-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ARttV1SkUao+Xwxa77eRNrhmDo4sKo8Af0KBQG/WKoMNTZNNl0xUpXKAiCsPf+QN PZbtv9b1ROGAWWhzXJOKqw== 0000950152-99-008296.txt : 19991018 0000950152-99-008296.hdr.sgml : 19991018 ACCESSION NUMBER: 0000950152-99-008296 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19990831 FILED AS OF DATE: 19991015 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RPM INC/OH/ CENTRAL INDEX KEY: 0000110621 STANDARD INDUSTRIAL CLASSIFICATION: PAINTS, VARNISHES, LACQUERS, ENAMELS & ALLIED PRODUCTS [2851] IRS NUMBER: 346550857 STATE OF INCORPORATION: OH FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14187 FILM NUMBER: 99729222 BUSINESS ADDRESS: STREET 1: 2628 PEARL RD STREET 2: P O BOX 777 CITY: MEDINA STATE: OH ZIP: 44258 BUSINESS PHONE: 3302735090 MAIL ADDRESS: STREET 1: 2628 PEARL RD STREET 2: P O BOX 777 CITY: MEDINA STATE: OH ZIP: 44258 FORMER COMPANY: FORMER CONFORMED NAME: REPUBLIC POWDERED METALS INC DATE OF NAME CHANGE: 19711027 10-Q 1 RPM, INC. 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended August 31, 1999 or ---------------------------------------------- [_] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ____________ to ___________. Commission File No. 0-5132 ------ RPM, INC. - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Ohio 34-6550857 - ------------------------------- --------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) P.O. Box 777; 2628 Pearl Road; Medina, Ohio 44258 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code (330) 273-5090 - -------------------------------------------------------------------------------- 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 the filing requirements for the past 90 days. Yes x No --- --- As of October 12, 1999, 108,020,367 RPM, Inc. Common Shares were outstanding. 2 RPM, INC. AND SUBSIDIARIES -------------------------- INDEX -----
PART I. FINANCIAL INFORMATION Page No. ------------------------------ -------- Consolidated Balance Sheets August 31, 1999 and May 31, 1999 3 Consolidated Statements of Income Three Months Ended August 31, 1999 and August 31, 1998 4 Consolidated Statements of Cash Flows Three Months Ended August 31, 1999 and August 31, 1998 5 Notes to Consolidated Financial Statements 6 Management's Discussion and Analysis of Results For Operations and Financial Condition 8 PART II. OTHER INFORMATION 13 ---------------------------
3 PART I. -- FINANCIAL INFORMATION 3 -------------------------------- ITEM 1. -- FINANCIAL STATEMENTS ------------------------------- RPM, INC. AND SUBSIDIARIES -------------------------- CONSOLIDATED BALANCE SHEETS --------------------------- (Unaudited) (In thousands, except per share amounts)
ASSETS ------ August 31, 1999 May 31, 1999 ---------------- ---------------- Current Assets Cash and short-term investments $ 34,492 $ 19,729 Trade accounts receivable (less allowance for doubtful accounts $17,009 and $14,248) 392,710 362,611 Inventories 256,362 242,445 Prepaid expenses and other current assets 88,792 80,634 ---------------- ---------------- Total current assets 772,356 705,419 ---------------- ---------------- Property, Plant and Equipment, At Cost 635,764 572,690 Less: accumulated depreciation and amortization 243,875 232,993 ---------------- ---------------- Property, plant and equipment, net 391,889 339,697 ---------------- ---------------- Other Assets Costs of businesses over net assets acquired, net of amortization 586,715 425,951 Intangible assets, net of amortization 330,061 232,556 Other 35,103 33,613 ---------------- ---------------- Total other assets 951,879 692,120 ---------------- ---------------- Total Assets $ 2,116,124 $ 1,737,236 ================ ================ LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current Liabilities Current portion of long term debt $ 6,473 $ 3,764 Notes and accounts payable 139,549 131,118 Accrued compensation and benefits 64,533 58,277 Accrued loss reserves 45,373 49,296 Other accrued liabilities 49,677 50,843 Restructuring reserve 40,870 Income taxes payable 3,846 9,251 ---------------- ---------------- Total current liabilities 350,321 302,549 ---------------- ---------------- Long-term Liabilities Long-term debt, less current maturities 865,813 582,109 Deferred income taxes 97,211 53,870 Other long-term liabilities 65,450 55,832 ---------------- ---------------- Total long-term liabilities 1,028,474 691,811 ---------------- ---------------- Shareholders' Equity Common shares, stated value $.015 per share; authorized 200,000,000 shares; outstanding 109,480,000 and 109,443,000 shares, respectively 1,614 1,613 Paid-in capital 423,557 423,204 Treasury shares, at cost (17,118) (17,044) Accumulated other comprehensive loss (24,159) (23,908) Retained earnings 353,435 359,011 ---------------- ---------------- Total shareholders' equity 737,329 742,876 ---------------- ---------------- Total Liabilities And Shareholders' Equity $ 2,116,124 $ 1,737,236 ================ ================
The accompanying notes to consolidated financial statements are an integral part of these statements. 4 RPM, INC. AND SUBSIDIARIES 4 -------------------------- CONSOLIDATED STATEMENTS OF INCOME --------------------------------- (Unaudited) (In thousands, except per share amounts) Three Months Ended August 31, ----------------------------- 1999 1998 -------- -------- Net Sales $495,542 $448,132 Cost of Sales 269,579 243,730 -------- -------- Gross Profit 225,963 204,402 Selling, General and Administrative Expenses 158,762 141,280 Restructuring Charge 45,000 Interest Expense, Net 9,889 9,748 -------- -------- Income Before Income Taxes 12,312 53,374 Provision for Income Taxes 5,048 22,150 -------- -------- Net Income $ 7,264 $ 31,224 ======== ======== Basic earnings per common share $ 0.07 $ 0.30 ======== ======== Diluted earnings per common share $ 0.07 $ 0.29 ======== ======== Dividends per common share $ 0.1175 $ 0.112 ======== ======== The accompanying notes to consolidated financial statements are an integral part of these statements. 5 RPM, INC. AND SUBSIDIARIES 5 -------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- (Unaudited) (In thousands, except per share amounts)
Three Months Ended August 31, ---------------------------- 1999 1998 ------------ ------------ Cash Flows From Operating Activities: Net Income $ 7,264 $ 31,224 Depreciation and amortization 17,909 14,273 Items not affecting cash and other (2,803) (2,201) Changes in working capital 25,788 (10,297) ------------ ------------ 48,158 32,999 ------------ ------------ Cash Flows From Investing Activities: Additions to property and equipment (13,407) (8,166) Acquisition of new businesses, net of cash (292,513) (20,388) ------------ ------------ (305,920) (28,554) ------------ ------------ Cash Flows From Financing Activities: Proceeds from stock option exercises 354 1,267 Repurchase of common shares (74) Increase (decrease) in debt 285,085 13,661 Dividends (12,840) (11,637) ------------ ------------ 272,525 3,291 ------------ ------------ Net Increase (Decrease) in Cash 14,763 7,736 Cash at Beginning of Period 19,729 40,783 ------------ ------------ Cash at End of Period $ 34,492 $ 48,519 ============ ============ Supplemental Schedule of Non-Cash Investing and Financing Activities: - --------------------------------------------------------------------- Conversion of Debt to Equity $ 157,042 Interest accreted on Convertible Debt Securities $ 1,696
The accompanying notes to consolidated financial statements are an integral part of these statements. 6 RPM, INC. AND SUBSIDIARIES 6 -------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ AUGUST 31, 1999 --------------- (Unaudited) ----------- NOTE A - BASIS OF PRESENTATION - ------------------------------ The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal, recurring accruals) considered necessary for a fair presentation have been included for the three months ended August 31, 1999. For further information, refer to the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended May 31, 1999. Certain reclassifications have been made to prior year amounts to conform with the current year presentation. NOTE B - INVENTORIES - -------------------- Inventories were composed of the following major classes:
August 31, 1999 (1) May 31, 1999 ------------------------- ------------------------- Raw material and supplies $85,467,000 $80,827,000 Finished goods 170,895,000 161,618,000 ========================= ========================= $256,362,000 $242,445,000 ========================= =========================
(1) Estimated, based on components at May 31, 1999. NOTE C - ACQUISITIONS - --------------------- On August 31, 1999, the Company acquired all of the outstanding shares of DAP Products Inc. ("DAP"). DAP, headquartered in Baltimore, Maryland, is a leading manufacturer of sealants, caulks, patch and repair compounds, wood preservatives and water repellents and adhesives, for the retail do-it-yourself market. This acquisition has been accounted for by the purchase method of accounting. The following data summarizes, on an unaudited pro-forma basis, the combined results of operations of the companies for the three months ended August 31, 1999 and August 31, 1998. The pro-forma amounts give effect to appropriate adjustments resulting from the combination, but are not necessarily indicative of future results of operations or of what results would have been for the combined companies.
Three Months Ended August 31, -------------------------------------------------------- 1999 1998 ------------------------- ------------------------- Net Sales $ 539,580,000 $ 510,045,000 ========================= ========================= Net Income $ 6,950,000 * $ 29,841,000 ========================= ========================= Basic earnings per common share $.06 * $.29 ========================= ========================= Diluted earnings per common share $.06 * $.27 ========================= =========================
* including the $26,550,000 after-tax restructuring charge, or $0.24 per share. 7 RPM, INC. AND SUBSIDIARIES 7 -------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ AUGUST 31, 1999 --------------- (Unaudited) ----------- NOTE D - COMPREHENSIVE INCOME As of June 1, 1998, the Company adopted SFAS No. 130 Reporting Comprehensive Income. SFAS No. 130 establishes new rules for the reporting and display of comprehensive income and its components; however, the adoption of this statement had no impact on the Company's net income. SFAS No. 130 requires other comprehensive income to include foreign currency translation adjustments, minimum pension liability adjustments and unrealized gains or losses on securities which, prior to adoption, were reported separately. Accordingly, total comprehensive income, comprised of net income and other comprehensive loss, amounted to $7,013,000, including the $26,550,000 after-tax restructuring charge, and $29,253,000 during the first quarter of fiscal years 2000 and 1999, respectively. NOTE E - RESTRUCTURING CHARGE In August 1999, the Company recorded a restructuring charge of $45,000,000 ($26,550,000 after tax, or $.24 per diluted share). Included in this total are facility closures and write-downs of property, plant and equipment of $21,000,000, write-downs of intangibles of $3,400,000, severance and other employee related costs of $17,000,000, and contract exit and termination costs of $3,600,000. As of August 31, 1999, the Company has paid or incurred $4,130,000 related to these charges. The Company anticipates that substantially all of the remaining restructuring and plant rationalization costs will be paid or incurred by May 31, 2001.
August 1999 Charge Utilized Through 8/31/99 Balance at 8/31/99 -------------------------- ------------------------- ------------------------- Property, plant and equipment $ 21,000,000 $ 1,001,000 $ 19,999,000 Intangibles 3,400,000 2,851,000 549,000 Severance Costs 17,000,000 278,000 16,722,000 Exit and termination costs 3,600,000 --- 3,600,000 -------------------------- ------------------------- ------------------------- $ 45,000,000 $ 4,130,000 $ 40,870,000 ========================== ========================= =========================
The facility closure costs represent estimated losses on the closure and sale of facilities, primarily in North America. The charge for property, plant and equipment represents write-downs to net realizable value of less efficient and duplicate machinery and equipment not needed in the combined restructured manufacturing operations. The severance and other employee related costs provide for a reduction of approximately 730 employees related to the facility closures and the streamlining of operations related to cost reduction initiatives. The costs of exit and contract termination costs are comprised primarily of non-cancelable lease obligations on the facilities to be closed. Approximately $1,900,000 of the property, plant and equipment write-down, $2,700,000 of the intangible write-down, $1,600,000 of the severance costs to be incurred and $2,600,000 of the exit and termination costs to be incurred, or approximately $8,800,000 in total, are related to the purchase of DAP Products Inc. (Note C), which rendered these assets and contracts redundant. 8 8 ITEM 2. - ------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION THREE MONTHS ENDED AUGUST 31, 1999 Reportable Segment Information - -------------------------------------------------------------------------------- Financial Accounting Standards (SFAS) No. 131, Disclosures about Segments of an Enterprise and Related Information, was adopted by the Company effective May 31, 1999. This Standard requires disclosure of segment information using the management approach, or the basis used internally to evaluate operating performance and to decide resource allocations. Comparative first quarter results on this basis are as follows:
- -------------------------------------------------------------------------------------------------------------------- Quarter Ended August 31, (000s) --------------------------------------------- 1999 1998 - -------------------------------------------------------------------------------------------------------------------- Net External Sales Industrial Division $302,009 $280,825 Consumer Division 193,533 167,307 ---------------------- ---------------------- Totals: $495,542 $448,132 ====================== ====================== Earnings Before Interest and Taxes (EBIT) (2) (1) Industrial Division $46,873 $32,873 $47,325 Consumer Division 23,375 (5,925) 17,905 Corporate/Other (3,047) (4,747) (2,418) ------------------- ---------------------- ---------------------- Totals: $67,201 $22,201 $62,812 =================== ====================== ====================== Identifiable Assets May 31, 1999 ------------ Industrial Division $1,028,030 $1,102,531 Consumer Division 1,038,753 586,846 Corporate/Other 49,341 47,859 ---------------------- ---------------------- Totals: $2,116,124 $1,737,236 ====================== ====================== - --------------------------------------------------------------------------------------------------------------------
(1) = as reported, including restructuring charge (2) = pro forma, before restructuring charge - -------------------------------------------------------------------------------- 9 9 RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- The Company's sales and earnings were ahead 11% and 8%, respectively, in the first quarter compared to last year, before a $45 million pre-tax restructuring charge, further discussed below. Including the restructuring charge, earnings were 77% lower than last year's first quarter. On August 3, 1999, the Company completed its acquisition of DAP Products Inc. and DAP Canada Corp. (collectively "DAP"), head-quartered in Baltimore, Maryland. DAP has annual sales of approximately $250 million, and is a leading North American manufacturer and marketer of caulks and sealants, spackling and glazing compounds, contact cements, and other specialty adhesives. DAP is reported within the Consumer Division and is expected to be neutral to the Company's earnings results in Fiscal Year 2000, but will contribute thereafter. The DAP acquisition accounted for approximately 45% of the first quarter sales increase. The Company's existing operations and several product line additions generated the balance of the sales increase, almost entirely from higher unit volume as pricing adjustments have been essentially flat. Exchange rate differences had a very slight negative effect on year-to-year sales. Sales may continue to be negatively affected if the dollar continues to strengthen. Internal growth within the Industrial Division continued at the last year rate of approximately 2.5% through the first quarter. Internal growth within the Consumer Division improved to nearly 3.5% during the first quarter, mainly from the timing of orders between periods, despite continued weakness in the automobile aftermarket. Internal growth in general, however, continued slower than planned from a slowdown in North American new construction, weak exports to a number of still-depressed overseas economies, and weather-related factors. The gross profit margin remained at 45.6% of sales. The Industrial Division improved to 46.2% from 45.6%, mainly from continuing margin improvements at Tremco, while the Consumer Division moved from 45.7% a year ago to 44.7% this quarter, from lower margins at DAP. Raw material price changes have not been a significant factor this year, and the Company remains confident that raw material prices will continue to be effectively managed in the foreseeable future. Selling, general and administrative expenses of 32.0% of sales compare with 31.6% a year ago. The Industrial Division expenses increased to 30.6% of sales from 28.7%, while the Consumer Division expenses decreased to 32.6% from 35.0% in 1999. Both Divisions continued with product and market development, promotional and other growth-related initiatives to set the stage for stronger sales growth in the future, including E-Commerce related initiatives within Corporate/Other. There were also a number of timing differences on certain expenses between years, such as legal and insurance-related issues having a $2.3 million favorable impact on the Industrial Division a year ago. The Consumer Division benefited mainly from increased volume coupled with good expense control, and from a lower SG&A percentage at DAP. On August 9, 1999, the Company announced a restructuring program to generate manufacturing, distribution, and administrative efficiencies, and to better position the Company for increased profitability and long-term growth. This program is responsible for the $45 million pre-tax ($.24 per share after-tax) restructuring charge in the first quarter, but the restructuring is expected to generate annualized pre-tax savings of $23 million ($.13 per share after-tax), once completed. These savings will phase in over the next two years, with the full savings expected beginning in fiscal 2002. Through the first quarter, the Company had paid or incurred $4.1 million of these charges, primarily associated with the write-down of certain designated property and intangibles (refer to Note E). The net cash requirements of the restructuring program are estimated to be approximately $4 million. The Company also plans to divest non-core product lines with annual sales of - -------------------------------------------------------------------------------- 10 10 approximately $100 million over the next two years, but with no net loss anticipated from these transactions. Principally because of the restructuring charge, EBIT declined dramatically in both Divisions and Corporate/Other from last year's first quarter. Without the restructuring charge, the Consumer Division generated 31% EBIT growth this first quarter, nearly evenly split between internal growth and from DAP, while the timing differences within SG&A expenses affected the Industrial Division EBIT, which declined 1%, and Corporate/Other expenses increased 26%, primarily from the growth initiatives cited above. Net interest expense increased $.5 million, primarily from increased indebtedness to acquire DAP and to repurchase common shares of the Company (refer to Liquidity and Capital Resources - Financing Activities). These increases were partly offset by interest saved from the August 10, 1998 redemption of the Company's convertible debt securities, which lowered interest expense by $1.3 million this quarter, and from slightly lower interest rates than a year ago. Before the restructuring charge, earnings increased 8% on the 11% sales increase, with the margin declining to 6.8% from 7.0% a year ago, primarily from the impact of DAP and its acquisition costs. Approximately one-half of the (pre-restructuring charge) growth in diluted earnings per share was internal, within the Consumer Division, with the balance of growth being acquisition-related. The issuance of 10.1 million common shares in connection with the August 10, 1998 redemption of the Company's convertible debt securities negatively impacted the calculation of basic earnings per share compared with last year, while the averaging of shares repurchased as of August 31, 1999 had a favorable impact. The restructuring charge reduced net earnings by $26.5 million, and both basic and diluted earnings per share by $.24. LIQUIDITY AND CAPITAL RESOURCES - -------------------------------------------------------------------------------- CASH PROVIDED FROM OPERATIONS - ----------------------------- The Company generated cash from operations of $48.2 million during the first quarter, compared with $33 million a year ago. The restructuring charge and its related current liability are the major impacts to net income and changes in working capital, respectively, between periods. Other than normal timing differences within the balance sheet, certain inventories had been built up during fiscal 1998 and into 1999 to accommodate increased retail business in the Consumer Division. These built-up inventory levels have since been reduced significantly, along with accounts receivable and other inventories in both Divisions, in order to conserve working capital. The Company's strong cash flow from operations continues to be its primary source of financing internal growth, with limited use of short-term credit. INVESTING ACTIVITIES - -------------------- The Company is not capital intensive, and capital expenditures generally do not exceed depreciation and amortization in a given year. Capital expenditures are made primarily to accommodate the Company's continued growth through improved production and distribution efficiencies and capacity, and to enhance administration. The investment of $293 million in new businesses this quarter reflects the acquisition of DAP, net of cash acquired. The Company historically has acquired complementary businesses, and this trend is expected to continue. FINANCING ACTIVITIES - -------------------- In January 1999, the Company announced the authorization of a share repurchase program, allowing repurchase of up to 5 million of the Company's common shares over a period of 12 months. As of October 7, 1999, the Company had repurchased approximately 2.8 million of its common shares at an average price of approximately $12.86 per share. On October 8, 1999, the Company announced the authorized expansion of the repurchase program to a total of 10 million common shares. The acquisition of DAP was financed with a bridge loan arranged through one of the Company's lead banks. This transaction has - -------------------------------------------------------------------------------- 11 11 since been refinanced through a $700 million commercial paper program, fully backed by the Company's existing $300 million revolving credit facility, plus a new $400 million revolving credit facility. As a result of this transaction, the Company's debt to capital ratio has increased to 54% from 44% at May 31, 1999. The stronger dollar effect on the Company's foreign net assets has tended to reduce shareholders' equity, and this trend could continue if the dollar continues to strengthen and the growth of foreign net assets continues. The Company maintains excellent relations with its banks and other financial institutions to further enable the financing of future growth opportunities. OTHER MATTERS - -------------------------------------------------------------------------------- YEAR 2000 READINESS DISCLOSURE - ------------------------------ The Company has substantially completed its Year 2000 remediation efforts, including testing, and does not anticipate disruptions in any of its operations as a result of the Year 2000. In addition, based on polling the Year 2000 preparedness of key third parties, the Company does not anticipate disruptions in those areas. As a result, the Company does not foresee the need to execute any contingency plans. The Company's most reasonably likely worst case scenario, should the Company or its key suppliers, customers or service providers fail to resolve the Year 2000 issue, would be a short-term slowdown or cessation of manufacturing operations at one or more of its facilities and a short-term inability of the Company to process orders and billings in a timely manner, and to deliver product to customers. The Company does not expect that any third party material to its business will be determined not to be Year 2000 compliant. If the Company determines that a third party with whom the Company has a material relationship is not Year 2000 compliant, the Company will: (a) investigate whether or not such noncompliance will affect the Company's relationship with such third party, and (b) if such relationship is materially impaired by a lack of Year 2000 compliance, the Company will seek a similarly situated party to provide the relevant products, supplies or services to the Company. The Company has been able to complete its efforts within the $5,500,000 budget and does not anticipate any further significant costs in this area. All Year 2000 costs have been and are expected to continue to be funded from the Company's operating cash flow. ENVIRONMENTAL MATTERS - --------------------- Environmental obligations continue to be appropriately addressed and, based upon the latest available information, it is not anticipated that the outcome of such matters will materially affect the Company's results of operations or financial condition. FORWARD-LOOKING STATEMENTS - -------------------------------------------------------------------------------- The foregoing discussion includes forward-looking statements relating to the business of the Company. These forward-looking statements, or other statements made by the Company, are made based on management's expectations and beliefs concerning future events impacting the Company and are subject to uncertainties and factors (including those specified below) which are difficult to predict and, in many instances, are beyond the control of the Company. As a result, actual results of the Company could differ materially from those expressed in or implied by any such forward-looking statements. These uncertainties and factors include (a) the price and supply of raw materials, particularly titantium dioxide, certain resins, aerosols and solvents; (b) continued growth in demand for the Company's products; (c) environmental liability risks inherent in the chemical coatings business; (d) the effect of changes in interest rates; (e) the effect of fluctuations in currency - -------------------------------------------------------------------------------- 12 12 exchange rates upon the Company's foreign operations; (f) the potential impact of the Euro currency conversion; (g) the effect of non-currency risks of investing in and conducting operations in foreign countries, including those relating to political, social, economic and regulatory factors; (h) future acquisitions and the Company's ability to effectively integrate such acquisitions; (i) the potential future impact of Year 2000 related software conversion issues; the potential impact of the Company's suppliers, customers and other third parties ability to identify and resolve their own Year 2000 obligations in such a way as to allow them to continue normal business operations or furnish raw materials, products, services or data to the Company and its operating companies without interruption; the potential impact of manufacturers of the Company's computer systems and software representations as to their Year 2000 status; and the potential impact of the Company's own Year 2000 investigation, remediation, testing and systems implementation efforts; and (j) the ability of the Company to realize the projected pre-tax savings associated with the restructuring and consolidation program, and to divest non-core product lines. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK - ----------------------------------------------------------------- MARKET RISK - -------------------------------------------------------------------------------- The Company is exposed to market risk from changes in interest rates and foreign exchange rates since it funds its operations through long- and short-term borrowings and denominates its business transactions in a variety of foreign currencies. There were no material changes in the Company's exposure to market risk from May 31, 1999. 13 13 RPM, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION PART II - ------- ITEM 1 -- LEGAL PROCEEDINGS - --------------------------- Bondex. - ------- As previously reported, Bondex International, Inc., a wholly-owned subsidiary of the Company ("Bondex"), was one of numerous corporate defendants in 395 then pending asbestos-related bodily injury lawsuits filed on behalf of various individual in various jurisdictions of the United States. Subsequently, an additional 104 such cases have been filed and 75 such cases which had been filed were dismissed with prejudice without payment pursuant to summary judgment or stipulation of the parties, leaving a total of 424 such cases pending. Bondex continues to deny liability in all asbestos-related lawsuits and continues to vigorously defend them. Under a cost-sharing agreement among Bondex and its insurers, the insurers are responsible for payment of a substantial portion of defense costs and indemnity payments, if any, with Bondex responsible for the balance. The Company believes that the ultimate resolution of the matters will not have a material adverse effect on the Company's financial position or results of operations. Dryvit. - ------- As previously reported, Dryvit Systems, Inc., a wholly-owned subsidiary of the Company ("Dryvit"), is a defendant or co-defendant in numerous separate but related lawsuits, some of which have sought to certify classes comprised of owners of structures clad with exterior insulated finish systems ("EIFS") products manufactured by Dryvit and other EIFS manufacturers. On September 27, 1999, Dryvit reached a tentative settlement of the North Carolina class-action styled Ruff et al. v. Parex, Inc. et al. The preliminary settlement is subject to the parties entering into a definitive settlement agreement; a fairness hearing; and final approval by the North Carolina state court. Although the court has ordered the parties to maintain confidentiality, the essential terms of the settlement will provide for a cash payment of $6 per square foot to eligible North Carolina homeowners who demonstrate the requisite level of moisture damage as verified by an independent inspection process. Attorney fees for plaintiffs' counsel will be determined by the court upon application by class counsel and will be awarded separately from settlement amounts paid to members of the class. Based upon the material terms of the proposed settlement and the anticipated final settlement agreement and attorney fee award, the Company does not believe the Ruff settlement will have a material adverse effect on the Company's financial position or results of operation. 14 14 RPM, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION ITEM 2 -- CHANGES IN SECURITIES - ------------------------------- (c) Recent Sales of Unregistered Securities. No securities of the Company that were not registered under the Securities Act of 1933 have been issued or sold by the Company during the period covered by this Quarterly Report on Form 10-Q other than the following: (i) On August 3, 1999, the Company issued 127,068 Common Shares to certain of its officers and other employees pursuant to the RPM, Inc. 1997 Restricted Stock Plan (the "Restricted Stock Plan"). Such shares are restricted pursuant to the terms of the Restricted Stock Plan. The issuance of such shares was made to individuals who were participants in the RPM, Inc. Benefit Restoration Plan and such awards were designed to replace cash benefit payments being canceled under the RPM, Inc. Benefit Restoration Plan. Consequently, no additional consideration was received by the Company for such issuance. The dollar value of the restricted share awards was based on the closing price of the Company's Common Shares on April 28, 1999, of $13.0625 per share. Registration under the Securities Act of 1933 was not effected with respect to the transaction described above in reliance upon the exemption from the registration contained in Section 4(2) of the Securities Act of 1933. ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K - ------------------------------------------ (a) Exhibits -------- Official Exhibit Number Description ----------------------- ----------- 2.1 Stock Purchase Agreement dated as of July 9, 1999, by and among the Company, Wassall DAP Holdings B.V. and Wassall PLC, which is incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K, dated August 4, 1999. 4.1 Form of Fixed Rate Promissory Note by and between the Company and The Chase Manhattan Bank, which is incorporated by 15 15 RPM, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION reference to Exhibit 4.1 to the Company's Current Report on Form 8-K, dated August 4, 1999. 10.1 Credit Agreement, dated as of July 29, 1999, among RPM, Inc., the financial institutions referred to therein and The Chase Manhattan Bank as administrative agent. 10.2 Multicurrency Credit Agreement, dated as of August 24, 1999, among Carbolinc Europe Ltd., Martin Mathys N.V., Radiant Color N.V., RPM Belgium N.V., RPM Europe B.V., RPM Holdings UK Ltd., RPM/Lux Consult S.A., RPOW (France) S.A., RPOW UK Ltd., Stonhard Deutschland GmbH, Tremco Ltd., RPM, Inc. and Deutsche Bank S.A., and Deutsche Bank AG London 10.3 Commercial Paper Placement Agency Agreement, dated as of August 10, 1998, between RPM, Inc. and Chase Securities, Inc. (similar forms of agreement were also executed with Banc One Capital Markets, Inc. and Banc of America Securities LLC). 10.4 Retirement Letter Agreement, dated August 23, 1999, between John H. Morris and RPM, Inc. 11.1 Statement regarding computation of per share earnings 27.1 Financial Data Schedule. (b) Reports on Form 8-K ------------------- The Company filed the following Current Reports on Form 8-K, during the three months ended August 31, 1999: (i) Current Report on Form 8-K, dated August 4, 1999, to report the acquisition of DAP Products Inc. and DAP Canada Corp.; and (ii) Current Report on Form 8-K, dated August 9, 1999, to file news releases reporting the financial results for fiscal year 1999, the Company's consolidation and reorganization program, and the Company's management reorganization. 16 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 thereunto duly authorized. RPM, Inc. By /s/ Thomas C. Sullivan ------------------------ Thomas C. Sullivan Chairman & Chief Executive Officer By /s/ Glenn R. Hasman -------------------- Glenn R. Hasman Vice President - Controller Date: 10/15/99 EX-10.1 2 EXHIBIT 10.1 1 Exhibit 10.1 CONFORMED COPY ************************************************************ RPM, INC. CREDIT AGREEMENT Dated as of July 29, 1999 $400,000,000 THE CHASE MANHATTAN BANK as Administrative Agent ************************************************************ CHASE SECURITIES INC. Book Manager and Lead Arranger 2 TABLE OF CONTENTS PAGE SECTION 1. Definitions and Accounting Matters .........................1 1.01 Certain Defined Terms ............................................1 1.02 Accounting Terms and Determinations .............................12 1.03 Class and Types of Loans .......................................13 SECTION 2. Commitments ................................................13 2.01 Loans ...........................................................13 2.02 Reductions of Commitments .......................................14 2.03 Fees ...........................................................14 2.04 Lending Offices ................................................15 2.05 Several Obligations .............................................15 2.06 Notes ..........................................................15 2.07 Use of Proceeds .................................................16 SECTION 3. Borrowings, Conversions and Prepayments ....................16 3.01 Borrowings ......................................................16 3.02 Prepayments and Conversions .....................................17 3.03 Competitive Bid Procedure .......................................17 SECTION 4. Payments of Principal and Interest .........................20 4.01 Repayment of Loans ..............................................20 4.02 Interest ........................................................20 SECTION 5. Payments; Pro Rata Treatment; Computations; Etc ............22 5.01 Payments .......................................................22 5.02 Pro Rata Treatment ..............................................22 5.03 Computations ....................................................23 5.04 Minimum and Maximum Amounts; Types ..............................23 5.05 Certain Notices ................................................23 5.06 Non-Receipt of Funds by the Administrative Agent ................24 5.07 Sharing of Payments, Etc. .......................................24 i 3 PAGE 5.08 Taxes ..........................................................25 SECTION 6. Yield Protection and Illegality ............................27 6.01 Additional Costs ................................................27 6.02 Limitation on Types of Loans ....................................29 6.03 Illegality ......................................................30 6.04 Substitute Base Rate Loans ......................................30 6.05 Compensation ...................................................30 6.06 Capital Adequacy ................................................31 6.07 Substitution of Lender ..........................................31 SECTION 7. Conditions Precedent .......................................32 7.01 Initial Loans ...................................................32 7.02 Initial and Subsequent Loans ....................................33 SECTION 8. Representations and Warranties .............................34 8.01 Corporate Existence .............................................34 8.02 Information ....................................................34 8.03 Litigation ......................................................35 8.04 No Breach ......................................................35 8.05 Corporate Action ................................................36 8.06 Approvals .......................................................36 8.07 Regulations U and X ............................................36 8.08 ERISA ...........................................................36 8.09 Taxes ..........................................................37 8.10 Subsidiaries ....................................................37 8.11 Investment Company Act ..........................................37 8.12 Public Utility Holding Company Act ..............................37 8.13 Ownership and Use of Properties .................................37 8.14 Environmental Matters ..........................................38 8.15 Year 2000 .......................................................38 8.16 Acquisition Documents ..........................................38 SECTION 9. Covenants ..................................................38 9.01 Information ....................................................39 9.02 Taxes and Claims ................................................40 9.03 Insurance .......................................................41 9.04 Maintenance of Existence; Conduct of Business ...................41 ii 4 PAGE 9.05 Maintenance of and Access to Properties .........................41 9.06 Compliance with Applicable Laws ................................41 9.07 Litigation ......................................................42 9.08 Leverage Ratio ..................................................42 9.09 Interest Coverage Ratio .........................................42 9.10 Mergers, Asset Dispositions, Etc. ..............................42 9.11 Liens ...........................................................42 9.12 Investments .....................................................43 9.13 Transactions with Affiliates ....................................43 9.14 Lines of Business ...............................................44 9.15 Environmental Matters ..........................................44 9.16 Lease Payments ..................................................44 SECTION 10. Defaults ..................................................45 10.01 Events of Default ...............................................45 SECTION 11. The Administrative Agent ..................................48 11.01 Appointment, Powers and Immunities ..............................48 11.02 Reliance by Administrative Agent ................................48 11.03 Defaults ........................................................49 11.04 Rights as a Lender ..............................................49 11.05 Indemnification ................................................50 11.06 Non-Reliance on Administrative Agent and Other Lenders ..........50 11.07 Failure to Act ..................................................50 11.08 Resignation or Removal of Administrative Agent ..................51 SECTION 12. Miscellaneous ............................................51 12.01 Waiver .........................................................51 12.02 Notices .........................................................52 12.03 Expenses, Etc. .................................................52 12.04 Indemnification ................................................52 12.05 Amendments, Etc..................................................52 12.06 Successors and Assigns ..........................................53 12.07 Confidentiality .................................................54 12.08 Survival .......................................................55 12.09 Captions ........................................................55 12.10 Counterparts; Integration .......................................55 12.11 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL .....................................................55 iii 5 PAGE Schedules --------- SCHEDULE I - Subsidiaries and Joint Ventures Exhibits -------- EXHIBIT A - Form of Note EXHIBIT B-1 - Form of Opinion of Counsel to the Company EXHIBIT B-2 - Form of Opinion of General Counsel of the Company EXHIBIT C - Form of Opinion of Special Counsel to the Administrative Agent iv 6 CREDIT AGREEMENT AGREEMENT dated as of July 29, 1999 among: RPM, INC., a corporation duly organized and validly existing under the laws of the State of Ohio (together with its successors, the "Company"); each of the lenders which is or which may from time to time become a signatory hereto (individually, together with its successors, a "Lender" and, collectively, together with their respective successors, the "Lenders"); and THE CHASE MANHATTAN BANK, as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the "Administrative Agent"). The parties hereto agree as follows: SECTION 1. Definitions and Accounting Matters. 