Exhibit 4.7






EXHIBIT 4.7




CREDIT AGREEMENT




among




APPLIED INDUSTRIAL TECHNOLOGIES, INC.,




and




THE CANADIAN BORROWERS NAMED HEREIN,

as Borrowers,




THE LENDERS NAMED HEREIN,

as Lenders,




KEYBANK NATIONAL ASSOCIATION,

as Lead Arranger, Book Runner and Administrative Agent,




and




U.S. BANK NATIONAL ASSOCIATION,

as Syndication Agent




 






dated as of

June 3, 2005




 







 


 









 





TABLE
OF CONTENTS



	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	ARTICLE I. DEFINITIONS
	 	 	1	 
	Section 1.1. Definitions
	 	 	1	 
	Section 1.2. Accounting Terms
	 	 	22	 
	Section 1.3. Terms Generally
	 	 	22	 
	 
	 	 	 	 
	ARTICLE II. AMOUNT AND TERMS OF CREDIT
	 	 	22	 
	Section 2.1. Amount and Nature of Credit
	 	 	22	 
	Section 2.2. US Revolving Credit
	 	 	23	 
	Section 2.3. CAD Revolving Loans
	 	 	28	 
	Section 2.4. Interest
	 	 	28	 
	Section 2.5. Evidence of Indebtedness
	 	 	30	 
	Section 2.6. Notice of Credit Event; Funding of Loans
	 	 	30	 
	Section 2.7. Payment on Loans and Other Obligations
	 	 	32	 
	Section 2.8. Prepayment
	 	 	33	 
	Section 2.9. Facility and Other Fees
	 	 	34	 
	Section 2.10. Modification of Commitment
	 	 	34	 
	Section 2.11. Computation of Interest and Fees
	 	 	36	 
	Section 2.12. Mandatory Payment
	 	 	36	 
	Section 2.13. Canadian Borrowers
	 	 	37	 
	Section 2.14. Waivers of Borrowers
	 	 	38	 
	Section 2.15. Extension of Commitment
	 	 	38	 
	 
	 	 	 	 
	ARTICLE III. ADDITIONAL PROVISIONS RELATING TO
FIXED RATE LOANS; INCREASED CAPITAL; TAXES
	 	 	38	 
	Section 3.1. Requirements of Law
	 	 	38	 
	Section 3.2. Taxes
	 	 	40	 
	Section 3.3. Funding Losses
	 	 	41	 
	Section 3.4. Eurodollar Rate or CAD Fixed Rate Lending Unlawful;
Inability to Determine Rate
	 	 	42	 
	 
	 	 	 	 
	ARTICLE IV. CONDITIONS PRECEDENT
	 	 	42	 
	Section 4.1. Conditions to Each Credit Event
	 	 	42	 
	Section 4.2. Conditions to the First Credit Event
	 	 	43	 
	 
	 	 	 	 
	ARTICLE V. COVENANTS
	 	 	44	 
	Section 5.1. Insurance
	 	 	44	 
	Section 5.2. Money Obligations
	 	 	44	 
	Section 5.3. Financial Statements and Information
	 	 	45	 
	Section 5.4. Financial Records
	 	 	46	 
	Section 5.5. Franchises; Change in Business
	 	 	46	 
	Section 5.6. ERISA Compliance
	 	 	46	 
	Section 5.7. Financial Covenants
	 	 	47	 
	Section 5.8. Borrowing
	 	 	47	 
	Section 5.9. Liens
	 	 	47	 
	Section 5.10. Regulations U and X
	 	 	48	 






 


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TABLE
OF CONTENTS



	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	Section 5.11. Investments, Loans and Guaranties
	 	 	48	 
	Section 5.12. Merger and Sale of Assets
	 	 	49	 
	Section 5.13. Acquisitions
	 	 	50	 
	Section 5.14. Notice
	 	 	51	 
	Section 5.15. Environmental Compliance
	 	 	51	 
	Section 5.16. Affiliate Transactions
	 	 	51	 
	Section 5.17. Use of Proceeds
	 	 	52	 
	Section 5.18. Corporate Names
	 	 	52	 
	Section 5.19. Subsidiary Guaranties
	 	 	52	 
	Section 5.20. Other Covenants
	 	 	53	 
	Section 5.21. Guaranties Under the Note Purchase Agreement
	 	 	53	 
	Section 5.22. Pari Passu Ranking
	 	 	53	 
	 
	 	 	 	 
	ARTICLE VI. REPRESENTATIONS AND WARRANTIES
	 	 	53	 
	Section 6.1. Corporate Existence; Subsidiaries; Foreign Qualification
	 	 	53	 
	Section 6.2. Corporate Authority
	 	 	54	 
	Section 6.3. Compliance with Laws and Contracts
	 	 	54	 
	Section 6.4. Litigation and Administrative Proceedings
	 	 	54	 
	Section 6.5. Title to Assets
	 	 	55	 
	Section 6.6. Liens and Security Interests
	 	 	55	 
	Section 6.7. Tax Returns
	 	 	55	 
	Section 6.8. Environmental Laws
	 	 	55	 
	Section 6.9. Continued Business
	 	 	55	 
	Section 6.10. Employee Benefits Plans
	 	 	56	 
	Section 6.11. Consents or Approvals
	 	 	56	 
	Section 6.12. Solvency
	 	 	56	 
	Section 6.13. Financial Statements
	 	 	57	 
	Section 6.14. Regulations
	 	 	57	 
	Section 6.15. Material Agreements
	 	 	57	 
	Section 6.16. Intellectual Property
	 	 	57	 
	Section 6.17. Insurance
	 	 	57	 
	Section 6.18. Accurate and Complete Statements
	 	 	57	 
	Section 6.19. Note Purchase Agreement
	 	 	58	 
	Section 6.20. Defaults
	 	 	58	 
	 
	 	 	 	 
	ARTICLE VII. EVENTS OF DEFAULT
	 	 	58	 
	Section 7.1. Payments
	 	 	58	 
	Section 7.2. Special Covenants
	 	 	58	 
	Section 7.3. Other Covenants
	 	 	58	 
	Section 7.4. Representations and Warranties
	 	 	58	 
	Section 7.5. Cross Default
	 	 	59	 
	Section 7.6. ERISA Default
	 	 	59	 
	Section 7.7. Change in Control
	 	 	59	 
	Section 7.8. Money Judgment
	 	 	59	 
	Section 7.9. Validity of Loan Documents
	 	 	59	 






 


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TABLE
OF CONTENTS



	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	Section 7.10. Note Purchase Agreement
	 	 	59	 
	Section 7.11. Solvency
	 	 	60	 
	 
	ARTICLE VIII. REMEDIES UPON DEFAULT
	 	 	60	 
	Section 8.1. Optional Defaults
	 	 	60	 
	Section 8.2. Automatic Defaults
	 	 	60	 
	Section 8.3. Letters of Credit
	 	 	61	 
	Section 8.4. Offsets
	 	 	61	 
	Section 8.5. Equalization Provision
	 	 	61	 
	Section 8.6. Other Remedies
	 	 	62	 
	 
	 	 	 	 
	ARTICLE IX. THE AGENT
	 	 	62	 
	Section 9.1. Appointment and Authorization
	 	 	62	 
	Section 9.2. Note Holders
	 	 	63	 
	Section 9.3. Consultation With Counsel
	 	 	63	 
	Section 9.4. Documents
	 	 	63	 
	Section 9.5. Agent and Affiliates
	 	 	63	 
	Section 9.6. Knowledge of Default
	 	 	63	 
	Section 9.7. Action by Agent
	 	 	63	 
	Section 9.8. Release of Guarantor of Payment
	 	 	64	 
	Section 9.9. Notice of Default
	 	 	64	 
	Section 9.10. Delegation of Duties
	 	 	64	 
	Section 9.11. Indemnification of Agent
	 	 	64	 
	Section 9.12. Successor Agent
	 	 	64	 
	Section 9.13. Other Agents
	 	 	65	 
	Section 9.14. Designated Lending Office
	 	 	65	 
	 
	 	 	 	 
	ARTICLE X. MISCELLANEOUS
	 	 	65	 
	Section 10.1. Lenders’ Independent Investigation
	 	 	65	 
	Section 10.2. No Waiver; Cumulative Remedies
	 	 	65	 
	Section 10.3. Amendments, Consents
	 	 	65	 
	Section 10.4. Notices
	 	 	66	 
	Section 10.5. Costs, Expenses and Taxes
	 	 	66	 
	Section 10.6. Indemnification
	 	 	67	 
	Section 10.7. Obligations Several; No Fiduciary Obligations
	 	 	67	 
	Section 10.8. Execution in Counterparts
	 	 	68	 
	Section 10.9. Binding Effect; Borrowers’ Assignment
	 	 	68	 
	Section 10.10. Lender Assignments
	 	 	68	 
	Section 10.11. Sale of Participations
	 	 	70	 
	Section 10.12. Patriot Act Notice
	 	 	71	 
	Section 10.13. Severability of Provisions; Captions; Attachments
	 	 	71	 
	Section 10.14. Investment Purpose
	 	 	71	 
	Section 10.15. Confidentiality
	 	 	71	 
	Section 10.16. Entire Agreement
	 	 	72	 
	Section 10.17. Legal Representation of Parties
	 	 	72	 






 


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TABLE
OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	 
	Section 10.18. Currency
	 	 	72	 
	Section 10.19. Governing Law; Submission to Jurisdiction
	 	 	73	 
	Section 10.20. Jury Trial Waiver 
	 	 	Signature Page 74	 






	 	 	 
	Exhibit A

	 	Form of US Revolving Credit Note
	Exhibit B

	 	Form of Swing Line Note
	Exhibit C

	 	Form of CAD Revolving Credit Note
	Exhibit D

	 	Form of Notice of Loan
	Exhibit E

	 	Form of Compliance Certificate
	Exhibit F

	 	Form of Assignment and Acceptance Agreement
	Exhibit G

	 	Form of Request for Extension
	Exhibit H

	 	US Borrower Investment Policy
	 
	 	 
	Schedule 1

	 	Lenders and Commitments
	Schedule 2

	 	Canadian Borrowers
	Schedule 2.2

	 	Existing Letters of Credit
	Schedule 3

	 	Guarantors of Payment
	Schedule 5.9

	 	Liens
	Schedule 6.1

	 	Subsidiaries
	Schedule 6.4

	 	Litigation and Administrative Proceedings
	Schedule 6.10

	 	ERISA Plans
	Schedule 6.15

	 	Material Agreements







 


iv









 







This CREDIT AGREEMENT (as the same may from time to time be amended, restated or otherwise
modified, this “Agreement”) is made effective as of the 3rd day of June, 2005 among:




(a) APPLIED INDUSTRIAL TECHNOLOGIES, INC., an Ohio corporation (“US Borrower”);



(b) each Canadian Borrower, as hereinafter defined (each such Canadian Borrower, together with
US Borrower, collectively, “Borrowers” and, individually, each a “Borrower”);



(c) the lenders listed on Schedule 1 hereto and each other Eligible Transferee, as
hereinafter defined, that becomes a party hereto pursuant to Section 2.10(b) or 10.10 hereof
(collectively, the “Lenders” and, individually, each a “Lender”);



(d) KEYBANK NATIONAL ASSOCIATION, as lead arranger, book runner and administrative agent for
the Lenders under this Agreement (“Agent”); and



(e) U.S. BANK NATIONAL ASSOCIATION, as syndication agent under this Agreement (the
“Syndication Agent”).



WITNESSETH:




WHEREAS, Borrowers, Agent and the Lenders desire to contract for the establishment of credits
in the aggregate principal amounts hereinafter set forth, to be made available to Borrowers upon
the terms and subject to the conditions hereinafter set forth;




NOW, THEREFORE, it is mutually agreed as follows:



ARTICLE I. DEFINITIONS




Section 1.1. Definitions. As used in this Agreement, the following terms shall have
the following meanings:



“Acquisition” shall mean any transaction or series of related transactions for the purpose of
or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the
assets of any Person (other than a Company), or any business or division of any Person (other than
a Company), (b) the acquisition of in excess of fifty percent (50%) of the stock (or other equity
interest) of any Person (other than a Company), or (c) the acquisition of another Person (other
than a Company) by a merger, amalgamation or consolidation or any other combination with such
Person.



“Additional Commitment” shall mean that term as defined in Section 2.10(b) hereof.


 


1









 





“Additional Lender” shall mean a financial institution that shall become a Lender during the
Commitment Increase Period pursuant to Section 2.10(b) hereof.



“Additional Lender Assumption Agreement” shall mean an additional lender assumption agreement,
in form and substance satisfactory to Agent, wherein an Additional Lender shall become a US Lender.



“Additional Lender Assumption Effective Date” shall mean that term as defined in
Section 2.10(b) hereof.



“Advantage” shall mean any payment (whether made voluntarily or involuntarily, by offset of
any deposit or other indebtedness or otherwise) received by any Lender in respect of the Applicable
Debt, if such payment results in that Lender having less than its pro rata share (based upon its
Applicable Commitment Percentage) of the Applicable Debt then outstanding.



“Affiliate” shall mean any Person, directly or indirectly, controlling, controlled by or under
common control with a Company and “control” (including the correlative meanings, the terms
“controlling”, “controlled by” and “under common control with”) shall mean the power, directly or
indirectly, to direct or cause the direction of the management and policies of a Company, whether
through the ownership of voting securities, by contract or otherwise.




“Agent” shall mean that term as defined in the first paragraph hereof.



“Agent Fee Letter” shall mean the Agent Fee Letter between US Borrower and Agent, dated as of
the Closing Date, as the same may from time to time be amended, restated or otherwise modified.




“Agreement” shall mean that term as defined in the first paragraph hereof.




“Applicable Commitment Percentage” shall mean, for each Lender:




(a) with respect to the US Revolving Credit Commitment, the percentage, if any, set
forth opposite such Lender’s name under the column headed “US Revolving Credit Commitment
Percentage” as listed in Schedule 1 hereto; and




(b) with respect to the CAD Revolving Credit Commitment, the percentage, if any, set
forth opposite such Lender’s name under the column headed “CAD Revolving Credit Commitment
Percentage” as listed in Schedule 1 hereto.




“Applicable Debt” shall mean:




(a) with respect to the Canadian Commitment, collectively, (i) all Indebtedness
incurred by Canadian Borrowers to the Canadian Lenders pursuant to this Agreement and the
other Loan Documents, and includes, without limitation, the principal of and interest on the
Loans payable by Canadian Borrowers to the Canadian Lenders, (ii) each extension, renewal or
refinancing of the foregoing, in whole or in part, and (iii) the
facility, prepayment and other fees and amounts payable hereunder in connection with the
Canadian Commitment; and


 


2









 






(b) with respect to the US Commitment, collectively, (i) all Indebtedness incurred by
US Borrower to the US Lenders pursuant to this Agreement and the other Loan Documents, and
includes, without limitation, the principal of and interest on the Loans payable by US
Borrower to such US Lenders in connection with the US Commitment, and all obligations with
respect to the Swing Line Commitment and the Letter of Credit Commitment, (ii) each
extension, renewal or refinancing of the foregoing, in whole or in part, and (iii) the
facility, prepayment and other fees and amounts payable hereunder in connection with the US
Commitment.




“Applicable Facility Fee Rate” shall mean:




(a) for the period from the Closing Date through October 31, 2005, ten (10) basis
points; and




(b) commencing with the Consolidated financial statements of US Borrower for the fiscal
quarter ending June 30, 2005, the number of basis points set forth in the following matrix,
based upon the result of the computation of the Leverage Ratio, shall be used to establish
the number of basis points that will go into effect on November 1, 2005 and thereafter:



	 	 	 
	Leverage Ratio	 	Applicable Facility Fee Rate
	Greater than or equal to 2.50 to 1.00

	 	20.00 basis points
	Less than 2.50 to 1.00 but greater than or
equal to 2.00 to 1.00

	 	17.50 basis points
	Less than 2.00 to 1.00 but greater than or
equal to 1.50 to 1.00

	 	15.00 basis points
	Less than 1.50 to 1.00 but greater than or
equal to 1.00 to 1.00

	 	12.50 basis points
	Less than 1.00 to 1.00

	 	10.00 basis points






After November 1, 2005, changes to the Applicable Facility Fee Rate shall be effective on the first
day of each month following the date upon which Agent received, or, if earlier, Agent should have
received, pursuant to Section 5.3(a) and (b) hereof, the Consolidated financial statements of the
Companies. The above matrix does not modify or waive, in any respect, the requirements of
Section 5.7 hereof, the rights of Agent and the Lenders to charge the Default Rate, or the rights
and remedies of Agent and the Lenders pursuant to Articles VII and VIII hereof.



“Applicable Lender” shall mean, (a) US Lenders with respect to the US Commitment, and (b)
Canadian Lenders with respect to the Canadian Commitment.


 


3









 






“Applicable Margin” shall mean:




(a) for the period from the Closing Date through October 31, 2005, thirty (30) basis
points; and




(b) commencing with the Consolidated financial statements of US Borrower for the fiscal
quarter ending June 30, 2005, the number of basis points set forth in the following matrix,
based upon the result of the computation of the Leverage Ratio, shall be used to establish
the number of basis points that will go into effect on November 1, 2005 and thereafter:



	 	 	 
	Leverage Ratio	 	Applicable Margin
	Greater than or equal to 2.50 to 1.00

	 	55.00 basis points
	Less than 2.50 to 1.00 but greater than or equal to
2.00 to 1.00

	 	47.50 basis points
	Less than 2.00 to 1.00 but greater than or equal to
1.50 to 1.00

	 	40.00 basis points
	Less than 1.50 to 1.00 but greater than or equal to
1.00 to 1.00

	 	32.50 basis points
	Less than to 1.00 to 1.00

	 	30.00 basis points






After November 1, 2005, changes to the Applicable Margin shall be effective on the first day of
each month following the date upon which Agent received, or, if earlier, Agent should have
received, pursuant to Section 5.3(a) and (b) hereof, the Consolidated financial statements of the
Companies. The above matrix does not modify or waive, in any respect, the requirements of Section
5.7 hereof, the rights of Agent and the Lenders to charge the Default Rate, or the rights and
remedies of Agent and the Lenders pursuant to Articles VII and VIII hereof.



“Assignment Agreement” shall mean an Assignment and Acceptance Agreement in the form of the
attached Exhibit F.



“Authorized Officer” shall mean a Financial Officer or other individual authorized by a
Financial Officer in writing (with a copy to Agent) to handle certain administrative matters in
connection with this Agreement.



“Base Rate” shall mean a rate per annum equal to the greater of (a) the Prime Rate or
(b) one-half of one percent (0.50%) in excess of the Federal Funds Effective Rate. Any change in
the Base Rate shall be effective immediately from and after such change in the Base Rate.



“Base Rate Loan” shall mean a US Revolving Loan described in Section 2.2(a) hereof on which US
Borrower shall pay interest at a rate based on the Base Rate.




“Borrower” shall mean that term as defined in the first paragraph hereof.


 


4









 





“Business Day” shall mean (a) a day of the year on which banks are not authorized or required
to close in Cleveland, Ohio, (b) if the applicable Business Day shall relate to any
Eurodollar Loan, a day of the year on which dealings in deposits are carried on in the London
interbank Eurodollar market, or (c) if the applicable Business Day shall relate to any CAD
Revolving Loan, a day of the year on which dealings in deposits are carried on in Canada.



“CAD Base Rate” shall mean the per annum interest rate established from time to time by
JPMorgan Canada as JPMorgan Canada’s “prime rate” or similar index, whether or not such rate is
publicly announced, applicable to commercial loans made by JPMorgan Canada in Canada in CAD;
provided that the CAD Base Rate may not be the lowest interest rate charged by JPMorgan Canada for
such commercial loans. Each change in the CAD Base Rate shall be effective immediately from and
after such change.



“CAD Base Rate Loan” shall mean a CAD Revolving Loan described in Section 2.3 hereof on which
Canadian Borrowers shall pay interest at a rate based on the CAD Base Rate.




“CAD” or “Canadian Dollar” shall mean lawful money of Canada.



“CAD Equivalent” shall mean the amount denominated in CAD, as of any date of determination,
that could be purchased with the applicable amount of Dollars at the most favorable spot exchange
rate quoted by Agent at approximately 11:00 A.M. (Eastern time) on such date.



“CAD Fixed Rate” shall mean, in respect of any Interest Period applicable to a CAD Fixed Rate
Loan, the rate per annum determined by Agent by reference to the average rate quoted on the Reuters
Monitor Screen (Page CDOR, or such other page as may replace such page on such screen for the
purpose of displaying Canadian interbank bid rates for Canadian Dollar bankers’ acceptances)
applicable to Canadian Dollar bankers’ acceptances (on a three hundred sixty-five (365) day basis)
with a term comparable to such Interest Period as of 10:00 A.M. (Eastern time) on the first day of
such Interest Period. If for any reason the Reuters Monitor Screen rates are unavailable, CAD Fixed
Rate means the rate of interest determined by Agent that is equal to the rate (rounded upwards to
the nearest basis point) quoted by JPMorgan Canada in respect of Canadian Dollar bankers’
acceptances (on a three hundred sixty-five (365) day basis) with a term comparable to such Interest
Period. No adjustment shall be made to account for the difference between the number of days in a
year on which the rates referred to in this definition are based and the number of days in a year
on the basis of which interest is calculated in this Agreement.



“CAD Fixed Rate Loan” shall mean a CAD Revolving Loan described in Section 2.3 hereof on which
Canadian Borrowers shall pay interest at a rate based on the Derived CAD Fixed Rate.



“CAD Revolving Credit Commitment” shall mean the obligation hereunder, during the Commitment
Period, of each Canadian Lender to make CAD Revolving Loans up to the Maximum Amount for such
Canadian Lender.



“CAD Revolving Credit Note” shall mean a CAD Revolving Credit Note executed and delivered
pursuant to Section 2.5(c) hereof.


 


5









 





“CAD Revolving Exposure” shall mean the Dollar Equivalent of the aggregate principal amount of
all CAD Revolving Loans.



“CAD Revolving Loan” shall mean a CAD Base Rate Loan or a CAD Fixed Rate Loan granted to a
Canadian Borrower in accordance with Section 2.3 hereof.



“Canadian Borrower” shall mean each of the Foreign Subsidiaries of US Borrower set forth on
Schedule 2 hereto.



“Canadian Commitment” shall mean the obligation hereunder of the Canadian Lenders, during the
Commitment Period, to make CAD Revolving Loans pursuant to the CAD Revolving Credit Commitment, up
to the Maximum CAD Revolving Amount.



“Canadian Guarantor of Payment” shall mean each Foreign Subsidiary that shall execute and
deliver a Guaranty of Payment to Agent, pursuant to Section 5.19 hereof, subsequent to the Closing
Date.



“Canadian Lender” shall mean each Lender that is designated as a Canadian Lender on
Schedule 1 hereto.



“Capitalized Lease Obligations” shall mean obligations of the Companies for the payment of
rent for any real or personal property under leases or agreements to lease that, in accordance with
GAAP, have been or should be capitalized on the books of the lessee and, for purposes hereof, the
amount of any such obligation shall be the capitalized amount thereof determined in accordance with
GAAP.




“Change in Control” shall mean:




(a) the acquisition of, or, if earlier, the shareholder or director approval of the
acquisition of, ownership or voting control, directly or indirectly, beneficially or of
record, on or after the Closing Date, by any Person or group (within the meaning of Rule
13d-3 of the SEC under the Securities Exchange Act of 1934, as then in effect), of shares
representing more than thirty-three percent (33%) of the aggregate ordinary Voting Power
represented by the issued and outstanding capital stock of US Borrower;




(b) the occupation of a majority of the seats (other than vacant seats) on the board of
directors of US Borrower by Persons who were neither (i) nominated by the board of directors
of US Borrower nor (ii) appointed by directors so nominated; or




(c) the occurrence of a change in control, or other similar provision, as defined in
any Material Indebtedness Agreement.



“Closing Commitment Amount” shall mean the Dollar Equivalent of One Hundred Million Dollars
($100,000,000).


 


6









 





“Closing Date” shall mean the effective date of this Agreement as set forth in the first
paragraph of this Agreement.



“Closing Fee Letter” shall mean the Closing Fee Letter among US Borrower, Agent and the
Lenders, dated as of the Closing Date.



“Code” shall mean the Internal Revenue Code of 1986, as amended, together with the rules and
regulations promulgated thereunder.




“Commitment” shall mean the US Commitment and the Canadian Commitment.



“Commitment Increase Period” shall mean the period from the Closing Date to the date that is
thirty (30) days prior to the last day of the Commitment Period.



“Commitment Period” shall mean the period from the Closing Date to June 2, 2010, or such
earlier date on which the Commitment shall have been terminated pursuant to Article VIII hereof.




“Companies” shall mean all Borrowers and Subsidiaries.




“Company” shall mean a Borrower or Subsidiary.



“Compliance Certificate” shall mean a certificate, substantially in the form of the attached
Exhibit E.



“Confidential Information” shall mean all confidential or proprietary information about the
Companies that has been furnished by any Company to Agent or any Lender, whether furnished before
or after the Closing Date and regardless of the manner in which it is furnished, but does not
include any such information that (a) is or becomes generally available to the public other than as
a result of a disclosure by Agent or such Lender not permitted by this Agreement, (b) was available
to Agent or such Lender on a nonconfidential basis prior to its disclosure to Agent or such Lender
or (c) becomes available to Agent or such Lender on a nonconfidential basis from a Person other
than any Company that is not, to the best knowledge of Agent or such Lender, acting in violation of
a confidentiality agreement with a Company or is not otherwise prohibited from disclosing the
information to Agent or such Lender.



“Consideration” shall mean, in connection with an Acquisition (or a Disposition), the
aggregate consideration paid, including borrowed funds, cash, the issuance of securities or notes,
the assumption or incurring of liabilities (direct or contingent), the payment of consulting fees
or fees for a covenant not to compete and any other consideration paid for such Acquisition (or
Disposition).



“Consolidated” shall mean the resultant consolidation of the financial statements of US
Borrower and its Subsidiaries in accordance with GAAP, including principles of consolidation
consistent with those applied in preparation of the consolidated financial statements referred to
in Section 6.13 hereof.


 


7









 





“Consolidated Depreciation and Amortization Charges” shall mean, for any period, the aggregate
of all depreciation and amortization charges for fixed assets, leasehold improvements and general
intangibles (specifically including goodwill) of US Borrower for such period, as determined on a
Consolidated basis and in accordance with GAAP.



“Consolidated EBITDA” shall mean, for any period, as determined on a Consolidated basis and in
accordance with GAAP, Consolidated Net Earnings for such period plus the aggregate amounts deducted
in determining such Consolidated Net Earnings in respect of (a) Consolidated Interest Expense, (b)
Consolidated Income Tax Expense, (c) Consolidated Depreciation and Amortization Charges, (d) to the
extent that US Borrower expenses such charges, Consolidated stock option expenses up to an
aggregate amount of Five Million Dollars ($5,000,000) per fiscal year of US Borrower, and (e) (i)
extraordinary or non-recurring charges, minus (ii) extraordinary or non-recurring cash gains.



“Consolidated Income Tax Expense” shall mean, for any period, all provisions for taxes based
on the gross or net income of US Borrower (including, without limitation, any additions to such
taxes, and any penalties and interest with respect thereto), and all franchise taxes of US
Borrower, as determined on a Consolidated basis and in accordance with GAAP.



“Consolidated Interest Expense” shall mean, for any period, the interest expense of US
Borrower for such period, as determined on a Consolidated basis and in accordance with GAAP.



“Consolidated Net Earnings” shall mean, for any period, without duplication, an amount equal
to (a) the net income (loss) of US Borrower for such period, plus (b) upon the consummation of an
Acquisition (with Consideration in excess of Two Million Five Hundred Thousand Dollars
($2,500,000)) permitted under Section 5.13 hereof, trailing twelve months pro forma historical net
income (loss), less (c) upon the consummation of a Disposition (with Consideration in excess of Two
Million Five Hundred Thousand Dollars ($2,500,000)), trailing twelve months pro forma historical
net income (loss), all as determined on a Consolidated basis and in accordance with GAAP.



“Consolidated Net Worth” shall mean, at any date, the stockholders’ equity of US Borrower,
determined as of such date on a Consolidated basis and in accordance with GAAP.



“Consolidated Total Assets” shall mean, at any date, an amount equal to the total assets of US
Borrower, as determined on a Consolidated basis and in accordance with GAAP.



“Consolidated Total Liabilities” shall mean, at any date, the Total Liabilities of US
Borrower, as determined on a Consolidated basis and in accordance with GAAP.



“Controlled Group” shall mean a Company and each Person required to be aggregated with a
Company under Code Section 414(b), (c), (m) or (o).



“Credit Event” shall mean the making by the Lenders of a Loan, the conversion by the Lenders
of a Base Rate Loan or a CAD Base Rate Loan to a Fixed Rate Loan, the continuation by the Lenders
of a Fixed Rate Loan after the end of the applicable Interest Period, the making
by the Swing Line Lender of a Swing Loan, or the issuance by the Fronting Lender of a Letter of
Credit.


 


8









 





“Credit Party” shall mean a Borrower, and any Subsidiary or other Affiliate that is a
Guarantor of Payment.



“Default” shall mean an event or condition that constitutes, or with the lapse of any
applicable grace period or the giving of notice or both would constitute, an Event of Default, and
that has not been waived by the Required Lenders (or, if applicable, all of the Lenders) in
writing.



“Default Rate” shall mean (a) with respect to any Loan, a rate per annum equal to two percent
(2%) in excess of the rate otherwise applicable thereto, and (b) with respect to any other amount,
if no rate is specified or available, a rate per annum equal to two percent (2%) in excess of the
Base Rate from time to time in effect.



“Derived CAD Fixed Rate” shall mean a rate per annum equal to the sum of the Applicable Margin
(from time to time in effect) plus the CAD Fixed Rate.



“Derived Eurodollar Rate” shall mean a rate per annum equal to the sum of the Applicable
Margin (from time to time in effect) plus the Eurodollar Rate.



“Derived Swing Loan Rate” shall mean a rate per annum equal to (a) Agent’s cost of funds as
quoted to US Borrower by Agent and agreed to by US Borrower, plus (b) the Applicable Margin (from
time to time in effect).



“Designated Lending Office” shall mean the office of Agent, c/o JPMorgan Canada, Royal Bank
Tower, South Plaza, Suite 1800, Toronto, Ontario M5J2J2 Attention: Indrani Lazarus, or such other
office and address in Canada as Agent may from time to time designate.



“Disposition” shall mean any transaction or series of related transactions for the purpose of
or resulting, directly or indirectly, in the transfer or other disposition of (a) in excess of
fifty percent (50%) of the stock (or other equity interest) or (b) all or substantially all of the
assets of any Company, or any business unit or division of any Company.




“Dollar” or the sign $ shall mean lawful money of the United States of America.



“Dollar Equivalent” shall mean (a) with respect to a CAD Revolving Loan, the Dollar equivalent
of the amount of such CAD Revolving Loan, determined by Agent on the basis of its spot rate at
approximately 11:00 A.M. (London time) on the date two Business Days before the date of such CAD
Revolving Loan, for the purchase of Canadian Dollars with Dollars for delivery on the date of such
CAD Revolving Loan, and (b) with respect to any other amount, if such amount is denominated in
Dollars, then such amount in Dollars and, otherwise the Dollar equivalent of such amount,
determined by Agent on the basis of its spot rate at approximately 11:00 A.M. (London time) on the
date for which the Dollar equivalent amount of such amount is being determined, for the purchase of
Canadian Dollars with Dollars for delivery on such date; provided, however, that, in calculating
the Dollar Equivalent for purposes of determining (i) any Borrower’s obligation to prepay Loans
pursuant to Section 2.12 hereof, or (ii) any Borrower’s
ability to request additional Loans pursuant to the Commitment, Agent may, in its discretion, on
any Business Day selected by Agent (prior to payment in full of the Obligations), calculate the
Dollar Equivalent of each such Loan. Agent shall notify US Borrower of the Dollar Equivalent of
the CAD Revolving Loans or any other amount, at the time that such Dollar Equivalent shall have
been determined pursuant to this definition.


