securities must comply with the following requirements:

(i) The Trustee or a third party acting solely as agent for the Trustee has possession of the collateral;

(ii) The Trustee or a third party acting as agent for the Trustee shall have a first perfected security interest in the collateral free and clear of the claims of any third parties;

(iii) The collateral will consist of Government Securities and will have a minimum market value (expressed as a percentage of the obligation) on a valuation date as follows:

Remaining Maturity

Frequency of
Valuation	*0-1 yrs**		*1-5 yrs**		*5-10 yrs**		*10-15 yrs**		*15-30 yrs**
Daily	103	%	106	%	107	%	109	%	116	%
Weekly	104		112		114		120		125
Monthly	107		123		130		133		143
Quarterly	108		125		135		140		150

* Not inclusive

(iv) In the event the collateral does not meet the requisite collateral percentage set forth in (iii) above on a valuation date, the party supplying the collateral shall have the following number of days to provide additional collateral in order to meet the requisite percentage:

(a) one business day for daily valuations,

(b) two business days for weekly valuations, and

(v) The Trustee will liquidate the collateral and reinvest the proceeds in Investment Securities if the requisite collateral percentage is not maintained after the period set forth in (iv) above.

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EXHIBIT C

[RESERVED.]

C-1

South Carolina Jobs-Economic Development Authority

Variable Rate Demand

Industrial Development Revenue Bonds

(Roller Bearing Company of America, Inc. Project)

Series 1994A

EXHIBIT D

NOTICE OF ELECTION TO TENDER/RETAIN BONDS

The undersigned hereby irrevocably notifies , as Tender Agent, of its election to (check one)

o (i) present the Bonds described below and have such Bonds purchased by the Tender Agent on , (the “Tender Date”) at the Tender Price equal to 100% of the principal amount plus interest accrued and unpaid thereon, to, but not including, the Tender Date.

o (ii) retain the Bonds described below. The undersigned hereby acknowledges that any rating on the Bonds may be reduced or withdrawn after the date hereof. [If the Interest Mode is being adjusted from a Weekly Mode or Monthly Mode to any other Interest Mode add the following: “and that the tender option terminates on such Interest Mode Adjustment Date”]

This Notice shall not be accepted by the Tender Agent unless it is properly completed and received at its offices (specified below). Such Notice must be delivered to the Tender Agent on a Business Day by hand or by mail, at , Attention: Corporate Trust Department.

Provisions Relating to Election to Retain Bonds. This Notice must be delivered to the Tender Agent on a Business Day by hand or by mail, at , Attention: Corporate Trust Department, on or prior to the fifth Business Day next preceding (i) a Rate Adjustment Date, (ii) an Interest Mode Adjustment Date, or (iii) an Alternate Credit Facility Date, as such terms are defined in the Indenture.

AN OWNER’S EXERCISE OF THE OPTION TO RETAIN SUCH BOND IS IRREVOCABLE AND BINDING ON SUCH OWNER AND CANNOT BE WITHDRAWN.

Provisions Relating to Election To Tender Bonds: The undersigned hereby agrees to sell, assign and transfer the Bonds to the Tender Agent, and hereby irrevocably constitutes and appoints the Tender Agent, as duly authorized attorney, to authorize the Trustee to transfer the Bonds on the books kept for registration thereof and to register such Bonds, with full power of substitution. The undersigned agrees to deliver to the Tender Agent, at , Attention: Corporate Trust Department, the Bonds at or before 10:30 a.m., New York Time, on the Tender Date.

AN OWNER’S EXERCISE OF THE OPTION TO HAVE SUCH BOND PURCHASED IS IRREVOCABLE AND BINDING ON SUCH OWNER AND CANNOT BE WITHDRAWN. IF ANY OWNER OF BONDS SHALL FAIL TO DELIVER THE BONDS DESCRIBED IN SUCH OWNER’S NOTICE, SUCH BONDS SHALL CONSTITUTE UNDELIVERED BONDS. REPLACEMENT BONDS

D-1

SHALL BE EXECUTED, AUTHENTICATED AND DELIVERED IN THE PLACE OF SUCH UNDELIVERED BONDS AS PROVIDED IN THE INDENTURE AND SUCH REPLACEMENT BONDS MAY BE OFFERED AND SOLD BY THE REMARKETING AGENT IN ACCORDANCE WITH THE REMARKETING AGREEMENT.

The undersigned hereby directs the Tender Agent to make payment to the undersigned of the Tender Price of the Bonds, together with accrued interest thereon, and elects to receive payment of the Tender Price of the Bonds, in one of the following manners (check the desired method):

MANNER A		by check or draft mailed to the Owner on the applicable Tender Date, upon surrender of the Bonds (if not submitted herewith) to the Tender Agent at the address specified above for hand delivery.

MANNER B		by wire transfer of immediately available funds to account number at (must be in continental United States) on the applicable Tender Date; provided however, that the undersigned may not utilize this Manner B to receive the Tender Price unless the undersigned is the Owner of and is tendering at least $1,000,000 aggregate principal amount of the Bonds and the wire transfer instructions are provided to the Tender Agent with this Notice.

General Provisions. The Tender Agent’s determination of whether this Notice is properly completed and the compliance with the delivery requirements set forth herein shall be binding on the undersigned.

D-2

Bond or Bonds (or Portions Thereof)

Presented For Purchase/To Be Retained

Amount thereof being

Tendered(1)/Amount

Bond Number(s)		thereof being Retained(2)




Total
Amount:

(1) Unless Bondowner is having all of his Bonds purchased, principal amount must be $100,000 or integral multiples of $5,000 in excess thereof if in the Weekly Mode or the Monthly Mode and $5,000 or integral multiples thereof if in the Semiannual Mode, Annual Mode and Multiyear Mode, with remaining principal of retained Bonds in Authorized Denominations.

(2) must be a principal amount which is $100,000 or integral multiples of $5,000 in excess thereof if in the Weekly Mode or the Monthly Mode and $5,000 or integral multiples thereof if in the Semiannual Mode, Annual Mode and Multiyear Mode.

Signature(s) *

Signature
guaranteed by


Print or Type Name

Street Address

City, State and Zip Code

Area Code and Telephone Number

Social Security Number or Taxpayer ID Number:

* The signature(s) to this Notice must correspond with the name(s) of the Owner of any Bond(s) submitted herewith, as it appears on the books of the Tender Agent, in every particular without alteration, enlargement or any change whatsoever and such signature must be guaranteed by an eligible guarantor institution as defined by SEC Rule l7Ad-15 (17 CFR 240.l7Ad-15).

D-3

EXHIBIT E

RATE ADJUSTMENT NOTICE

This notice is being sent pursuant to the provisions of the Trust Indenture dated as of September 1, 1994 (the “Indenture”) between the South Carolina Jobs-Economic Development Authority (the “Issuer”) and , as Trustee (the “Trustee”). Capitalized terms used in this notice shall have the same meanings as in your Bond, unless otherwise defined. You are hereby notified as follows:

1. The interest rate on the Issuer’s Variable Rate Demand Industrial Development Revenue Bonds (Roller Bearing Company of America, Inc. Project) Series 1994A (the “Bonds”), will be adjusted on (the “Rate Adjustment Date”). Your Bond will be purchased on the Rate Adjustment Date at a price of 100% of the principal amount thereof plus interest accrued and unpaid thereon to, but not including, the Tender Date, unless you elect to retain your Bond.

2. The Remarketing Agent has notified the Trustee that the Preliminary Rate determined in accordance with the Indenture is % (the “Preliminary Rate”). The actual interest rate for the Bonds shall be determined on the Rate Adjustment Date, which rate may be less than, equal to or greater than the Preliminary Rate. In order to retain all or any portion of your Bond (which portion shall be [$100,000] [$5,000] or an integral multiple thereof), you must deliver to , at its principal corporate trust office at , Attention: Corporate Trust Department, on or prior to the fifth (5th) Business Day preceding such date the attached Notice of Election to Retain Bonds.

3. In addition, you are further notified that on the Rate Adjustment Date, the interest on your Bond will be established at a new interest rate and interest on your Bond will be payable at such newly established interest rate for the Interest Period commencing on the Rate Adjustment Date.




	Title:

EXHIBIT F

INTEREST MODE ADJUSTMENT NOTICE

This notice is being sent pursuant to the provisions of the Trust Indenture dated as of September 1, 1994 (the “Indenture”), between the South Carolina Jobs-Economic Development Authority (the “Issuer”), and , as Trustee. Capitalized terms used in this notice shall have the same meanings as in the Indenture.