1.01 Certain Defined Terms. As used herein, the following terms shall have the following meanings (all terms defined in this Section 1.01 or in other provisions of this Agreement in the singular to have the same meanings when used in the plural and vice versa): "ABSOLUTE RATE" shall mean, with respect to any Competitive Loan (other than a Eurodollar Competitive Loan), the fixed rate of interest per annum specified by the Lender making such Competitive Loan in its related Competitive Bid. "ACCEPTABLE INSURER" means an insurance company (i) having an A.M. Best rating of "A-" or better and being in a financial size category of X or larger (as such category is defined as of the date hereof) or (ii) otherwise acceptable to the Majority Lenders. First Colonial Insurance Company, a wholly-owned Subsidiary of the Company, is deemed to be acceptable with respect to the dollar amount of insurance it is providing on the date of this Agreement. "ACQUIRED BUSINESS" shall mean all of the stock of DAP Products Inc., a Delaware corporation, and DAP Canada Corp., a Canadian corporation. "ACQUISITION" shall mean the acquisition by the Company of the Acquired Business and all other transactions contemplated by the Acquisition Documents to be consummated on or before the Closing Date. 7 "ACQUISITION DOCUMENTS" shall mean the Stock Purchase Agreement, dated as of July 9, 1999, between the Company, Wassall DAP Holdings B.V. and Wassall plc, including the exhibits and schedules thereto, and all material agreements, documents and instruments executed and delivered by or addressed to or specifically required by the Company pursuant to or in connection with any of the foregoing. "AFFILIATE" shall mean, as to any Person, any other Person which directly or indirectly controls, or is under common control with, or is controlled by, such Person and, if such Person is an individual, any member of the immediate family (including parents, siblings, spouse, children, stepchildren, nephews, nieces and grandchildren) of such individual and any trust whose principal beneficiary is such individual or one or more members of such immediate family and any Person who is controlled by any such member or trust. As used in this definition, "control" (including, with correlative meanings, "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise), provided that, in any event, any Person which owns directly or indirectly more than 5% of the securities having ordinary voting power for the election of directors or other governing body of a corporation or more than 5% of the partnership or other ownership interests of any other Person (other than as a limited partner of such other Person) will be deemed to control such corporation or other Person. "APPLICABLE LENDING OFFICE" shall mean, for each Lender and for each Type of Loan, the Lending Office of such Lender (or of an affiliate of such Lender) specified by such Lender from time to time to the Administrative Agent and the Company as the office by which its Loans of such Type are to be made and/or issued and maintained. "BANKRUPTCY CODE" shall mean the United States Bankruptcy Code, as now or hereafter in effect, or any successor statute. "BASE RATE" shall mean, with respect to any Base Rate Loan for any day, the rate per annum equal to the higher as of such day of (i) the Federal Funds Rate plus 1/2 of 1% or (ii) the Prime Rate. "BASE RATE LOANS" shall mean Loans which bear interest at a rate based upon the Base Rate. "BASIC DOCUMENTS" shall mean this Agreement, the Notes and the Acquisition Documents. 2 8 "BUSINESS DAY" shall mean any day other than a day on which commercial banks are authorized or required to close in New York City and, where such term is used in the definition of "Quarterly Date" in this Section 1.01 or if such day relates to a borrowing of, a payment or prepayment of principal of or interest on, a conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice by the Company with respect to any such borrowing, payment, prepayment, conversion or Interest Period, which is also a day on which dealings in Dollar deposits are carried out in the London interbank market. "CAPITAL LEASE OBLIGATIONS" shall mean, as to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP (including Statement of Financial Accounting Standards No. 13 of the Financial Accounting Standards Board) and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP (including such Statement No. 13). "CERCLA" shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time, and regulations promulgated thereunder. "CHASE" shall mean The Chase Manhattan Bank and its successors. "CLASS" shall have the meaning assigned to such term in Section 1.03. hereof. "CLOSING DATE" shall mean the date of the initial Loans hereunder. "CODE" shall mean the Internal Revenue Code of 1986, as amended, or any successor statute. "COMMITMENT" shall mean, as to any Lender, the obligation of such Lender to make Loans in an aggregate principal amount at any one time outstanding up to but not exceeding the amount set forth opposite such Lender's name on the signature pages hereof under the caption "Commitment" (as the same may be reduced from time to time pursuant to Section 2.02 hereof). "COMMITMENT TERMINATION DATE" shall mean July 27, 2000 or, if such day is not a Business Day, the next preceding Business Day. "COMMITTED LOAN" shall mean a Revolving Loan or a Term Loan. 3 9 "COMPETITIVE BID" shall mean an offer by a Lender to make a Competitive Loan in accordance with Section 3.03 hereof. "COMPETITIVE BID RATE" shall mean, with respect to any Competitive Bid, the Competitive Margin or the Absolute Rate, as applicable, offered by the Lender making such Competitive Bid. "COMPETITIVE BID REQUEST" shall mean a request by the Company for Competitive Bids in accordance with Section 3.03 hereof. "COMPETITIVE LOAN" shall mean a loan made pursuant to Section 3.03 hereof. "COMPETITIVE MARGIN" shall mean, with respect to any Eurodollar Competitive Loan, the marginal rate of interest, if any, to be added to or subtracted from the Eurodollar Rate to determine the rate of interest applicable to such Loan, as specified by the Lender making such Loan in its related Competitive Bid. "CONTROLLED GROUP" shall mean all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Company, are treated as a single employer under Section 414 of the Code. "DEFAULT" shall mean an Event of Default or an event which with notice or lapse of time or both would, unless cured or waived, become an Event of Default. "DISCLOSURE DOCUMENTS" shall mean the Company's annual report on Form 10-K for 1998, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, and (x) the audited balance sheets of DAP Products Inc. and the related statements of earnings and cash flows as of and for the fiscal years ended December 31, 1997 and 1998, (y) the unaudited balance sheets of DAP Canada Corp. and the related statements of earnings and cash flows as of and for the fiscal years ended December 31, 1997 and 1998 and the five month period ended May 31, 1999, and (z) the unaudited balance sheet of DAP Products Inc. as of May 31, 1999 and the related unaudited statement of earnings and cash flows for the five month period then ended, delivered as part of the Acquisition Documents. "DOLLARS" and "$" shall mean lawful money of the United States of America. 4 10 "EBIT" shall mean, for any period, determined on a consolidated basis for the Company and its Subsidiaries, net operating income of the Company and its Subsidiaries (calculated before provision for income taxes, interest expense, extraordinary items and income attributable to equity in affiliates) for such period. "ENVIRONMENTAL LAWS" shall mean any and all applicable federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, codes, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to the environment or the effect of the environment on human health or to emissions, discharges or release of pollutants, contaminants, Hazardous Substances or wastes into the environment, including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to 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. "ENVIRONMENTAL LIABILITIES" shall mean all liabilities in connection with or relating to the business, assets, presently or previously owned or leased property, activities (including, without limitation, off-site disposal) or operations of the Company and each Subsidiary, whether vested or unvested, contingent or fixed, actual or potential, known or unknown, which arise under or relate to matters covered by Environmental Laws. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. "EURODOLLAR BASE RATE" shall mean, with respect to any Eurodollar Loans, the rate per annum appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the first day of the Interest Period for such Eurodollar Loans, as the rate for Dollar deposits for a period comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the "Eurodollar Base Rate" with respect to such Eurodollar Loans for such Interest Period shall be the arithmetic mean, as calculated by the Administrative Agent, of the respective rates per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) quoted by the Reference Lenders at approximately 11:00 a.m. London time by the principal London branch of each of the Reference Lenders on the day two Business Days prior to the first day of the 5 11 Interest Period for such Loans for the offering to leading banks in the London interbank market of Dollar deposits in immediately available funds, for a period, and in an amount, comparable to such Interest Period and the principal amount of the Eurodollar Loan which shall be made by such Reference Lender and outstanding during such Interest Period. If any Reference Lender is not participating in any Eurodollar Loans during the Interest Period therefor (pursuant to Section 3.03 or 6.04 hereof or for any other reason), the Eurodollar Base Rate for such Loans for such Interest Period shall be determined by reference to the amount of the Loan which such Reference Lender would have made had such Loans been Committed Loans in which it was participating. If any Reference Lender does not furnish a timely quotation, the Administrative Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Lender or Lenders or, if none of such quotations is available on a timely basis, the provisions of Section 6.02 shall apply. "EURODOLLAR LOANS" shall mean Loans the interest on which is determined on the basis of rates referred to in the definition of "Eurodollar Base Rate" in this Section 1.01. "EURODOLLAR RATE" shall mean, for any Eurodollar Loans, a rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by the Administrative Agent to be equal to (i) the Eurodollar Base Rate for such Loans for the Interest Period for such Loans divided by (ii) 1 minus the Eurodollar Reserve Requirement for such Loans for such Interest Period. "EURODOLLAR RESERVE REQUIREMENT" shall mean, for any Eurodollar Loans for any Interest Period therefor, the average maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are required to be maintained during such Interest Period under Regulation D by member banks of the Federal Reserve System in New York City with deposits exceeding one billion Dollars against "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Eurodollar Reserve Requirement shall reflect any other reserves required to be maintained by such member banks by reason of any Regulatory Change against (i) any category of liabilities which includes deposits by reference to which the Eurodollar Rate is to be determined as provided in the definition of "Eurodollar Base Rate" in this Section 1.01 or (ii) any category of extensions of credit or other assets which include Eurodollar Loans. "EVENT OF DEFAULT" shall have the meaning assigned to such term in Section 10.01 hereof. 6 12 "FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) 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 by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to Chase on such day on such transactions as determined by the Administrative Agent. "FIXED RATE LOANS" shall mean Eurodollar Committed Loans and, for purposes of Section 6 hereof only, shall also mean Eurodollar Competitive Loans. "GAAP" shall mean generally accepted accounting principles as in effect from time to time in the United States consistently applied. "GUARANTY" by any Person shall mean any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Indebtedness of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise, other than agreements to purchase goods at an arm's length price in the ordinary course of business) or (ii) entered into for the purpose of assuring in any other manner the holder of such Indebtedness of the payment thereof or to protect such holder against loss in respect thereof (in whole or in part), provided that the term Guaranty shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "HAZARDOUS SUBSTANCES" shall mean any toxic, radioactive, caustic or otherwise hazardous substance, including petroleum, its derivatives, by-products and other hydrocarbons, or any substance having constituent elements displaying any of the foregoing characteristics, regulated under Environmental Laws. "INDEBTEDNESS" shall mean, as to any Person (determined without duplication): (i) indebtedness of such Person for borrowed money (whether by loan or the issuance and sale of debt securities) or for the deferred purchase or acquisition price of property or services, other than accounts payable (other than 7 13 for borrowed money) incurred in the ordinary course of business; (ii) obligations of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account of such Person (whether or not such obligations are contingent); (iii) Capital Lease Obligations of such Person; (iv) obligations of such Person to redeem or otherwise retire shares of capital stock of such Person; (v) indebtedness of others of the type described in clause (i), (ii), (iii) or (iv) above secured by a Lien on the property of such Person, whether or not the respective obligation so secured has been assumed by such Person; and (vi) indebtedness of others of the type described in clause (i), (ii), (iii) or (iv) above Guaranteed by such Person. "INTEREST EXPENSE" shall mean, for any period, the sum (determined without duplication) of the aggregate amount of interest accruing during such period on Indebtedness of the Company and its Subsidiaries (on a consolidated basis), including the interest portion of payments under Capital Lease Obligations and any capitalized interest, and excluding amortization of debt discount and expense. "INTEREST PERIOD" shall mean, (1) with respect to any Eurodollar Loans, the period commencing on the date such Loans are made or converted from other types of Loans or the last day of the next preceding Interest Period with respect to such Loans and ending on the numerically corresponding day in the first, second (subject to the availability of deposits of the corresponding maturity to each of the Lenders in the London interbank market), third or sixth calendar month thereafter, as the Company may select as provided in Section 5.05 hereof, except that each such Interest Period which commences on the last Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent calendar month; and (2) with respect to any Absolute Rate Competitive Loans, the period (which shall not be less than seven days or more than 360 days) commencing on the date such Loans are made and ending on the date specified in the applicable Competitive Bid Request. Notwithstanding the foregoing: (i) each Interest Period which would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day (or, in the case of an Interest Period for Eurodollar Loans, if such next succeeding Business Day falls in the next succeeding calendar month, on the next preceding Business Day); (ii) each Interest Period which begins before the Commitment Termination Date and would otherwise end after 8 14 the Commitment Termination Date shall end on the Commitment Termination Date, and each Interest Period which would otherwise end after the first anniversary of the Commitment Termination Date shall end on the first anniversary of the Commitment Termination Date; and (iii) no Interest Period for any Fixed Rate Loans shall have a duration of less than one month and, if the Interest Period for any Fixed Rate Loan would otherwise be a shorter period, such Loans shall not be available hereunder. "INVESTMENTS" shall have the meaning assigned to such term in Section 9.12 hereof. "LIEN" shall mean, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, the Company and each of its Subsidiaries shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "LIQUID INVESTMENTS" shall mean (i) certificates of deposit maturing within 90 days of the acquisition thereof denominated in Dollars and issued by (X) a Lender or (Y) a bank or trust company having combined capital and surplus of at least $500,000,000 and which has (or which is a Subsidiary of a bank holding company which has) publicly traded debt securities rated A- or higher by Standard & Poor's Ratings Services or A-3 or higher by Moody's Investors Service, Inc.; (ii) obligations issued or guaranteed by the United States of America, with maturities not more than one year after the date of issue; and (iii) commercial paper with maturities of not more than 90 days and a published rating of not less than A-1 from Standard & Poor's Ratings Services or P-1 from Moody's Investors Service, Inc. "LOANS" shall mean the loans made by the Lenders to the Company pursuant to this Agreement. "MAJORITY LENDERS" shall mean, at any time while no Committed Loans are outstanding, Lenders having at least 51% of the aggregate amount of the Commitments and, at any time while Committed Loans are outstanding, Lenders holding at least 51% of the outstanding aggregate principal amount of the Committed Loans; provided that for purposes of declaring the Loans to be due and payable pursuant to Section 10.01 and for all purposes after the Loans become due and payable pursuant to Section 10.01 hereof or the Commitments terminate, the outstanding principal amount of the Competitive Loans shall be added to the outstanding principal amount of the Committed Loans in determining the Majority Lenders. 9 15 "MATERIAL ADVERSE EFFECT" means (i) a material adverse effect on the condition (financial or otherwise), results of operations, properties, assets, liabilities (including, without limitation, tax and ERISA liabilities and Environmental Liabilities), business, operations, capitalization, shareholders' equity, franchises or prospects of the Company and its Subsidiaries, taken as a whole; or (ii) a material adverse effect on the ability of the Company to perform its obligations under the Credit Agreement or the Notes. "MULTIEMPLOYER PLAN" shall mean at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which the Company or any member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the Controlled Group during such five year period. "NOTES" shall have the meaning assigned to such term in Section 2.06 hereof. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "PERSON" shall mean an individual, a corporation, a company, a voluntary association, a partnership, a trust, an unincorporated organization or a government or any agency, instrumentality or political subdivision thereof. "PLAN" shall mean an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and either (i) is maintained or contributed to, by the Company or any member of the Controlled Group for employees of the Company or any member of the Controlled Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by the Company or any Person which was at such time a member of the Controlled Group for employees of any Person which was at such time a member of the Controlled Group. "POST-DEFAULT RATE" shall mean, in respect of any principal of any Loan or any other amount payable by the Company under this Agreement, a rate per annum equal to the sum of 2% plus the higher of (i) the Base Rate as in effect from time to time and (ii) in the case of any Loan, the rate of interest (if any) otherwise applicable to such Loan. "PRIME RATE" shall mean the rate of interest from time to time announced by Chase at the Principal Office as its prime commercial lending rate. Each 10 16 change in the interest rate provided for herein resulting from a change in the Prime Rate shall take effect at the time of such change in the Prime Rate. "PRINCIPAL OFFICE" shall mean the principal office of Chase, presently located at 270 Park Avenue, New York, New York 10017. "QUARTERLY DATES" shall mean the last Business Day of each March, June, September and December. "REFERENCE LENDERS" shall mean each of National City Bank, KeyBank National Association and Chase. "REGULATION D" shall mean Regulation D of the Board of Governors of the Federal Reserve System as the same may be amended or supplemented from time to time. "REGULATORY CHANGE" shall mean, with respect to any Lender, any change on or after the date of this Agreement in United States federal, state or foreign laws or regulations (including Regulation D) or the adoption or making on or after such date of any interpretations, directives or requests applying to a class of lenders including such Lender of or under any United States federal or state, or any foreign, laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof. "RELEASE" shall mean any discharge, emission or release, including a "Release" as defined in CERCLA at 42 U.S.C. Section 9601(22). The term "Released" shall have a corresponding meaning. "REVOLVING CREDIT PERIOD" shall mean the period from and including the date hereof to but not including the Commitment Termination Date. "REVOLVING LOAN" shall mean a Loan made pursuant to Section 2.01(a) hereof. "SENIOR OFFICER" shall mean the chief executive officer, president, chief financial officer or vice president-finance and treasurer of the Company. "SIGNIFICANT SUBSIDIARY" shall mean at any time any Subsidiary of the Company, except Subsidiaries of the Company which, if aggregated and considered as a single Subsidiary at the time of occurrence with respect to such Subsidiaries of any event or condition of the kind described in clause (e), (f) or (g) of Section 10.01, would not meet the definition of a "significant subsidiary" 11 17 contained as of the date hereof in Regulation S-X of the Securities and Exchange Commission; provided that for purposes of Section 9.04 only, "Significant Subsidiary" shall mean at any time any Subsidiary which would meet the definition of a "significant subsidiary" contained as of the date hereof in Regulation S-X of the Securities and Exchange Commission. "SUBSIDIARY" shall mean, with respect to any Person, any corporation of which at least a majority of the outstanding shares of stock having by the terms thereof ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether or not at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more of the Subsidiaries of such Person or by such Person and one or more of the Subsidiaries of such Person. "TERM LOAN" shall mean a Loan made pursuant to Section 2.01(c) hereof. "TYPE" shall have the meaning assigned to such term in Section 1.03 hereof. "UNFUNDED LIABILITIES" shall mean, with respect to any Plan, at any time, the amount (if any) by which (i) the value of all benefits liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such benefits under Title IV of ERISA (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of the Company or any member of the Controlled Group to the PBGC or any other Person under Title IV of ERISA. 1.02 Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all financial statements and certificates and reports as to financial matters required to be delivered hereunder shall be prepared, in accordance with GAAP; provided that if any change in GAAP in itself materially affects the calculation of any financial covenant in Section 9, the Company may by notice to the Administrative Agent, or the Administrative Agent (at the request of the Majority Lenders) may by notice to the Company, require that such covenant thereafter be calculated in accordance with GAAP as in effect, and applied by the Company, immediately before such change in GAAP occurs. If such notice is given, the compliance certificates delivered pursuant to Section 9.01 after such change occurs shall be accompanied by reconciliations of the difference between the calculation set forth 12 18 therein and a calculation made in accordance with GAAP as in effect from time to time after such change occurs. To enable the ready determination of compliance with the covenants set forth in Section 9 hereof, the Company will not change from May 31 in each year the date on which its fiscal year ends, nor from August 31, November 30 and February 28 the dates on which the first three fiscal quarters in each fiscal year end. 1.03 Class and Types of Loans. Loans hereunder are distinguished by "Class" and "Type". The "Class" of a Loan refers to whether such Loan is a Revolving Loan, a Term Loan or a Competitive Loan. The "Type" of a Loan refers to whether such Loan is a Eurodollar Loan or a Base Rate Loan or, in the case of a Competitive Loan, a Eurodollar Loan or an Absolute Rate Loan. Thus, for example, a "Eurodollar Competitive Loan" is a Competitive Loan which is also a Eurodollar Loan. SECTION 2. Commitments. 2.01 Loans. (a) Revolving Loans. Each Lender severally agrees, on the terms and subject to the conditions of this Agreement, to make Revolving Loans from time to time during the Revolving Credit Period to the Company in an aggregate principal amount at any one time outstanding which shall not (i) exceed its Commitment, as reduced from time to time pursuant to Section 2.02 hereof or (ii) result in the aggregate principal amount of Loans exceeding the aggregate amount of the Commitments, as so reduced from time to time. (b) Competitive Loans. In addition to Revolving Loans, the Company may from time to time during the Revolving Credit Period request the Lenders to make offers to make Competitive Loans to the Company as set forth in Section 3.03. The Lenders may, but shall have no obligation to, make such offers and the Company may, but shall have no obligation to, accept any such offers; provided that the aggregate principal amount of all Loans shall not at any time exceed the aggregate amount of the Commitments, as reduced from time to time pursuant to Section 2.02 hereof. (c) Term Loans. Each Lender severally agrees, on the terms and subject to the conditions of this Agreement, to make a Term Loan to the Company on the Commitment Termination Date in an amount up to but not exceeding the amount of its Commitment, as then in effect. (d) Notwithstanding anything to the contrary contained herein, all or any part of a Loan that any Lender (a "Granting Lender") may be obligated to fund 13 19 pursuant to this Agreement may be funded on such Lender's behalf by a special purpose funding vehicle (an "SPC"); provided that if an SPC fails to fund all or any part of such Loan, the Granting Lender shall be obligated to fund such Loan pursuant to the terms hereof. The funding of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were funded by such Granting Lender, and for purposes of this Agreement such Loan shall be deemed to have been made by such Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or payment under this Agreement for which a Lender would otherwise be liable. Notwithstanding anything to the contrary contained in this Agreement, any SPC may disclose on a confidential basis any non-public information relating to its funding of Loans to any rating agency, commercial paper dealer or provider of any surety or guarantee for such SPC's obligations. This subsection (d) may not be amended without the prior written consent of each Granting Lender which has notified the Company that all or any part of any of its Loans is being funded by an SPC at the time of such amendment. 2.02 Reductions of Commitments. (a) Mandatory. The Commitments shall terminate on the Commitment Termination Date; provided, that if the Closing Date shall not have occurred by August 15, 1999, the Commitments shall terminate on such date. (b) Optional. The Company shall have the right to terminate or reduce the Commitments at any time or from time to time, provided that: (i) the Company shall give notice of each such termination or reduction to the Administrative Agent as provided in Section 5.05 hereof and (ii) each partial reduction shall be in an aggregate amount equal to $10,000,000 or any greater multiple of $5,000,000. (c) No Reinstatement. Commitments once terminated or reduced may not be reinstated. 2.03 Fees. (a) Facility Fees. The Company shall pay to the Administrative Agent for the account of each Lender facility fees on the daily average amount of such Lender's Commitment (whether used or unused), for the period from the Closing Date to but excluding the earlier of the date the Commitments are terminated or the Commitment Termination Date, at a rate of 0.125% per annum; provided that, if such Lender continues to have any Committed Loans outstanding after its Commitment terminates, then such facility fee shall continue to accrue on the daily outstanding principal amount of such Lender's Committed Loans from and 14 20 including the date on which its Commitment terminates to but excluding the date on which such Lender ceases to have any Committed Loans outstanding. Accrued facility fees shall be payable on the Quarterly Dates and on the date the Commitments are terminated (and, if later, on the date the Loans shall be repaid in their entirety); provided that any facility fees accruing after the first anniversary of the Commitment Termination Date shall be payable on demand. (b) Utilization Fees. During any period when the aggregate outstanding principal amount of the Loans exceeds 33% of the aggregate amount of the Commitments or the Commitments have been terminated but Loans are outstanding, the Company shall pay to the Administrative Agent for the account of each Lender utilization fees at a rate of 0.125% per annum. Such utilization fee shall accrue on the average daily aggregate outstanding principal amount of such Lender's Loans and shall be payable on the Quarterly Dates and on the date the Commitments are terminated (and, if later, on the date the Loans shall be repaid in their entirety); provided that any utilization fees accruing after the first anniversary of the Commitment Termination Date shall be payable on demand. (c) Other Fees. The Company shall pay to the Administrative Agent on the Closing Date other fees in the amounts heretofore mutually agreed. The Company shall pay to the Administrative Agent on the Closing Date and on each anniversary thereof, so long as any of the Commitments are in effect and until payment in full of all Loans hereunder, all interest thereon and all other amounts payable hereunder, an annual administrative agency fee in the amount heretofore mutually agreed. 2.04 Lending Offices. The Loans of each Type made by each Lender shall be made and maintained at such Lender's Applicable Lending Office for Loans of such Type. 2.05 Several Obligations. The failure of any Lender to make any Loan to be made by it on the date specified therefor shall not relieve any other Lender of its obligation to make its Loan on such date, but neither the Administrative Agent nor any Lender shall be responsible for the failure of any other Lender to make a Loan to be made by such other Lender. 2.06 Notes. The Loans made by each Lender shall be evidenced by a single Note of the Company (each a "NOTE") in substantially the form of Exhibit A hereto, dated the Closing Date, payable to the order of such Lender in an amount equal to the aggregate unpaid principal amount of such Lender's Loans and otherwise duly completed. Each Lender may, by notice to the Company and the Administrative Agent, request that its Loans of a particular Class or Type be evidenced by a separate Note in an amount equal to the aggregate unpaid principal 15 21 amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant Class or Type. Each reference in this Agreement to the "Note" of such Lender shall be deemed to refer to and include any or all of such Notes, as the context may require. Each Lender is hereby authorized by the Company to endorse on the schedule (or a continuation thereof) attached to each Note of such Lender, to the extent applicable, the date, amount and Class or Type of and the Interest Period (if any) for each Loan made by such Lender to the Company hereunder, and the date and amount of each payment or prepayment of principal of such Loan received by such Lender, provided that any failure by such Lender to make any such endorsement or any error in such endorsement shall not affect the obligations of the Company under such Note or hereunder in respect of such Loan. 2.07 Use of Proceeds. The proceeds of the Loans shall be used by the Company to backstop the issuance of commercial paper by the Company, the proceeds of which shall be used to finance the consummation of the Acquisition and refinance existing indebtedness for borrowed money and for working capital and other general corporate purposes. None of such proceeds shall be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any margin stock (within the meaning of Regulation U or X of the Board of Governors of the Federal Reserve System). SECTION 3. Borrowings, Conversions and Prepayments. 3.01 Borrowings. (a) Committed Loans. The Company shall give the Administrative Agent notice of each borrowing of Committed Loans to be made hereunder as provided in Section 5.05 hereof. Not later than 11:00 a.m. (or, in the case of Base Rate Loans, 1:00 p.m.) New York time on the date specified for each such borrowing hereunder, each Lender shall make available the amount of the Committed Loan to be made by it on such date to the Administrative Agent, at the Principal Office, in immediately available funds, for the account of the Company. The amount so received by the Administrative Agent shall, subject to the terms and conditions of this Agreement, be made available to the Company by depositing the same, in immediately available funds, in an account designated by the Company maintained with the Administrative Agent at the Principal Office. (b) Competitive Loans. Requests by the Company of offers to make Competitive Loans shall be made as provided in Section 3.03. 16 22 3.02 Prepayments and Conversions. (a) Optional Prepayments and Conversions. The Company shall have the right to prepay Committed Loans or to convert Committed Loans of one Type into Committed Loans of another Type, at any time or from time to time, provided that: (i) the Company shall give the Administrative Agent notice of each such prepayment or conversion as provided in Section 5.05 hereof, and (ii) except to the extent required pursuant to Section 6.04 hereof, Fixed Rate Loans may be prepaid or converted only on the last day of an Interest Period for such Loans. The Company may not prepay Competitive Loans or convert Competitive Loans from one Type to a different Type, except that the Company may prepay Competitive Loans to the extent required pursuant to Section 3.02(b). (b) Mandatory Prepayments. On the date of each reduction of Commitments pursuant to Section 2.02(b), the Company shall prepay Loans, together with accrued interest on the principal amount prepaid, to the extent (if any) required so that the aggregate principal amount of Loans outstanding immediately after such prepayment will not exceed the aggregate amount of the Commitments after giving effect to such reduction. Any prepayment pursuant to this subsection (b) shall be applied, first, to Revolving Loans and second, to Competitive Loans, pro rata. 3.03 Competitive Bid Procedure. (a) Subject to the terms and conditions set forth herein, from time to time during the Revolving Credit Period the Company may request Competitive Bids and may (but shall not have any obligation to) accept Competitive Bids and borrow Competitive Loans; provided that the aggregate principal amount of outstanding Loans at any time shall not exceed the total Commitments. To request Competitive Bids, the Company shall notify the Administrative Agent of such request by telephone, in the case of a Eurodollar borrowing, not later than 11:00 a.m., New York City time, four Business Days before the date of the proposed borrowing, and, in the case of an Absolute Rate borrowing, not later than 10:00 a.m., New York City time, one Business Day before the date of the proposed borrowing; provided that the Company may submit up to (but not more than) three Competitive Bid Requests on the same day, but a Competitive Bid Request shall not be made within five Business Days after the date of any previous Competitive Bid Request, unless any and all such previous Competitive Bid Requests shall have been withdrawn or all Competitive Bids received in response thereto rejected. Each such telephonic Competitive Bid Request shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Competitive Bid Request in a form approved by the Administrative Agent and signed by the Company. Each such telephonic and written Competitive Bid Request shall specify the following information: 17 23 (i) the aggregate amount of the requested borrowing; (ii) the date of such borrowing, which shall be a Business Day; (iii) whether such borrowing is to be a Eurodollar borrowing or a Absolute Rate borrowing; and (iv) the Interest Period to be applicable to such borrowing, which shall be a period contemplated by the definition of the term "Interest Period". Promptly following receipt of a Competitive Bid Request in accordance with this Section, the Administrative Agent shall notify the Lenders of the details thereof by telecopy, inviting the Lenders to submit Competitive Bids. (b) Each Lender may (but shall not have any obligation to) make one or more Competitive Bids to the Company in response to a Competitive Bid Request. Each Competitive Bid by a Lender must be in a form approved by the Administrative Agent and must be received by the Administrative Agent by telecopy, in the case of a Eurodollar borrowing, not later than 10:00 a.m., New York City time, three Business Days before the proposed date of such borrowing, and in the case of an Absolute Rate borrowing, not later than 10:00 a.m., New York City time, on the proposed date of such borrowing. Competitive Bids that do not conform substantially to the form approved by the Administrative Agent may be rejected by the Administrative Agent, and the Administrative Agent shall notify the applicable Lender as promptly as practicable. Each Competitive Bid shall specify (i) the principal amount (which shall be a minimum of $5,000,000 and an integral multiple of $1,000,000 and which may equal the entire principal amount of the borrowing requested by the Company) of the Competitive Loan or Loans that the Lender is willing to make, (ii) the Competitive Bid Rate or Rates at which the Lender is prepared to make such Loan or Loans (expressed as a percentage rate per annum in the form of a decimal to no more than four decimal places) and (iii) the Interest Period applicable to each such Loan and the last day thereof. (c) The Administrative Agent shall promptly notify the Company by telecopy of the Competitive Bid Rate and the principal amount specified in each Competitive Bid and the identity of the Lender that shall have made such Competitive Bid. (d) Subject only to the provisions of this paragraph, the Company may accept or reject any Competitive Bid. The Company shall notify the Administrative Agent by telephone, confirmed by telecopy in a form approved by 18 24 the Administrative Agent, whether and to what extent it has decided to accept or reject each Competitive Bid, in the case of a Eurodollar borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing, and in the case of an Absolute Rate borrowing, not later than 11:00 a.m., New York City time, on the proposed date of the borrowing; provided that (i) the failure of the Company to give such notice shall be deemed to be a rejection of each Competitive Bid, (ii) the Company shall not accept a Competitive Bid made at a particular Competitive Bid Rate if the Company rejects a Competitive Bid made at a lower Competitive Bid Rate, (iii) the aggregate amount of the Competitive Bids accepted by the Company shall not exceed the aggregate amount of the requested Competitive borrowing specified in the related Competitive Bid Request, (iv) to the extent necessary to comply with clause (iii) above, the Company may accept Competitive Bids at the same Competitive Bid Rate in part, which acceptance, in the case of multiple Competitive Bids at such Competitive Bid Rate, shall be made pro rata in accordance with the amount of each such Competitive Bid, and (v) except pursuant to clause (iv) above, no Competitive Bid shall be accepted for a Competitive Loan unless such Competitive Loan is in a minimum principal amount of $5,000,000 and an integral multiple of $1,000,000; provided further that if a Competitive Loan must be in an amount less than $5,000,000 because of the provisions of clause (iv) above, such Competitive Loan may be for a minimum of $1,000,000 or any integral multiple thereof, and in calculating the pro rata allocation of acceptances of portions of multiple Competitive Bids at a particular Competitive Bid Rate pursuant to clause (iv) the amounts shall be rounded to integral multiples of $1,000,000 in a manner determined by the Company. A notice given by the Company pursuant to this paragraph shall be irrevocable. (e) The Administrative Agent shall promptly notify each bidding Lender by telephone (to be followed by telecopy) whether or not its Competitive Bid has been accepted (and, if so, the amount and Competitive Bid Rate so accepted), and each successful bidder will thereupon become bound, subject to the terms and conditions hereof, to make the Competitive Loan in respect of which its Competitive Bid has been accepted. (f) If the Administrative Agent shall elect to submit a Competitive Bid in its capacity as a Lender, it shall submit such Competitive Bid directly to the Company at least one quarter of an hour earlier than the time by which the other Lenders are required to submit their Competitive Bids to the Administrative Agent pursuant to subsection (b) of this Section. 19 25 SECTION 4. Payments of Principal and Interest. 