 


9









 





“Domestic Guarantor of Payment” shall mean each of the Companies designated a “Domestic
Guarantor of Payment” on Schedule 3 hereto, each of which is executing and delivering a
Guaranty of Payment on the Closing Date, and any other Domestic Subsidiary that shall deliver a
Guaranty of Payment to Agent subsequent to the Closing Date.




“Domestic Subsidiary” shall mean a Subsidiary that is not a Foreign Subsidiary.



“Dormant Subsidiary” shall mean a Company that (a) is not a Credit Party, (b) has aggregate
assets of less than One Million Dollars ($1,000,000) and aggregate investments by the Companies of
less than One Million Dollars ($1,000,000), and (c) has no direct or indirect Subsidiaries with
aggregate assets for all such Subsidiaries of more than One Million Dollars ($1,000,000).



“Eligible Transferee” shall mean a commercial bank, financial institution or other “accredited
investor” (as defined in SEC Regulation D), or, for the purposes of the Canadian Commitment, as
defined in Ontario Securities Commission Rule 45-501), that is not a Borrower, a Subsidiary or an
Affiliate.



“Environmental Laws” shall mean all provisions of law, statutes, ordinances, rules,
regulations, permits, licenses, judgments, writs, injunctions, decrees, orders, awards and
standards promulgated by the government of the United States of America by any state or
municipality thereof or any foreign jurisdiction, or by any court, agency, instrumentality,
regulatory authority or commission of any of the foregoing concerning health, safety and protection
of, or regulation of the discharge of substances into, the environment.



“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time
to time, and the regulations promulgated pursuant thereto.



“ERISA Event” shall mean (a) the existence of a condition or event with respect to an ERISA
Plan that presents a significant risk of the imposition of an excise tax in a material amount or
any other material liability on a Company or of the imposition of a Lien on the assets of a
Company; (b) the engagement by a Controlled Group member in a non-exempt “prohibited transaction”
(as defined under ERISA Section 406 or Code Section 4975) or a breach of a fiduciary duty under
ERISA that, in either case, could result in a material liability to a Company; (c) the application
by a Controlled Group member for a waiver from the minimum funding requirements of Code Section 412
or ERISA Section 302 or a Controlled Group member is required to provide security under Code
Section 401(a)(29) or ERISA Section 307; (d) the occurrence of a Reportable Event with respect to
any Pension Plan as to which 30-day notice is required to be provided to the PBGC; (e) the
withdrawal by a Controlled Group member from a Multiemployer Plan in a “complete withdrawal” or a
“partial withdrawal” (as such terms are


 


10









 






defined
in ERISA Sections 4203 and 4205, respectively) which results or is likely to result in a material liability to a Company; (f) the involvement of, or occurrence or existence of any event or
condition that makes likely the involvement of, a Multiemployer Plan in any reorganization under
ERISA Section 4241; (g) the failure of an ERISA Plan (and any related trust) that is intended to be
qualified under Code Sections 401 and 501 to be so qualified or the failure of any “cash or
deferred arrangement” under any such ERISA Plan to meet the requirements of Code Section 401(k),
provided, in any such case, that the failure exposes or is likely to expose a Company to material
liability; (h) the taking by the PBGC of any steps to terminate a Pension Plan or appoint a trustee
to administer a Pension Plan, or the taking by a Controlled Group member of any steps to terminate
a Pension Plan; (i) the failure by a Controlled Group member or an ERISA Plan to satisfy any
requirements of law applicable to an ERISA Plan, provided, in any such case, that the failure
exposes or is likely to expose a Company to material liability; (j) the commencement, existence or
threatening of a claim, action, suit, audit or investigation with respect to an ERISA Plan, other
than a routine claim for benefits, and such action or suit could reasonably be expected to have a
Material Adverse Effect; or (k) any incurrence by or any expectation of the incurrence by a
Controlled Group member of any liability for post-retirement medical benefits under any Welfare
Plan, other than as required by ERISA Section 601, et. seq. or Code Section 4980B,
except for limited benefits in connection with a severance arrangement or benefits for retired
senior executives or directors of a Company.



“ERISA Plan” shall mean an “employee benefit plan” (within the meaning of ERISA Section 3(3))
that a Controlled Group member at any time sponsors or maintains, or to which a Controlled Group
member contributes, has liability or has a contribution obligation.



“Eurocurrency Liabilities” shall have the meaning assigned to that term in Regulation D of the
Board of Governors of the Federal Reserve System, as in effect from time to time.



“Eurodollar” shall mean a Dollar denominated deposit in a bank or branch outside of the United
States.



“Eurodollar Loan” shall mean a Loan described in Section 2.2(a) hereof on which US Borrower
shall pay interest at a rate based upon the Derived Eurodollar Rate.



“Eurodollar Rate” shall mean, with respect to a Eurodollar Loan, for any Interest Period, a
rate per annum equal to the quotient obtained (rounded upwards, if necessary, to the nearest
1/16th of 1%) by dividing (a) the rate of interest, determined by Agent in accordance
with its usual procedures (which determination shall be conclusive absent manifest error) as of
approximately 11:00 A.M. (London time) three Business Days prior to the beginning of such Interest
Period pertaining to such Eurodollar Loan, as listed on British Bankers Association Interest Rate
LIBOR 01 or 02 as provided by Reuters (or, if for any reason such rate is unavailable from Reuters,
from any other similar company or service that provides rate quotations comparable to those
currently provided by Reuters) as the rate in the London interbank market for Dollar deposits in
immediately available funds with a maturity comparable to such Interest Period, provided that, in
the event that such rate quotation is not available for any reason, then the Eurodollar Rate shall
be the average (rounded upward to the nearest 1/16th of 1%) of the per annum rates at which
deposits in immediately available funds in Dollars for the relevant Interest Period and in the
amount of the Eurodollar Loan to be disbursed or to remain
outstanding during such Interest Period, as the case may be, are offered to Agent (or an affiliate
of Agent, in Agent’s discretion) by prime banks in any Eurodollar market reasonably selected by
Agent, determined as of 11:00 A.M. (London time) (or as soon thereafter as practicable), three
Business Days prior to the beginning of the relevant Interest Period pertaining to such Eurodollar
Loan hereunder; by (b) 1.00 minus the Reserve Percentage.


 


11









 





“Event of Default” shall mean an event or condition that shall constitute an event of default
as defined in Article VII hereof.



“Excluded Taxes” shall mean net income taxes (and franchise taxes imposed in lieu of net
income taxes) imposed on Agent or a Lender by the Governmental Authority located in the
jurisdiction where Agent or such Lender is organized (other than any such taxes arising solely from
Agent or such Lender having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement or any other Loan Document).



“Existing Letter of Credit” shall have the meaning given to such term in Section 2.2(b)(vii)
hereof.



“Federal Funds Effective Rate” shall mean, for any day, the rate per annum (rounded upward to
the nearest one one-hundredth of one percent (1/100 of 1%)) announced by the Federal Reserve Bank
of New York (or any successor) on such day as being the weighted average of the rates on overnight
federal funds transactions arranged by federal funds brokers on the previous trading day, as
computed and announced by such Federal Reserve Bank (or any successor) in substantially the same
manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the
“Federal Funds Effective Rate” as of the Closing Date.



“Financial Officer” shall mean any of the following officers: chief executive officer,
president, any vice president, chief financial officer, treasurer, assistant treasurer, controller
or assistant controller. Unless otherwise qualified, all references to a Financial Officer in this
Agreement shall refer to a Financial Officer of US Borrower.




“Fixed Rate Loan” shall mean a Eurodollar Loan or a CAD Fixed Rate Loan.




“Foreign Subsidiary” shall mean a Subsidiary that is organized outside of the United States.



“Fronting Lender” shall mean, (a) as to any Letter of Credit transaction hereunder, Agent as
issuer of the Letter of Credit, or, in the event that Agent either shall be unable to issue or
shall agree, with the consent of US Borrower, that another US Lender may issue, a Letter of Credit,
such other US Lender as shall agree to issue the Letter of Credit in its own name, but on behalf of
the Lenders hereunder, or (b) as to any Existing Letter of Credit, KeyBank National Association.


 


12









 





“Funded Indebtedness” shall mean, without duplication, the sum of (a) all Indebtedness for
borrowed money, (b) all Capitalized Lease Obligations and (c) all Indebtedness pursuant to letters
of credit, synthetic lease and asset securitizations.



“GAAP” shall mean generally accepted accounting principles in the United States as then in
effect, which shall include the official interpretations thereof by the Financial Accounting
Standards Board, applied on a basis consistent with the past accounting practices and procedures of
US Borrower.



“Governmental Authority” shall mean any nation or government, any state, province or territory
or other political subdivision thereof, any governmental agency, authority, instrumentality,
regulatory body, court, central bank or other governmental entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or pertaining to
government, any securities exchange and any self-regulatory organization.



“Guarantor” shall mean a Person that shall have pledged its credit or property in any manner
for the payment or other performance of the indebtedness, contract or other obligation of another
and includes (without limitation) any guarantor (whether of payment or of collection), surety,
co-maker, endorser or Person that shall have agreed conditionally or otherwise to make any
purchase, loan or investment in order thereby to enable another to prevent or correct a default of
any kind.



“Guarantor of Payment” shall mean US Borrower, a Domestic Guarantor of Payment or a Canadian
Guarantor of Payment.



“Guaranty of Payment” shall mean the Parent Guaranty of Payment and each Guaranty of Payment
executed and delivered on or after the Closing Date in connection with this Agreement by the
Guarantors of Payment, as the same may from time to time be amended, restated or otherwise
modified.



“Hedge Agreement” shall mean any (a) hedge agreement, interest rate swap, basis swap
agreement, cap, collar or floor agreement, or other interest rate management device entered into by
a Company with any Person in connection with any Indebtedness of such Company, or (b) currency swap
agreement, forward currency purchase agreement or similar arrangement or agreement designed to
protect against fluctuations in currency exchange rates entered into by a Company with any Person.




 


13









 





“Indebtedness” shall mean, for any Company (excluding in all cases trade payables payable in
the ordinary course of business by such Company), without duplication, (a) all obligations to repay
borrowed money, direct or indirect, incurred, assumed, or guaranteed, (b) all obligations for the
deferred purchase price of capital assets, (c) all obligations under conditional sales or other
title retention agreements, (d) the fair value (as disclosed on US Borrower’s quarterly financial
statements, prepared on a quarterly basis and reported to the SEC in 10-Q and 10-K reports) of all
obligations (contingent or otherwise) under any letter of credit, banker’s acceptance, currency
swap agreement, interest rate swap, cap, collar or floor agreement or other interest rate
management or hedging device, (e) all synthetic leases, (f) all lease obligations that
have been or should be capitalized on the books of such Company in accordance with GAAP, (g) all
obligations of such Company with respect to asset securitization financing programs to the extent
that there is recourse against such Company or such Company is liable (contingent or otherwise)
under any such program, (h) all obligations to advance funds to, or to purchase assets, property or
services from, any other Person in order to maintain the financial condition of such Person, and
(i) any other transaction (including forward sale or purchase agreements) having the commercial
effect of a borrowing of money entered into by such Company to finance its operations or capital
requirements.




“Interest Adjustment Date” shall mean the last day of each Interest Period.



“Interest Coverage Ratio” shall mean, as determined for the most recently completed four
fiscal quarters of US Borrower, on a Consolidated basis and in accordance with GAAP, the ratio of
(a) Consolidated EBITDA to (b) Consolidated Interest Expense.




“Interest Period” shall mean:




(a) with respect to a Eurodollar Loan, the period commencing on the date such
Eurodollar Loan is made and ending on the last day of such period, as selected by US
Borrower pursuant to the provisions hereof, and, thereafter (unless such Eurodollar Loan is
converted to a Base Rate Loan), each subsequent period commencing on the day after the last
day of the immediately preceding Interest Period and ending on the last day of such period,
as selected by US Borrower pursuant to the provisions hereof. The duration of each Interest
Period for a Eurodollar Loan shall be one month, two months, three months or six months, in
each case as US Borrower may select upon notice, as set forth in Section 2.6 hereof;
provided that (i) if US Borrower shall fail to so select the duration of any Interest Period
at least three Business Days prior to the Interest Adjustment Date applicable to such
Eurodollar Loan, US Borrower shall be deemed to have converted such Eurodollar Loan to a
Base Rate Loan at the end of the then current Interest Period; and (ii) US Borrower may not
select any Interest Period for a Eurodollar Loan that ends after any date when principal is
due on such Eurodollar Loan; and




(b) with respect to a CAD Fixed Rate Loan, the period commencing on the date such CAD
Fixed Rate Loan is made and ending on the last day of such period, as selected by Canadian
Borrowers pursuant to the provisions hereof, and, thereafter (unless such CAD Fixed Rate
Loan is converted to a CAD Base Rate Loan), each subsequent period commencing on the day
after the last day of the immediately preceding Interest Period and ending on the last day
of such period, as selected by Canadian Borrowers pursuant to the provisions hereof. The
duration of each Interest Period for a CAD Fixed Rate Loan shall be one month, two months,
three months or six months, in each case as Canadian Borrowers may select upon notice, as
set forth in Section 2.6 hereof; provided that (i) if Canadian Borrowers shall fail to so
select the duration of any Interest Period at least three Business Days prior to the
Interest Adjustment Date applicable to such Loan, Canadian Borrowers shall be deemed to have
converted such CAD Fixed Rate Loan to a CAD Base Rate Loan at the end of the then current
Interest Period; and (ii) Canadian
Borrowers may not select any Interest Period for a CAD Fixed Rate Loan that ends after any
date when principal is due on such CAD Fixed Rate Loan.


 


14









 





“JPMorgan Canada” shall mean JP Morgan Chase Bank, N.A., Toronto Branch, and its successors
and assigns.



“Lender Agreement” shall mean that certain Lender Agreement, dated as of the Closing Date,
among Agent, on behalf of the US Lenders, and the Canadian Lenders, as the same may from time to
time be amended, restated or otherwise modified.



“Letter of Credit” shall mean a commercial documentary letter of credit or standby letter of
credit that shall be issued by the Fronting Lender for the account of US Borrower or a Domestic
Guarantor of Payment, including amendments thereto, if any, and shall have an expiration date no
later than the earlier of (a) one year after its date of issuance or (b) thirty (30) days prior to
the last day of the Commitment Period.



“Letter of Credit Commitment” shall mean the commitment of the Fronting Lender, on behalf of
the Lenders, to issue Letters of Credit in an aggregate face amount of up to Twenty-Five Million
Dollars ($25,000,000).



“Letter of Credit Exposure” shall mean, at any time, the sum of (a) the aggregate undrawn
amount of all issued and outstanding Letters of Credit, and (b) the aggregate of the draws made on
Letters of Credit that have not been reimbursed by US Borrower or converted to a Revolving Loan
pursuant to Section 2.2(b) hereof.



“Leverage Ratio” shall mean, at any time, on a Consolidated basis and in accordance with GAAP,
the ratio of (a) Net Indebtedness (for the most recently completed fiscal quarter of US Borrower)
to (b) Consolidated EBITDA (for the most recently completed four fiscal quarters of US Borrower).



“Lien” shall mean any mortgage, security interest, lien (statutory or other), charge,
assignment, hypothecation, encumbrance on, pledge or deposit of, or conditional sale, leasing
(other than operating leases), sale with a right of redemption or other title retention agreement
and any capitalized lease with respect to any property (real or personal) or asset.



“Loan” shall mean a Revolving Loan or a Swing Loan granted to US Borrower or Canadian
Borrowers by the Lenders in accordance with Section 2.2(a), 2.2(c) or 2.3 hereof.



“Loan Documents” shall mean, collectively, this Agreement, each Note, each Guaranty of
Payment, all documentation relating to each Letter of Credit, the Agent Fee Letter and the Closing
Fee Letter, as any of the foregoing may from time to time be amended, restated or otherwise
modified or replaced, and any other document delivered pursuant thereto.



“Material Adverse Effect” shall mean a material adverse effect on (a) the business,
operations, property, condition (financial or otherwise) or prospects of US Borrower or (b) the
business, operations, property, condition (financial or otherwise) or prospects of the Companies
taken as a whole.


 


15









 





“Material Indebtedness Agreement” shall mean any debt instrument, lease (capital, operating or
otherwise), guaranty, contract, commitment, agreement or other arrangement evidencing or entered
into in connection with Funded Indebtedness of any Company or the Companies equal to or in excess
of the amount of Twenty Million Dollars ($20,000,000).



“Maximum Amount” shall mean, for each Lender, the amount set forth opposite such Lender’s name
under the column headed “Maximum Amount” as set forth on Schedule 1 hereto, subject to
decreases determined pursuant to Section 2.10(a) hereof, increases pursuant to Section 2.10(b)
hereof and assignments of interests pursuant to Section 10.10 hereof; provided, however, that the
Maximum Amount for the Swing Line Lender shall exclude the Swing Line Commitment.



“Maximum CAD Revolving Amount” shall mean Twenty-Five Million Dollars ($25,000,000), as such
amount may be reduced pursuant to Section 2.10(a) hereof.



“Maximum Commitment Amount” shall mean the Dollar Equivalent of One Hundred Twenty-Five
Million Dollars ($125,000,000).



“Maximum US Revolving Amount” shall mean Seventy-Five Million Dollars ($75,000,000), as such
amount may be reduced pursuant to Section 2.10(a) hereof or increased pursuant to Section 2.10(b)
hereof.




“Moody’s” shall mean Moody’s Investors Service, Inc., or any successor to such company.



“Multiemployer Plan” shall mean a Pension Plan that is subject to the requirements of Subtitle
E of Title IV of ERISA.



“Net Indebtedness” shall mean, at any time, the excess, if any, of (a) Indebtedness of the
Companies as of such date, over (b) the Unrestricted Domestic Cash Amount as of such date;
provided, however, that, notwithstanding the actual amount of the Unrestricted Domestic Cash
Amount, no more than Eighty Million Dollars ($80,000,000) of the Unrestricted Domestic Cash Amount
may be used to calculate Net Indebtedness.



“Note” shall mean a Revolving Credit Note or the Swing Line Note, or any other promissory note
delivered pursuant to this Agreement.



“Note Purchase Agreement” shall mean, collectively, the (a) the Private Shelf Agreement dated
as of November 27, 1996, between US Borrower and each of the Purchasers (as defined therein), as
amended through the date of this Agreement, (b) the Note Purchase Agreement, dated as of November
15, 2000, among US Borrower, Applied Nova Scotia Company and each of the Purchasers (as defined
therein), relating to $20,000,000 of 7.98% Senior Notes due November 15, 2010, (c) the Note
Purchase Agreement, dated as of November 15, 2000, among
US Borrower and each of the Purchasers (as defined therein), relating to $5,000,000 of 7.98% Senior
Notes due November 15, 2010, and (d) any other similar public or private debt instrument or
agreement that meets the definition of Material Indebtedness Agreement; as each of the foregoing
may from time to time be further amended, restated or otherwise modified or replaced.


 


16









 






“Notice of Loan” shall mean a Notice of Loan in the form of the attached Exhibit D.



“Obligations” shall mean, collectively, all Indebtedness and other obligations incurred by any
Borrower or Guarantor of Payment to Agent, the Fronting Lender, the Swing Line Lender, or any
Lender (or any affiliate thereof) pursuant to this Agreement and includes the principal of and
interest on all Loans and all obligations pursuant to the Letters of Credit, and each extension,
renewal or refinancing thereof in whole or in part, the facility, prepayment and other fees and
amounts payable hereunder, and all fees and charges in connection with the Letters of Credit.



“Organizational Documents” shall mean, with respect to any Person (other than an individual),
such Person’s Articles (Certificate) of Incorporation, operating agreement or equivalent formation
documents, and Regulations (Bylaws), or equivalent governing documents, and any amendments to any
of the foregoing.




“Other Taxes” shall mean any and all present or
future stamp or documentary taxes or any other excise
or property taxes, goods and services taxes,
harmonized sales taxes and other sales taxes, charges
or similar levies arising from any payment made
hereunder or from the execution, delivery or
enforcement of, or otherwise with respect to, this
Agreement, the Lender Agreement or any other Loan
Document.



“Overall Commitment Percentage” shall mean a Lender’s percentage of the Total Commitment
Amount based upon such Lender’s Maximum Amount of the Total Commitment Amount.



“Parent Guaranty of Payment” shall mean the Guaranty of Payment, executed and delivered by US
Borrower with respect to the Canadian Borrowers, as the same may from time to time be amended,
restated or otherwise modified.




“Participant” shall mean that term as defined in Section 10.11 hereof.




“Patriot Act” shall mean Uniting and Strengthening
America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001, USA
Patriot Act, Title III of Pub. L. 107-56, signed into
law October 26, 2001, as amended from time to time.



“PBGC” shall mean the Pension Benefit Guaranty Corporation, or its successor.


 


17









 





“Pension Plan” shall mean an ERISA Plan that is a “pension plan” (within the meaning of ERISA
Section 3(2)).




“Permitted Foreign Subsidiary Loans and Investments” shall mean:




(a) any loans made prior to the Closing Date by a Credit Party or a Domestic Subsidiary
to a Foreign Subsidiary;




(b) any investments made prior to the Closing Date by a Credit Party or a Domestic
Subsidiary in a Foreign Subsidiary; and




(c) any loans by a Company to, investments by a Company in, guaranties by a Company of
Indebtedness of, and Letters of Credit issued to or for the benefit of, a Foreign Subsidiary
that is not a Credit Party, made on or after the Closing Date, up to the aggregate amount,
for all such Foreign Subsidiaries, equal to the lesser of (i) Thirty Million Dollars
($30,000,000) per fiscal year of US Borrower, or (ii) twenty percent (20%) of Consolidated
Net Worth during the Commitment Period; provided that, if any loan, investment, guaranty or
letter of credit is made for the benefit of a Foreign Subsidiary that becomes a Credit Party
after the Closing Date, the amount attributable to such loan, investment, guaranty or letter
of credit shall be excluded from the foregoing calculation.



“Permitted Investment” shall mean an investment of a Company in the stock (or other debt or
equity instruments) of a Person (other than a Company), so long as the aggregate amount of all such
investments of all Companies does not exceed, at any time, an aggregate amount equal to twenty
percent (20%) of Consolidated Net Worth, based upon the financial statements of the Companies for
the most recently completed fiscal quarter; provided that, at such time as a Permitted Investment
results in an Acquisition and the acquired Person becomes a Guarantor of Payment, the amount of
such investment shall be excluded from the aforesaid calculation.



“Person” shall mean any individual, sole proprietorship, partnership, joint venture,
unincorporated organization, corporation, limited liability company, unlimited liability company,
institution, trust, estate, government or other agency or political subdivision thereof or any
other entity.



“Prime Rate” shall mean the interest rate established from time to time by Agent as Agent’s
prime rate, whether or not such rate shall be publicly announced; the Prime Rate may not be the
lowest interest rate charged by Agent for commercial or other extensions of credit. Each change in
the Prime Rate shall be effective immediately from and after such change.



“Regularly Scheduled Payment Date” shall mean the last day of each March, June, September and
December of each year.



“Related Writing” shall mean each Loan Document and any other assignment, mortgage, security
agreement, guaranty agreement, subordination agreement, financial statement, audit
report or other writing furnished by any Credit Party, or any of its officers, to Agent or the
Lenders pursuant to or otherwise in connection with this Agreement.


 


18









 





“Reportable Event” shall mean a reportable event as that term is defined in Title IV of ERISA,
except actions of general applicability by the Secretary of Labor under Section 110 of such Act.



“Request for Extension” shall mean a notice, substantially in the form of the attached
Exhibit G.



“Required Lenders” shall mean (a) (i) the holders of at least fifty-one percent (51%) of the
Total Commitment Amount, or, if there shall be any borrowing hereunder, the holders of at least
fifty-one percent (51%) of the aggregate amount of the Revolving Credit Exposure (excluding the
Swing Line Exposure), and (ii) at least three of the Lenders; or (b) (A) the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the Total Commitment Amount, or, if there shall be
any borrowing hereunder, the holders of at least sixty-six and two-thirds percent (66-2/3%) of the
aggregate amount of the Revolving Credit Exposure (excluding the Swing Line Exposure), and (B) at
least two of the Lenders.



“Requirement of Law” shall mean, as to any Person, any law, treaty, rule or regulation or
determination or policy statement or interpretation of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.



“Reserve Percentage” shall mean for any day that percentage (expressed as a decimal) that is
in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or
any successor) for determining the maximum reserve requirement (including, without limitation, all
basic, supplemental, marginal and other reserves and taking into account any transitional
adjustments or other scheduled changes in reserve requirements) for a member bank of the Federal
Reserve System in Cleveland, Ohio, in respect of Eurocurrency Liabilities. The Derived Eurodollar
Rate shall be adjusted automatically on and as of the effective date of any change in the Reserve
Percentage.



“Revolving Credit Commitment” shall mean the US Revolving Credit Commitment and the CAD
Revolving Credit Commitment.



“Revolving Credit Exposure” shall mean, at any time, the sum of (a) the US Revolving Exposure,
and (b) the CAD Revolving Exposure.




“Revolving Credit Note” shall mean a US Revolving Credit Note or a CAD Revolving Credit Note.




“Revolving Loan” shall mean a US Revolving Loan or a CAD Revolving Loan.



“SEC” shall mean the United States Securities and Exchange Commission, or any governmental
body or agency succeeding to any of its principal functions.


 


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“Standard & Poor’s” shall mean Standard & Poor’s Ratings Group, a division of McGraw-Hill,
Inc., or any successor to such company.



“Subordinated” shall mean, as applied to Indebtedness, Indebtedness that shall have been
subordinated (by written terms or written agreement being, in either case, in form and substance
satisfactory to Agent and the Required Lenders) in favor of the prior payment in full of the
Obligations.



“Subsidiary” of a Company shall mean (a) a corporation more than fifty percent (50%) of the
Voting Power of which is owned, directly or indirectly, by such Company or by one or more other
subsidiaries of such Company or by such Company and one or more subsidiaries of such Company, (b) a
partnership, limited liability company or unlimited liability company of which such Company, one or
more other subsidiaries of such Company or such Company and one or more subsidiaries of such
Company, directly or indirectly, is a general partner or managing member, as the case may be, or
otherwise has an ownership interest greater than fifty percent (50%) of all of the ownership
interests in such partnership, limited liability company or unlimited liability company, or (c) any
other Person (other than a corporation, partnership, limited liability company or unlimited
liability company) in which such Company, one or more other subsidiaries of such Company or such
Company and one or more subsidiaries of such Company, directly or indirectly, has at least a
majority interest in the Voting Power or the power to elect or direct the election of a majority of
directors or other governing body of such Person.



“Swing Line Commitment” shall mean the commitment of the Swing Line Lender to make Swing Loans
to US Borrower up to the aggregate amount at any time outstanding of Twenty-Five Million Dollars
($25,000,000).



“Swing Line Exposure” shall mean, at any time, the aggregate principal amount of all Swing
Loans outstanding.



“Swing Line Lender” shall mean KeyBank National Association, as holder of the Swing Line
Commitment.



“Swing Line Note” shall mean the Swing Line Note executed and delivered pursuant to Section
2.5(b) hereof.



“Swing Loan” shall mean a loan that shall be denominated in Dollars granted to US Borrower by
the Swing Line Lender under the Swing Line Commitment.



“Swing Loan Maturity Date” shall mean, with respect to any Swing Loan, the earlier of (a) the
date agreed to by US Borrower and the Swing Line Lender, which shall be no more than thirty (30)
days after the date such Swing Loan is made, or (b) the last day of the Commitment Period.



“Taxes” shall mean any present or future taxes, levies, imposts, duties, charges, fees,
deductions or withholdings now or hereafter imposed, levied, collected, withheld or assessed by
any Governmental Authority (together with any interest, penalties or similar liabilities with
respect thereto) other than Excluded Taxes.


 


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“Total Commitment Amount” shall mean the Closing Commitment Amount, as such amount may be
increased up to the Maximum Commitment Amount pursuant to Section 2.10(b) hereof, or decreased
pursuant to Section 2.10(a) hereof.



“Total Liabilities” shall mean, at any date, the total of all items of Indebtedness or
liability that, in accordance with GAAP, would be included in determining total liabilities on the
liability side of the balance sheet.



“Unrestricted Domestic Cash Amount” shall mean, at any date, that portion of US Borrower’s or
a Domestic Subsidiary’s aggregate cash and cash equivalents in excess of Ten Million Dollars
($10,000,000) that is on deposit with one or more Lenders and that is not encumbered by or subject
to any Lien (including, without limitation, any Lien permitted hereunder), setoff (other than
ordinary course setoff rights of a depository bank arising under a bank depository agreement for
customary fees, charges and other account-related expenses due to such depository bank thereunder),
counterclaim, recoupment, defense or other right in favor of any Person.



“US Borrower Investment Policy” shall mean the investment policy of US Borrower attached
hereto as Exhibit H, as the same may be amended from time to time with prior written notice
to Agent and the Lenders.



“US Commitment” shall mean the obligation hereunder of the US Lenders, during the Commitment
Period, to make Loans and issue Letters of Credit pursuant to the US Revolving Credit Commitments,
up to the Maximum US Revolving Amount.



“US Lender” shall mean each Lender that is designated as a US Lender on Schedule 1
hereto.



“US Revolving Credit Commitment” shall mean the obligation hereunder, during the Commitment
Period, of (a) each US Lender to make US Revolving Loans up to the Maximum Amount for such US
Lender, (b) the Fronting Lender to issue and each US Lender to participate in Letters of Credit
pursuant to the Letter of Credit Commitment, and (c) the Swing Line Lender to make and each US
Lender to participate in Swing Loans pursuant to the Swing Line Commitment.



“US Revolving Credit Note” shall mean a US Revolving Credit Note executed and delivered
pursuant to Section 2.5(a) hereof.



“US Revolving Exposure” shall mean the sum of (a) the aggregate principal amount of all US
Revolving Loans outstanding, (b) the Swing Line Exposure, and (c) the Letter of Credit Exposure.


 


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“US Revolving Loan” shall mean a Base Rate Loan or a Eurodollar Loan granted to US Borrower in
accordance with Section 2.2(a) hereof.



“Voting Power” shall mean, with respect to any Person, the exclusive ability to control,
through the ownership of shares of capital stock, partnership interests, membership interests or
otherwise, the election of members of the board of directors or other similar governing body of
such Person. The holding of a designated percentage of Voting Power of a Person means the
ownership of shares of capital stock, partnership interests, membership interests or other
interests of such Person sufficient to control exclusively the election of that percentage of the
members of the board of directors or similar governing body of such Person.



“Welfare Plan” shall mean an ERISA Plan that is a “welfare plan” within the meaning of ERISA
Section 3(l).



Section 1.2. Accounting Terms. Any accounting term not specifically defined in this
Article I shall have the meaning ascribed thereto by GAAP.



Section 1.3. Terms Generally. The foregoing definitions shall be applicable to the
singular and plurals of the foregoing defined terms.



ARTICLE II. AMOUNT AND TERMS OF CREDIT





Section 2.1. Amount and Nature of Credit.



(a) Subject to the terms and conditions of this Agreement, the Lenders, during the Commitment
Period and to the extent hereinafter provided, shall make Loans to Borrowers, participate in Swing
Loans made by the Swing Line Lender to US Borrower, and issue or participate in Letters of Credit
at the request of US Borrower, in such aggregate amount as Borrowers shall request pursuant to the
Commitment; provided, however, that in no event shall the Revolving Credit Exposure be in excess of
the Total Commitment Amount.



(b) Each US Lender, for itself and not one for any other, agrees to make US Revolving Loans,
make or participate in Swing Loans, and issue or participate in Letters of Credit, during the
Commitment Period, on such basis that, immediately after the completion of any borrowing by US
Borrower or the issuance of a Letter of Credit, (i) the aggregate outstanding principal amount of
US Revolving Loans made by such US Lender, when combined with such US Lender’s pro rata share of
the Letter of Credit Exposure and the Swing Line Exposure, shall not be in excess of the Maximum
Amount for such US Lender, and (ii) the aggregate outstanding principal amount of US Revolving
Loans made by such US Lender shall represent that percentage of the aggregate principal amount then
outstanding on all US Revolving Loans that shall be such US Lender’s Applicable Commitment
Percentage. Each
borrowing (other than Swing Loans) from the US Lenders hereunder shall be made pro rata according
to the respective Applicable Commitment Percentages of the US Lenders.


