<PAGE> 1
FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended DECEMBER 31, 1996
----------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- ---------------------
Commission File Number 1-2299
--------
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-0117420
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3600 Euclid Avenue, Cleveland, Ohio 44115
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 881-2838
-------------------------
BEARINGS, INC.
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Shares of common stock outstanding on January 31, 1997 12,348,869
-----------------------------------------
(No par Value)
<PAGE> 2
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
-------------------------------------
(formerly BEARINGS, INC.)
INDEX
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Page No.
<S> <C>
Part I: FINANCIAL INFORMATION
Item 1: Financial Statements
Statements of Consolidated Income -
Three Months and Six Months
Ended December 31, 1996 and 1995 2
Consolidated Balance Sheets -
December 31, 1996 and June 30, 1996 3
Statements of Consolidated Cash Flows
Six Months Ended December 31, 1996 and 1995 4
Statements of Consolidated Shareholders' Equity -
Six Months Ended December 31, 1996 and
Year Ended June 30, 1996 5
Notes to Consolidated Financial Statements 6 - 8
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 12
Part II: OTHER INFORMATION
Item 1: Legal Proceedings 13 - 14
Item 4: Other Information 14
Item 6: Exhibits and Reports on Form 8-K 14 - 15
Cautionary Statement under Private Securities
Litigation Reform Act of 1995 15 - 16
Signatures 16
</TABLE>
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM I: Financial Statements
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
------------------------------------------------------
(formerly BEARINGS, INC.)
STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
(Thousands, except per share amounts)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
December 31 December 31
1996 1995 1996 1995
------------------------- --------------------------
<S> <C> <C> <C> <C>
Net Sales $274,992 $275,140 $557,241 $552,199
--------- --------- --------- ---------
Cost and Expenses
Cost of sales 200,025 203,246 408,800 410,089
Selling, distribution and
administrative 63,265 60,526 126,014 120,831
--------- --------- --------- ---------
263,290 263,772 534,814 530,920
--------- --------- --------- ---------
Operating Income 11,702 11,368 22,427 21,279
--------- --------- --------- ---------
Interest
Interest expense 1,595 2,394 3,156 4,453
Interest income (253) (106) (571) (177)
--------- --------- --------- ---------
1,342 2,288 2,585 4,276
--------- --------- --------- ---------
Income Before Income Taxes 10,360 9,080 19,842 17,003
--------- --------- --------- ---------
Income Taxes
Federal 3,704 3,145 6,959 5,899
State and local 653 759 1,475 1,399
--------- --------- --------- ---------
4,357 3,904 8,434 7,298
--------- --------- --------- ---------
Net Income $ 6,003 $ 5,176 $ 11,408 $ 9,705
========= ========= ========= =========
Net Income per share $ 0.48 $ 0.42 $ 0.92 $ 0.79
========= ========= ========= =========
Cash dividends per common
share $ 0.16 $ 0.14 $ 0.30 $ 0.26
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 4
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
------------------------------------------------------
(formerly BEARINGS, INC.)
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
December 31 June 30
1996 1996
-------------------- -------------------
(Unaudited)
<S> <C> <C>
Assets
------
Current assets
Cash and temporary investments $ 6,882 $ 9,243
Accounts receivable, less allowance
of $2,892 and $2,400 136,465 155,524
Inventories (at LIFO) 133,113 127,937
Other current assets 4,363 2,434
-------------------- -------------------
Total current assets 280,823 295,138
-------------------- -------------------
Property - at cost
Land 13,028 13,529
Buildings 65,194 64,441
Equipment 74,115 71,938
-------------------- -------------------
152,337 149,908
Less accumulated depreciation 67,810 63,574
-------------------- -------------------
Property - net 84,527 86,334
-------------------- -------------------
Other assets 18,618 22,600
-------------------- -------------------
TOTAL ASSETS $ 383,968 $ 404,072
==================== ===================
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities
Notes payable $ 25,106 $ 30,056
Current portion of long-term debt 11,429 11,429
Accounts payable 52,735 67,652
Compensation and related benefits 18,700 19,081
Other accrued liabilities 13,730 14,964
-------------------- -------------------
Total current liabilities 121,700 143,182
Long-term debt 57,143 62,857
Other liabilities 10,232 8,741
-------------------- -------------------
TOTAL LIABILITIES 189,075 214,780
-------------------- -------------------
Shareholders' Equity
Preferred Stock - no par value; 2,500
shares authorized; none issued or
outstanding
Common stock - no par value; 30,000
shares authorized; 13,954 shares issued 10,000 10,000
Additional paid-in capital 9,012 7,528
Income retained for use in the business 204,916 197,232
Less 1,611 and 1,577 treasury shares -
at cost (23,853) (21,260)
Less shares held in trust for
deferred compensation plans (4,014) (3,008)
Less unearned restricted common
stock compensation (1,168) (1,200)
-------------------- -------------------
TOTAL SHAREHOLDERS' EQUITY 194,893 189,292
-------------------- -------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 383,968 $ 404,072
==================== ===================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 5
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
------------------------------------------------------
(Formerly Bearings, Inc.)
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
Six Months Ended
December 31
----------------------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 11,408 $ 9,705
Adjustments to reconcile net income to cash provided by (used in)operating
activities:
Depreciation 6,829 6,885
Provision for losses on accounts receivable 1,048 1,477
Gain on sale of property (143) (629)
Amortization of restricted common stock
compensation and goodwill 383 455
Treasury shares contributed to employee
benefit plans 1,914 1,821
Changes in current assets and liabilities, net of
effects from acquisition and disposal of
businesses:
Accounts receivable 14,995 4,560
Inventories (11,176) (25,920)
Other current assets (1,929) (156)
Accounts payable and accrued expenses (16,021) (4,687)
Other - net 868 622
- ------------------------------------------------------------------------------------------------------------------------
Net Cash provided by (used in) Operating Activities 8,176 (5,867)
- ------------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Property purchases (6,636) (7,768)
Proceeds from property sales 1,657 1,787
Proceeds from sale of Aircraft Division 9,090
Acquisition of businesses, less cash acquired (4,253)
Deposits and other 3,745 (4,917)
- ------------------------------------------------------------------------------------------------------------------------
Net Cash provided by (used in) Investing Activities 7,856 (15,151)
- ------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Net borrowings (repayments) under
Line-of-credit agreements (4,950) 26,520
Long-term debt repayments (5,714)
Exercise of stock options 264 1,112
Dividends paid (3,724) (3,071)
Purchase of treasury shares (4,269) (1,307)
- ------------------------------------------------------------------------------------------------------------------------
Net Cash provided by (used in) Financing Activities (18,393) 23,254
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash
and temporary investments (2,361) 2,236
Cash and temporary investments
at beginning of period 9,243 4,789
- ------------------------------------------------------------------------------------------------------------------------
Cash and Temporary Investments
at End of Period $ 6,882 $ 7,025
========================================================================================================================
Supplemental Cash Flow Information
Cash paid during the period for:
Income taxes $ 9,425 $ 8,766
Interest $ 3,418 $ 3,998
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 6
APPLIED INDUSTIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
-----------------------------------------------------
(formerly BEARINGS, INC.)
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
For the Six Months Ended December 31, 1996 (Unaudited)
and Year Ended June 30, 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
Income
Shares of Additional Retained Treasury
Common Stock Common Paid-in for Use in Shares
Outstanding Stock Capital the Business - at cost
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
Balance at July 1, 1995 12,174 $10,000 $4,812 $180,426 ($22,845)
Net income 23,334
Cash dividends - $.54 per share (6,528)
Purchase of common stock
for treasury (86) (2,212)
Treasury shares issued for:
Retirement Savings Plan contributions 138 1,692 1,805
Exercise of stock options 107 391 1,390
Deferred compensation plans 43 416 583
Restricted common stock awards 1 13 19
Amortization of restricted common
stock compensation 204
Other
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1996 12,377 10,000 7,528 197,232 (21,260)
Net income 11,408
Cash dividends - $.30 per share (3,724)
Purchase of common stock
for treasury (157) (4,269)
Treasury shares issued for:
Retirement Savings Plan contributions 67 980 934
Exercise of stock options 22 (20) 284
Deferred compensation plans 30 466 402
Restricted common stock awards 4 58 56
Amortization of restricted common
stock compensation
Other
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 12,343 $10,000 $9,012 $204,916 ($23,853)
==================================================================================================================================
<CAPTION>
Shares Held in Unearned
Trust for Restricted Total
Deferred Common Stock Shareholders'
Compensation Plans Compensation Equity
======================================================================
<S> <C> <C> <C>
($1,426) ($2,633) $168,334
23,334
(6,528)
(2,212)
3,497
1,781
(999)
(32)
1,465 1,669
(583) (583)
- -------------------------------------------------------------------
(3,008) (1,200) 189,292
11,408
(3,724)
(4,269)
1,914
264
(868)
(114)
146 146
(138) (138)
- -------------------------------------------------------------------
($4,014) ($1,168) $194,893
===================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 7
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
------------------------------------------------------
(formerly BEARINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands) (Unaudited)
- -----------------------------------------------------------------------------
1. NAME CHANGE
Effective January 1, 1997, the Company changed its name from Bearings,
Inc. to Applied Industrial Technologies, Inc.
2. BASIS OF PRESENTATION
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial
position as of December 31, 1996 and June 30, 1996, and the results of
operations for the three months and six months ended December 31, 1996
and 1995, and cash flows for the six months ended December 31, 1996 and
1995.
The results of operations for the three and six months ended December
31, 1996 are not necessarily indicative of the results to be expected
for the fiscal year.
Cost of sales for interim financial statements are computed using
estimated gross profit percentages which are adjusted throughout the
year based upon available information. Adjustments to actual cost are
made based on the annual physical inventory and the effect of year-end
inventory quantities on LIFO costs.
3. NET INCOME PER SHARE
Net income per share was computed using the weighted average number of
common shares outstanding for the period.
Average shares outstanding for the computation of net income per share
were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
1996 1995 1996 1995
------------------ ----------------
<S> <C> <C> <C>
12,410 12,307 12,408 12,257
</TABLE>
6
<PAGE> 8
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
------------------------------------------------------
(formerly BEARINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands) (Unaudited)
-----------------------------------------------------------------------------
4. BUSINESS COMBINATIONS
On February 9, 1996 the Company exchanged 486 shares of Bearings, Inc.
common stock for all of the outstanding shares of Engineered Sales,
Inc., a distributor of hydraulic, pneumatic and electro-hydraulic
components, systems and related fluid power engineering services. This
business combination is accounted for as a pooling of interests.
The Company's reported statements of consolidated income for the three
months and six months ended December 31, 1995 and shareholders equity
at July 1, 1995 have been restated to reflect the Engineered Sales
acquisition.
5. SALE OF DIVISION
On August 9, 1996 the Company sold the Dixie Bearings Aircraft Division
located in Atlanta, GA to Aviation Sales Company for $9,090. The assets
were sold at their approximate net book value. The sale did not have a
material effect on the consolidated financial statements.
6. RECENTLY ISSUED ACCOUNTING STANDARD
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation", which the Company will be required to adopt
for the fiscal year ending June 30, 1997. As permitted by SFAS 123, the
Company does not intend to change its method of accounting for
stock-based compensation. The Company has not yet determined the pro
forma disclosures for employee awards granted in the six months ended
December 31, 1996 and the fiscal year ending June 30, 1996, which will
be presented in the notes to financial statements for the year ending
June 30, 1997.
7. LONG-TERM DEBT
The Company has entered into an agreement with Prudential Insurance
Company of America for an uncommitted shelf facility enabling the
Company to borrow up to $50,000 in additional long-term financing. The
Company may make long-term borrowings at its sole discretion, with
terms ranging anywhere from seven to twenty years under this agreement.
At December 31, 1996 there were no borrowings under this agreement.
7
<PAGE> 9
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
------------------------------------------------------
(formerly BEARINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands) (Unaudited)
-----------------------------------------------------------------------------
8. LITIGATION
As reported in the Notes to the Consolidated Financial Statements
contained in the 1996 Annual Report to shareholders, a $32,400 judgment
was rendered against King Bearing, Inc. (King) in June 1992 in a
lawsuit pending in the Superior Court of Orange County, California. The
1990 agreement for the acquisition of King included specific
indemnification of the Company for any financial damages or losses
related to the lawsuit. The indemnification was also guaranteed by the
ultimate parent of King's former owner, a Fortune 500 company with
stockholders' equity exceeding five billion dollars at June 30, 1996.
The judgment was strongly contested by counsel retained by the
indemnitor on behalf of King, and in September 1992 the trial court
granted King's motion for a new trial as to all but $219 in damages
returned by the jury. In September 1996 the California Court of
Appeals, Fourth Appellate District, affirmed the trial court's grant of
King's motion for a new trial and reversed its exclusion of the $219 in
damages from the new trial order. As a result, a new trial will be
scheduled. Due to the indemnification and guarantee, management
believes that the outcome of this matter will not have a material
adverse effect on the consolidated financial position or results of
operations of the Company.
8
<PAGE> 10
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
(formerly BEARINGS, INC.)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------------------------------------
The following is Management's discussion and analysis of certain significant
factors which have affected the Company's: (1) financial condition at December
31, 1996 and June 30, 1996 and (2) results of operations during the periods
included in the accompanying Statements of Consolidated Income and Consolidated
Cash Flows.
FINANCIAL CONDITION
Liquidity and Working Capital
- -----------------------------
Cash provided by operating activities was $8.2 million in the six months ended
December 31, 1996. This compares to $5.9 million used in operating activities in
the same period a year ago.
Cash flow from operations depends primarily upon generating operating income and
controlling the investment in inventory and receivables, and managing the timing
of payments to suppliers. The Company has continuing programs to monitor and
control these investments. During the six month period ended December 31, 1996
inventories (excluding inventories sold with the Aircraft Division) increased
approximately $11.2 million. Inventory increased for purchases made in
anticipation of the January 1997 price increases by certain suppliers. Accounts
receivable decreased by $15.0 million due to improved timing of collections and
traditionally lower sales in the first six months of the fiscal year.
Investments in property totaled $6.6 million and $7.8 million in the six months
ended December 31, 1996 and 1995 respectively. These capital expenditures were
primarily made for building and upgrading branch and distribution center
facilities, acquisition of data processing equipment, and vehicles. The new
company owned distribution center in Atlanta was opened during the quarter ended
September 30, 1996. Construction was started on a new distribution center in Ft.
Worth, TX. This build-to-suit facility will be financed under an operating lease
and is expected to open in late-Spring of 1997.
Working capital at December 31, 1996 was $159.1 million compared to $152.0
million at June 30, 1996. The current ratio was 2.3 at December 31, 1996 and 2.1
at June 30, 1996. This increase is primarily due to a decrease in short-term
notes payable, from cash provided from operations, the receipt of proceeds from
the sale of the Aircraft Division, and the refund of insurance deposits included
in other assets.
9
<PAGE> 11
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
(formerly BEARINGS, INC.)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------------------------------------
Capital Resources
- -----------------
Capital resources are obtained from income retained in the business,
indebtedness under the Company's lines of credit and long-term debt and from
operating lease arrangements.
Average combined short-term and long-term borrowing was $91.8 million for the
six months ended December 31, 1996 and $111.8 million during the year ended June
30, 1996. The average effective interest rate on the short-term borrowings for
the six months ended December 31, 1996 decreased to 6.4% from an average rate of
6.6% for the six months ended December 31, 1995 due to lower interest rates on
short-term debt. The Company has $110 million of short-term lines of credit with
commercial banks which provide for payment of interest at various interest rate
options, none of which are in excess of the banks' prime rate. The Company had
$20.0 million of borrowings under these short-term bank lines of credit at
December 31, 1996. Unused bank lines of credit of $90.0 million are available
for future short-term financing needs. In addition, the Company also had $5.1
million of other short-term notes payable outstanding outside of these bank line
of credit arrangements.
The Board of Directors has authorized the purchase of up to 420,000 shares of
the Company's common stock to fund employee benefit programs and stock option
and award programs. These purchases are made in open market and negotiated
transactions, from time-to-time, depending upon market conditions. The Company
acquired 150,500 shares of its common stock for $4.1 million during the quarter.
Management expects that capital resources provided from operations, available
lines of credit and long-term debt and operating leases will be sufficient to
finance normal working capital needs, business acquisitions, enhancement of
facilities and equipment and the purchase of additional Company common stock.
Management also believes that additional long-term debt and line of credit
financing could be obtained if desired.
10
<PAGE> 12
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
(formerly BEARINGS, INC.)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
A summary of the period-to-period changes in principal items included in the
statements of consolidated income follows:
<TABLE>
<CAPTION>
Increase (Decrease)
(Dollars in thousands)
Three Months Ended Six Months Ended
December 31 December 31
1996 and 1995 1996 and 1995
Percent Percent
Amount Change Amount Change
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales $ (148) (.1)% $ 5,042 .9%
Cost of sales (3,221) (1.6)% (1,289) (.3)%
Selling, distribution
and administrative
expenses 2,739 4.5% 5,183 4.3%
Operating income 334 2.9% 1,148 5.4%
Interest expense -net (946) (41.3)% (1,691) (39.5)%
Income before income
taxes 1,280 14.1% 2,839 16.7%
Income taxes 453 11.6% 1,136 15.6%
Net income 827 16.0% 1,703 17.5%
</TABLE>
Three Months Ended December 31, 1996 and 1995
- ---------------------------------------------
The sales decrease of .1% for the quarter was due to an overall slowing in
the industrial economy, particularly in the machine tool, steel and forest
products industry and the sale of the Dixie Bearings Aircraft Division during
the quarter ended September 30, 1996. Gross profit, as a percentage of sales,
increased from 26.1% to 27.3% primarily due to changes in the product mix, as
sales of lower margin bearing products declined and sales of non-bearing
products continued to grow. Additionally, lower freight costs also favorably
impacted the gross profit percentage.
11
<PAGE> 13
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
(formerly BEARINGS, INC.)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------------------------------------
Selling, distribution and administrative expenses increased by 4.5% from higher
compensation and health care costs and higher advertising and other expense
related to the Company's name change.
Interest expense-net for the quarter decreased by 41.3% primarily from a
decrease in average borrowing.
