Exhibit 4.2





EXHIBIT 4.2




[CONFORMED COPY,

including all amendments]




BEARINGS, INC.

3600 Euclid Avenue

Cleveland, Ohio 44115-2515




As of November 27, 1996




Prudential Investment Management, Inc.

(herein called “PRUDENTIAL”)

Each Prudential Affiliate which becomes

bound by this Agreement as hereinafter

provided (together with Prudential, the

“PURCHASERS”)

c/o Prudential Capital Group

Two Prudential Plaza

Suite 5600

Chicago, Illinois 60601




Gentlemen:



The undersigned, BEARINGS, INC., an Ohio corporation (herein called the
“COMPANY”), hereby agrees with you as set forth below. Reference is made to paragraph
10 hereof for definitions of capitalized terms used herein and not otherwise defined
herein.



1. AUTHORIZATION OF ISSUE OF PRIVATE SHELF NOTES. The Company will authorize
the issue of its senior promissory notes (herein called the “PRIVATE SHELF NOTES”) in
the aggregate principal amount of $150,000,000, to be dated the date of issue thereof,
to mature, in the case of each Private Shelf Note so issued, no more than fifteen (15)
years after the issuance thereof, to have an average life, in the case of each Note so
issued, of no more than twelve (12) years after the date of original issuance thereof,
to bear interest on the unpaid balance thereof from the date thereof at the rate per
annum (and to have such other particular terms consistent with the terms of this
Agreement) as shall be set forth in the Confirmation of Acceptance with respect to
such Private Shelf Note delivered pursuant to paragraph 2E, and to be substantially in
the form of EXHIBIT A attached hereto. The terms “Private Shelf Note” and “Private
Shelf Notes” as used herein shall include each Private Shelf Note delivered pursuant
to any provision of this Agreement and each Private Shelf Note delivered in
substitution or exchange for any such Private Shelf Note pursuant to any such
provision. The terms “NOTE” or “NOTES” as used herein shall include each Private
Shelf Note (whether designated a Series A Note, Series B Note or Series C Note, etc.)
delivered pursuant to any provision of this Agreement and each Note delivered in
substitution or exchange for any such Note pursuant to any such provision. Notes
which have (i) the same final maturity, (ii) the same principal prepayment dates,
(iii) the same principal prepayment amounts (as a percentage of the original principal
amount of each Note), (iv) the same interest rate, (v) the same interest payment
periods, and (vi) which are otherwise designated a “Series”
hereunder or in the Confirmation of Acceptance whether or not the foregoing
conditions are satisfied, are herein called a “SERIES” of Notes.


 


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2. PURCHASE AND SALE OF NOTES.



2A. FACILITY. Subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties set forth herein, Prudential is
willing to consider, in its sole discretion and within limits which may be authorized
for purchase by Prudential and Prudential Affiliates from time to time, the purchase
of Private Shelf Notes pursuant to this Agreement. The willingness of Prudential to
consider such purchase of Private Shelf Notes is herein called the “FACILITY”. At any
time, $50,000,000, minus the aggregate principal amount of Private Shelf Notes
purchased and sold pursuant to this Agreement prior to such time, minus the aggregate
principal amount of “ACCEPTED NOTES” (as hereinafter defined) which have not yet been
purchased and sold hereunder prior to such time, is herein called the “AVAILABLE
FACILITY AMOUNT” at such time. [NOTE: PURSUANT TO THE AMENDMENT DATED FEBRUARY 16,
2010, THE PARTIES EXPRESSLY ACKNOWLEDGED AND AGREED THAT THE AVAILABLE FACILITY AMOUNT
AS OF SUCH DATE WAS $100,000,000.] NOTWITHSTANDING THE WILLINGNESS OF PRUDENTIAL TO
CONSIDER PURCHASES OF PRIVATE SHELF NOTES, THIS AGREEMENT IS ENTERED INTO ON THE
EXPRESS UNDERSTANDING THAT NEITHER PRUDENTIAL NOR ANY PRUDENTIAL AFFILIATE SHALL BE
OBLIGATED TO MAKE OR ACCEPT OFFERS TO PURCHASE PRIVATE SHELF NOTES, OR TO QUOTE RATES,
SPREADS OR OTHER TERMS WITH RESPECT TO SPECIFIC PURCHASES OF PRIVATE SHELF NOTES, AND
THE FACILITY SHALL IN NO WAY BE CONSTRUED AS A COMMITMENT BY PRUDENTIAL OR ANY
PRUDENTIAL AFFILIATE.



2B. ISSUANCE PERIOD. Private Shelf Notes may be issued and sold pursuant to
this Agreement until the earlier of (i) February 16, 2013 and (ii) the thirtieth day
after Prudential shall have given to the Company, or the Company shall have given to
Prudential, a written notice stating that it elects to terminate the Facility. The
period during which Private Shelf Notes may be issued and sold pursuant to this
Agreement is herein called the “ISSUANCE PERIOD”.



2C. REQUEST FOR PURCHASE. The Company may from time to time during the Issuance
Period make requests for purchases of Private Shelf Notes (each such request being
herein called a “REQUEST FOR PURCHASE”). Each Request for Purchase shall be made to
Prudential by telecopier and confirmed by nationwide overnight delivery service, and
shall (i) specify the aggregate principal amount of Private Shelf Notes covered
thereby, which shall not be less than $5,000,000 and shall not be greater than the
Available Facility Amount at the time such Request for Purchase is made, (ii) specify
the principal amounts, final maturities, principal prepayment dates and amounts and
interest payment periods (quarterly in arrears) of the Private Shelf Notes covered
thereby, (iii) specify the use of proceeds of such Private Shelf Notes, (iv) specify
the proposed day for the closing of the purchase and sale of such Private Shelf Notes,
which shall be a Business Day during the Issuance Period not more than thirty (30)
days after the making of such Request for Purchase and in any event not less than
three (3) days after any Acceptance with respect to such Request for Purchase under
paragraph 2E, (v) specify the number of the account and the name and address of the
depository institution to which the purchase prices of such Private Shelf Notes are to
be transferred on the Private Shelf Closing Day for such purchase and sale, (vi)
certify that the representations and warranties contained in paragraph 8 hereof are
true on and as of the date of such Request for Purchase except to the
extent of changes caused by the transactions herein contemplated and that there
exists on the date of such Request for Purchase no Event of Default or Default (and
that no Event of Default or Default shall arise as the result of the purchase and sale
of such Private Shelf Notes), and (vii) be substantially in the form of EXHIBIT B
attached hereto. Each Request for Purchase shall be in writing and shall be deemed
made when received by Prudential.


 


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2D. RATE QUOTES. As soon as practicable and in any event not later than five
(5) Business Days after the Company shall have given Prudential a Request for Purchase
pursuant to paragraph 2C, Prudential may, but shall be under no obligation to, provide
(by telephone and promptly thereafter confirmed by telecopier, in each case no earlier
than 9:30 A.M. and no later than 1:30 P.M. New York City local time) interest rate
quotes for the several principal amounts, maturities, prepayment schedules and
interest payment periods of Private Shelf Notes specified in such Request for
Purchase. Each quote shall represent the interest rate per annum payable on the
outstanding principal balance of such Private Shelf Notes until such balance shall
have become due and payable, at which Prudential or a Prudential Affiliate would be
willing to purchase such Private Shelf Notes at 100% of the principal amount thereof.
Such rate quotes shall be made and determined by Prudential in accordance with the
internal methods and procedures then used by Prudential to price comparable
transactions with companies similarly situated with similar credit risks.



2E. ACCEPTANCE. Within the Acceptance Window, the Company may, subject to the
terms of paragraph 2F, elect to accept such interest rate quotes as to not less than
$5,000,000 aggregate principal amount of the Private Shelf Notes specified in the
applicable Request for Purchase. Such election shall be made by an Authorized Officer
of the Company notifying Prudential by telephone or telecopier within the Acceptance
Window (but not earlier than 9:30 A.M. or later than 2:00 P.M., New York City local
time) that the Company elects to accept such interest rate quotes, specifying the
Private Shelf Notes (each such Private Shelf Note being herein called an “ACCEPTED
NOTE”) as to which such acceptance (herein called an “ACCEPTANCE”) relates. The day
the Company notifies Prudential of an Acceptance with respect to any Accepted Notes is
herein called the “ACCEPTANCE DAY” for such Accepted Notes. Any interest rate quotes
as to which Prudential does not receive an Acceptance within the Acceptance Window
shall expire, and no purchase or sale of Private Shelf Notes hereunder shall be made
based on such expired interest rate quotes. Subject to paragraph 2F and the other
terms and conditions hereof, the Company agrees to sell to Prudential or a Prudential
Affiliate, and Prudential agrees to purchase, or to cause the purchase by a Prudential
Affiliate of, the Accepted Notes at 100% of the principal amount of such Notes. As
soon as practicable following the Acceptance Day, the Company, Prudential and each
Prudential Affiliate which is to purchase any such Accepted Notes will execute a
confirmation of such Acceptance substantially in the form of EXHIBIT C attached hereto
(herein called a “CONFIRMATION OF ACCEPTANCE”). If the Company should fail to execute
and return the applicable Confirmation of Acceptance to Prudential within three
Business Days following receipt of a Confirmation of Acceptance with respect to any
Accepted Notes, Prudential may at its election at any time prior to its receipt
thereof cancel the closing with respect to such Accepted Notes by so notifying the
Company in writing.



2F. MARKET DISRUPTION. Notwithstanding the provisions of paragraph 2E, if
Prudential shall have provided interest rate quotes pursuant to paragraph 2E and
thereafter, prior to the time an Acceptance with respect to such quotes shall have
been notified to Prudential in accordance with paragraph 2E, the domestic market for
U.S. Treasury securities or derivatives shall have closed or there shall occur a
general suspension, material limitation, or significant disruption of trading in
securities generally on the New York Stock Exchange or in the domestic
market for U.S. Treasury securities, then such interest rate quotes shall expire,
and no purchase or sale of Private Shelf Notes hereunder shall be made based on such
expired interest rate quotes. If the Company thereafter notifies Prudential of the
Acceptance of any such interest rate quotes, such Acceptance shall be ineffective for
all purposes of this Agreement, and Prudential shall promptly notify the Company that
the provisions of this paragraph 2F are applicable with respect to such Acceptance.


 


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2G. PRIVATE SHELF CLOSING. Not later than 11:30 A.M. (New York City local time)
on the Private Shelf Closing Day for any Accepted Notes, the Company will deliver to
each Purchaser listed in the Confirmation of Acceptance relating thereto at the
offices of Prudential Capital Group, Two Prudential Plaza, Suite 5600, Chicago,
Illinois 60601, Attention: Law Department, the Private Shelf Notes to be purchased by
such Purchaser in the form of a single Accepted Note for the Accepted Notes which have
exactly the same terms (or such greater number of Notes in authorized denominations as
such Purchaser may request) dated the Private Shelf Closing Day and registered in such
Purchaser’s name (or in the name of its nominee), against payment of the purchase
price thereof by transfer of immediately available funds for credit to the Company’s
account specified in the Request for Purchase of such Private Shelf Notes. If the
Company fails to tender to any Purchaser the Accepted Notes to be purchased by such
Purchaser on the scheduled Private Shelf Closing Day for such Accepted Notes as
provided above in this paragraph 2G, or any of the conditions specified in paragraph
3A shall not have been fulfilled by the time required on such scheduled Private Shelf
Closing Day, the Company shall, prior to 1:00 P.M., New York City local time, on such
scheduled Private Shelf Closing Day notify such Purchaser in writing whether (x) such
closing is to be rescheduled (such rescheduled date to be a Business Day during the
Issuance Period not less than one Business Day and not more than 30 Business Days
after such scheduled Private Shelf Closing Day (the “RESCHEDULED CLOSING DAY”)) and
certify to such Purchaser that the Company reasonably believes that it will be able to
comply with the conditions set forth in paragraph 3 on such Rescheduled Closing Day
and that the Company will pay the Delayed Delivery Fee, if any, in accordance with
paragraph 2H(2) or (y) such closing is to be cancelled as provided in paragraph 2H(3).
In the event that the Company shall fail to give such notice referred to in the
preceding sentence, such Purchaser may at its election, at any time after 1:00 P.M.,
New York City local time, on such scheduled Private Shelf Closing Day, notify the
Company in writing that such closing is to be cancelled as provided in paragraph
2H(3). Notwithstanding anything to the contrary contained in this Agreement, the
Company may not elect to reschedule a closing with respect to any given Accepted Notes
on more than one occasion, unless Prudential shall have otherwise consented in writing
which consent shall not be unreasonably denied.



2H. FEES.



2H(1). ISSUANCE FEE. On each Private Shelf Closing Day, the Company agrees to
pay Prudential in immediately available funds a fee (the “Issuance Fee”) in an amount
equal to 0.10% of the aggregate principal amount of Notes sold on such Private Shelf
Closing Day. The issuance Fee for the Series B Notes has been previously paid in full
as agreed by the parties.