 


22









 





(c) Each Canadian Lender, for itself and not one for any other, agrees to make CAD Revolving
Loans, during the Commitment Period, on such basis that, immediately after the completion of any
borrowing by Canadian Borrowers, (i) the Dollar Equivalent of the aggregate outstanding principal
amount of CAD Revolving Loans made by such Canadian Lender shall not be in excess of the Maximum
Amount for such Canadian Lender, and (ii) the aggregate outstanding principal amount of the CAD
Revolving Loans made by such Canadian Lender shall represent that percentage of the aggregate
principal amount then outstanding on all CAD Revolving Loans that shall be such Canadian Lender’s
Applicable Commitment Percentage. Each borrowing from the Canadian Lenders hereunder shall be made
pro rata according to the respective Applicable Commitment Percentages of the Canadian Lenders.



(d) The Loans may be made as US Revolving Loans as described in Section 2.2(a) hereof, CAD
Revolving Loans as described in Section 2.3 hereof and Swing Loans as described in Section 2.2(c)
hereof, and Letters of Credit may be issued in accordance with Section 2.2(b) hereof.




Section 2.2. US Revolving Credit.



(a) US Revolving Loans. Subject to the terms and conditions of this Agreement, during
the Commitment Period, the US Lenders shall make a US Revolving Loan or US Revolving Loans to US
Borrower in such amount or amounts as US Borrower may from time to time request, but not exceeding
in aggregate principal amount at any time outstanding hereunder the Maximum US Revolving Amount,
when such US Revolving Loans are combined with the Letter of Credit Exposure and the Swing Line
Exposure. US Borrower shall have the option, subject to the terms and conditions set forth herein,
to borrow US Revolving Loans, maturing on the last day of the Commitment Period, by means of any
combination of Base Rate Loans or Eurodollar Loans. Subject to the provisions of this Agreement,
US Borrower shall be entitled under this Section 2.2(a) to borrow funds, repay the same in whole or
in part and re-borrow hereunder at any time and from time to time during the Commitment Period.




(b) Letters of Credit.




(i) Generally. Subject to the terms and conditions of this Agreement, during
the Commitment Period, the Fronting Lender shall, in its own name, on behalf of the US
Lenders, issue such Letters of Credit for the account of US Borrower or a Domestic Guarantor
of Payment, as US Borrower may from time to time request. US Borrower shall not request any
Letter of Credit (and the Fronting Lender shall not be obligated to issue any Letter of
Credit) if, after giving effect thereto, (A) the Letter of Credit Exposure would exceed the
Letter of Credit Commitment or (B) the US Revolving Exposure would exceed the Maximum US
Revolving Amount. The issuance of each Letter of Credit shall confer upon each US Lender
the benefits and liabilities of a participation consisting of an undivided pro rata interest
in the Letter of Credit to the extent of such US Lender’s Applicable Commitment Percentage.


 


23









 






(ii) Request for Letter of Credit. Each request for a Letter of Credit shall
be delivered to Agent (and to the Fronting Lender, if the Fronting Lender is a Lender other
than Agent) by an Authorized Officer not later than 11:00 A.M. (Eastern time) three Business
Days prior to the day upon which the Letter of Credit is to be issued. Each such request
shall be in a form acceptable to Agent (and the Fronting Lender, if the Fronting Lender is a
Lender other than Agent) and specify the face amount thereof, whether such Letter of Credit
shall be a commercial documentary or standby Letter of Credit, the account party, the
beneficiary, the intended date of issuance, the expiry date thereof, and the nature of the
transaction to be supported thereby. Concurrently with each such request, US Borrower, and
any other Credit Party for whose account the Letter of Credit is to be issued, shall execute
and deliver to the Fronting Lender an appropriate application and agreement, being in the
standard form of the Fronting Lender for such letters of credit, as amended to conform to
the provisions of this Agreement if required by Agent. Agent shall give the Fronting Lender
and each US Lender notice of each such request for a Letter of Credit.




(iii) Commercial Documentary Letters of Credit. With respect to each Letter of
Credit that shall be a commercial documentary letter of credit and the drafts thereunder,
whether issued for the account of US Borrower or any other Credit Party, US Borrower agrees
to (A) pay to Agent, for the pro rata benefit of the US Lenders, a non-refundable commission
based upon the face amount of such Letter of Credit, which shall be paid quarterly in
arrears, on each Regularly Scheduled Payment Date, at a rate per annum equal to the
Applicable Margin for Eurodollar Loans (in effect on the date such payment is to be made)
times the face amount of such Letter of Credit; (B) pay to Agent, for the sole benefit of
the Fronting Lender, an additional Letter of Credit fee, which shall be paid on the date
that any draw shall be made on such Letter of Credit, at the rate of one-eighth percent
(1/8%) of the amount drawn under such Letter of Credit; and (C) pay to Agent, for the sole
benefit of the Fronting Lender, such other issuance, amendment, negotiation, draw,
acceptance, telex, courier, postage and similar transactional fees as are generally charged
by the Fronting Lender under its fee schedule as in effect from time to time.




(iv) Standby Letters of Credit. With respect to each Letter of Credit that
shall be a standby letter of credit and the drafts thereunder, if any, whether issued for
the account of US Borrower or any other Credit Party, US Borrower agrees to (A) pay to
Agent, for the pro rata benefit of the US Lenders, a non-refundable commission based upon
the face amount of such Letter of Credit, which shall be paid quarterly in arrears, on each
Regularly Scheduled Payment Date, at a rate per annum equal to the Applicable Margin for
Eurodollar Loans (in effect on the date such payment is to be made) times the undrawn face
amount of such Letter of Credit; (B) pay to Agent, for the sole benefit of the Fronting
Lender, an additional Letter of Credit fee, which shall be paid on each date that such
Letter of Credit shall be issued, amended or renewed at the rate of one-eighth percent
(1/8%) of the face amount of such Letter of Credit; and (C) pay to Agent, for the sole
benefit of the Fronting Lender, such other issuance, amendment, negotiation, draw,
acceptance, telex, courier, postage and similar transactional fees as are generally charged
by the Fronting Lender under its fee schedule as in effect from time to time.


 


24









 






(v) Refunding of Letters of Credit with Revolving Loans. Whenever a Letter of
Credit shall be drawn, US Borrower shall immediately reimburse the Fronting Lender for the
amount drawn. In the event that the amount drawn shall not have been reimbursed by US
Borrower within one Business Day of the drawing of such Letter of Credit, at the sole option
of Agent (and the Fronting Lender, if the Fronting Lender is a Lender other than Agent), US
Borrower shall be deemed to have requested a US Revolving Loan, subject to the provisions of
Sections 2.2(a) and 2.6 hereof (other than the requirement set forth in Section 2.6(d)
hereof), in the amount drawn. Such US Revolving Loan shall be evidenced by the US Revolving
Credit Notes (or, if a US Lender has not requested a US Revolving Credit Note, by the
records of Agent and such US Lender). Each US Lender agrees to make a US Revolving Loan on
the date of such notice, subject to no conditions precedent whatsoever. Each US Lender
acknowledges and agrees that its obligation to make a US Revolving Loan pursuant to Section
2.2(a) hereof when required by this subsection (v) shall be absolute and unconditional and
shall not be affected by any circumstance whatsoever, including, without limitation, the
occurrence and continuance of a Default or Event of Default, and that its payment to Agent,
for the account of the Fronting Lender, of the proceeds of such US Revolving Loan shall be
made without any offset, abatement, recoupment, counterclaim, withholding or reduction
whatsoever and whether or not such US Lender’s US Revolving Credit Commitment shall have
been reduced or terminated. US Borrower irrevocably authorizes and instructs Agent to apply
the proceeds of any borrowing pursuant to this subsection (v) to reimburse, in full, the
Fronting Lender for the amount drawn on such Letter of Credit. Each such US Revolving Loan
shall be deemed to be a Base Rate Loan unless otherwise requested by and available to US
Borrower hereunder. Each US Lender is hereby authorized to record on its records relating
to its US Revolving Credit Note (or, if such US Lender has not requested a US Revolving
Credit Note, its records relating to US Revolving Loans) such US Lender’s pro rata share of
the amounts paid and not reimbursed on the Letters of Credit.




(vi) Participation in Letters of Credit. If, for any reason, Agent (or the
Fronting Lender if the Fronting Lender shall be a Lender other than Agent) shall be unable
to or, in the opinion of Agent, it shall be impracticable to, convert any Letter of Credit
to a US Revolving Loan pursuant to the preceding subsection (v), Agent (or the Fronting
Lender if the Fronting Lender is a Lender other than Agent) shall have the right to request
that each US Lender purchase a participation in the amount due with respect to such Letter
of Credit, and Agent shall promptly notify each US Lender thereof (by facsimile or
telephone, confirmed in writing). Upon such notice, but without further action, the
Fronting Lender hereby agrees to grant to each US Lender, and each US Lender hereby agrees
to acquire from the Fronting Lender, an undivided participation interest in the amount due
with respect to such Letter of Credit in an amount equal to such US Lender’s Applicable
Commitment Percentage of the principal amount due with respect to such Letter of Credit. In
consideration and in furtherance of the foregoing, each US Lender hereby absolutely and
unconditionally agrees, upon receipt of notice as provided above, to pay to Agent, for the
account of the Fronting Lender, such US Lender’s ratable share of the amount due

 


25









 






with respect to such Letter of Credit (determined in accordance with such US Lender’s Applicable Commitment Percentage). Each US
Lender acknowledges and agrees that its obligation to acquire participations in the amount
due under any Letter of Credit that is drawn but not reimbursed by US Borrower pursuant to
this subsection (vi) shall be absolute and unconditional and shall not be affected by any
circumstance whatsoever, including, without limitation, the occurrence and continuance of a
Default or Event of Default, and that each such payment shall be made without any offset,
abatement, recoupment, counterclaim, withholding or reduction whatsoever and whether or not
such US Lender’s US Revolving Credit Commitment shall have been reduced or terminated. Each
US Lender shall comply with its obligation under this subsection (vi) by wire transfer of
immediately available funds, in the same manner as provided in Section 2.6 hereof with
respect to US Revolving Loans. Each US Lender is hereby authorized to record on its records
such US Lender’s pro rata share of the amounts paid and not reimbursed on the Letters of
Credit. In addition, each US Lender agrees to risk participate in the Existing Letters of
Credit as provided in subsection (vii) below.




(vii) Existing Letters of Credit. Schedule 2.2 hereto contains a
description of all letters of credit outstanding on, and to continue in effect after, the
Closing Date. Each such letter of credit issued by a bank that is or becomes a US Lender
under this Agreement on the Closing Date (each, an “Existing Letter of Credit”) shall
constitute a “Letter of Credit” for all purposes of this Agreement, issued, for purposes of
subsection (vi) above, on the Closing Date. US Borrower, Agent and the US Lenders hereby
agree that, from and after such date, the terms of this Agreement shall apply to the
Existing Letters of Credit, superseding any other agreement theretofore applicable to them
to the extent inconsistent with the terms hereof. Notwithstanding anything to the contrary
in any reimbursement or other agreement applicable to the Existing Letters of Credit, the
fees payable in connection with each Existing Letter of Credit to be shared with the US
Lenders, or paid to the Fronting Lender for its own account, shall accrue from the Closing
Date at the rate provided in this Section 2.2(b).




(c) Swing Loans.




(i) Generally. Subject to the terms and conditions of this Agreement, during
the Commitment Period, the Swing Line Lender shall make a Swing Loan or Swing Loans to US
Borrower in such amount or amounts as US Borrower, through an Authorized Officer, may from
time to time request; provided that US Borrower shall not request any Swing Loan if, after
giving effect thereto, (A) the US Revolving Exposure would exceed the Maximum US Revolving
Amount, or (B) the Swing Line Exposure would exceed the Swing Line Commitment. Each Swing
Loan shall be due and payable on the Swing Loan Maturity Date applicable thereto. US
Borrower shall not request that more than two Swing Loans be outstanding at any time. Each
Swing Loan shall be made in Dollars.


 


26









 






(ii) Refunding of Swing Loans. If the Swing Line Lender so elects, by giving
notice to US Borrower and the US Lenders, US Borrower agrees that the Swing Line Lender
shall have the right, in its sole discretion, to require that any Swing Loan be
refinanced as a US Revolving Loan. Such US Revolving Loan shall be a Base Rate Loan unless
otherwise requested by and available to US Borrower hereunder. Upon receipt of such notice
by US Borrower and the US Lenders, US Borrower shall be deemed, on such day, to have
requested a US Revolving Loan in the principal amount of the Swing Loan in accordance with
Sections 2.2(a) and 2.6 hereof (other than the requirement set forth in Section 2.6(d)
hereof). Each US Lender agrees to make a US Revolving Loan on the date of such notice,
subject to no conditions precedent whatsoever. Such US Revolving Loan shall be evidenced by
the US Revolving Credit Notes (or, if a US Lender has not requested a US Revolving Credit
Note, by the records of Agent and such US Lender). Each US Lender acknowledges and agrees
that such US Lender’s obligation to make a US Revolving Loan pursuant to Section 2.2(a)
hereof when required by this subsection (ii) is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including, without limitation, the occurrence and
continuance of a Default or Event of Default, and that its payment to Agent, for the account
of the Swing Line Lender, of the proceeds of such US Revolving Loan shall be made without
any offset, abatement, recoupment, counterclaim, withholding or reduction whatsoever and
whether or not such US Lender’s US Revolving Credit Commitment shall have been reduced or
terminated. US Borrower irrevocably authorizes and instructs Agent to apply the proceeds of
any borrowing pursuant to this subsection (ii) to repay in full such Swing Loan.




(iii) Participation in Swing Loans. If, for any reason, Agent is unable to or,
in the opinion of Agent, it is impracticable to, convert any Swing Loan to a US Revolving
Loan pursuant to the preceding subsection (ii), then on any day that a Swing Loan is
outstanding (whether before or after the maturity thereof), Agent shall have the right to
request that each US Lender purchase a participation in such Swing Loan, and Agent shall
promptly notify each US Lender thereof (by facsimile or telephone, confirmed in writing).
Upon such notice, but without further action, the Swing Line Lender hereby agrees to grant
to each US Lender, and each US Lender hereby agrees to acquire from the Swing Line Lender,
an undivided participation interest in such Swing Loan in an amount equal to such US
Lender’s Applicable Commitment Percentage of the principal amount of such Swing Loan. In
consideration and in furtherance of the foregoing, each US Lender hereby absolutely and
unconditionally agrees, upon receipt of notice as provided above, to pay to Agent, for the
benefit of the Swing Line Lender, such US Lender’s ratable share of such Swing Loan
(determined in accordance with such US Lender’s Applicable Commitment Percentage). Each US
Lender acknowledges and agrees that its obligation to acquire participations in Swing Loans
pursuant to this subsection (iii) is absolute and unconditional and shall not be affected by
any circumstance whatsoever, including, without limitation, the occurrence and continuance
of a Default or an Event of Default, and that each such payment shall be made without any
offset, abatement, recoupment, counterclaim, withholding or reduction whatsoever and whether
or not such US Lender’s US Revolving Credit Commitment shall have been reduced or
terminated. Each US Lender shall comply with its obligation under this subsection (iii) by
wire transfer of immediately available funds, in the same manner as provided in Section 2.6
hereof with respect to US Revolving Loans to be made by such US Lender.


 


27









 





Section 2.3. CAD Revolving Loans. Subject to the terms and conditions of this
Agreement, during the Commitment Period, the Canadian Lenders shall make a CAD Revolving Loan or
CAD Revolving Loans to Canadian Borrowers in such amount or amounts as Canadian Borrowers may from
time to time request, but not exceeding in aggregate principal amount at any time outstanding
hereunder the Maximum CAD Revolving Amount. Canadian Borrowers shall have the option, subject to
the terms and conditions set forth herein, to borrow CAD Revolving Loans, maturing no later than
the last day of the Commitment Period, by means of any combination of CAD Base Rate Loans or CAD
Fixed Rate Loans. Subject to the provisions of this Agreement, Canadian Borrowers shall be
entitled under this Section 2.3 to borrow funds, repay the same in whole or in part and re-borrow
hereunder at any time and from time to time during the Commitment Period.




Section 2.4. Interest.




(a) US Revolving Loans.




(i) Base Rate Loan. US Borrower shall pay interest on the unpaid principal
amount of a Base Rate Loan outstanding from time to time from the date thereof until paid at
the Base Rate from time to time in effect. Interest on such Base Rate Loan shall be
payable, commencing June 30, 2005, and on each Regularly Scheduled Payment Date thereafter
and at the maturity thereof.




(ii) Eurodollar Loans. US Borrower shall pay interest on the unpaid principal
amount of each Eurodollar Loan outstanding from time to time, fixed in advance on the first
day of the Interest Period applicable thereto through the last day of the Interest Period
applicable thereto (but subject to changes in the Applicable Margin), at the Derived
Eurodollar Rate. Interest on such Eurodollar Loan shall be payable on each Interest
Adjustment Date with respect to an Interest Period (provided that if an Interest Period
shall exceed three months, the interest must be paid every three months, commencing three
months from the beginning of such Interest Period).



(b) Swing Loans. US Borrower shall pay interest to Agent, for the sole benefit of the
Swing Line Lender (and any US Lender that shall have purchased a participation in such Swing Loan),
on the unpaid principal amount of each Swing Loan outstanding from time to time from the date
thereof until paid at the Derived Swing Loan Rate applicable to such Swing Loan. Interest on each
Swing Loan shall be payable on the Swing Loan Maturity Date applicable thereto. Each Swing Loan
shall bear interest for a minimum of one day.




(c) CAD Revolving Loans.




(i) CAD Base Rate Loan. Canadian Borrowers shall pay interest on the unpaid
principal amount of a CAD Base Rate Loan outstanding from time to time from the date thereof
until paid at the CAD Base Rate from time to time in effect. Interest on such CAD Base Rate
Loan shall be payable, commencing June 30, 2005, and on each Regularly Scheduled Payment
Date thereafter and at the maturity thereof.




(ii) CAD Fixed Rate Loans. Canadian Borrowers shall pay interest on the unpaid
principal amount of each CAD Fixed Rate Loan outstanding from time to time, fixed in advance
on the first day of the Interest Period applicable thereto through the last day of the
Interest Period applicable thereto (but subject to changes in the Applicable Margin), at the
Derived CAD Fixed Rate. Interest on such CAD Fixed Rate Loan shall be payable on each
Interest Adjustment Date with respect to an Interest Period (provided that if an Interest
Period shall exceed ninety (90) days, the interest must be paid every ninety (90) days,
commencing ninety (90) days from the beginning of such Interest Period).


 


28









 





(d) Default Rate. Anything herein to the contrary notwithstanding, if an Event of
Default shall occur, upon the election of the Required Lenders, (i) the principal of each Loan and
the unpaid interest thereon shall bear interest, until paid, at the Default Rate, (ii) the fee for
the aggregate undrawn face amount of all issued and outstanding Letters of Credit shall be
increased by two percent (2%) in excess of the rate otherwise applicable thereto, and (iii) in the
case of any other amount then due and owing from Borrowers hereunder or under any other Loan
Document, such amount shall bear interest at the Default Rate until paid; provided that, during an
Event of Default under Section 7.11 hereof, the applicable Default Rate shall apply without any
election or action on the part of Agent or any Lender.




(e) Limitation on Interest.




(i) General. In no event shall the rate of interest hereunder exceed the
maximum rate allowable by law.




(ii) Canadian Interest. If any provision of this Agreement or any other Loan
Document would obligate any Canadian Borrower to make any payment of interest or other
amount payable to (including for the account of) any Canadian Lender in an amount, or
calculated at a rate, that would be prohibited by law or would result in a receipt by such
Canadian Lender of interest at a criminal rate (as such terms are construed under the
Criminal Code (Canada)) then, notwithstanding such provision, such amount or rate shall be
deemed to have been adjusted with retroactive effect to the maximum amount or rate of
interest, as the case may be, as would not be so prohibited by law or so result in a receipt
by such Canadian Lender of interest at a criminal rate, such adjustment to be effected, to
the extent necessary, as follows: (A) first, by reducing the amount or rate of interest
required to be paid to such Canadian Lender under this Article II; and (B) thereafter, by
reducing any fees, commissions, premiums and other amounts required to be paid to such
Canadian Lender that would constitute interest for purposes of Section 347 of the Criminal
Code (Canada). Notwithstanding the foregoing, and after giving effect to all adjustments
contemplated thereby, if a Canadian Lender shall have received an amount in excess of the
maximum amount permitted by that section of the Criminal Code (Canada), then Canadian
Borrowers shall be entitled, by notice in writing to such Canadian Lender, to obtain
reimbursement from such Canadian Lender in an amount equal to such excess, and pending such
reimbursement, such amount shall be deemed to be an amount payable by such Canadian Lender
to Canadian Borrowers. Any amount or rate of interest referred to in this Article II with
respect to the Canadian Commitment shall be determined in accordance with generally accepted
actuarial practices and principles as an effective annual rate of interest over the term
that the Canadian Commitment remains outstanding on the assumption that any charges, fees or
expenses
that fall within the meaning of “interest” (as defined in the Criminal Code (Canada)) shall,
if they relate to a specific period of time, be pro-rated over that period of time and
otherwise be pro-rated over the Commitment Period and, in the event of a dispute, a
certificate of a Fellow of the Canadian Institute of Actuaries appointed by Agent shall be
conclusive for the purposes of such determination.


 


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Section 2.5. Evidence of Indebtedness.



(a) US Revolving Loans. Upon the request of a US Lender, to evidence the obligation
of US Borrower to repay the Base Rate Loans and Eurodollar Loans made by such US Lender and to pay
interest thereon, US Borrower shall execute a US Revolving Credit Note in the form of the attached
Exhibit A, payable to the order of such US Lender in the principal amount of its US
Revolving Credit Commitment or, if less, the aggregate unpaid principal amount of US Revolving
Loans made by such US Lender; provided, however, that failure of a US Lender to request a Revolving
Credit Note shall in no way detract from US Borrower’s obligations to such US Lender hereunder.



(b) Swing Loan. The obligation of US Borrower to repay the Swing Loans and to pay
interest thereon shall be evidenced by a Swing Line Note of US Borrower in the form of the attached
Exhibit B, and payable to the order of the Swing Line Lender in the principal amount of the
Swing Line Commitment, or, if less, the aggregate unpaid principal amount of Swing Loans made by
the Swing Line Lender.



(c) CAD Revolving Loans. Upon the request of a Canadian Lender, to evidence the
obligation of Canadian Borrowers to repay the CAD Base Rate Loans and the CAD Fixed Rate Loans made
by such Canadian Lender and to pay interest thereon, Canadian Borrowers shall execute a CAD
Revolving Credit Note in the form of the attached Exhibit C, payable to the order of such
Canadian Lender in the principal amount of its CAD Revolving Credit Commitment or, if less, the
aggregate unpaid principal amount of CAD Revolving Loans made by such Canadian Lender; provided,
however, that failure of a Canadian Lender to request a CAD Revolving Credit Note shall in no way
detract from Canadian Borrowers’ obligations to such Canadian Lender hereunder.




Section 2.6. Notice of Credit Event; Funding of Loans.



(a) Notice of Credit Event. US Borrower, through an Authorized Officer, shall provide
to Agent a Notice of Loan prior to (i) 11:00 A.M. (Eastern time) on the proposed date of borrowing
or conversion of any Base Rate Loan, (ii) 11:00 A.M. (Eastern time) three Business Days prior to
the proposed date of borrowing, conversion or continuation of any Eurodollar Loan, (iii) 11:00 A.M.
(Eastern time) on the proposed date of borrowing of any Swing Loan, (iv) 11:00 A.M. (Eastern time)
on the proposed date of borrowing or conversion of any CAD Base Rate Loan, and (v) 11:00 A.M.
(Eastern time) three Business Days prior to the proposed date of borrowing, conversion or
continuation of any CAD Fixed Rate Loan. US Borrower shall comply with the notice provisions set
forth in Section 2.2(b) hereof with respect to Letters of Credit.


 


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(b) Funding of Loans. Agent shall notify the Applicable Lenders of the date, amount
and Interest Period (if applicable) promptly upon the receipt of a Notice of Loan, and, in any
event, by 2:00 P.M. (Eastern time) on the date such Notice of Loan is received. On the date that
the Credit Event set forth in such Notice of Loan is to occur, each such Applicable Lender shall
provide to Agent at the Designated Lending Office, not later than 3:00 P.M. (Eastern time), the
amount in Dollars, or, with respect to the Canadian Commitment, in Canadian Dollars, in federal or
other immediately available funds, required of it. If Agent (or the Designated Lending Office)
shall elect to advance the proceeds of such Loan prior to receiving funds from such Lender, Agent
(or the Designated Lending Office, as appropriate) shall have the right, upon prior notice to the
appropriate Borrower, to debit any account of the appropriate Borrower or otherwise receive such
amount from the appropriate Borrower, on demand, in the event that such Lender shall fail to
reimburse Agent (or the Designated Lending Office, as appropriate) in accordance with this
subsection. Agent (or the Designated Lending Office, as appropriate) shall also have the right to
receive interest from such Lender at the Federal Funds Effective Rate (or cost of funds with
respect to the Designated Lending Office) in the event that such Lender shall fail to provide its
portion of the Loan on the date requested and Agent (or the Designated Lending Office, as
appropriate) shall elect to provide such funds.



(c) Conversion of Loans. At the request of US Borrower to Agent, subject to the
notice and other provisions of this Section 2.6, the US Lenders shall convert a Base Rate Loan to
one or more Eurodollar Loans at any time and shall convert a Eurodollar Loan to a Base Rate Loan on
any Interest Adjustment Date applicable thereto. Swing Loans may be converted by the Swing Line
Lender to US Revolving Loans in accordance with Section 2.2(c)(ii) hereof. At the request of
Canadian Borrowers to Agent, subject to the notice and other provisions of this Section 2.6, the
Canadian Lenders shall convert a CAD Base Rate Loan to one or more CAD Fixed Rate Loans at any time
and shall convert a CAD Fixed Rate Loan to a CAD Base Rate Loan on any Interest Adjustment Date
applicable thereto.




(d) Minimum Amount. Each request for:




(i) a Base Rate Loan shall be in an amount of not less than One Million Dollars
($1,000,000), increased by increments of Five Hundred Thousand Dollars ($500,000);




(ii) a Eurodollar Loan shall be in an amount of not less than Five Million Dollars
($5,000,000), increased by increments of One Million Dollars ($1,000,000);




(iii) a Swing Loan shall be in an amount of not less than Five Hundred Thousand Dollars
($500,000);




(iv) a CAD Base Rate Loan shall be in an amount of not less than One Million Canadian
Dollars (CAD 1,000,000), increased by increments of Five Hundred Thousand Canadian Dollars
(CAD 500,000); and




(v) a CAD Fixed Rate Loan shall be in an amount of not less than Five Million Canadian
Dollars (CAD 5,000,000), increased by increments of One Million Canadian Dollars (CAD
1,000,000).


 


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(e) Interest Periods. At no time shall US Borrower request that Eurodollar Loans be
outstanding for more than six different Interest Periods, and, if a Base Rate Loan is outstanding,
then Eurodollar Loans shall be limited to five different Interest Periods at any time. At no time
shall Canadian Borrowers request that CAD Fixed Rate Loans be outstanding for more than six
different Interest Periods, and, if a CAD Base Rate Loan is outstanding, then CAD Fixed Rate Loans
shall be limited to five different Interest Periods at any time.




Section 2.7. Payment on Loans and Other Obligations.



(a) Payments Generally. Each payment made hereunder by a Credit Party shall be made
without any offset, abatement, recoupment, counterclaim, withholding or reduction whatsoever.



(b) Payments in Canadian Dollars. With respect to any CAD Revolving Loan, all
payments (including prepayments) to the Canadian Lenders of the principal of or interest on such
CAD Revolving Loan or other payment, including but not limited to principal, interest, fees or any
other amount owed by Canadian Borrowers under this Agreement, shall be made in Canadian Dollars.
All such payments shall be remitted by Canadian Borrowers to Agent at the Designated Lending
Office, for the account of the Canadian Lenders, not later than 1:00 P.M. (Eastern time) on the due
date thereof in same day funds. Any payments received by the Designated Lending Office after 1:00
P.M. (Eastern time) shall be deemed to have been made and received on the next Business Day.



(c) Payments in Dollars. With respect to any Loan (other than a CAD Revolving Loan),
all payments (including prepayments) to Agent of the principal of or interest on such Loan or other
payment, including but not limited to principal, interest, fees or any other amount owed by US
Borrower under this Agreement, shall be made in Dollars. All payments described in this subsection
(c) shall be remitted to Agent at the address of Agent for notices referred to in Section 10.4
hereof for the account of the US Lenders (or the Fronting Lender or the Swing Line Lender, as
appropriate) not later than 11:00 A.M. (Eastern time) on the due date thereof in immediately
available funds. Any such payments received by Agent after 11:00 A.M. (Eastern time) shall be
deemed to have been made and received on the next Business Day.



(d) Payments to Lenders. Upon Agent’s receipt of payments hereunder, Agent shall
immediately distribute to the Applicable Lenders (except with respect to Swing Loans, which shall
be paid to the Swing Line Lender or, with respect to Letters of Credit, certain of which payments
shall be paid to the Fronting Lender, as appropriate) their respective ratable shares, if any, of
the amount of principal, interest, and facility and other fees received by Agent for the account of
such Lender. Payments received by Agent in Dollars shall be delivered to the US Lenders in Dollars
in immediately available funds and payments received at the Designated Lending Office in Canadian
Dollars shall be delivered to the Canadian Lenders in Canadian
Dollars in same day funds; provided that, if Agent receives a payment in a currency other than the
currency in which the underlying obligation was made, Agent shall have the right, in its sole
discretion, to convert such currency into its CAD Equivalent or Dollar Equivalent, as applicable.
Each Lender shall record, as appropriate, any principal, interest or other payment, the principal
amounts of Base Rate Loans, Eurodollar Loans, CAD Base Rate Loans and CAD Fixed Rate Loans, the
type of currency for each Loan, all prepayments and the applicable dates, including Interest
Periods, with respect to the Loans made, and payments received by such Lender, by such method as
such Lender may generally employ; provided, however, that failure to make any such entry shall in
no way detract from the obligations of Borrowers under this Agreement or any Note. The aggregate
unpaid amount of Loans, types of Loans, Interest Periods and similar information with respect to
the Loans and Letters of Credit set forth on the records of Agent shall be rebuttably presumptive
evidence with respect to such information, including the amounts of principal, interest and fees
owing to each Lender.


 


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(e) Timing of Payments. Whenever any payment to be made hereunder, including, without
limitation, any payment to be made on any Loan, shall be stated to be due on a day that is not a
Business Day, such payment shall be made on the next Business Day and such extension of time shall
in each case be included in the computation of the interest payable on such Loan; provided,
however, that, with respect to any Eurodollar Loan, if the next Business Day shall fall in the
succeeding calendar month, such payment shall be made on the preceding Business Day and the
relevant Interest Period shall be adjusted accordingly.




Section 2.8. Prepayment.



(a) Right to Prepay. Borrowers shall have the right at any time or from time to time
to prepay, on a pro rata basis for all of the Applicable Lenders (except with respect to Swing
Loans, which shall be paid to the Swing Line Lender), all or any part of the principal amount of
the Loans then outstanding to such Lenders from such Borrowers, as designated by Borrowers. Such
payment shall include interest accrued on the amount so prepaid to the date of such prepayment and
any amount payable under Article III hereof with respect to the amount being prepaid. Prepayments
of Base Rate Loans and CAD Base Rate Loans shall be without any premium or penalty, other than any
prepayment fees, penalties or other charges that may be contained in any Hedge Agreement.