4.01 Repayment of Loans. (a) The Revolving Loans shall mature on the last day of the Revolving Credit Period. (b) Each Competitive Loan shall mature on the last day of the Interest Period applicable thereto. (c) The Term Loans shall mature on the first anniversary of the Commitment Termination Date. 4.02 Interest. The Company will pay to the Administrative Agent for the account of each Lender interest on the unpaid principal amount of each Loan made by such Lender for the period commencing on the date of such Loan to but excluding the date such Loan shall be paid in full, at the following rates per annum: (a) if such Loan is a Base Rate Loan, the Base Rate; (b) if such Loan is a Eurodollar Revolving Loan, the Eurodollar Rate plus 0.625%; (c) if such Loan is a Eurodollar Competitive Loan, the Eurodollar Rate PLUS (or MINUS) the Competitive Margin quoted by the Lender making such Loan in accordance with Section 3.03 hereof; and (d) if such Loan is an Absolute Rate Loan, the Absolute Rate for such Loan for the Interest Period therefor quoted by the Lender making such Loan in accordance with Section 3.03 hereof. Notwithstanding any of the foregoing, the Company will pay to the Administrative Agent for the account of each Lender interest at the applicable Post-Default Rate on the principal of any Loan made by such Lender and on any other amount payable by the Company hereunder to or for the account of such Lender (but, if such amount is interest, only to the extent legally enforceable), which shall not be paid in full when due (whether at stated maturity, by acceleration or otherwise) for the period commencing on the due date thereof until the same is paid in full. Accrued interest on each Loan shall be payable (i) if such Loan is a Base Rate Loan, on each Quarterly Date, (ii) if such Loan is a Fixed Rate Loan or Competitive Loan, on the last day of the Interest Period for such Loan (and, if such Interest Period exceeds 90 days' (in the case of an Absolute Rate Loan) or 20 26 three months' (in the case of a Eurodollar Loan) duration, quarterly, commencing on the first quarterly anniversary of the first day of such Interest Period), and (iii) in any event, upon the payment, prepayment or conversion thereof, but only on the principal so paid or prepaid or converted; provided that interest payable at the Post-Default Rate shall be payable from time to time on demand of the Administrative Agent or the Majority Lenders. Promptly after the determination of any interest rate provided for herein or any change therein, the Administrative Agent shall notify the Lenders and the Company thereof. Notwithstanding the foregoing provisions of this Section 4.02, if at any time the rate of interest set forth above on any Loan of or other obligation payable to any Lender (the "STATED RATE") exceeds the maximum non-usurious interest rate permissible for such Lender to charge commercial borrowers under applicable law (the "MAXIMUM RATE" for such Lender), the rate of interest charged on such Loan of or other obligation payable to such Lender hereunder shall be limited to the Maximum Rate for such Lender. If the Stated Rate for any Loan of a Lender that has theretofore been subject to the preceding paragraph at any time is less than the Maximum Rate for such Lender, the principal amount of such Loan shall bear interest at the Maximum Rate for such Lender until the total amount of interest paid to such Lender or accrued on its Loans hereunder equals the amount of interest which would have been paid to such Lender or accrued on such Lender's Loans hereunder if the Stated Rate had at all times been in effect. If, upon payment in full of all amounts payable hereunder, the total amount of interest paid to any Lender or accrued on such Lender's Loans under the terms of this Agreement is less than the total amount of interest which would have been paid to such Lender or accrued on such Lender's Loans if the Stated Rate had, at all times, been in effect, then the Company shall, to the extent permitted by applicable law, pay to the Administrative Agent for the account of such Lender an amount equal to the difference between (a) the lesser of (i) the amount of interest which would have accrued on such Lender's Loans if the Maximum Rate for such Lender had at all times been in effect or (ii) the amount of interest which would have accrued on such Lender's Loans if the Stated Rate had at all times been in effect and (b) the amount of interest actually paid to such Lender or accrued on its Loans under this Agreement. If any Lender ever receives, collects or applies as interest any sum in excess of the Maximum Rate for such Lender, such excess amount shall be applied to the reduction of the principal balance of its Loans or to other amounts (other than interest) payable hereunder, and if no such principal is then outstanding, such excess or part thereof remaining shall be paid to the Company. 21 27 SECTION 5. Payments; Pro Rata Treatment; Computations; Etc. 5.01 Payments. Except to the extent otherwise provided herein, all payments of principal, interest and other amounts to be made by the Company hereunder and under the Notes shall be made in Dollars, in immediately available funds, to the Administrative Agent at the Principal Office, not later than 11:00 a.m. New York time on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). The Administrative Agent, or any Lender for whose account any such payment is made, may (but shall not be obligated to) debit the amount of any such payment which is not made by such time to any ordinary deposit account of the Company with the Administrative Agent or such Lender, as the case may be. The Company shall, at the time of making each payment hereunder or under any Note, specify to the Administrative Agent the Loans or other amounts payable by the Company hereunder to which such payment is to be applied (and in the event that it fails to so specify, or if an Event of Default has occurred and is continuing, the Administrative Agent may apply such payment as it may elect in its sole discretion to amounts then due, but subject to the other terms and conditions of this Agreement, including, without limitation, Section 5.02 hereof). Each payment received by the Administrative Agent hereunder or under any Note for the account of a Lender shall be paid promptly to such Lender, in immediately available funds, for the account of such Lender's Applicable Lending Office. If the due date of any payment hereunder or under any Note would otherwise fall on a day which is not a Business Day such date shall be extended to the next succeeding Business Day and interest shall be payable for any principal so extended for the period of such extension. 5.02 Pro Rata Treatment. Except to the extent otherwise provided herein: (a) each borrowing from the Lenders under Section 2.01(a) hereof shall be made from the Lenders, each payment of facility and utilization fees under Section 2.03 hereof shall be made for the account of the Lenders, and each termination or reduction of the Commitments under Section 2.02 hereof shall be applied to the Commitments of the Lenders, pro rata according to the Lenders' respective percentages of the Commitments; (b) each payment by the Company of principal of or interest on Committed Loans of a particular Type (other than payments in respect of Committed Loans of individual Lenders provided for by Section 6 hereof) shall be made to the Administrative Agent for the account of the Lenders pro rata in accordance with the respective unpaid principal amounts of such Committed Loans held by the Lenders; and (c) each conversion of Committed Loans of a particular Type (other than conversions of Committed Loans of individual Lenders pursuant to Section 6.04 hereof) shall be made pro rata among the Lenders in accordance with the respective principal amounts of such Committed Loans held by the Lenders. 22 28 5.03 Computations. Interest and fees shall be computed on the basis of a year of 360 days and actual days elapsed, except that interest on Base Rate Loans when the Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 or 366 days and actual days elapsed (in each case, including the first day but excluding the last day), in the period for which payable. 5.04 Minimum and Maximum Amounts; Types. Each borrowing, conversion and prepayment of principal of Committed Loans shall be in an aggregate principal amount equal to (a) in the case of Eurodollar Loans, $5,000,000 or any larger multiple of $1,000,000, and (b) in the case of Base Rate Loans, at least $5,000,000, except that any borrowing of Committed Loans may be in the aggregate amount of the unused portion of the Commitments (borrowings, conversions or prepayments of Committed Loans of different Types or, in the case of Fixed Rate Loans, having different Interest Periods, at the same time hereunder to be deemed separate borrowings, conversions and prepayments for purposes of the foregoing, one for each Type or Interest Period). Notwithstanding anything to the contrary contained in this Agreement there shall not be, at any one time, more than ten Interest Periods in effect with respect to Fixed Rate Loans. 5.05 Certain Notices. Except as specified in Section 3.03 with respect to Competitive Loans, notices to the Administrative Agent of terminations or reductions of Commitments, of borrowings, conversions and prepayments of Loans and of the duration of Interest Periods shall be irrevocable and shall be effective only if received by the Administrative Agent not later than 12:00 noon (or, in the case of borrowings or prepayments of Base Rate Loans, 10:30 a.m.) New York time on the number of Business Days prior to the date of the relevant termination, reduction, borrowing, conversion and/or prepayment specified below: Number of Business Notice Days Prior ------ ---------- Termination or reduction of Commitments 3 Borrowing or prepayment of Base Rate Loans 0 Borrowing or prepayment of, conversion of or into, or duration of Interest Period for, Fixed Rate Loans 3 23 29 Each notice of termination or reduction shall specify the amount of the Commitments to be terminated or reduced. Each notice of borrowing, conversion or prepayment shall specify the amount, Class and Type of the Loans to be borrowed, converted or prepaid (subject to Sections 3.02 and 5.04 hereof), the date of borrowing, conversion or prepayment (which shall be a Business Day) and, in the case of Fixed Rate Loans, the duration of the Interest Period therefor (subject to the definition of Interest Period). Each such notice of duration of an Interest Period shall specify the Loans to which such Interest Period is to relate. The Administrative Agent shall promptly notify the affected Lenders of the contents of each such notice. In the event that the Company fails to select the duration of any Interest Period for any Fixed Rate Loans within the time period and otherwise as provided in this Section 5.05, such Loans (if outstanding as Fixed Rate Loans) will be automatically converted into Base Rate Loans on the last day of the then current Interest Period for such Loans or (if outstanding as Base Rate Loans) will remain as, or (if not then outstanding) will be made as, Base Rate Loans. 5.06 Non-Receipt of Funds by the Administrative Agent. Unless the Administrative Agent shall have been notified by a Lender or the Company (the "PAYOR") prior to the date on (or, in the case of Base Rate Loans, prior to the time by) which such Lender is to make payment to the Administrative Agent of the proceeds of a Loan to be made by it hereunder or the Company is to make a payment to the Administrative Agent for the account of one or more of the Lenders, as the case may be (such payment being herein called the "REQUIRED PAYMENT"), which notice shall be effective upon receipt, that the Payor does not intend to make the Required Payment to the Administrative Agent, the Administrative Agent may assume that the Required Payment has been made and may, in reliance upon such assumption (but shall not be required to), make the amount thereof available to the intended recipient on such date (or at such time) and, if the Payor has not in fact made the Required Payment to the Administrative Agent, the recipient of such payment shall, on demand, pay to the Administrative Agent the amount made available to it together with interest thereon in respect of the period commencing on the date such amount was so made available by the Administrative Agent until the date the Administrative Agent receives such amount at a rate per annum equal to the Federal Funds Rate for such period. 5.07 Sharing of Payments, Etc. The Company agrees that, in addition to (and without limitation of) any right of set-off, bankers' lien or counterclaim a Lender may otherwise have, each Lender shall be entitled, at its option, to offset balances held by it for the account of the Company at any of its offices, in Dollars or in any other currency, against any principal of or interest on any of such Lender's Loans to the Company hereunder which is not paid when due (regardless of whether such balances are then due to the Company), in which case it shall 24 30 promptly notify the Company and the Administrative Agent thereof, provided that such Lender's failure to give such notice shall not affect the validity thereof. If a Lender shall obtain payment of any principal of or interest on any Committed Loan made by it under this Agreement, through the exercise of any right of set-off, banker's lien, counterclaim or similar right, or otherwise, it shall promptly purchase from the other Lenders participations in the Committed Loans made by the other Lenders in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all the Lenders shall share the benefit of such payment (net of any expenses which may be incurred by such Lender in obtaining or preserving such benefit) pro rata in accordance with the unpaid principal and interest on the Committed Loans then due to each of them. To such end all the Lenders shall make appropriate adjustments among themselves (by the resale of participations sold or otherwise) if such payment is rescinded or must otherwise be restored. The Company agrees, to the fullest extent it may effectively do so under applicable law, that any Person purchasing a participation in the Loans made by another Person, whether or not acquired pursuant to the foregoing arrangements, may exercise all rights of set-off, bankers' lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder of Loans or other obligations in the amount of such participation. Nothing contained herein shall require any Lender to exercise any such right or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of the Company. 5.08 Taxes. (a) Any and all payments by the Company hereunder shall be made, in accordance with Section 5.01, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Administrative Agent, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender or the Administrative Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Lender, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction of such Lender's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "TAXES"). If the Company shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender or the Administrative Agent, (i) except as provided in subsection (g) below, the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 5.08), such Lender or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Company shall make such deductions and (iii) the 25 31 Company shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Company agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement, the Notes or any other document referred to herein or therein (hereinafter referred to as "OTHER TAXES"). (c) The Company will indemnify each Lender and the Administrative Agent for the full amount of Taxes or Other Taxes (including related penalties, interest and expenses) imposed by any jurisdiction on amounts payable under this Section 5.08 paid by such Lender or the Administrative Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Lender or the Administrative Agent (as the case may be) makes written demand therefor. It is understood that Taxes do not include any withholdings or other obligations imposed on a Lender with respect to payments by such Lender to a participant in such Lender's Loans. (d) Within 30 days after the date of any payment of Taxes, the Company or a Lender, in the case of any Taxes paid by such Lender, will furnish to the Administrative Agent, at its address referred to in Section 12.02, the original or a certified copy of a receipt evidencing payment thereof. (e) At the reasonable request of the Company, a Lender or the Administrative Agent shall apply at the Company's expense for a refund in respect of Taxes or Other Taxes previously paid by the Company pursuant to this Section 5.08 if in the opinion of such Lender or Administrative Agent there is a reasonable basis for such refund. Notwithstanding the foregoing, none of the Lenders or the Administrative Agent shall be obligated to pursue such refund if, in its sole good faith judgment, such action would be disadvantageous to it. If any Lender subsequently receives from a taxing authority a refund of any Tax previously paid by the Company and for which the Company has indemnified the Lender pursuant to this Section 5.08, such Lender shall within 30 days after receipt of such refund, and to the extent permitted by applicable law, pay to the Company the net amount of any such recovery after deducting taxes and expenses attributable thereto. (f) Not later than the Closing Date or, in the case of any bank or financial institution that becomes a Lender after the Closing Date pursuant to Section 12.06, the date of the instrument of assignment pursuant to which such bank or 26 32 financial institution became a Lender, and annually thereafter or at such other times as the Administrative Agent or the Company may request, each Lender organized under the laws of a jurisdiction outside the United States shall provide the Administrative Agent and the Company with duly completed copies of Form 1001 or Form 4224 or any successor form prescribed by the Internal Revenue Service of the United States certifying that such Lender is exempt from United States withholding taxes with respect to all payments to be made to such Lender hereunder or other documents satisfactory to the Company and the Administrative Agent indicating that all payments to be made to such Lender hereunder are not subject to such taxes (an "EXEMPTION CERTIFICATE"). In the case of payments to or for any Lender organized under the laws of a jurisdiction outside the United States, unless the Administrative Agent and the Company have received an Exemption Certificate from such Lender, the Company, or the Administrative Agent if the Company has not withheld, may withhold taxes from such payments at the applicable statutory rate; provided that if the Company has withheld it shall so notify the Administrative Agent. If the Company is required to pay additional amounts to any Lender pursuant to this Section 5.08, such Lender shall use reasonable efforts to designate a different Applicable Lending Office if such designation will thereafter avoid the need for any additional payments under this Section 5.08 and will not, in the sole judgment of such Lender, be otherwise disadvantageous to such Lender. A Lender which ceases to be exempt from United States withholding taxes shall notify the Administrative Agent and the Company promptly thereof. (g) If a Lender organized under the laws of a jurisdiction outside the United States fails to comply with the provisions of subsection (f) above, then the Company shall not have any obligation to increase the sum payable to such Lender pursuant to Section 5.08(a) or to indemnify such Lender pursuant to Section 5.08(c) for Taxes (including related penalties, interest and expenses) imposed by the United States or any political subdivision thereof. SECTION 6. Yield Protection and Illegality. 6.01 Additional Costs. (a) The Company shall pay to the Administrative Agent for the account of each Lender from time to time such amounts as such Lender may determine to be necessary to compensate it for any costs incurred by such Lender which such Lender determines are attributable to its making or maintaining of any Fixed Rate Loans hereunder or its obligation to make any of such Loans hereunder, or any reduction in any amount receivable by such Lender hereunder in respect of any of such Loans or such obligation (such increases in costs and reductions in amounts 27 33 receivable being herein called "ADDITIONAL COSTS"), in each case resulting from any Regulatory Change which: (i) changes the basis of taxation of any amounts payable to such Lender under this Agreement or its Notes in respect of any of such Loans (other than changes which affect taxes measured by or imposed on the overall net income of such Lender or of its Applicable Lending Office for any of such Loans by the jurisdiction in which such Lender has its principal office or such Applicable Lending Office); or (ii) imposes or modifies any reserve, special deposit, insurance assessment or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, such Lender (including any of such Loans or any deposits referred to in the definitions of "Eurodollar Base Rate" in Section 1.01 hereof but excluding, with respect to any such Fixed Rate Loan, any such requirements included in the applicable Domestic Reserve Requirement or Eurodollar Reserve Requirement); or (iii) imposes any other condition affecting this Agreement (or any of such extensions of credit or liabilities). Each Lender will notify the Company through the Administrative Agent of any event occurring after the date of this Agreement which will entitle such Lender to compensation pursuant to this Section 6.01(a) as promptly as practicable after it obtains knowledge thereof and determines to request such compensation, and (if so requested by the Company through the Administrative Agent) will designate a different Applicable Lending Office for the relevant Type of Fixed Rate Loans of such Lender if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole opinion of such Lender, be disadvantageous to such Lender (provided that such Lender shall have no obligation to so designate an Applicable Lending Office located in the United States of America). Each Lender will furnish the Company with a statement setting forth the basis and amount of each request by such Lender for compensation under this Section 6.01(a). If any Lender requests compensation from the Company under this Section 6.01(a), the Company may, by notice to such Lender through the Administrative Agent, suspend the obligation of such Lender to make additional Fixed Rate Loans of the relevant Type to the Company until the Regulatory Change giving rise to such request ceases to be in effect (in which case the provisions of Section 6.04 hereof shall be applicable). (b) Without limiting the effect of the foregoing provisions of this Section 6.01, if, by reason of any Regulatory Change, any Lender either (i) incurs 28 34 Additional Costs based on or measured by the excess above a specified level of the amount of a category of deposits or other liabilities of such Lender which includes deposits by reference to which the interest rate on any Type of Fixed Rate Loans is determined as provided in this Agreement or a category of extensions of credit or other assets of such Lender which includes any Type of Fixed Rate Loans or (ii) becomes subject to restrictions on the amount of such a category of liabilities or assets which it may hold, then, if such Lender so elects by notice to the Company (with a copy to the Administrative Agent), the obligation of such Lender to make Fixed Rate Loans of the relevant Type hereunder shall be suspended until the date such Regulatory Change ceases to be in effect (in which case the provisions of Section 6.04 hereof shall be applicable). (c) Determinations and allocations by any Lender for purposes of this Section 6.01 of the effect of any Regulatory Change on its costs of maintaining its obligations to make Loans or of making or maintaining Loans or on amounts receivable by it in respect of Loans, and of the additional amounts required to compensate such Lender in respect of any Additional Costs, shall be presumed correct absent manifest error. (d) Notwithstanding the foregoing, the Company shall not be required to compensate any Lender for any Additional Costs incurred more than one year prior to the date that such Lender notifies the Company thereof, unless such Additional Costs were caused by the retroactive application of a Regulatory Change to a date more than one year prior to the date of such notice. 6.02 Limitation on Types of Loans. Anything herein to the contrary notwithstanding, if, with respect to any Fixed Rate Loans: (a) the Administrative Agent determines (which determination shall be conclusive) that quotations of interest rates for the relevant deposits referred to in the definition of "Eurodollar Base Rate" in Section 1.01 hereof are not being provided by the Reference Lenders in the relevant amounts or for the relevant maturities for purposes of determining the rate of interest for such Loans for Interest Periods therefor as provided in this Agreement; or (b) the Majority Lenders determine (which determination shall be conclusive) and notify the Administrative Agent that the relevant rates of interest referred to in the definition of "Eurodollar Base Rate" in Section 1.01 hereof upon the basis of which the rates of interest for such Loans are to be determined do not accurately reflect the cost to such Lenders of making or maintaining such Loans for Interest Periods therefor; 29 35 then the Administrative Agent shall promptly notify the Company and each Lender thereof, and so long as such condition remains in effect, the Lenders shall be under no obligation to make Fixed Rate Loans of the relevant Type or to convert Base Rate Loans into Fixed Rate Loans of the relevant Type and the Company shall, on the last day(s) of the then current Interest Period(s) for the outstanding Fixed Rate Loans of the relevant Type, either prepay such Loans or convert such Loans into Base Rate Loans in accordance with Section 3.02 hereof. 6.03 Illegality. Notwithstanding any other provision of this Agreement to the contrary, in the event that it becomes unlawful for any Lender or its Applicable Lending Office to (a) honor its obligation to make Fixed Rate Loans of any Type hereunder, or (b) maintain Fixed Rate Loans of any Type hereunder, then such Lender shall promptly notify the Company thereof through the Administrative Agent and such Lender's obligation to make Fixed Rate Loans of such Type hereunder shall be suspended until such time as such Lender may again make and maintain Fixed Rate Loans of such Type (in which case the provisions of Section 6.04 hereof shall be applicable). 6.04 Substitute Base Rate Loans. If the obligation of any Lender to make Fixed Rate Loans of any Type shall be suspended pursuant to Section 6.01, 6.02 or 6.03 hereof, all Loans which would otherwise be made by such Lender as Fixed Rate Loans of such Type shall be made instead as Base Rate Loans (and, if an event referred to in Section 6.01(b) or 6.03 hereof has occurred and such Lender so requests by notice to the Company with a copy to the Administrative Agent, each Fixed Rate Loan of such Type of such Lender then outstanding shall be automatically converted into a Base Rate Loan on the date specified by such Lender in such notice) and, to the extent that Fixed Rate Loans of such Type are so made as (or converted into) Base Rate Loans, all payments of principal which would otherwise be applied to such Fixed Rate Loans of such Type shall be applied instead to such Base Rate Loans. 6.05 Compensation. The Company shall pay to the Administrative Agent for the account of each Lender, upon the request of such Lender through the Administrative Agent, such amount or amounts as shall be sufficient (in the reasonable opinion of such Lender) to compensate it for any loss, cost or expense incurred by it as a result of: (a) any payment, prepayment or conversion of a Fixed Rate Loan made by such Lender on a date other than the last day of an Interest Period for such Loan; or (b) any failure by the Company to borrow a Fixed Rate Loan to be made by such Lender on the date for such borrowing specified in the 30 36 relevant notice of borrowing under Section 5.05 hereof or Section 3.03 hereof. Notwithstanding the foregoing, the Company shall not be required to compensate any Lender for any such loss, cost or expense incurred more than one year prior to the date that such Lender notifies the Company thereof. 6.06 Capital Adequacy. If any Lender shall determine that the adoption or implementation of any applicable law, rule, regulation or treaty regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Applicable Lending Office) with any request or directive issued after the date hereof regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Lender or any Person controlling such Lender (a "PARENT") as a consequence of its obligations hereunder to a level below that which such Lender (or its Parent) could have achieved but for such adoption, change or compliance (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, within 15 days after demand by such Lender (with a copy to the Administrative Agent), the Company shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. A statement of any Lender claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be presumed correct absent manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. 6.07 Substitution of Lender. If (i) the Company is required to withhold with respect to any Lender pursuant to Section 5.08, (ii) any Lender has demanded compensation under Section 6.01(a) or Section 6.06 or (iii) the obligation of any Lender to make Fixed Rate Loans has been suspended pursuant to Section 6.01(b)(ii) or Section 6.03, and so long as no Default shall have occurred and be continuing, the Company shall have the right to request one or more substitute banks, financial institutions or funds (which may be one or more of the Lenders) reasonably satisfactory to the Administrative Agent to purchase such Lender's Note and assume such Lender's Commitment hereunder by paying to such Lender an amount equal to all of the obligations of the Company to such Lender hereunder including, without limitation, principal and accrued interest and fees. Any costs or expenses incurred by the Administrative Agent in connection with assisting the Company pursuant hereto shall be paid upon demand by the Company. The Administrative Agent shall respond promptly to any request by the Company for its consent to a substitute for a Lender. 31 37 SECTION 7. Conditions Precedent. 7.01 Initial Loans. The obligation of each Lender to make the initial Loans to be made by it hereunder is subject to the following conditions precedent, each of which shall have been fulfilled to the satisfaction of the Administrative Agent on or prior to July 29, 1999 (or, in the case of Section 7.01(d), on or prior to August 15, 1999): (a) Corporate Action. The Administrative Agent shall have received certified copies of the Articles of Incorporation and Code of Regulations of the Company and of all corporate action taken by the Company authorizing the execution, delivery and performance of this Agreement and the Notes (including, without limitation, a certificate of the Company setting forth the resolutions authorizing the transactions contemplated thereby). (b) Incumbency. The Company shall have delivered to the Administrative Agent a certificate in respect of the name and signature of each of the officers (i) who is authorized to sign on its behalf this Agreement and the Notes and (ii) who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with this Agreement and the Notes. The Administrative Agent and each Lender may conclusively rely on such certificates until it receives notice in writing from the Company to the contrary. (c) Notes. The Administrative Agent shall have received a Note for each Lender, duly completed and executed. (d) Acquisition. All of the conditions to the consummation of the Acquisition shall have been duly satisfied in accordance with the Acquisition Documents (subject to waivers and other modifications thereof which, in the aggregate, are not material), and the Administrative Agent shall have received (or arrangements satisfactory to the Administrative Agent shall have been made for it to receive) a copy of each Acquisition Document (including, without limitation, each certificate, opinion of counsel or other material writing delivered in connection with the consummation of the Acquisition) and a certificate of the Company to the effect set forth in the first clause of this Section 7.01(d). 32 38 (e) Fees and Expenses. The Company shall have paid to the Administrative Agent for its account fees in the amount previously agreed upon by the Company. (f) Opinion of Counsel to the Company. The Administrative Agent shall have received an opinion of Calfee, Halter & Griswold LLP, counsel to the Company, and the General Counsel of the Company, substantially in the form of Exhibit B-1 and B-2 hereto, respectively. (g) Opinion of Special Counsel to the Administrative Agent. The Administrative Agent shall have received an opinion of Davis Polk & Wardwell, special counsel to the Administrative Agent, substantially in the form of Exhibit C hereto. (h) Counterparts. The Administrative Agent shall have received counterparts of this Agreement executed and delivered by or on behalf of each of the parties hereto (or, in the case of any Lender as to which the Administrative Agent shall not have received such a counterpart, the Administrative Agent shall have received evidence satisfactory to it of the execution and delivery by such Lender of a counterpart hereof). (i) Commercial Paper Ratings. The Administrative Agent shall have received evidence that the Company's commercial paper shall have been rated at least A-2 by Standard & Poor's Ratings Services and P-2 by Moody's Investors Service, Inc. (j) Other Documents. The Administrative Agent shall have received such other documents relating to the transactions contemplated hereby as the Administrative Agent may reasonably request. 7.02 Initial and Subsequent Loans. The obligation of each Lender to make any Loan to be made by it hereunder is subject to the conditions precedent that, as of the date of such Loan, and before and after giving effect thereto: (a) no Default shall have occurred and be continuing; and (b) the representations and warranties made by the Company in this Agreement shall be true on and as of the date of the making of such Loan, with the same force and effect as if made on and as of such date. Each notice of borrowing by the Company hereunder or Competitive Bid Request shall constitute a certification by the Company to the effect set forth in 33 39 the preceding sentence (both as of the date of such notice or Competitive Bid Request and as of the date of such borrowing). SECTION 8. Representations and Warranties. The Company represents and warrants to the Lenders and the Administrative Agent as follows (including, in the case of any representation or warranty made as of the Closing Date, both before and immediately after giving effect to the Acquisition): 8.01 Corporate Existence. Each of the Company and its Subsidiaries: (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; (b) has all requisite corporate power, and has all governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now being or as proposed to be conducted, except in the case of such licenses, authorizations, consents and approvals, where the failure to obtain them would not have a Material Adverse Effect; and (c) is qualified to do business in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary and where failure so to qualify would have a Material Adverse Effect. 8.02 Information. (a) All information heretofore furnished by the Company to the Administrative Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby did not as of the date thereof and will not as of the Closing Date contain any untrue statement of a material fact or assumption or omit to state a material fact or assumption necessary in order to make the statements contained therein not misleading; provided that (i) the Company makes no representation as to any materials prepared by or on behalf of DAP Products Inc. or DAP Canada Corp. in connection with their offer for sale and (ii) although the management of the Company believes that the projections presented in the pro forma consolidated balance sheet of the Company and its Subsidiaries as of May 31, 1999 and set forth in the Confidential Information Memorandum dated July 1999 are reasonable, they were not prepared in accordance with GAAP and the Company makes no representation as to their attainability. (b) Without limiting the generality of paragraph (a): (i) The audited consolidated balance sheet of the Company and its Subsidiaries as of May 31, 1998 and the audited consolidated statements of income, shareholders' equity and cash flows for the fiscal year ended May 31, 1998 (collectively, the "FINANCIAL STATEMENTS") have been prepared in accordance with generally accepted accounting principles consistently applied. The Financial Statements fairly present the financial position of the Company and its Subsidiaries as of May 31, 1998 and the 34 40 results of their operations and their cash flows for the fiscal year ended May 31, 1998 in conformity with generally accepted accounting principles. (ii) The unaudited consolidated balance sheet of the Company and its Subsidiaries as of February 28, 1999 and the unaudited consolidated statements of income, shareholders' equity and cash flows for the nine months then ended have been prepared in accordance with generally accepted accounting principles consistently applied, and fairly present the financial position of the Company and its Subsidiaries as of February 28, 1999 and the results of their operations and their cash flows for the nine months then ended in conformity with generally accepted accounting principles (subject to normal year-end adjustments). (iii) The Company and its Subsidiaries did not on the date of the balance sheet referred to in clause (i) above, and will not on the Closing Date, have any material contingent liabilities, material liabilities for taxes, unusual and material forward or long-term commitments or material unrealized or anticipated losses from any unfavorable commitments, except as referred to or reflected or provided for in said balance sheet. (c) The Company has disclosed to the Lenders in writing any and all facts (other than general economic and industry conditions) which have or may have a Material Adverse Effect. (d) Since May 31, 1998 no event has occurred and no condition has come into existence which has had, or is reasonably likely to have, a Material Adverse Effect. 8.03 Litigation. Except as disclosed in the Disclosure Documents, there are no legal or arbitral proceedings or any proceedings by or before any governmental or regulatory authority or agency, now pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect or which in any manner draw into question the validity of the Credit Agreement or the Notes. The disclosure of litigation to the Lenders pursuant to this Section does not necessarily mean that such litigation is of the type described in this Section or that the Company believes that such litigation has any merit whatsoever. 8.04 No Breach. None of the execution and delivery of the Basic Documents, the consummation of the Acquisition or the transactions therein contemplated or compliance with the terms and provisions thereof will conflict with or result in a breach of, or require any consent under, the Articles of 35 41 Incorporation or Codes of Regulation or comparable instruments of the Company or any of its Subsidiaries, or any applicable law or regulation, or any order, writ, injunction or decree of any court or governmental authority or agency, or any Basic Document or other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which it is bound or to which it is subject, or constitute a default under any such material agreement or instrument, or result in the creation or imposition of any Lien upon any of the revenues or assets of the Company or any of its Subsidiaries pursuant to the terms of any such agreement or instrument. 8.05 Corporate Action. The Company has all necessary corporate power and authority to consummate the Acquisition and to execute, deliver and perform its obligations under the Basic Documents to which it is a party; the consummation of the Acquisition and the execution, delivery and performance by the Company of the Basic Documents to which it is a party have been duly authorized by all necessary corporate action; and this Agreement has been duly and validly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company and, on the Closing Date, each of the other Basic Documents to which the Company is to be a party will constitute its legal, valid and binding obligation, in each case enforceable in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization or moratorium or other similar laws relating to the enforcement of creditors' rights generally and by general equitable principles. 8.06 Approvals. Each of the Company and its Subsidiaries has obtained all authorizations, approvals and consents of, and has made all filings and registrations with, any governmental or regulatory authority or agency and any third party necessary for the consummation of the Acquisition and the execution, delivery or performance by it of any Basic Document to which it is a party, or for the validity or enforceability thereof. 8.07 Regulations U and X. Neither the Company nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U or X of the Board of Governors of the Federal Reserve System) and no part of the proceeds of any Loan hereunder will be used to purchase or carry any such margin stock. 8.08 ERISA. The Company and each member of the Controlled Group have fulfilled their obligations under the minimum funding standards of ERISA and the Code with respect to each Plan and are in compliance in all material respects with the presently applicable provisions of ERISA and the Code with respect to each Plan. No such Person has (i) sought a waiver of the minimum 36 42 funding standard under Section 412 of the Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan, or made any amendment to any Plan, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Code or (iii) incurred any liability under Title IV of ERISA (other than a liability to the PBGC for premiums under Section 4007 of ERISA). 8.09 Taxes. Each of the Company and its Subsidiaries has filed all United States Federal income tax returns and all other material tax returns which are required to be filed by it and has paid all taxes due pursuant to such returns or pursuant to any assessment received by it, except to the extent the same may be contested as permitted by Section 9.02 hereof. There are no material tax disputes or contests pending as of the Closing Date. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of taxes and other governmental charges are, in the opinion of the Company, adequate. 8.10 Subsidiaries. Schedule I hereto is a complete and correct list, as of the date of this Agreement, of all Subsidiaries of the Company and of all Investments held by the Company or any of its Subsidiaries in any material joint venture or other similar Person. The Company owns, free and clear of Liens, all outstanding shares of its Subsidiaries and all such shares are validly issued, fully paid and non-assessable and the Company (or the respective Subsidiary of the Company) also owns, free and clear of Liens, all such Investments. 8.11 Investment Company Act. Neither the Company nor any of its Subsidiaries is an investment company within the meaning of the Investment Company Act of 1940, as amended, or, directly or indirectly, controlled by or acting on behalf of any Person which is an investment company, within the meaning of said Act. 8.12 Public Utility Holding Company Act. Neither the Company nor any of its Subsidiaries is a "holding company", or an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 8.13 Ownership and Use of Properties. Each of the Company and its Subsidiaries will have on the Closing Date and at all times thereafter, legal title or ownership of, or the right to use pursuant to enforceable and valid agreements or arrangements, all tangible property, both real and personal, and all franchises, licenses, copyrights, patents and know-how which is material to the operation of its business as proposed to be conducted. 