Donaldson Company. Inc. Form 10-Q dated January 31, 2005






CONFORMED COPY 











DONALDSON COMPANY, INC. 






$30,000,000

4.85% Senior Notes, Series 2004-A

Due December 17, 2011 






_________________ 



SECOND SUPPLEMENT AND

FIRST AMENDMENT TO

NOTE PURCHASE AGREEMENT 

_________________ 






Dated as of September 30, 2004 











PPN: 257651 B*9 
















SECOND SUPPLEMENT AND

FIRST AMENDMENT TO

NOTE PURCHASE AGREEMENT 



        THIS SECOND SUPPLEMENT AND
FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT (this “Second Supplement”) is entered into as of September 30, 2004
between Donaldson Company, Inc., a Delaware corporation (the “Company”), each Purchaser listed in the attached Schedule
A (individually a “Purchaser” and collectively, the “Purchasers”) and the other holders of outstanding Notes
executing the signature pages hereto for the purpose of agreeing to Section 1(c) hereof and the amendments to the Note Purchase
Agreement (the “other noteholders”) contained herein. 


R E C I T A L S 



        A.        The Company has previously
entered into a Note Purchase Agreement dated as of July 15, 1998 with the institutions listed in Schedule A thereto and a First
Supplement to Note Purchase Agreement dated as of August 1, 1998 with the institutions named in Schedule A thereto (as so
supplemented, the “Note Purchase Agreement”); 



        B.                 The
Purchasers and other noteholders own all of the Notes outstanding as set forth in the attached Schedule B; 



        C.                 The
Company has entered into an amended and restated credit agreement with its banks that provides, among other things, for the
obligations of the Company thereunder to be guarantied by certain Subsidiaries of the Company; and 



        D.                 The
Company desires to issue and sell, and the Purchasers desire to purchase, an additional series of Notes (as defined in the Note
Purchase Agreement) pursuant to the Note Purchase Agreement and in accordance with the terms set forth below; 



        NOW, THEREFORE, the Company,
the Purchasers and the other noteholders agree as follows: 



	1. 	  	Authorization of the New Series of Notes; Subsidiary Guaranty; Release. 







	  	        (a)   Description
of Series 2004-A Notes.   The Company has authorized the issue and sale of $30,000,000 aggregate principal
amount of Notes to be designated as its 4.85% Senior Notes, Series 2004-A, due December 17, 2011 (the “Series 2004-A
Notes,” such term to include any such Notes issued in substitution therefor pursuant to Section 13 of the Note Purchase
Agreement). The Series 2004-A Notes shall be substantially in the form set out in Exhibit 1(a), with such changes therefrom, if
any, as may be approved by the Purchasers and the Company. 




















	  	        (b)   Subsidiary Guaranties.   All
of the outstanding Notes and the Series 2004-A Notes, will be guarantied by the Subsidiary Guarantors pursuant to a guaranty
substantially in the form set out in Exhibit 1(b) (the “Subsidiary Guaranty”). 







	  	        (c)   Release
of Subsidiary Guaranty.   Each holder of a Note agrees to release and discharge a Subsidiary Guarantor from the
Subsidiary Guaranty upon written request of the Company, provided that (i) such Subsidiary has been, or concurrently with the
release by the holders of Notes, will be released and discharged as guarantor under and in respect of the Credit Agreement and any
other Indebtedness of the Company; (ii) such release and discharge is not part of a plan of financing that contemplates such
Subsidiary Guarantor guaranteeing any other Indebtedness of the Company or becoming a borrower under the Credit Agreement; (iii)
no Default or Event of Default exists or will exist immediately following such release and discharge; (iv) if any fee or other
consideration is paid or given to any holder of Indebtedness in connection with such release, other than the repayment of all or a
portion of such Indebtedness, each holder of a Note receives equivalent consideration on a pro rata basis; and (v) at the time of
such written request, the Company delivers to each holder of Notes a certificate of a Responsible Officer certifying the matters
set forth in clauses (i) through (iv). 







        2.   Sale
and Purchase of Series 2004-A Notes.   Subject to the terms and conditions of this Second Supplement and the
Note Purchase Agreement, the Company will issue and sell to the Purchasers, and the Purchasers will purchase from the Company, at
the Closing provided for in Section 3, Series 2004-A Notes in the principal amount specified opposite their names in the
attached Schedule A at the purchase price of 100% of the principal amount thereof. The obligations of the Purchasers hereunder are
several and not joint obligations and no Purchaser shall have any liability to any Person for the performance or non-performance
by any other Purchaser hereunder. 



        3.   Closing.   The
sale and purchase of the Series 2004-A Notes to be purchased by the Purchasers shall occur at the offices of Gardner Carton &
Douglas LLP, Suite 3700, 191 North Wacker Drive, Chicago, Illinois 60606 at 9:00 a.m., Chicago time, at a closing on December 17,
2004 (the “Closing”) or on such other Business Day thereafter, not later than December 31, 2004, as may be agreed upon
by the Company and the Purchasers. At the Closing the Company will deliver to each Purchaser the Series 2004-A Notes to be
purchased by it in the form of a single Note (or such greater number of Series 2004-A Notes in denominations of at least $500,000
as the Purchasers may request) dated the date of the Closing and registered in its name (or in the name of its nominee), against
delivery by the Purchasers to the Company or its order of immediately available funds in the amount of the purchase price therefor
by wire transfer of immediately available funds for the account of the Company to account number 1502-5005-4130 at US Bank –
Minneapolis, US Bank Place, 601 Second Avenue South, Minneapolis, MN 55402, ABA No. 0910-0002-2. If at the Closing the
Company shall fail to tender such Series 2004 Notes to a Purchaser as provided above in this Section 3, or any of the conditions
specified in Section 4 of the Note Purchase Agreement, as modified or expanded by Section 4 hereof, shall not have been fulfilled
to such Purchaser’s satisfaction, such Purchaser shall, at its election, be relieved of all further obligations under this
Agreement, without thereby waiving any rights it may have by reason of such failure or such nonfulfillment. 





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        4.   Conditions
to Closing.   Each Purchaser’s obligation to purchase and pay for the Series 2004-A Notes to be sold to it
at the Closing is subject to the fulfillment to its satisfaction, prior to or at the Closing, of the conditions set forth in
Section 4 of the Note Purchase Agreement, as hereafter modified, and to the following additional conditions: 



	  	        (a)   References
in Section 4 of the Note Purchase Agreement to “Series 1998-A Notes” shall be deemed to be references to the Series
2004-A Notes and references to the “Closing” shall be deemed to refer to the Closing as such term is defined in this
Second Supplement; 







	  	        (b)   The
legal opinions, and forms thereof, called for by Section 4.4 of the Note Purchase Agreement shall be appropriately modified to
reflect this Second Supplement and the transactions contemplated herein, including the authorization, execution and enforceability
of the Subsidiary Guaranty and other matters related thereto; 







	  	        (c)   At
least three Business Days prior to the date of the Closing, each Purchaser shall have received a copy of written instructions
signed by a Responsible Officer on letterhead of the Company confirming the information specified in Section 3 including (i) the
name and address of the transferee bank, (ii) such transferee bank’s ABA number and (iii) the account name and number into
which the purchase price for the Notes is to be deposited; 







	  	        (d)   Each
Subsidiary Guarantor shall have executed and delivered the Subsidiary Guaranty and each Purchaser and each other holder of Notes
shall have received an executed counterpart thereof; and 







	  	        (e)   The
Purchasers and their special counsel shall have been provided with a copy of the executed Credit Agreement. 