Income taxes as a percentage of income before taxes was 42.1% in the three
months ended December 31, 1996 and 43.0% in the three months ended December 31,
1995.
As a result of the above factors, net income increased by 16.0% compared to the
same quarter of last year. Income per share increased by 14.3% due to the
increase in net income and offset by an increase in the average number of shares
outstanding.
Six Months Ended December 31, 1996 and 1995
- -------------------------------------------
The sales increase of .9% for the period was lower than in prior six month
period-to-period comparisons. The slowing in sales growth occurred from an
overall slowing in the industrial economy, particularly in the machine tool,
steel and forest products industry. The decline in sales growth was also
affected by the sale of Dixie Aircraft division during the quarter ended
September 30, 1996. Gross profit, as a percentage of sales, increased from 25.7%
to 26.6% primarily due to changes in the product mix as sales of lower margin
bearing products declined and sales in non-bearing products continue to grow. In
addition, lower freight costs also favorably impacted the gross profit
percentage.
Selling, distribution and administrative expenses increased by 4.3% from higher
compensation expense and health care costs.
Interest expense-net for the period decreased by 39.5% primarily from a decrease
in average borrowing.
Income taxes as a percentage of income before taxes was 42.5% in the six months
ended December 31, 1996 and 42.9% in the six months ended December 31, 1995.
As a result of the above factors, net income increased by 17.5% compared to the
same period last year. Income per share increased by 16.5% due to an increase in
income and an increase in the average number of shares outstanding.
12
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
(a) The Company incorporates by reference herein the description of the case
captioned IN RE: ROBERT LEE BICKHAM, ET AL. V. METROPOLITAN LIFE INS. CO.,
ET AL., 22nd Judicial District Court for the Parish of Washington, State of
Louisiana, Case No. 70,760-E; and two related cases pending in the same
court -- IDA MAE WILLIAMS, ET AL. V. METROPOLITAN LIFE INS. CO., ET AL.,
Case No. 72,986-F and BENNIE L. ADAMS, ET AL. V. METROPOLITAN LIFE INS.
CO., ET AL., Case No. 72,154-B, -- found in Item 3 "Pending Legal
Proceedings" contained in the Company's Form 10-K for the fiscal year ended
June 30, 1996. Notwithstanding potential indemnification from suppliers and
insurance, the Company believes, based on circumstances presently known,
that these cases are not material to its business or financial condition.
(b) The Company also incorporates by reference herein the descriptions of the
case captioned KING BEARING, INC. V. CARYL EDMUND ORANGES, ET AL., Superior
Court of the State of California, County of Orange, Case No. 53-42-31 found
in Item 3 "Pending Legal Proceedings" contained in the Company's Form 10-K
for the fiscal year ended June 30, 1996, and in Part II, Item 1 of the Form
10-Q for the quarter ended September 30, 1996. On September 30, 1996, the
California Court of Appeal, Fourth Appellate District, affirmed the trial
court's grant of King Bearing's motion for a new trial; reversed the trial
court's exclusion of the $219,000 in damages from the new trial order; and
affirmed the judgment in favor of Bearings, Inc. The cross-complainants'
petition for rehearing by the Court of Appeal and petition for review by
the California Supreme Court were both denied. As a result, the matter will
be remanded to the trial court for a new trial. Under the 1990 Stock
Purchase Agreement relative to the acquisition of King Bearing, the Company
is specifically indemnified by the ultimate parent of the former owner of
King Bearing (whose stockholders' equity exceeded $5 billion at June 30,
1996) for any damages or loss relating to this action. The Company believes
that this case will have no material adverse effect on its business or
financial condition.
(c) The Company and/or one of its subsidiaries is a defendant in several
employment- and product-related
13
<PAGE> 15
lawsuits. Based on circumstances presently known, the Company believes
that these cases are not material to its business or financial
condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Annual Meeting of Shareholders of the Company held on October
22, 1996, the Shareholders (i) reelected William E. Butler, Russell R.
Gifford and L. Thomas Hiltz as Directors of Class III for a term
expiring in 1999, (ii) approved an amendment to the Company's Amended
and Restated Articles of Incorporation to change the name of the
Company to Applied Industrial Technologies, Inc., and (iii) ratified
the appointment of Deloitte & Touche LLP as independent auditors of
the Company for the fiscal year ending June 30, 1997. Substantially
the same information was previously reported in Part II, Item 5 "Other
Information" of the Company's Form 10-Q for the quarter ended
September 30, 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
EXHIBIT NO. DESCRIPTION
----------- -----------
4(a) Amended and Restated Articles of Incorporation of Applied
Industrial Technologies, Inc.
4(b) Code of Regulations of Applied Industrial Technologies, Inc.,
adopted September 6, 1988 (filed as Exhibit 4(b) to the Applied
Industrial Technologies, Inc. Form 8-K dated October 21, 1988,
SEC File No. 1-2299, and incorporated here by reference).
4(c) Certificate of Merger of Bearings, Inc. (Ohio) and Bearings, Inc.
(Delaware) filed with the Ohio Secretary of State on October 18,
1988 (filed as Exhibit 4 to the Applied Industrial Technologies,
Inc. Form 10-K for the fiscal year ended June 30, 1989, SEC File
No. 1-2299, and incorporated here by reference).
14
<PAGE> 16
4(d) 80,000,000 Maximum Aggregate Principal Amount Note Purchase and
Private Shelf Facility dated October 31, 1992 between Applied
Industrial Technologies, Inc. and The Prudential Insurance
Company of America (as amended and restated).
10(a) Applied Industrial Technologies, Inc. Supplemental Defined
Contribution Plan (January 1, 1997 Restatement).
10(b) Applied Industrial Technologies, Inc. Deferred Compensation Plan
(January 1, 1997 Restatement).
10(c) Applied Industrial Technologies, Inc. Deferred Compensation Plan
for Non-Employee Directors (January 1, 1997 Restatement).
11 Computation of Net Income Per Share.
27 Financial Data Schedule.
(b) The Company did not file, nor was it required to file, a Report on
Form 8-K with the Securities and Exchange Commission during the
quarter ended December 31, 1996.
CAUTIONARY STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report, including Part I, Item 2 -- Management's Discussion and
Analysis, may contain statements that are forward-looking, as that term is
defined by the Private Securities Litigation Reform Act of 1995 or by the
Securities and Exchange Commission in its rules, regulations and releases. The
Company intends that such forward-looking statements be subject to the safe
harbors created thereby. All forward-looking statements are based on current
expectations regarding important risk factors. Accordingly, actual results may
differ materially from those expressed in the forward-looking statements, and
the making of such statements should not be regarded as a representation by the
Company or any other person that the results expressed therein will be achieved.
Important risk factors include, but are not limited to, the following:
changes in operating expenses; changes in the economy; the availability of
product; the effect of price increases; the variability and timing of business
opportunities including acquisitions, customer agreements, supplier
15
<PAGE> 17
authorizations and other business strategies; changes in accounting policies and
practices; the effect of organizational changes within the Company; adverse
results in significant litigation matters; adverse state and federal regulation
and legislation; and the occurrence of extraordinary events (including natural
events and acts of God, fires, floods and accidents).
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
APPLIED INDUSTRIAL
TECHNOLOGIES, INC.
(Company)
Date: February 14, 1997 By:/S/ John C. Dannemiller
-----------------------
John C. Dannemiller
Chairman, Chief Executive
Officer & President
Date: February 14, 1997 By:/S/ John R. Whitten
-------------------
John R. Whitten
Vice President-Finance &
Treasurer
16
<PAGE> 18
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
EXHIBIT INDEX
TO FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
PAGE
<S> <C> <C>
4(a) Amended and Restated Articles of Attached
Incorporation of Applied Industrial
Technologies, Inc.
4(b) Code of Regulations of Applied Industrial
Technologies, Inc., adopted September 6,
1988 (filed as Exhibit 4(b) to the Applied
Industrial Technologies, Inc. Form 8-K dated
October 21, 1988, SEC File No. 1-2299, and
incorporated here by reference).
4(c) Certificate of Merger of Bearings, Inc.(Ohio) and Bearings,
Inc. (Delaware) filed with the Ohio Secretary of State on
October 18, 1988 (filed as Exhibit 4 to the Applied
Industrial Technologies, Inc. Form 10-K for the
fiscal year ended June 30, 1989, SEC File No. 1-2299,
and incorporated here by reference).
4(d) $80,000,000 Maximum Aggregate Attached
Principal Amount Note Purchase and Private
Shelf Facility dated October 31, 1992
between Applied Industrial Technologies,
Inc. and The Prudential Insurance Company of
America (as amended and restated).
10(a) Applied Industrial Technologies, Inc. Supplemental Attached
Defined Contribution Plan (January 1, 1997
Restatement).
10(b) Applied Industrial Technologies, Attached
Inc. Deferred Compensation Plan (January 1, 1997
Restatement).
</TABLE>
<PAGE> 19
10(c) Applied Industrial Technologies, Inc. Attached
Deferred Compensation Plan for Non-Employee
Directors (January 1, 1997 Restatement).
11 Computation of Net Income Per Share. Attached
27 Financial Data Schedule. Attached
<PAGE> 1
Exhibit 4(a)
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
FIRST: The name of the Corporation shall be Applied Industrial
Technologies, Inc.
SECOND: The place in the State of Ohio where the principal office of the
Corporation will be located is 3600 Euclid Avenue, Cleveland, Ohio 44115, in
Cuyahoga County, or such other location as the Board of Directors shall from
time to time determine.
THIRD: The purpose for which the Corporation is formed is to engage in any
lawful act or activity for which corporations may be formed under Sections
1701.01 to 1701.98, inclusive, of the Revised Code of Ohio, as now in effect or
hereinafter amended.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is Thirty Million (30,000,000) shares of Common Stock,
without par value, and Two Million Five Hundred Thousand (2,500,000) shares of
Preferred Stock, without par value.
No holder of shares of stock of any class of the Corporation shall, as such
holder, have any rights to subscribe for or purchase (a) any shares of stock of
any class, any warrants, options or other instruments that shall confer upon the
holder thereof the right to subscribe for or purchase or receive from the
Corporation any shares of stock of any class which the Corporation may issue or
sell, whether or not such shares shall be exchangeable for any shares of stock
of the Corporation of any class or classes and whether or not such shares shall
be unissued shares, now or hereafter authorized, or shares acquired by the
Corporation after the issue thereof, and whether or not such shares of stock,
warrants, options or other instruments are issued for cash or services or
property or by way of dividend or otherwise, or (b) any other security of the
Corporation which shall be convertible into, or exchangeable for, any shares of
stock of the Corporation or any class or classes, or to which shall be attached
or appurtenant to any warrant, option or other instrument that shall confer upon
the holder of such security the right to subscribe for or purchase or receive
from the Corporation any shares of its stock or any class or classes, whether or
not such shares shall be unissued shares, now or hereafter authorized, or shares
acquired by the Corporation after the issue thereof, and whether or not such
securities are issued for cash or services or property or by way of dividend or
otherwise, other than such right, if any, as the Board of Directors, in its sole
discretion, may from time to time determine. If the Board of Directors shall
offer to the holders of shares of stock of any class of the Corporation, or any
of them, any such shares of stock, options, warrants, instruments or other
securities of the Corporation, such offer shall not, in any way, constitute a
waiver or release of the right of the Board of Directors subsequently to dispose
of other securities of the Corporation without offering the same to said
holders.
<PAGE> 2
The shares of such classes shall have the following express terms:
DIVISION A
EXPRESS TERMS OF THE PREFERRED STOCK
(1) The Preferred Stock may be issued from time to time in one or more
series. All shares of Preferred Stock shall be of equal rank and shall be
identical with all other shares except in respect of the matters that may be
fixed by the Board of Directors as hereinafter provided, and each share of each
series shall be identical with all other shares of such series, except, if
dividends are to be cumulative, as to the date from which dividends are
cumulative. Subject to the provisions of Sections 2 and 3 of this Division,
which provisions shall apply to all Preferred Stock, the Board of Directors
hereby is authorized to cause such shares to be issued in one or more series and
with respect to each such series prior to the issuance thereof to fix:
(a) The number of shares constituting such series, including
the authority to increase or decrease such number, and the distinctive
designation of such series.
(b) The dividend rate of the shares of such series, whether
the dividends shall be cumulative and, if so, the date from which they
shall be cumulative, and the relative rights of priority, if any, of
payment of dividends on shares of such series.
(c) The right, if any, of the Corporation to redeem shares of
such series and the terms and conditions of such redemption including
the redemption price.
(d) The rights of the shares in case of a voluntary or
involuntary liquidation, dissolution, or winding up of the Corporation,
and the relative rights of priority, if any, of payment of shares of
such series.
(e) The obligation, if any, of the Corporation to retire
shares of such series pursuant to a retirement or sinking fund or fund
of a similar nature and the terms and conditions of such obligation.
(f) The terms and conditions, if any, upon which shares of
such series shall be convertible into or exchangeable for shares of
stock of any other class or classes of stock of the Corporation or
other entity or of any other series of Preferred Stock, including the
price or prices or the rate or rates of conversion or exchange and the
terms of adjustment, if any.
(g) Any other rights, preferences or limitations of the shares
of such series as may be permitted by law.
The Board of Directors is authorized to adopt from time to time
amendments to the Articles of Incorporation fixing, with respect to each such
series, the matters described in clauses (a) through (g), inclusive, of this
Section 1.
2
<PAGE> 3
(2) The Preferred Stock shall be senior to the Common Stock in payment
of dividends and payment in respect of liquidation or dissolution.
(3) The holders of Preferred Stock shall be entitled to one vote for
each share of such stock upon all matters presented to the shareholders; and,
except as otherwise required by law, the holders of Preferred Stock and the
holders of Common Stock shall vote together as one class on all matters.
DIVISION B
EXPRESS TERMS OF THE COMMON STOCK
The Common Stock shall be subject to the express terms of the Preferred
Stock and any series thereof and to the terms of Article EIGHTH. Each share of
Common Stock shall be equal to every other share of Common Stock and the holders
thereof shall be entitled to one vote for each share of such stock on all
questions presented to the shareholders.
FIFTH: Except as otherwise provided in these Articles of Incorporation
or in the Regulations, the holders of a majority of the outstanding shares are
authorized to take any action which, but for this provision, would require the
vote or other action of the holders of more than a majority of such shares.
SIXTH: Except as otherwise provided in these Articles of Incorporation,
the Corporation, by its Board of Directors, may purchase issued shares, to the
extent permitted by law.
SEVENTH: The affirmative vote of the holders of not less than eighty
percent (80%) of the voting power of the Corporation in the election of
directors shall be required for the approval or authorization of any Business
Combination; provided, however, that the eighty percent voting requirement shall
not be applicable if the Business Combination is a merger or consolidation and
the cash or fair market value of the property, securities or other consideration
to be received per share by holders of the Common Stock of the Corporation in
the Business Combination (a) is not less than the highest per share price (with
appropriate adjustments for recapitalizations and for stock splits, stock
dividends and like distributions), paid by the Related Person in acquiring any
of its holdings of the Corporation's Common Stock and (b) if the Related Person
has acquired Common Stock with varying forms of consideration, the form of
consideration to be received by the holders of the Common Stock in the Business
Combination is cash or the form used to acquire the largest percentage of the
voting power of the Corporation in the election of directors owned by the
Related Person.
For the purpose of this Article SEVENTH:
(1) The term "Business Combination" shall mean (i) any merger or
consolidation of the Corporation or a subsidiary with or into a Related Person,
(ii) any sale, lease, exchange, transfer
3
<PAGE> 4
or other disposition, including, without limitation, a mortgage or any other
security device, of all or any "Substantial Part" (as hereinafter defined) of
the assets, either of the Corporation (including, without limitation, of any
voting securities of a subsidiary) or of a subsidiary, to a Related Person,
(iii) any merger or consolidation of a Related Person with or into the
Corporation or a subsidiary of the Corporation, (iv) any sale, lease, exchange,
transfer or other disposition of all or any Substantial Part of the assets of a
Related Person to the Corporation or a subsidiary of the Corporation, (v) the
issuance of any securities of the Corporation or a subsidiary of the Corporation
to a Related Person, (vi) any reclassification of securities (including any
reverse stock split) or recapitalization what would have the effect of
increasing the voting power of a Related Person, (vii) the adoption of any plan
or proposal for the liquidation or dissolution of the Corporation proposed by or
on behalf of a Related Person, and (viii) any agreement, contract or other
arrangement providing for any of the transactions described in this definition
of Business Combination.
(2) The term "Related Person" shall mean and include any individual,
corporation, partnership or other person or entity which, together with its
"Affiliates" and "Associates" (as defined on October 18, 1988 in Rule 12b-2
under the Securities Exchange Act of 1934), "Beneficially Owns" (as defined on
October 18, 1988 in Rule 13d-3 under the Securities Exchange Act of 1934) Common
Stock or Preferred Stock of the Corporation consisting in the aggregate of 20
percent or more of the outstanding voting power of the Corporation in the
election of directors, and any Affiliate or Associate of any such individual,
corporation, partnership or other person or entity.
(3) The term "Substantial Part" shall mean more than thirty percent
(30%) of the fair market value of the total assets of the corporation in
question, as of the end of its most recent fiscal year ending prior to the time
the determination is being made.
(4) Without limitation, any Common Stock of the Corporation, or
Preferred Stock of the Corporation that has voting power in the election of
directors, that any Related Person has the right to acquire pursuant to any
agreement, or upon exercise of conversion rights, warrants or options, or
otherwise shall be deemed beneficially owned by the Related Person.
(5) For the purposes of this Article SEVENTH, the term "other
consideration to be received" shall include, without limitation, Common Stock of
the Corporation retained by its existing public stockholders in the event of a
Business Combination in which the Corporation is the surviving corporation.
Notwithstanding any other provisions of these Articles of Incorporation
or the Regulations of the Corporation or any provision of law which might
otherwise permit a lesser vote, but in addition to any affirmative vote of the
holders of any particular class or series of stock required by law or these
Articles of Incorporation or the Regulations of the Corporation, the
affirmative vote of the holders of at least eighty percent (80%) of the
Corporation's voting power in the election of directors, voting as a single
class, shall be required to alter, amend or repeal this Article SEVENTH or to
adopt any provisions in these Articles of Incorporation or the
4
<PAGE> 5
Regulations of the Corporation which are inconsistent with the provisions of
this Article SEVENTH.