You are hereby notified as follows:

1. An option has been exercised to convert the Interest Rate Mode applicable to the Issuer’s Variable Rate Demand Industrial Development Revenue Bonds (Roller Bearing Company of America, Inc. Project) Series 1994A (the “Bonds”), from a(n) Weekly/Monthly/Semiannual/Annual/ Multiyear ( )-Year Mode to a(n) Weekly/Monthly/Semiannual/Annual/ Multiyear ( )-Year) Mode on (the “Interest Mode Adjustment Date”). Unless you deliver a Notice of Election to Retain Bonds to (the “Tender Agent”), at its principal corporate trust office, at , Attention: Corporate Trustee Department, in the form which is attached, your Bond will be purchased on such date at a price of 100% of the principal amount thereof plus interest accrued and unpaid thereon to, but not including, the Tender Date.

2. If your Bond or any portion thereof is so purchased, payment therefor will be made on or after the tender date thereof upon presentation and surrender at the principal corporate trust office of the Tender Agent at , Attention: Corporate Trust Department, of such Bond, duly endorsed in blank for transfer (with all signatures guaranteed by an eligible guarantor institution as defined by SEC Rule l7Ad-15 (17 CFR 240.l7Ad-15)).

3. In addition, you are further notified that:

(A) Interest will no longer accrue to you on your Bond on and after the tender date thereof unless the Tender Agent has received directions from you not to so purchase your Bond as herein provided, and, other than the right to receive payment of the purchase price for your Bond, you shall then cease to have further rights under the Indenture;

(B) You have the right to direct the Tender Agent not to purchase all or any portion of your Bond, which portion shall be $ (the minimum authorized denomination for the new Interest Mode) or any integral multiple thereof, if you deliver the attached Notice of Election to Retain Bonds to the Tender Agent at its address above on or before the date occurring 5 days prior to the Interest Mode Adjustment Date; and

(i) After the Interest Mode Adjustment Date, the interest rate on the portion of your Bond not purchased will be determined in accordance with the Weekly/Monthly/Semiannual/Annual/Multiyear ( -year) Mode, with interest being paid on the [first Business Day of each month] [September 1 and March 1 of each year]; (and)

F-1

(ii) The Trustee will inform you of the Interest Rate on the portion of your Bond not purchased, on or soon after the Interest Mode Adjustment Date[; and] [ . ]

[THE FOLLOWING SHALL BE INSERTED ONLY IF THE BONDS WILL BE IN A WEEKLY MODE OR MONTHLY MODE]

[(iii) After the Interest Mode Adjustment Date, you may require the portion of your Bond not previously purchased to be purchased pursuant to Section 301 of the Indenture on a Tender Date specified by you as further described in the Indenture.]

Date:

			,
	as Trustee


	By:
		Title:

F-2

EXHIBIT G

NOTICE OF ALTERNATE CREDIT FACILItY

THIS NOTICE WILL NOT BE GIVEN IF THE BONDS

ARE IN A MULTIYEAR MODE

NOTICE TO BONDOWNERS

This notice is being sent pursuant to the provisions of the Trust Indenture dated as of September 1, 1994 (the “Indenture”), between the South Carolina Jobs-Economic Development Authority (the “Issuer”) and , as Trustee. Capitalized terms used in this notice shall have the same meanings as in the Indenture.

You are hereby notified as follows:

1. An Alternate Credit Facility issued by and relating to the Issuer’s Variable Rate Demand Industrial Development Revenue Bonds (Roller Bearing Company of America, Inc. Project) Series 1994A (the “Bonds”), will become effective on (the “Alternate Credit Facility Date”). Unless you deliver a Notice of Election to Retain Bonds as described below, your Bond will be purchased on such date at a price of 100% of the principal amount thereof. A copy of the proposed form of Alternate Credit Facility and certain financial information relating to the issuer thereof are on file at the office of the Trustee and are available for inspection at your request.

2. If your Bond or any portion thereof is so purchased, payment therefor will be made on the Alternate Credit Facility Date upon presentation and surrender at the Principal Office of the Tender Agent

( , Attention: Corporate Trust Department) prior to 10:30 A.M., New York Time on the Alternate Credit Facility Date, of such Bond, duly endorsed in blank for transfer (with all signatures guaranteed by an eligible guarantor institution as defined by SEC rule l7Ad-15 (17 CFR 240.l7Ad-15)).

3. In addition, you are further notified that:

(A) Interest will no longer accrue to you on your Bond on and after the Alternate Credit Facility Date unless the Trustee has received directions from you not to so purchase your Bond as herein provided, and, other than the right to receive payment of the purchase price for your Bond, you shall then cease to have further rights under the Indenture; and

G-1

(B) You have the right to direct that all or any portion of your Bond not be purchased, which portion shall be $ (the minimum authorized denomination for the Interest Rate Mode to be in effect on the Alternate Credit Facility Date) or any integral multiple thereof, if you deliver the Notice of Election to Retain Bonds to the Tender Agent at its address above on or before the fifth Business Day next preceding the Alternate Credit Facility Date.

Date:


	as Trustee


	By:
		Title:

G-2

EXHIBIT H

REPRESENTATION LETTER

[Trustee]

[Trustee Address]

[Remarketing Agent]

[Remarketing Agent Address]

[Credit Enhancer]

[Credit Enhancer Address]

Re: $7,700,000 Variable Rate Demand Industrial Development Revenue Bonds (Roller Bearing Company of America, Inc. Project) Series 1994A of the South Carolina Jobs-Economic Development Authority

Ladies and Gentlemen:

The undersigned (the “Investor”) hereby represents and warrants to you as follows:

[THE FOLLOWING PARAGRAPH 1 IS FOR USE PURSUANT TO SECTION 210(i) OF THE INDENTURE.]

1. The Investor proposes to purchase $ aggregate principal amount of the above-referenced bonds (the “Bonds”) issued pursuant to that certain Trust Indenture dated as of September 1, 1994 (the “Indenture”), between the South Carolina Jobs-Economic Development Authority and

, as trustee. The Investor understands that the Bonds and the credit enhancement with respect thereto have not been registered under the Securities Act of 1933, as amended (the “1933 Act”) or the securities laws of any state and will be sold to the Investor in reliance upon certain exemptions from registration and in reliance upon the representations and warranties of the Investor set forth herein.

[THE FOLLOWING PARAGRAPH 1 IS FOR USE PURSUANT TO SECTION 210(iii) OF THE INDENTURE.]

1. The Investor understands that [Remarketing Agent] may offer to the Investor for purchase in a secondary market transaction the above-referenced bonds (the “Bonds”) issued pursuant to that certain Trust Indenture dated as of September 1, 1994 (the “Indenture”), between the South Carolina Jobs-Economic Development Authority and , as trustee. The Investor understands that the Bonds and the credit enhancement with respect thereto have not been registered under the Securities Act of 1933, as amended (the “1933 Act”) or the securities laws of any state and may be sold to the Investor in reliance upon certain exemptions from registration and in reliance upon the representations and warranties of the Investor set forth herein.

H-1

2. The Investor has sufficient knowledge and experience in business and financial matters in general, and investments such as the Bonds in particular, to enable the Investor to evaluate the risks involved in an investment in the Bonds.

3. The Investor confirms that its investment in the Bonds constitutes an investment that is suitable for and consistent with its investment program and that the Investor is able to bear the economic risk of an investment in the Bonds, including a complete loss of such investment.

4. The Investor is purchasing the Bonds solely for its own account for investment purposes only, and not with a view to, or in connection with, any distribution, resale, pledging, fractionalization, subdivision or other disposition thereof (subject to the understanding that disposition of Investor’s property will remain at all times within its control).

5. The Investor agrees that it will only offer, sell, pledge, transfer or exchange any of the Bonds it purchases (i) in accordance with an available exemption from the registration requirements of Section 5 of the 1933 Act, (ii) in accordance with any applicable state securities laws and (iii) in accordance with the provisions of the Indenture.

6. The Investor is familiar with Rule 144A promulgated under the 1933 Act and is a “qualified institutional buyer” as defined in Rule 144A; it is aware that [the] [any] sale of Bonds to it [is] [may be] made in reliance on Rule 144A and understands that such Bonds may be offered, resold, pledged or transferred only (i) to a person who the Investor reasonably believes is a qualified institutional buyer that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A, or (ii) pursuant to another exemption from registration under the 1933 Act.