37 43 8.14 Environmental Matters. Except as disclosed in the Disclosure Documents, neither the Company nor any of its Subsidiaries has (i) failed to obtain any permits, certificates, licenses, approvals, registrations and other authorizations which are required under any applicable Environmental Law where failure to have any such permit, certificate, license, approval, registration or authorization would have a Material Adverse Effect; (ii) failed to comply with the terms and conditions of all such permits, certificates, licenses, approvals, registrations and authorizations, and are also in compliance with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in any applicable Environmental Law or in any notice or demand letter from any regulatory authority issued, entered, promulgated or approved thereunder where failure to comply would have a Material Adverse Effect; or (iii) failed to conduct its business so as to comply in all respects with applicable Environmental Laws where failure to so comply would have a Material Adverse Effect. The disclosure of any failure or alleged failure to the Lenders pursuant to this Section does not necessarily mean that such failure is of the type described in this Section or that any such allegation has any merit whatsoever. 8.15 Year 2000. The cost to the Company and its Subsidiaries of any reprogramming required to permit the proper functioning, in and following the year 2000, of (i) the computer systems of the Company and its Subsidiaries and (ii) equipment containing embedded microchips (including systems and equipment supplied by others or with which the Company's systems interface) and the testing of all such systems and equipment, as so reprogrammed, and of the reasonably foreseeable consequences of year 2000 to the Company and its Subsidiaries (including, without limitation, reprogramming errors and the failure to others' systems or equipment) would not reasonably be expected to result in a Default or Event of Default or have a Material Adverse Effect. To the knowledge of the Company, except for such of the reprogramming referred to in the preceding sentence as may be necessary, which reprogramming the Company expects to complete in a timely fashion, the computer and management information systems of the Company and its Subsidiaries are and, with ordinary course upgrading and maintenance and planned systems conversions and/or upgrades, will continue to be, sufficient to permit the Company to conduct its businesses without a Material Adverse Effect. 8.16 Acquisition Documents. All of the representations and warranties of the Company and its Subsidiaries contained in the Acquisition Documents are true and correct as of the time made. SECTION 9. Covenants. The Company agrees that, so long as any of the Commitments are in effect and until payment in full of all Loans hereunder, all 38 44 interest thereon and all other amounts payable hereunder, unless the Majority Lenders shall agree otherwise as contemplated by Section 12.05 hereof: 9.01 Information. The Company shall deliver to each of the Lenders: (a) as soon as available and in any event within 90 days after the end of each fiscal year of the Company, consolidated statements of income, shareholders' equity and cash flows of the Company and its Subsidiaries for such year and the related consolidated balance sheet as at the end of such year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, and accompanied by an opinion thereon of Ciulla, Smith & Dale LLP or other independent certified public accountants of recognized national standing, which opinion shall state that said consolidated financial statements fairly present in all material respects the consolidated financial condition and results of operations of the Company and its Subsidiaries as at the end of, and for, such fiscal year; (b) as soon as available and in any event within 60 days after the end of each fiscal quarter of the Company other than the last fiscal quarter in each fiscal year, consolidated statements of income, shareholders' equity and cash flows of the Company and its Subsidiaries for such fiscal quarter and for the portion of the fiscal year ended at the end of such fiscal quarter, and the related consolidated balance sheet as at the end of such fiscal quarter, accompanied, in each case, by a certificate of a Senior Officer, which certificate shall state that said consolidated financial statements fairly present in all material respects the consolidated financial condition and results of operations of the Company in accordance with GAAP (except for footnotes of the type required by the Securities and Exchange Commission to be included in quarterly reports on Form 10-Q), consistently applied, as at the end of, and for, such period (subject to normal year-end audit adjustments); (c) promptly upon the mailing thereof to the shareholders of the Company generally, copies of all financial statements, reports and proxy statements so mailed; (d) promptly upon the filing thereof, copies of all registration statements (other than any registration statements on Form S-8 or its equivalent) and any reports which the Company shall have filed with the Securities and Exchange Commission; (e) if and when the Company or any member of the Controlled Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or 39 45 knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC, (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or makes any amendment to any Plan which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of a Senior Officer setting forth details as to such occurrence and action, if any, which the Company or member of the Controlled Group is required or proposes to take; (f) promptly after management of the Company knows that any Default has occurred and is continuing, a notice of such Default, describing the same in reasonable detail; and (g) from time to time such other information regarding the financial condition, operations, prospects or business of the Company as the Administrative Agent or any Lender through the Administrative Agent may reasonably request. The Company will furnish to each Lender, at the time it furnishes each set of financial statements pursuant to paragraph (a) or (b) above, a certificate of a Senior Officer (i) to the effect that, to the best of his knowledge after due inquiry, no Default has occurred and is continuing (or, if any Default has occurred and is continuing, describing the same in reasonable detail) and (ii) setting forth in reasonable detail the computations necessary to determine whether it was in compliance with Sections 9.08 to 9.12, inclusive, and 9.16 hereof as of the end of the respective fiscal quarter or fiscal year. 9.02 Taxes and Claims. The Company will pay and discharge, and will cause each of its Subsidiaries to pay and discharge, all material taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any property belonging to it, prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid, might become a Lien upon the property of the Company or such Subsidiary, provided that neither the Company nor such Subsidiary shall be required to pay any such tax, assessment, charge, levy or claim the payment of which is being contested in good faith and by proper 40 46 proceedings if it maintains adequate reserves with respect thereto and if such contest, proceedings and reserves have been described in a certificate of a Senior Officer delivered to the Lenders. 9.03 Insurance. The Company will maintain, and will cause each of its Subsidiaries to maintain, insurance with responsible companies in such amounts and against such risks as is usually carried by companies of established repute engaged in the same or similar businesses, owning similar properties, and located in the same general areas as the Company and its Subsidiaries. 9.04 Maintenance of Existence; Conduct of Business. The Company will preserve and maintain, and will cause each of its Subsidiaries to preserve and maintain, its corporate existence and all of its rights, privileges and franchises necessary or desirable in the normal conduct of its business, and will conduct its business in a regular manner; provided that nothing herein shall prevent (i) the merger and dissolution of any Subsidiary of the Company into the Company so long as the Company is the surviving corporation, (ii) the merger of any Subsidiary of the Company into any other Subsidiary of the Company, or (iii) the sale of any Subsidiary of the Company which is not a Significant Subsidiary. It is understood that the preservation and maintenance of rights, privileges and franchises shall not prevent the Company and its Subsidiaries from disposing of assets in any transaction not otherwise prohibited pursuant to this Section 9.04 or Section 9.10 hereof. 9.05 Maintenance of and Access to Properties. The Company will keep, and will cause each of its Subsidiaries to keep, all of its properties necessary in its business in good working order and condition (having regard to the condition of such properties at the time such properties were acquired by the Company or such Subsidiary), ordinary wear and tear excepted, and proper books of record and account in which full, true and correct entries in conformity with GAAP shall be made of all dealings and transactions in relation to its business activities, and will permit representatives of the Lenders to inspect such properties and, upon reasonable notice and at reasonable times, to examine and make extracts and copies from the books and records of the Company and any such Subsidiary. 9.06 Compliance with Applicable Laws. The Company will comply, and will cause each of its Subsidiaries to comply, with the requirements of all applicable laws, rules, regulations and orders of any governmental body or regulatory authority (including, without limitation, all Environmental Laws), a breach of which would have a Material Adverse Effect, except where contested in good faith and by proper proceedings. 41 47 9.07 Litigation. The Company will promptly give to the Administrative Agent (which shall promptly notify each Lender) notice in writing of all litigation and of all proceedings of which it is aware before any courts, arbitrators or governmental or regulatory agencies affecting the Company or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect. 9.08 Leverage Ratio. The Company will not permit Indebtedness of the Company and its Subsidiaries, determined on a consolidated basis, on any date to exceed 65% of the sum of such Indebtedness and consolidated shareholders' equity of the Company and its Subsidiaries on such date. 9.09 Interest Coverage Ratio. The Company will not permit the ratio, calculated as at the end of each fiscal quarter ending after the Closing Date for the four fiscal quarters then ended, of EBIT for such period to Interest Expense for such period to be less than 3:1. 9.10 Mergers, Asset Dispositions, Etc. The Company will not (i) consolidate or merge with or into any other Person or (ii) sell, lease or otherwise transfer, directly or indirectly, in one transaction or a series of related transactions, all or substantially all of its business or assets; provided that the Company may merge with another Person if (A) the Company is the corporation surviving such merger and (B) immediately after giving effect to such merger, no Default shall have occurred and be continuing. 9.11 Liens. The Company will not, and will not permit any of its Subsidiaries to, create or suffer to exist any Lien upon any property or assets, now owned or hereafter acquired, securing any Indebtedness or other obligation, except: (i) Liens existing on the Closing Date and securing Indebtedness in an aggregate principal amount not exceeding $10,000,000; (ii) Liens existing on other assets at the date of acquisition thereof or which attach to such assets concurrently with or within 90 days after the acquisition thereof, securing Indebtedness incurred to finance the acquisition thereof in an aggregate principal amount at any time outstanding not exceeding $15,000,000; (iii) any Lien existing on any asset of any corporation at the time such corporation becomes a Subsidiary of the Company or is merged or consolidated with or into the Company or one of its Subsidiaries and not created in contemplation of such event; 42 48 (iv) any Lien arising out of the refinancing, extension, renewal or refunding of any Indebtedness secured by any Lien permitted by any of the foregoing clauses of this Section 9.11, provided that such Indebtedness is not increased and is not secured by any additional assets; (v) other Liens arising in the ordinary course of the business of the Company or such Subsidiary which are not incurred in connection with the borrowing of money or the obtaining of advances or credit, do not secure any obligation in an amount exceeding $15,000,000 and do not materially detract from the value of its property or assets or materially impair the use thereof in the operation of its business; and (vi) Liens not otherwise permitted by the foregoing clauses of this Section 9.11 securing Indebtedness in an aggregate principal or face amount at any date not to exceed $15,000,000. 9.12 Investments. The Company will not, and will not permit any of its Subsidiaries to, make or permit to remain outstanding any advances, loans or other extensions of credit or capital contributions (other than prepaid expenses in the ordinary course of business) to (by means of transfers of property or assets or otherwise), or purchase or own any stocks, bonds, notes, debentures or other securities of, any Person (all such transactions being herein called "INVESTMENTS"), except: (i) operating deposit accounts; (ii) Liquid Investments; (iii) subject to Section 9.13 hereof, Investments in accounts and notes receivable acquired in the ordinary course of business as presently conducted; (iv) Investments existing on the Closing Date in Subsidiaries or joint ventures, and Investments after the Closing Date by First Colonial Insurance Company, a wholly-owned Subsidiary of the Company, in the ordinary course of its business; (v) Investments not otherwise permitted by the foregoing clauses of this Section 9.12 in Subsidiaries of the Company and in Persons which become Subsidiaries of the Company as the result of such Investments; (vi) Investments not otherwise permitted by the foregoing clauses of this Section 9.12 in joint ventures in an aggregate amount not to exceed $35,000,000; and (vii) Investments not otherwise permitted by the foregoing clauses of this Section 9.12 in an aggregate amount not to exceed $5,000,000. 9.13 Transactions with Affiliates. Except as expressly permitted by this Agreement the Company will not, and will not permit any of its Subsidiaries to, directly or indirectly: (i) make any Investment in an Affiliate of the Company (other than a Subsidiary of the Company); (ii) transfer, sell, lease, assign or otherwise dispose of any assets to an Affiliate of the Company (other than a Subsidiary of the Company); (iii) merge into or consolidate with or purchase or acquire assets from an Affiliate of the Company (other than a Subsidiary of the Company); or (iv) enter into any other transaction directly or indirectly with or for 43 49 the benefit of an Affiliate of the Company (other than a Subsidiary of the Company) (including, without limitation, Guaranties and assumptions of obligations of an Affiliate of the Company (other than a Subsidiary of the Company)); provided that (a) any Affiliate of the Company who is an individual may serve as a director, officer or employee of the Company and receive reasonable compensation or indemnification in connection with his or her services in such capacity; and (b) any transaction entered into by the Company or a Subsidiary of the Company with an Affiliate of the Company which is not a Subsidiary of the Company providing for the leasing of property, the rendering or receipt of services or the purchase or sale of inventory and other assets in the ordinary course of business must be for a monetary or business consideration which would be substantially as advantageous to the Company or such Subsidiary as the monetary or business consideration which would obtain in a comparable arm's length transaction with a Person not an Affiliate of the Company. 9.14 Lines of Business. The Company and its Subsidiaries, taken as a whole, shall not engage to any substantial extent in any line or lines of business activity other than present or related product lines. 9.15 Environmental Matters. The Company will promptly give to the Lenders notice in writing of any complaint, order, citation, notice or other written communication from any Person with respect to, or if the Company becomes aware after due inquiry of, (i) the existence or alleged existence of a violation of any applicable Environmental Law or Environmental Liability at, upon, under or within any property now or previously owned, leased, operated or used by the Company or any of its Subsidiaries or any part thereof, or due to the operations or activities of the Company, any Subsidiary on or in connection with such property or any part thereof (including receipt by the Company or any Subsidiary of any notice of the happening of any event involving the Release of a reportable quantity under any applicable Environmental Law or cleanup of any Hazardous Substance), (ii) any Release on such property or any part thereof in a quantity that is reportable under any applicable Environmental Law, (iii) the commencement of any cleanup pursuant to or in accordance with any applicable Environmental Law of any Hazardous Substances on or about such property or any part thereof and (iv) any pending or threatened proceeding for the termination, suspension or non-renewal of any permit required under any applicable Environmental Law, in each case which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect. 9.16 Lease Payments. Neither the Company nor any of its Subsidiaries will incur or assume (whether pursuant to a Guaranty or otherwise) any liability for rental payments under a lease with a lease term (as defined in Financial Accounting Standards No. 13 of the Financial Accounting Standards Board, as in 44 50 effect on the date hereof) if (i) such lease is of an asset previously owned by the Company or any of its Subsidiaries and (ii) after giving effect thereto, the aggregate amount of minimum lease payments that the Company and its Subsidiaries have so incurred or assumed (excluding payments in respect of a lease (whether now or hereafter existing) of Rust-Oleum Corporation's corporate headquarters located in Vernon Hills, Illinois) will exceed, on a consolidated basis, $7,500,000 for any calendar year under all such leases. SECTION 10. Defaults. 10.01 Events of Default. If one or more of the following events (herein called "EVENTS OF DEFAULT") shall occur and be continuing: (a) default in the payment of (i) any principal of any Loan when due or of (ii) any interest on any Loan or other amount payable hereunder within five Business Days after the due date thereof; or (b) the Company or any of its Subsidiaries shall default in the payment when due of any principal of or interest on Indebtedness having an aggregate outstanding principal amount of at least $20,000,000 (other than the Loans); or any event or condition shall occur which results in the acceleration of the maturity of any such Indebtedness or enables (or, with the giving of notice or lapse of time or both, would enable) the holder of any such Indebtedness or any Person acting on such holder's behalf to accelerate the maturity thereof; or (c) any representation or warranty made or deemed made by the Company or any Subsidiary herein, or in any certificate furnished to any Lender or the Administrative Agent pursuant to the provisions hereof, shall prove to have been false or misleading in any material respect as of the time made or furnished; or (d) (i) the Company shall default in the performance of any of its obligations under Section 2.07 or Sections 9.08 through 9.13 and 9.16 hereof; or (ii) the Company or any Subsidiary shall default in the performance of any of its other obligations hereunder, and such default described in this subclause (ii) shall continue unremedied for a period of 30 days after notice thereof to the Company by the Administrative Agent or any Lender (through the Administrative Agent); or (e) the Company or any of its Significant Subsidiaries shall admit in writing its inability to, or be generally unable to, pay its debts as such debts become due; or 45 51 (f) the Company or any of its Significant Subsidiaries shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the Bankruptcy Code, (iv) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or readjustment of debts, (v) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Bankruptcy Code, or (vi) take any corporate or partnership action for the purpose of effecting any of the foregoing; or (g) a proceeding or case shall be commenced, without the application or consent of the Company or any of its Significant Subsidiaries in any court of competent jurisdiction, seeking (i) its liquidation, reorganization, dissolution or winding-up, or the composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of such Person or of all or any substantial part of its assets, or (iii) similar relief in respect of such Person under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, and such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of 90 days; or an order for relief against such Person shall be entered in an involuntary case under the Bankruptcy Code; or (h) a final judgment or judgments for the payment of money shall be rendered by a court or courts against the Company or any of its Subsidiaries in excess of $35,000,000 in the aggregate (excluding any amount of such judgment as to which an Acceptable Insurer has acknowledged liability), and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within 10 days from the date of entry thereof, or the Company or such Subsidiary shall not, within said period of 10 days, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal; or (i) the Company or any member of the Controlled Group shall fail to pay when due an amount or amounts aggregating in excess of $20,000,000 for which it shall have become liable under Title IV of ERISA; or notice of intent to terminate a Plan or Plans having aggregate Unfunded Liabilities in excess of $20,000,000 shall be filed under Title IV 46 52 of ERISA by the Company or any member of the Controlled Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer, any Plan or Plans having aggregate Unfunded Liabilities in excess of $20,000,000; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Plan or Plans having aggregate Unfunded Liabilities in excess of $20,000,000 must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause the Company or one or more members of the Controlled Group to incur a current payment obligation in excess of $20,000,000; or (j) (i) as a result of one or more transactions after the date of this Agreement, any "person" or "group" of persons shall have "beneficial ownership" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended, and the applicable rules and regulations thereunder) of 30% or more of the outstanding common stock of the Company; or (ii) without limiting the generality of the foregoing, during any period of 12 consecutive months, commencing after the date of this Agreement, individuals who at the beginning of such 12-month period were directors of the Company shall cease for any reason to constitute a majority of the board of directors of the Company; THEREUPON: the Administrative Agent may (and, if directed by the Majority Lenders, shall) by notice to the Company (a) declare the Commitments terminated (whereupon the Commitments shall be terminated) and/or (b) declare the principal amount then outstanding of and the accrued interest on the Loans and fees and all other amounts payable hereunder and under the Notes to be forthwith due and payable, whereupon such amounts shall be and become immediately due and payable, without other notice, presentment, demand, protest or other formalities of any kind (all of which are hereby expressly waived by the Company); provided that in the case of the occurrence of an Event of Default with respect to the Company referred to in clause (f) or (g) of this Section 10.01, the Commitments shall be automatically terminated and the principal amount then outstanding of and the accrued interest on the Loans and fees and all other amounts payable hereunder and under the Notes shall be and become automatically and immediately due and payable, without notice (including, without limitation, notice of intent to accelerate), presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Company. Each Lender hereby agrees that, unless so requested by the 47 53 Administrative Agent with the consent of the Majority Lenders, it shall not take or cause to be taken any action to declare the Commitments terminated or to declare payable or collect the amounts referred to above that is independent from any action taken or to be taken by the Administrative Agent, unless such action is taken in connection with an Event of Default described in clause (a), (e), (f) or (g) of this Section 10.01. SECTION 11. The Administrative Agent. 11.01 Appointment, Powers and Immunities. Each Lender hereby irrevocably appoints and authorizes the Administrative Agent to act as its agent hereunder and under the Notes with such powers as are specifically delegated to the Administrative Agent by the terms hereof and thereof, together with such other powers as are reasonably incidental thereto. The Administrative Agent (which term as used in this Section 11 shall include reference to its affiliates and its and its affiliates' officers, directors, employees and agents): (a) shall have no duties or responsibilities except those expressly set forth in this Agreement and the Notes, and shall not by reason of this Agreement or any Note be a trustee for any Lender; (b) shall not be responsible to the Lenders for any recitals, statements, representations or warranties contained in this Agreement or the Notes, or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement or any the Notes, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any Note or any other document referred to or provided for herein or therein or for any failure by the Company or any of its Subsidiaries or any other Person to perform any of its obligations hereunder or thereunder; (c) shall not be required to initiate or conduct any litigation or collection proceedings hereunder or under any Note except to the extent requested by the Majority Lenders, and (d) shall not be responsible for any action taken or omitted to be taken by it hereunder or under any Note or any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or willful misconduct. The Administrative Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. 11.02 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telex, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the Administrative Agent. As to any matters not expressly provided for by this Agreement or the Notes, the Administrative Agent shall in all cases be fully protected in acting, or in refraining 48 54 from acting, hereunder and thereunder in accordance with instructions signed by the Majority Lenders and such instructions of the Majority Lenders and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. 11.03 Defaults. The Administrative Agent shall not be deemed to have knowledge of the occurrence of a Default (other than the non-payment of principal of or interest on Loans or facility or utilization fees) unless the Administrative Agent has received notice from a Lender or the Company specifying such Default and stating that such notice is a "Notice of Default". In the event that the Administrative Agent receives such a notice of the occurrence of a Default, the Administrative Agent shall give prompt notice thereof to the Lenders (and shall give each Lender prompt notice of each such non-payment). The Administrative Agent shall (subject to Section 11.07 hereof) take such action with respect to such Default as shall be directed by the Majority Lenders, provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interests of the Lenders. 11.04 Rights as a Lender. With respect to its Commitment and the Loans made by it, Chase in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as the Administrative Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include the Administrative Agent in its individual capacity. The Administrative Agent may (without having to account therefor to any Lender) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Company (and any of its Affiliates) as if it were not acting as the Administrative Agent and the Administrative Agent may accept fees and other consideration from the Company (in addition to the agency fees and arrangement fees heretofore agreed to between the Company, the Administrative Agent) for services in connection with this Agreement or otherwise without having to account for the same to the Lenders. 11.05 Indemnification. The Lenders agree to indemnify the Administrative Agent (to the extent not reimbursed under Section 12.03 or 12.04 hereof, but without limiting the obligations of the Company under said Sections 12.03 and 12.04), ratably in accordance with their respective Commitments, for any and all 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 Administrative Agent in any way relating to or arising out of this Agreement or any other Basic Document or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (including, without limitation, the 49 55 costs and expenses which the Company is obligated to pay under Sections 12.03 and 12.04 hereof but excluding, unless a Default has occurred and is continuing, normal administrative costs and expenses incident to the performance of its agency duties hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents, provided that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the party to be indemnified. 11.06 Non-Reliance on Administrative Agent and Other Lenders. Each Lender agrees that it has, independently and without reliance on the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Company and decision to enter into this Agreement and that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or its Note or Notes. The Administrative Agent shall not be required to keep itself informed as to the performance or observance by the Company or any other Person of this Agreement or any of the other Basic Documents or any other document referred to or provided for herein or therein or to inspect the properties or books of the Company or any other Person. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Administrative Agent hereunder or under the Notes, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of the Company or any other Person (or any of their affiliates) which may come into the possession of the Administrative Agent. 11.07 Failure to Act. Except for action expressly required of the Administrative Agent hereunder and under any Note, the Administrative Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction by the Lenders of their indemnification obligations under Section 11.05 hereof against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. 11.08 Resignation or Removal of Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided below, the Administrative Agent may resign at any time by giving notice thereof to the Lenders and the Company and the Administrative Agent may be removed at any time with or without cause by the Majority Lenders. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Administrative Agent reasonably acceptable to the Company. If no 50 56 successor Administrative Agent shall have been so appointed by the Majority Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Majority Lenders' removal of the retiring Administrative Agent (the "NOTICE DATE"), then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent reasonably acceptable to the Company. Any successor Administrative Agent shall be (i) a Lender or (ii) if no Lender has accepted such appointment within 40 days after the Notice Date, a bank which has an office in New York, New York with a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Section 11 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent. SECTION 12. Miscellaneous. 12.01 Waiver. No failure on the part of the Administrative Agent or any Lender to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Agreement or the Notes shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided in this Agreement and the Notes are cumulative and not exclusive of any remedies provided by law. 12.02 Notices. All notices and other communications provided for herein (including, without limitation, any modifications of, or waivers or consents under, this Agreement) shall be given or made by telex, telegraph, telecopy, cable or other writing and telexed, telecopied, telegraphed, cabled, mailed or delivered to the intended recipient at the "Address for Notices" specified below its name on the signature pages hereof; or, as to any party, at such other address as shall be designated by such party in a notice to the Company and the Administrative Agent given in accordance with this Section 12.02. Except as otherwise provided in this Agreement, all such communications shall be deemed to have been duly given when transmitted by telex or telecopier, delivered to the telegraph or cable office or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid. 51 57 12.03 Expenses, Etc. If an Event of Default occurs, the Company agrees to pay or reimburse each of the Lenders and the Administrative Agent for paying all costs and expenses of each of the Lenders and the Administrative Agent (including counsels' fees) incurred as a result of such Event of Default and collection, enforcement, bankruptcy, insolvency and other proceedings resulting therefrom. 12.04 Indemnification. The Company shall indemnify the Administrative Agent, the Lenders and each affiliate thereof and their respective directors, officers, employees, attorneys and agents from, and hold each of them harmless against, any and all losses, liabilities, claims or damages to which any of them may become subject, insofar as such losses, liabilities, claims or damages arise out of or result from (i) any actual or proposed use by the Company of the proceeds of any extension of credit by any Lender hereunder or breach by the Company of this Agreement or any other Basic Document, (ii) any Environmental Liabilities or (iii) any investigation, litigation or other proceeding (including any threatened investigation or proceeding) relating to the foregoing, whether or not the indemnified Person is a party thereto, and the Company shall reimburse the Administrative Agent and each Lender, and each affiliate thereof and their respective directors, officers, employees and agents, upon demand for any expenses (including legal fees and fees of engineers, environmental consultants and similar technical personnel) incurred in connection with any such investigation or proceeding; but excluding any such losses, liabilities, claims, damages or expenses incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified. 12.05 Amendments, Etc. No amendment or waiver of any provision of this Agreement or the Notes, nor any consent to any departure by the Company therefrom, shall in any event be effective unless the same shall be agreed or consented to by the Majority Lenders and the Company, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, that no amendment, waiver or consent shall (i) increase any Commitment of any Lender or subject any Lender to any additional obligations, without the written consent of such Lender; (ii) reduce the principal of, or interest on, any Loan, or any fees hereunder, without the written consent of each Lender affected thereby; (iii) postpone any date fixed for any payment of principal of, or interest on, any Loan, or any fee hereunder pursuant to Sections 2.03, 4.01 or 4.02 hereof, without the written consent of each Lender affected thereby; (iv) change the percentage of any of the Commitments or of the aggregate unpaid principal amount of any of the Loans, or the number of Lenders, which shall be required for the Lenders or any of them to take any action under this Agreement, without the written consent of each Lender; or (v) change any provision contained in Sections 2.07, 6, 12.03 or 12.04 hereof or this Section 52 58 12.05 or Section 12.08 hereof. Notwithstanding anything in this Section 12.05 to the contrary, no amendment, waiver or consent shall be made with respect to Section 11 without the consent of the Administrative Agent. 12.06 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns except that the Company may not assign its rights or obligations hereunder or under the Notes without the prior written consent of all of the Lenders. Each Lender may assign any Loan or Loans or all or any part of its Commitment (i) to any affiliate thereof, (ii) to any other Lender, or (iii) with the consent of the Company and the Administrative Agent, which consents shall not be unreasonably withheld, to any other bank or financial institution or fund; provided that (x) any assignment shall not be less than $5,000,000 or, if less, shall constitute an assignment of all of such Lender's Commitment and Loans and (y) the Company shall be deemed to be reasonable in withholding consent if the assignee is not exempt from United States withholding taxes. Upon execution by the assignor and the assignee of an instrument pursuant to which the assignee assumes such rights and obligations, payment by such assignee to such assignor of an amount equal to the purchase price agreed between such assignor and such assignee and delivery to the Administrative Agent and the Company of an executed copy of such instrument together with payment by such assignee to the Administrative Agent of a processing fee of $2,500, such assignee shall have, to the extent of such assignment (unless otherwise provided therein), the same rights and benefits as it would have if it were a Lender hereunder and the assignor shall be, to the extent of such assignment (unless otherwise provided therein) released from its obligations under this Agreement. Upon the consummation of such assignment, the Company shall make appropriate arrangements so that, if required, new Notes are issued to the assignor and the assignee. If such assignee is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the effectiveness of the applicable instrument of assumption, deliver to the Company and the Administrative Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 5.08(f). Each Lender may (without the consent of any other party to this Agreement) sell participations in all or any part of any Loan or Loans made by it to another bank or other entity, in which event the participant shall not have any rights under this Agreement (except as provided in the next succeeding sentence hereof), or in the case of a Loan, such Lender's Note (the participant's rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the participant relating thereto, which agreement shall not give the participant the right to consent to any modification, amendment or waiver other than one described in clause (i), (ii) or (iii) of Section 12.05 hereof). The Company agrees that each participant shall be entitled to the benefits of Sections 5.07 and 6 with respect to its participation; 53 59 provided that no participant shall be entitled to receive any greater amount pursuant to such Sections than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such participant had no such transfer occurred. Each Lender may furnish any information concerning the Company and its Subsidiaries in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants) which have agreed in writing to be bound by the provisions of Section 12.07 hereof. The Administrative Agent and the Company may, for all purposes of this Agreement, treat any Lender as the holder of any Note drawn to its order (and owner of the Loans evidenced thereby) until written notice of assignment or other transfer shall have been received by them from such Lender. Notwithstanding anything to the contrary, any Lender may at any time assign all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank. No such assignment shall release the transferor Lender from its obligations hereunder. 12.07 Confidentiality. Each Lender agrees to keep confidential any information delivered or made available by the Company to it prior to the end of the term of this Agreement which is clearly indicated to be confidential information; provided that nothing herein shall prevent any Lender from disclosing such information (i) to any other Lender, (ii) to its officers, directors, employees, affiliates, agents, attorneys and accountants who have a need to know such information in accordance with customary banking practices and who receive such information having been made aware of the restrictions set forth in this Section, (iii) upon the order (which, for avoidance of doubt, includes any subpoena) of any court or administrative agency, (iv) upon the request or demand of any regulatory agency or authority having jurisdiction over such Lender, (v) which has been publicly disclosed, (vi) to the extent reasonably required in connection with any litigation to which the Administrative Agent, any Lender, the Company or their respective affiliates may be a party, (vii) to the extent reasonably required in connection with the exercise of any remedy hereunder, (viii) to such Lender's legal counsel and independent auditors, and (ix) to any actual or proposed participant or assignee of all or part of its rights hereunder which has agreed in writing to be bound by the provisions of this Section 12.07. 12.08 Survival. The obligations of the Company under Sections 5.08, 6.01, 6.05, 12.03 and 12.04 hereof and the obligations of the Lenders under Sections 11.05 and 12.07 shall survive the repayment of the Loans and the termination of the Commitments. 12.09 Captions. The table of contents and the captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. 54 60 12.10 Counterparts; Integration. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral and written, relating to the subject matter hereof (except to the extent specific reference is made to any such agreement in Section 2.03 hereof). 