10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2005

OR

o  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    0-3279

KIMBALL INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)
 

Indiana	35-0514506
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)
1600 Royal Street, Jasper, Indiana	47549-1001
(Address of principal executive offices)	(Zip Code)

(812) 482-1600

Registrant's telephone number, including area code

Not Applicable

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 o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): 
Large accelerated filero                                  Accelerated filer x                                Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yeso    No x

The number of shares outstanding of the Registrant's common stock as of January 18, 2006 were:

Class A Common Stock - 13,279,512 shares

Class B Common Stock - 24,929,234 shares

1

KIMBALL INTERNATIONAL, INC.
FORM 10-Q
INDEX

		Page No.
PART I    FINANCIAL INFORMATION
	Item 1. Financial Statements
	Condensed Consolidated Balance Sheets         - December 31, 2005 (Unaudited) and June 30, 2005	3
	Condensed Consolidated Statements of Income (Unaudited)         - Three and Six Months Ended December 31, 2005 and 2004	4
	Condensed Consolidated Statements of Cash Flows (Unaudited)         - Six Months Ended December 31, 2005 and 2004	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6-19
	Item 2. Management's Discussion and Analysis of Financial     Condition and Results of Operations	19-29
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	29
	Item 4. Controls and Procedures	29
PART II    OTHER INFORMATION
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	30
	Item 4.  Submission of Matters to a Vote of Security Holders	30
	Item 5.  Other Information	31
	Item 6. Exhibits	31
SIGNATURES		32
EXHIBIT INDEX		33

2

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands, Except for Share Data)

	(Unaudited) December 31,  2005	June 30,    2005
Assets
Current Assets:
Cash and cash equivalents	$  78,008	$  57,253
Short-term investments	65,487	60,270
Receivables, less allowances of $2,148 and $2,142, respectively	128,076	125,178
Inventories	75,434	87,531
Assets held for sale	10,111	-0-
Other	20,793	21,808
Total current assets	377,909	352,040
Property and Equipment - net of accumulated depreciation of $327,801 and     $356,639, respectively	146,004	176,054
Capitalized Software - net of accumulated amortization of $47,357 and     $43,415, respectively	29,702	37,273
Other Assets	29,197	35,173
Total Assets	$582,812	$600,540
Liabilities and Share Owners' Equity
Current Liabilities:
Current maturities of long-term debt	$         15	$         49
Accounts payable	90,250	87,049
Borrowings under credit facility	2,079	2,154
Dividends payable	6,477	6,420
Accrued expenses	54,504	52,700
Total current liabilities	153,325	148,372
Other Liabilities:
Long-term debt, less current maturities	339	350
Deferred income taxes and other	13,847	23,592
Total other liabilities	14,186	23,942
Share Owners' Equity:
Common stock-par value $0.05 per share:
Class A - 49,826,000 shares authorized                        14,368,000 shares issued	718	718
Class B - 100,000,000 shares authorized                         28,657,000 shares issued	1,433	1,433
Additional paid-in capital	5,501	4,625
Retained earnings	481,092	495,557
Accumulated other comprehensive income	1,046	901
Deferred stock-based compensation	-0-	(7,812)
Less: Treasury stock, at cost
Class A - 1,088,000 and 377,000 shares, respectively	(15,693)	(5,610)
Class B - 3,728,000 and 3,881,000 shares, respectively	(58,796)	(61,586)
Total Share Owners' Equity	415,301	428,226
Total Liabilities and Share Owners' Equity	$582,812	$600,540
See Notes to Condensed Consolidated Financial Statements 3

KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except for Per Share Data)

(Unaudited)	(Unaudited)
Three Months Ended	Six Months Ended
December 31,	December 31,

	2005	2004	2005	2004
Net Sales	$273,934	$272,686	$541,338	$531,645
Cost of Sales	214,516	212,302	424,515	414,282
Gross Profit	59,418	60,384	116,823	117,363
Selling, General and Administrative Expenses	51,814	53,867	106,360	105,266
Restructuring Expense	2,627	-0-	7,398	321
Operating Income	4,977	6,517	3,065	11,776
Other Income (Expense):
Interest income	980	457	1,814	892
Interest expense	(37)	(35)	(74)	(73)
Non-operating income	1,234	2,792	2,269	5,380
Non-operating expense	(59)	(537)	(524)	(922)
Other income, net	2,118	2,677	3,485	5,277
Income from Continuing Operations Before Taxes on Income	7,095	9,194	6,550	17,053
Provision for Income Taxes	1,969	1,675	1,580	3,583
Income from Continuing Operations	5,126	7,519	4,970	13,470
Loss from Discontinued Operations, Net of Tax	(892)	(1,403)	(7,598)	(2,339)
Income (Loss) Before Cumulative Effect of Change in Accounting Principle	4,234	6,116	(2,628)	11,131
Cumulative Effect of Change in Accounting Principle, Net of Tax	-0-	-0-	299	-0-
Net Income (Loss)	$    4,234	$   6,116	$  (2,329)	$  11,131
Earnings (Loss) Per Share of Common Stock:
Basic Earnings Per Share from Continuing Operations:
Class A	$0.13	$0.19	$0.12	$0.35
Class B	$0.14	$0.20	$0.13	$0.36
Diluted Earnings Per Share from Continuing Operations:
Class A	$0.13	$0.19	$0.12	$0.34
Class B	$0.14	$0.20	$0.13	$0.35
Basic Earnings (Loss) Per Share:
Class A	$0.10	$0.16	($0.07)	$0.29
Class B	$0.11	$0.16	($0.06)	$0.29
Diluted Earnings (Loss) Per Share:
Class A	$0.10	$0.16	($0.07)	$0.28
Class B	$0.11	$0.16	($0.06)	$0.29
Dividends Per Share of Common Stock:
Class A	$0.155	$0.155	$0.310	$0.310
Class B	$0.160	$0.160	$0.320	$0.320
Average Total Number of Shares Outstanding  Class A and B Common Stock:
Basic	38,203	38,139	38,184	38,129
Diluted	38,343	38,525	38,309	38,518

See Notes to Condensed Consolidated Financial Statements                                  4

KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	(Unaudited) Six Months Ended December 31,
(Amounts in Thousands)
	2005	2004
Cash Flows From Operating Activities:
Net income (loss)	$ (2,329)	$ 11,131
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Cumulative effect of a change in accounting principle	(497)	-0-
Depreciation and amortization	18,437	20,991
Gain on sales of assets	(1,183)	(540)
Loss (gain) on disposal of discontinued operations	12,221	(520)
Restructuring	4,998	116
Deferred income tax and other deferred charges	(8,000)	(2,010)
Stock-based compensation	1,696	1,332
Change in current assets and liabilities:
Receivables	(7,887)	(11,048)
Inventories	(317)	472
Other current assets	1,338	5,786
Accounts payable	3,555	2,194
Accrued expenses	(147)	(5,677)
Net cash provided by operating activities	21,885	22,227
Cash Flows From Investing Activities:
Capital expenditures	(12,538)	(12,914)
Proceeds from sales of assets	3,040	47
Proceeds from sales of facilities/subsidiaries	1,912	17,520
Proceeds from disposal of discontinued operations	23,772	2,300
Purchase of capitalized software and other assets	(102)	(1,946)
Purchases of available-for-sale securities	(18,090)	(60,746)
Sales and maturities of available-for-sale securities	12,676	48,419
Other, net	395	-0-
Net cash provided by (used for) investing activities	11,065	(7,320)
Cash Flows From Financing Activities:
Net change in short-term borrowings	(75)	2,294
Net change in long-term debt	(45)	(325)
Dividends paid to share owners	(12,080)	(12,063)
Other, net	51	(622)
Net cash used for financing activities	(12,149)	(10,716)
Effect of Exchange Rate Change on Cash and Cash Equivalents	(46)	636
Net Increase in Cash and Cash Equivalents	20,755	4,827
Cash and Cash Equivalents at Beginning of Period	57,253	39,991
Cash and Cash Equivalents at End of Period	$ 78,008	$ 44,818
Supplemental Disclosure of Cash Flow Information:
Cash paid (refunded) during the period for:
Income taxes	$       322	$     (595)
Interest	$         90	$       141
Total Cash, Cash Equivalents and Short-Term Investments:
Cash and cash equivalents	$  78,008	$ 44,818
Short-term investments	65,487	57,820
Totals	$143,495	$102,638
See Notes to Condensed Consolidated Financial Statements
5

KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of Kimball International, Inc. (the "Company") have been prepared in accordance with the instructions to Form 10-Q.  As such, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, although the Company believes that the disclosures are adequate to make the information presented not misleading. All significant intercompany transactions and balances have been eliminated. Management believes the financial statements include all adjustments (consisting only of normal recurring adjustments) considered necessary to present fairly the financial statements for the interim periods. The results of operations for the interim periods shown in this report are not necessarily indicative of results for any future interim period or for the entire year. It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K.

The Company has classified several operations as discontinued.  During the quarter ended December 31, 2005, the Company committed to a plan to exit an operation that manufactures polyurethane and polyester molded components for use in the recreational vehicle, signage and residential furniture industries.  Also during the quarter, the Company completed the sale of a fixed-wall furniture systems operation and a forest products hardwood lumber operation.  In fiscal year 2005, the Company exited the residential furniture market which was part of the branded furniture product line and also discontinued its veneer slicing operations.  All of this activity is applicable to the Furniture and Cabinets segment.  In accordance with Financial Accounting Standards Board (FASB) Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the accompanying Condensed Consolidated Financial Statements and notes have been restated to reflect the results of these operations as discontinued operations.  See Note 8-Discontinued Operations of Notes to Condensed Consolidated Financial Statements for further discussion of these discontinued operations.

Certain prior year information has been reclassified to conform to the current year presentation.  Based on accounting interpretations, the Company changed its classifications of investments in auction rate securities, previously classified as cash and cash equivalents, to short-term investments for the prior period presented in the accompanying Condensed Consolidated Statement of Cash Flows.  Auction rate securities are variable rate bonds tied to short-term interest rates with maturities on the face of the securities in excess of 90 days.  Auction rate securities have interest rate resets through a modified Dutch auction, at predetermined short-term intervals, usually every 1, 7, 28 or 35 days.  The Company had historically classified auction rate securities as cash and cash equivalents if the period between the interest rate resets was 90 days or less, which was based on our ability to either liquidate our holdings or roll our investments over to the next reset period.  The Company has made adjustments to the accompanying Condensed Consolidated Statement of Cash Flows to reflect the gross purchases and sales of these securities as investing activities.  These reclassifications had no impact on the results of operations of the Company.

The Company also changed its classification of gains and losses on sales of property and equipment, previously shown in non-operating income, to selling, general and administrative expense for each of the periods presented in the accompanying Condensed Consolidated Statements of Income. Amounts reclassified in the three and six-month periods ended December 31, 2004 were gains of, in millions, $0 and $0.5, respectively.  In the three and six months ended December 31, 2005, the Company recognized, in millions, $1.0 and $1.2, respectively, of gains on the sale of property and equipment as selling, general and administrative expense.

6

Stock-Based Compensation

As described in Note 7-Stock Compensation Plans of Notes to Condensed Consolidated Financial Statements, the Company maintains stock-based employee compensation plans which allow for the issuance of restricted stock, restricted share units, unrestricted share grants, incentive stock options, nonqualified stock options, performance shares, performance units and stock appreciation rights for grant to officers and other key employees of the Company, and to members of the Board of Directors who are not employees.  Prior to fiscal year 2006, the Company accounted for the plans under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations (APB 25). Accordingly, because all stock options granted had an exercise price equal to the market value of the underlying common stock on the date of the grant, no expense related to employee stock options was recognized. However, expense related to other share-based awards such as restricted share units and performance shares had been recognized in the income statement under APB 25.  Effective July 1, 2005, the Company adopted the fair value recognition provisions of FASB Statement No. 123(R), Share-Based Payment (FAS 123(R)).  Under the modified prospective method of adoption selected by the Company, compensation expense related to stock options is recognized beginning in fiscal year 2006, but compensation cost in fiscal year 2005 related to stock options continues to be disclosed on a pro forma basis only.  Additionally, as of the effective date, the Company eliminated its balance of Deferred Stock-Based Compensation, which represented unrecognized compensation cost for restricted share unit awards, and reclassified it to Treasury Stock and Additional Paid-In Capital, in accordance with the modified prospective transition method.  Financial statements for prior periods have not been restated.

FAS 123(R) requires that forfeitures be estimated over the vesting period of an award, rather than being recognized as a reduction of compensation expense when the forfeiture actually occurs.  FAS 123(R) also requires that liability awards be revalued to fair value, which, upon the adoption of FAS 123(R), had the effect of a reduction of a liability for outstanding stock appreciation rights.  The impact of the revaluation of stock appreciation rights and the use of the estimated forfeiture method for prior periods has been presented on the Condensed Consolidated Statements of Income as a Cumulative Effect of Change in Accounting Principle, as required by FAS 123(R).  The cumulative effect recorded in the first quarter of fiscal year 2006 totaled $0.3 million of income, net of taxes.  The earnings per share impact can be found in Exhibit 11- Computation of Earnings per Share.

The Company's stock-based compensation plans allow early vesting when an employee reaches retirement age and ceases continuous service.  Under FAS 123(R), awards granted after June 30, 2005 require acceleration of compensation expense through an employee's retirement age, whether or not the employee is expected to cease continuous service on that date.  For awards granted on or before June 30, 2005, the Company accelerates compensation expense only in cases where a retirement eligible employee is expected to cease continuous service prior to an award's vesting date.  If the new provisions of FAS 123(R) had been in effect for awards prior to June 30, 2005, compensation expense including the pro forma effect of stock options, net of tax, would have been $0.2 million and $0.1 million higher during the six months ended December 31, 2005 and 2004, respectively.  There would have been an immaterial difference in compensation expense during the three months ended December 31, 2005 and 2004.

7

The following table illustrates the effect on income from continuing operations and earnings per share from continuing operations if the Company had applied the fair value recognition provisions to stock-based employee compensation in fiscal year 2005.

Three Months Ended
December 31, 2004 Six Months Ended
December 31, 2004

(Amounts in Thousands, Except for Per Share Data)
Income from Continuing Operations, as reported	$ 7,519	$13,470
Add: Stock-based employee compensation expense included in reported income, net of related tax effects	433	722
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	539	968
Pro Forma Income from Continuing Operations	$ 7,413	$13,224
Earnings Per Share:
As reported:
Basic Earnings Per Share from Continuing Operations:
Class A	$0.19	$0.35
Class B	$0.20	$0.36
Diluted Earnings Per Share from Continuing Operations:
Class A	$0.19	$0.34
Class B	$0.20	$0.35
Pro Forma:
Basic Earnings Per Share from Continuing Operations:
Class A	$0.19	$0.34
Class B	$0.20	$0.35
Diluted Earnings Per Share from Continuing Operations:
Class A	$0.19	$0.34
Class B	$0.19	$0.35

Tooling

The Company capitalizes the cost of tooling which it owns or which it has a noncancelable right to use during a supply arrangement.  As of both December 31, 2005 and June 30, 2005, the Company had $3.0 million of Company-owned tooling costs capitalized.  The Company had an immaterial amount of customer-owned tooling costs capitalized as of December 31, 2005, and had $0.8 million capitalized as of June 30, 2005.

Effective Tax Rate

In determining our quarterly provision for income taxes, we use an estimated annual effective tax rate which is based on our expected annual income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate.  Unusual or infrequently occurring items are separately recognized in the quarter in which they occur.  See Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations for more information on the Company's effective tax rate.

8

New Accounting Standards

In December 2005, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) Statement of Position (SOP) 94-6-1, Terms of Loan Products That May Give Rise to a Concentration of Credit Risk.  This FSP provides guidance on terms of loans that may give rise to a concentration of credit risk, and disclosures and other accounting considerations required for concentration of credit risks.  The FSP is effective for the Company in the second quarter of fiscal year 2006.  The Company has provided disclosures related to concentration of credit risks.  The adoption of this FSP did not have a material impact on the Company's financial position, results of operations or cash flows.

In November 2005, the FASB issued FSP Financial Accounting Standard (FAS) 115-1 and FAS 124-1, the Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.  This FSP provides guidance on determining if an investment is considered to be impaired, if the impairment is other-than-temporary, and the measurement of impairment losses.  It also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments.  The FSP is effective for the Company beginning in the third quarter of fiscal year 2006.  The Company is currently accounting for investments in accordance with this guidance, and therefore, the adoption of this FSP will not have a material impact on the Company's financial position, results of operations or cash flows.

In October 2005, the FASB issued FSP FAS 123(R)-2, Practical Accommodation to the Application of Grant Date as Defined in FASB Statement No. 123(R), which provides clarification of the concept of mutual understanding between employer and employee with respect to the grant date of a share-based payment award.  This FSP provides that a mutual understanding of the key terms and conditions of an award shall be presumed to exist at the date the award is approved in accordance with the relevant corporate governance requirements if the recipient does not have the ability to negotiate the key terms and conditions of the award and those key terms and conditions will be communicated to the individual recipient within a relatively short time period from the date of approval.  This guidance became effective for the Company in the second quarter of fiscal year 2006.  The adoption of this FSP did not have a material impact on the Company's financial position, results of operations or cash flows.

In September 2005, the FASB ratified the Emerging Issues Task Force (EITF) consensus on Issue No. 04-13, Accounting for Purchases and Sales of Inventory with the Same Counterparty (EITF 04-13).  EITF 04-13 generally requires exchanges of inventory within the same line of business to be recognized at the carrying value of the inventory transferred, except in cases where finished goods inventory is exchanged for raw material or work-in-process inventory.  EITF 04-13 is effective for the Company beginning in the fourth quarter of fiscal year 2006. The Company does not believe that the adoption of EITF 04-13 will have a material effect on its financial position, results of operations or cash flows.

Note 2. Inventories

Inventory components of the Company are as follows:

	December 31,	June 30,
	2005	2005
(Amounts in Thousands)
Finished Products	$23,059	$30,525
Work-in-Process	6,278	13,969
Raw Materials	46,097	43,037
Total Inventory	$75,434	$87,531

For interim reporting, LIFO inventories are computed based on year-to-date quantities and interim changes in price levels. Changes in quantities and price levels are reflected in the interim financial statements in the period in which they occur.

9

Note 3. Comprehensive Income (Loss)

Comprehensive income (loss) includes all changes in equity during a period except those resulting from investments by, and distributions to, Share Owners. Comprehensive income, shown net of tax if applicable, for the three and six-month periods ended December 31, 2005 and 2004 is as follows:

Three Months Ended	Six Months Ended
December 31,	December 31,

	2005	2004	2005	2004
(Amounts in Thousands)
Net Income (Loss)	$  4,234	$ 6,116	$ (2,329)	$11,131
Change in Unrealized Gains/Losses on Securities [1]	(42)	(99)	(116)	2
Change in Gains/Losses on Derivatives [2]	99	1,079	257	1,341
Foreign Currency Translation Adjustment	9	16	4	15
Comprehensive Income (Loss)	$  4,300	$ 7,112	$ (2,184)	$12,489

[1] Net of tax expense/(benefit), in thousands, of ($27) and ($66) for the three months ended December 31, 2005 and 2004, respectively, and ($77) and $0 for the six months ended December 31, 2005 and 2004, respectively.

[2] Net of tax expense, in thousands, of $22 and $257 for three months ended December 31, 2005 and 2004, respectively, and $65 and $318 for the six months ended December 31, 2005 and 2004, respectively.  The Company's use of derivatives is generally limited to forward purchases of foreign currency designated as cash flow hedges to protect against foreign currency exchange rate risks inherent in forecasted transactions denominated in a foreign currency.

Note 4. Segment Information

Management organizes the Company into segments based upon differences in products and services offered in each segment. The Furniture and Cabinets segment provides furniture for the office and hospitality industries, sold under the Company's family of brand names. The Furniture and Cabinets segment also provides engineering and manufacturing services which utilize common production and support capabilities on a contract basis to customers in the office furniture and residential furniture and cabinets industries. The Electronic Contract Assemblies segment provides engineering and manufacturing services which utilize common production and support capabilities to a variety of industries globally. The Company's focus is on electronic assemblies that have high durability requirements and are sold on a contract basis and produced to customers' specifications. The Company currently sells primarily to customers in the automotive, industrial controls and medical industries. Intersegment sales are insignificant.

10

Unallocated corporate assets include cash and cash equivalents, short-term investments and other assets not allocated to segments. Unallocated corporate income from continuing operations consists of income not allocated to segments for purposes of evaluating segment performance and includes income from corporate investments and other non-operational items. The basis of segmentation and accounting policies of the segments are consistent with those as disclosed in the Company's Annual Report on Form 10-K for the year ended June 30, 2005.

At or For the
Three Months Ended	Six Months Ended
December 31,	December 31,

	2005		2004		2005		2004
(Amounts in Thousands)
Net Sales:
Furniture and Cabinets	$169,343		$159,876		$328,562		$310,884
Electronic Contract Assemblies	104,562		112,590		212,522		220,464
Unallocated Corporate and Eliminations	29		220		254		297
Consolidated	$273,934		$272,686		$541,338		$531,645
Income from Continuing Operations:
Furniture and Cabinets	$    2,518		$    1,702		$       993		$    3,894
Electronic Contract Assemblies	1,141		4,701		1,960		7,520
Unallocated Corporate and Eliminations	1,467		1,116		2,017		2,056
Consolidated	$     5,126	[1]	$    7,519	[2]	$    4,970	[1]	$   13,470	[2]
Total Assets:
Furniture and Cabinets	$249,016		$302,592
Electronic Contract Assemblies	204,698		222,917
Unallocated Corporate and Eliminations	129,098		89,491
Consolidated	$582,812	[3]	$615,000

[1] Income from Continuing Operations includes after-tax restructuring charges, in thousands, of $1,653 and $4,602 in the three and six months ended December 31, 2005, respectively, all recorded in the Furniture and Cabinets segment.  See Note 5 - Restructuring Expense of Notes to Condensed Consolidated Financial Statements for further discussion.

[2] Income from Continuing Operations includes after-tax restructuring charges, in thousands, of $0 and $193 in the three and six months ended December 31, 2004, respectively.  On a segment basis, in the three and six months ended December 31, 2004, the Furniture and Cabinets segment recorded, in thousands, $0 and $179 of after-tax restructuring charges, and Unallocated Corporate recorded, in thousands, $0 and $14 of after-tax restructuring charges, respectively.  See Note 5 - Restructuring Expense of Notes to Condensed Consolidated Financial Statements for further discussion.

[3] Significant reductions in Furniture and Cabinets segment assets were the result of sales of a forest products hardwood lumber business and a fixed-wall furniture systems business, and the exit of a manufacturing facility located in Mexicali, Mexico.  Unallocated corporate assets increased primarily as a result of proceeds from the sale of non-core business units.

11

Sales by Product Line

The Furniture and Cabinets segment produces and sells a variety of similar products and services. Net sales to external customers by product line within the Furniture and Cabinets segment were as follows:

Three Months Ended	Six Months Ended
December 31,	December 31,

	2005	2004	2005	2004
(Amounts in Thousands)
Net Sales:
Furniture and Cabinets
Branded Furniture	$146,650	$130,840	$284,574	$257,662
Contract Private Label Products	22,693	29,036	43,988	53,222
Total	$169,343	$159,876	$328,562	$310,884

Note 5. Restructuring Expense

During the first quarter of fiscal year 2006, the Company announced a plan to sharpen its focus on primary markets within the Furniture and Cabinets segment.  Actions under the plan include consolidation of administrative, marketing and business development functions to better serve the segment's primary markets.  To simplify and standardize business processes, a portion of the Company's Enterprise Resource Planning (ERP) software is being redesigned during approximately the next three years, and accelerated amortization, employee severance and other consolidation costs will be recognized during this period.  During the first quarter of fiscal year 2006, capitalized software costs related to the ERP software that was not yet placed in service were abandoned and recognized as impaired.  Restructuring charges related to ERP software impairment, accelerated amortization and employee severance are recorded on the Restructuring Expense line item of the Company's Condensed Consolidated Financial Statements of Income.  The plan also included the sale of a forest products hardwood lumber business and a business unit which produced fixed-wall furniture systems.  Losses on the sale of these business units are presented on the Discontinued Operations line item on the Company's Condensed Consolidated Statements of Income.  See Note 8-Discontinued Operations of Notes to Condensed Consolidated Financial Statements for further discussion of these discontinued operations.  The Company estimates total pre-tax charges under the plan to be approximately $18.4 million, including a loss on the sale of business operations of $10.4 million which was recorded as discontinued operations and restructuring charges for software impairment of $3.5 million, acceleration of software amortization of $2.2 million, employee severance costs of $1.8 million, and fixed asset impairment and other restructuring costs of $0.5 million.

During the fourth quarter of fiscal year 2005, the Company announced a plan to consolidate its Mexican contract furniture and cabinets operations into one facility located in Juarez, Mexico, resulting in the closure of its manufacturing facility in Mexicali, Mexico.  The plan includes lease charges, severance and other employee costs, equipment relocation costs, asset impairment and other miscellaneous consolidation costs.  The Company's total pre-tax restructuring charges under the plan are expected to approximate $4.4 million.  Activities outlined in this restructuring plan which began in the fourth quarter of fiscal year 2005 are substantially complete and will be finalized during the third quarter of this fiscal year.

During the second quarter of fiscal year 2003, the Company announced incremental cost scaling actions to more closely align its operating capacities and capabilities with reduced demand levels related to the prolonged nature of the global economic slowdown in many of the Company's markets and the resulting continuation of underutilized manufacturing capacity. The actions included the consolidation of capabilities and operations, selling and/or exiting redundant facilities, aligning personnel costs and adjusting associated assets to their current fair values.  Activities outlined in this restructuring plan began in the second quarter of fiscal year 2003 and were completed in the first quarter of fiscal year 2005.  Total costs of these completed plans were within initial management estimates.

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The Company accounts for restructuring costs in accordance with Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities.  Restructuring charges are included in the Restructuring Expense line item on the Company's Condensed Consolidated Statements of Income.

Fiscal Year 2006 Charges

As a result of the fiscal year 2005 and 2006 restructuring plans, the Company recognized consolidated pre-tax restructuring expense of $2.6 million and $7.4 million in the three and six months ended December 31, 2005, respectively, within the Furniture and Cabinets segment.  Included in the restructuring charge for the three and six months ended December 31, 2005, respectively, is $0.1 million and $1.0 million for employee transition costs, $1.3 million and $5.0 million for asset impairment and $1.2 million and $1.4 million for plant closure and other costs.

Fiscal Year 2005 Charges

As a result of the fiscal year 2003 restructuring plan, the Company recognized consolidated pre-tax restructuring expense of $0.0 and $0.3 million in the three and six months ended December 31, 2004, respectively, primarily within the Furniture and Cabinets segment. Included in the restructuring charge is $0.1 million for asset impairment and $0.2 million for plant closure and other exit costs.

Reserves

At December 31, 2005, a total of $0.4 million of restructuring liabilities related to the fiscal year 2005 and 2006 restructuring plans remained on the Condensed Consolidated Balance Sheet as shown below.  The restructuring charge, utilization and cash paid, and ending reserve balances at December 31, 2005 were as follows:

	Transition and Other Employee Costs	Asset Impairment	Plant Closure and Other Exit Costs	Total
(Amounts in Thousands)
Accrued Restructuring at June 30, 2005	$     53	$     --	$    --	$     53
Amounts Charged - Cash	1,020	--	1,380	2,400
Amounts Charged - Non-Cash	--	4,998	--	4,998
Subtotal	1,020	4,998	1,380	7,398
Amounts Utilized / Cash Paid	(924)	(4,998)	(1,173)	(7,095)
Amounts Adjusted	--	--	--	--
Accrued Restructuring at December 31, 2005	$   149	$     --	$  207	$  356

In total, the Company has recognized pre-tax restructuring charges of $3.9 million and pre-tax losses on sales of discontinued operations of $10.4 million related to the restructuring plan announced in fiscal year 2006 and pre-tax charges of $3.6 million related to the restructuring plan announced in fiscal year 2005.

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Note 6. Guarantees and Product Warranties

As of December 31, 2005, the Company had guarantees issued which are contingent on the future performance of another entity. The guarantees include customer lease financing with recourse whereby the Company may become liable to a third party leasing company if the customer defaults on its lease, guarantees of third party dealer facility leases and bank loans whereby the Company may become liable if the dealer defaults on a lease or bank loan, and guarantees associated with subleases whereby the Company may be responsible for lease commitments if the sublessee defaults. At the inception of a guarantee, the Company recognizes a liability for obligations the Company may incur if specified triggering events or conditions occur. The liability is recorded at fair value which is estimated based on various factors including risk that the Company may have to perform under a guarantee, and ability to recover against payments made on a guarantee. The maximum potential liability and carrying amount recorded for these guarantees is immaterial to the Company's financial position.

The Company estimates product warranty liability at the time of sale based on historical repair cost trends in conjunction with the length of the warranty offered. Management may refine the warranty liability in cases where specific warranty issues become known.

Changes in the product warranty accrual for the six months ended December 31, 2005 and 2004 were as follows:

Six Months Ended
December 31,

(Amounts in Thousands)	2005	2004
Product Warranty Liability at the beginning of the period	$ 3,653	$ 3,578
Accrual for warranties issued	484	668
Accruals (reductions) related to pre-existing warranties (including changes in estimates)	(496)	84
Settlements made (in cash or in kind)	(1,029)	(732)
Product Warranty Liability at the end of the period	$ 2,612	$ 3,598

Note 7. Stock Compensation Plans

On August 19, 2003, the Board of Directors adopted the 2003 Stock Option and Incentive Plan (the "2003 Plan"), which was approved by the Company's Share Owners on October 21, 2003.  Under the 2003 Plan, 2,500,000 shares of Common Stock were reserved for restricted stock, restricted share units, unrestricted share grants, incentive stock options, nonqualified stock options, performance shares, performance units and stock appreciation rights for grant to officers and other key employees of the Company, and to members of the Board of Directors who are not employees.  The 2003 Plan is a 10 year plan.  The Company also has stock options outstanding under two former stock incentive plans, which are described below.  The pre-tax compensation cost that was charged against income for all of the plans was $1.0 million and $1.7 million for the three and six months ended December 31, 2005, respectively.  The total income tax benefit recognized in the income statement for stock compensation arrangements was $0.4 million and $0.7 million for the three and six months ended December 31, 2005, respectively.  These compensation expense and tax benefit amounts exclude the impact of the Cumulative Effect of a Change in Accounting Principle, as described in Note 1-Summany of Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements.  The Company generally uses treasury shares to satisfy option exercises and share unit conversions.

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Performance Shares

The Company awards performance shares to officers and other key employees under the 2003 Plan.  Under these awards, a number of shares will be granted to each participant based upon the attainment of the applicable bonus percentage calculated under the Company's profit sharing incentive bonus plan as applied to a total potential share award made and approved by the Compensation Committee. Performance shares vest at the end of the fiscal year in which the performance measurement period is complete, and are issued as Class A and Class B common shares shortly after vesting.  Certain outstanding performance shares are applicable to performance measurement periods in future fiscal years.  The contractual life of performance shares ranges from one to five years.  If a participant is not employed by the Company on the date of issuance, the performance share award is forfeited, except in the case of death, retirement at age 62 or older, or total permanent disability.  A portion of a participant's performance shares may be forfeited due to a change in eligibility. 

A summary of performance share activity under the 2003 Plan during the six months ended December 31, 2005 is presented below:

	Number of Shares	Weighted Average Grant Date Fair Value
Performance shares outstanding at July 1, 2005	--	$      --
Granted	509,184	12.22
Vested	--	--
Forfeited	(16,715)	12.24
Performance shares outstanding at December 31, 2005	492,469	$12.22

As of December 31, 2005, there was approximately $3.3 million of unrecognized compensation cost related to performance shares, based on the latest estimated attainment of performance goals.  That cost is expected to be recognized over a weighted-average period of 3.9 years.  No performance shares vested during the three and six months ended December 31, 2005.  The fair value of performance shares is based on the stock price at the date of award, reduced by the present value of dividends normally paid over the vesting period which are not payable on outstanding performance share awards.

Restricted Share Units

Nonvested Restricted Share Units (RSU) awarded to officers and other key employees are currently outstanding under the 2003 Plan. RSUs vest five years after the date of award.  Upon vesting, the outstanding number of RSUs and the value of dividends accumulated over the vesting period are converted to shares of Class A and Class B common stock.  If the employment of a holder of an RSU terminates for any reason other than death, retirement at age 62 or older, or total permanent disability before the RSU has vested, the RSU will be forfeited. If employment terminates due to one of those reasons, the RSU will become fully vested and payable.

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A summary of RSU activity under the 2003 Plan during the six months ended December 31, 2005 is presented below:

	Number of Share Units	Weighted Average Grant Date Fair Value
Restricted Share Units outstanding at July 1, 2005	614,375	$15.77
Granted	--	--
Vested	--	--
Forfeited	(35,050)	15.87
Restricted Share Units outstanding at December 31, 2005	579,325	$15.76

As of December 31, 2005, there was approximately $4.8 million of unrecognized compensation cost related to nonvested RSU compensation arrangements awarded under the 2003 Plan.  That cost is expected to be recognized over a weighted-average period of 3.6 years.  No RSUs vested during the three and six months ended December 31, 2005.  The fair value of RSU awards is based on the stock price at the date of award.

Unrestricted Share Grants

Under the 2003 Plan, unrestricted shares may be granted to participants as consideration for service to the Company.  Unrestricted share grants do not have vesting periods, holding periods, restrictions on sale or other restrictions.  The fair value of unrestricted shares is based on the stock price at the date of the award.  During both the three and six months ended December 31, 2005, the Company granted a total of 18,501 unrestricted shares of Class B common stock at an average grant date fair value of $11.22.  These shares were issued to members of the Board of Directors as compensation for director's fees, as a result of directors' elections to receive unrestricted shares in lieu of cash payment.

Stock Options

The Company has stock options outstanding under two former stock incentive plans.  The 1996 Stock Incentive Program, which was approved by the Company's Share Owners on October 22, 1996, allowed the issuance of incentive stock options, nonqualified stock options, stock appreciation rights, and performance share awards to officers and other key employees of the Company, and to members of the Board of Directors who are not employees.  The 1996 Stock Incentive Program will continue to have options outstanding through fiscal year 2013.  The 1996 Directors' Stock Compensation and Option Plan, available to all members of the Board of Directors, was approved by the Company's Share Owners on October 22, 1996.  Under terms of that plan, Directors electing to receive all, or a portion, of their fees in the form of Company stock were also granted a number of stock options equal to 50% of the number of shares received for compensation of fees. The Directors' Stock Compensation and Option Plan will continue to have options outstanding through fiscal year 2009.  No shares remain available for issuance under the Company's prior stock option plans.

There were no stock option grants awarded or exercised during the three and six months ended December 31, 2005.  The fair value of each outstanding option award was estimated on the date of grant using a Black Scholes valuation model.  Assumptions used in the model for the prior year grants are described in the Company's Annual Report on Form 10-K for the year ended June 30, 2005.  Options granted under the plans generally are exercisable from six months to five years after the date of grant and expire five to ten years after the date of grant.  Stock options are forfeited when employment terminates, except in case of retirement at age 62 or older, death or permanent disability.

The Company also has an immaterial number of stock appreciation rights outstanding under the former 1996 Stock Incentive Program.  As valued by the Black Scholes valuation model, these awards had no value as of December 31, 2005.

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A summary of stock option activity under the two former plans during the six months ended December 31, 2005 is presented below:

	Number of Shares	Weighted Average Exercise Price	Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Options outstanding at July 1, 2005	2,317,400	$15.84
Granted	--	--
Exercised	--	--
Forfeited	(154,227)	16.18
Expired	(256,573)	16.37
Options outstanding at December 31, 2005	1,906,600	$15.75	5.5 years	$0
Options exercisable at December 31, 2005	1,266,731	$16.09	4.8 years	$0

Note 8. Discontinued Operations

On September 15, 2005, in conjunction with its restructuring plan to sharpen its focus on primary markets within the Furniture and Cabinets segment, the Company approved plans to sell the operations of a forest products hardwood lumber business and a business which produced and sold fixed-wall furniture systems and will no longer have continuing involvement in these businesses.  Additionally on November 8, 2005, the Company approved a plan to exit a non-core business that manufactures polyurethane and polyester molded components for use in the recreational vehicle, signage and residential furniture industries. 

On October 14, 2005, the Company completed the sale of the fixed-wall furniture systems business, which included primarily the sale of property and equipment, inventory, accounts receivable and product rights.  The purchase price totaled $1.2 million, of which $0.3 million was received at closing and $0.9 million is a note receivable.  The sale resulted in a net loss of $1.4 million, which was recorded as a $1.3 million estimated impairment loss in discontinued operations during the first quarter ended September 30, 2005, and was increased by $0.1 million during the second quarter ended December 31, 2005 when the sale was completed.  The loss on disposal of the fixed-wall furniture business included an after-tax goodwill impairment loss, in thousands, of $261 recognized in the Furniture and Cabinet segment during the quarter ended September 30, 2005.  The goodwill impairment loss was based upon the cessation of cash flows related to the fixed-wall furniture systems business.  The Company's balance of goodwill related to continuing operations, in thousands, as of December 31, 2005 was $1,733 compared to $2,166 as of June 30, 2005. 

