Exhibit 10.2
EXECUTION VERSION
SECOND AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT
dated as of November 10, 2010
between
THE TIMKEN CORPORATION,
as Originator
and
TIMKEN RECEIVABLES CORPORATION,
as Buyer

 

--------------------------------------------------------------------------------

 

Table of Contents

             
 
      Page   
 
            ARTICLE I AMOUNTS AND TERMS     3  
 
           
Section 1.1
  Purchase of Receivables     3  
Section 1.2
  Payment for the Purchase     5  
Section 1.3
  Purchase Price Credit Adjustments     6  
Section 1.4
  Payments and Computations, Etc.     7  
Section 1.5
  Transfer of Records.     7  
Section 1.6
  Recharacterization; Assignment to Agent     7  
 
            ARTICLE II REPRESENTATIONS AND WARRANTIES     8  
 
           
Section 2.1
  Representations and Warranties of Originator     9  
 
            ARTICLE III CONDITIONS OF PURCHASE     12  
 
           
Section 3.1
  Conditions Precedent to Payments     13  
 
            ARTICLE IV COVENANTS     13  
 
           
Section 4.1
  Affirmative Covenants of Originator     13  
Section 4.2
  Negative Covenants of Originator     17  
 
            ARTICLE V TERMINATION EVENTS     18  
 
           
Section 5.1
  Termination Events     18  
Section 5.2
  Remedies     20  
 
            ARTICLE VI INDEMNIFICATION     20  
 
           
Section 6.1
  Indemnities by Originator     20  
Section 6.2
  Other Costs and Expenses     22  
 
            ARTICLE VII MISCELLANEOUS     22  
 
           
Section 7.1
  Waivers and Amendments     22  
Section 7.2
  Notices     23  
Section 7.3
  Protection of Ownership Interests of Buyer     23  
Section 7.4
  Confidentiality     24  
Section 7.5
  Bankruptcy Petition     24  
Section 7.6
  CHOICE OF LAW     25  
Section 7.7
  CONSENT TO JURISDICTION     25  
Section 7.8
  WAIVER OF JURY TRIAL     25  
Section 7.9
  Integration; Binding Effect; Survival of Terms     25  
Section 7.10
  Counterparts; Severability; Section References     26  
Section 7.11
  Amendment and Restatement     26  

i 

--------------------------------------------------------------------------------

 

Exhibits

     
Exhibit I
  Definitions
 
   
Exhibit II
  Principal Place of Business of the Seller Parties; Location(s) of Records;
Federal Employer Identification Number(s); Prior Names
 
   
Exhibit III
  Lock-Boxes; Collection Accounts; Collection Banks
 
   
Exhibit IV
  [RESERVED]
 
   
Exhibit V
  Credit and Collection Policy
 
   
Exhibit VI
  [RESERVED]
 
   
Exhibit VII
  Form of Subordinated Note

ii 

--------------------------------------------------------------------------------

 

SECOND AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT
     This SECOND AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT, dated as of
November 10, 2010, is by and between The Timken Corporation, an Ohio corporation
(“Originator”), and Timken Receivables Corporation, a Delaware corporation
(“Buyer”). Unless defined elsewhere herein, capitalized terms used in this
Agreement shall have the meanings assigned to such terms in Exhibit I.
PRELIMINARY STATEMENTS
          The parties hereto are parties to the Amended and Restated Receivables
Sale Agreement dated as of December 30, 2005 (as amended, supplemented or
otherwise modified from time to time heretofore, the “Existing Sale Agreement”).
          The parties hereto desire to amend and restate the Existing Sale
Agreement in its entirety as set forth herein (it being the intent of the
parties hereto that this Agreement not constitute a novation of the Existing
Sale Agreement).
          Originator now owns, and from time to time hereafter will own,
Receivables. Originator wishes to transfer and assign to Buyer, and Buyer wishes
to acquire from Originator, all of Originator’s right, title and interest in and
to such Receivables, together with the Related Security and Collections with
respect thereto.
          Originator and Buyer intend the transactions contemplated hereby to be
true sales or true contributions of the Receivables and other property hereby
transferred from Originator to Buyer, providing Buyer with the full benefits of
ownership of the Receivables and such other property, and Originator and Buyer
do not intend these transactions to be, or for any purpose to be characterized
as, loans from Buyer to Originator.
          Following the transfer of Receivables from Originator, Buyer will sell
undivided interests therein and in the associated Related Security and
Collections pursuant to that certain Receivables Purchase Agreement of even date
herewith (as the same may from time to time hereafter be amended, supplemented,
restated or otherwise modified, the “Purchase Agreement”) among Buyer, The
Timken Corporation, as Servicer, the “Purchasers” from time to time party
thereto (the “Purchasers”), the “Managing Agents” from time to time party
thereto (the “Managing Agents”), and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New
York Branch, as agent for the Purchasers (in such capacity, the “Agent”).
ARTICLE I
AMOUNTS AND TERMS
          Section 1.1 Purchase of Receivables.
          (a) Prior to the date hereof, the Originator has sold all of such
Originator’s right, title and interest in and to all Receivables then existing,
together with all Related Security

3

--------------------------------------------------------------------------------

 

in respect thereof, Collections thereon and proceeds with respect to any of the
foregoing pursuant to the Existing Sale Agreement.
          (b) In consideration for the Purchase Price in accordance with
Section 1.2 below, and upon the terms and subject to the conditions set forth
herein, Originator does hereby sell, assign, transfer, set-over and otherwise
convey to Buyer, without recourse (except to the extent expressly provided
herein), on the date hereof and on each Business Day thereafter until and
including the Termination Date (each a “Transfer Date”), all of Originator’s
right, title and interest in and to all Receivables existing as of the close of
business on the Business Day immediately prior to such Transfer Date, together,
in each case, with all Related Security relating thereto and all Collections
thereof. Buyer hereby agrees to purchase all such Receivables, all Related
Security relating thereto and all Collections thereof on each Transfer Date.
From and after the Termination Date, Originator shall not be obligated to sell
Receivables to Buyer, but may at its option, based on such considerations it
determines to be appropriate at the time, including, without limitation, the
creditworthiness of Buyer at such time, elect to continue selling Receivables to
Buyer.
          (c) In accordance with clause (b) above, on each Transfer Date, Buyer
shall acquire all of Originator’s right, title and interest in and to all
Receivables existing as of the close of business on the Business Day immediately
prior to such Transfer Date, together with all Related Security relating thereto
and all Collections thereof; and Buyer shall be obligated to pay the Purchase
Price therefor in accordance with Section 1.2.
          (d) It is the intention of the parties hereto that the Purchases of
Receivables made hereunder shall constitute “sales” of “accounts” or “payment
intangibles” (as each such term is used in Article 9 of the UCC), which sales,
along with the sales of the Related Security and Collections hereunder, are
absolute and irrevocable and provide Buyer with the full benefits of ownership
of the Receivables and such Related Security and Collections. The parties hereto
intend that Originator retain no interest in the Receivables, the Related
Security and the Collections transferred to Buyer hereunder. Except for the
Purchase Price Credits owed pursuant to Section 1.3, the sales of Receivables,
the Related Security and the Collections are made without recourse to
Originator; provided, however, that (i) Originator shall be liable to Buyer for
all representations, warranties and covenants made by Originator in favor of
Buyer pursuant to the terms of the Transaction Documents to which Originator is
a party, and (ii) such sales do not constitute and are not intended to result in
an assumption by Buyer or any assignee thereof of any obligation of Originator
or any other Person arising in connection with the Receivables, the related
Contracts and/or other Related Security or any other obligations of Originator.
In view of the intention of the parties hereto that the Purchase of Receivables
made hereunder shall constitute sales of such Receivables rather than loans
secured thereby, Originator agrees that it will, on or prior to the date hereof
and in accordance with Section 4.1(e)(ii), mark its master data processing
records relating to the Receivables with a legend acceptable to Buyer and to the
Agent (as Buyer’s assignee), evidencing that Buyer has purchased such
Receivables as provided in this Agreement and to note in its financial
statements that its Receivables have been sold to Buyer. Upon the request of
Buyer or the Agent (as Buyer’s assignee), Originator will file such financing or
continuation statements, or amendments thereto or assignments thereof, and
execute, deliver and, if applicable, file such other instruments or notices, as
may be necessary or appropriate to perfect and maintain the perfection of
Buyer’s ownership interest in the

4

--------------------------------------------------------------------------------

 

Receivables and the Related Security and Collections with respect thereto, or as
Buyer or the Agent (as Buyer’s assignee) may reasonably request.
          Section 1.2 Payment for the Purchase.
          (a) The Purchase Price for each Receivable purchased hereunder shall
be due and owing in full by Buyer to Originator or its designee on the Transfer
Date therefor (but shall be reconciled on the Settlement Date immediately
following such Transfer Date as described below) and shall be paid to Originator
as follows:
(i) first, by delivery of immediately available funds, to the extent of funds
available to Buyer from its subsequent sale of an interest in the Receivables to
the Agent for the benefit of the Managing Agents and the Purchasers under the
Purchase Agreement or other cash on hand; and
(ii) second, either (1) by delivery of the proceeds of a subordinated revolving
loan from Originator to Buyer (a “Subordinated Loan”) in an amount not to exceed
the lesser of (x) the remaining unpaid portion of such Purchase Price and
(y) the maximum Subordinated Loan that could be borrowed without rendering
Buyer’s Net Worth less than the Required Capital Amount; and/or (2) at
Originator’s election as contemplated in Section 1.2(c), by accepting such
Receivables as a contribution to Buyer’s capital in an amount equal to the
remaining unpaid balance of such Purchase Price.
The Buyer may, with respect to any Purchase Price, offset against such Purchase
Price any amounts owed by Originator to Buyer hereunder and which have become
due but remain unpaid.
Subject to the limitations set forth in clause (ii)(1) above, Originator
irrevocably agrees to advance each Subordinated Loan requested by Buyer on or
prior to the Termination Date. The Subordinated Loans shall be evidenced by, and
shall be payable in accordance with the terms and provisions of the Subordinated
Note and shall be payable solely from funds which Buyer is not required under
the Purchase Agreement to set aside for the benefit of, or otherwise pay over
to, the Agent, the Managing Agents, the Purchasers, the Servicer or any other
“Indemnified Party” referenced in the Purchase Agreement. Originator is hereby
authorized by Buyer to endorse on the schedule attached to the Subordinated Note
an appropriate notation evidencing the date and amount of each advance
thereunder, as well as the date of each payment with respect thereto, provided
that the failure to make such notation shall not affect any obligation of Buyer
thereunder.
          (b) Although the Purchase Price for each Receivable purchased after
the date hereof shall be due and payable by Buyer to Originator on the Transfer
Date therefor, a precise reconciliation of the Purchase Price between Buyer and
Originator shall be effected on a monthly basis on Settlement Dates with respect
to all Receivables sold during the same Calculation Period most recently ended
prior to such Settlement Date and based on the information contained in the
Monthly Report delivered by the Servicer pursuant to Article VIII of the
Purchase Agreement for the Calculation Period. Although such reconciliation
shall be effected on Settlement Dates, increases or decreases in the amount
owing under the Subordinated Note and