12.11 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. THE COMPANY HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE COMPANY, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written. RPM, INC. By /s/ David P. Reif -------------------------------- Title: Vice President Corporate Finance Address for Notices: 55 61 2628 Pearl Road P.O. Box 777 Medina, Ohio 44258 Attention: David P. Reif, Vice President Corporate Finance Telephone Number: 330-273-8833 Telecopy Number: 330-225-6574 56 62 Commitment: THE CHASE MANHATTAN BANK $35,000,000 By /s/ Peter Dedousis --------------------------------- Title: Managing Director Address for Notices: The Chase Manhattan Bank 270 Park Avenue, 38th Floor New York, New York 10017 Attention: Stacey Haimes Telecopy Number: (212) 270-1355 57 63 Commitment: NATIONAL CITY BANK $35,000,000 By /s/ Terri L. Cable --------------------------------- Title: Senior Vice President Address for Notices: National City Bank 1900 East 9th Street, 10th Floor Cleveland, Ohio 44114-3484 Attention: Terri Cable Telecopy Number: (216) 222-0003 58 64 Commitment: KEYBANK NATIONAL ASSOCIATION $35,000,000 By /s/ Marianne T. Meil --------------------------------- Title: Vice President Address for Notices: KeyBank National Association 127 Public Square Mail Code: OH-01-27-0606 Cleveland, Ohio 44114-1306 Attention: Marianne Meil Telecopy Number: (216) 689-4981 59 65 Commitment: BANK OF AMERICA, N.A. $31,250,000 By /s/ Valerie C. Mills --------------------------------- Title: Managing Director Address for Notices: Bank of America 231 South LaSalle Street, 9th Floor Chicago, Illinois 60697 Attention: Valerie Mills Telecopy Number: (312) 987-0303 60 66 Commitment: BANK ONE, MICHIGAN $31,250,000 By /s/ Patrick F. Dunphy --------------------------------- Title: Vice President Address for Notices: Bank One, Michigan 611 Woodward Avenue, MI1-8073 Detroit, Michigan 48226 Attention: Wieslaw (Wes) Sliwinski Telecopy Number: (313) 225-1671 61 67 Commitment: FIRST UNION NATIONAL BANK $31,250,000 By /s/ Paul L. Menconi --------------------------------- Title: Vice President Address for Notices: First Union National Bank 301 South College Street, 10th Floor Charlotte, North Carolina 28288 Attention: Peter Steffen Telecopy Number: (704) 383-7236 62 68 Commitment: WACHOVIA BANK, N.A. $31,250,000 By /s/ Terence A. Snellings --------------------------------- Title: Senior Vice President Address for Notices: Wachovia Bank, N.A. 191 Peachtree Street N.E. Atlanta, Georgia 30303 Attention: Jay Johnson Telecopy Number: (404) 332-6898 63 69 Commitment: CREDIT SUISSE FIRST BOSTON $20,000,000 By /s/ Douglas E. Maher --------------------------------- Title: Vice President By /s/ James P. Moran --------------------------------- Title: Director Address for Notices: Credit Suisse First Boston 11 Madison Avenue New York, New York 10010-3692 Attention: Douglas E. Maher Telecopy Number: (212) 325-8615 64 70 Commitment: FIFTH THIRD BANK, NORTHEASTERN OHIO $20,000,000 By /s/ Roy C. Lanctot --------------------------------- Title: Vice President Address for Notices: Fifth Third Bank, Northeastern Ohio 1404 East 9th Street, 2nd Floor Cleveland, Ohio 44114 Attention: Roy C. Lanctot Telecopy Number: (216) 274-5507 65 71 Commitment: KBC BANK N.V. $20,000,000 By /s/ John E. Thierfelder --------------------------------- Title: Vice President By /s/ Nelson Conde --------------------------------- Title: Vice President and Controller Address for Notices: KBC Bank N.V. 125 West 55th Sreet New York, New York 10019 Attention: John E. Thierfelder Telecopy Number: (212) 541-0793 66 72 Commitment: MELLON BANK, N.A. $20,000,000 By /s/ Jeffrey R. Dickson --------------------------------- Title: Vice President Address for Notices: Mellon Bank, N.A. One Mellon Bank Center, Room 0370 Pittsburgh, Pennsylvania 15258-0001 Attention: Jeffrey R. Dickson Telecopy Number: (412) 234-8888 67 73 Commitment: ABN AMRO BANK N.V. $20,000,000 By /s/ Patrick M. Pastore --------------------------------- Title: Vice President By /s/ Louis K. McLinden, Jr. --------------------------------- Title: Vice President Address for Notices: ABN AMRO Bank N.V. One PPG Place, Suite 2950 Pittsburgh, Pennsylvania 15222 Attention: Louis K. McLinden, Jr. Telecopy Number: (412) 566-2266 68 74 Commitment: THE BANK OF NEW YORK $20,000,000 By /s/ Edward J. Dougherty III --------------------------------- Title: Vice President U.S. Commercial Banking Address for Notices: The Bank of New York One Wall Street, 22nd Floor New York, New York 10266 Attention: Edward Dougherty Telecopy Number: (212) 635-6434 69 75 Commitment: HARRIS TRUST AND SAVINGS BANK $20,000,000 By /s/ Peter Krawchuk --------------------------------- Title: Vice President Address for Notices: Harris Trust and Savings Bank 111 West Monroe Street, Floor 10-West Chicago, Illinois 60603 Attention: Peter Krawchuk Telecopy Number: (312) 461-5225 70 76 Commitment: ALLFIRST BANK $15,000,000 By /s/ Carol A. Dalton --------------------------------- Title: Senior Vice President Address for Notices: Allfirst Bank 25 South Charles Street, 18th Floor Baltimore, Maryland 21201 Attention: John Serocca Telecopy Number: (410) 545-2047 71 77 Commitment: FIRSTAR BANK, N.A. $15,000,000 By /s/ John D. Barrett --------------------------------- Title: Senior Vice President Address for Notices: FIRSTAR Bank, N.A. 1350 Euclid Avenue, 8th Floor Cleveland, Ohio 44115 Attention: John Barrett Telecopy Number: (216) 623-9208 Total Commitments: $400,000,000 72 78 THE CHASE MANHATTAN BANK, as Administrative Agent By /s/ Peter Dedousis --------------------------------- Title: Managing Director Address for Notices: The Chase Manhattan Bank 1 Chase Manhattan Plaza, 8th Floor New York, New York 10081 Attention: Loan and Agency Services Lisa Pucciarelli Telecopy Number: (212) 552-5777 Copy to: The Chase Manhattan Bank 270 Park Avenue, 38th Floor New York, New York 10017 Attention: Stacey Haimes Telecopy Number: (212) 270-1355 73 EX-10.2 3 EXHIBIT 10.2 1 Exhibit 10.2 - -------------------------------------------------------------------------------- MULTICURRENCY CREDIT AGREEMENT - -------------------------------------------------------------------------------- Dated as of 26 August 1999 among Carboline Europe Ltd. Martin Mathys N.V. Radiant Color N.V. RPM Belgium N.V. RPM Europe B.V. RPM Holdings UK Ltd. RPM/Lux Consult S.A. RPOW (France) S.A. RPOW UK Ltd. Stonhard Deutschland GmbH Tremco Ltd. and RPM, Inc. and Deutsche Bank S.A. Deutsche Bank AG London 2 TABLE OF CONTENTS ----------------- PRELIMINARY STATEMENT 4 - ----------------------------------------------------------------------------- Article I - DEFINITIONS AND ACCOUNTING TERMS 4 - ----------------------------------------------------------------------------- 1.1. CERTAIN DEFINED TERMS 4 1.2. ACCOUNTING TERMS 12 1.3. CURRENCY EQUIVALENTS GENERALLY 13 1.4 AUTHORIZATION OF BORROWER REPRESENTATIVES 13 Article II - THE FACILITY 13 - ----------------------------------------------------------------------------- 2.1. THE DRAWINGS 13 2.2. FACILITY FEE 14 2.3. VOLUNTARY REDUCTION OF THE COMMITMENT 14 2.4. INCREASED COSTS 14 2.5. TAXES 15 2.6. ILLEGALITY 16 2.7. SHARING OF PAYMENTS 17 2.8. EVIDENCE OF INDEBTEDNESS 18 Article III - MAKING AN ADVANCE 18 - ----------------------------------------------------------------------------- 3.1. DRAWDOWN 18 3.2. PREPAYMENTS 19 3.3. FUNDING LOSSES 19 3.4. REPAYMENT 20 3.5. INTEREST 20 Article IV - ISSUING A GUARANTEE 20 - ----------------------------------------------------------------------------- 4.1. ISSUE 21 4.2. FEE 21 Article V - ISSUING A LETTER OF CREDIT 21 - ----------------------------------------------------------------------------- 5.1. ISSUE 22 5.2. FEE AND/OR INTEREST 22 Article VI - GUARANTY 22 - ----------------------------------------------------------------------------- 6.1. GUARANTY 22 -1- 3 6.2. GUARANTY ABSOLUTE 23 6.3. WAIVER 23 6.4. SUBROGATION 24 Article VII - CONDITIONS OF LENDING 24 - -------------------------------------------------------------------------------- 7.1. CONDITION PRECEDENT TO DRAWINGS 24 7.2. CONDITIONS PRECEDENT TO EACH DRAWING 25 Article VIII - REPRESENTATIONS AND WARRANTIES 25 - -------------------------------------------------------------------------------- 8.1. DUE ORGANIZATION 25 8.2. DUE AUTHORIZATION 26 8.3. NO GOVERNMENTAL APPROVAL 26 8.4. ENFORCEABLE AGREEMENT 26 8.5. FINANCIAL INFORMATION 26 8.6. LITIGATION 26 8.7. MARGIN STOCK 27 8.8. NO DEFAULT 27 8.9. ERISA COMPLIANCE 27 8.10. TITLE TO PROPERTIES 27 8.11. TAXES 28 8.12. ENVIRONMENTAL MATTERS 28 8.13. USE OF PROCEEDS 28 8.14. REGULATED ENTITIES 29 8.15. SUBSIDIARY BORROWERS 29 8.16. INSURANCE 29 8.17. COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES, ETC. 29 8.18. YEAR 2000 29 8.19. REIMBURSEMENT OF THE DECEMBER14, 1993 CREDIT AGREEMENT 30 Article IX - AFFIRMATIVE COVENANTS 30 - -------------------------------------------------------------------------------- 9.1. FINANCIAL STATEMENTS 30 9.2. CERTIFICATES; OTHER INFORMATION 30 9.3. NOTICES 31 9.4. PRESERVATION OF CORPORATE EXISTENCE RIGHTS 32 9.5. INSURANCE 33 9.6. PAYMENT OF OBLIGATIONS 33 9.7. COMPLIANCE WITH LAWS 33 9.8. INSPECTION OF PROPERTY AND BOOKS AND RECORDS 34 9.9. USE OF DRAWINGS 34 9.10. FURTHER ASSURANCES 34 Article X - NEGATIVE COVENANTS 34 - -------------------------------------------------------------------------------- 10.1. LIENS, ETC. 34 -2- 4 10.2. MERGERS, CONSOLIDATIONS AND DISPOSITIONS OF ASSETS 36 10.3. USE OF PROCEEDS 36 10.4. ACCOUNTING CHANGES 36 10.5. LEVERAGE RATIO 36 10.6. RATIO OF EBIT TO INTEREST EXPENSE 37 Article XI - EVENTS OF DEFAULT 37 - ------------------------------------------------------------------------------- 11.1. EVENTS OF DEFAULT 37 11.2. REMEDIES 39 Article XII - THE AGENT 39 - ------------------------------------------------------------------------------- 12.1. AUTHORIZATION AND ACTION 39 12.2. AGENT'S RELIANCE, ETC 40 12.3. DBSA AND AFFILIATES 40 12.4. INDEMNIFICATION 40 Article XIII - MISCELLANEOUS 41 - ------------------------------------------------------------------------------- 13.1. AMENDMENTS 41 13.2. NOTICES 41 13.3. NO WAIVER; REMEDIES 41 13.4. EXPENSES 41 13.5. RIGHT OF SET-OFF 42 13.6. JUDGMENT CURRENCY CONVERSIONS 42 13.7. BINDING EFFECT 43 13.8. PARTICIPATIONS 43 13.9. EXECUTION IN COUNTERPARTS 44 13.10. SEVERABILITY 44 13.11. GOVERNING LAW AND JURISDICTION 44 -3- 5 MULTICURRENCY CREDIT AGREEMENT This Multicurrency Credit Agreement (the "AGREEMENT") is entered into as of August 26, 1999 among: (a) RPM, Inc., a corporation organized under the laws of the State of Ohio ("RPM"), as "GUARANTOR"; and (b) - Carboline Europe Ltd., a corporation organized under the laws of United Kingdom, - Martin Mathys N.V., a corporation organized under the laws of Belgium, - Radiant Color N.V., a corporation organized under the laws of Belgium, - RPM Belgium N.V., a corporation organized under the laws of Belgium, - RPM Europe B.V., a corporation organized under the laws of the Netherlands, - RPM Holdings UK Ltd., a corporation organized under the laws of United Kingdom, - RPM/Lux Consult S.A., a corporation organized under the laws of Luxembourg, - RPOW (France) S.A., a corporation organized under the laws of France, - RPOW UK Ltd., a corporation organized under the laws of United Kingdom, - Stonhard Deutschland GmbH, a corporation organized under the laws of Germany, and - Tremco Ltd., a corporation organized under the laws of United Kingdom, each referred to hereinafter individually as a "BORROWER" and, collectively, as "BORROWERS"; and (c) Deutsche Bank S.A. ("DBSA") and Deutsche Bank AG London ("DBL"), as "Lenders"; and (d) Deutsche Bank S.A. ("DBSA") as agent (the "AGENT") for the Lenders hereunder. PRELIMINARY STATEMENT RPM has requested that the Lenders make drawings available to the Borrowers pursuant to the terms of this Agreement, which include, among other terms, a guaranty by RPM of any drawings made to such Borrowers. The Agent and Lenders have agreed to do so. NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows: ARTICLE I - DEFINITIONS AND ACCOUNTING TERMS 1.1. Certain Defined Terms - -------------------------- As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "ADVANCE" means an advance made, or to be made, under Section III. -4- 6 "AFFILIATE" means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract or otherwise. Without limitation, any director, executive officer or beneficial owner of 15% or more of the voting equity of a Person shall for the purposes of this Agreement, be deemed to control the other Person. "AGREEMENT" means this Multicurrency Credit Agreement. "ALLOCATION PERCENTAGE" means, with respect to DBSA, 80%, and, with respect to DBL, 20%. "ALTERNATIVE CURRENCY" means the British sterling (or GBP) or the United States dollar (USD) as the case may be. "BORROWER REPRESENTATIVE" means any of the following: Keith R. Smiley, Frank C. Sullivan and David P. Reif. "BUSINESS DAY" means a day (other than a Saturday or a Sunday) on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System is open for dealing in inter-bank deposits, with respect to a transaction involving Euro and (a) with respect to a transaction in GBP, is also a day on which dealings are carried on in the London interbank market and (b) with respect to a transaction in USD, is also a day on which dealings are carried in the interbank markets of London and New York City. "CAPITAL LEASE OBLIGATIONS" means, as to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP (including Statement of Financial Accounting Standards No. 13 of the Financial Accounting Standards Board) and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP (including such Statement No. 13). "CLOSING DATE" means the date of execution of this Agreement. "CODE" means the U.S. Internal Revenue Code of 1986, and regulations promulgated thereunder. "COMMITMENT" means the amount of 25,000,000 (twenty five million) Euro or its equivalent in an Alternative Currency, to the extent not cancelled, reduced or transferred under this Agreement. "COMMITMENT PERIOD" means the period from and including the date of this Agreement until but excluding the Final Maturity Date. -5- 7 "COMPLIANCE CERTIFICATE" means a certificate delivered to the Agent by RPM pursuant to Section 9.2(a), substantially in the form of Schedule 3. "CONSOLIDATED EBIT" means, for any period, determined on a consolidated basis for the Guarantor and its Subsidiaries, net operating income of the Guarantor and its Subsidiaries (calculated before provision for income taxes, interest expense, extraordinary items and income attributable to equity in affiliates) for such period. "CONSOLIDATED INTEREST EXPENSE" means, for any period, the sum (determined without duplication) of the aggregate amount of interest accruing during such period on Indebtedness of the Company and its Subsidiaries (on a consolidated basis), including the interest portion of payments under Capital Lease Obligations and any capitalized interest, and excluding amortization of debt discount and expense. "CONSOLIDATED NET INCOME (LOSS)" means, for any period, with respect to any Person, all amounts which would, in accordance with GAAP, be included in net income (loss) on the consolidated income statement of such Person and its Subsidiaries for such period. "CONSOLIDATED TOTAL ASSETS" means, with respect to any Person, as of the date of any determination thereof, the aggregate of all assets appearing on the balance sheet of such Person and its Subsidiaries prepared in accordance with GAAP on a consolidated basis. "CONTRACTUAL OBLIGATIONS" means, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its property is bound. "CONTROLLED GROUP" means RPM and all Persons (whether or not incorporated) under common control or treated as a single employer with RPM pursuant to Section 414 of the Code. "DBL" means Deutsche Bank AG London. "DBSA" means Deutsche Bank S.A.. "DEFAULT" means an event that with notice or lapse of time or both would become an Event of Default. "DRAWING" means a drawing on the Facility under form of an Advance, a Guarantee and/or a Letter of Credit made by any Lender to, or on behalf of, a Borrower. "ENVIRONMENTAL CLAIMS" means all claims, however asserted, by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law or for release or injury to the environment or threat to public health, personal injury (including sickness, disease or death), property damage, natural resources damage, or otherwise alleging liability or responsibility for damages (punitive or otherwise), cleanup, -6- 8 removal, remedial or response costs, restitution, civil or criminal penalties, injunctive relief, or other type of relief, resulting from or based upon (a) the alleged or actual presence, placement, migration, spillage, leakage, disposal, discharge, emission or release of any Hazardous Material at, in, or from property, whether or not owned by a Borrower, or (b) any other circumstances forming the basis of any violation, or alleged violation, of any Environmental Law. "ENVIRONMENTAL LAWS" means all federal, national, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations, registration requirements and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental and land use matters or health and safety matters involving Hazardous Materials. "ENVIRONMENTAL LIABILITIES" shall mean all liabilities in connection with or relating to the business, assets, presently or previously owned or leased property, activities (including, without limitation, off-site disposal) or operations of the Guarantor and each Subsidiary, whether vested or unvested, contingent or fixed, actual or potential, known or unknown, which arise under or relate to matters covered by Environmental Laws. "ERISA" means the U.S. Employee Retirement Income Security Act of 1974, as amended from time to time, and regulations promulgated and rulings issued thereunder. "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with a Borrower within the meaning of Section 414 (b), 414 (c) or 414 (m) of the Code. "ERISA EVENT" means (a) with respect to any Qualified Plan or Multiemployer Plan, an event set forth in Section 4043 of ERISA or the regulations thereunder other than any such event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the PBGC; (b) a withdrawal by a Borrower or any ERISA Affiliate from a Qualified Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA); (c) a complete or partial withdrawal by a Borrower or any ERISA Affiliate from a Multiemployer Plan or cessation of operations at a facility by a Borrower or an ERISA Affiliate described in Section 4062(e) of ERISA; (d) the filing of a notice of intent to terminate, the treatment of a plan amendment as a termination under Section 4041 or 4041A of ERISA or the commencement of proceedings by the PBGC to terminate a Qualified Plan or Multiemployer Plan subject to Title IV of ERISA; (e) a failure by a Borrower or any member of the Controlled Group to make required contributions to a Qualified Plan or Multiemployer Plan; (f) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Qualified Plan or Multiemployer Plan; (g) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon a Borrower or any ERISA Affiliate; (h) an application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code with respect to any Plan; (i) a non-exempt prohibited transaction occurs with respect to any Plan for which a Borrower or any Subsidiary of a Borrower could reasonably be expected to be directly or indirectly liable; or (j) a violation of the applicable requirements of Section 404 or 405 of ERISA or the exclusive benefit rule under Section 401(a) of the Code by -7- 9 any fiduciary or disqualified person with respect to any Plan for which a Borrower or any member of the Controlled Group could reasonably be expected to be directly or indirectly liable. "EUR and "Euro" each means the lawful currency of the member states of the European Union that adopt the single currency in accordance with the Treaty establishing the European Community, as amended by the Treaty on European Union. "EVENT OF DEFAULT" has the meaning specified in Section 11.1. "FINAL MATURITY DATE" means the 364th calendar day after the date on which the Bank serves notice of cancellation of the Agreement on the Borrowers or, if such date is not a Business Day, the immediately preceding Business Day. "FACILITY" means the multicurrency credit facility, the terms of which are set out in this Agreement. "GAAP" means generally accepted accounting principles in the United States as set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), consistently applied. "GOVERNMENTAL AUTHORITY" means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "GUARANTEE" means a guarantee made, or to be made, upon Section IV. "HAZARDOUS MATERIALS" means all those substances which are regulated by, or which may form the basis of liability under, any Environmental Law, including all substances identified under any Environmental Law as a pollutant, contaminant, hazardous waste, hazardous constituent, hazardous chemicals, special waste, hazardous substance, hazardous material, regulated substance, or toxic substance, or petroleum or petroleum derived substance or waste. "IBOR" means the rate per annum determined by the Agent as the rate for deposits for a period comparable to the relevant Interest Period which appears, for an Advance in EURO, on the Telerate page 248 at 11:00 a.m., Brussels time, or, in case of an Advance in an Alternative Currency, on the Telerate page 3750 at 11:00 a.m. London time, two Business Days before the first day of such Interest Period. If no such offered rates appear on the relevant Telerate page for the relevant currency and period, IBOR will be determined as the average rate of interest per annum (a) at which deposits in EURO are offered by the principal office of DBSA to prime banks in the Brussels interbank market at 11:00 a.m. (Brussels time) or (b) at which deposits in the Alternative Currency are offered by the principal office of Deutsche Bank in London, United Kingdom to prime banks in the London interbank market at 11:00 a.m. (London time) two -8- 10 Business Days before the first day of such Interest Period in an amount substantially equal to such Advance and for a period comparable to such Interest Period. The Agent may nominate an alternative source of screen rates if these pages are replaced by others which display the rates for inter-bank deposits offered by leading banks. "INDEBTEDNESS" of any Person means, without duplication, (i) indebtedness of such Person for borrowed money (whether by loan or the issuance and sale of debt securities) or for the deferred purchase or acquisition price of property or services, other than accounts payable (other than for borrowed money) incurred in the ordinary course of business; (ii) obligations of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account of such Person (whether or not such obligations are contingent); (iii) Capital Lease Obligations of such Person; (iv) obligations of such Person to redeem or otherwise retire shares of capital stock of such Person; (v) indebtedness of others of the type described in clause (i), (ii), (iii) or (iv) above secured by a Lien on the property of such Person, whether or not the respective obligation so secured has been assumed by such Person; and (vi) indebtedness of others of the type described in clause (i), (ii), (iii) or (iv) above Guaranteed by such Person. "INSOLVENCY PROCEEDING" means (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors; in each case (a) and (b) undertaken under U.S. federal, state or foreign law, including the U.S. Bankruptcy Code. "INTEREST PAYMENT DATE" means, with respect to any Advance, the last day of an Interest Period applicable to such Advance. "INTEREST PERIOD" means, with respect to any Advance, the period commencing on the Business Day the Advance is disbursed to, but not excluding, the Maturity Date, provided that: (a) if any Interest Period pertaining to an Advance would otherwise end on a day which is not a Business Day, that Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day; (b) any Interest Period pertaining to an Advance that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (c) no Interest Period shall extend beyond the Termination Date. "LENDING OFFICE" means, with respect to any Lender, the office of such Lender specified as its Lending Office beneath its name on its signature page hereto or such other office of such -9- 11 Lender as such Lender may from time to time specify to the Borrowers, the Agent and the Lenders. "LENDER DRAWING PERCENTAGES" has the meaning specified in Schedule 1. "LETTER OF CREDIT" means an import letter of credit made, or to be made, under Section V. "LIEN" means any mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement, encumbrance, lien (statutory or other) or other security interest (including those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a capital lease, any financing lease having substantially the same economic effect as any of the foregoing, or the filing of any financing statement naming the owner of the asset to which such lien relates as debtor, under the UCC or any comparable law) and any contingent or other agreement to provide any of the foregoing. "MARGIN" means, for each Advance, 0.45% per annum. "MARGIN STOCK" means "margin stock" as such term is defined in Regulation T, U or X of the U.S. Federal Reserve Board. "MATERIAL ADVERSE EFFECT" means (i) a material adverse effect on the condition (financial or otherwise), results of operations, properties, assets, liabilities (including, without limitation, tax and ERISA liabilities and Environmental Liabilities), business, operations, capitalization, shareholders' equity, franchises or prospects of the Guarantor or any Borrower and its Subsidiaries, taken as a whole; or (ii) a material adverse effect on the ability of the Guarantor or any Borrower taken as a whole to perform its obligations under the Agreement. "MATURITY DATE" means: (a) with respect to an Advance, the date on which that Advance becomes due and payable pursuant to the terms thereof. If that date is not a Business Day, the Maturity Date shall be extended to the next Business Day, unless such Business Day falls after the Final Maturity Date, in which case the Maturity Date shall be brought back to the immediately preceding Business Day; (b) with respect to a Guarantee, the date on which that Guarantee expires pursuant to the term thereof. "MULTIEMPLOYER PLAN" means a "multiemployer plan" (within the meaning of Section 4001(a)(3) of ERISA) and to which any member of the Controlled Group makes, is making, or is obligated to make contributions or, during the preceding three calendar years, has made, or been obligated to make, contributions. "NOTICE OF DRAWING" means a notice given by a Borrower to the Agent pursuant to Section 3.1, 4.1 and 5.1, in substantially the form of Schedule 4. "OBLIGATIONS" means all Drawings, and other Indebtedness, liabilities, obligations, covenants and duties owing by the Borrowers to any Lender, the Agent, or any other Person -10- 12 required to be indemnified hereunder, of any kind or nature, present or future, whether or not evidenced by any note, guaranty or other instrument, arising under this Agreement, whether or not for the payment of money, whether arising by reason of an extension of credit, a loan, guaranty, indemnification or in any other manner, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired. "ORIGINAL EURO AMOUNT" means in relation to a Drawing: (a) if that Drawing is denominated in Euro, the amount of that Drawing; (b) if that Drawing is denominated in an Alternative Currency, the equivalent in Euro of the amount of that Drawing calculated at the spot exchange rate for the purchase of the relevant Alternative Currency in the Brussels foreign exchange market with Euro at 11:00 a.m. two Business Days before the first day of the Drawing. "OTHER TAXES" has the meaning specified in Section 2.5(b). "PBGC" means the U.S. Pension Benefit Guaranty Corporation. "PAYMENT OFFICE" means, for Euro, DBSA's office in Brussels, Belgium, located on the date hereof at 17 Avenue Marnix, 1000 Brussels, and, for any Alternative Currency, such office of Deutsche Bank as shall be from time to time selected by the Agent and notified by the Agent to the Borrowers and the Lenders. "PERSON" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "PLAN" means an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and either (i) is maintained or contributed to, by the Guarantor or any member of the Controlled Group for employees of the Guarantor or any member of the Controlled Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by the Guarantor or any Person which was at such time a member of the Controlled Group for employees of any Person which was at such time a member of the Controlled Group. "PERMITTED LIENS" has the meaning specified in Section 10.1. "QUALIFIED PLAN" means a pension plan (as defined in Section 3(2) of ERISA) intended to be tax-qualified under Section 401(a) of the Code and which any member of the Controlled Group sponsors, maintains, or to which it makes, is making or is obligated to make contributions, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding period covering at least five (5) plan years, but excluding any Multiemployer Plan. "SEC" means the Securities and Exchange Commission of the United States of America. -11- 13 "SUBSIDIARY" of a Person means any corporation, association, partnership, joint venture or other business entity of which more than 50% of the voting stock or other equity interests (in the case of Persons other than corporations), is owned or controlled directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof. "SIGNIFICANT SUBSIDIARY" means at any time any Subsidiary of the Guarantor which would meet the definition of a "significant subsidiary" contained as of the date hereof in Regulation S-X of the SEC. "SUBSIDIARY OBLIGATIONS" means Obligations that are owed by any Subsidiary Borrower. "TAXES" has the meaning specified in Section 2.5(a). "TERMINATION DATE" means the earlier of the Final Maturity Date or the date of termination in whole of the Commitment pursuant to Section 2.3 or 11.2. "UCC" means the Uniform Commercial Code as promulgated by the American Law Institute and the National Conference of commissioners on Uniform State Laws in the United States. "UNFUNDED PENSION LIABILITIES" means, with respect to any Plan, at any time, the amount (if any) by which (i) the value of all benefits liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such benefits under Title IV of ERISA (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of the Guarantor or any member of the Controlled Group to the PBGC or any other Person under Title IV of ERISA. "UNITED STATES" and "U.S." each means United States of America. "WHOLLY-OWNED SUBSIDIARY" means any corporation in which (other than directors' qualifying shares required by law) 100% of the capital stock of each class having ordinary voting power, and 100% of the capital stock of every other class, in each case, at the time as of which any determination is being made, is owned, beneficially and of record, by a Borrower, or by one or more of the other Wholly-Owned Subsidiaries, or both. "WITHDRAWAL LIABILITIES" means, as of any determination date, the aggregate amount of the liabilities, if any, pursuant to Section 4201 of ERISA if the Controlled Group made a complete withdrawal from all Multiemployer Plans and any increase in contributions pursuant to Section 4243 of ERISA. 1.2. Accounting Terms - --------------------- -12- 14 All accounting terms not specifically defined herein shall be construed in accordance with GAAP as consistently applied in the preparation of the financial statements referred to in Section 8.5. 1.3. Currency Equivalents Generally - ----------------------------------- For all purposes of this Agreement, the equivalent in any Alternative Currency of an amount in Euro shall be determined at the rate of exchange quoted by Deutsche Bank S.A. in Brussels, Belgium, at 11:00 a.m. (Brussels time) two Business Days before the date of determination, to prime banks in Brussels for the spot purchase in the Brussels foreign exchange market of such amount of Euro with such Alternative Currency. 1.4 Authorization of Borrower Representatives - --------------------------------------------- For purposes of this Agreement including, without limitation, Section 3.1 of this Agreement, each of the Borrowers hereby: (i) authorizes each of the Borrower Representatives to make such requests, give such notices or furnish such certificates as may be required by this Agreement for the benefit of any or all of the Borrowers and (ii) authorizes the Agent to treat such requests or notices given or made by a Borrower Representative being given or made by such Borrower for purposes of this Agreement. Unless otherwise agreed to by the Agent, and except as for purposes of Article IV and Article V, the Borrower Representative shall be the only party entitled to give such notices or make such requests directly to the Agent for purposes of this Agreement. Each of the Borrowers agrees to be bound by all requests and notices and other such actions by a Borrower Representative and agrees that all notices to and demands upon a Borrower Representative shall constitute effective notice to and demand upon the Borrowers for all purposes hereof. In each case, the Agent and the Banks shall be entitled to rely upon all notices, requests or certificates made by a Borrower Representative pursuant to the provisions of this Agreement as being made or furnished on behalf of, and with the effect of irrevocably binding, the Borrowers. ARTICLE II - THE FACILITY 2.1. The Drawings - ----------------- (a) On the terms and conditions hereinafter set forth each Lender severally agrees during the Commitment Period to make Advances to the Borrowers, or issue Guarantees or Letters of Credit on behalf of the Borrowers, in accordance with the "Lender Drawing Percentages" set forth in Schedule 1 hereto, denominated in Euro and/or Alternative Currency up to an aggregate Original Euro Amount not exceeding the Commitment at that time. (b) The aggregate amount of all Lenders' Drawings shall not exceed (whether in Euro or in one or more Alternative Currencies) at any time outstanding the aggregate Original Euro -13- 15 Amount of EUR 25,000,000 (twenty five million Euro) (as such amount may be reduced from time to time pursuant to Section 2.3). (c) Each Drawing shall be in an aggregate amount not less than EUR 250,000 (or the equivalent thereof in any Alternative Currency) and shall consist of Drawings made to the same Borrower on the same day by the Lenders ratably according to the Lender Drawing Percentages. (d) During the existence of a Default or Event of Default, no Borrower may elect to have a new Drawing made. (e) Each Borrower is severally liable for its own Drawings, and each Borrower is not a guarantor of the Drawings made to the other Borrowers. 2.2. Facility Fee - ----------------- RPM agrees to pay to the Agent from the Closing Date a facility fee equal to 0.15% per annum of the Commitment, payable quarterly in advance. 2.3. Voluntary Reduction of the Commitment - ------------------------------------------ RPM shall have the right, upon at least three (3) Business Days' notice to the Agent, to terminate in whole or reduce in part the unused portion of the Commitment; provided, however, that each partial reduction shall be in the aggregate amount of EUR 1,000,000 or an integral multiple of EUR 1,000,000 in excess thereof. 2.4. Increased Costs - -------------------- (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining Drawings, then the Borrowers shall from time to time, upon demand by such Lender (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to RPM and the Agent by such Lender, shall be conclusive and binding for all purposes, absent manifest error. (b) If any Lender determines that compliance with any law or regulation or any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and that the amount of such capital is increased by or based upon the existence of such Lender's commitment -14- 16 to lend hereunder and other commitments of this type, then, upon demand by such Lender (with a copy of such demand to the Agent), the Borrowers shall immediately pay to the Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender or such corporation in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder. A certificate as to such amounts submitted to RPM and the Agent by such Lender shall be conclusive and binding for all purposes, absent manifest error. 2.5. Taxes - ---------- (a) Any and all payments by the Borrowers hereunder shall be made free and clear of and without deduction or withholding for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, EXCLUDING, in the case of each Lender and the Agent, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender or the Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Lender, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction of such Lender's Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrowers, any Lender or the Agent shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender or the Agent, (i) the sum payable by the Borrowers shall be increased as may be necessary so that after the Borrowers, such Lender or the Agent has made all required deductions (including deductions applicable to additional sums payable under this Section 2.5) such Lender 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, (ii) the Borrowers, such Lender or the Agent shall make such deductions and (iii) the Borrowers or the Agent shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. The Agent hereby confirms that, at the Closing Date, there is no deduction or withholding applicable of taxes for any payment under this Agreement. (b) In addition, each Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made by such Borrower or by the Agent hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement (hereinafter referred to as "Other Taxes"). (c) Each Borrower will indemnify each Lender and the Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.5) paid by such Lender or the Agent -15- 17 (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Lender or the Agent (as the case may be) makes written demand therefor. (d) Within 30 days after the date of any payment by any Borrower of Taxes, such Borrower will furnish to the Agent the original or a certified copy of a receipt evidencing payment thereof. If no Taxes are payable in respect of payments by such Borrower hereunder, such Borrower, upon reasonable request by Agent, will furnish to the Agent a certificate from each appropriate taxing authority, unless it shall have previously delivered an opinion of counsel acceptable to the Agent, in either case stating that such payment is exempt from or not subject to Taxes. In the event of a change in circumstances or law affecting the conclusions stated in any such opinion, another opinion of counsel acceptable to the Agent shall be delivered to the Agent by the affected Borrower. (f) In order to avoid the occurrence, or minimize the amount, of any Taxes or Other Taxes, each Lender agrees to designate a different Lending Office with respect to its Advances if such designation will reduce or prevent the occurrence of such Taxes or Other Taxes and will not, in the judgment of such Lender, be illegal or otherwise disadvantageous to such Lender. (g) If (i) a Borrower is required to withhold taxes with respect to any Lender pursuant to Section 2.5, (ii) any Lender has demanded compensation under Section 2.4, (iii) the obligation of any Lender to make Drawings has been suspended pursuant to Section 2.4 or Section 2.6, and so long as no Default shall have occurred and be continuing, the Borrower shall have the right to request one or more substitute banks, financial institutions or funds (which may be one or more of the Lenders) reasonably satisfactory to the Agent to purchase such Lender's Drawing by paying to such Lender an amount equal to all of the obligations of the Borrower to such Lender hereunder including, without limitation, principal and accrued interest and fees. Any costs or expenses incurred by the Agent in connection with assisting the Borrower pursuant hereto shall be paid upon demand by such Borrower. The Agent shall respond promptly to any request by a Borrower for its consent to a substitute for a Lender. 2.6. Illegality - --------------- (a) If any Lender determines that the introduction of any law or regulation, or any change in any law or regulation or in the interpretation or administration thereof, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for any Lender or its Lending office to make Drawings under the Agreement, then, on notice thereof by the Lender to the Borrowers through the Agent, the obligation of that Lender to make Drawings shall be suspended until the Lender has notified the Agent and the Borrowers that the circumstances giving rise to such determination no longer exists. (b) If a Lender determines that it is unlawful to maintain any Advance, the Borrowers shall prepay in full all Advances of that Lender then outstanding, together with interest accrued thereon, either on the last day of the Interest Period thereof if the Lender may lawfully -16- 18 continue to maintain such Advances to such day, or immediately, if the Lender may not lawfully continue to maintain such Advances. (c) If a Lender determines that it is unlawful to maintain any Guarantee or Letter of Credit, the Borrowers shall take all the appropriate measures to cancel such Guarantee or Letter of Credit and shall pay all due interest and/or fees. (d) Before giving any notice to the Agent pursuant to this Section 2.6, the affected Lender shall designate a different Lending Office with respect to its Drawings if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of such Lender, be illegal or otherwise disadvantageous to such Lender. 2.7. Sharing of Payments - ------------------------ (a) If any Lender obtains any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Drawings made by it in excess of its ratable share of payments on account of the Drawings obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Drawings made by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them, PROVIDED, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (a) the amount of such Lender's required repayment to (b) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.7(a) may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. The provisions of this Section 2.7(a) shall survive the payment of all Obligations. (b) If the Agent or any Lender receives a payment insufficient to discharge all the amounts then due and payable by the Borrower or either the Guarantor under this Agreement, the Agent or the Lender agrees to apply that payment towards the obligations of the Borrower or that Guarantor under this Agreement in the following order: (i) first, in or towards payment of unpaid costs or expenses of the Agent in its capacity as such under or in connection with this Agreement; (ii) secondly, in or towards payment of any facility fee due but unpaid under Section 2.2; (iii) thirdly, in or towards payment pro rata of any accrued interest or fee due but unpaid under this Agreement; (iv) fourthly, in or towards payment pro rata of any principal due but unpaid under this Agreement; -17- 19 (v) fifthly, in or towards payment pro rata of any other sums due but unpaid under this Agreement. The Agent will vary the order set out in paragraphs (i) to (v) inclusive above if requested by all Lenders. The provisions of this Section 2.7(b) will override any appropriation made by the Borrower or either Guarantor. 