exv10w2






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	 






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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








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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.



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          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.



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          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: 	 
	 	 	 	 



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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