EIGHTH: No person shall make a Control Share Acquisition without first
obtaining the prior authorization of the Corporation's shareholders at a special
meeting of shareholders called by the Board of Directors in accordance with this
Article EIGHTH.
(1) Procedure. Any Person who proposes to make a Control Share
Acquisition shall deliver a notice ("Notice") to the Corporation at its
principal place of business that sets forth all of the following information:
a) The identity of the Person who is giving the Notice;
b) A statement that the Notice is given pursuant to this
Article EIGHTH;
c) The number and class of shares of the Corporation owned,
directly or indirectly, by the Person who gives the Notice;
d) The range of voting power (as specified in Section (6)(b)(1)
of this Article EIGHTH) under which the proposed Control
Share Acquisition would, if consummated, fall;
e) A description in reasonable detail of the terms of the
proposed Control Share Acquisition; and
f) Representations, supported by reasonable information, that
the proposed Control Share Acquisition would be consummated
if shareholder approval is obtained and, if consummated,
would not be contrary to law and that the Person who is
giving the Notice has the financial capacity to make the
proposed Control Share Acquisition.
(2) Call of Special Meeting of Shareholders. The Board of Directors of
the Corporation shall, within ten (10) days after receipt by the Corporation of
a Notice that complies with Section (1), call a special meeting of shareholders
to be held not later than fifty (50) days after receipt of the Notice by the
Corporation, unless the Person who delivered the Notice agrees to a later date,
to consider the proposed Control Share Acquisition; provided that the Board of
Directors shall have no obligation to call such a meeting if they make a
determination within ten (10) days after receipt of the Notice that (i) the
Notice was not given in good faith; (ii) the proposed Control Share Acquisition
would not be in the best interests of the Corporation and its shareholders or
(iii) the proposed Control Share Acquisition could not be consummated for
financial or legal reasons. Notwithstanding anything to the contrary contained
in clause (ii) of the immediately preceding sentence, the Board of Directors
shall call such special meeting of shareholders if the Control Share Acquisition
described in the Notice is for any and all shares of the Corporation, for cash,
at a price higher than the highest price at which shares of Common
5
<PAGE> 6
Stock have been traded during the ninety (90) day period prior to the date on
which the Corporation receives the Notice.
The Board of Directors may adjourn such special meeting of shareholders
if prior to such meeting the Corporation has received a Notice from any other
Person and the Board of Directors has determined that the Control Share
Acquisition proposed by such other Person, or a merger, consolidation or sale of
assets of the Corporation, should be presented to shareholders at an adjourned
meeting or at a special meeting held at a later date.
For purposes of making a determination that a special meeting of
shareholders should not be called pursuant to this Section (2), no such
determination shall be deemed void or voidable with respect to the Corporation
merely because one or more of its directors or officers who participated in
deliberations regarding such determination may be deemed to be other than
disinterested, if in any such case the material facts of the relationship giving
rise to a basis for self-interest are known to the directors and the directors,
in good faith reasonably justified by the facts, make such determination by the
affirmative vote of a majority of the disinterested directors, even though the
disinterested directors constitute less than a quorum. For purposes of this
paragraph, "disinterested directors" shall mean directors whose material
contacts with the Corporation are limited principally to activities as a
director or shareholder. Persons who have material and recurring business or
professional contacts with the Corporation shall not be deemed to be
"disinterested directors" for purposes of this provision. A director shall not
be deemed to be other than a "disinterested director" merely because he would no
longer be a director if the proposed Control Share Acquisition were approved and
consummated.
(3) Notice of Special Meeting. The Corporation shall, as promptly as
practicable, give notice of the special meeting of shareholders called pursuant
to Section (2) to all shareholders of record as of the record date set for such
meeting. Such notice shall include or be accompanied by a copy of the Notice and
by a statement of the Corporation, authorized by the Board of Directors, of its
position or recommendation, or that it is taking no position or making no
recommendation, with respect to the proposed Control Share Acquisition.
(4) Requirements for Approval. The Person who delivered the Notice may
make the proposed Control Share Acquisition if both of the following occur:
(a) The shareholders of the Corporation authorize such
acquisition at the special meeting of shareholders called pursuant to
Section (2), at which meeting a quorum is present, by the affirmative
vote of a majority of the Voting Stock represented at such meeting in
person or by proxy and by a majority of the portion of such Voting
Stock represented at such meeting in person or by proxy excluding the
votes of Interested Shares. A quorum shall be deemed to be present at
such special meeting if at least a majority of the issued and
outstanding Voting Stock, and a majority of such Voting Stock excluding
Interested Shares, are represented at such meeting in person or by
proxy.
6
<PAGE> 7
(b) Such acquisition is consummated, in accordance with the
terms so authorized, not later than three hundred sixty (360) days
following shareholder authorization of the Control Share Acquisition.
(5) Violations of Restriction. Any Voting Stock issued or transferred
to any Person in violation of this Article EIGHTH shall hereinafter be called
"Excess Shares." In the event that any Person acquires Excess Shares, then, in
addition to any other remedies which the Corporation may have at law or in
equity as a result of such acquisition, the Corporation shall have the right to
treat the issuance or transfer of any such Excess Shares as null and void. In
the event the Corporation is not permitted to treat an issuance or transfer of
Excess Shares as null and void, such Excess Shares will be treated as the
equivalent of treasury shares of the Corporation and, as such, holders of Excess
Shares will hold such Excess Shares as agent of the Corporation and shall have
no right to exercise or receive the benefits of shareholder rights appurtenant
to such Excess Shares. In such event, the Corporation may redeem any or all
Excess Shares, arrange a sale to one or more purchasers who could acquire such
Excess Shares without violating this Article EIGHTH, or seek other appropriate
remedies. In addition, any Person who receives dividends, interest or any other
distribution with respect to Excess Shares shall hold the same as agent for the
Corporation and, following a permitted transfer, for the transferee thereof.
Notwithstanding the foregoing, any person who holds Excess Shares may transfer
the same (together with any distributions thereon) to any Person who, following
such transfer, would not own shares in violation of this Article EIGHTH. Upon
such permitted transfer, the Corporation shall pay or distribute to the
transferee any distributions on the Excess Shares not previously paid or
distributed.
(6) Definitions. As used in this Article EIGHTH:
(a) "Person" includes, without limitation, an individual, a
corporation (whether nonprofit or for profit), a partnership, an
unincorporated society or association, and two or more persons having a
joint or common interest.
(b)(1) "Control Share Acquisition" means the acquisition,
directly or indirectly, by any Person, of shares of the Corporation
that, when added to all other shares of the corporation in respect of
which such Person, directly or indirectly, may exercise or direct the
exercise of voting power as provided in this paragraph, would entitle
such Person, immediately after such acquisition, directly or
indirectly, to exercise or direct the exercise of voting power of the
Corporation in the election of directors within any of the following
ranges of such voting power:
(i) One-fifth or more but less than one-third of such
voting power;
(ii) One-third or more but less than a majority of such
voting power; or
(iii) A majority of such voting power.
7
<PAGE> 8
A bank, broker, nominee, trustee, or other Person who acquires
shares in the ordinary course of business for the benefit of others in
good faith and not for the purpose of circumventing this Article EIGHTH
shall, however, be deemed to have voting power only of shares in
respect of which such Person would be able to exercise or direct the
exercise of votes at a special meeting of shareholders called pursuant
to Section (2) of this Article EIGHTH without further instruction from
others. For purposes of this Article EIGHTH, the acquisition of
securities immediately convertible into shares of the Corporation with
voting power in the election of directors shall be treated as an
acquisition of such shares.
(b)(2) The acquisition of any shares of the Corporation does
not constitute a Control Share Acquisition for the purposes of this
Article EIGHTH if the acquisition is consummated in any of the
following circumstances:
(i) By underwriters in good faith and not for the
purpose of circumventing this Article EIGHTH in connection
with any offering to the public of securities of the
Corporation;
(ii) By bequest or inheritance, by operation of law
upon the death of any individual, or by any other transfer
without valuable consideration, including a gift, that is made
in good faith and not for the purpose of circumventing this
Article EIGHTH;
(iii) Pursuant to the satisfaction of a pledge or
other security interest created in good faith and not for the
purpose of circumventing this Article EIGHTH;
(iv) Pursuant to a merger, consolidation, combination
or majority share acquisition adopted or authorized by
shareholder vote in compliance with the provisions of Article
SEVENTH of these Articles of Incorporation and Sections
1701.78, 1701.79 or 1701.83 of the Ohio Revised Code if the
Corporation is a party to the agreement of merger,
consolidation or acquisition, as the case may be;
(v) Under such circumstances that the acquisition
does not result in the Person acquiring shares of the
Corporation being entitled, immediately thereafter and for the
first time, directly or indirectly, to exercise or direct the
exercise of voting power of the Corporation in the election of
directors within the range of one-fifth or more but less than
one-third of such voting power, or within any of the ranges of
voting power specified in Section (6)(b)(1)(i), (ii) or (iii)
which is higher than the range of voting power applicable to
such Person immediately prior to such acquisition;
(vi) Prior to October 18, 1988; or
(vii) Pursuant to a contract existing prior to
October 18, 1988.
8
<PAGE> 9
The acquisition by any Person of shares of the Corporation in
a manner described under this Section (6)(b)(2) shall be deemed to be a
Control Share Acquisition authorized pursuant to this Article EIGHTH
within the range of voting power specified in Section (6)(b)(1)(i),
(ii) or (iii) that such Person is entitled to exercise after such
acquisition, provided that, in the case of an acquisition in a manner
described under Section (6)(b)(1)(i), (ii) or (iii), the transferor of
shares to such Person had previously obtained any authorization of
shareholders required under this Article EIGHTH in connection with such
transferor's acquisition of shares of the Corporation.
(b)(3) The acquisition of shares of the Corporation in good
faith and not for the purpose of circumventing this Article EIGHTH from
any Person whose Control Share Acquisition had previously been
authorized by shareholders in compliance with this Article EIGHTH, or
from any Person whose previous acquisition of shares would have
constituted a Control Share Acquisition but for Section (6)(b)(2), does
not constitute a Control Share Acquisition for the purpose of this
Article EIGHTH unless such acquisition entitles any Person, directly or
indirectly, alone or with others, to exercise or direct the exercise of
voting power of the Corporation in the election of directors in excess
of the range of such voting power authorized pursuant to this Article
EIGHTH, or deemed to be so authorized under Section (6)(b)(2).
(c) "Interested Shares" means Voting Stock with respect to
which any of the following persons may exercise or direct the exercise
of the voting power:
(1) any Person whose Notice prompted the calling of a
special meeting of shareholders pursuant to Section (2);
(2) any officer of the Corporation elected or appointed
by the directors of the Corporation; and
(3) any employee of the Corporation who is also a
director of the corporation.
(d) "Voting Stock" means all securities of the Corporation
entitled to vote generally in the election of directors, and, for
purposes of Sections (5) and (10) of this Article EIGHTH, shall mean
securities of the Corporation immediately convertible into securities
entitled to vote generally in the election of the directors.
(7) Proxies. No proxy appointed for or in connection with the
shareholder authorization of a Control Share Acquisition pursuant to this
Article EIGHTH is valid if it provides that it is irrevocable. No such proxy is
valid unless it is sought, appointed, and received both:
(a) In accordance with all applicable requirements of law;
and
9
<PAGE> 10
(b) Separate and apart from the sale or purchase, contract or
tender for sale or purchase, or request or invitation for tender for
sale or purchase, of shares of the Corporation.
(8) Revocability of Proxies. Proxies appointed for or in connection
with the shareholder authorization of a Control Share Acquisition pursuant to
this Article EIGHTH shall be revocable at all times prior to the obtaining of
such shareholder authorization, whether or not coupled with an interest.
(9) Amendments. Notwithstanding any other provisions of these Articles
of Incorporation or the Regulations of the Corporation or any provision of law
that might otherwise permit a lesser vote, but in addition to any affirmative
vote of the holders of any particular class or series of stock required by law,
the Articles of Incorporation or the Regulations of the Corporation, the
affirmative vote of the holders of at least eighty percent (80%) of the Voting
Stock, voting as a single class, shall be required to alter, amend or repeal
this Article EIGHTH or adopt any provisions in these Articles of Incorporation
or the Regulations of the Corporation which are inconsistent with the provisions
of this Article EIGHTH.
(10) Legend on Share Certificates. Each certificate representing Voting
Stock of the Corporation shall contain the following legend:
Transfer of the securities represented by this Certificate is
subject to the provisions of Article EIGHTH of the Corporation's
Articles of Incorporation as the same may be in effect from time to
time. Upon written request delivered to the Secretary of the
Corporation at its principal place of business, the Corporation will
mail to the holder of this Certificate a copy of such provisions
without charge within five (5) days after receipt of written request
therefor. By accepting this Certificate the holder hereof acknowledges
that it is accepting same subject to the provisions of said Article
EIGHTH as the same may be in effect from time to time and covenants
with the Corporation and each holder thereof from time to time to
comply with the provisions of said Article EIGHTH as the same may be in
effect from time to time.
NINTH: The provisions of Section 1701.831 of the Ohio Revised Code, as
amended from time to time, or any successor provision or provisions to said
Section, shall not apply with respect to any particular Control Share
Acquisition, as such is defined in said Section, regarding this Corporation so
long as Article NINTH of these Articles of Incorporation, as such Articles of
Incorporation may be amended from time to time, remains an Article of these
Articles of Incorporation and remains substantially in full force and effect,
disregarding any renumbering of such Article NINTH resulting from any amendment
of these Articles of Incorporation.
TENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in these Articles of Incorporation which may be
contained in these articles of incorporation of a corporation organized under
the laws of the State of Ohio, in the manner now or hereafter prescribed by
statute or these Articles of Incorporation, and all rights conferred upon
stockholders herein are granted subject to this reservation.
10
<PAGE> 1
CONFORMED EXECUTION COPY
Exhibit 4(d)
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BEARINGS, INC.
NOTE PURCHASE AND PRIVATE SHELF FACILITY
WITH
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
$80,000,000 MAXIMUM AGGREGATE PRINCIPAL AMOUNT
Dated as of October 31, 1992,
As Amended on November 27, 1996
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<PAGE> 2
TABLE OF CONTENTS
(Not Part of Agreement)
Page
1. AUTHORIZATION OF ISSUE OF PRIVATE SHELF NOTES......................... 1
2. PURCHASE AND SALE OF NOTES............................................ 1
3. CONDITIONS OF CLOSING................................................. 5
4. PREPAYMENTS........................................................... 6
5. AFFIRMATIVE COVENANTS................................................. 7
6. NEGATIVE COVENANTS.................................................... 9
7. EVENTS OF DEFAULT..................................................... 12
8. REPRESENTATIONS, COVENANTS AND WARRANTIES............................. 15
9. REPRESENTATIONS OF THE PURCHASERS..................................... 18
10. DEFINITIONS........................................................... 19
11. MISCELLANEOUS......................................................... 25
<PAGE> 3
LIST OF ATTACHMENTS
-------------------
PURCHASER SCHEDULE
EXHIBIT A -- FORM OF PRIVATE SHELF NOTE
EXHIBIT B -- FORM OF REQUEST FOR PURCHASE
EXHIBIT C -- FORM OF CONFIRMATION OF ACCEPTANCE
EXHIBIT D-1 -- FORM OF OPINION OF COMPANY'S SPECIAL COUNSEL
(Initial Closing)
EXHIBIT D-2 -- FORM OF OPINION OF COMPANY'S COUNSEL
(Private Shelf Note Closings)
EXHIBIT E -- LIST OF AGREEMENTS RESTRICTING DEBT
EXHIBIT F -- LIST OF SUBSIDIARIES
EXHIBIT G -- LIST OF ENCUMBRANCES
<PAGE> 4
BEARINGS, INC.
3600 Euclid Avenue
Cleveland, Ohio 44115-2515
As of October 31, 1992,
As Amended on November 27, 1996
To: The Prudential Insurance Company
of America (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
9700 Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
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 $80,000,000, to
be dated the date of issue thereof, to mature, in the case of each Private Shelf
Note so issued, no less than seven (7) years and no more than fifteen (15) years
after the issuance thereof (and, unless otherwise agreed by the Company,
Prudential and the applicable Purchasers, have an average life of approximately
6.75 years), 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.
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
agrees to purchase and the Company agrees to issue Private Shelf Notes pursuant
to the terms of this Agreement in an aggregate principal amount of $80,000,000
in increments of at least
<PAGE> 5
$40,000,000 on or before December 24, 1992 (the "ISSUANCE PERIOD"). Prudential's
agreement to purchase Private Shelf Notes hereunder is referred to herein as the
"FACILITY". At any time, $80,000,000 minus the aggregate principal amount of
Private Shelf Notes purchased and sold pursuant to this Agreement prior to such
time is herein called the "AVAILABLE FACILITY AMOUNT" at such time. A maximum of
two (2) draws may be made under the Facility which shall automatically expire
concurrently with the second draw hereunder. Prudential agrees to use reasonable
efforts to facilitate the prompt completion of the procedures specified in this
Agreement for draws under the Facility.
2B. PERIODIC SPREAD INFORMATION. Not later than 9:30 A.M. (New York
City local time) on a Business Day during the Issuance Period if there is an
Available Facility Amount on such Business Day, the Company may request by
telecopier or telephone, and within a reasonable time after such request,
Prudential will, to the extent reasonably practicable, provide to the Company on
such Business Day (or, if such request is received after 9:30 A.M. (New York
City local time) on such Business Day, on the following Business Day),
information (by telecopier or telephone) with respect to various spreads at
which Prudential or Prudential Affiliates will consider purchasing Private Shelf
Notes.
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 $40,000,000
and shall not be greater than the Available Facility Amount at the time such
Request for Purchase is made, (ii) specify the final maturities, principal
payment 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 no more than ten (10) 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.
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 shall provide (by telephone
and promptly thereafter confirmed by telecopier, in each case no earlier than
9:30 A.M. and no later than 1:00 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
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<PAGE> 6
procedures used by Prudential to price comparable transactions with companies
similarly situated with similar credit risks.