5

--------------------------------------------------------------------------------

 

any contribution of capital by Originator to Buyer made pursuant to
Section 1.2(a) shall be deemed to have occurred and shall be effective as of the
date that the Purchase Price is due and payable. On each Settlement Date,
Originator shall determine the net increase or the net reduction in the
outstanding principal amount of the Subordinated Note and the amount of any
capital contributions occurring during the immediately preceding Calculation
Period and shall account for such net increase or net reduction in its books and
records.
          (c) Each contribution of a Receivable by Originator to Buyer shall be
deemed to be a Purchase of such Receivable by Buyer for all purposes of this
Agreement. Buyer hereby acknowledges that Originator shall have no obligations
to make further capital contributions to Buyer, in respect of Originator’s
equity interest in Buyer or otherwise, in order to provide funds to pay the
Purchase Price to Originator under this Agreement or for any other reason.
          (d) If Buyer shall fail to make any payment of the applicable Purchase
Price in respect of any Purchase on or before the Settlement Date immediately
following the Transfer Date for such Purchase, then Originator shall not be
obligated to sell the Receivables and the property related thereto subject to
such Purchase to Buyer, and in such event, Originator shall give Buyer, Agent
and each Managing Agent written notice that it is not selling such Receivables
and related property as a result of Buyer’s failure to pay the applicable
Purchase Price when due (an “Election Notice”).
          Section 1.3 Purchase Price Credit Adjustments. If on any day:
          (a) the Outstanding Balance of a Receivable is:
               (i) reduced as a result of any defective or rejected goods or
services, any discount or any adjustment or otherwise by Originator (other than
cash Collections on account of the Receivables), or
               (ii) reduced or canceled as a result of a setoff in respect of
any claim by any Person (whether such claim arises out of the same or a related
transaction or an unrelated transaction), or
          (b) any of the representations and warranties set forth in Article II
(other than representations and warranties in respect of the matters addressed
in clause (a) above) shall have been untrue when made with respect to all or a
portion, as the case may be, of any Receivable or the Related Security with
respect thereto,
then, in such event, Buyer shall be entitled to a credit (each, a “Purchase
Price Credit”) against the Purchase Price otherwise payable hereunder in an
amount equal to the amount of such reduction or cancellation in the case of
clause (a) or the Outstanding Balance of such Receivable in the case of clause
(b).
          (c) If the aggregate amount of all Purchase Price Credits during any
Calculation Period shall exceed the aggregate amount of Purchase Price payable
in respect of Receivables coming into existence during such Calculation Period,
Originator shall pay an amount in cash equal to such excess to Buyer on the
Settlement Date following the end of such Calculation Period or on such earlier
date as the Agent may direct, provided that the Originator

6

--------------------------------------------------------------------------------

 

shall be allowed to pay the above amount of such Purchase Price Credits by
crediting such amount to Buyer as a payment of any indebtedness owed to
Originator under the Subordinated Note so long as both (x) the Termination Date
has not occurred and (y) Buyer can satisfy the conditions to a “Reinvestment”
under the Purchase Agreement as of the applicable date of determination.
          Section 1.4 Payments and Computations, Etc. All amounts to be paid or
deposited by Buyer hereunder shall be paid or deposited in accordance with the
terms hereof no later than 12:00 noon (New York City time) on the day when due
in immediately available funds to the account of Originator designated from time
to time by Originator or as otherwise directed by Originator. If any payment
owed by any Person hereunder becomes due on a day that is not a Business Day,
then such payment shall be made on the next succeeding Business Day. If any
Person fails to pay any amount hereunder when due, interest shall accrue on such
unpaid amount at the Default Rate until such amount is paid in full and, such
Person agrees to pay such interest on demand; provided, however, that such
Default Rate shall not at any time exceed the maximum rate permitted by
applicable law. All computations of interest payable hereunder shall be made on
the basis of a year of 365/6 days for the actual number of days (including the
first but excluding the last day) elapsed.
          Section 1.5 Transfer of Records.
          (a) In connection with the Purchases of Receivables hereunder,
Originator hereby sells, transfers, assigns and otherwise conveys to Buyer all
of Originator’s right and title to and interest in the Records relating to all
Receivables sold hereunder, without the need for any further documentation in
connection with the Purchases. In connection with such transfer, Originator
hereby grants to each of Buyer, the Agent and the Servicer an irrevocable,
non-exclusive license to use, without royalty or payment of any kind, all
software used by Originator to account for the Receivables, to the extent
necessary to administer the Receivables, whether such software is owned by
Originator or is owned by others and used by Originator under license agreements
with respect thereto, provided that should the consent of any licensor of
Originator to such grant of the license described herein be required, Originator
hereby agrees that upon the request of Buyer (or the Agent as Buyer’s assignee),
Originator will use its reasonable efforts to obtain the consent of such
third-party licensor. The license granted hereby shall be irrevocable, and shall
terminate on the date this Agreement terminates in accordance with its terms.
          (b) Originator (i) shall take such action requested by Buyer and/or
the Agent (as Buyer’s assignee), from time to time hereafter, that may be
necessary or appropriate to ensure that Buyer and its assigns under the Purchase
Agreement have an enforceable ownership interest in the Records relating to the
Receivables purchased from Originator hereunder, and (ii) shall use its
reasonable efforts to ensure that Buyer, the Agent and the Servicer each has an
enforceable right (whether by license or sublicense or otherwise) to use all of
the computer software used to account for the Receivables and/or to recreate
such Records.
          Section 1.6 Recharacterization; Assignment to Agent.
          (a) If, notwithstanding the intention of the parties expressed in
Section 1.1(b), any sale (including by way of contribution) by Originator to
Buyer of Receivables, Related

7

--------------------------------------------------------------------------------

 

Security and Collections hereunder shall be characterized for any purpose, other
than solely for income tax purposes, as a secured loan and not a sale or such
sale shall for any reason be ineffective or unenforceable (any of the foregoing
being a “Recharacterization”), then this Agreement shall be deemed to constitute
a security agreement under the UCC and other applicable law. For this purpose
and without being in derogation of the parties’ intention that the transfers of
Receivables, Related Security and Collections hereunder shall constitute “true
sales” or “true contributions” thereof, Originator hereby grants to Buyer a
valid and perfected security interest in all of Originator’s right, title and
interest in, to and under all Receivables now existing and hereafter arising,
all Collections, all Related Security with respect thereto, all other rights and
payments relating to the Receivables and all proceeds of any and all of the
foregoing, and all other assets in which Buyer has acquired, may hereafter
acquire and/or purports pursuant to the terms and provisions of this Agreement
to have acquired, an interest under this Agreement to secure (i) the prompt and
complete payment of a loan deemed to have been made in an amount equal to the
Purchase Price of the Receivables and (ii) all other obligations of Originator
hereunder (including the obligation to transfer Receivables to Buyer) which
security interest shall be prior to all other Adverse Claims thereto other than
Permitted Adverse Claims. Buyer and its assigns shall have, in addition to the
rights and remedies which they may have under this Agreement, all other rights
and remedies provided to a secured creditor under the UCC and other applicable
law, which rights and remedies shall be cumulative. Originator hereby authorizes
Buyer (and any of its assigns), within the meaning of Section 9-509 of any
applicable enactment of the UCC, as secured party, to file, without the
signature of the debtor, the UCC financing statements contemplated hereby or in
such form as the Agent may approve. In the case of any Recharacterization,
Originator and the Buyer represent and warrant as to itself that each remittance
of Collections by such Originator to the Buyer hereunder will have been (i) in
payment of a debt incurred by Originator in the ordinary course of business or
financial affairs of Originator and the Buyer and (ii) made in the ordinary
course of business or financial affairs of Originator and the Buyer.
          (b) Originator acknowledges that Buyer, pursuant to the Purchase
Agreement, shall assign to the Agent, for the benefit of the Agent, the Managing
Agents and the Purchasers thereunder, all of its rights, remedies, powers and
privileges hereunder and that the Agent may further assign such rights,
remedies, powers and privileges to the extent permitted in the Purchase
Agreement. Originator agrees that the Agent, as the assignee of Buyer, shall,
subject to the terms of the Purchase Agreement, have the right to enforce this
Agreement and to exercise directly all of Buyer’s rights and remedies under this
Agreement (including, without limitation, the right to give or withhold any
consents or approvals of Buyer to be given or withheld hereunder, and, in any
case, without regard to whether specific reference is made to Buyer’s assigns in
the provisions of this Agreement which set forth such rights and remedies) and
Originator agrees to cooperate fully with the Agent, the Managing Agents and the
Purchasers in the exercise of such rights and remedies. Originator further
agrees to give to the Agent and each Managing Agent copies of all notices it is
required to give to Buyer hereunder.

8

--------------------------------------------------------------------------------

 

ARTICLE II
REPRESENTATIONS AND WARRANTIES
          Section 2.1 Representations and Warranties of Originator. Originator
hereby represents and warrants to Buyer and its assigns as of the date hereof
and on the date of each Purchase hereunder that:
          (a) Corporate Existence and Power. Originator is (1) a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation, and (2) is duly qualified to do business and is in good
standing as a registered foreign corporation and has and holds all corporate
power and all governmental licenses, authorizations, consents and approvals
required to carry on its business in each jurisdiction in which its business is
conducted except where the failure to be in good standing or to hold any such
governmental licenses, authorizations, consents and approvals could not
reasonably be expected to have a Material Adverse Effect. Originator is
organized solely under the laws of the State of Ohio.
          (b) Power and Authority; Due Authorization Execution and Delivery. The
execution and delivery by Originator of this Agreement and each other
Transaction Document to which it is a party, and the performance of its
obligations hereunder and thereunder and, Originator’s use of the proceeds of
the Purchases made hereunder, are within its corporate powers and authority and
have been duly authorized by all necessary corporate action on its part. This
Agreement and each other Transaction Document to which Originator is a party has
been duly executed and delivered by Originator.
          (c) No Conflict. The execution and delivery by Originator of this
Agreement and each other Transaction Document to which it is a party, and the
performance of its obligations hereunder and thereunder do not (i) violate its
certificate or articles of incorporation or by-laws (or equivalent
organizational documents), (ii) violate any law, rule or regulation of any
governmental authority binding upon it, (iii) result in a breach of or
constitute a default under any agreement, contract or instrument to which it is
a party or by which it or any of its property is bound, or (iv) violate any
order, writ, judgment, award, injunction or decree of any governmental authority
binding upon or affecting it or its property, and do not result in the creation
or imposition of any Adverse Claim on assets of Originator or its Subsidiaries
(except as created by the Transaction Documents).
          (d) Governmental Authorization. Other than the filing of the financing
statements required hereunder, no authorization or approval or other action by,
and no notice to or filing with, any governmental authority is required for the
due execution and delivery by Originator of this Agreement and each other
Transaction Document to which it is a party and the performance of its
obligations hereunder and thereunder.
          (e) Actions, Suits. There are no actions, suits or proceedings pending
by or before any governmental authority, or to the best of Originator’s
knowledge, threatened, against or affecting Originator, or any of its
properties, in or before any court, arbitrator or other body, that could
reasonably be expected to have a Material Adverse Effect. Originator is not in
default with respect to any order of any court, arbitrator or governmental
authority that could reasonably be expected to have a Material Adverse Effect.
          (f) Binding Effect. This Agreement and each other Transaction Document
to which Originator is a party constitute the legal, valid and binding
obligations of Originator