 


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2H(2). DELAYED DELIVERY FEE. If the closing of the purchase and sale of any
Accepted Note is delayed for any reason beyond the original Private Shelf Closing Day
for such Accepted Note, the Company will pay to Prudential (a) on the Cancellation
Date or actual closing date of such purchase and sale and (b) if earlier, the next
Business Day following 90 days after the Acceptance Day for such Accepted Note and on
each Business Day following 90 days after the prior payment hereunder, a fee (herein
called the “Delayed Delivery Fee”) calculated as follows:



(BEY — MMY) X DTS/360 X Full Price




where “BEY” means Bond Equivalent Yield, i.e., the bond equivalent yield per annum of
such Accepted Note; “MMY” means Money Market Yield, i.e., the yield per annum on a
commercial paper investment of the highest quality selected by Prudential on the date
Prudential receives notice of the delay in the closing for such Accepted Notes having
a maturity date or dates the same as, or closest to, the Rescheduled Closing Day or
Rescheduled Closing Days (a new alternative investment being selected by Prudential
each time such closing is delayed); “DTS” means Days to Settlement, i.e., the number
of actual days elapsed from and including the original Private Shelf Closing Day with
respect to such Accepted Note (in the case of the first such payment with respect to
such Accepted Note) or from and including the date of the immediately preceding
payment (in the case of any subsequent delayed delivery fee payment with respect to
such Accepted Note) to but excluding the date of such payment; and “FULL PRICE” means
the principal amount, i.e., the principal amount of the Accepted Note for which such
calculation is being made. If the Delayed Delivery Fee is zero or negative, there
will be no Delayed Delivery Fee. Nothing contained herein shall obligate any
Purchaser to purchase any Accepted Note on any day other than the Private Shelf
Closing Day for such Accepted Note, as the same may be rescheduled from time to time
in compliance with paragraph 2G.



2H(3). CANCELLATION FEE. If the Company at any time notifies Prudential in
writing that the Company is canceling the closing of the purchase and sale of any
Accepted Note, or if Prudential notifies the Company in writing under the
circumstances set forth in the last sentence of paragraph 2E or the penultimate
sentence of paragraph 2G that the closing of the purchase and sale of such Accepted
Note is to be canceled, or if the closing of the purchase and sale of such Accepted
Note is not consummated on or prior to the last day of the Issuance Period (the date
of any such notification, or the last day of the Issuance Period, as the case may be,
being herein called the “CANCELLATION DATE”), the Company will pay Prudential in
immediately available funds an amount (the “CANCELLATION FEE”) calculated as follows:



PI X Full Price




where “PI” means Price Increase, i.e., the quotient (expressed in decimals) obtained
by dividing (a) the excess of the ask price (as determined by Prudential) of the Hedge
Treasury Note(s) on the Cancellation Date over the bid price (as determined by
Prudential) of the Hedge Treasury Note(s) on the Acceptance Day for such Accepted Note
by (b) such bid price; and “FULL PRICE” has the meaning set forth in paragraph 2H(2),
above. The foregoing bid and ask prices shall be as reported by Telerate Systems,
Inc. (or, if such data for any reason ceases to be available through Telerate Systems,
Inc., any publicly available source of similar market data selected by Prudential).
Each price shall be based on a U.S. Treasury security having a par value of $100.00
and shall be rounded to the second decimal place. If the Price Increase is zero or
negative, there will be no Cancellation Fee.


 


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2H(4). STRUCTURING FEE. In consideration for the time, effort and expense
involved in the preparation, negotiation and execution of this Agreement and the
amendment of the Existing Agreement, the Company agrees to pay Prudential on the date
of the execution of this Agreement in immediately available funds a fee (the
“STRUCTURING FEE”) in the amount of $10,000.



3. CONDITIONS OF CLOSING. Prudential’s and any Purchaser’s obligation to
purchase and pay for any Private Shelf Notes, is subject in each case to the
satisfaction, on or before the applicable Closing Day for such Notes, of the
conditions set forth in paragraph 3A.



3A(1). OPINION OF COMPANY’S COUNSEL. On the Initial Closing Day, Prudential
shall have received from Robert C. Stinson, Esq., general counsel of the Company, a
favorable opinion satisfactory to Prudential and substantially in the form of EXHIBIT
D-1 attached hereto.



3A(2). OPINION OF COMPANY’S COUNSEL. On each Private Shelf Closing Day, each
Purchaser shall have received from Robert C. Stinson, Esq., general counsel of the
Company (or other counsel reasonably acceptable to the Purchasers), a favorable
opinion satisfactory to the Purchasers and substantially in the form of EXHIBIT D-2
attached hereto.



3A(3). REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The representations and
warranties contained in paragraph 8 hereof shall be true on and as of the applicable
Closing Day, except to the extent of changes caused by the transactions herein
contemplated; there shall exist on the applicable Closing Day no Event of Default or
Default; and the Company shall have delivered to each Purchaser an Officer’s
Certificate, dated the applicable Closing Day, to both such effects.



3A(4). FEES. On or before the Initial Closing Day, the Company shall have paid
in full to Prudential the Structuring Fee required by paragraph 2H(4). On or before
each Private Shelf Closing Day, the Company shall have paid in full to Prudential any
Issuance Fee required by paragraph 2H(1) and to the Purchasers any Delayed Delivery
Fee or Cancellation Fee required by paragraph 2H(2) or 2H(3).



3A(5). PURCHASE PERMITTED BY APPLICABLE LAWS. The purchase of and payment for
the Notes to be purchased on the applicable Private Shelf Closing Day on the terms and
conditions herein provided (including the use of the proceeds of such Notes by the
Company) shall not violate any applicable law or governmental regulation (including,
without limitation, Section 5 of the Securities Act or Regulation T, U or X of the
Board of Governors of the Federal Reserve System) and shall not subject any Purchaser
to any material tax (other than ordinary income taxes), material penalty, material
liability or other onerous condition under or pursuant to any applicable law or
governmental regulation, and such Purchaser shall have received such certificates or
other evidence as such Purchaser may have requested no less than 5 days before any
scheduled closing to establish compliance with this condition.



3A(6). LEGAL MATTERS. Counsel for the Purchasers shall be satisfied as to all
legal matters in all material respects relating to such purchase and sale.


 


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3A(7). PROCEEDINGS. All corporate and other proceedings taken or to be taken in
connection with the transactions contemplated hereby and all documents incident
thereto shall be reasonably satisfactory in substance and form to each Purchaser, and
each Purchaser shall have received all such counterpart originals or certified or
other copies of such documents as it may reasonably request.



3A(8). SALE OF NOTES OF SAME SERIES TO OTHER PURCHASERS. The Company shall have
tendered to the other Purchasers (if any) the Notes of the same Series to be purchased
by them at the closing.



4. PREPAYMENTS. The Notes shall be subject to prepayment with respect to the
required prepayments specified in paragraph 4A and under the circumstances specified
in paragraphs 4B and 4E.



4A. REQUIRED PREPAYMENT OF PRIVATE SHELF NOTES. Until each respective Series of
Private Shelf Notes shall be paid in full, each respective Series of Private Shelf
Notes shall be subject to such required prepayments, if any, as are specified for such
Series of Private Shelf Notes in accordance with the provisions of paragraph 2C
hereof. Any prepayment made by the Company pursuant to any other provision of this
paragraph 4 shall not reduce or otherwise affect its obligation to make any prepayment
as specified in the respective Series of Private Shelf Notes.



4B. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT. Subject to the
limitations set forth below, the Notes shall be subject to prepayment, in whole at any
time or from time to time in part (in $100,000 increments and not less than $2,000,000
per occurrence), at the option of the Company, at 100% of the principal amount so
prepaid plus interest thereon to the prepayment date and the Yield-Maintenance Amount,
if any, with respect to each Note so prepaid. Any partial prepayment of the Notes
pursuant to this paragraph 4B shall be applied in satisfaction of required payments of
principal in the inverse order of their scheduled due dates.



4C. NOTICE OF OPTIONAL PREPAYMENT. The Company shall give to the holder of each
Note of a Series irrevocable written notice of any optional prepayment pursuant to
paragraph 4B with respect to such Series not less than 30 days prior to the prepayment
date, specifying (i) such prepayment date, (ii) the aggregate principal amount of the
Notes of such Series to be prepaid on such date, (iii) the principal amount of the
Notes of such holder to be prepaid on that date, and (iv) stating that such optional
prepayment is to be made pursuant to paragraph 4B. Notice of optional prepayment
having been given as aforesaid, the principal amount of the Notes specified in such
notice, together with interest thereon to the prepayment date and together with the
Yield-Maintenance Amount, if any, with respect thereto, shall become due and payable
on such prepayment date.



4D. PARTIAL PAYMENTS PRO RATA. In the case of each prepayment pursuant to
paragraphs 4A or 4B of less than the entire unpaid principal amount of all outstanding
Notes of any Series, the amount to be prepaid shall be applied prorata to all
outstanding Notes of such Series (including, for the purpose of this paragraph 4D
only, all Notes of such Series prepaid or otherwise retired or purchased or otherwise
acquired by the Company or any of its Subsidiaries or Affiliates other than by
prepayment pursuant to paragraphs 4A or 4B) according to the respective unpaid
principal amounts thereof.


 


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4E. RETIREMENT OF NOTES. The Company shall not, and shall not permit any of its
Subsidiaries or Affiliates to, prepay or otherwise retire in whole or in part prior to
their stated final maturity (other than (i) by prepayment pursuant to paragraphs 4A or
4B or (ii) upon acceleration of such final maturity pursuant to paragraph 7A), or
purchase or otherwise acquire, directly or indirectly, Notes held by any holder unless
the Company or such Subsidiary or Affiliate shall have offered to prepay or otherwise
retire or purchase or otherwise acquire, as the case may be, the same proportion of
the aggregate principal amount of Notes held by each other holder of Notes at the time
outstanding upon the same terms and conditions. Any Notes so prepaid or otherwise
retired or purchased or otherwise acquired by the Company or any of its Subsidiaries
or Affiliates shall not be deemed to be outstanding for any purpose under this
Agreement, except as provided in paragraph 4D. In the event that (i) the Company at
any time requests in writing the approval by the holders of the Notes of a merger,
acquisition, recapitalization or reorganization, the consummation of which would
result in an Event of Default or Default hereunder, and (ii) the Required Holders
shall have failed to grant such approval within ninety (90) days of the date of such
written request, then the Company may, subject to the terms of the first sentence of
this paragraph 4E and simultaneously with the consummation of such prohibited
transaction, prepay the Notes of the nonconsenting holders at 100% of the principal
amount so prepaid plus interest thereon to the prepayment date and the
Yield-Maintenance Amount, if any, with respect to such Note within one hundred fifty
(150) days of the date of the written request.



5. AFFIRMATIVE COVENANTS.



5A. FINANCIAL STATEMENTS. The Company covenants that it will deliver to each
Significant Holder in triplicate:




(i) as soon as practicable and in any event within 60 days after
the end of each quarterly period (other than the last quarterly period)
in each fiscal year, consolidated statements of income, stockholders’
equity and cash flows of the Company and its Subsidiaries for the period
from the beginning of the current fiscal year to the end of such
quarterly period, and a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarterly period, setting forth in
each case in comparative form figures for the corresponding period in the
preceding fiscal year, all in reasonable detail and certified by an
authorized financial officer of the Company, subject to changes resulting
from year-end adjustments; provided, however, that
delivery (which may be by delivery of an electronic version or by
providing notice and access to a version that may be downloaded from the
Company’s website) pursuant to clause (iii) below of copies of the
Quarterly Report on Form lO-Q of the Company for such quarterly period
filed with the Securities and Exchange Commission shall be deemed to
satisfy the requirements of this clause (i);




(ii) as soon as practicable and in any event within 120 days after
the end of each fiscal year, consolidated statements of income,
stockholders’ equity, and cash flows of the Company and its Subsidiaries
for such year, and a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such year, setting forth in each case in
comparative form corresponding consolidated figures from the preceding
annual audit, all in reasonable detail and satisfactory in form to the
Required Holder(s) and, reported on by independent public accountants of
recognized national standing selected by the Company whose report shall
be without limitation as to scope of the audit and satisfactory in
substance to the
Required Holder(s); provided, however, that delivery
(which may be by delivery of an electronic version or by providing notice
and access to a version that may be downloaded from the Company’s
website) pursuant to clause (iii) below of copies of the Annual Report on
Form 10-K of the Company for such fiscal year filed with the Securities
and Exchange Commission shall be deemed to satisfy the requirements of
this clause (ii);


 


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(iii) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as it shall
send to its public stockholders and copies of all registration
statements (without exhibits) and all reports which it files with the
Securities and Exchange Commission (or any governmental body or agency
succeeding to the functions of the Securities and Exchange Commission),
excluding registration statements on Form S-8; provided,
however, that the delivery requirement with respect to any such
financial statements, proxy statements, notices and reports may be
satisfied by delivery of an electronic version or by providing notice
and access to a version that may be downloaded from the Company’s
website;




(iv) promptly upon receipt thereof, a copy of each other report
submitted to the Company or any Subsidiary by independent accountants in
connection with any annual, interim or special audit made by them of the
books of the Company or any Subsidiary; and




(v) with reasonable promptness, such other financial data as such
Significant Holder may reasonably request.