        5.   Representations
and Warranties of the Company.   The Company represents and warrants to the Purchasers that each of the
representations and warranties contained in Section 5 of the Note Purchase Agreement is true and correct as of the date
hereof (a) except that all references to “Purchasers” and “you” therein shall be deemed to refer to the
Purchasers and each Purchaser hereunder, all references to “this Agreement” shall be deemed to refer to the Note
Purchase Agreement as supplemented and amended by this Second Supplement, all references to “Notes” therein shall be
deemed to include the Series 2004-A Notes, and (b) except for changes to such representations and warranties or the Schedules
referred to therein, which changes are set forth in the attached Schedule 5. Section 5 of the Note Purchase Agreement also is
amended to modify or add the following representations and warranties: 



	  	        (a)   Section 5.3 is amended to read in its entirety as follows:  







	  	        5.3   Disclosure. 







	  	        Except
as disclosed in Schedule 5.3, and except for projections, as to which no representation or warranty is made other than as stated
in the next 









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	  	sentence, this Agreement, the documents, certificates or other
writings delivered to you by or on behalf of the Company in connection with the transactions contemplated hereby, including the
financial statements listed in Schedule 5.5, taken as a whole, do not contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they
were made. The projections included in the materials delivered to you by or on behalf of the Company are based on good faith
estimates and assumptions that the Company believes are reasonable. Except as expressly described in Schedule 5.3, or in one of
the documents, certificates or other writings identified therein, or in the financial statements listed in Schedule 5.5,
since July 31, 2003, there has been no change in the financial condition, operations, business, properties or prospects of the
Company or any Subsidiary, except changes that individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect. There is no fact known to the Company that could reasonably be expected to have a Material Adverse Effect
that has not been set forth herein or in the other documents, certificates and other writings delivered to you by or on behalf of
the Company specifically for use in connection with the transactions contemplated hereby. 







	  	        (b)   Section
5.14 is amended to read in its entirety as follows (and all references therein to the 1998-A Notes shall be deemed to refer to the
Series 2004-A Notes): 







	  	        5.14.   Use of Proceeds; Margin Regulations. 







	  	        The Company will
apply the proceeds of the sale of the Series 1998-A Notes to the repayment of Indebtedness to banks. No part of the proceeds from
the sale of the Series 1998-A Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any
margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 221), other than
repurchases of stock of the Company that are in compliance with Regulation U, or for the purpose of buying or carrying or trading
in any securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or
to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock does not constitute more
than 10% of the value of the consolidated assets of the Company and its Subsidiaries and the Company does not have any present
intention that margin stock will constitute 25% or more of the value of such assets. As used in this Section, the terms
“margin stock” and “purpose of buying or carrying” shall have the meanings assigned to them in
said Regulation U. 







	  	        (c)    Section
5.16 is amended to read in its entirety as follows: 







	  	        5.16.   Foreign Assets Control Regulations, Anti-Terrorism Order, etc. 









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	  	        Neither
the sale of the Notes by the Company hereunder nor its use of the proceeds thereof will violate (a) the Trading with the Enemy
Act, as amended, (b) any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) or any enabling legislation or executive order relating thereto, (c) the Anti-Terrorism Order or (d)
the United States Foreign Corrupt Practices Act of 1977, as amended. Without limiting the foregoing, neither the Company nor any
Subsidiary (i) is a blocked person described in the Specially Designated Nationals and Blocked Persons List of the Office of
Foreign Assets Control or in Section 1 of the Anti-Terrorism Order or (ii) to the knowledge of the Company, engages in
any dealings or transactions, or is otherwise associated, with any such person. The Company and its Subsidiaries are in
compliance, in all material respects, with all applicable provisions of the USA Patriot Act. 







	  	        (d)    A
new Section 5.19 is added to read in its entirety as follows:  







	  	        5.19.   Solvency of Subsidiary Guarantors. 







	  	        After giving
effect to the transactions contemplated herein and after giving due consideration to any rights of contribution (i) the fair value
of the assets of each Subsidiary Guarantor (both at fair valuation and at present fair saleable value) exceeds its liabilities,
(ii) each Subsidiary Guarantor is able to and expects to be able to pay its debts as they mature, and (iii) each Subsidiary
Guarantor has capital sufficient to carry on its business as conducted and as proposed to be conducted. 







        6.   Representations
of the Purchasers.   Each Purchaser confirms to the Company that the representations set forth in
Section 6.1 of the Note Purchase Agreement are true and correct as to it, except that all references therein to
“you” therein shall be deemed to refer to each Purchaser hereunder, and all references to “Series 1998-A
Notes” therein shall be deemed to include the Series 2004-A Notes. Each Purchaser also represents to the Company that it is
an “accredited investor” as that term is defined in Rule 501(a) of Regulation D under the Securities Act. Section 6.2 of
the Note Purchase Agreement is amended to read in its entirety, which is confirmed by each Purchaser: 



	  	        6.2.   Source of Funds. 







	  	        Each Purchaser
represents that that at least one of the following statements is an accurate representation as to each source of funds (a
“Source”) to be used by it to pay the purchase price of the Notes to be purchased by it hereunder: 







	  	        (a)   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 









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	  	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 its state of domicile; or 






	  	        (b)   the
Source is a separate account that is maintained solely in connection with its 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 







	  	        (c)   the
Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1 (issued January 29, 1990), or
(ii) a bank collective investment fund, within the meaning of PTE 91-38 (issued August 12, 1991) and, except as it has disclosed
to the Company in writing pursuant to this paragraph (c), 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 







	  	        (d)   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 (i) the identity of such QPAM and (ii) 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 (d); or 







	  	        (e)   the
Source constitutes assets of a “plan(s)” (within the meaning of Section IV of PTE 96-23 (the “INHAM
Exemption”)) 









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	  	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 any Obligor and (i) the identity of
such INHAM and (ii) 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 (e); or 






	  	        (f)   the
Source is a governmental plan; or  







	  	        (g)   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 paragraph (g); or 







	  	        (h)   the
Source does not include assets of any employee benefit plan, individual retirement account or other arrangement subject to the
prohibited transaction rules under ERISA or the Code. 







	  	As used in this Section 6, the terms “employee benefit
plan”, “governmental plan” and “separate account” shall have the respective meanings assigned to such
terms in Section 3 of ERISA. 






        7.   Scheduled
Prepayments of the Series 2004-A Notes.   No regularly scheduled prepayments are due on
the Series 2004-A Notes prior to their stated maturity.  



        8.   Section
10 of Note Purchase Agreement.   Section 10 of the Note Purchase Agreement is amended
as follows:  



	  	        (a)   Schedule 10.2.   Schedule
10.2 is replaced by Schedule 10.2 to this Second Supplement.  







	  	        (b)   New
Section 10.9.   A new Section 10.9 is added to read in its entirety as follows:  







	  	        10.9.   Additional Subsidiary Guarantors. 







	  	        The Company will
cause any Subsidiary that is organized under the laws of any state or other jurisdiction of the United States and that (whether or
not required by the terms of the Credit Agreement) is to guarantee, Indebtedness in respect of the Credit Agreement, to enter into
the Subsidiary Guaranty concurrently therewith and as a part thereof to deliver to each of holder of the Notes: 







	  	        (a)       a
copy of an executed Joinder to the Subsidiary Guaranty;  









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	  	        (b)       a
certificate signed by a Responsible Officer of the Company or of such Subsidiary confirming the accuracy of the representations
and warranties in paragraphs (a) through (g) of the Joinder to the Subsidiary Guaranty, with respect to such Subsidiary and the
Subsidiary Guaranty as it relates to such Subsidiary, as applicable; and 







	  	        (c)       an
opinion of counsel (who may be counsel for the Company) reasonably satisfactory to the Required Holders addressed to each holder
of the Notes to the effect that the Subsidiary Guaranty of such Subsidiary has been duly authorized, executed and delivered and
that the Subsidiary Guaranty constitutes the legal, valid and binding contract and agreement of such Subsidiary enforceable
against such Subsidiary in accordance with its terms, except as enforcement of such terms may be limited by bankruptcy,
insolvency, fraudulent conveyance and similar laws affecting the enforcement of creditors’ rights generally and by general
equitable principles. 







        9.    Section
11 of the Note Purchase Agreement. Section 11 of the Note Purchase Agreement is
amended as follows:  



	  	        (a)    Section 11(c).   Section
11(c) is amended to read in its entirety as follows:  







	  	        (c)    the
Company defaults in the performance of or compliance with any term contained in Section 7.1(e) or Sections 10.1 through 10.9; or








	  	        (b)    Section
11(e).   Section 11(e) is amended to read in its entirety as follows:  







	  	        (e)    any
representation or warranty made in writing by or on behalf of the Company or any Subsidiary Guarantor or by any officer of the
Company or any Subsidiary Guarantor in this Agreement or in the Subsidiary Guaranty or in any writing furnished in connection with
the transactions contemplated hereby proves to have been false or incorrect in any material respect on the date as of which made;
or 







	  	        (c)    New
Section 11(k).   A new Section 11(k) is added to read in its entirety as follows:  







	  	        (k)       any
Subsidiary Guarantor defaults in the performance of or compliance with any term contained in the Subsidiary Guaranty or the
Subsidiary Guaranty ceases to be in full force and effect, except as provided in Section 1(c) of the Second Supplement, or is
declared to be null and void in whole or in material part by a court or other governmental or regulatory authority having
jurisdiction or the validity or enforceability thereof shall be contested by the Company or any Subsidiary Guarantor or any of
them renounces any of the same or denies that it has any or further liability thereunder. 