(b) Notice of Prepayment. US Borrower shall give Agent notice of prepayment of any
Base Rate Loan or Swing Loan not later than 11:00 A.M. (Eastern time) on the Business Day such
prepayment is to be made and written notice of the prepayment of any Eurodollar Loan not later than
1:00 P.M. (Eastern time) three Business Days before the Business Day on which such prepayment is to
be made. Canadian Borrowers shall give Agent notice of prepayment of any CAD Base Rate Loan not
later than 11:00 A.M. (Eastern time) on the Business Day such prepayment is to be made and written
notice of the prepayment of any CAD Fixed Rate Loan not later than 1:00 P.M. (Eastern time) three
Business Days before the Business Day on which such prepayment is to be made.



(c) Minimum Amount. Other than in the case of a mandatory payment pursuant to Section
2.12 or Article III hereof, each prepayment of (i) a Eurodollar Loan shall be in the
principal amount of not less than Three Million Dollars ($3,000,000), and (ii) a CAD Fixed Rate
Loan shall be in the principal amount of not less than Three Million Canadian Dollars (CAD
3,000,000).




 


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Section 2.9. Facility and Other Fees.




(a) Facility Fee.




(i) US Commitment. US Borrower shall pay to Agent, for the ratable account of
the US Lenders, as a consideration for the US Commitment, a facility fee from the Closing
Date to and including the last day of the Commitment Period, payable quarterly, at a rate
per annum equal to (A) the Applicable Facility Fee Rate in effect on the payment date, times
(B) the average daily Maximum US Revolving Amount in effect during such quarter. The
facility fee shall be payable in arrears, on June 30, 2005 and on each Regularly Scheduled
Payment Date thereafter, and on the last day of the Commitment Period.




(ii) Canadian Commitment. Canadian Borrowers shall pay to Agent at the
Designated Lending Office, for the ratable account of the Canadian Lenders, as a
consideration for the Canadian Commitment, a facility fee from the Closing Date to and
including the last day of the Commitment Period, payable quarterly, at a rate per annum
equal to (A) the Applicable Facility Fee Rate in effect on the payment date, times (B) the
average daily Maximum CAD Revolving Amount in effect during such quarter. The facility fee
shall be payable in arrears, on June 30, 2005 and on each Regularly Scheduled Payment Date
thereafter, and on the last day of the Commitment Period.



(b) Agent Fee. US Borrower shall pay to Agent, for its sole benefit, the fees set
forth in the Agent Fee Letter.




Section 2.10. Modifications to Commitment.




(a) Optional Reduction of Commitment.




(i) US Commitment. US Borrower may at any time and from time to time
permanently reduce in whole or ratably in part the US Commitment of the US Lenders hereunder
to an amount not less than the then existing US Revolving Credit Exposure, by giving Agent
not fewer than three Business Days notice of such reduction, provided that any such partial
reduction shall be in an aggregate amount, for all of the US Lenders, of not less than Five
Million Dollars ($5,000,000), increased by increments of One Million Dollars ($1,000,000).
Agent shall promptly notify each US Lender of the date of each such reduction and such US
Lender’s proportionate share thereof. After each such reduction, the facility fees payable
hereunder shall be calculated upon the Maximum US Revolving Amount as so reduced.




(ii) Canadian Commitment. Canadian Borrowers may at any time and from time to
time permanently reduce in whole or ratably in part the Canadian Commitment of the Canadian
Lenders hereunder to an amount not less than the then existing CAD
Revolving Exposure, by giving Agent not fewer than three Business Days notice of such
reduction, provided that any such partial reduction shall be in an aggregate amount, for all
of the Canadian Lenders, of not less than Five Million Canadian Dollars (CAD 5,000,000),
increased by increments of One Million Canadian Dollars (CAD 1,000,000). Agent shall
promptly notify each Canadian Lender of the date of each such reduction and such Canadian
Lender’s proportionate share thereof. After each such reduction, the facility fees payable
hereunder shall be calculated upon the Maximum CAD Revolving Amount as so reduced.


 


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(iii) Generally. If Borrowers reduce in whole the Commitment of the Lenders,
on the effective date of such reduction (the appropriate Borrowers having prepaid in full
the unpaid principal balance, if any, of the Loans, together with all interest and facility
and other fees accrued and unpaid, and provided that no Letter of Credit Exposure or Swing
Line Exposure shall exist), all of the Notes, if Notes have been issued, shall be delivered
to Agent marked “Canceled” and Agent shall redeliver such Notes to Borrowers. Any partial
reduction in the Total Commitment Amount shall be effective during the remainder of the
Commitment Period. The US Commitment may not, at any time, be reduced to an amount less
than the then existing amount of the Canadian Commitment.



(b) Increase in Commitment. At any time during the Commitment Increase Period, US
Borrower may increase the Total Commitment Amount from the Closing Commitment Amount up to the
Maximum Commitment Amount (with a corresponding increase in the Maximum US Revolving Amount) by
either (i) increasing, for one or more US Lenders, with their prior written consent (and with the
prior written consent of Agent), their respective US Revolving Credit Commitments, or (ii)
including one or more Additional Lenders, with the prior written consent of Agent (which shall not
be unreasonably withheld), each with a new US Revolving Credit Commitment, as a party to this
Agreement (collectively, the “Additional Commitment”). During the Commitment Increase Period, the
Lenders agree that Agent, in its sole discretion, may permit one or more Additional Commitments
upon satisfaction of the following requirements: (A) each Additional Lender, if any, shall execute
an Additional Lender Assumption Agreement, (B) Agent shall provide to each Lender a revised
Schedule 1 to this Agreement, including revised Applicable Commitment Percentages for each
of the Lenders, if appropriate, at least three Business Days prior to the date of the effectiveness
of such Additional Commitments (each an “Additional Lender Assumption Effective Date”), (C) each
Additional Lender’s US Revolving Credit Commitment shall be for an amount of no less than Ten
Million Dollars ($10,000,000), and (D) US Borrower shall execute and deliver to Agent and the US
Lenders such replacement or additional US Revolving Credit Notes as shall be required by Agent (to
the extent Notes have been requested by the affected Lenders). The Lenders hereby authorize Agent
to execute each Additional Lender Assumption Agreement on behalf of the Lenders. On each
Additional Lender Assumption Effective Date, the US Lenders shall make adjustments among themselves
with respect to the US Revolving Loans then outstanding and amounts of principal, interest and
facility fees and other amounts paid or payable with respect thereto as shall be necessary, in the
opinion of Agent, in order to reallocate among such US Lenders such outstanding amounts, based on
the revised Applicable Commitment Percentages and to otherwise carry out fully the intent and terms
of this Section 2.10(b). In connection therewith, it is
understood and agreed that the Maximum Amount of any Lender will not be increased (or decreased
except pursuant to Section 2.10(a) hereof) without the prior written consent of such Lender. US
Borrower shall not increase the Total Commitment Amount pursuant to this Section 2.10(b) if a
Default or an Event of Default shall then exist, or immediately after giving effect to any such
increase would exist.


 


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Section 2.11. Computation of Interest and Fees.



(a) Generally. With the exception of Base Rate Loans, CAD Base Rate Loans and CAD
Fixed Rate Loans, interest on Loans and facility and other fees and charges hereunder shall be
computed on the basis of a year having three hundred sixty (360) days and calculated for the actual
number of days elapsed. With respect to Base Rate Loans, CAD Base Rate Loans and CAD Fixed Rate
Loans, interest shall be computed on the basis of a year having three hundred sixty-five (365) days
or three hundred sixty-six (366) days, as the case may be, and calculated for the actual number of
days elapsed.



(b) Interest Act (Canada). For purposes of disclosure pursuant to the Interest Act
(Canada), the annual rates of interest or fees to which the rates of interest or fees provided in
this Agreement and the other Loan Documents (and stated herein and therein, as applicable, to be
computed on the basis of a year having three hundred sixty (360) days, three hundred sixty-five
(365) days or any other period of time less than a calendar year) are equivalent to the rates so
determined when multiplied by the actual number of days in the applicable calendar year and divided
by three hundred sixty (360), three hundred sixty-five (365) days or such other period of time,
respectively.




Section 2.12. Mandatory Payment.



(a) US Revolving Credit Commitment. If, at any time, the US Revolving Credit Exposure
shall exceed the Maximum US Revolving Amount as then in effect, US Borrower shall, as promptly as
practicable, but in no event later than the next Business Day, prepay an aggregate principal amount
of the US Revolving Loans sufficient to bring the US Revolving Credit Exposure within the Maximum
US Revolving Amount.



(b) Swing Line Commitment. If, at any time, the Swing Line Exposure shall exceed the
Swing Line Commitment, US Borrower shall, as promptly as practicable, but in no event later than
the next Business Day, prepay an aggregate principal amount of the Swing Loans sufficient to bring
the Swing Line Exposure within the Swing Line Commitment.



(c) CAD Revolving Credit Commitment. If, at any time, the CAD Revolving Exposure
shall exceed the Maximum CAD Revolving Amount as then in effect, Canadian Borrowers shall, as
promptly as practicable, but in no event later than the next Business Day, prepay an aggregate
principal amount of the CAD Revolving Loans sufficient to bring the CAD Revolving Exposure within
the Maximum CAD Revolving Amount.



(d) Total Commitment Amount. If, at any time, the Revolving Credit Exposure shall
exceed the Total Commitment Amount as then in effect, Borrowers shall, as promptly as practicable,
but in no event later than the next Business Day, prepay an aggregate principal amount of the Loans
sufficient to bring the Revolving Credit Exposure within the Total Commitment Amount.


 


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(e) Generally. Unless otherwise designated by Borrowers, each prepayment pursuant to
this Section 2.12 shall be applied in the following order (i) first, on a pro rata basis among all
of the outstanding Base Rate Loans or CAD Base Rate Loans, as applicable, and (ii) second, on a pro
rata basis among all of the outstanding Eurodollar Loans and CAD Fixed Rate Loans, as applicable,
provided that, if the outstanding principal amount of any Eurodollar Loan or CAD Fixed Rate Loan
shall be reduced to an amount less than the minimum amount set forth in Section 2.6 hereof as a
result of such prepayment, then such Eurodollar Loan or CAD Fixed Rate Loan, as the case may be,
shall be converted into a Base Rate Loan or CAD Base Rate Loan, as appropriate, on the date of such
prepayment. Any prepayment of a Eurodollar Loan, Swing Loan or CAD Fixed Rate Loan pursuant to
this Section 2.12 shall be subject to the prepayment provisions set forth in Article III hereof.




Section 2.13. Canadian Borrowers.



(a) Joint and Several Liability of Canadian Borrowers. Each request by a Canadian
Borrower for the making, conversion or continuation of a CAD Revolving Loan shall be deemed to be a
joint and several request by all Canadian Borrowers. Each Canadian Borrower hereby authorizes any
other Canadian Borrower to request that US Borrower submit a Notice of Loan for a CAD Revolving
Loan on behalf of Canadian Borrowers. Each Canadian Borrower acknowledges and agrees that Agent
and the Canadian Lenders are entering into this Agreement at the request of each Canadian Borrower
and with the understanding that each Canadian Borrower is and shall remain fully liable, jointly
and severally, for payment in full of the Applicable Debt; provided that, anything in this
Agreement to the contrary notwithstanding, no Canadian Borrower will at any time be liable for the
Indebtedness of US Borrower. Each Canadian Borrower agrees that it is receiving or will receive a
direct pecuniary benefit for each CAD Revolving Loan made hereunder.



(b) Maximum Liability of Each Canadian Borrower. Anything in this Agreement or any
other Loan Document to the contrary notwithstanding, in no event shall the maximum liability of any
Canadian Borrower exceed the maximum amount that (after giving effect to the incurring of the
obligations hereunder and to any rights to contribution of such Canadian Borrower from other
Affiliates of such Canadian Borrower) would not render the rights to payment of Agent and the
Canadian Lenders hereunder void, voidable or avoidable under any applicable fraudulent transfer
law.



(c) Appointment of US Borrower as Canadian Borrower’s Agent. Each Canadian Borrower
hereby irrevocably appoints US Borrower as the borrowing agent and attorney-in-fact for all
Canadian Borrowers, which appointment shall remain in full force and effect unless and until Agent
shall have received prior written notice signed by each Canadian Borrower that such appointment has
been revoked. Each Canadian Borrower hereby irrevocably appoints and
authorizes US Borrower (i) to provide Agent with all notices with respect to CAD Revolving Loans
obtained for the benefit of any Canadian Borrower and all other notices and instructions under this
Agreement, and (ii) to take such action as US Borrower deems appropriate on its behalf to obtain
CAD Revolving Loans and to exercise such other powers as are reasonably incidental thereto to carry
out the purposes of this Agreement.


 


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Section 2.14. Waivers of Borrowers. In the event that any obligation of any Borrower
under this Agreement is deemed to be an agreement by such Borrower to answer for the debt or
default of another Credit Party, each Borrower represents and warrants that (a) no representation
has been made to such Borrower as to the creditworthiness of such other Credit Party, and (b) such
Borrower has established adequate means of obtaining from such other Credit Party on a continuing
basis, financial or other information pertaining to such other Credit Party’s financial condition.
Each Borrower expressly waives, except as expressly required under this Agreement, diligence,
demand, presentment, protest and notice of every kind and nature whatsoever, and consents that
Agent, the Lenders and any other Credit Party may deal with each other in connection with such
obligations or otherwise, or alter any contracts now or hereafter existing between them, in any
manner whatsoever, including without limitation the renewal, extension, acceleration or changes in
time for payment of any such obligations or in the terms or conditions of any security held. Agent
and the Lenders are hereby expressly given the right, at their option, to proceed in the
enforcement of any of the Obligations independently of any other remedy or security they may at any
time hold in connection with such obligations secured and it shall not be necessary for Agent and
the Lenders to proceed upon or against or exhaust any other security or remedy before proceeding to
enforce their rights against such Borrower. Each Borrower further subordinates any right of
subrogation, reimbursement, exoneration, contribution, indemnification, setoff or other recourse in
respect of sums paid to Agent and the Lenders by any other Credit Party.



Section 2.15. Extension of Commitment. Contemporaneously with the delivery of the
financial statements required pursuant to Section 5.3(b) hereof (beginning with the financial
statements for the fiscal year of US Borrower ending June 30, 2005), US Borrower may deliver a
Request for Extension, requesting that the Lenders extend the maturity of the Commitment for an
additional year. Each such extension shall require the unanimous written consent of all of the
Lenders and shall be upon such terms and conditions as may be agreed to by Agent, Borrowers and the
Lenders. US Borrower shall pay any reasonable and properly documented attorneys’ fees or other
expenses of Agent in connection with the documentation of any such extension, as well as such other
fees as may be agreed upon between Borrowers and Agent.



ARTICLE III. ADDITIONAL PROVISIONS RELATING TO FIXED RATE

LOANS; INCREASED CAPITAL; TAXES





Section 3.1. Requirements of Law.



(a) If, after the Closing Date, (i) the adoption of or any change in any Requirement of Law or
in the interpretation or application thereof or (ii) the compliance by any Lender with any request
or directive (whether or not having the force of law) from any central bank or other Governmental
Authority:




(A) shall subject any Lender to any tax of any kind whatsoever with respect to this
Agreement, any Letter of Credit or any Fixed Rate Loan made by it, or change the basis of
taxation of payments to such Lender in respect thereof (except for Taxes and Excluded Taxes
which are governed by Section 3.2 hereof);


 


38









 






(B) shall impose, modify or hold applicable any reserve, special deposit, compulsory
loan or similar requirement against assets held by, deposits or other liabilities in or for
the account of, advances, loans or other extensions of credit by, or any other acquisition
of funds by, any office of such Lender that is not otherwise included in the determination
of the Eurodollar Rate or the CAD Fixed Rate; or




(C) shall impose on such Lender any other condition;



and the result of any of the foregoing is to increase the cost to such Lender of making, converting
into, continuing or maintaining Fixed Rate Loans or issuing or participating in Letters of Credit,
or to reduce any amount receivable hereunder in respect thereof, then, in any such case, US
Borrower (and any Canadian Borrower to which such Loan was made) shall pay to such Lender, promptly
after receipt of a written request therefor, any additional amounts necessary to compensate such
Lender for such increased cost or reduced amount receivable. If any Lender becomes entitled to
claim any additional amounts pursuant to this subsection (a), such Lender shall promptly notify US
Borrower (with a copy to Agent) of the event by reason of which it has become so entitled.



(b) If any Lender shall have determined that, after the Closing Date, the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the interpretation or application
thereof or compliance by such Lender or any corporation controlling such Lender with any request or
directive regarding capital adequacy (whether or not having the force of law) from any Governmental
Authority shall have the effect of reducing the rate of return on such Lender’s or such
corporation’s capital as a consequence of its obligations hereunder, or under or in respect of any
Letter of Credit, to a level below that which such Lender or such corporation could have achieved
but for such adoption, change or compliance (taking into consideration the policies of such Lender
or corporation with respect to capital adequacy), then from time to time, upon submission by such
Lender to US Borrower (with a copy to Agent) of a written request therefor (which shall include the
method for calculating such amount and reasonable detail with respect to the calculation), the
appropriate Borrowers shall promptly pay or cause to be paid to
such Lender such additional amount or amounts as will compensate such Lender for such reduction.



(c) A certificate as to any additional amounts payable pursuant to this Section 3.1 together
with a reasonably detailed calculation and description of such amounts contemplated by this Section
3.1, submitted by any Lender to US Borrower (with a copy to Agent) shall be rebuttably presumptive
evidence of the amounts so payable. In determining any such additional amounts, such Lender may
use any method of averaging and attribution that it (in its good faith, reasonable credit judgment)
shall deem applicable. The obligations of Borrowers pursuant to this Section 3.1 shall survive the
termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.


 


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Section 3.2. Taxes.



(a) All payments made by any Credit Party under any Loan Document shall be made free and clear
of, and without deduction or withholding for or on account of any Taxes or Other Taxes. If any
Taxes or Other Taxes are required to be withheld from any amounts payable to Agent or any Lender
hereunder, the amounts so payable to Agent or such Lender shall be increased to the extent
necessary to yield to Agent or such Lender (after payment of all Taxes and Other Taxes) interest or
any such other amounts payable hereunder at the rates or in the amounts specified in the Loan
Documents.



(b) In addition, the Credit Parties shall pay Other Taxes to the relevant Governmental
Authority in accordance with applicable law.



(c) Whenever any Taxes or Other Taxes are required to be withheld and paid by a Credit Party,
such Credit Party shall timely withhold and pay such taxes to the relevant Governmental
Authorities. As promptly as possible thereafter, such Credit Party shall send to Agent for its own
account or for the account of the relevant Lender, as the case may be, a certified copy of an
original official receipt received by such Credit Party showing payment thereof. If such Credit
Party shall fail to pay any Taxes or Other Taxes when due to the appropriate taxing authority or
fails to remit to Agent the required receipts or other required documentary evidence, such Credit
Party shall indemnify Agent and the appropriate Lenders on demand for any incremental taxes,
interest or penalties that may become payable by Agent or such Lender as a result of any such
failure.



(d) If any Lender shall be so indemnified by a Credit Party, such Lender shall use reasonable
efforts to obtain the benefits of any refund, deduction or credit for any taxes or other amounts
with respect to the amount paid by such Credit Party and shall reimburse such Credit Party to the
extent, but only to the extent, that such Lender shall receive a refund with respect to the amount
paid by such Credit Party or an effective net reduction in taxes or other governmental charges
(including any taxes imposed on or measured by the total net income of such Lender) of the United
States or any state or subdivision or any other Governmental Authority thereof by virtue of any
such deduction or credit, after first giving effect to all other deductions and credits otherwise
available to such Lender. If, at the time any audit of such Lender’s income tax return is
completed, such Lender determines, based on such audit, that it shall not have been entitled to
the full amount of any refund reimbursed to such Credit Party as aforesaid or that its net income
taxes shall not have been reduced by a credit or deduction for the full amount reimbursed to such
Credit Party as aforesaid, such Credit Party, upon request of such Lender, shall promptly pay to
such Lender the amount so refunded to which such Lender shall not have been so entitled, or the
amount by which the net income taxes of such Lender shall not have been so reduced, as the case may
be.


 


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(e) Each Lender that is not (i) a citizen or resident of the United States of America, (ii) a
corporation, partnership or other entity created or organized in or under the laws of the United
States of America (or any jurisdiction thereof), or (iii) an estate or trust that is subject to
U.S. federal income taxation regardless of the source of its income (any such Person, a “Non-U.S.
Lender”) shall deliver to US Borrower and Agent two copies of either U.S. Internal Revenue Service
Form W-8BEN or Form W-8ECI, or, in the case of a Non-U.S. Lender claiming exemption from U.S.
federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of
“portfolio interest”, a statement with respect to such interest and a Form W-8BEN, or any
subsequent versions thereof or successors thereto, properly completed and duly executed by such
Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding
tax on all payments by Credit Parties under this Agreement and the other Loan Documents. Such
forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this
Agreement or such other Loan Document. In addition, each Non-U.S. Lender shall deliver such forms
or appropriate replacements promptly upon the obsolescence or invalidity of any form previously
delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify US Borrower at any
time it determines that such Lender is no longer in a position to provide any previously delivered
certificate to US Borrower (or any other form of certification adopted by the U.S. taxing
authorities for such purpose). Notwithstanding any other provision of this subsection (e), a
Non-U.S. Lender shall not be required to deliver any form pursuant to this subsection (e) that such
Non-U.S. Lender is not legally able to deliver.



(f) The agreements in this Section 3.2 shall survive the termination of the Loan Documents and
the payment of the Loans and all other amounts payable hereunder.



Section 3.3. Funding Losses. US Borrower, and any appropriate Canadian Borrower to
the extent such activity involves a CAD Fixed Rate Loan made to such Canadian Borrower, agree to
indemnify each Lender, promptly after receipt of a written request therefor, and to hold each
Lender harmless from, any properly documented loss or expense that such Lender may sustain or incur
as a consequence of (a) default by a Borrower in making a borrowing of, conversion into or
continuation of Fixed Rate Loans after such Borrower has given a notice requesting the same in
accordance with the provisions of this Agreement, (b) default by a Borrower in making any
prepayment of or conversion from Fixed Rate Loans after such Borrower has given a notice thereof in
accordance with the provisions of this Agreement, (c) the making of a prepayment of a Fixed Rate
Loan on a day that is not the last day of an Interest Period applicable thereto, (d) the making of
a prepayment of a Swing Loan on a day that is not the Swing Loan Maturity Date applicable thereto,
or (e) any conversion of a Fixed Rate Loan to a Base Rate Loan or CAD Base Rate Loan pursuant to
Section 3.4 hereof on a day that is not the last day of an Interest Period applicable thereto.
Such indemnification shall be in an amount equal to the excess, if any, of (i) the amount
of interest that would have accrued on the amounts so prepaid, or not so borrowed, converted or
continued, for the period from the date of such prepayment or of such failure to borrow, convert or
continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert
or continue, the Interest Period that would have commenced on the date of such failure) or the
applicable Swing Loan Maturity Date in each case at the applicable rate of interest for such Loans
provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii)
the amount of interest (as reasonably determined by such Lender) that would have accrued to such
Lender on such amount by placing such amount on deposit for a comparable period with leading banks
in the appropriate London interbank market (or Canadian market, if applicable), along with any
administration fee charged by such Lender. A certificate as to any amounts payable pursuant to
this Section 3.3 submitted to US Borrower (with a copy to Agent) by any Lender, together with a
reasonably detailed calculation and description of such amounts shall be rebuttably presumptive
evidence of the amounts so payable. The obligations of Borrowers pursuant to this Section 3.3
shall survive the termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.


 


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Section 3.4. Eurodollar Rate or CAD Fixed Rate Lending Unlawful; Inability to Determine
Rate.



(a) If any Lender shall determine (which determination shall, upon notice thereof to US
Borrower and Agent, be conclusive and binding on Borrowers) that, after the Closing Date, (i) the
introduction of or any change in or in the interpretation of any law makes it unlawful, or (ii) any
Governmental Authority asserts that it is unlawful, for such Lender to make or continue any Loan
as, or to convert (if permitted pursuant to this Agreement) any Loan into, a Fixed Rate Loan, the
obligations of such Lender to make, continue or convert any such Fixed Rate Loan shall, upon such
determination, be suspended until such Lender shall notify Agent that the circumstances causing
such suspension no longer exist, and all outstanding Fixed Rate Loans payable to such Lender shall
automatically convert (if conversion is permitted under this Agreement) into a Base Rate Loan or
CAD Base Rate Loan, as the case may be, or be repaid (if no conversion is permitted) at the end of
the then current Interest Periods with respect thereto or sooner, if required by law or such
assertion.



(b) If Agent or the Required Lenders determine that for any reason adequate and reasonable
means do not exist for determining the Eurodollar Rate or CAD Fixed Rate for any requested Interest
Period with respect to a proposed Fixed Rate Loan, or that the Eurodollar Rate or CAD Fixed Rate
for any requested Interest Period with respect to a proposed Fixed Rate Loan does not adequately
and fairly reflect the cost to the applicable Lenders of funding such Loan, Agent will promptly so
notify US Borrower and each applicable Lender. Thereafter, the obligation of the applicable
Lenders to make or maintain such Fixed Rate Loan shall be suspended until Agent (upon the
instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, US Borrower
may revoke any pending request for a borrowing of, conversion to or continuation of such Fixed Rate
Loan or, failing that, will be deemed to have converted such request into a request for a borrowing
of a Base Rate Loan or CAD Base Rate Loan, as the case may be, in the amount specified therein.



ARTICLE IV. CONDITIONS PRECEDENT




Section 4.1. Conditions to Each Credit Event. The obligation of the Lenders, the
Fronting Lender and the Swing Line Lender to participate in any Credit Event shall be conditioned,
in the case of each Credit Event, upon the following:



(a) all conditions precedent as listed in Section 4.2 hereof required to be satisfied prior to
the first Credit Event shall have been satisfied prior to or as of the first Credit Event;



(b) US Borrower shall have submitted a Notice of Loan (or with respect to a Letter of Credit,
complied with the provisions of Section 2.2(b) hereof) and otherwise complied with Section 2.6
hereof;


 


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(c) no Default or Event of Default shall then exist or immediately after the Credit Event
would exist; and



(d) each of the representations and warranties contained in Article VI hereof shall be true in
all material respects as if made on and as of the date of the Credit Event, except to the extent
that any thereof expressly relate to an earlier date.



Each request by US Borrower or a Canadian Borrower for a Credit Event shall be deemed to be a
representation and warranty by Borrowers, to the best of each such Borrower’s knowledge, as of the
date of such request as to the satisfaction of the conditions precedent specified in subsections
(c) and (d) above.



Section 4.2. Conditions to the First Credit Event. Borrowers shall cause the
following conditions to be satisfied on or prior to the Closing Date. The obligation of the
Lenders, the Fronting Lender and the Swing Line Lender to participate in the first Credit Event is
subject to Borrowers satisfying each of the following conditions prior to or concurrently with such
Credit Event:



(a) Notes. US Borrower shall have executed and delivered to each US Lender requesting
a US Revolving Credit Note its US Revolving Credit Note and shall have executed and delivered to
Swing Line Lender the Swing Line Note. Each Canadian Borrower shall have executed and delivered to
each Canadian Lender requesting a CAD Revolving Credit Note its CAD Revolving Credit Note.



(b) Guaranties of Payment. Each Guarantor of Payment shall have executed and
delivered to Agent a Guaranty of Payment.



(c) Officer’s Certificate, Resolutions, Organizational Documents. Borrowers shall
have delivered to Agent an officer’s certificate (or comparable domestic or foreign documents)
certifying the names of the officers of each Credit Party signing any of the Loan Documents,
together with the true signatures of such officers and certified copies of (i) the resolutions of
the board of directors (or comparable domestic or foreign documents) of such Credit Party
evidencing approval of the execution and delivery of the Loan Documents and the execution of other
Related Writings to which such Credit Party is a party, and (ii) the Organizational Documents of
such Credit Party.



(d) Legal Opinions. Borrowers shall have delivered to Agent opinions of counsel, in
form and substance satisfactory to Agent and the Lenders, for each Credit Party.



(e) US Borrower Investment Policy. Borrowers shall have delivered to Agent a copy of
the US Borrower Investment Policy as in effect on the Closing Date.



(f) Good Standing and Full Force and Effect Certificates. Borrowers shall have
delivered to Agent a good standing certificate or full force and effect certificate (or comparable
domestic or foreign document), for each Credit Party, issued on or about the Closing Date by the
Secretary of State in the state where such Credit Party is incorporated or formed (or appropriate
foreign official).


 


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(g) Closing and Legal Fees; Agent Fee Letter. Borrowers shall have (i) executed and
delivered to Agent, the Agent Fee Letter and paid to Agent, for its sole account, the fees stated
therein to be paid on or prior to the Closing Date, (ii) executed and delivered to Agent the
Closing Fee Letter and paid to Agent, for the account of the Lenders, the fees stated therein to be
paid on or prior to the Closing Date, and (iii) paid all reasonable and properly documented legal
fees and expenses of Agent in connection with the preparation and negotiation of the Loan
Documents.



(h) Letter of Direction. US Borrower shall have delivered to Agent a letter of
direction authorizing Agent, on behalf of the Lenders, to disburse the proceeds of the Loans, which
includes the transfer of funds under this Agreement and wire instructions setting forth the
locations to which such funds shall be sent.



(i) Long Term Debt Instruments. US Borrower shall have provided to Agent copies of
all long term debt instruments, certified by a Financial Officer as complete, of the Companies.



(j) Existing Credit Agreement. Borrowers shall have terminated the Credit Agreement
between Borrowers and KeyBank National Association, as agent, dated as of October 31, 2003, which
termination shall be deemed to have occurred upon payment in full of all of the Indebtedness
outstanding thereunder and the execution of this Agreement.



(k) No Material Adverse Change. No material adverse change, in the opinion of Agent,
shall have occurred in the financial condition, operations or prospects of the Companies since
March 31, 2005.



(l) Miscellaneous. Borrowers shall have provided to Agent and the Lenders such other
items and shall have satisfied such other conditions as may be reasonably required by Agent or the
Lenders.



ARTICLE V. COVENANTS




Section 5.1. Insurance. The Companies shall (a) maintain insurance to such extent
and against such hazards and liabilities as is commonly maintained by Persons similarly situated;
and (b) within ten days of any Lender’s written request, furnish to such Lender such information
about the Companies’ insurance as that Lender may from time to time reasonably request.



Section 5.2. Money Obligations. Each Company shall pay in full (a) prior in each
case to the date when penalties would attach, all material taxes, assessments and governmental
charges and levies (except only those so long as and to the extent that the same shall be contested
in good faith by appropriate and timely proceedings and for which adequate provisions have been
established in accordance with GAAP) for which it may be or become liable or to which any or all of
its properties may be or become subject; (b) all material wage obligations to its employees in
compliance with the Fair Labor Standards Act (29 U.S.C. §§ 206-207) or any comparable provisions;
and (c) all of its other obligations calling for the payment of money (except only those so long as
and to the extent that nonpayment would not cause a Material Adverse Effect) before such payment
becomes overdue.


 


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Section 5.3. Financial Statements and Information.



(a) Quarterly Financials. Borrowers shall furnish to Agent and the Lenders, within
fifty (50) days after the end of each of the first three quarter-annual periods of each fiscal year
of US Borrower, balance sheets of the Companies as of the end of such period and statements of
income (loss), stockholders’ equity and cash flow for the quarter and fiscal year to date periods,
all prepared on a Consolidated basis, in accordance with GAAP, and in form and detail satisfactory
to Agent and the Lenders and certified by a Financial Officer of US Borrower; provided, however,
that delivery pursuant to paragraph (d) below of copies of the Quarterly Report on Form 10-Q of the
Companies for such quarterly period filed with the SEC shall be deemed to satisfy the requirements
of this subsection (a).