Together with each delivery of financial statements required by clauses (i) and (ii)
above, the Company will deliver to each Significant Holder an Officer’s Certificate
demonstrating (with computations in reasonable detail) compliance by the Company and
its Subsidiaries with the provisions of paragraph 6 and stating that, to the best of
their knowledge based upon reasonable inquiry, there exists no Event of Default or
Default, or, if any Event of Default or Default exists, specifying the nature and
period of existence thereof and what action the Company proposes to take with respect
thereto. Together with each delivery of financial statements required by clause (ii)
above, the Company will deliver to each Significant Holder a report of such
accountants stating that, in making the audit necessary for their report on such
financial statements, they have obtained no knowledge of any Event of Default or
Default, or, if they have obtained knowledge of any Event of Default or Default,
specifying the nature and period of existence thereof. Such accountants, however,
shall not be liable to anyone by reason of their failure to obtain knowledge of any
Event of Default or Default which would not be disclosed in the course of an audit
conducted in accordance with generally accepted auditing standards.



The Company also covenants that immediately after any Responsible Officer obtains
knowledge of an Event of Default or Default, it will deliver to each Significant
Holder an Officer’s Certificate specifying the nature and period of existence thereof
and what action the Company proposes to take with respect thereto.



5B. INFORMATION REQUIRED BY RULE 144A. The Company covenants that it will, upon
the request of the holder of any Note, provide such holder, and any qualified
institutional buyer designated by such holder, such financial and other information as
such holder may reasonably determine to be necessary in order to permit compliance
with the information requirements of Rule 144A under the Securities Act in connection
with the resale of Notes, except at such times as the Company is subject to the reporting
requirements of section 13 or 15(d) of the Exchange Act. For the purpose of this
paragraph 5B, the term “qualified institutional buyer” shall have the meaning
specified in Rule 144A under the Securities Act.



 


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5C. INSPECTION OF PROPERTY. The Company covenants that it will permit any
Person designated by any Significant Holder in writing, at such Significant Holder’s
expense, to visit and inspect any of the properties of the Company and its
Subsidiaries, to discuss the affairs, finances and accounts of any of such
corporations with the principal officers of the Company and its independent public
accountants and, if a Default or Event of Default shall be continuing, to examine the
corporate books and financial records of the Company and its Subsidiaries and obtain
copies thereof or extracts therefrom, all at such reasonable times as the Company and
such Significant Holder shall agree but in any event within three Business Days from
request of any Purchaser and during normal business hours.



5D. COVENANT TO SECURE NOTES EQUALLY. The Company covenants that, if it or any
Subsidiary shall create or assume any Lien upon any of its property or assets, whether
now owned or hereafter acquired, other than Liens permitted by the provisions of
paragraph 6B(1) (unless the prior written consent to the creation or assumption
thereof shall have been obtained pursuant to paragraph 11C), it will make or cause to
be made effective provision whereby the Notes will be secured by such Lien equally and
ratably with any and all other Debt thereby secured so long as any such other Debt
shall be so secured.



5E. MAINTENANCE OF INSURANCE. The Company covenants that it and each Subsidiary
shall maintain, with financially sound and reputable insurers, insurance in such
amounts and against such liabilities and hazards as is ordinarily carried by companies
similarly situated in the same or similar lines of business.



6. NEGATIVE COVENANTS. Unless the Required Holders shall otherwise consent in
writing, the Company agrees to observe and perform each of the negative covenants set
forth below so long as any Note shall remain outstanding.



6A(1). [RESERVED]



6A(2). [RESERVED]



6A(3). [RESERVED]



6A(4). INTEREST COVERAGE RATIO. The Company shall not suffer or permit at any
time the Interest Coverage Ratio to be less than 3.00 to 1.00.



6B. CREDIT AND OTHER RESTRICTIONS. The Company covenants that it will not and
will not permit any Subsidiary to:



6B(1). LIEN RESTRICTIONS. Create, incur, assume or suffer to exist any Lien
upon any of its property or assets, whether now owned or hereafter acquired (whether
or not provision is made for the equal and ratable securing of Notes in accordance
with the provisions of paragraph 5D hereof), except:




(i) Liens for taxes or other governmental charges not yet due or
which are being actively contested in good faith by appropriate
proceedings;


 


10









 






(ii) Liens incidental to the conduct of its business or the
ordinary operation or use of its property which were not incurred in
connection with the borrowing of money or obtaining credit or advances;




(iii) Liens on property or assets of a Subsidiary to secure
obligations of such Subsidiary to the Company or another Subsidiary;




(iv) Liens identified on EXHIBIT G to the Existing Agreement a
copy of which is attached hereto;




(v) Liens relating to the ledger balances, consignments, and other
similar arrangements and other Liens (including Liens consisting of
Capitalized Lease Obligations and/or purchase money security interests)
to secure Debt, provided that (x) the Debt to which the Lien relates is
permitted by paragraph 6B(2) and (y) the aggregate amount of Debt (plus,
without duplication, the aggregate amount of such ledger balances,
consignments and other similar arrangements) secured by such Liens does
not exceed at any time 20% of Consolidated Tangible Net Worth; and




(vi) Liens consisting of survey exceptions, minor encumbrances,
easements and rights of way, or zoning or other restrictions as to the
use of real properties; PROVIDED, HOWEVER, that such Liens in the
aggregate do not materially impair the usefulness of such property in
the business of the Company and its Subsidiaries, taken as a whole.



Except for guaranties permitted or contemplated by paragraph 6B(10) or with respect to
banker’s liens arising by operation of law (so long as the Company is in compliance
with clause (v) of this paragraph 6B(1), with the amount of Debt secured by such
banker’s liens being equal, for the purpose of determining compliance with such clause
(v), to the lesser of the value of assets subject to such banker’s liens or the
outstanding amount of the Debt as to which such banker’s liens may be exercised),
neither the Company nor any Subsidiary is permitted to create, incur, assume or suffer
to exist any Lien upon any property or assets to secure any obligations under the
Credit Agreement.



6B(2). DEBT RESTRICTION. Create, incur, assume or suffer to exist any
Debt, except:




(i) Debt in existence on March 28, 1996;




(ii) Debt of any Subsidiary to the Company or to any other
Subsidiary; and




(iii) additional Debt of the Company and/or any Subsidiary subject
to the proviso set forth below;



provided, however, (x) that the aggregate principal amount of
consolidated Debt of the Company and its Subsidiaries shall not exceed at any time an
amount equal to 58% of Consolidated Capitalization and (y) Priority Debt shall not
exceed at any time an amount equal to 20% of Consolidated Net Worth.


 


11









 





6B(3). LOANS, ADVANCES AND INVESTMENTS. Make or permit to remain outstanding
loans or advances to, or own, purchase or acquire any stock obligations or securities
of, or any other interest in, or make any capital contributions to, any Person
(collectively, “INVESTMENTS”), except that the Company or any Subsidiary may:




(i) make or permit to remain outstanding loans or advances to any
Subsidiary;




(ii) own, purchase or acquire stock, obligations or securities of
a Subsidiary or of a corporation which immediately after such purchase
or acquisition will be a Subsidiary;




(iii) acquire and own (a) stock of the Company so long as no
Default or Event of Default exists after giving effect to the
acquisition thereof and (b) stock, obligations or securities received in
settlement of debts (created in the ordinary course of business) owing
to the Company or any Subsidiary;




(iv) own, purchase or acquire prime commercial paper, banker’s
acceptances and certificates of deposit in the United States and
Canadian commercial banks (having capital resources in excess of $100
million U.S.), repurchase agreements with respect to the foregoing, in
each case due within one year from the date of purchase and payable in
the United States in United States dollars, obligations of the United
States Government or any agency thereof, and obligations guaranteed by
the United States Government;




(v) make or permit to remain outstanding relocation, travel and
other like advances to officers and employees in the ordinary course of
business;




(vi) permit to remain outstanding Investments existing on March
28, 1996; and




(vii) make other Investments not in excess of 20% of Consolidated
Net Worth.



6B(4). DISPOSITION OF CERTAIN ASSETS. Sell, lease, transfer or otherwise
dispose of any assets of the Company or any Subsidiary other than in an Excluded
Transfer, unless the net book value of the assets sold, leased, transferred or
otherwise disposed of outside of the ordinary course of business in the then most
recent 24 month period together with the net book value of any assets then proposed to
be sold, leased, transferred or otherwise disposed of outside of the ordinary course
of business do not exceed 30% of Consolidated Tangible Net Worth. For purposes of
this paragraph and paragraph 6B(2), a sale of the Company’s or its Subsidiaries’
receivables in connection with financing of the Company or any of its Subsidiaries
under a securitization program shall be deemed to constitute Debt of the Company or
any such Subsidiary and not a sale of assets



6B(5). SALE OF STOCK AND DEBT OF SUBSIDIARIES. Sell or otherwise dispose of, or
part with control of, any shares of stock or debt of any Subsidiary, except to the
Company or any Subsidiary, and except that all shares of stock and debt of any
Subsidiary at the time owned by or owed to the Company and all Subsidiaries may by
sold as an entirety for fair market value (as determined in good faith by the Board of
Directors of the Company) provided that the net book value of the assets of such
Subsidiary, together with the net book value of the
assets of the Company and any other Subsidiaries sold during the then most recent
24 month period do not exceed 30% of Consolidated Tangible Net Worth.


 


12









 





6B(6). MERGER AND CONSOLIDATION. Merge with or consolidate into any other
company, except (i) Subsidiaries may be merged into the Company, (ii) the Company may
merge with another entity provided that the Company is the surviving corporation and
no Default or Event of Default under this Agreement would exist after giving effect to
the merger or as a result thereof, (iii) any Subsidiary may be merged with or into
another corporation provided that the surviving corporation is a Subsidiary (in the
case of a merger that does not involve the Company) or the Company and no Default or
Event of Default would exist after giving effect to the merger or as a result thereof,
or (iv) the Company may be merged into a Subsidiary or a newly created entity
organized under the laws of any state of the United States which has conducted no
previous business and at the time of such merger shall have no liabilities, if, in
either case, the surviving corporation assumes the obligations of the Company under
the Notes in a manner reasonably satisfactory to the Required Holders of the Notes and
no Default or Event of Default shall exist after giving effect to the merger or as a
result thereof.



6B(7). SALE OR DISCOUNT OF RECEIVABLES. Sell with recourse, discount or pledge
any of its notes receivable or accounts receivable other than receivables sold
constituting Debt under clause (vii) of the definition thereof provided that (i) the
aggregate face amount of all such receivables sold shall not exceed $70,000,000, and
(ii) after giving effect to such sale, the Company is in compliance with paragraph
6B(2).



6B(8). LEASE OBLIGATIONS. Lease real property or personal property (excluding
data processing equipment, vehicles, and other equipment leased in the ordinary course
of business) for terms exceeding three years if after giving effect thereto the
aggregate amount of all payments in any fiscal year payable by the Company and its
Subsidiaries would exceed an aggregate of 15% of Consolidated Tangible Net Worth.



6B(9). RESTRICTED TRANSACTIONS. Deal directly or indirectly with an Affiliate,
any Person related by blood, adoption, or marriage to any Affiliate or any Person
owning 5% or more of the Company’s stock, provided that (i) the Company may deal with
such Persons in the ordinary course of business at arm’s length, (ii) the Company may
make loans or advances to officers permitted by paragraph 6B(3) and (iii) in addition
to the foregoing, so long as the stock of the Company is publicly held, the Company
may deal with such Persons so long as the aggregate amount of such transactions does
not exceed $1,000,000 in any fiscal year.



6B(10). OTHER SUBSIDIARY GUARANTIES. The Company covenants that it will not
permit any Subsidiary organized under the laws of the United States or any state
thereof (a “U.S. Subsidiary”) to create, issue, incur, assume or become subject to or
liable under any guarantee with respect to any Material Indebtedness Agreement unless
such U.S. Subsidiary promptly executes and delivers to the holders of the Notes a
Guaranty of Payment of Debt substantially in the form of Exhibit I hereto.
Notwithstanding the foregoing, the Company covenants that it will not permit any
Subsidiary to create, issue, incur, assume or become subject to or liable under any
guarantee with respect to the Credit Agreement unless such Subsidiary promptly
executes and delivers to the holders of the Notes a Guaranty of Payment of Debt
substantially in the form of Exhibit I hereto; provided, however, that the foregoing
shall not apply to any guaranty created, issued, incurred or assumed by a Subsidiary
organized under the laws of a jurisdiction other than the United States or any state
thereof (a “Non-U.S. Subsidiary”) in respect of Debt incurred by any other Non-U.S.
Subsidiary pursuant to the Credit Agreement so long as such Non-U.S. Subsidiary that
creates, issues, incurs or assumes such guaranty has not
also created, issued, incurred or assumed a guaranty in respect of Debt incurred by
the Company or any U.S. Subsidiary pursuant to the Credit Agreement.