2E. ACCEPTANCE. Within one hour after Prudential shall have provided
any interest rate quotes pursuant to paragraph 2D or such shorter period as
Prudential may reasonably specify to the Company (such period herein called 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 $40,000,000
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. In the event the closing with respect to any Accepted
Notes fails to occur within ten (10) days of the Acceptance Day for any reason
(other than Prudential's failure to fund the purchase price of the Private Shelf
Notes after all conditions to closing specified in paragraph 3A have been
satisfied on or before 11:30 A.M. New York City local time on the last Business
Day preceding the end of such ten day period), the interest rate applicable to
such Accepted Notes may increase based upon the costs of the delayed closing to
Prudential as reasonably determined by Prudential. 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. Prior to the close of business on the Business
Day next 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").
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, 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
market for U.S. Treasury securities and other financial instruments, 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.
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, 9700 Sears Tower, 233 South
Wacker Drive, Chicago, Illinois 60606 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
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<PAGE> 7
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 canceled 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 canceled as provided in paragraph 2H(3).
2H. FEES.
2H(1). FACILITY FEE. The Company agrees to pay Prudential in
immediately available funds a fee (the "FACILITY FEE") on December 24, 1992 in
an amount equal to one-eighth of one percent (.125%) of the Unused Facility
Amount which will exist as of the close of business on such date; provided,
however, that the Facility Fee shall be canceled if the Unused Facility Amount
is less than or equal to $40,000,000 on December 24, 1992. The term "UNUSED
FACILITY AMOUNT" shall mean, at any time, the Available Facility Amount at such
time plus the aggregate principal amount of Accepted Notes which have not been
purchased and sold hereunder prior to such time.
2H(2). DELAYED DELIVERY FEE. If the closing of the purchase and sale of
any Accepted Note is delayed for any reason (other than Prudential's failure to
fund the purchase price of the Accepted Notes after all conditions to closing
specified in paragraph 3A have been satisfied on or before 11:30 A.M. New York
City local time on the last Business Day preceding the 31st day after the
Acceptance Day) beyond the original Closing Day for such Accepted Note, the
Company will pay to Prudential on the last Business Day of each calendar month,
commencing with the first such day to occur more than 30 days after the
Acceptance Day for such Accepted Note and ending with the last such day to occur
prior to the Cancellation Date or the actual closing date of such purchase and
sale, and on the Cancellation Date or actual closing date of such purchase and
sale (if such Cancellation Date or closing date occurs more than 30 days after
the Acceptance Day for such Accepted Note), 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 an alternative investment 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 thirty first day
after the Acceptance Day of such Accepted Note (in the case of the first such
payment
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<PAGE> 8
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 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 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.
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 and the Company's obligation
to issue any Private Shelf Note is subject to the conditions set forth in
paragraph 3B.
3A(1). OPINION OF COMPANY'S COUNSEL. On the Initial Closing Day,
Prudential shall have received from Thompson, Hine and Flory, special counsel
for 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.
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<PAGE> 9
3A(4). FEES. On or before each Private Shelf Closing Day, the Company
shall have paid in full to Prudential any fee required by paragraph 2H(1) and to
the Purchasers any 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 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 G,
T 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.
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.
3B. CONDITIONS TO COMPANY'S OBLIGATION UNDER PARAGRAPH . The
Company's obligation to issue Private Shelf Notes shall be subject to the
following conditions:
(i) the rate quotes provided by Prudential to the Company
pursuant to paragraph 2D shall not exceed 131 basis points above the
interpolated Treasury rate corresponding to the weighted average life
of the applicable Notes;
(ii) in the event that the interest rate quote provided by
Prudential to the Company pursuant to paragraph 2D equals or exceeds
9.63% per annum, then the Company's obligation to offer Notes for
purchase in an aggregate principal amount of $80,000,000 under
paragraph 1 shall be reduced to $20,000,000;
(iii) if the conditions specified in paragraph 2F are
applicable, then the Company's obligations to offer Notes for purchase
under paragraph 2A shall be suspended until such conditions are no
longer applicable but the Company obligation to offer Notes shall in no
event continue beyond January 31, 1993; and
(iv) after all conditions to closing under paragraph 3A have
been satisfied, the applicable Purchaser shall fund the purchase price
of the Notes on the applicable Closing Day.
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.
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<PAGE> 10
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 pro
rata 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.
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
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<PAGE> 11
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 pursuant to clause (iii) below of copies of the
Quarterly Report on Form 10-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 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);
(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;
(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
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<PAGE> 12
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.
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.
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<PAGE> 13
6A(1). LIQUIDITY. The Company covenants that it will not permit
Consolidated Current Assets less Consolidated Current Liabilities determined at
the end of any fiscal quarter to fall below an amount equal to $125,000,000.
6A(2). CURRENT RATIO. The Company covenants that it will not permit the
ratio (expressed as a percentage) of Consolidated Current Assets to Consolidated
Current Liabilities determined at the end of any fiscal quarter to fall below
150%.
6A(3). CONSOLIDATED TANGIBLE NET WORTH. The Company covenants that it
will not permit Consolidated Tangible Net Worth determined at the end of any
fiscal quarter to fall below $115,000,000 PLUS an amount equal to 30% of annual
Consolidated Net Income (less 0% in the event of a loss), applied at the end of
each fiscal year commencing with the fiscal year ending June 30, 1996.
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;
(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 encumbrance
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.
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
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<PAGE> 14
(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 Tangible Net Worth.
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 15% of
Consolidated Tangible 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.
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<PAGE> 15
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.
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.
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
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<PAGE> 16
(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
$5,000,000; 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 $10,000,000; or
(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
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<PAGE> 17
(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
(xii) any one or more unpaid or unsatisfied judgments or
decrees in excess of $5,000,000 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
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<PAGE> 18
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.
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.
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 existing and in good standing under the laws of the
jurisdiction in which it is incorporated, and the Company has and each
Subsidiary has the corporate 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.
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
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<PAGE> 19
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 for such 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.
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
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<PAGE> 20
proceedings for which adequate reserves have been established in accordance with
generally accepted accounting principles.
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the Company nor
any of its Subsidiaries is a party to any contract or agreement or subject to
any charter or other corporate restriction which materially and adversely
affects its business, property or assets, or financial condition. 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 pursuant to,
the charter or by-laws 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.
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. REGULATION G, ETC. Neither the Company nor any Subsidiary owns or
has any present intention of acquiring any "margin stock" as defined in
Regulation G (12 CFR Part 207) of the Board of Governors of the Federal Reserve
System (herein called "margin stock"). 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 or for the purpose of maintaining, reducing or retiring any
indebtedness which was originally incurred to purchase or carry any stock that
is currently a margin stock or for any other purpose which might constitute this
transaction a "purpose credit" within the meaning of such Regulation G. 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 G,
Regulation T 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.
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
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<PAGE> 21
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.
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 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.
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 may (so far as the Company can now 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.
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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<PAGE> 22
9B. SOURCE OF FUNDS. No part of the funds used by such Purchaser to
pay the purchase price of the Notes being purchased by such Purchaser hereunder
constitutes assets allocated to any separate account maintained by such
Purchaser. For the purpose of this paragraph 9B, the term "separate account"
shall have the meaning specified 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 4A or is declared to be
immediately due and payable pursuant to paragraph 7A, as the context requires.
"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 (calculated on the same
periodic basis as that on which interest on such Note is payable) equal to the
Reinvestment Yield with respect to such Called Principal.
"REINVESTMENT YIELD" shall mean, with respect to the Called Principal
of any Note, 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.
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<PAGE> 23
"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 4A 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 have the meaning specified in paragraph 2E.
"ACCEPTED NOTE" shall have the meaning specified in paragraph 2E.
"AFFILIATE" shall mean any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the Company,
except a Subsidiary. 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.
"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, Allen Weaver, Regional Vice President, Jean Hamilton,
President, Len Lillard, Vice President and 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 or a member of its Law Department.
Any action taken under this Agreement on behalf of the Company by any individual
who on or after the date of this Agreement shall have been an Authorized Officer
of the Company and whom Prudential in good faith believes to be an Authorized
Officer of the Company at the time of such action shall be binding on the
Company even though such individual shall have ceased to be an Authorized
Officer of the Company, and any action taken under this Agreement on behalf of
Prudential by any individual who on or after the date of this Agreement shall
have been an Authorized Officer of Prudential and whom the Company in good faith
believes to be an Authorized Officer of Prudential at the time of such action
shall be binding on Prudential even though such individual shall have ceased to
be an Authorized Officer of Prudential.
"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 The Prudential Insurance Company of America is not open for
business.
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<PAGE> 24
"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.
"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 CURRENT ASSETS" and "CONSOLIDATED CURRENT LIABILITIES"
shall mean the consolidated current assets and consolidated current liabilities
of the Company and its Subsidiaries each determined in accordance with generally
accepted accounting principles, provided that inventory shall be valued at
current cost. The current portion of Funded Debt shall not be included in the
calculation of Consolidated Current Liabilities.
"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.
"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; (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; and (vi) obligations
under any other contract which, in economic effect, is substantially equivalent
to a guarantee; all as determined in accordance with generally accepted
accounting principles. The term Debt shall not include 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
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<PAGE> 25
balance sheet of the Company prepared in accordance with generally accepted
accounting principles.
"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.
"FACILITY" shall have the meaning specified in paragraph 2A.
"FACILITY FEE" shall have the meaning specified in paragraph 2H(1).
"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.
"INITIAL CLOSING DAY" shall mean October 31, 1992.
"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.
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<PAGE> 26
"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.
"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.
"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.
"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.
"PRUDENTIAL" shall mean The Prudential Insurance Company of America.
"PRUDENTIAL AFFILIATE" shall mean any corporation or other entity all
of the Voting Stock (or equivalent voting securities or interests) of which is
owned by Prudential either directly or through Prudential Affiliates.
"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.
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<PAGE> 27
"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 l.
"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 organized under the laws of any
state of the United States or Canada which conducts the major portion of its
business in and makes the major portion of its sales to Persons located in the
United States and Canada, and 80% of the stock of every class of which, except
directors' qualifying shares, is owned by the Company either directly or through
Subsidiaries.
"TRANSFEREE" shall mean any direct or indirect transferee of all or any
part of any Note purchased by any Purchaser under this Agreement.
"UNUSED FACILITY AMOUNT" shall have the meaning specified in paragraph
2H(1).
"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 the criteria for
evaluating the Company's financial
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<PAGE> 28
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.
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
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 costs incurred in connection
with the Initial Closing Day or any draw under the Facility), the transactions
contemplated hereby and any subsequent proposed modification of, or proposed
consent under, this Agreement, whether or not such proposed modification shall
be effected or 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.
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
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<PAGE> 29
(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 $l,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.
- 26 -
<PAGE> 30
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 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 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
- 27 -
<PAGE> 31
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 ouch 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.
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.
- 28 -
<PAGE> 32
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.
Very truly yours,
BEARINGS, INC.
By: /s/ John R. Whitten
Title: Vice President & Treasurer
The foregoing Agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Leonard H. Lillard IV
- -------------------------------
Vice President
- 29 -
<PAGE> 33
PURCHASER SCHEDULE
Bearings, Inc.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
(1) Address for all notices relating to payments:
The Prudential Insurance Company of America
c/o Prudential Capital Group
Three Gateway Center
100 Mulberry Street
Newark, New Jersey 07102-4077
Attention: Investment Administration Unit
Telecopy: (201) 802-8055
(2) Address for all other communications and notices:
The Prudential Insurance Company of America
c/o Prudential Capital Group
9700 Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
Attention: Regional Vice President
Telecopy: (312) 454-8222
(3) Recipient of telephonic prepayment notices:
Manager, Asset Management Unit
Telephone: (201) 802-6429
Telecopy: (201) 802-8055
(4) Tax Identification No.: 22-1211670
- 30 -
<PAGE> 34
EXHIBIT A
---------
[FORM OF PRIVATE SHELF NOTE]
BEARINGS, INC.
SENIOR NOTE
(Fixed Rate)
SERIES ________
No. _________
ORIGINAL PRINCIPAL AMOUNT:
ORIGINAL ISSUE DATE:
INTEREST RATE:
INTEREST PAYMENT DATES: 1
FINAL MATURITY DATE:
PRINCIPAL INSTALLMENT DATES AND AMOUNTS:
FOR VALUE RECEIVED, the undersigned, BEARINGS, INC. (herein called the
"Company"), a corporation organized and existing under the laws of the State of
Ohio, hereby promises to pay to ______________________________, or registered
assigns, the principal sum of ______________________________ DOLLARS ton the
Final Maturity Date specified above] [, payable in installments on the Principal
Installment Dates and in the amounts specified above, and on the Final Maturity
Date specified above in an amount equal to the unpaid balance of the principal
hereof,] with interest (computed on the basis of a 360-day year--30-day month)
(a) on the unpaid balance thereof at the Interest Rate per annum specified
above, payable on each Interest Payment Date specified above and on the Final
Maturity Date specified above, commencing with the Interest Payment Date next
succeeding the date hereof, until the principal hereof shall have become due and
payable, and (b) on any overdue payment (including any overdue prepayment) of
principal, any overdue payment of interest, and any overdue payment of any
Yield-Maintenance Amount (as defined in the Note Agreement referred to below),
payable on each Interest Payment Date 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) 2% plus the Interest Rate specified above or (ii) 2%
over the rate of interest publicly announced by Morgan Guaranty Trust Company of
New York from time to time in New York City as its Prime Rate.
Payments of principal of, and interest on, and any Yield-Maintenance
Amount payable with respect to, this Note are to be made at the main office of
Morgan Guaranty Trust Company of New York in New York City or at such other
place as the holder hereof shall designate to the Company in writing, in lawful
money of the United States of America.
This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to a Note Purchase and Private Shelf Agreement, dated
as of October 31, 1992 (herein called the "Agreement"), between the Company, on
the one hand, and The Prudential Insurance Company of America and each
"Prudential Affiliate" (as defined in the Agreement) which becomes a party
thereto, on the other hand, and is entitled to the benefits thereof. As
--------
1 Insert "April 30, July 30, October 30 and January 30" if interest payments are
quarterly.
A-1
<PAGE> 35
provided in the Agreement, this Note is subject to prepayment, in whole or from
time to time in part on the terms specified in the Agreement.
This Note is a registered Note and, as provided in the 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 shall not be affected by any notice to the contrary.
In case an Event of Default, as defined in the Agreement, shall
occur and be continuing, the principal of this Note may be declared or otherwise
become due and payable in the manner and with the effect provided in the
Agreement.
This Note is intended to be performed in the State of Illinois and
shall be construed and enforced in accordance with the law of such State.
BEARINGS, INC.
By:
----------------------------
Title:
A-1
<PAGE> 36
EXHIBIT B
[FORM OF REQUEST FOR PURCHASE]
BEARINGS, INC.
Reference is made to the Note Purchase and Private Shelf Agreement
(the "Agreement"), dated as of October 31, 1992, between Bearings, Inc. (the
"Company"), and The Prudential Insurance Company of America and each Prudential
Affiliate which becomes a party thereto. All terms used herein that are defined
in the Agreement have the respective meanings specified in the Agreement.
Pursuant to Paragraph 2C of the Agreement, the Company hereby makes
the following Request for Purchase:
1. Aggregate principal amount of
the Notes covered hereby
(the "Notes") .......................... $_________________
2. Individual specifications of the Notes:
Principal
Final Installment Interest
Principal Maturity Dates and Payment
Amount * Date Amounts Period
- --------- -------- ----------- --------
3. Use of proceeds of the Notes:
4. Proposed day for the closing of the purchase and sale of the Notes:
______________, or, if earlier, the last Business Day which is no
more than ten (10) days after the Acceptance Day for the Notes
covered by this Request for Purchase.
- --------
* Minimum principal amount of $____________
B-2
<PAGE> 37
5. The purchase price of the Notes is to be transferred to:
Name, Address Name and
and ABA Routing Number of Telephone No.
Number of Bank Account of Bank Officer
- -------------- --------- ---------------
6. The Company certifies (a) that the representations and warranties
contained in paragraph 8 of the Agreement are true on and as of the
date of this Request for Purchase except to the extent of changes
caused by the transactions contemplated in the Agreement and (b)
that there exists on the date of this Request for Purchase no Event
of Default or Default.
Dated: BEARINGS, INC.
By:________________________________
Authorized Officer
B-3
<PAGE> 38
EXHIBIT C
---------
[FORM OF CONFIRMATION OF ACCEPTANCE]
BEARINGS, INC.
Reference is made to the Note Purchase and Private Shelf Agreement
(the "Agreement"), dated as of October 31, 1992 between Bearings, Inc. (the
"Company") and The Prudential Insurance Company of America. All terms used
herein that are defined in the Agreement have the respective meanings specified
in the Agreement.
Prudential or the Prudential Affiliate which is named below as a
Purchaser of Notes hereby confirms the representations as to such Notes set
forth in paragraph 9 of the Agreement, and agrees to be bound by the provisions
of paragraphs 2E and 2G of the Agreement relating to the purchase and sale of
such Notes.
Pursuant to paragraph 2E of the Agreement, an Acceptance with
respect to the following Accepted Notes is hereby confirmed:
I. Accepted Notes: Aggregate principal
amount $_____________
(A) (a) Name of Purchaser:
(b) Principal amount:
(c) Final maturity date:
(d) Principal installment dates and amounts:
(e) Interest rate:
(f) Interest payment period:
(g) Payment and notice instructions: As set forth on
attached Purchaser Schedule
(B) (a) Name of Purchaser:
(b) Principal amount:
(c) Final maturity date:
(d) Principal installment dates and amounts:
(e) Interest rate:
(f) Interest payment period:
(g) Payment and notice instructions: As set forth on
attached Purchaser Schedule
[(C), (D)....... same information as above.]
C-1
<PAGE> 39
II. Closing Day: [Must be within 10 days of the date of this Confirmation of
Acceptance.]
Dated: BEARINGS, INC.