9

--------------------------------------------------------------------------------

 

enforceable against Originator in accordance with their respective terms, except
as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws relating to or limiting creditors’ rights
generally and by general principles of equity (regardless of whether enforcement
is sought in a proceeding in equity or at law).
          (g) Accuracy of Information. All information heretofore furnished by
Originator or any of its Affiliates to Buyer, the Agent, any Managing Agent or
any Purchaser for purposes of or in connection with this Agreement, any of the
other Transaction Documents or any transaction contemplated hereby or thereby
is, and all such information hereafter furnished by Originator or any of its
Affiliates to Buyer, the Agent, any Managing Agent or any Purchaser will be,
when taken as a whole, true and accurate in every material respect on the date
such information is stated or certified and does not and will not, when taken as
a whole, contain any material misstatement of fact or omit to state a material
fact or any fact necessary to make the statements contained therein not
misleading.
          (h) Use of Proceeds. No proceeds of the Purchase hereunder will be
used (i) for a purpose that violates, or would be inconsistent with,
Regulation T, U or X promulgated by the Board of Governors of the Federal
Reserve System from time to time or (ii) to acquire any security other than on a
non-hostile basis pursuant to a negotiated acquisition or merger agreement
approved by the board of directors or other applicable governing body of the
seller or entity to be acquired and under circumstances in which no material
challenge to such acquisition shall be pending or threatened by any shareholder
or director of the seller or entity to be acquired.
          (i) Good Title. Immediately prior to the time each Receivable is sold
hereunder, Originator shall be the legal and beneficial owner of each such
Receivable and any Related Security with respect thereto, free and clear of any
Adverse Claim, except Permitted Adverse Claims.
          (j) Perfection. This Agreement, together with the filing of the
financing statements contemplated hereby, is effective to, and shall, upon each
Purchase hereunder, transfer to Buyer (and Buyer shall acquire from Originator)
legal and equitable title to, with the right to sell and encumber each
Receivable existing and hereafter arising, together with the Related Security
and Collections with respect thereto, free and clear of any Adverse Claim,
except Permitted Adverse Claims. There have been duly filed all financing
statements or other similar instruments or documents necessary under the UCC (or
any comparable law) of all appropriate jurisdictions to perfect Buyer’s
ownership interest in the Receivables, the Related Security and the Collections.
No effective financing statement, or other instrument similar in effect, is
filed in any recording office listing the Originator as debtor covering any
Receivable, Related Security or Collections except such as may be filed in favor
of the Agent (or listing Originator as debtor and assigned to Buyer and then the
Agent) or listing Buyer as secured party and the Agent as assignee.
          (k) Places of Business. The principal places of business and chief
executive office of Originator and the offices where it keeps all of its Records
are located at the addresses listed on Exhibit II or such other locations of
which Buyer has been notified in accordance with Section 4.2(a) in jurisdictions
where all action required by Section 4.2(a) has been taken and

10

--------------------------------------------------------------------------------

 

completed. Originator’s Federal Employer Identification Number is correctly set
forth on Exhibit II.
          (l) Collections. Originator has directed each Obligor to make payment
of all Collections to a Lock-Box or a Collection Account listed on Exhibit III
hereto (or that is otherwise subject to a Collection Account Agreement).
          (m) Material Adverse Effect. Since December 31, 2009 no event has
occurred that would have a Material Adverse Effect.
          (n) Names. In the past five (5) years, Originator has not used any
corporate names, trade names or assumed names other than the name in which it
has executed this Agreement and has not been organized in any jurisdiction other
than the State of Ohio.
          (o) Ownership of Buyer. Originator owns, directly or indirectly, 100%
of the issued and outstanding capital stock of Buyer, free and clear of any
Adverse Claim, except Permitted Adverse Claims. Such capital stock is validly
issued, fully paid and nonassessable, and there are no options, warrants or
other rights to acquire securities of Buyer.
          (p) Not an Investment Company. Originator is not an “investment
company” within the meaning of the Investment Company Act of 1940, as amended,
or any successor statute.
          (q) Compliance with Law. Originator has complied in all respects with
all applicable laws, rules, regulations, orders, writs, judgments, injunctions,
decrees or awards to which it may be subject except where the failure to comply
could not reasonably be expected to have a Material Adverse Effect. Each
Receivable, together with the Contract related thereto, does not contravene, in
any material respect, any laws, rules or regulations applicable thereto
(including, without limitation, laws, rules and regulations relating to truth in
lending, fair credit billing, fair credit reporting, equal credit opportunity,
fair debt collection practices and privacy), and no part of such Contract is in
violation, in any material respect, of any such law, rule or regulation.
          (r) Compliance with Credit and Collection Policy. Originator has
complied in all material respects with the Credit and Collection Policy with
regard to each Receivable and the related Contract, and has not made any
material change to such Credit and Collection Policy, except as permitted by the
Purchase Agreement.
          (s) Payments to Originator. With respect to each Receivable
transferred to Buyer hereunder, the Purchase Price received by Originator
constitutes reasonably equivalent value in consideration therefor, taking into
account any increase in the balance of the amounts payable by the Buyer under
the Subordinated Note, and such transfer was not made for the account of any
antecedent debt. No transfer by Originator of any Receivable hereunder is or may
be voidable under any section of the Bankruptcy Reform Act of 1978 (11 U.S.C. §§
101 et seq.), as amended.
          (t) Enforceability of Contracts. Each Contract with respect to each
Receivable is effective to create, and has created, a legal, valid and binding
obligation of the

11

--------------------------------------------------------------------------------

 

related Obligor to pay the Outstanding Balance of the Receivable created
thereunder and any accrued interest thereon, enforceable against the Obligor in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws relating
to or limiting creditors’ rights generally and by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law).
          (u) Eligible Receivables. Each Receivable included in the Net
Receivables Balance as an Eligible Receivable on the Transfer Date therefor (as
reflected in the first Report delivered after such Transfer Date that reflects
the existence of such Receivable) was an Eligible Receivable on such Transfer
Date.
          (v) Accounting. The manner in which Originator accounts for the
transactions contemplated by this Agreement is consistent with the treatment of
the transfers hereunder as true sales.
          (w) Compliance with Representations. On and as of the date of each
Purchase hereunder, Originator hereby represents and warrants that all of the
other representations and warranties set forth in this Article II are true and
correct in all material respects on and as of each such date (and after giving
effect to all Receivables in existence on each such date) as though made on and
as of each such date.
          (x) Purpose. Originator has determined that, from a business
viewpoint, the sale of the Receivables and related interests to Buyer hereunder
are in the best interests of Originator.
          (y) Nonconsolidation. Originator has at all times on or after the date
hereof operated and conducted its affairs in compliance with Section 4.1(i).
          (z) Taxes. Originator has filed or caused to be filed all federal,
state and other material tax returns which are required to be filed by it, and
has paid or caused to be paid all material taxes required by law to be paid by
it prior to such taxes becoming delinquent, other than any taxes or assessments
the validity of which is being contested in good faith by appropriate
proceedings.
          (aa) Solvency. Both before and after giving effect to (i) each
Purchase contemplated by this Agreement and the other Transaction Documents and
(ii) the payment and accrual of all transaction costs in connection with the
foregoing, Originator is and will be Solvent. No event of the type described in
Section 5.1(d) has been commenced or to its knowledge threatened in writing
against it.
          (bb) ERISA. The Originator has not incurred and does not expect to
incur any material liabilities (except for premium payments arising in the
ordinary course of business) payable to the PBGC under ERISA.

12

--------------------------------------------------------------------------------

 

ARTICLE III
CONDITIONS OF PURCHASE
          Section 3.1 Conditions Precedent to Payments. Buyer’s obligation to
pay for Receivables purchased hereunder shall be subject to the conditions
precedent that (a) the Termination Date shall not have occurred; and (b) Buyer
(or the Agent as Buyer’s assignee) shall have received such other approvals,
opinions or documents as it or they may reasonably request pursuant to the terms
of Section 6.2 of the Purchase Agreement.
ARTICLE IV
COVENANTS
          Section 4.1 Affirmative Covenants of Originator. Until the date on
which this Agreement terminates in accordance with its terms, Originator hereby
covenants as set forth below:
          (a) Financial Reporting. Originator will maintain, for itself and each
of its Subsidiaries, a system of accounting established and administered in
accordance with GAAP, and furnish to Buyer, the Agent and each Managing Agent:
               (i) Annual Reporting. Within 90 days after the close of each of
its fiscal years, audited, unqualified financial statements (which shall include
balance sheets, statements of income and retained earnings and a statement of
cash flows, each on a consolidated basis) for the Performance Guarantor for such
fiscal year certified in a manner acceptable to Buyer, the Agent and each
Managing Agent by independent public accountants reasonably acceptable to Buyer,
the Agent and each Managing Agent.
               (ii) Quarterly Reporting. Within 45 days after the close of the
first three (3) quarterly periods of each of its fiscal years, the Originator
shall furnish with respect to the Performance Guarantor, on a consolidated
basis, balance sheets of the Performance Guarantor as at the close of each such
period and statements of income and retained earnings and a statement of cash
flows for the Performance Guarantor for the period from the beginning of such
fiscal year to the end of such quarter, all certified by the chief financial
officer of the Performance Guarantor.
               (iii) [RESERVED].
               (iv) Shareholders Statements and Reports. Promptly upon the
furnishing thereof to the shareholders of the Performance Guarantor of all
financial statements, reports and proxy statements so furnished.
               (v) S.E.C. Filings. Promptly upon the filing thereof, copies of
all registration statements and annual, quarterly, monthly or other regular
reports which Originator, the Performance Guarantor or any of their Subsidiaries
files with the Securities and Exchange Commission.
               (vi) Copies of Notices. Promptly upon its receipt of any notice,
request for consent, financial statements, certification, report or other
communication under or in connection with any Transaction Document from any
Person other than Buyer, the Agent, any Managing Agent or any Purchaser, copies
of the same.