7. If the Investor sells any of the Bonds other than pursuant to a mandatory or optional tender and purchase provided for in and complying with the Indenture, the Investor or its agent will obtain from any subsequent purchaser the same representations contained in this Representation Letter.

8. The Investor acknowledges and understands that you, any trustee under the Indenture and each of the “issuers” (as such term is used in the 1933 Act) of the Bonds and any security related thereto are relying and will continue to rely on the statements made herein. The Investor agrees to notify you immediately of any changes in the information and conclusions herein.

			Very truly yours,

			[Name of Investor]

Dated:

			By:
			Name:
			Title:
			[Must be President, Chief Financial
			Officer or other Executive Officer]

H-2

Exhibit 10.13

CONFIDENTIAL

LOAN AGREEMENT

between

SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY
and

ROLLER BEARING COMPANY OF AMERICA, INC.
Relating to

$3,000,000
Variable Rate Demand
Industrial Development Revenue Bonds
(Roller Bearing Company of America, Inc. Project)
Series 1994B

DATED AS OF SEPTEMBER 1, 1994

TABLE OF CONTENTS

(This Table of Contents is for convenience of reference only and is not intended to define, limit or describe the scope or intent of any provisions of this Loan Agreement).

ARTICLE I	DEFINITIONS, CONSTRUCTION AND CERTAIN GENERAL PROVISIONS
Section 1.1.		Definitions
Section 1.2.		Rules of Interpretation
ARTICLE II	REPRESENTATIONS
Section 2.1.		Representations by the Issuer
Section 2.2.		Representations and Warranties by the Borrower
ARTICLE III	THE LOAN; ISSUANCE OF THE BONDS
Section 3.1.		Amount and Source of the Loan
Section 3.2.		Reserved
Section 3.3.		Reserved
Section 3.4.		Disbursements from the Project Fund and the Cost of Issuance Fund
Section 3.5.		Investment of Fund Moneys
Section 3.6.		Loan Payments
Section 3.7.		Additional Payments
Section 3.8.		Obligations Unconditional
Section 3.9.		Credit Facility
Section 3.10.		Alternate Credit Facility
Section 3.11.		Issuance of Bonds

Section 3.12.		Borrower Required to Pay Costs in Event ProjectFund Insufficient
Section 3.13.		Completion Date
ARTICLE IV	OPERATION OF THE PLANT
Section 4.1.		Operation of the Plant
Section 4.2.		Environmental Compliance
Section 4.3.		Payment of Project Costs
Section 4.4.		Deficiency of Project Fund
ARTICLE V	MAINTENANCE; TAXES; INSURANCE
Section 5.1.		Maintenance of Plant by Borrower
Section 5.2.		Sale or Lease of Plant; Assignment of Loan Agreement by Borrower
Section 5.3.		Taxes, Assessments and Other Charges
Section 5.4.		Use of Plant
Section 5.5.		Insurance Required
ARTICLE VI	PARTICULAR COVENANTS
Section 6.1.		Access to the Plant and Inspection; Operation of the Plant
Section 6.2.		Financial Statements
Section 6.3.		Indemnification
Section 6.4.		Further Assurances and Corrective Instruments
Section 6.5.		Litigation Notice
Section 6.6.		Annual Certificate
ARTICLE VII	ASSIGNMENT OF ISSUER’S RIGHTS UNDER LOAN AGREEMENT
Section 7.1.		Assignment by the Issuer
Section 7.2.		Restriction on Transfer of Issuer’s Rights

iii

Section 7.3.		Credit Enhancer’s Remedial Rights
ARTICLE VIII	EVENTS OF DEFAULT AND REMEDIES
Section 8.1.		Events of Default Defined
Section 8.2.		Remedies on Default
Section 8.3.		No Remedy Exclusive
Section 8.4.		Agreement to Pay Attorneys’ Fees and Expenses
Section 8.5.		Issuer and Borrower to Give Notice of Default
Section 8.6.		Performance Of Borrower’s Obligations
Section 8.7.		Remedial Rights Assigned to the Trustee
Section 8.8.		Credit Enhancer to Direct Trustee
ARTICLE IX	PREPAYMENT AND ACCELERATION OF LOAN PAYMENTS
Section 9.1.		Prepayment at the Option of the Borrower
Section 9.2.		Optional Prepayment Upon Certain Events
Section 9.3.		Reserved
Section 9.4.		Mandatory Prepayment Upon Certain Defaults
Section 9.5.		Mandatory Prepayment From Amounts Remaining in Project Fund
Section 9.6.		Right to Prepay at Any Time
Section 9.7.		Notice of Prepayment
Section 9.8.		Precedence of this Article
ARTICLE X	MISCELLANEOUS
Section 10.1.		Authorized Representatives
Section 10.2.		Term of Loan Agreement
Section 10.3.		Notices
Section 10.4.		Performance Date Not a Business Day

Section 10.5.	Binding Effect
Section 10.6.	Amendments, Changes and Modifications
Section 10.7.	Execution in Counterparts
Section 10.8.	No Pecuniary Liability
Section 10.9.	Extent of Covenants of the Issuer; No Personal or Pecuniary Liability
Section 10.10.	Net Loan
Section 10.11.	Security Interests
Section 10.12.	Complete Agreement
Section 10.13.	Severability
Section 10.14.	Governing Law
Section 10.15.	Not a Limitation
Section 10.16.	Consent to Jurisdiction; Service of Process
EXHIBIT A
EXHIBIT B
EXHIBIT C

LOAN AGREEMENT

THIS LOAN AGREEMENT, dated as of September 1, 1994 (this “Agreement” or Loan Agreement), between the SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY, a body corporate and politic and an agency of the State of South Carolina (the “Issuer”), and ROLLER BEARING COMPANY OF AMERICA, INC., a Delaware corporation (the “Borrower”);

WITNESSETH:

WHEREAS, the Issuer acting by and through its Board of Directors, is authorized and empowered under and pursuant to the provisions of Title 41, Chapter 43, Code of Laws of South Carolina 1976, as amended (the “Act”), to acquire and cause to be acquired properties that are projects under the Act through which the industrial, commercial, agricultural and recreational development of the State of South Carolina (the “State”) will be promoted and trade developed by inducing business enterprises to locate in and remain in the State and thus provide maximum opportunities for the creation and retention of jobs and improvement of the standard of living of the citizens of the State; and

WHEREAS, the Issuer is further authorized by Section 41-43-110 of the Act to issue revenue bonds payable by the Issuer solely from revenues and receipts from any financing agreement between the Issuer and any business enterprise with respect to such project and secured by a pledge of said revenues and receipts and by an assignment of such financing agreement; and

WHEREAS, pursuant to the Act, the Issuer is authorized to issue its Variable Rate Demand Industrial Development Revenue Bonds (Roller Bearing Company of America, Inc. Project) Series 1994B in the principal amount of $3,000,000 (the “Bonds”) for the purpose of providing working capital (the “Project”) in connection with an approximately 60,000 square foot expansion of an existing facility for the manufacture of roller bearings in Darlington County, South Carolina which is owned and operated by the Borrower; and

WHEREAS, the proceeds from the sale of the Bonds will be loaned to the Borrower pursuant to the provisions of this Loan Agreement to enable the Borrower to fund the Project; and

WHEREAS, the amount necessary to provide the working capital constituting the Project will require the issuance, sale and delivery of the Bonds, as hereinafter provided; and

ARTICLE I

DEFINITIONS, CONSTRUCTION AND CERTAIN GENERAL PROVISIONS

“Additional Payments” means the Additional Payments described in Section 3.7 hereof.

“Borrower Documents” means this Loan Agreement and the Collateral Documents.

“Event of Default” means any Event of Default as defined in Section 8.1 hereof.

“Loan Payment Date” means an Interest Payment Date, Principal Payment Date or any other date on which the principal of and interest on the Bonds is payable.

“Loan Payments” means the Loan Payments described in Section 3.6 hereof.

“Loan Term” means the period from the effective date of this Loan Agreement until the expiration hereof pursuant to Section 10.2 of this Loan Agreement.

“Plant” means the facility, including machinery and equipment, for manufacture of roller bearings operated by the Borrower in Darlington County, South Carolina, as expanded with the proceeds of the Series 1994A Bonds.

“Project” means the working capital generally described in Exhibit A hereto, as provided for in this Loan Agreement.