By:______________________________
Title:___________________________
[THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA]
By:_______________________________
Vice President
[PRUDENTIAL AFFILIATE]
By:_______________________________
Vice President
C-2
<PAGE> 40
Exhibit D-1
-----------
[TH&F LETTERHEAD]
October 31, 1992
The Prudential Insurance Company of America
c/o Prudential Capital Group
9700 Sears Tower
233 South Wacker
Drive Chicago, IL 60606
Dear Sirs:
We have acted as counsel for Bearings, Inc., an Ohio corporation
(the "Company"), in connection with the Note Purchase and Private Shelf
Facility, dated as of October 31, 1992, between the Company and you (the
Agreement). All terms used herein that are defined in the Agreement have the
respective meanings specified in the Agreement.
In this connection, we have examined such certificates of public
officials, certificates of officers of the Company and copies certified to our
satisfaction of corporate documents and records of the Company and of other
papers, and have made such other investigations, as we have deemed relevant and
necessary as a basis for our opinion hereafter set forth. We have relied upon
such certificates of public officials and of officers of the Company with
respect to the accuracy of material factual matters contained therein which were
not independently established. With respect to the opinion expressed in
paragraph 3 below, we have also relied upon the representation made by you in
paragraph 9A of the Agreement. With respect to the opinion expressed in para
graph 4 below, we have relied solely upon the opinion of Robert C. Stinson, Vice
President-General Counsel of the Company and upon our review of the Company's
Amended and Restated Articles of Incorporation and Code of Regulations.
Based on the foregoing, it is our opinion that:
1. The Company is validly existing in good standing under the laws
of the State of Ohio. The Company has the corporate power to carry on its
business as now being conducted.
2. The Agreement has been duly authorized by all requisite
corporate action and duly executed and delivered by authorized officers of the
Company, and is a valid obligation of the Company, legally binding upon and
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights generally and
(b) general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
3. It is not necessary in connection with the offering, issuance,
sale and delivery of the Notes under the circumstances contemplated by the
Agreement to register the Notes under the Securities Act or to qualify an
indenture in respect of the Notes under the Trust Indenture Act of 1939, ask
amended.
<PAGE> 41
The Prudential Insurance Company of America
Page 2
4. Insofar as is known to us after having made due inquiry with
respect thereto, the execution and delivery of the Agreement, the offering of
the Notes and fulfillment of and compliance with the provisions of the Agreement
do not 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 pursuant to, or require any authorization, consent, approval, exemption,
or other action by or notice to or filing with any court, administrative or
governmental body or other Person (other than routine filings after the date
hereof with the Securities and Exchange Commission and/or state Blue Sky
authorities) pursuant to, the charter or by-laws of the Company, any applicable
law (including any securities or Blue Sky law), statute, rule or regulation or
any mortgage, deed of trust, indenture, loan agreement or other material
agreement (including, without limitation, any agreement listed in Exhibit E to
the Agreement), instrument, order, judgment or decree known to us to which the
Company or any of its Subsidiaries is a party or otherwise subject.
The opinions set forth above are subject to the following
qualifications and assumptions:
A. We are admitted to practice in the State of Ohio and have
reviewed and relied upon Ohio law and the federal laws of the United States
only, and we have undertaken no review of the laws or applications of laws of
any other jurisdiction. Accordingly, this opinion is limited to the laws and
application thereof of Ohio and the federal laws of the United States. For
purposes of this opinion, we have assumed that Illinois law is substantively
equivalent to Ohio law although we have not reviewed Illinois law.
B. As used in this letter, the phrases "to our knowledge" or
"known to us" with reference to matters of fact, mean that after inquiries of
officers of the Company and on the basis of information that has come to our
attention during the course of our representation of the Company in connection
with the Agreement, we find no reason to believe that the opinions expressed
herein are factually incorrect; beyond that we have made no independent factual
investigations for the purpose of rendering this opinion.
C. We have assumed that the Agreement is a valid, binding and
enforceable obligation of Prudential which has been duly authorized, executed
and delivered by it.
D. We express no opinion as to the availability of any specific
remedy upon breach of any of the agreements, documents or obligations referred
to herein beyond the practical realization of the benefits intended to be
provided to you thereby. In addition, we express no opinion with respect to the
recoverability of attorneys' fees pursuant to any provision requiring the
payment thereof.
Very truly yours,
<PAGE> 42
Exhibit D-2
-----------
[BEARINGS, INC. LETTERHEAD]
[Dates of Draws]
The Prudential Insurance Company of America
c/o Prudential Capital Group
9700 Sears Tower
233 South Wacker Drive
Chicago, IL 60606
[Names and addresses of other purchasers]
Dear Sir:
I am the general counsel of Bearings, Inc., an Ohio corporation
(the "Company"), and have acted as counsel for the Company in connection with
the $80,000,000 Maximum Aggregate Principal Amount Private Shelf Facility, dated
as of October 29, 1992, between the Company and you (the "Agreement.), pursuant
to which the Company has issued to you today its Series _____ Private Shelf
Notes in the aggregate principal amount of $______________ (the "Notes"). All
terms used herein that are defined in the Agreement have the respective meanings
specified in the Agreement.
In this connection, I have examined such certificates of public
officials, certificates of officers of the Company and copies certified to my
satisfaction of corporate documents and records of the Company and of other
papers, and have made such other investigations, as I have deemed relevant and
necessary as a basis for our opinion hereafter set forth. We have relied upon
such certificates of public officials and of officers of the Company with
respect to the accuracy of material factual matters contained therein which were
not independently established. With respect to the opinion expressed in
paragraph 3 below, I have also relied upon the representation made by you in
paragraph 9A of the Agreement.
Based on the foregoing, it is my opinion that:
1. The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Ohio. Each Subsidiary
is a corporation validly existing in good standing under the laws of its
jurisdiction of incorporation. The Company has, and each Subsidiary has, the
corporate power to carry on its business as now being conducted.
2. The Agreement and the Notes have been duly authorized by all
requisite corporate action and duly executed and delivered by authorized
officers of the Company, and is a valid obligation of the Company, legally
binding upon and enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and (b) general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
3. It is not necessary in connection with the offering, issuance,
sale and delivery of the Notes under the circumstances contemplated by the
Agreement to register the Notes
<PAGE> 43
The Prudential Insurance Company of America
Page 2
under the Securities Act or to qualify an indenture in respect of the Notes
under the Trust Indenture Act of 1939, as amended.
4. The extension, arranging and obtaining of the credit
represented by the Notes do not result in any violation of regulation G, T or X
of the Board of Governors of the Federal Reserve System.
5. Insofar as is known to me after having made due inquiry with
respect thereto, the execution and delivery of the Agreement, the offering of
the Notes and fulfillment of and compliance with the provisions of the Agreement
do not 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 pursuant to, or require any authorization, consent, approval, exemption,
or other action by or notice to or filing with any court, administrative or
governmental body or other Person (other than routine filings after the date
hereof with the Securities and Exchange Commission and/or state Blue Sky
authorities) pursuant to, the charter or by-laws of the Company, any applicable
law (including any securities or Blue Sky law), statute, rule or regulation or
any mortgage, deed of trust, indenture, loan agreement or other material
agreement (including, without limitation, any agreement listed in Exhibit E to
the Agreement), instrument, order, judgment or decree known to me to which the
Company or any of its Subsidiaries is a party or otherwise subject.
The execution and delivery of the Agreement, the offering,
issuance and sale of the Notes and fulfillment of and compliance with the
respective provisions of the Agreement and the Notes do not 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 pursuant to, or require
any authorization, consent, approval, exemption, or other action by or notice to
or filing with any court, administrative or governmental body or other Person
(other than routine filings after the date hereof with the Securities and
Exchange Commission and/or state Blue Sky authorities) pursuant to, the charter
or by-laws of the Company, any applicable law (including any securities or Blue
Sky law), statute, rule or regulation or (insofar as is known to me after having
made due inquiry with respect thereto) any agreement (including, without
limitation, any agreement listed in Exhibit E to the Agreement), instrument,
order, judgment or decree known to me to which the Company or any of its
Subsidiaries is a party or otherwise subject.
The opinions set forth above are subject to the following
qualifications and assumptions:
A. I am admitted to practice in the State of Ohio and have
reviewed and relied upon Ohio law and the federal laws of the United States
only, and I have undertaken no review of the laws or applications of laws of any
other jurisdiction. Accordingly, this opinion is limited to the laws and
application thereof of Ohio and the federal laws of the United States. For
purposes of this opinion, I have assumed that Illinois law is substantively
equivalent to Ohio law although I have not reviewed Illinois law.
B. As used in this letter, the phrase known to men with reference
to matters of fact, mean that after inquiries of officers of the Company and on
the basis of information that has come to my attention during the course of our
representation of the Company in connection with the Agreement, I find no reason
to believe that the opinions expressed herein are factually incorrect; beyond
that I have made no independent factual investigations for the purpose of
rendering this opinion.
<PAGE> 44
The Prudential Insurance Company of America
Page 3
C. I have assumed that the Agreement is a valid, binding and
enforceable obligation of Prudential which has been duly authorized, executed
and delivered by it.
D. I express no opinion as to the availability of any specific
remedy upon breach of any of the agreements, documents or obligations referred
to herein beyond the practical realization of the benefits intended to be
provided to you thereby. In addition, I express no opinion with respect to the
recoverability of attorneys' fees pursuant to any provision requiring the
payment thereof.
Very truly yours,
<PAGE> 45
EXHIBIT E
---------
LIST OF AGREEMENTS RESTRICTING DEBT
Director borrowing resolutions in effect from time to time may limit the total
amount of indebtedness which the Company is authorized to incur. Presently those
resolutions limit total borrowings to $140,000,000 (with temporary authority up
to $190,000,000 through 12/31/92).
Other than that none.
<PAGE> 46
EXHIBIT F
---------
LIST OF SUBSIDIARIES
Active
- ------
Dixie Bearings, Incorporated
Bruening Bearings, Inc.
King Bearing, Inc.
Inactive
- --------
Bearings, Inc. (TN)
Bearings Continental, Inc.
Bearings Pan American, Inc.
Bearing Sales & Service, Inc.
The Ohio Ball Bearing Company
Industrial Distributions, Inc.
Bearings, Inc. (AL)
<PAGE> 47
EXHIBIT G
---------
LIST OF ENCUMBRANCES
1. Possible liens of landlords for rents arising under applicable state laws.
2. Restrictions, easements, reservations and other encumbrances on real
properties owned by the Company or any Subsidiary, none of which materially
interfere with the operations of such properties.
3. Liens arising out of Ledger Balance Inventories, consignments and similar
arrangements with suppliers.
4. Rights, if any, of creditors of customers to inventories on consignment
with customers where no UCC filing has been made by the Company.
5. Financing statements, if any, filed in connection with equipment leases,
none of which are material to the financial condition to the Company or its
subsidiaries.
6. Guarantee by Company to Dunn & Bradstreet and its customers with respect
to debt of subsidiaries.
7. Statutory liens, including mechanics liens, on vehicles, real estate and
other equipment, none of which are material to the financial condition of
the Company or its subsidiaries.
<PAGE> 1
Exhibit 10(a)
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
SUPPLEMENTAL DEFINED CONTRIBUTION PLAN
(JANUARY 1, 1997 RESTATEMENT)
<PAGE> 2
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
SUPPLEMENTAL DEFINED CONTRIBUTION PLAN
(JANUARY 1, 1997 RESTATEMENT)
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Section Page
------- ----
ARTICLE I
DEFINITIONS
<S> <C> <C>
1.1 Definitions ................................................................... 2
1.2 Construction .................................................................. 4
ARTICLE II
ELIGIBILITY FOR PLAN PARTICIPATION 5
ARTICLE III
SUPPLEMENTAL CONTRIBUTIONS
3.1 Supplemental 401(k) Contributions ............................................. 6
3.2 Supplemental Matching Contributions ........................................... 6
3.3 Vesting of Supplemental Matching
Contributions................................................................ 6
3.4 Years of Vesting Service....................................................... 7
ARTICLE IV
SEPARATE ACCOUNTS
4.1 Types of Separate Accounts .................................................... 8
4.2 Adjustment of Separate Accounts ............................................... 8
4.3 Investment Elections for Supplemental
401(k) Contributions......................................................... 8
4.4 Investment Change of Future Supplemental
401(k) Contributions......................................................... 9
4.5 Election to Transfer Invested Past
Supplemental 401(k) Contributions............................................ 9
4.6 Investment of Matching Contributions........................................... 9
</TABLE>
-i-
<PAGE> 3
ARTICLE V
DISTRIBUTION
<TABLE>
<S> <C> <C>
5.1 Distribution Upon Termination of Employment ................................... 10
5.2 Method of Distribution ........................................................ 10
5.3 Times of Payments.............................................................. 10
5.4 Hardship Distribution.......................................................... 11
5.5 Distributions Upon Death....................................................... 11
5.6 Taxes.......................................................................... 11
ARTICLE VI
BENEFICIARIES 13
ARTICLE VII
ADMINISTRATIVE PROVISIONS
7.1 Administration ................................................................ 14
7.2 Powers and Authorities of the Committee ....................................... 14
7.3 Indemnification ............................................................... 14
7.4 Section 16b Procedures......................................................... 15
ARTICLE VIII
AMENDMENT AND TERMINATION 16
ARTICLE IX
MISCELLANEOUS
9.1 Non-Alienation of Benefits .................................................... 17
9.2 Payment of Benefits to Others ................................................. 17
9.3 Plan Non-Contractual .......................................................... 17
9.4 Funding ....................................................................... 18
9.5 Claims of Other Persons ....................................................... 18
9.6 Severability .................................................................. 18
9.7 Governing Law ................................................................. 18
</TABLE>
-ii-
<PAGE> 4
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
SUPPLEMENTAL DEFINED CONTRIBUTION PLAN
(JANUARY 1, 1997 RESTATEMENT)
WHEREAS, Bearings, Inc. established the Bearings, Inc. Supplemental
Defined Contribution Plan, effective as of January 1, 1996, for the benefit of a
select group of management or highly compensated employees; and
WHEREAS, the Bearings, Inc. Supplemental Defined Contribution Plan was
amended subsequently on two occasions; and
WHEREAS, effective as of January 1, 1997, Bearings, Inc. changed its
name to Applied Industrial Technologies, Inc.; and
WHEREAS, it is desired to amend and restate the Bearings, Inc.
Supplemental Defined Contribution Plan to reflect such plan sponsor name change;
NOW, THEREFORE, effective as of January 1, 1997, the Bearings, Inc.
Supplemental Defined Contribution Plan is hereby renamed the Applied Industrial
Technologies, Inc. Supplemental Defined Contribution Plan and is amended and
restated in the manner hereinafter set forth:
<PAGE> 5
ARTICLE I
DEFINITIONS
-----------
1.1 DEFINITIONS. Except as otherwise required by the context, the
terms used in the Plan shall have the meaning hereinafter set forth.
(1) The term "AFFILIATE" shall mean any member of a
controlled group of corporations (as determined under Section
414(b) of the Code) of which the Company is a member, any member
of a group of trades or businesses under common control (as
determined under Section 414(c) of the Code) with the Company,
any member of an affiliated service group (as determined under
Section 414(m) of the Code) of which the Company is a member, and
any other entity which is required to be aggregated with the
Company pursuant to the provisions of Section 414(o) of the Code.
(2) The term "BENEFICIARY" shall mean the person or
persons who, in accordance with the provisions of Article VI, is
entitled to receive a distribution hereunder in the event a
Participant dies before his interest under the Plan has been
distributed to him in full.
(3) The term "BOARD" shall mean the Board of Directors of
the Company.
(4) The term "CODE" shall mean the Internal Revenue Code
of 1986, as amended from time to time. Reference to a section of
the Code shall include such section and any comparable section or
sections of any future legislation that amends, supplements, or
supersedes such section.
(5) The term "COMPANY" shall mean, for any period prior to
January 1, 1997, Bearings, Inc., and for any period after
December 31, 1996, Applied Industrial Technologies, Inc. its
corporate successors, and the surviving corporation resulting
from any merger of Applied Industrial Technologies, Inc. with any
other corporation or corporations.
(6) The term "COMPANY STOCK" shall mean the common stock
of the Company.
(7) The term "COMPANY STOCK FUND" shall mean the Fund
consisting primarily of Company Stock.
- 2 -
<PAGE> 6
(8) The term "COMMITTEE" shall mean the Applied Industrial
Technologies, Inc. Supplemental Excess Defined Contribution Plan
Committee (formerly the Bearings, Inc. Supplemental Excess
Defined Contribution Plan Committee) which shall be comprised of
the same individuals who serve on the administrative committee
for the Retirement Savings Plan and which shall administer the
Plan in accordance with the provisions of Article VII.
(9) The term "COMPENSATION" shall mean the total wages
which are paid to a Participant during a Plan Year by an Employer
for his services as an Employee while he is a Participant,
including incentive compensation, commissions, bonuses, and
elective contributions made on behalf of such Participant under
the Plan or any other plan that are not includible in gross
income under Sections 125 and 402(e)(3) of the Code, but
excluding moving or educational reimbursement expenses, amounts
deferred under any non-qualified deferred compensation program,
amounts realized from the exercise of stock options, imputed
income attributable to any fringe benefit, and any amounts
received in lieu of benefits under a plan that meets the
requirements of Section 125 of the Code.
(10) The term "COMPREHENSIVE PLAN" shall mean the Applied
Industrial Technologies, Inc. Deferred Compensation and
Supplemental Benefit Plan (formerly known as the Bearings, Inc.
Comprehensive Deferred Compensation and Supplemental Benefit
Plan).
(11) The term "FUND" shall mean any of the funds
maintained for the investment of Plan assets in accordance with
the provisions of Article VII.
(12) The term "PARTICIPANT" shall mean any employee of the
Company or an Affiliate, who participates in the Plan pursuant to
Article II of the Plan.
(13) The term "PLAN" shall mean the Applied Industrial
Technologies, Inc. Supplemental Defined Contribution Plan
(formerly known as the Bearings, Inc. Supplemental Defined
Contribution Plan) as amended and restated herein, effective as
of January 1, 1997, with all amendments, modifications and
supplements hereinafter made. The Plan is part of the
Comprehensive Plan and listed on Exhibit A attached thereto.
(14) The term "RETIREMENT SAVINGS PLAN" shall mean the
Applied Industrial Technologies, Inc. Retirement Savings Plan
- 3 -
<PAGE> 7
(formerly the Bearings, Inc. Retirement Savings Plan), as amended
from time to time.