2.8. Evidence of Indebtedness - ----------------------------- (a) 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 Drawing 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. (b) The Agent shall maintain a control account and a subsidiary account for each Lender, in which accounts (taken together) shall be recorded (i) the date and amount of each Drawing made hereunder, (ii) the name of the Borrower, (iii) the type of Drawing and the Interest Period applicable thereto and the currency in which such Drawings are made, (iv) the amount of any principal or interest or fee due and payable or to become due and payable from each Borrower to each Lender hereunder, and (v) the amount of any sum received by the Agent or the Lenders from the Borrowers hereunder and each Lender's share thereof. (c) Such entries made by the Agent shall be conclusive and binding for all purposes, absent manifest error. ARTICLE III - MAKING AN ADVANCE 3.1. Drawdown - ------------- (a) Each Advance shall be made on a Borrower's irrevocable written notice (or telephonic notice, promptly confirmed by a writing) delivered to the Agent in the form of a Notice of Drawing (which notice must be received by the Agent not later than 10:00 a.m. Brussels time) two Business Days prior to the requested date of a proposed Drawing consisting of Advances. The duration of an Advance shall be one, two, three, or six months. The Notice of Drawing shall specify (i) the requested date of such Advance, which shall be a Business Day, (ii) the name of the Borrower, (iii) the aggregate amount of such Advance, (iv) the currency of such Advance and (v) the Interest Period for each Advance to be made as part of such Drawing. (b) The Agent shall notify each Lender upon receipt of a Notice of Drawing and of such Lender's pro rata share (pursuant to the Lender Advance Percentages) thereof, no later -18- 20 than 11:00 a.m. Brussels Time. If the Advance is in an Alternative Currency, the Agent shall also state the aggregate equivalent amount of such Advance in Euro and such Lender's ratable portion of such Advance. (c) Each Lender shall, on the date of such Advance, make available its pro rata share (pursuant to the Lender Drawing Percentages) of the Advance in the requested currency. (d) Within the limits of the Commitment, each Borrower may borrow, repay and re-borrow under this Section 2.2. 3.2. Prepayments - ---------------- Prepayments of Advances are permitted on three Business Days' written notice to the Agent, PROVIDED, that any Borrower who prepays an Advance reimburses each Lender for its losses or expenses incurred or sustained as a consequence of such prepayment in accordance with Section 3.3. 3.3. Funding Losses - ------------------- The Borrowers agree to reimburse each Lender and to hold each Lender harmless from any loss or expense that such Lender sustains or incurs as a consequence of: (i) the failure of any Borrower to make any payment or required prepayment of principal of any Advance (including payments made after any acceleration thereof); (ii) the failure of any Borrower to borrow after such Borrower has given a Notice of Drawing; (iii) the failure of any Borrower to make any prepayment permitted hereunder after giving notice thereof; or (iv) the repayment of an Advance on a day which is not the last day of the Interest Period with respect thereto; including any such loss or expense (including any loss of income) arising from the liquidation or reemployment of funds obtained by it to maintain its Advances hereunder or from fees payable to terminate the deposits from which such funds were obtained. Reemployment costs shall include the amount (if any) by which the amount of interest which such Lender is able to obtain for the remainder of the period of the Advance by placing the principal amount repaid by the Borrower on deposit in the applicable interbank market is less than the amount of interest which would have accrued on the amount prepaid for the remaining period thereon if no repayment had taken place. A certificate delivered by the Agent as to the determination of the reemployment cost shall be conclusive and binding on the Borrower absent manifest error. Solely for purposes of calculating amounts payable by the Borrowers to the -19- 21 Lenders under this Section 3.3, each Advance made by a Lender (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded by a matching deposit in Euro or an Alternative Currency or other borrowing in the interbank eurocurrency market for a comparable amount and for a comparable period, whether or not such Advance is in fact so funded. 3.4. Repayment - -------------- Each of the Borrowers will repay the Advances made to such Borrower on the Maturity Date of such Advance, provided that no Borrower shall be liable for any Advance made to any other Borrower. Provided further, if the Termination Date occurs prior to the Maturity Date, each of the Borrowers shall repay the principal amount of all Advances to such Borrower on the Termination Date. 3.5. Interest - ------------- (a) Each Borrower shall pay to the relevant Lender interest on the principal amount of each Advance made to it by such Lender from the date of such Advance until such Advance is paid in full, at a rate per annum equal to the sum of the appropriate IBOR for the relevant Interest Period plus the Margin. (b) Interest on each Advance shall be paid in arrears on each Interest Payment Date relating to such Advance. During the existence of an Event of Default, interest shall be paid on demand. (c) During the continuance of an Event of Default and after acceleration, the Borrowers shall pay interest on the principal amount of all Obligations due and payable at a rate per annum equal to 2% above the rate per annum required to be paid on such Advance immediately prior to the date on which such amount became due. (d) The Agent shall give prompt notice to the Borrowers and the Lenders of the applicable interest rate; PROVIDED that any failure to do so shall not relieve the Borrowers of any liability hereunder or provide the basis for any claim against the Agent. (e) All computations of fee and interest under this Agreement shall be made on the basis of a 360-day year or, where market practice otherwise dictates, a 365-day year, and actual days elapsed. Each determination of an interest rate by the Agent pursuant hereto shall be conclusive and binding on the Borrowers and the Lenders in the absence of manifest error. ARTICLE IV - ISSUING A GUARANTEE -20- 22 4.1. Issue - ---------- (a) Each Guarantee shall be issued on a Borrower' or a Borrower Representative's irrevocable written notice (or telephonic notice, promptly confirmed by a writing) delivered to the Agent in the form of a Notice of Drawing (which notice must be received by the Agent not later than 10:00 a.m. Brussels time) five Business Days prior to the requested date of a proposed Drawing consisting of Guarantees. The duration of a Guarantee shall be up to 364 days. The Notice of Drawing shall specify (i) the requested date of such Guarantee, which shall be a Business Day, (ii) the name of the Borrower, (iii) the aggregate amount of such Guarantee and its currency, (iv) the name of the beneficiary and (v) the Maturity Date. (b) The Agent shall promptly notify each Lender upon receipt of a Notice of Drawing and of such Lender's pro rata share (pursuant to the Lender Advance Percentages) thereof. If the Guarantee is in an Alternative Currency, the Agent shall also state the aggregate equivalent amount of such Guarantee in Euro and such Lender's ratable portion of such Guarantee. (c) If a Lender is required to honor a Guarantee on behalf of a Borrower, such Borrower will pay such Lender the amount so honored, within 5 Business Days from the date in which such Borrower receives written notice from the Lender that such Guarantee was honored. 4.2. Fee - -------- (a) Each Borrower shall pay to the relevant Lender a fee for the issue of each Guarantee made to it by such Lender from the date of such Guarantee until its Maturity Date (as amended or extended by request of such Borrower), according to the terms specified by the Lender for that Guarantee, which terms shall be customary for such a transaction in such country. (b) During the continuance of an Event of Default and after acceleration, the Borrowers shall pay a fee on the principal amount of all Obligations due and payable at a rate per annum equal to 2% above the rate per annum required to be paid on such Guarantee immediately prior to the date on which such Event of Default occurs. (c) The Lender shall give prompt notice to the Borrower of the applicable fee; PROVIDED that any failure to do so shall not relieve the Borrower of any liability hereunder or provide the basis for any claim against the Agent or the Lender. ARTICLE V - ISSUING A LETTER OF CREDIT -21- 23 5.1. Issue - ---------- (a) Each Letter of Credit shall be issued on a Borrower' or a Borrower Representative's irrevocable written notice (or telephonic notice, promptly confirmed by a writing) delivered to the Agent in the form of a Notice of Drawing (which notice must be received by the Agent not later than 10:00 a.m. Brussels time) five Business Days prior to the requested date of a proposed Drawing consisting of Letter of Credit. The duration of a Letter of Credit shall be up to 364 days. The Notice of Drawing shall specify (i) the requested date of such Letter of Credit, which shall be a Business Day, (ii) the name of the Borrower, (iii) the aggregate amount of such Letter of Credit and its currency, (iv) the name of the beneficiary, (v) the type of Letter of Credit, and (vi) the Maturity Date. (b) The Agent shall promptly notify each Lender upon receipt of a Notice of Drawing and of such Lender's pro rata share (pursuant to the Lender Advance Percentages) thereof. If the Letter of Credit is in an Alternative Currency, the Agent shall also state the aggregate equivalent amount of such Letter of Credit in Euro and such Lender's ratable portion of such Letter of Credit. 5.2. Fee and/or Interest - ------------------------ (a) Each Borrower shall pay to the Lender fees and/or interest for the issue of each Letter of Credit made to it by such Lender from the date of such Letter of Credit until its Maturity Date, according to the terms specified by the Lender for that Letter of Credit, which terms shall be customary for such a transaction in such country. (b) During the continuance of an Event of Default and after acceleration, the Borrowers shall pay an additional fee on the principal amount of all Obligations due and payable at a rate per annum equal to 2% above the rate per annum required to be paid on such Letter of Credit immediately prior to the date on which such Event of Default occurs. (c) The Lender shall give prompt notice to the Borrower of the applicable interest and/or fee; PROVIDED that any failure to do so shall not relieve the Borrower of any liability hereunder or provide the basis for any claim against the Agent or the Lender. ARTICLE VI - GUARANTY 6.1. Guaranty - ------------- -22- 24 RPM unconditionally and irrevocably guarantees the punctual payment and performance when due, in Euro (or the equivalent thereof in any Alternative Currency), whether at stated maturity, by acceleration or otherwise, of all Subsidiary Obligations. 6.2. Guaranty Absolute - ---------------------- This is a guaranty of payment and not of collection. RPM guarantees that the Subsidiary Obligations will be paid strictly in accordance with the terms of this Agreement. The Obligations of RPM under this guaranty are independent of the Subsidiary Obligations, and a separate action or actions may be brought and prosecuted against RPM to enforce this guaranty, whether or not any action is brought against the Subsidiary Borrowers or whether the Subsidiary Borrowers are joined in any such action or actions. This guaranty shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment of any of the Subsidiary Obligations is rescinded or must otherwise be returned by the Lenders upon the insolvency, bankruptcy or reorganization of any of the Subsidiary Borrowers or otherwise, all as though such payment had not been made. The liability of RPM under this guaranty shall be absolute and unconditional irrespective of: (a) any lack of validity or enforceability of any other portion of this Agreement (including, without limitation, the validity or enforceability against the Subsidiary Borrowers of the Subsidiary Obligations) or any other agreement or instrument relating hereto; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Subsidiary Obligations, or any other amendment or waiver of or any consent to departure from this Agreement, including, without limitation, any increase in the Subsidiary Obligations resulting from the extension of additional credit to the Subsidiary Borrowers or otherwise; (c) any change, restructuring or termination of the corporate structure or existence of any of the Subsidiary Borrowers; or (d) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Subsidiary Borrowers or a guarantor. 6.3. Waiver - ----------- RPM hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Subsidiary Obligations, and any requirement that the Lenders exhaust any right or take any action against the Subsidiary Borrowers or any other Person. -23- 25 6.4. Subrogation - ---------------- RPM hereby acknowledges and agrees that any obligations owed by any Subsidiary Borrower to RPM, now or hereafter arising, in connection with this Agreement or pursuant to this guaranty are hereby subordinated to the Indebtedness of the Subsidiary Borrowers to the Lenders and the Agent. RPM hereby unconditionally agrees that until the payment and satisfaction in full of all the Subsidiary Obligations, RPM: (a) shall not exercise any right or remedy arising by reason of any performance by RPM of its guaranty in this Article VI, whether by subrogation or otherwise, against the Subsidiary Borrowers or any security for any of the Subsidiary Obligations, and (b) shall promptly turn over to the Agent any funds or collateral received by RPM from the Subsidiary Borrowers on account of or relating to the Subsidiary Obligations or RPM's payment of any portion to the Subsidiary Obligations (and RPM shall hold any such funds or collateral in trust for the benefit of the Lenders until such funds or collateral are delivered to the Agent); PROVIDED, however, RPM shall not be obligated to turn over any funds or collateral received by RPM from the Subsidiary Borrowers in the ordinary course of business if such funds or collateral were not paid or delivered to RPM in connection with the Subsidiary Obligations. ARTICLE VII - CONDITIONS OF LENDING 7.1. Condition Precedent to Drawings - ------------------------------------ The obligation of the Lenders to make the Drawings is subject to the conditions precedent that the Borrower shall have paid all fees and expenses due on the Closing Date, and the Agent shall have received on or before the day of the initial Drawing the following, in form and substance satisfactory to the Agent and in sufficient copies for each Lender: (a) This Agreement, executed by all the Borrowers; (b) Certified copies of the resolutions of the Board of Directors of RPM authorizing the Drawings provided for herein and the execution, delivery and performance of this Agreement; equivalent documents for each Subsidiary Borrower; and, with respect to all the Borrowers, certified copies of all documents evidencing other necessary corporate action and Governmental approvals, if any, with respect to this Agreement; (c) Copies of the articles or certificate of incorporation of RPM, including all amendments thereto and copies of the by-laws of RPM as in effect on the Closing Date, with all amendments thereto, certified by the secretary or assistant secretary of RPM; and equivalent documents for each Subsidiary Borrower; (d) An existence and/or good standing certificate for RPM from the Secretary of State of Ohio as of a recent date; -24- 26 (e) A certificate of the secretary or an assistant secretary of RPM certifying the names and true signatures of the officers of each Borrower authorized to sign this Agreement and the other documents to be delivered hereunder; (f) A favorable opinion of Calfee, Halter & Griswold LLP, General Counsel for RPM, substantially in the form of Schedule 5 hereto and as to such other matters as any Lender through the Agent may reasonably request; and (g) Such other approvals, opinions or documents as the Agent or any Lender may request. 7.2. Conditions Precedent to Each Drawing - ----------------------------------------- The obligation of the Lenders to make a Drawing is subject to the satisfaction of the following conditions precedent on or before the date the relevant Drawing is to be made: (a) With respect to each Drawing, the Agent shall have received a Notice of Drawing. (b) The representations and warranties made by the Borrowers contained in Article VIII shall be true and correct on and as of the date of each Drawing with the same effect as if made on and as of such date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date). (c) No Default or Event of Default shall exist or shall result from such Drawing. (d) The Borrowers shall have paid all fees and expenses due at such time. Each Notice of Drawing submitted by a Borrower hereunder shall constitute a representation and warranty by such Borrower hereunder, as of the date of each such notice and as of the date of the making of each Drawing, that the conditions in this Section 7.2 are satisfied. ARTICLE VIII - REPRESENTATIONS AND WARRANTIES RPM represents and warrants to the Lenders and the Agent as follows: 8.1. Due Organization - --------------------- Each of the Guarantor and the Borrowers (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; (b) has all requisite corporate power, and has all governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now being or as proposed to be conducted, except in the case of such licenses, authorizations, consents and approvals, where the failure to obtain them would not have a Material Adverse Effect; and (c) is qualified to do -25- 27 business in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary and where failure so to qualify would have a Material Adverse Effect. 8.2. Due Authorization - ---------------------- The execution, delivery and performance by each of the Guarantor and the Borrowers of this Agreement are within such Guarantor and Borrowers' corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) such Guarantor and Borrowers' charter or by-laws or (ii) any law or contractual restriction binding on or affecting such Guarantor and Borrowers, in either case where such contravention would result in a Material Adverse Effect. 8.3. No Governmental Approval - ----------------------------- No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body is required for the due execution, delivery and performance by the Guarantor and the Borrowers of this Agreement. 8.4. Enforceable Agreement - -------------------------- This Agreement is the legal, valid and binding obligation of the Guarantor and the Borrowers enforceable against the Guarantor and the Borrowers in accordance with its terms, except as the enforceability thereof may be limited by general public principles such as bankruptcy or Chapter 11 regulation. The guaranty contained in Article VI is enforceable against RPM in accordance with its terms, except as the enforceability thereof may be limited by general public principles such as bankruptcy or Chapter 11 regulation. 8.5. Financial Information - -------------------------- The consolidated balance sheets of RPM and its Subsidiaries as of May 31, 1998, and the related consolidated statements of income and retained earnings of RPM and its Subsidiaries for the fiscal year then ended, copies of which have been furnished to each Lender, fairly present in all material respects the financial condition of RPM and its Subsidiaries as at such date and the results of the operations of RPM and its Subsidiaries for the period ended on such date, all in accordance with GAAP consistently applied, and since May 31, 1998, to the best of Guarantor's knowledge (after due enquiry) there has been no material adverse change in such condition or operations. 8.6. Litigation - --------------- -26- 28 There is (to the best knowledge of the Guarantor) no pending or threatened action or proceeding affecting RPM or any of its Subsidiaries before any court, Governmental Authority or arbitrator, that has not been previously disclosed in RPM's filings with the SEC, or that may result in a Materially Adverse Effect, or that purports to affect the legality, validity or enforceability of this Agreement as to any one of the Guarantor and the Borrowers, except as disclosed on Schedule 2 attached hereto. The disclosure of litigation to the Agent or Lenders pursuant to this Section does not necessarily mean that such litigation is of the type described in this Section or that such Guarantor or Borrower believes that such litigation has any merit whatsoever. 8.7. Margin Stock - ----------------- Neither the Guarantor nor any of its Subsidiaries is engaged, principally or as one of its important activity, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U or X issued by the Board of Governors of the U.S. Federal Reserve System), and no proceeds of any Advance will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. 8.8. No Default - --------------- No Default or Event of Default has occurred and is continuing or would result from the incurring of any Obligations by each of the Guarantor and the Borrowers. Each of the Guarantor and the Borrowers is not in default under or with respect to any material Contractual Obligation which would result in a Material Adverse Effect on the whole. 8.9. ERISA Compliance - --------------------- Each ERISA Affiliate has fulfilled its obligations under the minimum funding standards of ERISA and the Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Code with respect to each Plan or will be in such compliance prior to the expiration of the remedial amendment period permitted under Section 401(b) of the Code as such remedial amendment period shall be extended by the Internal Revenue Service. No ERISA Affiliate has (a) sought a waiver of the minimum funding standard under Section 412 of the Code in respect of any Plan, (b) failed to make any contribution or payment to any Plan or made any amendment to any Plan, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Code or (c) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. 8.10. Title to Properties - ------------------------- -27- 29 Each of the Guarantor and its Subsidiaries will have on the Closing Date and at all times thereafter, legal title or ownership of, or the right to use pursuant to enforceable and valid agreements or arrangements, all tangible property, both real and personal, and all franchises, licenses, copyrights, patents and know-how, all of the foregoing which are material to the operation of its business as proposed to be conducted. 8.11. Taxes - ----------- Each of the Guarantor and its Subsidiaries has filed all material tax returns required to be filed by any Governmental Authority, and has paid all taxes, assessments, fees and other governmental charges levied or imposed upon it or its properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP (or the comparable accounting standards of such Subsidiary's country). There is no proposed tax assessment against such Borrower who would, if the assessment were made, reasonably be expected to adversely affect the ability of the Lenders to collect the Advances. 8.12. Environmental Matters - --------------------------- Except as has been previously reported in RPM's filings with the SEC, the Guarantor and its Subsidiaries have not (i) failed to obtain any permits, certificates, licenses, approvals, registrations and other authorizations which are required under any applicable Environmental Law where failure to have any such permit, certificate, license, approval, registration or authorization would have a Material Adverse Effect; (ii) failed to comply with the terms and conditions of all such permits, certificates, licenses, approvals, registrations and authorizations, and are also in compliance with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in any applicable Environmental Law or in any notice or demand letter from any regulatory authority issued, entered, promulgated or approved thereunder where failure to comply would have a Material Adverse Effect; or (iii) failed to conduct its business so as to comply in all respects with applicable Environmental Laws where failure to so comply would have a Material Adverse Effect. The disclosure of any failure or alleged failure to the Lenders pursuant to this Section does not necessarily mean that failure is of the type described in this Section or that such allegation has any merit whatsoever. 8.13. Use of Proceeds - --------------------- The proceeds of the Advances are being used by such Borrower for general corporate purposes (including debt refinancing) and will not be used for the purchase or carrying of Margin Stock in violation of Regulations U or X of the Board of Governors of the U.S. Federal Reserve System. -28- 30 8.14. Regulated Entities - ------------------------ Neither the Guarantor nor any of its Subsidiaries is not an "investment company" or an "affiliated person" or a "promoter" or a "principal underwriter" for an "investment company," as such terms are defined in the U.S. Investment Company Act of 1940, as amended. 8.15. Subsidiary Borrowers - -------------------------- All Borrowers are Wholly-Owned Subsidiaries of the Guarantor. 8.16. Insurance - --------------- The property of each of the Guarantor and the Borrowers is insured with financially sound and reputable insurance companies, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where such Guarantor or Borrower operates. 8.17. Copyrights, Patents, Trademarks and Licenses, Etc. - -------------------------------------------------------- Such Guarantor or its Subsidiaries own or are licensed or otherwise have the right to use all of the patents, trademarks, service marks, trade names, copyrights, franchises, authorizations and other rights that are reasonably necessary for the operation of their respective businesses, without conflict with the rights of any other Person which would have a Material Adverse Effect on the whole. Except as specifically disclosed in Schedule 2, no claim or litigation regarding any of the foregoing is pending or threatened, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or, to the knowledge of such Guarantor, proposed, that has not been previously disclosed in RPM's filings with the SEC, which, in either case, could reasonably be expected to have a Material Adverse Effect. 8.18. Year 2000 - --------------- The cost to the Guarantor and its Subsidiaries of any reprogramming required to permit the proper functioning, in and following the year 2000, of (i) the computer systems of the Guarantor and its Subsidiaries and (ii) equipment containing embedded microchips (including systems and equipment supplied by others or with which the Guarantor's systems interface) and the testing of all such systems and equipment, as so reprogrammed, and of the reasonably foreseeable consequences of year 2000 to the Guarantor and its Subsidiaries (including, without limitation, reprogramming errors and the failure to others' systems or equipment) would not reasonably be expected to result in a Default or Event of Default or have a Material Adverse Effect. To the knowledge of the Guarantor, except for such of the reprogramming referred to in the preceding sentence as may be necessary, which reprogramming the Guarantor expects to complete in a timely fashion, the computer and management information systems of the Guarantor and its Subsidiaries are and, with ordinary course upgrading and maintenance and planned systems -29- 31 conversions and/or upgrades, will continue to be, sufficient to permit the Guarantor to conduct its businesses without a Material Adverse Effect. 8.19. Reimbursement of the December14, 1993 Credit Agreement - ------------------------------------------------------------ RPM, concurrently with the receipt by any Borrower of the initial Advance hereunder, shall satisfy in full all its obligations to Credit Lyonnais Chicago Branch ("CLCB"), Credit Lyonnais Cayman Island Branch ("CLCIB") and Credit Lyonnais Belgium ("CLB") pursuant to that certain $30,000,000 Multi-Currency Credit Agreement dated December 14, 1993 (as amended or modified) among RPM, CLCB as agent and certain other banks as direct participants, including CLCB and CLB, and shall apply for the cancellation of the latter agreement. ARTICLE IX - AFFIRMATIVE COVENANTS So long as any Advance or other Obligation or any interests and/or fees payable thereunder remains unpaid or unsatisfied or the Commitment remains available, RPM will: 9.1. Financial Statements - ------------------------- Deliver to the Agent in form and detail satisfactory to the Agent with sufficient copies for each Lender: (a) as soon as available, but not later than 120 days after the end of each fiscal year, a copy of the audited and consolidated balance sheet and its accompanying income statement and statement of cash flows of the Guarantor as of the end of such fiscal year, setting forth in each case in comparative form the figures for the previous year, and accompanied by an opinion of the independent public accounting firm of Ciulla, Smith & Dale LLP, or other independent certified public accountants of recognized public standing, stating that such financial statements present fairly in all material respects the consolidated financial position of such Guarantor as of the dates indicated and the results of its operations and cash flows for the periods indicated in conformity with GAAP. Such opinion shall not be qualified or limited for any reason, including, without limitation, because of a restricted or limited examination by such accountant of any material portion of such Borrower's records; and (b) as soon as available, but not later than 60 days after the end of each of such Guarantor's three non-year-end fiscal quarters, a copy of the unaudited consolidated financial statements of such Guarantor setting forth its financial position as of the end of such fiscal quarter and the results of its operations and its cash flows for such quarter, prepared in accordance with GAAP consistently applied (except for footnotes of the type required by the SEC to be included in quarterly reports on Form 10-Q and subject to normal year-end audit adjustments). 9.2. Certificates; Other Information - ------------------------------------ -30- 32 Furnish to the Agent with sufficient copies for each Lender: (a) concurrently with the delivery of the financial statements referred to in Sections 9.1(a) and (b) above, a Compliance Certificate (substantially in the form of Schedule 3 hereto), signed by the chief financial officer of the Guarantor, and if any condition or event which constitutes a Default or any Event of Default exists, a statement in such certificate specifying in reasonable detail the nature and period of existence thereof and the action such Guarantor or Borrower has taken, is taking or proposes to take with respect thereto; (b) promptly upon their becoming available, copies all material registration statements and all periodic reports (other than any registration statements on Form S-8 or its equivalent), if any, which such Guarantor shall have filed with the U.S. Securities and Exchange Commission (or any successor agency), ; and (c) promptly, such additional business, financial, corporate affairs and other information as the Agent, at the request of any Lender, may from time to time reasonably request. 9.3. Notices - ------------ Promptly notify the Agent and each Lender in writing of the following conditions, events or situations to the extent they have not been previously disclosed in RPM's filings with the SEC and to the extent that the failure to give such notice would result in a Material Adverse Effect: (a) promptly after the management of the Guarantor knows that any Event of Default or Default has occurred and is continuing, the occurrence of any Default or Event of Default; (b) (i) any breach or non-performance of, or any default under, any Contractual Obligation of such Guarantor or any Borrower which could result in a Material Adverse Effect; and (ii) any dispute, litigation, investigation, proceeding or suspension which may exist at any time between such Guarantor or any Borrower and any Governmental Authority which could result in a Material Adverse Effect; (c) the commencement of, or any material development in any litigation or proceeding affecting such Guarantor or any Borrower (i) which has a reasonable possibility of resulting in liability to the Guarantor or any Borrower in the amount of EUR 10,000,000 or more, (ii) in which injunctive or similar relief is sought and which, if adversely determined, would reasonably be expected to have a Material Adverse Effect, or (iii) in which the relief sought is an injunction or other stay of the performance of this Agreement; (d) any complaint, order, citation, notice or other written communication from and Person with respect to, or if RPM becomes aware after due inquiry of, (i) the existence or alleged existence of a violation of any applicable Environmental Law or Environmental Liability at, upon, under or within any property now or previously owned, leased, operated or used RPM or any of its Subsidiaries or any part thereof, or due to the operations or activities of RPM, any Subsidiary on or in connection with such property or any part thereof (including -31- 33 receipt by the Guarantor or any Subsidiary of any notice of the happening of any event involving the Release of a reportable quantity under any applicable Environmental Law or cleanup of any Hazardous Substance), (ii) any Release on such property or any part thereof in a quantity that is reportable under any applicable Environmental Law, (iii) the commencement of any cleanup pursuant to or in accordance with any applicable Environmental Law of any Hazardous Substances on or about such property or any part thereof and (iv) and pending or threatened proceeding for the termination, suspension or non-renewal of any permit required under any applicable Environmental Law, in each case which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect. (e) if and when the Guarantor or any member of the Controlled Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC, (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or makes any amendment to any Plan which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of a senior officer setting forth details as to such occurrence and action, if any, which the Guarantor or member of the Controlled Group is required or proposes to take; (f) any Material Adverse Effect subsequent to the date of the most recent audited financial statements of RPM and its Subsidiaries delivered to the Lenders pursuant to Section 9.1(a). Each notice pursuant to this section shall be accompanied by a written statement signed by the chief financial officer of RPM setting forth details of the occurrence referred to therein, and stating what action RPM proposes to take with respect thereto and at what time. Each notice under Section 9.3(a) shall describe with particularity the provisions of this Agreement that have been breached. 9.4. Preservation of Corporate Existence Rights - ----------------------------------------------- (a) Except as permitted in Section 10.2, maintain and preserve in full force and effect its corporate (or other form of) existence and good standing under the laws of its jurisdiction -32- 34 of incorporation provided that nothing herein shall prevent (i) the merger or dissolution of any Subsidiaries of the Guarantor into such Guarantor so long as such Guarantor is the surviving corporation, (ii) the merger of any Subsidiary of the Guarantor into any other Subsidiary of the Guarantor, or (iii) the sale of any Subsidiary of the Guarantor which is not a Significant Subsidiary. It is understood that the preservation and maintenance of rights, privileges and franchises shall not prevent such Guarantor and its Subsidiaries from disposing of assets in any transaction not otherwise prohibited pursuant to this Section 9.4 or Section 10.2 hereof. (b) Maintain and preserve all rights or privileges necessary or desirable in the normal operation of its business and keep all of its property necessary to its business in good working order and condition (having regard to the condition of such properties at the time such properties were acquired by such Guarantor or Borrower), normal wear and tear excepted. 9.5. Insurance - -------------- Maintain with financially sound and reputable independent insurers, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by companies of established reputation engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other companies of established reputation. Upon request of the Agent or any Lender, such Borrower shall furnish the Agent, with sufficient copies for each Lender, at reasonable intervals (which prior to the occurrence of an Event of Default shall not exceed one time in any 12 month period), a certificate of the chief financial officer of RPM (and, if requested by the Agent, any insurance broker of such Borrower) setting forth the nature and extent of all insurance maintained by such Borrower in accordance with this Section 9.5. 9.6. Payment of Obligations - --------------------------- Pay all material taxes, assessments, governmental charges and other obligations (the failure of which to pay would result in a Material Adverse Effect) when due, except as may be contested in good faith or those as to which a bona fide dispute may exist and for which adequate reserves have been provided if required by GAAP (or the comparable accounting standards of such Borrower's country) and the non-payment of which does not materially affect the Borrower's title to or right to use any of its property in the aggregate. 9.7. Compliance with Laws - ------------------------- The Guarantor will comply, and will cause each of its Subsidiaries to comply, with the requirements of all applicable laws, rules, regulations and orders of any governmental body or regulatory authority (including, without limitation, all Environmental Laws), a breach of which -33- 35 would have a Material Adverse Effect, except where contested in good faith and by proper proceedings. 9.8. Inspection of Property and Books and Records - ------------------------------------------------- Maintain proper books of record and account in conformity with GAAP (or the comparable accounting standards of such Borrower's country) consistently applied and permit representatives and independent contractors of the Agent or any Lender to visit and inspect any of its properties, to examine corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its respective officers and independent public accountants upon reasonable prior notice and at such reasonable times during normal business hours. 9.9. Use of Drawings - -------------------- Use the proceeds of the Advances solely to refinance Indebtedness and other general lawful corporate purposes. Issue of Guarantees and Letters of Credit are for general lawful corporate purposes. 9.10. Further Assurances - ------------------------ Execute and deliver to the Agent such further instruments and do such other further acts as the Agent or the Lenders may reasonably request to carry out more effectively the purposes of this Agreement and any related documents. ARTICLE X - NEGATIVE COVENANTS So long as any Advance or other Obligation or any interests and/or fees payable thereunder remains unpaid or unsatisfied or the Commitment remains available, RPM will not: 10.1. Liens, Etc. - ----------------- Create or suffer to exist any Lien, upon or with respect to any of its properties, whether now owned or hereafter acquired, in each case to secure or provide for the payment of any Indebtedness of any Person, other than the following ("Permitted Liens"): (a) Purchase money liens or purchase money security interests upon or in any property acquired or held by such Guarantor or Subsidiary in the ordinary course of business to secure the purchase price of such property or to secure Indebtedness incurred solely for the purpose of financing the acquisition of such property; -34- 36 (b) Any Lien existing on the property of such Guarantor or Subsidiary on the Closing Date and any extension, renewal or replacement Lien (each a "Replacement Lien") arising out of the extension, renewal or replacement of the related obligation secured by such Lien, so long as any such Replacement Lien does not extend to property not covered by the Lien replaced or renewed; (c) Liens for taxes, fees, assessments or other Governmental charges or statutory obligations which are not delinquent or remain payable without penalty, or to the extent that non-payment thereof is permitted by Section 8.11, provided that no notice of Lien has been filed or recorded under the Code; (d) Liens arising in the ordinary course of business in connection with obligations that are not overdue or which are being contested in good faith and by appropriate proceedings, including, but not limited to Liens under bid, performance and other surety bonds, supersedes and appeal bonds, Liens on advance or progress payments received from customers under contracts for the sale, lease or license of goods, software or services and upon the products being sold or licensed, in each case securing performance of the underlying contract or the repayment of such advances in the event final acceptance of performance under such contracts does not occur; and Liens upon funds collected temporarily from others pending payment or remittance on their behalf; (e) Liens (other than any Lien imposed by ERISA) required in ordinary course of business in connection with workers' compensation, unemployment insurance and other social security legislation; (f) Liens, easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the businesses of such Guarantor or Subsidiary; (g) Liens arising solely by virtue of any statutory or common law provision relating to banker's liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution; provided that (i) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by such Guarantor or Subsidiary in excess of those set forth by regulations promulgated by the U.S. Federal Reserve Board or other central bank or similar Governmental Authority, and (ii) such deposit account is not intended by such Guarantor or Subsidiary to provide collateral to the depository institution; (h) Any Lien on any asset existing at the time such asset is acquired by such Guarantor or Subsidiary or is merged into or consolidated with such Guarantor or Subsidiary and not created in contemplation of such event and any Replacement Lien (as defined in clause (b) above) arising out of the extension, renewal or replacement of the related obligation secured by such Lien, so long as any such Replacement Lien does not extend to property not covered by the Lien replaced or renewed; -35- 37 PROVIDED that the aggregate principal amount of the Indebtedness secured by the Liens referred to in clauses (a), (b) and (h) above shall not at any time exceed five percent of RPM's Consolidated Total Assets. 10.2. Mergers, Consolidations and Dispositions of Assets - -------------------------------------------------------- (a) Consolidate or merge with or into any other Person, or (b) Sell, lease or otherwise transfer, directly or indirectly, in one transaction or a series of related transactions, all or substantially all of its business or assets; or (c) Sell any Significant Subsidiary or any Borrower to which there is any Drawing outstanding; provided that, if immediately after giving effect to such transaction, no Default shall have occurred and be continuing, nothing herein shall prevent (i) the merger or dissolution of any Subsidiaries of the Guarantor into such Guarantor so long as such Guarantor is the surviving corporation, (ii) the merger of any Subsidiary of the Guarantor into any other Subsidiary of the Guarantor, or (iii) the sale of any Subsidiary of the Guarantor which is not a Significant Subsidiary. 10.3. Use of Proceeds - --------------------- Use any portion of any Advance, directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise refinance Indebtedness of the Borrowers, their Subsidiaries or others incurred to purchase or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying any margin Stock. 