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        10.   Section
15.1 of the Note Purchase Agreement.   Section 15.1 of the Note Purchase Agreement is amended to read in its entirety as
follows: 



	  	        15.1.   Transaction Expenses. 







	  	        Whether
or not the transactions contemplated hereby are consummated, the Company will pay all costs and expenses (including reasonable
attorneys’ fees of one special counsel for you and the Other Purchasers collectively and, if reasonably required, local or
other counsel) incurred by you and each Other Purchaser or holder of a Note in connection with such transactions and in connection
with any amendments, waivers or consents under or in respect of this Agreement, the Notes or the Subsidiary Guaranty (whether or
not such amendment, waiver or consent becomes effective), including: (a) the costs and expenses incurred in enforcing or defending
(or determining whether or how to enforce or defend) any rights under this Agreement, the Notes or the Subsidiary Guaranty or in
responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement, the
Notes or the Subsidiary Guaranty, or by reason of being a holder of any Note and (b) the costs and expenses, including financial
advisors’ fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection
with any work-out or restructuring of the transactions contemplated hereby and by the Notes and the Subsidiary Guaranty. The
Company will pay, and will save you and each other holder of a Note harmless from, all claims in respect of any fees, costs or
expenses if any, of brokers and finders (other than those retained by you). 







        11.   Definitions;
Schedule B.   The following definitions in Schedule B are amended in their entirety or the following new
definitions are added to Schedule B, in the appropriate alphabetical order: 



	  	        “Anti-Terrorism
Order” means Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With
Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)). 







	  	        “Credit
Agreement” means the Amended and Restated Credit Agreement dated as of September 2, 2004 among the Company, various
subsidiaries of the Company, The Bank of Tokyo-Mitsubishi, Ltd., Chicago Branch, Lloyds TSB Bank plc, and U.S. Bank National
Association, as Co-Syndication Agents, Bank of America, N.A., as Administrative Agent and L/C Issuer and the other Lenders party
thereto and Banc of America Securities LLC, as Sole Lead Arranger and Sole Book Manager, as such agreement may be hereafter
amended, modified, restated, supplemented, refinanced, increased or reduced from time to time, and any successor credit agreement
or similar facilities. 







	  	        “INHAM
Exemption” is defined in Section 6.2(e) of the Second Supplement.  









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	  	        “Material
Adverse Effect” means a material adverse effect on (a) the business, operations, affairs, financial condition,
assets or properties of the Company and its Restricted Subsidiaries taken as a whole, or (b) the ability of the Company to perform
its obligations under this Agreement and the Notes, or (c) the ability of any Subsidiary Guarantor to perform its obligations
under the Subsidiary Guaranty, or (d) the validity or enforceability of this Agreement, the Notes or the Subsidiary Guaranty.








	  	        “NAIC
Annual Statement” is defined in Section 6.2(a) of the Second Supplement.  







	  	        “Priority
Debt” means, as of any date, the sum (without duplication) of (a) unsecured Indebtedness of Domestic Restricted
Subsidiaries on such date (other than (i) Indebtedness owed to the Company or another Restricted Subsidiary (ii) Indebtedness of a
Person outstanding at the time such Person is merged or consolidated with, or becomes, a Restricted Subsidiary) and
(iii) Guaranties by a Subsidiary Guarantor of the Notes and of Indebtedness in respect of the Credit Agreement and (b)
Indebtedness of the Company and its Domestic Restricted Subsidiaries secured by Liens permitted by Section 10.2(j) on such date.








	  	        “QPAM
Exemption” is defined in Section 6.2(d) of the Second Supplement.  







	  	        “Second
Supplement” means the Second Supplement and First Amendment to Note Purchase
Agreement dated as of September 30, 2004 between the Company and the Purchasers and other
holders of Notes named in Schedules A and B thereto.  







	  	        “Significant
Subsidiary” means, as of the date of determination, (a) any Subsidiary Guarantor and (b) any other Restricted Subsidiary
the assets or revenues of which account for more than 10% of the Consolidated Total Assets of the Company and its Restricted
Subsidiaries at the end of the most recently ended fiscal period or more than 10% of the consolidated revenues of the Company and
its Restricted Subsidiaries for the most recently completed four fiscal quarters. 







	  	        “Subsidiary
Guarantor” means Donaldson Capital, Inc., a Minnesota corporation and a Subsidiary, and any other Subsidiary that is
organized under the laws of any state or other jurisdiction of the United States and that hereafter becomes a party to the
Subsidiary Guaranty. 







	  	        “Subsidiary
Guaranty” is defined in Section 1(a) of the Second Supplement.  









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	  	        “USA
Patriot Act” means Public Law 107-56 of the United States of America, United and Strengthening America by Providing Tools
Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001. 







In addition, the reference to “the date of this Agreement” in
clause (d) of the definition of “Restricted Investments” is amended to refer to “the date of the Second
Supplement” and Schedule B-1 is amended by substituting therefor Schedule B-1 to this Second Supplement. 



        12.   Applicability
of Note Purchase Agreement.   Except as otherwise expressly provided herein (and expressly permitted by the
Note Purchase Agreement), all of the provisions of the Note Purchase Agreement are incorporated by reference herein and shall
apply to the Series 2004-A Notes as if expressly set forth in this Supplement and, except as so provided or where the context
otherwise requires, references in the Note Purchase Agreement to “Series 1998-A Notes” and to the “Notes”
shall be deemed to refer to the Series 2004-A Notes and to include the Series 2004-A Notes. 

















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        IN WITNESS WHEREOF, the
Company, the Purchasers and the other noteholders have caused this Second Supplement to be executed and delivered as of the date
set forth above. 


	 	 	 	 	 	 
	 	 	DONALDSON COMPANY, INC.
	 
	 		By:  		/s/   William M. Cook 	 
	 	

	 		Name:  		William M. Cook 	 
	 		Title:  		President & CEO 	 


































  










	 	 	 	 	 	 
	 	 	METROPOLITAN LIFE INSURANCE COMPANY 
	 
	 		By:  		/s/   Timothy Powell 	 
	 	

	 		Name:  		Timothy Powell 	 
	 		Title:  		Director 	 





























S-2 










	 	 	 	 	 	 
	 	 	STATE FARM LIFE INSURANCE COMPANY 
	 
	 		By:  		/s/   Jeff Attwood 	 
	 	

	 		Name:  		Jeff Attwood 	 
	 		Title:  		Investment Officer 	 
	 
	 
	 		By:  		/s/   Larry Rottunda 	 
	 	

	 		Name:  		Larry Rottunda 	 
	 		Title:  		Assistant Secretary 	 





























S-3 











        The undersigned holders of
Series 1998-A Notes have caused this Second Supplement to be executed solely for the purpose of agreeing to the provisions of
Section 1(c) and consenting to the amendments to the Note Purchase Agreement provided for in this Second Supplement. 


	 	 	 	 	 	 
	 	 	PRINCIPAL LIFE INSURANCE COMPANY, 
ON BEHALF OF ONE OR MORE SEPARATE ACCOUNTS 
	 
	 		By:  		Principal Global Investors, LLC,
a Delaware limited liability company,
its authorized signatory 	 
	 
	 		By:  		/s/   Douglas A. Drees 	 
	 	

	 		Its:  		Douglas A. Drees, Counsel 	 
	 
	 		By:  		/s/   Joellen J. Watts 	 
	 	

	 		Its:  		Joellen J. Watts, Counsel 	 
























S-4 










	 	 	 	 	 	 
	 	 	MIDLAND NATIONAL LIFE INSURANCE COMPANY 
	 
	 		By:  		Midland Advisors Company, as agent 	 
	 
	 		By:  		/s/   Tyson Rehfeld 	 
	 	

	 		Name:  		Tyson Rehfeld 	 
	 		Title:  		Vice President 	 






























S-5 










	 	 	 	 	 	 
	 
	 	 	AMERITAS LIFE INSURANCE CORP. 
	 