(15) The term "SEPARATE ACCOUNT" shall mean each of the
accounts maintained in the name of a Participant pursuant to
Section 4.1 of the Plan.
(16) The term "SUPPLEMENTAL MATCHING ACCOUNT" shall mean
the Separate Account to which Supplemental Matching Contributions
are credited in accordance with the provisions of Sections 3.2
and 4.1 of the Plan.
(17) The term "SUPPLEMENTAL MATCHING CONTRIBUTIONS" shall
mean the contributions credited to a Participant under the Plan
pursuant to Section 3.2.
(18) The term "SUPPLEMENTAL 401(K) CONTRIBUTION ACCOUNT"
shall mean the Separate Account to which Supplemental 401(k)
Contributions are credited in accordance with the provisions of
Sections 3.1 and 4.1 of the Plan.
(19) The term "SUPPLEMENTAL 401(K) CONTRIBUTIONS" shall
mean the contributions credited to a Participant under the Plan
pursuant to Section 3.1.
(20) The term "TRUST" shall mean the trust maintained
pursuant to the terms of the Applied Industrial Technologies,
Inc. Supplemental Executive Retirement Benefits Trust Agreement
(formerly known as the Bearings, Inc. Supplemental Executive
Retirement Benefits Trust Agreement).
(21) The term "VALUATION DATE" shall mean each business
day of each calendar month.
(22) The term "YEARS OF VESTING SERVICE" shall mean
service credited to a Participant under the provisions of Section
3.4.
1.2 CONSTRUCTION. Where necessary or appropriate to the meaning
hereof, the singular shall be deemed to include the plural, the plural to
include the singular, the masculine to include the feminine, and the feminine to
include the masculine.
- 4 -
<PAGE> 8
ARTICLE II
ELIGIBILITY FOR PLAN PARTICIPATION
----------------------------------
Any select management or highly compensated employee of the
Company or an Affiliate who is determined to be highly compensated pursuant to
procedures established by the Company and whose contributions under the
Retirement Savings Plan are limited due to the provisions of Section 401(a)(17),
Section 401(k), Section 401(m), Section 402(g), or Section 415 of the Code,
shall become a Participant in the Plan upon the filing of a written election in
the form and manner prescribed by the Company to reduce his Compensation for the
purpose of making Supplemental 401(k) Contributions under the Plan.
- 5 -
<PAGE> 9
ARTICLE III
SUPPLEMENTAL CONTRIBUTIONS
--------------------------
3.1 SUPPLEMENTAL 401(K) CONTRIBUTIONS. The Supplemental 401(k)
Contribution Account of each Participant shall be credited with Supplemental
401(k) Contributions equal to the amount deferred from his Compensation in
accordance with a completed Compensation reduction authorization with respect to
the Plan pursuant to procedures established by the Company. Such Compensation
reduction authorization may be revised with respect to future Supplemental
401(k) Contributions as of any January 1 or July 1, provided that such revision
occurs prior to such effective date.
3.2 SUPPLEMENTAL MATCHING CONTRIBUTIONS. The Supplemental
Matching Account of each Participant who is employed by the Company or an
Affiliate shall be credited each year with Supplemental Matching Contributions
equal to the amount with respect to which Matching Contributions under the
Retirement Savings Plan are limited for such year due to the requirements of the
provisions of Sections 401(k) and 401(m) of the Code.
3.3 VESTING OF SUPPLEMENTAL MATCHING CONTRIBUTIONS. A
Participant shall become vested in the balance of his Supplemental Matching
Account pursuant to the following schedule.
<TABLE>
<CAPTION>
Years Of Vesting Service Percentage Vested
------------------------ -----------------
<S> <C>
Less than one 0%
One but less than two 25%
Two but less than three 50%
Three but less than four 75%
Four or more 100%
</TABLE>
- 6 -
<PAGE> 10
Notwithstanding the foregoing, a Participant who is employed by the Company or
an Affiliate shall become 100 percent vested in his Supplemental Matching
Account upon the earlier of: (i) attainment of age 65, (ii) disability, (iii)
death, or (iv) a Change of Control.
3.4 YEARS OF VESTING SERVICE. For purposes of determining the
vested interest of a Participant in his Supplemental Matching Account, a
Participant shall be credited with Years of Vesting Service equal to the Years
of Service with which he is credited under the Retirement Savings Plan.
- 7 -
<PAGE> 11
ARTICLE IV
SEPARATE ACCOUNTS
-----------------
4.1 TYPES OF SEPARATE ACCOUNTS. Each Participant shall have
established in his name Separate Accounts which shall reflect the type of
contributions credited to him pursuant to Article III. Such Separate Accounts
shall be as follows:
(a) a Supplemental 401(k) Account which shall reflect the
Supplemental 401(k) Contributions credited to a
Participant pursuant to Section 3.1 as well as any amount
transferred from the King Bearing, Inc. Nonqualified
Supplemental Executive Retirement Plan and any adjustment
thereto pursuant to Section 4.2; and
(b) a Supplemental Matching Account which shall reflect the
Supplemental Matching Contributions credited to a
Participant pursuant to Section 3.2 and any adjustment
thereto pursuant to Section 4.2.
4.2 ADJUSTMENT OF SEPARATE ACCOUNTS. The Separate Accounts of a
Participant shall be adjusted as of each Valuation Date to reflect the deemed
investment of such Separate Accounts in the Funds as determined by the
Committee.
4.3 INVESTMENT ELECTIONS FOR SUPPLEMENTAL 401(K) CONTRIBUTIONS.
Each Participant, upon becoming a Participant under the Plan in accordance with
the provisions of Article II, shall make an investment election directing the
manner in which his Supplemental 401(k) Contributions shall be deemed to be
invested in the Funds. The investment election of a Participant shall specify a
combination, which in the aggregate equals 100 percent and conforms with
procedures prescribed by the Company, indicating in which Funds his Supplemental
401(k) Contributions shall be deemed to be invested. The investment option so
elected by a Participant shall remain in effect until he changes his investment
election pursuant to Section 4.4 or receives distribution of his Separate
Accounts.
- 8 -
<PAGE> 12
4.4 INVESTMENT CHANGE OF FUTURE SUPPLEMENTAL 401(K)
CONTRIBUTIONS. Each Participant may elect to change the manner in which
contributions credited to his Supplemental 401(k) Contribution Account are to be
deemed invested. Any such change in the investment election of a Participant
with respect to his Supplemental 401(k) Contributions shall specify a
combination among the Funds which in the aggregate equals 100 percent. Such
election shall be made in the manner specified by the Company and in accordance
with procedures prescribed by the Company. The investment option so elected by a
Participant shall remain in effect until he makes another election change with
respect to future contributions in accordance with the provisions of the Plan.
Any such election which directs a change in an investment election heretofore in
effect shall become effective in accordance with procedures prescribed by the
Company. Amounts credited to the Separate Accounts of such Participant as of any
date prior to the date on which such change is to become effective shall not be
affected by any such change.
4.5 ELECTION TO TRANSFER INVESTED PAST SUPPLEMENTAL 401(K)
CONTRIBUTIONS. Subject to any procedures adopted by the Company, a Participant
may elect to have the balance of his Supplemental 401(k) Contribution Account
transferred from the Fund or Funds in which it is deemed invested to one or more
of the other Funds. Any such election shall be made in accordance with
procedures prescribed by the Company. Upon receipt of such election, the Company
shall cause the transfer of such amount as of the effective date of the election
of the Participant from the Fund or Funds in which it is deemed invested to the
Fund or Funds so elected and designated by the Participant.
4.6 INVESTMENT OF MATCHING CONTRIBUTIONS. All Matching
Contributions shall be deemed to be invested in the Company Stock Fund.
- 9 -
<PAGE> 13
ARTICLE V
DISTRIBUTION
------------
5.1 DISTRIBUTION UPON TERMINATION OF EMPLOYMENT. The entire
balance credited to a Participant's Separate Accounts shall be distributed to
such Participant or his Beneficiary after termination of such Participant's
employment with the Company or an Affiliate. The value of any Separate Account
deemed to be invested in Company Stock shall be distributed in Company Stock or
in cash pursuant to the election of the Participant and the value of any
Separate Account deemed to be invested in a Fund, other than one consisting of
Company Stock, shall be distributed in cash.
5.2 METHOD OF DISTRIBUTION. Except as otherwise may be provided
in Sections 5.3 and 5.4, the benefits payable under the Plan from a
Participant's Separate Accounts shall be paid to the Participant, or his
Beneficiary, if applicable, in a single sum cash payment or in equal annual
installment payments over a period of not more than three years and shall be
determined as of the most recent Valuation Date.
5.3 TIME OF PAYMENTS. Except as otherwise may be provided in the
Trust or as provided in Section 5.4, distribution of the value of a
Participant's Separate Accounts shall commence upon a date which is not more
than 30 days after the earlier of (i) the Participant's termination of
employment due to resignation, retirement, death or other reason, or (ii) the
date he receives his interest under the Retirement Savings Plan. Notwithstanding
any other provision of the Plan to the contrary, a Participant, subject to
approval of the Company, may elect to change the manner and the time of
distribution of the value of his Separate Accounts during the period which
commences no earlier than 90
- 10 -
<PAGE> 14
days prior to his termination of employment and terminates no later than 30 days
prior to his termination of employment.
5.4 HARDSHIP DISTRIBUTION. Prior to the time the Separate
Accounts of a Participant become payable under Section 5.3, the Company, in its
sole discretion, may elect to distribute all or a portion of the Participant's
Separate Accounts on account of severe financial hardship of the Participant.
For purposes of the Plan, severe financial hardship shall be deemed to exist in
the event the Company determines that the Participant requires a distribution to
meet immediate and heavy financial needs resulting from a sudden or unexpected
illness or accident of the Participant or a member of his or her family, loss of
the Participant's property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant. A distribution based on financial hardship shall not exceed the
amount required to meet the immediate financial need created by the hardship and
the income taxes resulting from such distribution.
5.5 DISTRIBUTIONS UPON DEATH. Upon the death of a Participant,
the balance of his Separate Accounts shall be paid to his Beneficiary pursuant
to the provisions of Section 5.3 and Article VI.
5.6 TAXES. In the event any taxes are required by law to be
withheld or paid from any payments made pursuant to the Plan, the Company shall
cause the withholding of such amounts from such payments and shall transmit the
withheld amounts to the appropriate taxing authority. In addition, it is the
intention of the Company that benefits credited to a Participant under the Plan
shall not be included in the gross income of the Participants or their
Beneficiaries until such time as benefits are distributed under the
- 11 -
<PAGE> 15
provisions of the Plan. If, at any time, it is determined that benefits under
the Plan are currently taxable to a Participant or his Beneficiary, the amounts
credited to the Participant's Separate Accounts which become so taxable shall be
distributable immediately to him; provided, however, that in no event shall
amounts so payable to a Participant exceed the value of his Separate Accounts.
- 12 -
<PAGE> 16
ARTICLE VI
BENEFICIARIES
-------------
In the event a Participant dies before his interest under the
Plan in his Separate Accounts has been distributed in full, any remaining
interest shall be distributed pursuant to Article V to his Beneficiary, who
shall be the person designated as such in writing by the Participant in the form
and manner specified by the Company. In the event a Participant does not
designate a Beneficiary or his designated Beneficiary does not survive him, his
beneficiary under the Retirement Savings Plan shall be his Beneficiary for Plan
purposes.
- 13 -
<PAGE> 17
ARTICLE VII
ADMINISTRATIVE PROVISIONS
-------------------------
7.1 ADMINISTRATION. The Plan shall be administered by the Company
in a manner that is generally consistent with the administration of the
Retirement Savings Plan, as from time to time amended, except that the Plan
shall be administered as an unfunded plan not intended to meet the qualification
requirements of Section 401 of the Code.
7.2 POWERS AND AUTHORITIES OF THE COMMITTEE. The Company shall
have full power and authority to interpret, construe and administer the Plan and
its interpretations and construction hereof, and actions hereunder, including
the timing, form, amount or recipient of any payment to be made hereunder, shall
be binding and conclusive on all persons for all purposes. The Company may
delegate any of its powers, authorities, or responsibilities for the operation
and administration of the Plan to any person or to the Committee so designated
in writing by it and may employ such attorneys, agents, and accountants as it
may deem necessary or advisable to assist it in carrying out its duties
hereunder. No member of the Committee shall be liable to any person for any
action taken or omitted in connection with the interpretation and administration
of the Plan unless attributable to his own willful misconduct or lack of good
faith. Members of the Committee shall not participate in any action or
determination regarding their own benefits, if any, payable under the Plan.
7.3 INDEMNIFICATION. In addition to whatever rights of
indemnification a member of the Committee, or any other person or persons to
whom any power, authority, or responsibility is delegated pursuant to Section
7.2, may be entitled under the articles of incorporation, regulations, or
by-laws of the Company, under any provision of law, or under
- 14 -
<PAGE> 18
any other agreement, the Company shall satisfy any liability actually and
reasonably incurred by any such member or such other person or persons,
including expenses, attorneys' fees, judgments, fines, and amounts paid in
settlement, in connection with any threatened, pending, or completed action,
suit, or proceeding which is related to the exercise or failure to exercise by
such member or such other person or persons of any of the powers, authority,
responsibilities, or discretion provided under the Plan.
7.4 SECTION 16B PROCEDURES. In conjunction with rules promulgated
by the Securities and Exchange Commission under Section 16 of the Securities
Exchange Act of 1934, as amended, the Company has established Section 16b
Procedures which affect certain transactions under the Plan involving Employer
Securities held for the benefit of an Officer. Such Procedures, which are hereby
incorporated into the Plan shall constitute for all purposes a part of the Plan.
In the event that the Procedures conflict with any other provision of the Plan,
the Procedures shall override such other provision and shall be controlling. For
purposes of this Section 7.4, the following terms shall have the meaning
hereinafter set forth.
(a) The term "Employer Security" shall mean any qualifying
employer security as defined in Section 407(d)(5) of ERISA
which is also an equity security as defined under the
Securities Exchange Act of 1934, as amended.
(b) The term "Officer" shall mean any person who is designated
as an "Officer" of the Company for purposes of Section 16
of the Securities Exchange Act of 1934, as amended.
(c) The term "Section 16b Procedures" or "Procedures" shall
mean the Administrative Procedures Applicable to Officers
and Directors Under Employee Benefit Plans Maintained by
Applied Industrial Technologies, Inc., effective as of
January 1, 1997, with all amendments and modifications
thereafter made.
- 15 -
<PAGE> 19
ARTICLE VIII
AMENDMENT AND TERMINATION
-------------------------
The Company reserves the right to amend or terminate the Plan at
any time by action of the Board; provided, however, that no such action shall
adversely affect any Participant who is receiving benefits under the Plan or
whose Separate Accounts are credited with any contributions thereto, unless an
equivalent benefit is provided under another plan or program sponsored by the
Company or an Affiliate.
- 16 -
<PAGE> 20
ARTICLE IX
MISCELLANEOUS
-------------
9.1 NON-ALIENATION OF BENEFITS. No benefit under the Plan shall
at any time be subject in any manner to alienation or encumbrance. If any
Participant or Beneficiary shall attempt to, or shall, alienate or in any way
encumber his benefits under the Plan, or any part thereof, or if by reason of
his bankruptcy or other event happening at any time any such benefits would
otherwise be received by anyone else or would not be enjoyed by him, his
interest in all such benefits shall automatically terminate and the same shall
be held or applied to or for the benefit of such person, his spouse, children,
or other dependents as the Board may select.
9.2 PAYMENT OF BENEFITS TO OTHERS. If any Participant or
Beneficiary to whom a benefit is payable is unable to care for his affairs
because of illness or accident, any payment due (unless prior claim therefor
shall have been made by a duly qualified guardian or other legal representative)
may be paid to the spouse, parent, brother, or sister, or any other individual
deemed by the Board to be maintaining or responsible for the maintenance of such
person. Any payment made in accordance with the provisions of this Section 9.2
shall be a complete discharge of any liability of the Plan with respect to the
benefit so paid.
9.3 PLAN NON-CONTRACTUAL. Nothing herein contained shall be
construed as a commitment or agreement on the part of any person employed by the
Company to continue his employment with the Company, and nothing herein
contained shall be construed as a commitment on the part of the Company to
continue the employment or the annual rate of compensation of any such person
for any period, and all Participants shall remain subject to discharge to the
same extent as if the Plan had never been established.
- 17 -
<PAGE> 21
9.4 FUNDING. The Company may cause Plan benefits to be paid from
the Trust, which is a grantor trust that provides for full funding of Plan
benefits in the event of a potential change in control or a change in control.
Subject to the provisions of the trust agreement governing such trust fund, the
obligation of the Company under the Plan to provide a Participant or a
Beneficiary with a benefit constitutes the unsecured promise of the Company to
make payments as provided herein, and no person shall have any interest in, or a
lien or prior claim upon, any property of the Company.
9.5 CLAIMS OF OTHER PERSONS. The provisions of the Plan shall in
no event be construed as giving any person, firm or corporation any legal or
equitable right as against the Company, its officers, employees, or directors,
except any such rights as are specifically provided for in the Plan or are
hereafter created in accordance with the terms and provisions of the Plan.
9.6 SEVERABILITY. The invalidity or unenforceability of any
particular provision of the Plan shall not affect any other provision hereof,
and the Plan shall be construed in all respects as if such invalid or
unenforceable provision were omitted herefrom.
- 18 -
<PAGE> 22
9.7 GOVERNING LAW. The provisions of the Plan shall be governed
and construed in accordance with the laws of the State of Ohio.
Executed at Cleveland, Ohio, this 11th day of February, 1997.