“Series 1994A Bonds” means the Issuer’s $7,700,000 Variable Rate Demand Industrial Development Revenue Bonds (Roller Bearing Company of America, Inc. Project) Series 1994A.

“Series 1994A Loan Agreement” means the Loan Agreement dated of even date herewith between the Issuer and the Borrower, delivered with respect to the Series 1994A Bonds, as amended, restated or supplemented.

“Unassigned Issuer’s Rights” means the Issuer’s rights to reimbursement and payment of its costs and expenses and rebatable arbitrage under Sections 3.7(b) and (d).8.4 and 8.6 hereof, its rights of access under Section 6.1 hereof, its rights to indemnification under Sections 4.5 and 6.3 hereof, its rights to exemption from liability under Sections 10.8 and 10.9 hereof, its rights to receive notices, reports and other statements and its rights to consent to certain matters.

Section 1.2. Rules of Interpretation. (a) Words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders.

(e) Wherever an item or items are listed after the word “including”, such listing is not intended to be a listing that excludes items not listed.

[End of Article I]

ARTICLE II

REPRESENTATIONS

Section 2.1. Representations by the Issuer. The Issuer makes the following representations as the basis for the undertakings on its part herein contained:

(a) The Issuer is a body politic and corporate and an agency of the State.

(d) To finance the costs of the working capital constituting the Project, the Issuer proposes to issue the Bonds in the aggregate principal amount of $3,000,000. The Bonds will bear interest at the rates and be scheduled to mature as set forth in Article II of the Indenture and will be subject to purchase from the Owners thereof in accordance with the provisions of Article III of the Indenture and redemption prior to maturity in accordance with the provisions of Article IV of the Indenture. The Bonds are to be issued under and secured by the Indenture, pursuant to which the payments, revenues and receipts derived by the Issuer pursuant to this Loan Agreement, other than Unassigned Issuer’s Rights, will be pledged and assigned to the Trustee as security for payment of the principal of, premium, if any, and interest on the Bonds.

Section 2.2. Representations and Warranties by the Borrower. The Borrower represents and warrants as follows:

foregoing or violates any judgment, order, writ, injunction, decree, law, rule or regulation to which it is subject.

(d) The Borrower is knowledgeable in the operation of manufacturing facilities of the magnitude and nature of the Plant.

(g) To the best of the Borrower’s knowledge, except to the extent disclosed to the Credit Enhancer, the operation and maintenance of the Plant does not conflict with any zoning, building, safety, health or environmental quality or other law, ordinance, order, rule or regulation applicable thereto.

(h) The Borrower will keep and perform faithfully all of its duties, obligations, covenants and undertakings contained herein and in the Borrower Documents.

(j) The Borrower agrees that during the Loan Term it will maintain its existence, will not dissolve (other than a technical dissolution under State law so long as the Borrower is immediately reconstituted) or otherwise dispose of all or substantially all of its assets; provided that the Borrower may, without violating the agreement contained in this paragraph, merge or consolidate with another legal entity or sell or otherwise transfer to another legal entity all or substantially all of its assets as an entirety and thereafter dissolve, provided (i) that such merger, consolidation or transfer will not affect the excludability of the interest on the Bonds from gross income for federal income tax purposes; (ii) that if the successor or transferee legal entity is not the Borrower, then such legal entity shall be a legal entity, organized and existing under the laws of one of the States of the United States of America and shall be qualified to do business in the State; (iii) such successor or transferee entity shall assume all of the obligations of the Borrower under the Borrower Documents in which event the Borrower shall be released from its obligations under the Borrower Documents; and (iv) the Credit Enhancer consents thereto in writing.

(n) The working capital constituting the Project will be used solely in connection with the Borrower’s operation of the Plant or to pay costs of issuance of the Bonds.

(p) The Project is of the type authorized and permitted by the Act, and the Project is substantially the same in all material respects to that described in the notice of public hearing published in The Darlington News and Post on June 1, 1994.

(q) The Plant is located wholly within Darlington County, South Carolina.

(r) The Borrower will not take any action or omit to take any action or permit any action which is within its control to be taken or omitted which would impair the excludability from gross income for federal income taxation purposes of interest on the Series 1994A Bonds.

[End of Article II]

ARTICLE III

THE LOAN; ISSUANCE OF THE BONDS

Section 3.2. [Reserved].

Section 3.3. [Reserved].

Section 3.4. Disbursements from the Project Fund and the Cost of Issuance Fund.

(i) provide working capital for the Borrower in connection with the operation of the Plant;

(ii) pay financing, legal, accounting, printing and engraving fees, charges and expenses, and all other such fees, charges and expenses incurred in connection with the authorization, sale, issuance and delivery of the Bonds and the preparation and delivery of this Loan Agreement and related documents; and

(iii) pay the fees and expenses of the Trustee, Registrar, Tender Agent and Paying Agent properly incurred in connection with the execution and delivery of the Indenture and of the Credit Enhancer properly incurred in connection with the issuance of the Credit Facility and the execution and delivery of the Letter of Credit Agreement.

(b) All moneys in the Project Fund (including moneys earned thereon by investment thereof) remaining after the completion of funding of the Project and payment, or provision for payment, in full of the costs provided in the preceding subsection of this Section, then due and payable, shall as soon as practicable be paid into the Revenue Fund to be used for the redemption of the Bonds, or a portion thereof, at the earliest possible date.

(c) All disbursements from the Project Fund for the items described in this Section shall be made only upon the written order of an Authorized Borrower Representative and the following conditions shall have been satisfied with respect to such disbursement:

proposed to be made formed the basis for any disbursement theretofore made from the Project Fund;

(B) There shall be in existence no Event of Default or situation which, upon the giving of notice or the passage of time or both would become an Event of Default; and

(d) Should the Borrower be unable to request final disbursement from the Project Fund as described above prior to a date which is five (5) years from the Bond Issuance Date, such funds remaining in the Project Fund shall be considered to be moneys remaining in the Project Fund after completion of the Project and shall be paid into the Revenue Fund and expended as described in Section 3.4(b) unless the Borrower delivers to the Trustee an opinion of Bond Counsel that such treatment is not necessary to retain the State tax-exempt status of the Bonds.

(e) All disbursements from the Cost of Issuance Fund for the items described above shall be made only upon the written order of the Authorized Borrower Representative in substantially the form attached hereto as Exhibit B.

Section 3.5. Investment of Fund Moneys. Any moneys held as part of the Funds under the Indenture shall be invested or reinvested by the Trustee as provided in the Indenture.

Section 3.6. Loan Payments. The Borrower shall pay the following amounts to the Trustee, all as “Loan Payments” under this Loan Agreement:

(i) the amount of the principal, if any, of the Bonds due and payable on such Loan Payment Date, whether at stated maturity, by redemption prior to maturity or acceleration or otherwise;

(ii) the amount of interest on the Bonds due and payable on such Loan Payment Date;

(iii) the amount of redemption premium, if any, on the Bonds due and payable on such Loan Payment Date; and

(iv) the purchase price of any Bonds required to be purchased on such Loan Payment Date pursuant to Article III of the Indenture.

Section 3.7. Additional Payments. The Borrower shall pay the following amounts to the following persons, all as “Additional Payments” under this Loan Agreement:

(b) To the Issuer, upon demand, its regular administrative and issuance fees and charges, if any, and all expenses (including without limitation attorney’s fees) incurred by the Issuer in relation to the transactions contemplated by this Loan Agreement and the Indenture, which are not otherwise to be paid by the Borrower under this Loan Agreement or the Indenture;

(d) To the appropriate person, such payments as are required (i) as payment for or reimbursement of any and all reasonable costs, expenses and liabilities incurred by the Issuer, the Credit Enhancer or the Trustee or any of them in satisfaction of any obligations of the Borrower hereunder and under the other Borrower Documents that the Borrower does not perform, or incurred in the defense of any action or proceeding with respect to the Project, this Loan Agreement, the Indenture or the other Borrower Documents, or (ii) as reimbursement for expenses paid, or as prepayment of expenses to be paid, by the Issuer or the Trustee that are incurred as a result of a request by the Borrower or for which the Borrower is liable under this Loan Agreement;

(e) To the appropriate Person, any other amounts required to be paid by the Borrower under this Loan Agreement; and

(f) All Costs of Issuance and fees, charges and expenses, including agent and counsel fees, incurred in connection with the issuance of the Bonds, as and when the same become due.