	 		By:  		Ameritas Investment Advisors, Inc., as agent 	 
	 
	 		By:  		/s/   Andrew S. White 	 
	 	

	 		Name:  		Andrew S. White 	 
	 		Title:  		Vice President 	 
	 
	 	 	AMERITAS VARIABLE LIFE INSURANCE COMPANY 
	 
	 		By:  		Ameritas Investment Advisors, Inc., as agent 	 
	 
	 		By:  		/s/   Andrew S. White 	 
	 	

	 		Name:  		Andrew S. White 	 
	 		Title:  		Vice President 	 





















S-6 











Schedule A to

Second Supplement  


INFORMATION RELATING TO PURCHASERS 


	Name of Purchaser 
		Principal Amount of Series
2004-A Notes to be Purchased 

	Metropolitan Life Insurance Company	 	$15,000,000	 





METROPOLITAN LIFE INSURANCE COMPANY

1 MetLife Plaza

27-01 Queens Plaza North

Long Island City, New York 11101 



(Securities to be registered in the name of Metropolitan Life Insurance Company) 



	(1) 	  	All scheduled payments of principal and interest by wire transfer
of immediately available funds to: 





	 	Bank Name:	 	JPMorgan Chase Bank	 
	 	ABA Routing #:	 	021-000-021	 
	 	Account No.:	 	002-2-410591	 
	 	Account Name:	 	Metropolitan Life Insurance Company	 
	 	Ref:	 	Donaldson Company 4.85% Senior Notes, Series 2004-A due 
December 17, 2011	 






	  	with sufficient information to identify the source and application
of such funds, including issuer, PPN#, interest rate, maturity and whether payment is of principal, interest, make whole amount or
otherwise. 






	  	For all payments other than scheduled payments of principal and
interest, the Company shall seek instructions from the holder, and in the absence of instructions to the contrary, will make such
payments to the account and in the manner set forth above. 






	(2) 	  	All notices and communications: 






	  	Metropolitan Life Insurance Company

Investments, Private Placements

10 Park Avenue

Morristown, New Jersey 07962-1902

Attention: Director

Facsimile (973) 355-4250 

















Schedule A 










	  	        With a copy OTHER than with respect to deliveries of financial statements to: 






	  	Metropolitan Life Insurance Company

10 Park Avenue

Morristown, New Jersey 07962-1902

Attention: Chief Counsel-Securities Investments (PRIV)

Facsimile (973) 355-4338 






	(3) 	  	Original notes delivered to: 






	  	Metropolitan Life Insurance Company

Securities Investments, Law Department

10 Park Avenue

Morristown, New Jersey 07962-1902

Attention: Sandip Khosla, Esq. 






	(4) 	  	Taxpayer I.D. Number: 13-5581829 









-2-

Schedule A 










Schedule A to

Second Supplement  


INFORMATION RELATING TO PURCHASERS 


STATE FARM LIFE INSURANCE COMPANY

TAX ID #37-0533090 


Participation/Series:      $15,000,000/2004-A  


Wire Transfer Instructions: 


	 	JPMorganChase	 	 	 
	 	ABA#	 	021000021	 
	 	Attn:	 	SSG Private Income Processing	 
	 	A/C#	 	900 9 000200	 
	 	For further credit to:	 	State Farm Life Insurance Company 
Custody Account # G06893	 
	 	RE:	 	PPN #: 257651 B* 9 Rate: 4.85% Maturity Date: 12/17/11	 






Send notices, financial statements, officer’s certificates and other
correspondence to: 



	  	State Farm Life Insurance Company

Investment Dept. E-8

One State Farm Plaza

Bloomington, IL 61710 





Send confirms to:  



	  	State Farm Life Insurance Company

Investment Accounting Dept. D-3

One State Farm Plaza

Bloomington, IL 61710 





Send the original security (via registered mail) to: 



	  	JPMorganChase

Attn: Barbara Walsh

(North America Insurance)

3 Chase Metrotech Center-5th Floor

Brooklyn, New York 11245 








Send an additional copy of the
original security plus an original set of closing documents and two conformed copies of
the Note Purchase Agreement to: 



	  	State Farm Insurance Companies

One State Farm Plaza

Bloomington, Illinois 61710

Attn:   Investment Legal E-3

            Larry Rottunda, Investment Counsel  









-3-

Schedule A 











Schedule B to

Second Supplement  







	Holder
			Principal Amount

		6.20% Senior Notes,
Series-1998-A,
Tranche 1 
		6.31% Senior Notes,
Series-1998-A, 
Tranche 2 
		6.39% Senior Notes,
Series 1998-B 

	Metropolitan Life Insurance Company	 	 	 	  	 	$	  22,000,000	 	$	  25,000,000	 
	 
	Principal Life Insurance Company	 	 	$	  10,000,000	 
	 
	Midland National Life Insurance Company*	 	 	 	5,000,000	 
	 
	State Farm Life Insurance Company	 	 	 	5,000,000	 	 	5,000,000	 
	 
	Ameritas Life Insurance Company	 	 	 	2,000,000	 
	 
	Ameritas Variable Life Insurance Company	 	 	 	1,000,000	 
		
		
		
	
	 
	        Total	 	 	$	  23,000,000	 	$	  27,000,000	 	$	  25,000,000	 
		
		
		
	












_________________ 



* Beneficial owner. Registered in the name of Hare & Co. 


















Schedule B 












Schedule B-1 to

Second Supplement  



EXISTING INVESTMENTS 



	Investment in Advanced Filtration Systems Inc.	 	 	$	 9,594,000	 
	 
	Investment in PT Panata Jaya Mandiri	 	 	$	 4,186,000	 
	 
	Investment in Rashed al-Rashed & Sons-Donaldson Ltd.	 	 	$	   761,000	 
	 
	Investment in Onboard Technologies	 	 	$	   200,000	 
	 
	Loan to Jay Ward in the amount of	 	 	$	    10,000	 
	 
	Loan to Mys-Tec Sales, Inc. in the amount of	 	 	$	   292,000	 
























Schedule B-1 











Schedule 5 to

Second Supplement  


EXCEPTIONS TO REPRESENTATIONS

AND WARRANTIES 



        Section
5.4.   Schedule 5.4 is replaced by Schedule 5.4 to this Second Supplement.  



        Section
5.5.   Schedule 5.5 is replaced by Schedule 5.5 to this Second Supplement.  



        Section
5.8.   Schedule 5.8 is replaced by Schedule 5.8 to this Second Supplement.  



        Section
5.9.   Reference to December 31, 1990 shall be deemed to refer to July 31, 2000.  



        Section
5.11.   Schedule 5.11 is replaced by Schedule 5.11 to this Second Supplement.  



        Section
5.13.   Reference to the number 42 shall be deemed to refer to 4.  



        Section
5.15.   Reference to April 20, 1998 shall be deemed to refer to July 31, 2004 and Schedule 5.15 is replaced
with Schedule 5.15 to this Second Supplement. 


















Schedule 5 












Schedule 5.3 to

Second Supplement  


DISCLOSURE MATERIALS 



Offering Memorandum dated July 2004 with respect to the Amended and Restated
Credit Agreement dated September 2, 2004. 

























Schedule 5.3 












Schedule 5.4 to

Second Supplement  


SUBSIDIARIES AND OWNERSHIP OF SUBSIDIARY STOCK 



	(i)  	   	Subsidiaries  






*Unless otherwise noted, all listed subsidiaries are owned 100% by Donaldson
Company, Inc. or a Subsidiary of the Donaldson Company, Inc. 


Donaldson Capital, Inc. (Minnesota, U.S.A.)

Nippon Donaldson, Ltd. (Japan)

Donaldson Korea Company, Ltd. (Republic of South Korea)

Donaldson Filtration (Asia Pacific) Pte. Ltd. (Singapore)

Donaldson Australasia Pty, Ltd. (Australia)

Donaldson India Filter Systems Private Limited (India)

P.T. Donaldson Systems Indonesia (Indonesia) (96.5% net ownership by the Donaldson Company, Inc.) 

ASHC, Inc (U.S.A.)

           Prestadora de Servicios Aquas S. de R.L. de C.V. (Mexico)



Donaldson Filtration Industrial S. de R.L. de C.V. (Mexico)

Donaldson S.A. de C.V. (Mexico)

           DIEMO S.A. de C.V. (Mexico)



Donaldson Sales, Inc. (Barbados)

Donaldson do Brazil M&E Limitida (Brazil)

Donaldson Filtration Systems Pty, Ltd. (South Africa)

Donaldson Canada, Inc. (Canada)

ultrafilter Pty, Ltd (Australia)

ultrafilter Co Ltd. (Thailand)

Donaldson Filtration Inc. (Phillipines)

Donaldson Filtration sdn hdn (Malaysia)

PT ultrafilter (Indonesia)

ultrafilter Pte Ltd.

