EXHIBIT 4(d)
Prudential Financial Prudential Capital Group
Corporate Finance
Xxx Xxxxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
Tel 000-000-0000 Fax 000-000-0000
November 14, 2003
Applied Industrial Technologies, Inc.
Xxx Xxxxxxx Xxxxx
Xxxxxxxxx, Xxxx 00000
Ladies and Gentlemen:
Reference is made to that certain Private Shelf Agreement,
dated as of November 27, 1996 (as heretofore amended, the "1996 Note
Agreement"), between Applied Industrial Technologies, Inc., an Ohio corporation
formerly known as Bearings, Inc. (the "Company"), and The Prudential Insurance
Company of America ("Prudential"), pursuant to which the Company issued and sold
and Prudential purchased the Company's 6.60% Series B Notes due December 8, 2007
in the original aggregate principal amount of $50,000,000.
Pursuant to the request of the Company and in accordance with
the provisions of paragraph 11C of the 1996 Note Agreement, the parties hereto
agree as follows:
SECTION 1. Amendment. From and after the date this letter
becomes effective in accordance with Section 2 hereof, the 1996 Note Agreement
is amended as follows:
(a) New paragraph 6A(4) is added to the 1996 Note
Agreement, such paragraph 6A(4) to read as follows:
"6A(4). INTEREST COVERAGE RATIO. The Company shall
not suffer or permit at any time the Interest Coverage Ratio
to be less than 3.00 to 1.00."
(b) The following sentence is added to the end of
paragraph 6B(1) of the 1996 Note Agreement:
"Except for guaranties permitted or contemplated by paragraph
6B(10) or with respect to banker's liens arising by operation
of law (so long as the Company is in compliance with clause
(v) of this paragraph 6B(1), with the amount of Debt secured
by such
banker's liens being equal, for the purpose of determining
compliance with such clause (v), to the lesser of the value of
assets subject to such banker's liens or the outstanding
amount of the Debt as to which such banker's liens may be
exercised), neither the Company nor any Subsidiary is
permitted to create, incur, assume or suffer to exist any Lien
upon any property or assets to secure any obligations under
the Credit Agreement."
(c) Clause (x) in the proviso at the end of paragraph
6B(2) of the 1996 Note Agreement is amended in its entirety to read as
follows:
"(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 50% of Consolidated
Capitalization and"
(d) Paragraph 6B(10) of the 1996 Note Agreement is
amended in its entirety to read as follows::
"6B(10). OTHER SUBSIDIARY GUARANTIES. The Company
covenants that it will not permit any Subsidiary organized
under the laws of the United States or any state thereof to
create, issue, incur, assume or become subject to or liable
under any guarantee with respect to any Debt of the Company
unless such Subsidiary promptly executes and delivers to the
holders of the Notes a Guaranty of Payment of Debt
substantially in the form of Exhibit I hereto."
(e) New paragraph 6B(11) is added to the 1996 Note
Agreement, such paragraph 6B(11) to read as follows:
"6B(11). OTHER COVENANTS. In the event that the
Company or any of its Subsidiaries shall enter into, or shall
have entered into, any Material Indebtedness Agreement,
wherein the covenants contained therein shall be more
restrictive than the covenants set forth herein, then the
Company and its Subsidiaries shall be bound hereunder by such
more restrictive covenants with the same force and effect as
if such covenants were written herein."
(f) The following definitions the 1996 Note Agreement are
each amended in its entirety to read as follows or added to the 1996
Note Agreement, as applicable:
"CANADIAN BORROWER" shall mean each of the
Subsidiaries of the Company set forth on Schedule 2 to the
Credit Agreement.
"CONSOLIDATED EBIT" shall mean, for any period,
Consolidated Net Income for such period plus the aggregate
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amounts deducted in determining such Consolidated Net Income
in respect of (a) Consolidated Interest Expense, (b)
Consolidated Income Tax Expense, (c) stock option expenses, up
to an aggregate amount of Two Million Dollars ($2,000,000) per
fiscal year of the Company, and (d) (i) extraordinary or
non-recurring charges, minus (ii) extraordinary or
non-recurring cash gains, determined on a consolidated basis
in accordance with generally accepted accounting principles.
"CONSOLIDATED INCOME TAX EXPENSE" shall mean, for any
period, all provisions for taxes based on the gross or net
income of the Company (including, without limitation, any
additions to such taxes, and any penalties and interest with
respect thereto), and all franchise taxes of the Company,
determined on a consolidated basis and in accordance with
generally accepted accounting principles.
"CONSOLIDATED INTEREST EXPENSE" shall mean, for any
period, the interest expense of the Company for such period,
determined on a consolidated basis and in accordance with
generally accepted accounting principles.
"CREDIT AGREEMENT" shall mean the Credit Agreement,
dated as of October 31, 2003, among the Company, the Canadian
Borrowers, the Banks, Keybank National Association, as Lead
Arranger, Book Runner and Administrative Agent, and U.S. Bank
National Association, as Syndication Agent, as amended,
modified, supplemented, restated, replaced or refinanced from
time to time.