13

--------------------------------------------------------------------------------

 

               (vii) Change in Credit and Collection Policy. At least thirty
(30) days prior to the effectiveness of any material change in or amendment to
the Credit and Collection Policy, a description, or if available, a copy of the
Credit and Collection Policy then in effect and a notice indicating such change
or amendment.
               (viii) Other Information. Promptly, from time to time, such other
information, documents, records or reports relating to the Receivables or the
financial condition or operations, of Originator as Buyer, the Agent or any
Managing Agent may from time to time reasonably request in order to protect the
interests of Buyer (and the Agent as Buyer’s assignee) under or as contemplated
by this Agreement.
               (ix) Avoidance of Duplication. To the extent compliance with
clause (v) above provides the information required under clause (i), (ii) or
(iv) above on a timely and complete basis, such that the requirement for
separate deliveries under clause (i), (ii) or (iv) above would merely duplicate
the materials theretofore provided under clause (v) above, separate reports for
purposes of clause (i), (ii) or (iv), as applicable, shall not be required.
Documents required to be delivered pursuant to clauses (i), (ii), (iv) or (v)
(to the extent any such documents are included in materials otherwise filed with
the Securities and Exchange Commission) may be delivered electronically and if
so delivered, shall be deemed to have been delivered on the date (1) on which
the Performance Guarantor posts such documents, or provides a link thereto on
the Performance Guarantor’s website on the Internet at www.timken.com or (2) on
which such documents are delivered to the Buyer; provided, that upon the request
of the Buyer, the Originator shall deliver paper copies of any such documents
requested by the Buyer.
          (b) Notices. Originator will notify Buyer, the Agent and each Managing
Agent in writing of any of the following promptly upon learning of the
occurrence thereof, describing the same and, if applicable, the steps being
taken with respect thereto:
               (i) Termination Events or Potential Termination Events. The
occurrence of each Termination Event and each Potential Termination Event, by a
statement of an Authorized Officer of Originator.
               (ii) Judgment and Proceedings. (1) The entry of any judgment or
decree against Originator or any of its Subsidiaries if the aggregate amount of
all judgments and decrees then outstanding against Originator and its
Subsidiaries exceeds the Material Judgment Level or (2) the institution of any
litigation, arbitration proceeding or governmental proceeding against Originator
asserting a claim in excess of the Material Judgment Level.
               (iii) Material Adverse Effect. The occurrence of any event or
condition that has, or could reasonably be expected to have, a Material Adverse
Effect.
               (iv) Defaults Under Other Agreements. The occurrence of a default
or an event of default under any other financing arrangement in respect of
Indebtedness in an aggregate principal amount equal to or greater than the
Material Indebtedness Level pursuant to which Originator is a debtor or an
obligor.

14

--------------------------------------------------------------------------------

 

               (v) Downgrade of the Performance Guarantor. Any downgrade of the
Debt Rating of the Performance Guarantor setting forth the nature of such
change.
          (c) Compliance with Laws and Preservation of Corporate Existence.
Originator will comply in all respects with all applicable laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it may be subject, except where the failure to so comply could not reasonably be
expected to have a Material Adverse Effect. Originator will preserve and
maintain its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified in good
standing as a foreign corporation in each jurisdiction where its business is
conducted, except where the failure to so comply could not reasonably be
expected to have a Material Adverse Effect.
          (d) Audits. Originator will furnish to Buyer, the Agent and each
Managing Agent from time to time such information with respect to it and the
Receivables as Buyer, the Agent or any Managing Agent may reasonably request.
Originator will, from time to time during regular business hours as requested by
Buyer, the Agent or any Managing Agent, upon prior reasonable notice and at the
sole cost of Originator, permit Buyer, the Agent, each Managing Agent or their
respective agents or representatives, (i) to examine and make copies of and
abstracts from all Records in the possession or under the control of Originator
relating to the Receivables and the Related Security, including, without
limitation, the related Contracts, and (ii) to visit the offices and properties
of Originator for the purpose of examining such materials described in clause
(i) above, and to discuss matters relating to Originator’s financial condition
or the Receivables and the Related Security or Originator’s performance under
any of the Transaction Documents or Originator’s performance under the Contracts
and, in each case, with any of the officers or employees of Originator having
knowledge of such matters. Any such audit of the Records shall be at the sole
cost of Originator; provided that, unless a Termination Event or an Amortization
Event under the Purchase Agreement shall have occurred and be continuing at the
time any such audit is requested by the Buyer, Originator shall not be required
to reimburse the Buyer, the Agent or any Managing Agent for the costs or
expenses in respect of more than two such audits (in the aggregate for all such
Persons) during any calendar year.
          (e) Keeping and Marking of Records and Books.
               (i) Originator will maintain and implement administrative and
operating procedures (including, without limitation, an ability to recreate
records evidencing Receivables in the event of the destruction of the originals
thereof), and keep and maintain all documents, books, records and other
information reasonably necessary or advisable for the collection of all
Receivables (including, without limitation, records adequate to permit the
immediate identification of each new Receivable and all Collections of and
adjustments to each existing Receivable). Originator will give Buyer, the Agent
and each Managing Agent notice of any material change in the administrative and
operating procedures referred to in the previous sentence.
               (ii) Originator will (A) on or prior to the date hereof, mark its
master data processing records and other books and records relating to the
Receivables with a legend, acceptable to Buyer and the Agent, describing Buyer’s
ownership interests in the

15

--------------------------------------------------------------------------------

 

Receivables and further describing the Purchaser Interests of the Agent (on
behalf of the Managing Agents and the Purchasers) under the Purchase Agreement
and (B) upon the request of Buyer or the Agent (with the consent or at the
direction of the Required Financial Institutions) after the occurrence and
during the continuation of a Termination Event or an Amortization Event under
the Purchase Agreement, (x) mark each Contract with a legend describing Buyer’s
ownership interests in the Receivables and further describing the Purchaser
Interests of the Agent (on behalf of the Managing Agents and the Purchasers) and
(y) deliver to Buyer (or the Agent as Buyer’s assignee) all Contracts
(including, without limitation, all multiple originals of any such Contract)
relating to the Receivables.
          (f) Compliance with Contracts and Credit and Collection Policy. On the
date hereof, the Credit and Collection Policy exists in the form of procedures
and protocols that have been consistently observed by Originator over a period
of years in the origination and servicing of the Receivables and have been set
forth in writing in the form of general procedures attached hereto as Exhibit V.
Originator will timely and fully (i) perform and comply in all material respects
with all provisions, covenants and other promises required to be observed by it
under the Contracts related to the Receivables, and (ii) comply in all respects
with the Credit and Collection Policy in regard to each Receivable and the
related Contract.
          (g) [RESERVED].
          (h) Ownership. Originator will take all necessary action to establish
and maintain, irrevocably in Buyer (and the Agent as Buyer’s assignee), legal
and equitable title to the Receivables, the Related Security and the
Collections, free and clear of any Adverse Claims other than Permitted Adverse
Claims (including, without limitation, the filing of all financing statements or
other similar instruments or documents necessary under the UCC (or any
comparable law) of all appropriate jurisdictions to perfect Buyer’s interest in
such Receivables, Related Security and Collections and such other action to
perfect, protect or more fully evidence the interest of Buyer as Buyer, the
Agent or any Managing Agent may reasonably request).
          (i) Purchasers’ Reliance. Originator acknowledges that the Agent, the
Managing Agents and the Purchasers are entering into the transactions
contemplated by the Purchase Agreement in reliance upon Buyer’s identity as a
legal entity that is separate from Originator and any Affiliates thereof.
Therefore, from and after the date of execution and delivery of this Agreement,
Originator will take all reasonable steps including, without limitation, all
steps that Buyer or any assignee of Buyer may from time to time reasonably
request to maintain Buyer’s identity as a separate legal entity and to make it
manifest to third parties that Buyer is an entity with assets and liabilities
distinct from those of Originator and any Affiliates thereof and not just a
division of Originator. Without limiting the generality of the foregoing and in
addition to the other covenants set forth herein, Originator (i) will not hold
itself out to third parties as liable for the debts of Buyer nor purport to own
the Receivables and other assets acquired by Buyer, (ii) will take all other
actions necessary on its part to ensure that Buyer is at all times in compliance
with the covenants set forth in Section 7.1(i) of the Purchase Agreement and
(iii) will cause all tax liabilities arising in connection with the transactions
contemplated herein or otherwise to be allocated between Originator and Buyer on
an arm’s-length basis, provided however that nothing herein shall prohibit the
Originator and Buyer from filing a consolidated, combined or unitary tax return.

16

--------------------------------------------------------------------------------

 

          (j) Collections. Originator will instruct all Obligors to remit all
Collections to either a Lock-Box or a Collection Account that is subject to a
Collection Account Agreement that is in full force and effect. In the event any
payments relating to Receivables are remitted directly to Originator or any
Affiliate of Originator, Originator will remit (or will cause to be remitted)
directly to a Collection Bank and will deposit (or will cause to be deposited)
all such remittances into a Collection Account that is subject to a Collection
Account Agreement within two (2) Business Days following receipt thereof. At all
times prior to such remittance, Originator will itself hold or, if applicable,
will cause such payments to be held in trust for the exclusive benefit of Buyer
and its assigns.
          (k) Taxes. Originator will file all material tax returns and reports
required by law to be filed by it and pay or cause to be paid when due all
material taxes and governmental charges at any time owing, other than any taxes
or assessments the validity of which are being contested in good faith by
appropriate proceedings.
          (l) Accounting. Originator will account for the transactions
contemplated by this Agreement in its financial statements in a manner that is
consistent with the parties’ characterization of such transactions as true sales
as described in Section 1.1(b) and will not assert any ownership interests in
the Receivables sold hereunder and, except as provided in Section 4.2(e), will
not take any actions or make any statements to third parties inconsistent with
such ownership.
          (m) Originator will cause all cash collections and other cash proceeds
in respect of all Excluded Receivables to be remitted to accounts other than a
Collection Account.
          Section 4.2 Negative Covenants of Originator. Until the date on which
this Agreement terminates in accordance with its terms, Originator hereby
covenants that:
          (a) Name Change, Offices and Records. Originator will not make any
change to its name (within the meaning of Section 9-507(c) of any applicable
enactment of the UCC), identity, or jurisdiction of organization, unless (i) at
least forty-five (45) days prior to the effective date of any such change,
Originator provides written notice thereof to Buyer and the Agent and each
Managing Agent, (ii) at least ten (10) days prior to such effective date,
delivers to Buyer and the Agent such financing statements (Forms UCC-1 and
UCC-3), which Buyer, the Agent or any Managing Agent may reasonably request to
reflect such change, together with such other documents and instruments that
Buyer, the Agent or any Managing Agent may reasonably request in connection
therewith, (iii) at least ten (10) days prior to such effective date, Originator
has taken all other steps to ensure that Buyer and the Agent, for the benefit of
itself, the Managing Agents and the Purchasers, continue to have a first
priority perfected ownership in the Receivables, the Related Security related
thereto and any Collections thereon (subject to Permitted Adverse Claims) and
(iv) in the case of any change in its jurisdiction of organization, if requested
by Buyer, Agent or any Managing Agent, Buyer, Agent and Managing Agent shall
have received, prior to such change, an opinion of counsel, in form and
substance reasonably satisfactory to Buyer, the Agent and the Managing Agents,
as to such incorporation and Originator’s valid existence and good standing and
the perfection and preservation of priority of Buyer’s ownership interest in,
and the Agent’s ownership or security interest in, the Receivables, the Related
Security and Collections.