On November 30, 2005, the Company completed the sale of the forest products hardwood lumber business to Indiana Hardwoods, Inc., which included primarily the sale of property and equipment, inventory, accounts receivable and timber assets.  The president and owner of Indiana Hardwoods, Inc. is Barry L. Cook, who was formerly employed by the Company as a Vice President of Kimball International, Inc. and had responsibility for this hardwoods lumber operation.  The transaction prices were negotiated between the Company and Indiana Hardwoods, Inc.  The Company also considered offers from other interested outside parties, but ultimately determined that it was in the Company's best interest financially to sell this operation to Indiana Hardwoods, Inc.  The purchase price totaled $25.5 million, of which $23.5 million was received at closing and $2.0 million is a note receivable.  The terms of the note receivable require monthly payments of interest for a three-year period, with the principal coming due after the three-year period.  The note is subordinate to the purchaser's bank loan.  If the purchaser is not in compliance with bank loan covenants or does not maintain sufficient cash flows, the principal payment on the note receivable may be delayed beyond three years.  The sale resulted in a net loss of $4.8 million, which was recorded as a $5.1 million estimated impairment loss in discontinued operations during the first quarter ended September 30, 2005, and was reduced by $0.3 million during the second quarter ended December 31, 2005 when the sale was completed.  The Company has no ongoing commitments resulting from the sales agreement.

The Company has notes receivable outstanding for the sale of the hardwoods lumber business and the final working capital adjustment on the sale of the fixed-wall furniture systems business, per the terms of the sales agreements.  The notes may represent a concentration of credit risk.  The Company maintains a provision for potential credit losses based on expected collectibility of these notes, which the Company believes is adequate.

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On November 8, 2005, as part of continued efforts to tighten its focus on primary markets, the Company approved a plan to exit a non-core business that manufactures polyurethane and polyester molded components for use in the recreational vehicle, signage and residential furniture industries.  The exit plan includes primarily the sale of inventories and machinery and equipment.  The Company will not have significant continuing cash flows or continuing involvement with this business.  After-tax impairment charges of $1.1 million have been recognized as a result of negotiations through December 31, 2005.  Subsequently, on January 20, 2006, the Company completed the sale of this business. 

On January 17, 2005, the Company announced its decision to exit the branded residential furniture business, which was part of the branded furniture product line within the Furniture and Cabinets segment.  The exit plan included discontinuing procurement of branded residential furniture, ending marketing and dealer activities, and selling remaining inventories.  The branded residential furniture operation had no long-lived assets, and all branded residential furniture inventory has been sold.

On October 12, 2004, the Company announced a plan to exit its veneer slicing operation, which is part of the forest products product line within the Furniture and Cabinets segment.  The plan included the sale of veneer slicing machinery, equipment and remaining veneer inventories.  During the quarter ended December 31, 2004, veneer slicing and warehousing operations ceased and all inventory and assets were sold in fiscal year 2005.

In accordance with FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, these businesses have been classified as discontinued operations, and their operating results and losses on disposal are presented on the Loss from Discontinued Operations, Net of Tax line of the Condensed Consolidated Statements of Income.  Assets of the polyurethane business that were held for sale are presented on a separate line of the Condensed Consolidated Balance Sheet.

Operating results and losses on sales of discontinued operations were as follows:

	Three Months Ended		Six Months Ended
	December 31,		December 31,
(Amounts in Thousands)	2005	2004	2005	2004
Net Sales of Discontinued Operations	$ 10,639	$  27,567	$   28,619	$ 53,622
Operating Income (Loss) of Discontinued Operations	$        12	$  (2,873)	$      (462)	$  (4,429)
Benefit for Income Taxes	24	1,157	212	1,777
Income (Loss) from Operations of Discontinued Operations, Net of Tax	$        36	$   (1,716)	$      (250)	$ (2,652)
Gain (Loss) on Disposal of Discontinued Operations	$  (1,544)	$       520	$ (12,221)	$      520
Benefit (Provision) for Income Taxes	616	(207)	4,873	(207)
Gain (Loss) on Disposal of Discontinued Operations, Net of Tax	$     (928)	$       313	$   (7,348)	$      313
Loss from Discontinued Operations, Net of Tax	$     (892)	$  (1,403)	$   (7,598)	$ (2,339)

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Note 9.  Assets Held for Sale

During the quarter ended December 31, 2005, several assets were classified as held for sale, including assets related to discontinued operations and other assets which met the criteria to be classified as held for sale.  The discontinued operation's assets are held in the Furniture and Cabinets segment, and include property and equipment and inventory related to the polyurethane business held for sale.  Other assets held for sale consist of property and equipment held as corporate assets, including an idle manufacturing facility and an aircraft. 

Major classes of Assets Held for Sale consisted of the following:

(Amounts in Thousands)	December 31, 2005	June 30, 2005
Current assets	$     343	$ --
Property and equipment	9,768	--
Total assets held for sale	$10,111	$ --

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

BUSINESS OVERVIEW

Kimball International, Inc. provides a variety of products from its two business segments: the Furniture and Cabinets segment and the Electronic Contract Assemblies segment. The Furniture and Cabinets segment provides furniture for the office and hospitality industries, sold under the Company's family of brand names. The Furniture and Cabinets segment also provides engineering and manufacturing services which utilize common production and support capabilities on a contract basis to customers in the office furniture and residential furniture and cabinets industries. The Electronic Contract Assemblies segment provides engineering and manufacturing services which utilize common production and support capabilities to a variety of industries globally.

Management currently considers the following events, trends and uncertainties to be most important to understanding its financial condition and operating performance:

• Globalization continues to reshape not only the industries in which the Company operates but also its key customers.

• Competitive pricing continues to put pressure on the Company's operating margins, especially for suppliers of electronic contract assemblies to customers in the automotive industry. Within the Furniture and Cabinets segment, pricing remains competitive on select projects.

• Results continue to be hindered by manufacturing inefficiencies at select operations.

• Growth in the office furniture industry continues according to the Business and Institutional Furniture Manufacturer's Association (BIFMA International).

• Costs of several key components used in Furniture and Cabinets segment products, primarily commodities such as steel and wood composite sheet stock, are a continuous challenge.

• The nature of the contract electronics manufacturing industry is such that the start-up of new programs to replace departing customers or expiring programs occurs frequently and the new programs often carry lower margins. The success of the Electronics segment is dependent on the successful replacement of such customers or programs. Such changes usually occur gradually over time as old programs phase out of production while newer programs ramp up.

• Some of the Company's component parts are used in completed assemblies in vehicles produced by U.S. automotive manufacturers.  Some of these U.S. automotive companies have recently announced restructuring activities.

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• The Company's net cash position from an aggregate of cash, cash equivalents, and short-term investments, less short-term borrowings totaled $141 million at December 31, 2005, and the Company continued to generate positive operating cash flow in fiscal year 2006.

• The increasingly competitive marketplace mandates that the Company continually re-evaluate its business models.

• The regulatory and business environment for U.S. public companies requires that the Company continually evaluate and enhance its practices in the areas of corporate governance and management practices.

• The Company's employees - throughout its business operations - are an integral part of the Company's ability to compete successfully, and the stability of its management team is critical to long-term share owner value.

To address these and other trends and events, the Company has taken, or continues to consider and take, the following actions or issues:

• As end markets dictate, the Company is continually assessing excess capacity and developing plans to better utilize manufacturing operations, including shifting manufacturing capacity to lower cost venues as necessary.

• The Company has aggressively moved to increase prices of end products that have been impacted by changes in commodity costs.

• As part of its previously announced plan to sharpen the focus of the Furniture and Cabinets segment to its primary markets, during the second quarter of fiscal year 2006, the Company sold a forest products hardware lumber business unit and a business unit which produced and sold fixed-wall furniture systems. The Company also approved during the second quarter a plan to sell an operation that manufactures polyurethane and polyester molded components for use in the recreational vehicle, signage and residential furniture industries and completed the sale in January 2006.

• As part of a restructuring plan announced in September 2005, the business processes within the Furniture and Cabinets segment are being simplified and standardized and business functions are being consolidated. The Company expects to make additional capital expenditures and incur incremental consolidation costs before fully realizing the additional benefits.

• The Company continues to evaluate the most effective uses of the excess cash that its operations continue to generate, including acquisition opportunities and other uses.

• The Company has taken a number of steps to conform its corporate governance to evolving national and industry-wide best practices among U.S. public companies, not only to comply with new legal requirements, but also to enhance the decision-making process of the Board of Directors.

• Taking into account such best practices and the ongoing evolution of the Company from a family-owned enterprise to a public company with an increasing number of unaffiliated shareholders, the Board of Directors elected in January 2006 to opt in to certain provisions of Indiana corporate law.

• The Company continues to evaluate means to preserve the value of its experienced employees and management team and further align their interests with those of the shareholders.

The preceding statements could be considered forward-looking statements under the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties including, but not limited to, a significant change in economic conditions, loss of key customers or suppliers, or similar unforeseen events.

Restructuring
During the first quarter of fiscal year 2006, the Company announced a restructuring plan to sharpen its focus on primary markets within the Furniture and Cabinets segment. Administrative, marketing and business development functions are being consolidated to better serve the segment's primary markets. To simplify and standardize business processes, a portion of the Company's Enterprise Resource Planning (ERP) software is being redesigned during approximately the next three years, and anticipated expenses include accelerated amortization, employee severance and other consolidation costs.

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During the fourth quarter of fiscal year 2005, the Company announced a restructuring plan to consolidate its Mexican furniture and cabinets operations into one facility located in Juarez, Mexico resulting in the closure of its manufacturing facility in Mexicali, Mexico. The plan includes lease charges, severance and other employee costs, equipment relocation costs, asset impairment and other miscellaneous consolidation costs. The decision to consolidate the operations was a result of excess capacity. The consolidation and exit activities are substantially complete and will be finalized during the third quarter of this fiscal year.

Restructuring charges recorded in the second quarter of fiscal year 2006 were primarily related to the consolidation of two Mexican furniture manufacturing operations into one location.

During the second quarter of fiscal year 2003, the Company's Board of Directors approved a restructuring plan comprised of incremental cost scaling actions to more closely align the Company's operating capacities and capabilities with reduced demand levels related to the prolonged nature of the global economic slowdown in many of the Company's markets and the resulting continuation of underutilized manufacturing capacity within both of the Company's segments. The Company has successfully executed these restructuring activities, and the final restructuring expenses pursuant to this plan were recorded in the first quarter of fiscal year 2005.  Total costs of these completed plans were within initial management estimates.

The restructuring plans are discussed in further detail in Note 5 - Restructuring Expense of Notes to Condensed Consolidated Financial Statements.

Discontinued Operations
During the first quarter of fiscal year 2006, the Company committed to plans to sell a forest products hardwood lumber business unit and a business unit which produced and sold fixed-wall furniture systems. Both business units were part of the Furniture and Cabinets segment, and both sales were completed during the current fiscal year second quarter. During the second quarter of fiscal year 2006, the Company also committed to a plan to sell an operation that manufactures polyurethane and polyester molded components for use in the recreational vehicle, signage and residential furniture industries. This business unit was part of the Furniture and Cabinets segment and was classified as held for sale as of December 31, 2005. Subsequently, on January 20, 2006, the Company completed the sale of this business.  During fiscal year 2005, the Company exited the branded residential furniture business which was part of the branded furniture product line within the Furniture and Cabinets segment. Also during fiscal year 2005, the Company exited a veneer slicing operation. The cessation of these non-core operations does not impact any of the remaining operations of the Company. The results of the above mentioned operations are reported as discontinued operations in the Company's Condensed Consolidated Financial Statements and all prior periods have been restated.

(See Note 8 - Discontinued Operations of Notes to Condensed Consolidated Financial Statements for more information on the discontinued operations.)

Financial results of the discontinued operations were as follows:

Three Months Ended	Six Months Ended
December 31,	December 31,

(Amounts in Thousands, Except for Per Share Data)	2005	2004	2005	2004
Net Sales of Discontinued Operations	$  10,639	$    27,567	$   28,619	$   53,622
Operating Income (Loss) of Discontinued Operations, Net of Tax	$         36	$    (1,716)	$      (250)	$   (2,652)
Gain (Loss) on Disposal of Discontinued Operations, Net of Tax	(928)	313	(7,348)	313
Loss from Discontinued Operations, Net of Tax	$     (892)	$    (1,403)	$   (7,598)	$   (2,339)
Loss from Discontinued Operations per Class B Diluted Share	$ (0.03)	$ (0.04)	$ (0.20)	$ (0.06)

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Related Party Disclosure
During the second quarter of fiscal year 2006, the Company's forest products hardwood lumber operation which has been accounted for as a discontinued operation was sold to Indiana Hardwoods, Inc.  Barry L. Cook, President of Indiana Hardwoods, Inc., was formerly employed by the Company as a Vice President of Kimball International, Inc. and had responsibility for this hardwoods lumber operation.  The transaction prices were negotiated between the Company and Indiana Hardwoods, Inc.  The Company also considered offers from other interested outside parties, but ultimately determined that it was in the Company's best interest financially to sell this operation to Indiana Hardwoods, Inc.  The purchase price totaled $25.5 million, of which $23.5 million was received at closing and $2.0 million is a note receivable.  The Company has no ongoing commitments resulting from the sales agreement.

Adoption of FASB Statement No. 123(R), Share-Based Payment
The Company maintains stock-based employee compensation plans. Prior to fiscal year 2006, the Company accounted for the plans under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations (APB 25). Accordingly, because all stock options granted had an exercise price equal to the market value of the underlying common stock on the date of the grant, no expense related to employee stock options was recognized in income. However, expense related to other share-based awards such as restricted share units (RSUs) and performance shares had been recognized in the income statement under APB 25. Effective July 1, 2005, the Company adopted the fair value recognition provisions of FASB Statement No. 123(R), Share-Based Payment (FAS 123(R)). Under the modified prospective method of adoption selected by the Company, compensation expense related to stock options is recognized beginning in fiscal year 2006, but compensation cost in fiscal year 2005 related to stock options continues to be disclosed on a pro forma basis only in Note 1-Summary of Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements. Results for prior years have not been restated.

After-tax stock option expense recognized during the three and six-month periods ended December 31, 2005 totaled, in thousands, $33 and $125, respectively. The Company estimates after-tax expense for previously issued stock options will be, in thousands, approximately $200 for the remainder of fiscal year 2006, $400 for fiscal year 2007, and $100 for fiscal year 2008, assuming a constant estimated forfeiture rate.

As of December 31, 2005, there was approximately $3.3 million of unrecognized compensation cost related to performance shares, based on the latest estimated attainment of performance goals. That cost is expected to be recognized over a weighted-average period of 3.9 years. As of December 31, 2005, there was approximately $4.8 million of unrecognized compensation cost related to nonvested RSU compensation arrangements awarded under the Plan. That cost is expected to be recognized over a weighted-average period of 3.6 years.

FAS 123(R) requires that forfeitures be estimated over the vesting period of an award, rather than being recognized as a reduction of compensation expense when the forfeiture actually occurs. FAS 123(R) also requires that liability awards be revalued to fair value, which, upon the adoption of FAS 123(R), had the effect of a reduction of a liability for outstanding stock appreciation rights. The impact of the revaluation of the stock appreciation rights and the use of the estimated forfeiture method for prior periods has been presented on the Condensed Consolidated Income Statements as a Cumulative Effect of a Change in Accounting Principle, as required by FAS 123(R). The cumulative effect totaled $0.3 million of income, net of taxes, and was recognized in the first quarter of the current fiscal year.

During the current fiscal year, the Company shifted from awarding RSUs, which vest based solely on the passage of time, as a management retention vehicle, to awards of performance shares. The Company has not awarded stock options since fiscal year 2004.

(See Note 7 - Stock Compensation Plans of Notes to Condensed Consolidated Financial Statements for more information.)

The following discussions are based on income from continuing operations and therefore exclude all income statement activity of the discontinued operations and the cumulative effect of the accounting change.

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Financial Overview - Consolidated

Second quarter fiscal year 2006 net sales of $273.9 million increased slightly from fiscal year 2005 second quarter net sales of $272.7 million as a net sales increase within the Furniture and Cabinets segment more than offset a net sales decrease within the Electronic Contract Assemblies segment. Second quarter fiscal year 2006 consolidated income from continuing operations was $5.1 million, or $0.14 per Class B diluted share, and includes $1.7 million, or $0.04 per Class B diluted share, of after-tax restructuring costs primarily related to the consolidation of two Mexican furniture manufacturing operations into one location. The prior fiscal year second quarter consolidated income from continuing operations was $7.5 million, or $0.20 per Class B diluted share.

Net sales for the six-month period ended December 31, 2005 of $541.3 million were up 2% from the same period of the prior year as a net sales increase in the Furniture and Cabinets segment was greater than the net sales decrease in the Electronic Contract Assemblies segment. Current fiscal year-to-date income from continuing operations for the period ended December 31, 2005 totaled $5.0 million, or $0.13 per Class B diluted share, inclusive of $4.6 million, or $0.12 per Class B diluted share, of after-tax restructuring costs. These restructuring charges were within the Furniture and Cabinets segment and primarily related to exit costs to consolidate two Mexican furniture manufacturing operations into one location and impairment of integrated ERP software related to consolidation of various business functions. Income from continuing operations for the year-to-date period ended December 31, 2004 totaled $13.5 million, or $0.35 per Class B diluted share, inclusive of $0.2 million, or $0.01 per Class B diluted share, of after-tax restructuring costs.

The Company experienced a decline in consolidated gross margin as a percent of sales for the second quarter and year-to-date period of fiscal year 2006 when compared to the prior fiscal year same periods. When compared to the prior fiscal year second quarter, margin declines within the Electronic Contract Assemblies segment were partially offset by an improvement in gross margin in the Furniture and Cabinets segment in addition to a sales mix shift toward the Furniture and Cabinets segment which carries a higher gross margin as a percent of sales than the Electronics segment. Consolidated Selling, General and Administrative (SG&A) expenses decreased in both absolute dollars and as a percent of net sales from the prior fiscal year second quarter due to lower selling and product warranty costs and gains on the sale of an idled manufacturing facility and an administrative office building.  The SG&A improvement was partially offset by higher incentive compensation costs.  SG&A expenses in the 2006 fiscal year-to-date period increased in absolute dollars, but decreased slightly as a percent of net sales from the prior fiscal year-to-date period.  Second quarter fiscal year 2006 consolidated other income of $2.1 million was lower than the prior year second quarter other income of $2.7 million.  Current fiscal year-to-date other income of $3.5 million was lower than the prior fiscal year-to-date other income of $5.3 million. Both the second quarter and year-to-date declines in other income were due to smaller positive currency fluctuations compared to the prior year same periods.

The effective income tax rate for the three and six-month periods ended December 31, 2005 increased 9.6 and 3.1 percentage points, respectively, from the same periods of the prior fiscal year as a greater portion of current year consolidated income was generated by domestic operations which have a higher effective tax rate than the Company's foreign facilities.

The Company changed its classification of gains and losses on sales of property and equipment, previously shown in non-operating income, to selling, general and administrative expense for each of the periods presented in the accompanying Condensed Consolidated Statements of Income. Amounts reclassified in the three and six-month periods ended December 31, 2004 were, in millions, $0 and $0.5, respectively.  In the three and six months ended December 31, 2005, the Company recognized, in millions, $1.0 and $1.2, respectively, of gains on the sale of property and equipment as selling, general and administrative expense.

Comparing the balances as of December 31, 2005 to June 30, 2005, the decline in the Company's property and equipment net of accumulated depreciation was primarily related to the sale of discontinued operations and the reclassification of other property and equipment to assets held for sale.  The decline in the deferred income taxes and other line on the Condensed Consolidated Balance Sheets was primarily due to changes in deferred taxes related to the reclassification of certain property and equipment to assets held for sale, the accelerated depreciation and asset impairment related to the discontinued operation and restructuring activities, and the impact of temporary differences between the financial statement carrying amount and tax base of other fixed assets.

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Results of Operations by Segment - Three and Six Months Ended December 31, 2005 Compared to Three and Six Months Ended December 31, 2004

Furniture and Cabinets Segment

The Furniture and Cabinets segment provides furniture for a variety of industries, sold under the Company's family of brand names and on a contract basis. The Company's production flexibility allows it to utilize portions of the available production capacity created by lower volumes within these product lines to support and balance increased production schedules of other product lines within this segment.

Second quarter fiscal year 2006 net sales of $169.3 million increased 6% in the Furniture and Cabinets segment when compared to fiscal year 2005 second quarter net sales of $159.9 million due to higher net sales in the branded furniture product line which more than offset decreased sales of contract private label products. Six-month net sales for fiscal year 2006 increased 6% when compared to six-month net sales for fiscal year 2005 as a net sales increase in the branded furniture product line more than offset the net sales decrease in the contract private label products. At December 31, 2005, open orders for the Furniture and Cabinets segment increased 8% from open orders at December 31, 2004.

Second quarter fiscal year 2006 net sales of the Company's branded furniture products, which include office and hospitality furniture, totaled $146.7 million as compared to net sales of $130.8 million for the second quarter last fiscal year as sales of both hospitality and office furniture increased. The office furniture net sales increase was driven by both volume and price increases on select office furniture products. The hospitality furniture increase was driven by higher sales of the standard product offerings. Fiscal 2006 year-to-date net sales of branded furniture products increased 10% when compared to six-month net sales for fiscal year 2005 as sales of both hospitality and office furniture increased. Branded furniture products open orders at December 31, 2005 were 13% higher than December 31, 2004 on both higher office furniture and hospitality furniture open orders.

Net sales of contract private label products, which include office furniture and residential furniture such as large-screen projection television cabinets, decreased 22% and 17%, respectively, in the second quarter and first half of fiscal year 2006, compared to the prior year same periods primarily due to decreased sales of residential furniture. At December 31, 2005, open orders for contract private label products were 19% lower than open orders at December 31, 2004.

Second quarter fiscal year 2006 income from continuing operations in the Furniture and Cabinets segment improved to $2.5 million, which included $1.7 million of after-tax restructuring charges, compared to income from continuing operations of $1.7 million in the second quarter of fiscal year 2005. The current quarter after-tax restructuring charges of $1.7 million were primarily related to the plan that was announced in the prior fiscal year to consolidate two Mexican furniture manufacturing operations into one location. Gross margin as a percent of sales in this segment improved over the prior fiscal year second quarter primarily due to price increases on select branded furniture products, leverage from the higher sales volumes, and improved labor efficiencies. Gross margin was somewhat hindered by inefficiencies associated with the facility consolidation activities in Mexico. Partially offsetting the improvement in margins, SG&A costs increased in absolute dollars but decreased as a percent of sales in the second quarter of fiscal year 2006 when compared to last year as higher employee benefit and incentive compensation costs were partially offset by lower warranty expenses. For the six-month period ended December 31, 2005, the Furniture and Cabinets segment recorded income from continuing operations of $1.0 million, inclusive of after-tax restructuring charges of $4.6 million, a decline from the prior year same period income from continuing operations of $3.9 million, inclusive of after-tax restructuring charges of $0.2 million.

Risk factors within this segment include, but are not limited to, general economic and market conditions, successful execution of restructuring plans, increased global competition, supply chain cost pressures and relationships with strategic customers and product distributors. Additional risk factors that could have an effect on the Company's performance are contained in the Company's Form 10-K filing for the period ended June 30, 2005.

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Electronic Contract Assemblies Segment

Electronic Contract Assemblies segment net sales of $104.6 million for the second quarter of fiscal year 2006 decreased from net sales of $112.6 million for the prior fiscal year second quarter. New product introductions generated revenues in the current year second quarter that only partially replaced expiring programs. Current fiscal year second quarter electronic contract assembly sales to customers in the automotive and medical industries were lower than the prior fiscal year second quarter, while sales to customers in the industrial controls industry were higher. Net sales for the six-month period ended December 31, 2005 of $212.5 million decreased 4% from the prior year same period net sales of $220.5 million. Current fiscal year-to-date electronic contract assembly sales to customers in the automotive industry were lower than the prior fiscal year-to-date, while sales to customers in the industrial controls and medical industries were higher.

Electronic Contract Assemblies segment second quarter fiscal year 2006 income from continuing operations totaled $1.1 million, which is a decrease from the prior fiscal year second quarter income from continuing operations of $4.7 million. Electronic Contract Assemblies segment gross margin as a percent of sales decreased in the second quarter of fiscal year 2006 compared to the prior fiscal year second quarter in part due to the lower sales volumes, tighter margins on products resulting from competitive pricing pressures, and a sales mix shift among various products to those with lower margins. In addition, production labor costs did not decrease in proportion to the volume decline. Lower new product introduction costs in the current quarter partially offset the gross margin decline. Operating results were also impacted by higher employee benefit expenses in the current quarter which were more than offset by lower incentive compensation costs. In addition, the year-over-year second quarter earnings comparison was negatively impacted by prior year favorable foreign currency fluctuations and higher taxes as a greater portion of income was generated during the current quarter by domestic operations which have a higher effective tax rate than the Company's foreign facilities. For the six-month period ended December 31, 2005, this segment recorded income from continuing operations of $2.0 million, a decline from income from continuing operations of $7.5 million for the six-month period ended December 31, 2004.

Included in this segment are sales to TRW Automotive, Inc., a full-service automotive supplier, which accounted for the following portions of consolidated net sales and Electronic Contract Assemblies segment net sales:

Three Months Ended	Six Months Ended
December 31,	December 31,

	2005	2004	2005	2004
As a % of Consolidated Net Sales from Continuing Operations	13%	12%	13%	12%
As a % of Electronic Contract Assemblies Segment Net Sales from Continuing Operations	34%	28%	34%	29%

The increased percentages of segment net sales were a result of increased sales to TRW Automotive, Inc. coupled with lower total Electronics segment net sales. The increased TRW Automotive, Inc. sales of certain braking products and electronic power steering products were partially offset by other TRW Automotive, Inc. braking products reaching end of life. TRW Automotive, Inc. sells complete braking assemblies, in part manufactured by the Company, to several major automotive companies, most with multiple braking assembly programs that span multiple vehicle platforms, which partially mitigates the Company's exposure to this customer. The Company also continues to focus on diversification of the Electronic Contract Assemblies segment customer base.

The nature of the contract electronics manufacturing industry is such that the start-up of new customers and new programs to replace expiring programs occurs frequently. New customer and program start-ups generally cause losses early in the life of a program, which are generally recovered as the program matures and becomes established. This segment continues to experience margin pressures related to an overall excess capacity position in the electronics subcontracting services market. New business awards for projects in the automotive industry are extremely competitive.

Risk factors within this segment include, but are not limited to, general economic and market conditions, increased globalization, competitive pricing, foreign currency exchange rate fluctuations, rapid technological changes, component availability, the contract nature of this industry, and the importance of sales to large customers. The continuing success of this segment is dependent upon its ability to replace expiring customers/programs with new customers/programs. Additional risk factors that could have an effect on the Company's performance are contained in the Company's Form 10-K filing for the period ended June 30, 2005.

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Liquidity and Capital Resources

The Company's net cash position from an aggregate of cash, cash equivalents, and short-term investments less short-term borrowings increased from $115 million at June 30, 2005 to $141 million at December 31, 2005. Based on accounting interpretations, the Company changed its classification of investments in municipal bond auction rate securities, previously classified as cash and cash equivalents, to short-term investments for the prior period presented in the accompanying Condensed Consolidated Statement of Cash Flows. Auction rate securities are variable rate municipal bonds tied to short-term interest rates with maturities on the face of the securities in excess of 90 days. Auction rate securities have interest rate resets through a modified Dutch auction, at predetermined short-term intervals, usually every 1, 7, 28 or 35 days. The Company had historically classified auction rate securities as cash and cash equivalents if the period between the interest rate resets was 90 days or less, which was based on our ability to either liquidate our holding or roll our investments over to the next reset period.

Working capital at December 31, 2005 was $225 million compared to working capital of $204 million at June 30, 2005. The December 31, 2005 current assets included $10 million of assets held for sale of which most were previously included in long-term assets. The current ratio was 2.5 at December 31, 2005 and 2.4 at June 30, 2005.

The Company's internal measure of accounts receivable performance, also referred to as Days Sales Outstanding (DSO) for the first half of fiscal year 2006 improved to 43.3 from 45.9 for the same period of fiscal year 2005. The Company defines DSO as the average of monthly accounts and notes receivable divided by one day's net sales. The Company's Production Days Supply on Hand (PDSOH) of inventory measure for the first half of fiscal year 2006 decreased to 44.7 from 56.5 for the same period of fiscal year 2005 primarily due to reduced inventory levels associated with the discontinued operations. The Company defines PDSOH as the average of the monthly gross inventory divided by one day's cost of sales.

Operating activities generated $22 million of cash flow in the first six months of fiscal year 2006 which was flat with the same period of fiscal year 2005. The Company reinvested $13 million into capital investments for the future, comprised primarily of manufacturing equipment. During the first quarter of the current fiscal year, the Company announced its intentions to invest in building an electronics manufacturing facility in Nanjing, China in fiscal year 2006. The Company also expects to continue to invest in resources for leveraging new and improved enterprise-wide information technology systems and solutions. Fiscal year 2006 investing cash flow activities included $24 million in proceeds received from the sale of discontinued operations. Fiscal year 2006 financing cash flow activities included $12 million in dividend payments, which remained flat with the prior year six months ended December 31, 2004.

The Company's $75 million revolving credit facility allows for both issuances of letters of credit and cash borrowings. At December 31, 2005, the Company had $2.1 million of short-term borrowings outstanding under a separate foreign credit facility which is backed by the $75 million revolving credit facility. The Company issued an additional $3.8 million in letters of credit against the revolving credit facility, which reduces total availability to borrow to $69.1 million at December 31, 2005. At June 30, 2005, the Company had $2.2 million of short-term borrowings outstanding.  On December 7, 2005, the credit facility was amended for an administrative item that was immaterial.

The $75 million revolving credit facility also provides an option to increase the amount available for borrowing to $125 million at the Company's request, subject to participating banks' consent. The credit facility requires the Company to comply with certain debt covenants including debt-to-total capitalization, interest coverage ratio, minimum net worth, and other terms and conditions. The Company was in compliance with these covenants at December 31, 2005.

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The Company believes its principal sources of liquidity from available funds on hand, cash generated from operations and the availability of borrowing under the Company's revolving credit facility will be sufficient in fiscal year 2006 for working capital needs and for funding investments in the Company's future, including potential acquisitions. The Company's primary source of funds is its ability to generate cash from operations to meet its liquidity obligations, which could be affected by factors such as a decline in demand for the Company's products, loss of key contract customers, the ability of the Company to generate profits, and other unforeseen circumstances. The Company's secondary source of funds is its revolving credit facility, which is contingent on complying with certain debt covenants. The Company does not expect the covenants to limit or restrict its ability to borrow on the facility in fiscal year 2006. The Company anticipates maintaining a strong liquidity position for the next 12 months.

The preceding statements are forward-looking statements under the Private Securities Litigation Reform Act of 1995 where factors could cause actual results to differ materially from forward-looking statements.

Contractual Obligations

Compared to the contractual obligations disclosure in the Company's Form 10-K filing for the period ended June 30, 2005, there have been no material changes to the aggregate contractual obligations of the Company outside the ordinary course of business.

Off-Balance Sheet Arrangements

Other than operating leases entered into in the normal course of business, the Company's off-balance sheet arrangements are limited to guarantees which are contingent on the future performance of another entity. However, these arrangements do not have a material current effect and are not reasonably likely to have a material future effect on the Company's financial condition, results of operations, liquidity, capital expenditures or capital resources. The Company does not have material exposures to trading activities of non-exchange traded contracts or material transactions with related parties. The preceding statements are forward-looking statements under the Private Securities Litigation Reform Act of 1995, where factors could cause actual results to differ materially from forward-looking statements.

Critical Accounting Policies

The Company's consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. These principles require the use of estimates and assumptions that affect amounts reported and disclosed in the consolidated financial statements and related notes. Actual results could differ from these estimates and assumptions. Management uses its best judgment in the assumptions used to value these estimates, which are based on current facts and circumstances, prior experience, and other assumptions that are believed to be reasonable. The Company's management overlays a fundamental philosophy of valuing its assets and liabilities in an appropriately conservative manner. Management believes the following critical accounting policies reflect the more significant judgments and estimates used in preparation of the Company's consolidated financial statements and are the policies that are most critical in the portrayal of the Company's financial position and results of operations. Management has discussed these critical accounting policies and estimates with the Audit Committee of the Company's Board of Directors and with the Company's independent registered public accounting firm.

Revenue recognition - The Company recognizes revenue when title and risk transfer to the customer, which under the terms and conditions of the sale may occur either at the time of shipment or when the product is delivered to the customer. Service revenue is recognized as services are rendered. Shipping and handling fees billed to customers are recorded as sales while the related shipping and handling costs are included in cost of goods sold. Guidelines regarding revenue recognition are strictly adhered to and volatility resulting from estimates or judgment is minimal.

• Allowance for sales returns - At the time revenue is recognized certain provisions may also be recorded, including returns and allowances, which involve estimates based on current discussions with applicable customers, historical experience with a particular customer and/or product, and other relevant factors. As such, these factors may change over time causing the provisions to be adjusted accordingly. At December 31 and June 30, 2005, the reserve for returns and allowances was $2.5 million and $2.2 million, respectively. Over the past two years, the returns and allowances reserve has been approximately 2% of gross trade receivables.

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• Allowance for doubtful accounts - Allowance for doubtful accounts is generally based on a percentage of aged accounts receivable, where the percentage increases as the accounts receivable become older. However, management judgment is utilized in the final determination of the allowance based on several factors including specific analysis of a customer's credit worthiness, changes in a customer's payment history, historical bad debt experience, and general economic and market trends. The allowance for doubtful accounts at December 31 and June 30, 2005 was $1.7 million and $1.9 million, respectively, and over the past two years, this reserve has trended between approximately 1% and 3% of gross trade accounts receivable.

Excess and obsolete inventory - Inventories were valued using the lower of last-in, first-out (LIFO) cost or market value for approximately 34% and 50% of consolidated inventories at December 31 and June 30, 2005, respectively, including approximately 79% and 86% of the Furniture and Cabinets segment inventories at December 31 and June 30, 2005, respectively. The remaining inventories are valued at lower of first-in, first-out (FIFO) cost or market value. Inventories recorded on the Company's balance sheet are adjusted for excess and obsolete inventory. In general, the Company purchases materials and finished goods for contract-based business from customer orders and projections, primarily in the case of long lead time items, and has a general philosophy to only purchase materials to the extent covered by a written commitment from its customers. However, there are times when inventory is purchased beyond customer commitments due to minimum lot sizes and inventory lead time requirements, or where component allocation or other procurement issues may exist. Evaluation of excess inventory includes such factors as anticipated usage, inventory turnover, inventory levels, and product demand levels. Factors considered when evaluating inventory obsolescence include the age of on-hand inventory and reduction in value due to damage, use as showroom samples, design changes or cessation of product lines.

Self-insurance reserves - The Company is self-insured up to certain limits for auto and general liability, workers' compensation and certain employee health benefits including medical, short-term disability and dental with the related liabilities included in the accompanying financial statements. The Company's policy is to estimate reserves based upon a number of factors including known claims, estimated incurred but not reported claims and actuarial analyses, which are based on historical information along with certain assumptions about future events. Changes in assumptions for such matters as increased medical costs and changes in actual experience could cause these estimates to change and reserve levels to be adjusted accordingly. At both December 31 and June 30, 2005, the Company's accrued liabilities for self-insurance exposure were $8.0 million, excluding immaterial amounts held in a voluntary employees' beneficiary association (VEBA) trust.

Income taxes - Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse. The Company evaluates the recoverability of its deferred tax assets each quarter by assessing the likelihood of future profitability and available tax planning strategies that could be implemented to realize its deferred tax assets. If recovery is not likely, the Company provides a valuation allowance based on its best estimate of future taxable income in the various taxing jurisdictions and the amount of deferred taxes ultimately realizable. Future events could change management's assessment. In addition, the Company operates within multiple taxing jurisdictions and is subject to tax audits in these jurisdictions. These audits can involve complex issues, which may require an extended period of time to resolve. However, the Company believes it has made adequate provision for income taxes for all years that are subject to audit. As tax periods are closed, the provision is adjusted accordingly.

New Accounting Standards

In December 2005, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) Statement of Position (SOP) 94-6-1, Terms of Loan Products That May Give Rise to a Concentration of Credit Risk. This FSP provides guidance on terms of loans that may give rise to a concentration of credit risk, and disclosures and other accounting considerations required for concentration of credit risks. The FSP is effective for the Company in the second quarter of fiscal year 2006. The Company has provided disclosures related to concentration of credit risks. The adoption of this FSP did not have a material impact on the Company's financial position, results of operations or cash flows.

In November 2005, the FASB issued FSP Financial Accounting Standard (FAS) 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. This FSP provides guidance on determining if an investment is considered to be impaired, if the impairment is other-than-temporary, and the measurement of impairment losses. It also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The FSP is effective for the Company beginning in the third quarter of fiscal year 2006. The Company is currently accounting for investments in accordance with this guidance, and therefore, the adoption of this FSP will not have a material impact on the Company's financial position, results of operations or cash flows.

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In October 2005, the FASB issued FSP FAS 123(R)-2, Practical Accommodation to the Application of Grant Date as Defined in FASB Statement No. 123(R), which provides clarification of the concept of mutual understanding between employer and employee with respect to the grant date of a share-based payment award. This FSP provides that a mutual understanding of the key terms and conditions of an award shall be presumed to exist at the date the award is approved in accordance with the relevant corporate governance requirements if the recipient does not have the ability to negotiate the key terms and conditions of the award and those key terms and conditions will be communicated to the individual recipient within a relatively short time period from the date of approval. This guidance became effective for the Company in the second quarter of fiscal year 2006. The adoption of this FSP did not have a material impact on the Company's financial position, results of operations or cash flows.