 


13









 





6B(11). OTHER COVENANTS. In the event that the Company or any of its
Subsidiaries 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 Company and its Subsidiaries shall be bound
hereunder by such more restrictive covenants with the same force and effect as if such
covenants were written herein.



7. EVENTS OF DEFAULT.



7A. ACCELERATION. If any of the following events shall occur and be continuing
for any reason whatsoever (and whether such occurrence shall be voluntary or
involuntary or come about or be effected by operation of law or otherwise):




(i) the Company defaults in the payment of any principal of, or
Yield-Maintenance Amount payable with respect to, any Note when the same
shall become due, either by the terms thereof or otherwise as herein
provided; or




(ii) the Company defaults in the payment of any interest on any
Note for more than five (5) days after the date due; or




(iii) (A) (1) the Company or any Subsidiary defaults (whether as
primary obligor or as guarantor or other surety) in any payment of
principal of or interest on any other obligation for money borrowed
(including any obligation under a conditional sale or other title
retention agreement entered into as a means of acquiring the subject
property, any obligation issued or assumed as full or partial payment for
property if secured by a purchase money mortgage or any obligation under
notes payable or drafts accepted representing extensions of credit)
beyond any period of grace provided with respect thereto, or (2) the
Company or any Subsidiary fails to perform or observe any other
agreement, term or condition contained in any agreement under which any
of the foregoing obligations are issued or created (or if any other event
thereunder or under any such agreement shall occur and be continuing),
and the effect of such default under clause (1) above or failure or event
under clause (2) above is to cause, or to permit the holder or holders of
such obligation (or a trustee on behalf of such holder or holders) to
cause, such obligation to become due (or to be repurchased by the Company
or any Subsidiary) prior to any stated maturity, provided that the
aggregate amount of all obligations as to which such a payment default
shall occur and be continuing or such a failure or other event causing or
permitting acceleration (or resale to the Company or any Subsidiary)
shall occur and be continuing exceeds $20,000,000; or (B) the Company or
any Subsidiary fails to perform or observe any term or condition of any
agreement or lease (other than those specified in clause (A) of this
paragraph 7A(iii)) beyond any applicable grace period with respect
thereto (or if any other event thereunder shall occur and be continuing
beyond any applicable grace period), if the effect of such failure or
event is to cause, or permit the holder or holders of such obligation (or
trustee on behalf of such holder or holders) to cause, such obligation to
become due prior to any stated maturity or require the repurchase,
redemption or defeasance of such obligation, provided that the aggregate
amount of all obligations as to which such
failure or other event causing or permitting acceleration or
requiring the repurchase, redemption or defeasance shall exceed
$20,000,000; or


 


14









 






(iv) any representation or warranty made by the Company herein or
by the Company or any of its officers in any writing furnished in
connection with or pursuant to this Agreement shall be false in any
material respect on the date as of which made; or




(v) the Company fails to perform or observe any agreement
contained in paragraph 6; or




(vi) the Company fails to perform or observe any other agreement,
term or condition contained herein and such failure shall not be
remedied within 30 days after any Responsible Officer obtains actual
knowledge thereof; or




(vii) the Company or any Subsidiary makes an assignment for the
benefit of creditors or is generally not paying its debts as such debts
become due; or




(viii) any decree or order for relief in respect of the Company or
any Subsidiary is entered under any bankruptcy, reorganization,
compromise, arrangement, insolvency, readjustment of debt, dissolution
or liquidation or similar law, whether now or hereafter in effect
(herein called the “Bankruptcy Law”), of any jurisdiction; or




(ix) the Company or any Subsidiary petitions or applies to any
tribunal for, or consents to, the appointment of, or taking possession
by, a trustee, receiver, custodian, liquidator or similar official of
the Company or any Subsidiary, or of any substantial part of the assets
of the Company or any Subsidiary, or commences a voluntary case under
the Bankruptcy Law of the United States or any proceedings (other than
proceedings for the voluntary liquidation and dissolution of a
Subsidiary) relating to the Company or any Subsidiary under the
Bankruptcy Law of any other jurisdiction; or




(x) any such petition or application is filed, or any such
proceedings are commenced, against the Company or any Subsidiary and the
Company or such Subsidiary by any act indicates its approval thereof,
consent thereto or acquiescence therein, or an order, judgment or decree
is entered appointing any such trustee, receiver, custodian, liquidator
or similar official, or approving the petition in any such proceedings,
and such order, judgment or decree remains unstayed and in effect for
more than 30 days; or




(xi) any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than
60 days; or


 


15









 






(xii) any one or more unpaid or unsatisfied judgments or decrees in
excess of $20,000,000 in the aggregate at any one time outstanding is
entered against the Company and/or its Subsidiaries, excluding those
judgments or decrees (A) that shall have been stayed, vacated or bonded,
(B) which are not final and non-appealable, provided that the Company or
such Subsidiary is contesting any such judgment or decree in good faith
and by appropriate
proceedings diligently pursued,(C) for and to the extent the Company
or any Subsidiary is insured and with respect to which the insurer
specifically has assumed responsibility in writing therefor, (D) for and
to the extent the Company or any Subsidiary are otherwise indemnified if
the terms of such indemnification are satisfactory to the Required
Holders or (E) that have been outstanding for less than 60 days; then (a)
if such event is an Event of Default specified in clause (i) or (ii) of
this paragraph 7A, the holder of any Note (other than the Company or any
of its Subsidiaries or Affiliates) may at its option, by notice in
writing to the Company, declare such Note to be, and such Note shall
thereupon be and become, immediately due and payable at par together with
interest accrued thereon, without presentment, demand, protest or notice
of any kind, all of which are hereby waived by the Company, (b) if such
event is an Event of Default specified in clause (viii), (ix) or (x) of
this paragraph 7A with respect to the Company, all of the Notes at the
time outstanding shall automatically become immediately due and payable
at par together with interest accrued thereon, without presentment,
demand, protest or notice of any kind, all of which are hereby waived by
the Company, and (c) if such event is not an Event of Default specified
in clause (viii), (ix) or (x) of this paragraph 7A with respect to the
Company, the Required Holder(s) of any Series of Notes may at its or
their option, by notice in writing to the Company, declare all of the
Notes of such Series to be, and all of the Notes of such Series shall
thereupon be and become, immediately due and payable together with
interest accrued thereon and together with the Yield-Maintenance Amount,
if any, with respect to each Note of such Series, without presentment,
demand, protest or other notice of any kind, all of which are hereby
waived by the Company, provided that the Yield-Maintenance Amount, if
any, with respect to each Note of such Series shall be due and payable
upon such declaration only if (x) such event is an Event of Default
specified in any of clauses (i) to (vi),inclusive, or (xi) or (xii) of
this paragraph 7A, (y) the Required Holders of such Series shall have
given to the Company, at least 10 Business Days before such declaration,
written notice stating its or their intention so to declare the Notes of
such Series to be immediately due and payable and identifying one or more
such Events of Default whose occurrence on or before the date of such
notice permits such declaration, and (z) one or more of the Events of
Default so identified shall be continuing at the time of such
declaration; or




(xiii) a Change in Control shall occur.



7B. RESCISSION OF ACCELERATION. At any time after any or all of the Notes of a
Series shall have been declared immediately due and payable pursuant to paragraph 7A,
the Required Holder(s) of such Series may, by notice in writing to the Company,
rescind and annul such declaration and its consequences if (i) the Company shall have
paid all overdue interest on the Notes of such Series, the principal of and
Yield-Maintenance Amount, if any, payable with respect to any Notes of such Series
which have become due otherwise than by reason of such declaration, and interest on
such overdue interest and overdue principal and Yield-Maintenance Amount at the rate
specified in the Notes of such Series, (ii) the Company shall not have paid any
amounts which have become due solely by reason of such declaration, (iii) all Events
of Default and Defaults, other than non-payment of amounts which have become due
solely by reason of such declaration, shall have been cured or waived pursuant to
paragraph 11C, and (iv) no judgment or decree shall have been entered for the payment
of any amounts due pursuant to the Notes of such Series or this Agreement (as this
Agreement pertains to the
Notes of such Series). No such rescission or annulment shall extend to or affect
any subsequent Event of Default or Default or impair any right arising therefrom.


 


16









 





7C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be declared
immediately due and payable pursuant to paragraph 7A or any such declaration shall be
rescinded and annulled pursuant to paragraph 7B, the Company shall forthwith give
written notice thereof to the holder of each Note at the time outstanding.



7D. OTHER REMEDIES. If any Event of Default or Default shall occur and be
continuing, the holder of any Note may proceed to protect and enforce its rights under
this Agreement and such Note by exercising such remedies as are available to such
holder in respect thereof under applicable law, either by suit in equity or by action
at law, or both, whether for specific performance of any covenant or other agreement
contained in this Agreement or in aid of the exercise of any power granted in this
Agreement. No remedy conferred in this Agreement upon the holder of any Note is
intended to be exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy conferred herein or now or
hereafter existing at law or in equity or by statute or otherwise.



8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company represents, covenants
and warrants as follows:



8A. ORGANIZATION. The Company is a corporation duly organized and existing in
good standing under the laws of the State of Ohio, each Subsidiary is a corporation or
other legal entity existing and in good standing under the laws of the jurisdiction in
which it is incorporated or organized, and the Company has and each Subsidiary has the
corporate or other power to own its respective property and to carry on its respective
business as now being conducted. The names and jurisdictions of incorporation of each
Subsidiary are set forth on Exhibit F attached hereto.



8B. FINANCIAL STATEMENTS. The Company has furnished Prudential and each
Purchaser of any Accepted Notes with the following financial statements, identified by
a principal financial officer of the Company: (i) a consolidated balance sheet of the
Company and its Subsidiaries as of the last day in each of the five fiscal years of
the Company most recently completed prior to the date as of which this representation
is made or repeated to such Purchaser (other than fiscal years completed within 120
days prior to such date for which audited financial statements have not been released)
and a consolidated statement of income, stockholders’ equity and statement of cash
flows of the Company and its Subsidiaries for each such year, all certified by
Deloitte & Touche LLP (or such other independent public accountants of recognized
national standing selected by the Company or other accounting firm as may be
reasonably acceptable to such Purchaser); and (ii) a consolidated balance sheet of the
Company and its Subsidiaries as at the end of the quarterly period (if any) most
recently completed prior to such date and after the end of such fiscal year (other
than quarterly periods completed within 60 days prior to such date for which financial
statements have not been released) and the comparable quarterly period in the
preceding fiscal year and consolidated statements of income, stockholders’ equity and
cash flows of the Company and its Subsidiaries for the periods from the beginning of
the fiscal years in which such quarterly periods are included to the end of such
quarterly periods, prepared by the Company. Such financial statements (including any
related schedules and/or notes) are true and correct in all material respects
(subject, as to interim statements, to changes resulting from audits and year-end
adjustments), have been prepared in accordance with generally accepted accounting
principles consistently followed throughout the periods involved and show all
liabilities, direct and contingent, of the Company and its
Subsidiaries required to be shown in accordance with such principles. The
balance sheets fairly present the condition of the Company and its Subsidiaries as at
the dates thereof, and the statements of income and statements of cash flows fairly
present the results of the operations of the Company and its Subsidiaries for the
periods indicated. There has been no material adverse change in the business,
condition (financial or otherwise) or operations of the Company and its Subsidiaries
taken as a whole since the end of the most recent fiscal year for which such audited
financial statements have been furnished.


 


17









 





8C. ACTIONS PENDING. There is no action, suit, investigation or proceeding
pending or, to the knowledge of the Company, threatened against the Company or any
Subsidiary or any properties or rights of the Company or any Subsidiary, by or before
any court, arbitrator or administrative or governmental body which could be reasonably
expected to result in any material adverse change in the business, condition
(financial or otherwise) or operations of the Company and its Subsidiaries taken as a
whole.



8D. OUTSTANDING DEBT. Neither the Company nor any Subsidiary has any Debt
outstanding except as permitted by paragraph 6B(2). There exists no payment default
or other default in any material respect under the provisions of any instrument
evidencing such Debt or of any agreement relating thereto.



8E. TITLE TO PROPERTIES. To the best knowledge of the Responsible Officers
based upon reasonable inquiry, the Company has, and each Subsidiary has, good and
indefeasible title to its respective real properties (other than properties which it
leases) and good title to all of its other properties and assets, including the
properties and assets reflected in the most recent audited balance sheet referred to
in paragraph 8B (other than properties and assets disposed of in the ordinary course
of business), subject to no Lien of any kind except Liens permitted by paragraph
6B(1). The Company and each Subsidiary enjoys peaceful and undisturbed possession of
all leases necessary in any material respect for the conduct of their respective
businesses, none of which contains any unusual or burdensome provisions which could be
reasonably expected to materially affect or impair the operation of such businesses.
All such leases are valid and subsisting and are in full force and effect.