(b) Annual Audit Report. Borrowers shall furnish to Agent and the Lenders, within one
hundred (100) days after the end of each fiscal year of US Borrower, an annual audit report of the
Companies for that year prepared on a Consolidated basis, in accordance with GAAP, and in form and
detail satisfactory to Agent and the Lenders and certified by an independent public accountant
satisfactory to Agent, which report shall include balance sheets and statements of income (loss),
stockholders’ equity and cash-flow for that period; provided, however, that delivery pursuant to
paragraph (d) below of copies of the Annual Report on Form 10-K of the Companies for such period
filed with the SEC shall be deemed to satisfy the requirements of
this paragraph (b).



(c) Compliance Certificate. Borrowers shall furnish to Agent and the Lenders,
concurrently with the delivery of the financial statements set forth in subsections (a) and (b)
above, a Compliance Certificate.



(d) Public Financial Information. Borrowers shall furnish to Agent and the Lenders,
as soon as available, (i) copies of
Form 10-Q quarterly reports, Form 10-K annual reports, and Form
8-K current reports, (ii) notice of (and, upon the request of Agent, copies of) any other filings
made by US Borrower with the SEC, and (iii) notice of (and, upon the request of Agent, copies of)
any other information that is provided by US Borrower to its shareholders generally, provided that
if any such materials are available electronically as a filing with the SEC, Borrowers shall give
Agent prompt notice of such filing and the giving of such notice shall satisfy Borrowers’
obligation to provide Agent and the Lenders copies of such publicly filed materials.



(e) Financial Information of Companies. Borrowers shall furnish to Agent and the
Lenders, promptly upon the written request of Agent or any Lender, such other information about the
material financial condition, properties and operations of the Companies as Agent or such Lender
may from time to time reasonably request, which information shall be submitted in form and detail
reasonably satisfactory to Agent or such Lender and certified by a Financial Officer of the Company
or Companies in question.


 


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Section 5.4. Financial Records. The Companies shall at all times maintain true and
complete, in all material respects, records and books of account, all in accordance with GAAP, and
at all reasonable times (during normal business hours and upon notice to such Company) permit Agent
or any Lender, or any representative thereof, to examine such Company’s books and records and to
make excerpts therefrom and transcripts thereof.




Section 5.5. Franchises; Change in Business.



(a) Each Company shall preserve and maintain at all times its existence (except as otherwise
permitted under Section 5.12 hereof) and its material rights and franchises.



(b) No Company shall engage in any business if, as a result thereof, the general nature of the
business of the Companies taken as a whole would be substantially changed from the general nature
of the business the Companies are engaged in on the Closing Date.



Section 5.6. ERISA Compliance. No Company shall incur any material accumulated
funding deficiency within the meaning of ERISA, or any material liability to the PBGC, established
thereunder in connection with any ERISA Plan. Borrowers shall furnish to the Lenders (a) as soon as
possible and in any event within thirty (30) days after any Company knows or has reason to know
that any material Reportable Event with respect to any ERISA Plan has occurred, a statement of a
Financial Officer of such Company, setting forth details as to such Reportable Event and the action
that such Company proposes to take with respect thereto, together with a copy of the notice of such
Reportable Event given to the PBGC if a copy of such notice is available to such Company, and
(b) promptly after receipt thereof a copy of any material notice such Company, or any member of the
Controlled Group may receive from the PBGC or the Internal Revenue Service with respect to any
ERISA Plan administered by such Company; provided that this latter clause shall not apply to
notices of general application promulgated by the PBGC or the Internal Revenue Service or to
letters or notices (such as favorable Determination Letter) with respect to an ERISA Plan, which do
not threaten a material liability to the Companies. Borrowers shall promptly notify the Lenders of
any material taxes assessed, proposed to be assessed or that Borrowers have reason to believe may
be assessed against a Company by the Internal Revenue Service with respect to any ERISA Plan. As
used in this Section 5.6 and in Section 6.10 hereof, “material” means the measure of a matter of
significance that shall be determined as being an amount equal to five percent (5%) of Consolidated
Net Worth. As soon as practicable, and in any event within twenty (20) days, after any Company
shall become aware that a material ERISA Event shall have occurred, such Company shall provide
Agent with notice of such ERISA Event with a certificate by a Financial Officer of such Company
setting forth the details of the event and the action such Company or another Controlled Group
member proposes to take with respect thereto. Borrowers shall, at the request of Agent or any
Lender, deliver or cause to be delivered to Agent or such Lender, as the case may be, true and
correct copies of any documents relating to the ERISA Plan of any Company.


 


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Section 5.7. Financial Covenants.



(a) Leverage Ratio. US Borrower shall not suffer or permit at any time the Leverage
Ratio to exceed 3.00 to 1.00.



(b) Interest Coverage Ratio. US Borrower shall not suffer or permit at any time the
Interest Coverage Ratio to be less than 3.00 to 1.00.



Section 5.8. Borrowing. No Company shall create, incur or have outstanding any
Indebtedness of any kind; provided that this Section 5.8 shall not apply to the following:




(a) the Loans, the Letters of Credit and any other Indebtedness under this Agreement;



(b) asset securitizations up to the maximum aggregate amount, for all Companies, of Fifty
Million Dollars ($50,000,000);



(c) secured Indebtedness (including Capitalized Lease Obligations) so long as the aggregate
amount of all such Indebtedness (exclusive of asset securitizations) outstanding at any time for
all Companies does not exceed an amount equal to ten percent (10%) of Consolidated Total Assets,
based upon the financial statements of US Borrower for the most recently completed fiscal quarter;
and



(d) unsecured Indebtedness.



Section 5.9. Liens. No Company shall create, assume or suffer to exist (upon the
happening of a contingency or otherwise) any Lien upon any of its property or assets, whether now
owned or hereafter acquired; provided that this Section 5.9 shall not apply to the following:



(a) (i) Liens for taxes, assessments or governmental charges or levies on such Company’s
property or assets if the same shall not at the time be delinquent or thereafter can be paid
without penalty, or are being actively contested in good faith by appropriate and timely
proceedings and for which adequate reserves shall have been established in accordance with GAAP,
and (ii) Liens arising in the ordinary course of business out of pledges or deposits under workers’
compensation laws, unemployment insurance, old age pensions, or social security, retirement
benefits or similar legislation;



(b) other statutory Liens incidental to the conduct of its business or the ownership of its
property and assets that (i) were not incurred in connection with the borrowing of money or the
obtaining of advances or credit, and (ii) do not in the aggregate materially detract from the value
of its property or assets or materially impair the use thereof in the operation of its business;



(c) Liens on property or assets of a Domestic Subsidiary to secure obligations of such
Domestic Subsidiary to US Borrower or a Domestic Guarantor of Payment;



(d) Liens on property or assets of a Foreign Subsidiary to secure obligations of such Foreign
Subsidiary to a Canadian Borrower or a Canadian Guarantor of Payment;


 


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(e) easements or other minor defects or irregularities in title of real property not
interfering in any material respect with the use of such property in the business of any Company;




(f) Liens relating to ledger balances, consignments and other similar arrangements;




(g) asset securitizations permitted pursuant to Section 5.12(i) hereof; or



(h) any other Liens (including all Liens existing on the Closing Date as set forth in
Schedule 5.9 hereto), so long as the aggregate amount of Indebtedness secured by all such
Liens (exclusive of asset securitizations) does not exceed for all Companies at any time an
aggregate amount equal to ten percent (10%) of Consolidated Total Assets, based upon the financial
statements of US Borrower for the most recently completed fiscal quarter.



Section 5.10. Regulations U and X. No Company shall take any action that would
result in any non-compliance of the Loans or Letters of Credit with Regulations U or X, or any
other applicable regulation, of the Board of Governors of the Federal Reserve System.



Section 5.11. Investments, Loans and Guaranties. No Company shall, without the prior
written consent of Agent and the Required Lenders, (a) create, acquire or hold any Subsidiary,
(b) make or hold any investment in any stocks, bonds or securities of any kind, (c) be or become a
party to any joint
venture or other partnership, (d) make or keep outstanding any advance or loan to any Person, or
(e) be or become a Guarantor of any kind; provided that this Section 5.11 shall not apply to the
following:




(i) any endorsement of a check or other medium of payment for deposit or collection
through normal banking channels or similar transaction in the normal course of business;




(ii) any investment in direct obligations of the United States of America or in
certificates of deposit issued by a member bank (having capital resources in excess of One
Hundred Million Dollars ($100,000,000)) of the Federal Reserve System;




(iii) any investment in commercial paper or securities that at the time of such
investment is assigned a AAA rating (or its equivalent) in accordance with the rating
systems employed by either Moody’s or Standard & Poor’s;




(iv) the holding of each of the Subsidiaries listed on Schedule 6.1 hereto, and
the creation, acquisition and holding of any new Subsidiary after the Closing Date so long
as such new Subsidiary shall have been created, acquired or held in accordance with the
terms and conditions of this Agreement;




(v) loans to a Credit Party or Domestic Subsidiary from a Company that are not
prohibited under Section 5.8 hereof;


 


48









 






(vi) any guaranty by a Company of Indebtedness of another Company so long as such
Indebtedness is permitted pursuant to Section 5.8 hereof;




(vii) the holding of any stock or equity interest that remains following the sale or
other disposition of a Company (or a majority interest therein) permitted by Section 5.12
hereof;




(viii) any advance or loan to an officer, employee, agent or similar Person of or
consultant to a Company as an advance on commissions, travel, relocation expenses and other
items in the ordinary course of business, so long as all such advances and loans from all
Companies aggregate not more than the maximum principal sum of Five Million Dollars
($5,000,000) at any time outstanding;




(ix) Permitted Investments;




(x) Permitted Foreign Subsidiary Loans and Investments;




(xi) the holding of any stock or equity interest that has been acquired pursuant to an
Acquisition permitted by Section 5.13 hereof, subject to the restriction in subsection (x)
above;




(xii) the creation, acquisition or holding of any Domestic Subsidiary so long as such
Domestic Subsidiary, if required pursuant to Section 5.19 hereof, becomes a Guarantor of
Payment in accordance with Section 5.19 hereof, and, subject to the restriction in
subsection (x) above, the creation, acquisition or holding of any Foreign Subsidiary; or




(xiii) any investments may be made pursuant to the US Borrower Investment Policy.



Section 5.12. Merger and Sale of Assets. No Company shall merge or consolidate with
any other Person, or sell, lease or transfer or otherwise dispose of all or a substantial part of
its assets to any Person, except that, if no Default or Event of Default shall then exist or
immediately thereafter shall begin to exist:



(a) any Domestic Subsidiary may merge with US Borrower (provided that US Borrower shall be the
continuing or surviving Person) or any one or more Domestic Guarantors of Payment;



(b) any Domestic Subsidiary may sell, lease, transfer or otherwise dispose of any of its
assets to (i) US Borrower or (ii) any Domestic Guarantor of Payment;



(c) any Domestic Subsidiary (other than a Credit Party) may merge with or sell, lease,
transfer or otherwise dispose of any of its assets to any other Domestic Subsidiary;


 


49









 





(d) any Foreign Subsidiary may merge or amalgamate with a Canadian Borrower (provided that
such Canadian Borrower shall be the continuing or surviving Person) or one or more Canadian
Guarantors of Payment (provided that such Canadian Guarantor of Payment shall be the continuing or
surviving Person);



(e) any Foreign Subsidiary may sell, lease, transfer or otherwise dispose of any of its assets
to a Canadian Borrower or a Canadian Guarantor of Payment;



(f) any Foreign Subsidiary other than a Credit Party may merge or amalgamate with or sell,
lease, transfer or otherwise dispose of any of its assets to any other Foreign Subsidiary;



(g) any Company may sell, lease, transfer or otherwise dispose of any of its assets to any
Person (in addition to any such sale, lease, transfer or disposal to US Borrower or a Domestic
Guarantor of Payment) so long as the aggregate amount of all such assets sold, leased, transferred
or otherwise disposed of by all Companies in any fiscal year of US Borrower does not exceed an
amount equal to five percent (5%) of the rolling two-year average of Consolidated Total Assets;



(h) Acquisitions may be effected in accordance with the provisions of Section 5.13 hereof; and



(i) any Company may enter into (or have existing on the Closing Date) asset securitization
financing programs, up to an aggregate amount, for all such programs of all Companies (including
existing asset securitization programs), not to exceed Fifty Million Dollars ($50,000,000) during
the Commitment Period.



Section 5.13. Acquisitions. No Company shall effect an Acquisition; provided,
however, that a Credit Party may effect an Acquisition so long as:



(a) in the case of a merger, amalgamation or other combination with a Borrower, such Borrower
shall be the surviving entity, and in each case, US Borrower shall be a surviving entity;



(b) in the case of a merger, amalgamation or other combination with a Credit Party (other than
a Borrower), a Credit Party shall be the surviving entity;



(c) the Companies shall be in full compliance with the Loan Documents both prior to and
subsequent to the transaction;



(d) no Default or Event of Default shall exist prior to or after giving effect to such
Acquisition; and



(e) Borrowers shall have provided to Agent and the Lenders, at least ten days prior to such
Acquisition with respect to which the Consideration is in excess of the Dollar Equivalent of Fifty
Million Dollars ($50,000,000), (i) written notice of such proposed Acquisition, (ii) historical
financial statements of the target entity, and (iii) a pro forma financial statement of the
Companies accompanied by a certificate of a Financial Officer of US Borrower showing pro forma
compliance with Section 5.7 hereof, both before and after giving effect to the proposed
Acquisition.


 


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Section 5.14. Notice. Each Borrower shall cause a Financial Officer of such Borrower
to promptly notify Agent and the Lenders whenever any Default or Event of Default may occur
hereunder or any representation or warranty made in Article VI hereof or elsewhere in this
Agreement or in any Related Writing may for any reason cease in any material respect to be true and
complete.



Section 5.15. Environmental Compliance. Each Company shall comply in all material
respects with any and all Environmental Laws including, without limitation, all Environmental Laws
in jurisdictions in which such Company owns or operates a facility or site, arranges for disposal
or treatment of hazardous substances, solid waste or other wastes, accepts for transport any
hazardous substances, solid waste or other wastes or holds any interest in real property or
otherwise. Borrowers shall furnish to the Lenders, promptly after receipt thereof, a copy of any
notice such Company may receive from any Governmental Authority or private Person or otherwise,
that any material litigation or proceeding pertaining to any environmental, health or safety matter
has been filed or is threatened against such Company, any real property in which such Company
holds any interest or any past or present operation of such Company. No Company shall allow the
release or disposal of hazardous waste, solid waste or other wastes on, under or to any real
property in which any Company holds any interest or performs any of its operations, in violation of
any material provision of Environmental Law. As used in this Section 5.15, “litigation or
proceeding” means any demand, claim, notice, suit, suit in equity action, administrative action,
investigation or inquiry whether brought by any Governmental Authority or private Person or
otherwise. Borrowers shall defend, indemnify and hold Agent and the Lenders harmless against all
properly documented costs, expenses, claims, damages, penalties and liabilities of every kind or
nature whatsoever (including attorneys’ fees) arising out of or resulting from the noncompliance of
any Company with any Environmental Law. Such indemnification shall survive any termination of this
Agreement.



Section 5.16. Affiliate Transactions. No Company shall, directly or indirectly,
enter into or permit to exist any transaction (including, without limitation, the purchase, sale,
lease or exchange of any property or the rendering of any service) with any Affiliate (other than a
Company that is a Credit Party) on terms that shall be less favorable to such Company than those
that might be obtained at the time in a transaction with a non-Affiliate; provided, however, that
the foregoing shall not prohibit (a) the payment of customary and reasonable directors’ fees to
directors who are not employees of a Company or an Affiliate; (b) any transaction between a Company
(if a Credit Party) and an Affiliate (if a Credit Party, a Foreign Subsidiary (other than with
respect to loans and investments) or iSource Performance Materials L.L.C.) which US Borrower
reasonably determines in good faith is beneficial to the Companies as a whole and which is not
entered into for the purpose of hindering the exercise by Agent or the Lenders of their rights or
remedies under this Agreement; (c) any employment agreement, employee benefit plan, stock option
plan, officer and director indemnification agreement or any similar arrangement entered into by a
Company in the ordinary course of business; (d) loans to employees or officers to the extent
permitted under this Agreement; or (e) loans and investments in Foreign Subsidiaries permitted
under Section 5.11 hereof.


 


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Section 5.17. Use of Proceeds. US Borrower’s use of the proceeds of the US Revolving
Loans shall be for working capital and other general corporate purposes (including, without
limitation, share repurchases) of the Companies, for refinancing of existing credit facilities and
for Acquisitions. Canadian Borrowers’ use of the proceeds of the CAD Revolving Loans shall be for
working capital and other general corporate purposes (including, without limitation, share
repurchases) of the Canadian Borrowers, for refinancing of existing credit facilities and for
Acquisitions.



Section 5.18. Corporate Names. No Borrower shall change its corporate name and no
Credit Party shall change its state or jurisdiction of organization, unless, in each case, US
Borrower shall have provided Agent and the Lenders with prompt written notice thereof.



Section 5.19. Subsidiary Guaranties. Each Domestic Subsidiary and any other
Subsidiary that shall be organized under the laws of Canada or a Province of Canada created,
acquired or held subsequent to the Closing Date,
shall, within ten days after such Subsidiary is created or acquired, execute and deliver to Agent a
Guaranty of Payment of all of the Applicable Debt, such agreement to be in form and substance
acceptable to Agent and the Required Lenders, along with such corporate governance and
authorization documents and an opinion of counsel as may be deemed necessary or advisable by Agent
and the Required Lenders; provided, however, that:



(a) a Subsidiary shall not be required to execute such Guaranty of Payment so long as (i) the
total assets of such Subsidiary shall be less than Ten Million Dollars ($10,000,000), and (ii) the
aggregate of the total assets of all such Subsidiaries with total asset values of less than Ten
Million Dollars ($10,000,000) and which have not executed a Guaranty of Payment does not exceed the
aggregate amount of Twenty Million Dollars ($20,000,000). In the event that the total assets of
any Subsidiary that shall not be a Guarantor of Payment shall be at any time equal to or greater
than Ten Million Dollars ($10,000,000) (or the foregoing Twenty Million Dollars ($20,000,000) shall
be exceeded), Borrowers shall provide Agent and the Lenders with prompt written notice of such
asset value;



(b) with respect to a Subsidiary required to execute a Guaranty of Payment pursuant to this
Section 5.19, if (i) the total assets of such Subsidiary shall be less than Fifteen Million Dollars
($15,000,000), and (ii) the aggregate of the total assets of all such Subsidiaries shall be less
than Thirty Million Dollars ($30,000,000), then such Subsidiary may delay the delivery to Agent of
such Guaranty of Payment and ancillary documentation until the first quarterly financial reporting
date of US Borrower with respect to the quarterly period in which such Subsidiary was created,
acquired or experienced an increase in amount of assets;



(c) a Foreign Subsidiary (other than a Subsidiary organized under the laws of Canada or a
Province of Canada) shall not be required to execute such Guaranty of Payment;


 


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(d) a Foreign Subsidiary organized under the laws of Canada or a Province of Canada is not
required to execute a Guaranty of Payment so long as the total assets of all such Foreign
Subsidiaries not executing a Guaranty of Payment, and not becoming a Canadian Borrower pursuant to
the following subsection (e) hereof, does not aggregate in excess of ten percent (10%) of
Consolidated Total Assets;



(e) a Foreign Subsidiary organized under the laws of Canada or a Province of Canada that is
required to execute a Guaranty of Payment pursuant to this Section 5.19 may, at Borrowers’ option,
in lieu of executing a Guaranty of Payment, be joined as a Canadian Borrower pursuant to
documentation in form and substance acceptable to Agent, in its sole discretion; and



(f) notwithstanding anything in this Section 5.19 to the contrary, (i) any Company that is a
Guarantor of the obligations under any Material Indebtedness Agreement of any Borrower, and (ii)
subject to Sections 5.19(a) and (b) hereof, any Domestic Subsidiary that is the parent of a Foreign
Subsidiary, shall also be required to execute a Guaranty of Payment pursuant to this Section 5.19,
unless otherwise agreed to in writing by Agent.



Section 5.20. Other Covenants. In the event that any Company shall enter into, or
shall have entered into, any Material Indebtedness Agreement, wherein the covenants contained
therein shall be more restrictive than the covenants set forth herein, then the Companies shall be
bound hereunder by such more restrictive covenants with the same force and effect as if such
covenants were written herein.



Section 5.21. Guaranties Under the Note Purchase Agreement. No Company shall be or
become a Guarantor of any Indebtedness incurred pursuant to the Note Purchase Agreement unless such
Company is also a Guarantor of Payment under this Agreement.



Section 5.22. Pari Passu Ranking. The Obligations shall, and Borrowers shall take
all necessary action to ensure that the Obligations shall, at all times, rank at least pari passu
in right of payment with any Indebtedness under the Note Purchase Agreement and all other senior
unsecured Indebtedness of each Borrower.



ARTICLE VI. REPRESENTATIONS AND WARRANTIES





Section 6.1. Corporate Existence; Subsidiaries; Foreign Qualification.



(a) Each Company is duly organized, validly existing and in good standing under the laws of
its state or jurisdiction of incorporation or organization, and is duly qualified and authorized to
do business and is in good standing as a foreign entity in each jurisdiction where the character of
its property or its business activities makes such qualification necessary, except where the
failure to so qualify could not reasonably be expected to cause or result in a Material Adverse
Effect.


 


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(b) As of the Closing Date, Schedule 6.1 hereto sets forth (i) each Company, (ii) each
Company’s state or jurisdiction of organization, and (iii) each Person that owns the stock or other
equity interest of each Company (other than US Borrower).



Section 6.2. Corporate Authority. Each Credit Party has the right and power and is
duly authorized and empowered to enter into, execute and deliver the Loan Documents to which it is
a party and to perform and observe the provisions of the Loan Documents. The Loan Documents to
which each Credit Party is a party have been duly authorized and approved by such Credit Party’s
board of directors or other governing body, as applicable, and are the valid and binding
obligations of such Credit Party, enforceable against such Credit Party in accordance with their
respective terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors’ rights generally and by equitable principles (regardless of
whether enforcement is sought in equity or at law). The execution, delivery and performance of the
Loan Documents will not conflict with nor result in any breach in any of the provisions of, or
constitute a default under, or result in the creation of any Lien (other than Liens permitted under
Section 5.9 hereof) upon any assets or property of any Company under the provisions of, such
Company’s Organizational Documents or any agreement.




Section 6.3. Compliance with Laws and Contracts. Each Company:



(a) holds all material permits, certificates, licenses, orders, registrations, franchises,
authorizations, and other approvals from any Governmental Authority necessary for the conduct of
its business and is in compliance in all material respects with all applicable laws relating
thereto;



(b) is in compliance in all material respects with all federal, state, local, or foreign
applicable statutes, rules, regulations, and orders including, without limitation, those relating
to environmental protection, occupational safety and health, and equal employment practices on the
Closing Date and, except where the failure to be in compliance could not reasonably be expected to
have or result in a Material Adverse Effect, after the Closing Date; and



(c) is not in material violation of or in default under any agreement to which it is a party
or by which its assets are subject or bound on the Closing Date and, except with respect to any
violation or default that could not reasonably be expected to have or result in a Material Adverse
Effect, after the Closing Date.



Section 6.4. Litigation and Administrative Proceedings. Except as disclosed on
Schedule 6.4 hereto, there are (a) no lawsuits, actions, investigations, or other
proceedings pending or threatened against any Company, or in respect of which any Company may have
any liability, in any court or before any Governmental Authority, arbitration board, or other
tribunal, (b) no orders, writs, injunctions, judgments, or decrees of any court or government
agency or instrumentality to which any Company is a party or by which the property or assets of any
Company are bound, and (c) no grievances, disputes, or controversies outstanding with any union or
other organization of the employees of any Company, or threats of work stoppage, strike, or pending
demands for collective bargaining, that, as to (a) through (c) above, could reasonably be expected
to have a Material Adverse Effect.


 


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Section 6.5. Title to Assets. Each Credit Party has good title to and ownership of
all property it purports to own, which property is free and clear of all Liens, except those
permitted under Section 5.9 hereof.



Section 6.6. Liens and Security Interests. On and after the Closing Date, except for
Liens permitted pursuant to Section 5.9 hereof, (a) there is no financing statement or similar
notice of Lien outstanding covering any personal property of any Company; (b) there is no mortgage
or charge outstanding covering any real property of any Company; and (c) no real or personal
property of any Company is subject to any security interest or Lien of any kind.



Section 6.7. Tax Returns. All federal, state, provincial and local tax returns and
other reports required by law to be filed in respect of the income, business, properties and
employees of each Company have been filed and all taxes, assessments, fees and other governmental
charges that are due and payable have been paid, except as otherwise permitted herein or where the
failure to do so could not reasonably be expected to cause or result in a Material Adverse Effect.
The provision for taxes on the books of each Company is adequate, in all material respects, for all
years not closed by applicable statutes and for the current fiscal year.



Section 6.8. Environmental Laws. Each Company is in compliance, in all material
respects, with all Environmental Laws, including, without limitation, all Environmental Laws in all
jurisdictions in which any Company owns or operates, or has owned or operated, a facility or site,
arranges or has arranged for disposal or treatment of hazardous substances, solid waste or other
wastes, accepts or has accepted for transport any hazardous substances, solid waste or other wastes
or holds or has held any interest in real property or otherwise. No litigation or proceeding
arising under, relating to or in connection with any Environmental Law is pending or, to the best
knowledge of each Company, threatened, against any Company, any real property in which any Company
holds or has held an interest or any past or present operation of any Company that is likely to
have a Material Adverse Effect. No release, threatened release or disposal of hazardous waste,
solid waste or other wastes is occurring, or has occurred (other than those that are currently
being cleaned up in accordance with Environmental Laws), on, under or to any real property in which
any Company holds any interest or performs any of its operations, in violation of any Environmental
Law that is likely to have a Material Adverse Effect. As used in this Section 6.8, “litigation or
proceeding” means any demand, claim, notice, suit, suit in equity, action, administrative action,
investigation or inquiry whether brought by any Governmental Authority or private Person, or
otherwise.



Section 6.9. Continued Business. There exists no actual, pending, or, to each
Borrower’s knowledge, any threatened termination, cancellation or limitation of, or any
modification or change in the business relationship of any Company and any customer or supplier, or
any group of customers or suppliers, whose purchases or supplies, individually or in the aggregate,
are material to the business of any Company, and there exists no present condition or state of
facts or circumstances that could reasonably be expected to have a Material Adverse Effect or
prevent a Company from conducting such business or the transactions contemplated by this Agreement
in substantially the same manner in which it was previously conducted.


 


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Section 6.10. Employee Benefits Plans. Schedule 6.10 hereto identifies each
ERISA Plan. No ERISA Event has occurred or is expected to occur with respect to an ERISA Plan.
Full payment has been made of all amounts that a Controlled Group member is required, under
applicable law or under the governing documents, to have paid as a contribution to or a benefit
under each ERISA Plan. The liability of each Controlled Group member with respect to each ERISA
Plan has been fully funded based upon reasonable and proper actuarial assumptions, has been fully
insured, or has been fully reserved for on its financial statements. No changes have occurred or
are expected to occur that
would cause a material increase in the cost of providing benefits under the ERISA Plan. With
respect to each ERISA Plan that is intended to be qualified under Code Section 401(a), (a) the
ERISA Plan and any associated trust operationally comply with the applicable requirements of Code
Section 401(a); (b) the ERISA Plan and any associated trust have been amended to comply in all
material respects with all such requirements as currently in effect, other than those requirements
for which a retroactive amendment can be made within the “remedial amendment period” available
under Code Section 401(b) (as extended under Treasury Regulations and other Treasury pronouncements
upon which taxpayers may rely); (c) the ERISA Plan and any associated trust have received a
favorable determination letter from the Internal Revenue Service stating that the ERISA Plan
qualifies under Code Section 401(a), that the associated trust qualifies under Code
Section 501(a) and, if applicable, that any cash or deferred arrangement under the ERISA Plan
qualifies under Code Section 401(k), unless the ERISA Plan was first adopted at a time for which
the above-described “remedial amendment period” has not yet expired; (d) the ERISA Plan currently
satisfies the requirements of Code Section 410(b), without regard to any retroactive amendment that
may be made within the above-described “remedial amendment period”; and (e) no contribution made to
the ERISA Plan is subject to an excise tax under Code Section 4972. With respect to any Pension
Plan (other than with respect to the Detroit Ball Bearing Company Union Employees’ Retirement
Plan), the “accumulated benefit obligation” of Controlled Group members with respect to the Pension
Plan (as determined in accordance with Statement of Accounting Standards No. 87, “Employers’
Accounting for Pensions”) does not exceed the fair market value of Pension Plan assets.



Section 6.11. Consents or Approvals. No consent, approval or authorization of, or
filing, registration or qualification with, any Governmental Authority or any other Person is
required to be obtained or completed by any Company in connection with the execution, delivery or
performance of any of the Loan Documents, that has not already been obtained or completed.




Section 6.12. Solvency.



(a) US Borrower. US Borrower has received consideration that is the reasonable
equivalent value of the obligations and liabilities that US Borrower has incurred to Agent and the
Lenders. US Borrower is not insolvent as defined in any applicable state, federal or relevant
foreign statute, nor will US Borrower be rendered insolvent by the execution and delivery of the
Loan Documents to Agent and the Lenders. US Borrower is not engaged or about to engage in any
business or transaction for which the assets retained by it are or will be an unreasonably small
amount of capital, taking into consideration the obligations to Agent and the Lenders incurred
hereunder. US Borrower does not intend to, nor does it believe that it will, incur debts beyond
its ability to pay such debts as they mature.


 


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(b) Canadian Borrowers. Each Canadian Borrower has received consideration that is the
reasonable equivalent value of the obligations and liabilities that such Canadian Borrower has
incurred to Agent and the Canadian Lenders. No Canadian Borrower is insolvent as defined in any
applicable state, federal or relevant foreign statute, nor will any Canadian Borrower be rendered
insolvent by the execution and delivery of the Loan Documents to Agent and the Canadian Lenders.
No Canadian Borrower is engaged or about to engage in any business or
transaction for which the assets retained by it are or will be an unreasonably small amount of
capital, taking into consideration the obligations to Agent and the Canadian Lenders incurred
hereunder. No Canadian Borrower intends to, nor does it believe that it will, incur debts beyond
its ability to pay such debts as they mature.



Section 6.13. Financial Statements. The audited Consolidated financial statements of
Borrowers for the fiscal year ended June 30, 2004 furnished to Agent and the Lenders, are true and
complete, have been prepared in accordance with GAAP, and fairly present, in all material respects,
the financial condition of the Companies as of the dates of such financial statements and the
results of their operations for the periods then ending. Since the dates of such statements, there
has been no material adverse change in any Company’s financial condition, properties or business or
any change in any Company’s accounting procedures.



Section 6.14. Regulations. No Company is engaged principally or as one of its
important activities, in the business of extending credit for the purpose of purchasing or carrying
any “margin stock” (within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System of the United States of America). Neither the granting of any Loan (or any
conversion thereof) or Letter of Credit nor the use of the proceeds of any Loan or Letter of Credit
will violate, or be inconsistent with, the provisions of Regulation T, U or X or any other
Regulation of such Board of Governors.



Section 6.15. Material Agreements. Except as disclosed on Schedule 6.15
hereto, no Company is a party to any (a) debt instrument (excluding the Loan Documents); (b) lease
(capital, operating or otherwise), whether as lessee or lessor thereunder; or (c) collective
bargaining agreement that, as to subsections (a) through (c) above, if violated, breached, or
terminated for any reason, would have or would be reasonably expected to have a Material Adverse
Effect.



Section 6.16. Intellectual Property. Each Company owns, possesses, or has the right
to use all of the patents, patent applications, industrial designs, trademarks, service marks,
copyrights, licenses, and rights with respect to the foregoing necessary for the conduct of its
business without any known material conflict with the rights of others.



Section 6.17. Insurance. The Companies maintain with financially sound and reputable
insurers insurance with coverage and limits as required by law and as is customary with Persons
engaged in the same businesses as the Companies.



Section 6.18. Accurate and Complete Statements. Neither the Loan Documents nor any
written statement made by any Company in connection with any of the Loan Documents contains any
untrue statement of a material fact or omits a material fact necessary to make the statements
contained therein or in the Loan Documents not misleading. After due inquiry by Borrowers, there
is no
known fact that any Company has not disclosed to Agent and the Lenders that has or is likely to
have a Material Adverse Effect.