-Donaldson Luxembourg S.a.r.l. (Luxembourg)

           Donaldson Coordination Center, B.V.B.A. (Belgium)

           Donaldson Torit, B.V. (Netherlands)

                      Donaldson Nederland B.V. (Netherlands)

                      ultrafilter B.V. (Netherlands)

                      Donaldson Schweiz GmbH (Switzerland)

                      ultrafilter AG (Switzerland)
                      

                      Donaldson Filtre Sistemleri Ticaret Ltd Sirketi (Turkey)

                      ultrafilter s.r.o. (Slovakia)

                      ultrafilter sp. zoo (Poland) 






Schedule 5.4 











                      Donaldson Polska sp. zoo (Poland)

                      ultrafilter AS (Norway)

                      Donaldson Italia Srl (Italy)

                      Donaldson Filtration Österreich GmbH (Austria)

                      ultrafilter s.l. (Spain)

                      ultrafilter s.r.o (Czech Republic)

                      Donaldson Czech Republic (Czech Republic)



                      Donaldson France, S.A.S. (France)

                                 Tecnov Donaldson, S.A.S. (France)

                                 ultrafilter S.A.S. (France)

                                 Donaldson Filtros Iberica S.L. (Spain)



                      Donaldson Scandinavia APS (Denmark)

                                 ultrafilter APS (Denmark)



                      Donaldson Far East Limited (Hong Kong)

                                 Donaldson (Wuxi) Filters Co., Ltd. (China)

                                            Shanghai Donaldson Filtration Co., Ltd. (China)

                                 Donaldson Ltd. (Thailand)



                      Donaldson Europe, B.V.B.A. (Belgium)

                                 Donaldson Belgie B.V.B.A. (Belgium)



                      Donaldson UK Holding Ltd. (UK)

                                 ultrafilter Ltd. (UK)

                                            DCE Donaldson Ltd. (UK)

                                 DFCH Ltd. (UK)

                                            Donaldson Filter Components Ltd. (UK)

                                                       Tetratec Europe Ltd. (UK)

                                                       DCE Ltd. (UK)

                                                       DCE Group Ltd. (UK)

                                                           Donaldson Ibérica, Soluciones en Filtracion, S.L. (Spain)

                                                           DCE Donaldson (Pty) Ltd. (South Africa)



                      Donaldson Deutschland Holding GmbH (Germany)

                                 Donaldson GmbH (Germany)

                                 Torit DCE GmbH (Germany)

                                 ultrafilter kft (Hungary)



                      Donaldson Filtration Deutschland GmbH (Germany)

                                 ultratroc GmbH (Germany)

                                 ultra air GmbH (Germany)

                                 Quality Air GmbH (Germany)

                                 ultrafilter s.r.l. (Romania)

                                 ultrafilter International AG (Switzerland) 









Schedule 5.4 










	(ii)  	   	Other Affiliates  






	  	Advanced Filtration Systems Inc. (Illinois, USA) 50%

PT Panata Jaya Mandiri (Jakarta, Indonesia) 30%

Rashed al-Rashed & Sons-Donaldson Ltd. (Dammam, Saudi Arabia) 49%  






	(iii)  	   	Directors and Officers  






	  	
Directors:

F. Guillaume Bastiaens, Vice Chairman, Cargill, Inc.

William M. Cook, President and Chief Executive Officer, Donaldson Company, Inc.

Janet M. Dolan, President and Chief Executive Officer, Tennant Company

Jack W. Eugster, Non-Executive Chairman, ShopKo Stores, Inc.

John F. Grundhofer, Chairman Emeritus, U.S. Bancorp

Kendrick B. Melrose, Chairman and Chief Executive Officer, The Toro Company

Paul David Miller, Chairman, Alliant Techsystems Inc.

Jeffrey Noddle, Chairman, President and Chief Executive Officer, SUPERVALU INC.

William G. Van Dyke, Chairman, Donaldson Company, Inc.

John P. Wiehoff, Chief Executive Officer and President, C.H. Robinson Worldwide, Inc. 







	  	Officers:

William G. Van Dyke, Chairman, Donaldson Company, Inc.

William M. Cook, President and Chief Executive Officer, Donaldson Company, Inc.

James R. Giertz, Senior Vice President, Commercial and Industrial

Nickolas Priadka, Senior Vice President, International

Lowell F. Schwab, Senior Vice President, Engine Systems and Parts

Dale M. Couch, Vice President and General Manager, Asia Pacific

Norman C. Linnell, Vice President, General Counsel and Secretary

Charles J. McMurray, Vice President, Human Resources

Geert Henk Touw, Vice President and General Manager, Europe/Middle East/Africa

William I. Vann, Vice President, Operations

Thomas R. VerHage, Vice President and Chief Financial Officer  






















Schedule 5.4 










Schedule 5.5 to

Second Supplement  


FINANCIAL STATEMENTS 



The only financial statements provided by Donaldson Company, Inc. (other than
financial statements delivered to the Purchasers in their capacity as holders of Notes pursuant to Section 7.1(a) and (b)) are the
following financial summaries included in the Offering Memorandum described in Schedule 5.3: 


Summary of Historical Financial Information (Fiscal 2001-2003) 


Summary of Projected Financial Information (Fiscal 2004-2009) 






















Schedule 5.5 












Schedule 5.8 to

Second Supplement  


LITIGATION 



The Company is appealing a judgment entered against it in the Engineering
Products Company v. Donaldson patent infringement case, which case is discussed in the Company’s press release dated August
13, 2004, the text of which appears below: 


	Press Release	 	 	 	Source: Donaldson Company, Inc.	 





Donaldson Company to Appeal Judgment 
Friday August 13, 6:00 am ET  



MINNEAPOLIS, Aug. 13 /PRNewswire-FirstCall/ — Donaldson Company, Inc.
(NYSE: DCI – News) announced today the outcome of post trial motions in the jury trial between Donaldson and
Engineered Products Company, Inc. (“EPC”). In 1998, EPC filed a patent infringement lawsuit against Donaldson in the
U.S. Federal District Court for the Northern District of Iowa. On May 11, 2004, the jury found in favor of EPC on its willful
infringement claims against Donaldson. On August 12, 2004, the Court ruled that damages should be approximately $16.0 million.
Donaldson intends to vigorously challenge the judgment and will appeal the decision to the Federal Circuit Court of Appeals. This
appeal could take up to two years or longer. EPC’s patent expired on May 1, 2001 and will not impact Donaldson’s ongoing
business operations. Donaldson confirms previous guidance of delivering its 15th consecutive year of double-digit earnings growth
when it issues its fourth quarter earnings release on August 31. 


About Donaldson Company, Inc. 



Donaldson Company, Inc., headquartered in Minneapolis, is a leading worldwide
provider of filtration systems and replacement parts. Founded in 1915, Donaldson is a technology-driven company committed to
satisfying customer needs for filtration solutions through innovative research and development. Donaldson serves customers in the
industrial and engine markets including dust collection, power generation, specialty filtration, compressed air purification,
off-road equipment, industrial compressors, and trucks. Our 10,000 employees contribute to the company’s success at over 30
manufacturing locations around the world. In fiscal year 2003, Donaldson reported sales of more than $1.2 billion and achieved its
14th consecutive year of double-digit earnings growth. Donaldson is a member of the S&P MidCap 400 Index and Donaldson shares
are traded on the New York Stock Exchange under the symbol DCI. Additional company information is available at
http://www.donaldson.com 












Schedule 5.8 










Schedule 5.11 to

Second Supplement  


LICENSES, PERMITS, ETC. 



The Company is appealing a judgment entered against it in the Engineering
Products Company v. Donaldson patent infringement case, which case is discussed in the Company’s press release dated August
13, 2004 (see Schedule 5.8). 



The Company also has various ongoing legal assessments and actions relating
to violation of certain intellectual property rights of the Company, none of which, however, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect. 






