In September 2005, the FASB ratified the Emerging Issues Task Force (EITF) consensus on Issue No. 04-13, Accounting for Purchases and Sales of Inventory with the Same Counterparty (EITF 04-13). EITF 04-13 generally requires exchanges of inventory within the same line of business to be recognized at the carrying value of the inventory transferred, except in cases where finished goods inventory is exchanged for raw material or work-in-process inventory. EITF 04-13 is effective for the Company beginning in the fourth quarter of fiscal year 2006. The Company does not believe that the adoption of EITF 04-13 will have a material effect on its financial position, results of operations or cash flows.

Forward-Looking Statements

Certain statements contained within this document are considered forward-looking under the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of words such as "believes", "estimates", "projects", "expects", "anticipates" and similar expressions. These forward-looking statements are subject to risks and uncertainties including, but not limited to, general economic conditions, significant volume reductions from key contract customers, loss of key customers or suppliers within specific industries, availability or cost of raw materials, increased competitive pricing pressures reflecting excess industry capacities, foreign currency exchange rate fluctuations or similar unforeseen events. Additional cautionary statements regarding other risk factors that could have an effect on the future performance of the Company are contained in the Company's Form 10-K filing for the period ended June 30, 2005.

 

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our market risks from the information disclosed in Item 7A "Quantitative and Qualitative Disclosures About Market Risk" of our Annual Report on Form 10-K for the year ended June 30, 2005.

Item 4.  Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

The Company maintains controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon their evaluation of those controls and procedures performed as of December 31, 2005, the Chief Executive Officer and Chief Financial Officer of the Company concluded, based upon their best judgment, that the Company's disclosure controls and procedures were effective.

(b) Changes in internal control over financial reporting.

There have been no changes in the Company's internal control over financial reporting that occurred during the quarter ended December 31, 2005 that have materially affected, or that are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II.  OTHER INFORMATION

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

The following table presents a summary of share repurchases made by the Company:

Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
Month #1 (October 1-October 31, 2005)	--	--	--	2,000,000
Month #2 (November 1-November 30, 2005)	--	--	--	2,000,000
Month #3 (December 1-December 31, 2005)	--	--	--	2,000,000
Total	--	--	--

The share repurchase program previously authorized by the Board of Directors was announced on August 5, 2004.  The program allows for the repurchase of up to 2 million of any combination of Class A or Class B shares and will remain in effect until all shares authorized have been repurchased.

Item 4.  Submission of Matters to a Vote of Security Holders

The Company's Annual Meeting of Share Owners was held on October 18, 2005.  The Board of Directors was elected in its entirety, based on the following election results:
Nominees as Directors by Holders of Class A Common Stock	Votes For*	Votes Withheld
Douglas A. Habig	12,322,055	39,463
James C. Thyen	12,322,055	39,463
John B. Habig	12,322,055	39,463
Ronald J. Thyen	12,322,055	39,463
Christine M. Vujovich	12,316,983	44,535
John T. Thyen	12,322,055	39,463
Polly B. Kawalek	12,316,983	44,535
Harry W. Bowman	12,316,983	44,535
Geoffrey L. Stringer	12,316,983	44,535
Gary P. Critser	12,322,055	39,463

Broker non-votes totaled 750 for each of the above nominees as Directors.

 *Votes for nominees as Directors by holders of Class A Common Stock represented 91% of the total 13,495,331 Class A shares outstanding and eligible to vote.

Nominee as Director by Holders of Class B Common Stock	Votes For*	Votes Withheld
Dr. Jack R. Wentworth	21,178,108	1,078,606
Broker non-votes totaled 731,601 for the above nominee as Director.
*Votes for nominee as Director by holders of Class B Common Stock represented 86% of the total 24,656,980 Class B shares outstanding and eligible to vote.

The 2005 Profit Sharing Incentive Bonus Plan was approved by holders of Class A Common Stock, based on the following voting results:
Votes For*: 12,039,760	Votes Against: 58,661	Abstentions: 155,080

Broker non-votes totaled 108,767 for the above proposal.
*Votes for the 2005 Profit Sharing Incentive Bonus Plan by holders of Class A Common Stock represented 89% of the total 13,495,331 Class A shares outstanding and eligible to vote.

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Item 5. Other Information

In lieu of filing a Form 8-K under Item 5.03, "Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year," the Company is providing the following disclosure in this Form 10-Q as the Form 10-Q is being filed within the four business day reporting requirement for the event.

Effective January 31, 2006, the Board of Directors of the Company amended Article XV: Regulation of Shareholders, Sections 1 and 2, of the By-laws of the Company. A copy of the Restated By-laws of the Company, as amended, is attached to this Form 10-Q as Exhibit 3(b) and is incorporated by reference herein.

Section 1 of Article XV of the Company's By-laws previously contained the Company's election not to be governed by Chapter 42 of the Indiana Business Corporation Law. The amendment changed that election such that, effective January 31, 2006, the Company will be governed by the provisions of Chapter 42 of the Indiana Business Corporation Law, which is the Control Share Acquisitions Statute. In addition, the amendment to the By-laws added a provision that any or all control shares acquired in a control share acquisition will be subject to redemption by the Company if either (a) no acquiring person statement has been filed in accordance with IC 23-1-42-6 or (b) the control shares are not accorded full voting rights by the Company's shareholders as provided in IC 23-1-42-9.

Section 2 of Article XV of the Company's By-laws was amended to rescind a prior election not to be governed by Chapter 43 of the Indiana Business Corporation Law. The amendment provides that, effective January 31, 2006, the Company will be governed by the provisions of Chapter 43 of the Indiana Business Corporation Law, which is the Business Combinations Statute.
 

Item 6.  Exhibits

    Exhibits (numbered in accordance with Item 601 of Regulation S-K)

(3(a))  Amended and restated Articles of Incorporation of the Company (Incorporated by reference to the Company's Form 10-K for the year ended June 30, 2002)

(3(b))  Restated By-laws of the Company

(10(a))  Credit Agreement, dated as of May 20, 2004, among the Company, the Lenders and Bank One, NA, and First Amendment to Credit Agreement, dated as of December 7, 2005, by and among the Company, the Lenders Party Thereto and JPMorgan Chase Bank

(10(b))  Summary of Director and Named Executive Officer Compensation

(11)  Computation of Earnings Per Share

(31.1) Certification filed by Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(31.2) Certification filed by Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(32.1)  Certification furnished by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(32.2)  Certification furnished by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

31

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereto duly authorized.

	KIMBALL INTERNATIONAL, INC.
By:	/s/ James C. Thyen
	JAMES C. THYEN President, Chief Executive Officer
	February 2, 2006
By:	/s/ Robert F. Schneider
	ROBERT F. SCHNEIDER Executive Vice President, Chief Financial Officer
	February 2, 2006

32

Kimball International, Inc.
Exhibit Index

Exhibit No.	Description
3(a)	Amended and restated Articles of Incorporation of the Company (Incorporated by reference to the Company's Form 10-K for the year ended June 30, 2002)
3(b)	Restated By-laws of the Company
10(a)	Credit Agreement, dated as of May 20, 2004, among the Company, the Lenders and Bank One, NA, and First Amendment to Credit Agreement, dated as of December 7, 2005, by and among the Company, the Lenders Party Thereto and JPMorgan Chase Bank
10(b)	Summary of Director and Named Executive Officer Compensation
11	Computation of Earnings Per Share
31.1	Certification filed by Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification filed by Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification furnished by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification furnished by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

33

EX-3

Exhibit 3(b)

RESTATED BY-LAWS

OF

KIMBALL INTERNATIONAL, INC.

(Reflecting all amendments through January 31, 2006)

ARTICLE I: LOCATION OF OFFICES

        Section 1 - Principal Office: The principal office of the corporation shall be at 1600 Royal Street, Jasper, Indiana.

        Section 2 - Other Offices: The corporation may have and maintain such other offices as the Board of Directors may deem expedient.

ARTICLE II: CORPORATE SEAL

        Section 1 - The corporation shall have a corporate seal which shall be as follows: A circular disc, on the outer margin of which shall appear the corporate name and State of Incorporation, with the words "Corporate Seal" through the center, so mounted that it may be used to impress these words in raised letters upon paper.

ARTICLE III: FISCAL YEAR

        Section 1 - The fiscal year of the corporation shall begin with the first day of July and terminate on the thirtieth day of June of each year.

ARTICLE IV: STOCKHOLDERS' MEETINGS

        Section 1 - Place of Meetings: All meetings of the stockholders shall be held at the principal office of the corporation except such meetings as the Board of Directors by resolution determine shall be held elsewhere, in which case meetings may be held upon notice as hereinafter provided at such place or places within or without the State of Indiana as said Board of Directors may determine.

        Section 2 - Annual Meetings: The annual meeting of the stockholders shall be held on the third Tuesday of October in each year or on such other date as may be fixed by the Board of Directors, provided such annual meeting shall be held in any event within five (5) months after the close of each fiscal year of the corporation. If the day fixed for the annual meeting shall be a legal holiday, such meeting shall be held on the next succeeding business day. At each annual meeting, the stockholders shall elect the directors and shall conduct only such other business as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) specified in the notice of the meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors or (iii) otherwise properly brought before the meeting by a stockholder of the corporation who (A) was a stockholder of record at the time of giving the notice provided for in this Section, (B) is entitled to vote at the meeting and (C) complied with the notice procedures set forth in this Section. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the corporation at the principal executive office of the corporation. To be timely, a stockholder's notice shall be delivered not less than 90 days nor more than 110 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the stockholder, to be timely, must be so delivered not earlier than the 110th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement (as defined herein) of the date of such meeting is first made.

        Such stockholder's notice shall set forth as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; (ii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made (A) the name and address of such stockholder, as they appear on the corporation's books, and the name and address of such beneficial owner, (B) the class and number of shares of the corporation which are owned beneficially and of record by such stockholder and such beneficial owner as of the date such notice is given, and (C) a representation that such stockholder intends to appear in person or by proxy at the meeting to propose such business; (iii) in the event that such business includes a proposal to amend either the Articles of Incorporation or the By-laws of the corporation, the language of the proposed amendment; and (iv) if the stockholder intends to solicit proxies in support of such stockholder's proposal, a representation to that effect. The foregoing notice requirements shall be deemed satisfied by a stockholder if the stockholder has notified the corporation of his or her intention to present a proposal at an annual meeting and such stockholder's proposal has been included in a proxy statement that has been prepared by management of the corporation to solicit proxies for such annual meeting; provided, however, that if such stockholder does not appear or send a qualified representative to present such proposal at such annual meeting, the corporation need not present such proposal for a vote at such meeting, notwithstanding that proxies in respect of such vote may have been received by the corporation. Notwithstanding anything in these By-laws to the contrary, no business shall be conducted at any annual meeting except in accordance with this paragraph, and the Chairman of the Board or other person presiding at an annual meeting of stockholders may refuse to permit any business to be brought before an annual meeting without compliance with the foregoing procedures or if the stockholder solicits proxies in support of such stockholder's proposal without such stockholder having made the representation required by clause (iv) of the second preceding sentence.

        For the purposes of this paragraph "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In addition to the provisions of this paragraph, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in these By-laws shall be deemed to affect any rights of the stockholders to request inclusion of proposals in the corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.

        Section 3 - Special Meetings: Special meetings of the stockholders may be called only by the Board of Directors.

        Section 4 - Notices: A written or printed notice stating the place, day and hour of either annual or special meetings and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered or mailed by the Secretary or by the officers or persons calling the meeting to each holder of the capital stock of the corporation at the time entitled to vote at such address as appears upon the records of the corporation at least ten, but not more than sixty, days before the date of the meeting. Notice of any stockholders' meeting may be waived in writing by any stockholder if the waiver sets forth in reasonable detail the purpose or purposes for which the meeting is called and the time and place thereof. Except as required by the Indiana Business Corporation Law, no notice of the holding of an adjourned meeting shall be necessary. Each stockholder who has in the manner above provided waived notice of a stockholders' meeting or who is present in person or represented thereat by a proxy complying with the requirements set forth in Article IV, Section 8, shall be conclusively presumed to have been given due notice of such meeting, except as required by the Indiana Business Corporation Law.

        Section 5 - Quorum: At any meeting of stockholders, a majority of the shares of the capital stock outstanding and entitled by the Articles of Incorporation to vote, represented in person or by proxy, shall constitute a quorum for the transaction of business, but less than a majority may convene and adjourn.

        Section 6 - Voting: Stockholders entitled to vote by the Articles of Incorporation shall be entitled to vote at all meetings in person or by proxy. At all meetings, each share of stock entitled to vote by the Articles of Incorporation shall be entitled to one vote on all questions, and a majority of the votes of such stock cast at any such meeting shall be sufficient for the adoption or rejection of any question presented (other than the election of the Board of Directors) unless otherwise provided by law or by the Articles of Incorporation of the corporation. The Board of Directors shall be elected by a plurality of the votes properly cast.

        For the purpose of determining stockholders entitled to vote at any meeting of the stockholders or any adjournment thereof, or stockholders entitled to receive payment of any dividend, or in order to make a determination of stockholders for any other purpose, only those stockholders who are stockholders of record on the record date fixed by the Board of Directors or as provided in Article XI, Section 2 hereof, shall be entitled to vote.

        Shares standing in the name of a corporation may be voted by such officers, agent, or proxy as the Board of Directors of such corporation may appoint. Shares held by fiduciaries may be voted by the fiduciaries in such manner as the instrument or order appointing such fiduciaries may direct. In the absence of any such direction or the inability of the fiduciaries to act in accordance therewith, shares held jointly by three (3) or more fiduciaries shall be voted in accordance with the will of the majority and, where the fiduciaries or a majority of them cannot agree or where they are equally divided upon the questions of voting such shares, any Court of general equity jurisdiction may, upon petition filed by any of such fiduciaries or by any party in interest, direct the voting of such shares as it may deem for the best interest of the beneficiaries, and such shares shall be voted in accordance with such direction. Shares that are pledged may, unless otherwise provided in the agreement of pledge, be voted by the stockholder pledging the same until the shares have been transferred to the pledgee on the books of the corporation, and, thereafter, they may be voted by the pledgee.

        Section 7 - Voting Lists: The officer or agent having charge of the stock transfer book shall make, at least five (5) business days before each meeting of stockholders, a complete list of the stockholders arranged in alphabetical order with the address and number of shares held by each, which list shall be on file at the principal office of the corporation and subject to inspection by any stockholder. Such list shall be produced and kept open at the time and place of meeting and subject to the inspection of any stockholder during the holding of such meeting. The original stock register or transfer book, or a duplicate thereof kept in the State of Indiana, shall be the only evidence as to who are the stockholders entitled to examine such list or the stock ledger or transfer book or to vote at any meeting of the stockholders.

        Section 8 - Proxies: A shareholder may vote his or her shares either in person or by proxy. A shareholder may appoint a proxy to vote or otherwise act for the shareholder (including authorizing the proxy to receive, or to waive, notice of any shareholders' meetings within the effective period of such proxy) in any manner authorized by the Indiana Business Corporation Law. An appointment of a proxy is effective when received by the Secretary or other officer or agent authorized to tabulate votes and is effective for eleven (11) months unless a shorter or longer period is expressly provided in the appointment form. The proxy's authority may be limited to a particular meeting or may be general and authorize the proxy to represent the shareholder at any meeting of shareholders held within the time provided in the appointment form. Subject to the Indiana Business Corporation Law and to any express limitation on the proxy's authority appearing on the face of the appointment form, the corporation is entitled to accept the proxy's vote or other action as that of the shareholder making the appointment.

        Section 9 - Written Consent: Any action required or permitted to be taken at a shareholders' meeting may be taken without a meeting if the action is taken by all the shareholders entitled to vote on the action. The action must be evidenced by one (1) or more written consents describing the action taken, signed by all the shareholders entitled to vote on the action (facsimile signatures may be accepted), and delivered to the corporation for inclusion in the minutes or filing with the corporate records. Action taken under this Section 9 is effective when the last shareholder signs the consent, unless the consent specifies a different prior or subsequent effective date, in which case the action is effective on or as of the specified date. Such consent shall have the same effect as a unanimous vote of all shareholders and may be described as such in any document.

        Section 10 - Participation by Conference Telephone: Any or all shareholders may participate in any shareholders' meeting by, or through the use of, any means of communication, such as conference telephone, by which all shareholders participating may simultaneously hear each other during the meeting. Any shareholder participating in a meeting by such means is deemed to be present in person for all purposes at the meeting.

ARTICLE V: DIRECTORS

        Section 1 - Number: The Board of Directors of this corporation shall consist of eleven (11) members, ten (10) of whom shall be elected by holders of Class A Common Stock, voting as a class, and one (1) of whom shall be elected by holders of Class B Common Stock, voting as a class.

        Section 2 - Election: Directors shall be elected annually at the annual meeting of stockholders; provided that, in the event of failure to hold such meeting or to hold such election thereat, they may be elected at any special meeting of stockholders called for that purpose. At such election, the Chairman of the Board or the Secretary may appoint inspectors or judges who shall report to the meeting upon the validity of all proxies received and count the votes cast and make a report thereof to the stockholders' meeting, and, in the absence of any such appointments, the Secretary of the corporation shall report to the meeting upon the validity of all proxies received, count the votes cast and make a report thereof at the stockholders' meeting.

        Section 3 - Term of Office: The directors shall hold office from the date of their election until the next succeeding annual meeting or until their successors are elected and shall qualify.

        Section 4 - Vacancies: Any vacancy, or vacancies, in the Board of Directors, arising from any cause, shall be filled by a majority vote of the remaining members of the Board until the next annual meeting of the stockholders.

        Section 5 - Fees: Each director of the corporation shall receive an annual retainer in an amount, plus a sum for each of the six (6) regular meetings of the Board, all as fixed and determined from time to time by the Board of Directors and in addition thereto, reimbursement for expenses incurred by each member of the Board in attending each regular, special or adjourned meeting of the Board which has been called, whether or not a quorum is present.

        Section 6 - Nominations: Nominations of persons for election as directors may be made by the Board of Directors or by any stockholder who is a stockholder of record at the time of giving the notice of nomination provided for in this Section 6 and who is entitled to vote in the election of directors. Any stockholder of record entitled to vote in the election of directors at a meeting may nominate a person or persons for election as directors only if timely written notice of such stockholder's intent to make such nomination is given to the Secretary of the corporation in accordance with the procedures for bringing business before an annual meeting set forth in Section 2 of Article IV of these By-laws. To be timely, a stockholder's notice shall be delivered (i) with respect to an election to be held at an annual meeting of stockholders, not less than 90 days nor more than 110 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the stockholder, to be timely, must be so delivered not earlier than the 110th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement (as defined in Section 2 of Article IV of these By-laws) is first made of the date of such meeting, and (ii) with respect to an election to be held at a special meeting of stockholders, not earlier than the 110th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees to be elected at such meeting.

        Such stockholder's notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination, of the person or persons to be nominated and of the beneficial owner, if any, on whose behalf the nomination is made; (b) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting in such election and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the stockholder, any such beneficial owner, each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each nominee proposed by such stockholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had each nominee been nominated, or intended to be nominated, by the Board of Directors; (e) the consent of each nominee to serve as a director if so elected; and (f) if the stockholder intends to solicit proxies in support of such stockholder's nominee(s), a representation to that effect. The chairman of any meeting of stockholders to elect directors and the Board of Directors may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure or if the stockholder solicits proxies in support of such stockholder's nominee(s) without such stockholder having made the representation required by clause (f) of the preceding sentence. In addition to the provisions of this paragraph, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein.

ARTICLE VI: DIRECTORS' MEETINGS

        Section 1 - Regular Meetings: Regular meetings of the Board of Directors shall be held in the months of February, April, June, August, October and December of each year on such day of the month, and at such time of day and place, within or without the State of Indiana, as the Board of Directors may designate or as may be determined by the Chairman of the Board or the Vice Chairman of the Board, provided that each director shall be given at least two (2) days advance notice of the date, time and place of any regular meeting set by any of the foregoing officers.

        Section 2 - Special Meetings: Special meetings of the Board of Directors may be held at any time at the principal office of the corporation or elsewhere within or without the State of Indiana, as shall be specified in the notice of such meeting.

        The Secretary shall call a special meeting whenever and wherever so requested by the Chairman of the Board, the Vice Chairman of the Board, the Chief Executive Officer or the President, or by three (3) directors.

        Section 3 - Organization Meeting: Immediately following the meeting of the stockholders at which the directors are elected, the Board of Directors shall meet and organize, and they may also transact such other business as may be presented.

        Section 4 - Notice: No notice shall be required for a regular meeting of the Board of Directors, except as provided in Article VI, Section 1. No notice shall be required for an "organization meeting," if held on the same day as the stockholders' meeting at which the directors were elected. No notice of the holding of an adjourned meeting shall be necessary. Each director shall be given at least two (2) days advance notice of the date, time and place of each special meeting of the Board of Directors. The notice of a special meeting need not describe the purpose of such meeting. Notice of any meeting may be waived in writing.

        Section 5 - Quorum: At all meetings of the Board of Directors, a majority of the whole Board shall be necessary to constitute a quorum for the transaction of any business except the filling of vacancies, but less than a majority may convene and adjourn.

        Section 6 - Voting: All questions coming before any meeting of the Board of Directors for action shall be decided by a majority vote of the directors present at said meeting unless otherwise provided by law, by the Articles of Incorporation or by these By-laws.

        Section 7 - Written Consents: Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if the action is taken by all members of the Board of Directors. The action must be evidenced by one (1) or more written consents describing the action taken, signed by each director (facsimile signatures may be accepted), and included in the minutes or filed with the corporate records reflecting the action taken. Action taken under this Section 7 is effective when the last director signs the consent, unless the consent specifies a different prior or subsequent effective date, in which cases the action is effective on or as of the specified date. A consent signed under this Section 7 shall have the same effect as a unanimous vote of all members of the Board of Directors and may be described as such in any document.

        Section 8 - Participation by Conference Telephone: Any or all directors may participate in a regular or special meeting by, or through the use of, any means of communication, such as conference telephone, by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by such means shall be deemed to be present in person at the meeting.

ARTICLE VII: EXECUTIVE COMMITTEE

        Section 1 - Number, Qualifications, Appointment: The Board of Directors may appoint, by a majority vote of all directors in office, not less than two (2) directors who, together with the Chairman of the Board, the Vice Chairman of the Board, the Chief Executive Officer (if the Chief Executive Officer is also a director) and the President (if the President is also a director), shall constitute the Executive Committee of the corporation. The Chairman of the Board shall serve as chairman of said committee.

        Section 2 - Powers and Duties: The Executive Committee shall advise with and aid the officers of the corporation in all matters concerning its interests and the management of its business, and, when the Board of Directors is not in session, the Executive Committee shall have and may exercise all of the powers of the Board of Directors with reference to the conduct of the business of the corporation, except as otherwise provided by the Indiana Business Corporation Law.

        Section 3 - Term of Office: The members of the Executive Committee shall hold office from the date of their appointment until the next succeeding organization meeting of the directors, provided that the Board of Directors shall at all times have the power to remove any member of the Executive Committee.

        Section 4 - Vacancies: Any vacancy, or vacancies, in the Executive Committee, arising from any cause, shall be filled by a majority vote of the remaining members of the Board until the next annual or special meeting of the shareholders.

        Section 5 - Fees: Members of the Executive Committee, as such, shall not receive any stated salary for their services, but expenses, if any, of attendance and a fee in such an amount as may be determined by the Board of Directors from time to time shall be paid for attendance at each such Executive Committee meeting.

        Section 6 - Meetings: The Executive Committee shall meet at such times and places as the Chairman of the Board, the Vice Chairman of the Board, the Chief Executive Officer (if the Chief Executive Officer is a member of the Executive Committee) or the President (if the President is a member of the Executive Committee) may designate, provided that at least one day's advance notice of such meeting shall be given to each member of the committee. A majority of the Executive Committee shall constitute a quorum for the transaction of all business. All questions coming before any meeting of the Executive Committee for action shall be decided by a majority vote of the members present at said meeting.

        Section 7 - Written Consents: Any action required or permitted to be taken at any meeting of the Executive Committee may be taken without a meeting if the action is taken by all members of the Executive Committee. The action must be evidenced by one (1) or more written consents describing the action taken, signed by each member (facsimile signatures may be accepted), and included in the minutes or filed with the corporate records reflecting the action taken. Action taken under this Section 7 is effective when the last member signs the consent, unless the consent specifies a different prior or subsequent effective date, in which cases the action is effective on or as of the specified date. A consent signed under this Section 7 shall have the same effect as a unanimous vote of all members of the Executive Committee and may be described as such in any document.

        Section 8 - Participation by Conference Telephone: Any or all members of the Executive Committee may participate in any meeting of the Executive Committee by, or through the use of, any means of communication, such as conference telephone, by which all members participating may simultaneously hear each other during the meeting. A member participating in a meeting by such means shall be deemed to be present in person at the meeting.

ARTICLE VIII: AUDIT AND OTHER COMMITTEES

        The Board of Directors shall appoint an Audit Committee. The membership requirements, as well as the powers and responsibilities of the Audit Committee shall be set forth in a written charter adopted by the Board of Directors and shall meet all requirements imposed by (a) all applicable federal and state securities laws, rules and regulations and (b) any applicable rule, regulation or listing standard of any national securities exchange or automated inter-dealer quotation system of a national securities association (such as NASDAQ) or any other stock exchange or similar quotation system upon which any security of the Company is listed or reported or otherwise subject thereto.

        The Board of Directors may create one (1) or more committees in addition to any Executive and Audit Committees and appoint members of the Board of Directors to serve on them, by resolution of the Board of Directors adopted by a majority of all the Directors in office when the resolution is adopted. The committee may exercise the authority of the Board of Directors to the extent specified in the resolution. Each committee may have one (1) or more members, and all the members of such committee shall serve at the pleasure of the Board of Directors.

ARTICLE IX: OFFICERS

        Section 1 - Titles: The officers of the corporation shall consist of the Chairman of the Board, the Vice Chairman of the Board, the Chief Executive Officer, the President, an Assistant to the Chief Executive Officer, a Chief Financial Officer, a Chief Administrative Officer, an Assistant to the President, one or more Chief Operations Officer(s), a Secretary, a Treasurer, and a Chief Accounting Officer. The Board of Directors may elect, at the request of the Chairman of the Board, the Vice Chairman of the Board, the Chief Executive Officer or the President, one or more Senior Executive Vice Presidents, Executive Vice Presidents or Vice Presidents, and one or more Assistants to the officers of the corporation.

        Section 2 - Qualifications of the Chairman of the Board and Vice Chairman of the Board: The Chairman of the Board and the Vice Chairman of the Board shall be chosen from among the members of the Board of Directors.

        Section 3 - Election of Officers: The officers elected by the Board of Directors shall be elected annually at the organization meeting of the Board, provided that any officers not so elected at such meeting may be elected subsequently at any regular or special meeting of the Board.

        Section 4 - Term of Office: All officers shall serve at the pleasure of the Board and shall hold office from the date of their election until the next succeeding annual organization meeting of the Board of Directors or until their successors are elected and shall qualify.

        Section 5 - Vacancies: Any vacancy or vacancies among the officers, arising from any cause, shall be filled by the Board of Directors.

        Section 6 - Combining Offices: Any two or more offices may be held by the same person except that the duties of President and Secretary shall not be performed by the same person.

ARTICLE X: POWER AND DUTIES OF DIRECTORS AND OFFICERS

        Section 1 - Directors: The business and affairs of the corporation shall be managed by a Board of Directors except where specifically excepted by law and these By-laws.

        Section 2 - Executive Committee: In the interim between meetings of the Board of Directors, the Executive Committee shall have and exercise all the powers and authority of the Board of Directors, except as otherwise provided by the Indiana Business Corporation Law, provided that no action of the committee shall conflict with action had or taken by the Board of Directors.

        Section 3 - Officers: The Chairman of the Board, the Vice Chairman of the Board, the Chief Executive Officer and the President, in addition to the duties hereinafter specified, shall perform all duties incident to the office held by them, as well as such other duties as may be assigned to them from time to time by the Board of Directors, and, in the case of the Vice Chairman of the Board, the Chief Executive Officer and the President, such duties as may be assigned to them from time to time by the Chairman of the Board. Each of the other officers of the corporation shall perform all duties incident to the office held by them, as well as such other duties as may be assigned to them from time to time by the Board of Directors, the Chief Executive Officer or the President.

        Section 4 - Chairman of the Board: The Chairman of the Board shall preside at all meetings of the Board of Directors and shall have general control and management of the business of the corporation.

        Section 5 - Vice Chairman of the Board: In addition to his or her other duties, in the absence of the Chairman of the Board, the Vice Chairman of the Board shall preside at meetings of the Board of Directors.

        Section 6 - Chief Executive Officer: The Chief Executive Officer shall have day-to-day control and management of the business and affairs of the corporation subject to the control of the Board of Directors. He or she shall preside at all meetings of shareholders and, in the absence of the Chairman of the Board and the Vice Chairman of the Board, at meetings of the Board of Directors. The Chief Executive Officer shall have specific charge and supervision of all subordinate officers and all employees of the corporation and may delegate or assign to such officers and employees such of his or her duties and responsibilities as he or she may elect which are not specifically prescribed by the By-laws or resolutions of the Board of Directors.

        Section 7 - President: In the absence of the Chairman of the Board, the Vice Chairman of the Board and the Chief Executive Officer, the President shall have the general control and management of the business and affairs of the corporation.

        Section 8 - Assistant to the Chief Executive Officer: The Assistant to the Chief Executive Officer shall perform such duties as may be assigned to him or her from time to time by the Chief Executive Officer.

        Section 9 - Chief Financial Officer: The Chief Financial Officer shall be responsible for all financial matters of the corporation.

        Section 10 - Chief Operations Officer(s): The Chief Operations Officer(s) shall be responsible for all manufacturing and production of the corporation.

        Section 11 - Chief Administrative Officer: The Chief Administrative Officer shall be responsible for all administrative functions of the corporation affecting the corporation as a whole.

        Section 12 - Assistant to the President: The Assistant to the President shall perform such duties as may be assigned to him or her from time to time by the President.

        Section 13 - Vice Presidents: The Senior Executive Vice Presidents, Executive Vice Presidents or other Vice Presidents shall perform such duties as may be respectively assigned to them from time to time by the Board of Directors, the Chief Executive Officer or the President. The Board of Directors or Executive Committee may designate one or more of the Vice Presidents as Senior Executive Vice Presidents or Executive Vice Presidents.

        Section 14 - Secretary: Subject to the authority of the Board of Directors, the Chief Executive Officer and the President, the Secretary shall have the custody of the corporate seal and records of the corporation and charge of all the records of the corporation. He or she shall act as Secretary at meetings of the stockholders, directors and the Executive Committee and enter the minutes of such meetings in a book provided for that purpose and shall attend to publishing, giving and serving all official notices of the corporation. He or she shall perform such other duties as may be assigned to him or her.

        Section 15 - Assistant Secretaries: In the absence or disability of the Secretary, the Assistant Secretaries shall act with all the powers of the Secretary. They shall perform such other duties as may be assigned to them.

        Section 16 - Treasurer: Subject to the authority of the Board of Directors, the Chief Executive Officer and the President, the Treasurer shall have the custody of all negotiable instruments and securities of the corporation and shall have responsibility for all collections and disbursements of corporate funds. He or she may endorse all commercial documents requiring endorsement for or on behalf of the corporation. He or she shall perform such other duties as may be assigned to him or her.

        Section 17 - Assistant Treasurers: In the absence or disability of the Treasurer, the Assistant Treasurers shall act with all the powers of the Treasurer. They shall perform such other duties as may be assigned to them.

        Section 18 - Chief Accounting Officer: Subject to the authority of the Board of Directors, the Chief Executive Officer and the President, the Chief Accounting Officer shall have general supervision of the accounting of the corporation. He or she shall perform such other duties as may be assigned to him or her.

ARTICLE XI: STOCK

        Section 1 - Stock Certificates: Each stockholder shall be entitled to a certificate signed by the Chairman of the Board, the President or a Vice President and by the Secretary or an Assistant Secretary of the corporation and sealed with the corporate seal of the corporation, certifying to the number of shares owned by him or her in the corporation. Where such certificate is also signed by a transfer agent and a registrar, the signatures of any such Chairman of the Board, President, Vice President, Secretary or Assistant Secretary and the seal of the corporation may be facsimiles. In case any officer or officers who shall have signed or whose facsimile signature shall have been used on any such certificate or certificates shall cease to be such officer or officers of the corporation before such certificate or certificates shall have been delivered by the corporation, such certificate or certificates may, nevertheless, be issued and delivered by the corporation with the same effect as if such officer or officers had not ceased to be such at the date of its issue.

        Section 2 - Transfer of Shares: Stock shall be transferable on the stock transfer books of the corporation in person or by an attorney duly authorized and upon surrender and cancellation of the old certificates therefor.

        The Board of Directors of the corporation may close its stock transfer books for a period of time up to the maximum period of time permitted by rules and regulations of the Securities and Exchange Commission and the Indiana Business Corporation Law preceding the date of any meeting of stockholders or the date for the payment of any dividend, provided, however, that in lieu of closing the stock transfer books, the Board of Directors may fix in advance a date pursuant to any applicable rules and regulations of the Securities and Exchange Commission (which, as to stockholders' meetings, shall be a date not more than seventy (70) days prior to the meeting), as the record date for the determination of the stockholders entitled to notice of and to vote at any such meeting, or entitled to receive payment of any such dividend, and in such case such stockholders and only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of and to vote at such meeting, or to receive payment of such dividend, as the case may be, notwithstanding any transfer of any stock on the books of the corporation after such record date fixed as aforesaid. If the stock transfer books are not closed, and no record date is fixed by the Board of Directors, no shares shall be voted at any meeting which shall have been transferred on the books of the corporation within ten (10) days next preceding the date of such meeting.

        Section 3 - Replacing Certificates: In case of the loss or destruction of any certificate of stock and the submission of proper proof thereof by the owner, a new certificate may be issued in lieu thereof under such regulations and restrictions as the Board of Directors may prescribe.

ARTICLE XII: AUTHORIZED SIGNATURES

        Section 1 - Negotiable Instruments: The Chief Executive Officer, the President or the Treasurer may authorize the use of facsimile signatures for certain types of accounts maintained by the corporation or with respect to checks or drafts which are less than a designated amount. The Chief Executive Officer, the President or the Treasurer also may authorize employees of particular business units of the corporation to sign or authorize checks, drafts, other negotiable instruments and electronic funds transfers up to a designated dollar amount if the corporation's Audit and Management Group (or any successor to such Group) certifies that such business unit meets such standards regarding internal control as may be specified by the Chief Executive Officer, the President or the Treasurer. Except as so authorized, all checks, drafts, other negotiable instruments and electronic funds transfers shall be made in the name of the corporation and signed or authorized by one officer or employee of the corporation and countersigned or counterauthorized by a different officer or employee of the corporation. The Chief Executive Officer, the President and the Treasurer each are authorized and empowered to designate in writing both officer and non-officer employees of the corporation who shall be empowered to sign or countersign checks, drafts, and negotiable instruments for and on behalf of the corporation, and any such written designation shall have the same force and binding legal effect on the corporation as a resolution of the Board of Directors so empowering such officer or non-officer employees. Any such written designation may be revoked at any time by the Chief Executive Officer, the President or the Treasurer, and, in their absence or unavailability, any member of the Executive Committee of the Board of Directors may revoke such written designation.

        Section 2 - Contracts and Documents: The Chairman of the Board, the Vice Chairman of the Board, the Chief Executive Officer or the President may, in the corporation's name, sign all deeds, leases, contracts or similar documents that may be authorized by the Board of Directors unless otherwise directed by the Board of Directors or otherwise provided herein or in the Articles of Incorporation or as otherwise required by law. The Chairman of the Board, the Chief Executive Officer or the President is authorized and empowered to designate in writing both officer and non-officer employees of the corporation who shall be empowered to sign contracts or other documents for and on behalf of the corporation, and any such written designation shall have the same force and binding legal effect on the corporation as a resolution of the Board of Directors so empowering such officer or non-officer employees. Any such written designation may be revoked at any time by the Chairman of the Board, the Chief Executive Officer or the President, and, in their absence or unavailability, any member of the Executive Committee of the Board of Directors may revoke such written designation.

ARTICLE XIII: FIDELITY BONDS

        Section 1 - The officers and employees of the corporation shall, in the discretion of the Board of Directors, the Chairman of the Board or the President, give bonds for the faithful discharge of their respective duties, in such form and such amounts as may be directed by the Board of Directors, the Chairman of the Board or the President.