 


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Section 6.19. Note Purchase Agreement. (a) No Default or Event of Default (as each
term (or similar term, if any) is defined in the Note Purchase Agreement) exists, nor will any such
Default or Event of Default exist immediately after the granting of any loan under this Agreement
or the Note Purchase Agreement, or any agreement executed in connection therewith; (b) no Company
has incurred any “Debt” (as defined, or as a similar term is defined, in each Note Purchase
Agreement) in violation of the provisions of any Note Purchase Agreement; and (c) the Obligations
(as defined herein) constitutes “Debt” (as defined or, as a similar term is defined, in each Note
Purchase Agreement) permitted pursuant to the provisions of the Note Purchase Agreements. No
Subsidiary is a Guarantor under any Note Purchase Agreement or any other Material Indebtedness
Agreement that is not also a Guarantor of Payment hereunder.



Section 6.20. Defaults. No Default or Event of Default exists hereunder, nor will
any begin to exist immediately after the execution and delivery hereof.



ARTICLE VII. EVENTS OF DEFAULT





Each of the following shall constitute an Event of Default hereunder:



Section 7.1. Payments. If (a) the interest on any Loan or any facility or other fee
shall not be paid in full when due and payable or within three Business Days thereafter, or (b) the
principal of any Loan or any obligation under any Letter of Credit shall not be paid in full when
due and payable.



Section 7.2. Special Covenants. If any Company shall fail or omit to perform and
observe Section 5.7, 5.8, 5.9, 5.11, 5.12 or 5.13 hereof.



Section 7.3. Other Covenants. If any Company shall fail or omit to perform and
observe any agreement or other provision (other than those referred to in Section 7.1 or 7.2
hereof) contained or referred to in this Agreement or any Related Writing that is on such Company’s
part to be complied with, and that Default shall not have been fully corrected within thirty (30)
days after the giving of written notice thereof to a Borrower by Agent or any Lender that the
specified Default is to be remedied.



Section 7.4. Representations and Warranties. If any representation, warranty or
statement made in or pursuant to this Agreement or any Related Writing or any other material
information furnished by any Company to the Lenders or any thereof or any other holder of any Note,
shall be false or erroneous in any material respect.


 


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Section 7.5. Cross Default. If any Company shall default in the payment of principal
or interest due and owing upon any other obligation for borrowed money in excess of the aggregate,
for all such obligations of all such Companies, of the Dollar Equivalent of Twenty Million Dollars
($20,000,000) beyond any period of grace provided with respect thereto or in the performance or
observance of any other agreement, term or condition contained in any agreement under which such
obligation is created, if the effect of such default is to allow the acceleration of the maturity
of such Indebtedness or to permit the holder thereof to cause such Indebtedness to become due prior
to its stated maturity.



Section 7.6. ERISA Default. The occurrence of one or more ERISA Events that (a) the
Required Lenders determine could reasonably be expected to have a Material Adverse Effect, or (b)
results in a Lien on any of the assets of any Company, in the aggregate for all such Liens for all
Companies, in excess of One Million Dollars ($1,000,000).




Section 7.7. Change in Control. If any Change in Control shall occur.



Section 7.8. Money Judgment. A final judgment or order for the payment of money
shall be rendered against any Company by a court of competent jurisdiction, that remains unpaid or
unstayed and undischarged for a period (during which execution shall not be effectively stayed) of
thirty (30) days after the date on which the right to appeal has expired, provided that the
aggregate of all such judgments, for all such Companies, shall exceed the Dollar Equivalent of Ten
Million Dollars ($10,000,000) (less any amount that will be covered by the proceeds of insurance
and is not subject to dispute by the insurance provider).



Section 7.9. Validity of Loan Documents. (a) Any material provision, in the
reasonable opinion of Agent, of any Loan Document shall at any time for any reason cease to be
valid, binding and enforceable against any Credit Party; (b) the validity, binding effect or
enforceability of any Loan Document against any Credit Party shall be contested by any Credit
Party; (c) any Credit Party shall deny that it has any or further liability or obligation
thereunder; or (d) any Loan Document shall be terminated, invalidated or set aside, or be declared
ineffective or inoperative or in any way cease to give or provide to Agent and the Lenders the
benefits purported to be created thereby. In addition to any other material Loan Documents, this
Agreement, each Note and each Guaranty of Payment shall be deemed to be “material”.



Section 7.10. Note Purchase Agreement. If (a) any event of default (as each term or
similar term is defined in any Note Purchase Agreement) shall occur under any Note Purchase
Agreement or any agreement executed in connection therewith, or (b) the Indebtedness incurred in
connection with any Note Purchase Agreement shall be accelerated for any reason.


 


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Section 7.11. Solvency. If any Borrower or other Company (other than a Foreign
Subsidiary with aggregate assets of less than Two Million Dollars ($2,000,000) or a Dormant
Subsidiary) shall (i) except as permitted in Section 5.12 hereof, discontinue business,
(ii) generally not pay its debts as such debts become due, (iii) make a general assignment for the
benefit of creditors, (iv) apply for or consent to the appointment of an interim receiver, a
receiver and manager, an administrator, sequestrator, monitor, a custodian, a trustee, an interim
trustee or liquidator of all or a substantial part of its assets or of such Company (or Companies),
(v) be adjudicated a debtor or insolvent or have entered against it an order for relief under Title
11 of the United States Code, or under any other bankruptcy insolvency, liquidation, winding-up,
corporate or similar statute or law, foreign, federal, state or provincial, in any applicable
jurisdiction, now or hereafter existing, as any of the foregoing may be amended from time to time,
(vi) file a voluntary petition in bankruptcy, or file a proposal or notice of intention to file a
proposal or have an involuntary proceeding filed against it and the same shall continue undismissed
for a period of thirty (30) days from commencement of such proceeding or case, or file a petition
or an answer or an application or a proposal seeking reorganization or an arrangement with
creditors or seeking to take advantage of any other law (whether federal, provincial or state, or,
if applicable, other jurisdiction) relating to relief of debtors, or admit (by answer, by default
or otherwise) the material allegations of a petition filed against it in any bankruptcy,
reorganization, insolvency or other proceeding (whether federal, provincial or state, or, if
applicable, other jurisdiction) relating to relief of debtors, (vii) suffer or permit to continue
unstayed and in effect for thirty (30) consecutive days any judgment, decree or order entered by a
court of competent jurisdiction, that approves a petition or an application or a proposal seeking
its reorganization or appoints an interim receiver, a receiver and manager, an administrator,
custodian, trustee, interim trustee or liquidator of all or a substantial part of its assets, or of
such Company (or Companies), or (viii) take, or omit to take, any action in order thereby to effect
any of the foregoing.



ARTICLE VIII. REMEDIES UPON DEFAULT





Notwithstanding any contrary provision or inference herein or elsewhere:



Section 8.1. Optional Defaults. If any Event of Default referred to in Section 7.1,
7.2, 7.3, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9 or 7.10 hereof shall occur, Agent may, with the consent of
the Required Lenders, and shall, at the written request of the Required Lenders, give written
notice to Borrowers to:



(a) terminate the Commitment, if not previously terminated, and, immediately upon such
election, the obligations of the Lenders, and each thereof, to make any further Loan, and the
obligation of the Fronting Lender to issue any Letter of Credit, immediately shall be terminated;
and/or



(b) accelerate the maturity of all of the Obligations (if the Obligations are not already due
and payable), whereupon all of the Obligations shall become and thereafter be immediately
due and payable in full without any presentment or demand and without any further or other notice
of any kind, all of which are hereby waived by each Borrower.



Section 8.2. Automatic Defaults. If any Event of Default referred to in Section 7.11
hereof shall occur:



(a) all of the Commitment shall automatically and immediately terminate, if not previously
terminated, and no Lender thereafter shall be under any obligation to grant any further Loan, nor
shall the Fronting Lender be obligated to issue any Letter of Credit; and


 


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(b) the principal of and interest then outstanding on all of the Loans, and all of the other
Obligations, shall thereupon become and thereafter be immediately due and payable in full (if the
Obligations are not already due and payable), all without any presentment, demand or notice of any
kind, which are hereby waived by each Borrower.



Section 8.3. Letters of Credit. If the maturity of the Obligations shall be
accelerated pursuant to Section 8.1 or 8.2 hereof, US Borrower shall immediately deposit with
Agent, as security for the obligations of US Borrower and any other Credit Party to reimburse Agent
and the Lenders for any then outstanding Letters of Credit, cash equal to the sum of the aggregate
undrawn balance of any then outstanding Letters of Credit. Agent and the Lenders are hereby
authorized, at their option, to deduct any and all such amounts from any deposit balances then
owing by any Lender (or any affiliate of such Lender) to or for the credit or account of any
Company, as security for the obligations of US Borrower and any other Credit Party to reimburse
Agent and the Lenders for any then outstanding Letters of Credit.



Section 8.4. Offsets. If there shall occur or exist any Event of Default referred to
in Section 7.11 hereof or if the maturity of the Obligations is accelerated pursuant to Section 8.1
or 8.2 hereof, each Lender shall have the right at any time to set off against, and to appropriate
and apply toward the payment of, any and all of the Obligations then owing by a Borrower to such
Lender (including, without limitation, any participation purchased or to be purchased pursuant to
Section 2.2(b), 2.2(c) or 8.5 hereof), whether or not the same shall then have matured, any and all
deposit (general or special) balances and all other indebtedness then held or owing by such Lender
(including, without limitation, by branches and agencies or any affiliate of such Lender, wherever
located) to or for the credit or account of such Borrower, all without notice to or demand upon any
Borrower or any other Person, all such notices and demands being hereby expressly waived by each
Borrower.




Section 8.5. Equalization Provision.



(a) Equalization. Each US Lender agrees with the other US Lenders that if it, at any
time, shall obtain any Advantage over the other US Lenders, or any thereof, in respect of the
Applicable Debt (except as to Swing Loans and amounts under Article III hereof), such US Lender
shall purchase from the other US Lenders, for cash and at par, such additional participation in the
Applicable Debt as shall be necessary to nullify the Advantage. Each
Canadian Lender agrees with the other Canadian Lenders that if it, at any time, shall obtain any
Advantage over the other Canadian Lenders, or any thereof, in respect of the Applicable Debt
(except as to amounts under Article III hereof), such Canadian Lender shall purchase from the other
Canadian Lenders, for cash and at par, such additional participation in the Applicable Debt as
shall be necessary to nullify the Advantage.



(b) Recovery of Advantage. If any such Advantage resulting in the purchase of an
additional participation as aforesaid shall be recovered in whole or in part from the Lender
receiving the Advantage, each such purchase shall be rescinded, and the purchase price restored
(but without interest unless such Lender receiving the Advantage is required to pay interest on the
Advantage to the Person recovering the Advantage from such Lender) ratably to the extent of the
recovery.


 


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(c) Application and Sharing of Set-Off Amounts. Each Lender further agrees with the
other Lenders that if it at any time shall receive any payment for or on behalf of a Credit Party
on any Indebtedness owing by such Credit Party to such Lender by reason of offset of any deposit or
other Indebtedness, it shall apply such payment first to any and all Indebtedness owing by such
Credit Party to such Lender pursuant to this Agreement (including, without limitation, any
participation purchased or to be purchased pursuant to this Section or any other Section of this
Agreement). Each Credit Party agrees that any Lender so purchasing a participation from the other
Lenders, or any thereof, pursuant to this Section may exercise all of its rights of payment
(including the right of set-off) with respect to such participation as fully as if such Lender were
a direct creditor of such Credit Party in the amount of such participation.



Section 8.6. Other Remedies. The remedies in this Article VIII are in addition to,
not in limitation of, any other right, power, privilege, or remedy, either in law, in equity, or
otherwise, to which the Lenders may be entitled. Agent shall exercise the rights under this
Article VIII and all other collection efforts on behalf of the Lenders and no Lender shall act
independently with respect thereto, except as otherwise specifically set forth in this Agreement.



ARTICLE IX. THE AGENT




The Lenders authorize KeyBank National Association and KeyBank National Association hereby
agrees to act as agent for the Lenders in respect of this Agreement upon the terms and conditions
set forth elsewhere in this Agreement, and upon the following terms and conditions:



Section 9.1. Appointment and Authorization. Each Lender hereby irrevocably appoints
and authorizes Agent to take such action as agent on its behalf and to exercise such powers
hereunder as are delegated to Agent by the terms hereof, together with such powers as are
reasonably incidental thereto, including, without limitation, to execute and deliver the Lender
Agreement on behalf of the Lenders. Neither Agent nor any of its affiliates, directors, officers,
attorneys or employees shall (a) be liable for any action taken or omitted to be taken by it or
them hereunder or in connection
herewith, except for its or their own gross negligence or willful misconduct (as determined by a
court of competent jurisdiction), or be responsible in any manner to any of the Lenders for the
effectiveness, enforceability, genuineness, validity or due execution of this Agreement or any
other Loan Documents, (b) be under any obligation to any Lender to ascertain or to inquire as to
the performance or observance of any of the terms, covenants or conditions hereof or thereof on the
part of Borrowers or any other Company, or the financial condition of Borrowers or any other
Company, or (c) be liable to any of the Companies for consequential damages resulting from any
breach of contract, tort or other wrong in connection with the negotiation, documentation,
administration or collection of the Loans or Letters of Credit or any of the Loan Documents. Each
Lender, by becoming a party to this Agreement, agrees to be bound by and subject to the terms and
conditions of the Lender Agreement as if it were an original party thereto.


 


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Section 9.2. Note Holders. Agent may treat the payee of any Note as the holder
thereof until written notice of transfer shall have been filed with Agent, signed by such payee and
in form satisfactory to Agent.



Section 9.3. Consultation With Counsel. Agent may consult with legal counsel
selected by Agent and shall not be liable for any action taken or suffered in good faith by Agent
in accordance with the opinion of such counsel.



Section 9.4. Documents. Agent shall not be under any duty to examine into or pass
upon the validity, effectiveness, genuineness or value of any Loan Document or any other Related
Writing furnished pursuant hereto or in connection herewith or the value of any collateral obtained
hereunder, and Agent shall be entitled to assume that the same are valid, effective and genuine and
what they purport to be.



Section 9.5. Agent and Affiliates. Agent and its affiliates may make loans to, issue
letters of credit for the account of, accept deposits from, acquire equity interests in and
generally engage in any kind of banking, trust, financial advisory, underwriting or other business
with the Companies and Affiliates as though Agent were not Agent hereunder and without notice to or
consent of any Lender. Each Lender acknowledges that, pursuant to such activities, Agent or its
affiliates may receive information regarding any Company or any Affiliate (including information
that may be subject to confidentiality obligations in favor of such Company or such Affiliate) and
acknowledge that Agent shall be under no obligation to provide such information to other Lenders.
With respect to Loans and Letters of Credit (if any), Agent and its affiliates shall have the same
rights and powers under this Agreement as any other Lender and may exercise the same as though
Agent was not Agent, and the terms “Lender” and “Lenders” include Agent and its affiliates, to the
extent applicable, in their individual capacities.



Section 9.6. Knowledge of Default. It is expressly understood and agreed that Agent
shall be entitled to assume that no Default or Event of Default has occurred, unless Agent has been
notified by a Lender in writing that such
Lender believes that a Default or Event of Default has occurred and is continuing and specifying
the nature thereof or has been notified by a Borrower pursuant to Section 5.14 hereof.



Section 9.7. Action by Agent. Subject to the other terms and conditions hereof, so
long as Agent shall be entitled, pursuant to Section 9.6 hereof, to assume that no Default or Event
of Default shall have occurred and be continuing, Agent shall be entitled to use its discretion
with respect to exercising or refraining from exercising any rights that may be vested in it by, or
with respect to taking or refraining from taking any action or actions that it may be able to take
under or in respect of, this Agreement. Agent shall incur no liability under or in respect of this
Agreement by acting upon any notice, certificate, warranty or other paper or instrument believed by
it to be genuine or authentic or to be signed by the proper party or parties, or with respect to
anything that it may do or refrain from doing in the reasonable exercise of its judgment, or that
may seem to it to be necessary or desirable in the premises.


 


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Section 9.8. Release of Guarantor of Payment. In the event of a transfer of assets
permitted by Section 5.12 hereof (or otherwise permitted pursuant to this Agreement) where the
proceeds of such transfer are applied in accordance with the terms of this Agreement to the extent
required to be so applied, Agent, at the request and expense of Borrowers, is hereby authorized by
the Lenders to release a Guarantor of Payment in connection with such permitted transfer.



Section 9.9. Notice of Default. In the event that Agent shall have acquired actual
knowledge of any Default or Event of Default, Agent shall promptly notify the Lenders and shall
take such action and assert such rights under this Agreement as the Required Lenders shall direct
and Agent shall inform the other Lenders in writing of the action taken. Agent may take such
action and assert such rights as it deems to be advisable, in its discretion, for the protection of
the interests of the holders of the Obligations.



Section 9.10. Delegation of Duties. Agent may execute any of its duties under this
Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall
be entitled to advice of counsel and other consultants or experts concerning all matters pertaining
to such duties. Agent shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects in the absence of gross negligence or willful misconduct, as
determined by a court of competent jurisdiction.



Section 9.11. Indemnification of Agent. The Lenders agree to indemnify Agent (to the
extent not reimbursed by Borrowers) ratably, according to their respective Overall Commitment
Percentages, from and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including attorneys’ fees) or disbursements of any kind
or nature whatsoever that may be imposed on, incurred by or asserted against Agent in its capacity
as agent in any way relating to or arising out of this Agreement, the Lender Agreement or any Loan
Document or any action taken or omitted by Agent with respect to this Agreement, the Lender
Agreement or any Loan Document, provided that no Lender shall be liable for any portion of such
liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys’ fees)
or disbursements resulting from Agent’s gross negligence or willful misconduct as determined by a
court of competent jurisdiction, or from any action taken or omitted by Agent in any capacity other
than as agent under this Agreement, the Lender Agreement or any other Loan Document. No action
taken in accordance with the directions of the Required Lenders shall be deemed to constitute gross
negligence or willful misconduct for purposes of this Section 9.11. The undertaking in this
Section 9.11 shall survive repayment of the Loans, cancellation of the Notes, expiration or
termination of the Letters of Credit, and the resignation or replacement of Agent.



Section 9.12. Successor Agent. Agent may resign as agent hereunder by giving not
fewer than thirty (30) days prior written notice to Borrowers and the Lenders. If Agent shall
resign under this Agreement, then either (a) the Required Lenders shall appoint from among the
Lenders a successor agent for the Lenders (with the consent of US Borrower so long as an Event of
Default has not occurred and which consent shall not be unreasonably withheld), or (b) if a
successor agent shall not be so appointed and approved within the thirty (30) day period following
Agent’s notice to the Lenders of its resignation, then Agent shall appoint a successor agent that
shall serve as agent until such time as the Required Lenders appoint a successor agent. Upon its
appointment, such successor agent shall succeed to the rights, powers and duties as agent, and the
term “Agent” shall mean such successor effective upon its appointment, and the former agent’s
rights, powers and duties as agent shall be terminated without any other or further act or deed on
the part of such former agent or any of the parties to this Agreement.


 


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Section 9.13. Other Agents. As used in this Agreement, the term “Agent” shall only
include Agent. The Syndication Agent shall not have any rights, obligations or responsibilities
hereunder in such capacity.



Section 9.14. Designated Lending Office. The Lender that acts as the Designated
Lending Office of Agent from time to time shall be entitled to the same indemnifications with
respect to Borrowers and the other Lenders that Agent would have were it performing the
administrative duties that the Designated Lending Office performs from time to time.



ARTICLE X. MISCELLANEOUS




Section 10.1. Lenders’ Independent Investigation. Each Lender, by its signature to
this Agreement, acknowledges and agrees that Agent has made no representation or warranty, express
or implied, with respect to the creditworthiness, financial condition, or any other condition of
any Company or with respect to the statements contained in any information memorandum furnished in
connection herewith or in any other oral or written communication between Agent and such Lender.
Each Lender represents that it has made and shall continue to make its own independent
investigation of the creditworthiness, financial condition and affairs of the Companies in
connection with the extension of credit hereunder, and agrees that Agent has no duty or
responsibility, either initially or on a continuing basis, to provide any Lender with any credit or
other information with respect thereto (other than such notices as may be expressly required to be
given by Agent to the Lenders hereunder), whether coming into its possession before the first
Credit Event hereunder or at any time or times thereafter. Each Lender further represents that it
has reviewed each of the Loan Documents, including, but not limited to, the Lender Agreement.



Section 10.2. No Waiver; Cumulative Remedies. No omission or course of dealing on
the part of Agent, any Lender or the holder of any Note in exercising any right, power or remedy
hereunder or under any of the Loan Documents shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder or under any of the
Loan Documents. The remedies herein provided are cumulative and in addition to any other rights,
powers or privileges held by operation of law, by contract or otherwise.




Section 10.3. Amendments, Consents.



(a) General Rule. No amendment, modification, termination, or waiver of any provision
of any Loan Document nor consent to any variance therefrom, shall be effective unless the same
shall be in writing and signed by the Required Lenders and Borrowers and then such waiver or
consent shall be effective only in the specific instance and for the specific purpose for which
given.


 


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(b) Exceptions to General Rule. Anything herein to the contrary notwithstanding,
unanimous consent of the Lenders shall be required with respect to (i) any increase in the
Commitment hereunder (except as specified in Section 2.10(b) hereof), (ii) the extension of
maturity of the Loans, the payment date of interest or scheduled principal hereunder, or the
payment of facility or other fees or amounts payable hereunder, (iii) any reduction in the rate of
interest on the Loans (provided that the institution of the Default Rate and a subsequent removal
of the Default Rate shall not constitute a decrease in interest rate of this Section 10.3), or in
any amount of scheduled principal or interest due on any Loan, or the payment of facility or other
fees hereunder or any change in the manner of pro rata application of any payments made by
Borrowers to the Lenders hereunder, (iv) any change in any percentage voting requirement, voting
rights, or the Required Lenders definition in this Agreement, (v) the release of any Borrower or
Guarantor of Payment except as permitted by Section 9.8 hereof, or (vi) any amendment to this
Section 10.3 or Section 8.5 hereof. Each Lender or other holder of a Note shall be bound by any
amendment, waiver or consent obtained as authorized by this Section 10.3, regardless of its failure
to agree thereto.



(c) Generally. Notice of amendments or consents ratified by the Lenders hereunder
shall be forwarded by Agent to all of the Lenders. Each Lender or other holder of a Note (or
interest in any Loan) shall be bound by any amendment, waiver or consent obtained as authorized by
this Section, regardless of its failure to agree thereto.



Section 10.4. Notices. All notices, requests, demands and other communications
provided for hereunder shall be in writing and, if to a Borrower, mailed or delivered to it,
addressed to it at the address specified on the signature pages of this Agreement, if to a Lender,
mailed or delivered to it, addressed to the address of such Lender specified on the signature pages
of this Agreement, or, as to each party, at such other address as shall be designated by such party
in a written notice to each of the other parties. All notices, statements, requests, demands and
other communications provided for hereunder shall be given by overnight delivery or first class
mail with postage prepaid by registered or certified mail, addressed as aforesaid, or sent by
facsimile or e-mail (with telephonic confirmation of receipt of such facsimile or e-mail, except
that telephonic confirmation is not required when notice is being provided under Section 5.3(d)
hereof); provided that all notices hereunder shall not be effective until received.



Section 10.5. Costs, Expenses and Taxes. US Borrower and, to the extent relating to
the Canadian Commitment, Canadian Borrowers agree to pay on demand all reasonable and properly
documented costs and expenses of Agent, including but not limited to, (a) syndication,
administration, travel and out-of-pocket expenses, including but not limited to attorneys’ fees and
expenses, of Agent in connection with the preparation, negotiation and closing of the Lender
Agreement and the Loan Documents, the administration of the Lender Agreement and the Loan
Documents, and the collection and disbursement of all funds hereunder and the other instruments and
documents to be delivered hereunder, (b) extraordinary expenses of Agent in connection with the
administration of the Lender Agreement and the Loan Documents and the other instruments and
documents to be delivered hereunder, and (c) the reasonable fees and out-of-pocket expenses of
special counsel for Agent, with respect to the foregoing, and of local counsel, if any, who may be
retained by said special counsel with respect thereto. US Borrower and, to the extent relating to
the Canadian Commitment, Canadian Borrowers also agree to pay, on demand, all properly documented
costs and expenses of Agent and the Lenders, including reasonable attorneys’ fees, in connection
with the restructuring or enforcement of the Obligations, this Agreement, the Lender Agreement or
any Related Writing. In addition, US Borrower and, to the extent relating to the Canadian
Commitment, Canadian Borrowers shall pay any and all properly documented stamp and other taxes and
fees payable or determined to be payable in connection with the execution and delivery of the Loan
Documents, and the other instruments and documents to be delivered hereunder, and agree to hold
Agent and each Lender harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes or fees other than those
liabilities resulting from the gross negligence or willful misconduct (as determined by a court of
competent jurisdiction) of Agent, or, with respect to amounts owing to a Lender, such Lender, in
each case.


 


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Section 10.6. Indemnification.



(a) US Borrower. US Borrower agrees to defend, indemnify and hold harmless Agent and
the Lenders (and their respective affiliates, officers, directors, attorneys, agents and
employees) from and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including attorneys’ fees) or disbursements of any kind
or nature whatsoever that may be imposed on, incurred by or asserted against Agent or any
Lender in connection with any investigative, administrative or judicial proceeding (whether or not
such Lender or Agent shall be designated a party thereto) or any other claim by any Person relating
to or arising out of the Lender Agreement and any Loan Document or any actual or proposed use of
proceeds of the Loans or any of the Obligations, or any activities of any Company or its
Affiliates.



(b) Canadian Borrowers. Each Canadian Borrower agrees to defend, indemnify and hold
harmless Agent and the Canadian Lenders (and their respective affiliates, officers, directors,
attorneys, agents and employees) from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses (including attorneys’ fees) or
disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted
against Agent or any Canadian Lender in connection with any investigative, administrative or
judicial proceeding (whether or not such Canadian Lender or Agent shall be designated a party
thereto) or any other claim by any Person relating to or arising out of the Lender Agreement and
any Loan Document executed by a Canadian Borrower or any actual or proposed use of proceeds of the
CAD Revolving Loans or any of the Applicable Debt, or any activities of any Company or its
Affiliates.



(c) Generally. None of Agent or any Lender shall have the right to be indemnified
under this Section 10.6 for its own gross negligence or willful misconduct, as determined by a
court of competent jurisdiction. All obligations provided for in this Section 10.6 shall survive
any termination of this Agreement.



Section 10.7. Obligations Several; No Fiduciary Obligations. The obligations of the
Lenders hereunder are several and not joint. Nothing contained in this Agreement and no action
taken by Agent or the Lenders pursuant hereto shall be deemed to constitute Agent or the Lenders a
partnership, association, joint venture or other entity. No default by any Lender hereunder shall
excuse the other Lenders from any obligation under this Agreement; but no Lender shall have or
acquire any additional obligation of any kind by reason of such default. The relationship between
Borrowers and the Lenders with respect to the Loan Documents and the Related Writings is and shall
be solely that of debtors and creditors, respectively, and neither Agent nor any Lender shall have
any fiduciary obligation toward any Credit Party with respect to any such documents or the
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Section 10.8. Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts, and by facsimile
signature, each of which counterparts when so executed and delivered shall be deemed to be an
original and all of which taken together shall constitute but one and the same agreement.



Section 10.9. Binding Effect; Borrowers’ Assignment. This Agreement shall become
effective when it shall have been executed by each Borrower, Agent and each Lender and thereafter
shall be binding upon and inure to the benefit of each Borrower, Agent and each of the Lenders and
their
respective successors and assigns, except that no Borrower shall have the right to assign its
rights hereunder or any interest herein without the prior written consent of Agent and all of the
Lenders.




Section 10.10. Lender Assignments.



(a) Assignments of Commitments. Each Lender shall have the right at any time or times
to assign to an Eligible Transferee (other than to a Lender that shall not be in compliance with
this Agreement), without recourse, all or a percentage of all of the following: (i) such Lender’s
Commitment, (ii) all Loans made by that Lender, (iii) such Lender’s Notes, and (iv) such Lender’s
interest in any Letter of Credit or Swing Loan, and any participation purchased pursuant to Section
2.2(b), 2.2(c) or 8.5 hereof.



(b) Prior Consent. No assignment may be consummated pursuant to this Section 10.10
without the prior written consent of US Borrower and Agent (other than an assignment by any Lender
to another Lender or to any affiliate of such Lender which affiliate is an Eligible Transferee and
either wholly-owned by a Lender or is wholly-owned by a Person that wholly owns, either directly or
indirectly, such Lender), which consent of US Borrower and Agent shall not be unreasonably withheld
(a failure of US Borrower to approve a distressed debt fund or vulture fund shall not be deemed to
be unreasonable so long as the Leverage Ratio for the most recently completed four fiscal quarters
of US Borrower shall be less than 3.00 to 1.00); provided, however, that US Borrower’s consent
shall not be required if, at the time of the proposed assignment, any Default or Event of Default
shall then exist. Anything herein to the contrary notwithstanding, any Lender may at any time make
a collateral assignment of all or any portion of its rights under the Loan Documents to a Federal
Reserve Bank, and no such assignment shall release such assigning Lender from its obligations
hereunder.



(c) Minimum Amount. Each such assignment shall be in a minimum amount of the lesser
of Five Million Dollars ($5,000,000) of the assignor’s Commitment and interest herein, or the
entire amount of the assignor’s Commitment and interest herein.


 


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(d) Assignment Fee. Unless the assignment shall be to an affiliate of the assignor or
the assignment shall be due to merger of the assignor or for regulatory purposes, either the
assignor or the assignee shall remit to Agent, for its own account, an administrative fee of Three
Thousand Five Hundred Dollars ($3,500).



(e) Assignment Agreement. Unless the assignment shall be due to merger of the
assignor or a collateral assignment for regulatory purposes, the assignor shall (i) cause the
assignee to execute and deliver to US Borrower and Agent an Assignment Agreement, and (ii) execute
and deliver, or cause the assignee to execute and deliver, as the case may be, to Agent such
additional amendments, assurances and other writings as Agent may reasonably require.



(f) Non-U.S. Assignee. If the assignment is to be made to an assignee that is
organized under the laws of any jurisdiction other than the United States or any state thereof, the
assignor Lender shall cause such assignee, at least five Business Days prior to the effective date
of such assignment, (i) to represent to the assignor Lender (for the benefit of the assignor
Lender,
Agent and Borrowers) that under applicable law and treaties no taxes will be required to be
withheld by Agent, Borrowers or the assignor with respect to any payments to be made to such
assignee in respect of the Loans hereunder, (ii) to furnish to the assignor Lender (and, in the
case of any assignee registered in the Register (as defined below), Agent and US Borrower) either
U.S. Internal Revenue Service Form W-8ECI or U.S. Internal Revenue Service Form W-8BEN, as
applicable (wherein such assignee claims entitlement to complete exemption from U.S. federal
withholding tax on all payments hereunder), and (iii) to agree (for the benefit of the assignor,
Agent and Borrowers) to provide to the assignor Lender (and, in the case of any assignee registered
in the Register, to Agent and US Borrower) a new Form W-8ECI or Form W-8BEN, as applicable, upon
the expiration or obsolescence of any previously delivered form and comparable statements in
accordance with applicable U.S. laws and regulations and amendments duly executed and completed by
such assignee, and to comply from time to time with all applicable U.S. laws and regulations with
regard to such withholding tax exemption. Notwithstanding any other provisions hereof, a Canadian
Lender may not make any assignment to an Eligible Assignee that is a non-resident of Canada for
purposes of the Income Tax Act of Canada (with respect to which payments to such non-resident of
principal, interest, fees and other amounts by the Canadian Borrowers would be subject to Canadian
withholding tax) at a rate higher than that then applicable to the assignor.