Schedule 5.11 











Schedule 5.15 to

Second Supplement  


INDEBTEDNESS 


	Amounts in $ Millions:	 	 	 		 	 		 
	 
	Short-term debt:	 	 
	        Multi-currency revolving facility	 	 	$	  0.0	 
	        Uncommitted credit facilities	 	 	 	12.4	 
	        Credit facilities of international subsidiaries	 	 	 	7.3	 	$	 19.7	 
		
		
	
	Current maturities of long-term debt	 	 
	        6.20% Unsecured senior notes due July 15, 2005	 	 	$	 23.0	 
	        1.9475% Guaranteed senior notes due Jan 29, 2005	 	 	 	10.7	 
	        Aggregated current capital leases	 	 	 	0.6	 	$	 34.3	 
		
		
	
	Long-term debt:	 	 
	6.31% Unsecured senior notes due July 15, 2008	 	 	$	 28.6	 
	6.39% Unsecured senior notes due August 15, 2010	 	 	 	24.5	 
	1.51% Guaranteed note due March 28, 2006	 	 	 	7.1	 
	9.4% Secured installment note due January 31, 2007	 	 	 	0.1	 
	Aggregated Long-term Capital Leases	 	 	 	2.6	 
	Variable rate industrial development revenue bonds	 	 
	        due September 1, 2024	 	 	 	8.0	 	$	 70.9	 
		
		
	






NOTE:   Since the close of F’04
(7-31-04), the Donaldson Company, Inc. engaged in the following material transactions. 



	  	•  	  	The Donaldson Company, Inc. has amended and restated its existing
$150 million three year credit agreement that was to mature on September 27, 2005. The amendment extends the maturity date of the
facility to September 2, 2009. 






	  	•  	  	The Donaldson Company, Inc. has drawn $75 Million under its
amended and restated credit agreement. 






	  	•  	  	The Company has repurchased three million shares, or approximately
3.5 percent, of its outstanding common stock after the market closed on September 3, 2004. The shares were purchased from Banc of
America Securities LLC under an overnight share repurchase program at a total cost of approximately $86.5 million. 









Schedule 5.15 













Schedule 10.2 to

Second Supplement  


LIENS 


Donaldson Filtration Systems (Pty) Ltd Secured Note of 726,000
Rand 



Capitalized leases in the aggregate amount of Euro 2,657,000 























Schedule 10.2 










Exhibit 1(a) to

Second Supplement  


[FORM OF SERIES 2004-A NOTE] 


DONALDSON COMPANY, INC. 


4.85% Senior Note, Series 2004-A

due December 17, 2011 


	No. [_____]	 	 	 	[Date]	 
	$[_______]	 	 	 	PPN: 257651 B*9	 






        FOR VALUE RECEIVED, the
undersigned, DONALDSON COMPANY, INC. (herein called the “Company”), a corporation organized and existing under the laws
of the State of Delaware, promises to pay to [ ], or registered assigns, the principal sum of
$[           ] on December 17, 2011, with interest (computed on the basis
of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 4.85% per annum from the date
hereof, payable semiannually, on June 17 and December 17 in each year, commencing with the June 17 or December 17 next succeeding
the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any
overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any
Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the
option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 6.85%
or (ii) 2% over the rate of interest publicly announced by Bank of America, NA from time to time in Chicago, Illinois as its
“base” or “prime” rate. 



        Payments of principal of,
interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at
the principal office of Bank of America, NA in Chicago, Illinois or at such other place as the Company shall have designated by
written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. 



        This Note is one of a series
of Notes (herein called the “Notes”) issued pursuant to a Note Purchase Agreement dated as of July 15, 2004, as
supplemented and amended by a First Supplement dated as of August 1, 1998 and a Second Supplement and First Amendment dated as of
September 30, 2004 (as so supplemented and amended and as hereafter from time to time amended and supplemented, the “Note
Purchase Agreement”), and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to
have made the representations set forth in Sections 6.1 (to the extent such representation is required for such transfer) and 6.2
of the Note Purchase Agreement. The Notes have not been registered under the Securities Act of 1933, as amended. 






Schedule 5 











        This Note is a registered
Note and, as provided in Section 13 of the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder’s
attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the
transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is
registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be
affected by any notice to the contrary. 



        This Note is subject to
optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement
but not otherwise. 



        If an Event of Default, as
defined in the Note Purchase Agreement, occurs and is continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note
Purchase Agreement. 



        Payment of the principal of,
and interest and Make-Whole Amount, if any, on this Note, and all other amounts due under the Note Purchase Agreement, is
guaranteed pursuant to the terms of a Subsidiary Guaranty dated as of December 17, 2004 of certain Subsidiaries of the
Company.* 



        This Note 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 excluding
choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such
State. 


	 	 	 	 	 	 
	 	 	DONALDSON COMPANY, INC. 
	 
	 
	   		By:  	 	   	 
	 	

		  	 
	   		Name:  	 	   	 
	 	

		  	 
	   		Title:  	 	   	 
	 	

		  	 





















_________________ 

*    This paragraph must be deleted at such time as there are no
Subsidiary Guarantors. 





-2-

Exhibit 1(a) 










Exhibit 1(b) to

Second Supplement  


FORM OF SUBSIDIARY GUARANTY 



        THIS GUARANTY (this
“Guaranty”) dated as of December 17, 2004 is made by the undersigned (each, a “Guarantor”), in favor of the
holders from time to time of the Notes hereinafter referred to and their respective successors and assigns (collectively, the
“Holders” and each individually, a “Holder”). 



        W
I T N E S S E T H : 



        WHEREAS, Donaldson Company,
Inc. (the “Company”) entered into a Note Purchase Agreement dated as of July 15, 1998, a First Supplement to Note
Purchase Agreement dated as of August 1, 1998 and a Second Supplement and First Amendment dated as of September 30, 2004 (the Note
Purchase Agreement as so supplemented and amended and as it may hereafter be amended, supplemented, restated or otherwise modified
from time to time in accordance with its terms, the “Note Purchase Agreement”); 



        WHEREAS, the Note Purchase
Agreement provides for the issuance by the Company of up to $150,000,000 aggregate principal amount of Notes (as defined in the
Note Purchase Agreement), of which the Company has heretofore issued $50,000,000 aggregate principal amount of Series 1998-A Notes
and $25,000,000 aggregate principal amount of Series 1998-B Notes and, concurrently with the delivery by the Guarantors of this
Guaranty, is issuing $30,000,000 aggregate principal amount of Series 2004-A Notes; 



        WHEREAS, the Parent owns,
directly or indirectly, all of the issued and outstanding capital stock or partnership interests of each Guarantor and, by virtue
of such ownership and otherwise, each Guarantor will derive substantial benefits from the purchase by the Holders of the
Company’s Notes; 



        WHEREAS, it is a condition
precedent to the obligation of the Holders to purchase the Notes that each Guarantor shall have executed and delivered this
Guaranty to the Holders; and 



        WHEREAS, each Guarantor
desires to execute and deliver this Guaranty to satisfy the conditions described in the preceding paragraph; 



        NOW, THEREFORE, in
consideration of the premises and other benefits to each Guarantor, and of the purchase of the Company’s Notes by the
Holders, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, each Guarantor
makes this Guaranty as follows: 





Schedule 5 










        SECTION 1.   Definitions.   Any
capitalized terms not otherwise herein defined shall have the meanings attributed to them in the Note Purchase Agreement.




        SECTION 2.   Guaranty.   Each
Guarantor, jointly and severally with each other Guarantor, unconditionally and irrevocably guarantees to the Holders the due,
prompt and complete payment by the Company of the principal of, Make-Whole Amount, if any, and interest on, and each other amount
due under, the Notes or the Note Purchase Agreement, when and as the same shall become due and payable (whether at stated maturity
or by required or optional prepayment or by declaration or otherwise) in accordance with the terms of the Notes and the Note
Purchase Agreement (the Notes and the Note Purchase Agreement being sometimes hereinafter collectively referred to as the
“Note Documents” and the amounts payable by the Company under the Note Documents, and all other monetary obligations of
the Company thereunder (including reasonable attorneys’ fees and expenses), being sometimes collectively hereinafter referred
to as the “Obligations”). This Guaranty is a guaranty of payment and not just of collectibility and is in no way
conditioned or contingent upon any attempt to collect from the Company or upon any other event, contingency or circumstance
whatsoever. If for any reason whatsoever the Company shall fail or be unable duly, punctually and fully to pay such amounts as and
when the same shall become due and payable, each Guarantor, without demand, presentment, protest or notice of any kind, will
forthwith pay or cause to be paid such amounts to the Holders under the terms of such Note Documents, in lawful money of the
United States, at the place specified in the Note Purchase Agreement, or perform or comply with the same or cause the same to be
performed or complied with, together with interest (to the extent provided for under such Note Documents) on any amount due and
owing from the Company. Each Guarantor, promptly after demand, will pay to the Holders the reasonable costs and expenses of
collecting such amounts or otherwise enforcing this Guaranty, including, without limitation, the reasonable fees and expenses of
counsel. Notwithstanding the foregoing, the right of recovery against each Guarantor under this Guaranty is limited to the extent
it is judicially determined with respect to any Guarantor that entering into this Guaranty would violate Section 548 of the United
States Bankruptcy Code or any comparable provisions of any state law, in which case such Guarantor shall be liable under this
Guaranty only for amounts aggregating up to the largest amount that would not render such Guarantor’s obligations hereunder
subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provisions of any state law.