Section 3.11. Issuance of Bonds. In order to provide funds for the Project, the Issuer agrees that it will issue, sell and deliver the Bonds to the original purchasers thereof. The proceeds of the sale of the Bonds shall be paid over to the Trustee for the account of the Issuer in accordance with the Indenture.

Section 3.12. Borrower Required to Pay Costs in Event Project Fund Insufficient. In the event that money in the Project Fund is not sufficient to pay all costs of providing the Project, the Borrower shall, nonetheless, complete the Project and shall pay all costs of such completion in full from its own funds. The Borrower shall not be entitled to any reimbursement for such completion costs from the Issuer, the Credit Enhancer or any Trustee, Registrar or Paying Agent, nor shall it be entitled to any abatement, diminution or postponement of Loan Payments.

Section 3.13. Completion Date. The Completion Date of the Project shall be evidenced to the Issuer, the Credit Enhancer and the Trustee by a certificate signed by an Authorized Borrower Representative substantially in the form attached hereto as Exhibit C.

[End of Article III]

ARTICLE IV

OPERATION OF THE PLANT

Section 4.1. Operation of the Plant. The Borrower represents, warrants, covenants and agrees that it has obtained or shall obtain all necessary or required permits, licenses, consents and approvals that are material for the operation and maintenance of the Plant and shall comply in all material respects with all lawful requirements of any governmental body regarding the use or condition of the Plant, whether existing or later enacted, foreseen or unforeseen or whether involving any change in governmental policy or requiring structural or other changes to the Project and irrespective of the cost of so complying.

Neither the Issuer, the Trustee or the Credit Enhancer, nor their respective successors or assigns are the agents or representatives of the Borrower, and the Borrower is not the agent of the Issuer, the Trustee or the Credit Enhancer, and this Loan Agreement shall not be construed to make any of the Issuer, the Trustee or the Credit Enhancer liable to materialmen, contractors, subcontractors, craftsmen, laborers or others for goods or services delivered by them in connection with the expansion of the Plant, or for debts or claims accruing to the aforesaid parties against the Borrower. This Loan Agreement shall not create any contractual relation either expressed or implied between the Issuer, the Trustee or the Credit Enhancer and any materialmen, contractors, subcontractors, craftsmen, laborers or any other person supplying any work, labor or materials in connection with the expansion of the Plant.

[End of Article IV]

ARTICLE V

MAINTENANCE; TAXES; INSURANCE

Section 5.1. Maintenance of Plant by Borrower. The Borrower agrees that during the term of this Agreement it will keep and maintain the Plant in good condition, repair and working order, ordinary wear and tear excepted, at its own cost, and will make or cause to be made from time to time all necessary repairs thereto (including external and structural repairs) and renewals and replacements thereto.

Section 5.2. Sale or Lease of Plant; Assignment of Loan Agreement by Borrower. Upon the written consent of the Credit Enhancer and the delivery of an Opinion of Bond Counsel to the Trustee and the Credit Enhancer that such action is permitted by the Borrower Documents and the Act, and shall not adversely affect the exclusion from gross income for federal income tax purposes of the interest on the Series 1994A Bonds, the Borrower may assign, mortgage, pledge, sell, lease, grant a security interest in, or in any other manner transfer, convey or dispose of the Plant or any interest therein or part thereof or assign any of its right, title and interest in, to and under this Loan Agreement in accordance with the Borrower Documents; provided that no such assignment with respect to this Loan Agreement shall be made unless a corresponding assignment is made with respect to the Series l994A Loan Agreement.

Section 5.3. Taxes, Assessments and Other Charges. The Borrower shall pay all taxes, assessments and charges of any kind whatsoever that may at any time be lawfully assessed or levied against or with respect to the Plant (including any tax upon or with respect to the income or profits of the Issuer from the Plant that, if not paid, would become a charge on the payments to be made under this Loan Agreement prior to or on a parity with the charge thereon created by the Indenture and including ad valorem, sales and excise taxes, assessments and charges upon the Borrower’s interest in the Plant), all utility and other charges incurred in the operation, maintenance, use, occupancy and upkeep of the Plant and all assessments and charges lawfully made by any governmental body for public improvements that may be secured by lien on the Plant.

Section 5.4. Use of Plant. The Issuer will not take or cause the Trustee to take any action (other than as provided herein or in the Indenture) to interfere with the Borrower’s interest in the Plant or to interfere with possession, custody, use and enjoyment of the Plant.

Section 5.5. Insurance Required. The Borrower shall cause the Plant to be kept continuously insured against such risks as are customarily insured against by companies conducting activities similar to those of the Borrower in connection with the Plant, and shall pay as the same become due all premiums in respect thereof, all as provided in the Credit Documents.

[End of Article V]

ARTICLE VI

PARTICULAR COVENANTS

Section 6.1. Access to the Plant and Inspection; Operation of the Plant. The duly authorized agents of the Issuer, the Credit Enhancer and the Trustee shall have the right, at all reasonable times upon the furnishing of reasonable notice under the circumstances, to enter upon the Plant and to examine and inspect the Plant, subject to any secrecy regulation or agreement or national security law or regulation of the government of the United States of America. The Borrower will execute, acknowledge and deliver all such further documents and do all such other acts and things as may be necessary to grant to the Issuer, the Credit Enhancer and the Trustee such right of entry. The duly authorized agents of the Issuer, the Credit Enhancer and the Trustee shall also be permitted, at all reasonable times upon reasonable notice under the circumstances, to examine the books and records of the Borrower with respect to the Plant, the working capital provided for herein, and the obligations of the Borrower hereunder.

Section 6.3. Indemnification. (a) The Borrower releases the Issuer and the Trustee from, agrees that the Issuer and the Trustee shall not be liable for, and indemnifies the Issuer and the Trustee against, all liabilities, losses, damages (including reasonable attorneys’ fees), causes of action, suits, claims, costs and expenses, demands and judgments of any nature imposed upon or asserted against the Issuer or the Trustee, on account of: (i) any loss or damage to property or injury to or death of or loss by any Person that may be occasioned by any cause whatsoever pertaining to the construction, maintenance, operation and use of the Plant; (ii) any breach or default on the part of the Borrower in the performance of any covenant or agreement of the Borrower under this Loan Agreement, the Borrower Documents or any related document, or arising from any act or failure to act by the Borrower, or any of its agents, contractors, servants, employees or licensees; (iii) violation by the Borrower or any Affiliate of any law, ordinance or regulation affecting the ownership, occupancy or use of the Plant; (iv) the authorization, issuance and sale of the Bonds, and the provision of any information furnished by the Borrower in connection therewith concerning the Project or the Borrower or arising from (1) any errors or omissions of any nature whatsoever such that the Bonds, when delivered to the Bondowners, are not validly issued and binding obligations of the Issuer, or (2) any fraud or misrepresentations or omissions contained in the proceedings of the Issuer or the Trustee with respect to, or as a result of, materials furnished in writing by the Borrower relating to the issuance of the Bonds which, if known to the original purchaser of the Bonds, would reasonably be a material factor in its decision to purchase the Bonds; and (v) any claim or action or proceeding with respect to the matters set forth in subsections (i), (ii), (iii) and (iv) above brought thereon; provided, however, that the Borrower does not hereby release the Issuer or the Trustee from, or agree that either of them shall not be liable for, or indemnify either of them against any liabilities, losses, damages (including attorneys’ fees), causes of action, suits, claims, costs and expenses, demands and judgments of any nature imposed upon or asserted against either of them on account of, with respect to the Issuer, its willful misconduct, or, with respect to the Trustee, its negligence or willful misconduct.

Borrower has, to the best of its knowledge, kept, observed, performed and fulfilled each and every covenant, provision and condition of the Borrower Documents on its part to be performed and is not in default, in the performance or observance of any of the terms, covenants, provisions or conditions hereof. If the Borrower shall be in default such certificate shall specify all such defaults and the nature thereof.

[End of Article VI]

ARTICLE VII

ASSIGNMENT OF ISSUER’S RIGHTS UNDER LOAN AGREEMENT

Section 7.2. Restriction on Transfer of Issuer’s Rights. The Issuer will not sell, assign, transfer or convey its interests in this Loan Agreement except pursuant to the Indenture.

[End of Article VII]

ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES

Section 8.1. Events of Default Defined. The term “Event of Default” shall mean any one or more of the following events:

(a) Failure by the Borrower to make timely payment of any Loan Payment or any Additional Payment when due.

(d) The occurrence of an Act of Bankruptcy with respect to the Borrower.