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
By: /S/ John C. Robinson
--------------------------------
Title: Vice Chairman
And: /S/ Fred D. Bauer
--------------------------------
Title: Assistant Secretary
- 19 -
<PAGE> 1
Exhibit 10(b)
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
DEFERRED COMPENSATION PLAN
(JANUARY 1, 1997 RESTATEMENT)
<PAGE> 2
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
DEFERRED COMPENSATION PLAN
(JANUARY 1, 1997 RESTATEMENT)
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Section Page
------- ----
ARTICLE I
DEFINITIONS
<S> <C> <C>
1.1 Definitions............................................2
1.2 Construction...........................................4
ARTICLE II
ELECTIONS BY ELIGIBLE EMPLOYEES
2.1 Election to Defer......................................5
2.2 Effectiveness of Elections.............................5
ARTICLE III
ACCOUNTS AND INVESTMENTS
3.1 Establishment of Accounts..............................6
3.2 Amount of Deferrals....................................6
3.3 Adjustment of Accounts.................................6
ARTICLE IV
DISTRIBUTION OF ACCOUNTS
4.1 Method of Distribution.................................7
4.2 Time of Payments.......................................7
4.3 Hardship Distribution..................................7
4.4 Distributions Upon Death...............................8
4.5 Taxes..................................................8
ARTICLE V
BENEFICIARIES 9
ARTICLE VI
MISCELLANEOUS
6.1 Amendment and Termination of the Plan.................10
6.2 Non-Alienation........................................10
6.3 Payment of Benefits to Others.........................10
6.4 Plan Non-Contractual..................................10
6.5 Taxability of Plan Benefits...........................11
6.6 Funding...............................................11
6.7 Section 16b Procedures................................11
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
6.8 Severability....................................12
6.9 Governing Law...................................12
</TABLE>
-ii-
<PAGE> 4
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
DEFERRED COMPENSATION PLAN
(JANUARY 1, 1997 RESTATEMENT)
WHEREAS, the Bearings, Inc. Deferred Compensation Plan was established,
effective as of July 1, 1993, by Bearings, Inc. to provide key executives of
Bearings, Inc. and its affiliates with a means by which to defer receipt of all
or a portion of their incentive compensation payable under the Bearings, Inc.
Management Incentive Plan; and
WHEREAS, the Bearings, Inc. Deferred Compensation Plan was amended
subsequently on two occasions; and
WHEREAS, effective as of January 1, 1997, Bearings, Inc. changed its
name to Applied Industrial Technologies, Inc.; and
WHEREAS, it is desired to amend and restate the Bearings, Inc. Deferred
Compensation Plan to reflect such plan sponsor name change;
NOW, THEREFORE, effective as of January 1, 1997, the Bearings, Inc.
Deferred Compensation Plan is hereby renamed the Applied Industrial
Technologies, Inc. Deferred Compensation Plan and is amended and restated in the
manner hereinafter set forth.
<PAGE> 5
ARTICLE I
DEFINITIONS
-----------
1.1 DEFINITIONS. As used herein, the following words shall have the
meanings hereinafter set forth unless otherwise specifically provided.
(1) The term "AFFILIATE" shall mean any member of a
controlled group of corporations (as determined under Section
414(b) of the Code) of which the Company is a member any
member of a group of trades or business under common control
(as determined under Section 414(c) of the Code) with the
Company any member of an affiliated service group (as
determined under Section 414(m) of the Code) of which the
Company is a member and any other entity which is required to
be aggregated with the Company pursuant to the provisions of
Section 414(o) of the Code.
(2) The term "ANNUAL INCENTIVE PLAN" shall mean any
management incentive plan adopted by the Board with respect to
any Fiscal Year.
(3) The term "AWARD" shall mean the aggregate benefit
payable to a Plan Participant under an Annual Incentive Plan
for a Fiscal Year.
(4) The term "BENEFICIARY" shall mean the person or
persons who, in accordance with the provisions of Article V,
is entitled to distribution hereunder in the event a
Participant dies before his interest under the Plan has been
distributed to him in full.
(5) The term "BOARD" shall mean the Board of
Directors of the Company.
(6) The term "COMMITTEE" shall mean the Executive
Organization and Compensation Committee of the Board, or such
other committee of the Board that is designated by the Board
to administer the Plan. The Committee shall be constituted so
as to satisfy any applicable legal requirements including the
requirements of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 or any similar rule which may
subsequently be in effect. The members shall be appointed by,
and serve at the pleasure of, the Board and any vacancy on the
Committee shall be filled by the Board.
(7) The term "COMMON SHARES" shall mean the common
stock of the Company.
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<PAGE> 6
(8) The term "COMPANY" shall mean, for any period
prior to January 1, 1997, Bearings, Inc., and for any period
after December 31, 1996, Applied Industrial Technologies,
Inc., its corporate successors, and any corporation into or
with which it is merged or consolidated.
(9) The term "COMPREHENSIVE PLAN" shall mean the
Applied Industrial Technologies, Inc. Deferred Compensation
and Supplemental Benefit Plan (formerly known as the
Bearings, Inc. Comprehensive Deferred Compensation and
Supplemental Benefit Plan.)
(10) The term "DEFERRAL" shall mean that portion of
an Award which a Participant elects to defer pursuant to the
terms of the Plan.
(11) The term "DEFERRAL ACCOUNT" shall mean the
bookkeeping account established under the Plan in the name of
each Participant to reflect the Deferrals of such Participant.
(12) The term "ELIGIBLE EMPLOYEE" shall mean any
highly compensated or select management employee of the
Company or an Affiliate who is designated by the Committee to
participate in an Annual Incentive Plan with respect to a
particular Fiscal Year.
(13) The term "FAIR MARKET VALUE" shall mean the
average of the high and low prices of a Common Share as
reported on the composite tape for securities listed on the
New York Stock Exchange for the date in question, provided
that if no sales of Common Shares were made on said exchange
on that date, the average of the high and low prices of a
Common Share as reported on said composite tape for the
nearest preceding day on which sales of Common Shares were
made on said Exchange.
(14) The term "FISCAL YEAR" shall mean the fiscal
year of the Company, which as of January 1, 1997, begins on
each July 1 and ends on the subsequent June 30.
(15) The term "FUND" shall mean any investment fund
designated by the Committee in which Deferrals can be deemed
to be invested; provided, however, that one such Fund shall be
deemed to be invested in Common Shares.
(16) The term "PARTICIPANT" shall mean an Eligible
Employee who elects to defer all or any portion of an Award
under the Plan pursuant to the provision of Article II.
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<PAGE> 7
(17) The term "PLAN" shall mean Applied Industrial
Technologies, Inc. Deferred Compensation Plan (formerly known
as the Bearings, Inc. Deferred Compensation Plan), as amended
and restated herein, with all amendments, supplements, and
modifications hereafter made. The Plan is part of the
Comprehensive Plan and listed on Exhibit A attached thereto.
(18) The term "TRUST" shall mean the trust maintained
pursuant to the terms of the Applied Industrial Technologies,
Inc. Supplemental Executive Retirement Benefits Trust
Agreement (formerly known as the Bearings, Inc. Supplemental
Executive Retirement Benefits Trust Agreement).
(19) The term "VALUATION DATE" shall mean the last
day of each Fiscal Year quarter and any other date as may be
designated as such by the Committee.
1.2 CONSTRUCTION. Where necessary or appropriate to the meaning herein,
the singular shall be deemed to include the plural and the masculine pronoun to
include the feminine.
-4-
<PAGE> 8
ARTICLE II
ELECTIONS BY ELIGIBLE EMPLOYEES
-------------------------------
2.1 ELECTION TO DEFER. Prior to the January 1 following the adoption by
the Board of an Annual Incentive Plan, an Eligible Employee may elect to defer
receipt of all or a portion of the Award that he may receive under such Annual
Incentive Plan as a Deferral under the Plan. Any election under this Section 2.1
shall be made in the form (an "Election Form") and manner specified by the
Committee and acceptable to the Company. In addition, such election shall
indicate the allocation of the Deferral to be deemed invested in the Funds.
2.2 EFFECTIVENESS OF ELECTIONS. Subject to the provisions of Section
4.3, elections shall be effective and irrevocable upon the delivery of an
Election Form to the Committee. Subject to the provisions of Article IV and
Section 6.7, amounts deferred pursuant to any election hereunder shall be
invested and distributed in the manner and at the time set forth in such
election.
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<PAGE> 9
ARTICLE III
ACCOUNTS AND INVESTMENTS
------------------------
3.1 ESTABLISHMENT OF ACCOUNTS. The Deferral Account of each Participant
shall have subaccounts, which shall reflect the Funds into which Deferrals are
deemed invested and credited pursuant to the applicable Election Form filed by
the Participant with the Committee.
3.2 AMOUNT OF DEFERRALS. If a Participant elects to have less than 50%
of his Award deferred under the Plan as a Deferral, the amount of such Deferral
shall be credited to his Deferral Account and subaccounts in accordance with his
duly filed Election Form. If, however, the Participant elects to have at least
50% of his Award deferred under the Plan as a Deferral and elects to have at
least 50% of his Award deemed to be invested in a Fund comprised of Common
Shares, 110% of the amount of such Deferral deemed so invested in Common Shares,
and 100% of the amount of such Deferral deemed to be invested in any other Fund,
shall be credited to his Deferral Account and subaccounts in accordance with the
terms of his duly filed Election Form. In the event any Deferral or portion
thereof is deemed to be invested in a Fund, such crediting shall be made within
30 days after the date on which the Deferral would otherwise have been payable
to the Participant under the applicable Annual Incentive Plan and Common Shares
of a Fund so credited to a Deferral Account shall be valued at Fair Market
Value.
3.3 ADJUSTMENT OF ACCOUNTS. As of each Valuation Date, the value of
each Deferral Account shall be adjusted to reflect deemed earnings, losses and
dividends determined by the Committee. Common Shares of a Fund credited to any
Deferral Account shall be valued at Fair Market Value.
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<PAGE> 10
ARTICLE IV
DISTRIBUTION OF ACCOUNTS
------------------------
4.1 METHOD OF DISTRIBUTION. The value of a Participant's Deferral
Account deemed invested in a Fund comprised of Common Shares shall be
distributed in Common Shares and the value of a Participant's Deferral Account
deemed otherwise invested shall be distributed in cash. Such value shall be
determined as of the most recent Valuation Date. Subject to the provisions of
Section 4.2, distribution of a Participant's Deferral Account shall be made
either in a lump sum or in equal annual installments over a period of not more
than ten years as specified in such Participant's Election Form.
4.2 TIME OF PAYMENTS. Except as otherwise provided in this Section 4.2
or Section 4.3, distribution of the value of a Participant's Deferral Account
shall commence on the date specified in his Election Form. Notwithstanding any
other provision of the Plan to the contrary, a Participant may elect to change
the manner and the time of distribution of the value of his Deferral Account
during the period which commences no earlier than 90 days prior to his
termination of employment and ends no later than 30 days prior to his
termination of employment; provided, however, that in the event a Participant's
employment is terminated with less than 30 days notice, such Participant may
elect to change the manner and time of distribution of the value of his Deferral
Account during the period which commences as of the day he receives notice of
his termination of employment and ends ten days thereafter.
4.3 HARDSHIP DISTRIBUTION. Prior to the time the Deferral Account of a
Participant becomes payable under Section 4.2, the Committee, in its sole
discretion, may elect to distribute all or a portion of the a Participant's
Deferral Account on account of
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<PAGE> 11
severe financial hardship of the Participant. For purposes of the Plan, severe
financial hardship shall be deemed to exist in the event the Committee
determines that the Participant requires a distribution to meet immediate and
heavy financial needs resulting from a sudden or unexpected illness or accident
of the Participant or a member of his or her family, loss of the Participant's
property due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant. A distribution based on financial hardship shall not exceed the
amount required to meet the immediate financial need created by the hardship and
the income taxes resulting from such distribution.
4.4 DISTRIBUTIONS UPON DEATH. Upon the death of a Participant, the
balance of his or her Deferral Account shall be paid to his Beneficiary pursuant
to the provisions of Article V.
4.5 TAXES. In the event any taxes are required by law to be withheld or
paid from any payments made pursuant to the Plan, the Committee shall cause such
amounts from such payments and shall transmit the withheld amounts to the
appropriate taxing authority.
-8-
<PAGE> 12
ARTICLE V
BENEFICIARIES
-------------
In the event a Participant dies before his interest under the Plan in
his or her Deferral Account has been distributed in full, any remaining interest
shall be distributed pursuant to Article IV to his Beneficiary, who shall be the
person designated as such in writing by the Participant in the form and manner
specified by the Company. In the event a Participant does not designate a
Beneficiary or his designated Beneficiary does not survive him, his Beneficiary
shall be his estate.
-9-
<PAGE> 13
ARTICLE VI
MISCELLANEOUS
-------------
6.1 AMENDMENT AND TERMINATION OF THE PLAN. The Company reserves the
right to amend or terminate the Plan at any time; provided, however, that no
amendment or termination shall affect the rights of Participants to amounts
previously credited to their Deferral Accounts pursuant to Section 3.2.
6.2 NON-ALIENATION. No benefit under the Plan shall at any time be
subject in any manner to alienation or encumbrance. If any Participant or
Beneficiary shall attempt to, or shall, alienate or in any way encumber his
rights or benefits under the Plan, or any part thereof, or if by reason of his
bankruptcy or other event happening at any time any such benefits would
otherwise be received by anyone else or would not be enjoyed by him, his
interest in all such benefits shall automatically terminate and the same shall
be held or applied to or for the benefit of such person, his spouse, children,
or other dependents as the Committee may select.
6.3 PAYMENT OF BENEFITS TO OTHERS. If any Participant or Beneficiary to
whom a benefit is payable under the Plan is unable to care for his affairs
because of illness or accident, any payment due (unless prior claim therefor
shall have been made by a duly qualified guardian or other legal representative)
may be paid to the spouse, parent, brother, sister, adult child, or any other
individual deemed by the Company to be maintaining or responsible for the
maintenance of such person. Any payment made in accordance with the provisions
of this Section 5.3 shall be a complete discharge of any liability of the Plan
with respect to the benefit so paid.
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<PAGE> 14
6.4 PLAN NON-CONTRACTUAL. Nothing contained herein shall be construed
as a commitment or agreement on the part of any person employed by the Company
to continue his employment with the Company, and nothing herein contained shall
be construed as a commitment on the part of the Company to continue the
employment or the annual rate of compensation of any such person for any period,
and all Participants shall remain subject to discharge to the same extent as if
the Plan had never been established.
6.5 TAXABILITY OF PLAN BENEFITS. This Plan is intended to be treated as
an unfunded deferred compensation plan under the Internal Revenue Code of 1986,
as amended. It is the intention of the Company that the amounts deferred
pursuant to the Plan shall not be included in the gross income of the
Participants or their Beneficiaries until such time as the deferred amounts are
distributed from the Plan. If, at any time, it is determined that amounts
deferred pursuant to the Plan are currently taxable to a Participant or his
Beneficiary, the amounts credited to such Participant's Deferral Account which
become so taxable shall be distributed immediately to him; provided, however,
that in no event shall amounts so payable under the Plan to a Participant exceed
the value of his Deferral Account.
6.6 FUNDING. The Company may cause Plan benefits to be paid from the
Trust which is a grantor trust that provides full funding of the Plan benefits
in the event of a potential change in control or change in control. Subject to
the provisions of the Trust, the obligation of the Company under the Plan to
provide a Participant or Beneficiary with a benefit constitutes the unsecured
promise of the Company to make payments as provided herein, and no person shall
have any interest in, or a lien or prior claim upon, any property of the
Company.
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<PAGE> 15
6.7 SECTION 16B PROCEDURES. In conjunction with rules promulgated by
the Securities and Exchange Commission under Section 16 of the Securities
Exchange Act of 1934, as amended, the Company has established Section 16b
Procedures which affect certain transactions under the Plan involving Employer
Securities held for the benefit of a Director. Such Procedures, which are hereby
incorporated into the Plan shall constitute for all purposes a part of the Plan.
In the event that the Procedures conflict with any other provision of the Plan,
the Procedures shall override such other provision and shall be controlling. For
purposes of this Section, the following terms shall have the meaning hereinafter
set forth.
(a) The term "Employer Security" shall mean any qualifying
employer security as defined in Section 407(d)(5) of ERISA
which is also an equity security as defined under the
Securities Exchange Act of 1934, as amended.
(b) The term "Officer" shall mean any person who is designated as
an "Officer" of the Company for purposes of Section 16 of the
Securities Exchange Act of 1934, as amended.
(c) The term "Section 16b Procedures" or "Procedures" shall mean
the Administrative Procedures Applicable to Officers and
Directors Under Employee Benefit Plans Maintained by Applied
Industrial Technologies, Inc., effective as of January 1,
1997, with all amendments and thereafter made.
6.8 SEVERABILITY. The invalidity or unenforceability of any particular
provision of the Plan shall not affect any other provision hereof, and the Plan
shall be construed in all respects as if such invalid or unenforceable provision
were omitted herefrom.
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<PAGE> 16
6.9 GOVERNING LAW. The provisions of the Plan shall be governed and
construed in accordance with the laws of the State of Ohio.
Executed at Cleveland, Ohio, this 11th day of February, 1997.
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
By: /S/ John C. Robinson
--------------------------------
Title: Vice Chairman
And: /S/ Fred D. Bauer
--------------------------------
Title: Assistant Secretary
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<PAGE> 1
Exhibit 10(c)
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
DEFERRED COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
(JANUARY 1, 1997 RESTATEMENT)
<PAGE> 2
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
DEFERRED COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
(JANUARY 1, 1997 RESTATEMENT)
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Section Page
------- ----
ARTICLE I
DEFINITIONS
<S> <C> <C>
1.1 Definitions............................................2
1.2 Construction...........................................3
ARTICLE II
ELECTIONS BY DIRECTORS
2.1 Election to Defer......................................4
2.2 Effectiveness of Elections.............................4
2.3 Amendment and Termination of Elections.................4
ARTICLE III
ACCOUNTS AND INVESTMENTS
3.1 Establishment of Accounts..............................6
3.2 Amount of Deferrals....................................6
3.3 Adjustment of Accounts.................................6
ARTICLE IV
DISTRIBUTION OF ACCOUNTS
4.1 Method of Distribution.................................7
4.2 Time of Payments.......................................7
4.3 Hardship Distribution..................................7
4.4 Distributions Upon Death...............................8
4.5 Taxes..................................................8
ARTICLE V
BENEFICIARIES 9
ARTICLE VI
MISCELLANEOUS
6.1 Amendment and Termination of the Plan.................10
6.2 Non-Alienation........................................10
6.3 Payment of Benefits to Others.........................10
6.4 Plan Non-Contractual..................................10
6.5 Taxability of Plan Benefits...........................11
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
6.6 Funding.............................................11
6.7 Section 16b Procedures..............................11
6.8 Severability........................................12
6.9 Governing Law.......................................12
</TABLE>
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<PAGE> 4
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
DEFERRED COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
(JANUARY 1, 1997 RESTATEMENT)
WHEREAS, the Bearings, Inc. Deferred Compensation Plan for Non-Employee
Directors was established, effective as of July 1, 1991, by Bearings, Inc. to
provide non-employee members of the Board of Directors of Bearings, Inc. the
option to defer receipt of all or a portion of the compensation payable to them
for services as Directors; and
WHEREAS, the Bearings, Inc. Deferred Compensation Plan for Non-
Employee Directors was amended subsequently on two occasions; and
WHEREAS, effective as of January 1, 1997, Bearings, Inc. changed its
name to Applied Industrial Technologies, Inc.; and
WHEREAS, it is desired to amend and restate the Bearings, Inc. Deferred
Compensation Plan for Non-Employee Directors to reflect such plan name sponsor
change;
NOW, THEREFORE, effective as of January 1, 1997, the Bearings, Inc.