8F. TAXES. To the best knowledge of the Responsible Officers based upon
reasonable inquiry, the Company has, and each Subsidiary has, filed all Federal, State
and other income tax returns which are required to be filed, and each has paid all
taxes as shown on such returns and on all assessments received by it to the extent
that such taxes have become due, except such taxes as are being contested in good
faith by appropriate proceedings for which adequate reserves have been established in
accordance with generally accepted accounting principles.



8G. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the execution nor
delivery of this Agreement or the Notes, nor the offering, issuance and sale of the
Notes, nor fulfillment of nor compliance with the terms and provisions hereof and of
the Notes will conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under, or result in any violation of, or result
in the creation of any Lien upon any of the properties or assets of the Company or any
of its Subsidiaries (other than Liens permitted by this Agreement) pursuant to, the
charter or code of regulations of the Company or any of its Subsidiaries, any award of
any arbitrator or any agreement (including any agreement with stockholders), nor to
the best of the Responsible Officers’ knowledge based upon reasonable inquiry, any
instrument, order, judgment, decree, statute, law, rule or regulation to which the
Company or any of its Subsidiaries is subject. Neither the Company nor any of its
Subsidiaries
is a party to, or otherwise subject to any provision contained in, any instrument
evidencing indebtedness of the Company or any of its Subsidiaries, any agreement
relating thereto or any other contract or agreement (including its charter) which
limits the amount of, or otherwise imposes restrictions on the incurring of,
indebtedness of the Company of the type to be evidenced by the Notes except as set
forth in the agreements listed in EXHIBIT E attached hereto (as such EXHIBIT E may
have been modified from time to time by written supplements thereto delivered by the
Company and accepted in writing by Prudential).


 


18









 





8H. OFFERING OF NOTES. Neither the Company nor any agent acting on its behalf
has, directly or indirectly, offered the Notes or any similar security of the Company
for sale to, or solicited any offers to buy the Notes or any similar security of the
Company from, or otherwise approached or negotiated with respect thereto with, any
Person other than Institutional Investors, and neither the Company nor any agent
acting on its behalf has taken or will take any action which would subject the
issuance or sale of the Notes to the provisions of Section 5 of the Securities Act or
to the registration provisions of any securities or Blue Sky law of any applicable
jurisdiction.



8I. USE OF PROCEEDS. The proceeds of the sale of any Private Shelf Notes will
be used for the purposes stated in the relevant Request for Purchase. None of such
proceeds will be used, directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any “margin stock” as defined in
Regulation U (12 CFR Part 221) of the Board of Governors of the Federal Reserve System
(herein called “margin stock”) or for the purpose of maintaining, reducing or retiring
any indebtedness which was originally incurred to purchase or carry any stock that is
then currently a margin stock or for any other purpose which might constitute the
purchase of such Notes transaction a “purpose credit” within the meaning of such
Regulation U, unless the Company shall have delivered to the Purchaser which is
purchasing such Notes, on the Private Shelf Closing Day for such Notes an opinion of
counsel satisfactory to such Purchaser stating that the purchase of such Notes does
not constitute a violation of such Regulation U. Neither the Company nor any agent
acting on its behalf has taken or will take any action which might cause this
Agreement or the Notes to violate Regulation T, Regulation U or any other regulation
of the Board of Governors of the Federal Reserve System or to violate the Securities
Exchange Act of 1934, as amended, in each case as in effect now or as the same may
hereafter be in effect. The Company is not a Person described in Section 1 of the
Anti-Terrorism Order and none of the proceeds from the issuance of the Notes will, to
the Company’s knowledge, directly or indirectly, be transferred to or used for the
benefit of any such Person.



8J. ERISA. No accumulated funding deficiency (as defined in section 302 of
ERISA and section 412 of the Code), whether or not waived, exists with respect to any
Plan (other than a Multiemployer Plan). No liability to the Pension Benefit Guaranty
Corporation has been or is expected by the Company or any ERISA Affiliate to be
incurred with respect to any Plan (other than a Multiemployer Plan) by the Company,
any Subsidiary or any ERISA Affiliate which is or would be materially adverse to the
business, condition (financial or otherwise) or operations of the Company and its
Subsidiaries taken as a whole. Neither the Company, any Subsidiary or any ERISA
Affiliate has incurred or presently expects to incur any withdrawal liability under
Title IV of ERISA with respect to any Multiemployer Plan which is or would be
materially adverse to the Company and its Subsidiaries taken as a whole. The
execution and delivery of this Agreement and the issuance and sale of the Notes will
be exempt from, or will not involve any transaction which is subject to the
prohibitions of, section 406 of ERISA and will not involve any transaction in
connection with which a penalty could be imposed under section 502(i) of ERISA or a
tax could be imposed pursuant to section 4975 of
the Code. The representation by the Company in the next preceding sentence is
made in reliance upon and subject to the accuracy of each Purchaser’s representation
in paragraph 9B.


 


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8K. GOVERNMENTAL CONSENT. Neither the nature of the Company or of any
Subsidiary, nor any of their respective businesses or properties, nor any relationship
between the Company or any Subsidiary and any other Person, nor any circumstance in
connection with the offering, issuance, sale or delivery of the Notes is such as to
require any authorization, consent, approval, exemption or other action by or notice
to or filing with any court or administrative or governmental body (other than routine
filings after the date of closing with the Securities and Exchange Commission and/or
state Blue Sky authorities) in connection with the execution and delivery of this
Agreement, the offering, issuance, sale or delivery of the Notes or fulfillment of or
compliance with the terms and provisions of this Agreement.



8L. ENVIRONMENTAL COMPLIANCE. To the best knowledge of the Responsible Officers
based upon reasonable inquiry, the Company and its Subsidiaries and all of their
respective properties and facilities have complied at all times and in all respects
with all applicable federal, state, local and regional statutes, laws, ordinances and
judicial or administrative orders, judgments, rulings and regulations relating to
protection of the environment except, in any such case, where failure to comply would
not result in a material adverse effect on the business, condition (financial or
otherwise) or operations of the Company and its Subsidiaries taken as a whole or the
ability of the Company to perform its obligations under this Agreement.



8M. HOSTILE TENDER OFFERS. None of the proceeds of the sale of any Notes will
be used to finance a Hostile Tender Offer.



8N. DISCLOSURE. Neither this Agreement nor any other document, certificate or
statement furnished to any Purchaser by or on behalf of the Company in connection
herewith contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein and therein not
misleading. There is no fact peculiar to the Company or any of its Subsidiaries which
materially adversely affects or in the future can be reasonably expected to (so far as
the Company can now reasonably foresee) materially adversely affect the business,
property or assets, or financial condition of the Company and its Subsidiaries taken
as a whole and which has not been set forth in this Agreement or in the other
documents, certificates and statements furnished to the Purchasers by the Company
prior to the date hereof in connection with the transactions contemplated hereby



8O. SECTION 144A. The Notes are not of the same class as securities, if any, of
the Company listed on a national securities exchange registered under Section 6 of the
Exchange Act or quoted in a U.S. automated inter-dealer quotation system.



9. REPRESENTATIONS OF THE PURCHASERS.



Each Purchaser represents as follows:



9A. NATURE OF PURCHASE. Such Purchaser is not acquiring the Notes to be
purchased by it hereunder with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act, provided that the
disposition of such Purchaser’s property shall at all times be and remain within its
control.


 


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9B. SOURCE OF FUNDS. At least one of the following statements is an accurate
representation as to each source of funds (a “Source”) to be used by such Purchaser to
pay the purchase price of the Notes to be purchased by such Purchaser hereunder:




(i) the Source is an “insurance company general account” (as the
term is defined in the United States Department of Labor’s Prohibited
Transaction Exemption (“PTE”) 95-60) in respect of which the reserves and
liabilities (as defined by the annual statement for life insurance
companies approved by the National Association of Insurance Commissioners
(the “NAIC Annual Statement”)) for the general account contract(s) held
by or on behalf of any employee benefit plan together with the amount of
the reserves and liabilities for the general account contract(s) held by
or on behalf of any other employee benefit plans maintained by the same
employer (or affiliate thereof as defined in PTE 95-60) or by the same
employee organization in the general account do not exceed 10% of the
total reserves and liabilities of the general account (exclusive of
separate account liabilities) plus surplus as set forth in the NAIC
Annual Statement filed with such Purchaser’s state of domicile; or




(ii) the Source is a separate account that is maintained solely in
connection with such Purchaser’s fixed contractual obligations under
which the amounts payable, or credited, to any employee benefit plan (or
its related trust) that has any interest in such separate account (or to
any participant or beneficiary of such plan (including any annuitant))
are not affected in any manner by the investment performance of the
separate account; or




(iii) the Source is either (a) an insurance company pooled separate
account, within the meaning of PTE 90-1 or (b) a bank collective
investment fund, within the meaning of the PTE 91-38 and, except as
disclosed by such Purchaser to the Company in writing pursuant to this
clause (iii), no employee benefit plan or group of plans maintained by
the same employer or employee organization beneficially owns more than
10% of all assets allocated to such pooled separate account or collective
investment fund; or




(iv) The Source constitutes assets of an “investment fund” (within
the meaning of Part V of PTE 84-14 (the QPAM Exemption)) managed by a
“qualified professional asset manager” or “QPAM” (within the meaning of
Part V of the QPAM Exemption), no employee benefit plan’s assets that are
included in such investment fund, when combined with the assets of all
other employee benefit plans established or maintained by the same
employer or by an affiliate (within the meaning of Section V(c)(1) of the
QPAM Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets managed by
such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are
satisfied, neither the QPAM nor a person controlling or controlled by the
QPAM (applying the definition of “control” in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (a) the identity
of such QPAM and (b) the names of all employee benefit plans whose assets
are included in such investment fund have been disclosed to the Company
in writing pursuant to this clause (iv); or


 


21









 






(v) the Source constitutes assets of a “plan(s)” (within the meaning
of Section IV of PTE 96-23 (the “INHAM Exemption”)) managed by an
“in-house asset manager” or “INHAM” (within the meaning of Part IV of the
INHAM exemption), the conditions of Part I(a), (g) and (h) of the INHAM
Exemption are satisfied, neither the INHAM nor a person controlling or
controlled by the INHAM (applying the definition of “control” in Section
IV(h) of the INHAM Exemption)owns a 5% or more interest in the Company
and (a) the identity of such INHAM and (b) the name(s) of the employee
benefit plan(s) whose assets constitute the Source have been disclosed to
the Company in writing pursuant to this clause (v); or




(vi) the Source is a governmental plan; or




(vii) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee benefit
plans, each of which has been identified to the Company in writing
pursuant to this clause (vii); or




(viii) the Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA.



As used in this paragraph 9B, the terms “employee benefit plan”, “governmental
plan”, and “separate account” shall have the respective meanings assigned to such
terms in Section 3 of ERISA.



10. DEFINITIONS. For the purpose of this Agreement, the terms defined in
paragraphs 1 and 2 shall have the respective meanings specified therein, and the
following terms shall have the meanings specified with respect thereto below:



10A. YIELD-MAINTENANCE TERMS.



“CALLED PRINCIPAL” shall mean, with respect to any Note, the principal of such
Note that is to be prepaid pursuant to paragraph 4B or is declared to be immediately
due and payable pursuant to paragraph 7A, as the context requires.



“DESIGNATED SPREAD” shall mean (i) 0% with respect to the Series A Notes, (ii)
0.50% for the Series B Notes and (iii) unless otherwise specified in the Confirmation
of Acceptance with respect thereto, 0% for any other Series of Notes.



“DISCOUNTED VALUE” shall mean, with respect to the Called Principal of any Note,
the amount obtained by discounting all Remaining Scheduled Payments with respect to
such Called Principal from their respective scheduled due dates to the Settlement Date
with respect to such Called Principal, in accordance with accepted financial practice
and at a discount factor (as converted to reflect the periodic basis on which interest
on such Note is payable, if payable other than on a semi-annual basis) equal to the
Reinvestment Yield with respect to such Called Principal.


 


22









 





“REINVESTMENT YIELD” shall mean, with respect to the Called Principal of any
Note, the Designated Spread over the yield to maturity implied by (i) the yields
reported, as of 10:00 A.M. (New York City local time) on the Business Day next
preceding the Settlement Date with respect to such Called Principal, on the display
designated as “Page 678” on the
Telerate Service (or such other display as may replace Page 678 on the Telerate
Service) for actively traded U.S. Treasury securities having a maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement Date, or if such
yields shall not be reported as of such time or the yields reported as of such time
shall not be ascertainable, (ii) the Treasury Constant Maturity Series yields
reported, for the latest day for which such yields shall have been so reported as of
the Business Day next preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable
successor publication) for actively traded U.S. Treasury securities having a constant
maturity equal to the Remaining Average Life of such Called Principal as of such
Settlement Date. Such implied yield shall be determined, if necessary, by (a)
converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with
accepted financial practice and (b) interpolating linearly between yields reported for
various maturities.