17

--------------------------------------------------------------------------------

 

          (b) Change in Payment Instructions to Obligors. Originator will not
change the instructions to Obligors regarding payments to be made to any
Lock-Box or Collection Account or direct any Obligor to make any payments on any
Receivables to any Lock-Box or Collection Account that is not listed on
Exhibit III hereof, unless Buyer, the Agent and each Managing Agent shall have
received, at least ten (10) days before the proposed effective date therefor,
(i) written notice of such addition, termination or change and (ii) with respect
to the addition of a Collection Bank or a Collection Account or Lock-Box, an
executed Collection Account Agreement with respect to the new Collection Bank,
Collection Account or Lock-Box; provided, however, that Originator may make
changes in instructions to Obligors regarding payments if such new instructions
require such Obligor to make payments to another existing Lockbox or Collection
Account.
          (c) Modifications to Contracts and Credit and Collection Policy.
Originator will not make any change to the Credit and Collection Policy that
could reasonably be expected to adversely affect the collectability of the
Receivables or decrease the credit quality of any newly created Receivables.
Except as otherwise permitted in its capacity as Servicer pursuant to Article
VIII of the Purchase Agreement, Originator will not extend, amend or otherwise
modify the terms of any Receivable or any Contract related thereto other than in
accordance with the Credit and Collection Policy.
          (d) Sales, Liens. Originator will not sell, assign (by operation of
law or otherwise) or otherwise dispose of, or grant any option with respect to,
or create or suffer to exist any Adverse Claim upon (including, without
limitation, the filing of any financing statement) or with respect to, any
Receivable, Related Security or Collections, or upon or with respect to any
Contract under which any Receivable arises, or assign any right to receive
income with respect thereto (other than, in each case, the creation of the
interests therein in favor of Buyer provided for herein), and Originator will
defend the right, title and interest of Buyer in, to and under any of the
foregoing property, against all claims of third parties claiming through or
under Originator, in each case above, other than Permitted Adverse Claims.
          (e) Accounting for Purchase. Originator will not, and will not permit
any Affiliate to, account for or treat (whether in financial statements or
otherwise) the transactions contemplated hereby in any manner other than the
sale of the Receivables and the Related Security by Originator to Buyer or in
any other respect account for or treat the transactions contemplated hereby in
any manner other than as a sale of the Receivables and the Related Security by
Originator to Buyer except to the extent that such transactions are not
recognized on account of consolidated financial reporting in accordance with
GAAP.
ARTICLE V
TERMINATION EVENTS
          Section 5.1 Termination Events. The occurrence of any one or more of
the following events shall constitute a Termination Event:
          (a) Originator shall fail:

18

--------------------------------------------------------------------------------

 

     (i) to make any payment or deposit required hereunder when due and such
failure shall continue for more than one (1) Business Day (it being understood
that for purposes of this Section 5.1(a), the Purchase Price in respect of any
Receivable shall not be deemed to be due until the Settlement Date immediately
following the Transfer Date therefor);
     (ii) to perform or observe any covenant set forth in Section 4.2 hereof; or
     (iii) to perform or observe any term, covenant or agreement hereunder
(other than as referred to in clause (i) or (ii) of this paragraph (a)) or any
other Transaction Document to which it is a party and such failure shall
continue for five (5) consecutive Business Days after the earlier of the date
upon which the Originator (1) obtains knowledge of such failure or (2) receives
notice of such failure from the Buyer.
          (b) Any representation, warranty, certification or statement made or
deemed made by Originator in this Agreement (excluding any representation,
warranty, certification or statement made by Originator relating to the
eligibility or characteristics of any Receivable), any other Transaction
Document or in any other document delivered pursuant hereto or thereto shall
prove to have been incorrect in any material respect when made or deemed made
(it being understood that the materiality threshold referenced above shall not
be applicable with respect to any clause of any representation or warranty which
itself contains a materiality qualification).
          (c) Failure of Originator to pay any Indebtedness when due (after
giving effect to any applicable grace period) in an amount in excess of the
Material Indebtedness Level or the default by Originator in the performance of
any term, provision or condition contained in any agreement under which any such
Indebtedness was created or is governed, in each case above, the effect of which
is to cause, or to permit the holder or holders of such Indebtedness to cause,
such Indebtedness to become due prior to its stated maturity; or any such
Indebtedness of Originator shall be declared to be due and payable or required
to be prepaid (other than by a regularly scheduled payment or a voluntary
prepayment) prior to the date of maturity thereof.
          (d) (i) Originator or any of its Subsidiaries shall generally not pay
its debts as such debts become due or shall admit in writing its inability to
pay its debts generally or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against Originator or any
of its Subsidiaries seeking to adjudicate it bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee or other similar
official for it or any substantial part of its property; provided that, in the
case of any proceeding instituted against Originator or any of its Subsidiaries
(other than the Buyer), such event shall not constitute a Termination Event
until either (A) such proceeding shall have remained undismissed or unstayed for
a period of sixty (60) days, (B) an order for relief shall have been entered
against Originator or the applicable Subsidiary under the Federal bankruptcy
laws or (C) Originator or such Subsidiary (as applicable) shall have taken
corporate action consenting to, approving or acquiescing in the commencement or
maintenance of such proceeding; or (ii) Originator or any of its Subsidiaries
shall take any corporate action to authorize any of the actions set forth in the
foregoing clause (i) of this subsection (d).

19

--------------------------------------------------------------------------------

 

          (e) A Change of Control shall occur.
          (f) One or more final judgments for the payment of money in an amount
in excess of the Material Judgment Level shall be entered against Originator on
claims not covered by insurance or as to which the insurance carrier has denied
its responsibility, and such judgment shall continue unsatisfied and in effect
for forty-five (45) consecutive days without a stay of execution.
          Section 5.2 Remedies. Upon the occurrence and during the continuation
of a Termination Event, Buyer may take any of the following actions: (i) declare
the Termination Date to have occurred, whereupon the Termination Date shall
forthwith occur, without demand, protest or further notice of any kind, all of
which are hereby expressly waived by Originator; provided, however, that upon
the occurrence of Termination Event described in Section 5.1(d), the Termination
Date shall automatically occur, without demand, protest or any notice of any
kind, all of which are hereby expressly waived by Originator and (ii) to the
fullest extent permitted by applicable law, declare that any amounts then due
and owing by Originator to Buyer shall bear interest at the Default Rate. The
aforementioned rights and remedies shall be in addition to all other rights and
remedies of Buyer and its assigns available under this Agreement, by operation
of law, at equity or otherwise, all of which are hereby expressly preserved,
including, without limitation, all rights and remedies provided under the UCC,
all of which rights shall be cumulative.
ARTICLE VI
INDEMNIFICATION
          Section 6.1 Indemnities by Originator. Without limiting any other
rights that Buyer may have hereunder or under applicable law, Originator hereby
agrees to indemnify Buyer and its assigns, officers, directors, agents and
employees (each an “Indemnified Party”) from and against any and all damages,
losses, claims, taxes, liabilities, costs, expenses and all other amounts
payable, including reasonable attorneys’ fees (which attorneys may be employees
of Buyer) and disbursements (all of the foregoing being collectively referred to
as “Indemnified Amounts”) awarded against or incurred by any of them arising out
of or as a result of this Agreement or the acquisition, either directly or
indirectly, by Buyer of an interest in the Receivables, excluding, however:
               (i) Indemnified Amounts to the extent a final judgment of a court
of competent jurisdiction holds that such Indemnified Amounts resulted from
gross negligence or willful misconduct on the part of the Indemnified Party
seeking indemnification;
               (ii) Indemnified Amounts to the extent the same includes losses
or other Indemnified Amounts in respect of Receivables that are uncollectible on
account of the insolvency, bankruptcy or lack of creditworthiness of the related
Obligor or any obligor under any Related Security therefor; and
               (iii) Excluded Taxes;
provided, however, that nothing contained in this sentence shall limit the
liability of Originator or limit the recourse of Buyer to Originator in respect
of any representations or warranties made

20

--------------------------------------------------------------------------------

 

by Originator under or in connection with this Agreement. Without limiting the
generality of the foregoing indemnification, Originator shall indemnify the
Indemnified Parties for Indemnified Amounts (including, without limitation,
losses in respect of uncollectible receivables, regardless of whether
reimbursement therefor would constitute recourse to Originator) relating to or
resulting from:
               (i) any representation or warranty made by Originator (or any
officers of Originator) under or in connection with this Agreement, any other
Transaction Document (in any case, without regard to any qualifications
concerning the occurrence or non-occurrence of a Material Adverse Effect or
similar concepts of materiality) or any other information or report delivered by
Originator pursuant hereto or thereto, which shall have been false or incorrect
when made or deemed made;
               (ii) the failure by Originator, to comply with any applicable
law, rule or regulation with respect to any Receivable or Contract related
thereto, or the nonconformity of any Receivable or Contract included therein
with any such applicable law, rule or regulation or any failure of Originator to
keep or perform any of its obligations, express or implied, with respect to any
Contract;
               (iii) any failure of Originator to perform its duties, covenants
or other obligations in accordance with the provisions of this Agreement or any
other Transaction Document (in any case, without regard to any qualifications
concerning the occurrence or non-occurrence of a Material Adverse Effect or
similar concepts of materiality);
               (iv) any products liability or similar claim arising out of or in
connection with merchandise, insurance or services that are the subject of any
Contract;
               (v) any dispute, claim, offset or defense (other than discharge
in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable
(including, without limitation but subject to the foregoing parenthetical, a
defense based on such Receivable or the related Contract not being a legal,
valid and binding obligation of such Obligor enforceable against it in
accordance with its terms), or any other claim resulting from the sale of the
merchandise or service related to such Receivable or the furnishing or failure
to furnish such merchandise or services;
               (vi) the commingling of Collections of Receivables at any time
with other funds;
               (vii) any investigation, litigation or proceeding related to or
arising from this Agreement or any other Transaction Document, the transactions
contemplated hereby, the use of the proceeds of the Purchase, the ownership of
the Receivables or any other investigation, litigation or proceeding relating to
Originator in which any Indemnified Party becomes involved as a result of any of
the transactions contemplated hereby;
               (viii) any inability to litigate any claim against any Obligor in
respect of any Receivable as a result of such Obligor being immune from civil
and commercial law and suit on the grounds of sovereignty or otherwise from any
legal action, suit or proceeding;

21

--------------------------------------------------------------------------------

 