"INTEREST COVERAGE RATIO" shall mean, for the most
recently completed four fiscal quarters of the Company, on a
consolidated basis and in accordance with GAAP, the ratio of
(a) Consolidated EBIT to (b) Consolidated Interest Expense.
"MATERIAL INDEBTEDNESS AGREEMENT" shall mean any debt
instrument, lease (capital, operating or otherwise), guaranty,
contract, commitment, agreement or other arrangement
evidencing or entered into in connection with Debt of the
Company or any Subsidiary equal to or in excess of the amount
of Twenty Million Dollars ($20,000,000).
"PRIORITY DEBT" shall mean, as of any time of
determination thereof, the aggregate amount, without
duplication, of (i) all obligations of the Company or
Subsidiaries secured by Liens permitted by clauses (iv) or (v)
of paragraph 6B(1), and (ii) Debt of Subsidiaries, other than
(a) Debt of the Canadian
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Borrowers owed to the Canadian Banks under the Credit
Agreement, (b) Debt consisting of guarantees by Subsidiaries
of Debt of the Company so long as such guarantees are
permitted under paragraph 6B(10) hereof and (c) Debt owed by a
Subsidiary to the Company or another Subsidiary."
SECTION 2. Conditions Precedent. The amendments in Section 1
of this letter shall become effective upon the satisfaction of each of the
following conditions:
(a) The Company shall have delivered to Prudential a
counterpart of this letter duly executed by the Company and consented
to by each Subsidiary party to a Guaranty of Payment of Debt or which
executes a guarantee of the Company's obligations under the Credit
Agreement;
(b) The Company and the Banks shall have executed and
delivered the Credit Agreement in form and substance reasonably
satisfactory to Prudential, and Prudential shall have received a
photocopy thereto and of all operative agreements delivered in
connection therewith;
(c) Prudential and Keybank National Association, for
itself and as agent for the banks under the Credit Agreement, dated as
of November 5, 1998, shall have executed a termination of the
Intercreditor Agreement, in form and substance satisfactory to
Prudential, and such Credit Agreement shall have been terminated; and
(d) The Company shall have paid the reasonable fees and
disbursements of special counsel to Prudential in connection with this
letter and the transactions contemplated hereby.
SECTION 3. Representation and Warranties. The Company
represents and warrants to the Prudential that (i) there are no Defaults or
Events of Default under the 1996 Note Agreement and (ii) the Company has full
power, authority and legal right to enter into this letter.
SECTION 4. Reference to and Effect on Agreements. Upon the
effectiveness of this letter, each reference to the 1996 Note Agreement in any
other document, instrument or agreement shall mean and be a reference to the
1996 Note Agreement as modified by this letter. Except as specifically set forth
in Section 1 hereof, the 1996 Note Agreement shall remain in full force and
effect and is hereby ratified and confirmed in all respects.
SECTION 5. Governing Law. THIS LETTER SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY,
THE LAW OF THE STATE OF ILLINOIS (EXCLUDING ANY CONFLICTS OF LAW RULES WHICH
WOULD OTHERWISE CAUSE THIS AGREEMENT TO BE CONSTRUED OR ENFORCED IN ACCORDANCE
WITH, OR THE RIGHTS OF THE PARTIES TO BE GOVERNED BY, THE LAWS OF ANY OTHER
JURISDICTION).
SECTION 6. Counterparts; Section Titles. This letter may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which
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when so executed and delivered shall be deemed to be an original and all of
which taken together shall constitute but one and the same instrument. The
section titles contained in this letter are and shall be without substance,
meaning or content of any kind whatsoever and are not a part of the agreement
between the parties hereto.
Very truly yours,
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Xxxxxxx Xxxxxxxxx
Vice President
Agreed and accepted:
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
By: /s/ Xxxx X. Xxxxxxx
--------------------------
Name: Xxxx X. Xxxxxxx
Title:VP-CFO Consented to:
APPLIED INDUSTRIAL TECHNOLOGIES-CA LLC
APPLIED INDUSTRIAL TECHNOLOGIES-DBB, INC.
APPLIED INDUSTRIAL TECHNOLOGIES-XXXXX, INC.
APPLIED INDUSTRIAL TECHNOLOGIES-INDIANA LLC
APPLIED INDUSTRIAL TECHNOLOGIES-MAINLINE, INC.
APPLIED INDUSTRIAL TECHNOLOGIES-TX LP
APPLIED INDUSTRIAL TECHNOLOGIES-PA LLC
AIR AND HYDRAULICS ENGINEERING, INCORPORATED
ESI ACQUISITION CORPORATION
THE OHIO BALL BEARING COMPANY
BEARINGS PAN AMERICAN, INC.
BEARINGS SALES AND SERVICES, INC.
AIR DRAULICS ENGINEERING CO.
APPLIEDLINK, INC.
APPLIED-MICHIGAN, LTD
APPLIED INDUSTRIAL TECHNOLOGIES-CAPITAL LLC
By: /s/ Xxxx X. Xxxxxxx
Name: Xxxx X. Xxxxxxx
Title:VP-CFO
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