“REMAINING AVERAGE LIFE” shall mean, with respect to the Called Principal of any
Note, the number of years (calculated to the nearest one-twelfth year) obtained by
dividing (i) such Called Principal into (ii) the sum of the products obtained by
multiplying (a) each Remaining Scheduled Payment of such Called Principal (but not of
interest thereon) by (b) the number of years (calculated to the nearest one-twelfth
year) which will elapse between the Settlement Date with respect to such Called
Principal and the scheduled due date of such Remaining Scheduled Payment.



“REMAINING SCHEDULED PAYMENTS” shall mean, with respect to the Called Principal
of any Note, all payments of such Called Principal and interest thereon that would be
due on or after the Settlement Date with respect to such Called Principal if no
payment of such Called Principal were made prior to its scheduled due date.



“SETTLEMENT DATE” shall mean, with respect to the Called Principal of any Note,
the date on which such Called Principal is to be prepaid pursuant to paragraph 4B or
is declared to be immediately due and payable pursuant to paragraph 7A, as the context
requires.



“YIELD-MAINTENANCE AMOUNT” shall mean, with respect to any Note, an amount equal
to the excess, if any, of the Discounted Value of the Called Principal of such Note
over the sum of (i) such Called Principal plus (ii) interest accrued thereon as of
(including interest due on) the Settlement Date with respect to such Called Principal.
The Yield-Maintenance Amount shall in no event be less than zero.



10B. OTHER TERMS.



“ACCEPTANCE” shall have the meaning specified in paragraph 2E.



“ACCEPTANCE DAY” shall have the meaning specified in paragraph 2E.



“ACCEPTANCE WINDOW” shall mean, with respect to any interest rate quote made by
Prudential pursuant to paragraph 2D, the time period designated by Prudential during
which the Company may elect to accept such interest rate quote as to not less than
$5,000,000 in aggregate principal amount of Private Shelf Note specified in the
Request for Purchase.



“ACCEPTED NOTE” shall have the meaning specified in paragraph 2E.


 


23









 





“AFFILIATE” of any Person shall mean (i) any Person directly or indirectly
controlling, controlled by, or under direct or indirect common control with such
Person (except, with respect to the Company, a Subsidiary) and (ii) with respect to
Prudential, shall include any managed account, investment fund or other vehicle for
which Prudential or any Prudential Affiliate acts as investment advisor or portfolio
manager. A Person shall be deemed to control a corporation if such Person possesses,
directly or indirectly, the power to direct or cause the direction of the management
and policies of such corporation, whether through the ownership of voting securities,
by contract or otherwise.



“ANTI-TERRORISM ORDER” means Executive Order No. 13,224, 66 Fed. Reg. 49,079
(2001) issued by the President of the U.S. (Executive Order Blocking Property and
Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support
Terrorism).



“AUTHORIZED OFFICER” shall mean (i) in the case of the Company, its chief
executive officer, its chief operating officer, its chief financial officer, its
corporate secretary, and any vice president of the Company designated as an
“Authorized Officer” of the Company for the purpose of this Agreement in an Officer’s
Certificate executed by the Company’s chief executive officer or chief financial
officer and delivered to Prudential, and (ii) in the case of Prudential, any officer
of Prudential designated as its “Authorized Officer” in the Information Schedule or
any officer of Prudential designated as its “Authorized Officer” for the purpose of
this Agreement in a certificate executed by one of its Authorized Officers.



“AVAILABLE FACILITY AMOUNT” shall have the meaning specified in paragraph 2A.



“BANKRUPTCY LAW” shall have the meaning specified in clause (viii) of paragraph
7A.



“BUSINESS DAY” shall mean any day other than (i) a Saturday or a Sunday, (ii) a
day on which commercial banks in New York City are required or authorized to be closed
and (iii) for purposes of paragraph 2C hereof only, a day on which Prudential
Investment Management, Inc. is not open for business.



“CANADIAN BORROWER” shall mean each of the Subsidiaries of the Company set forth
on Schedule 2 to the Credit Agreement.



“CANCELLATION DATE” shall have the meaning specified in paragraph 2H(3).



“CANCELLATION FEE” shall have the meaning specified in paragraph 2H(3).



“CAPITALIZED LEASE OBLIGATION” shall mean any rental obligation which, under
generally accepted accounting principles, is or will be required to be capitalized on
the books of the Company or any Subsidiary, taken at the amount thereof accounted for
as indebtedness (net of interest expenses) in accordance with such principles.



“CLOSING DAY” shall mean the Initial Closing Day or a Private Shelf Closing Day,
as the case may be.


 


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“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, by any Person or group (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission 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 Stock
represented by the issued and outstanding capital stock of the Company;




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




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



“CODE” shall mean the Internal Revenue Code of 1986, as amended.



“CONFIRMATION OF ACCEPTANCE” shall have the meaning specified in paragraph 2E.



“CONSOLIDATED CAPITALIZATION” shall mean Consolidated Tangible Net Worth of the
Company and its Subsidiaries plus Debt.



“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 the Company
for such period, as determined on a consolidated basis and in accordance with
generally accepted accounting principles.



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



“CONSOLIDATED INCOME TAX EXPENSE” shall mean, for any period, all provisions for
taxes based on the gross or net income of the Company (including, without limitation,
any additions to such taxes, and any penalties and interest with respect thereto), and
all franchise taxes of the Company, determined on a consolidated basis and in
accordance with generally accepted accounting principles.



“CONSOLIDATED INTEREST EXPENSE” shall mean, for any period, the interest expense
of the Company for such period, determined on a consolidated basis and in accordance
with generally accepted accounting principles.


 


25









 





“CONSOLIDATED NET INCOME” shall mean consolidated net income of the Company and
its Subsidiaries as determined in accordance with generally accepted accounting
principles.



“CONSOLIDATED TANGIBLE NET WORTH” shall mean the sum of (i) the par value (or
value stated on the books of the Company) of the capital stock of all classes of the
Company, plus (or minus in the case of a surplus deficit) (ii) the amount of the
consolidated surplus, whether capital or earned, of the Company and its Subsidiaries,
plus (iii) the amount of paid in capital, less the sum of treasury stock, unamortized
debt discount and expense, goodwill, trademarks, trade names, patents, non-current
deferred charges and other intangible assets and any write-up of the value of any
asset, all determined on a consolidated basis for the Company and all Subsidiaries in
accordance with generally accepted accounting principles.



“COUNTY BONDS GUARANTY” shall have the meaning assigned to such term in the
Inducement Agreement.



“CREDIT AGREEMENT” shall mean the Credit Agreement, dated as of June 3, 2005,
among the Company, the Canadian Borrowers, the Banks, Keybank National Association, as
Lead Arranger, Book Runner and Administrative Agent, and U.S. Bank National
Association, as Syndication Agent, as amended, modified, supplemented, restated,
replaced or refinanced from time to time.



“DEBT” shall mean and include, (i) any obligation payable for borrowed money
(including capitalized lease obligations but excluding reserves for deferred income
taxes and other reserves to the extent that such reserves do not constitute an
obligation); (ii) indebtedness payable which is secured by any lien on property owned
by the Company or any Subsidiary; (iii) guarantees, endorsements (other than
endorsements of negotiable instruments for collection in the ordinary course of
business) and other contingent liabilities (whether direct or indirect) in connection
with the obligation, stock or dividends of any Person (other than under the Project
Bonds Guaranty and the County Bonds Guaranty); (iv) obligations under any contract
providing for the making of loans, advances or capital contributions to any Person, in
each case in order to enable such Person primarily to maintain working capital, net
worth or any other balance sheet condition or to pay debts, dividends or expenses; (v)
ledger balances, consignments and other similar arrangements but only to the extent
required to be shown as debt on the consolidated balance sheet of the Company in
accordance with generally accepted accounting principles; (vi) obligations under any
other contract which, in economic effect, is substantially equivalent to a guarantee;
(vii) the face amount of receivables sold to any Person for the purpose of enabling
such Person to incur Debt or sell interests in such receivables to finance the
purchase price of such receivables, and (viii) guaranteed purchase contracts which are
required to be shown as debt on the Company’s consolidated balance sheet in accordance
with generally accepted accounting principles (but not including guaranteed purchase
contracts to the extent that the obligations thereunder are not required to be shown
as debt on the Company’s consolidated balance sheet in accordance with generally
accepted accounting principles); all as determined in accordance with generally
accepted accounting principles. The term Debt shall not include (a) obligations under
the Company’s compensation or benefit plans in effect from time to time to the extent
not required to be shown as debt on the consolidated balance sheet of the Company
prepared in accordance with generally accepted accounting principles and (b) trade
payables incurred in the ordinary course of business (including ledger balances,
consignments and other similar arrangements) to the extent such trade payables
(including ledger balances, consignments and other similar arrangements) are not
required to be shown as debt on the
consolidated balance sheet of the Company prepared in accordance with generally
accepted accounting principles.


 


26









 





“DELAYED DELIVERY FEE” shall have the meaning specified in paragraph 2H(2).



“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.



“ERISA AFFILIATE” shall mean any corporation which is a member of the same
controlled group of corporations as the Company within the meaning of section 414(b)
of the Code, or any trade or business which is under common control with the Company
within the meaning of section 414(c) of the Code.



“EVENT OF DEFAULT” shall mean any of the events specified in paragraph 7A,
provided that there has been satisfied any requirement in connection with such event
for the giving of notice, or the lapse of time, or the happening of any further
condition, event or act, and “DEFAULT” shall mean any of such events, whether or not
any such requirement has been satisfied.



“EXCHANGE ACT” shall mean the Securities Exchange Act of 1934, as amended.



“EXCLUDED TRANSFER” shall mean any sell, lease, transfer or other disposition of
any assets of the Company or any Subsidiary which is either (i) made in the ordinary
course of business or (ii) made to the Company or any Subsidiary and after giving
effect to such transaction the Company’s ultimate percentage ownership of the assets
sold, leased, transferred or other disposed of has not been reduced (giving the
Company appropriate credit for indirect ownership of assets by virtue of ownership
through any Subsidiary but only to the extent of the Company’s percentage ownership of
such Subsidiary).



“EXISTING AGREEMENT” shall mean that certain Note Purchase and Private Shelf
Agreement dated as of October 31, 1992 between the Company and Prudential.



“FACILITY” shall have the meaning specified in paragraph 2A.



“FUNDED DEBT” shall mean with respect to any Person, all Debt of such Person
which by its terms or by the terms of any instrument or agreement relating thereto
matures, or which is otherwise payable, more than one year from, or is directly or
indirectly renewable or extendible at the option of the debtor to a date more than one
year (including an option of the debtor under a revolving credit or similar agreement
obligating the lender or lenders to extend credit over a period of more than one year)
from, the date on which Funded Debt is to be determined.



“HEDGE TREASURY NOTE(S)” shall mean, with respect to any Accepted Note, the
United States Treasury Note or Notes whose duration (as determined by Prudential) most
closely matches the duration of such Accepted Note.



“HOSTILE TENDER OFFER” shall mean, with respect to the use of proceeds of any
Note, any offer to purchase, or any purchase of, shares of capital stock of any
corporation or equity interests in any other entity, or securities convertible into or
representing the beneficial ownership of, or rights to acquire, any such shares or
equity interests, if such shares, equity
interests, securities or rights are of a class which is publicly traded on any
securities exchange or in any over-the-counter market, other than purchases of such
shares, equity interests, securities or rights representing less than 5% of the equity
interests or beneficial ownership of such corporation or other entity for portfolio
investment purposes, and such offer or purchase has not been duly approved by the
board of directors of such corporation or the equivalent governing body of such other
entity prior to the date on which the Company makes the Request for Purchase of such
Note.


 


27









 





“INDUCEMENT AGREEMENT” shall mean that certain Inducement Agreement dated as of
March 1, 1996 between the Company and Prudential, a copy of which is attached hereto
as EXHIBIT H.



“INITIAL CLOSING DAY” shall mean November 27, 1996.



“INSTITUTIONAL INVESTOR” shall mean Prudential, any Prudential Affiliate or any
bank, bank affiliate, financial institution, insurance company, pension fund,
endowment or other organization which regularly acquires debt instruments for
investment.



“INTEREST COVERAGE RATIO” shall mean, for the most recently completed four fiscal
quarters of the Company, on a consolidated basis and in accordance with GAAP, the
ratio of (a) Consolidated EBITDA to (b) Consolidated Interest Expense.



“ISSUANCE FEE” shall have the meaning specified in paragraph 2H(1).



“ISSUANCE PERIOD” shall have the meaning specified in paragraph 2A.



“LIEN” shall mean any mortgage, pledge, security interest, encumbrance, lien
(statutory or otherwise) or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any lease in
the nature thereof, and the filing of or agreement to give any financing statement
under the Uniform Commercial Code of any jurisdiction) or any other type of
preferential arrangement for the purpose, or having the effect, of protecting a
creditor against loss or securing the payment or performance of an obligation.



“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 Debt of the Company
or any Subsidiary equal to or in excess of the amount of Twenty Million Dollars
($20,000,000).