               (ix) any Termination Event described in Section 5.1(d);
               (x) any failure to vest and maintain vested in Buyer, or to
transfer to Buyer, legal and equitable title to, and ownership of, the
Receivables, the Related Security and the Collections, free and clear of any
Adverse Claim (other than any Permitted Adverse Claim);
               (xi) the failure to have filed, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of any
applicable jurisdiction or other applicable laws with respect to any Receivable,
the Related Security and Collections with respect thereto, and the proceeds of
any thereof, whether at the time of the Purchase or at any subsequent time;
               (xii) any action or omission by Originator which reduces or
impairs the rights of Buyer with respect to any Receivable or the value of any
such Receivable;
               (xiii) any attempt by any Person to void the Purchase hereunder
under statutory provisions or common law or equitable action;
               (xiv) any dispute, suit or claim arising out of any provision in
any Contract which (A) restricts or prohibits, or requires the Obligor’s consent
to, the transfer, sale or assignment of the rights to payment of Originator or
any of its assignees under such Contract or (B) contains a confidentiality
provision that purports to restrict the ability of any Purchaser to exercise its
rights under this Agreement, including, without limitation, the right to review
such Contract; and
               (xv) the failure to pay when due any taxes, including without
limitation, sales, excise or personal property taxes, payable by Originator as a
result of the performance of this Agreement or the sale of an interest in the
Receivables, other than Excluded Taxes.
          Section 6.2 Other Costs and Expenses. Originator shall pay to Buyer on
demand all reasonable costs and out-of-pocket expenses in connection with the
preparation, execution, delivery and administration of this Agreement, the
transactions contemplated hereby and the other documents to be delivered
hereunder. Originator shall pay to Buyer on demand any and all reasonable costs
and expenses of Buyer, if any, including reasonable counsel fees and expenses in
connection with the enforcement of this Agreement and the other documents
(including any amendments hereto or thereto) delivered hereunder and in
connection with any restructuring or workout of this Agreement or such
documents, or the administration of this Agreement following a Termination
Event.
ARTICLE VII
MISCELLANEOUS
          Section 7.1 Waivers and Amendments. (a) No failure or delay on the
part of Buyer, the Agent or any Managing Agent, as applicable, in exercising any
power, right or remedy under this Agreement shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power, right or remedy
preclude any other further exercise thereof or the

22

--------------------------------------------------------------------------------

 

exercise of any other power, right or remedy. The rights and remedies herein
provided shall be cumulative and nonexclusive of any rights or remedies provided
by law. Any waiver of this Agreement shall be effective only in the specific
instance and for the specific purpose for which given.
          (b) No provision of this Agreement or the Subordinated Note may be
amended, supplemented, modified or waived except in writing signed by Originator
and Buyer and, to the extent required under the Purchase Agreement, the Agent
and the Required Financial Institutions.
          Section 7.2 Notices. Except as provided below, all communications and
notices provided for hereunder shall be in writing (including bank wire,
telecopy or electronic facsimile transmission or similar writing) and shall be
given to the other parties hereto at their respective addresses or telecopy
numbers set forth on the signature pages hereof or at such other address or
telecopy number as such Person may hereafter specify for the purpose of notice
to each of the other parties hereto. Each such notice or other communication
shall be effective (i) if given by telecopy, upon the receipt thereof, (ii) if
given by mail, three (3) Business Days after the time such communication is
deposited in the mail with first class postage prepaid or (iii) if given by any
other means, when received at the address specified in this Section 7.2.
          Section 7.3 Protection of Ownership Interests of Buyer.
          (a) Originator agrees that from time to time, at its expense, it will
promptly execute and deliver all instruments and documents, and take all
actions, that may be necessary or desirable, or that Buyer, the Agent or any
Managing Agent may reasonably request, to perfect, protect or more fully
evidence the interests of Buyer in the Receivables, the Related Security and the
Collections, or to enable Buyer, the Agent or any Managing Agent to exercise and
enforce their rights and remedies hereunder. At any time that a Termination
Event or an Amortization Event has occurred and is continuing, Buyer, the Agent
or any Managing Agent may, at Originator’s sole cost and expense, direct
Originator to notify the Obligors of Receivables of the ownership interests of
Buyer under this Agreement and may also direct that payments of all amounts due
or that become due under any or all Receivables be made directly to Buyer or its
designee.
          (b) If Originator fails to perform any of its obligations hereunder,
Buyer (or the Agent as Buyer’s assignee) may (but shall not be required to)
perform, or cause performance of, such obligation, and Buyer’s (or such
assigns’) costs and expenses incurred in connection therewith shall be payable
by Originator as provided in Section 6.2. Originator irrevocably authorizes
Buyer (and the Agent as Buyer’s assignee) at any time and from time to time in
the sole discretion of Buyer (or the Agent as Buyer’s assignee), and appoints
Buyer (and the Agent as Buyer’s assignee) as its attorney(ies)-in-fact, to act
on behalf of Originator (i) to execute on behalf of Originator as debtor and to
file financing statements and amendments thereto necessary or desirable in
Buyer’s (or the Agent’s as Buyer’s assignee) sole discretion to perfect and to
maintain the perfection and priority of the interest of Buyer in the
Receivables, Related Security, and Collections and (ii) to file a carbon,
photographic or other reproduction of this Agreement or any financing statement
with respect to the Receivables as a financing statement in such offices as
Buyer (or the Agent as Buyer’s assignee) in their sole discretion deem necessary
or desirable

23

--------------------------------------------------------------------------------

 

to perfect and to maintain the perfection and priority of Buyer’s interests in
the Receivables, Related Security and Collections. This appointment is coupled
with an interest and is irrevocable.
          (c) Upon the later of (x) the termination of this Agreement and
(y) the date upon which all Receivables transferred hereunder have been
collected in full, Buyer shall deliver and, where applicable, execute and
endorse such agreements, documents and instruments evidencing or effecting the
release of the security interests, liens and other Adverse Claims created
pursuant to this Agreement as may be reasonably requested and prepared from time
to time by the Originator and reasonably acceptable to Buyer.
          Section 7.4 Confidentiality.
          (a) Originator shall maintain and shall cause each of its employees
and officers to maintain the confidentiality of this Agreement and the other
confidential proprietary information with respect to the Agent, the Managing
Agents and the Purchasers and their respective businesses obtained by it or them
in connection with the structuring, negotiating and execution of the
transactions contemplated herein, except that Originator and its officers and
employees may disclose such information to Originator’s external accountants and
attorneys and as required by any applicable law or order of any judicial or
administrative proceeding.
          (b) Anything herein to the contrary notwithstanding, Originator hereby
consents to the disclosure of any nonpublic information with respect to it
(i) to Buyer, any Managing Agent, the Agent and the Purchasers by each other,
(ii) by Buyer, any Managing Agent, the Agent or the Purchasers to any
prospective or actual assignee or participant of any of them or (iii) by any
applicable Managing Agent to any rating agency, Commercial Paper dealer or
provider of a surety, guaranty or credit or liquidity enhancement to the Conduit
in such Managing Agent’s Purchaser Group or any entity organized for the purpose
of purchasing, or making loans secured by, financial assets for which such
Managing Agent acts as the administrative agent and to any officers, directors,
employees, outside accountants and attorneys of any of the foregoing. In
addition, the Purchasers, the Managing Agents and the Agent may disclose any
such nonpublic information pursuant to any law, rule, regulation, direction,
request or order of any judicial, administrative or regulatory authority or
proceedings (whether or not having the force or effect of law).
          Section 7.5 Bankruptcy Petition.
          (a) Originator and Buyer each hereby covenants and agrees that, prior
to the date that is one year and one day after the payment in full of all
outstanding senior Indebtedness of any Conduit, it will not institute against,
or join any other Person in instituting against, such Conduit any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceeding under the laws of the United States or any state of the
United States.
          (b) Originator hereby covenants and agrees that, prior to the date
that is one year and one day after the payment in full of all outstanding senior
Indebtedness of Buyer, it will not institute against, or join any other Person
in instituting against, Buyer any bankruptcy,

24

--------------------------------------------------------------------------------

 

reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceeding under the laws of the United States or any state of the
United States.
          Section 7.6 CHOICE OF LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING WITHOUT LIMITATION SECTION 5-1401 AND SECTION 5-1402 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK).
          Section 7.7 CONSENT TO JURISDICTION. ORIGINATOR HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW
YORK STATE COURT SITTING IN NEW YORK COUNTY (BOROUGH OF MANHATTAN) IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT
EXECUTED BY ORIGINATOR PURSUANT TO THIS AGREEMENT AND ORIGINATOR HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION
IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL LIMIT THE RIGHT OF BUYER, THE AGENT, ANY MANAGING AGENT OR
ANY PURCHASER TO BRING PROCEEDINGS AGAINST ORIGINATOR IN THE COURTS OF ANY OTHER
JURISDICTION. ANY JUDICIAL PROCEEDING BY ORIGINATOR AGAINST BUYER, THE AGENT,
ANY MANAGING AGENT, ANY PURCHASER OR ANY AFFILIATE THEREOF INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY ORIGINATOR PURSUANT TO THIS
AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK COUNTY (BOROUGH OF
MANHATTAN).
          Section 7.8 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT
OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT EXECUTED BY
ORIGINATOR PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER
OR THEREUNDER.
          Section 7.9 Integration; Binding Effect; Survival of Terms.
          (a) This Agreement and each Transaction Document contain the final and
complete integration of all prior expressions by the parties hereto with respect
to the subject matter hereof and shall constitute the entire agreement among the
parties hereto with respect to the subject matter hereof superseding all prior
oral or written understandings.

25

--------------------------------------------------------------------------------

 

          (b) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns
(including any trustee in bankruptcy). This Agreement shall create and
constitute the continuing obligations of the parties hereto in accordance with
its terms and shall remain in full force and effect until terminated in
accordance with its terms; provided, however, that the rights and remedies with
respect to (i) any breach of any representation and warranty made by Originator
pursuant to Article II, (ii) the indemnification and payment provisions of
Article VI, and Section 7.5 shall be continuing and shall survive any
termination of this Agreement.
          Section 7.10 Counterparts; Severability; Section References. This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same Agreement. Delivery of an executed signature page of this Agreement by
facsimile or other electronic transmission shall be effective as delivery of a
manually executed counterpart hereof. Any provisions of this Agreement which are
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Unless otherwise
expressly indicated, all references herein to “Article,” “Section” or “Exhibit”
shall mean articles and sections of, and schedules and exhibits to, this
Agreement.
          Section 7.11 Amendment and Restatement.
          (a) This Agreement amends and restates in its entirety the Existing
Sale Agreement, and the terms and provisions of the Existing Sale Agreement
shall, subject to this Section 7.11, be superseded hereby.
          (b) Notwithstanding the amendment and restatement of the Existing Sale
Agreement by this Agreement:
          (i) each Subordinated Loan existing on the date hereof under the
Existing Sale Agreement shall continue in effect as a Subordinated Loan
hereunder, without any diminution or other modification thereto or effect
thereon occurring or being deemed to occur by reason of the amendment and
restatement of the Existing Sale Agreement hereby; and
          (ii) Originator shall continue to be liable to the Buyer with respect
to all obligations of it under the Existing Sale Agreement, including, without
limitation, all agreements on the part of the Originator under the Existing Sale
Agreement to indemnify the Buyer in connection with events or conditions arising
or existing prior to the effective date of this Agreement, including, but not
limited to, those events and conditions set forth in Article VI thereof.
          (c) This Agreement is given in substitution for the Existing Sale
Agreement and not as payment of any of the obligations of Originator or the
Buyer thereunder, and is in no way intended to constitute a novation of the
Existing Sale Agreement. Nothing contained herein is intended to amend, modify
or otherwise affect any obligation of the Buyer, the Originator or

26

--------------------------------------------------------------------------------

 

          the Performance Guarantor (in respect of its obligations under any
Performance Undertaking) existing prior to the date hereof.
          (d) Upon the effectiveness of this Agreement, each reference to the
Existing Sale Agreement in any other document, instrument or agreement executed
and/or delivered in connection therewith shall mean and be a reference to this
Agreement unless the context otherwise requires.
          (e) Upon the effectiveness of this Agreement, the terms of this
Agreement shall govern all aspects of the transactions contemplated herein.
[signature page follows]

27

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date hereof.