ARTICLE XIV: INDEMNIFICATION

        Section 1 - Every person (and the heirs, executors and administrators of such
person) who is or was a director or officer of this corporation or of any subsidiary of this corporation or who, at the request of the Board of Directors of this corporation, served in any position or capacity or on any committee for this corporation or for or in any other corporation, partnership, association, trust, foundation, not-for-profit corporation, employee benefit plan or other organization or entity, shall be indemnified by the corporation against any and all liability and reasonable expense that may be incurred by him in connection with or resulting from any claim, action, suit or proceeding in which either (i) such person is wholly successful, thereby entitling such person to Mandatory Indemnification, or (ii) such person is not wholly successful but it is nevertheless determined, pursuant to the procedures set forth below in Section 2 of this Article XIV of these By-laws, that such person acted in good faith and that such person reasonably believed that (a) in the case of conduct in his official capacity, his conduct was in the corporation's best interests, or (b) in all other cases, his conduct was at least not opposed to the best interests of such corporation, entity or organization, and, in addition with respect to any criminal action or proceeding, either had reasonable cause to believe his conduct was lawful or had no reasonable cause to believe his conduct was unlawful, thereby entitling such person to Permissive Indemnification. A person shall be considered to have been serving an employee benefit plan at the request of the corporation if his duties to the corporation also impose duties on, or otherwise involve services by, him to the plan or to participants in or beneficiaries of the plan. The terms "claim," "action," "suit" or "proceeding" shall mean and include any threatened, pending or completed claim, action, suit or proceeding (whether brought by or in the right of the corporation of any other corporation or otherwise), and all appeals thereof, whether civil, criminal, administrative or investigative, formal or informal, in which any person described in the first sentence of this section may become involved as a party or otherwise:

(a)    by reason of his being or having been a director or officer of the corporation, or of any subsidiary corporation of the corporation, or of any other corporation where he served as such at the request of the corporation, or

(b)    by reason of his acting or having acted in any position or capacity or on any committee for this corporation or any subsidiary corporation of this corporation, or in any position or capacity in or for a partnership, association, trust, foundation, not-for-profit corporation, employee benefit plan or other organization or entity where he served as such at the request of the corporation, or

(c)    by reason of any action taken or not taken by him in any such capacity, whether or not he continues in such capacity at the time such liability or expense shall have been incurred.

The terms "liability" and "expenses" shall include, but shall not be limited to, counsel fees and disbursements and amounts of judgments, fines or penalties against, and amounts paid in settlement by or on behalf of, a person, and excise taxes assessed with respect to an employee benefit plan, but shall not in any event include any liability or expenses on account of profits realized by him in the purchase or sale of securities of the corporation. The term "wholly successful" shall mean (a) termination of any action, suit or proceeding against the person in question without any finding of liability or guilt against him, (b) the expiration of a reasonable period of time after the making of any claim or threat of an action, suit or proceeding without the institution of the same, without any payment or promise made to induce a settlement, or (c) approval by a court, with knowledge of the indemnity herein provided, of a settlement of any claim, action, suit or proceeding. The termination of any claim, action, suit or proceeding by judgment, order, settlement (whether with or without court approval), or conviction or upon a plea of guilty or of nolo contendere, or its equivalent, shall not by itself create a presumption that a person did not meet the standards of conduct for Permissive Indemnification. The actions of a person with respect to an employee benefit plan subject to the Employee Retirement Income Security Act of 1974 shall be deemed to have been taken in what the person reasonably believed to be the best interests of the corporation if the person reasonably believed he was acting in conformity with the requirements of such Act or he reasonably believed his actions to be in the interests of the participants in or beneficiaries of the plan.

        Section 2 - With regard to Permissive Indemnification, the determination that a person acted in good faith and that such person reasonably believed that (a) in the case of conduct in his official capacity, his conduct was in the corporation's best interests, or (b) in all other cases, his conduct was at least not opposed to the best interests of the corporation, and, in addition, with respect to any criminal action or proceeding, either had reasonable cause to believe that his conduct was lawful or had no reasonable cause to believe that his conduct was unlawful with regard to a specific claim, action, suit or proceeding in or as to which such person is not wholly successful shall be made by or for the Board of Directors of the corporation in the manner hereinafter described. Any requests for such indemnification must first be proposed to the Board of Directors of the corporation, and a motion for such indemnification may be made by any director of the corporation, including a director who is seeking such indemnification for himself. If a quorum of directors eligible to decide the matter exists within the limitations and requirements of I.C. 23-1-37-12 (b)(1), such directors may either (i) decide the question themselves; (ii) refer the matter to Special Legal Counsel for decision pursuant to I.C. 23-1-37-12(b)(3)(A); or (iii) decline to take any action to either decide the question of such indemnification or refer the matter for decision to Special Legal Counsel.

        If there does not exist a quorum of directors eligible to decide the matter within the limitations and requirements of I.C. 23-1-37-12(b)(1), a majority of the entire Board of Directors may either (i) refer the matter to a committee of two or more directors who are eligible to vote thereon pursuant to I.C. 23-1-37-12(b)(2) who may either decide the matter themselves or refer the matter to Special Legal Counsel for decision pursuant to I.C. 23-1-37-12(b)(3)(A); (ii) if such a committee cannot be appointed, refer the matter to Special Legal Counsel pursuant to the procedures described in I.C. 23-1-37-12(b)(3)(B); or (iii) decline to take any action to refer the matter of such indemnification to a committee or to Special Legal Counsel. Any decision on the question of entitlement to such Permissive Indemnification by a majority of a quorum of the Board of Directors eligible to vote pursuant to I.C. 23-1-37-12(b)(1); by a special committee of eligible directors pursuant to I.C. 23-1-37-12(b)(2); or by Special Legal Counsel duly appointed pursuant to the provisions of I.C. 23-1-37-12(b)(3), shall be in the sole and absolute discretion of such person or persons who are to make such determination. If it is determined and decided that such Permissive Indemnification should be given in a specific situation, the authorization for such indemnification and a determination of the amount thereof shall be made in accordance with the procedures and requirements of I.C. 23-1-37-12(c). For purposes of this Section 2 Permissive Indemnification shall be deemed to have been denied (i) if a majority of any group of persons who are to decide the question do not vote in favor of the proposed indemnification; (ii) if the Board of Directors or any committee thereof declines to take any permitted action to either decide the question, refer it to a committee, or refer it to Special Legal Counsel; (iii) if no decision is made by the person or persons who were to decide such question within a period of six (6) months after such indemnification was first proposed to the Board of Directors of the corporation; or (iv) to the extent that the dollar amount of any indemnification to be made by the corporation is less than the total dollar amount of indemnification proposed or requested to be made. If proposed Permissive Indemnification is denied, the question may not be reconsidered at any subsequent time by the corporation.

        Section 3 - Expenses incurred with respect to any claim, action, suit or proceeding may be advanced by the corporation (by action of the Board of Directors, whether or not a disinterested quorum exists) prior to the final disposition thereof upon receipt of an undertaking by or on behalf of the recipient to repay such amount unless he is entitled to indemnification under this Article of these By-laws.

        Section 4 - The rights of mandatory and Permissive Indemnification provided in this Article of the By-laws shall be in addition to any rights to which any such person may otherwise be entitled by contract, as matter of law, or pursuant to I.C. 23-1-37. Any person claiming the right to indemnification pursuant to any provisions of these By-laws may at any time apply for indemnification to or seek review of any decision denying indemnification or determining the amount thereof by a court pursuant to I.C. 23-1-37-11. Persons who are not directors or officers of the corporation but who are directors or officers of any subsidiary may be indemnified to the extent authorized at any time or from time to time by the Board of Directors.

        Section 5 - Irrespective of the provisions of this Article of the By-laws, the Board of Directors may, at any time or from time to time, approve indemnification of directors and officers or other persons to the full extent permitted by the provisions of the Indiana Business Corporation Law at the time in effect, whether on account of past or future transactions.

        Section 6 - To the extent not inconsistent with Indiana law as in effect from time to time, the Board of Directors may, at any time or from time to time, approve the purchase and maintenance of insurance on behalf of any person described in the first sentence of Section 1 of this Article XIV against any liability asserted against him in his capacity or arising out of his status as such a person, whether or not the corporation would have the power to indemnify him under the provisions of this Article of the By-laws. In the event that any expense or liability otherwise subject to indemnification hereunder is covered entirely or in part by any insurance, the indemnification provided for by this Article of these By-laws shall only be available, if at all, as to any uninsured liability or expense or that portion which is in excess of the amount of all available insurance coverage. Under no circumstances shall any insurer or other person making payment under such an insurance policy or contract be subrogated to the rights of any person entitled to indemnification under this Article of these By-laws.

        Section 7 - Any and all references contained in Article XIV of these By-laws to any provision, section, subsection or portion of the Indiana Code (I.C.) shall mean the Indiana Code as the same existed on December 9, 1986, and no subsequent amendment, repeal, modification, change, or judicial invalidation of any provision of the Indiana Code subsequent to December 9, 1986, shall alter, modify, or otherwise affect these By-laws, and these By-laws shall be construed and interpreted under the statutory law of the State of Indiana as it existed as of the date of adoption of these By-laws.

        Section 8 - The indemnification herein required or permitted by these amended indemnification By-laws shall be a contractual obligation, undertaking and commitment of the corporation as to any person who either continued to serve or commenced to serve, following the date of the adoption of these amended indemnification By-laws, as a director or officer of this corporation or any subsidiary of this corporation, or in any other position or capacity, at the request of this corporation or any subsidiary corporation, on any committee, partnership, association, trust, foundation, not-for-profit corporation, employee benefit plan, or other organization or entity, and no subsequent amendment or repeal of these By-laws and no judicial decision invalidating the legislation authorizing the indemnification provided for by these By-laws or invalidating all or any part of these indemnification By-laws shall in any manner deny, diminish, limit, restrict, or qualify the indemnification herein provided for, for any such person who so continued to serve or commenced to serve with regard to any claim concerning any matter which occurred, which commenced to occur, or which continued to occur subsequent to the adoption of these amended indemnification By-laws and prior to any such amendment, repeal, or judicial invalidation.

ARTICLE XV: REGULATION OF SHAREHOLDERS

        Section 1 - Election to be Governed by Control Share Acquisitions Statute. Effective as of January 31, 2006, the corporation shall be governed by the provisions of Chapter 42 of the Indiana Business Corporation Law, as amended. In addition, any or all control shares acquired in a control share acquisition shall be subject to redemption by the corporation if either:

(a) no acquiring person statement has been filed with the corporation with respect to such control share acquisition in accordance with I.C. 23-1-42-6, or

(b) the control shares are not accorded full voting rights by the corporation's shareholders as provided in I.C. 23-1-42-9.

        A redemption pursuant to Section 1(a) above may be made at any time during the period ending 60 days after the last acquisition of control shares by the acquiring person. A redemption pursuant to Section 1(b) above may be made at any time during the period ending two years after the shareholder vote with respect to the granting of voting rights to such control shares. Any redemption pursuant to this Section 1 shall be made at the fair value of the control shares and pursuant to such procedures for such redemption as may be set forth in these By-laws or adopted by resolution of the Board of Directors.

        As used in this Section 1, the terms "control shares," "control share acquisition," "acquiring person statement" and "acquiring person" shall have the meanings ascribed to such terms in I.C. 23-1-42.

        Section 2 - Election to be Governed by Business Combinations Statute. Effective as of January 31, 2006, the corporation shall be governed by the provisions of Chapter 43 of the Indiana Business Corporation Law, as amended, and its prior election not to be so governed is rescinded in accordance with I.C. 23-1-43-22(2).

ARTICLE XVI: MISCELLANEOUS

        Section 1 - Depositories: The funds of the corporation shall be deposited in the name of the corporation with such depositories as may be designated by the Board of Directors, the Chief Executive Officer, the President or the Treasurer.

ARTICLE XVII: AMENDMENTS

        Section 1 - These By-laws may be altered, amended or repealed by a majority vote of the whole Board of Directors at any meeting, the notice of which includes notice of the proposed alteration, amendment or repeal.

EX-10

Exhibit 10(a)

CREDIT AGREEMENT

DATED AS OF MAY 20, 2004

AMONG

KIMBALL INTERNATIONAL, INC.,

THE LENDERS,

AND

BANK ONE, NA
AS AGENT AND AS LC ISSUER

BANC ONE CAPITAL MARKETS, INC.
AS LEAD ARRANGER AND SOLE BOOK RUNNER

TABLE OF CONTENTS

ARTICLE I.  DEFINITIONS	1
ARTICLE II.  THE CREDITS	13
2.1.  Commitment	13
2.2.  Determination of Dollar Amounts; Required Payments; Termination	14
2.3.  Ratable Loans	14
2.4.  Types of Advances	14
2.5.  Swing Line Loans	14
2.5.1.  Amount of Swing Line Loans	14
2.5.2.  Borrowing Notice	15
2.5.3.  Making of Swing Line Loans	15
2.5.4.  Repayment of Swing Line Loans	15
2.6.  Commitment Fee; Reductions in Aggregate Commitment	16
2.7.  Minimum Amount of Each Advance/Maximum Number of Eurocurrency Advances	16
2.8.  Optional Principal Payments	16
2.9.  Method of Selecting Types and Interest Periods for New Advances	17
2.10.  Conversion and Continuation of Outstanding Advances	17
2.11.  Changes in Interest Rate, etc	18
2.12.  Rates Applicable After Default	18
2.13.  Method of Payment	19
2.14.  Method of Borrowing	19
2.15.  Telephonic Notices	20
2.16.  Interest Payment Dates; Interest and Fee Basis	20
2.17.  Notification of Advances, Interest Rates, Prepayments and Commitment Reductions	20
2.18.  Lending Installations	20
2.19.  Facility LCs	21
2.19.1.  Issuance	21
2.19.2.  Participations	21
2.19.3.  Notice	21
2.19.4.  LC Fees	22
2.19.5.  Administration; Reimbursement by Lenders	22
2.19.6.  Reimbursement by Borrower	22
2.19.7.  Obligations Absolute	23
2.19.8.  Actions of LC Issuer	23
2.19.9.  Indemnification	24
2.19.10.  Lenders' Indemnification	24
2.19.11.  Facility LC Collateral Account	24
2.19.12.  Rights as a Lender	25
2.20.  Non-Receipt of Funds by the Agent	25
2.21.  Replacement of Lender	25
2.22.  Increase in Aggregate Commitment	26
2.23.  Amendment and Restatement	26
2.24.  Noteless Agreement; Evidence of Indebtedness	26
2.25.  Market Disruption	27
2.26.  Judgment Currency	27
ARTICLE III. YIELD PROTECTION; TAXES	28
3.1.  Yield Protection	28
3.2.  Changes in Capital Adequacy Regulations	29
3.3.  Availability of Types of Advances	29
3.4.  Funding Indemnification	29
3.5.  Taxes	30
3.6.  Lender Statements; Survival of Indemnity	31
ARTICLE IV. CONDITIONS PRECEDENT	32
4.1. Initial Credit Extension	32
4.2. Each Credit Extension	33
4.3. Post-Closing Covenant	33
ARTICLE V. REPRESENTATIONS AND WARRANTIES	34
5.1. Existence and Standing	34
5.2. Authorization and Validity	34
5.3. No Conflict; Government Consent	34
5.4. Financial Statements	34
5.5. Material Adverse Change	35
5.6. Taxes	35
5.7. Litigation and Contingent Obligations	35
5.8. Subsidiaries	35
5.9. ERISA	35
5.10. Accuracy of Information	35
5.11. Regulation U	36
5.12. Material Agreements	36
5.13. Compliance With Laws	36
5.14. Ownership of Properties	36
5.15. Plan Assets; Prohibited Transactions	36
5.16. Environmental Matters	36
5.17. Investment Company Act	36
5.18. Public Utility Holding Company Act	37
5.19. Post-Retirement Benefits	37
ARTICLE VI. COVENANTS	37
6.1.  Financial Reporting	37
6.2.  Use of Proceeds	38
6.3.  Notice of Default	38
6.4.  Conduct of Business	38
6.5.  Taxes	39
6.6.  Insurance	39
6.7.  Compliance with Laws	39
6.8.  Maintenance of Properties	39
6.9.  Inspection	39
6.10.  Indebtedness	39
6.11.  Merger	40
6.12.  Sale of Assets	40
6.13.  Investments and Acquisitions	40
6.14.  Liens	41
6.15.  Affiliates	42
6.16.  Rate Management Obligations	42
6.17.  Addition of Guarantors; Addition of Pledged Stock	42
6.18.  Financial Covenants	43
6.18.1.  Interest Coverage Ratio	43
6.18.2.  Minimum Net Worth	43
ARTICLE VII. DEFAULTS	43
ARTICLE VIII. ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES	46
8.1. Acceleration; Facility LC Collateral Account	46
8.2. Amendments	47
8.3. Preservation of Rights	47
ARTICLE IX. GENERAL PROVISIONS	48
9.1.  Survival of Representations	48
9.2.  Governmental Regulation	48
9.3.  Headings	48
9.4.  Entire Agreement	48
9.5.  Several Obligations; Benefits of this Agreement	48
9.6.  Expenses; Indemnification	48
9.7.  Numbers of Documents	49
9.8.  Accounting	49
9.9.  Severability of Provisions	49
9.10.  Nonliability of Lenders/Mutual Release of Consequential Damages	49
9.11.  Confidentiality	50
9.12.  Nonreliance	50
9.13.  Disclosure	50
9.14.  USA PATRIOT ACT NOTIFICATION	50
ARTICLE X. THE AGENT	51
10.1.  Appointment; Nature of Relationship	51
10.2.  Powers	51
10.3.  General Immunity	51
10.4.  No Responsibility for Loans, Recitals, etc.	51
10.5.  Action on Instructions of Lenders	52
10.6.  Employment of Agents and Counsel	52
10.7.  Reliance on Documents; Counsel	52
10.8.  Agent's Reimbursement and Indemnification	52
10.9.  Notice of Default	53
10.10.  Rights as a Lender	53
10.11.  Lender Credit Decision	53
10.12.  Successor Agent	53
10.13.  Agent and Arranger Fees	54
10.14.  Delegation to Affiliates	54
10.15.  Collateral Releases	54
ARTICLE XI. SETOFF; RATABLE PAYMENTS	54
11.1.  Setoff	54
11.2.  Ratable Payments	55
ARTICLE XII. BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS	55
12.1.  Successors and Assigns	55
12.2.  Participations	56
12.2.1.  Permitted Participants; Effect	56
12.2.2.  Voting Rights	56
12.2.3.  Benefit of Certain Provisions	56
12.3.  Assignments	56
12.3.1.  Permitted Assignments	56
12.3.2.  Consents	57
12.3.3.  Effect; Effective Date	57
12.3.4.  Register	58
12.4.  Dissemination of Information	58
12.5.  Tax Treatment	58
ARTICLE XIII. NOTICES	58
13.1.  Notices; Effectiveness; Electronic Communication	58
(i)  Notices Generally	58
(ii)  Electronic Communications	59
(iii)  Change of Address, Etc.	59
ARTICLE XIV. COUNTERPARTS	59
14.1.  Counterparts; Effectiveness	59
14.2.  Electronic Execution of Assignments	59
ARTICLE XV. CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL	60
15.1.  CHOICE OF LAW	60
15.2.  CONSENT TO JURISDICTION	60
15.3.  WAIVER OF JURY TRIAL	60
The following schedules and exhibits have been omitted from this filing:
Exhibit A  Form of Note
Exhibit B  Compliance Certificate
Exhibit C  Assignment and Assumption Agreement
Exhibit D  Loan/Credit Related Money Transfer Instruction
Schedule 2.19  Existing Letters of Credit
Schedule 5.7  Litigation
Schedule 5.8 Subsidiaries
Schedule 5.14  Ownership of Properties
Schedule 6.10  Indebtedness
Schedule 6.12  Sale of Assets
Schedule 6.13  Existing Investments
Schedule 6.14  Liens

CREDIT AGREEMENT

    This Agreement, dated as of May 20, 2004, is among Kimball International, Inc., the Lenders and Bank One, NA, a national banking association having its principal office in Chicago, Illinois, as LC Issuer and as Agent. The parties hereto agree as follows:

ARTICLE I

DEFINITIONS

    As used in this Agreement:

    "Acquisition" means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, by which the Borrower or any of its Subsidiaries (i) acquires any going business or all or substantially all of the assets of any firm, corporation or limited liability company, or division thereof, whether through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the outstanding ownership interests of a partnership or limited liability company.

    "Advance" means a borrowing hereunder, (i) made by some or all of the Lenders on the same Borrowing Date, or (ii) converted or continued by the Lenders on the same date of conversion or continuation, consisting, in either case, of the aggregate amount of the several Loans of the same Type and, in the case of Eurocurrency Loans, in the same Agreed Currency and for the same Interest Period. The term "Advance" shall include Swing Line Loans unless otherwise expressly provided.

    "Affected Lender" is defined in Section 2.21.

    "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person owns 10% or more of any class of voting securities (or other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise.

    "Agent" means Bank One in its capacity as contractual representative of the Lenders pursuant to Article X, and not in its individual capacity as a Lender, and any successor Agent appointed pursuant to Article X.

    "Aggregate Commitment" means the aggregate of the Commitments of all the Lenders, as reduced or increased from time to time pursuant to the terms hereof.

    "Aggregate Outstanding Credit Exposure" means, at any time, the aggregate of the Outstanding Credit Exposure of all the Lenders.

    "Agreed Currencies" means (i) Dollars, (ii) so long as it remains an Eligible Currency, Euros, and (iii) any other Eligible Currency which the Borrower requests the Agent to include as Agreed Currency hereunder and which is acceptable to all of the Lenders.

    "Agreement" means this credit agreement, as it may be amended or modified and in effect from time to time.

    "Alternate Base Rate" means, for any day, a rate of interest per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of the Federal Funds Effective Rate for such day plus 1/2% per annum.

    "Applicable Fee Rate" means, at any time, the percentage rate per annum at which Commitment Fees are accruing on the unused portion of the Aggregate Commitment or, with respect to any outstanding Facility LC, the percentage rate per annum of the LC Fee under Section 2.19.4, at such time as set forth in the Pricing Schedule.

    "Applicable Margin" means, with respect to Advances of any Type at any time, the percentage rate per annum which is applicable at such time with respect to Advances of such Type as set forth in the Pricing Schedule.

    "Approved Fund" means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

    "Approximate Equivalent Amount" of any currency with respect to any amount of Dollars shall mean the Equivalent Amount of such currency with respect to such amount of Dollars on or as of such date, rounded up to the nearest amount of such currency as determined by the Agent from time to time.

    "Arranger" means Banc One Capital Markets, Inc., a Delaware corporation, and its successors, in its capacity as Lead Arranger and Sole Book Runner.

    "Article" means an article of this Agreement unless another document is specifically referenced.

    "Authorized Officer" means any of the President, Chief Financial Officer, Treasurer, and Assistant Treasurer of the Borrower, acting singly; provided, that, two Authorized Officers shall be required for execution of this Agreement or any amendment, modification or extension of this Agreement.

    "Available Aggregate Commitment" means, at any time, the Aggregate Commitment then in effect minus the Aggregate Outstanding Credit Exposure at such time.

    "Bank One" means Bank One, NA, a national banking association having its principal office in Chicago, Illinois, in its individual capacity, and its successors.

    "Borrower" means Kimball International, Inc., an Indiana corporation, and its successors and assigns.

    "Borrowing Date" means a date on which an Advance is made hereunder.

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    "Borrowing Notice" is defined in Section 2.9.

    "Business Day" means (i) with respect to any borrowing, payment or rate selection of Eurocurrency Advances, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago and New York City for the conduct of substantially all of their commercial lending activities, interbank wire transfers can be made on the Fedwire system and dealings in Dollars and the other Agreed Currencies are carried on in the London interbank market (and, if the Advances which are the subject of such borrowing, payment or rate selection are denominated in Euro, a day upon which such clearing system as is determined by the Agent to be suitable for clearing or settlement of the Euro is open for business), and (ii) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago for the conduct of substantially all of their commercial lending activities and interbank wire transfers can be made on the Fedwire system.

    "Capital Expenditures" means, without duplication, any expenditures for any purchase or other acquisition of any asset which would be classified as a fixed or capital asset on a consolidated balance sheet of the Borrower and its Subsidiaries prepared in accordance with GAAP.

    "Capitalized Lease" of a Person means any lease of Property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP.

    "Capitalized Lease Obligations" of a Person means the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with GAAP.

    "Cash Equivalent Investments" means (i) short-term obligations of, or fully guaranteed by, the United States of America, (ii) commercial paper rated A-1 or better by S&P or P-1 or better by Moody's, (iii) demand deposit accounts maintained in the ordinary course of business, (iv) investments included in the Investment Guidelines, and (v) certificates of deposit issued by and time deposits with commercial banks (whether domestic or foreign) having capital and surplus in excess of $100,000,000; provided in each case that the same provides for payment of both principal and interest (and not principal alone or interest alone) and is not subject to any contingency regarding the payment of principal or interest.

    "Change in Control" means (i) the Family Group owns less than 35% of the Class A voting stock, or (ii) the acquisition by any Person (other than a member of the Family Group), or two or more Persons (other than members of the Family Group) acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of more of the Class A voting stock of the Borrower than that owned by the Family Group.

    "Code" means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time.

    "Collateral Documents" means each Pledge Agreement, in the form prescribed by the Agent, duly executed by certain of the Borrower's Subsidiaries to the Agent for the benefit of the Lenders to secure the Obligations, constituting a first priority pledge of 65% of the capital stock

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of the Borrower's first tier non-U.S. Subsidiaries now or hereafter owned by the Borrower or its U.S. Subsidiaries, including any amendment or modification thereof.

    "Collateral Shortfall Amount" is defined in Section 8.1.

    "Commitment" means, for each Lender, the obligation of such Lender to make Revolving Loans, and participate in Facility LCs issued hereunder, in Agreed Currencies in the Equivalent Amounts not exceeding the amount set forth opposite its signature below, as it may be modified as a result of any assignment that has become effective pursuant to Section 12.3.2 or as otherwise modified from time to time pursuant to the terms hereof.

    "Computation Date" is defined in Section 2.2.

    "Consolidated EBIT" means Consolidated Net Income plus, to the extent deducted from revenues in determining Consolidated Net Income, (i) Consolidated Interest Expense, (ii) expense for taxes paid or accrued, and (iii) extraordinary losses incurred other than in the ordinary course of business, minus, to the extent included in Consolidated Net Income, extraordinary gains realized other than in the ordinary course of business, all calculated for the Borrower and its Subsidiaries on a consolidated basis.

    "Consolidated EBITDA" means Consolidated EBIT plus, to the extent deducted from revenues in determining Consolidated Net Income, depreciation and amortization of the Borrower and its Subsidiaries determined on a consolidated basis.

    "Consolidated Indebtedness" means at any time the Indebtedness of the Borrower and its Subsidiaries calculated on a consolidated basis as of such time.

    "Consolidated Interest Expense" means, with reference to any period, the interest expense of the Borrower and its Subsidiaries calculated on a consolidated basis for such period.

    "Consolidated Net Income" means, with reference to any period, the net income (or loss) of the Borrower and its Subsidiaries calculated on a consolidated basis for such period.

    "Consolidated Net Worth" means at any time the consolidated stockholders' equity of the Borrower and its Subsidiaries calculated on a consolidated basis as of such time.

    "Consolidated Total Capitalization" means at any time the sum of Consolidated Indebtedness and Consolidated Net Worth, each calculated at such time.

    "Contingent Obligation" of a Person means, without duplication, any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement, take-or-pay contract or the obligations of any such Person as general partner of a partnership with respect to the liabilities of the partnership.

    "Controlled Group" means all members of a controlled group of corporations or other business entities and all trades or businesses (whether or not incorporated) under common

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control which, together with the Borrower or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code.

    "Conversion/Continuation Notice" is defined in Section 2.10.

    "Credit Extension" means the making of an Advance or the issuance of a Facility LC hereunder.

    "Credit Extension Date" means the Borrowing Date for an Advance or the issuance date for a Facility LC.

    "Default" means an event described in Article VII.

    "Dollar Amount" of any currency at any date shall mean (i) the amount of such currency if such currency is Dollars or (ii) the equivalent in Dollars of such amount if such currency is any currency other than Dollars, calculated on the basis of the arithmetical mean of the buy and sell spot rates of exchange of the Agent for such currency on the London market at 11:00 a.m., London time, on or as of the most recent Computation Date provided for in Section 2.2.

    "Dollars" and "$" shall mean the lawful currency of the United States of America.

    "Eligible Currency" means any currency other than Dollars (i) that is readily available, (ii) that is freely traded, (iii) in which deposits are customarily offered to banks in the London interbank market, (iv) which is convertible into Dollars in the international interbank market and (v) as to which an Equivalent Amount may be readily calculated. If, after the designation by the Lenders of any currency as an Agreed Currency, (x) currency control or other exchange regulations are imposed in the country in which such currency is issued with the result that different types of such currency are introduced, (y) such currency is, in the determination of the Agent, no longer readily available or freely traded or (z) in the determination of the Agent, an Equivalent Amount of such currency is not readily calculable, the Agent shall promptly notify the Lenders and the Borrower, and such currency shall no longer be an Agreed Currency until such time as all of the Lenders agree to reinstate such currency as an Agreed Currency and promptly, but in any event within five Business Days of receipt of such notice from the Agent, the Borrower shall repay all Loans in such affected currency or convert such Loans into Loans in Dollars or another Agreed Currency, subject to the other terms set forth in Article II.

    "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to (i) the protection of the environment, (ii) the effect of the environment on human health, (iii) emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into surface water, ground water or land, or (iv) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the clean-up or other remediation thereof.

    "Equivalent Amount" of any currency with respect to any amount of Dollars at any date shall mean the equivalent in such currency of such amount of Dollars, calculated on the basis of the arithmetical mean of the buy and sell spot rates of exchange of the Agent for such other currency at 11:00 a.m., London time, on the date on or as of which such amount is to be determined.

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    "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any rule or regulation issued thereunder.

    "Euro" and/or "EUR" means the euro referred to in Council Regulation (EC) No. 1103/97 dated June 17, 1997 passed by the Council of the European Union, or, if different, the then lawful currency of the member states of the European Union that participate in the third stage of Economic and Monetary Union.

    "Eurocurrency" means any Agreed Currency.

    "Eurocurrency Advance" means an Advance which, except as otherwise provided in Section 2.12, bears interest at the applicable Eurocurrency Rate.

    "Eurocurrency Loan" means a Loan which, except as otherwise provided in Section 2.12, bears interest at the applicable Eurocurrency Rate.

    "Eurocurrency Payment Office" of the Agent shall mean, for each of the Agreed Currencies, the office, branch, affiliate or correspondent bank of the Agent specified as the "Eurocurrency Payment Office" for such currency in Schedule 1 hereto or such other office, branch, affiliate or correspondent bank of the Agent as it may from time to time specify to the Borrower and each Lender as its Eurocurrency Payment Office.

    "Eurocurrency Rate" means, with respect to a Eurocurrency Advance for the relevant Interest Period, the sum of (i) the quotient of (a) the Eurocurrency Reference Rate applicable to such Interest Period, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to such Interest Period, plus (ii) the Applicable Margin.

    "Eurocurrency Reference Rate" means, with respect to a Eurocurrency Advance for the relevant Interest Period, the applicable British Bankers' Association LIBOR rate for deposits in U.S. dollars as reported by any generally recognized financial information service as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, provided that, if no such British Bankers' Association LIBOR rate is available to the Agent, the applicable Eurocurrency Reference Rate for the relevant Interest Period shall instead be the rate determined by the Agent to be the rate at which Bank One or one of its Affiliate banks offers to place deposits in U.S. dollars with first-class banks in the interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, in the approximate amount of Bank One's relevant Eurocurrency Loan and having a maturity equal to such Interest Period.

    "Excluded Taxes" means, in the case of each Lender or applicable Lending Installation and the Agent, taxes imposed on its overall net income, real estate property taxes and franchise taxes imposed on it, by (i) the jurisdiction under the laws of which such Lender or the Agent is incorporated or organized or (ii) the jurisdiction in which the Agent's or such Lender's principal executive office or such Lender's applicable Lending Installation is located.

    "Exhibit" refers to an exhibit to this Agreement, unless another document is specifically referenced.

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    "Facility LC" is defined in Section 2.19.1 and also includes the letters of credit set forth on Schedule 2.19.

    "Facility LC Application" is defined in Section 2.19.3.

    "Facility LC Collateral Account" is defined in Section 2.19.11.

    "Facility Termination Date" means May 20, 2009, or any earlier date on which the Aggregate Commitment is reduced to zero or otherwise terminated pursuant to the terms hereof.

    "Family Group" means all Persons who are members of the combined, extended families of Mr. Arnold Habig and Mr. Herbert Thyen, both of Dubois County, Indiana, including, but not limited to:

(i) the spouses of Mr. Habig and Mr. Thyen;
(ii) the descendants, no matter the degrees of relationship, of Mr. Habig and Mr. Thyen;
(iii) the nieces and nephews, no matter the degrees of relationship, of Mr. Habig and Mr. Thyen;   
(iv) in-laws of Mr. Habig and Mr. Thyen;
(v) the in-laws of any Person who is a member of (i), (ii) or (iii) above;
(vi) any trust created for the benefit of a Person described in (i), (ii), (iii), (iv) or (v) above-and
(vii) a corporation all of the outstanding capital stock of which is owned by, or a partnership all of the partners of which are, or any other organization all of the members of which are, members of the Family Group.

    "Federal Funds Effective Rate" means, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago time) on such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent in its sole discretion.

    "Floating Rate" means, for any day, a rate per annum equal to the Alternate Base Rate for such day, in each case changing when and as the Alternate Base Rate changes.

    "Floating Rate Advance" means an Advance which, except as otherwise provided in Section 2.12, bears interest at the Floating Rate.

    "Floating Rate Loan" means a Loan which, except as otherwise provided in Section 2.12, bears interest at the Floating Rate.

    "Fund" means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

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    "GAAP" means generally accepted accounting principles as in effect from time to time in the United States, applied in a manner consistent with that used in preparing the financial statements referred to in Section 5.4.

    "Guarantor" means each U.S. domestic Subsidiary of Borrower, now or hereafter existing, and its successors and assigns.

    "Guaranty" means each Subsidiary Guaranty, in the form prescribed by the Agent, executed by a Guarantor in favor of the Agent, for the ratable benefit of the Lenders, as it may be amended or modified and in effect from time to time.

    "Indebtedness" of a Person means, without duplication, such Person's (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of Property or services (other than accounts payable arising in the ordinary course of such Person's business payable on terms customary in the trade), (iii) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or production from Property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by notes, acceptances, or other instruments, (v) obligations of such Person to purchase securities or other Property arising out of or in connection with the sale of the same or substantially similar securities or Property, (vi) Capitalized Lease Obligations, (vii) Contingent Obligations, (viii) reimbursement or other obligations in connection with Letters of Credit, (ix) obligations in connection with Sale and Leaseback Transactions and (x) any other obligation for borrowed money or other financial accommodation which in accordance with GAAP would be shown as a liability on the consolidated balance sheet of such Person.

    "Interest Period" means, with respect to a Eurocurrency Advance, a period of one, two, three or six months commencing on a Business Day selected by the Borrower pursuant to this Agreement. Such Interest Period shall end on the day which corresponds numerically to such date one, two, three or six months thereafter, provided, however, that if there is no such numerically corresponding day in such next, second, third or sixth succeeding month, such Interest Period shall end on the last Business Day of such next, second, third or sixth succeeding month. If an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a new calendar month, such Interest Period shall end on the immediately preceding Business Day.

    "Investment" of a Person means any loan, advance (other than commission, travel and similar advances to officers and employees made in the ordinary course of business), extension of credit (other than accounts receivable arising in the ordinary course of business on terms customary in the trade) or contribution of capital by such Person; stocks, bonds, mutual funds, partnership interests, notes, debentures or other securities owned by such Person; any deposit accounts and certificate of deposit owned by such Person; and structured notes, derivative financial instruments and other similar instruments or contracts owned by such Person.

    "Investment Guidelines" means the Borrower's existing Investment Guidelines dated October 31, 2003 as in effect as of the date hereof, and any amendments or modifications thereto that are approved by the Borrower's chief financial officer with the written consent of the Required Lenders.

    "LC Fee" is defined in Section 2.19.4.

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    "LC Issuer" means Bank One (or any subsidiary or affiliate of Bank One designated by Bank One) in its capacity as issuer of Facility LCs hereunder.

    "LC Obligations" means, at any time, the sum, without duplication, of (i) the aggregate undrawn stated amount under all Facility LCs outstanding at such time plus (ii) the aggregate unpaid amount at such time of all Reimbursement Obligations.

    "LC Payment Date" is defined in Section 2.19.5.

    "Lenders" means the lending institutions listed on the signature pages of this Agreement and their respective successors and assigns. Unless otherwise specified, the term "Lenders" includes Bank One in its capacity as Swing Line Lender.

    "Lending Installation" means, with respect to a Lender or the Agent, the office, branch, subsidiary or affiliate of such Lender or the Agent with respect to each Agreed Currency listed on the signature pages hereof or on the administrative information sheets provided to the Agent in connection herewith or otherwise selected by such Lender or the Agent pursuant to Section 2.18.

    "Letter of Credit" of a Person means a letter of credit or similar instrument which is issued upon the application of such Person or upon which such Person is an account party or for which such Person is in any way liable.

    "Leverage Ratio" means, as of any date of calculation, the ratio of (i) Consolidated Indebtedness outstanding on such date to (ii) Consolidated Total Capitalization on such date.

    "Lien" means any lien (statutory or other), mortgage, security interest, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement).

    "Loan" means a Revolving Loan or a Swing Line Loan.

    "Loan Documents" means this Agreement, the Facility LC Applications, any Notes issued pursuant to Section 2.24, the Fee Letter, any Guaranty, any Collateral Documents, and any other documents or instruments now or hereafter executed and delivered by or on behalf of Borrower to any Lender or the Agent to evidence, govern or secure the Obligations.

    "Material Adverse Effect" means a material adverse effect on (i) the business, Property, condition (financial or otherwise), results of operations, or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Borrower to perform its obligations under the Loan Documents to which it is a party, or (iii) the validity or enforceability of any of the Loan Documents or the rights or remedies of the Agent, the LC Issuer or the Lenders thereunder.