(g) Deliveries by Borrowers. Upon satisfaction of all applicable requirements
specified in subsections (a) through (f) above, Borrowers shall execute and deliver (i) to Agent,
the assignor and the assignee, any consent or release (of all or a portion of the obligations of
the assignor) required to be delivered by Borrowers in connection with the Assignment Agreement,
and (ii) to the assignee and the assignor, if applicable, an appropriate Note or Notes. After
delivery of the new Note or Notes, the assignor’s Note or Notes being replaced shall be returned to
US Borrower marked “replaced”.


 


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(h) Effect of Assignment. Upon satisfaction of all applicable requirements set forth
in subsections (a) through (g) above, and any other condition contained in this Section 10.10,
(i) the assignee shall become and thereafter be deemed to be a “Lender” for the purposes of this
Agreement, (ii) the assignor shall be released from its obligations hereunder to the extent that
its interest has been assigned, (iii) in the event that the assignor’s entire interest has been
assigned, the assignor shall cease to be and thereafter shall no longer be deemed to be a “Lender”
and (iv) the signature pages hereto and Schedule 1 hereto shall be automatically amended,
without further action, to reflect the result of any such assignment.



(i) Agent to Maintain Register. Agent shall maintain at the address for notices
referred to in Section 10.4 hereof a copy of each Assignment Agreement delivered to it and a
register (the “Register”) for the recordation of the names and addresses of the Lenders and the
Commitment of, and principal amount of the Loans owing to, each Lender from time to time. The
entries in the Register shall be conclusive, in the absence of manifest error, and Borrowers, Agent
and the Lenders may treat each Person whose name is recorded in the Register as the owner of the
Loan recorded therein for all purposes of this Agreement. The Register shall be available for
inspection by Borrowers or any Lender at any reasonable time and from time to time upon reasonable
prior notice.



Section 10.11. Sale of Participations. Any Lender may, in the ordinary course of its
commercial banking business and in accordance with applicable law, at any time sell participations
to one or more commercial banks or other Persons other than a Company or an Affiliate of a Company
(each a “Participant”) in all or a portion of its rights or obligations under this Agreement and
the other Loan Documents (including, without limitation, all or a portion of the Commitment and the
Loans and participations owing to it and the Note held by it); provided that:



(a) any such Lender’s obligations under this Agreement and the other Loan Documents shall
remain unchanged;



(b) such Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations;



(c) the parties hereto shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement and each of the other
Loan Documents;



(d) such Participant shall be bound by the provisions of Section 8.5 hereof, and the Lender
selling such participation shall obtain from such Participant a written confirmation of its
agreement to be so bound; and



(e) no Participant (unless such Participant is itself a Lender) shall be entitled to require
such Lender to take or refrain from taking action under this Agreement or under any other Loan
Document, except that such Lender may agree with such Participant that such Lender will not,
without such Participant’s consent, take action of the type described as follows:




(i) increase the portion of the participation amount of any Participant over the amount
thereof then in effect, or extend the Commitment Period, without the written consent of each
Participant affected thereby; or




 


70









 




(ii) reduce the principal amount of or extend the time for any payment of principal of
any Loan, or reduce the rate of interest or extend the time for payment of interest on any
Loan, or reduce the commitment fee, without the written consent of each Participant affected
thereby.



Borrowers agree that any Lender that sells participations pursuant to this Section 10.11 shall
still be entitled to the benefits of Article III hereof, notwithstanding any such transfer;
provided, however, that the obligations of Borrowers shall not increase as a result of such
transfer and Borrowers shall have no obligation to any Participant.



Section 10.12. Patriot Act Notice. Each Lender and Agent (for itself and not on
behalf of any other party) hereby notifies the Credit Parties that, pursuant to the requirements of
the Patriot Act, such Lender and Agent are required to obtain, verify and record information that
identifies the Credit Parties, which information includes the name and address of the Credit
Parties and other information that will allow such
Lender or Agent, as applicable, to identify the Credit Parties in accordance with the Patriot Act.
US Borrower shall provide, to the extent commercially reasonable, such information and take such
actions as are reasonably requested by Agent or a Lender in order to assist Agent or such Lender in
maintaining compliance with the Patriot Act.



Section 10.13. Severability of Provisions; Captions; Attachments. Any provision of
this Agreement that shall be 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 or affecting the validity or enforceability of such
provision in any other jurisdiction. The several captions to sections and subsections herein are
inserted for convenience only and shall be ignored in interpreting the provisions of this
Agreement. Each schedule or exhibit attached to this Agreement shall be incorporated herein and
shall be deemed to be a part hereof.



Section 10.14. Investment Purpose. Each of the Lenders represents and warrants to
Borrowers that it is entering into this Agreement with the present intention of acquiring any Note
issued pursuant hereto for investment purposes only and not for the purpose of distribution or
resale, it being understood, however, that each Lender shall at all times retain full control over
the disposition of its assets.



Section 10.15. Confidentiality. Agent and each Lender shall hold all Confidential
Information in accordance with the customary procedures of Agent or such Lender for handling
confidential information of this nature, and in accordance with safe and sound banking practices.
Notwithstanding the foregoing, Agent or any Lender may in any event make disclosures of, and
furnish copies of Confidential Information (a) to another agent under this Agreement or another
Lender; (b) when reasonably required by any bona fide transferee or participant in connection with
the contemplated transfer of any Loans or Commitment or participation therein (provided that each
such prospective transferee or participant shall execute an agreement for the benefit of Borrowers
with such prospective transferor Lender or participant containing provisions substantially
identical to those contained in this Section 10.15); (c) to the parent corporation or other
affiliates of Agent or such Lender, and to their respective auditors and attorneys; and (d) as
required or requested by any governmental agency or representative thereof, or pursuant to legal
process, provided, that, unless specifically prohibited by applicable law or court order, Agent or
such Lender, as applicable, shall notify the chief financial officer of US Borrower of any request
by any governmental agency or representative thereof (other than any such request in connection
with an examination of the financial condition of Agent or such Lender by such governmental
agency), and of any other request pursuant to legal process, for disclosure of any such non-public
information prior to disclosure of such Confidential Information. In no event shall Agent or any
Lender be obligated or required to return any materials furnished by or on behalf of any Company.
Each Borrower hereby agrees that the failure of Agent or any Lender to comply with the provisions
of this Section 10.15 shall not relieve any Borrower of any of the obligations to Agent and the
Lenders under this Agreement and the other Loan Documents.


 


71









 





Section 10.16. Entire Agreement. This Agreement, any Note and any other Loan
Document or other agreement, document or instrument attached hereto or executed on or as of the
Closing Date integrate all of the terms and conditions mentioned herein or incidental hereto and
supersede all oral representations and negotiations and prior writings with respect to the subject
matter hereof.



Section 10.17. Legal Representation of Parties. The Loan Documents were negotiated
by the parties with the benefit of legal representation and any rule of construction or
interpretation otherwise requiring this Agreement or any other Loan Document to be construed or
interpreted against any party shall not apply to any construction or interpretation hereof or
thereof.




Section 10.18. Currency.



(a) Currency Equivalent Generally. For the purposes of making valuations or
computations under this Agreement (but not for the purposes of the preparation of any financial
statements delivered pursuant hereto), unless expressly provided otherwise, where a reference is
made to a dollar amount the amount is to be considered as the amount in Dollars and, therefor, each
other currency shall be converted into the Dollar Equivalent.



(b) Payment Currency. All payments by a Credit Party shall be made in the manner, at
the place and in the currency (the “Payment Currency”) required by the Loan Documents; provided,
however, that, if the Payment Currency is other than Dollars, such Credit Party may, at its option
(or, if for any reason whatsoever such Credit Party is unable to effect payments in the foregoing
manner, such Credit Party shall be obligated to) pay to Agent, for the benefit of the Lenders, the
equivalent amount in Dollars computed at the selling rate of Agent or a selling rate chosen by
Agent, most recently in effect on or prior to the date such payment was due. In any case in which
a Credit Party makes or is obligated to make a payment in Dollars, such Credit Party shall hold
Agent and the Lenders harmless from any loss incurred by Agent and the Lenders arising from any
change in the value of Dollars in relation to the Payment Currency between the date such payment is
due and the date Agent is actually able to apply such Payment Currency to such payment.


 


72









 





Section 10.19. Governing Law; Submission to Jurisdiction. This Agreement, each of
the Notes and any Related Writing shall be governed by and construed in accordance with the laws of
the State of Ohio and the respective rights and obligations of Borrowers, Agent, and the Lenders
shall be governed by Ohio law, without regard to principles of conflicts of laws. Each Borrower
hereby irrevocably submits to the non-exclusive jurisdiction of any Ohio state or federal court
sitting in Cleveland, Ohio, over any action or proceeding arising out of or relating to this
Agreement, the Obligations or any Related Writing, and each Borrower hereby irrevocably agrees that
all claims in respect of such action or proceeding may be heard and determined in such Ohio state
or federal court. Each Borrower, on behalf of itself and its Subsidiaries, hereby irrevocably
waives, to the fullest extent permitted by law, any objection it may now or hereafter have to the
laying of venue in any action or proceeding in any such court as well as any right it may now or
hereafter have to remove such action or proceeding, once commenced, to another
court on the grounds of FORUM NON CONVENIENS or otherwise. Each Borrower agrees that a final,
nonappealable judgment in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by law.



[Remainder of page left intentionally blank]





 


73











 





Section 10.20. JURY TRIAL WAIVER. TO THE EXTENT PERMITTED BY LAW, EACH BORROWER,
AGENT AND EACH LENDER WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWERS, AGENT AND THE LENDERS, OR ANY THEREOF,
ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG
THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.



IN WITNESS WHEREOF, the parties have executed and delivered this Credit Agreement in
Cleveland, Ohio as of the date first set forth above.



	 	 	 	 	 	 	 	 	 
	Address:	 	One Applied Plaza

Cleveland, Ohio 44115	 	APPLIED INDUSTRIAL TECHNOLOGIES,
INC.	 	 
	 

	 	Attn: Chief Financial Officer
	 	By:
	 	/s/ Mark O. Eisele
 

Mark O. Eisele 

Vice President — Chief Financial
Officer & Treasurer
	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Fred D. Bauer	 	 
	 

	 	 	 	
	 	 	 	 
	 

	 	 	 	
	 	Fred D. Bauer 

Vice President — General Counsel &
Secretary	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	One Applied Plaza	 	AIT LIMITED PARTNERSHIP	 	 
	 

	 	Cleveland, Ohio 44115

Attn: Chief Financial Officer
	 	by:
	 	Applied Nova Scotia Company, 
its
general partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Mark O. Eisele	 	 
	 

	 	 	 	
	 	 	 	 
	 

	 	 	 	
	 	Mark O. Eisele 

Vice President — Chief Financial
Officer & Treasurer	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Fred D. Bauer	 	 
	 

	 	 	 	
	 	 	 	 
	 

	 	 	 	
	 	Fred D. Bauer 

Vice President — General Counsel &
Secretary	 	 






 


74









 





	 	 	 	 	 	 	 	 	 
	Address:	 	One Applied Plaza

Cleveland, Ohio 44115	 	APPLIED INDUSTRIAL TECHNOLOGIES,
LTD.

	 	 
	 

	 	Attn: Chief Financial Officer 
	 	By:
	 	/s/ Mark O. Eisele	 	 
	 

	 	 	 	
	 	 	 	 
	 

	 	 	 	
	 	Mark O. Eisele 

Vice President — Chief Financial
Officer & 

Treasurer	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Fred D. Bauer	 	 
	 

	 	 	 	
	 	 	 	 
	 

	 	 	 	
	 	Fred D. Bauer

Vice President — General Counsel &


Secretary	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	One Applied Plaza 
Cleveland, Ohio 44115	 	APPLIED NOVA SCOTIA COMPANY

	 	 
	 

	 	
Attn: Chief Financial Officer
	 	By:
	 	/s/ Mark O. Eisele

Mark O. Eisele 

Vice President — Chief Financial
Officer & 

Treasurer	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Fred D. Bauer	 	 
	 

	 	 	 	
	 	 	 	 
	 

	 	 	 	
	 	Fred D. Bauer

Vice President — General Counsel &
Secretary	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	One Applied Plaza
Cleveland, Ohio 44115	 	DYNAVEST NOVA SCOTIA COMPANY

	 	 
	 

	 	Attn: Chief Financial Officer
	 	By:
	 	/s/ Mark O. Eisele

Mark O. Eisele 

Vice President — Chief Financial
Officer & Treasurer	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Fred D. Bauer	 	 
	 

	 	 	 	
	 	 	 	 
	 

	 	 	 	
	 	Fred D. Bauer 

Vice President — General Counsel &
Secretary	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	127 Public Square

Cleveland, Ohio 44114-1306
Attn: Institutional Banking	 	KEYBANK NATIONAL ASSOCIATION

as Agent and as a Lender

	 	 
	 

	 	 
	 	By:
	 	/s/ Marianne T. Meil	 	 
	 

	 	 	 	
	 	 	 	 
	 

	 	 	 	
	 	Marianne T. Meil

Vice President	 	 






 


75









 





	 	 	 	 	 	 	 	 	 
	Address:	 	1350 Euclid Avenue, 11th Floor

Cleveland, Ohio 44115
Attn: Christine C. Gencer	 	U.S. BANK NATIONAL ASSOCIATION,

as Syndication Agent and as a Lender

	 	 
	 

	 	 
	 	By:
	 	/s/ Christine C. Gencer	 	 
	 

	 	 	 	
	 	 	 	 
	 

	 	 	 	
	 	Christine C. Gencer 

Vice President	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	600 Superior Avenue, East
Cleveland, Ohio 44114	 	FIFTH THIRD BANK

	 	 
	 

	 	Attn: Martin H. McGinty
	 	By:
	 	/s/ Martin H. McGinty

Martin H. McGinty 

Vice President	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	1375 East Ninth Street, Suite 2430
Cleveland, Ohio 44114	 	PNC BANK, NATIONAL ASSOCIATION

	 	 
	 

	 	Attn: Joseph G. Moran
	 	By:
	 	/s/ Joseph G. Moran

Joseph G. Moran 

Managing Director	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	Royal Bank Tower, South Plaza
Floor 1800
Toronto, Ontario M5J2J2	 	JPMORGAN CHASE BANK, N.A., TORONTO BRANCH

	 	 
	 

	 	Attn: Dana E. Jurgens
	 	By:
	 	/s/ Dana E. Jurgens

Dana E. Jurgens

Vice President	 	 







 


76









 







SCHEDULE 1




	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	US REVOLVING	 	 	US REVOLVING	 	 	 	 
	 	 	CREDIT	 	 	CREDIT	 	 	 	 
	 	 	COMMITMENT	 	 	COMMITMENT	 	 	MAXIMUM	 
	US LENDERS	 	PERCENTAGE	 	 	AMOUNT	 	 	AMOUNT	 
	KeyBank National Association
	 	 	36.67	%	 	$	27,500,000.00	 	 	$	27,500,000.00	 
	U.S. Bank National Association
	 	 	26.67	%	 	$	20,000,000.00	 	 	$	20,000,000.00	 
	Fifth Third Bank
	 	 	20.00	%	 	$	15,000,000.00	 	 	$	15,000,000.00	 
	PNC Bank, National Association
	 	 	16.66	%	 	$	12,500,000.00	 	 	$	12,500,000.00	 
	 	 	 	 	 	 	 	 	 	 
	Maximum US Revolving Amount
	 	 	100.00	%	 	$	75,000,000.00	 	 	 	 	 






	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	CAD REVOLVING	 	 	CAD REVOLVING	 	 	 	 
	 	 	CREDIT	 	 	CREDIT	 	 	 	 
	 	 	COMMITMENT	 	 	COMMITMENT	 	 	MAXIMUM	 
	CANADIAN LENDERS	 	PERCENTAGE	 	 	AMOUNT	 	 	AMOUNT	 
	JPMorgan Chase
Bank, N.A., Toronto Branch
	 	 	100.00	%	 	$	25,000,000.00	 	 	$	25,000,000.00	 
	Maximum CAD Revolving Amount
	 	 	100.00	%	 	$	25,000,000.00	 	 	 	 	 
	TOTAL COMMITMENT AMOUNT
	 	 	 	 	 	 	 	 	 	$	100,000,000.00	 





 


 









 





SCHEDULE 2




CANADIAN BORROWERS





	1.	 	AIT Limited Partnership, a limited partnership organized under the laws of Ontario


	 
	2.	 	Applied Industrial Technologies Ltd., a corporation incorporated under the laws of
Canada

	 
	3.	 	Applied Nova Scotia Company, a Nova Scotia unlimited liability company


	 
	4.	 	Dynavest Nova Scotia Company, a Nova Scotia unlimited liability company





 


 









 










SCHEDULE 2.2

EXISTING LETTERS OF CREDIT




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Issue	 	 	Renewal	 	 	Expiration	 	 
	Bank	 	L/C #	 	 	Beneficiary	 	Amount	 	 	Date	 	 	Basis	 	Date	 	Comments
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	KeyBank
	 	 	300096	 	 	Pacific Employers	 	 	3,973,415	 	 	 	7/1/1998	 	 	Auto-Annual	 	31-Oct	 	Complete ACE Program
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	KeyBank
	 	 	300469	 	 	Zurich	 	 	212,974	 	 	 	10/3/1997	 	 	Auto-Annual	 	1-Nov	 	Invetech Program
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	KeyBank
	 	 	300095	 	 	Hartford	 	 	1,600,000	 	 	 	7/1/1995	 	 	Auto-Annual	 	1-Jul	 	Entire Hartford Requirement
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	KeyBank
	 	 	300094	 	 	Travelers	 	 	300,000	 	 	 	7/1/1995	 	 	Auto-Annual	 	31-Oct	 	Entire Travelers Requirement
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	KeyBank
	 	 	305267	 	 	USF&G	 	 	2,400,000	 	 	 	9/18/2002	 	 	Auto-Annual	 	18-Sep	 	Entire USF&G Requirement
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 





 


 









 





SCHEDULE 3




DOMESTIC GUARANTORS OF PAYMENT





	1.	 	Applied Industrial Technologies-CA LLC, a Delaware limited liability company

	 
	2.	 	Applied Industrial Technologies-DBB, Inc., an Ohio corporation

	 
	3.	 	Applied Industrial Technologies-Dixie, Inc., a Tennessee corporation

	 
	4.	 	Applied Industrial Technologies-Indiana LLC, an Ohio limited liability company

	 
	5.	 	Applied Industrial Technologies-Mainline, Inc., a Wisconsin corporation

	 
	6.	 	Applied Industrial Technologies-TX LP, a Delaware limited partnership

	 
	7.	 	Applied Industrial Technologies-PA LLC, a Pennsylvania limited liability company

	 
	8.	 	Air and Hydraulics Engineering, Incorporated, an Alabama corporation

	 
	9.	 	ESI Acquisition Corporation, an Ohio corporation

	 
	10.	 	The Ohio Ball Bearing Company, an Ohio corporation

	 
	11.	 	Bearings Pan American, Inc., an Ohio corporation

	 
	12.	 	Bearing Sales and Service, Inc., a Washington corporation

	 
	13.	 	Air Draulics Engineering Co., a Tennessee corporation

	 
	14.	 	Applied-Michigan, Ltd., an Ohio limited liability company

	 
	15.	 	Applied Industrial Technologies-Capital LLC, a Delaware limited liability company






CANADIAN GUARANTORS OF PAYMENT




None


 


 









 





SCHEDULE 5.9




LIENS




None.



 


 









 





SCHEDULE 6.1

SUBSIDIARIES




	 	 	 	 	 
	Name of Subsidiary	 	State of Incorporation	 	Outstanding Shares
	Air Draulics Engineering Co.

	 	Tennessee
	 	100% Parent Corp.
	Air and Hydraulics Engineering, Incorporated

	 	Alabama
	 	100% Parent Corp.
	AIT Limited Partnership

	 	Ontario
	 	Applied Nova Scotia Company

99% General Partner

Dynavest Nova Scotia Company

1% Limited Partner
	Applied Industrial Technologies Ltd.

	 	Canada [federal]
	 	100% Applied Nova Scotia Company
	Applied Industrial Technologies — CA LLC

	 	Delaware
	 	100% Parent Corp.
	Applied Industrial Technologies — CAPITAL LLC

	 	Delaware
	 	100% Applied Industrial

Technologies — CA LLC
	Applied Industrial Technologies — DBB, Inc.

	 	Ohio
	 	100% Parent Corp.
	Applied Industrial Technologies — Dixie, Inc.

	 	Tennessee
	 	100% Parent Corp.
	Applied Industrial Technologies — Indiana LLC

	 	Ohio
	 	Parent Corp. 99% Member

The Ohio Ball Bearing Company

1% Member
	Applied Industrial Technologies — Mainline, Inc.

	 	Wisconsin
	 	100% Parent Corp.
	Applied Industrial Technologies — PA LLC

	 	Pennsylvania
	 	Parent Corp. 99% Member

The Ohio Ball Bearing Company

1% Member
	Applied Industrial Technologies — PACIFIC LLC

	 	Delaware
	 	100% Applied Industrial

Technologies — CA LLC

The Ohio Ball Bearing Company

1% Member
	Applied Industrial Technologies — TX LP

	 	Delaware
	 	Parent Corp. 1% General Partner

Bearings Pan American, Inc.

99% Limited Partner
	Applied Mexico, S.A. de C.V.

	 	Mexico
	 	97% Applied Mexico Holdings,

S.A. de C. V.

3% Sergio H. Nevarez
	Applied Mexico Holdings, S. A. de C.V.

	 	Mexico
	 	99.9% Bearing Sales & Service, Inc.
	 

	 	 	 	0.1% Bearings Pan American, Inc.
	Applied — Michigan, Ltd.

	 	Ohio
	 	Applied Industrial Technologies — DBB, Inc. 95% Member
Applied Industrial Technologies-
Mainline, Inc. 5% Member
	Applied Nova Scotia Company

	 	Nova Scotia
	 	100% Parent Corp.
	BER International, Inc.

	 	Barbados
	 	100% Parent Corp.
	Bearing Sales & Service, Inc.

	 	Washington
	 	100% Applied Industrial Technologies-Dixie, Inc.
	Bearings, Inc.

	 	Alabama
	 	100% Parent Corp.
	Bearings, Inc.

	 	Tennessee
	 	100% Parent Corp.
	Bearings Pan American, Inc.

	 	Ohio
	 	100% Parent Corp.
	Dynavest Nova Scotia Company

	 	Nova Scotia
	 	100% Applied Nova Scotia Company
	ESI Acquisition Corporation

	 	Ohio
	 	100% Parent Corp.
	Rafael Benitez Carrillo Inc.

	 	Puerto Rico
	 	100% Parent Corp.
	The Ohio Ball Bearing Company

	 	Ohio
	 	100% Parent Corp.
	Atelier P.V. Hydraulique 2004 Inc.

	 	Canada [federal]
	 	100% Le Groupe GLM (2005) Inc.
	Le Groupe GLM (2005) Inc.

	 	Canada [federal]
	 	100% Applied Industrial Technologies Ltd.






 


 









 





SCHEDULE 6.4




LITIGATION AND ADMINISTRATIVE PROCEEDINGS




NOTE: THIS DISCLOSURE CONTAINS CONFIDENTIAL INFORMATION AND IS

SUBJECT IN ALL RESPECTS TO THE CONFIDENTIALITY PROVISIONS OF THE

CREDIT AGREEMENT TO WHICH THIS SCHEDULE IS ATTACHED




Applied Industrial Technologies, Inc. (as successor in interest to King Bearing, Inc., alleged
successor in interest to Valley Industrial Supply Co., Inc.) (“Applied”) has been named as a
defendant in a case in the Superior Court of California, County of San Francisco, Elven Odell
Qualls v. Alcoa, Inc., et al., Case Number CGC05437700. The plaintiff, who worked as a carpenter
and machinist during the 1960’s and 1970’s at a location to which King Bearing, Inc. and Valley
Industrial Supply Co., Inc. allegedly distributed Johns Manville products containing asbestos, has
been diagnosed with mesothelioma. The plaintiff alleges that Applied is liable for negligence and
strict liability and seeks $13.5 million in general and special damages and $10 million in punitive
damages. If liability were assessed against Applied, Applied would seek indemnification from King
Bearing’s insurance carriers.**





	 	 	 
	**	 	The inclusion of proceedings on this schedule does not constitute a determination that any such
proceeding would constitute a Material Adverse Effect (as such term is defined in the Credit
Agreement) to Applied or any of the Guarantors.




 


 









 









SCHEDULE 6.10




ERISA PLANS




Applied Industrial Technologies, Inc. Retirement Plan (PN: 003)



Detroit Ball Bearing Company Union Employees’ Retirement Plan (PN: 001)


 


 









 





SCHEDULE 6.15




MATERIAL AGREEMENTS




Note Purchase Agreements among Applied Industrial Technologies, Inc., Applied Nova Scotia
Company, Hartford Life Insurance Company and MONY Life Insurance Company with respect to the U.S.
$20,000,000 7.98 Senior Notes due November 15, 2010 and the $5,000,000 Senior Notes due
November 15, 2010.



$150,000,000 Private Shelf Agreement, dated as of November 27, 1996, between Applied
Industrial Technologies, Inc. and The Prudential Insurance Company of America, as amended on
January 30, 1998, October 24, 2000, November 14, 2003, and February 25, 2004, pursuant to which
Applied Industrial Technologies issued and sold and Prudential Insurance Company of America
purchased a 6.60% senior unsecured Note in the original aggregate principal amount of $50,000,000,
due December 8, 2007. The current amount outstanding under this facility is $50,000,000.



Guaranty Agreement between Applied Industrial Technologies, Inc., Guarantor and The Huntington
National bank, as Trustee, dated as of March 1, 1996 for the guaranty of up to $3,877,643.89 of the
$18,835,000 Cleveland-Cuyahoga County Port Authority Taxable Headquarters Revenue Bonds Series
1996. The Bonds consist of Series A Bonds and Series B Bonds. The Series A Bonds mature on March
1, 2016 and bear interest at the annual rate of seven and twenty-eight one-hundredths percent
(7.28%) per year.



Guaranty Agreement between Applied Industrial Technologies, Inc., Guarantor and The Prudential
Insurance Company of America, as Holder, dated as of March 1, 1996 for the guaranty of $1,800,000
County of Cuyahoga, Ohio Taxable Development Revenue Bonds, Series 1996. The Bonds mature on March
1, 2016 and bear interest at a rate of seven and nineteen one-hundredths percent (7.19%) per year.



Lease Agreement between Cleveland-Cuyahoga County Port Authority, Lessor and Bearings, Inc.
(n/k/a Applied Industrial Technologies, Inc.), Lessee, dated as of March 1, 1996, for lease of the
company’s headquarters.



Agreement among Applied Industrial Technologies — DBB, Inc. and Truck Drivers Local Union No.
299, Affiliated with the International Brotherhood of Teamsters, AFL/CIO, February 2, 2004 -
February 1, 2007. This agreement covers approximately 38 employees in the positions of drivers and
back-up drivers located at Applied service centers within a 50 mile radius of 1450 Howard Street,
Detroit, MI. The covered locations are: 23857 Industrial Park Drive, Farmington Hills, MI; 35430
Beattie Drive, Sterling Heights, MI and 11700 Metro Center Drive, Building D, Romulus, MI. (The
original 1450 Howard Street, Detroit, MI location is now closed.)


 


 









 





EXHIBIT A

FORM OF

US REVOLVING CREDIT NOTE




			
	 	 	 
	$                    
	 	Cleveland, Ohio
	 
	 	June 3, 2005






FOR VALUE RECEIVED, the undersigned, APPLIED INDUSTRIAL TECHNOLOGIES, INC., an Ohio
corporation (“US Borrower”), promises to pay, on the last day of the Commitment Period, as defined
in the Credit Agreement (as hereinafter defined), to the order of                      (“Lender”) at the main
office of KEYBANK NATIONAL ASSOCIATION, as Agent, as hereinafter defined, 127 Public Square,
Cleveland, Ohio 44114-1306 the principal sum of



			
	 	 	 
	[                                        ] AND 00/100
	 	DOLLARS






or the aggregate unpaid principal amount of all US Revolving Loans, as defined in the Credit
Agreement made by Lender to US Borrower pursuant to Section 2.2 of the Credit Agreement, whichever
is less, in lawful money of the United States of America.



As used herein, “Credit Agreement” means the Credit Agreement dated as of June 3, 2005, among
US Borrower and Canadian Borrowers, as each term is defined therein, the Lenders, as defined
therein, U.S. Bank National Association, as syndication agent, and KeyBank National Association, as
lead arranger, book runner and administrative agent for the Lenders (“Agent”), as the same may from
time to time be amended, restated or otherwise modified. Each capitalized term used herein that is
defined in the Credit Agreement and not otherwise defined herein shall have the meaning ascribed to
it in the Credit Agreement.



US Borrower also promises to pay interest on the unpaid principal amount of each US Revolving
Loan from time to time outstanding, from the date of such US Revolving Loan until the payment in
full thereof, at the rates per annum that shall be determined in accordance with the provisions of
Section 2.4(a) of the Credit Agreement. Such interest shall be payable on each date provided for
in such Section 2.4(a); provided, however, that interest on any principal portion that is not paid
when due shall be payable on demand.



The portions of the principal sum hereof from time to time representing Base Rate Loans and
Eurodollar Loans, and payments of principal of any thereof, shall be shown on the records of Lender
by such method as Lender may generally employ; provided, however, that failure to make any such
entry shall in no way detract from the obligations of US Borrower under this Note.



If this Note shall not be paid at maturity, whether such maturity occurs by reason of lapse of
time or by operation of any provision for acceleration of maturity contained in the Credit
Agreement, the principal hereof and the unpaid interest thereon shall bear interest, until paid, at
a rate per annum equal to the Default Rate, if required by Section 2.4(d) of the Credit Agreement.
All payments of principal of and interest on this Note shall be made in immediately available
funds.


 


 









 





This Note is one of the US Revolving Credit Notes referred to in the Credit Agreement.
Reference is made to the Credit Agreement for a description of the right of the undersigned to
anticipate payments hereof, the right of the holder hereof to declare this Note due prior to its
stated maturity, and other terms and conditions upon which this Note is issued.



Except as expressly provided in the Credit Agreement, US Borrower expressly waives
presentment, demand, protest and notice of any kind. This Note shall be governed by and construed
in accordance with the laws of the State of Ohio, without regard to conflicts of laws provisions.



JURY TRIAL WAIVER. US BORROWER, TO THE EXTENT PERMITTED BY LAW, HEREBY WAIVES ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, AMONG US BORROWER, CANADIAN BORROWERS, AGENT AND THE LENDERS, OR ANY THEREOF, ARISING
OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH THE CREDIT AGREEMENT, THIS NOTE OR ANY OTHER NOTE OR OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.



	 	 	 	 	 
	 	APPLIED INDUSTRIAL TECHNOLOGIES, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



 


 









 





EXHIBIT B

FORM OF

SWING LINE NOTE




			
	 	 	 
	$25,000,000
	 	Cleveland, Ohio
	 
	 	June 3, 2005






FOR VALUE RECEIVED, the undersigned, APPLIED INDUSTRIAL TECHNOLOGIES, INC., an Ohio
corporation (“US Borrower”), promises to pay to the order of KEYBANK NATIONAL ASSOCIATION (“Swing
Line Lender”) at the main office of KEYBANK NATIONAL ASSOCIATION, as Agent, as hereinafter defined,
127 Public Square, Cleveland, Ohio 44114-1306 the principal sum of



			
	 	 	 
	TWENTY-FIVE MILLION AND 00/100
	 	DOLLARS






or the aggregate unpaid principal amount of all Swing Loans, as defined in the Credit Agreement (as
hereinafter defined) made by Swing Line Lender to US Borrower pursuant to Section 2.2(c) of the
Credit Agreement, whichever is less, in lawful money of the United States of America on the earlier
of the last day of the Commitment Period, as defined in the Credit Agreement, or, with respect to
each Swing Loan, the Swing Loan Maturity Date applicable thereto.