(e) The occurrence of an Event of Default as defined in the Indenture.

(f) The occurrence of an Event of Default as defined in the Series 1994A Loan Agreement.

Section 8.4. Agreement to Pay Attorneys’ Fees and Expenses. Subject to the provisions of Section 3.7 hereof, in correction with any Event of Default by the Borrower, if the Issuer or the Trustee employs attorneys or incurs other expenses for the collection of amounts payable hereunder or the enforcement of the performance or observance of any covenants or agreements on the part of the Borrower herein contained, the Borrower agrees that it will, on demand therefor, pay to the Issuer and the Trustee the reasonable fees of such attorneys and such other reasonable expenses so incurred by the Issuer and the Trustee.

Section 8.6. Performance Of Borrower’s Obligations. If the Borrower shall fail to keep or perform any of its obligations as provided in this Loan Agreement in respect of (a) maintenance of insurance, (b) payments of taxes, assessments and other charges, (c) repairs and maintenance of the Plant, and (d) compliance with legal or insurance requirements, or in the making of any other payment or performance of any other obligation, then the Issuer, the Credit Enhancer or the Trustee, may (but shall not be obligated so to do) upon the continuance of such failure on the Borrower’s part for 5 days after notice of such failure is given to the Borrower and the other listed parties by the Issuer, the Credit Enhancer or the Trustee, and without waiving or releasing the Borrower from any obligation hereunder, as an additional but not exclusive remedy, make any such payment or perform any such obligation, and all sums so paid by the Issuer, the Credit Enhancer or the Trustee and all necessary incidental costs and expenses incurred by the Issuer, the Credit Enhancer or the Trustee in performing such obligations shall be deemed to be Additional Payments or payments due under the Collateral Documents, as applicable, and shall be paid to the Issuer, the Credit Enhancer or the Trustee on demand.

Section 8.8. Credit Enhancer to Direct Trustee. Any provision herein to the contrary notwithstanding, unless an Event of Default described in subparagraph (a), (b), (c) or (e)(i) of Section 801 of the Indenture, or an Event of Default described in subparagraph (g) of said Section 801 as the same relates to a default described in subparagraphs (a), (b), (c) or (e)(i) of Section 801 of the Series 1994A Indenture, shall have occurred and be continuing, the Issuer shall (subject to the requirements of Section 901(1) of the Indenture) exercise the remedies provided for hereunder only if and as directed in writing by the Credit Enhancer and shall not waive any Event of Default without the prior written consent

of the Credit Enhancer; provided that such direction shall not be otherwise than in accordance with the provisions of law and of the Indenture.

[End of Article VIII]

ARTICLE IX

PREPAYMENT AND ACCELERATION OF LOAN PAYMENTS

Section 9.1. Prepayment at the Option of the Borrower. Upon the exercise by the Borrower, with the prior written consent of the Credit Enhancer, of its option to cause the Bonds or any portion thereof to be redeemed pursuant to Section 401 of the Indenture, the Borrower shall prepay Loan Payments in whole or in part at the times and at the prepayment prices sufficient to redeem all or a corresponding portion of the Bonds then Outstanding in accordance with said Section. At the written direction of the Borrower such prepayments shall be applied to the redemption of the Bonds in whole or in part in accordance with said Section.

Section 9.3. [Reserved].

Section 9.5. Mandatory Prepayment From Amounts Remaining in Project Fund. Redemption of Bonds with proceeds derived under Section 3.4(b) hereof shall be deemed a prepayment of the Loan Payments in the same amount as the amount of Bonds redeemed. The Borrower shall pay or cause to be paid to the Trustee from Available Moneys, at the time of a transfer from the Project Fund to the Revenue Fund, such amount as is necessary to cause the transferred amount to equal an Authorized Denomination.

Section 9.7. Notice of Prepayment. To exercise an option granted by Section 9.1, Section 9.2 or Section 9.6, the Borrower shall give written notice to the Issuer, the Credit Enhancer and the Trustee which shall specify therein the date upon which a prepayment of Loan Payments will be made, which date shall be not less than 45 days from the date the notice is received by the Trustee, and which shall contain the written consent of the Credit Enhancer. In the Indenture, the Issuer has directed the Trustee to forthwith take all steps (other than the payment of the money required to redeem the Bonds) necessary under the applicable provisions of the Indenture to effect any redemption of the then Outstanding Bonds, in whole, or in part, pursuant to Section 402 of the Indenture.

[End of Article IX]

ARTICLE X

MISCELLANEOUS

Section 10.1. Authorized Representatives. Whenever under this Loan Agreement the approval of the Issuer is required or the Issuer is required or permitted to take some action, such approval shall be given or such action shall he taken by an Authorized Issuer Representative, and the Borrower, the Credit Enhancer and the Trustee shall be authorized to act on any such approval or action. Any approval shall not he unreasonably withheld or delayed.

Section 10.3. Notices. Except as otherwise provided herein, it shall be sufficient service of any notice, request, complaint, demand or other paper required by this Agreement to be given to or filed if the same shall be duly mailed by first-class mail, postage pre-paid, certified or registered mail, or sent by telegram, telecopy or telex or other similar communication, confirmed in writing by first-class mail, postage prepaid, certified or registered mail, or sent by telegram, telecopy or telex or other similar communication, on the same day, addressed as specified in Section 1302 of the Indenture. All notices given by first-class mail, certified or registered mail, postage prepaid, as aforesaid shall be deemed duly given as of the third day after they are so mailed; all notices given by telegram, telecopy or telex or other similar communication shall be deemed duly given as of the date the same are transmitted by such means to the recipient thereof; provided, however, that any notice deemed to be given on a date that is not a Business Day in the jurisdiction in which such notice is delivered to the addressee thereof, such notice shall not he deemed duly given until the next succeeding Business Day; provided, further, that notices to the Trustee shall he deemed given as of the date they are received by the Trustee. A duplicate copy of each notice, certificate or other communication given hereunder by either the Issuer or the Trustee to the other shall also be given to the Borrower, the Remarketing Agent and the Credit Enhancer. In the event of notice to any party other than the Issuer or the Trustee, a copy of the notice shall he provided to the Borrower, the Remarketing Agent and the Credit Enhancer. In addition, the Trustee shall send to the Credit Enhancer, the Borrower, the Tender Agent and the Remarketing Agent a copy of each notice sent to the Bondowners. The Issuer, the Trustee, the Tender Agent, the Borrower, the Credit Enhancer

and the Remarketing Agent may from time to time designate, by notice given under the terms of the Indenture to the others of such parties, such other address to which subsequent notices, certificates or other communications shall be sent.

Section 10.9. Extent of Covenants of the Issuer; No Personal or Pecuniary Liability. All covenants, obligations and agreements of the Issuer contained in this Loan Agreement and the Indenture shall be effective to the extent authorized and permitted by applicable law. No such covenant, obligation or agreement shall be deemed to be a covenant, obligation or agreement of any present or future member, officer, agent or employee of the Issuer in other than his official capacity, and no official executing the Bonds shall be liable personally on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof or by reason of the covenants, obligations or agreements of the Issuer contained in this Loan Agreement or in the Indenture. No provision, covenant or agreement contained in this Loan Agreement, the Indenture or the Bonds, or any obligation herein or therein imposed upon the Issuer, or the breach thereof, shall constitute or give rise to or impose upon the Issuer a pecuniary liability or a charge.

Section 10.14. Governing Law. This Loan Agreement shall be governed by and construed in accordance with the laws of the State of South Carolina.

Section 10.16. Consent to Jurisdiction; Service of Process.

(c) The Borrower covenants that throughout the period during which any of the Bonds remain outstanding, if a new agent for service or process within the State is designated pursuant to the terms of subsection (1,) of this section, the Borrower will immediately file with the Issuer, the name and address of such new agent and the date on which its appointment is to become effective.

IN WITNESS WHEREOF, the Issuer and the Borrower have caused this Loan Agreement to be executed in their respective names.

	SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY

	By	/s/ [Illegible]
		Chairman, Board of Directors

[SEAL]

ATTEST:

By	/s/ [Illegible]
	Executive Director

		ROLLER BEARING COMPANY OF AMERICA, INC.

		By	/s/ [Illegible]
			Its CFO and TREASURER

[SEAL]

ATTEST:

By	/s/ [Illegible]
	Its

EXHIBIT A

DESCRIPTION OF PROJECT

The provision of working capital to be utilized in connection with an approximately 60,000 square foot expansion of an existing facility for the manufacture of roller bearings in Darlington County, South Carolina.