    "Material Indebtedness" means Indebtedness in an outstanding principal amount of $10,000,000 or more in the aggregate (or the equivalent thereof in any currency other than U.S. dollars).

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    "Material Indebtedness Agreement" means any agreement under which any Material Indebtedness was created or is governed or which provides for the incurrence of Indebtedness in an amount which would constitute Material Indebtedness (whether or not an amount of Indebtedness constituting Material Indebtedness is outstanding thereunder).

    "Modify" and "Modification" are defined in Section 2.19.1.

    "Moody's" means Moody's Investors Service, Inc.

    "Multiemployer Plan" means a Plan maintained pursuant to a collective bargaining agreement or any other arrangement to which the Borrower or any member of the Controlled Group is a party to which more than one employer is obligated to make contributions.

    "National Currency Unit" means the unit of currency (other than a Euro unit) of each member sate of the European Union that participates in the third stage of Economic and Monetary Union.

    "Non-U.S. Lender" is defined in Section 3.5(iv).

    "Note" is defined in Section 2.24.

    "Obligations" means all unpaid principal of and accrued and unpaid interest on the Loans, all Reimbursement Obligations, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations of the Borrower to the Lenders or to any Lender, the Agent, the LC Issuer or any indemnified party arising under the Loan Documents.

    "Other Taxes" is defined in Section 3.5(ii).

    "Outstanding Credit Exposure" means, as to any Lender at any time, the sum of (i) the aggregate principal amount of its Revolving Loans outstanding at such time, plus (ii) an amount equal to its Pro Rata Share of the aggregate principal amount of Swing Line Loans outstanding at such time, plus (iii) an amount equal to its Pro Rata Share of the LC Obligations at such time.

    "Participants" is defined in Section 12.2.1.

    "Payment Date" means the last day of each calendar quarter.

    "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto.

    "Person" means any natural person, corporation, firm, joint venture, partnership, limited liability company, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof.

    "Plan" means an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which the Borrower or any member of the Controlled Group may have any liability.

    "Prior Credit Agreement" is defined in Section 2.23.

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    "Pro Rata Share" means, with respect to a Lender, a portion equal to a fraction the numerator of which is such Lender's Commitment and the denominator of which is the Aggregate Commitment.

    "Pricing Schedule" means the Schedule attached hereto identified as such.

    "Prime Rate" means a rate per annum equal to the prime rate of interest announced from time to time by Bank One or its parent (which is not necessarily the lowest rate charged to any customer), changing when and as said prime rate changes.

    "Property" of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person.

    "Purchasers" is defined in Section 12.3.1.

    "Rate Management Obligations" of a Person means any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all agreements, contracts, devices or arrangements primarily designed to protect the Borrower from the fluctuations of interest rates, commodity prices, exchange rates or forward rates applicable to the Borrower's assets, liabilities or exchange transactions, including, but not limited to, dollar-denominated or cross-currency interest rate exchange agreements, forward currency exchange agreements, interest rate cap or collar protection agreements, forward rate currency or interest rate options, puts and warrants or any similar derivative transactions, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any of the foregoing; excluding, however, in (i) and (ii) above, any and all real estate leases, equipment leases and agreements for the purchase or sale of products, all of which are entered into by the Borrower and/or any Subsidiary in the normal and ordinary course of business.

    "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System.

    "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System.

    "Reimbursement Obligations" means, at any time, the aggregate of all obligations of the Borrower then outstanding under Section 2.19 to reimburse the LC Issuer for amounts paid by the LC Issuer in respect of any one or more drawings under Facility LCs.

    "Reportable Event" means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC has by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided, however, that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of

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ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code.

    "Required Lenders" means at least 2 Lenders in the aggregate having at least a majority of the Aggregate Commitment or, if the Aggregate Commitment has been terminated, at least 2 Lenders in the aggregate holding at least a majority of the Aggregate Outstanding Credit Exposure.

    "Reserve Requirement" means, with respect to an Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on Eurocurrency liabilities.

    "Revolving Loan" means, with respect to a Lender, such Lender's loan made pursuant to its commitment to lend set forth in Section 2.1 (or any conversion or continuation thereof).

    "S&P" means Standard and Poor's Ratings Services, a division of The McGraw Hill Companies, Inc.

    "Sale and Leaseback Transaction" means any sale or other transfer of Property by any Person with the intent to lease such Property as lessee.

    "Schedule" refers to a specific schedule to this Agreement, unless another document is specifically referenced.

    "Section" means a numbered section of this Agreement, unless another document is specifically referenced.

    "Single Employer Plan" means a Plan maintained by the Borrower or any member of the Controlled Group for employees of the Borrower or any member of the Controlled Group.

    "Subsidiary" of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a "Subsidiary" shall mean a Subsidiary of the Borrower.

    "Substantial Portion" means, with respect to the Property of the Borrower and its Subsidiaries, Property which represents more than 25% of the consolidated assets of the Borrower and its Subsidiaries as would be shown in the consolidated financial statements of the Borrower and its Subsidiaries on a cumulative basis.

    "Swing Line Borrowing Notice" is defined in Section 2.5.2.

    "Swing Line Commitment" means the obligation of the Swing Line Lender to make Swing Line Loans up to a maximum principal amount of $5,000,000 at any one time outstanding.

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    "Swing Line Lender" means Bank One or such other Lender which may succeed to its rights and obligations as Swing Line Lender pursuant to the terms of this Agreement.

    "Swing Line Loan" means a Loan made available to the Borrower by the Swing Line Lender pursuant to Section 2.5.

    "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and any and all liabilities with respect to the foregoing, but excluding Excluded Taxes and Other Taxes.

    "Transferee" is defined in Section 12.4.

    "Type" means, with respect to any Advance, its nature as a Floating Rate Advance or a Eurocurrency Advance and with respect to any Loan, its nature as a Floating Rate Loan or a Eurocurrency Loan.

    "Unfunded Liabilities" means the amount (if any) by which the present value of all vested and unvested accrued benefits under all Single Employer Plans exceeds the fair market value of all such Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plans using PBGC actuarial assumptions for single employer plan terminations.

    "Unmatured Default" means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default.

    "Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of the outstanding voting securities of which shall at the time be owned or controlled, directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (ii) any partnership, limited liability company, association, joint venture or similar business organization 100% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled.

    The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms.

ARTICLE II

THE CREDITS

    2.1. Commitment. From and including the date of this Agreement and prior to the Facility Termination Date, each Lender severally agrees, on the terms and conditions set forth in this Agreement, to (i) make Loans to the Borrower in Agreed Currencies from time to time in Dollar Amounts, provided that all Floating Rate Loans shall be made in Dollars, and (ii) participate in Facility LCs issued upon the request of the Borrower, provided that, after giving effect to the making of each such Loan and the issuance of each such Facility LC, such Lender's Outstanding Credit Exposure shall not exceed its Commitment. Subject to the terms of this Agreement, the Borrower may borrow, repay and reborrow at any time prior to the Facility Termination Date. The Commitments to extend credit hereunder shall expire on the Facility

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Termination Date. The LC Issuer will issue Facility LCs hereunder on the terms and conditions set forth in Section 2.19.

    2.2. Determination of Dollar Amounts; Required Payments; Termination. (i) The Agent will determine the Dollar Amount of:

    (a) each Advance as of the date three Business Days prior to the Borrowing Date or, if applicable, date of conversion/continuation of such Advance, and

    (b) all outstanding Advances on and as of the last Business Day of each quarter and on any other Business Day elected by the Agent in its discretion or upon instruction by the Required Lenders.

Each day upon or as of which the Agent determines Dollar Amounts as described in the preceding clauses (a) and (b) is herein described as a "Computation Date" with respect to each Advance for which a Dollar Amount is determined on or as of such day. If at any time the Dollar Amount of the sum of the aggregate principal amount of all outstanding Advances (calculated, with respect to those Advances denominated in Agreed Currencies other than Dollars, as of the most recent Computation Date with respect to each such Advance) exceeds the Aggregate Commitment, the Borrower shall immediately repay Advances in an aggregate principal amount sufficient to eliminate any such excess.

    (ii) The Aggregate Outstanding Credit Exposure and all other unpaid Obligations shall be paid in full by the Borrower on the Facility Termination Date.

    2.3. Ratable Loans. Each Advance hereunder (other than any Swing Line Loan) shall consist of Revolving Loans made from the several Lenders ratably in proportion to the ratio that their respective Commitments bear to the Aggregate Commitment.

    2.4. Types of Advances. The Advances may be Floating Rate Advances or Eurocurrency Advances, or a combination thereof, selected by the Borrower in accordance with Sections 2.9 and 2.10, or Swing Line Loans selected by the Borrower in accordance with Section 2.5.

    2.5. Swing Line Loans.

        2.5.1. Amount of Swing Line Loans. Upon the satisfaction of the conditions precedent set forth in Section 4.2 and, if such Swing Line Loan is to be made on the date of the initial Advance hereunder, the satisfaction of the conditions precedent set forth in Section 4.1 as well, from and including the date of this Agreement and prior to the Facility Termination Date, the Swing Line Lender agrees, on the terms and conditions set forth in this Agreement, to make Swing Line Loans to the Borrower in Dollars from time to time in an aggregate principal amount not to exceed the Swing Line Commitment, provided that the Aggregate Outstanding Credit Exposure shall not at any time exceed the Aggregate Commitment, and provided further that at no time shall the sum of (i) the Swing Line Lender's Pro Rata Share of the Swing Line Loans, plus (ii) the outstanding Revolving Loans made by the Swing Line Lender pursuant to Section 2.1, exceed the Swing Line Lender's Commitment at such time. Subject to the terms of this Agreement, the Borrower may borrow, repay and reborrow Swing Line Loans at any time prior to the Facility Termination Date.

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        2.5.2. Borrowing Notice. The Borrower shall deliver to the Agent and the Swing Line Lender irrevocable notice (a "Swing Line Borrowing Notice") not later than noon (Chicago, Illinois time) on the Borrowing Date of each Swing Line Loan, specifying (i) the applicable Borrowing Date (which date shall be a Business Day), and (ii) the aggregate amount of the requested Swing Line Loan which shall be an amount not less than $100,000. The Swing Line Loans shall bear interest at the Floating Rate.

        2.5.3. Making of Swing Line Loans. Promptly after receipt of a Swing Line Borrowing Notice, the Agent shall notify each Lender by fax, or other similar form of transmission, of the requested Swing Line Loan. Not later than 2:00 p.m. (Chicago, Illinois time) on the applicable Borrowing Date, the Swing Line Lender shall make available the Swing Line Loan, in funds immediately available to the Agent at its address specified pursuant to Article XIII. The Agent will promptly make the funds so received from the Swing Line Lender available to the Borrower on the Borrowing Date at the Agent's aforesaid address.

        2.5.4. Repayment of Swing Line Loans. Each Swing Line Loan shall be paid in full by the Borrower on or before the 10th Business Day after the Borrowing Date for such Swing Line Loan. In addition, the Swing Line Lender (i) may at any time in its sole discretion with respect to any outstanding Swing Line Loan, or (ii) shall on the 10th Business Day after the Borrowing Date of any Swing Line Loan, require each Lender (including the Swing Line Lender) to make a Revolving Loan in the amount of such Lender's Pro Rata Share of such Swing Line Loan (including, without limitation, any interest accrued and unpaid thereon), for the purpose of repaying such Swing Line Loan. Not later than noon (Chicago, Illinois time) on the date of any notice received pursuant to this Section 2.5.4, each Lender shall make available its required Revolving Loan, in funds immediately available to the Agent at its address specified pursuant to Article XIII. Revolving Loans made pursuant to this Section 2.5.4 shall initially be Floating Rate Loans and thereafter may be continued as Floating Rate Loans or converted into Eurocurrency Loans in the manner provided in Section 2.10 and subject to the other conditions and limitations set forth in this Article II. Unless a Lender shall have notified the Swing Line Lender, prior to its making any Swing Line Loan, that any applicable condition precedent set forth in Sections 4.1 or 4.2 had not then been satisfied, such Lender's obligation to make Revolving Loans pursuant to this Section 2.5.4 to repay Swing Line Loans shall be unconditional, continuing, irrevocable and absolute and shall not be affected by any circumstances, including, without limitation, (a) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Agent, the Swing Line Lender or any other Person, (b) the occurrence or continuance of a Default or Unmatured Default, (c) any adverse change in the condition (financial or otherwise) of the Borrower, or (d) any other circumstances, happening or event whatsoever. In the event that any Lender fails to make payment to the Agent of any amount due under this Section 2.5.4, the Agent shall be entitled to receive, retain and apply against such obligation the principal and interest otherwise payable to such Lender hereunder until the Agent receives such payment from such Lender or such obligation is otherwise fully satisfied. In addition to the foregoing, if for any reason any Lender fails to make payment to the Agent of any amount due under this Section 2.5.4, such Lender shall be deemed, at the option of the Agent, to have unconditionally and irrevocably purchased from the Swing Line Lender, without recourse or warranty, an undivided interest and participation in the applicable Swing Line Loan in the amount of such

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Revolving Loan, and such interest and participation may be recovered from such Lender together with interest thereon at the Federal Funds Effective Rate for each day during the period commencing on the date of demand and ending on the date such amount is received. On the Facility Termination Date, the Borrower shall repay in full the outstanding principal balance of the Swing Line Loans.

    2.6. Commitment Fee; Reductions in Aggregate Commitment. The Borrower agrees to pay to the Agent for the account of each Lender a commitment fee at a per annum rate equal to the Applicable Fee Rate on the average daily Available Aggregate Commitment from the date hereof to and including the Facility Termination Date, payable on each Payment Date hereafter and on the Facility Termination Date. Swing Line Loans shall not count as usage of any Lender's Commitment for the purpose of calculating the commitment fee due hereunder. The Borrower may permanently reduce the Aggregate Commitment in whole, or in part ratably among the Lenders in integral multiples of $5,000,000 (or the Approximate Equivalent Amount if denominated in an Agreed Currency other than Dollars), upon at least five Business Days' written notice to the Agent, which notice shall specify the amount of any such reduction, provided, however, that the amount of the Aggregate Commitment may not be reduced below the aggregate principal Dollar Amount of the outstanding Advances. All accrued commitment fees shall be payable on the effective date of any termination of the obligations of the Lenders to make Loans hereunder. For purposes of calculating the commitment fee hereunder, the principal amount of each Advance made in an Agreed Currency other than Dollars shall be at any time the Dollar Amount of such Advance as determined on the most recent Computation Date with respect to such Advance.

    2.7. Minimum Amount of Each Advance/Maximum Number of Eurocurrency Advances. Each Eurocurrency Advance shall be in the minimum amount of $1,000,000 (and in multiples of $100,000 if in excess thereof) (or the Approximate Equivalent Amounts if denominated in an Agreed Currency other than Dollars), and each Floating Rate Advance (other than an Advance to repay Swing Line Loans) shall be in the minimum amount of $250,000 (and in multiples of $50,000 if in excess thereof), provided, however, that any Floating Rate Advance may be in the amount of the unused Aggregate Commitment. Notwithstanding anything contained herein, not more than eight Eurocurrency Advances may be outstanding at any one time.

    2.8. Optional Principal Payments. The Borrower may from time to time pay, without penalty or premium, all outstanding Floating Rate Advances (other than Swing Line Loans), or, in a minimum aggregate amount of $250,000 or any integral multiple of $50,000 in excess thereof, any portion of the outstanding Floating Rate Advances (other than Swing Line Loans) upon two Business Days' prior notice to the Agent. The Borrower may at any time pay, without penalty or premium, all outstanding Swing Line Loans, or, in a minimum amount of $100,000 and increments of $50,000 in excess thereof, any portion of the outstanding Swing Line Loans, with notice to the Agent and the Swing Line Lender by 11:00 a.m. (Chicago, Illinois time) on the date of repayment. The Borrower may from time to time pay, subject to the payment of any funding indemnification amounts required by Section 3.4 but without penalty or premium, all outstanding Eurocurrency Advances, or, in a minimum aggregate amount of $1,000,000 or any integral multiple of $100,000 in excess thereof (or the Approximate Equivalent Amounts if denominated in an Agreed Currency other than Dollars), any portion of the outstanding Eurocurrency Advances upon three Business Days' prior notice to the Agent.

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    2.9. Method of Selecting Types and Interest Periods for New Advances. The Borrower shall select the Type of Advance and, in the case of each Eurocurrency Advance, the Interest Period and Agreed Currency applicable thereto from time to time. The Borrower shall give the Agent irrevocable notice (a "Borrowing Notice") not later than 11:00 a.m. (Chicago, Illinois time) on the Borrowing Date of each Floating Rate Advance (other than a Swing Line Loan), and not later than 10:00 a.m. (Chicago, Illinois time) at least three Business Days before the Borrowing Date for each Eurocurrency Advance denominated in Dollars and four business days before the Borrowing Date for each Eurocurrency Advance denominated in an Agreed Currency other than Dollars, specifying:

(i) the Borrowing Date, which shall be a Business Day, of such Advance,

(ii) the aggregate amount of such Advance,

(iii) the Type of Advance selected, and

(iv) in the case of each Eurocurrency Advance, the Interest Period and the Agreed Currency applicable thereto.

Not later than 3:00 p.m. (Chicago, Illinois time) on each Borrowing Date, each Lender shall make available its Revolving Loan or Revolving Loans in funds immediately available to the Agent at its address specified pursuant to Article XIII. The Agent will make the funds so received from the Lenders available to the Borrower at the Agent's aforesaid address.

    2.10. Conversion and Continuation of Outstanding Advances. Floating Rate Advances (other than Swing Line Loans) shall continue as Floating Rate Advances unless and until such Floating Rate Advances are converted into Eurocurrency Advances pursuant to this Section 2.10 or are repaid in accordance with Section 2.8. Each Eurocurrency Advance shall continue as a Eurocurrency Advance until the end of the then applicable Interest Period therefor, at which time:

(i) each such Eurocurrency Advance denominated in Dollars shall be automatically converted into a Floating Rate Advance unless (x) such Eurocurrency Advance is or was repaid in accordance with Section 2.8 or (y) the Borrower shall have given the Agent a Conversion/Continuation Notice (as defined below) requesting that, at the end of such Interest Period, such Eurocurrency Advance either continue as a Eurocurrency Advance for the same or another Interest Period or be converted into a Floating Rate Advance; and

(ii) each such Eurocurrency Advance denominated in an Agreed Currency other than Dollars shall automatically continue as a Eurocurrency Advance in the same Agreed Currency with an Interest Period of one month unless (x) such Eurocurrency Advance is or was repaid in accordance with Section 2.8 or (y) the Borrower shall have given the Agent a Conversion/Continuation Notice (as defined below) requesting that, at the end of such Interest Period, such Eurocurrency Advance continue as a Eurocurrency Advance for the same or another Interest Period.

Subject to the terms of Section 2.7, the Borrower may elect from time to time to convert all or any part of a Floating Rate Advance (other than a Swing Line Loan) into a Eurocurrency

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Advance. The Borrower shall give the Agent irrevocable notice (a "Conversion/Continuation Notice") of each conversion of a Floating Rate Advance into a Eurocurrency Advance or continuation of a Eurocurrency Advance not later than 10:00 a.m. (Chicago, Illinois time) at least three Business Days, in the case of a conversion into or continuation of a Eurocurrency Advance denominated in Dollars, or at least four Business Days, in the case of a conversion into a continuation of a Eurocurrency Advance denominated in an Agreed Currency other than Dollars, prior to the date of the requested conversion or continuation, specifying:

(i) the requested date, which shall be a Business Day, of such conversion or continuation,

(ii) the Agreed Currency, the aggregate amount and Type of the Advance which is to be converted or continued, and

(iii) the amount of such Advance which is to be converted into or continued as a Eurocurrency Advance and the duration of the Interest Period applicable thereto.

    2.11. Changes in Interest Rate, etc. Each Floating Rate Advance (other than a Swing Line Loan) shall bear interest on the outstanding principal amount thereof, for each day from and including the date such Advance is made or is automatically converted from a Eurocurrency Advance into a Floating Rate Advance pursuant to Section 2.10, to but excluding the date it is paid or is converted into a Eurocurrency Advance pursuant to Section 2.10 hereof, at a rate per annum equal to the Floating Rate for such day. Each Swing Line Loan shall bear interest on the outstanding principal amount thereof, for each day from and including the day such Swing Line Loan is made to but excluding the date it is paid, at a rate per annum equal to the Floating Rate for such day. Changes in the rate of interest on that portion of any Advance maintained as a Floating Rate Advance will take effect simultaneously with each change in the Alternate Base Rate. Each Eurocurrency Advance shall bear interest on the outstanding principal amount thereof from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the interest rate determined by the Agent as applicable to such Eurocurrency Advance based upon the Borrower's selections under Sections 2.9 and 2.10 and otherwise in accordance with the terms hereof. No Interest Period may end after the Facility Termination Date.

    2.12. Rates Applicable After Default. Notwithstanding anything to the contrary contained in Section 2.9, 2.10 or 2.11, during the continuance of a Default or Unmatured Default the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that no Advance may be made as, converted into or continued as a Eurocurrency Advance. During the continuance of a Default the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that (i) each Eurocurrency Advance shall bear interest for the remainder of the applicable Interest Period at the rate otherwise applicable to such Interest Period plus 2% per annum, (ii) each Floating Rate Advance shall bear interest at a rate per annum equal to the Floating Rate in effect from time to time plus 2% per annum and the LC Fee shall be increased by 2% per annum, provided that, during the continuance of a Default under Section 7.6 or 7.7, the interest rates set forth in clauses (i) and (ii) above and the increase in the LC Fee set forth in clause (iii) above

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shall be applicable to all Credit Extensions without any election or action on the part of the Agent or any Lender.

    2.13. Method of Payment. (i) Each Advance shall be repaid and each payment of interest thereon shall be paid in the currency in which such Advance was made or, where such currency has converted to Euro, in the Euro. All payments of the Obligations hereunder shall be made, without setoff, deduction, or counterclaim, in immediately available funds to the Agent at (except as set forth in the next sentence) the Agent's address specified pursuant to Article XIII, or at any other Lending Installation of the Agent specified in writing by the Agent to the Borrower, by noon (local time) on the date when due and shall (except with respect to repayments of Swing Line Loans and except in the case of Reimbursement Obligations for which the LC Issuer has not been fully indemnified by the Lenders, or as otherwise specifically required hereunder) be applied ratably by the Agent among the Lenders. All payments to be made by the Borrower hereunder in any currency other than Dollars shall be made in such currency on the date due in such funds as may then be customary for the settlement of international transactions in such currency for the account of the Agent, at its Eurocurrency Payment Office for such currency and shall be applied ratably by the Agent among the Lenders. Each payment delivered to the Agent for the account of any Lender shall be delivered promptly by the Agent to such Lender in the same type of funds that the Agent received at, (a) with respect to Floating Rate Loans and Eurocurrency Loans denominated in Dollars, its address specified pursuant to Article XIII or at any Lending Installation specified in a notice received by the Agent from such Lender and (b) with respect to Eurocurrency Loans denominated in an Agreed Currency other than Dollars, in the funds received from the Borrower at the address of the Agent's Eurocurrency Payment Office for such currency. The Agent is hereby authorized to charge the account of the Borrower maintained with Bank One for each payment of principal, interest and fees as it becomes due hereunder. Each reference to the Agent in this Section 2.13 shall also be deemed to refer, and shall apply equally, to the LC Issuer, in the case of payments required to be made by the Borrower to the LC Issuer pursuant to Section 2.19.6.

    (ii) Notwithstanding the foregoing provisions of this Section, if, after the making of any Advance in any currency other than Dollars, currency control or exchange regulations are imposed in the country which issues such currency with the result that the type of currency in which the Advance was made (the "Original Currency") no longer exists or the Borrower is not able to make payment to the Agent for the account of the Lenders in such Original Currency, then all payments to be made by the Borrower hereunder in such currency shall instead be made when due in Dollars in an amount equal to the Dollar Amount (as of the date of repayment) of such payment due, it being the intention of the parties hereto that the Borrower take all risks of the imposition of any such currency control or exchange regulations. For purposes of this Section 2.13(ii), the commencement of the third stage of European Economic and Monetary Union shall not constitute the imposition of currency control or exchange regulations.

    (iii) If any Advance is capable of being made in either the Euro or in a National Currency Unit, such Advance shall be made in the Euro.

    2.14. Method of Borrowing. On each Borrowing Date, each Lender shall make available its Loan or Loans, if any, (i) if such Loan is denominated in Dollars, not later than noon, Chicago, Illinois time, in Federal or other funds immediately available to the Agent, in Chicago, Illinois at its address specified in or pursuant to Article XIII and, (ii) if such Loan is denominated in an Agreed Currency other than Dollars, not later than noon, local time, in the city of the Agent's Eurocurrency Payment Office for such currency, in such funds as may then be

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customary for the settlement of international transactions in such currency in the city of and at the address of the Agent's Eurocurrency Payment Office for such currency. Unless the Agent determines that any applicable condition specified in Article IV has not been satisfied, the Agent will make the funds so received from the Lenders available to the Borrower at the Agent's aforesaid address. Notwithstanding the foregoing provisions of this Section 2.14, to the extent that a Loan made by a Lender matures on the Borrowing Date of a requested Loan, such Lender shall apply the proceeds of the Loan it is then making to the repayment of principal of the maturing Loan.

    2.15. Telephonic Notices. The Borrower hereby authorizes the Lenders and the Agent to extend, convert or continue Advances, effect selections of Agreed Currencies and Types of Advances and to transfer funds based on telephonic notices made by any person or persons the Agent or any Lender in good faith believes to be acting on behalf of the Borrower, it being understood that the foregoing authorization is specifically intended to allow Borrowing Notices and Conversion/Continuation Notices to be given telephonically. The Borrower agrees to deliver promptly to the Agent a written confirmation, if such confirmation is requested by the Agent or any Lender, of each telephonic notice signed by an Authorized Officer. If the written confirmation differs in any material respect from the action taken by the Agent and the Lenders, the records of the Agent and the Lenders shall govern absent manifest error.

    2.16. Interest Payment Dates; Interest and Fee Basis. Interest accrued on each Floating Rate Advance shall be payable on each Payment Date, commencing with the first such date to occur after the date hereof and at maturity. Interest accrued on each Eurocurrency Advance shall be payable on the last day of its applicable Interest Period, on any date on which the Eurocurrency Advance is prepaid, whether by acceleration or otherwise, and at maturity. Interest accrued on each Eurocurrency Advance having an Interest Period longer than three months shall also be payable on the last day of each three-month interval during such Interest Period. Interest, commitment fees and LC Fees shall be calculated for actual days elapsed on the basis of a 360-day year, except for interest on any Loans denominated in British Pounds Sterling which shall be calculated for actual days elapsed on the basis of a 365-day year. Interest shall be payable for the day an Advance is made but not for the day of any payment on the amount paid if payment is received prior to noon (local time) at the place of payment. If any payment of principal of or interest on an Advance shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest in connection with such payment.

    2.17. Notification of Advances, Interest Rates, Prepayments and Commitment Reductions. Promptly after receipt thereof, the Agent will notify each Lender of the contents of each Aggregate Commitment reduction notice, Borrowing Notice, Swing Line Borrowing Notice, Conversion/Continuation Notice, and repayment notice received by it hereunder. Promptly after notice from the LC Issuer, the Agent will notify each Lender of the contents of each request for issuance of a Facility LC hereunder. The Agent will notify each Lender of the interest rate applicable to each Eurocurrency Advance promptly upon determination of such interest rate and will give each Lender prompt notice of each change in the Alternate Base Rate.

    2.18. Lending Installations. Each Lender may book its Loans and its participation in any LC Obligations and the LC Issuer may book the Facility LCs at any Lending Installation selected by such Lender or the LC Issuer, as the case may be, and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Loans, Facility LCs, participations in LC Obligations and any Notes issued

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hereunder shall be deemed held by each Lender or the LC Issuer, as the case may be, for the benefit of any such Lending Installation. Each Lender and the LC Issuer may, by written notice to the Agent and the Borrower in accordance with Article XIII, designate replacement or additional Lending Installations through which Loans will be made by it or Facility LCs will be issued by it and for whose account Loan payments or payments with respect to Facility LCs are to be made.

    2.19. Facility LCs.

        2.19.1 Issuance. The LC Issuer hereby agrees, on the terms and conditions set forth in this Agreement, to issue standby and commercial Letters of Credit in Dollars (each, a "Facility LC") and to renew, extend, increase, decrease or otherwise modify each Facility LC ("Modify," and each such action a "Modification"), from time to time from and including the date of this Agreement and prior to the Facility Termination Date upon the request of the Borrower; provided that immediately after each such Facility LC is issued or Modified, (i) the aggregate amount of the outstanding LC Obligations shall not exceed $20,000,000 and (ii) the Aggregate Outstanding Credit Exposure shall not exceed the Aggregate Commitment. No Facility LC shall have an expiry date later than eighteen months after its issuance and any Facility LC having an expiry date beyond the Facility Termination Date must be fully collateralized by cash in the Facility LC Collateral Account as of the Facility Termination Date.

        2.19.2. Participations. Upon the issuance or Modification by the LC Issuer of a Facility LC in accordance with this Section 2.19, the LC Issuer shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably sold to each Lender, and each Lender shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably purchased from the LC Issuer, a participation in such Facility LC (and each Modification thereof) and the related LC Obligations in proportion to its Pro Rata Share.

        2.19.3. Notice. Subject to Section 2.19.1, the Borrower shall give the LC Issuer notice prior to 10:00 a.m. (Chicago, Illinois time) at least five Business Days prior to the proposed date of issuance or Modification of each Facility LC, specifying the beneficiary, the proposed date of issuance (or Modification) and the expiry date of such Facility LC, and describing the proposed terms of such Facility LC and the nature of the transactions proposed to be supported thereby. Upon receipt of such notice, the LC Issuer shall promptly notify the Agent, and the Agent shall promptly notify each Lender, of the contents thereof and of the amount of such Lender's participation in such proposed Facility LC. The issuance or Modification by the LC Issuer of any Facility LC shall, in addition to the conditions precedent set forth in Article IV (the satisfaction of which the LC Issuer shall have no duty to ascertain), be subject to the conditions precedent that such Facility LC shall be satisfactory to the LC Issuer and that the Borrower shall have executed and delivered such application agreement and/or such other instruments and agreements relating to such Facility LC as the LC Issuer shall have reasonably requested (each, a "Facility LC Application"). In the event of any conflict between the terms of this Agreement and the terms of any Facility LC Application, the terms of this Agreement shall control.

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        2.19.4. LC Fees. The Borrower shall pay to the Agent, for the account of the Lenders ratably in accordance with their respective Pro Rata Shares, (i) with respect to each standby Facility LC, a letter of credit fee at a per annum rate equal to the Applicable Fee Rate in effect from time to time on the average daily undrawn stated amount under such standby Facility LC, such fee to be payable in arrears on each Payment Date, and (ii) with respect to each commercial Facility LC, a one-time letter of credit fee in an amount equal to the LC Issuer's standard fee then in effect for commercial letters of credit (or, with respect to a Modification of any such commercial Facility LC which increases the stated amount thereof, such increase in the stated amount) thereof, such fee to be payable on the date of such issuance or increase (each such fee described in this sentence an "LC Fee"). The Borrower shall also pay to the LC Issuer for its own account (x) at the time of issuance of each Facility LC, a fronting fee in an amount to be agreed upon between the LC Issuer and the Borrower, and (y) documentary and processing charges in connection with the issuance or Modification of and draws under Facility LCs in accordance with the LC Issuer's standard schedule for such charges as in effect from time to time.

        2.19.5. Administration; Reimbursement by Lenders. Upon receipt from the beneficiary of any Facility LC of any demand for payment under such Facility LC, the LC Issuer shall notify the Agent and the Agent shall promptly notify the Borrower and each other Lender as to the amount to be paid by the LC Issuer as a result of such demand and the proposed payment date (the "LC Payment Date"). The responsibility of the LC Issuer to the Borrower and each Lender shall be only to determine that the documents (including each demand for payment) delivered under each Facility LC in connection with such presentment shall be in conformity in all material respects with such Facility LC. The LC Issuer shall endeavor to exercise the same care in the issuance and administration of the Facility LCs as it does with respect to letters of credit in which no participations are granted, it being understood that in the absence of any gross negligence or willful misconduct by the LC Issuer, each Lender shall be unconditionally and irrevocably liable without regard to the occurrence of any Default or any condition precedent whatsoever, to reimburse the LC Issuer on demand for (i) such Lender's Pro Rata Share of the amount of each payment made by the LC Issuer under each Facility LC to the extent such amount is not reimbursed by the Borrower pursuant to Section 2.19.6 below, plus (ii) interest on the foregoing amount to be reimbursed by such Lender, for each day from the date of the LC Issuer's demand for such reimbursement (or, if such demand is made after 11:00 a.m. (Chicago, Illinois time) on such date, from the next succeeding Business Day) to the date on which such Lender pays the amount to be reimbursed by it, at a rate of interest per annum equal to the Federal Funds Effective Rate for the first three days and, thereafter, at a rate of interest equal to the rate applicable to Floating Rate Advances.

        2.19.6. Reimbursement by Borrower. The Borrower shall be irrevocably and unconditionally obligated to reimburse the LC Issuer on or before the applicable LC Payment Date for any amounts to be paid by the LC Issuer upon any drawing under any Facility LC, without presentment, demand, protest or other formalities of any kind; provided that neither the Borrower nor any Lender shall hereby be precluded from asserting any claim for direct (but not consequential) damages suffered by the Borrower or such Lender to the extent, but only to the extent, caused by (i) the willful misconduct or gross negligence of the LC Issuer in determining whether a request presented under any Facility LC issued by it complied with the terms of such Facility LC or (ii) the LC

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Issuer's failure to pay under any Facility LC issued by it after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC. All such amounts paid by the LC Issuer and remaining unpaid by the Borrower shall bear interest, payable on demand, for each day until paid at a rate per annum equal to (x) the rate applicable to Floating Rate Advances for such day if such day falls on or before the applicable LC Payment Date and (y) the sum of 2% plus the rate applicable to Floating Rate Advances for such day if such day falls after such LC Payment Date. The LC Issuer will pay to each Lender ratably in accordance with its Pro Rata Share all amounts received by it from the Borrower for application in payment, in whole or in part, of the Reimbursement Obligation in respect of any Facility LC issued by the LC Issuer, but only to the extent such Lender has made payment to the LC Issuer in respect of such Facility LC pursuant to Section 2.19.5. Subject to the terms and conditions of this Agreement (including without limitation the submission of a Borrowing Notice in compliance with Section 2.8 and the satisfaction of the applicable conditions precedent set forth in Article IV), the Borrower may request an Advance hereunder for the purpose of satisfying any Reimbursement Obligation.

        2.19.7. Obligations Absolute. The Borrower's obligations under this Section 2.19 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against the LC Issuer, any Lender or any beneficiary of a Facility LC. The Borrower further agrees with the LC Issuer and the Lenders that the LC Issuer and the Lenders shall not be responsible for, and the Borrower's Reimbursement Obligation in respect of any Facility LC shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any dispute between or among the Borrower, any of its Affiliates, the beneficiary of any Facility LC or any financing institution or other party to whom any Facility LC may be transferred or any claims or defenses whatsoever of the Borrower or of any of its Affiliates against the beneficiary of any Facility LC or any such transferee. The LC Issuer shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Facility LC. The Borrower agrees that any action taken or omitted by the LC Issuer or any Lender under or in connection with each Facility LC and the related drafts and documents, if done without gross negligence or willful misconduct, shall be binding upon the Borrower and shall not put the LC Issuer or any Lender under any liability to the Borrower. Nothing in this Section 2.19.7 is intended to limit the right of the Borrower to make a claim against the LC Issuer for damages as contemplated by the proviso to the first sentence of Section 2.19.6.

        2.19.8. Actions of LC Issuer. The LC Issuer shall be entitled to rely, and shall be fully protected in relying, upon any Facility LC, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the LC Issuer. The LC Issuer shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first have received such advice or concurrence of the Required Lenders as it reasonably deems appropriate or it shall first be indemnified to its reasonable satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action.

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Notwithstanding any other provision of this Section 2.19, the LC Issuer shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Lenders and any future holders of a participation in any Facility LC.

        2.19.9. Indemnification. The Borrower hereby agrees to indemnify and hold harmless each Lender, the LC Issuer and the Agent, and their respective directors, officers, agents and employees from and against any and all claims and damages, losses, liabilities, costs or expenses which such Lender, the LC Issuer or the Agent may incur (or which may be claimed against such Lender, the LC Issuer or the Agent by any Person whatsoever) by reason of or in connection with the issuance, execution and delivery or transfer of or payment or failure to pay under any Facility LC or any actual or proposed use of any Facility LC, including, without limitation, any claims, damages, losses, liabilities, costs or expenses which the LC Issuer may incur by reason of or in connection with (i) the failure of any other Lender to fulfill or comply with its obligations to the LC Issuer hereunder (but nothing herein contained shall affect any rights the Borrower may have against any defaulting Lender) or (ii) by reason of or on account of the LC Issuer issuing any Facility LC which specifies that the term "Beneficiary" included therein includes any successor by operation of law of the named Beneficiary, but which Facility LC does not require that any drawing by any such successor Beneficiary be accompanied by a copy of a legal document, satisfactory to the LC Issuer, evidencing the appointment of such successor Beneficiary; provided that the Borrower shall not be required to indemnify any Lender, the LC Issuer or the Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (x) the willful misconduct or gross negligence of the LC Issuer in determining whether a request presented under any Facility LC complied with the terms of such Facility LC or (y) the LC Issuer's failure to pay under any Facility LC after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC. Nothing in this Section 2.19.9 is intended to limit the obligations of the Borrower under any other provision of this Agreement.