10.4. Accounting Changes - ------------------------ Make any material change in accounting treatment or reporting practices, except (a) as required or permitted by GAAP (or the comparable accounting standards of such Guarantor or Subsidiary's country) and (b) as disclosed in the notes accompanying the financial statements delivered pursuant to Sections 9.1(a) and (b) hereof. 10.5. Leverage Ratio - -------------------- Permit Indebtedness of the Guarantor and its Subsidiaries, determined on a consolidated basis, on any date to exceed 65% of the sum of such Indebtedness and consolidated shareholders' equity of the Guarantor and its Subsidiaries on such date. -36- 38 10.6. Ratio of EBIT to Interest Expense - --------------------------------------- Permit the ratio, calculated as at the end of each fiscal quarter ending after the Closing Date for the four fiscal quarters then ended, of Consolidated EBIT for such period to Consolidated Interest Expense for such period to be less than 3:1. ARTICLE XI - EVENTS OF DEFAULT 11.1. Events of Default - ----------------------- Any of the following shall constitute an "Event of Default": (a) A Borrower fails to pay (i) any principal of, or (ii) interest and/or fee on, or (iii) any other amount payable on any Drawing within five Business Days after the due date thereof; or (b) Any representation or warranty made by the Guarantor or a Borrower herein or in any document delivered to the Lenders in connection with this Agreement proves to have been incorrect in any material respect when made; or (c) The Guarantor or a Borrower fails to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be performed or observed and the failure to perform or observe such other term, covenant or agreement remains unremedied for 30 days after notice thereof to the Guarantor or any Borrower by the Agent or any Lender and results in a Material Adverse Effect; or (d) The Guarantor or any of its Subsidiaries fails to pay any principal of or premium or interest on any Indebtedness which is outstanding in a principal amount of at least EUR 20,000,000 (or its equivalent in any Alternative Currency) in the aggregate (but excluding Indebtedness arising under this Agreement) of such Guarantor or such Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure continues after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness; or any other event occurs or condition exists under any agreement or instrument relating to any such Indebtedness and continues after the applicable grace period, if any, specified in such agreement or instrument expires, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness; or any such Indebtedness is declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or (e) Any judgment for the payment of money in excess of EUR 35,000,000 in the aggregate (or its equivalent in any Alternative Currency) is rendered by a court or courts against the Guarantor or any of its Subsidiaries (excluding any amount of such a judgment as to which an acceptable insurer has acknowledged liability), provided that -37- 39 - within 10 days from the date of entry thereof, such judgment has not been discharged, or - within 10 days from the date of entry thereof, a stay of execution thereof has not been procured, or - within said period of 10 days (or such longer period during which execution of the judgment shall have been stayed), no appeal has been lodged and accepted so that the execution thereof has been stayed during such appeal; or (f) The Guarantor or any member of the Controlled Group shall fail to pay when due an amount or amounts aggregating in excess of EUR 20,000,000 (or its equivalent in any Alternative Currency) for which it shall have become liable under Title IV of ERISA; or notice of intent to terminate a Plan or Plans having aggregate Unfunded Pension Liabilities in excess of EUR 20,000,000 shall be filed under Title IV of ERISA by the Guarantor or any member of the Controlled Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer, any Plan or Plans having aggregate Unfunded Pension Liabilities in excess of EUR 20,000,000; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Plan or Plans having aggregate Unfunded Pension Liabilities in excess of EUR 20,000,000 must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause the Guarantor or any member of the Controlled Group to incur a current payment obligation in excess of EUR 20,000,000; or (g) RPM fails in any material respect to perform or observe any term, covenant or agreement under its guaranty in Article VI; or such guaranty is for any reason partially (including with respect to future advances) or wholly revoked or invalidated, or otherwise ceases to be in full force and effect, or RPM or any other Person contests in any manner the validity or enforceability thereof or denies that it has any further liability or obligation thereunder; or (h) RPM (i) generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any, whether at stated maturity or otherwise, (ii) voluntarily ceases to conduct its business, (iii) commences any Insolvency Proceeding with respect to itself; or (iv) takes any action to effectuate or authorize any of the foregoing; or (i) One or more of the following occurs: (x) an involuntary Insolvency Proceeding is commenced or filed against the Guarantor or any Guarantor's Subsidiary, or any writ, judgment, warrant of attachment, execution or similar process, is issued or levied against a substantial part of the Guarantor or any Guarantor's Subsidiaries, properties, and any such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded within 90 days after commencement, filing or levy; (y) the Guarantor or any Guarantor's Subsidiary admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any -38- 40 Insolvency Proceeding; or (z) the Guarantor or any Guarantor's Subsidiary acquiesces in the appointment of a receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor), or other similar Person for itself or a substantial portion of its property or business. 11.2. Remedies - -------------- If any Event of Default occurs, the Agent shall, at the request of, or may, with the consent of, all the Lenders, (a) declare the Commitment of the Lenders to make Drawings to be terminated, whereupon such Commitment shall forthwith be terminated; (b) declare the unpaid principal amount of all outstanding Drawings, all interest and/or fees accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other related document to be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrowers; and (c) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under this Agreement or applicable law; PROVIDED, however, that upon the occurrence of any event specified in paragraph (h) or (i) of Section 11.1 above (in the case of clause (x) of paragraph (i), upon the expiration of the 60-day period mentioned therein), the obligation of each Lender to make Drawings shall automatically terminate without notice to the Borrowers and the unpaid principal amount of all outstanding Drawings and all interest and/or fees and other amounts as aforesaid shall automatically become due and payable without further act of the Agent or any Lender and without notice to the Borrowers; and PROVIDED further, that in any case, the Lenders may, in their sole and absolute discretion, waive any Event of Default. ARTICLE XII - THE AGENT 12.1. Authorization and Action - ------------------------------ Each Lender hereby appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of the Indebtedness resulting from the Drawings), the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of all the Lenders; PROVIDED, however, that the Agent shall not be required to take any action which -39- 41 exposes the Agent to personal liability or which is contrary, in the Agent's opinion, to this Agreement or applicable law. The Agent agrees to give to each Lender prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement. 12.2. Agent's Reliance, Etc - --------------------------- Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Agent: (a) may consult with legal counsel (including counsel for any Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (b) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement; (c) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Guarantor or any Borrower or to inspect the property (including the books and records) of the Guarantor or the Borrowers; (d) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (e) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telefax, e-mail) believed by it to be genuine and signed or sent by the proper party or parties. 12.3. DBSA and Affiliates - ------------------------- DBSA and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Guarantor, any of its Subsidiaries and any Person who may do business with or own securities of any Guarantor or any such Subsidiary, all as if DBSA was not the Agent and without any duty to account therefor to the Lenders. 12.4. Indemnification - --------------------- The Lenders agree to indemnify the Agent (to the extent not reimbursed by the Borrowers), ratably according to the respective aggregate principal amount of Drawings then made by each of them (or if no such Drawings are at the time outstanding, ratably according to their respective Allocation Percentages), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Agreement or any action taken or omitted by the Agent under this -40- 42 Agreement, PROVIDED that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its ratable share (pursuant to its Allocation Percentage) of any out-of-pocket expenses (including counsel and paralegal fees) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Agent is not reimbursed for such expenses by the Borrowers. ARTICLE XIII - MISCELLANEOUS 13.1. Amendments - ---------------- No amendment or waiver of any provision of this Agreement, nor consent to any departure by any Borrower therefrom, shall in any event be effective unless the same is in writing and signed by all the Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 13.2. Notices - ------------- All notices and other communications provided for hereunder shall be in writing (including facsimile and e-mail communication) and delivered, if to the Guarantor or a Borrower, at the address listed beneath its signature on the signature pages hereof; if to any Lender, at the address for notices specified beneath its name on the signature pages hereof; and if to the Agent, at its address for notices listed beneath its signature on the signature pages hereof. Any party hereto may in a written notice to the other parties change its address or other information relating to payment. Except as otherwise provided in this Agreement, all such communications shall be deemed to have been duly given when transmitted by telex or telecopier, delivered to the telegraph or cable office or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid. 13.3. No Waiver; Remedies - ------------------------- No failure on the part of any Lender or the Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. 13.4. Expenses - -------------- -41- 43 If an Event of Default occurs, the Borrowers shall pay or reimburse each Lender and the Agent within thirty (30) Business Days after demand for all costs and expenses incurred by them as a result of such Event of Default and collection, enforcement, bankruptcy, insolvency and other proceeding resulting therefrom. 13.5. Right of Set-off - ---------------------- Upon (i) the occurrence and during the continuance of any Event of Default and (ii) the making of the request or the granting of the consent specified by Section 11.2 to authorize the Agent to declare the Drawings due and payable pursuant to the provisions of Section 11.2, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrowers against any and all of the obligations of the Borrowers now or hereafter existing under this Agreement. Each Lender agrees promptly to notify the Borrowers after any such set-off and application made by such Lender, PROVIDED that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which such Lender may have. 13.6. Judgment Currency Conversions - ----------------------------------- (a) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in any currency (the "Original Currency"), into another currency (the "Other 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 DBSA could purchase the Original Currency with the Other Currency in Brussels, Belgium on the second Business Day preceding that on which final judgment is given. (b) The obligation of any Borrower in respect of any sum due in the Original Currency from it to any Lender or the Agent hereunder held by such Lender shall, notwithstanding any judgment in any Other 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 banking procedures purchase Euros with such Other Currency; if the amount of the Original Currency so purchased is less than the sum originally due to such Lender or the Agent (as the case may be) in the Original Currency, the Borrowers agree, 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 Original Currency so purchased exceeds the sum originally due to any Lender or the Agent (as the case may be) in the Original Currency, such Lender or the Agent (as the case may be) agrees to remit such excess to the Borrower or Borrowers making the payment. -42- 44 13.7. Binding Effect - -------------------- This Agreement shall become effective when it shall have been executed by the Guarantor and the Borrowers and the Agent and when the Agent has been notified by each Lender named on the signature pages hereof that such Lender has executed it and thereafter shall be binding upon and inure to the benefit of the Borrowers, the Agent and each Lender and their respective successors and assigns, except that neither the Guarantor nor any Borrower shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders. 13.8. Participations - -------------------- Each Lender may assign any Drawing or Drawings or all or any part of its Commitment (i) to any affiliate thereof, (ii) to any other Lender, or (iii) with the consent of the Guarantor and the Agent, which consents shall not be unreasonably withheld, to any other bank or financial institution or fund; provided that (x) any assignment shall not be less than EUR 5,000,000 or, if less, shall constitute an assignment of all of such Lender's Commitment and Drawings and (y) the Guarantor shall be deemed to be reasonable in withholding consent if the assignee is not exempt from United States withholding taxes. Upon execution by the assignor and the assignee of an instrument pursuant to which the assignee assumes such rights and obligations, payment by such assignee to such assignor of an amount equal to the purchase price agreed between such assignor and such assignee and delivery to the Agent and the Guarantor of an executed copy of such instrument together with payment by such assignee to the Agent of a processing fee of EUR 2,500, such assignee shall have, to the extent of such assignment (unless otherwise provided therein), the same rights and benefits as it would have if it were a Lender hereunder and the assignor shall be, to the extent of such assignment (unless otherwise provided therein) released from its obligations under this Agreement. Upon the consummation of such assignment, the Borrower shall make appropriate arrangements so that, if required, new Drawings are issued to the assignor and the assignee. Such assignee shall, prior to the effectiveness of the applicable instrument of assumption, deliver to the Guarantor and the Agent certification as to exemption from deduction or withholding of taxes in accordance with Section 2.5. Each Lender may (without the consent of any other party to this Agreement) sell participations in all or any part of any Drawing or Drawings made by it to another bank or other entity, in which event the participant shall not have any rights under this Agreement (the participant's rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favour of the participant relating thereto). The Guarantor agrees that each participant shall be entitled to the benefits of Section 2.4 (Increased Costs), Section 2.6 (Illegality) and Section 2.7 (Sharing of Payments) with respect to its participation; provided that no participant shall be entitled to receive any greater amount -43- 45 pursuant to such Sections than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such participant had no such transfer occurred. Each Lender may furnish any information concerning the Guarantor and its Subsidiaries in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants) which have agreed in writing to be bound by the provisions of Section 13.8 (b) hereof. The Agent and the Guarantor may, for all purposes of this Agreement, treat any Lender as a Lender until written notice of assignment or other transfer shall have been received by them from such Lender. 13.9. Execution in Counterparts - ------------------------------- This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 13.10. Severability - ------------------- The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 13.11. Governing law and jurisdiction - ------------------------------------- (a) This agreement shall be governed by, and construed in accordance with, the law of Belgium. (b) Any legal action or proceeding with respect to this Agreement and any other related documents may be brought in the courts of Brussels, and by execution and delivery of this Agreement, each of the Guarantor and the Borrowers, the Agent and the Lenders consents, for itself and in respect of its property, to the non-exclusive jurisdiction of those courts. Each of the Guarantor and the Borrowers, the Agent and the Lenders irrevocably waives any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any action or proceeding in such jurisdiction in respect of this Agreement or any document related hereto. The Guarantor, the Borrowers, the Agent and the Lenders each waive personal service of any summons, complaint or other process, which may be made by any other means permitted by Belgium law. -44- 46 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. RPM, INC. By: /s/ Keith R. Smiley Name: Keith R. Smiley Title: V.P. - Treasurer Address for notices: RPM, Inc. 2628 Pearl Road P. O. Box 777 Medina, Ohio 44258 Attention: Keith Smiley Facsimile: 1-330-225 65 74 Telephone: 1-330-273 88 37 -45- 47 CARBOLINE EUROPE LTD. By: /s/ Keith R. Smiley Name: Keith R. Smiley Title: Authorized Representative Address for notices: Carboline Europe Ltd. Torrington Avenue Coventry CV4 9TJ United Kingdom Attention: Mark Hotchin Facsimile: 44-780-813 89 54 Telephone: 44-12 03 69 41 47 With a copy to: Carboline Europe Ltd. c/o RPM, Inc. 2628 Pearl Road P. O. Box 777 Medina, Ohio 44258 Attention: Keith Smiley Facsimile: 1-330-225 65 74 Telephone: 1-330-273 88 37 -46- 48 MARTIN MATHYS N.V. By: /s/ Keith R. Smiley Name: Keith R. Smiley Title: Authorized Representative Address: Martin Mathys N.V. Kolenbergstraat 23 B - 3545 Halen Address for notices: Martin Mathys N.V. c/o RPM Europe B.V. Braak 1 NL - 4704 RJ Roosendaal Attention: Kurt Allen Facsimile: 31-16 55 60 646 Telephone: 31-16 55 69 340 With a copy to: Martin Mathys N.V. c/o RPM, Inc. 2628 Pearl Road P.O. Box 777 Medina, Ohio 44258 Attention: Keith Smiley Facsimile: 1-330-225 65 74 Telephone: 1-330-273 88 37 -47- 49 RADIANT COLOR N.V. By: /s/ Keith R. Smiley Name: Keith R. Smiley Title: Authorized Representative Address for notices: Radiant Color N.V. Europark 1046 B - 3530 Houthalen Attention: Frank Rutten Facsimile: 011/52.66.79 Telephone: 011/52.49.22 With a copy to: Radiant Color N.V. c/o RPM, Inc. 2628 Pearl Road P.O. Box 777 Medina, Ohio 44258 Attention: Keith Smiley Facsimile: 1-330-225 65 74 Telephone: 1-330-273 88 37 -48- 50 RPM BELGIUM N.V. By: /s/ Keith R. Smiley Name: Keith R. Smiley Title: Authorized Representative Address for notices: RPM Belgium N.V. Henri Dunantstraat 11b Industriepark Noord B - 8700 Tielt Attention: Martine De Witte Facsimile: 051/40.00.71 Telephone: 051/40.38.01 With a copy to: RPM Belgium N.V. c/o RPM, Inc. 2628 Pearl Road P.O. Box 777 Medina, Ohio 44258 Attention: Keith Smiley Facsimile: 1-330-225 65 74 Telephone: 1-330-273 88 37 -49- 51 RPM EUROPE B.V. By: /s/ Keith R. Smiley Name: Keith R. Smiley Title: Authorized Representative Address for notices: RPM Europe B.V. Braak 1 NL - 4704 RJ Roosendaal Attention: Kurt Allen Facsimile: 31-16 55 60 646 Telephone: 31-16 55 69 340 With a copy to: RPM Europe B.V. c/o RPM, Inc. 2628 Pearl Road P. O. Box 777 Medina, Ohio 44258 Attention: Keith Smiley Facsimile: 1-330-225 65 74 Telephone: 1-330-273 88 37 -50- 52 RPM HOLDINGS UK LTD. By: /s/ Keith R. Smiley Name: Keith R. Smiley Title: Authorized Representative Address for notices: RPM Holdings UK Ltd. Clifton House Bunnlan Place BASINGSTOKE HAMPSHIRE RG 21 7 JE United Kingdom Attention: Mark Hotchin Facsimile: 44-780-813 89 54 Telephone: 44-12 03 69 41 47 With a copy to: RPM Holdings UK Ltd. c/o RPM, Inc. 2628 Pearl Road P. O. Box 777 Medina, Ohio 44258 Attention: Keith Smiley Facsimile: 1-330-225 65 74 Telephone: 1-330-273 88 37 -51- 53 RPM LUX CONSULT S.A. By: /s/ Keith R. Smiley Name: Keith R. Smiley Title: Authorized Representative Address: RPM Lux Consult S.A. Rue de la Gare 18 L - 6117 Junglinster Address for notices: RPM Lux Consult S.A. c/o RPM Belgium N.V. Henri Dunantstraat 11b Industriepark Noord B - 8700 Tielt Attention: Martine De Witte Facsimile: 051/40.00.71 Telephone: 051/40.38.01 With a copy to: RPM Lux Consult S.A. c/o RPM, Inc. 2628 Pearl Road P. O. Box 777 Medina, Ohio 44258 Attention: Keith Smiley Facsimile: 1-330-225 65 74 Telephone: 1-330-273 88 37 -52- 54 RPOW (FRANCE) S.A. By: /s/ Keith R. Smiley Name: Keith R. Smiley Title: Authorized Representative Address: RPOW (France) S.A. Rue Jules Verne 11 F - 95322 Saint-Leu La Foret Address for notices: RPOW (France) S.A. c/o RPM Europe B.V. Braak 1 NL - 4704 RJ Roosendaal Attention: Kurt Allen Facsimile: 31-16 55 60 646 Telephone: 31-16 55 69 340 With a copy to: RPOW (France) S.A. c/o RPM, Inc. 2628 Pearl Road P. O. Box 777 Medina, Ohio 44258 Attention: Keith Smiley Facsimile: 1-330-225 65 74 Telephone: 1-330-273 88 37 -53- 55 RPOW UK Ltd. By: /s/ Keith R. Smiley Name: Keith R. Smiley Title: Authorized Representative Address: RPOW UK Ltd. Clifton House Bunnlan Place BASINGSTOKE HAMPSHIRE RG 21 7 JE United Kingdom Address for notices: RPOW UK Ltd. c/o RPM, Inc. 2628 Pearl Road P. O. Box 777 Medina, Ohio 44258 Attention: Keith Smiley Facsimile: 1-330-225 65 74 Telephone: 1-330-273 88 37 -54- 56 STONHARD DEUTSCHLAND GMBH By: /s/ Keith R. Smiley Name: Keith R. Smiley Title: Authorized Representative Address: Stonhard Deutschland GmbH Shumanstrasse 18 52146 Wurselen/Aachen Germany Address for notices: Stonhard Deutschland GmbH c/o Stonhard European Headquarters 143 Woluwelaan B - 1831 Diegem Attention: Michel Nolis Facsimile: 32-2-720 47 27 Telephone: 32-2-720 89 82 With a copy to: Stonhard Deutschland GmbH c/o RPM, Inc. 2628 Pearl Road P. O. Box 777 Medina, Ohio 44258 Attention: Keith Smiley Facsimile: 1-330-225 65 74 Telephone: 1-330-273 88 37 -55- 57 TREMCO LTD. By: /s/ Keith R. Smiley Name: Keith R. Smiley Title: Authorized Representative Address for notices: Tremco Ltd. Edinburgh Avenue 393 Slough SL 1 4UF United Kingdom Attention: Peter Crawford Facsimile: 44-17 53 82 26 40 Telephone: 44-17 53 69 16 96 With a copy to: Tremco Ltd. c/o RPM, Inc. 2628 Pearl Road P. O. Box 777 Medina, Ohio 44258 Attention: Keith Smiley Facsimile: 1-330-225 65 74 Telephone: 1-330-273 88 37 -56- 58 DEUTSCHE BANK S.A., as "Agent" By: /s/ Denis Cambier /s/ Vincent Pinte Name: Denis CAMBIER Vincent PINTE Title: Corporate Finance Officer Corporate Finance Manager Address for notices: Marnix Avenue 17 B - 1000 Brussels Attention: Mr. Thierry Mathieu Facsimile: 32-2-551 63 09 Telephone: 32-2-551 69 53 -57- 59 DEUTSCHE BANK S.A., as a "Lender" By: /s/ Denis Cambier /s/ Vincent Pinte Name: Denis CAMBIER Vincent PINTE Title: Corporate Finance Officer Corporate Finance Manager Lending Office and Address for notices: Marnix Avenue 17 B - 1000 Brussels Attention: Mr. Thierry Mathieu Facsimile: 32-2-551 63 09 Telephone: 32-2-551 69 53 -58- 60 DEUTSCHE BANK AG LONDON, as a "Lender" By: /s/ Alan Richardson /s/ Tanja Schnell Name: Alan Richardson Tanja Schnell Title: Director Manager Lending Office and Address for notices: Winchester House 1 Great Winchester Street London EC2N 2DB Attention: Credit Administration - Roger Penn Facsimile: 44-171-545 4638 Telephone: 44-171-545 7137 -59- EX-10.3 4 EXHIBIT 10.3 1 Exhibit 10.3 COMMERCIAL PAPER PLACEMENT AGENCY AGREEMENT, dated as of August 10, 1999, between RPM, INC., an Ohio corporation (the "Issuer"), and CHASE SECURITIES INC., a Delaware corporation (the "Placement Agent"). The Issuer intends to issue short-term notes pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act"), and Rule 506 thereunder. The Issuer desires to enter into this Agreement with the Placement Agent in order to provide for the offer and sale of such notes in the manner described herein. The parties hereto, in consideration of the premises and mutual covenants herein contained, agree as follows: 1. Definitions. ----------- "BUSINESS DAY" shall mean any day other than a Saturday or Sunday or a day when banks are authorized or required by law to close in New York City or Chicago. "COMPANY INFORMATION" shall mean the Private Placement Memorandum (defined below), together with, to the extent applicable, information provided by the Issuer pursuant to Section 7(b) hereof. "DTC" shall mean the Depository Trust Company. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. "INSTITUTIONAL ACCREDITED INVESTOR" shall mean an institutional investor that is reasonably believed to qualify as an "accredited investor" as defined in Rule 501(a) under the 1933 Act. "ISSUING AND PAYING AGENT" shall mean The Chase Manhattan Bank, the issuing and paying agent under the Issuing and Paying Agency Agreement, or any successor thereto. "ISSUING AND PAYING AGENCY AGREEMENT" shall mean the issuing and paying agency agreement, dated as of August ____, 1999, between the Issuer and the Issuing and Paying Agent, as the same may from time to time be amended. "NOTES" shall mean short-term promissory notes of the Issuer, substantially in the form of Annex A to the Issuing and Paying Agency Agreement in the case of certificated Notes, and represented by master notes substantially in the form of Annex B to the Issuing and Paying Agency Agreement in the case of book-entry Notes, issued by the Issuer from time to time pursuant to the Issuing and Paying Agency Agreement. "OFFERING MATERIALS" shall mean the offering materials concerning the Issuer contemplated by Section 7 hereof, and such offering materials as from time to time revised or supplemented. "PLACEMENT AGENT INFORMATION": shall mean the information concerning the Placement Agent provided by the Placement Agent in writing expressly for inclusion in the Private 2 Placement Memorandum, as set forth under the headings "Chase Securities Inc. and Affiliates" and "Additional Information" therein. "PRIVATE PLACEMENT MEMORANDUM" shall mean the private placement memorandum with respect to the offer and sale of the Notes (including materials referred to therein or incorporated by reference therein), prepared in accordance with Section 7 hereof and provided to purchasers or prospective purchasers of the Notes, and all amendments and supplements thereto which may be prepared from time to time in accordance with this Agreement. "PERSON" shall mean an individual, a corporation, a partnership, a trust, an association or any other entity. "QUALIFIED INSTITUTIONAL BUYER" hall have the meaning assigned to that term in Rule 144A under the 1933 Act. "RULE 144A" shall mean Rule 144A under the 1933 Act. "SEC" shall mean the U.S. Securities and Exchange Commission, or any successor thereto. 2. Issuance and Placement of Commerical Paper Notes. ------------------------------------------------ (a) The Issuer hereby appoints the Placement Agent to act as the Issuer's placement agent in connection with the sale of the Notes in accordance with the terms hereof, and the Placement Agent hereby accepts such appointment. While (i) the Issuer has and shall have no obligation to permit the Placement Agent to purchase any Notes for its own account or to arrange for the sale of the Notes and (ii) the Placement Agent has and shall have no obligation to purchase any Notes for the Placement Agent's own account or to arrange for the sale of Notes, the parties agree that, as to any and all Notes which the Placement Agent may purchase or the sale of which the Placement Agent may arrange, such Notes will be purchased or sold by the Placement Agent in reliance on, among other things, the agreements, representations, warranties and covenants of the Issuer contained herein and on the terms and conditions and in the manner provided for herein. Without limiting the generality of the foregoing, the Issuer agrees that the Issuer will not engage any person or party to assist in the placement of the Notes other than a placement agent that has executed a placement agreement with the Issuer which agreement is substantially in the form hereof and that, without the prior written consent of the Placement Agent (which Consent shall not be unreasonably withheld), the Issuer shall not permit to become effective any amendment, supplement, waiver or consent to or under such placement agreement. (b) If the Issuer and the Placement Agent shall agree on the terms of the purchase of any Note by the Placement Agent or the sale of any Note arranged by the Placement Agent (including, but not limited to, agreement with respect to the date of issue, purchase price, principal amount maturity and interest rate (in the case of interest-bearing Notes) or discount rate thereof (in the case of Notes issued on a discount basis), and appropriate compensation for the Placement Agent's services hereunder) pursuant to this Agreement, the Placement Agent shall confirm the terms of each such agreement promptly to the Issuer in the Placement Agent's customary form, the Issuer shall cause such Note to be issued and delivered in accordance with the terms of the Issuing and Paying Agency Agreement, and payment for such Note shall be 2 3 made in accordance with such Agreement. The authentication and delivery of such Note by the Issuing and Paying Agent shall constitute the issuance of such Note by the Issuer. The Issuer shall deliver Notes signed by the Issuer to the Issuing and Paying Agent, and instructions shall be delivered to the Issuing and Paying Agent to complete, authenticate and deliver such Notes in the manner prescribed in the Issuing and Paying Agency Agreement. The Placement Agent shall be entitled to compensation at such rates and paid in such manner as the Issuer and the Placement Agent shall from time to time agree upon in connection with the transactions contemplated hereby. (c) The Notes may be issued either in physical bearer form or in book-entry form. Notes in book-entry form shall be represented by master notes registered in the name of a nominee of DTC and recorded in the book-entry system maintained by DTC. References to "Notes" in this Agreement shall refer to both physical and book-entry Notes unless the context otherwise requires. The Notes may be issued either at a discount or as interest-bearing obligations with interest payable at maturity in a stated amount. (d) Each Note purchased by, or the sale of which is arranged through, the Placement Agent hereunder shall (i) have a face amount of $100,000, or an integral multiple of $1,000 in excess thereof, (ii) have a maturity which is a Business Day not later than the 364th day next succeeding such Note's date of issuance and (iii) not contain any provision for extension, renewal or automatic "rollover." 3. Representations and Warranties of the Issuer. --------------------------------------------- (a) The Issuer represents and warrants as follows: (i) The Issuer is a duly organized and validly existing corporation in good standing under the laws of the jurisdiction of its incorporation and has the corporate power and authority to own its property, to carry on its business as presently being conducted, to execute and deliver this Agreement, the Issuing and Paying Agency Agreement and the Notes, and to perform and observe the conditions hereof and thereof (ii) Each of this Agreement and the Issuing and Paying Agency Agreement has been duly authorized, executed and delivered by the Issuer and constitutes a legal, valid and binding agreement of the Issuer. The issuance and sale of Notes by the Issuer hereunder have been duly authorized by the Issuer and, when delivered by the Issuing and Paying Agent as provided in the Issuing and Paying Agency Agreement, each Note will be the valid and binding obligation of the Issuer. (iii) Assuming that the Notes are offered and sold in the manner contemplated by Section 6 below, the offer and sale by the Issuer of such Notes will constitute exempt transactions under Section 4(2) of the 1933 Act and Rule 506 thereunder, and, accordingly, registration of the Notes under the 1933 Act will not be required. Qualification of an indenture with respect to the Notes under the Trust Indenture Act of 1939, as amended, will not be required in connection with the offer, issuance, sale or delivery of the Notes. 3 4 (iv) The Issuer is neither an "investment company" nor a "company controlled by an investment company" within the meaning of the Investment Company Act of 1940, as amended. (v) No consent or action of, or filing or registration with, any governmental or public regulatory body or authority is required to authorize, or is otherwise required in connection with, the execution, delivery or performance of this Agreement, the Issuing and Paying Agency Agreement or the Notes, except as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Notes. (vi) Neither the execution and delivery by the Issuer of any of this Agreement, the Issuing and Paying Agency Agreement and the Notes, nor the fulfillment of or compliance with the terms and provisions hereof or thereof by the Issuer, will (x) result in the creation or imposition of any material mortgage, lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Issuer or (y) violate any of the terms of the Issuer's charter documents or by-laws, any credit agreement, indenture, or other similar debt instrument, or any other material contract or instrument to which the Issuer is a party or by which it or its property is bound, or any law or regulation, or any order, writ, injunction or decree of any court or governmental instrumentality, to which the Issuer is subject or by which it or its property is bound, except violations or defaults which have been waived, or which would not have, singly or in the aggregate, a material adverse effect on the Issuer or its subsidiaries, taken as a whole, or which would not affect the validity of the Notes. (vii) There are no actions, suits, proceedings, claims or governmental investigations pending or, to the knowledge of the Issuer, threatened against the Issuer or any of its officers or directors or any persons who control the Issuer (within the meaning of Section 15 of the 1933 Act or Section 20 of the Exchange Act) or to which any property of the Issuer is subject which could reasonably be expected to have in a material adverse change in the condition (financial or otherwise) of the Issuer and its subsidiaries, taken as a whole, or materially prevent or interfere with, or materially and adversely affect the Issuer's execution, delivery of performance of, any of this Agreement, the Issuing and Paying Agency Agreement and the Notes. (viii) The initial Offering Materials do not, and any amendments or supplements thereto and any subsequent Offering Materials and any amendments or supplements thereto will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they are made, not misleading (provided that no representation or warranty is made as to the Placement Agent Information). (b) Each issuance of Notes by the issuer shall be deemed a representation and warranty by the Issuer to the Placement Agent, as of the date thereof, that both before and after giving effect to such issuance, (i) the representations and warranties of the Issuer set forth in Section 3(a) hereof remain true and correct on and as of such date as if made on and as of such date (except to the extent such representations and warranties, expressly relate solely to an earlier date); (ii) the corporate resolutions and certificate of incumbency referred to in Section 5 hereof remain accurate and in full force and effect; (iii) since the date of the most recent Offering 4 5 Materials, there has been no material adverse change in the financial condition or operations of the Issuer which has not been disclosed to the Placement Agent; and (iii) the Issuer is not in default of any of its obligations hereunder, under the Issuing and Paying Agency Agreement or under any Note. 4. Covenants and Agreements of the Issuer. --------------------------------------- (a) Without the prior written consent of the Placement Agent (which shall not be unreasonably withheld), the Issuer shall not permit to become effective any amendment, supplement, waiver or consent to or under the Issuing and Paying Agency Agreement. The Issuer shall give to the Placement Agent, at least 60 Business Days prior to the proposed effective date thereof, notice of any proposed amendment, supplement, waiver or consent under the Issuing and Paying Agency Agreement. The Issuer shall provide to the Placement Agent, promptly after the same is executed, a copy of any amendment, supplement or written waiver or consent covered by the notice requirements of this Section 4(a). The Issuer further agrees to furnish prior written notice to the Placement Agent, as soon as possible and in any event at least 60 days prior to the effective date thereof, of any proposed resignation, termination or replacement of the Issuing and Paying Agent. (b) The Issuer shall, whenever there shall occur any change in the Issuer's financial condition or any development or occurrence in relation to the Issuer that would be material to the holders of Notes or potential holders of Notes, promptly, and in any event prior to any subsequent issuance of Notes, notify the Placement Agent of such change, development or occurrence. (c) The Issuer covenants and agrees with the Placement Agent that the Issuer will promptly furnish to the Placement Agent a copy of any notice, report or other information, relating to the Notes delivered to or from rating agencies then rating the Notes. (d) The Issuer shall not use the proceeds of the sale of the Notes for the purpose of purchasing or carrying securities within the meaning of Regulation T of the Board of Governors of the Federal Reserve System, unless the Issuer gives not less than 10 days' prior written notice to the Placement Agent of the Issuer's intention to do so and prompt notice of the actual commencement of such use of proceeds. In the event that, after receipt of such a notice, the Placement Agent purchases Notes as principal and does not resell such Notes on the day of such purchase, the Placement Agent shall sell such Notes only to persons it reasonably believes to be Qualified Institutional Buyers or to Qualified Institutional Buyers it reasonably believes are acting for other Qualified Institutional Buyers, in each case pursuant to Rule 144A. 5. Conditions Precedent ---------------------- At or promptly after the execution of this Agreement, and as conditions precedent to any obligations of the Placement Agent hereunder, there shall have been furnished to the Placement Agent, in form and substance satisfactory to the Placement Agent: (i) an original or photocopy of the executed Issuing and Paying Agency Agreement; 5 6 (ii) a certified copy of resolutions duly adopted by the Board of Directors of the Issuer authorizing and approving the transactions contemplated hereby; (iii) a certificate of incumbency showing the officers and other representatives of the Issuer authorized to execute Notes and to give instructions concerning the issuance of Notes; (iv) an opinion of counsel to the Issuer addressed to the Placement Agent in form and substance reasonably satisfactory to the Placement Agent; (v) a copy of each other opinion of counsel furnished to any Person that may be delivered in connection with the issuance of the Notes, including, but not limited to, any opinion delivered under or relating to the Issuing and Paying Agency Agreement, each of which shall be addressed to the Placement Agent; (vi) true and correct copies of the letters assigning ratings and of all other correspondence to the Issuer from the rating agencies that have assigned a rating to the Notes; (vii) a copy of the Offering Materials, including the Private Placement Memorandum, approved in writing by the Issuer; (viii) true and correct copies of any documents relating to the Notes executed by the Issuer and DTC; and (ix) in connection with issuance of Notes in book-entry form, a copy of the master note(s) evidencing such Notes. 