A-1

EXHIBIT B

Request No.

Date:

WRITTEN REQUEST FOR DISBURSEMENT FROM
SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY

		FUND
(ROLLER BEARING OF AMERICA, INC. PROJECT)
Series 1994B

To: Mark Twain Bank

Attention: Corporate Trust Department

as Trustee under the Trust Indenture, dated as of September 1, 1994, between the South Carolina Jobs-Economic Development Authority, and said Trustee

1. The date and number of this request are as set forth above. The amount of such request is $

2. All terms in this request shall have and are used with the meanings specified in the Loan Agreement.

3. The conditions to disbursement set forth in Section 3.4(c) of the Loan Agreement have been met and satisfied with respect to this request.

4. With respect to this request, the Borrower hereby certifies as to those items set forth in (2) and (3) of Section 3.4(c)(A) of the Loan Agreement.

	ROLLER BEARING COMPANY OF AMERICA, INC.

	By:
		Authorized Borrower Representative

Consented to this day of , 199 .

HELLER FINANCIAL, INC.

By
Authorized Signatory

B-1

EXHIBIT C

COMPLETION CERTIFICATE

To:		Mark Twain Bank, Trustee

		and

		South Carolina Jobs-Economic Development Authority, Issuer and

		Heller Financial Inc., Credit Enhancer

From:		Authorized Borrower Representative

Subject:		$3,000,000 South Carolina Jobs-Economic Development Authority Variable Rate Demand Industrial Development Revenue Bonds (Roller Bearing Company of America, Inc. Project) Series 1994B

1. The funding of the Project was completed as of , 19 (the “Completion Date”).

2. The money in the Project Fund in excess of the total set forth in 1(a) above represents the surplus proceeds of the Bonds and the Trustee under the Indenture is hereby authorized and directed to deposit such money to the Revenue Fund to be used to redeem the principal amount of outstanding Revenue Bonds at the earliest possible time. Accompanying this Certificate (or otherwise to be made available to the Trustee as follows: ) are Available Moneys sufficient to cause the amount to be deposited to equal an Authorized Denomination.

C-1

This certificate is given without prejudice to any rights against third parties which exist at the date hereof or which may subsequently come into being.

	ROLLER BEARING COMPANY OF AMERICA, INC.


	By:
		Authorized Borrower Representative

Date: , 19

C-2

Exhibit 10.14

CONFIDENTIAL

SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY

and

MARK TWAIN BANK,

as Trustee

TRUST INDENTURE

Dated as of September 1, 1994

Relating to

$3,000,000

Variable Rate Demand

Industrial Development Revenue Bonds

(Roller Bearing Company of America, Inc. Project)

Series 1994B

TABLE OF CONTENTS

ARTICLE I	DEFINITIONS; RULES OF CONSTRUCTION

Section 101.	Definitions of Words and Terms
Section 102.	Rules of Interpretation

ARTICLE II	THE BONDS

Section 201.	Authorization, Issuance and Terms of Bonds
Section 202.	Nature of Obligations
Section 203.	Interest Rates and Interest Payment Provisions
Section 204.	Changes in Interest Modes
Section 205.	Execution, Authentication and Delivery of Bonds
Section 206.	Registration, Transfer and Exchange of Bonds
Section 207.	Temporary Bonds
Section 208.	Mutilated, Lost, Stolen, Destroyed or Undelivered Bonds
Section 209.	Cancellation and Destruction of Bonds Upon Payment
Section 210.	Limitation on Transfer and Exchange

ARTICLE III	TENDER AND PURCHASE OF BONDS

Section 301.	Optional Tender of Bonds During Weekly Mode or Monthly Mode
Section 302.	Mandatory Tender of Bonds
Section 303.	Irrevocability of Elections; Return of Improperly Completed Documents
Section 304.	Notice of Principal Amount of Bonds Tendered
Section 305.	Remarketing of Tendered Bonds
Section 306.	Notice of Principal Amount of Bonds Remarketed
Section 307.	Purchase of Tendered Bonds
Section 308.	Remarketing of Pledged Bonds
Section 309.	Purchase Fund
Section 310.	No Sales After Certain Defaults
Section 311.	Remarketing Agent
Section 312.	Qualifications of Remarketing Agent

ARTICLE IV	REDEMPTION OF BONDS

Section 401.	Optional Redemption
Section 402.	Mandatory and Extraordinary Redemption
Section 403.	Selection of Bonds to be Redeemed
Section 404.	Notice of Redemption of Bonds in Weekly or Monthly Mode
Section 405.	Notice of Redemption of Bonds in Semiannual, Annual or Multiyear Mode
Section 406.	Effect of Call for Redemption

ARTICLE V	REVENUES AND FUNDS

Section 501.	Creation of Funds and Accounts
Section 502.	Initial Deposits
Section 503.	Project Fund
Section 504.	Costs of Issuance Fund
Section 505.	Revenue Fund
Section 506.	Debt Service Fund
Section 507.	General Fund
Section 508.	Payments Under Credit Facility
Section 509.	Reserved
Section 510.	Final Balances
Section 511.	Non-Presentment of Bonds

ARTICLE VI	DEPOSITARIES OF MONEYS, SECURITY FOR DEPOSITS AND INVESMENT OF FUNDS

Section 601.	Moneys to be Held in Trust
Section 602.	Investment of Moneys
Section 603.	Record Keeping

ARTICLE VII	PARTICULAR COVENANTS AND PROVISIONS

Section 701.	Issuer to Issue Bonds and Execute Indenture
Section 702.	Performance of Covenants
Section 703.	Instruments of Further Assurance
Section 704.	Credit Facility
Section 705.	Enforcement of Credit Facility
Section 706.	Alternate Credit Facility
Section 707.	General Limitation on Issuer Obligations
Section 708.	Recording and Filing
Section 709.	Possession and Inspection of Books and Documents
Section 710.	Rights and Duties Under Agreement and Credit Facility
Section 711.	Tax Covenants

ARTICLE VIII	DEFAULT AND REMEDIES

Section 801.	Events of Default
Section 802.	Acceleration; Mandatory Purchase
Section 803.	Surrender of Possession of Trust Estate; Rights and Duties of Trustee in Possession
Section 804.	Appointment of Receivers in Event of Default
Section 805.	Exercise of Remedies by the Trustee
Section 806.	Limitation on Exercise of Remedies by Bondowners
Section 807.	Right of Bondowners to Direct Proceedings
Section 808.	Application of Moneys in Event of Default
Section 809.	Remedies Cumulative
Section 810.	Delay or Omission Not Waiver
Section 811.	Effect of Discontinuance of Proceedings
Section 812.	Waivers of Events of Default

Section 813.	Pledged Bonds

ARTICLE IX	THE TRUSTEE

Section 901.	Acceptance of Trusts
Section 902.	Fees, Charges and Expenses of the Trustee
Section 903.	Notice to the Bondowners if Default Occurs
Section 904.	Intervention by the Trustee
Section 905.	Successor Trustee Upon Merger, Consolidation or Sale
Section 906.	Trustee Required; Eligibility
Section 907.	Resignation of Trustee
Section 908.	Removal of Trustee
Section 909.	Appointment of Successor Trustee
Section 910.	Vesting of Trusts in Successor Trustee
Section 911.	Trust Estate May be Vested in Co-Trustee
Section 912.	Accounting
Section 913.	Paying Agents; Bond Registrar; Appointment and Acceptance of Duties; Removal
Section 914.	The Tender Agent
Section 915.	Notice to Rating Agency
Section 916.	Right of Trustee to Pay Taxes and Other Charges

ARTICLE X	SUPPLEMENTAL INDENTURES

Section 1001.	Supplemental Indentures Not Requiring Consent of Bondowners
Section 1002.	Supplemental Indentures Requiring Consent of Bondowners
Section 1003.	Borrower’s Consent to Supplemental Indentures
Section 1004.	Opinion of Bond Counsel

ARTICLE XI	AMENDMENT OF AGREEMENT AND CREDIT FACILITY

Section 1101.	Amendments, Changes or Modifications to the Agreement and Credit Facility Not Requiring Consent of Bondowners

Section 1102.	Amendments, Changes or Modifications to the Agreement and Credit Facility Requiring Consent of Bondowners
Section 1103.	Opinion of Bond Counsel