        2.19.10. Lenders' Indemnification. Each Lender shall, ratably in accordance with its Pro Rata Share, indemnify the LC Issuer, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including reasonable counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct or the LC Issuer's failure to pay under any Facility LC after the presentation to it of a request strictly complying with the terms and conditions of the Facility LC) that such indemnitees may suffer or incur in connection with this Section 2.19 or any action taken or omitted by such indemnitees hereunder.

        2.19.11. Facility LC Collateral Account. The Borrower agrees that it will, upon the request of the Agent or the Required Lenders and until the final expiration date of any Facility LC and thereafter as long as any amount is payable to the LC Issuer or the Lenders in respect of any Facility LC, maintain a special collateral account pursuant to arrangements satisfactory to the Agent (the "Facility LC Collateral Account") at the Agent's office at the address specified pursuant to Article XIII, in the name of such Borrower but under the sole dominion and control of the Agent, for the benefit of the Lenders and in which such Borrower shall have no interest other than as set forth in

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Section 8.1. The Borrower hereby pledges, assigns and grants to the Agent, on behalf of and for the ratable benefit of the Lenders and the LC Issuer, a security interest in all of the Borrower's right, title and interest in and to all funds which may from time to time be on deposit in the Facility LC Collateral Account to secure the prompt and complete payment and performance of the Obligations. The Agent will invest any funds on deposit from time to time in the Facility LC Collateral Account in certificates of deposit of Bank One having a maturity not exceeding 30 days. Nothing in this Section 2.19.11 shall either obligate the Agent to require the Borrower to deposit any funds in the Facility LC Collateral Account or limit the right of the Agent to release any funds held in the Facility LC Collateral Account in each case other than as required by Section 8.1 and Section 2.19.1.

        2.19.12. Rights as a Lender. In its capacity as a Lender, the LC Issuer shall have the same rights and obligations as any other Lender.

    2.20. Non-Receipt of Funds by the Agent. Unless the Borrower or a Lender, as the case may be, notifies the Agent prior to the date on which it is scheduled to make payment to the Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal, interest or fees to the Agent for the account of the Lenders, that it does not intend to make such payment, the Agent may assume that such payment has been made. The Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption. If such Lender or the Borrower, as the case may be, has not in fact made such payment to the Agent, the recipient of such payment shall, on demand by the Agent, repay to the Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Agent until the date the Agent recovers such amount at a rate per annum equal to (x) in the case of payment by a Lender, the Federal Funds Effective Rate for such day for the first three days and, thereafter, the interest rate applicable to the relevant Loan or (y) in the case of payment by the Borrower, the interest rate applicable to the relevant Loan.

    2.21. Replacement of Lender. If the Borrower is required pursuant to Section 3.1, 3.2 or 3.5 to make any additional payment to any Lender or if any Lender's obligation to make or continue, or to convert Floating Rate Advances into, Eurocurrency Advances shall be suspended pursuant to Section 3.3 (any Lender so affected an "Affected Lender"), the Borrower may elect, if such amounts continue to be charged or such suspension is still effective, to replace such Affected Lender as a Lender party to this Agreement, provided that no Default or Unmatured Default shall have occurred and be continuing at the time of such replacement, and provided further that, concurrently with such replacement, (i) another bank or other entity which is reasonably satisfactory to the Borrower and the Agent shall agree, as of such date, to purchase for cash the Advances and other Obligations due to the Affected Lender pursuant to an assignment substantially in the form of Exhibit C and to become a Lender for all purposes under this Agreement and to assume all obligations of the Affected Lender to be terminated as of such date and to comply with the requirements of Section 12.3 applicable to assignments, and (ii) the Borrower shall pay to such Affected Lender in same day funds on the day of such replacement (A) all interest, fees and other amounts then accrued but unpaid to such Affected Lender by the Borrower hereunder to and including the date of determination, including without limitation payments due to such Affected Lender under Sections 3.1, 3.2 and 3.5, and (B) an amount, if any, equal to the payment which would have been due to such Lender on the day of such replacement under Section 3.4 had the Loans of such Affected Lender been prepaid on such date rather than sold to the replacement Lender.

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    2.22 Increase in Aggregate Commitment. If no Default shall have occurred and be continuing at such time, the Borrower may, if it so elects, increase the Aggregate Commitment hereunder, either by designating a Person not theretofore a Lender and acceptable to the Agent to become a Lender or by agreeing with an existing Lender that such Lender's Commitment shall be increased. Upon execution and delivery by the Borrower and such Lender or other Person of an instrument of assumption in form and amount reasonably satisfactory to the Agent, such existing Lender shall have a Commitment as therein set forth or such other Person shall become a Lender with a Commitment as therein set forth and all the rights and obligations of the Lender with such a Commitment hereunder; provided that (i) the Borrower shall provide prompt notice of such increase to the Agent, which shall promptly notify the other Lenders, (ii) the aggregate amount of each such increase which is effective on any day shall be at least $5,000,000, (iii) the Aggregate Commitment shall at no time exceed $125,000,000, (iv) the Agent shall have consented in writing, (v) not more than 2 Aggregate Commitment increases may be issued in any calendar year, and (vi) a Person becoming a Lender with a Commitment or a Lender increasing its Commitment, as appropriate, shall have received any required customary closing conditions, including, without limitation, the Borrower's authorizing resolutions and opinions of counsel. Any request received by the Agent from the Borrower to increase the Aggregate Commitment shall be delivered to each Lender and shall be implemented by one or more existing Lenders agreeing to increase their Commitments or by a Person agreeing to become a Lender with a Commitment; provided that no Lender shall have any obligation to increase its Commitment but each Lender shall have the right to elect to increase its Commitment in its sole discretion pro rata with any other one or more Persons agreeing to become a Lender hereunder or by any combination of the foregoing, as determined by the Agent in consultation with the Borrower. An increase in the Aggregate Commitment and any amendments to the Credit Agreement to evidence such increase shall not require the consent of any Lender not participating in such increase.

    2.23 Amendment and Restatement. This Agreement amends and restates the Credit Agreement dated December 20, 2002 among the Borrower, the lenders party thereto and the Agent (the "Prior Credit Agreement"). All Advances and Letters of Credit outstanding under the Prior Credit Agreement shall constitute Advances and Letters of Credit under this Agreement and all fees and other obligations accrued under the Prior Credit Agreement will continue to accrue and be paid under this Agreement under the terms of this Agreement. The Advances and other obligations pursuant hereto are issued in exchange and replacement for the Advances and other obligations under the Prior Credit Agreement, and shall not be a novation or satisfaction thereof. The Lenders acknowledge and agree that such transfers of rights and interests under the Loan Documents shall take place among the Lenders as of the effective date of this Agreement to give effect to Commitments set forth on the signature pages hereof.

    2.24 Noteless Agreement; Evidence of Indebtedness. (i) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

    (ii) The Agent shall also maintain accounts in which it will record (a) the amount of each Loan made hereunder, the Agreed Currency and Type thereof and the Interest Period with respect thereto, (b) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder, (c) the original stated amount of each

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Facility LC and the amount of LC Obligations outstanding at any time, and (d) the amount of any sum received by the Agent hereunder from the Borrower and each Lender's share thereof.

    (iii) The entries maintained in the accounts maintained pursuant to paragraphs (i) and (ii) above shall be prima facie evidence of the existence and amounts of the Obligations therein recorded; provided, however, that the failure of the Agent or any Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Obligations in accordance with their terms.

    (iv) Any Lender may request that its Loans be evidenced by a promissory note or, in the case of the Swing Line Lender, promissory notes representing its Revolving Loans and Swing Line Loans, respectively, substantially in the form of Exhibit A, with appropriate changes for notes evidencing Swing Line Loans (each a "Note"). In such event, the Borrower shall prepare, execute and deliver to such Lender such Note or Notes payable to the order of such Lender. Thereafter, the Loans evidenced by each such Note and interest thereon shall at all times (prior to any assignment pursuant to Section 12.3) be represented by one or more Notes payable to the order of the payee named therein, except to the extent that any such Lender subsequently returns any such Note for cancellation and requests that such Loans once again be evidenced as described in paragraphs (i) and (ii) above.

    2.25. Market Disruption. Notwithstanding the satisfaction of all conditions referred to in Article II and Article IV with respect to any Advance in any Agreed Currency other than Dollars, if there shall occur on or prior to the date of such Advance any change in national or international financial, political or economic conditions or currency exchange rates or exchange controls which would in the reasonable opinion of the Agent or the Required Lenders make it impracticable for the Eurocurrency Loans comprising such Advance to be denominated in the Agreed Currency specified by the Borrower, then the Agent shall forthwith give notice thereof to the Borrower and the Lenders, and such Loans shall not be denominated in such Agreed Currency but shall be made on such Borrowing Date in Dollars, in an aggregate principal amount equal to the Dollar Amount of the aggregate principal amount specified in the related Borrowing Notice or Conversion/Continuation Notice, as the case may be, as Floating Rate Loans, unless the Borrower notifies the Agent at least one Business Day before such date that (i) it elects not to borrow on such date or (ii) it elects to borrow on such date in a different Agreed Currency, as the case may be, in which the denomination of such Loans would in the opinion of the Agent and the Required Lenders be practicable and in an aggregate principal amount equal to the Dollar Amount of the aggregate principal amount specified in the related Borrowing Notice or Conversion/Continuation Notice, as the case may be.

    2.26. Judgment Currency. If for the purposes of obtaining judgment in any court it is necessary to convert a sum due from the Borrower hereunder in the currency expressed to be payable herein (the "specified currency") into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Agent could purchase the specified currency with such other currency at the Agent's main office on the Business Day preceding that on which final, non appealable judgment is given. The obligations of the Borrower in respect of any sum due to any Lender or the Agent hereunder shall, notwithstanding any judgment in a currency other than the specified currency, be discharged only to the extent that on the Business Day following receipt by such Lender or the Agent (as the case may be) of any sum adjudged to be so due in such other currency such Lender or the Agent (as the case may be) may in accordance with normal, reasonable banking procedures purchase the specified currency with such other

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currency. If the amount of the specified currency so purchased is less than the sum originally due to such Lender or the Agent, as the case may be, in the specified currency, the Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify such Lender or the Agent, as the case may be, against such loss, and if the amount of the specified currency so purchased exceeds (a) the sum originally due to any Lender or the Agent, as the case may be, in the specified currency and (b) any amounts shared with other Lenders as a result of allocations of such excess as a disproportionate payment to such Lender under Section 11.2, such Lender or the Agent, as the case may be, agrees to remit such excess to the Borrower.

ARTICLE III

YIELD PROTECTION; TAXES

    3.1. Yield Protection. If, on or after the date of this Agreement, the adoption of any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law), or any change in the interpretation or administration thereof by any governmental or quasi-governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender or applicable Lending Installation or the LC Issuer with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency:

    (i) subjects any Lender or any applicable Lending Installation or the LC Issuer to any Taxes, or changes the basis of taxation of payments (other than with respect to Excluded Taxes) to any Lender or the LC Issuer in respect of its Eurocurrency Loans, Facility LCs or participations therein, or

    (ii) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation or the LC Issuer (other than reserves and assessments taken into account in determining the interest rate applicable to Eurocurrency Advances), or

    (iii) imposes any other condition the result of which is to increase the cost to any Lender or any applicable Lending Installation or the LC Issuer of making, funding or maintaining its Eurocurrency Loans (including, without limitation, any conversion of any Loan denominated in an Agreed Currency other than Euro into a Loan denominated in Euro), or of issuing or participating in Facility LCs, or reduces any amount receivable by any Lender or any applicable Lending Installation or the LC Issuer in connection with its Eurocurrency Loans, Facility LCs or participations therein, or requires any Lender or any applicable Lending Installation or the LC Issuer to make any payment calculated by reference to the amount of Eurocurrency Loans, Facility LCs or participations therein held or interest or LC Fees received by it, by an amount deemed material by such Lender or the LC Issuer as the case may be,

and the result of any of the foregoing is to increase the cost to such Lender or applicable Lending Installation or the LC Issuer, as the case may be, of making or maintaining its Eurocurrency Loans (including, without limitation, any conversion of any Loan denominated in an Agreed

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Currency other than Euro into a Loan denominated in Euro) or Commitment or of issuing or participating in Facility LCs or to reduce the return received by such Lender or applicable Lending Installation or the LC Issuer, as the case may be, in connection with such Eurocurrency Loans, Commitment, Facility LCs or participations therein, then, within 15 days of demand by such Lender or the LC Issuer, as the case may be, the Borrower shall pay such Lender or the LC Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the LC Issuer, as the case may be, for such increased cost or reduction in amount received.

    3.2. Changes in Capital Adequacy Regulations. If a Lender or the LC Issuer determines the amount of capital required or expected to be maintained by such Lender or the LC Issuer, any Lending Installation of such Lender or the LC Issuer or any corporation controlling such Lender or the LC Issuer is increased as a result of a Change, then, within 15 days of demand by such Lender or the LC Issuer, the Borrower shall pay such Lender or the LC Issuer the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender or the LC Issuer determines is attributable to this Agreement, its Outstanding Credit Exposure or its Commitment to make Loans and issue or participate in Facility LCs, as the case may be, hereunder (after taking into account such Lender's or the LC Issuer's policies as to capital adequacy). "Change" means (i) any change after the date of this Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of or change in any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the date of this Agreement which affects the amount of capital required or expected to be maintained by any Lender or the LC Issuer or any Lending Installation or any corporation controlling any Lender or the LC Issuer. "Risk-Based Capital Guidelines" means (i) the risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices Entitled "International Convergence of Capital Measurements and Capital Standards," including transition rules, and any amendments to such regulations adopted prior to the date of this Agreement.

    3.3. Availability of Types of Advances. If any Lender determines that maintenance of its Eurocurrency Loans at a suitable Lending Installation would violate any applicable law, rule, regulation, or directive, whether or not having the force of law, or if the Required Lenders determine that (i) deposits of a type and maturity appropriate to match fund Eurocurrency Advances are not available or (ii) the interest rate applicable to Eurocurrency Advances does not accurately reflect the cost of making or maintaining Eurocurrency Advances, then the Agent shall suspend the availability of Eurocurrency Advances and require any affected Eurocurrency Advances to be repaid or converted to Floating Rate Advances, subject to the payment of any funding indemnification amounts required by Section 3.4.

    3.4. Funding Indemnification. If any payment of a Eurocurrency Advance occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise, or a Eurocurrency Advance is not made on the date specified by the Borrower for any reason other than default by the Lenders, the Borrower will indemnify each Lender for any loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain such Eurocurrency Advance.

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    3.5. Taxes. (i) All payments by the Borrower to or for the account of any Lender, the LC Issuer or the Agent hereunder or under any Note or Facility LC Application shall be made free and clear of and without deduction for any and all Taxes. If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender, the LC Issuer or the Agent, (a) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.5) such Lender, the LC Issuer or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (b) the Borrower shall make such deductions, (c) the Borrower shall pay the full amount deducted to the relevant authority in accordance with applicable law and (d) the Borrower shall furnish to the Agent the original copy of a receipt evidencing payment thereof within 30 days after such payment is made.

    (ii) In addition, the Borrower hereby agrees to pay any present or future stamp or documentary taxes and any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under any Note or Facility LC Application or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note or Facility LC Application ("Other Taxes").

    (iii) The Borrower hereby agrees to indemnify the Agent, the LC Issuer and each Lender for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed on amounts payable under this Section 3.5) paid by the Agent, the LC Issuer or such Lender as a result of its Commitment, any Loans made by it hereunder, or otherwise in connection with its participation in this Agreement and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. Payments due under this indemnification shall be made within 30 days of the date the Agent, the LC Issuer or such Lender makes demand therefor pursuant to Section 3.6.

    (iv) Each Lender that is not incorporated under the laws of the United States of America or a state thereof (each a "Non-U.S. Lender") agrees that it will, not more than ten Business Days after the date of this Agreement, (i) deliver to the Agent two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI, certifying in either case that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, and (ii) deliver to the Agent a United States Internal Revenue Form W-8 or W-9, as the case may be, and certify that it is entitled to an exemption from United States backup withholding tax. Each Non-U.S. Lender further undertakes to deliver to each of the Borrower and the Agent (x) renewals or additional copies of such form (or any successor form) on or before the date that such form expires or becomes obsolete, and (y) after the occurrence of any event requiring a change in the most recent forms so delivered by it, such additional forms or amendments thereto as may be reasonably requested by the Borrower or the Agent. All forms or amendments described in the preceding sentence shall certify that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form or amendment with respect to it and such Lender advises the Borrower and the Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax.

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    (v) For any period during which a Non-U.S. Lender has failed to provide the Borrower with an appropriate form pursuant to clause (iv), above (unless such failure is due to a change in treaty, law or regulation, or any change in the interpretation or administration thereof by any governmental authority, occurring subsequent to the date on which a form originally was required to be provided), such Non-U.S. Lender shall not be entitled to indemnification under this Section 3.5 with respect to Taxes imposed by the United States; provided that, should a Non-U.S. Lender which is otherwise exempt from or subject to a reduced rate of withholding tax become subject to Taxes because of its failure to deliver a form required under clause (iv), above, the Borrower shall take such steps as such Non-U.S. Lender shall reasonably request to assist such Non-U.S. Lender to recover such Taxes.

    (vi) Any Lender that is entitled to an exemption from or reduction of withholding tax with respect to payments under this Agreement or any Note pursuant to the law of any relevant jurisdiction or any treaty shall deliver to the Borrower (with a copy to the Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate.

    (vii) If the U.S. Internal Revenue Service or any other governmental authority of the United States or any other country or any political subdivision thereof asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered or properly completed, because such Lender failed to notify the Agent of a change in circumstances which rendered its exemption from withholding ineffective, or for any other reason), such Lender shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax, withholding therefor, or otherwise, including penalties and interest, and including taxes imposed by any jurisdiction on amounts payable to the Agent under this subsection, together with all costs and expenses related thereto (including attorneys fees and time charges of attorneys for the Agent, which attorneys may be employees of the Agent). The obligations of the Lenders under this Section 3.5(vii) shall survive the payment of the Obligations and termination of this Agreement.

    3.6. Lender Statements; Survival of Indemnity. To the extent reasonably possible, each Lender shall designate an alternate Lending Installation with respect to its Eurocurrency Loans to reduce any liability of the Borrower to such Lender under Sections 3.1, 3.2 and 3.5 or to avoid the unavailability of Eurocurrency Advances under Section 3.3, so long as such designation is not, in the judgment of such Lender, disadvantageous to such Lender. Each Lender shall deliver a written statement of such Lender to the Borrower (with a copy to the Agent) as to the amount due, if any, under Section 3.1, 3.2, 3.4 or 3.5. Such written statement shall set forth in reasonable detail the calculations upon which such Lender determined such amount and shall be final, conclusive and binding on the Borrower in the absence of manifest error. Determination of amounts payable under such Sections in connection with a Eurocurrency Loan shall be calculated as though each Lender funded its Eurocurrency Loan through the purchase of a deposit of the type, currency and maturity corresponding to the deposit used as a reference in determining the Eurocurrency Rate applicable to such Loan, whether in fact that is the case or not. Unless otherwise provided herein, the amount specified in the written statement of any Lender shall be payable on demand after receipt by the Borrower of such written statement. The obligations of the Borrower under Sections 3.1, 3.2, 3.4 and 3.5 shall survive payment of the Obligations and termination of this Agreement.

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ARTICLE IV

CONDITIONS PRECEDENT

    4.1. Initial Credit Extension. The Lenders shall not be required to make the initial Credit Extension hereunder until satisfaction of the following conditions precedent:

    (i) The Agent shall have received copies of the articles or certificate of incorporation of the Borrower and each Guarantor, together with all amendments, and a certificate of good standing, each certified by the appropriate governmental officer in its jurisdiction of incorporation, as well as any other information required by Section 326 of the USA PATRIOT ACT or necessary for the Agent or any Lender to verify the identity of Borrower as required by Section 326 of the USA PATRIOT Act.

    (ii) The Agent shall have received copies, certified by the Secretary or Assistant Secretary of the Borrower and each Guarantor, of its by-laws and of its Board of Directors' resolutions and of resolutions or actions of any other body authorizing the execution of the Loan Documents to which the Borrower or such Guarantor, as applicable, is a party.

    (iii) The Agent shall have received an incumbency certificate, executed by the Secretary or Assistant Secretary of the Borrower and each Guarantor, which shall identify by name and title and bear the signatures of the Authorized Officers and any other officers of the Borrower and such Guarantor authorized to sign the Loan Documents to which the Borrower or such Guarantor is a party, upon which certificate the Agent and the Lenders shall be entitled to rely until informed of any change in writing by the Borrower.

    (iv) The Agent shall have received a certificate, signed by the chief financial officer of the Borrower, stating that on the initial Credit Extension Date no Default or Unmatured Default has occurred and is continuing.

    (v) The Agent shall have received a written opinion of the Borrower's and the Guarantors' counsel, addressed to the Lenders, in form and substance acceptable to the Lenders.

    (vi) Lender shall have received any Note requested by a Lender pursuant to Section 2.24 payable to the order of each such requesting Lender.

    (vii) The Agent shall have received written money transfer instructions, in substantially the form of Exhibit D, addressed to the Agent and signed by an Authorized Officer, together with such other related money transfer authorizations as the Agent may have reasonably requested.

    (viii) Each of the Loan Documents shall have been duly executed and delivered by the Borrower and the Guarantors, as applicable, to the Agent.

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    (ix) The Agent shall have received the original stock certificates of the pledged securities required by the Collateral Documents, endorsed in blank.

    (x) The Lenders shall have received the Borrower's audited June 30, 2003 financial statements and the Borrower's December 31, 2003 financial statements.

    (xi) The Agent shall have received satisfactory return after search in accordance with the Uniform Commercial Code or the applicable law in such governmental offices as the Agent shall have deemed appropriate.

    (xii) The Agent shall have received a compliance certificate, in substantially the form of Exhibit B, duly completed and executed by the Borrower.

    (xiii) The Agent shall have received a solvency certificate, in the form prescribed by the Agent, duly executed by the Borrower.

    (xiv) The Agent shall have determined that (i) since March 11, 2004, there is an absence of any material adverse change or disruption in primary or secondary loan syndication markets, financial markets or in capital markets generally that would likely impair syndication of the Loans hereunder and (ii) the Borrower have fully cooperated with the Agent's syndication efforts including, without limitation, by providing the Agent with information regarding the Borrower's operations and prospects and such other information as the Agent deems necessary to successfully syndicate the Loans hereunder.

    (xv) The Lenders shall have received such other documents as any Lender or its counsel may have reasonably requested.

    4.2. Each Credit Extension. The Lenders shall not be required to make any Credit Extension unless on the applicable Credit Extension Date:

    (i) There exists no Default or Unmatured Default.

    (ii) The representations and warranties contained in Article V are true and correct as of such Credit Extension Date except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct on and as of such earlier date.

    (iii) All legal matters incident to the making of such Credit Extension Date shall be satisfactory to the Lenders and their counsel.

Each Borrowing Notice or request for issuance of a Facility LC with respect to each such Credit Extension shall constitute a representation and warranty by the Borrower that the conditions contained in Sections 4.2(i) and (ii) have been satisfied. Any Lender may require a duly completed compliance certificate in substantially the form of Exhibit B as a condition to making a Credit Extension.

    4.3. Post-Closing Covenant. Notwithstanding the provisions of Sections 4.1 and 4.2, the Borrower shall have until July 30, 2004 to cause the Collateral Document applicable to

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the pledge of capital stock in Kimball Electronics Poland, Sp. z o.o. to be executed and delivered to the Agent.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

    The Borrower represents and warrants to the Lenders that:

    5.1. Existence and Standing. Each of the Borrower and its Subsidiaries is a corporation, partnership (in the case of Subsidiaries only) or limited liability company duly and properly incorporated or organized, as the case may be, validly existing and (to the extent such concept applies to such entity) in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted.

    5.2. Authorization and Validity. The Borrower has the power and authority and legal right to execute and deliver the Loan Documents to which it is a party and to perform its obligations thereunder. The execution and delivery by the Borrower of the Loan Documents to which it is a party and the performance of its obligations thereunder have been duly authorized by proper corporate proceedings, and the Loan Documents to which the Borrower is a party constitute legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally.

    5.3. No Conflict; Government Consent. Neither the execution and delivery by the Borrower of the Loan Documents to which it is a party, nor the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will violate (i) any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Borrower or any of its Subsidiaries or (ii) the Borrower's or any Subsidiary's articles or certificate of incorporation, partnership agreement, certificate of partnership, articles or certificate of organization, by-laws, or operating or other management agreement, as the case may be, or (iii) the provisions of any indenture, instrument or agreement to which the Borrower or any of its Subsidiaries is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder, or result in, or require, the creation or imposition of any Lien in, of or on the Property of the Borrower or a Subsidiary pursuant to the terms of any such indenture, instrument or agreement. No order, consent, adjudication, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, or other action in respect of any governmental or public body or authority, or any subdivision thereof, which has not been obtained by the Borrower or any of its Subsidiaries, is required to be obtained by the Borrower or any of its Subsidiaries in connection with the execution and delivery of the Loan Documents, the borrowings under this Agreement, the payment and performance by the Borrower of the Obligations or the legality, validity, binding effect or enforceability of any of the Loan Documents.

    5.4. Financial Statements. The June 30, 2003 and December 31, 2003 consolidated financial statements of the Borrower and its Subsidiaries heretofore delivered to the Lenders were prepared in accordance with generally accepted accounting principles in effect on the date

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such statements were prepared and fairly present the consolidated financial condition and operations of the Borrower and its Subsidiaries at such date and the consolidated results of their operations for the period then ended.

    5.5. Material Adverse Change. Since June 30, 2003 there has been no change in the business, Property, prospects, condition (financial or otherwise) or results of operations of the Borrower and its Subsidiaries which could reasonably be expected to have a Material Adverse Effect.

    5.6. Taxes. The Borrower and its Subsidiaries have filed all United States federal tax returns and all other tax returns which are required to be filed and have paid all taxes due pursuant to said returns or pursuant to any assessment received by the Borrower or any of its Subsidiaries, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided in accordance with GAAP and as to which no Lien exists. The United States income tax returns of the Borrower and its Subsidiaries have been audited by the Internal Revenue Service through the fiscal year ended June 30, 2001. No tax liens have been filed and no claims are being asserted with respect to any such taxes. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of any taxes or other governmental charges are adequate.

    5.7. Litigation and Contingent Obligations. Except as set forth on Schedule 5.7, there is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of any of their officers, threatened against or affecting the Borrower or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect or which seeks to prevent, enjoin or delay the making of any Credit Extensions. Other than any liability incident to any litigation, arbitration or proceeding which (i) could not reasonably be expected to have a Material Adverse Effect or (ii) is set forth on Schedule 5.7, the Borrower has no material contingent obligations not provided for or disclosed in the financial statements referred to in Section 5.4.

    5.8. Subsidiaries. Schedule 5.8 contains an accurate list of all Subsidiaries of the Borrower as of the date of this Agreement, setting forth their respective jurisdictions of organization and the percentage of their respective capital stock or other ownership interests owned by the Borrower or other Subsidiaries. All of the issued and outstanding shares of capital stock or other ownership interests of such Subsidiaries have been (to the extent such concepts are relevant with respect to such ownership interests) duly authorized and issued and are fully paid and non-assessable.

    5.9. ERISA. The Unfunded Liabilities of all Single Employer Plans do not in the aggregate exceed $10,000,000. Neither the Borrower nor any other member of the Controlled Group has incurred, or is reasonably expected to incur, any withdrawal liability to Multiemployer Plans in excess of $10,000,000 in the aggregate. Each Plan complies in all material respects with all applicable requirements of law and regulations, no Reportable Event has occurred with respect to any Plan, neither the Borrower nor any other member of the Controlled Group has withdrawn from any Plan or initiated steps to do so, and no steps have been taken to reorganize or terminate any Plan.

    5.10. Accuracy of Information. No information, exhibit or report furnished by the Borrower or any of its Subsidiaries to the Agent or to any Lender in connection with the negotiation of, or compliance with, the Loan Documents contained any material misstatement of

35

fact or omitted to state a material fact or any fact necessary to make the statements contained therein not misleading.

    5.11. Regulation U. Margin stock (as defined in Regulation U) constitutes less than 25% of the value of those assets of the Borrower and its Subsidiaries which are subject to any limitation on sale, pledge, or other restriction hereunder.

    5.12. Material Agreements. Neither the Borrower nor any Subsidiary is a party to any agreement or instrument or subject to any charter or other corporate restriction which could reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any Subsidiary is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in (i) any agreement to which it is a party, which default could reasonably be expected to have a Material Adverse Effect or (ii) any agreement or instrument evidencing or governing Indebtedness.

    5.13. Compliance With Laws. The Borrower and its Subsidiaries have complied with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof having jurisdiction over the conduct of their respective businesses or the ownership of their respective Property except for any failure to comply with any of the foregoing which could not reasonably be expected to have a Material Adverse Effect.

    5.14. Ownership of Properties. Except as set forth on Schedule 5.14, on the date of this Agreement, the Borrower and its Subsidiaries will have good title, free of all Liens other than those permitted by Section 6.14, to all of the Property and assets reflected in the Borrower's most recent consolidated financial statements provided to the Agent as owned by the Borrower and its Subsidiaries.

    5.15. Plan Assets; Prohibited Transactions. The Borrower is not an entity deemed to hold "plan assets" within the meaning of 29 C.F.R. § 2510.3-101 of an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA or any plan (within the meaning of Section 4975 of the Code), and neither the execution of this Agreement nor the making of Credit Extensions hereunder gives rise to a prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code.

    5.16. Environmental Matters. In the ordinary course of its business, the officers of the Borrower consider the effect of Environmental Laws on the business of the Borrower and its Subsidiaries, in the course of which they identify and evaluate potential risks and liabilities accruing to the Borrower due to Environmental Laws. On the basis of this consideration, the Borrower has concluded that Environmental Laws cannot reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any Subsidiary has received any notice to the effect that its operations are not in material compliance with any of the requirements of applicable Environmental Laws or are the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which non-compliance or remedial action could reasonably be expected to have a Material Adverse Effect.

    5.17. Investment Company Act. Neither the Borrower nor any Subsidiary is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended.

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    5.18. Public Utility Holding Company Act. Neither the Borrower nor any Subsidiary is a "holding company" or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended.

    5.19. Post-Retirement Benefits. The present value of the expected cost of post-retirement medical and insurance benefits payable by the Borrower and its Subsidiaries to its employees and former employees, as estimated by the Borrower in accordance with procedures and assumptions deemed reasonable by the Required Lenders, does not exceed $7,500,000.

ARTICLE VI

COVENANTS

    During the term of this Agreement, unless the Required Lenders shall otherwise consent in writing:

    6.1. Financial Reporting. The Borrower will maintain, for itself and each Subsidiary, a system of accounting established and administered in accordance with generally accepted accounting principles, and furnish to the Lenders:

    (i) Within 90 days after the close of each of its fiscal years, an unqualified audit report certified by Deloitte & Touche, Ernst & Young, KPMG or PricewaterhouseCoopers (and their respective successors) or other independent certified public accountants reasonably acceptable to the Lenders, prepared in accordance with GAAP on a consolidated basis for itself and its Subsidiaries, including balance sheets as of the end of such period, related profit and loss and reconciliation of surplus statements, and a statement of cash flows, accompanied by any management letter prepared by said accountants.

    (ii) Within 45 days after the close of the first three quarterly periods of each of its fiscal years, for itself and its Subsidiaries, consolidated unaudited balance sheets as at the close of each such period and consolidated profit and loss and reconciliation of surplus statements and a statement of cash flows for the period from the beginning of such fiscal year to the end of such quarter, all certified by its chief financial officer.

    (iii) Together with the financial statements required under Sections 6.1(i) and (ii), a compliance certificate in substantially the form of Exhibit B signed by its chief financial officer showing the calculations necessary to determine compliance with this Agreement and stating that no Default or Unmatured Default exists, or if any Default or Unmatured Default exists, stating the nature and status thereof.

    (iv) With respect to each Single Employer Plan in existence, within 270 days after the close of each fiscal year, a statement of the Unfunded Liabilities of each such Single Employer Plan, certified as correct by an actuary enrolled under ERISA.

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    (v) As soon as possible and in any event within 10 days after the Borrower knows that any Reportable Event has occurred with respect to any Plan, a statement, signed by the chief financial officer of the Borrower, describing said Reportable Event and the action which the Borrower proposes to take with respect thereto.

    (vi) As soon as possible and in any event within 10 days after receipt by the Borrower, a copy of (a) any notice or claim to the effect that the Borrower or any of its Subsidiaries is or may be liable to any Person as a result of the release by the Borrower, any of its Subsidiaries, or any other Person of any toxic or hazardous waste or substance into the environment, and (b) any notice alleging any violation of any federal, state or local environmental, health or safety law or regulation by the Borrower or any of its Subsidiaries, which, in either case, could reasonably be expected to have a Material Adverse Effect.

    (vii) Promptly upon the furnishing thereof to the shareholders of the Borrower, copies of all financial statements, reports and proxy statements so furnished.

    (viii) Promptly upon the filing thereof, copies of all registration statements and annual, quarterly, monthly or other regular reports which the Borrower or any of its Subsidiaries files with the Securities and Exchange Commission.

    (ix) Such other information (including non-financial information) as the Agent or any Lender may from time to time reasonably request.

    If any information which is required to be furnished to the Lenders under this Section 6.1 is required by law or regulation to be filed by the Borrower with a government body on an earlier date, then the information required hereunder shall be furnished to the Lenders at such earlier date.

    6.2. Use of Proceeds. The Borrower will, and will cause each Subsidiary to, use the proceeds of the Credit Extensions for general corporate purposes, including acquisitions. The Borrower will not, nor will it permit any Subsidiary to, use any of the proceeds of the Advances to purchase or carry any "margin stock" (as defined in Regulation U).

    6.3. Notice of Default. The Borrower will, and will cause each Subsidiary to, give prompt notice in writing to the Lenders of the occurrence of any Default or Unmatured Default and of any other development, financial or otherwise, which could reasonably be expected to have a Material Adverse Effect.

    6.4. Conduct of Business. The Borrower will, and will cause each Subsidiary to, carry on and conduct its business in substantially the same manner, including through permitted joint venture Investments, and in substantially the same fields of enterprise as it is presently conducted and do all things necessary to remain duly incorporated or organized, validly existing and (to the extent such concept applies to such entity) in good standing as a corporation, partnership or limited liability company in its jurisdiction of incorporation or organization, as the case may be, and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted.

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    6.5. Taxes. The Borrower will, and will cause each Subsidiary to, timely file complete and correct United States federal and applicable foreign, state and local tax returns required by law and pay when due all taxes, assessments and governmental charges and levies upon it or its income, profits or Property, except those which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside in accordance with GAAP.

    6.6. Insurance. The Borrower will, and will cause each Subsidiary to, maintain with financially sound and reputable insurance companies insurance on substantially all their Property in such amounts and covering such risks as is consistent with sound business practice, and the Borrower will furnish to any Lender upon request full information as to the insurance carried.

    6.7. Compliance with Laws. The Borrower will, and will cause each Subsidiary to, materially comply with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject including, without limitation, all Environmental Laws.

    6.8. Maintenance of Properties. The Borrower will, and will cause each Subsidiary to, do all things necessary to maintain, preserve, protect and keep its Property in good repair, working order and condition, and make all necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times, provided that the Borrower may discontinue operations in the ordinary course of business.

    6.9. Inspection. The Borrower will, and will cause each Subsidiary to, permit the Agent and the Lenders, by their respective representatives and agents, to inspect any of the Property, books and financial records of the Borrower and each Subsidiary, to examine and make copies of the books of accounts and other financial records of the Borrower and each Subsidiary, and to discuss the affairs, finances and accounts of the Borrower and each Subsidiary with, and to be advised as to the same by, their respective officers at such reasonable times and intervals as the Agent or any Lender may designate.

    6.10. Indebtedness. The Borrower will not, nor will it permit any Subsidiary to, create, incur or suffer to exist any Indebtedness, except:

    (i) The Loans and the Reimbursement Obligations, including Loans made hereunder pursuant to any increase in the Aggregate Commitment in accordance with Section 2.22.

    (ii) Indebtedness existing on the date hereof and described in Schedule 6.10.

    (iii) Indebtedness owed to the Borrower by a Guarantor or by a non-U.S. Subsidiary, of which the Borrower has granted a first priority pledge of 65% of such non-U.S. Subsidiary's capital stock to the Agent pursuant to the Collateral Documents.

    (iv) Other Indebtedness of the Borrower outstanding at any time not exceeding the sum of (a) $100,000,000, minus (b) the then outstanding principal balance of Indebtedness permitted under Section 6.10(v).

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    (v) Other Indebtedness of the Borrower's Subsidiaries not exceeding in the aggregate outstanding at any time an amount equal to 15% of Borrower's Consolidated Net Worth.

    6.11. Merger. The Borrower will not, nor will it permit any Subsidiary to, merge or consolidate with or into any other Person, except that a Subsidiary may merge into the Borrower or a Wholly-Owned Subsidiary and except as provided in Sections 6.13(v) and (vi).