6. Offers, Sales and Resales of Notes. ----------------------------------- All offers and sales of the Notes by the Issuer shall be effected pursuant to the exemption from the registration requirements of the 1933 Act provided by Section 4(2) thereof, which exempts transactions by an issuer not involving any public offering. Offers and sales of the Notes by the Issuer through the Placement Agent acting as agent for the Issuer shall be made in accordance with Rule 506 under the 1933 Act. Notes may be resold or otherwise transferred by the holders thereof only if the Notes are registered under the 1933 Act or if any exemption (including, but not limited to, the exemption afforded by Rule 144A) from the registration requirements of the 1933 Act is available, PROVIDED, HOWEVER, that the Issuer shall have no obligation to register the Notes under the 1933 Act and has no intention of doing so at any time in the future. The Placement Agent (only with respect to offers and sales made by it as agent for the Issuer and reoffers and subsequent resales or other transfers made by or through the Placement Agent) and the Issuer hereby establish and agree to observe the following procedures in connection with offers, sales and subsequent resales or other transfers of the Notes: (a) The Issuer hereby confirms to the Placement Agent that within the preceding six months neither the Issuer nor any person other than the Placement Agent acting on behalf of the 6 7 Issuer has offered or sold any Notes, or any substantially similar security of the Issuer, except as described in Section 2(a), to, or solicited offers to buy any such security from, any person other than the Placement Agent. The Issuer also agrees that as long as the Notes are being offered for sale by the Placement Agent as contemplated hereby and until at least six months after the offer of Notes hereunder has been terminated, neither the Issuer nor any person other than the Placement Agent (except as contemplated by Section 2(a) hereof) will offer the Notes or any substantially similar security of the Issuer for sale to, or solicit offers to buy any such security from, any person other than the Placement Agent except with the prior written consent of the Placement Agent (which consent shall not be unreasonably withheld), it being understood that such agreement is made with a view to bringing the offer and sale of the Notes within the exemption provided by Section 4(2) of the 1933 Act and Rule 506 thereunder and shall survive any termination of this Agreement. (b) Offers and sales of the Notes shall be made only to the following types of investors; (i) Institutional Accredited Investors (including, but not limited to, a bank, as defined in Section 3(a)(2) of the 1933 Act, or a savings and loan association or other institution, as defined in Section 3(a)(5)(A) of the 1933 Act, whether acting in its individual or fiduciary capacity, provided that if it is acting in a fiduciary capacity it has sole investment discretion with respect to any account for which it is purchasing a Note), (ii) fiduciaries or agents (other than U.S. banks or savings and loan associations of the type described in clause (i) of this sentence) that will be purchasing Notes for one or more accounts, each of which is an Institutional Accredited Investor, and (iii) Qualified Institutional Buyers. (c) Resales and other transfers of the Notes by the holders thereof shall be made, only to the Issuer or to Institutional Accredited Investors or, in the case of Notes resold or otherwise transferred pursuant to Rule 144A, to Qualified Institutional Buyers or, if the Rule 144A resale is made through the Placement Agent, to institutional investors that the Placement Agent reasonably believes to qualify as Qualified Institutional Buyers. The Placement Agent shall not be liable to any person or entity for any resales or other transfers made in violation of the foregoing conditions that are not made by or through the Placement Agent. (d) The Notes shall be offered only by approaching prospective purchasers on an individual basis. No general solicitation or general advertising shall be used in connection with the offering of the Notes. Without limiting the generality of the foregoing, without the prior written approval of the Placement Agent, the Issuer shall not issue any press release, generate any publicity, allow any "tombstone" or other advertisement to be published, or hold any meeting with securities analysts to the extent that any of these actions relates to the Notes. (e) No sale of Notes to any one purchaser shall be for less than $100,000 principal amount and no Note shall be issued in a smaller face amount. If the purchaser is a non-bank fiduciary acting on behalf of others, each person for whom such purchaser is acting must purchase at least $100,000 face amount of Notes. (f) Each Note shall contain the following legend: THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY OTHER APPLICABLE SECURITIES 7 8 LAW. BY ITS ACCEPTANCE OF THIS NOTE, THE PURCHASER REPRESENTS THAT (A) THE PURCHASER IS (1) AN INSTITUTIONAL INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF REGULATION D UNDER THE ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR"), INCLUDING, WITHOUT LIMITATION, A BANK, AS DEFINED IN SECTION 3(a)(2) OF THE ACT, OR A SAVINGS AND LOAN ASSOCIATION OR OTHER INSTITUTION, AS DEFINED IN SECTION 3(a)(5)(A) OF THE ACT, WHETHER ACTING IN ITS INDIVIDUAL OR FIDUCIARY CAPACITY, PROVIDED THAT, IF IT IS ACTING IN A FIDUCIARY CAPACITY, IT HAS SOLE INVESTMENT DISCRETION WITH RESPECT TO ANY ACCOUNT FOR WHICH IT IS PURCHASING A NOTE, OR (2) A FIDUCIARY OR AGENT (OTHER THAN A U.S. BANK OR SAVINGS AND LOAN ASSOCIATION OF THE TYPE DESCRIBED IN CLAUSE (A)(1) OF THIS SENTENCE) PURCHASING THIS NOTE FOR AN ACCOUNT WHICH IS AN INSTITUTIONAL ACCREDITED INVESTOR THAT IS PURCHASING AT LEAST $100,000 OF NOTES OF THE TYPE REPRESENTED HEREBY, OR (3) A QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE MEANING OF RULE 144A UNDER THE ACT; (B) THIS NOTE IS BEING ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION HEREOF; (C) ANY RESALE OF THIS NOTE WILL BE MADE ONLY (1) TO THE ISSUER, CHASE SECURITIES INC. ("CSI"), OR ANOTHER PERSON DESIGNATED BY THE ISSUER AS A PLACEMENT AGENT FOR THIS NOTE (CSI AND EACH SUCH PLACEMENT AGENT TO BE REFERRED TO HEREINAFTER AS "PLACEMENT AGENT"), NONE OF WHICH SHALL HAVE ANY OBLIGATION TO ACQUIRE THIS NOTE, (2) THROUGH A PLACEMENT AGENT TO AN INSTITUTIONAL INVESTOR APPROVED AS AN ACCREDITED INVESTOR OR REASONABLY BELIEVED TO BE A QIB BY A PLACEMENT AGENT IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE ACT, OR (3) TO A QIB IN A TRANSACTION THAT MEETS THE REQUIREMENTS OF RULE 144A; AND (D) IN THE CASE OF SALES PURSUANT TO RULE 144A, IT IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF ANOTHER QIB AND THE PURCHASER UNDERSTANDS THAT THIS NOTE WAS SOLD TO THE PURCHASER PURSUANT TO AN EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE ACT PURSUANT TO RULE 144A. (g) The. Placement Agent shall furnish to each purchaser of newly issued Notes a copy of the Private Placement Memorandum, and each amendment or supplement thereto (other than any amendment or supplement that has been completely superseded by a later amendment or supplement), and any additional Offering Materials approved by the Issuer and requested by such purchaser. (h) For so long as any of the Notes is outstanding and is a "restricted security" within the meaning of Rule 144(a)(3) under the 1933 Act, (i) the Issuer shall cause to be provided to any holder of Notes and any prospective purchaser of the Notes designated by a holder of such Notes, upon the request of such holder or prospective purchaser, the information, if any, required to be provided to such holder or prospective purchaser by Rule 144A(d)(4) and (ii) the Issuer shall update such information from time to time in order to prevent such information from 8 9 becoming false or misleading and the Issuer shall take such other actions as are necessary to ensure that the safe harbor exemption from the registration requirements of the 1933 Act under Rule 144A is and will be available for resale of the Notes conducted in accordance with Rule 144A. (i) In the event that any Note offered or to be offered by the Placement Agent would be ineligible for resale under Rule 144A (because such Note is of the same class (within the meaning of Rule 144A) as any other securities of the Issuer which are at such time listed on a national securities exchange registered under Section 6 of the Exchange Act, or quoted in a U.S. automated inter-dealer quotation system), the Issuer shall immediately notify the placement Agent (by telephone, confirmed in writing) of such fact and shall promptly prepare and deliver to the Placement Agent an amendment or supplement to the Offering Materials describing the Notes that are ineligible, the reason for such ineligibility and any other relevant information relating thereto. (j) The Issuer agrees promptly from time to time to take such action as the Placement Agent may reasonably request to qualify the Notes for offering and sale under the securities laws of such jurisdictions as the Placement Agent may request and to comply with such laws so as to permit the continuance of sales and resales therein for as long as may be necessary to complete the transactions contemplated hereby, provided that in connection therewith the Issuer shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction other than consent to service of process under such state securities laws. The Issuer also agrees to reimburse the Placement Agent for any reasonable fees or costs incurred in so qualifying the Notes. 7. Disclosure. ----------- (a) The Issuer understands that, in connection with the offer and sale of the Notes, from time to time offering materials, including a Private Placement Memorandum and any other Company Information approved by the Company for dissemination to purchasers or potential purchasers of the Notes (the "Offering Materials") will be prepared relating to the Issuer, which may be distributed to the Placement Agent's sales personnel and to purchasers and prospective purchasers of the Notes. (b) To provide a basis for the preparation of the Offering Materials and to assist in the Placement Agent's ongoing credit review procedures and sale of the Notes, the Issuer agrees to furnish to the Placement Agent, as these items become available, (i) the Issuer's most recent report on Form 10-K filed with the SEC and each report on Form 10-Q or 8-K filed by the Issuer with the SEC since the most recent Form 10-K, (ii) the Issuer's most recent annual audited financial statements and each interim financial statement or report prepared subsequent thereto, if not included in item (i) above, (iii) the Issuer's and its affiliates' other publicly available recent reports, including, but not limited to, any publicly available filings or reports provided to their respective shareholders, any national securities exchange or any rating agency, and any information generally supplied in writing to securities analysts, (iv) research reports with respect to the Company prepared by any brokerage house or rating agency, (vi) any other information or disclosure prepared pursuant to Section 7(f) hereof, (vii) and any other information or document prepared or approved by the Issuer for dissemination to purchasers or potential purchasers of the 9 10 Notes. In addition, the Issuer shall provide the Placement Agent with such other information as the Placement Agent may reasonably request for the purpose of its ongoing credit review of the Issuer. (c) The Issuer recognizes that the accuracy and completeness of the Offering Materials are dependent on the accuracy and completeness of the information obtained by the Placement Agent and, subject to Section 7(d) and Section 8 hereof, the Placement Agent shall not be responsible for any inaccuracy in any Offering Materials. (d) The Placement Agent agrees that prior to the distribution of any Offering Materials the Placement Agent will provide the Issuer with a copy thereof for the Issuer's approval. The Issuer agrees promptly to notify the Placement Agent in writing of the Issuer's approval or disapproval of any Offering Materials submitted to the Issuer for review. Any such approval by the Issuer shall be deemed to be a representation by the Issuer that the Offering Materials (excluding any Placement Agent Information) so approved does not contain an untrue statement of a material fact nor omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. (e) The Issuer represents and warrants to the Placement Agent that the financial statements of the Issuer delivered or to be delivered to the Placement Agent in accordance with this Section 7 are or will be in accordance with generally accepted accounting principles and practices in effect in the United States on the date such statements were or will be prepared and fairly do or will present the financial condition and operations of the Issuer at such date and the results of the Issuer's operations for the period then ended. (f) The Issuer further agrees to notify the Placement Agent promptly upon the occurrence of (i) any event that would render any material fact contained in the Issuer's most recent financial reports, as submitted to the Placement Agent, untrue or misleading, or (ii) any event relating to or affecting the Issuer that would cause the Offering Materials then in use to include an untrue statement of material fact or to omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading. In such event, the Issuer agrees to supply the Placement Agent promptly with such information as will correct such untrue or misleading statement or such omission. 8. Indemnification. - ------------------- (a) The Issuer agrees to indemnify the Placement Agent and its affiliates, their respective directors, officers, employees, and agents, and each person who controls the Placement Agent or its affiliates within the meaning of the 1933 Act or the Exchange Act and any successor thereto (the Placement Agent and each such person being an "Indemnified Person") from and against any and all losses, claims, damages and liabilities, joint or several (collectively, the "Damages"), to which such Indemnified Person may become subject under any applicable federal or state law, or otherwise, related to or arising out of (i) any untrue statement or alleged untrue statement or a material fact contained in the Offering Materials or in any information (whether oral or written) or documents furnished or made available by the Issuer to offerees of the Notes or any of their representatives or the omission or the alleged omission to state therein a material fact necessary to make the statements therein not misleading in light of 10 11 the circumstances under which they were made (except to the extent such Damages relate to or arise out of the Placement Agent Information), or (ii) any matter or transaction contemplated by this Agreement or by the engagement of the Placement Agent pursuant to, and the performance by the Placement Agent of the services contemplated by, this Agreement and shall promptly reimburse any Indemnified Person for all expenses (including, but not limited to, reasonable fees and disbursements of external counsel), as they are incurred, in connection with the investigation of, preparation for or defense of any pending or threatened claims or any action or proceeding arising therefrom, whether or not such Indemnified Person is a party, provided, however, that, with respect to (ii) herein, the Issuer shall not be liable in any such case to the extent such loss, claim, damage or liability is finally judicially determined to have resulted primarily from an Indemnified Person's gross negligence, bad faith, or willful misconduct. (b) The Placement Agent agrees to indemnify the Issuer and its affiliates, their respective directors, officers, employees, and agents, each person who controls the Issuer or its affiliates within the meaning of the 1933 Act or the Exchange Act, and any successor thereto (the Issuer and each such person being an "Issuer Indemnified Person") from and any all Damages to which such Issuer Indemnified Person may become subject under any applicable federal or state law, or otherwise, related to or arising out of the Placement Agent information. (c) Promptly after receipt by an Indemnified Person under this Section 8 of notice of any claim or the commencement of any action, the Indemnified Person shall, if a claim in respect thereof is to be made against the Issuer under this Section 8, notify the Issuer in writing of the claim or the commencement of that action; PROVIDED, HOWEVER, that the failure to notify the Issuer shall not relieve it from any liability that the Issuer may have under this Section 8 except up to the extent of any factual and material prejudice suffered by the Issuer as a result of such failure; and, PROVIDED, FURTHER, that in no event shall the failure to notify the Issuer relieve it from any liability that the Issuer may have to an Indemnified Person otherwise than under this Section 8. If any such claim or action shall be brought against an Indemnified Person, and such Indemnified Person notifies the Issuer thereof, the Issuer shall be entitled to participate therein and, to the extent that the Issuer wishes, to assume the defense thereof with counsel reasonably satisfactory to the Indemnified Person. After notice from the Issuer to the Indemnified Person of the Issuer's election to assume the defense of such claim or action, the Issuer shall not be liable to the Indemnified Person under this Section 8 for any legal or other expenses subsequently incurred by the Indemnified Person in connection with the defense thereof other than reasonable costs of investigation. The Issuer shall not be liable for any settlement of any such action effected without the Issuer's written consent (which consent shall not be unreasonably withheld) but, if settled with the Issuer's written consent or if there is final judgment for the plaintiff in any such action, the Issuer agrees to indemnify and hold harmless any Indemnified Person from and against any loss or liability by reason of such settlement or judgment. (c) In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in this Section 8 is for any reason unavailable or insufficient to hold harmless an Indemnified Person, other than as expressly provided above, the Issuer and the Placement Agent shall contribute to the aggregate costs of satisfying such liability (i) in such proportion as is appropriate to reflect the relative benefits received by the Issuer, on the one hand, and the Placement Agent, on the other hand, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only 11 12 the relative benefits referred to in clause (i) above but also the relative fault of the Issuer on the one hand and the Placement Agent on the other with respect to the statements or omissions which resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Issuer on the one hand and the Placement Agent on the other with respect to such offering shall be deemed to be in the same proportion as the aggregate proceeds to the Issuer of the Notes sold pursuant hereto (before deducting expenses) bear to the aggregate commissions and fees earned by the Placement Agent hereunder. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuer on the one hand or the Placement Agent on the other, the intent of the parties, and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Issuer and the Placement Agent agree that it would not be just and equitable if contributions pursuant to this Section 8 were to be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an Indemnified Person as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 8 shall be deemed to include, for purposes of this Section 8, but not be limited to, any fees and disbursements of external counsel reasonably incurred by an Indemnified Person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8, the aggregate of all amounts paid by the Placement Agent pursuant to the foregoing shall not exceed the aggregate of such commissions and fees earned by the Placement Agent hereunder. (d) The obligations of the Issuer in this Section 8 are in addition to any other liability that the Issuer may otherwise have. (e) The provisions of this Section 8 shall survive the termination of this Agreement. 9. Choice of Forum. ---------------- For purposes of any suit, action or proceeding brought by the Issuer against the Placement Agent in connection with or arising out of this Agreement, any agreement, instrument or document entered into in connection with this Agreement, or the offer and sale of the Notes the Issuer submits to the non-exclusive jurisdiction of the Federal courts located in the Borough of Manhattan and the courts of the State of New York located in the Borough of Manhattan. 10. Notices. -------- All notices required under the terms and provisions hereof shall be in writing, delivered by hand, by mail (postage prepaid), or by telex, telecopier or telegram, and any such notice shall be effective when received at the address specified below. 12 13 If to the Issuer: If to the Placement Agent: - ---------------- ------------------------- RPM, Inc. Chase Securities Inc. 2628 Pearl Road 270 Park Avenue, 9th Floor P.O. Box 777 New York, New York 10017 Medina, OH 44258 Attention: Money Market Division Attention: David P. Reif III/ Fax No.: 212-834-6560 P. Kelly Tompkins Fax No: 330-225-8743 With a copy to: - --------------- Edward W. Moore Calfee, Halter & Griswold LLP 1400 McDonald Investment Center 800 Superior Avenue Cleveland OH 44114-2688 Fax No.: 216-241-0816 or, if to any of the foregoing parties or their successors, at such other address as such party or successor may designate from time to time by notice duly given in accordance with the terms of this Section 10 to the other party hereto. 11. Governing Law. -------------- THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS CONFLICT OF LAWS PROVISIONS. 12. Entire Agreement. ----------------- This Agreement constitutes the entire agreement between the parties hereto with respect to the matters covered hereby and supersedes all prior agreements and understandings between the parties. 13. Amendment and Termination; Successor; Counterparts. --------------------------------------------------- (a) The terms of this Agreement shall not be waived, altered, modified, amended or supplemented in any manner whatsoever except by written instrument signed by both parties hereto. The Issuer or the Placement Agent may terminate this Agreement upon at least 30 days' written notice to the other, provided that such termination shall not affect the obligations of the parties hereunder with respect to Notes unpaid at the time of such termination or with respect to actions or events occurring prior to such termination. (b) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; PROVIDED, HOWEVER, that the Issuer may not assign, either in whole or in part, any of its rights or obligations under this Agreement without the prior written consent of the Placement Agent (which consent shall not be unreasonably withheld), and any such assignment without such consent shall be null and void. The Placement Agent may assign and transfer, either in whole or in part, any of its rights or obligations under 13 14 this Agreement to any affiliate of the Placement Agent, upon at least 30 days' prior written notice to the Issuer. (c) This Agreement may be executed in several counterparts, each of which shall be deemed an original hereof 14. Captions. --------- The captions in this Agreement are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. 15. Severability of Provisions. --------------------------- Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity of such provisions in any other jurisdiction. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date and year first above written. RPM, INC. By /s/ David P. Reif ------------------------- Name: David P. Reif Title: Vice President CHASE SECURITIES INC. By /s/ Marco Tenada ------------------------- Name: Marco Tenada Title: Vice President 14 EX-10.4 5 EXHIBIT 10.4 1 Exhibit 10.4 August 23, 1999 PERSONAL & CONFIDENTIAL Mr. John H. Morris Executive Vice President RPM, Inc. 2628 Pearl Road Medina, Ohio 44256 Re: Retirement Letter Agreement --------------------------- Dear Jay: Please accept this Letter Agreement as confirmation of the recent discussions in which you have agreed to retire as Executive Vice President of RPM, Inc. ("RPM"), effective November 30, 1999 and to serve as an employed consultant thereafter until January 31, 2000. We have designed a retirement package to provide you with a measure of financial protection and benefits coverage. You should also know that this package has been reviewed and approved by RPM's Board of Directors. Accordingly, the following confirms the agreement between RPM and you relating to your retirement including, without limitation, the specifics of your compensation and benefits package, release, and various continuing obligations to RPM. You have also agreed that you will not stand for re-election to the RPM Board of Directors (and all subsidiary boards and officer positions) in October 1999. 1. RETIREMENT. We acknowledge and mutually agree to treat your retirement as Executive Vice President of RPM as a voluntary retirement, effective November 30, 1999 ("Retirement Date"). From the date of this Letter Agreement until January 31, 2000 ("Consulting Period"), your primary duties of responsibility shall be to provide transitional assistance as may be requested by the Chairman of RPM in connection with the planned restructuring and reorganization of RPM's operations. 2. COMPENSATION/CONSULTING. In consideration of the covenants and releases contained in this Letter Agreement, your consulting services to RPM, and in lieu of any payments which may be due under the Employment Agreement originally dated July 19, 1988 and subsequently amended July 15, 1998, RPM will pay you a total of $780,000 as follows: one payment of $32,500 will be paid to you on or before December 31, 1999 and the remaining $747,500 will be paid in a lump sum on or before the end of the Consulting Period. 3. BONUS. In addition to the foregoing compensation, RPM will pay you a Fiscal 1999 bonus of $290,000. This bonus will be payable in the ordinary course as and when authorized by RPM's Compensation Committee. You hereby acknowledge and we agree that you will not be eligible for and will not receive any further bonus thereafter. 2 John H. Morris August 23, 1999 Page 2 4. 401 (k) PLAN. You shall be permitted to continue participating in and contributing to the RPM 401(k) plan as an employee of RPM through the end of the Consulting Period, subject to the terms and conditions of the plan and to applicable federal, state and local laws, rules and regulations. Any standard "employer match" of contributions will be made through the end of the Consulting Period. 5. BENEFITS. Except as set forth below, your benefit coverage as an employee under RPM's medical and dental plans will continue for you and your spouse at RPM's cost until your 65th birthday or until you are covered by another employer's plan, whichever may occur earlier. Thereafter, you and your spouse's medical and dental coverage will be your sole responsibility, but you both will be able to participate (at your expense) in RPM's medical and dental plans. Any conversion or retiree rights you have under the health plan and any rights you may have under the federal Consolidated Omnibus Budget Reconciliation Act, as amended ("COBRA") will be described in a separate letter once RPM's coverage period ends. Your Split Dollar and GRIP RPM paid life insurance benefits will be maintained until December 1, 2001. After that date, the Split Dollar life insurance of 1 1/2 times will be in effect. Thereafter, your conversion options will be explained to you in detail by RPM's agent. 6. LUMP SUM PENSION/SERP CALCULATION AND PAYMENT. You will be eligible for and will receive as lump sum payments on or before January 31, 2000, your total available pension and SERP as calculated to age 62. Although the definitive calculations under each plan will not finally be determined until January 31, 2000, the amount of such payments in combination will be no less than $2,241,512. We further agree that all Restricted Share grants previously awarded to you under the RPM, Inc. Restricted Stock Plan (the details of which are set forth in Exhibit B) will be forfeited and we recognize that the full value of your SERP has been credited back to and included in the total lump sum calculation. 7. STOCK OPTIONS. All stock options vest immediately (a list of which is set forth in Exhibit A) and may be exercised at any time during the term of the Consulting Period. 1997 and 1998 grants can be exercised up to three (3) years following the Consulting Period. 1996 and earlier to be exercised by January 31, 2000. 8. VACATION PAY. You agree that you have been fully paid for any and all accrued and earned but unused vacation days and that no further vacation pay will accrue or be payable after the Retirement Date. 9. COMPANY LEASED AUTOMOBILE. RPM will continue to pay your lease payment with Creager Leasing until the end of the Consulting Period. Thereafter, you must either immediately purchase the car, take over the lease or immediately return the car to RPM, all in accordance with RPM's applicable leased car policies. If necessary, you agree to endorse or otherwise sign any instrument of title or registration as may be necessary to effect the transfer or surrender of the vehicle. 3 John H. Morris August 23, 1999 Page 3 10. GENERAL RELEASE. In consideration for the promises made by the parties and the payments to be made and other consideration to be provided by RPM under this Letter Agreement, the receipt and sufficiency of which are hereby acknowledged, you hereby release and forever discharge RPM and its employees, agents, subsidiaries, affiliated companies, officers, directors, successors, assigns and trustees, administrators and fiduciaries of any employee benefit program which RPM or its subsidiaries or affiliates serve in any capacity, from any and all claims, demands, causes of action or liabilities, which you ever had or now have arising out of or in any way connected with your employment with and/or retirement from RPM. Without limiting the generality of the foregoing, this release applies to any right which you have or may have to commence or maintain a charge or action alleging discrimination under any federal, state or local statute (whether before a court or an administrative agency), including, but not limited to, the Age Discrimination in Employment Act of 1967, Rehabilitation Act of 1973, the Older Worker's Benefits Protection Act of 1990, the Civil Rights Act of 1866, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Employee Retirement Income Security Act of 1974, the Americans with Disabilities Act, the Family and Medical Leave Act, the Fair Labor Standards Act, the Equal Pay Act of 1963, the National Labor Relations Act, the Ohio Civil Rights Act, all as amended and shall be amended from time to time, and to any right which you have or may have to commence or maintain a claim for attorneys' fees, wrongful discharge, constructive discharge, estoppel, breach of contract (including, without limitation, any claim of express or implied contract of employment and the breach thereof), damage to personal or professional reputation, misrepresentation, intentional or negligent infliction of emotional distress, monetary or equitable relief and payment of wages or any other employee fringe benefit (except as expressly provided for in this Letter Agreement) and all other claims of discrimination or retaliation of any type or basis. You warrant and represent that you have not directly or indirectly transferred or assigned rights or causes of action against RPM. You agree not to make, assert or maintain any charge, claim, demand or action that would be covered by this release. You agree that if you do make, assert or maintain any charge, claim, demand or action that would be covered by this release, you will return all payments made to you pursuant to this Letter Agreement. You agree that you will not apply for employment with RPM or its subsidiaries, affiliates, successors or assigns in the future and that you waive any right you may have to reinstatement. If you breach this provision, you agree to indemnify RPM and its employees, agents, subsidiaries, affiliated companies, officers, directors, successors and assigns, against all liabilities, costs and expenses, including, without limitation, reasonable attorneys' fees, related to such breach. 11. ADEA WAVER. You acknowledge that this Letter Agreement includes a waiver of any rights and claims arising under the Age Discrimination in Employment Act. You understand that you are not waiving rights or claims arising under the Age Discrimination in Employment Act that may arise after the date this Letter Agreement is executed. You acknowledge that the consideration you are receiving in exchange for this waiver of the rights and claims specified herein exceeds anything of value to which you already are entitled. You acknowledge that you are hereby advised in writing to consult with an attorney prior to executing this Letter Agreement. You represent and agree that 4 John H. Morris August 23, 1999 Page 4 you fully understand your right to discuss all aspects of this Letter Agreement with legal counsel and, to the extent you deem appropriate, you have fully availed yourself of this right. You acknowledge that you have entered into this Letter Agreement knowingly and voluntarily with full understanding of its terms and after having had the opportunity to seek and receive advice and counsel from your attorney. You acknowledge that you have been given a period of at least twenty-one (21) days within which to consider this Letter Agreement and your signature on the last page of this Letter Agreement indicates that you have had the benefit of that period. You acknowledge and agree that you are not entitled to a greater time period under applicable law. You understand that you may revoke this Letter Agreement during the seven (7) days following the execution of this Letter Agreement and that the Letter Agreement will not become effective until that seven (7) day revocation period has expired. Any such revocation must be made in writing to me at RPM, Inc., 2628 Pearl Road, Medina, OH 44256 within such seven (7) day period. 12. CONFIDENTIALITY. You agree that the terms of this Letter Agreement are confidential and you covenant and promise not to disclose any of the terms hereof to any third party, with the exception of your spouse and your legal, tax or financial advisors, and that you will be responsible for ensuring each of their compliance with these terms. You acknowledge and agree that RPM may disclose the terms of this Letter Agreement pursuant to its SEC or other legal reporting obligations. You agree that at no time will you utilize for your personal benefit or to the detriment of RPM or its subsidiaries or affiliates, or will you disclose, directly or indirectly, to any person, any Confidential Information without RPM's prior written consent. For purposes of this Letter Agreement, "Confidential Information" shall include, but not be limited to, any knowledge or information not already available to the public which you may have acquired during the period of your employment concerning RPM's products, inventions, formulations, designs, manufacturing, marketing, selling, pricing, suppliers, processes, customers and their requirements, employees, business or financial information and plans, scientific or technical information, trade secrets, accounting or tax information or other private or confidential matters of RPM or its subsidiaries or affiliates. 13. RETURN OF ITEMS. On or before the Retirement Date, and immediately upon request by RPM, you shall return any and all records and copies of records dealing with the operations and activities of RPM, its subsidiaries or affiliates, all Confidential Information and any and all property belonging to RPM including, but not limited to, RPM issued credit cards (e.g. air travel, telephone, car rental etc.), files, computer stored data, equipment, catalogs, samples, phones, documents or other such RPM property. If between the Retirement Date and the end of the Consulting Period, you come to possess any RPM property described above or similar to that described above, you will return it on or before the end of the Consulting Period, or immediately upon request by RPM. 14. NON-SOLICITATION/NON-COMPETE/COOPERATION. (a) From the Retirement Date through November 30, 2001, you agree that you will not in any way solicit, attempt to solicit or assist others in soliciting or inducing 5 John H. Morris August 23, 1999 Page 5 employees to leave RPM or its affiliates, or hire or attempt to hire any RPM or its affiliates' employees into any business. (b) RPM recognizes that you have a legitimate right to pursue business opportunities after the end of the Consulting Period and you recognize that RPM has a legitimate and vital interest in protecting its competitive position in the paint and coatings industry. In order to accommodate both parties legitimate business interests and clarify their respective rights and obligations, you acknowledge that the following list of companies, which includes all of their respective affiliates owned as of the date of this Letter Agreement ("Competitive Companies") have businesses that directly compete with affiliates of RPM. In recognition of this fact and in consideration of the compensation and other benefits you will be receiving under this Letter Agreement, from the Retirement Date through November 30, 2001, you agree that you will not, directly or indirectly, own, manage, operate, control, be employed by, consult with, or in any way be connected with any of the Competitive Companies. You further acknowledge and agree that this restriction is necessary to protect RPM's trade secrets and Confidential Information, and that the restrictions in time and scope are reasonable and necessary to further RPM's legitimate business interests and protect its competitive position in the industrial and consumer paint and coatings industry. Competitive Companies: Akzo Nobel; Ferro Corporation; H.B. Fuller; Imperial Chemical Industries PLC; Lawter International, Inc.; Lilly Industries, Inc.; NL Industries; PPG Industries, Inc.; Rohm and Haas Company; The Sherwin-Williams Company; SKW/Master Builders; and Valspar Corporation. (c) You agree to continue to cooperate fully with RPM and its affiliated companies in defending various lawsuits, including but not limited to, (upon reasonable advance notice), giving deposition and/or witness testimony in cases brought by Terry Merrill and Dennis Wolf until such time as these cases are finally adjudicated, settled or otherwise dismissed. 15. NON-DISPARAGEMENT. RPM and you mutually agree to not, directly or indirectly, individually or in concert with others, engage in any conduct or make any statement that is calculated or likely to have the effect of undermining, disparaging or otherwise reflecting poorly upon the reputation of you or RPM, or your or its goodwill, products, or business opportunities or that is in any manner detrimental to you or RPM and its employees, agents, subsidiaries, affiliated companies, officers, directors, successors and assigns. 16. NO ENCOURAGEMENT OF CLAIMS. You will not encourage or assist any person who is preparing to or actually files a lawsuit, charge, claim or complaint against RPM unless you are required to render such assistance pursuant to a lawful subpoena or other legal obligation. 6 John H. Morris August 23, 1999 Page 6 17. NON-LIABILITY. This Letter Agreement is not intended to constitute and should not be construed as constituting an admission of fault, wrongdoing or liability by either party, but rather reflects the desire of the parties to resolve fairly and amicably any past, present or future disputes or claims. 18. MISCELLANEOUS PROVISIONS. You acknowledge and agree that this Letter Agreement has been provided to you and that it fully satisfies all notice and other requirements under all applicable federal and Ohio laws, rules and regulations. 19. CHOICE OF LAWS. The provisions of this Letter Agreement shall be construed in accordance with the internal laws, but not the laws of conflicts, applicable to agreements made in Ohio. 20. SURVIVOR BENEFITS. In the event of your death before January 31, 2000, then, notwithstanding your death, all payments by RPM provided for in this Letter Agreement (to the extent not then paid), including but not limited to those payments referred to in Sections 2, 3 and 6 hereof, shall be paid to your spouse or to your estate. In the event of your death at any time before January 12, 2007 (your 65th birthday) then, notwithstanding your death, benefit coverage under RPM's medical and dental plans referred to in Section 5 hereof will continue for your spouse at RPM's cost until January 12, 2007. 21. ENTIRE AGREEMENT/SEVERABILITY. This Letter Agreement constitutes the entire agreement between the parties concerning the subject matter hereof and supersedes all prior and contemporaneous agreements, if any, between the parties relating to the subject matter hereof. If any provision in this Letter Agreement is held to be excessively broad, it shall be limited to the extent necessary to comply with applicable law. If any provision in this Letter Agreement shall, notwithstanding the preceding sentence, be held unenforceable by a court of competent jurisdiction, such enforceability shall not affect any other provision of this Letter Agreement. 22. COUNTERPARTS. This Letter Agreement may be signed in single or separate counterparts, each of which shall constitute an original. 23. SUCCESSORS AND ASSIGNS. This Letter Agreement shall be binding upon and inure to the benefit of you and your heirs, executors, administrators and personal representatives and shall be binding upon and inure to the benefit of RPM, its affiliated companies and their respective successors and assigns. All obligations of RPM under this Letter Agreement shall continue to be binding upon RPM and its successors and assigns regardless of any change in control of RPM, however precipitated and whether or not approved by RPM's Board of Directors. If, following a change of control, RPM or any successor or assign, as the case may be, fails to fully comply with any obligation to you, your spouse or your estate, RPM hereby irrevocably authorizes you, your spouse or your personal representative to retain counsel, at RPM's expense, to enforce your rights by whatever legal actions such counsel deems necessary and appropriate. 7 John H. Morris August 23, 1999 Page 7 24. ACKNOWLEDGEMENT. YOU REPRESENT AND AGREE THAT YOU FULLY UNDERSTAND YOUR RIGHT TO DISCUSS ALL ASPECTS OF THIS LETTER AGREEMENT WITH LEGAL COUNSEL AND, TO THE EXTENT YOU DEEM APPROPRIATE, YOU HAVE FULLY AVAILED YOURSELF OF THIS RIGHT, AND YOU HAVE CAREFULLY READ AND FULLY UNDERSTAND ALL THE PROVISIONS OF THIS LETTER AGREEMENT AND ARE VOLUNTARILY ENTERING INTO THIS LETTER AGREEMENT. THE RELEASE IN THIS LETTER AGREEMENT COVERS BOTH CLAIMS THAT YOU KNOW ABOUT AND CLAIMS WHICH YOU MAY BE UNAWARE OF OR OTHERWISE NOT KNOW ABOUT. YOU EXPRESSLY WAIVE ALL RIGHTS AFFORDED BY LAW, RULE OR REGULATION WHICH LIMITS THE EFFECT OF YOUR RELEASE WITH RESPECT TO UNKNOWN CLAIMS. YOU UNDERSTAND THE SIGNIFICANCE OF YOUR RELEASE OF UNKNOWN CLAIMS AND YOUR WAIVER OF STATUTORY PROTECTION AGAINST A RELEASE OF UNKNOWN CLAIMS. If you have any questions or require any assistance in these matters, please feel free to contact me. I wish you luck in your future endeavors. Very truly yours, RPM, Inc. /s/ Ronald A. Rice Ronald A. Rice Vice President cc: P. Kelly Tompkins, Vice President, General Counsel & Secretary - ------------------------------------------------------------------------------- I HAVE READ, UNDERSTAND AND ACCEPT ALL OF THE TERMS AND CONDITIONS AS SET FORTH IN THIS LETTER AGREEMENT. JOHN H. MORRIS /s/ John H. Morris WITNESS: /s/ Mary Ann Peterman - -------------------- ------------------------- [SIGNATURE] [SIGNATURE] - ------------------------------------------------------------------------------- EX-11.1 6 EXHIBIT 11.1 1 RPM, INC. AND SUBSIDIARIES -------------------------- CONSOLIDATED STATEMENTS OF COMPUTATIONS OF EARNINGS --------------------------------------------------- PER COMMON SHARE AND COMMON SHARE EQUIVALENTS --------------------------------------------- (Unaudited) ----------- Exhibit 11.1 ------------ (In thousands, except per share amounts)
Three Months Ended August 31, ------------------------------------------------------ 1999 1998 ------------------------ ------------------------ Shares Outstanding - ------------------ For computation of basic earnings per common share Weighted average shares 109,465 103,840 ------------------------ ------------------------ Total shares for basic earnings per share 109,465 103,840 For computation of diluted earnings per common share Net issuable common share equivalents 384 807 Additional shares associated with conversion of convertible securities --- 8,217 ------------------------ ------------------------ Total shares for diluted earnings per share 109,849 112,864 ======================== ======================== Net Income - ---------- Net income applicable to common shares for basic earnings per share $7,264 $31,224 Add back interest net of tax on convertible securities assumed to be converted --- 992 ------------------------ ------------------------ Net income applicable to common shares for diluted earnings $7,264 $32,216 ======================== ======================== Basic Earnings Per Common Share $.07 $.30 ==== ==== Diluted Earnings Per Common Share $.07 $.29 ==== ====
The accompanying notes to consolidated financial statements are an integral part of these statements. EX-27.1 7 EXHIBIT 27.1
5 1,000 U. S. DOLLAR 3-MOS MAY-31-2000 JUN-01-1999 AUG-31-1999 1 34,492 0 409,719 17,009 256,362 772,356 635,764 243,875 2,116,124 350,321 865,813 0 0 1,614 735,715 2,116,124 495,542 495,542 269,579 428,341 45,000 0 9,889 12,312 5,048 7,264 0 0 0 7,264 0.07 0.07
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