        SECTION 3.   Guarantor’s
Obligations Unconditional.   The obligations of each Guarantor under this Guaranty shall be primary, absolute
and unconditional obligations of each Guarantor, shall not be subject to any counterclaim, set-off, deduction, diminution,
abatement, recoupment, suspension, deferment, reduction or defense based upon any claim each Guarantor or any other person may
have against the Company or any other person, and to the full extent permitted by applicable law shall remain in full force and
effect without regard to, and shall not be released, discharged or in any way affected by, any circumstance or condition
whatsoever (whether or not each Guarantor or the Company shall have any knowledge or notice thereof), including: 





-2-

Exhibit 1(b) 











	  	        (a)       any
termination, amendment or modification of or deletion from or addition or supplement to or other change in any of the Note
Documents or any other instrument or agreement applicable to any of the parties to any of the Note Documents; 







	  	        (b)       any
furnishing or acceptance of any security, or any release of any security, for the Obligations, or the failure of any security or
the failure of any person to perfect any interest in any collateral; 







	  	        (c)       any
failure, omission or delay on the part of the Company or the Parent to conform or comply with any term of any of the Note
Documents or any other instrument or agreement referred to in paragraph (a) above, including, without limitation, failure to give
notice to any Guarantor of the occurrence of a “Default” or an “Event of Default” under any Note Document;








	  	        (d)       any
waiver of the payment, performance or observance of any of the obligations, conditions, covenants or agreements contained in any
Note Document, or any other waiver, consent, extension, indulgence, compromise, settlement, release or other action or inaction
under or in respect of any of the Note Documents or any other instrument or agreement referred to in paragraph (a) above or any
obligation or liability of the Company or the Parent, or any exercise or non-exercise of any right, remedy, power or privilege
under or in respect of any such instrument or agreement or any such obligation or liability; 







	  	        (e)       any
failure, omission or delay on the part of any of the Holders to enforce, assert or exercise any right, power or remedy conferred
on such Holder in this Guaranty, or any such failure, omission or delay on the part of such Holder in connection with any Note
Document, or any other action on the part of such Holder; 







	  	        (f)       any
voluntary or involuntary bankruptcy, insolvency, reorganization, arrangement, readjustment, assignment for the benefit of
creditors, composition, receivership, conservatorship, custodianship, liquidation, marshaling of assets and liabilities or similar
proceedings with respect to the Company, the Parent, any Guarantor or to any other person or any of their respective properties or
creditors, or any action taken by any trustee or receiver or by any court in any such proceeding; 







	  	        (g)       any
discharge, termination, cancellation, frustration, irregularity, invalidity or unenforceability, in whole or in part, of any of
the Note Documents or any other agreement or instrument referred to in paragraph (a) above or any term hereof; 







	  	        (h)       any
merger or consolidation of the Company or the Parent or any Guarantor into or with any other corporation, or any sale, lease or
transfer of any of the assets of the Company or the Parent or any Guarantor to any other person; 









-3-

Exhibit 1(b) 











	  	        (i)       any
change in the ownership of any shares of capital stock of the Company or the Parent or any change in the corporate relationship
between the Company or the Parent and any Guarantor, or any termination of such relationship; 







	  	        (j)       any
release or discharge, by operation of law, of any other Guarantor from the performance or observance of any obligation, covenant
or agreement contained in this Guaranty; or 







	  	        (k)       any
other occurrence, circumstance, happening or event whatsoever, whether similar or dissimilar to the foregoing, whether foreseen or
unforeseen, and any other circumstance which might otherwise constitute a legal or equitable defense or discharge of the
liabilities of a guarantor or surety or which might otherwise limit recourse against any Guarantor. 







        SECTION 4.   Full
Recourse Obligations.   The obligations of each Guarantor set forth herein constitute the full recourse
obligations of such Guarantor enforceable against it to the full extent of all its assets and properties. 



        SECTION 5.   Waiver.   Each
Guarantor unconditionally waives, to the extent permitted by applicable law, (a) notice of any of the matters referred to in
Section 3, (b) notice to such Guarantor of the incurrence of any of the Obligations, notice to such Guarantor or the Company
of any breach or default by such Company with respect to any of the Obligations or any other notice that may be required, by
statute, rule of law or otherwise, to preserve any rights of the Holders against such Guarantor, (c) presentment to or demand
of payment from the Company or the Guarantor with respect to any amount due under any Note Document or protest for nonpayment or
dishonor, (d) any right to the enforcement, assertion or exercise by any of the Holders of any right, power, privilege or
remedy conferred in the Note Purchase Agreement or any other Note Document or otherwise, (e) any requirement of diligence on
the part of any of the Holders, (f) any requirement to exhaust any remedies or to mitigate the damages resulting from any
default under any Note Document, (g) any notice of any sale, transfer or other disposition by any of the Holders of any
right, title to or interest in the Note Purchase Agreement or in any other Note Document and (h) any other circumstance
whatsoever which might otherwise constitute a legal or equitable discharge, release or defense of a guarantor or surety or which
might otherwise limit recourse against such Guarantor. 



        SECTION 6.   Subrogation,
Contribution, Reimbursement or Indemnity.   Until one year and one day after all Obligations have been paid in
full, each Guarantor agrees not to take any action pursuant to any rights which may have arisen in connection with this Guaranty
to be subrogated to any of the rights (whether contractual, under the United States Bankruptcy Code, as amended, including Section
509 thereof, under common law or otherwise) of any of the Holders against the Company or against any collateral security or
guaranty or right of offset held by the Holders for the payment of the Obligations. Until one year and one day after all
Obligations have been paid in full, each Guarantor agrees not to take any action pursuant to any contractual, common law,
statutory or other rights of reimbursement, contribution, exoneration or indemnity (or any similar right) from or against the
Company which may have arisen in 





-4-

Exhibit 1(b) 











connection with this Guaranty. So long as the Obligations remain, if any
amount shall be paid by or on behalf of the Company to any Guarantor on account of any of the rights waived in this paragraph,
such amount shall be held by such Guarantor in trust, segregated from other funds of such Guarantor, and shall, forthwith upon
receipt by such Guarantor, be turned over to the Holders (duly endorsed by such Guarantor to the Holders, if required), to be
applied against the Obligations, whether matured or unmatured, in such order as the Holders may determine. The provisions of this
paragraph shall survive the term of this Guaranty and the payment in full of the Obligations. 



        SECTION 7.   Effect
of Bankruptcy Proceedings, etc.   This Guaranty shall continue to be effective or be automatically reinstated,
as the case may be, if at any time payment, in whole or in part, of any of the sums due to any of the Holders pursuant to the
terms of the Note Purchase Agreement or any other Note Document is rescinded or must otherwise be restored or returned by such
Holder upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company or any other person, or upon or
as a result of the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to the Company
or other person or any substantial part of its property, or otherwise, all as though such payment had not been made. If an event
permitting the acceleration of the maturity of the principal amount of the Notes shall at any time have occurred and be
continuing, and such acceleration shall at such time be prevented by reason of the pendency against the Company or any other
person of a case or proceeding under a bankruptcy or insolvency law, each Guarantor agrees that, for purposes of this Guaranty and
its obligations hereunder, the maturity of the principal amount of the Notes and all other Obligations shall be deemed to have
been accelerated with the same effect as if any Holder had accelerated the same in accordance with the terms of the Note Purchase
Agreement or other applicable Note Document, and such Guarantor shall forthwith pay such principal amount, Make-Whole Amount, if
any, and interest thereon and any other amounts guaranteed hereunder without further notice or demand. 