    6.12. Sale of Assets. The Borrower will not, nor will it permit any Subsidiary to, lease, sell or otherwise dispose of its Property to any other Person, except:

    (i) Sales of inventory in the ordinary course of business.

    (ii) Leases, sales or other dispositions of its Property that, together with all other Property of the Borrower and its Subsidiaries previously leased, sold or disposed of (other than inventory in the ordinary course of business) as permitted by this Section during the period commencing on the date of this Agreement and ending with the month in which any such lease, sale or other disposition occurs, do not constitute a Substantial Portion of the Property of the Borrower and its Subsidiaries.

    (iii) Any transfer of an interest in accounts or notes receivable on a limited recourse basis, provided that such transfer qualifies as a sale under GAAP and that the amount of such financing does not exceed $100,000,000 at any one time outstanding.

    (iv) As described in Schedule 6.12.

    6.13. Investments and Acquisitions. The Borrower will not, nor will it permit any Subsidiary to, make or suffer to exist any Investments (including without limitation, loans and advances to, and other Investments in, Subsidiaries), or commitments therefor, or to create any Subsidiary or to become or remain a partner in any partnership or joint venture, or to make any Acquisition of any Person, except:

    (i) Cash Equivalent Investments.

    (ii) Existing Investments in Subsidiaries and other Investments in existence on the date hereof and described in Schedule 6.13.

    (iii) Investments by the Borrower in and to the Guarantors, and Investments by the Borrower in and to non-U.S. Subsidiaries, of which the Borrower has granted a first priority pledge of 65% of such non-U.S. Subsidiary's capital stock to the Agent pursuant to the Collateral Documents.

    (iv) Other Investments by the Borrower not exceeding $25,000,000 in the aggregate outstanding at any time.

    (v) Acquisitions by the Borrower or a Subsidiary of the Borrower on the conditions that: (a) in the event of a merger, the Borrower or the Subsidiary is the legal surviving corporation; (b) no Default or Unmatured Default has occurred and is

40

continuing at the time of such Acquisition or will result or occur after the consummation of such Acquisition; (c) the entity or business acquired is substantially in the same field or enterprise as presently conducted by the Borrower or its Subsidiaries; and (d) the aggregate amount of consideration (including, without limitation, all direct payments, all earnout and other deferred payments, and all Indebtedness assumed or incurred and any other form of consideration) paid or payable for such Acquisition or Investment does not exceed in the aggregate an amount equal to $25,000,000.

    (vi) Acquisitions by the Borrower or a Subsidiary of the Borrower having an aggregate amount of consideration (including, without limitation, all direct payments, all earnout and other deferred payments, and all Indebtedness assumed or incurred and any other form of consideration) paid or payable for such Acquisition in excess of $25,000,000 but less than $100,000,000 on the conditions that: (a) in the event of a merger, the Borrower or the Subsidiary is the legal surviving corporation; (b) no Default or Unmatured Default has occurred and is continuing at the time of such Acquisition or will result or occur after the consummation of such Acquisition; (c) the Agent receives prior notice of all material details of such Acquisition or Investment, and the entity or business acquired is substantially in the same field or enterprise as presently conducted by the Borrower or its Subsidiaries; (d) the Borrower provides satisfactory written evidence to the Agent that the Borrower's ratio of Consolidated Indebtedness to Consolidated EBITDA, calculated on a pro forma basis for the prior 12 month period giving effect to the consummation of such Acquisition, is less than 2.25 to 1.0; and (e) the Agent receives satisfactory evidence that the board of directors of the target entity, in the case of a corporation, or the members or managers (as applicable) of the target entity, in the case of a limited liability company, have approved the subject Acquisition.

    (vii) Other Acquisitions and Investments approved in writing by the Required Lenders.

    6.14. Liens. The Borrower will not, nor will it permit any Subsidiary to, create, incur, or suffer to exist any Lien in, of or on the Property of the Borrower or any of its Subsidiaries, except:

    (i) Liens for taxes, assessments or governmental charges or levies on its Property if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books.

    (ii) Liens imposed by law, such as carriers', warehousemen's and mechanics' liens and other similar liens arising in the ordinary course of business which secure payment of obligations not more than 60 days past due or which are being contested in good faith by appropriate proceedings and for which adequate reserves shall have been set aside on its books.

    (iii) Liens arising out of pledges or deposits under worker's compensation laws, unemployment insurance, old age pensions, or other social security or retirement benefits, or similar legislation.

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    (iv) Utility easements, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character and which do not in any material way affect the marketability of the same or interfere with the use thereof in the business of the Borrower or its Subsidiaries.

    (v) Liens on Property of the Borrower or any of its Subsidiaries created solely for the purpose of securing purchase money Indebtedness and Capitalized Lease Obligations in an aggregate principal amount not to exceed 10% of the Borrower's total assets at any one time outstanding, representing or incurred to finance, refinance or refund the purchase price of the Property, provided that no such Liens shall extend to or cover other Property of the Borrower or such Subsidiary so acquired, and the principal amount of Indebtedness secured by such Lien shall at not time exceed the original purchase price of the Property.

    (vi) Liens existing on the date hereof and described in Schedule 6.14 and future Liens, provided that the aggregate Indebtedness securing such existing and future Liens does not exceed $10,000,000 in the aggregate outstanding at any time.

    (vii) Liens in favor of the Agent, for the benefit of the Lenders, granted pursuant to any Collateral Document.

    6.15. Affiliates. The Borrower will not, and will not permit any Subsidiary to, enter into any transaction (including, without limitation, the purchase or sale of any Property or service) with, or make any payment or transfer to, any Affiliate except in the ordinary course of business and pursuant to the reasonable requirements of the Borrower's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than the Borrower or such Subsidiary would obtain in a comparable arms-length transaction.

    6.16. Rate Management Obligations. The Borrower will not, nor will it permit any Subsidiary to, incur Rate Management Obligations, other than Rate Management Obligations incurred in connection with interest rate, foreign currency or commodity exchange, swap, collar, cap or similar agreements entered into by the Borrower or any Subsidiary pursuant to which the Borrower or such Subsidiary has hedged its reasonably estimated interest rate, foreign currency or commodity exposure.

    6.17. Addition of Guarantors; Addition of Pledged Stock. Borrower will cause each new Subsidiary (other than a Subsidiary organized or incorporated outside the United States of America), whether hereafter created or acquired by Borrower or a Subsidiary pursuant to Section 6.13, to execute and deliver to the Agent a Guaranty. Such Guaranty shall be executed and delivered within thirty (30) days of the initial capitalization or Acquisition of such Subsidiary but in any event not later than the date Borrower obtains an Advance hereunder to be used in connection with, or related to, such capitalization or Acquisition or otherwise used in connection with such new Subsidiary's business. With delivery to the Agent of such Guaranty, Borrower shall also furnish, or cause to be furnished, to the Agent (a) copies of the certificate or articles of incorporation of such Guarantor, together with all amendments, and a certificate of good standing or existence, both certified by the appropriate governmental officer in its jurisdiction of incorporation; (b) copies, certified by the Secretary or Assistant Secretary of such Guarantor, of its by-laws and of its Board of Directors' resolutions (and resolutions of other bodies, if any are

42

reasonably deemed necessary by counsel for any Lender) authorizing the execution of the Guaranty; (c) an incumbency certificate, executed by the Secretary or Assistant Secretary of such Guarantor, which shall identify by name and title and bear the signature of the officers of such Guarantor authorized to sign the Guaranty; and (d) a favorable written opinion of such Guarantor's counsel, addressed to the Agent in a form acceptable to the Agent, opining (i) as to such Guarantor's existence, (ii) as to such Guarantor's authorization to execute the Guaranty, (iii) as to the enforceability of the Guaranty, and (iv) that the execution and performance of the Guaranty will not conflict with or result in a breach under any material contract, indenture, instrument or other agreement by which such Guarantor is bound or to which it is party. Simultaneously with the Borrower's Acquisition or capitalization of a non-U.S. Subsidiary, the Borrower shall (or, if the capital stock of such Subsidiary is owned by another Subsidiary, shall cause such other Subsidiary to) deliver to the Agent an executed supplement to the existing Collateral Document or a new stock pledge agreement, together with appropriate corporate resolutions, stock certificates, UCC filings or amendments and other documentation, in each case in form and substance reasonably satisfactory to the Agent and the Agent shall be reasonably satisfied that the Agent has a first priority perfected pledge of 65% of the capital stock of such non-U.S. Subsidiary owned by the Borrower and its Subsidiaries.

    6.18. Financial Covenants.

        6.18.1. Interest Coverage Ratio. The Borrower will not permit the ratio, determined as of the end of each of its fiscal quarters for the then most-recently ended four fiscal quarters, of (i) Consolidated EBIT to (ii) Consolidated Interest Expense to be less than 3.0 to 1.0.

        6.18.2. Minimum Net Worth. The Borrower will at all times maintain Consolidated Net Worth of not less than $387,000,000.

ARTICLE VII

DEFAULTS

    The occurrence of any one or more of the following events shall constitute a Default:

    7.1. Any representation or warranty made or deemed made by or on behalf of the Borrower or any of its Subsidiaries to the Lenders or the Agent under or in connection with this Agreement, any Credit Extension, or any certificate or information delivered in connection with this Agreement or any other Loan Document shall be materially false on the date as of which made.

    7.2. Nonpayment of principal of any Loan when due, nonpayment of any Reimbursement Obligation within one Business Day after the same becomes due, or nonpayment of interest upon any Loan or of any commitment fee, LC Fee or other obligations under any of the Loan Documents within five days after the same becomes due.

    7.3. The breach by the Borrower of any of the terms or provisions of Section 6.2, 6.10, 6.11, 6.12, 6.13, 6.14, 6.15, 6.16 or 6.18.

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    7.4. The breach by the Borrower (other than a breach which constitutes a Default under another Section of this Article VII) of any of the terms or provisions of this Agreement which is not remedied within five days after written notice from the Agent or any Lender.

    7.5. Failure of the Borrower or any of its Subsidiaries to pay when due any Material Indebtedness; or the default by the Borrower or any of its Subsidiaries in the performance (beyond the applicable grace period with respect thereto, if any) of any term, provision or condition contained in any Material Indebtedness Agreement, or any other event shall occur or condition exist, the effect of which default, event or condition is to cause, or to permit the holder(s) of such Material Indebtedness or the lender(s) under any Material Indebtedness Agreement to cause, such Material Indebtedness to become due prior to its stated maturity or any commitment to lend under any Material Indebtedness Agreement to be terminated prior to its stated expiration date; or any Material Indebtedness of the Borrower or any of its Subsidiaries shall be declared to be due and payable or required to be prepaid or repurchased (other than by a regularly scheduled payment) prior to the stated maturity thereof; or the Borrower or any of its Subsidiaries shall not pay, or admit in writing its inability to pay, its debts generally as they become due.

    7.6. The Borrower or any of its Subsidiaries shall (i) have an order for relief entered with respect to it under the Federal bankruptcy laws as now or hereafter in effect, (ii) make an assignment for the benefit of creditors, (iii) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any Substantial Portion of its Property, (iv) institute any proceeding seeking an order for relief under the Federal bankruptcy laws as now or hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (v) take any corporate or partnership action to authorize or effect any of the foregoing actions set forth in this Section 7.6 or (vi) fail to contest in good faith any appointment or proceeding described in Section 7.7.

    7.7. Without the application, approval or consent of the Borrower or any of its Subsidiaries, a receiver, trustee, examiner, liquidator or similar official shall be appointed for the Borrower or any of its Subsidiaries or any Substantial Portion of its Property, or a proceeding described in Section 7.6(iv) shall be instituted against the Borrower or any of its Subsidiaries and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of 30 consecutive days.

    7.8. Any court, government or governmental agency shall condemn, seize or otherwise appropriate, or take custody or control of, all or any portion of the Property of the Borrower and its Subsidiaries which, when taken together with all other Property of the Borrower and its Subsidiaries so condemned, seized, appropriated, or taken custody or control of, during the period commencing on the date of this Agreement and ending with the month in which any such action occurs, constitutes a Substantial Portion.

    7.9. The Borrower or any of its Subsidiaries shall fail within 30 days to pay, bond or otherwise discharge one or more (i) judgments or orders for the payment of money in excess of $10,000,000 (or the equivalent thereof in currencies other than U.S. Dollars) in the aggregate, or (ii) nonmonetary judgments or orders which, individually or in the aggregate, could reasonably

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be expected to have a Material Adverse Effect, which judgment(s), in any such case, is/are not stayed on appeal or otherwise being appropriately contested in good faith.

    7.10. The Unfunded Liabilities of all Single Employer Plans shall exceed in the aggregate $10,000,000 or any Reportable Event shall occur in connection with any Plan.

    7.11. Nonpayment by the Borrower or any Subsidiary of any Rate Management Obligation within five days after the same becomes due.

    7.12. Any Change in Control shall occur.

    7.13. The Borrower or any other member of the Controlled Group shall have been notified by the sponsor of a Multiemployer Plan that it has incurred withdrawal liability to such Multiemployer Plan in an amount which, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Borrower or any other member of the Controlled Group as withdrawal liability (determined as of the date of such notification), exceeds $10,000,000 or requires payments exceeding $5,000,000 per annum.

    7.14. The Borrower or any other member of the Controlled Group shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of the Borrower and the other members of the Controlled Group (taken as a whole) to all Multiemployer Plans which are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the respective plan years of each such Multiemployer Plan immediately preceding the plan year in which the reorganization or termination occurs by an amount exceeding $10,000,000.

    7.15. The Borrower or any of its Subsidiaries shall (i) be the subject of any proceeding or investigation pertaining to the release by the Borrower, any of its Subsidiaries or any other Person of any toxic or hazardous waste or substance into the environment, or (ii) violate any Environmental Law, which, in the case of an event described in clause (i) or clause (ii), could reasonably be expected to have a Material Adverse Effect.

    7.16. The occurrence of any "default", as defined in any Loan Document (other than this Agreement) or the breach of any of the terms or provisions of any Loan Document (other than this Agreement), which default or breach continues beyond any period of grace therein provided.

    7.17. Any Guaranty shall fail to remain in full force or effect or any action shall be taken to discontinue or to assert the invalidity or unenforceability of any Guaranty, or any Guarantor shall fail to comply with any of the terms or provisions of any Guaranty to which it is a party, or any Guarantor shall deny that it has any further liability under any Guaranty to which it is a party, or shall give notice to such effect.

    7.18. Any Collateral Document shall for any reason fail to create a valid and perfected first priority security interest in any collateral purported to be covered thereby, except as permitted by the terms of any Collateral Document, or any Collateral Document shall fail to remain in full force or effect or any action shall be taken to discontinue or to assert the invalidity or unenforceability of any Collateral Document, or the Borrower shall fail to comply with any of the terms or provisions of any Collateral Document.

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ARTICLE VIII

ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES

    8.1. Acceleration; Facility LC Collateral Account. (i) If any Default described in Section 7.6 or 7.7 occurs with respect to the Borrower, the obligations of the Lenders to make Loans hereunder and the obligation and power of the LC Issuer to issue Facility LCs shall automatically terminate and the Obligations shall immediately become due and payable without any election or action on the part of the Agent, the LC Issuer or any Lender and the Borrower will be and become thereby unconditionally obligated, without any further notice, act or demand, to pay to the Agent an amount in immediately available funds, which funds shall be held in the Facility LC Collateral Account, equal to the difference of (x) the amount of LC Obligations at such time, less (y) the amount on deposit in the Facility LC Collateral Account at such time which is free and clear of all rights and claims of third parties and has not been applied against the Obligations (such difference, the "Collateral Shortfall Amount"). If any other Default occurs, the Required Lenders (or the Agent with the consent of the Required Lenders) may (a) terminate or suspend the obligations of the Lenders to make Loans hereunder and the obligation and power of the LC Issuer to issue Facility LCs, or declare the Obligations to be due and payable, or both, whereupon the Obligations shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which the Borrower hereby expressly waives, and (b) upon notice to the Borrower and in addition to the continuing right to demand payment of all amounts payable under this Agreement, make demand on the Borrower to pay, and the Borrower will, forthwith upon such demand and without any further notice or act, pay to the Agent the Collateral Shortfall Amount, which funds shall be deposited in the Facility LC Collateral Account.

    (ii) If at any time while any Default is continuing, the Agent determines that the Collateral Shortfall Amount at such time is greater than zero, the Agent may make demand on the Borrower to pay, and the Borrower will, forthwith upon such demand and without any further notice or act, pay to the Agent the Collateral Shortfall Amount, which funds shall be deposited in the Facility LC Collateral Account.

    (iii) The Agent may at any time or from time to time after funds are deposited in the Facility LC Collateral Account, apply such funds to the payment of the Obligations and any other amounts as shall from time to time have become due and payable by the Borrower to the Lenders or the LC Issuer under the Loan Documents.

    (iv) At any time while any Default is continuing, neither the Borrower nor any Person claiming on behalf of or through the Borrower shall have any right to withdraw any of the funds held in the Facility LC Collateral Account. After all of the Obligations have been indefeasibly paid in full and the Aggregate Commitment has been terminated, any funds remaining in the Facility LC Collateral Account shall be returned by the Agent to the Borrower or paid to whomever may be legally entitled thereto at such time.

    (v) If, within 30 days after acceleration of the maturity of the Obligations or termination of the obligations of the Lenders to make Loans and the obligations and power of the LC Issuer to issue Facility LCs hereunder as a result of any Default (other than any Default as described in Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or decree for the payment of the Obligations due shall have been obtained or entered, the Required Lenders (in

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their sole discretion) shall so direct, the Agent shall, by notice to the Borrower, rescind and annul such acceleration and/or termination.

    8.2. Amendments. Subject to the provisions of this Section 8.2, the Required Lenders (or the Agent with the consent in writing of the Required Lenders) and the Borrower may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Lenders or the Borrower hereunder or waiving any Default hereunder; provided, however, that no such supplemental agreement shall, without the consent of all of the Lenders:

    (i) Extend the final maturity of any Loan, or extend the expiry date of any Facility LC to a date after the Facility Termination Date or forgive all or any portion of the principal amount thereof or any Reimbursement Obligation related thereto, or reduce the rate or extend the time of payment of interest or fees thereon or Reimbursement Obligations related thereto.

    (ii) Reduce the percentage specified in the definition of Required Lenders.

    (iii) Extend the Facility Termination Date, or reduce the amount or extend the payment date for, the mandatory payments required under Section 2.2, or permit the Borrower to assign its rights under this Agreement.

    (iv) Except as provided in Section 2.22, increase the amount of the Aggregate Commitment, the Commitment of any Lender hereunder or the commitment to issue Facility LCs.

    (v) Amend this Section 8.2.

    (vi) Release any guarantor of any Advance or, except as provided in the Collateral Documents, release all or substantially all of the Collateral.

No amendment of any provision of this Agreement relating to the Agent shall be effective without the written consent of the Agent, and no amendment of any provision relating to the LC Issuer shall be effective without the written consent of the LC Issuer. The Agent may waive payment of the fee required under Section 12.3.2 without obtaining the consent of any other party to this Agreement.

    8.3. Preservation of Rights. No delay or omission of the Lenders, the LC Issuer or the Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein, and the making of a Credit Extension notwithstanding the existence of a Default or the inability of the Borrower to satisfy the conditions precedent to such Credit Extension shall not constitute any waiver or acquiescence. Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by the Lenders required pursuant to Section 8.2, and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Agent, the LC Issuer and the Lenders until the Obligations have been paid in full.

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ARTICLE IX

GENERAL PROVISIONS

    9.1. Survival of Representations. All representations and warranties of the Borrower contained in this Agreement shall survive the making of the Credit Extensions herein contemplated.

    9.2. Governmental Regulation. Anything contained in this Agreement to the contrary notwithstanding, neither the LC Issuer nor any Lender shall be obligated to extend credit to the Borrower in violation of any limitation or prohibition provided by any applicable statute or regulation.

    9.3. Headings. Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents.

    9.4. Entire Agreement. The Loan Documents embody the entire agreement and understanding among the Borrower, the Agent, the LC Issuer and the Lenders and supersede all prior agreements and understandings among the Borrower, the Agent, the LC Issuer and the Lenders relating to the subject matter thereof other than those contained in the fee letter described in Section 10.13 which shall survive and remain in full force and effect during the term of this Agreement.

    9.5. Several Obligations; Benefits of this Agreement. The respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other (except to the extent to which the Agent is authorized to act as such). The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and assigns, provided, however, that the parties hereto expressly agree that the Arranger shall enjoy the benefits of the provisions of Sections 9.6, 9.10 and 10.11 to the extent specifically set forth therein and shall have the right to enforce such provisions on its own behalf and in its own name to the same extent as if it were a party to this Agreement.

    9.6. Expenses; Indemnification. (i) The Borrower shall reimburse the Agent and the Arranger for any costs, internal charges and out-of-pocket expenses (including reasonable attorneys' fees and time charges of attorneys for the Agent, which attorneys may be employees of the Agent) paid or incurred by the Agent or the Arranger in connection with the preparation, negotiation, execution, delivery, syndication, distribution (including, without limitation, via the internet), review, amendment, modification, and administration of the Loan Documents. The Borrower also agrees to reimburse the Agent, the Arranger, the LC Issuer and the Lenders for any costs, internal charges and out-of-pocket expenses (including reasonable attorneys' fees and time charges of attorneys for the Agent, the Arranger, the LC Issuer and the Lenders, which attorneys may be employees of the Agent, the Arranger, the LC Issuer or the Lenders) paid or incurred by the Agent, the Arranger, the LC Issuer or any Lender in connection with the collection and enforcement of the Loan Documents.

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    (ii) The Borrower hereby further agrees to indemnify the Agent, the Arranger, the LC Issuer, each Lender, their respective affiliates, and each of their directors, officers and employees against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all expenses of litigation or preparation therefor whether or not the Agent, the Arranger, the LC Issuer, any Lender or any affiliate is a party thereto) which any of them may pay or incur arising out of or relating to this Agreement, the other Loan Documents, the transactions contemplated hereby or the direct or indirect application or proposed application of the proceeds of any Credit Extension hereunder except to the extent that they are determined in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the party seeking indemnification. The obligations of the Borrower under this Section 9.6 shall survive the termination of this Agreement.

    9.7. Numbers of Documents. All statements, notices, closing documents, and requests hereunder shall be furnished to the Agent with sufficient counterparts so that the Agent may furnish one to each of the Lenders.

    9.8. Accounting. Except as provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP in a manner consistent with that used in preparing the financial statements referred to in Section 5.4. If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and the Borrower, the Agent or the Required Lenders shall so request, the Agent, the Lenders and the Loan Parties shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders), provided that, until so amended, such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and the Borrower shall provide to the Agent and the Lenders reconciliation statements showing the difference in such calculation, together with the delivery of monthly, quarterly and annual financial statements required hereunder.

    9.9. Severability of Provisions. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable.

    9.10. Nonliability of Lenders/Mutual Release of Consequential Damages. The relationship between the Borrower on the one hand and the Lenders, the LC Issuer and the Agent on the other hand shall be solely that of borrower and lender. Neither the Agent, the Arranger, the LC Issuer nor any Lender shall have any fiduciary responsibilities to the Borrower. Neither the Agent, the Arranger, the LC Issuer nor any Lender undertakes any responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrower's business or operations. The Borrower agrees that neither the Agent, the Arranger, the LC Issuer nor any Lender shall have liability to the Borrower (whether sounding in tort, contract or otherwise) for losses suffered by the Borrower in connection with, arising out of, or in any way related to, the transactions contemplated and the relationship established by the Loan Documents, or any act, omission or event occurring in connection therewith, unless it is determined in a final non-appealable judgment by a court of competent jurisdiction that such losses resulted from the gross negligence or willful misconduct of the party from which recovery is sought. Except as expressly provided in this Agreement, neither the Agent, the Arranger, the

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LC Issuer, any Lender nor the Borrower shall have any liability with respect to, and the Borrower, each Lender, the LC Issuer, the Arranger and the Agent hereby waives, releases and agrees not to sue for, any special, indirect, consequential or punitive damages suffered by it in connection with, arising out of, or in any way related to the Loan Documents or the transactions contemplated thereby.

    9.11. Confidentiality. The Agent and each Lender agrees to hold any confidential information which it may receive from the Borrower in connection with this Agreement in confidence, except for disclosure (i) to its Affiliates and to the Agent and any other Lender and their respective Affiliates, (ii) to legal counsel, accountants, and other professional advisors to such Lender or to a Transferee, (iii) to regulatory officials, (iv) to any Person as requested pursuant to or as required by law, regulation, or legal process, (v) to any Person in connection with any legal proceeding to which it is a party, (vi) to its direct or indirect contractual counterparties in swap agreements or to legal counsel, accountants and other professional advisors to such counterparties, (vii) permitted by Section 12.4, and (viii) to rating agencies if requested or required by such agencies in connection with a rating relating to the Advances hereunder. Without limiting Section 9.4, the Borrower agrees that the terms of this Section 9.11 shall set forth the entire agreement between the Borrower and each Lender (including the Agent) with respect to any confidential information previously or hereafter received by such Lender in connection with this Agreement, and this Section 9.11 shall supersede any and all prior confidentiality agreements entered into by such Lender with respect to such confidential information.

    9.12. Nonreliance. Each Lender hereby represents that it is not relying on or looking to any margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System) for the repayment of the Credit Extensions provided for herein.

    9.13. Disclosure. The Borrower and each Lender hereby acknowledge and agree that Bank One and/or its Affiliates from time to time may hold investments in, make other loans to or have other relationships with the Borrower and its Affiliates.

    9.14. USA PATRIOT ACT NOTIFICATION. The following notification is provided to Borrower pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318:

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person or entity that opens an account, including any deposit account, treasury management account, loan, other extension of credit, or other financial services product. What this means for Borrower: When Borrower opens an account, if Borrower is an individual, Agent and the Lenders will ask for Borrower's name, residential address, tax identification number, date of birth, and other information that will allow Agent and the Lenders to identify Borrower, and, if Borrower is not an individual, Agent and the Lenders will ask for Borrower's name, tax identification number, business address, and other information that will allow Agent and the Lenders to identify Borrower. Agent and the Lenders may also ask, if Borrower is an individual, to see Borrower's driver's license or other identifying documents, and, if Borrower is not an individual, to see Borrower's legal organizational documents or other identifying documents.

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ARTICLE X

THE AGENT

    10.1. Appointment; Nature of Relationship. Bank One, NA is hereby appointed by each of the Lenders as its contractual representative (herein referred to as the "Agent") hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes the Agent to act as the contractual representative of such Lender with the rights and duties expressly set forth herein and in the other Loan Documents. The Agent agrees to act as such contractual representative upon the express conditions contained in this Article X. Notwithstanding the use of the defined term "Agent," it is expressly understood and agreed that the Agent shall not have any fiduciary responsibilities to any Lender by reason of this Agreement or any other Loan Document and that the Agent is merely acting as the contractual representative of the Lenders with only those duties as are expressly set forth in this Agreement and the other Loan Documents. In its capacity as the Lenders' contractual representative, the Agent (i) does not hereby assume any fiduciary duties to any of the Lenders, (ii) is a "representative" of the Lenders within the meaning of the term "secured party" as defined in the Indiana Uniform Commercial Code and (iii) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents. Each of the Lenders hereby agrees to assert no claim against the Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Lender hereby waives.

    10.2. Powers. The Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Agent shall have no implied duties to the Lenders, or any obligation to the Lenders to take any action thereunder except any action specifically provided by the Loan Documents to be taken by the Agent.

    10.3. General Immunity. Neither the Agent nor any of its directors, officers, agents or employees shall be liable to the Borrower, the Lenders or any Lender for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except to the extent such action or inaction is determined in a final non-appealable judgment by a court of competent jurisdiction to have arisen from the gross negligence or willful misconduct of such Person.

    10.4. No Responsibility for Loans, Recitals, etc. Neither the Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (a) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder; (b) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document, including, without limitation, any agreement by an obligor to furnish information directly to each Lender; (c) the satisfaction of any condition specified in Article IV, except receipt of items required to be delivered solely to the Agent; (d) the existence or possible existence of any Default or Unmatured Default; (e) the validity, enforceability, effectiveness, sufficiency or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith; (f) the value, sufficiency, creation, perfection or priority of any Lien in any collateral security; or (g) the financial condition of the Borrower or any guarantor of any of the Obligations or of any of the Borrower's or any such guarantor's respective Subsidiaries.

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    10.5. Action on Instructions of Lenders. The Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Lenders, and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. The Lenders hereby acknowledge that the Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement or any other Loan Document unless it shall be requested in writing to do so by the Required Lenders. The Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action.

    10.6. Employment of Agents and Counsel. The Agent may execute any of its duties as Agent hereunder and under any other Loan Document by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The Agent shall be entitled to advice of counsel concerning the contractual arrangement between the Agent and the Lenders and all matters pertaining to the Agent's duties hereunder and under any other Loan Document.

    10.7. Reliance on Documents; Counsel. The Agent shall be entitled to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex, electronic mail message, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of counsel selected by the Agent, which counsel may be employees of the Agent. For purposes of determining compliance with the conditions specified in Sections 4.1 and 4.2, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Agent shall have received notice from such Lender prior to the applicable date specifying its objection thereto.

    10.8. Agent's Reimbursement and Indemnification. The Lenders agree to reimburse and indemnify the Agent ratably in proportion to their respective Commitments (or, if the Commitments have been terminated, in proportion to their Commitments immediately prior to such termination) (i) for any amounts not reimbursed by the Borrower for which the Agent is entitled to reimbursement by the Borrower under the Loan Documents, (ii) for any other expenses incurred by the Agent on behalf of the Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents (including, without limitation, for any expenses incurred by the Agent in connection with any dispute between the Agent and any Lender or between two or more of the Lenders) and (iii) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby (including, without limitation, for any such amounts incurred by or asserted against the Agent in connection with any dispute between the Agent and any Lender or between two or more of the Lenders), or the enforcement of any of the terms of the Loan Documents or of any such other documents, provided that (i) no Lender shall be liable for any of the foregoing to the extent any of the foregoing is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Agent and (ii) any

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indemnification required pursuant to Section 3.5(vii) shall, notwithstanding the provisions of this Section 10.8, be paid by the relevant Lender in accordance with the provisions thereof. The obligations of the Lenders under this Section 10.8 shall survive payment of the Obligations and termination of this Agreement.

    10.9. Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Unmatured Default hereunder unless the Agent has received written notice from a Lender or the Borrower referring to this Agreement describing such Default or Unmatured Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the Lenders.

    10.10. Rights as a Lender. In the event the Agent is a Lender, the Agent shall have the same rights and powers hereunder and under any other Loan Document with respect to its Commitment and its Loans as any Lender and may exercise the same as though it were not the Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is a Lender, unless the context otherwise indicates, include the Agent in its individual capacity. The Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Subsidiaries in which the Borrower or such Subsidiary is not restricted hereby from engaging with any other Person. The Agent, in its individual capacity, is not obligated to remain a Lender.

    10.11. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Agent, the Arranger or any other Lender and based on the financial statements prepared by the Borrower and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents. Each Lender also acknowledges that it will, independently and without reliance upon the Agent, the Arranger or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents. Except for any notice, report, document or other information expressly required to be furnished to the Lenders by the Agent or Arranger hereunder, neither the Agent nor the Arranger shall have any duty or responsibility (either initially or on a continuing basis) to provide any Lender with any notice, report, document, credit information or other information concerning the affairs, financial condition or business of the Borrower or any of its Affiliates that may come into the possession of the Agent or Arranger (whether or not in their respective capacity as Agent or Arranger) or any of their Affiliates.

    10.12. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower, such resignation to be effective upon the appointment of a successor Agent or, if no successor Agent has been appointed, forty-five days after the retiring Agent gives notice of its intention to resign. The Agent may be removed at any time with or without cause by written notice received by the Agent from the Required Lenders, such removal to be effective on the date specified by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint, on behalf of the Borrower and the Lenders, a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders within thirty days after the resigning Agent's giving notice of its intention to resign, then the resigning Agent may appoint, on behalf of the Borrower and the Lenders, a successor Agent. Notwithstanding the previous sentence, the Agent may at any time without the consent of the Borrower or any Lender, appoint any of its Affiliates which is a

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commercial bank as a successor Agent hereunder. If the Agent has resigned or been removed and no successor Agent has been appointed, the Lenders may perform all the duties of the Agent hereunder and the Borrower shall make all payments in respect of the Obligations to the applicable Lender and for all other purposes shall deal directly with the Lenders. No successor Agent shall be deemed to be appointed hereunder until such successor Agent has accepted the appointment. Any such successor Agent shall be a commercial bank having capital and retained earnings of at least $100,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning or removed Agent. Upon the effectiveness of the resignation or removal of the Agent, the resigning or removed Agent shall be discharged from its duties and obligations hereunder and under the Loan Documents. After the effectiveness of the resignation or removal of an Agent, the provisions of this Article X shall continue in effect for the benefit of such Agent in respect of any actions taken or omitted to be taken by it while it was acting as the Agent hereunder and under the other Loan Documents. In the event that there is a successor to the Agent by merger, or the Agent assigns its duties and obligations to an Affiliate pursuant to this Section 10.12, then the term "Prime Rate" as used in this Agreement shall mean the prime rate, base rate or other analogous rate of the new Agent.

    10.13. Agent and Arranger Fees. The Borrower agrees to pay to the Agent and the Arranger, for their respective accounts, the fees agreed to by the Borrower, the Agent and the Arranger pursuant to that certain letter agreement dated March 11, 2004, or as otherwise agreed from time to time.

    10.14. Delegation to Affiliates. The Borrower and the Lenders agree that the Agent may delegate any of its duties under this Agreement to any of its Affiliates. Any such Affiliate (and such Affiliate's directors, officers, agents and employees) which performs duties in connection with this Agreement shall be entitled to the same benefits of the indemnification, waiver and other protective provisions to which the Agent is entitled under Articles IX and X.

    10.15. Collateral Releases. The Lenders hereby empower and authorize the Agent to execute and deliver to the Borrower on their behalf any agreements, documents or instruments as shall be necessary or appropriate to effect any releases of Collateral which shall be permitted by the terms hereof or of any other Loan Document or which shall otherwise have been approved by the Required Lenders (or, if required by the terms of Section 8.2, all of the Lenders) in writing.

ARTICLE XI

SETOFF; RATABLE PAYMENTS

    11.1. Setoff. In addition to, and without limitation of, any rights of the Lenders under applicable law, if the Borrower becomes insolvent, however evidenced, or any Default occurs, any and all deposits (including all account balances, whether provisional or final and whether or not collected or available) and any other Indebtedness at any time held or owing by any Lender or any Affiliate of any Lender to or for the credit or account of the Borrower may be offset and applied toward the payment of the Obligations owing to such Lender, whether or not the Obligations, or any part thereof, shall then be due.

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    11.2. Ratable Payments. If any Lender, whether by setoff or otherwise, has payment made to it upon its Outstanding Credit Exposure (other than payments received pursuant to Section 3.1, 3.2, 3.4 or 3.5) in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to purchase a portion of the Aggregate Outstanding Credit Exposure held by the other Lenders so that after such purchase each Lender will hold its Pro Rata Share of the Aggregate Outstanding Credit Exposure. If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral ratably in proportion to their respective Pro Rata Shares of the Aggregate Outstanding Credit Exposure. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made.

ARTICLE XII

BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

    12.1. Successors and Assigns. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrower and the Lenders and their respective successors and assigns permitted hereby, except that (i) the Borrower shall not have the right to assign its rights or obligations under the Loan Documents without the prior written consent of each Lender, (ii) any assignment by any Lender must be made in compliance with Section 12.3, and (iii) any transfer by Participation must be made in compliance with Section 12.2. Any attempted assignment or transfer by any party not made in compliance with this Section 12.1 shall be null and void, unless such attempted assignment or transfer is treated as a participation in accordance with Section 12.3.2. The parties to this Agreement acknowledge that clause (ii) of this Section 12.1 relates only to absolute assignments and this Section 12.1 does not prohibit assignments creating security interests, including, without limitation, (x) any pledge or assignment by any Lender of all or any portion of its rights under this Agreement and any Note to a Federal Reserve Bank or (y) in the case of a Lender which is a Fund, any pledge or assignment of all or any portion of its rights under this Agreement and any Note to its trustee in support of its obligations to its trustee; provided, however, that no such pledge or assignment creating a security interest shall release the transferor Lender from its obligations hereunder unless and until the parties thereto have complied with the provisions of Section 12.3. The Agent may treat the Person which made any Loan or which holds any Note as the owner thereof for all purposes hereof unless and until such Person complies with Section 12.3; provided, however, that the Agent may in its discretion (but shall not be required to) follow instructions from the Person which made any Loan or which holds any Note to direct payments relating to such Loan or Note to another Person. Any assignee of the rights to any Loan or any Note agrees by acceptance of such assignment to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the owner of the rights to any Loan (whether or not a Note has been issued in evidence thereof), shall be conclusive and binding on any subsequent holder or assignee of the rights to such Loan.

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    12.2. Participations.

        12.2.1. Permitted Participants; Effect. Any Lender may at any time sell to one or more banks or other entities ("Participants") participating interests in any Outstanding Credit Exposure owing to such Lender, any Note held by such Lender, any Commitment of such Lender or any other interest of such Lender under the Loan Documents. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the owner of its Outstanding Credit Exposure and the holder of any Note issued to it in evidence thereof for all purposes under the Loan Documents, all amounts payable by the Borrower under this Agreement shall be determined as if such Lender had not sold such participating interests, and the Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents.