“MULTIEMPLOYER PLAN” shall mean any Plan which is a “multiemployer plan” (as such
term is defined in section 4001(a)(3) of ERISA).



“NOTES” shall have the meaning specified in paragraph 1.



“OFFICER’S CERTIFICATE” shall mean a certificate signed in the name of the
Company by an Authorized Officer of the Company.



“PERSON” shall mean and include an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.


 


28









 





“PLAN” shall mean any “employee pension benefit plan” (as such term is defined in
section 3 of ERISA) which is or has been established or maintained, or to which
contributions are or have been made, by the Company or any ERISA Affiliate.



“PRIORITY DEBT” shall mean, as of any time of determination thereof, the
aggregate amount, without duplication, of (i) all obligations of the Company secured
by Liens permitted by clauses (iv) or (v) of paragraph 6B(1) and (ii) Debt of
Subsidiaries, other (a) Debt of the Canadian Borrowers owed to the Canadian Banks
under the Credit Agreement, (b) Debt consisting of guarantees by Subsidiaries of Debt
of the Company so long as such guarantees are permitted under paragraph 6B(10) hereof
and (c) Debt owed by a Subsidiary to the Company or another Subsidiary.



“PRIVATE SHELF CLOSING DAY” for any Accepted Note shall mean the Business Day
specified for the closing of the purchase and sale of such Private Shelf Note in the
Request for Purchase of such Private Shelf Note, provided that if the closing of the
purchase and sale of such Accepted Note is rescheduled pursuant to paragraph 2G, the
Private Shelf Closing Day for such Accepted Note, for all purposes of this Agreement
except paragraph 2H(3), shall mean the Rescheduled Closing Day with respect to such
Closing.



“PRIVATE SHELF NOTE” and “PRIVATE SHELF NOTES” shall have the meanings specified
in paragraph 1.



“PROJECT BOND GUARANTY” shall have the meaning assigned to such term in the
Inducement Agreement.



“PRUDENTIAL” shall mean Prudential Investment Management, Inc.



“PRUDENTIAL AFFILIATE” shall mean any Affiliate of Prudential.



“PURCHASERS” shall mean, with respect to any Accepted Notes the Persons, either
Prudential or a Prudential Affiliate, who is purchasing such Accepted Notes.



“REQUEST FOR PURCHASE” shall have the meaning specified in paragraph 2C.



“REQUIRED HOLDER(S)” shall mean, with respect to the Notes of any series, at any
time, the holder or holders of at least 50.01% of the aggregate principal amount of
the Notes of such series outstanding at such time.



“RESCHEDULED CLOSING DAY” shall have the meaning specified in paragraph 2G.



“RESPONSIBLE OFFICER” shall mean the chief executive officer, chief operating
officer, chief financial officer or chief accounting officer of the Company or any
other officer of the Company involved principally in its financial administration or
its controllership function.



“SECURITIES ACT” shall mean the Securities Act of 1933, as amended.



“SERIES” shall have the meaning specified in paragraph 1.


 


29









 





“SERIES A NOTES” shall mean the 7.82% Series A Notes executed by the Company
pursuant to the Existing Agreement in the original aggregate principal amount of
$80,000,000 and due December 8, 2002.



“SERIES B NOTES” shall mean the 6.60% Series B Notes executed by the Company
pursuant to this Agreement in the original aggregate principal amount of $50,000,000
and due December 8, 2007.



“SIGNIFICANT HOLDER” shall mean (i) Prudential or any Prudential Affiliate, so
long as Prudential or any Prudential Affiliate shall hold any Note or any amount
remains available under the Facility or (ii) any other holder of at least 10% of the
aggregate principal amount of any Series of Notes from time to time outstanding. To
the extent that any notice or document is required to be delivered to the Significant
Holders under this Agreement, such requirement shall be satisfied with respect to
Prudential and all Prudential Affiliates by giving notice, or delivery of a copy of
any such document, to Prudential (addressed to Prudential and each such Prudential
Affiliate).



“SUBSIDIARY” shall mean any corporation, association, partnership, limited
partnership, limited liability company, joint venture or other business entity of
which more than 80% of the Voting Stock, membership interests or other equity
interests is owned or controlled directly or indirectly by the Company, or one or more
of the Subsidiaries of the Company, or a combination thereof.



“TRANSFEREE” shall mean any direct or indirect transferee of all or any part of
any Note purchased by any Purchaser under this Agreement.



“VOTING STOCK” shall mean, with respect to any corporation, any shares of stock
of such corporation whose holders are entitled under ordinary circumstances to vote
for the election of directors of such corporation (irrespective of whether at the time
stock of any other class or classes shall have or might have voting power by reason of
the happening of any contingency).



10C. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS. All references in this
Agreement to “general accepted accounting principles” shall be deemed to refer to
generally accepted accounting principles in effect in the United States at the time of
application thereof. Unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all determinations with respect to accounting matters
hereunder shall be made, and all unaudited financial statements and certificates and
reports as to financial matters required to be furnished hereunder shall be prepared,
in accordance with generally accepted accounting principles Notwithstanding the
foregoing, if any change in generally accepted accounting principles from those
applied in the preparation of the financial statements referred to in paragraph 8B is
occasioned by the promulgation of rules, regulations, pronouncements and opinions by
or required by the Financial Accounting Standards Board or the American Institute of
Certified Public Accountants (or successors thereto or agencies with similar
functions), the initial application of which change is made after the date of this
Agreement, and any such change results in a change in the method of calculation of
financial covenants, standards or terms found in this Agreement, the parties hereto
agree that until such time as the parties hereto agree upon an amendment to this
Agreement addressing such change, such financial covenants, standards and terms shall
be construed and calculated as though such change had not taken place. The parties
hereto agree to enter into good faith negotiations in order to amend the affected
provisions so as to reflect such accounting changes with the desired result that


 


30









 





the criteria for evaluating the Company’s financial condition shall be the same after
such changes as if such changes had not been made. When used herein, the term
“financial statement” shall include the notes and schedules thereto. Any reference
herein to any specific citation, section or form of law, statute, rule or regulation
shall refer to such new, replacement or analogous citation, section or form should
such citation, section or form be modified, amended or replaced. For purposes of
determining compliance with the financial covenants contained in this Agreement, any
election by the Company to measure an item of Debt using fair value (as permitted by
Statement of Financial Accounting Standards No. 159 or any similar accounting
standard) shall be disregarded and such determination shall be made as if such
election had not been made.



11. MISCELLANEOUS.



11A. NOTE PAYMENTS. The Company agrees that, so long as any Purchaser shall
hold any Note, it will make payments of principal of, interest on and any
Yield-Maintenance Amount payable with respect to such Note, which comply with the
terms of this Agreement, by wire transfer of immediately available funds for credit
(not later than 12:00 Noon, New York City local time, on the date due) to (i) the
account or accounts specified in the applicable Confirmation of Acceptance (in the
case of any Private Shelf Note) or (ii) such other account or accounts in the United
States as such Purchaser may designate in writing, notwithstanding any contrary
provision herein or in any Note with respect to the place of payment. Each Purchaser
agrees that, before disposing of any Note, such Purchaser will make a notation thereon
(or on a schedule attached thereto) of all principal payments previously made thereon
and of the date to which interest thereon has been paid. The Company agrees to afford
the benefits of this paragraph 11A to any Transferee which shall have made the same
agreement as each Purchaser has made in this paragraph 11A.



11B. EXPENSES. The Company agrees, whether or not the transactions contemplated
hereby shall be consummated, to pay, and save Prudential, each Purchaser and any
Transferee harmless against liability for the payment of, all reasonable out-of-pocket
expenses arising in connection with such transactions, including (i) all document
production and duplication charges and the fees and expenses of any special counsel
engaged by the Purchasers or any Transferee in connection with this Agreement (other
than with respect to the legal fees and expenses incurred in connection with the
Initial Closing Day or any draw under the Facility), the transactions contemplated
hereby and any subsequent Company proposed modification of, or Company proposed
consent under, this Agreement, whether or not such Company proposed modification shall
be effected or Company proposed consent granted, and (ii) the costs and expenses,
including attorneys’ fees, incurred by any Purchaser or any Transferee in enforcing
(or determining whether or how to enforce) any rights under this Agreement or the
Notes or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the transactions
contemplated hereby or by reason of any Purchaser’s or any Transferee’s having
acquired any Note, including without limitation costs and expenses incurred in any
bankruptcy case. The obligations of the Company under this paragraph 11B shall
survive the transfer of any Note or portion thereof or interest therein by any
Purchaser or any Transferee and the payment of any Note.


 


31









 





11C. CONSENT TO AMENDMENTS. This Agreement may be amended, and the Company may
take any action herein prohibited, or omit to perform any act herein required to be
performed by it, if the Company shall obtain the written consent to such amendment,
action or omission to act, of the Required Holder(s) of the Notes of each Series
except that, (i) with the written consent of the holders of all Notes of a particular
Series, and if an Event of Default shall have occurred and be continuing, of the
holders of all Notes of all Series, at the
time outstanding (and not without such written consents), the Notes of such
Series may be amended or the provisions thereof waived to change the maturity thereof,
to change or affect the principal thereof, or to change or affect the rate or time of
payment of interest on or any Yield-Maintenance Amount payable with respect to the
Notes of such Series, (ii) without the written consent of the holder or holders of all
Notes at the time outstanding, no amendment to or waiver of the provisions of this
Agreement shall change or affect the provisions of paragraph 7A or this paragraph 11C
insofar as such provisions relate to proportions of the principal amount of the Notes
of any Series, or the rights of any individual holder of Notes, required with respect
to any declaration of Notes to be due and payable or with respect to any consent,
amendment, waiver or declaration, (iii) with the written consent of Prudential (and
not without the written consent of Prudential) the provisions of paragraph 2 may be
amended or waived (except insofar as any such amendment or waiver would affect any
rights or obligations with respect to the purchase and sale of Notes which shall have
become Accepted Notes prior to such amendment or waiver), and (iv) with the written
consent of all of the Purchasers which shall have become obligated to purchase
Accepted Notes of any Series (and not without the written consent of all such
Purchasers), any of the provisions of paragraphs 2 and 3 may be amended or waived
insofar as such amendment or waiver would affect only rights or obligations with
respect to the purchase and sale of the Accepted Notes of such Series or the terms and
provisions of such Accepted Notes. Each holder of any Note at the time or thereafter
outstanding shall be bound by any consent authorized by this paragraph 11C, whether or
not such Note shall have been marked to indicate such consent, but any Notes issued
thereafter may bear a notation referring to any such consent. No course of dealing
between the Company and the holder of any Note nor any delay in exercising any rights
hereunder or under any Note shall operate as a waiver of any rights of any holder of
such Note. As used herein and in the Notes, the term “this Agreement” and references
thereto shall mean this Agreement as it may from time to time be amended or
supplemented.



11D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES. The Notes
are issuable as registered notes without coupons in denominations of at least
$1,000,000 except as may be necessary to reflect any amount not evenly divisible by
$1,000,000; provided, however, that no such minimum denomination shall apply to Notes
issued to, or issued upon transfer by any holder of the Notes to, Prudential or one or
more Prudential Affiliates or accounts managed by Prudential or Prudential Affiliates
or to any other entity or group of affiliates with respect to which the Notes so
issued or transferred shall be managed by a single entity. The Company shall keep at
its principal office a register in which the Company shall provide for the
registration of Notes and of transfers of Notes. Upon surrender for registration of
transfer of any Note at the principal office of the Company, the Company shall, at its
expense, execute and deliver one or more new Notes of like tenor and of a like
aggregate principal amount, registered in the name of such transferee or transferees.
At the option of the holder of any Note, such Note may be exchanged for other Notes of
like tenor and of any authorized denominations, of a like aggregate principal amount,
upon surrender of the Note to be exchanged at the principal office of the Company.
Whenever any Notes are so surrendered for exchange, the Company shall, at its expense,
execute and deliver the Notes which the holder making the exchange is entitled to
receive. Each installment of principal payable on each installment date upon each new
Note issued upon any such transfer or exchange shall be in the same proportion to the
unpaid principal amount of such new Note as the installment of principal payable on
such date on the Note surrendered for registration of transfer or exchange bore to the
unpaid principal amount of such Note. No reference need be made in any such new Note
to any installment or installments of principal previously due and paid upon the Note
surrendered for registration of transfer or exchange. Every Note surrendered for
registration of transfer or exchange shall be duly endorsed, or be accompanied
by a written instrument of transfer duly executed, by the holder of such Note or
such holder’s attorney duly authorized in writing. Any Note or Notes issued in
exchange for any Note or upon transfer thereof shall carry the rights to unpaid
interest and interest to accrue which were carried by the Note so exchanged or
transferred, so that neither gain nor loss of interest shall result from any such
transfer or exchange. Upon receipt of written notice from the holder of any Note of
the loss, theft, destruction or mutilation of such Note and, in the case of any such
loss, theft or destruction, upon receipt of such holder’s unsecured indemnity
agreement, or in the case of any such mutilation upon surrender and cancellation of
such Note, the Company will make and deliver a new Note, of like tenor, in lieu of the
lost, stolen, destroyed or mutilated Note.