ARTICLE XII	SATISFACTION AND DISCHARGE OF INDENTURE

Section 1201.	Defeasance
Section 1202.	Satisfaction and Discharge of the Indenture

ARTICLE XIII	MISCELLANEOUS PROVISIONS

Section 1301.	Consents and Other Instruments by Bondowners
Section 1302.	Notices
Section 1303.	Limitation of Rights Under the Indenture
Section 1304.	Suspension of Mail Service
Section 1305.	Business Days
Section 1306.	Immunity of Officers, Employees and Members of Issuer

iii

Section 1307.	Credit Enhancer’s Remedial Rights
Section 1308.	Severability
Section 1309.	Complete Agreement
Section 1310.	Execution in Counterparts
Section 1311.	Governing Law

Exhibit A - Bond Form
Exhibit B - Investment Securities Collateral Requirement
Exhibit C - [Reserved.]
Exhibit D - Notice of Election to Tender/Retain Bonds
Exhibit E - Rate Adjustment Notice
Exhibit F - Interest Mode Adjustment Notice
Exhibit G - Notice of Alternate Credit Facility
Exhibit H - Representation Letter

TRUST INDENTURE

THIS TRUST INDENTURE (the “Indenture”), made and entered into as of September 1, 1994, by and between the SOUTH CAROLINA JOBS-ECONOMIC DEVELOPMENT AUTHORITY, a body corporate and politic and an agency of the State of South Carolina (the “Issue”), and Mark Twain Bank, a Missouri banking corporation duly organized and existing and authorized to accept and execute trusts of the character herein set out under the laws of the State of Missouri, and having its principal corporate trust office located in St. Louis, Missouri, as Trustee (the “Trustee”);

WITNESSETH:

WHEREAS, pursuant to the Act, the Authority is authorized to issue its Variable Rate Demand Industrial Development Revenue Bonds (Roller Bearing Company of America, Inc. Project) Series 1994B in the original aggregate principal amount of $3,000,000 (the “Bonds”), for the purpose of providing working capital (“the Project”) with respect to an approximately 60,000 square foot expansion of an existing facility for the manufacture of roller bearings in Darlington County, South Carolina which is owned and operated by Roller Bearing Company of America, Inc., a Delaware corporation (the “Borrower”); and

WHEREAS, the Borrower has requested that the Issuer issue the Bonds in order to finance the Project; and

WHEREAS, the Board of Directors of the Issuer passed and approved a Resolution on August 24, 1994, authorizing the Issuer to issue the Bonds pursuant to this Indenture for the above purposes; and

WHEREAS, pursuant to such Resolution, the Issuer is authorized (i) to execute and deliver this Indenture for the purpose of issuing and securing the Bonds as hereinafter provided, and (ii) to enter into a Loan Agreement of even date herewith (the “Agreement”), between the Issuer and the Borrower, under which the Issuer will loan the proceeds of the Bonds to the Borrower in accordance with the provisions of the Agreement to finance the Project, in consideration of payments to be made by the Borrower to the Trustee which are to be sufficient to pay the principal of, redemption premium, if any, and interest on the Bonds as the same become due; and

WHEREAS, THE BONDS AND THE PREMIUM, IF ANY, AND INTEREST THEREON (INCLUDING ANY AMOUNTS PAYABLE IN CONNECTION WITH ANY PREPAYMENT OR PURCHASE OF THE BONDS) ARE LIMITED OBLIGATIONS OF THE ISSUER; THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE BONDS (“INCLUDING ANY AMOUNTS PAYABLE IN CONNECTION WITH ANY PURCHASE OF THE BONDS) ARE PAYABLE SOLELY FROM THE REVENUES OR MONEYS TO BE RECEIVED IN CONNECTION WITH THE FINANCING OF THE PROJECT OR FROM ANY OTHER MONEYS MADE AVAILABLE TO THE ISSUER FOR SUCH PURPOSE; NEITHER THE BONDS NOR THE INTEREST THEREON (INCLUDING ANY AMOUNTS PAYABLE IN CONNECTION WITH ANY PURCHASE OF THE BONDS) SHALL EVER CONSTITUTE AN INDEBTEDNESS OR A CHARGE AGAINST THE GENERAL CREDIT OF THE STATE, THE ISSUER, OR ANY OTHER PUBLIC BODY, OR OF THE TAXING POWERS OF THE STATE WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION AND SHALL NEVER CONSTITUTE OR GIVE RISE TO ANY PECUNIARY LIABILITY OF THE STATE, THE ISSUER, OR ANY OTHER PUBLIC BODY; THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS TO WHICH THE FAITH OR CREDIT OF THE STATE, THE ISSUER, OR ANY OTHER PUBLIC BODY, OR TAXING POWER OF THE STATE, IS PLEDGED;

NOW THEREFORE, THIS INDENTURE WITNESSETH:

GRANTING CLAUSES

(a) All right, title and interest of the Issuer (including, but not limited to, the right to enforce any of the terms thereof) in, to and under all Revenues (as hereinafter defined) derived by

the Issuer under and pursuant to and subject to the provisions of the Agreement but excluding the Unassigned Issuer’s Rights as defined in the Agreement) and the Credit Facility; and

(b) All other moneys and securities from time to time held by the Trustee under the terms of this Indenture (excluding amounts held in the Purchase Fund (as hereinafter defined)), and any and all other property (real, personal or mixed) of every kind and nature from time to time hereafter, by delivery or by writing of any kind, pledged, assigned or transferred as and for additional security hereunder by the Issuer, or by anyone in its behalf or with its written consent, to the Trustee, which is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof.

TO HAVE AND TO HOW, all and singular, the Trust Estate with all rights and privileges hereby transferred, pledged, assigned and/or granted or agreed or intended so to be, to the Trustee and its successors and assigns in trust forever;

ARTICLE I

DEFINITIONS; RULES OF CONSTRUCTION

“Accounts” means the accounts created pursuant to Section 501 hereof.

“Act” means Title 41, Chapter 43, Code of Laws of South Carolina 1976, as amended.

“Agreement” or “Loan Agreement” means the Loan Agreement, including the Exhibits attached thereto, dated as of the date of this Indenture, between the Issuer and the Borrower, with respect to the Bonds, as such Agreement may be from time to time amended, restated or supplemented in accordance with the provisions of Section 10.6 of the Agreement and Article XI hereof.

“Alternate Credit Facility Date” means a Business Day on or prior to the Termination Date on which the Borrower has complied with all requirements of this Indenture, including Section 706, regarding the substitution of an Alternate Credit Facility for the Credit Facility then in effect.

“Annual Mode” means an Interest Mode during which the interest rate on the Bonds is determined at twelve month intervals, as provided in Section 203(e) hereof.

“Authorized Borrower Representative” means either the Chief Financial Officer or the Vice President of the Borrower, or such other official of the Borrower at the time designated to act on behalf of the Borrower as evidenced by written certificate furnished to the Issuer, the Credit Enhancer and the Trustee containing the specimen signature of such person and signed on behalf of the Borrower by its Chief Executive Officer or its Chief Financial Officer. Such certificate may designate an alternate or alternates, each of whom shall be entitled to perform all duties of and exercise all powers of an Authorized Borrower Representative.

“Available Moneys Account” means the account by that name in the Revenue Fund created pursuant to Section 501 hereof.

“Bond” or “Bonds” means any bond or bonds authenticated and delivered under and pursuant to this Indenture.

“Bond Issuance Date” means the date of initial issuance and delivery of the Bonds.

“Bond Register” means the registration books of the Issuer kept by the Trustee to evidence the registration and transfer of Bonds.

“Bond Registrar” means the Trustee when acting as such.

“Bondowner” or “Owner” or “Registered Owner” means the person in whose name a Bond is registered on the Bond Register.

“Borrower” means Roller Bearing Company of America, Inc., a Delaware corporation, and any successor or assign thereto permitted under the Agreement.

“Costs of Issuance Fund” means the fund by that name created in Section 501 hereof.

“Credit Enhancer” means initially Heller Financial, Inc., a Delaware corporation, and any provider or providers of an Alternate Credit Facility.

“Credit Documents” means the documents described by said term in the Letter of Credit Agreement, in each case as the same may be amended, restated or supplemented from time to time.

“Credit Facility means the letter of credit initially issued by Heller Financial, Inc. and any Alternate Credit Facility issued by the Credit Enhancer in addition to or in substitution therefor, as the same may be amended, restated, supplemented, extended or renewed from time to time in accordance with the Agreement and this Indenture.