        12.2.2. Voting Rights. Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Credit Exposure or Commitment in which such Participant has an interest which would require consent of all of the Lenders pursuant to the terms of Section 8.2 or of any other Loan Document.

        12.2.3. Benefit of Certain Provisions. The Borrower agrees that each Participant shall be deemed to have the right of setoff provided in Section 11.1 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, provided that each Lender shall retain the right of setoff provided in Section 11.1 with respect to the amount of participating interests sold to each Participant. The Lenders agree to share with each Participant, and each Participant, by exercising the right of setoff provided in Section 11.1, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 11.2 as if each Participant were a Lender. The Borrower further agrees that each Participant shall be entitled to the benefits of Sections 3.1, 3.2, 3.4, 3.5, 9.6 and 9.10 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 12.3, provided that (i) a Participant shall not be entitled to receive any greater payment under Section 3.1, 3.2 or 3.5 than the Lender who sold the participating interest to such Participant would have received had it retained such interest for its own account, unless the sale of such interest to such Participant is made with the prior written consent of the Borrower, and (ii) any Participant not incorporated under the laws of the United States of America or any State thereof agrees to comply with the provisions of Section 3.5 to the same extent as if it were a Lender.

    12.3. Assignments.

        12.3.1. Permitted Assignments. Any Lender may at any time assign to one or more banks or other entities ("Purchasers") all or any part of its rights and obligations under the Loan Documents. Such assignment shall be substantially in the form of Exhibit C or in such other form as may be agreed to by the parties thereto. Each such assignment with respect to a Purchaser which is not a Lender or an Affiliate of a Lender

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or an Approved Fund shall either be in an amount equal to the entire applicable Commitment and Loans of the assigning Lender or (unless each of the Borrower and the Agent otherwise consents) be in an aggregate amount not less than $5,000,000. The amount of the assignment shall be based on the Commitment or outstanding Loans (if the Commitment has been terminated) subject to the assignment, determined as of the date of such assignment or as of the "Trade Date," if the "Trade Date" is specified in the assignment.

        12.3.2. Consents. The consent of the Borrower shall be required prior to an assignment becoming effective unless the Purchaser is a Lender, an Affiliate of a Lender or an Approved Fund, provided that the consent of the Borrower shall not be required if a Default has occurred and is continuing. The consent of the Agent shall be required prior to an assignment becoming effective unless the Purchaser is a Lender, an Affiliate of a Lender or an Approved Fund. The consent of the LC Issuer shall be required prior to an assignment of a Revolving Commitment becoming effective unless the Purchaser is a Lender with a Revolving Commitment. Any consent required under this Section 12.3.2 shall not be unreasonably withheld or delayed.

        12.3.3. Effect; Effective Date. Upon (i) delivery to the Agent of an assignment, together with any consents required by Sections 12.3.1 and 12.3.2, and (ii) payment of a $3,500 fee to the Agent for processing such assignment (unless such fee is waived by the Agent), such assignment shall become effective on the effective date specified in such assignment. The assignment shall contain a representation by the Purchaser to the effect that none of the consideration used to make the purchase of the Commitment and Outstanding Credit Exposure under the applicable assignment agreement constitutes "plan assets" as defined under ERISA and that the rights and interests of the Purchaser in and under the Loan Documents will not be "plan assets" under ERISA. On and after the effective date of such assignment, such Purchaser shall for all purposes be a Lender party to this Agreement and any other Loan Document executed by or on behalf of the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party thereto, and the transferor Lender shall be released with respect to the Commitment and Outstanding Credit Exposure assigned to such Purchaser without any further consent or action by the Borrower, the Lenders or the Agent. In the case of an assignment covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a Lender hereunder but shall continue to be entitled to the benefits of, and subject to, those provisions of this Agreement and the other Loan Documents which survive payment of the Obligations and termination of the applicable agreement. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 12.3 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 12.2. Upon the consummation of any assignment to a Purchaser pursuant to this Section 12.3.3, the transferor Lender, the Agent and the Borrower shall, if the transferor Lender or the Purchaser desires that its Loans be evidenced by Notes, make appropriate arrangements so that new Notes or, as appropriate, replacement Notes are issued to such transferor Lender and new Notes or, as appropriate, replacement Notes, are issued to such Purchaser, in each case in principal amounts reflecting their respective Commitments, as adjusted pursuant to such assignment.

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        12.3.4. Register. The Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at one of its offices in Chicago, Illinois a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower at any reasonable time and from time to time upon reasonable prior notice.

    12.4. Dissemination of Information. The Borrower authorizes each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a "Transferee") and any prospective Transferee any and all information in such Lender's possession concerning the creditworthiness of the Borrower and its Subsidiaries; provided that each Transferee and prospective Transferee agrees to be bound by Section 9.11 of this Agreement.

    12.5. Tax Treatment. If any interest in any Loan Document is transferred to any Transferee which is not incorporated under the laws of the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 3.5(iv).

ARTICLE XIII

NOTICES

    13.1. Notices; Effectiveness; Electronic Communication

    (i) Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in paragraph (ii) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows:

        (a) if to the Borrower, at its address or telecopier number set forth on the signature page hereof;

        (b) if to the Agent, at its address or telecopier number set forth on the signature page hereof;

        (c) if to the LC Issuer, at its address or telecopier number set forth on the signature page hereof;

        (d) if to a Lender, to it at its address (or telecopier number) set forth in its Administrative Questionnaire.

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Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices delivered through electronic communications to the extent provided in paragraph (ii) below, shall be effective as provided in said paragraph (ii).

    (ii) Electronic Communications. Notices and other communications to the Lenders and the LC Issuer hereunder may be delivered or furnished by electronic communication (including e-mail and internet or intranet websites) pursuant to procedures approved by the Agent or as otherwise determined by the Agent, provided that the foregoing shall not apply to notices to any Lender or the LC Issuer pursuant to Article II if such Lender or the LC Issuer, as applicable, has notified the Agent that it is incapable of receiving notices under such Article by electronic communication. The Agent or the Borrower may, in its respective discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it or as it otherwise determines, provided that such determination or approval may be limited to particular notices or communications.

    Unless the Agent otherwise prescribes, (a) notices and other communications sent to an e-mail address shall be deemed received upon the sender's receipt of an acknowledgement from the intended recipient (such as by the "return receipt requested" function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not given during the normal business hours of the recipient, such notice or communication shall be deemed to have been given at the opening of business on the next Business Day for the recipient, and (b) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (a) of notification that such notice or communication is available and identifying the website address therefor.

    (iii) Change of Address, Etc. Any party hereto may change its address or telecopier number for notices and other communications hereunder by notice to the other parties hereto.

ARTICLE XIV

COUNTERPARTS; INTEGRATION; EFFECTIVENESS; ELECTRONIC EXECUTION

    14.1 Counterparts; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Except as provided in Article IV, this Agreement shall become effective when it shall have been executed by the Agent and when the Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.

    14.2 Electronic Execution of Assignments. The words "execution," "signed," "signature," and words of like import in any assignment and assumption agreement shall be deemed to include electronic signatures or the keeping of records in electronic form, each of

59

which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, or any other state laws based on the Uniform Electronic Transactions Act.

ARTICLE XV

CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

    15.1. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (BUT WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF INDIANA, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

    15.2. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR INDIANA STATE COURT SITTING IN INDIANAPOLIS, INDIANA IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT, THE LC ISSUER OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE AGENT, THE LC ISSUER OR ANY LENDER OR ANY AFFILIATE OF THE AGENT, THE LC ISSUER OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN INDIANAPOLIS, INDIANA.

    15.3. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT, THE LC ISSUER AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.

    IN WITNESS WHEREOF, the Borrower, the Lenders, the LC Issuer and the Agent have executed this Agreement as of the date first above written.

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SIGNATURE PAGE OF
KIMBALL INTERNATIONAL, INC.
TO THE CREDIT AGREEMENT

	KIMBALL INTERNATIONAL, INC.
By:	/s/ Robert F. Schneider
	Robert F. Schneider, Executive Vice President, Chief Financial Officer, Treasurer
By:	/s/ R. Gregory Kincer
	R. Gregory Kincer, Vice President, Business Development, Assistant Treasurer
Address:	1600 Royal Street
	Jasper, Indiana 47549
Attention:	Chief Financial Officer
	Telephone:  (812) 482-1600
	FAX:  (812) 482-8060

SIGNATURE PAGE OF
BANK ONE, NA
TO THE CREDIT AGREEMENT

Commitments
	$40,000,000		BANK ONE, NA,
	(Equivalent Amount Sublimit for Agreed Currencies other than Dollars, $26,666,666)		Individually, as Agent and as LC Issuer
		By:	/s/ Randall K. Stephens
		Title:	Vice President
			111 Monument Circle 4th Floor
			Indianapolis, Indiana  46277
		Attention:	Randall K. Stephens
			Telephone:  (317) 321-7103
			FAX:  (317) 592-5270

SIGNATURE PAGE OF
LASALLE BANK NATIONAL ASSOCIATION
TO THE CREDIT AGREEMENT

$17,500,000		LASALLE BANK NATIONAL ASSOCIATION
(Equivalent Amount Sublimit for Agreed Currencies other than Dollars, $11,666,667)
	By:	/s/ Mark H. Veach
	Title:	Vice President
		One American Square, Suite 1600
		Indianapolis, Indiana  46282
	Attention:	Mark H. Veach, Vice President
		Telephone:  (317) 756-7011
		FAX:  (317) 756-7021

SIGNATURE PAGE OF
NATIONAL CITY BANK OF INDIANA
TO THE CREDIT AGREEMENT

$17,500,000		NATIONAL CITY BANK OF INDIANA
(Equivalent Amount Sublimit for Agreed Currencies other than Dollars, $11,666,667)
	By:	/s/ John W. Lichtle
	Title:	Vice President
		One National City Center
		Suite 200E
		Indianapolis, Indiana  46255
	Attention:	John W. Lichtle, Vice President
		Telephone:  (317) 267-7073
		FAX:  (317) 267-6249

FIRST AMENDMENT TO CREDIT AGREEMENT






BY AND AMONG


KIMBALL INTERNATIONAL, INC.

AND

THE LENDERS PARTY HERETO

AND

JPMORGAN CHASE BANK, N.A.,
AS SUCCESSOR BY MERGER TO BANK ONE, NA,
AS AGENT








DATED AS OF DECEMBER 7, 2005

 

FIRST AMENDMENT TO CREDIT AGREEMENT

        THIS FIRST AMENDMENT TO CREDIT AGREEMENT is made as of the 7th day of December, 2005, by and among KIMBALL INTERNATIONAL, INC. ("Borrower"), the Lenders party hereto and JPMORGAN CHASE BANK, N.A., as successor by merger to Bank One, NA, as agent (in such capacity, the "Agent"). The parties hereto agree as follows:

W I T N E S S E T H:

        WHEREAS, as of May 20, 2004, the parties hereto entered into a certain Credit Agreement (the "Agreement"); and

        WHEREAS, the parties desire to amend the Agreement with respect to the provisions requiring additional guarantors and additional pledged stock, subject to and as provided in this First Amendment;

        NOW, THEREFORE, in consideration of the premises, and the mutual promises herein contained, the parties agree that the Agreement shall be, and it hereby is, amended as provided herein and the parties further agree as follows:

PART I. AMENDATORY PROVISIONS
ARTICLE VI
COVENANTS

        6.13 Investments and Acquisitions. Section 6.13(iii) is hereby amended by substituting the following new Section 6.13(iii) in lieu of the existing Section 6.13(iii):

        (iii) Investments by the Borrower in and to the Guarantors, and Investments by the Borrower in and to non-U.S. Subsidiaries, of which the Borrower has granted a first priority pledge of 65% of such non-U.S. Subsidiary's capital stock to the Agent pursuant to the Collateral Documents if required under Section 6.17 hereof, and Investments by the Borrower in U.S. Subsidiaries that are not Guarantors if the Required Lenders have not required such U.S. Subsidiary to be a Guarantor in accordance with Section 6.17 hereof.

        6.17 Addition of Guarantors; Addition of Pledged Stock.

        Section 6.17 of the Agreement is hereby amended by substituting the following new Section 6.17 in lieu of the existing Section 6.17:

        6.17 Borrower shall give the Agent and the Lenders written notice as soon as practicable of the initial capitalization or Acquisition of each new Subsidiary, but, in any event, not later than thirty (30) days after such initial capitalization or Acquisition. If the Required Lenders require, at any time, Borrower will cause such new Subsidiary (other than a Subsidiary organized or incorporated outside the United States of America) to execute and deliver to the Agent a Guaranty. Such Guaranty shall be executed and delivered within thirty (30) days of the Required Lenders' request. With delivery to the Agent of such Guaranty, the Borrower shall also furnish, or cause to be furnished, to the Agent (a) copies of the certificate or articles of incorporation of such Guarantor, together with all amendments, and a certificate of good standing or existence, both certified by the appropriate governmental officer in its jurisdiction of incorporation; (b) copies, certified by the Secretary or Assistant Secretary of such Guarantor, of its by-laws and of its Board of Directors' resolutions (and resolutions of other bodies, if any are reasonably deemed necessary by counsel for any Lender) authorizing the execution of the Guaranty; (c) an incumbency certificate, executed by the Secretary or Assistant Secretary of such Guarantor, which shall identify by name and title and bear the signature of the officers of such Guarantor authorized to sign the Guaranty; and (d) a favorable written opinion of such Guarantor's counsel, addressed to the Agent in a form acceptable to the Agent, opining (i) as to such Guarantor's existence, (ii) as to such Guarantor's authorization to execute the Guaranty, (iii) as to the enforceability of the Guaranty, and (iv) that the execution and performance of the Guaranty will not conflict with or result in a breach under any material contract, indenture, instrument or other agreement by which such Guarantor is bound or to which it is party. If the Required Lenders require, at any time, the Borrower shall within thirty (30) days of its initial capitalization or Acquisition of a non-U.S. Subsidiary (or, if the capital stock of such new non-U.S. Subsidiary is owned by another Subsidiary, shall cause such other Subsidiary to) deliver to the Agent an executed supplement to the existing Collateral Document or a new stock pledge agreement, together with appropriate corporate resolutions, stock certificates, UCC filings or amendments and other documentation, in each case in form and substance reasonably satisfactory to the Agent and the Agent shall be reasonably satisfied that the Agent has a first priority perfected pledge of 65% of the capital stock of such non-U.S. Subsidiary owned by the Borrower and its Subsidiaries.

PART II. WAIVER

        The Required Lenders hereby waive through the date hereof the provisions of Section 6.17 of the Agreement with respect to the delivery of a pledge of 65% of the capital stock of Kimball Electronics (Nanjing) Co., Ltd and Kimball Electronics Manufacturing (Mauritius) Ltd. This waiver shall be in force and effect solely through the date of this First Amendment, unless otherwise agreed by the Required Lenders in the exercise of their sole discretion.

PART III. CONTINUING EFFECT

        Except as expressly modified herein:

        (a)     All terms, conditions, representations, warranties and covenants contained in the Agreement shall remain the same and shall continue in full force and effect, interpreted, wherever possible, in a manner consistent with this First Amendment; provided, however, in the event of any irreconcilable inconsistency, this First Amendment shall control;

        (b)     The representations and warranties contained in the Agreement shall survive this First Amendment in their original form as continuing representations and warranties of Borrower; and

        (c)     Capitalized terms used in this First Amendment, and not specifically herein defined, shall have the meanings ascribed to them in the Agreement.

        In consideration hereof, Borrower represents, warrants, covenants and agrees that:

        (aa)     Each representation and warranty set forth in the Agreement, as hereby amended, remains true and correct as of the date hereof in all material respects, except to the extent that such representation and warranty is expressly intended to apply solely to an earlier date and except changes reflecting transactions permitted by the Agreement;

        (bb)     There currently exist no offsets, counterclaims or defenses to the performance of the Obligations (such offsets, counterclaims or defenses, if any, being hereby expressly waived);

        (cc)     Except as expressly waived in this First Amendment, there does not exist any Default or Unmatured Default; and

        (dd)     After giving effect to this First Amendment and any transactions contemplated hereby, no Default or Unmatured Default is or will be occasioned hereby or thereby.

PART IV. INDEPENDENT CREDIT DECISION

        Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender, based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this First Amendment.

PART V. CONDITIONS PRECEDENT

        Notwithstanding anything contained in this First Amendment to the contrary, this First Amendment shall not become effective until each of the following conditions precedent have been fulfilled to the satisfaction of the Agent:

        (a)     The Agent shall have received counterparts of this First Amendment duly executed by the Agent, Borrower and the Required Lenders;

        (b)     All legal matters incident to this First Amendment shall be reasonably satisfactory to the Agent and its counsel.

        IN WITNESS WHEREOF, Borrower, the Agent and the Lenders have caused this First Amendment to be executed by their respective officers duly authorized as of the date first above written.

SIGNATURE PAGE OF
KIMBALL INTERNATIONAL, INC.
TO FIRST AMENDMENT TO CREDIT AGREEMENT

 

	"BORROWER"
	KIMBALL INTERNATIONAL, INC.
By:	/s/ Robert F. Schneider
	Robert F. Schneider, Executive Vice
	President, Chief Financial Officer,
	Treasurer
By:	/s/ James C. Thyen
	James C. Thyen, President,
	Chief Executive Officer

SIGNATURE PAGE OF
JPMORGAN CHASE BANK, N.A.
TO FIRST AMENDMENT TO CREDIT AGREEMENT


 

	JPMORGAN CHASE BANK, N.A., as successor
	by merger to Bank One, NA, Individually
	and as Agent
By:	/s/ Randall K. Stephens
Its:	Vice President

SIGNATURE PAGE OF
LASALLE BANK NATIONAL ASSOCIATION
TO FIRST AMENDMENT TO CREDIT AGREEMENT


 

	LASALLE BANK NATIONAL ASSOCIATION
By:	/s/ Jeffrey S. Nurkiewicz
Its:	First Vice President

SIGNATURE PAGE OF
NATIONAL CITY BANK OF INDIANA
TO FIRST AMENDMENT TO CREDIT AGREEMENT

 

	NATIONAL CITY BANK OF INDIANA
By:	/s/ Tracy J. Venable
Its:	Vice President

EX-10

Exhibit 10(b)

SUMMARY OF DIRECTOR AND NAMED EXECUTIVE OFFICER COMPENSATION

This summary sets forth the compensation of the Directors of Kimball International, Inc. (the "Company"). The summary also includes compensation of the Chief Executive Officer and four most highly compensated executive officers (the "Named Executive Officers") of the Company as identified in the Company's Proxy Statement. 

Director Compensation

All Outside (non-employee) Directors receive annual compensation of $24,000 for the year for service as Directors, and an additional $2,000 for each Board meeting attended. The Chairperson of the Audit Committee of the Board of Directors receives $3,500 per committee meeting, and other Audit Committee members receive $2,500 per committee meeting. Members of the Compensation Committee and the Governance and Nominating Committee receive $1,000 per committee meeting.  Members of the Executive Committee receive no additional compensation for their service on the committee.   

The Directors can elect to receive all or part of their annual retainer and meeting fees in shares of Class B Common Stock under the Company's 2003 Stock Option and Incentive Plan.   Directors are also reimbursed for travel expenses incurred in connection with Board and Committee meeting attendance.

An Outside Director is a director who is not an employee of the Company or one of its subsidiaries.  James C. Thyen, President and Chief Executive Officer, and Douglas A. Habig, Chairman of the Board, are Directors of the Company but do not receive compensation for their services as Directors.

Named Executive Officers

Base Pay

Periodically, the Compensation Committee of the Board of Directors reviews and approves the salaries that are paid to the Company's executive officers. The following are the current annualized base salaries for the Company's Named Executive Officers identified in the last proxy statement:

James C. Thyen, President and Chief Executive Officer	$776,360
Douglas A. Habig, Chairman of the Board	$638,300
Donald D. Charron, Executive Vice President, President-Kimball Electronics Group	$436,800
P. Daniel Miller, Executive Vice President, President-Furniture	$429,000
Robert F. Schneider, Executive Vice President, Chief Financial Officer	$356,200

Cash Bonus Plan

Each of the Named Executive Officers is able to participate in the Company's 2005 Profit Share Incentive Bonus Plan (the "Plan"), which was adopted by the Compensation Committee and approved at the 2005 Annual Meeting of Share Owners. The profit sharing framework of this Plan has been in place since prior to the Company becoming publicly traded in 1976. The Plan includes profit determinations at three levels within the Company: (1) Worldwide for Company-wide performance ("Worldwide"); (2) at a Group level for certain combinations of Business Units ("Group"); and (3) at a Business Unit level for the performance of designated operations within the Company ("Business Unit").

Goal. The goal of the Plan is to link an employee's compensation with the long-term financial success of the Company. The intent is to encourage participants to think, act and be rewarded like owners, and to seek out and undertake initiatives that continuously improve the long-term performance of the Company.

Eligibility. Executive officers and full-time salaried employees of the Company, except those covered under commission compensation programs, are eligible to participate in the Plan ("Participants").

Bonus Criteria. The Plan measures profitability in terms of "economic profit", generally equal to net income less the cost of capital. New capital expenditures are not included in computing the cost of capital for twelve months. The Compensation Committee must approve the profitability goals ("Targets") within the first 25% of the period of service to which the Targets relate, but not later than 90 days after the commencement of that period ("Relevant Time Period"). The Compensation Committee, within the Relevant Time Period, may make adjustments for non-operating income and loss and other profit-computation elements as it deems appropriate to provide optimal incentives for eligible employees. If other adjustments are necessary beyond the Relevant Time Period, the Named Executive Officers will not be eligible to receive any bonus resulting from such adjustments.

Bonus Amounts. The Plan establishes potential bonus amounts as a range of percentages of the Participant's salary, with the bonus percentage increasing with higher levels of profitability. The Plan also establishes different bonus percentage ranges across several Participant categories, setting higher bonus-percentage ranges for Participants who, by virtue of their responsibilities, are expected to have a greater effect on the Company's profitability.

The Named Executive Officers may earn bonuses anywhere from zero up to 100 percent of base salary. The Plan is designed so that Participants will achieve maximum bonuses only if the Company achieves Targets comparable to those of leading public companies and/or its competitors.

A Participant's total bonus under the Plan may not exceed $1,000,000 for any fiscal year.

Administration. For a particular fiscal year, the Compensation Committee must approve the Targets, profit-computation adjustments, and any other conditions at the Worldwide and Group profitability levels within the Relevant Time Period. Company management will determine the comparable features for each Business Unit profitability level.

At the end of each fiscal year, but before Plan bonuses may be paid, the Compensation Committee must certify in writing that Targets and other conditions have been satisfied. The Compensation Committee does not have the discretion to increase the amount of any bonus for the Named Executive Officers.

Because no single incentive plan is perfect and special situations occur where individual achievement may not be adequately recognized by the 2005 Profit Sharing Incentive Bonus Plan, there is a Supplemental Bonus Plan reviewed and approved on an annual basis by your Board of Directors where a maximum of 1.5%, on an after-tax basis, of the Company's overall annual net income (before bonuses paid pursuant to the Company's 2005 Profit Sharing Incentive Bonus Plan) may be designated as supplemental bonuses to those eligible employees, including all Named Executive Officers, at the discretion of the Chairman of the Board and President, Chief Executive Officer. Payments of any supplemental bonus are made under the same terms and conditions as the 2005 Profit Sharing Incentive Bonus Plan.  No bonuses were granted to any of the Named Executive Officers under this Supplemental Bonus Plan for fiscal year 2005.

Bonus Payments. Under the Company's bonus plans, bonuses are accrued annually and paid in five installments over the succeeding fiscal year. Except for provisions relating to retirement, death, and permanent disability, participants must be actively employed on each payment date to be eligible to receive any unpaid bonus installment. The total amount of bonus accrued and authorized to be paid to the Named Executive Officers based on the Company's fiscal year 2005 results is listed below. The Named Executive Officers received an installment of 50% of the payment in August 2005, 12.5% was paid in each September 2005 and January 2006 and the remaining portion will be paid in equal installments in April 2006 and June 2006.

James C. Thyen, President and Chief Executive Officer	$190,687
Douglas A. Habig, Chairman of the Board	$165,958
Donald D. Charron, Executive Vice President, President-Kimball Electronics Group	$173,978
P. Daniel Miller, Executive Vice President, President-Furniture	$168,400
Robert F. Schneider, Executive Vice President, Chief Financial Officer	$89,284

Retirement Plans

The Named Executive Officers participate in a defined contribution, participant-directed retirement plan with a 401(k) provision that all domestic employees are eligible to participate in (the "Retirement Plan"). The Retirement Plan provides for voluntary employee contributions as well as a discretionary annual Company contribution as determined by the Board of Directors based on income of the Company as defined in the Retirement Plan. Each eligible employee's Company contribution is defined as a percent of eligible compensation, the percent being identical for all eligible employees, including Named Executive Officers. Participant contributions are fully vested immediately and Company contributions are fully vested after five years of participation. All Named Executive Officers were fully vested at December 31, 2005. The Retirement Plan is fully funded. For those eligible employees who, under the 1986 Tax Reform Act, are deemed to be highly compensated, their individual Company contribution under the Retirement Plan is reduced. For employees who are eligible, including all Named Executive Officers, there is a nonqualified, Supplemental Employee Retirement Plan (SERP) in which the Company contributes to the account of each individual an amount equal to the reduction in the contribution under the Retirement Plan arising from the provisions of the 1986 Tax Reform Act.

Other

The Named Executive Officers are eligible to receive grants under the Company's 2003 Stock Option and Incentive Plan. The Named Executive Officers also receive nominal benefits such as executive financial services programs, supplemental group medical, automotive allowances, and other miscellaneous items.  The exact amounts received from these benefits are not predetermined and are disclosed annually in the Company's Proxy Statement. 

EX-11

Exhibit 11

KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE

EARNINGS PER SHARE	(Unaudited)	(Unaudited)
FROM CONTINUING OPERATIONS	Three Months Ended	Three Months Ended
	December 31, 2005	December 31, 2004

(Amounts in Thousands, Except for per Share Data)	Class A	Class B	Total	Class A	Class B	Total
Basic Earnings Per Share from Continuing Operations:
Dividends Declared	$ 2,020	$ 3,983	$ 6,003	$ 2,137	$ 3,949	$ 6,086
Undistributed Earnings (Loss)	(307)	(570)	(877)	511	922	1,433
Income from Continuing Operations	$ 1,713	$ 3,413	$ 5,126	$ 2,648	$ 4,871	$ 7,519
Average Basic Shares Outstanding	13,352	24,851	38,203	13,584	24,555	38,139
Basic Earnings Per Share from Continuing       Operations	$0.13	$0.14		$0.19	$0.20
Diluted Earnings Per Share from Continuing Operations:
Dividends Declared and Assumed        Dividends on Dilutive Shares	$ 2,040	$ 3,985	$ 6,025	$ 2,137	$ 3,959	$ 6,096
Undistributed Earnings (Loss)	(316)	(583)	(899)	510	913	1,423
Income from Continuing Operations	$ 1,724	$ 3,402	$ 5,126	$ 2,647	$ 4,872	$ 7,519
Average Diluted Shares Outstanding	13,482	24,861	38,343	13,807	24,718	38,525
Diluted Earnings Per Share from        Continuing Operations	$0.13	$0.14		$0.19	$0.20
Reconciliation of Basic and Diluted EPS from Continuing Operations Calculations:
Income from Continuing Operations       Used for Basic EPS Calculation	$ 1,713	$ 3,413	$ 5,126	$ 2,648	$ 4,871	$ 7,519
Assumed Dividends Payable on Dilutive Shares:
Stock options	--	--	--	--	--	--
Performance share awards	20	2	22	--	10	10
(Reduction) Increase of Undistributed      Earnings - allocated based on Class A      and Class B shares	(9)	(13)	(22)	(1)	(9)	(10)
Income from Continuing Operations       Used for Diluted EPS Calculation	$ 1,724	$ 3,402	$ 5,126	$ 2,647	$ 4,872	$ 7,519
Average Shares Outstanding for Basic       EPS Calculation	13,352	24,851	38,203	13,584	24,555	38,139
Dilutive Effect of Average Outstanding:
Stock options	--	--	--	--	--	--
Performance share awards	130	10	140	--	66	66
Restricted share units	--	--	--	223	97	320
Average Shares Outstanding for Diluted       EPS Calculation	13,482	24,861	38,343	13,807	24,718	38,525

Included in dividends declared for the basic and diluted earnings per share computation are dividends computed and accrued on unvested Class A and Class B restricted share units, which will be paid by a conversion to the equivalent value of common shares after a vesting period.

For the current year period, all 1,935,000 average stock options outstanding were antidilutive and were excluded from the dilutive calculation. For the prior year period, all 2,440,000 average stock options outstanding were antidilutive and were excluded from the dilutive calculation.

KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE

EARNINGS PER SHARE	(Unaudited)	(Unaudited)
FROM CONTINUING OPERATIONS	Six Months Ended	Six Months Ended
	December 31, 2005	December 31, 2004

(Amounts in Thousands, Except for per Share Data)	Class A	Class B	Total	Class A	Class B	Total
Basic Earnings Per Share from Continuing Operations:
Dividends Declared	$  4,178	$  7,958	$12,136	$ 4,283	$ 7,885	$12,168
Undistributed Earnings (Loss)	(2,518)	(4,648)	(7,166)	465	837	1,302
Income from Continuing Operations	$  1,660	$  3,310	$  4,970	$ 4,748	$ 8,722	$13,470
Average Basic Shares Outstanding	13,418	24,766	38,184	13,605	24,524	38,129
Basic Earnings Per Share from Continuing       Operations	$0.12	$0.13		$0.35	$0.36
Diluted Earnings Per Share from Continuing Operations:
Dividends Declared and Assumed        Dividends on Dilutive Shares	$  4,214	$  7,961	$12,175	$ 4,283	$ 7,907	$12,190
Undistributed Earnings (Loss)	(2,546)	(4,659)	(7,205)	459	821	1,280
Income from Continuing Operations	$  1,668	$  3,302	$  4,970	$ 4,742	$ 8,728	$13,470
Average Diluted Shares Outstanding	13,534	24,775	38,309	13,828	24,690	38,518
Diluted Earnings Per Share from        Continuing Operations	$0.12	$0.13		$0.34	$0.35
Reconciliation of Basic and Diluted EPS from Continuing Operations Calculations:
Income from Continuing Operations       Used for Basic EPS Calculation	$  1,660	$  3,310	$   4,970	$ 4,748	$ 8,722	$13,470
Assumed Dividends Payable on Dilutive Shares:
Stock options	--	--	--	--	--	--
Performance share awards	36	3	39	--	22	22
(Reduction) Increase of Undistributed      Earnings - allocated based on Class A      and Class B shares	(28)	(11)	(39)	(6)	(16)	(22)
Income from Continuing Operations       Used for Diluted EPS Calculation	$  1,668	$  3,302	$  4,970	$ 4,742	$ 8,728	$13,470
Average Shares Outstanding for Basic       EPS Calculation	13,418	24,766	38,184	13,605	24,524	38,129
Dilutive Effect of Average Outstanding:
Stock options	--	--	--	--	--	--
Performance share awards	116	9	125	--	68	68
Restricted share units	--	--	--	223	98	321
Average Shares Outstanding for Diluted       EPS Calculation	13,534	24,775	38,309	13,828	24,690	38,518

Included in dividends declared for the basic and diluted earnings per share computation are dividends computed and accrued on unvested Class A and Class B restricted share units, which will be paid by a conversion to the equivalent value of common shares after a vesting period.

For the current year period, all 2,063,000 average stock options outstanding were antidilutive and were excluded from the dilutive calculation. For the prior year period, all 2,498,000 average stock options outstanding were antidilutive and were excluded from the dilutive calculation.

KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
 

EARNINGS (LOSS) PER SHARE	(Unaudited)	(Unaudited)
FROM DISCONTINUED OPERATIONS	Three Months Ended	Three Months Ended
	December 31, 2005	December 31, 2004

Basic:
Class A	$(0.03)	$(0.03)
Class B	$(0.03)	$(0.04)
Diluted:
Class A	$(0.03)	$(0.03)
Class B	$(0.03)	$(0.04)

(Unaudited)	(Unaudited)
Six Months Ended	Six Months Ended
December 31, 2005	December 31, 2004

Basic:
Class A	$(0.20)	$(0.06)
Class B	$(0.20)	$(0.07)
Diluted:
Class A	$(0.20)	$(0.06)
Class B	$(0.20)	$(0.06)

EARNINGS PER SHARE	(Unaudited)	(Unaudited)
FROM CUMULATIVE EFFECT OF CHANGE	Three Months Ended	Three Months Ended
IN ACCOUNTING PRINCIPLE	December 31, 2005	December 31, 2004

Basic:
Class A	$0.00	$0.00
Class B	$0.00	$0.00
Diluted:
Class A	$0.00	$0.00
Class B	$0.00	$0.00

EARNINGS PER SHARE	(Unaudited)	(Unaudited)
FROM CUMULATIVE EFFECT OF CHANGE	Six Months Ended	Six Months Ended
IN ACCOUNTING PRINCIPLE	December 31, 2005	December 31, 2004

Basic:
Class A	$0.01	$0.00
Class B	$0.01	$0.00
Diluted:
Class A	$0.01	$0.00
Class B	$0.01	$0.00

KIMBALL INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
 

EARNINGS (LOSS) PER SHARE	(Unaudited)	(Unaudited)
(INCLUDING DISCONTINUED OPERATIONS	Three Months Ended	Three Months Ended
AND CUMULATIVE EFFECT OF CHANGE IN	December 31, 2005	December 31, 2004
ACCOUNTING PRINCIPLE)

(Amounts in Thousands, Except for per Share Data)	Class A	Class B	Total	Class A	Class B	Total
Basic Earnings Per Share:
Dividends Declared	$ 2,020	$ 3,983	$ 6,003	$ 2,137	$ 3,949	$ 6,086
Undistributed Earnings (Loss)	(619)	(1,150)	(1,769)	11	19	30
Net Income	$ 1,401	$ 2,833	$ 4,234	$ 2,148	$ 3,968	$ 6,116
Average Basic Shares Outstanding	13,352	24,851	38,203	13,584	24,555	38,139
Basic Earnings (Loss) Per Share	$0.10	$0.11		$0.16	$0.16
Diluted Earnings Per Share:
Dividends Declared and Assumed        Dividends on Dilutive Shares	$ 2,040	$ 3,985	$ 6,025	$ 2,137	$ 3,959	$ 6,096
Undistributed Earnings (Loss)	(630)	(1,161)	(1,791)	7	13	20
Net Income (Loss)	$ 1,410	$ 2,824	$ 4,234	$ 2,144	$ 3,972	$ 6,116
Average Diluted Shares Outstanding	13,482	24,861	38,343	13,807	24,718	38,525
Diluted Earnings (Loss) Per Share	$0.10	$0.11		$0.16	$0.16

EARNINGS (LOSS) PER SHARE	(Unaudited)	(Unaudited)
(INCLUDING DISCONTINUED OPERATIONS	Six Months Ended	Six Months Ended
AND CUMULATIVE EFFECT OF CHANGE IN	December 31, 2005	December 31, 2004
ACCOUNTING PRINCIPLE)

(Amounts in Thousands, Except for per Share Data)	Class A	Class B	Total	Class A	Class B	Total
Basic Earnings Per Share:
Dividends Declared	$ 4,178	$ 7,958	$12,136	$ 4,283	$ 7,885	$12,168
Undistributed Earnings (Loss)	(5,083)	(9,382)	(14,465)	(370)	(667)	(1,037)
Net Income (Loss)	$  (905)	$(1,424)	$(2,329)	$ 3,913	$ 7,218	$11,131
Average Basic Shares Outstanding	13,418	24,766	38,184	13,605	24,524	38,129
Basic Earnings (Loss) Per Share	$(0.07)	$(0.06)		$0.29	$0.29
Diluted Earnings Per Share:
Dividends Declared and Assumed        Dividends on Dilutive Shares	$ 4,214	$ 7,961	$12,175	$ 4,283	$ 7,907	$12,190
Undistributed Earnings (Loss)	(5,124)	(9,380)	(14,504)	(380)	(679)	(1,059)
Net Income (Loss)	$  (910)	$(1,419)	$(2,329)	$ 3,903	$ 7,228	$11,131
Average Diluted Shares Outstanding	13,534	24,775	38,309	13,828	24,690	38,518
Diluted Earnings (Loss) Per Share	$(0.07)	$(0.06)		$0.28	$0.29

EX-31

Exhibit 31.1

CERTIFICATIONS PURSUANT TO
RULE 13a-14(a)/15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James C. Thyen, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Kimball International, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 2, 2006
	/s/ James C. Thyen
	JAMES C. THYEN President, Chief Executive Officer

EX-31

Exhibit 31.2

CERTIFICATIONS PURSUANT TO
RULE 13a-14(a)/15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert F. Schneider, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Kimball International, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 2, 2006
	/s/ Robert F. Schneider
	ROBERT F. SCHNEIDER Executive Vice President, Chief Financial Officer

EX-32

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Kimball International, Inc. (the "Company") on Form 10-Q for the period ending December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, James C. Thyen, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: February 2, 2006
	/s/ James C. Thyen
	JAMES C. THYEN President, Chief Executive Officer

EX-32

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Kimball International, Inc. (the "Company") on Form 10-Q for the period ending December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert F. Schneider, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: February 2, 2006
	/s/ Robert F. Schneider
	ROBERT F. SCHNEIDER Executive Vice President, Chief Financial Officer