            THE TIMKEN CORPORATION
as Originator
      By:           Name:           Title:        

Address:
The Timken Corporation
1835 Dueber Avenue SW
PO Box 6928
Canton, OH 44706-0928
Attention: Robert L. Biddle
Facsimile: (412) 236-7419

            TIMKEN RECEIVABLES CORPORATION
as Buyer
      By:           Name:           Title:        

Address:
Timken Receivables Corporation
1835 Dueber Avenue SW
PO Box 6928
Canton, OH 44706-0928
Attention: Robert L. Biddle
Facsimile: (412) 236-7419
Signature Page to Second Amended and Restated Receivables Sale Agreement

 

--------------------------------------------------------------------------------

 

Exhibit I
Definitions
          This is Exhibit I to the Agreement (as hereinafter defined). As used
in the Agreement and the Exhibits, Schedules and Annexes thereto, capitalized
terms have the meanings set forth in this Exhibit I (such meanings to be equally
applicable to the singular and plural forms thereof). If a capitalized term is
used in the Agreement, or any Exhibit, Schedule or Annex thereto, and not
otherwise defined therein or in this Exhibit I, such term shall have the meaning
assigned thereto in Exhibit I to the Purchase Agreement.
          “Agent” has the meaning set forth in the Preliminary Statements to the
Agreement.
          “Agreement” means this Second Amended and Restated Receivables Sale
Agreement, dated as of November 10, 2010, between Originator and Buyer, as the
same may be amended, restated or otherwise modified.
          “Authorized Officer” means, with respect to Originator, its president,
corporate controller, treasurer or chief financial officer.
          “Buyer” has the meaning set forth in the preamble to the Agreement.
          “Calculation Period” means each calendar month or portion thereof
which elapses during the term of the Agreement.
          “Collection Account” means each concentration account, depositary
account, lock-box account or similar account in which any Collections are
collected or deposited and which is listed on Exhibit III, as such Exhibit III
may be amended from time to time by Originator with the written consent of Buyer
and the Agent.
          “Collections” means, with respect to any Receivable, all cash
collections and other cash proceeds in respect of such Receivable, including,
without limitation, all interest, Finance Charges or other related amounts
accruing in respect thereof and all cash proceeds of Related Security with
respect to such Receivable.
          “Contract” means, with respect to any Receivable, any and all
instruments, agreements, invoices or other writings pursuant to which such
Receivable arises or which evidence such Receivable.
          “Credit and Collection Policy” means Originator’s credit and
collection policies, practices and procedures relating to Contracts and
Receivables existing on the date hereof, as modified from time to time in
accordance with the Agreement. To the extent such policies, practices and
procedures have been reduced to writing, the same are set forth on Exhibit V.
          “Dilutions” means, at any time, the aggregate amount of reductions or
cancellations described in Section 1.3(a) of the Agreement.

1

--------------------------------------------------------------------------------

 

          “Discount Factor” means a percentage calculated to provide Buyer with
a reasonable return on its investment in the Receivables after taking account of
(i) the time value of money based upon the anticipated dates of collection of
the Receivables and the cost to Buyer of financing its investment in the
Receivables during such period and (ii) the risk of nonpayment by the Obligors.
Originator and Buyer may agree from time to time to change the Discount Factor
based on changes in one or more of the items affecting the calculation thereof,
provided that any change to the Discount Factor shall take effect as of the
commencement of a Calculation Period, shall apply only prospectively and shall
not affect the Purchase Price payment in respect of any Purchase which occurred
during any Calculation Period ending prior to the Calculation Period during
which Originator and Buyer agree to make such change.
          “Eligible Receivable” means, for purposes of this Agreement, a
Receivable that satisfies all of the criteria and requirements set forth in the
definition of “Eligible Receivable” set forth in Exhibit I to the Purchase
Agreement other than those criteria and requirements relating to (i) the
transfer of such Receivable pursuant to this Agreement or (ii) any actions by
Buyer.
          “Excluded Receivable” means any indebtedness or other obligations owed
to the Originator by (x) Autozone, Inc. in connection with the sale of goods or
the rendering of services by Originator to Autozone, Inc. and (y) General Parts
International, Inc. in connection with the sale of goods or the rendering of
services by Originator to General Parts International, Inc.
          “Excluded Taxes” means net income taxes (or franchise taxes paid in
lieu thereof) imposed on an Indemnified Party that are not in excess of the
amount of such taxes that would be owed if the transactions described in the
Purchase Agreement are given the Intended Characterization for tax purposes and,
to the extent that the Originator’s indemnification obligations under
Section 6.1 of this Agreement extend to the Indemnified Parties within the
meaning of Section 10.1 of the Purchase Agreement, any taxes covered by the
definition of Excluded Taxes contained in the Purchase Agreement.
          “Existing Sale Agreement” has the meaning set forth in the Preliminary
Statements to the Agreement.
          “Intended Characterization” means, for income tax purposes, the
characterization of the acquisition by the Purchasers of Purchaser Interests
under the Purchase Agreement as a loan or loans by the Purchasers to Buyer
secured by the Receivables, the Related Security and the Collections.
          “Lock-Box” means each locked postal box with respect to which a bank
who has executed a Collection Account Agreement has been granted exclusive
access for the purpose of retrieving and processing payments made on the
Receivables and which is listed on Exhibit III as such Exhibit III may be
amended from time to time by Originator with written consent of Buyer and the
Agent.
          “Managing Agent” has the meaning set forth in the Preliminary
Statements to the Agreement.
          “Material Adverse Effect” means a material adverse effect on (i) the
financial condition or operations of (A) Originator or (B) the Performance
Guarantor and its Subsidiaries

2

--------------------------------------------------------------------------------

 

taken as a whole, (ii) the ability of Originator to perform its obligations
under the Agreement or any other Transaction Document, (iii) the legality,
validity or enforceability of the Agreement or any other Transaction Document,
(iv) Originator’s, Buyer’s, the Agent’s, any Managing Agent’s or any Purchaser’s
interest in all or any material portion of the Receivables, the Related Security
or the Collections with respect thereto, or (v) the collectability of all or any
material portion of the Receivables (other than resulting directly from changes
in the credit profile of the Obligors).
          “Net Worth” means as of the last Business Day of the Calculation
Period preceding any date of determination, the excess, if any, of:
          (a) the aggregate Outstanding Balance of the Receivables at such time
          over
          (b) the sum of:
     (i) the aggregate Capital outstanding at such time
     plus
     (ii) the aggregate outstanding principal balance of the Subordinated Loans
(after giving effect to any Subordinated Loan proposed to be made on the date of
determination and any other “subordinated loans” made pursuant to any other
“Receivables Sale Agreement”).
          “Original Balance” means, with respect to any Receivable, the
Outstanding Balance of such Receivable on the date it was purchased by Buyer.
          “Originator” has the meaning set forth in the preamble to the
Agreement.
          “Performance Guarantor” means The Timken Company, an Ohio corporation.
          “Potential Termination Event” means an event which, with the passage
of time or the giving of notice, or both, would constitute a Termination Event.
          “Purchase” means each purchase by or contribution to Buyer from
Originator of the Receivables, the Related Security and the Collections related
thereto, in each case, under this Agreement.
          “Purchase Agreement” has the meaning set forth in the Preliminary
Statements to the Agreement.
          “Purchase Price” means, with respect to any Purchase on any date, the
aggregate price to be paid by Buyer to Originator for such Purchase in
accordance with Section 1.2 of the Agreement for the Receivables, Collections
and Related Security being sold to Buyer on such date, which price shall equal
(i) the product of (x) the Original Balance of such Receivables multiplied by
(y) one minus the Discount Factor then in effect, minus (ii) any Purchase Price

3

--------------------------------------------------------------------------------

 

Credits to be credited against the Purchase Price otherwise payable in
accordance with Section 1.3 of the Agreement.
          “Purchase Price Credit” has the meaning set forth in Section 1.3 of
the Agreement.
          “Purchaser” has the meaning set forth in the Preliminary Statements to
the Agreement.
          “Receivable” means all indebtedness and other obligations owed to
Buyer or Originator (at the time it arises) or in which Buyer or Originator has
a security interest or other interest, including, without limitation, any
indebtedness, obligation or interest constituting an account, chattel paper, an
instrument, a financial asset, investment property, a letter of credit right, a
supporting obligation or general intangible, arising in connection with the sale
of goods or the rendering of services by Originator, and further includes,
without limitation, the obligation to pay any Finance Charges with respect
thereto. Obligations of the Performance Guarantor or any Subsidiary thereof owed
to Originator shall not constitute a Receivable. Indebtedness and other rights
and obligations arising from any one transaction, including, without limitation,
indebtedness and other rights and obligations represented by an individual
invoice, shall constitute a Receivable separate from a Receivable consisting of
the indebtedness and other rights and obligations arising from any other
transaction. For the avoidance of doubt, any indebtedness, rights or obligations
referred to in the immediately preceding sentence shall be a separate Receivable
hereunder regardless of whether the account debtor or Originator treats such
indebtedness, rights or obligations as a separate payment obligation. No
Excluded Receivable shall constitute a “Receivable” hereunder.
          “Recharacterization” has the meaning set forth in Section 1.6(a).
          “Records” means, with respect to any Receivable, all Contracts and
other documents, books, records and other information (including, without
limitation, computer programs, tapes, disks, punch cards, data processing
software and related property and rights) relating to such Receivable, any
Related Security therefor and the related Obligor.
          “Related Security” means, with respect to any Receivable:
          (i) all of Originator’s interest in the inventory and goods (including
returned or repossessed inventory or goods), if any, the sale of which by
Originator gave rise to such Receivable, and all insurance contracts with
respect thereto,
          (ii) all security interests or liens and property subject thereto from
time to time, if any, purporting to secure payment of such Receivable, whether
pursuant to the Contract related to such Receivable or otherwise, together with
all financing statements and security agreements describing any collateral
securing such Receivable,
          (iii) all guaranties, letters of credit, insurance and other
agreements or arrangements of whatever character from time to time supporting or
securing payment of such Receivable whether pursuant to the Contract related to
such Receivable or otherwise,

4

--------------------------------------------------------------------------------

 

          (iv) all Records related to such Receivable, and
          (v) all proceeds of any of the foregoing.
          “Required Capital Amount” means, as of any date of determination, an
amount equal to thirty million dollars ($30,000,000).
          “Settlement Date” means the first day of each calendar month.
          “Subordinated Loan” has the meaning set forth in Section 1.2(a) of the
Agreement.
          “Subordinated Note” means a promissory note in substantially the form
of Exhibit VII hereto as more fully described in Section 1.2 of the Agreement,
as the same may be amended, restated, supplemented or otherwise modified from
time to time.
          “Termination Event” has the meaning set forth in Section 5.1 of the
Agreement.
          “Termination Date” means the earliest to occur of (i) the Facility
Termination Date, (ii) the Business Day immediately prior to the occurrence of a
Termination Event set forth in Section 5.1(d), (iii) the Business Day specified
in a written notice from Buyer to Originator following the occurrence of any
other Termination Event, (iv) the date specified by Buyer that is at least sixty
(60) days after Buyer’s receipt of written notice from Originator that it wishes
to terminate the facility evidenced by this Agreement and (v) the date that any
Election Notice is delivered in accordance with the terms hereof.
          “Transfer Date” has the meaning set forth in Section 1.2 of the
Agreement.
          All accounting terms not specifically defined herein shall be
construed in accordance with GAAP. All terms used in Article 9 of the UCC in the
State of New York, and not specifically defined herein, are used herein as
defined in such Article 9.