 


32









 





11E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due presentment for
registration of transfer, the Company may treat the Person in whose name any Note is
registered as the owner and holder of such Note for the purpose of receiving payment
of principal of and interest on, and any Yield-Maintenance Amount payable with respect
to, such Note and for all other purposes whatsoever, whether or not such Note shall be
overdue, and the Company shall not be affected by notice to the contrary. Subject to
the preceding sentence, the holder of any Note may from time to time grant
participations in all or any part of such Note to any Person on such terms and
conditions as may be determined by such holder in its sole and absolute discretion.



11F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All
representations and warranties contained herein or made in writing by or on behalf of
the Company in connection herewith shall survive the execution and delivery of this
Agreement and the Notes, the transfer by any Purchaser of any Note or portion thereof
or interest therein and the payment of any Note, and may be relied upon by any
Transferee, regardless of any investigation made at any time by or on behalf of any
Purchaser or any Transferee. Subject to the preceding sentence, this Agreement and
the Notes embody the entire agreement and understanding between the parties hereto
with respect to the subject matter hereof and supersede all prior agreements and
understandings relating to such subject matter.



11G. SUCCESSORS AND ASSIGNS. All covenants and other agreements in this
Agreement contained by or on behalf of any of the parties hereto shall bind and inure
to the benefit of the respective successors and assigns of the parties hereto
(including, without limitation, any Transferee) whether so expressed or not. The
Company shall not assign its rights under paragraph 2.



11H. DISCLOSURE TO OTHER PERSONS. The Company acknowledges that Prudential,
each Purchaser and each holder of any Note may deliver copies of any financial
statements and other documents delivered to it, and disclose any other information
disclosed to it, by or on behalf of the Company or any Subsidiary in connection with
or pursuant to this Agreement to (i) its directors, officers, employees, agents and
professional consultants, (ii) any Purchaser or holder of any Note, (iii) any
Institutional Investor to which it offers to sell any Note or any part thereof other
than a Competitor, (iv) any Institutional Investor to which it sells or offers to sell
a participation in all or any part of any Note other than a Competitor, (v) any
Institutional Investor from which it offers to purchase any security of the Company,
(vi) any federal or state regulatory authority having jurisdiction over it, (vii) the
National Association of Insurance Commissioners or any similar organization, or (viii)
any other Person to which such delivery or disclosure may be necessary (a) in
compliance with any law, rule, regulation or order applicable to it, (b) in response
to any subpoena or other legal process or informal investigative demand, (c) in
connection with any


 


33









 





litigation to which it is a party or (d) in order to enforce its rights under this Agreement. Subject to the disclosure permitted
in the first sentence of this paragraph, Prudential, each such Purchaser, each such
holder and any Person designated by any of the foregoing Persons under paragraph 5C
each agree to use their best efforts to hold in confidence and not to disclose or use
(other than for internal purposes which shall not include any usage that would subject
the Company or its officers to any fine or penalty under any securities laws or
regulations) any Confidential Information. “Confidential Information” shall mean
financial statements and reports delivered pursuant to paragraph 5A and other
non-public information regarding the Company which was obtained pursuant to paragraph
5B or paragraph 5C; PROVIDED, HOWEVER, that such term shall not include information
(x) which was publicly known, or otherwise known to you at the time of disclosure, (y)
which subsequently becomes publicly known through no act or omission by you or any of
your agents or (z) which otherwise becomes known to you other than through disclosure
by the Company to you. For purposes of this paragraph, “Competitors” shall mean any
Person which has (1) any of the following Standard Industrial Classification Codes
(“SIC Codes”): 5084, 5085, and 5063, or (2) a pension or benefit plan maintained by a
Person which has any of the foregoing SIC Codes. Prudential and each Purchaser shall
be entitled to rely on a certificate from a Person that it is not a “Competitor” of
the Company. The Company shall be entitled to modify or supplement in writing the
foregoing SIC Codes with the consent of the Required Holders which consent shall not
be unreasonably denied.



11I. NOTICES. All written communications provided for hereunder (other than
communications provided for under paragraph 2) shall be sent by first class mail or
nationwide overnight delivery service (with charges prepaid) or by hand delivery or
telecopy and (i) if to Prudential, addressed to Prudential at the address specified
for such communications in the Purchaser Schedule attached hereto or to such other
address as Prudential shall have specified in writing to the Company, (ii) if to any
Purchaser (other than Prudential), addressed to such Purchaser at the address
specified in the Confirmation of Acceptance (in the case of any Private Shelf Notes),
or at such other address as any Purchaser shall have specified in writing to the
Company, and (iii) if to any other holder of any Note, addressed to such other holder
at such address as such other holder shall have specified in writing to the Company
or, if any such other holder shall not have so specified an address to the Company,
then addressed to such other holder in care of the last holder of such Note which
shall have so specified an address to the Company, and (iv) if to the Company,
addressed to it at Bearings, Inc., 3600 Euclid Avenue, Cleveland, Ohio 44115,
Attention: John R. Whitten, Vice President-Finance and Treasurer, or at such other
address as the Company shall have specified to the holder of each Note in writing;
provided, however, that any such communication to the Company may also, at the option
of the Person sending such communication, be delivered by any other means either to
the Company at its address specified above or to any officer of the Company.



11J. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or the Notes
to the contrary notwithstanding, any payment of principal of or interest on, or
Yield-Maintenance Amount payable with respect to, any Note that is due on a date other
than a Business Day shall be made on the next succeeding Business Day. If the date
for any payment is extended to the next succeeding Business Day by reason of the
preceding sentence, the period of such extension shall be included in the computation
of the interest payable on such Business Day.


 


34









 





11K. SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.



11L. DESCRIPTIVE HEADINGS. The descriptive headings of the several paragraphs
of this Agreement are inserted for convenience only and do not constitute a part of
this Agreement.



11M. SATISFACTION REQUIREMENT. If any agreement, certificate or other writing,
or any action taken or to be taken, is by the terms of this Agreement required to be
satisfactory to any Purchaser, to any holder of Notes or to the Required Holder(s),
the determination of such satisfaction shall be made by such Purchaser, such holder or
the Required Holder(s), as the case may be, in the reasonable judgment (exercised in
good faith) of the Person or Persons making such determination.



11N. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE
STATE OF ILLINOIS.



11O. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together shall
constitute one instrument.



11P. BINDING AGREEMENT. When this Agreement is executed and delivered by the
Company and Prudential, it shall become a binding agreement between the Company and
Prudential. This Agreement shall also inure to the benefit of each Purchaser which
shall have executed and delivered a Confirmation of Acceptance, and each such
Purchaser shall be bound by this Agreement to the extent provided in such Confirmation
of Acceptance.



11Q. INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is prohibited by any
one of such covenants, the fact that it would be permitted by an exception to, or
otherwise be in compliance within the limitations of, another covenant shall not avoid
(i) the occurrence of a Default or Event of Default if such action is taken or such
condition exists or (ii) in any way prejudice an attempt by the holder of any Note to
prohibit through equitable action or otherwise the taking of any action by the Company
or any Subsidiary which would result in a Default or Event of Default.


 


35









 





11R. AMENDMENT OF CERTAIN AGREEMENTS. Upon the execution of this Agreement by
the Company and Prudential, paragraph 5 and 6 of the Existing Agreement are hereby
amended in their entirety so as to read as set forth, respectively, in paragraphs 5
and 6 of this Agreement and defined terms and cross references used in paragraphs 5
and 6 of the Existing Agreement, as amended hereby, shall be deemed to have the
respective meanings ascribed thereto in, and refer to paragraphs in, this Agreement;
PROVIDED, HOWEVER, that any reference to a “Note” or “Notes” in the Existing
Agreement, as amended hereby, shall mean the notes issued under and pursuant to the
Existing Agreement. No termination of this Agreement in whole or in part or any
modification hereof, shall affect the continued applicability of this paragraph and
the covenants referred to herein to the Existing Agreement. In addition, upon the
execution of this Agreement by the Company and Prudential (i) the amounts “$1,000,000”
and “$5,000,000” appearing in paragraph 7A(iii) of the Existing Agreement are hereby
deleted and the amounts “$5,000,000 and “$10,000,000” are hereby respectively
substituted therefor and (ii) paragraphs 7A(xii) and 10C of the Existing Agreement and
paragraphs 3(xi) and 5B of the Inducement Agreement are amended and restated in their
entirety so as to read as set forth in paragraph 7A(xii) of this Agreement (in the
case of paragraphs 7A(xii) of the Existing Agreement and 3(xi)of the Inducement
Agreement) and 10C of this Agreement (in the case of paragraph 10C of the Existing
Agreement and paragraph 5B of the Inducement Agreement).



	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 	 	BEARINGS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ John R. Whitten
 

John R. Whitten
	 	 
	 

	 	 	 	Vice President and Treasurer	 	 
	 
	 	 	 	 	 	 
	 

	 	And:
	 	/s/ Robert C. Stinson
 

Robert C. Stinson
	 	 
	 

	 	 	 	Secretary	 	 






The foregoing Agreement is

hereby accepted as of the

date first above written.




PRUDENTIAL INVESTMENT MANAGEMENT, INC.



	 	 	 
	By: /s/ P. Scott von Fischer

	 	 
	 

Vice President
	 	 







 


36









 







EXHIBIT A




INFORMATION SCHEDULE




Authorized Officers for Prudential




	 	 	 
	P. Scott von Fischer 

Managing Director 

Prudential Capital Group 

Two Prudential Plaza 

Suite 5600

Chicago, Illinois 60601

	 	Marie L. Fioramonti 

Managing Director 

Prudential Capital Group 

Two Prudential Plaza 

Suite 5600

Chicago, Illinois 60601
	 
	 	 
	Telephone: (312) 540-4225

Facsimile: (312) 540-4222

	 	Telephone: (312) 540-4233

Facsimile: (312) 540-4222
	 
	 	 
	Paul Miering 

Managing Director 

Central Credit 

Prudential Capital Group 

Four Gateway Center 

100 Mulberry Street 

Newark, New Jersey 07102

	 	William S. Engelking 

Senior Vice President 

Prudential Capital Group 

Two Prudential Plaza 

Suite 5600

Chicago, Illinois 60601
	 
	 	 
	Telephone: (973) 802-2815

Facsimile: (973) 624-6432

	 	Telephone: (312) 540-4214

Facsimile: (312) 540-4222
	 
	 	 
	Julia Buthman 

Senior Vice President 

Prudential Capital Group 

Two Prudential Plaza 

Suite 5600

Chicago, Illinois 60601

	 	Mathew Douglass 

Vice President 

Prudential Capital Group 

Two Prudential Plaza 

Suite 5600

Chicago, Illinois 60601
	 
	 	 
	Telephone: (312) 540-4237

Facsimile: (312) 540-4222

	 	Telephone: (312) 540-5435

Facsimile: (312) 540-4222






 


 









 





Tan Vu

Vice President

Prudential Capital Group

Two Prudential Plaza

Suite 5600

Chicago, Illinois 60601




Telephone: (312) 540-5437

Facsimile: (312) 540-4222



 


 









 





EXHIBIT F




LIST OF SUBSIDIARIES [1996 SCHEDULE] 




Applied Industrial Technologies — ABC, Inc. (OH)

Applied Industrial Technologies — DBB, Inc. (OH)

Applied Industrial Technologies — Dixie, Inc. (TN)

Applied Industrial Technologies — Mainline, Inc. (WI)

Applied Industrial Technologies — Midwest, Inc. (OH)

Applied Industrial Technologies — GA LP (DE LP operating in GA)

Applied Industrial Technologies — TN LP (DE LP operating in TN)

Applied Industrial Technologies — TX LP (DE LP operating in TX)

Applied Industrial Technologies — PA LLC (PA LLC)

Air and Hydraulics Engineering, Incorporated (AL)

American Bearing and Power Transmission, Inc. (MI) (subsidiary of Applied Industrial Technologies—DBB, Inc.)

ESI Acquisition Corporation (dba Engineered Sales, Inc.) (Ohio)

Moore Bearing Company (MI (subsidiary of Applied Industrial Technologies—DBB, Inc.)

The Ohio Ball Bearing Company (OH)

Bearings Pan American, Inc. (OH)

Bearings Sales and Services, Inc. (WA) (subsidiary of Applied Industrial Technologies — Dixie, Inc.)

BER International, Inc. (Barbados)

BER Capital, Inc. (DE)

Bearings, Inc. (AL)

Bearings, Inc. (TN)

Amerinetics Aerospace, Inc. (MI 1968) (inactive subsidiary of Applied Industrial Technologies —DBB, Inc.)

DBB Financial Service, Inc. (MI) (inactive subsidiary of Applied Industrial Technologies—DBB, Inc.)

Tri-State Development Company(MI) (inactive subsidiary of Applied Industrial Technologies—DBB, Inc.)