As used herein, “Credit Agreement” means the Credit Agreement dated as of June 3, 2005, among
US Borrower and Canadian Borrowers, as each term is defined therein, the Lenders, as defined
therein, U.S. Bank National Association, as syndication agent, and KeyBank National Association, as
lead arranger, book runner and administrative agent for the Lenders (“Agent”), as the same may from
time to time be amended, restated or otherwise modified. Each capitalized term used herein that is
defined in the Credit Agreement and not otherwise defined herein shall have the meaning ascribed to
it in the Credit Agreement.



US Borrower also promises to pay interest on the unpaid principal amount of each Swing Loan
from time to time outstanding, from the date of such Swing Loan until the payment in full thereof,
at the rates per annum that shall be determined in accordance with the provisions of Section 2.4(b)
of the Credit Agreement. Such interest shall be payable on each date provided for in such Section
2.4(b); provided, however, that interest on any principal portion that is not paid when due shall
be payable on demand.



The principal sum hereof from time to time and the payments of principal and interest thereon,
shall be shown on the records of Swing Line Lender by such method as Swing Line Lender may
generally employ; provided, however, that failure to make any such entry shall in no way detract
from the obligation of US Borrower under this Note.



If this Note shall not be paid at maturity, whether such maturity occurs by reason of lapse of
time or by operation of any provision for acceleration of maturity contained in the Credit
Agreement, the principal hereof and the unpaid interest thereon shall bear interest, until paid, at
a rate per annum equal to the Default Rate, if required by Section 2.4(d) of the Credit Agreement.
All payments of principal of and interest on this Note shall be made in immediately available
funds.


 


 









 





This Note is the Swing Line Note referred to in the Credit Agreement. Reference is made to
the Credit Agreement for a description of the right of the undersigned to anticipate payments
hereof, the right of the holder hereof to declare this Note due prior to its stated maturity, and
other terms and conditions upon which this Note is issued.



Except as expressly provided in the Credit Agreement, US Borrower expressly waives
presentment, demand, protest and notice of any kind. This Note shall be governed by and construed
in accordance with the laws of the State of Ohio, without regard to conflicts of laws provisions.



JURY TRIAL WAIVER. US BORROWER, TO THE EXTENT PERMITTED BY LAW, HEREBY WAIVES ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, AMONG US BORROWER, CANADIAN BORROWERS, AGENT AND THE LENDERS, OR ANY THEREOF, ARISING
OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH THE CREDIT AGREEMENT, THIS NOTE OR ANY OTHER NOTE OR OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.



	 	 	 	 	 
	 	APPLIED INDUSTRIAL TECHNOLOGIES, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



 


 









 





EXHIBIT C

FORM OF

CAD REVOLVING CREDIT NOTE




			
	 	 	 
	$                    
	 	Cleveland, Ohio
	 
	 	June 3, 2005






FOR VALUE RECEIVED, the undersigned, AIT LIMITED PARTNERSHIP, a limited partnership organized
under the laws of Ontario, APPLIED INDUSTRIAL TECHNOLOGIES LTD., a corporation incorporated under
the laws of Canada, APPLIED NOVA SCOTIA COMPANY, a Nova Scotia unlimited liability company and
DYNAVEST NOVA SCOTIA COMPANY, a Nova Scotia unlimited liability company (collectively, “Canadian
Borrowers”), jointly and severally, promise to pay, on the last day of the Commitment Period, as
defined in the Credit Agreement (as hereinafter defined), to the order of                      (“Lender”) at the
main office of KEYBANK NATIONAL ASSOCIATION, as Agent, as hereinafter defined, 127 Public Square,
Cleveland, Ohio 44114-1306 the CAD Equivalent of the principal sum of



			
	 	 	 
	[                                        ] AND 00/100
	 	DOLLARS






or the Dollar Equivalent of the aggregate unpaid principal amount of all CAD Revolving Loans, as
defined in the Credit Agreement made by Canadian Lender to Canadian Borrowers pursuant to Section
2.3 of the Credit Agreement, whichever is less, in Canadian Dollars.



As used herein, “Credit Agreement” means the Credit Agreement dated as of June 3, 2005, among
US Borrower and Canadian Borrowers, as each term is defined therein, the Lenders, as defined
therein, U.S. Bank National Association, as syndication agent, and KeyBank National Association, as
lead arranger, book runner and administrative agent for the Lenders (“Agent”), as the same may from
time to time be amended, restated or otherwise modified. Each capitalized term used herein that is
defined in the Credit Agreement and not otherwise defined herein shall have the meaning ascribed to
it in the Credit Agreement.



Canadian Borrowers also promise to pay interest on the unpaid principal amount of each CAD
Revolving Loan from time to time outstanding, from the date of such CAD Revolving Loan until the
payment in full thereof, at the rates per annum that shall be determined in accordance with the
provisions of Section 2.4(c) of the Credit Agreement. Such interest shall be payable on each date
provided for in such Section 2.4(c); provided, however, that interest on any principal portion that
is not paid when due shall be payable on demand.



The portions of the principal sum hereof from time to time representing CAD Base Rate Loans
and CAD Fixed Rate Loans, and payments of principal of any thereof, shall be shown on the records
of Lender by such method as Lender may generally employ; provided, however, that failure to make
any such entry shall in no way detract from the obligations of Canadian Borrowers under this Note.





 


 









 






If this Note shall not be paid at maturity, whether such maturity occurs by reason of lapse of
time or by operation of any provision for acceleration of maturity contained in the Credit
Agreement, the principal hereof and the unpaid interest thereon shall bear interest, until paid, at
a rate per annum equal to the Default Rate, if required by Section 2.4(d) of the Credit Agreement.
All payments of principal of and interest on this Note shall be made in immediately available
funds.



This Note is one of the CAD Revolving Credit Notes referred to in the Credit Agreement.
Reference is made to the Credit Agreement for a description of the right of the undersigned to
anticipate payments hereof, the right of the holder hereof to declare this Note due prior to its
stated maturity, and other terms and conditions upon which this Note is issued.



Except as expressly provided in the Credit Agreement, Canadian Borrowers expressly waive
presentment, demand, protest and notice of any kind. This Note shall be governed by and construed
in accordance with the laws of the State of Ohio, without regard to conflicts of laws provisions.



[Remainder of page intentionally left blank.]




 


 








 







JURY TRIAL WAIVER. CANADIAN BORROWERS, TO THE EXTENT PERMITTED BY LAW, EACH HEREBY
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE, AMONG US BORROWER, CANADIAN BORROWERS, AGENT AND THE LENDERS, OR ANY THEREOF,
ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG
THEM IN CONNECTION WITH THE CREDIT AGREEMENT, THIS NOTE OR ANY OTHER NOTE OR OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED
THERETO.



	 	 	 	 	 	 	 	 	 	 	 	 	 
	AIT LIMITED PARTNERSHIP	 	APPLIED INDUSTRIAL TECHNOLOGIES, LTD.	 	 
	by:

	 	Applied Nova Scotia Company,

its general partner
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 	 	 
	 	 	 
	 	 	 	 
	 	 
	 	 	Name:
	 	 	 	 	 	Name:	 	 	 	 
	 	 	Title:	 	 	 	 	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 	 	 
	 	 	 
	 	 	 	 
	 	 
	 	 	Name:
	 	 	 	 	 	Name:	 	 	 	 
	 	 	Title:	 	 	 	 	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	APPLIED NOVA SCOTIA COMPANY	 	DYNAVEST NOVA SCOTIA COMPANY	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 	 	 
	 	 	 
	 	 	 	 
	 	 
	 	 	Name:
	 	 	 	 	 	Name:	 	 	 	 
	 	 	Title:	 	 	 	 	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 	 	 
	 	 	 
	 	 	 	 
	 	 
	 	 	Name:
	 	 	 	 	 	Name:	 	 	 	 
	 	 	Title:	 	 	 	 	 	Title:	 	 	 	 





 


 









 





EXHIBIT D

FORM OF

NOTICE OF LOAN




[Date]                                        , 20____




KeyBank National Association

127 Public Square

Cleveland, Ohio 44114-0616

Attention: Institutional Banking




Ladies and Gentlemen:




The undersigned, Applied Industrial Technologies, Inc. (“US Borrower”), refers to the Credit
Agreement, dated as of June 3, 2005 (as the same may from time to time be amended, restated or
otherwise modified, the “Credit Agreement”, the terms defined therein being used herein as therein
defined), among Borrowers, the Lenders, as each term is defined in the Credit Agreement, U.S. Bank
National Association, as syndication agent, and KeyBank National Association, as Agent, and hereby
gives you notice, pursuant to Section 2.6 of the Credit Agreement, that Borrowers hereby request a
Loan under the Credit Agreement, and in connection therewith sets forth below the information
relating to the Loan (the “Proposed Loan”) as required by Section 2.6 of the Credit Agreement:




	 	(a)	 	The Borrower requesting the Proposed Loan is                                         .

	 
	 	(b)	 	The Business Day of the Proposed Loan is                     , 200_____.

	 
	 	(c)	 	The amount of the Proposed Loan is $                    / CAD                    .

	 
	 	(d)	 	The Proposed Loan is to be a: Base Rate Loan
 _____ 
/ Eurodollar Loan
 _____ 
/
CAD Base Rate Loan
 _____ 
/ CAD Fixed Rate Loan
 _____ 
/ Swing Loan
 _____ (Check one.)

	 
	 	(e)	 	If the Proposed Loan is a Fixed Rate Loan, the Interest Period requested is
one month
 _____ 
/ two months
 _____ 
/ three months
 _____ 
/ six months
 _____. (Check one.)







 


 









 





The undersigned hereby certifies on behalf of Borrowers that the following statements are true
on the date hereof, and will be true on the date of the Proposed Loan:



(i) the representations and warranties contained in each Loan Document are correct, before and
after giving effect to the Proposed Loan and the application of the proceeds therefrom, as though
made on and as of such date;



(ii) no event has occurred and is continuing, or would result from such Proposed Loan, or the
application of proceeds therefrom, that constitutes a Default or Event of Default; and



(iii) the conditions set forth in Section 2.6 and Article IV of the Credit Agreement have been
satisfied.



	 	 	 	 	 
	 	Very truly yours,


APPLIED INDUSTRIAL TECHNOLOGIES, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



 


 









 





EXHIBIT E

FORM OF

COMPLIANCE CERTIFICATE




For Fiscal Quarter ended                                         





THE UNDERSIGNED HEREBY CERTIFIES THAT:



(1) I am the duly elected President or Chief Financial Officer of Applied Industrial Technologies,
Inc., an Ohio corporation (“US Borrower”);



(2) I am familiar with the terms of that certain Credit Agreement, dated as of October 31, 2003,
among Borrowers, the Lenders, as each term is defined in the Credit Agreement, and KeyBank National
Association, as Agent (as the same may from time to time be amended, restated or otherwise
modified, the “Credit Agreement”, the terms defined therein being used herein as therein defined),
and the terms of the other Loan Documents, and I have made, or have caused to be made under my
supervision, a review in reasonable detail of the transactions and condition of Borrowers and their
Subsidiaries during the accounting period covered by the attached financial statements;



(3) The review described in paragraph (2) above did not disclose, and I have no knowledge of, the
existence of any condition or event that constitutes or constituted a Default or Event of Default,
at the end of the accounting period covered by the attached financial statements or as of the date
of this Certificate;



(4) The representations and warranties made by Borrowers contained in each Loan Document are true
and correct in all material respects as though made on and as of the date hereof (except for those
representations and warranties that relate to a specific date); and



(5) Set forth on Attachment I hereto are calculations of the financial covenants set forth in
Section 5.7 of the Credit Agreement, which calculations show compliance with the terms thereof.



IN WITNESS WHEREOF, I have signed this certificate the
 _____ 
day of                     , 20_____.



	 	 	 	 	 
	 	APPLIED INDUSTRIAL TECHNOLOGIES, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



 


 









 





EXHIBIT F

FORM OF

ASSIGNMENT AND ACCEPTANCE AGREEMENT




This Assignment and Acceptance Agreement (this “Assignment Agreement”) between
                                         (the “Assignor”) and                                     
     (the “Assignee”) is dated as of
                    , 20___. The parties hereto agree as follows:



1. Preliminary Statement. Assignor is a party to a Credit Agreement, dated as of June
3, 2005 (as the same may from time to time be amended, restated or otherwise modified, the “Credit
Agreement”), among APPLIED INDUSTRIAL TECHNOLOGIES, INC., an Ohio corporation (“US Borrower”), AIT
LIMITED PARTNERSHIP, a limited partnership organized under the laws of Ontario, APPLIED INDUSTRIAL
TECHNOLOGIES LTD., a corporation incorporated under the laws of Canada, APPLIED NOVA SCOTIA
COMPANY, a Nova Scotia unlimited liability company and DYNAVEST NOVA SCOTIA COMPANY, a Nova Scotia
unlimited liability company (“Canadian Borrowers” and, together with US Borrower, collectively,
“Borrowers” and, individually, each a “Borrower”), the lenders named on Schedule 1 thereto
(together with their respective successors and assigns, collectively, the “Lenders” and,
individually, each a “Lender”), U.S. BANK NATIONAL ASSOCIATION, as syndication agent, and KEYBANK
NATIONAL ASSOCIATION, as lead arranger, book runner and administrative agent for the Lenders
(“Agent”). Capitalized terms used herein and not otherwise defined herein shall have the meanings
attributed to them in the Credit Agreement.



2. Assignment and Assumption. Assignor hereby sells and assigns to Assignee, and
Assignee hereby purchases and assumes from Assignor, an interest in and to Assignor’s rights and
obligations under the Credit Agreement, effective as of the Assignment Effective Date (as
hereinafter defined), equal to the percentage interest specified on Annex 1 hereto
(hereinafter, “Assigned Percentage”) of Assignor’s right, title and interest in and to (a) the
Commitment, (b) any Loan made by Assignor that is outstanding on the Assignment Effective Date,
(c) Assignor’s interest in any Letter of Credit outstanding on the Assignment Effective Date,
(d) any Note delivered to Assignor pursuant to the Credit Agreement, and (e) the Credit Agreement
and the other Related Writings. After giving effect to such sale and assignment and on and after
the Assignment Effective Date, Assignee shall be deemed to have an “Applicable Commitment
Percentage” under the Credit Agreement equal to the Commitment Percentage set forth in subpart II.A
on Annex 1 hereto and an Assigned Amount as set forth on subpart I.B of Annex 1
hereto (hereinafter, the “Assigned Amount”).



3. Assignment Effective Date. The Assignment Effective Date (the “Assignment
Effective Date”) shall be [                    
 _____, _____] (or such other date agreed to by Agent). On or prior
to the Assignment Effective Date, Assignor shall satisfy the following conditions:



(a) receipt by Agent of this Assignment Agreement, including Annex 1 hereto, properly
executed by Assignor and Assignee and accepted and consented to by Agent and, if necessary pursuant
to the provisions of Section 10.10(b) of the Credit Agreement, by US Borrower;


 


 









 





(b) receipt by Agent from Assignor of a fee of Three Thousand Five Hundred Dollars ($3,500),
if required by Section 10.10(d) of the Credit Agreement;



(c) receipt by Agent from Assignee of an administrative questionnaire, or other similar
document, which shall include (i) the address for notices under the Credit Agreement, (ii) the
address of its Lending Office, (iii) wire transfer instructions for delivery of funds by Agent,
(iv) and such other information as Agent shall request; and



(d) receipt by Agent from Assignor or Assignee of any other information required pursuant to
Section 10.10 of the Credit Agreement or otherwise necessary to complete the transaction
contemplated hereby.



4. Payment Obligations. In consideration for the sale and assignment of Loans
hereunder, Assignee shall pay to Assignor, on the Assignment Effective Date, the amount agreed to
by Assignee and Assignor. Any interest, fees and other payments accrued prior to the Assignment
Effective Date with respect to the Assigned Amount shall be for the account of Assignor. Any
interest, fees and other payments accrued on and after the Assignment Effective Date with respect
to the Assigned Amount shall be for the account of Assignee. Each of Assignor and Assignee agrees
that it will hold in trust for the other party any interest, fees or other amounts which it may
receive to which the other party is entitled pursuant to the preceding sentence and to pay the
other party any such amounts which it may receive promptly upon receipt thereof.



5. Credit Determination; Limitations on Assignor’s Liability. Assignee represents and
warrants to Assignor, Borrowers, Agent and the Lenders (a) that it is capable of making and has
made and shall continue to make its own credit determinations and analysis based upon such
information as Assignee deemed sufficient to enter into the transaction contemplated hereby and not
based on any statements or representations by Assignor, (b) Assignee confirms that it meets the
requirements to be an assignee as set forth in Section 10.10 of the Credit Agreement; (c) Assignee
confirms that it is able to fund the Loans and the Letters of Credit as required by the Credit
Agreement; (d) Assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Credit Agreement, the Lender Agreement and the Related
Writings are required to be performed by it as a Lender thereunder; and (e) Assignee represents
that it has reviewed each of the Loan Documents and the Lender Agreement, and by its signature to
this Assignment Agreement, agrees to be bound by and subject to the terms and conditions of the
Loan Documents and the Lender Agreement, as if it were an original party thereto. It is understood
and agreed that the assignment and assumption hereunder are made without recourse to Assignor and
that Assignor makes no representation or warranty of any kind to Assignee and shall not be
responsible for (i) the due execution, legality, validity, enforceability, genuineness, sufficiency
or collectability of the Credit Agreement, the Lender Agreement or any Related Writings, (ii) any
representation, warranty or statement made in or in connection with the Credit Agreement, the
Lender Agreement or any of the Related Writings, (iii) the financial condition or creditworthiness
of any Borrower or any Guarantor of Payment, (iv) the performance of or compliance with any of the
terms or provisions of the Credit Agreement, the Lender Agreement or any of the Related Writings,
(v) the inspection of any of the property, books or records of Borrowers, or (vi) the validity,
enforceability, perfection,
priority, condition, value or sufficiency of any collateral securing or purporting to secure the
Loans or Letters of Credit. Neither Assignor nor any of its officers, directors, employees, agents
or attorneys shall be liable for any mistake, error of judgment, or action taken or omitted to be
taken in connection with the Loans, the Letters of Credit, the Credit Agreement, the Lender
Agreement or the Related Writings, except for its or their own bad faith or willful misconduct.
Assignee appoints Agent to take such action as agent on its behalf and to exercise such powers
under the Credit Agreement as are delegated to Agent by the terms thereof.


 


 









 





6. Indemnity. Assignee agrees to indemnify and hold Assignor harmless against any and
all losses, cost and expenses (including, without limitation, attorneys’ fees) and liabilities
incurred by Assignor in connection with or arising in any manner from Assignee’s performance or
non-performance of obligations assumed under this Assignment Agreement.



7. Subsequent Assignments. After the Assignment Effective Date, Assignee shall have
the right pursuant to Section 10.10 of the Credit Agreement to assign the rights which are assigned
to Assignee hereunder, provided that (a) any such subsequent assignment does not violate any of the
terms and conditions of the Credit Agreement, the Lender Agreement or any of the Related Writings,
or any law, rule, regulation, order, writ, judgment, injunction or decree and that any consent
required under the terms of the Credit Agreement, the Lender Agreement or any of the Related
Writings has been obtained, (b) the assignee under such assignment from Assignee shall agree to
assume all of Assignee’s obligations hereunder in a manner satisfactory to Assignor and
(c) Assignee is not thereby released from any of its obligations to Assignor hereunder.



8. Reductions of Aggregate Amount of Commitments. If any reduction in the Total
Commitment Amount occurs between the date of this Assignment Agreement and the Assignment Effective
Date, the percentage of the Total Commitment Amount assigned to Assignee shall remain the
percentage specified in Section 1 hereof and the dollar amount of the Commitment of Assignee shall
be recalculated based on the reduced Total Commitment Amount.



9. Acceptance of Agent; Notice by Assignor. This Assignment Agreement is conditioned
upon the acceptance and consent of Agent and, if necessary pursuant to Section 10.10 of the Credit
Agreement, upon the acceptance and consent of US Borrower; provided, that the execution of this
Assignment Agreement by Agent and, if necessary, by US Borrower is evidence of such acceptance and
consent.



 


 









 






10. Entire Agreement. This Assignment Agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements and understandings
between the parties hereto relating to the subject matter hereof.



11. Governing Law. This Assignment Agreement shall be governed by the laws of the
State of Ohio, without regard to conflicts of laws.



12. Notices. Notices shall be given under this Assignment Agreement in the manner set
forth in the Credit Agreement. For the purpose hereof, the addresses of the parties hereto
(until notice of a change is delivered) shall be the address set forth under each party’s name on
the signature pages hereof.




[Remainder of page intentionally left blank.]




 


 









 








13. JURY TRIAL WAIVER. EACH OF THE UNDERSIGNED, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE, AMONG AGENT, ANY OF THE LENDERS, AND/OR BORROWER ARISING OUT OF, IN CONNECTION WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN EACH OF THEM IN CONNECTION WITH
THIS INSTRUMENT OR ANY NOTE OR OTHER AGREEMENT, INSTRUMENT OR DOCUMENT EXECUTED OR DELIVERED IN
CONNECTION THEREWITH OR THE TRANSACTIONS RELATED HERETO.



IN WITNESS WHEREOF, the parties hereto have executed this Assignment Agreement by their duly
authorized officers as of the date first above written.



	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	ASSIGNOR:
	 
	 	 	 	 	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	   
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 	 

	 	 	Attn:	 	 
	 	By:	 	 
	 	 	Phone:	 	 
	 	 	 	Name:	 	 
	 	 	Fax:	 	 
	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 	ASSIGNEE:
	 
	 	 	 	 	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 	 

	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 	 

	 	 	Attn:	 	 
	 	By:	 	 
	 	 	Phone:	 	 
	 	 	 	Name:	 	 
	 	 	Fax:	 	 
	 	 	 	Title:	 	 






	 	 	 	 	 	 	 	 	 	 	 
	Accepted and Consented to this ___ day of ___, 20___:	 	Accepted and Consented to this ___ day of _______, 20___:
	 
	 	 	 	 	 	 	 	 	 	 
	KEYBANK NATIONAL ASSOCIATION, 

as Agent	 	APPLIED INDUSTRIAL TECHNOLOGIES,
INC.
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	 	 	 	 	 	 	 
	 	 	Name:	 	 	 	 	 	Name:	 	 
	 	 	Title:	 	 	 	 	 	Title:
	 	 






 


 









 





ANNEX 1

TO

ASSIGNMENT AND ACCEPTANCE AGREEMENT




On and after the Assignment Effective Date, after giving effect to all other assignments being
made by Assignor on the Assignment Effective Date, the Commitment of Assignee, and, if this is less
than an assignment of all of Assignor’s interest, Assignor, shall be as follows:



	 	 	 	 	 
	I. INTEREST OF ASSIGNOR BEING ASSIGNED TO ASSIGNEE
	 	 	 	 
	 
	A. Assigned Percentage
	 	 	 	%
	 
	B. Assigned Amount
	 	$	 	 
	 
	II. ASSIGNEE’S COMMITMENT (as of the Assignment Effective Date)
	 	 	 	 
	 
	A. Assignee’s Commitment Percentage under the Credit Agreement
	 	 	 	%
	 
	B. Assignee’s Commitment Amount under the Credit Agreement
	 	$	 	 
	 
	III. ASSIGNOR’S COMMITMENT (as of the Assignment Effective Date)
	 	 	 	 
	 
	A. Assignor’s Commitment Percentage under the Credit Agreement
	 	 	 	%
	 
	B. Assignor’s Commitment Amount under the Credit Agreement
	 	$	 	 





 


 









 





EXHIBIT G

FORM OF

REQUEST FOR EXTENSION




                                        , 200___




KeyBank National Association, as Agent

127 Public Square

Cleveland, Ohio 44114-0616

Attention: Institutional Banking




Ladies and Gentlemen:




The undersigned, Applied Industrial Technologies, Inc. (“US Borrower”), refers to the Credit
Agreement, dated as of October 31, 2003 (as the same may from time to time be amended, restated or
otherwise modified, the “Credit Agreement”, the terms defined therein being used herein as therein
defined), among Borrowers, as defined in the Credit Agreement, the Lenders, as defined in the
Credit Agreement, U.S. Bank National Association, as syndication agent, and KeyBank National
Association, lead arranger, book runner, and administrative agent for the Lenders (“Agent”), and
hereby gives you notice, pursuant to Section 2.15 of the Credit Agreement that the undersigned
hereby requests an extension as set forth below (the “Extension”) under the Credit Agreement, and
in connection with the Extension sets forth below the information relating to the Extension as
required by Section 2.15 of the Credit Agreement.



The undersigned hereby requests Agent and the Lenders to extend the Commitment Period from
                    
 _____, 200_____ to                     
 _____, 200___.



The undersigned hereby certifies that the following statements are true on the date hereof,
and will be true on the date of the Extension: (a) the representations and warranties contained in
each Loan Document are correct in all material respects, before and after giving effect to the
Extension and the application of the proceeds therefrom, as though made on and as of such date
(except with respect to those representations and warranties that refer to a specific date); (b) no
event has occurred and is continuing, or would result from such Extension, or the application of
proceeds therefrom, which constitutes a Default or an Event of Default; and (c) the applicable
conditions set forth in Section 2.15 and Article IV of the Credit Agreement have been satisfied.



	 	 	 	 	 
	 	Very truly yours,


APPLIED INDUSTRIAL TECHNOLOGIES, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



 


 









 





EXHIBIT H

US BORROWER INVESTMENT POLICY



 


 









 





APPLIED INDUSTRIAL TECHNOLOGIES

SHORT-TERM INVESTMENT POLICY




Purpose




This document establishes the responsibility, authority, and guidelines for the investment of the
excess cash balances of Applied Industrial Technologies.



Policy Administration




Applied Industrial Technologies (Applied) Corporate Treasury maintains centralized responsibility
to administer, direct and monitor the short-term investment of cash balances throughout Applied and
it’s domestic business units. Exceptions to this policy must be approved by the VP-CFO & Treasurer
and the CEO. In addition, all exceptions must be reported to the Audit Committee. Outside fund
managers may be hired to make investments for Applied with the approval of the VP-CFO & Treasurer
as long as the investment manager adheres to these investment guidelines.



Investment Objectives




The primary objectives of Applied Industrial Technologies, Inc. investment of excess cash balances,
in order of importance are:




	 	•	 	To preserve the principal value of the investments. Investments must be made in
securities offering a very high degree of safety with regard to principal to protect assets
so they are available for corporate purposes.







	 	•	 	To maintain liquidity to meet anticipated cash flow needs. Investment maturities and
liquidity must be matched to the company’s projected cash requirements to fund normal
operating budget/expenses.







	 	•	 	To achieve the best available yields consistent with capital preservation and liquidity
requirements.






Investment Authorization Levels




Investments on behalf of Applied Industrial Technologies may only be made to established investment
accounts by the following individuals: Assistant Treasurer, Assistant Controller, Controller and
VP-CFO & Treasurer.


 


 









 





Permissible Investment Instruments




All eligible investments will be U.S. dollars denominated and only with established investment
accounts of Applied Industrial Technologies, Inc. Fixed-income securities and other securities with
debt-like characteristics on a fixed rate and floating rate basis are permissible. Permitted
investments are as follows:




	 	•	 	Direct obligations of the U.S. Government or its Agencies including bills, notes
and bonds.







	 	•	 	Bank obligations, including certificates of deposits, time deposits and bankers
acceptances issued by U.S. Banks.







	 	•	 	Repurchase Agreements (backed by U.S. Government Securities)







	 	•	 	Money Market Mutual Funds that seek to maintain a constant share price while
maximizing current income, and which offer daily purchase and redemption
privileges.







	 	•	 	Mutual Funds that are comprised of U.S. Treasury or other U.S. Government issued
notes, with maturities of less than one year.







	 	•	 	Tax-exempt Investments in Municipal Bonds having maturities of less than one
year, backed by a letter of credit by the issuing bank.







	 	•	 	Corporate obligations of U.S. companies including Corporate Bonds and Commercial
paper.






Credit Quality Restrictions





	 	•	 	Acceptable securities include direct obligations of the U.S. government or
securities issued by a U.S. government sponsored agency and involve government
sponsorship or are fully guaranteed by the government agency.







	 	•	 	Commercial bank, insurance company, and corporate investment securities, issuers
must have at least either a long-term rating of “A” or equivalent and/or a
short-term rating of “A 1” or “P 1”.







	 	•	 	Money Market Mutual Funds will be limited to those funds with a rating of Aaa
from Moody’s (or equivalent Standard & Poor’s rating).







	 	•	 	Tax-exempt municipal securities must have at least a long-term rating of “AAA”
or better. Non-rated issues may be purchased if they are of equivalent investment
quality and they are either fully collateralized or guaranteed by an investment
contract or letter of credit issued by a bank, corporation, or insurance company
meeting the credit quality defined in the paragraph above.





 


 









 










Investment Accounts





	 	•	 	Authorized changes, additions or closures to the investment accounts of Applied
Industrial Technologies, Inc. require the approval of the CFO — Treasurer and any of the
following: Assistant Treasurer, Assistant Controller or Controller. These changes include
changing the type of account, account number, changes to existing investment agreements and
changes to authorized signatories.






Custody Requirements




Commercial and investment banks which are qualified as defined in these Guidelines, are authorized
to hold investments in safekeeping on behalf of Applied. Securities registered in book entry
format will be maintained in the name of an Applied entity.



Investment Instruments — Definitions and Specific Restrictions




U.S. Treasury Securities are direct obligations of the United States government and carry its full
faith and credit.




	 	•	 	Treasury Bills: T-bills are the most liquid securities in the money market because of
their impeccable credit quality, their relatively short maturities, and the substantial
volume of trading activity. T-bills are issued each week with maturities of 3 months, 6
months or 12 months.







	 	•	 	Treasury Notes: The Treasury issues interest-bearing notes that are sold at or near par
value and redeemed at par value. The original maturity of a Treasury note (T-note) when
initially sold is from more than one year up to 10 years. The Treasury issues two- and
four-year notes regularly.







	 	•	 	Treasury Bonds: The Treasury issues interest-bearing negotiable bonds that have a
maturity of more than 10 years from the date of issue. The only difference between T-notes
and Treasury bonds (T-bonds) is length of maturity from original issue.






Federal Agency Securities: Many agencies of the U.S. government issue securities to fund their
operations, or as intermediaries between different types of financial markets. Although agency
issues are smaller than Treasury issues, the liquidity of most agencies compares favorably with
other money market instruments. While credit risk exists, agency securities represent reasonable
risk.



Commercial Paper (CP) is an unsecured promissory note issued for a specific amount to mature in 180
days or less, issued by corporations, financial institutions, and other borrowers.




	 	•	 	Issuers sell CP directly to investors or through dealers. Dealers include securities
firms and commercial banks.







	 	•	 	Commercial paper is rated by credit rating agencies based on factors such as liquidity,
cash flow potential, earning trends, position in the industry, quality of management, and
backup credit facilities.







	 	•	 	Investments will be limited to those issuers whose commercial paper rating by Moody’s
(or equivalent) is “P-1” or better and whose long-term senior debt rating is “A2” or better
and not to have been downgraded within the last year. All such investments should have a
maximum maturity not exceeding 180 days.





 


 









 










Certificates of Deposits: Institutional CD’s are interest-bearing debt issues of financial
institutions in the U.S., with original maturities ranging from seven days to several years.



Repurchase (Repo) Agreements: Investments will be limited to transactions with Primary Government
Securities Dealers and have as collateral U.S. government and agency issues that meet guideline
restrictions. Repos will be further limited to a maximum term of 5 days.



Money Market Mutual Fund Shares: Available cash may be invested in Money Market Mutual Funds as
follows: (1) limited to those open-end funds which limit investments to the prime credit
instruments allowed in the above guidelines and which limit maturities of those various instruments
to a maximum of one year, (2) limited to those funds which permit immediate withdrawal of principal
by wire transfer at any time, and (3)limited to those funds which have a Money Market Fund Rating
of “AAA” from Moody’s (or equivalent).



Money Market Investment Accounts: Money market investments in any financial institution organized
under the laws of the United States of America with $30 billion or more in assets. In addition,
the financial institution must have a short-term rating by Moody’s (or equivalent) of “P-1” or
better and whose long-term senior debt rating is “A” or better.