5

--------------------------------------------------------------------------------

 

Exhibit II
     Places of Business; Locations of Records; Federal Employer Identification
Numbers
Originator’s Jurisdiction of Organization, Structure and Organization Number, if
any:
Ohio corporation; 1039143
Originator’s Chief Executive Office and Location of Records:
1835 Dueber Avenue
Canton, Ohio 44706
Originator’s Federal Employer Identification Number:
34-1878497
Originator’s Other Corporate, Partnership Trade and Assumed Names:
NONE

1

--------------------------------------------------------------------------------

 

Exhibit III
NAMES OF COLLECTION BANKS; COLLECTION ACCOUNTS

              Collection Bank       Corresponding Account Name/Address   Post
Office Box Address   Number
The Northern Trust Company
  P.O. Box 91821   45381
50 South LaSalle Street
  Chicago, IL 60675        
Chicago, IL 60675
           
The Northern Trust Company
  P.O. Box 91073   69698
50 South LaSalle Street
  Chicago, IL 60675        
Chicago, IL 60675
           
Wells Fargo Bank,
  P.O. Box 751580   2087370809949
National Association
  Charlotte, NC 28288-0013        
Charlotte, NC 28288-0013
           

          Collection Bank Name/ Address   Account Number    
The Bank of New York Mellon
  172-1301    
One Mellon Center
       
Pittsburgh, PA 15258-0001
       

1

--------------------------------------------------------------------------------

 

Exhibit IV
[RESERVED]

1

--------------------------------------------------------------------------------

 

Exhibit V
Credit and Collection Policy
(attached)

1

--------------------------------------------------------------------------------

 

Exhibit VI
[RESERVED]

1

--------------------------------------------------------------------------------

 

Exhibit VII
Form of
SECOND AMENDED AND RESTATED SUBORDINATED NOTE
November 10, 2010
          1. Note. FOR VALUE RECEIVED, the undersigned, Timken Receivables
Corporation, a Delaware corporation (“SPV”), hereby unconditionally promises to
pay to the order of The Timken Corporation, an Ohio corporation (“Originator”),
in lawful money of the United States of America and in immediately available
funds, on the day following the Termination Date on which (i) the Outstanding
Balance of all Receivables sold under the “Sale Agreement” referred to below has
been reduced to zero and (ii) Originator has paid to Buyer all indemnities,
adjustments and other amounts which may be owed under the Sale Agreement
(defined below) in connection with the Purchases (the “Collection Date”), the
aggregate unpaid principal sum outstanding of all “Subordinated Loans” made from
time to time by Originator to SPV pursuant to and in accordance with the terms
of that certain Second Amended and Restated Receivables Sale Agreement dated as
of November 10, 2010 between Originator and SPV (as amended, restated,
supplemented or otherwise modified from time to time, the “Sale Agreement”) or
the Existing Sale Agreement. Reference to Section 1.2 of the Sale Agreement is
hereby made for a statement of the terms and conditions under which the loans
evidenced hereby have been and will be made. All terms which are capitalized and
used herein and which are not otherwise specifically defined herein shall have
the meanings ascribed to such terms in the Sale Agreement.
          2. Interest. SPV further promises to pay interest on the outstanding
unpaid principal amount hereof from the date hereof until payment in full hereof
at a rate equal to the Prime Rate; provided, however, that if SPV shall default
in the payment of any principal hereof, SPV promises to pay, on demand, interest
at the rate of the Default Rate on any such unpaid amounts, from the date such
payment is due to the date of actual payment. Interest shall be payable on the
first Business Day of each month in arrears; provided, however, that SPV may
elect on the date any interest payment is due hereunder to defer such payment
and upon such election the amount of interest due but unpaid on such date shall
constitute principal under this Amended and Restated Subordinated Note (this
“Subordinated Note”). The outstanding principal of any loan made under this
Subordinated Note shall be due and payable on the Collection Date and may be
repaid or prepaid at any time without premium or penalty.
          3. Principal Payments. Originator is authorized and directed by SPV to
enter on the grid attached hereto, or, at its option, in its books and records,
the date and amount of each loan made by it which is evidenced by this
Subordinated Note and the amount of each payment of principal made by SPV, and
absent manifest error, such entries shall constitute prima facie evidence of the
accuracy of the information so entered; provided that neither the failure of
Originator to make any such entry or any error therein shall expand, limit or
affect the obligations of SPV hereunder.

2

--------------------------------------------------------------------------------

 

          4. Subordination. The indebtedness evidenced by this Subordinated Note
is subordinated to the prior payment in full of all of SPV’s recourse
obligations under that certain Receivables Purchase Agreement dated as of the
date hereof by and among SPV, The Timken Corporation, as Servicer, various
“Purchasers” from time to time party thereto, various “Managing Agents” from
time to time party thereto and The Bank Of Tokyo-Mitsubishi UFJ, Ltd., New York
Branch, as the “Agent” (as amended, restated, supplemented or otherwise modified
from time to time, the “Purchase Agreement”). The subordination provisions
contained herein are for the direct benefit of, and may be enforced by, the
Agent, the Managing Agents and the Purchasers and/or any of their respective
assignees (collectively, the “Senior Claimants”) under the Purchase Agreement.
Until the date on which all “Capital” outstanding under (and as defined in) the
Purchase Agreement has been repaid in full and all other obligations of SPV
and/or the Servicer thereunder and under the “Fee Letter” referenced therein
(all such obligations, collectively, the “Senior Claim”) have been indefeasibly
paid and satisfied in full, Originator shall not demand, accelerate, sue for,
take, receive or accept from SPV, directly or indirectly, in cash or other
property or by set-off or any other manner (including, without limitation, from
or by way of collateral) any payment or security of all or any of the
indebtedness under this Subordinated Note or exercise any remedies or take any
action or proceeding to enforce the same; provided, however, that (i) Originator
hereby agrees that it will not institute against SPV any proceeding of the type
described in Section 5.1(d) of the Sale Agreement unless and until the
Collection Date has occurred and (ii) nothing in this paragraph shall restrict
SPV from paying, or Originator from requesting, taking, receiving or accepting,
any payments under this Subordinated Note so long as SPV is not required under
the Purchase Agreement to set aside for the benefit of, or otherwise pay over
to, any of the Senior Claimants the funds used for such payments and further
provided that the making of such payment would not otherwise violate the terms
and provisions of the Purchase Agreement. Should any payment, distribution or
security or proceeds thereof be received by Originator in violation of the
immediately preceding sentence, Originator agrees that such payment shall be
segregated, received and held in trust for the benefit of, and deemed to be the
property of, and shall be immediately paid over and delivered to the Agent for
the benefit of the Senior Claimants.
          5. Bankruptcy; Insolvency. Upon the occurrence of any proceeding of
the type described in Section 5.1(d) of the Sale Agreement involving SPV as
debtor, then and in any such event the Senior Claimants shall receive payment in
full of all amounts due or to become due on or in respect of Capital and the
Senior Claim (including “CP Costs” and “Yield” as defined and as accruing under
the Purchase Agreement after the commencement of any such proceeding, whether or
not any or all of such CP Costs or Yield is an allowable claim in any such
proceeding) before Originator is entitled to receive payment on account of this
Subordinated Note, and to that end, any payment or distribution of assets of SPV
of any kind or character, whether in cash, securities or other property, in any
applicable insolvency proceeding, which would otherwise be payable to or
deliverable upon or with respect to any or all indebtedness under this
Subordinated Note, is hereby assigned to and shall be paid or delivered by the
Person making such payment or delivery (whether a trustee in bankruptcy, a
receiver, custodian or liquidating trustee or otherwise) directly to the Agent
for application to, or as collateral for the payment of, the Senior Claim until
such Senior Claim shall have been paid in full and satisfied.
          6. Amendments. This Subordinated Note shall not be amended or modified
except in accordance with Section 7.1 of the Sale Agreement.

3

--------------------------------------------------------------------------------

 

          7. GOVERNING LAW; SEVERABILITY. THIS SUBORDINATED NOTE SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS
LAWS). WHEREVER POSSIBLE EACH PROVISION OF THIS SUBORDINATED NOTE SHALL BE
INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW,
BUT IF ANY PROVISION OF THIS SUBORDINATED NOTE SHALL BE PROHIBITED BY OR INVALID
UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH
PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION
OR THE REMAINING PROVISIONS OF THIS SUBORDINATED NOTE.
          8. Waivers. All parties hereto, whether as makers, endorsers, or
otherwise, severally waive presentment for payment, demand, protest and notice
of dishonor. Originator additionally expressly waives all notice of the
acceptance by any Senior Claimant of the subordination and other provisions of
this Subordinated Note and expressly waives reliance by any Senior Claimant upon
the subordination and other provisions herein provided.
          9. Assignment. This Subordinated Note may not be assigned, pledged or
otherwise transferred to any party without the prior written consent of the
Agent, and any such attempted transfer shall be void.
          10. Amendment and Restatement. The principal amount of this
Subordinated Note includes the indebtedness heretofore evidenced by that certain
Amended and Restated Subordinated Note dated December 30, 2005 (the “Existing
Note”) and, to the extent such indebtedness is included in this Subordinated
Note, this Subordinated Note (i) merely re-evidences the indebtedness (including
accrued and unpaid interest) heretofore evidenced by the Existing Note, (ii) is
given in substitution for, and not as payment of, the Existing Note and (iii) is
in no way intended to constitute a novation of the SPV’s indebtedness which was
evidenced by the Existing Note.

            TIMKEN RECEIVABLES CORPORATION, as SPV
      By:           Title:                THE TIMKEN CORPORATION, as Originator
      By:           Title:           

4

--------------------------------------------------------------------------------

 

         

Schedule
to
AMENDED AND RESTATED SUBORDINATED NOTE
SUBORDINATED LOANS AND PAYMENTS OF PRINCIPAL

                      Amount of       Unpaid         Subordinated   Amount of
Principal   Principal     Date   Loan   Paid   Balance   Notation made by      
           

5