Deferred Compensation Plan for Non-Employee Directors is hereby renamed the
Applied Industrial Technologies, Inc. Deferred Compensation Plan for
Non-Employee Directors and is amended and restated in the manner hereinafter set
forth.
<PAGE> 5
ARTICLE I
DEFINITIONS
-----------
1.1 DEFINITIONS As used herein, the following words shall have the
meanings hereinafter set forth unless otherwise specifically provided.
(1) The term "BENEFICIARY" shall mean the person or
persons who, in accordance with the provisions of Article V,
is entitled to receive a distribution hereunder in the event a
Participant dies before his interest under the Plan has been
distributed to him in full.
(2) The term "BOARD" shall mean the Board of
Directors of the Company.
(3) The term "COMMITTEE" shall mean the Executive
Organization and Compensation Committee of the Board, or such
other committee of the Board that is designated by the Board
to administer the Plan. The Committee shall be constituted so
as to satisfy any applicable legal requirements including the
requirements of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 or any similar rule which may
subsequently be in effect. The members shall be appointed by,
and serve at the pleasure of, the Board and any vacancy on the
Committee shall be filled by the Board.
(4) The term "COMMON SHARES" shall mean the common
stock of the Company.
(5) The term "COMPANY" shall mean, for any period
prior to January 1, 1997, Bearings, Inc., and for any period
after December 31, 1996, Applied Industrial Technologies,
Inc., its corporate successors, and any corporation into or
with which it is merged or consolidated.
(6) The term "DEFERRAL" shall mean that portion of
the compensation a Participant elects to defer pursuant to the
terms of the Plan.
(7) The term "DEFERRAL ACCOUNT" shall mean the
bookkeeping account established under the Plan in the name of
each Participant to reflect the Deferrals of such Participant.
(8) The term "DIRECTOR" shall mean any non-employee
director of the Company.
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<PAGE> 6
(9) The term "FAIR MARKET VALUE" shall mean the
average of the high and low prices of a Common Share as
reported on the composite tape for securities listed on the
New York Stock Exchange for the date in question, provided
that if no sales of Common Shares were made on said exchange
on that date, the average of the high and low prices of a
Common Share as reported on said composite tape for the
preceding day on which sales of Common Shares were made on
said Exchange.
(10) The term "FISCAL YEAR" shall mean the fiscal
year of the Company, which as of January 1, 1997, begins on
each July 1 and ends on the subsequent June 30.
(11) The term "FUND" shall mean any investment fund
designated by the Committee in which Deferrals can be deemed
to be invested; provided, however, that one such Fund shall be
deemed to be invested in Common Shares.
(12) The term "PARTICIPANT" shall mean a Director who
elects to defer all or any portion of his compensation under
the Plan pursuant to the provisions of Article II.
(13) The term "PLAN" shall mean Applied Industrial
Technologies, Inc. Deferred Compensation Plan For Non-Employee
Directors (formerly known as the Bearings, Inc. Deferred
Compensation Plan For Non-Employee Directors), as amended and
restated herein, effective as of January 1, 1997, with all
amendments, supplements, and modifications hereafter made.
(14) The term "TRUST" shall mean the trust maintained
pursuant to the terms of the Applied Industrial Technologies,
Inc. Supplemental Executive Retirement Benefits Trust
Agreement (formerly known as the Bearings, Inc. Supplemental
Executive Retirement Benefits Trust Agreement).
(15) The term "VALUATION DATE" shall mean June 30 of
each Fiscal Year and any other date as may be designated as
such by the Committee.
1.2 CONSTRUCTION. Where necessary or appropriate to the meaning herein,
the singular shall be deemed to include the plural and the masculine pronoun to
include the feminine.
-3-
<PAGE> 7
ARTICLE II
ELECTIONS BY DIRECTORS
----------------------
2.1 ELECTION TO DEFER. Prior to the first day of any Fiscal Year
quarter (July 1, October 1, January 1, and April 1) a Director may elect to
defer receipt of all or a portion of the compensation payable to him for future
services as a Director as a Deferral under the Plan. If a Director becomes a
Director after the beginning of any Fiscal Year quarter, the Director may elect
to defer receipt of all or a portion of the compensation payable to him for
future services as a Director as a Deferral under the Plan. Any election under
this Section 2.1 shall be made on in the form (an "Election Form") and manner
specified by the Committee and acceptable to the Company. In addition, such
election shall indicate the allocation of the Deferral to be deemed invested in
the Funds.
2.2 EFFECTIVENESS OF ELECTIONS. Subject to the provisions of Sections
2.3 and 4.3, elections shall be effective and irrevocable upon the delivery of
an Election Form to the Committee. Subject to the provisions of Article IV and
Section 6.7, amounts deferred pursuant to any election hereunder shall be
invested and distributed in the manner and at the time set forth in such
election.
2.3 AMENDMENT AND TERMINATION OF ELECTIONS. A Director may terminate or
amend his election to defer receipt of compensation as a Deferral under the Plan
with respect to subsequent Fiscal Year quarters in a written notice delivered to
the Committee prior to commencement of the Fiscal Year quarter with respect to
which such compensation will be earned and such notice will be effective.
Amendments which serve only to change the designation of a Beneficiary shall be
permitted at any time and as often as necessary. Amounts credited to a
Participant's Deferral Account pursuant to Section 3.1 prior to the
-4-
<PAGE> 8
effective date of any termination or amendment shall not be affected thereby and
shall be paid at a time and in the manner specified in the Election Form in
effect when the Deferral occurred.
-5-
<PAGE> 9
ARTICLE III
ACCOUNTS AND INVESTMENTS
------------------------
3.1 ESTABLISHMENT OF ACCOUNTS. The Deferral Account of each Participant
shall have subaccounts which shall reflect the Funds into which Deferrals are
deemed invested and credited pursuant to the applicable Election Form filed by
the Participant with the Committee.
3.2 AMOUNT OF DEFERRALS. If a Participant elects to have compensation
deferred under the Plan as a Deferral invested in a Fund, other than a Fund
comprised of Common Shares, 100% of the amount of such Deferral deemed so
invested in Fund shall be credited to his Deferred Account and subaccounts in
accordance with his duly filed Election Form. If the Participant elects to have
some or all of his compensation deferred under the Plan as a Deferral invested
in a Fund comprised of Common Shares, 125% of the amount of such Deferral deemed
so invested in such a Fund shall be credited to his Deferred Account and
subaccounts in accordance with the terms of his duly filed Election Form. In the
event any Deferral or portion thereof is deemed to be invested in a Fund, such
crediting shall be made within 30 days after the date on which the Deferral
would otherwise have been payable to the Participant. Common Shares of a Fund so
credited to a Deferral Account shall be valued at Fair Market Value.
3.3 ADJUSTMENT OF ACCOUNTS. As of each Valuation Date, the value of
each Deferral Account shall be adjusted to reflect deemed earnings, losses and
dividends determined by the Committee. Common Shares of a Fund credited to any
Deferral Account shall be valued at Fair Market Value.
-6-
<PAGE> 10
ARTICLE IV
DISTRIBUTION OF ACCOUNTS
------------------------
4.1 METHOD OF DISTRIBUTION. The value of a Participant's Deferral
Account deemed invested in a fund comprised of Common Shares shall be
distributed in Common Shares and the value of a Participant's Deferral Account
deemed otherwise invested shall be distributed in cash. Such value shall be
determined as of the most recent Valuation Date. Subject to the provisions of
Section 4.2, distribution of a Participant's Deferral Account shall be made
either in a lump sum or in equal annual installments over a period of not more
than ten years as specified in such Participant's Election Form.
4.2 TIME OF PAYMENTS. Except as otherwise provided in this Section 4.2
or Section 4.3, distribution of the value of a Participant's Deferral Account
shall commence on the date specified in his Election Form. Notwithstanding any
other provision of the Plan to the contrary, a Participant may elect to change
the manner and the time of distribution of the value of his Deferral Account
during the period which commences no earlier than 90 days prior to his
termination as a Director and ends no later than 30 days prior to his
termination as a Director; provided, however, that in the event a Participant is
terminated as a Director with less than 30 days notice, such Participant may
elect to change the manner and time of distribution of the value of his Deferral
Account during the period which commences as of the day he receives notice of
his termination as a Director and ends ten days thereafter.
4.3 HARDSHIP DISTRIBUTION. Prior to the time the Deferral Account of a
Participant becomes payable under Section 4.2, the Committee, in its sole
discretion, may elect to distribute all or a portion of the a Participant's
Deferral Account on account of severe financial hardship of the Participant. For
purposes of the Plan, severe financial
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<PAGE> 11
hardship shall be deemed to exist in the event the Committee determines that the
Participant requires a distribution to meet immediate and heavy financial needs
resulting from a sudden or unexpected illness or accident of the Participant or
a member of his or her family, loss of the Participant's property due to
casualty, or other similar extraordinary and unforeseeable circumstances arising
as a result of events beyond the control of the Participant. A distribution
based on financial hardship shall not exceed the amount required to meet the
immediate financial need created by the hardship and the income taxes resulting
from such distribution.
4.4 DISTRIBUTIONS UPON DEATH. Upon the death of a Participant, the
balance of his or her Deferral Account shall be paid to his Beneficiary pursuant
to the provisions of Article V.
4.5 TAXES. In the event any taxes are required by law to be withheld
or paid from any payments made pursuant to the Plan, the Committee shall cause
such amounts from such payments and shall transmit the withheld amounts to the
appropriate taxing authority.
-8-
<PAGE> 12
ARTICLE V
BENEFICIARIES
-------------
In the event a Participant dies before his interest under the Plan in
his or her Deferral Account has been distributed in full, any remaining interest
shall be distributed pursuant to Article IV to his Beneficiary, who shall be the
person designated as such in writing by the Participant in the form and manner
specified by the Company. In the event a Participant does not designate a
Beneficiary or his designated Beneficiary does not survive him, his beneficiary
shall be his estate.
-9-
<PAGE> 13
ARTICLE VI
MISCELLANEOUS
-------------
6.1 AMENDMENT AND TERMINATION OF THE PLAN. The Company reserves the
right to amend or terminate the Plan at any time; provided, however, that no
amendment or termination shall affect the rights of Participants to amounts
previously credited to their Deferral Accounts pursuant to Section 3.2.
6.2 NON-ALIENATION. No benefit under the Plan shall at any time be
subject in any manner to alienation or encumbrance. If any Participant or
Beneficiary shall attempt to, or shall, alienate or in any way encumber his
rights or benefits under the Plan, or any part thereof, or if by reason of his
bankruptcy or other event happening at any time any such benefits would
otherwise be received by anyone else or would not be enjoyed by him, his
interest in all such benefits shall automatically terminate and the same shall
be held or applied to or for the benefit of such person, his spouse, children,
or other dependents as the Committee may select.
6.3 PAYMENT OF BENEFITS TO OTHERS. If any Participant or Beneficiary to
whom a benefit is payable under the Plan is unable to care for his affairs
because of illness or accident, any payment due (unless prior claim therefor
shall have been made by a duly qualified guardian or other legal representative)
may be paid to the spouse, parent, brother, sister, adult child, or any other
individual deemed by the Company to be maintaining or responsible for the
maintenance of such person. Any payment made in accordance with the provisions
of this Section 5.3 shall be a complete discharge of any liability of the Plan
with respect to the benefit so paid.
-10-
<PAGE> 14
6.4 PLAN NON-CONTRACTUAL. Nothing contained herein shall be construed
as a commitment or agreement on the part of any person employed by the Company
to continue his employment with the Company, and nothing herein contained shall
be construed as a commitment on the part of the Company to continue the
employment or the annual rate of compensation of any such person for any period,
and all Participants shall remain subject to discharge to the same extent as if
the Plan had never been established.
6.5 TAXABILITY OF PLAN BENEFITS. This Plan is intended to be treated as
an unfunded deferred compensation plan under the Internal Revenue Code of 1986,
as amended. It is the intention of the Company that the amounts deferred
pursuant to the Plan shall not be included in the gross income of the
Participants or their Beneficiaries until such time as the deferred amounts are
distributed from the Plan. If, at any time, it is determined that amounts
deferred pursuant to the Plan are currently taxable to a Participant or his
Beneficiary, the amounts credited to such Participant's Deferral Account which
become so taxable shall be distributed immediately to him; provided, however,
that in no event shall amounts so payable under the Plan to a Participant exceed
the value of his Deferral Account.
6.6 FUNDING. The Company may cause Plan benefits to be paid from the
Trust which is a grantor trust that provides full funding of the Plan benefits
in the event of a potential change in control or change in control. Subject to
the provisions of the Trust, the obligation of the Company under the Plan to
provide a Participant or Beneficiary with a benefit constitutes the unsecured
promise of the Company to make payments as provided herein, and no person shall
have any interest in, or a lien or prior claim upon, any property of the
Company.
-11-
<PAGE> 15
6.7 SECTION 16B PROCEDURES. In conjunction with rules promulgated by
the Securities and Exchange Commission under Section 16 of the Securities
Exchange Act of 1934, as amended, the Company has established Section 16b
Procedures which affect certain transactions under the Plan involving Employer
Securities held for the benefit of a Director. Such Procedures, which are hereby
incorporated into the Plan shall constitute for all purposes a part of the Plan.
In the event that the Procedures conflict with any other provision of the Plan,
the Procedures shall override such other provision and shall be controlling. For
purposes of this Section, the following terms shall have the meaning hereinafter
set forth.
(a) The term "Employer Security" shall mean any qualifying employer
security as defined in Section 407(d)(5) of ERISA which is also
an equity security as defined under the Securities Exchange Act
of 1934, as amended.
(b) The term "Officer" shall mean any person who is designated as an
"Officer" of the Company for purposes of Section 16 of the
Securities Exchange Act of 1934, as amended.
(c) The term "Section 16b Procedures" or "Procedures" shall mean the
Administrative Procedures Applicable to Officers and Directors
Under
-12-
<PAGE> 16
Employee Benefit Plans Maintained by Applied Industrial
Technologies, Inc., effective as of January 1, 1997, with all
amendments and thereafter made.
6.8 SEVERABILITY. The invalidity or unenforceability of any particular
provision of the Plan shall not affect any other provision hereof, and the Plan
shall be construed in all respects as if such invalid or unenforceable provision
were omitted herefrom.
6.9 GOVERNING LAW. The provisions of the Plan shall be governed and
construed in accordance with the laws of the State of Ohio.
Executed at Cleveland, Ohio, this 11th day of February, 1997.
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
By: /S/ John C. Robinson
----------------------------------
Title: Vice Chairman
And: /S/ Fred D. Bauer
----------------------------------
Title: Assistant Secretary
-13-
<PAGE> 1
EXHIBIT 11
APPLIED INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
(FORMERLY BEARINGS, INC.)
COMPUTATION OF NET INCOME PER SHARE
(UNAUDITED)
(THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31 DECEMBER 31
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
AVERAGE SHARES OUTSTANDING
1. AVERAGE COMMON SHARES
OUTSTANDING 12,410 12,307 12,408 12,257
2. NET ADDITIONAL SHARES
OUTSTANDING ASSUMING STOCK
OPTIONS EXERCISED AND
PROCEEDS USED TO PURCHASE
TREASURY STOCK 232 294 237 297
------- ------- ------- -------
3. ADJUSTED AVERAGE COMMON
SHARES OUTSTANDING FOR
FULLY DILUTED COMPUTATION 12,642 12,601 12,645 12,554
======= ======= ======= =======
NET INCOME
4. NET INCOME AS REPORTED IN
STATEMENTS OF CONSOLIDATED
INCOME $ 6,003 $ 5,176 $11,408 $ 9,705
======= ======= ======= =======
NET INCOME PER SHARE
5. NET INCOME PER AVERAGE
COMMON SHARE OUTSTANDING
(4/1) $ 0.48 $ 0.42 $ 0.92 $ 0.79
======= ======= ======= =======
6. NET INCOME PER COMMON
SHARE ON A FULLY
DILUTIVE BASIS (4/3) $ 0.47(A) $ 0.41(A) $ 0.90(A) $ 0.77(A)
======= ======= ======= =======
<FN>
(A) FULLY DILUTED NET INCOME PER SHARE IS NOT PRESENTED AS THE DILUTIVE
EFFECT IS LESS THAN 3%.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 6,882
<SECURITIES> 0
<RECEIVABLES> 139,357
<ALLOWANCES> 2,892
<INVENTORY> 133,113
<CURRENT-ASSETS> 280,823
<PP&E> 152,337
<DEPRECIATION> 67,810
<TOTAL-ASSETS> 383,968
<CURRENT-LIABILITIES> 121,700
<BONDS> 0
<COMMON> 10,000
0
0
<OTHER-SE> 184,893
<TOTAL-LIABILITY-AND-EQUITY> 383,968
<SALES> 274,992
<TOTAL-REVENUES> 274,992
<CGS> 200,025
<TOTAL-COSTS> 200,025
<OTHER-EXPENSES> 62,217
<LOSS-PROVISION> 1,048
<INTEREST-EXPENSE> 1,342
<INCOME-PRETAX> 10,360
<INCOME-TAX> 4,357
<INCOME-CONTINUING> 6,003
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,003
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.47
</TABLE>