        SECTION 8.   Term
of Agreement.   This Guaranty and all guaranties, covenants and agreements of each Guarantor contained herein
shall continue in full force and effect and shall not be discharged until the earlier to occur of (i) such time as all of the
Obligations shall be paid and performed in full and all of the agreements of such Guarantor hereunder shall be duly paid and
performed in full and (ii) such Guarantor is released by the Holders pursuant to Section 1(c) of the Second Supplement.




        SECTION 9.   Representations
and Warranties.   Each Guarantor represents and warrants to each Holder that: 



	  	        (a)       such
Guarantor is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has the
power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business
it transacts and proposes to transact; 









-5-

Exhibit 1(b) 











	  	        (b)       such
Guarantor has the power and authority to execute and deliver this Guaranty and to perform the provisions hereof, and this Guaranty
has been duly authorized by all necessary action on the part of such Guarantor; 







	  	        (c)       this
Guaranty constitutes the legal, valid and binding obligation of such Guarantor enforceable against such Guarantor in accordance
with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); 







	  	        (d)       the
execution, delivery and performance of this Guaranty will not (i) contravene, result in any breach of, or constitute a
default under, or result in the creation of any Lien in respect of any property of such Guarantor under, any agreement, or
corporate charter or by-laws to which such Guarantor is bound or by which such Guarantor or any of its properties may be bound or
affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree,
or ruling of any court, arbitrator or Governmental Authority applicable to such Subsidiary Guarantor or (iii) violate any
provision of any statute or other rule or regulation of any Governmental Authority applicable to such Guarantor; 







	  	        (e)       no
consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in
connection with the execution, delivery or performance by such Guarantor of this Guaranty; 







	  	        (f)       there
are no actions, suits or proceedings pending or, to the knowledge of such Guarantor, threatened against or affecting such
Guarantor, or any property of such Guarantor, in any court or before any arbitrator of any kind or before or by any Governmental
Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; 







	  	        (g)       after
giving effect to the transactions contemplated in the Note Purchase Agreement and after giving due consideration to any rights of
contribution (i) the fair value of the assets of such Guarantor (both at fair valuation and at present fair saleable value)
exceeds its liabilities, (ii) such Guarantor is able to and expects to be able to pay its debts as they mature, and
(iii) such Guarantor has capital sufficient to carry on its business as conducted and as proposed to be conducted. 







        SECTION 10.   Notices.   All
notices and communications provided for hereunder shall be in writing and sent by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or by registered or certified mail
with return receipt requested (postage prepaid), or by a recognized overnight delivery service (with charges prepaid) (a) if
to the Company or any Holder at the address set forth in the Note Purchase Agreement or (b) if to a Guarantor, in care of the
Company at the Company’s address set forth in the Note Purchase Agreement, or in each case at such other address as the 





-6-

Exhibit 1(b) 












Company, any Holder or such Guarantor shall from time to time designate in
writing to the other parties. Any notice so addressed shall be deemed to be given when actually received. 



        SECTION 11.   Survival.   All
warranties, representations and covenants made by each Guarantor herein or in any certificate or other instrument delivered by it
or on its behalf hereunder shall be considered to have been relied upon by the Holders and shall survive the execution and
delivery of this Guaranty, regardless of any investigation made by any of the Holders. All statements in any such certificate or
other instrument shall constitute warranties and representations by such Guarantor hereunder. 



        SECTION 12.   Submission
to Jurisdiction.   Each Guarantor irrevocably submits to the jurisdiction of the courts of the State of
Illinois and of the courts of the United States of America having jurisdiction in the State of Illinois for the purpose of any
legal action or proceeding in any such court with respect to, or arising out of, this Guaranty, the Note Purchase Agreement or the
Notes. Each Guarantor consents to process being served in any suit, action or proceeding by mailing a copy thereof by registered
or certified mail, postage prepaid, return receipt requested. Each Guarantor agrees that such service upon receipt (i) shall be
deemed in every respect effective service of process upon it in any such suit, action or proceeding and (ii) shall, to the fullest
extent permitted by law, be taken and held to be valid personal service upon and personal delivery to such Guarantor. 



        SECTION 13.   Miscellaneous.   Any
provision of this Guaranty 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. To the extent permitted by applicable law, each Guarantor hereby waives any provision of law that renders any
provisions hereof prohibited or unenforceable in any respect. The terms of this Guaranty shall be binding upon, and inure to the
benefit of, each Guarantor and the Holders and their respective successors and assigns. No term or provision of this Guaranty may
be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by each Guarantor and the
Required Holders. The section and paragraph headings in this Guaranty are for convenience of reference only and shall not modify,
define, expand or limit any of the terms or provisions hereof, and all references herein to numbered sections, unless otherwise
indicated, are to sections in this Guaranty. This Guaranty shall in all respects be governed by, and construed in accordance with,
the laws of the State of Illinois, excluding choice-of-law principles of the law of such State that would require the application
of the laws of a jurisdiction other than such State. 













-7-

Exhibit 1(b) 











        IN WITNESS WHEREOF, each
Guarantor has caused this Guaranty to be duly executed as of the day and year first above written. 


	 	 	 	 	 	 
	 	 	[Name of Guarantor] 
	 
	 
	   		By:  	 	   	 
	 	

		  	 
	   		Name:  	 	   	 
	 	

		  	 
	   		Title:  	 	   	 
	 	

		  	 
	 
	 
	 	 	[Name of Guarantor] 
	 
	 
	   		By:  	 	   	 
	 	

		  	 
	   		Name:  	 	   	 
	 	

		  	 
	   		Title:  	 	   	 
	 	

		  	 
	 
	 
	 	 	[Name of Guarantor] 
	 
	 
	   		By:  	 	   	 
	 	

		  	 
	   		Name:  	 	   	 
	 	

		  	 
	   		Title:  	 	   	 
	 	

		  	 


















-8-

Exhibit 1(b) 










FORM OF JOINDER TO SUBSIDIARY GUARANTY 



        The undersigned (the
“Guarantor”), joins in the Subsidiary Guaranty dated as of December 17, 2004 from the Guarantors named therein in favor
of the Holders, as defined therein, and agrees to be bound by all of the terms thereof and represents and warrants to the Holders
that: 



	  	        (a)       such
Guarantor is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has the
power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business
it transacts and proposes to transact; 







	  	        (b)       such
Guarantor has the power and authority to execute and deliver this Guaranty and to perform the provisions hereof, and this Guaranty
has been duly authorized by all necessary action on the part of such Guarantor; 







	  	        (c)       this
Guaranty constitutes the legal, valid and binding obligation of such Guarantor enforceable against such Guarantor in accordance
with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); 







	  	        (d)       the
execution, delivery and performance of this Guaranty will not (i) contravene, result in any breach of, or constitute a
default under, or result in the creation of any Lien in respect of any property of such Guarantor under, any agreement, or
corporate charter or by-laws to which such Guarantor is bound or by which such Guarantor or any of its properties may be bound or
affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree,
or ruling of any court, arbitrator or Governmental Authority applicable to such Subsidiary Guarantor or (iii) violate any
provision of any statute or other rule or regulation of any Governmental Authority applicable to such Guarantor; 







	  	        (e)       no
consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in
connection with the execution, delivery or performance by such Guarantor of this Guaranty; 







	  	        (f)       there
are no actions, suits or proceedings pending or, to the knowledge of such Guarantor, threatened against or affecting such
Guarantor, or any property of such Guarantor, in any court or before any arbitrator of any kind or before or by any Governmental
Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; 









-9-

Exhibit 1(b) 











	  	        (g)       after
giving effect to the transactions contemplated by the giving of this Joinder and giving due consideration to any rights of
contribution (i) the fair value of the assets of such Guarantor (both at fair valuation and at present fair saleable value)
exceeds its liabilities, (ii) such Guarantor is able to and expects to be able to pay its debts as they mature, and
(iii) such Guarantor has capital sufficient to carry on its business as conducted and as proposed to be conducted. 







Capitalized Terms used but not defined herein have the meanings ascribed in
the Subsidiary Guaranty. 



        IN WITNESS WHEREOF, the
undersigned has caused this Joinder to Subsidiary Guaranty to be duly executed as of __________, ____. 


	 	 	 	 	 	 
	 	 	[Name of Guarantor] 
	 
	 
	   		By:  	 	   	 
	 	

		  	 
	   		Name:  	 	   	 
	 	

		  	 
	   		Title:  	 	   	 
	 	

		  	 

























-10-

Exhibit 1(b)